GREECE/IRAN: WHAT'S CAUSING GREEK RELUCTANCE WITH

C O N F I D E N T I A L SECTION 01 OF 02 ATHENS 000651 SIPDIS ISN, EB, NEA, IO, P, T, TREASURY-TFI E.O. 12958: DECL: 05/12/2018 TAGS: EFIN ETRD TRGY UNSC KNNP IR GR PREL PGOV AORC SUBJECT: GREECE/IRAN: WHAT'S CAUSING GREEK RELUCTANCE WITH FURTHER IRAN SANCTIONS? REF: A. SECSTATE 48615 ¶B. NEMROFF E-MAIL 05/07/2008 Classified By: A/POLCOUNS JEFFREY HOVENIER. REASONS 1.4 (B) AND (D). ¶1. (C) SUMMARY: Deputy head of the Greek MFA Middle East directorate told us Greek reluctance to sign on to further Iran sanctions stemmed from several factors, including lack of an EU consensus, doubts about the effectiveness of sanctions, belief that greater engagement, not less, provided greater leverage, and incredulity about Israeli and U.S. estimates of Iranian nuclear intentions. But perhaps the most important factor was the GOG's unwillingness to defy Greek shipowners, who have significant dealings with the Iranians. END SUMMARY. ¶2. (C) DepPolCouns discussed ref A points on Greece's plans to submit a 60-day report on compliance with UNSCR 1803 with MFA A6 Middle East Directorate deputy head Giorgos Ayfantis. Ayfantis said the GOG understood it had an obligation to submit the report and that discussions were on-going on how to do so. The problem was a lack of unity on what to write. Ayfantis explained that the question of Iran sanctions was complicated. First, there was no EU consensus and a wide divergence of opinion. Contrary to reports from Brussels (ref B),he denied that Greece was joining with the Cypriots and Portuguese in being the main force undermining EU sanctions efforts, placing the blame instead on Spain and Germany, both of whom had big commercial interests in dealing with Iran and were reluctant to jeopardize those interests with further sanctions. ¶3. (C) Secondly, many in the EU, including Greece, were skeptical about the efficacy of sanctions. Greece and others agreed on the importance of Iran's not developing a nuclear weapons capability but doubted further sanctions would help achieve the goal. FM Bakoyannis opposed sanctions in principle, believing engagement was a potentially more fruitful approach. Others in the GOG took the engagement thesis a step farther, arguing that increasing trade with Iran could actually make it easier to halt Iran's nuclear program by giving us greater economic leverage. Also, many were skeptical that Iran really had an interest in developing nuclear weapons. Threatening to acquire such weapons, Ayfantis opined, got Iran further than actually acquiring them, since the latter would lead to a general consensus on the need to take retaliatory and defensive measures. Moreover, Israeli and U.S. predictions about Iran's intentions were discounted by many due to the experience of Saddam and WMD. ¶4. (C) Finally, Ayfantis explained another, particularly delicate factor shaping the Greek position. This was the interests of Greek shipowners, who have many dealings with the Iranians. Greek shipping interests in Iran were under threat from the Chinese, who were trying to develop their merchant marine relationship with the Iranians. Greek shipowners feared that further sanctions would not only directly impact Greek dealings with Iran, but also push the Iranians towards the Chinese. The GOG, for its part, had always been very attentive to the interests of the powerful Greek shipowners. But Ayfantis explained GOG concern for their interests was even greater now since the government was trying to persuade the shipowners to move their headquarters from their traditional base in London (where Labor-backed tax increases were becoming more burdensome) to the Greek port city of Piraeus near Athens. ¶5. (SBU) During the conversation, Ayfantis noted that recent Greek Ambassador to Teheran Karafotias would soon take over as head of the MFA's D1 Directorate for International Organizations, which overseas, amongst other things, UN policy. Ayfantis did not offer an opinion on the possible impact of Karafotias' appointment on sanctions policy, other than to say that Karafotias brought to the job a wealth of experience dealing with the Iranians. ¶6. (C) COMMENT: This is the first we have heard Greek footdragging on further Iran sanctions linked to the interests of Greek shipowners. The MFA has usually cited FM Bakoyannis' principled opposition, but we suspected more was at play due to Greek persistence. While acknowledgment of the shipowners' angle is refreshing, it does not bode well for changing the GOG's mind on Iran sanctions. Past experience (on such issues as trying to get the GOG to sign a PSI shipboarding agreement) suggests that when it comes to Greek shipowners -- who control the largest merchant marine fleet in the world and a significant portion of Greek GDP -- the GOG is quite deferential. SPECKHARD