BAHRAIN: ENSURING ROBUST IMPLEMENTATION OF

S E C R E T SECTION 01 OF 02 MANAMA 000714 SIPDIS SIPDIS ISN/CPI, T, NEA/ARP, EEB E.O. 12958: DECL: 07/26/2017 TAGS: KNNP MNUC ECON PARM IR BA REGION SUBJECT: BAHRAIN: ENSURING ROBUST IMPLEMENTATION OF UNSC-IMPOSED SANCTIONS ON IRAN REF: A. STATE 101574 ¶B. MANAMA 675 ¶C. STATE 98419 Classified By: Ambassador William T. Monroe, reasons 1.4(b) and (d). ¶1. (U) This is an action request. Please see paragraph 10. -------------- SUMMARY -------------- ¶2. (C) The Ambassador July 25 urged Central Bank Governor Al Miraj to continue his vigilance regarding Bahrain's involvement with Iranian financial institutions. Al Miraj said he remained committed to preserving the integrity of Bahrain's financial system. However, he stated that Ahli United Bank (AUB) CEO El-Labban had assured him that Future Bank's prospective venture to open a branch on Kish Island in Iran would be limited to trade-related projects and would involve nothing illicit. Al Miraj proposed a joint meeting with El-Labban to explore any legal basis of USG concerns regarding the venture as well as broader goals on Iran trade restrictions. Al Miraj doubted that UNSC financial prohibitions would deter Iran from its nuclear ambitions. Post requests talking points ahead of the aforementioned joint meeting with AUB. End Summary. -------------- VIGILANCE URGED -------------- ¶3. (C) The Ambassador, in his July 25 farewell call to Central Bank Governor Rashid Al Miraj, reaffirmed the importance of universal and robust implementation of UNSCRs 1737 and 1747 (per Ref. B). The Ambassador said that Iran is seeking any possible means of escaping the pressures currently being brought to bear on its nuclear weapons program by the financial restrictions these resolutions impose. He urged the CBB's continued vigilance in this regard. "I can't overstate how important this is from a U.S. point of view." The Ambassador acknowledged that Bahrain's UN delegation had submitted its 1737 and 1747 implementation reports and noted that the U.S. delegation had responded with specific questions regarding several Bank Sepah-related transactions. Al Miraj indicated that he had seen the questions but did not elaborate on the status of Bahrain's response. ¶4. (C) Al Miraj said he had read the demarche that the Ambassador had delivered to Foreign Minister Shaikh Khalid (Refs. C and D) and that he wished to assure the Ambassador that the CBB was committed to preserving the integrity of Bahrain's financial system. On AUB's interest in Future Bank, Al Miraj said AUB was only a minority stakeholder. He said he had discussed U.S. concerns with AUB CEO Adel El-Labban and had been assured that AUB's involvement with Future Bank transactions would be limited to trade-related projects and would involve nothing illicit. ¶5. (C) (Note: El-Labban confirmed to the Ambassador July 24th that Future Bank had applied for approval to open a branch on the Iranian Kish Island free zone. El-Labban told the Ambassador that Iran had been pressing Future Bank to open a branch in Iran, but that a branch on Kish Island would have little commercial significance (suggesting it was just a gesture to ease pressure from Tehran). ¶6. (C) Al Miraj asked if there was a legal basis for USG concerns over AUB's current and prospective additional stake in Future Bank. More broadly, he asked if the USG ultimately sought to restrict all commerce with Iran? If not, what commerce, financial ties, with Iran did the USG recognize as legitimate? "Iran is our neighbor and is an important commercial market." He proposed a joint meeting with AUB's El-Labban that would allow the CEO to fully discuss the issues and hopefully allay Embassy concerns. ¶7. (C) Acting Pol/Econ Chief stressed that, while there were financial ties with Iran that could be said to be legitimate, it was becoming increasingly difficult to distinguish these from the illegitimate. Deceptive financial practices supported by the Iranian Government meant that apparently clean transactions could be tainted. Increasing caution and scrutiny in dealing with Iranian institutions was, therefore, required. MANAMA 00000714 002 OF 002 -------------- FINANCIAL PROHIBITIONS SUFFICIENT? -------------- ¶8. (C) The Ambassador noted that UNSCRs 1737 and 1747 were having an effect. "You think so?" Al Miraj asked. He said it was difficult to believe that sanctions could be particularly effective so long as "two of the world's biggest countries, Russia and China," resisted truly meaningful measures. The Ambassador replied that Russia's suspension of assistance had significantly slowed the progress of Iran's nuclear program. He added that North Korea and Libya each served as instructive examples of the potential effectiveness of financial sanctions in reversing the development of rogue nuclear programs. ¶9. (C) Al Miraj said he believed these examples did not apply to Iran. He added that in his view, Iran saw itself as an ascending power with an agenda that called for exerting ever greater influence in the region. He doubted that Iranian leadership would be deterred from its ambitions by UNSC financial prohibitions. "Iran is belligerent. They have ambitions and they are already seeing their ambitions unfold in the Middle East." -------------- COMMENT AND ACTION REQUEST -------------- ¶10. (S) Although Al Miraj appears to be under no illusions regarding Iran's regional ambitions, his recognition of Iran as an "important commercial market" reflects a view widely held in Bahrain's business community. The CBB thus far assesses that from a due diligence perspective, there are no problems with Future Bank's future Kish Island venture (Ref. A). However, the bank is sensitive to potential threats to Bahrain's reputation as a tightly-regulated financial center, and we should use our upcoming meeting with CBB/AUB officials to press our position. Post requests releasable talking points tailored to address Governor Al Miraj's questions (para. 6) regarding the legal arguments against the pending Future Bank venture on Kish Island and trade/financing with Iran. End Comment. ********************************************* ******** Visit Embassy Manama's Classified Website: http://www.state.sgov.gov/p/nea/manama/ ********************************************* ******** MONROE