FRENCH SUPPORT FOR IRAQ COMPACT, IRAN SANCTIONS

S E C R E T SECTION 01 OF 02 PARIS 001708

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STATE FOR EB, EUR/WE, NEA
TREASURY FOR TFI, IA

E.O. 12958: DECL: 04/26/2017
TAGS: EFIN PREL ETTC PARM IR IQ FR
SUBJECT: FRENCH SUPPORT FOR IRAQ COMPACT, IRAN SANCTIONS


Classified by A/DCM Thomas J. White for reasons 1.4 (b) and (d)


1. (C) SUMMARY: Treasury Deputy Secretary Kimmitt met with the
French April 26 to discuss Iraq and Iran. Officials remained
positive about the Iraq Compact's goals, but were unable to
confirm ministerial participation at the Compact launch due to
French elections. On Iran, both of the presidential candidates
have spoken in equally strong terms, so officials predict France
will maintain its hard line on sanctions. END SUMMARY

POLITICAL DISCUSSION AT THE MFA
--------------

2. (SBU) Participants in the meeting included:

MFA
Gerard Araud, MFA Deputy Secretary General & Director General
for Political Affairs and for Security;
Jean-Pierre Guinhut, Special Coordinator for Iraq;
Francois-Xavier Carrel-Billiard, Counselor, Office of the
Minister;
Philippe Leglise-Costa, Deputy Director, Directorate of Economic
Affairs;
Gilles Bonnaud, Deputy Director, Directorate of North Africa &
Middle East;
Bernard Chappedelaine, Desk Officer, Directorate of North Africa
& Middle East;
Nicolas Kassianides, Desk Officer, Directorate of UN &
International Organizations;
Phillipe Errera, Deputy Director, Directorate of Strategic
Affairs, Security and Disarmament;
David Bertolotti, Desk Officer, Directorate of Strategic
Affairs, Security and Disarmament.

USG:
The Deputy Secretary of the Treasury;
DCM Tom White;
TFCO Otto Van Maerssen (notetaker);
PolOff Rob Waller.


3. (SBU) Treasury Deputy Secretary Robert Kimmitt met in Paris
April 26 with Gerard Araud, Director General of Political
Affairs at the MFA, to discuss the way forward on Iraq, and Iran
sanctions.

IRAQ
--------------

4. (C) Kimmitt thanked the French for their participation to
date in preparing the International Compact for Iraq. He
encouraged ministerial representation at its launch in Egypt on
May 3 (even if by a minister other than the foreign minister),
given the expected attendance of multiple Iraqi ministers (oil,
finance, planning, etc.) and ministers from most Preparatory
Group countries. Araud said that Ambassador Guinhut would
attend, but getting a French minister would be very difficult
given the current electoral campaign. He promised nevertheless
to pass Kimmitt's suggestion (that any minister would do) to the
political level for consideration.


5. (C) Kimmitt urged France to be in a position to endorse
support for the ICI, since it represents Iraq's transition over
the next 5 years from receiving development assistance to
receiving investment flows, thereby tapping its wealth for the
benefit of all Iraqis. He also encouraged France to support EIB
involvement in Iraq projects. Araud remarked that the EU has
already committed 1.8 billion euros, and is providing budget
support. The USG can rely on the EU. Guinhut noted that the
real question is not one of support, but of the security
situation. Kimmitt countered that the strategy in Iraq now more
explicitly links security operations to rebuilding, and Iraqi
officials are closely engaged in all such operations. He
encouraged greater French contribution to Iraq.

IRAN
--------------

6. (S) Kimmitt noted the importance of Europe continuing to
take the lead to contain Iran's nuclear ambitions, given the
existence of ties to Iran that the U.S. lacks. He noted that
the USG is moving away from broad country sanctions to targeted
measures against illicit conduct involving terrorism and
proliferation. UN action against Iran appears to be having a
political effect within Iran. Nevertheless, the USG remains
concerned about Iranian banks, including its central bank.


7. (S) Araud said USG pressure on French banks runs close to
foreign interference, but said that he expected Kimmitt to get a
stronger reaction from the French Treasury on that point. (Note:
In fact, per septel the French Treasury did not raise the issue.
End note.) He provided a frank readout about a split in views

PARIS 00001708 002 OF 002


within the MFA: the economic bureau is concerned about risk to
the banking system, but the non-proliferation bureau is quite
happy with the USG approach because it has been effective.
Araud commented that the French Assistant Secretary for Mideast
Affairs visited Tehran a week ago, and had heard many in the
business and political establishment saying that President
Ahmadi-Nejad is crazy, and that Iran may soon be obligated to
ration gasoline if it does not change policy.


8. (S) Araud noted that French banks have reduced their
exposure in Iran. The GoF is reducing its guarantees of export
credits by 20 percent, and intends to keep trending down. Bank
activities have been halved in one year, dropping from 6 to 2.7
billion euros of exposure. France cannot leave overnight,
especially since companies like Total have interests in selling
refined products. Iran is important to Total, and Total is
important to France. Araud remarked that the Iranian Ambassador
has been visiting French banks to encourage them to return to
doing business with Iran, but that has led nowhere. The
political directors will meet in May to discuss the way forward.
Araud does not think there is much systemic risk to the banking
system if other banks are targeted. He assured the Deputy
Secretary that France is committed to a third resolution should

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it prove necessary, although every step gets more difficult,
especially with China.


9. (S) Araud mentioned concerns in France about a new U.S. Iran
Sanctions Act, and said that France has asked that it be raised
at the next U.S.-EU meeting. It is important to hit Iran, not
each other, he said. Kimmitt acknowledged the concerns, and
said he intends to continue advocating targeted sanctions as the
most effective way forward.


10. (S) Kimmitt raised the issue of export credits, signaling
that he hopes to continue a dialogue. Economic Affairs Deputy
Director Leglise-Costa said he had seen reports of the OECD ECA
meeting, where the proposal to adopt a common line was not
enthusiastically welcomed. In France, however, in addition to
the reduction in credit guarantees, export credit controls
include a requirement that firms acknowledge their obligations
to perform due diligence regarding their Iranian customers and
the nature of any transaction.


11. (S) Kimmitt commented that the French may see a change in
the Chinese position on Iran sanctions, given their expanding
commercial banking interests in the U.S. market. Araud
confirmed that the French have sensed a stiffening, which they
attributed to the Chinese (and Russians) becoming fed up with
Iranian intransigence. He concluded that since both
presidential candidates have made tough statements about Iran,
French policy will remain the same after the elections.


12. (U) The Deputy Secretary cleared this message.

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

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