Identifier
Created
Classification
Origin
06TELAVIV1981
2006-05-19 17:16:00
SECRET
Embassy Tel Aviv
Cable title:
FM LIVNI PROMOTES FINANCIAL PRESSURE STRATEGY
how-to read a cableThis record is a partial extract of the original cable. The full text of the original cable is not available.
"S E C R E T SECTION 01 OF 03 TEL AVIV 001981
SIPDIS
TREASURY FOR SZUBIN
E.O. 12958: DECL: 05/18/2016
TAGS: EFIN IS PREL PTER KPAL KTFN ISRAELI PALESTINIAN AFFAIRS ECONOMY AND FINANCE
SUBJECT: FM LIVNI PROMOTES FINANCIAL PRESSURE STRATEGY
AGAINST HAMAS
Classified By: Ambassador Richard H. Jones for reasons 1.4(b) and (d).
-------
SUMMARY
-------
"S E C R E T SECTION 01 OF 03 TEL AVIV 001981
SIPDIS
TREASURY FOR SZUBIN
E.O. 12958: DECL: 05/18/2016
TAGS: EFIN IS PREL PTER KPAL KTFN ISRAELI PALESTINIAN AFFAIRS ECONOMY AND FINANCE
SUBJECT: FM LIVNI PROMOTES FINANCIAL PRESSURE STRATEGY
AGAINST HAMAS
Classified By: Ambassador Richard H. Jones for reasons 1.4(b) and (d).
--------------
SUMMARY
--------------
1. (S) In separate meetings with Ministry of Foreign Affairs
(MFA) officials on May 2, the GOI requested that the Treasury
Department warn the Misr Bank in Cairo against making
electronic fund transfers (EFT) to individual Palestinian
accounts at the Bank of Palestine in Gaza. Foreign Minister
(FM) Livni proposed a strategy of pressuring Hamas with a
financial siege for three to four months to see how Hamas
would respond. She asked Treasury Under Secretary (U/S) for
Terrorism and Financial Intelligence Stuart Levey for USG
assistance in preventing Electronic Funds Transfer (EFT) from
international banks into Palestinian accounts. Livni also
sought USG agreement to impose new conditions on
international donations through UNRWA, similar to those
already in place for Palestinian assistance provided through
USAID. End summary.
--------------
MFA RELAYS EUROPEAN FEARS ON IRAN SANCTIONS
--------------
2. (S) At the Tel Aviv offices of the MFA, U/S Levey met
briefly with members of the MFA's Strategic Affairs Bureau.
Non-Proliferation and Counterterrorism (CT) Department
Director Yehuda Yaakov related details from his recent
discussions with European diplomats on the situation with
Iran. Yaakov said that the Europeans had confided to him
that their elected officials are reluctant to publicly
support sanctions against Iran, because the European public
is fearful that sanctions are merely precursors to war. He
remarked that a UN Security Council Resolution, even a
""toothless"" one, would nonetheless be a positive step against
Iran.
--------------
GOI OPPOSED TO BRITISH PROPOSAL
--------------
3. (S) Project Manager for Economic and Humanitarian Aid to
the PA Eli Avidar took issue with a British proposal to
create a mechanism for the international community to donate
to the Palestinian people. According to Avidar, the GOI
agrees in principle to the establishment of an
internationally monitored fund or NGO to channel donations to
Palestinians not involved with Hamas. He stressed that the
GOI would not support any plan, including the current British
proposal, to pay Palestinian salaries with such a fund. He
reported that British diplomats had recently told him that a
British delegation would soon travel to Washington to brief
the USG on their proposal.
-------------- -
MISR BANK COMPLETED TEST RUN TO GAZA ACCOUNTS?
