IRAN: AMBASSADOR URGES FM HAMID NOT TO UNDERCUT UN

C O N F I D E N T I A L SECTION 01 OF 02 KUALA LUMPUR 000540

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/23/2017
TAGS: PREL KISL KNNP IR MY
SUBJECT: IRAN: AMBASSADOR URGES FM HAMID NOT TO UNDERCUT UN
EFFORTS, NOTES U.S. SANCTIONS LAW

REF: KUALA LUMPUR 61 - EMBASSY EXPRESSES CONCERN OVER
GAS DEAL

Classified By: Ambassador Christopher J. LaFleur, reasons 1.4 (b and d)

Summary
--------------


1. (C) The Ambassador called on Malaysian Foreign Minister
Syed Hamid Albar March 22 to urge Malaysia to discourage
major new investments in Iran, such as SKS Ventures. He
underlined the importance of Malaysians not appearing to
undercut UNSC efforts. The Ambassador also highlighted the
Iran Sanctions Act (ISA),and its potential implications.
Hamid responded that the Malaysian government could not
prohibit its citizens from doing business in Iran, absent
relevant UN sanctions. While he stressed that Malaysia did
not have a "pro-Iran" policy, he noted too that Iran's
resistance to the "West" enjoyed considerable support among
the Malaysian public, as in many other Islamic countries,
which meant the GOM had to handle such issues carefully.
However, he also informed us that the GOM had advised SKS on
the risks of investing in Iran. Hamid assured the Ambassador
that he and Prime Minister Abdullah used their good access to
Iranian leaders to urge them to find a solution through
negotiation. In a follow-on meeting, Ambassador-at-Large
Ghazzali cautioned that the GOM's reaction to any unilateral
U.S. sanctions would be very negative. End Summary.

Malaysia Should Not Send Wrong Signal to Iran
--------------


2. (C) The Ambassador, accompanied by DCM and polchief, used
his March 22 call on Foreign Minister Hamid to urge Malaysia
to hold back major new investments in Iran, particularly in
the petroleum sector, in light of UNSC sanctions discussions
and on-going diplomacy. With Iran clearly failing to meet
the requirements of UNSC resolution 1737, and the UNSC on the
verge of voting on strengthened sanctions, all countries
should discourage new oil/gas deals. To do otherwise would
send the wrong signal to Iran, undercut UN actions, and
damage the prospects for a diplomatic solution. The
Ambassador raised the planned investment by SKS Ventures as
an example, recalling the serious concerns we conveyed to the
Ministry in January (reftel). He also noted U.S.
congressional interest in implementation of the Iran
Sanctions Act (ISA).

GOM Cannot Prevent Private Investment
--------------


3. (C) The Foreign Minister responded that it was not
possible for the GOM to prohibit legitimate business dealings
with Iran. Malaysia would enforce UN sanctions, but
otherwise could only provide advice on country-specific risks
to potential Malaysian investors. Malaysia did not encourage
investment in Iran, but decisions were up to individual
companies. "From our perspective, this is not a question of
a pro-Iran policy," Hamid explained, "but is a question of
doing business that is profitable to us." In such business
dealings, "we don't talk religion, we don't talk nuclear
issues."

Privately Urging Iran to Find Peaceful Solution
-------------- --


4. (C) Hamid stated that Malaysia clearly did not want to
see "another conflict" in West Asia. Malaysia used its good
relations with Iranian leaders to convince them to find a
peaceful solution to the nuclear issue. Prime Minister
Abdullah had done so when he met President Ahmadinejad in
Bali last year and Hamid had made similar points to the
Iranian Foreign Minister when they met in Geneva on the
margins of the Human Rights Council. Hamid said the solution
should emerge from talks "without conditionalities." It was
a matter of "developing trust" on all sides. Hamid said
there was a feeling in the Muslim community of differential
treatment for North Korea and Iran, even though North Korea
had nuclear weapons and Iran claimed it was only pursing
nuclear energy. The Ambassador noted that North Korea had
ultimately engaged in negotiations, while Iran continued to
reject talks.

Iran Fills Vacuum of Leadership
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5. (C) The Foreign Minister shared his views that "Iran has
captured the imagination" of many Muslims and assumed an

KUALA LUMP 00000540 002 OF 002


increasingly prominent role. The Malaysian public was
sympathetic to Iran and the GOM needed to handle these issues
carefully to sustain public support. He attributed this
situation to the "vacuum" created by lack of leadership from
Saudi Arabia and other Arab states. Worse yet, if Saudi
Arabia were only to talk about the concerns of Sunni Muslims,
it will have ceded the Shi'a to Iranian leadership. Hamid
said he had shared these concerns with Arab counterparts
during his visits to the Middle East.

Ghazzali Cautions on Negative Response to U.S. Sanctions
-------------- --------------


6. (C) Ambassador LaFleur reinforced the U.S. position on
Iran and highlighted ISA ramifications in an immediate
follow-up meeting with Ambassador-at-Large and former
ambassador to the U.S. Ghazzali Khalid. Ghazzali reiterated
that the GOM would respect UN sanctions on Iran, but not U.S.
sanctions. He indicated Malaysia's reaction to U.S.
sanctions would be very negative and recalled that when some
in Congress had called for the U.S. to halt FTA negotiations
over SKS, GOM leaders had felt compelled to respond by
threatening to pull out of FTA negotiations themselves. Once
made public, sanctions or the threat of sanctions, would
necessarily entail a strong and negative GOM response.
Ghazzali stated that "our relationship with Iran allows us to
speak frankly with Iran." He thought that, from Teheran's
perspective, Malaysian views did not come with the same
baggage as those from Arab states. Ghazzali characterized PM
Abdullah's past bilateral talks with Iranian leaders as "very
blunt," with the PM urging Iran to play a "constructive role"
in the interest of "stability."

Comment
--------------


7. (C) Hamid responded in a calm and constructive manner to
the Ambassador's Iran points, and while he deflected the
notion of government action to stop investments in Iran, the
Foreign Minister appeared to be signaling that the GOM was
trying to be helpful behind the scenes. The reality is that
while Malaysia's Sunni leadership has little affection for
the Iranian leadership, Malaysia's strong sense of
nationalism, leadership of the OIC, adherence to Non-Aligned
world views, and the GOM's need to be seen by its core Malay
constituency as protecting Muslim interests would all
contribute to a strong rejection of U.S. unilateral sanctions
on Malaysian investors in Iran. Malaysia also is pursuing a
clear policy of increased trade and investment ties with
Iran. UN sanctions, however, are another matter, and we are
most likely to make an impact here by underlining the
importance of bolstering UNSC efforts to secure a diplomatic
solution to the Iran nuclear problem.
LAFLEUR