PRESSING ITALY ON AFGHANISTAN CAVEATS AND IRAN

S E C R E T SECTION 01 OF 04 ROME 000192

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NOFORN
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E.O. 12958: DECL: 01/30/2017
TAGS: PGOV XF AF IR IZ LE KNNP IT
SUBJECT: PRESSING ITALY ON AFGHANISTAN CAVEATS AND IRAN

REF: A. A. ROME 00162

B. B. ROME 00163

C. C. ROME 00166

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Classified By: DCM Anna M. Borg for reasons 1.4 (b) and (d).

Summary
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1. (C) Visiting EUR/WE director Allegrone urged GOI
officials to look hard at ways to enhance Italy's military
contribution in Afghanistan. MFA officials responded that
they were doing so, but had to tread carefully to avoid a
veto of mission funding by far-left members of the governing
coalition. An adviser to the PM said the GOI has launched a
domestic public relations campaign to improve support for the
mission. Senior MFA officials welcomed the Secretary's
renewed engagement in the MEPP and on Iran pledged "effective
implementation" of UNSCR 1737. The MFA's Near East Office
Director Pezzotti said Italy was finalizing a package for the
Lebanon donor conference of 100-150 million euros in
assistance, soft loans, and export/import credits. The
EUR/WE director noted the need to keep the pressure on Syria
as long as it continued its negative behavior, especially on
Lebanon. Regarding Kosovo, Allegrone outlined the U.S. goal
of achieving a rapid solution and MFA Political Director
Terzi agreed there was no turning back. End Summary.


Stay Course in Afghanistan; PM Launches PR Campaign
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2. (C) The Prime Minister's Deputy diplomatic advisor, Marco
Carnelos, said PM Prodi, FM D'Alema and MOD Parisi had
decided there will be no compromise on Italian participation
in the Afghanistan mission, despite strong opposition by far
left parties in the governing coalition. Carnelos said Prodi
had decided to launch a domestic PR campaign to improve
support for the mission. He said the PM's office will
highlight the role of the UN and EU in Afghanistan, as well
as civilian reconstruction efforts. They hope to use EU
Afghanistan coordinator Francesc Vendrell's January 24 visit
to explain, especially to the far-left, that Italy is not
involved in Afghanistan as a favor to the U.S. but rather
because the EU and UN think it is important. Carnelos said
Italy was thinking of how it could do more in Afghanistan,
especially in reconstruction and aid.


3. (C) Allegrone said the U.S. message in Brussels on
January 26 will fit in well with the Italian call for
additional assistance, but asked whether there would be any
change regarding caveats for troop movement. She noted EUR
A/S Fried's January 12 meeting (ref b) with FM D'Alema in
which he pressed Italy to bring ideas for enhanced
commitments in Afghanistan, including on caveats, to the NATO
FMs Ministerial on January 26. Carnelos said he foresaw no
change in the Italian position on caveats. Allegrone
followed up with MFA DG for Political Affairs Terzi. Terzi
said the GOI had undertaken an internal review on the issue
of additional equipment for ISAF (see ref c) but there was
strong opposition to the Afghan mission by some parties in
the ruling coalition and he could not predict what D'Alema
would actually be able to present on January 26.

Follow EU Lead on Iran
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4. (C) Allegrone stressed the importance of maintaining
pressure on Iran by following through on UNSCR 1737,
especially on the financial side, with PM's advisor,
Carnelos, and MFA DG Terzi. Both agreed and said Italy
advocated "effective implementation" of 1737 to be
coordinated within the EU. Carnelos added that working on
Iran within the EU Council is tough, a sentiment echoed by
Terzi who expressed frustration at the lack of a clear EU
policy on Iran. MFA non-proliferation Director Formica said
the January 22 GAERC meeting focused on the "effective
implementation" of UNSCR 1737, extending its interpretation
by the EU. He said Italy argued for a broad and effective
interpretation of the Resolution and finds the result
balanced. He said Brussels will prepare the common EU
position next week to be followed by new EU legislation which
will open the door to additional designations.


5. (C) On the question of the arms-embargo, Terzi said the
Ministers had agreed to reaffirm the EU's existing "code of

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conduct" agreement (already in force for 10 years) against
the sale of arms to Iran instead of a more formal ban on the
sale of weapons. Formica explained the rationale for not
including language on an arms embargo was that UNSCR 1737 did
not contain such language. But he said the approach agreed
upon, though weaker politically, will have the same practical
result - i.e. no EU sales of conventional weapons to Iran.
Terzi said that, given its recent experience with the Bank
Sepah case, and others, that Italy was trying to improve its
regulatory system on a national level by examining its
legislation to see what loop-holes should be closed.