-------------- -
4. (S) Avidar reported that on May 1, Misr Bank in Cairo
attempted a few electronic fund transfers (EFT) into
individual Palestinian accounts at the Bank of Palestine in
Gaza. He characterized this action as a ""test run"" to gauge
GOI and international reactions before conducting large scale
EFT into individual accounts. Avidar asked U/S Levey to warn
Misr Bank against such activity by declaring that they are
not operating according to FATF regulations. U/S Levey
advised that it was not such a simple matter, and that Hamas
was not a designated terrorist organization in most parts of
the world. U/S Levey asked MFA officials what they
envisioned as the strategic &end-game,8 but did not receive
a specific answer. (Comment. On May 17, NSC Counter
Terrorism Finance Director Udi Levi told Econoff that Misr
Bank had not/not attempted the ""test run"" EFT that Avidar
described above. Levi said that the GOI was closely
observing Misr Bank and that he would have been the first
person in the GOI to be notified if, in fact, such an attempt
had occurred. End Comment.)
--------------
LIVNI CONCERNED ABOUT RUSSIAN STANCE ON IRAN
--------------
5. (S) In a free-flowing discussion that at times resembled a
brainstorming session, FM Tzipi Livni, flanked by the
Directors General of the Foreign and Justice Ministries, met
with the Treasury delegation in her Tel Aviv office. U/S
Levey briefed the Foreign Minister on the Treasury
Department's plan to include private financial institutions
in a diplomatic campaign to financially isolate the
government of Iran, starting with targeted financial measures
aimed at individuals or entities supporting terrorism and
proliferation. Levey said that the USG intended to highlight
Iranian regime &bad conduct8 to governments and financial
institutions and underscore the risk to their professional
reputation from doing business with Iran, particularly given
the Government of Iran,s history of cloaking its activities
behind front-companies. FM Livni asked if the Treasury
efforts would occur in parallel to the U.S.-led action
against Iran at the UN or separately. She suggested that
Treasury's offensive could be a trial balloon for political
action at the UN, or a fallback tactic should the UNSC not
adopt a resolution against Iran. Livni said that she was
""not optimistic about the international community"" and was
""very concerned"" about the Russians' behavior regarding
Iran's nuclear threat. She revealed that the Russian Foreign
Minister had told her last week that the GOR would not allow
the UNSC to give the U.S. permission to go to war against
Iran.
-------------- -
LIVNI PROPOSES PRESSURE STRATEGY AGAINST HAMAS
-------------- -
6. (S) FM Livni expressed her fear that Hamas will gain
legitimacy as both a channel for international funding to the
Palestinians and as a political partner for future
negotiations with the GOI. To counter the legitimization of
Hamas, she proposed a pressure strategy for the next three to
four months, during which time the USG and GOI should ""draw a
very hard line"" against foreign funding of Palestinian
activities. U/S Levey asked, &what is our end game? To put
a noose around Hamas, neck?8 Livni claimed that it would
take two to three months before any humanitarian crisis would
emerge, and that the best policy for now was to apply
pressure and ""wait and see"" how Hamas responds. Concerned,
U/S Levey asked, &where will we be three months from now?
Will there be violence and chaos or are we going to figure
out a way to avert a humanitarian crisis?8 MOJ Director
General Abramovich suggested an international funding
mechanism to be vetted by the international community to
ensure that funds go to the Palestinian people and not to the
Hamas-led PA. (The Israeli officials noted that they would
not encourage international donors to donate even food to the
PA because food is as fungible as money, and might also
create the perception that Palestinians are starving.) FM
Livni admitted that the plan is ambitious and noted there is
international consensus that funds need to go to the
Palestinian people, and encouraged continued dialogue to find
an internationally acceptable solution. Continuing the
brainstorming session, FM Livni mentioned that the PA medical
and education systems are extremely problematic and wished
that the international community,s resources could replace
these PA systems. She expressed her disdain for the
Palestinian education system, and alluded to the sharp
increase in religious extremist ideology in the curriculum.
Moreover, she added that she did not want to keep the
Palestinian system going, but that basic services were needed
to support the population, &it is not good to chose between
bad options.8 Finally, she suggested that the future be
divided into phases of action, and that the next three months
should be used to create pressure on the Hamas-led PA before
coming up with a longer-term plan -- &Let,s keep the money
out.8
--------------
LIVNI ON MAY 9 QUARTET MEETING AND UNRWA
--------------
7. (S) FM Livni remarked that the May 9 meeting of the
Quartet will likely include a discussion of using the United
Nations Relief and Works Agency (UNRWA) to transfer funds to
the Palestinians. Since the UN does not consider Hamas to be
a terrorist organization, she insisted that money donated
through UNRWA must have new conditions placed upon it, such
as those that apply to assistance provided through USAID.
