FRANCE TIGHTENS POLICY ON IRAN EXPORT CREDITS

C O N F I D E N T I A L PARIS 000544

SIPDIS

INFO SECDEF WASHDC
UN SECURITY COUNCIL COLLECTIVE

SIPDIS

STATE FOR EUR/WE; NEA/IR; EB/IFD/ODF and EB/ESC/TFS Treasury for
IA/Office of Trade Finance
E.O. 12958: DECL:01/17/2017
TAGS: PREL EFIN MNUC EXIM UNSC OECD IR FR
SUBJECT: FRANCE TIGHTENS POLICY ON IRAN EXPORT CREDITS

REFS: A) STATE 4760 B) Paris 407

Classified By: Charge Thomas J. White for reasons 1.4 (b) and
(d).


1. (C) SUMMARY: France ratcheted up the pressure on Iran by
publicly announcing a change in its export credit policy. It
will strictly apply UNSCR 1737, ask companies to screen all
transactions with its export credit agency, and lower its
exposure to Iran. The announcement marks a u-turn in France's
previous reluctance to approach its private sector on the issue.
END SUMMARY


2. (U) At the Finance Ministry's annual meeting on export
credit policy held on February 8, Xavier Musca, Director General
for Economic Policy, announced France is changing its export
credit policy to Iran. He discussed UNSC resolution 1737, which
he described as an issue that encompasses much more than export
credit policy and which represents a change for the
international community with regard to relations with Iran. He
said France could not ignore the context of that resolution, and
so France henceforth would factor two considerations into its
export credit policy to Iran.


3. (U) First, Musca said France would follow a strict
application of UNSCR 1737. He said the Ministry of Finance has
asked France's export credit company, COFACE (Compagnie
Francaise d'Assurance pour le Commerce Exterieur),to put into
place a system for companies to declare all transactions with
Iran to allow the Ministry to screen for compliance with the
resolution. Second, Musca said that prudence dictates that,
although export credits will not be wholly cut off, France will
lower its credit cap in 2007. Musca added that these two
measures are entirely dependent on what Iran chooses to do about
its nuclear weapons program, and also upon further action in the
UN Security Council.


4. (U) The announcement was the only change in export credit
policy announced by Musca at the meeting, to which were invited
about 300 representatives of the financial community (e.g., ING
Bank, BNP Paribas, Societe Generale, etc.),the export community
(COFACE, Natixis, UbiFrance, etc.),large multinationals (AREVA,
Alstom, Alcatel-Lucent, Siemens, Peugeot, General Electric,
etc.) and defense firms (EADS, Eurocopter, Thales, among
others). In the accompanying handouts, Iran was listed as the
ninth most active market for COFACE in 2006, with 93 contracts
guaranteed, not including planes and ships. It was also listed
as the only country where the 2007 ceiling for maturities was
expected to go down (within contracts in a range of 200-500
million euros or 260-650 million dollars). On the accompanying
map, France has placed an asterisk on Iran, explaining it is
subject to restrictive measures per UNSC 1737.


5. (C) Commment: Musca's announcement comes days after the
Ambassador wrote to Finance Minister Breton urging him to halt
export credits to Iran, per ref A. While the performance was a
marked change in tone for Musca, who just this past summer
vehemently listed for us his objections to advising the private
sector of the prudential risks of dealing with Iran, it is
consistent with his view that more robust action with the French
private sector would require the cover of a UNSCR. The policy
is also in line with what French officials had told us
previously (ref B),but its importance lies in the very public
nature of its delivery.

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

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