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 -------------- ¶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