EU POLITICAL DIRECTOR ON IRAN

S E C R E T SECTION 01 OF 02 BRUSSELS 001008 NOFORN SIPDIS E.O. 12958: DECL: 06/30/2018 TAGS: PREL ETTC KNNP MNUC EFIN PGOV PHUM IR EUN SUBJECT: EU POLITICAL DIRECTOR ON IRAN REF: A. PARIS 1200 ¶B. BRUSSELS 955 Classified By: Alyce Tidball, Acting Political Minister Counselor for r easons 1.4 (b) and (d) ¶1. (C/NF) SUMMARY: Work continues in Brussels to push forward UNSCR 1803 implementation, but doubts remain about whether it will be possible to act at France's first GAERC session (July 22-23). EU Political Director Cooper requested additional information from Treasury about shifting flows of funds and financing activity. FinAtt promised to request a briefing from Washington on the issue. Cooper also suggested that strategic energy dependence/Russia issues might be growing in importance as a component of the sanctions debate in Europe. END SUMMARY. ¶2. (C/NF) EU Political Director Robert Cooper met with Treasury Department FinAtt and Financial Affairs Minister Counselor Barbara C. Matthews, on June 30, Acting Political Minister Counselor Alyce Tidball also attended. He told us the EU continues to seek implementation of UNSCR 1803 in all 27 Member States. The EU3 and the Italians seek action at the July GAERC. However, it is unclear whether sufficient consensus exists to move forward in July. As for sanctions beyond those called for in 1803, Cooper said the possibilities are strong that the EU will go into "coalition of the willing" territory, urging individual Member States to implement expanded restrictions. He noted that if this scenario unfolds, the Council and its Secretariat would not be involved because it would not incorporate all 27 Member States. (COMMENT: Following on the heels of the Irish rejection of the Lisbon Treaty, the French Presidency's open frustration with the EU process, and the French Presidency's willingness to consider independent action beyond the EU process, it seems that various policymakers are increasingly willing to consider a "two-speed" or "multi-speed" Europe. It is unclear whether such a process would be effective or legally possible in the sanctions arena, given the structure of bank branching and oversight laws and regulations in Europe. END COMMENT.) ¶3. (C/NF) Cooper asked if the next target in terms of banks would be Saderat, and whether Treasury was watching branching activity in the Gulf. Treasury Attache indicated that her office was focused on the EU dimension and so would not have detailed information on the regional picture. She noted that when Treasury Assistant Secretary O'Brien met with EU officials in June, he noted to his counterparts that EU leadership in implementing UNSCRs was being observed carefully in the Gulf and that action in Brussels could have a catalytic effect in the region. Cooper observed that expansion of Bank Saderat's activities could be in part replace Bank Melli's role. ¶4. (C/NF) Cooper asked whether Treasury was monitoring the flow of funds and possible shifts in funding activity. FinAtt responded that Assistant Secretary O'Brien had raised in June with EU counterparts observed re-pricing of transactions into euros. She noted that clearing euro transactions would occur in Frankfurt at the ECB. Cooper said it would be useful to have a picture of how things look through U.S. Treasury eyes worldwide with respect to flows of funds. Treasury Attache agreed to request a briefing by Treasury officials for Cooper in Brussels. ¶5. (S/NF) Cooper reiterated EU concerns about Chinese and Russian energy deals in Tehran (REF B). China closed a big oil deal with Iran last year and the question is whether it will also do one on gas. In addition, he said, the idea of a Gazprom-Iran deal makes him very nervous. Articles in the press, he noted, have linked financial sanctions to problems in the Iranian energy market, suggesting some success. Emphasizing EU desire to do things that will be effective, Cooper said, "we've gone part of the way, but still have a long way to go." ¶6. (C/NF) In a separate discussion with Poloff, Dutch and UK diplomats (strictly protect) reported that Italian diplomats made an exceptionally constructive intervention during the first round of EU-27 deliberations of the new EU3 proposal on UNSCR 1803-related measures. The Italians explained their policy about-face (i.e., now supporting an expansive rather than a narrow interpretation of 1803 responsibilities) based on their belief that the new proposal would tangibly interfere with Iran's ability to undertake proliferation-related activity. The Spanish reps did not have instructions at the first experts meeting; Malta, Cyprus, Greece, and Austria opposed the new EU3 draft and called for a narrow interpretation of the EU's implementation BRUSSELS 00001008 002 OF 002 duties under UNSCR 1803. The French Presidency is expected to keep the item on the expert working group (RELEX Counselors) twice-weekly agenda until a consensus draft is produced. (COMMENT: If the experts cannot reach agreement, it is likely that the French would elevate the action to the political level for handling by either the Ambassador-level Political and Security Committee (PSC) or the next GAERC on July 22. END COMMENT.) Murray .