6. (S) Allegrone thanked Terzi for Italy's cooperation on
Bank Sepah and asked what Italy was considering in terms of
limiting export credits and financial transactions, both -
she argued - key tools for putting pressure on the Iranian
government and its proliferation efforts. Terzi said the
Italian export-credit system was "fully aware" of the
political aspects of all transactions with Iran and a
decision had been made not to extend any new lines of credit.
In fact, he added, Italy's Iran credit insurance portfolio
had actually decreased recently. MFA Near East Office
Director Pezzotti expressed concern that the current path of
sanctions risked a spiral of escalation that could lead to a
situation in which the only exit would be through a military
intervention. Allegrone pushed back that we can always "stop
the spiral", noting that a path of increasingly robust
sanctions did not necessarily imply use of militarypower,
but at the same time we cannot take any tool off the table.

Iran Looking for U.S. Recognition?
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7. (C) Pezzotti said many informed interlocutors feel that
what Iran really wants is not a nuclear weapon, but
recognition by the U.S. of its status as a regional power.
Allegrone rejected this suggestion, pointing out that the
Secretary had recently repeated her offer to talk to Iran if

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they would agree to suspend enrichment. She argued that, if
the real goal were U.S. recognition, then the Iranian regime
could easily stop enrichment to hold a conversation.
Carnelos described Iran as a "big big" problem and said it
has been emboldened by developments in the region. The only
positive development, he said, is signs that President
Ahmadinejad's popularity is decreasing. There had also been
speculation that Supreme Leader Khamenei may be very ill,
because he had recently missed an important event that he had
been scheduled to attend. Noting the existence of multiple
power centers in Iran, and substantial opposition to
Ahmadinejad and the ruling regime, Carnelos observed that the
only unifying force was the national consensus on asserting
Iran's right to develop nuclear power.

Hopeful on MEPP with Renewed US Engagement
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8. (C) Allegrone told her interlocutors that the Secretary
had returned from her trip to the Middle East encouraged,
that she saw room to work with Olmert and Abbas, and that she
looks forward to a Quartet meeting February 2 before
returning again to the region. Officials in both the MFA and
prime minister's office welcomed the Secretary's renewed
peace process efforts. Pezzotti, MFA Director of Near East
Affairs, said that both sides are weak and neither is in a
position to make great concessions, but we must take this
opportunity to build confidence on both sides. Dialogue is
needed, and it will be important for the West to speak with a
single voice.


9. (C) PM Prodi's Mid-East advisor, Carnelos, said Prodi
remains emphatic in his support of the Quartet's three
conditions for dealing with the Palestinian authority but, as
a practical matter, would like to see formation of a
government of national unity that could follow through on its
commitments. Carnelos felt both the Israeli and Palestinian
sides were too weak politically to achieve any significant
progress on interim borders. He expressed concern that early
elections on the Palestinian side could create further
problems, since a Hamas win could not be ruled out.

Israel Pushes More Active Role for EUBAM
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10. (C) On the issue of EUBAM Rafah, Pezzotti said Italy was
displeased with Israel's closures of the Rafah border
crossing and has been pushing Israel to remove road blocks.

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Israel, meanwhile, has pressed Italy to enlarge the mandate
of the EUBAM Rafah forces (currently under Italian command)
to give the forces a greater role in controlling financial
transactions across the border. The Italians have responded
that they are not willing to contemplate enlarging their
mandate unless Israel changes its own rules on opening of the
border. EUBAM's current mandate expires May 24, so there is
still time for agreement, said Pezzotti, but another
challenging aspect to the situation is that it remains
unclear with whom the EU will negotiate on the Palestinian
side.

Prodi to travel to Mid-East; Quint to Meet Paris
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11. (C) Carnelos said PM Prodi planned to travel to Israel,
Jordan and Saudi Arabia in February (he said Prodi would
not/not go to Damascus or Tehran.) Pezzotti shared with us
that the EU Quint (informal mid-east DG-level - UK, France,
Spain, Germany, Italy - working group) planned to get
together informally on January 25 after the Paris Lebanon
Donors conference to prepare for the upcoming February 2
Quartet meeting.

