GERMANY - STATE/TREASURY DELEGATION DISCUSSES BURMA AND IRAN SANCTIONS

S E C R E T SECTION 01 OF 04 BERLIN 000424



SIPDIS



SIPDIS, P, T, E, EAP, NEA, ISN, EUR, EEB



E.O. 12958: DECL: 03/31/2018

TAGS: EFIN, KNNP, PHUM, PGOV, PREL, PARM, ETTC, BM, IR, GM

SUBJECT: GERMANY - STATE/TREASURY DELEGATION DISCUSSES

BURMA AND IRAN SANCTIONS





BERLIN 00000424 001.2 OF 004





Classified By: EMIN Robert A. Pollard for reasons 1.4 (b)

and (d).



1. (S) SUMMARY. German officials in the MFA, Economics

Ministry, and Finance Ministry, while initially skeptical

about the effectiveness of EU and U.S. trade and financial

sanctions on Burma, agreed to consider U.S. suggestions as to

how the EU might more effectively target sanctions. On Iran,

German interlocutors were unusually circumspect about the

status of efforts to adopt further EU autonomous sanctions.

Officials at the Economics Ministry expressed concern that

targeted Iran-related sanctions are moving in the direction

of a general trade embargo. While Economics Ministry

officials insisted that ambiguities in sanctions could expose

German banks and exporters to criminal penalties -- even in

cases of negligence -- MFA and Finance Ministry officials

pointed out that Government agencies operate telephone

hotlines/help desks for exporters and banks and reported that

negligence-based violations generally result in civil fines,

which can be appealed in a court of law. END SUMMARY.



2. (U) Deputy Assistant Secretary of State for International

Organization Affairs Brian Hook, Treasury Office of Foreign

Assets Control (OFAC) Director Adam Szubin, and OFAC

Associate Director John Smith visited Berlin March 27 to

discuss Burma and Iran sanctions with officials from the

German MFA, Economics Ministry, and Finance Ministry. In

addition, the delegation participated in a roundtable session

with representatives of German industry and banking

associations.



BURMA SANCTIONS

--------------



3. (C) Hook and Szubin told interlocutors at the MFA,

Economics Ministry, and Finance Ministry that the GAERC's

April review of the EU's Common Position on Burma presented

an opportunity to discuss ways to more effectively target EU

sanctions on Burma. They reported that EU and U.S. targeted

financial sanctions have had an impact on both the regime and

its supporters and recounted specific examples to that

effect. Szubin noted that UN Special Envoy Gambari, whose

mission appears to be yielding diminishing returns, had

recommended that the EU and U.S. adopt additional targeted

sanctions, which have had an impact on the regime and have

not hurt the Burmese people.



4. (C) MFA Deputy Director General for International Economic

Affairs Victor Elbling said Germany views sanctions as a tool

that supplements diplomacy, but added that careful

consideration must be given to application. The MFA assesses

that Burma sanctions have had a mixed impact, but have not

yet induced the desired behavior change. Elbling added that

the MFA has received inquiries from the Bundestag, where

parliamentarians are concerned that sanctions are hitting

innocents too hard. Elbling said it is important to enlist

the support of Burma's major trading partners in the region.



5. (C) Wolfgang Piecha, MFA Director for South East Asia,

said that Foreign Minister Steinmeier, during his recent

visit to Singapore, Indonesia, and Vietnam, had heard from

his counterparts that the only country with any influence

over the Burmese regime is China. Steinmeier left the region

with the impression that autonomous sanctions had been

largely counterproductive, had helped to forge solidarity

within the military, had increased China's influence, and had

given the regime excuses for legitimizing its rule. Piecha

said Germany supported UNSYG Ban's proposal for a UN-ASEAN

summit and said Germany does not believe Gambari's mission

has run its course, although he acknowledged that it was not

currently yielding results. Piecha said Germany had doubts

about the effectiveness of EU sanctions, which have already

been in place for 12 years. He added that Germany is

reluctant to support expansion of the EU's sanctions lists,

noting that restrictions on trade in gems and timber only

went into effect in late 2007/early 2008. He reiterated that

the Bundestag does not want to see ordinary people hurt by

sanctions.



