FRENCH AND G7/EU REACTIONS TO ADDITIONAL IRAN

S E C R E T PARIS 000124

SIPDIS

SIPDIS

STATE FOR T, ISN/CPI, EUR/PGI, EUR/PRA, EUR/WE and EB/ESC/TFS
Treasury for Levey, Glaser, Fowler
NSC for Tobey, Stephens, Herro

E.O. 12958: DECL: 1/11/17
TAGS: EFIN PARM PGOV ETTC UNSC FR
SUBJECT: FRENCH AND G7/EU REACTIONS TO ADDITIONAL IRAN
DESIGNATIONS UNDER EO 13382

REFS: A) STATE 2284

B) Rome 47
C) Berlin 47
D) London 104

Classified by Econ M/C Thomas J. White, Reasons 1.4 b and d


1. (S) SUMMARY: France appreciated early notice of the US
decision to designate domestically Bank Sepah delivered per ref
A, but will probably defer to the EU for any possible further
action against the bank, since it lacks independent national
authority on proliferation matters. Separately, France hosted
on January 10 an experts-level meeting with G7 partners and the
EU on WMD proliferation finance, where experts discussed Bank
Sepah and weighed next steps. END SUMMARY.

BILATERAL REACTION
--------------

2. (U) We delivered ref A demarche as requested on January 9 to
David Bertolotti at the MFA's nonproliferation office; as well
as to the Ministry of Finance to Karine Segura, Office Director
for Asset Controls, and Stephanie Talbot, special advisor for G7
issues.


3. (S) Bertolotti confirmed France had received notice through
its EMBASSY in Washington the day before. His initial reaction
was to note that France is not surprised about Bank Sepah, as
officials have been aware of its activities. In response to our
request that France consider similar action, Bertolotti observed
that France does not have legal tools equivalent to EO 13882
available for such an action. Without making any commitments,
he concluded EU-level action is a possibility, but promised
France would continue to study the issue.


4. (S) In advance of the G7 meeting on January 10, Talbot also
told us that she does not think France would be in a position to
follow the US lead. She said the GOF does not have any evidence
that the Paris branch of the bank had been involved in
questionable activities. Absent any "proof," the GOF likely
could not take action. She did note that the US Treasury
designation would have repercussions on the activities of the
Paris branch of the bank, since other financial institutions
would have taken note of our actions and may reconsider their
own dealings with Bank Sepah.


5. (S) We also delivered on January 11 a reinforcing message
from U/S Nick Burns to French MFA Political Director Gerard
Araud that "such designations are a necessary way to implement
effectively UNSCR 1737," along with a copy of Treasury's press
announcement of January 9.

G7 AND EU REACTION
--------------

6. (S) Concurrently, France hosted on January 10 an
experts-level meeting with G7 partners and the EU on WMD
proliferation finance, led on the US side by Treasury DAS Daniel
Glaser. Bank Sepah figured prominently among the discussion
topics (other details to be reported septel). The USDEL said
the US view is that the Treasury designation of Bank Sepah
implements UN Security Council Resolution 1737, which refers to
"necessary measures to prevent to provision to Iran of any . . .
financial assistance, investment, brokering or other service".


7. (S) The German delegation, led by Helmut Hoffman from the
MFA and Ursina Krumpholz from the Ministry of Industry, wondered
about the wisdom of the US targeting entire banks, and even
allowing that the designation is not punitive but designed to
change behavior, questioned how, as a practical matter, a bank
might be able to demonstrate change if all its assets were
frozen.


8. (S) The Canadian delegation, led by Jane Pearse from the
Department of Finance and Michael Blackmore from DFAIT's Nuclear
Non-Proliferation Division, noted that Canadian law only allows
for designations of individuals or entities, not the prevention
of transactions, so it would be impossible for Canada to take
further action until the UNSC makes additional designations.


9. (S) The EU delegation, led by Andreas Strub from the
E

European Council and Bruno Dupre from the Commission (DG Relex),
noted that the focus of the Commission has been on raising
awareness in the anti-money laundering/terror finance area, and
it is open to proposals from member states. However, it hopes
to avoid grey zones that lead to de facto bans on doing business
entirely.


10. (S) Italy, led by Filippo Formica from the MFA, commented
that it had prepared a circular to its banks to raise the
awareness of banks to doing business with Iran. It was a short
note focusing on the nature of the problem which, responding to
a question from Canada, does not include a definition of what
constitutes proliferation finance. The USDEL praised the
Italian initiative, saying it is a good example of steps that
can be taken even in advance of domestic legal authority.


11. (S) The French delegation, led by Phillipe Errera from the
French MFA and Corso Bavagnoli from the French Ministry of
Finance, welcomed the update from the USDEL, and suggested the
European Commission should get input bilaterally from the member
states on next steps.

Please visit Paris' Classified Website at:
http://www.state.sgov.gov/p/eur/paris/index.c fm
STAPLETON #