She said that she will attend the World Economic Forum (WEF)
meeting at Sharm el Sheikh on May 20-22, and had heard that
Treasury Secretary Snow will also attend. She suggested that
the WEF meeting might be an opportunity for further
discussion of international donations to the Palestinians.
The Ambassador remarked that PM Olmert was also scheduled to
be in Washington on May 23.
8. (S) Israel Money Laundering and Terrorist Financing
Prohibition Authority (IMPA) Director Yehuda Shaffer then
explained that small banks and money-changers in the
Palestinian territories do not deal with U.S. banks and would
not be affected by U.S. Treasury Department actions. He felt
that an international financial intelligence unit (FIU) must
monitor those banks. MOJ DG Abramowitz suggested that the
USG could help the GOI by setting up an FIU in the PA that
would be monitored by an international body. U/S Levey
responded that he was very wary of setting up such an FIU
that Hamas could use as an example of its compliance with
international demands.
--------------
ATTENDANCE
--------------
9. (S) Attendees at the first meeting with MFA officials
included:
Strategic Affairs Bureau Director Ambassador Miriam Ziv
Nonproliferation and CT Department Director Yehuda Yaakov
Nonproliferation and CT Department member Avivit Bar-Ilan
North America Desk Director Dan Arbell
PA Economic/Humanitarian Affairs Project Manager Eli Avidar
Treasury U/S Stuart Levey
Senior Advisor Adam Szubin
Policy Advisor Kristen Hecht
Financial Analyst Matt Epstein
Regional Treasury Attach Brian Grant
Econ Counselor and
Econoff.
The following Israeli and American officials attended the
second meeting in the Foreign Minister's office:
FM Tzipi Livni
MFA DG Ron Prosor
MOJ DG Aharon Abramowitz
Ambassador Miriam Ziv
IMPA Director Yehuda Shaffer
Treasury U/S Stuart Levey
Ambassador Richard H. Jones
Senior Advisor Adam Szubin
Policy Advisor Kristen Hecht
Financial Analyst Matt Epstein
Regional Treasury Attach Brian Grant
Econ Counselor and
Econoff.
10. This cable was cleared by Under Secretary of the Treasury
Stuart Levey.
********************************************* ********************
Visit Embassy Tel Aviv's Classified Website:
http://www.state.sgov.gov/p/nea/telaviv
You can also access this site through the State Department's
Classified SIPRNET website.
********************************************* ********************
JONES
"
SIPDIS
TREASURY FOR SZUBIN
E.O. 12958: DECL: 05/18/2016
TAGS: EFIN IS PREL PTER KPAL KTFN ISRAELI PALESTINIAN AFFAIRS ECONOMY AND FINANCE
SUBJECT: FM LIVNI PROMOTES FINANCIAL PRESSURE STRATEGY
AGAINST HAMAS
Classified By: Ambassador Richard H. Jones for reasons 1.4(b) and (d).
--------------
SUMMARY
--------------
1. (S) In separate meetings with Ministry of Foreign Affairs
(MFA) officials on May 2, the GOI requested that the Treasury
Department warn the Misr Bank in Cairo against making
electronic fund transfers (EFT) to individual Palestinian
accounts at the Bank of Palestine in Gaza. Foreign Minister
(FM) Livni proposed a strategy of pressuring Hamas with a
financial siege for three to four months to see how Hamas
would respond. She asked Treasury Under Secretary (U/S) for
Terrorism and Financial Intelligence Stuart Levey for USG
assistance in preventing Electronic Funds Transfer (EFT) from
international banks into Palestinian accounts. Livni also
sought USG agreement to impose new conditions on
international donations through UNRWA, similar to those
already in place for Palestinian assistance provided through
USAID. End summary.
--------------
MFA RELAYS EUROPEAN FEARS ON IRAN SANCTIONS
--------------
2. (S) At the Tel Aviv offices of the MFA, U/S Levey met
briefly with members of the MFA's Strategic Affairs Bureau.