6. (C) In a separate meeting, Economics Ministry Director for



BERLIN 00000424 002.2 OF 004





Foreign Trade Law Ursina Krumpholz supported the idea of

waiting to see the effects of the 2007 changes to EU

sanctions before discussing new steps. She said Germany also

wants to wait for the results of the May referendum.

Krumpholz also expressed skepticism about the effectiveness

of EU and U.S. restrictions on the import of Burmese gems and

timber, noting that the EU and U.S. are not Burma's major

trading partners. Like Elbling, she suggested that the EU

and the U.S. must do more to engage China and other major

Burmese trading partners in the region.



7. (C) Szubin said the U.S. shares Germany's assessment that

sanctions are not a "silver bullet," but a tool to facilitate

diplomacy. Szubin's interlocutors reacted with surprise when

he stated that the delegation was visiting not to suggest

another round of new measures, but to offer suggestions on

how the EU might target its sanctions more effectively.

Szubin recommended implementing an asset blocking requirement

on entities listed in Annex 7 of the EU Common Position. He

also suggested considering lifting investment restrictions on

the 1,207 companies listed in Annex 5. While this Annex is

aimed at facilitating the trade ban, the investment

restrictions have led banks to screen against this list,

resulting in a high number of false positives and prompting

financial institutions to either let all transactions through

or block the transactions of a large number of innocents.

Instead, he suggested using Annex 5 as a guide for importers.

Szubin noted that limited identifier information was the

reason U.S. designations on Burma included only 40 names. He

said the U.S. was willing to work with the EU to fill in gaps

in identifier information. Finally, Szubin recommended that

the EU consider listing the two major regime-owned

companies-- the Myanmar Gems Enterprise and the Myanmar

Timber Enterprise -- which are the main collectors of gem and

timber revenue, for asset blocking.



8. (C) Elbling and Krumpholz said Germany would consider the

U.S. suggestions, but again stressed the need to engage China

and other key players in South East Asia. Krumpholz noted

that it is difficult to get German companies to accept

sanctions -- not just in Burma, but in other countries, such

as Iran -- particularly autonomous sanctions. Hook stated

that the U.S. also prefers a multilateral approach, but

stressed that further action on Burma in the UN Security

Council would be difficult. Szubin agreed, stressing the

need to consider other options in the absence of the

preferred UN option. He added that the impact of EU-US

financial sanctions could be very significant, given the

centrality of the dollar, euro, and pound in international

trade, and that these effects should not be underestimated.



9. (C) Finance Ministry Deputy Director General for

International Financial Policy Berthold Leber noted that the

Finance Ministry plays a limited role on the issue, given

that there are "virtually no" payment transfers between Burma

and Germany. Michael Findeisen, Finance Ministry Director

for Terrorism Finance and Financial Crimes, agreed that

incomplete identifier information on UN and EU lists

(terrorism, Iran, Burma, etc.) was an obstacle to effective

implementation of financial sanctions. He argued that

informal financial transfer arrangements, such as hawala,

also posed difficulties. Szubin noted that the Burmese

regime needs access to major international financial centers,

both to finance sales of natural gas and to facilitate

transfers to companies' international operations. Findeisen

welcomed the delegation's suggestions on how to target EU

sanctions more effectively and said the Finance Ministry

would lobby the MFA in this regard. Findeisen said the

Finance Ministry was open to a further exchange of

information, as well as a cooperative endeavor to fill gaps

in identifier information.



IRAN SANCTIONS

--------------



10. (S) On Iran, Elbling and Krumpholz each noted that the EU

had completed implementation of the financial measures in

UNSCR 1803, but declined to give details about the state of

discussions in Brussels on EU post-1803 autonomous measures.

