EEB ASSISTANT SECRETARY SULLIVAN RAISES GAS DEAL \

2007-09-25 23:01:00 07STATE135395 Secretary of State CONFIDENTIAL 07BERN881|07BERN924|07STATE126979 VZCZCXRO7572\ PP RUEHAG RUEHBC RUEHDBU RUEHDE RUEHDIR RUEHKUK RUEHPT RUEHROV\ DE RUEHC #5395/01 2682315\ ZNY CCCCC ZZH\ P R 252301Z SEP 07\ FM SECSTATE WASHDC\ TO RUEHSW/AMEMBASSY BERN PRIORITY 2612\ INFO CIS COLLECTIVE\ EU MEMBER STATES COLLECTIVE\ IRAN COLLECTIVE\ RUEHAK/AMEMBASSY ANKARA 1491\ RUEHBK/AMEMBASSY BANGKOK 7667\ RUEHBR/AMEMBASSY BRASILIA 5721\ RUEHBY/AMEMBASSY CANBERRA 9024\ RUEHIL/AMEMBASSY ISLAMABAD 9123\ RUEHKL/AMEMBASSY KUALA LUMPUR 7137\ RUEHMO/AMEMBASSY MOSCOW 4459\ RUEHNE/AMEMBASSY NEW DELHI 3326\ RUEHNY/AMEMBASSY OSLO 4589\ RUEHOT/AMEMBASSY OTTAWA 7862\ RUEHTI/AMEMBASSY TIRANA 0098\ RUEHKO/AMEMBASSY TOKYO 0707\ RUEHYE/AMEMBASSY YEREVAN 4307\ RUEHIT/AMCONSUL ISTANBUL 1265\ RUEHPT/AMCONSUL PERTH 0525\ RUEHRI/AMCONSUL RIO DE JANEIRO 7877 C O N F I D E N T I A L SECTION 01 OF 02 STATE 135395 \ \ SIPDIS \ \ SIPDIS \ \ E.O. 12958: DECL: 09/19/2017 \ TAGS: ETTC PREL ENRG EPET IR SZ TU GR IT SUBJECT: EEB ASSISTANT SECRETARY SULLIVAN RAISES GAS DEAL \ CONCERNS WITH SWISS AMBASSADOR. \ \ REF: (A) STATE 126979 (B) BERN 881 (C) BERN 924 \ \ Classified By: EEB A/S Daniel Sullivan; Reason: 1.4 (d) \ \ ¶1. (C) Summary. EEB A/S Sullivan met with Swiss ambassador \ Ziswiler to underscore our concerns about the EGL \ gas/pipeline deal with Iran (reftels),particularly its \ negative impact on efforts to pressure Iran to comply with \ UNSC resolutions on its nuclear activities. Ziswiler \ defended the deal, asserting that it did not contravene UN \ sanctions resolutions and suggesting that it was needed to \ enhance energy security. Sullivan stressed the serious \ negative consequences of this first agreement to bring \ Iranian gas to Europe, and, noting clear indications of GOS \ involvement and support, rebutted claims that it was simply a \ private transaction. Ziswiler said he would take our points \ back to Bern. End Summary. \ \ ¶2. (C) EEB Assistant Secretary Daniel Sullivan met with Swiss \ Ambassador Ziswiler September 19 to reinforce strong USG \ concerns about the EGL deal to purchase gas from Iran and \ construct new pipeline infrastructure to bring it to Europe \ (Reftels). A/S Sullivan stressed the invidious effect of \ agreements of this kind, which directly undermine \ international efforts to pressure Iran to comply with UNSC \ resolutions concerning its nuclear activities. The outcome \ of those efforts is critically important, and it was deeply \ disappointing to see Switzerland involved in actions that \ impair the prospects for their success. \ \ ¶3. (C) A/S Sullivan noted that Iran takes every opportunity \ to play up commercial agreements, especially in the oil and \ gas sector, to suggest that UN efforts to apply economic \ pressure are failing and that Iran,s resources give it \ international leverage. Switzerland could be handing Iran a \ major diplomatic and commercial victory, while it continues \ to defy the international community. With efforts underway \ to craft a third sanctions resolution, the timing of the EGL \ deal was particularly bad. While we appreciate the \ conscientious way in which Switzerland has carried out its \ responsibilities as protecting power for the USG and official \ interlocutor with Iran, that role amplifies the negative \ impact of the EGL deal. \ \ ¶4. (C) Sullivan pointed out that the Swiss position stands in \ sharp contrast to that of the French. France has advised \ Total not to finalize its pending LNG deal with Iran at this \ time, and Foreign Minister Kouchner has said publicly that \ French companies are being encouraged not to bid on new \ contracts. That is the kind of stance we would like to see \ others take. Sullivan stressed that we are conveying the \ same message, discouraging energy deals with Iran, to others \ with similar plans, and noted that he had met with the CEO of \ Total and senior Shell representatives on this issue. \ \ ¶5. (C) Responding, Ambassador Ziswiler said Switzerland takes \ its international obligations with utmost seriousness. He \ pointed out that two Swiss banks, UBS and Credit Suisse, had \ been among the first to pull back from Iranian business; many \ banks elsewhere had not taken that step. He emphasized the \ importance of energy security as a concern of every \ government, suggesting that the EGL deal was necessary and \ desirable in that context. Switzerland, he said, depends on \ Russia for more than 50 percent of its gas imports, and \ needed to diversify its sources. Firms from other countries, \ such as Austria and Italy, were active in Iran,s oil and gas \ sector. Switzerland would be left behind its competitors if \ it did not take action. He stressed that the deal was not \ forbidden by UNSC resolutions, to which Switzerland \ \ STATE 00135395 002 OF 002 \ \ \ scrupulously adhered, and the GOS had also concluded that it \ was not an &investment8 subject to the Iran Sanctions Act \ (ISA, formerly ILSA). In any event, it was a private \ commercial transaction, in which the government was not \ directly involved. \ \ ¶6. (C) A/S Sullivan again stressed the deleterious effect of \ the deal, which would inevitably weaken the pressure on Iran \ and encourage Iranian obduracy. Going through with the deal \ would impair the effectiveness of UN action on a critically \ important issue )- an astounding position for a country as \ committed as Switzerland to international solutions for \ political problems. With respect to the activities of other \ countries in Iran,s oil and gas sector, there was much more \ talk than action, and Iran has had great difficulty in \ finalizing commitments by foreign companies. The idea that \ this was a purely private transaction was difficult to \ accept. It seems clear from our discussions in Bern, as well \ as the Ambassador,s own references to energy security as a \ national concern, that the GOS has strongly supported and \ facilitated this arrangement. It was telling that the \ President herself met with the visiting Iranian Acting Oil \ Minister, amid wide publicity, for a discussion of the gas \ deal. Concluding, A/S Sullivan emphasized that this \ transaction would have immense significance. It would be the \ first agreement to put Iranian gas into the heart of Europe. \ The negative consequences of that arrangement would be \ lasting. He hoped that the GOS and the company would fully \ consider those consequences before going forward. The \ Ambassador said he would fully report our further expressions \ of concern to Bern. \ \ ¶7. (C) Department appreciates Embassy efforts and the \ analysis provided in Ref. C. Welcome further reporting, as \ appropriate, as we continue to consider this matter. \ RICE \