Non-Proliferation and Counterterrorism (CT) Department
Director Yehuda Yaakov related details from his recent
discussions with European diplomats on the situation with
Iran. Yaakov said that the Europeans had confided to him
that their elected officials are reluctant to publicly
support sanctions against Iran, because the European public
is fearful that sanctions are merely precursors to war. He
remarked that a UN Security Council Resolution, even a
""toothless"" one, would nonetheless be a positive step against
Iran.
--------------
GOI OPPOSED TO BRITISH PROPOSAL
--------------
3. (S) Project Manager for Economic and Humanitarian Aid to
the PA Eli Avidar took issue with a British proposal to
create a mechanism for the international community to donate
to the Palestinian people. According to Avidar, the GOI
agrees in principle to the establishment of an
internationally monitored fund or NGO to channel donations to
Palestinians not involved with Hamas. He stressed that the
GOI would not support any plan, including the current British
proposal, to pay Palestinian salaries with such a fund. He
reported that British diplomats had recently told him that a
British delegation would soon travel to Washington to brief
the USG on their proposal.
-------------- -
MISR BANK COMPLETED TEST RUN TO GAZA ACCOUNTS?
-------------- -
4. (S) Avidar reported that on May 1, Misr Bank in Cairo
attempted a few electronic fund transfers (EFT) into
individual Palestinian accounts at the Bank of Palestine in
Gaza. He characterized this action as a ""test run"" to gauge
GOI and international reactions before conducting large scale
EFT into individual accounts. Avidar asked U/S Levey to warn
Misr Bank against such activity by declaring that they are
not operating according to FATF regulations. U/S Levey
advised that it was not such a simple matter, and that Hamas
was not a designated terrorist organization in most parts of
the world. U/S Levey asked MFA officials what they
envisioned as the strategic &end-game,8 but did not receive
a specific answer. (Comment. On May 17, NSC Counter
Terrorism Finance Director Udi Levi told Econoff that Misr
Bank had not/not attempted the ""test run"" EFT that Avidar
described above. Levi said that the GOI was closely
observing Misr Bank and that he would have been the first
person in the GOI to be notified if, in fact, such an attempt
had occurred. End Comment.)
--------------
LIVNI CONCERNED ABOUT RUSSIAN STANCE ON IRAN
--------------
5. (S) In a free-flowing discussion that at times resembled a
brainstorming session, FM Tzipi Livni, flanked by the
Directors General of the Foreign and Justice Ministries, met
with the Treasury delegation in her Tel Aviv office. U/S
Levey briefed the Foreign Minister on the Treasury
Department's plan to include private financial institutions
in a diplomatic campaign to financially isolate the
government of Iran, starting with targeted financial measures
aimed at individuals or entities supporting terrorism and
proliferation. Levey said that the USG intended to highlight
Iranian regime &bad conduct8 to governments and financial
institutions and underscore the risk to their professional
reputation from doing business with Iran, particularly given
the Government of Iran,s history of cloaking its activities
behind front-companies. FM Livni asked if the Treasury
efforts would occur in parallel to the U.S.-led action
against Iran at the UN or separately. She suggested that
Treasury's offensive could be a trial balloon for political
action at the UN, or a fallback tactic should the UNSC not
adopt a resolution against Iran. Livni said that she was
""not optimistic about the international community"" and was
""very concerned"" about the Russians' behavior regarding
Iran's nuclear threat. She revealed that the Russian Foreign
Minister had told her last week that the GOR would not allow
the UNSC to give the U.S. permission to go to war against
Iran.
-------------- -
LIVNI PROPOSES PRESSURE STRATEGY AGAINST HAMAS
-------------- -
6. (S) FM Livni expressed her fear that Hamas will gain
legitimacy as both a channel for international funding to the
Palestinians and as a political partner for future
negotiations with the GOI. To counter the legitimization of
Hamas, she proposed a pressure strategy for the next three to
four months, during which time the USG and GOI should ""draw a
very hard line"" against foreign funding of Palestinian
activities. U/S Levey asked, &what is our end game? To put
a noose around Hamas, neck?8 Livni claimed that it would
take two to three months before any humanitarian crisis would
emerge, and that the best policy for now was to apply
pressure and ""wait and see"" how Hamas responds. Concerned,
U/S Levey asked, &where will we be three months from now?
