UNVIE AMBASSADOR SCHULTE CONSULTATIONS ON

C O N F I D E N T I A L ATHENS 001109 SENSITIVE SIPDIS UNVIE FOR AMB. SCHULTE, DEPARTMENT ALSO FOR EUR/SE, NEA, ISN, AND IO E.O. 12958: DECL: 08/01/2018 TAGS: PREL PARM MNUC KNNP IAEA GR SUBJECT: UNVIE AMBASSADOR SCHULTE CONSULTATIONS ON IRAN/IAEA ISSUES REF: A. ATHENS 819 ¶B. ATHENS 874 Classified By: A/POLITICAL COUNSELOR JEFF HOVENIER FOR 1.4(b) AND (d) ¶1. (C) SUMMARY: U.S. Permanent Representative to the UN and International Organizations in Vienna Ambassador Greg Schulte visited Athens on July 28 to discuss Iran-related developments at the International Atomic Energy Agency (IAEA),and the broad two-track approach to negotiations with Iran and the importance of sanctions. He met with Goverment of Greece officials, Bank of Greece officials, and preeminent think tankers. In all of his meetings Schulte stressed the challenges we face from Iran and emphasized the ongoing unity between the U.S. and EU on this issue, which has helped bring along other countries such as Russia and China. He outlined the P5 1 proposal that EU High Commissioner Solana delivered to Iran on June 14 and the opportunities for Iran to engage the international community in serious negotiations. Schulte also stressed the need to move forward with the second track, sanctions, if Iran is looking to buy more time and not ready to seriously negotiate, as its July 19 response in Geneva suggests. His Greek interlocutors agreed that Iranian nuclear developments are of concern, but emphasized greater engagement and expressed skepticism about sanctions a3 an effective 4ool to leverage Iranian behavior. END SUMMARY MEETING WITH GOG OFFICIALS -------------- ¶2. (C) Schul4e, joined by Ambas3ador Speckhard, first met with Govern-ent kf Greece (GOG) officials at a roufdtable di3cussi/n at the Greek MFA. GOG par4icipants included Secretary General Aristides Agathocles, Director of UN and International Organization Affairs Ambassador Alexandros Rallis, Acting Director for Arab Countries and the Middle East George Ayfandis, and Ambassador Mercurios Karafotias, former Ambassador to Iran. ¶3. (C) MFA Secretary General Agathocles agreed with Schulte that we should all be deeply concerned about the possibility of an Iran with nuclear weapon capabilities. He also agreed that utilizing a two-track strategy is good, but focused more on engagement than on sanctions. Agathocles suggested the issue is "psychological," adding that we need to examine why Iran wants this capability ) does Tehran want to use these weapons regardless of the environment, or are they insecure about their position in the region? The SecGen suggested the Iranian nuclear program was driven more by the latter, noting that neighbors such as Israel, Pakistan and India have nuclear weapons. Agathocles asked if the U.S. is willing to offer Iran what Tehran really feels it needs to address its security concerns. Agathocles added that "normalizing relation" with Iran would also help provide security. ¶4. (C) Former Ambassador to Iran Karafotias said he believes there are two ways to stop Tehran's program: "annihilate the program" or convince Tehran it is useless and they are throwing away money. He said the latter was the only feasible way forward. Karafotias' own view is that there are three reasons Iran may want these capabilities. -- 1. Fear: the only country Iran really fears is the U.S., followed by Israel. -- 2. Survival of the regime: the number of people who benefit from the current regime and thus want to ensure its survival numbers in the millions ) including the armed forces, paramilitary forces, the clergy, and people with money. -- 3. Regional Role: Iran used to be a policeman of the region; it may be a different regime but it is the same country. Karafotias added that from Tehran's point of view the U.S. has lived with far worse regimes in place, why can't Washington trust the current regime? Karafotias suggested the U.S. seek to "build trust" with Iran by requesting that it do specific "achievable" things. He also recommended discrete bilateral contacts between the U.S. and Iran. ¶5. (C) Agathocles added that there is a general mistrust. He brought up Solana's visit to Geneva and noted that the Iranians had trouble accepting that Solana could represent the views of the U.S., EU, Russia and China. Agathocles further noted that he would soon be