S E C R E T SECTION 01 OF 02 IRAN RPO DUBAI 000006

SIPDIS

SIPDIS

TREASURY FOR HECHT

E.O. 12958: DECL: 2/15/2017
TAGS: ECON EFIN PGOV IR
SUBJECT: BUSINESSMAN'S VIEW ON IRAN'S TIGHTER BANKING SECTOR AND IRGC
PRESENCE IN IRAQ

REF: RPO DUBAI 0005

RPO DUBAI 00000006 001.2 OF 002


CLASSIFIED BY: Jillian Burns, Director, Iran Regional Presence
Office - Dubai, Department of State.
REASON: 1.4 (d)

1.(S) Summary. According to a Dubai-based Iranian entrepreneur,
private Iranian banks are not faring well. In particular, he
predicted that Saman Bank will soon be bankrupt. The contact
opined that the Iranian government has done more to damage cash
flows in and out of Iran than recent actions taken by the US and
the UN. In his opinion, US and UN actions only harm honest,
legitimate business entities, as anyone wanting to move money
and goods can do so via informal - and not always legal -
networks. The businessman claimed that he is one of a handful
of local Iranians engaged in legitimate business and not simply
operating in Dubai to circumvent sanctions. He said in fact he
no longer tries to conduct much business in Iran, because of the
difficult operating climate. Regarding Iranian presence in
Iraq, he claimed that some IRGC members there are actually
retired and now in business. They are among the few
businessmen who can "stomach" the investment climate and
security environment there. End Summary.

Iranian banking
--------------

2.(S) In a February 13 conversation, a local Iranian
entrepreneur told IRPoff that private banks in Iran are not
faring well. He claimed that Saman Bank (owned by Khodro car
manufacturers) is on the verge of bankruptcy because it
overextended itself by opening letters of credit (LCs) valued at
2.5 times its actual collateral. In general, stated the
entrepreneur, private Iranian banks offer loans and extend LCs
on much more relaxed terms than state-owned banks. Despite the
fact that private banks charge higher rates than the government
imposed rates used by state banks, "easier" terms and a focus on
customer service have attracted customers away from state banks.


3.(S) When asked if recent US and UN actions against Iran have
impacted the price of LCs, the businessman said "on

e week after
you took action, the Central Bank stopped all LCs in Iran."
(Note: it was not clear if he was referring to US Treasury
action or UNSC resolution 1737. Endnote) He continued, "I don't
know why they did that. Their restrictions have done more to
harm business than anything the international community could
have done." Reportedly, LCs are being opened again in Iran -
albeit on a much slower basis. The contact said a committee at
the Central Bank has to review every request for an LC. If
opening a letter of credit from Dubai, the businessman said it
is much better to use Standard Chartered than Dubai-based
Iranian banks - as the rates are better at Standard Chartered.
He said he had used HSBC in the past as well, but HSBC cut all
of its business ties with Iran.

Impact of US and UNSC actions
--------------

4.(S) The contact noted that in recent years "many" Iranians
moved to Dubai and set up local companies with the express
purpose of circumventing US sanctions. The entrepreneur claimed
that he is one of a handful of Iranians based in Dubai with an
almost wholly UAE market. He said if necessary, he could cut
off all ties with Iran and remain in business. He claimed that
US Treasury actions and UNSCR 1737 only serve to hurt legitimate
business entities - like himself - who use formal, legal means
to transfer goods and money. He said that individuals who want
to get around the sanctions are able to do so through informal
channels. Because of the extensive network between Dubai and
Iran, the contact claimed that informal systems to move goods
and money are quite deep-rooted. He claimed that one method to
illegally move money from Iran to Dubai is to open an LC in
Dubai and have the money transferred from Iran - absent any
actual shipment of goods. The contact said all that is needed
is a falsified bill of lading and certificate of origin. (Note:
similar information reported in reftel by separate source.
Endnote)

IRGC in Iraq
--------------

5.(S) The contact noted that Iran has historic ties to many
countries in the region, and Iraq is no different. The

RPO DUBAI 00000006 002.2 OF 002


businessman claimed that some of what appears to be IRGC
presence there may be in fact former IRGC members now engaged in
business activities. The contact noted that former IRGC members
are much more comfortable doing business in Iraq than the
average individual. They are used to hostile environments, he
said. It is possible they pass on information to the Iranian
government, he said, just like a former US official working in
the private sector abroad may continue to share information with
the US government. (Note: The contact claimed ongoing
friendships with former IRGC members from his time of mandatory
military service, although he did not indicate whether he had
done his service in that branch. Endnote)

6.(S) Comment: The contact indicated his motivation for
speaking with IRPoff was a personal desire to promote positive
US-Iran relations. Although critical of the Iranian government,
he caveated all of his comments by noting that he sees himself
as a mediator - trying to tell both sides the truth. He offered
to arrange a meeting for IRPO with the new Iranian Ambassador to
the UAE, former Foreign Ministry spokesman Asefi, which we
respectfully declined. He commented that he was surprised by
the appointment of someone as senior as Asefi to the UAE and
mused whether it was a reaction to IRPO's presence here. He
claimed that Asefi was relatively open-minded. In addition,
the businessman clearly wanted to persuade the US that the
current sanctions regime on Iran more negatively impacted
legitimate businesses operating through formal, legal channels,
not the Iranian government and illegal trade. Whether these
were self-serving or genuine comments is not known. End Comment.
BURNS