ITALY LOOKS TO SANCTIONS COMMITTEE FOLLOW-UP ON

S E C R E T SECTION 01 OF 02 ROME 000017

SIPDIS

NOFORN
SIPDIS

E.O. 12958: DECL: 01/05/2027
TAGS: PREL EFIN KNNP IR UNAUS IT
SUBJECT: ITALY LOOKS TO SANCTIONS COMMITTEE FOLLOW-UP ON
1737

REF: A. A:ROME 3378

B. B:STATE 202585

ROME 00000017 001.2 OF 002


Classified By: Pol M/C David D. Pearce for reasons 1.4 (b) and (d).

Summary
--------------


1. (S/NF) Pol M/C called MFA Political Director Giulio Terzi
January 4 to follow up on GOI thinking following passage of
UNSCR 1737, and in particular next steps on Bank Sepah and
Iran's Aerospace Industries Organnization (AIO). Terzi said
the GOI has no plans to withdraw Bank Sepah's authority to
operate in Rome but will do everything necessary to follow up
on the resolution, including freezing assets pursuant to
international or national decisions (e.g., a US executive
order). To this end, Terzi advocated sanctions committee
follow-up action on both Bank Sepah and AIO. Such action, he
said, could effectively forbid the Bank Sepah-AIO operations,
and turn the Rome Bank Sepah branch into "an empty box". He
said an Italian inter-departmental group would meet soon to
consider next steps on 1737 implementation. Calls to the
Ministry of Finance and Bank of Italy showed that holiday
schedules had interrupted consideration of the issue, with
the Bank indicating that their own legal review of
possibilities offered by 1737 would not be complete until
about January 10. End Summary.


No GOI Plan, Yet, to Shut Down Bank Sepah
--------------


2. (S) Terzi said there was nothing substantively new in
Italy's position from what he had outlined to Treasury U/S
Levey December 20 (ref A). There are no plans, for the
moment, to block or withdraw the operating authority of Bank
Sepah as such. However, GOI will do everything necessary to
follow up on the resolution, including conditions for
freezing assets pursuant to international or national
decisions (e.g. US executive order.)


3. (S/NF) Pol M/C said U/S Levey had made plain our interest
in designating Bank Sepah. As a result of his talks here,
Levey was also attuned to the need to coordinate public
handling of any such designation carefully with GOI, given
the importance and centrality of the Italian evidence. Pol
M/C stressed that AIO, which we had already designated,
remains another concern. Although Russia had removed AIO
from the resolution's annex, Pol M/C said that we were urging
others to include it in their national designations.


But Sanctions Panel Could Make It "Empty Box"
--------------


4. (S) Terzi said the Russian UNSC permrep was expected to
move on appointments to the sanctions committee the week of
January 8, which will put an actual mechanism in place; the
sanctions committee would not just be on paper. Bank Sepah
and AOI should then be taken up in the committee as an urgent
question. Sanctions committee action, he said, could
effectively forbid the Bank Sepah-AIO operations, and turn
the Rome bank branch into "an empty box". Terzi commented
that sanctions committee action "could be a relief for
everyone" because it would clarify matters, and he saw no
reason why its actions could not go beyond what was actually
in the resolution.


No MFA Objection to US Designation of Bank Sepah
-------------- ---


5. (S/NF) Terzi said he and his colleagues had briefed FM
D'Alema following the December 20 Levey meetings on the
possibility of US designation of Bank Sepah, and Terzi had
been confirmed in his views; the minister had issued no
instructions for him to raise or object to such US action.
He repeated, however, that the GOI did want coordination with
the USG on public handling of any announcement.


6. (S) Terzi said the letter from Bank of Italy Governor
Draghi to D'Alema had been received, and there had been some
discussions in-house at the MFA. There will be further MFA
discussions January 8 and 9 and an inter-departmental meeting
on the subject January 10.

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Delayed Consideration at BoI and Finance
--------------


7. (C) Calls to the Ministry of Finance and Bank of Italy
showed that the holidays had interrupted consideration of
UNSC 1737 and its policy implications. Finance deferred
discussion with us until January 8, while Deputy DG Carosio
of the Bank of Italy, a participant in earlier discussions
with Treasury U/S Levey, told Econ M/C that an in-house legal
review would not be completed before about January 10.

Comment
--------------


8. (S) Terzi was careful to caveat that he was speaking
before the GOI inter-departmental discussion. The lack of
internal discussion at the Ministry of Finance and Bank of
Italy make it difficult to draw any conclusions about
positions and outcomes of the interagency review. From what
Terzi said, however, it appears the MFA will be looking for,
and even forward-leaning on, sanctions committee follow-up
action on Bank Sepah and AIO. Whether the Ministry of
Finance and the Bank of Italy are equally cooperative remains
to be seen. End Comment.
BORG