meeting with the new Iranian Ambassador to Greece, and he offered to raise any (##)issues the U.S. wanted in (##)would pass along (##) (##) SANCTIONS -------------- the GOG is skeptical of the international community seeks to further develop sanctions, the Security Council must be involved. Stating that he was speaking personally, Agathocles said he doubted any type of sanction will change Iran's mind, although he made clear Greece will respect its EU and UN obligations in this regard. The SecGen argued that sanctions or no sanctions, money and business will continue to move in and out of Iran. (Comment: We have heard similar questions about the effectiveness of sanctions from various GOG interlocutors End Comment.). Amb. Schulte reiterated that sanctions are an essential part of our two-track strategy with Iran, and that although we hope to see progress on the "cooperation track," that requires unity and resolution with regard to the "sanctions track." BANK OF GREECE -------------- ¶7. (C) Ambassador Schulte met with Deputy Governor of the Bank of Greece (BG, Greece's central bank) Eleni Dendrinou-Louri. Louri was joined by two senior Bank of Greece staff from the bank supervision group, the office within the BG responsible for transmitting U.S., UN and EU actions or requests related to the investigation or freezing of assets of suspected terrorists to banks in Greece as well as Greek bank branches outside of Greece. ¶8. (C) Louri explained to Ambassador Schulte that there is one Iranian bank located in Greece: Bank Saderat. She indicated that despite the heavy financial burden of doing so, the Bank of Greece has launched two control operations to scrutinize all Bank Saderat transactions over the level of 50,000 euros (see reftel). In both control operations, BG staff has found nothing questionable and has judged Bank Saderat to be in compliance with Greek laws and regulations. BG bank supervisory staff, however, noted that there are limits to what they can do. The majority of the transactions, which are expor credits, are from China and UAE. BG staff emphasized that it is therefore important to make sure that countries in which transactions are based (i.e. goods bought or sold) are also vigorously monitoring transactions to ensure that the listed goods are actually the ones being bought and sold. Louri indicated that the BG will continue to conduct controls against Bank Saderat, and that they have all the legal authorities necessary should they need to take actions against Bank Saderat for suspicious transactions. ¶9. (C) A/Deputy Economic Counselor asked whether there is any evidence that Bank Saderat is taking advantage of the weaknesses in Greece's anti-money laundering/terrorist finance regime as noted in the 2007 FATF report. BG supervision staff indicated that Bank Saderat's Athens branch is small, but that its transaction volume more than doubled between 2005 and 2007 (from 150 million euros to 350 million euros). They believe, however, that the volume in 2008 will not surpass the volume from 2007. THINK TANKS/OUTREACH -------------- ¶10. (SBU) Schulte met with small but interested groups of acedemics and journalists at the Hellenic Foundation for European and Foreign Policy (ELIAMEP) and the Institute for International Relations (IIR) to discuss the broad two-track strategy with Iran. Two overlapping issues at both events were the effect of a new U.S. administration and the effectiveness of sanctions. Schulte stressed that six more months of Iran violating Security Council resolutions will not be looked upon favorably by any administration, thus Iran should not wait. On sanctions, Amb Schulte said there is evidence that sanctions are causing debate among the Iranian leadership, but stressed the importance of a two-track approach. ¶11. (U) Both organizations - ELIAMEP with its seasoned commentators and IIR with its younger University of Athens audience - are featuring Schulte's visit on their websites. ELIAMEP will post a transcript jointly produced with the Embassy. Meanwhile, elite SKAI TV ran the exclusive interview with Schulte in primetime on the night of his visit. Influential To Vima newspaper reported on the visit the next day. Additional local coverage could develop when Iran responds to the Geneva encounter. See also http://athens.usembassy.gov. 12.(U) This cable has been cleared by UNVIE. SPECKHARD