MGLE01: LEBANESE VIEWS OF SYRIA AND IRAN

UNCLAS BEIRUT 000743 SIPDIS SIPDIS STATE PASS USTR E.O. 12958: N/A TAGS: EFIN ECON ETRD EINV KIPR LE SY SUBJECT: MGLE01: LEBANESE VIEWS OF SYRIA AND IRAN INCREASING BANKING TIES ¶1. On March 6, the Iranian Bank Saderat public relations department announced that Bank Saderat and the Commercial Bank of Syria (CBS) are to establish a jointly-run bank. Currently, there are no further details as to how Bank Saderat's five branches in Lebanon and the two branches of the Commercial Bank of Syria's subsidiary in Lebanon, the Syrian Lebanese Commercial Bank, will be affected by the increased banking ties between Bank Saderat and the CBS. On March 9, Econoff discussed the impact of increased banking ties between Syria and Iran with two prominent Lebanese businessmen who travel to Syria regularly. SYRIA LOOKING FOR BANKING SECURITY -------------- ¶2. Dr. Riad Saadeh, an agriculture and development economist with business interests in Syria, said that increased banking ties between Syria and Iran "make sense for security reasons." Although Saadeh was not aware of details of the new banking arrangement, he was not surprised at increased ties between Bank Saderat and the CBS. He noted that Syria has made several recent economic moves to insulate itself from further economic pressures from the U.S., including moving from the dollar to the euro as an exchange currency. Saadeh told us that he supplies the Syrian government with European goods and that last year the Syrians had asked him to provide products for two years. According to Saadeh, Syrian government officials asked for the additional goods because they were afraid of a blockage of access to European goods. ¶3. Saad Azhari, the Deputy Chairman of BLOM Bank and the Vice President of the Banks' Association, told Econoff that the CBS is increasingly seeing "doors closed" in Europe and would logically look toward Iran and China as normal options for cooperation. Azhari echoed Saadeh's sentiments that increased banking ties between Syria and Iran "makes sense" due to the increased political cooperation between the Syrian and Iranian governments. LEBANESE BANKING SECTOR UNAFFECTED BY BANKING DEAL -------------- ¶4. Azari cautioned Econoff about the significance of the banking deal on the Lebanese branches of Bank Saderat. He called Bank Saderat a "peanut-sized bank" that was an insignificant player in Lebanon with a minimal balance sheet of USD 100 million in total assets. Azari replied that Bank Saderat probably caters to Iranians in Lebanon when Econoff asked him what role Bank Saderat served in the Lebanese banking sector. FELTMAN