Italy To Provide over 100 million for Lebanon
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12. (SBU) Allegrone thanked her interlocutors for the
leading role Italy was playing in Lebanon and in particular
within UNIFIL and encouraged Italy to show support for
Siniora's government by bringing a significant pledge to the
Paris donors conference. MFA Near East Director Pezzotti
said, unlike the mission in Afghanistan, the mission in
Lebanon is relatively uncontroversial domestically but Italy
is already expending a substantial sum to support its UNIFIL
commitment, and the assistance budget is tight. While
details of Italy's pledge for Paris were still being worked
out at the time of our meeting, Pezzotti said they were
looking at a total package of 100-150 million euros: 30-50
million in soft loans; 50 million in projects; 32 million (40
with interest) in export/import credits; and some cash.
(Note: at the Paris conference January 25, D'Alema ended up
offering an additional 120 million for Lebanon, including
65 million in credit assistance funds and 55 million in
budgetary assistance. D'Alema also said Rome, one of
Lebanon's leading trade partners, had offered to renegotiate
its trade debt.)


13. (S/NF) Carnelos reaffirmed Italy's support for Siniora's
government and noted that PM Prodi and Siniora speak almost
once a week. Pezzotti said Italy was ready to take the
UNIFIL command February 17. He noted reports from the field
indicate UNIFIL is generally positively received from all
sides and perceived as a neutral force. However, Italy has
some information indicating terrorists (al-Qa'ida) have begun
infiltrating camps in the South. Pezzotti said so far
Hizballah hasn't wanted to provoke UNIFIL and is being
cautious. DG Terzi said the effectiveness and safety of the
UNIFIL operation would depend on political developments;
UNIFIL troops had begun to see what he termed "light
intimidation" by Hizballah, including complaints by locals,
funneled through Parliament speaker Berri, of UNIFIL soldiers
taking pictures without LAF presence.

Lebanon: Syria Won't Let Go
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14. (C) Allegrone said the U.S. felt it remained important
to contain and isolate Syria and urged Italy to do the same.
The PM's advisor, Carnelos, was 'not optimistic' on Syria and
couldn't see an easy way out. He said the Syrians' only real
objectives were to stop the international tribunal and regain
influence in Lebanon. He said he had asked the Syrian
Ambassador in Rome recently why Syria hadn't opened
diplomatic relations with Lebanon, and the Ambassador had no
response "although he had lots of words on everything else".
Pezzotti said there have been talks within the EU of offering
an economic package to Syria, but Italy was skeptical because
what Syria really wants - Lebanon - it cannot have.


15. (C) Allegrone asked if Italy would support UNIFIL
deploying along the Syrian border in an effort to prevent the
flow of weapons across the porous border, stressing the
importance to UNIFIL's overall success of stopping the flow
of weapons. Pezzotti, Carnelos and Terzi all referred to a
recent letter from Israeli PM Olmert to PM Prodi saying

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Hizballah has not stopped weapons smuggling and asking for
UNIFIL deployment on the border. Pezzotti said the situation
was "difficult" and would require Siniora's approval, which
would be hard for him at the moment. Carnelos noted a UNSC
change in UNIFIL's mandate would be necessary, but such a
change could also increase tensions in the region and have a
net negative effect. On the question of sending an unarmed,
EU civilian border monitoring/training team (with no dual-use
equipment) to the Syrian side of the border, Carnelos
expressed frustration with the Syrians. Italy had repeatedly
told the Syrians that acceptance would be a significant
gesture of good will, but so far they hadn't accepted.

Kosovo - No Plan B
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16. (C) MFA DG Terzi said the Italian assessment of the
recent elections was more positive than what had been
reported by the international press. Terzi particularly
appreciated A/S Fried's support (ref a) to help convince some
less willing EU partners of the need to start Stabilization
and Association Agreements (SAA) talks with Serbia as soon as
possible. He thanked the U.S. for supporting PfP membership
for Serbia which he said had had a positive impact and had
probably helped shape the elections. Allegrone noted U.S.
support for moving forward soon on the basis of the Ahtisaari
recommendations. Terzi was hopeful that Russian concerns
could be allayed and a Kosovo resolution could be put before
the UNSC. He stressed that there is no Plan B.

Comment
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17. (C) All conversations were dominated by the Middle East
and Afghanistan. The Italians face substantial domestic
pressure, including within their own governing coalition, on
the Afghan mission. Hence the need for a domestic PR
campaign. Nevertheless, both the PM and FM have made clear
that they are determined to stick by Italy's NATO, EU, and UN
commitments there. They are proud of their leadership role
in Lebanon, but concerned about political and security
developments and the possible impact on their troops. They
are also clearly pleased and hopeful about the
administration's renewed engagement on the
Israeli-Palestinian issue. On Iran, the MFA and the PM's
office appear to get the point that financial pressure will
be key to the effort to get Iran back to the table on the
nuclear issue. But given the large and longstanding
commercial relationship with Iran, we should expect to see
the GOI seek to frame its actions on 1737 implementation as
much as possible in an EU and UNSC context. End Comment.


18. (U) This cable was cleared by EUR/WE Director Allegrone.
SPOGLI