|07KUALALUMPUR61||2007-01-10 10:29:00||UNCLASSIFIED//FOR OFFICIAL USE ONLY||Embassy Kuala Lumpur|
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UNCLAS SECTION 01 OF 02 KUALA LUMPUR 000061
1. (SBU) Summary: Embassy raised concerns with the Malaysian
Government regarding a reported $16 billion gas development
deal between a Malaysian firm, SKS Ventures, and Iran, noting
possible implications under the Iran Sanctions Act and
pointing out the particularly poor timing given recent UN
sanctions against Iran. Foreign Ministry officers
highlighted Malaysia's more benign view of Iran, growing
trade relations with Teheran, and the difficulty of acting
against a private firm based on another country's law. They
reiterated, however, Malaysia's intention to abide by UNSCR
1737 sanctions against Iran. A representative from the
Ministry of International Trade and Industry responded that
he only knew what he had read in the press about the deal.
SKS Ventures is owned by Syed Moktar Al-Bukhary, one of the
country's wealthiest ethnic Malay businessmen with
connections to former Prime Minister Mahathir. End Summary.
2. (SBU) A/DCM called on desk officers in the Malaysian
Foreign Ministry's Americas and Multilateral Affairs
divisions on January 10 to express concern over press reports
of the signing of a $16 billion Memorandum of Understanding
between Malaysia's SKS Ventures and the National Iranian Oil
Company (NIOC). According to press accounts, SKS Ventures'
upstream project would help to develop the Golshan and Ferdos
gas fields, including building LNG production units, based on
a buyback contract. NOIC expects this to be followed by
another contract for downstream cooperation over a period of
25 years. The volume of the Golshan and Ferdows gas fields
is estimated at 50 trillion and ten trillion cubic feet,
respectively, making them the largest gas fields outside of
Russia. Production is expected to yield 70 million and 25
million cubic meters daily from the Golshan and Ferdows
3. (SBU) A/DCM noted that the US continues to have deep
concerns about Iranian policies and actions, in particular,
at this time, Iran's nuclear activities, which we believe are
aimed at establishing a nuclear weapons capability. In light
of Iran's policies and actions, we have long opposed
investment in Iran's petroleum sector, and our Iran Sanctions
Act, with provisions that were recently reauthorized by
Congress, provides for sanctions for certain such
investments. Against the backdrop of recently-imposed UNSC
sanctions on Iran, this was a particularly unfortunate time
to be entering into agreements for gas development projects
in Iran, even if these were not directly related to Iran's
nuclear and missile programs. A/DCM urged the Malaysian
Government to weigh in with SKSV to reconsider plans to move
forward with its reported agreement on the Ferdos and Golshan
gas fields, particularly at this sensitive time.
4. (SBU) Foreign Ministry desk officers, unfamiliar with the
reported SKSV deal, expressed appreciation for the
information and the background on the Iran Sanctions Act.
They explained that Malaysia had a different perception of
Iran's nuclear development program and did not share the U.S.
view of Iran's program as a security threat. Malaysia and
Iran enjoyed a strengthening trade relationship. The
Malaysian Government, even if it were so inclined, would have
a difficult time restricting private Malaysian investment in
Iran on the basis of another country's law. UNSC sanctions
on Iran's nuclear and missile programs, however, constituted
another matter. The GOM would respect and implement UNSCR
1737 sanctions. The desk officers note that the Ministry of
International Trade and Industry (MITI) would play an
important role in such issues. The desk officers said they
would share our concerns with senior Ministry officials, who
were unavailable to meet at short notice.
5. (SBU) EconOff contacted Dato Ooi Say Chuan at MITI who
responded that he only knew what he had read in the press,
but that the Ministry would look into the matter.
6. (SBU) SKS Ventures is owned by Tan Sri Syed Mokhtar
Al-Bukhary, a Malaysian businessman considered to be one of
the richest ethnic Malay corporate figures. Syed built his
original fortune through rice trading, land deals and state
government contracts. Observers attribute his later rise to
Syed's close connections with former Prime Minister Mahathir.
Syed's business interests include plantations, property
development, construction, engineering, power generation,
mining, seaport construction and operation, airport
management, railways, hotels, manufacturing, retail, and
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defense technologies. Syed Mokhtar has been the recipient of
countless Malaysian government contracts and coveted
licenses. According to press reports, in 2006 Saudi Arabia
awarded a $30 billion contract to one of Syed's companies for
development and management of "Jizan economic city," together
with the Bin Laden Group.
7. (U) Press reports quote an unnamed source close to Syed
Mokhtar as saying, "We don't worry about the sanctions.
There's so much liquidity, you don't have to go to New York,"
and pointing out that funds can be raised in the Middle East
or in Iran itself.
8. (SBU) Comment: In light of Malaysia's friendly relations
with Iran and its strong opposition to sanctions in general,
we should not expect a supportive response from the GOM.
Also, with Syed Mokhtar's broad holdings both within and
outside of Malaysia, it is not clear to us that U.S.
sanctions against SKS Ventures would have significant impact
on his bottom line.