Will there be violence and chaos or are we going to figure
out a way to avert a humanitarian crisis?8 MOJ Director
General Abramovich suggested an international funding
mechanism to be vetted by the international community to
ensure that funds go to the Palestinian people and not to the
Hamas-led PA. (The Israeli officials noted that they would
not encourage international donors to donate even food to the
PA because food is as fungible as money, and might also
create the perception that Palestinians are starving.) FM
Livni admitted that the plan is ambitious and noted there is
international consensus that funds need to go to the
Palestinian people, and encouraged continued dialogue to find
an internationally acceptable solution. Continuing the
brainstorming session, FM Livni mentioned that the PA medical
and education systems are extremely problematic and wished
that the international community,s resources could replace
these PA systems. She expressed her disdain for the
Palestinian education system, and alluded to the sharp
increase in religious extremist ideology in the curriculum.
Moreover, she added that she did not want to keep the
Palestinian system going, but that basic services were needed
to support the population, &it is not good to chose between
bad options.8 Finally, she suggested that the future be
divided into phases of action, and that the next three months
should be used to create pressure on the Hamas-led PA before
coming up with a longer-term plan -- &Let,s keep the money
out.8
--------------
LIVNI ON MAY 9 QUARTET MEETING AND UNRWA
--------------
7. (S) FM Livni remarked that the May 9 meeting of the
Quartet will likely include a discussion of using the United
Nations Relief and Works Agency (UNRWA) to transfer funds to
the Palestinians. Since the UN does not consider Hamas to be
a terrorist organization, she insisted that money donated
through UNRWA must have new conditions placed upon it, such
as those that apply to assistance provided through USAID.
She said that she will attend the World Economic Forum (WEF)
meeting at Sharm el Sheikh on May 20-22, and had heard that
Treasury Secretary Snow will also attend. She suggested that
the WEF meeting might be an opportunity for further
discussion of international donations to the Palestinians.
The Ambassador remarked that PM Olmert was also scheduled to
be in Washington on May 23.
8. (S) Israel Money Laundering and Terrorist Financing
Prohibition Authority (IMPA) Director Yehuda Shaffer then
explained that small banks and money-changers in the
Palestinian territories do not deal with U.S. banks and would
not be affected by U.S. Treasury Department actions. He felt
that an international financial intelligence unit (FIU) must
monitor those banks. MOJ DG Abramowitz suggested that the
USG could help the GOI by setting up an FIU in the PA that
would be monitored by an international body. U/S Levey
responded that he was very wary of setting up such an FIU
that Hamas could use as an example of its compliance with
international demands.
--------------
ATTENDANCE
--------------
9. (S) Attendees at the first meeting with MFA officials
included:
Strategic Affairs Bureau Director Ambassador Miriam Ziv
Nonproliferation and CT Department Director Yehuda Yaakov
Nonproliferation and CT Department member Avivit Bar-Ilan
North America Desk Director Dan Arbell
PA Economic/Humanitarian Affairs Project Manager Eli Avidar
Treasury U/S Stuart Levey
Senior Advisor Adam Szubin
Policy Advisor Kristen Hecht
Financial Analyst Matt Epstein
Regional Treasury Attach Brian Grant
Econ Counselor and
Econoff.
The following Israeli and American officials attended the
second meeting in the Foreign Minister's office:
FM Tzipi Livni
MFA DG Ron Prosor
MOJ DG Aharon Abramowitz
Ambassador Miriam Ziv
IMPA Director Yehuda Shaffer
Treasury U/S Stuart Levey
Ambassador Richard H. Jones
Senior Advisor Adam Szubin
Policy Advisor Kristen Hecht
Financial Analyst Matt Epstein
Regional Treasury Attach Brian Grant
Econ Counselor and
Econoff.
10. This cable was cleared by Under Secretary of the Treasury
Stuart Levey.
********************************************* ********************
Visit Embassy Tel Aviv's Classified Website:
http://www.state.sgov.gov/p/nea/telaviv
You can also access this site through the State Department's
Classified SIPRNET website.
********************************************* ********************
JONES
"