GERMANY'S RESPONSE TO U.S. MEASURES ON EDBI / EIHB

C O N F I D E N T I A L BERLIN 001474

SIPDIS
NEA/IR FOR GROEN
ISN/CPI FOR MCGEEHAN
TREASURY
E/EEB FOR COULTER

E.O. 12958: DECL: 10/31/2033
TAGS: KNNP MUNC PREL PARM EFIN IR GM
SUBJECT: GERMANY'S RESPONSE TO U.S. MEASURES ON EDBI / EIHB

REF: A. STATE 114408

B. LONDON 2600

C. BERLIN 884

D. BERLIN 796

Classified By: Acting Global Affairs Unit Chief David Fisher for reason
s 1.4 (b) and (d)


1. This is an action request. Please see paragraph 6.


2. (C) SUMMARY. In response to ref A, German Ministry of
Finance officials stated there are no clear facts to connect
Europaisich-Iranische Handelsbank AG (EIHB) to the Export
Development Bank of
Iran (EDBI) and that, further, Germany's review failed to
show that EDBI has any cross border activity in Germany.
Therefore, Germany does not plan to take unilateral action
against EIHB, but will continue
subjecting EIHB to stricter scrutiny. German officials noted
their disappointment with the lack of U.S. support of German
positions at the recent FATF negotiations. END SUMMARY.


3. (C) Econoff and Poloff met with German Ministry of
Finance officials Michael Findeisen and Kristina Wogatski and
delivered reftel talking points. Poloff also delivered
points separately to the MFA's Iran Unit Chief Andreas
Krueger. Findeisen stated the German regulators must treat
EIHB carefully, as it is a German bank, despite its Iranian
ownership. He acknowledged that EIHB has been discussed
frequently within the EU framework, coming under much
criticism by the UK (ref B). Referring to conversations
earlier this year (ref C, D),Findeisen stated that Germany
already carefully polices EIHB, placing it under stricter
supervision than other banks. He added that Price Waterhouse
Coopers performed an external audit of EIHB in August and
that his ministry, the MFA and the German banking regulatory
agency, BaFin, will review the results, expected in November.
He admitted that an ongoing review of EIHB's possible
correspondent bank relationships is not complete, as they
number into the thousands. Finally, he stated that there is
no information to date that EIHB is involved, either
intentionally or recklessly with terror finance or
proliferation.


4. (C) Further, Findeisen noted that EDBI gets "good
cooperation" from the World Bank. He recognizes that
complicated payment chains pose a problem and that the best
current solution is to work the listed banks. Given the
complexity of payment chains, Findeisen suggested
rhetorically that the ultimate solution would be to designate
the Central Bank of Iran, but observed wryly that this is
currently "politically sensitive." He reiterated German's
position that the EU remains the best forum for sanctions
actions against banks and stated that there will be
discussion among the member states regarding EIHB. In a
separate conversation, Krueger commented that the German
Government has held discussions on how to deal with EIHB,
focusing particularly on the role and duties of EIHB's
supervisory board.


5. (C) Without being specific, Findeisen expressed
displeasure over the failure of France, the UK and the U.S.
to support Germany's position in recent FATF talks. He was
also not specific when he complained of a lack of support
from the G-7 on Germany's Iran and Uzbekistan postitions.
While action by the FATF would have sent a clearer signal, he
said, Germany will now act unilaterally, without "grand
statements of support by France or the UK." Germany will, he
said, set up "adequate preventative measures" and take a
"harsh approach" in implementation. He noted that Finance
Ministries from Italy, France and UK supported multi-lateral
action, but that the MFAs from these countries did not.


6. (C) Action Request. In light of Germany's expressed
displeasure over recent FATF discussions, post would
appreciate receiving talking points for use in future
discussions with host country interlocutors on FATF issues.
Timken Jr