(COMMENT: Elbling and Krumpholz were considerably more



BERLIN 00000424 003.2 OF 004





circumspect than working-level colleagues in both ministries,

who have expressed frustration on other occasions with the

pace of Slovenia's efforts, as Council President, to move

discussions on Iran forward. END COMMENT). Elbling stated

that Germany and other EU member states are paying close

attention to the case before the European Court of Justice

(ECJ) on due process safeguards for individuals under

sanctions. He said there are concerns in Brussels that the

ECJ will even take a critical view on implementation of UNSCR

1803. Krumpholz expressed similar concerns.



11. (S) Hook, noting that the case before the ECJ concerns

individuals, not entities, suggested the case was

inapplicable to measures on financial insitutions. "Germany

takes the legal aspect seriously," Elbling said. "The EU

has to be more stringent than the UN." On Banks Melli and

Saderat, Krumpholz stated that the Economics Ministry had not

yet seen "proof of conscious support of Iran's proliferation

activities." In response to a question, Krumpholz said the

Economics Ministry had not been "comfortable" with the

evidence on Bank Sepah, either.



12. (S) Krumpholz said the Economics Ministry remains

concerned about perceptions that UN and EU sanctions are

leaving the area of nonproliferation and moving toward

general trade sanctions. She noted this sentiment wasshared

by German businesses, which are also concened that

ambiguities in trade and financial measres and gaps in

identifier information could expse banks and exporters to

legal jeopardy. She eplained that even negligence-based

violation of anctions could expose company compliance

officers-- who are personally liable under German law -- t

criminal penalties, including prison sentences f up to six

months. Krumpholz argued that German law does not provide

for civil penalties in such cases.



13. (S) In this regard, the assessment of MFA and Finance

Ministry officials on sanctions enforcement differed

considerably. MFA International Economic Policy officer

Claudia Schuett reported that the the German Federal Office

of Economics and Export Controls (BAFA) and the Bundesbank,

which is responsible for financial sanctions enforcement in

Germany, operate a telephone hotline/help desk for sanctions

and export control-related inquiries. The Finance Ministry's

Findeisen reported that German banks that violate sanctions

generally do so as the result of sloppiness, recklessness, or

negligence. In such cases, he said, the Bundesbank generally

levies a civil fine, which is subject to appeal in a court of

law. (NOTE: Trade sanctions violations are generally

investigated by state and federal prosecutors under Germany's

Foreign Trade and Payments Act and/or War Weapons Control

Act. END NOTE.) Findeisen agreed, however, that

sanctions-related violations are more easily avoided with

correct and complete identifier data.



INDUSTRY ROUNDTABLE ON IRAN

--------------



14. (C) In an industry roundtable discussion, Hook and Szubin

outlined the rationale behind U.S. sanctions policy on Iran,

as a means to facilitate international diplomatic efforts.

They stressed the U.S. preference for multilateral approaches

but the need for autonomous measures when multilateral

efforts fall short. They also emphasized that sanctions are

having an impact on influential constituencies in Iran. A

representative of the German Federation of Industry (BDI)

said business accepts that Iran's nuclear program is a

threat, but argued that only multilateral sanctions can be

effective. Otherwise, compliant firms in "responsible

countries" lose out while other countries simply pick up

market share. A German Chamber of Commerce (DIHK) official

disputed that sanctions are ratcheting up pressure enough to

induce the regime to change its strategic position and cited

the Majles election results.



15. (C) A representative of the German Association of Banks

pointed out that German exporters waited for months for EU

clarification on implementation of UNSCR 1737 paragraph 15, a

situation that put its member banks in the "embarrassing

position" of having to decide whether to pay exporters and



BERLIN 00000424 004.2 OF 004





"eat the risk" in the interim. He added that German banks

are responsible to pay customers of the German branches of

Iranian banks who lack sufficient liquidity, as they are all

part of the same deposit insurance scheme.



16. (U) DAS Hook and Mr. Szubin have cleared this message.

TIMKEN JR