ISA: SWISS SUPPORT EGL DEAL, VIEW IT AS ISA AND \

2007-07-19 14:17:00 07BERN664 Embassy Bern CONFIDENTIAL 07STATE79777 VZCZCXYZ0001\
PP RUEHWEB\
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DE RUEHSW #0664/01 2001417\
ZNY CCCCC ZZH\
P 191417Z JUL 07\
FM AMEMBASSY BERN\
TO RUEHC/SECSTATE WASHDC PRIORITY 4233\
INFO RUCNMEU/EU INTEREST COLLECTIVE PRIORITY\
RHEHAAA/WHITE HOUSE WASHINGTON DC PRIORITY\
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0130\
RUEHGV/USMISSION GENEVA PRIORITY 2731\
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY\
C O N F I D E N T I A L BERN 000664 \
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SIPDIS \
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SIPDIS \
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STATE FOR P, E, ISN, EUR \
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E.O. 12958: DECL: 07/18/2017 \
TAGS: ENRG ETTC PARM SZ
SUBJECT: ISA: SWISS SUPPORT EGL DEAL, VIEW IT AS ISA AND \
UNSCR COMPLIANT \
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REF: A. STATE 79777 \
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B. STATE 22311 \
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Classified By: POL/E Eric Lundberg, Reason 1.4 b/d \
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1.(C) Summary. Econoff delivered the EGL points in REF A to \
a Swiss officials from the Departments of Foreign Affairs, \
Energy, and Economic Affairs on July 18. The Swiss officials \
confirmed that EGL signed the reported multi-billion dollar \
contract with the government of Iran for 5.5 billion cubic \
meters of liquid natural gas annually. The GOS added that \
EGL's contract and the proposed TPA pipeline to deliver the \
gas to Europe would help Switzerland diversify its energy \
supply, reducing its reliance upon Russia for LNG. Hammer \
said that EDA lawyers determined that EGL's contract was \
consistent with UNSCR 1737 and 1747 and believed that the \
annual value of the contact would fall below the $20 million \
threshold wherein the Iran Sanctions Act (ISA) could be \
applied. End Summary. \
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EGL Deal Signed, Contingencies are Business Confidential \
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2.(C) Econoff raised the serious concerns the USG has with \
EGL's gas contract with Iran, during a July 18 meeting with \
Swiss Foreign Affairs Department (EDA) Americas Division \
Deputy Urs Hammer, Swiss Federal Office of Energy (SOFE) \
International Affairs officer Pascal Previdoli, and Swiss \
State Secretariat for Economic Affairs (SECO) Middle East and \
African Affairs Director Rita Trier-Somazzi. SOFE's \
Previdoli confirmed that the EGL contract has been signed and \
that it could be valued in the billions of dollars depending \
on the price of the gas and the length of the contract. He \
said that there were uncertainties in the contract, as Iran \
has signed 15 LNG deals to date and did not have the capacity \
to meet all of its current commitments. He told Econoff that \
the contingencies in the EGL deal were not disclosed to the \
Swiss government because they were considered business \
confidential, but added that EGL certainly included caveats \
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SIPDIS \
in the contract, given the unreliable nature of the supplier \
and the numerous commitments the Iranians have made. \
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EGL Making No Investments in Iran \
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3. (C) Previdoli explained that the EGL deal was approved by \
the Swiss and EU member state governments and was part of an \
European energy security plan to diversity the continents \
supply of LNG. Russia, a country Previdoli described as \
non-transparent and prone to negative energy policies, \
remains unreliable, forcing Switzerland and Europe to arrange \
alternate suppliers of LNG to prevent a "cut off." The Swiss \
government did not oppose EGL's deal because it was only for \
the delivery of 5.5 billion cubic meters annually and did not \
entail gas or petroleum investments in Iran. The contract \
was also consistent with EU legislation and was therefore \
supported in Brussels. \
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UN and ISA Compliant \
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4. (C) EDA's Hammer explained that the Swiss government had \
examined EGL's contract because it did not want Switzerland \
to be in violation of UNSCR 1737 or 1747. EDA's lawyers also \
examined the potential conflicts with the Iran Sanctions Act \
(ISA) and were of the opinion that the EGL deal would be \
compliant with ISA, since the annual value of the contract \
for the gas is not likely to exceed the annual $20 million \
limit. \
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Pipe(line) Dreams \
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5. (C) SOFE's Previdoli and SECO's Trier-Somazzi explained \
that the two trans-Adriatic pipelines under construction, the \
TAP and the IGI, were competing with one another and that \
only one would be economically viable. The pipelines were at \
identical stages of planning and funding, making EGL's \
conclusion of a gas deal an important selling point for \
investors. The TPA pipeline's financial future was much \
brighter, but not certain, as there are Russian and Italian \
interests pitted against it. \
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Comment \
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6. (C) Comment. The Swiss government firmly believes the EGL \
deal will benefit Swiss economic security, since it promises \
to diversify the Swiss gas supply away from Russia and \
introduce competition into the market, lowering prices. The \
government also maintains that the deal is in full conformity \
with UNSCR 1737 and 1747, and lawyers were confident that it \
would not run afoul of ISA. The Swiss government remains \
committed to the P5-plus-one negotiations and to ensuring \
that Iran not develop a nuclear weapons capability. \
According to the Swiss government, these objectives are not \
undermined by the EGL deal. \
CONEWAY \