Identifier
Created
Classification
Origin
08BRUSSELS1468
2008-09-23 10:45:00
SECRET//NOFORN
USEU Brussels
Cable title:  

IRAN SANCTIONS: U/S LEVEY MEETINGS WITH EU

Tags:  ETTC EFIN ENRG KNNP KTFN PTER PHUM PINR IR 
pdf how-to read a cable
VZCZCXRO9336
PP RUEHAG RUEHBC RUEHDE RUEHDIR RUEHKUK RUEHROV
DE RUEHBS #1468/01 2671045
ZNY SSSSS ZZH
P 231045Z SEP 08 ZDK
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC PRIORITY
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEAIIA/CIA WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK
RUCPDOC/USDOC WASHDC
RUEHUNV/USMISSION UNVIE VIENNA
RHEHNSC/NSC WASHDC
RHMFISS/FBI WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HOMELAND SECURITY CENTER WASHINGTON DC
RHEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEAWJA/DEPT OF JUSTICE WASHDC
RUEKJCS/DOD WASHDC
S E C R E T SECTION 01 OF 05 BRUSSELS 001468 

NOFORN
SIPDIS

STATE FOR EUR/ERA, EUR/WE, NEA/IR, S/CT, ISN/RA, EEB/ESC,
IO, VCI, P AND T
TREASURY FOR TFFC, TFI

E.O. 12958: DECL: 09/23/2018
TAGS: ETTC EFIN ENRG KNNP KTFN PTER PHUM PINR IR
IZ, EUN, PARM, AORC, TRGY, SNAR, KCRM, UNSC, PL, UK, EI,
DA, FI, IT
SUBJECT: IRAN SANCTIONS: U/S LEVEY MEETINGS WITH EU

Classified By: USEU EconMinCouns Peter Chase for reasons 1.4 (b),(d),
(e).

S E C R E T SECTION 01 OF 05 BRUSSELS 001468

NOFORN
SIPDIS

STATE FOR EUR/ERA, EUR/WE, NEA/IR, S/CT, ISN/RA, EEB/ESC,
IO, VCI, P AND T
TREASURY FOR TFFC, TFI

E.O. 12958: DECL: 09/23/2018
TAGS: ETTC EFIN ENRG KNNP KTFN PTER PHUM PINR IR
IZ, EUN, PARM, AORC, TRGY, SNAR, KCRM, UNSC, PL, UK, EI,
DA, FI, IT
SUBJECT: IRAN SANCTIONS: U/S LEVEY MEETINGS WITH EU

Classified By: USEU EconMinCouns Peter Chase for reasons 1.4 (b),(d),
(e).


1. (S//NF) SUMMARY: On September 8 and 9, U.S. Treasury
Under Secretary for Terrorism and Financial Intelligence
Stuart Levey met with EU and Member State officials to take
stock of U.S.-EU cooperation regarding Iran's illicit
proliferation activities. U/S Levey underscored the
effectiveness of the recent approach with measures targeting
Iran's specific proliferation activities and described the
impact USG has observed in part as a result of the EU's
recent designation of Bank Melli. In response to a question
from Finland, Levey overviewed for Political and Security
Committee (PSC) Ambassadors from 15 EU Member States the
forthcoming measures the USG may consider as next steps and
invited the EU to consider similar measures: focusing on
Iran's shipping company (IRISL),insurance / reinsurance for
IRISL, and vigilance against others aiding sanctions evasion
such as banks Mellat and Saderat. External Relations
Commissioner Benita Ferrero-Waldner agreed that Transatlantic
cooperation has been excellent to date on this difficult
challenge, and is personally interested in improving the
regime's abysmal human rights record as well. Council

Secretariat Political Director Robert Cooper wants to see
what the prospects might be of a speedy, if nonsubstantive,
fourth UN Security Council Resolution before he pushes the EU
to examine taking further autonomous measures. END SUMMARY.

-------------- --------------
U/S Levey: Multilateralism, Effective Targeted Measures,
Sanctions' Impact
-------------- --------------


2. (C) In all meetings, U/S Levey highlighted the USG's
commitment to pursuing multilateral efforts aimed at Iran's
illicit behavior. This marked a departure from previous eras
of trade-based sanctions targeting entire economies. Levey
noted the deliberate targeting of measures focused
specifically on Iran's illicit behaviors -- nuclear, missile,
or sanctions evasion and deceptive conduct.


3. (C//NF) Levey commended the EU's June designation of
Iran's Bank Melli, which had "surprised" the Iranians and
provoked the exact kind of debate the USG is seeking in Iran.
The EU Melli designation also changed the banking debate in
the UAE and Asia, even prompting more cooperation from the
Chinese whose businesses are no longer engaging Melli.
Iran's bluster notwithstanding, this and other targeted
measures are having an impact by not only financially
isolating the regime but by prompting debate among key
sectors of Iranian society on the choice to maintain the
current policies.

--------------
Next Steps
--------------


4. (S//NF) Levey flagged current USG thinking is leaning
toward gold-plating our implementation of existing UNSCRs
quickly as further resolutions are likely to proceed at a
slow pace in New York. We will follow the "spirit and the
letter" of the resolutions. He outlined Treasury's focus on
three immediate steps:

--a) focusing on Iranian shipping, namely the Islamic
Republic of Iran Shipping Lines (IRISL),in accordance with
the spirit of UNSCR 1803;
--b) discouraging insurance and reinsurance companies from
insuring IRISL, using authorities of paragraph 6 in UNSCR
1737 regarding financial services and proliferation; and
--c) increased vigilance against entities helping designated
parties to evade sanctions, including banks Mellat and
Saderat.

BRUSSELS 00001468 002 OF 005



Levey urged all EU interlocutors to consider similar measures
as soon as possible to maximize the possibility of a
diplomatic outcome to this problem, including through the
Financial Action Task Force.


5. (S//NF) Addressing a common European question, Levey
noted that the two major U.S. presidential candidates would
both want to continue pressuring Iran via such non-military
means as sanctions in order to promote the best possible
chance of a diplomatic solution. Noted that not many months
are left before Iran's nuclear program reaches the "point of
no return," he encouraged the EU to continue and intensify
their Iran sanctions policy. Urgent diplomacy is needed and
Israel's sense of insecurity is real.

--------------
EU Reactions: Council Secretariat's Cooper
--------------


6. (S//NF) Council Secretariat Political Director Robert
Cooper said he knows little about how banking sanctions work,
other than his impression that they work. It seems to be
"the single most effective" approach. The good news is that
we are seeing "little bits of reactions" from Iran, beyond
the surface, particularly after the EU's Melli designation.
Though Iran had found a work-around through the Gulf, they
also had problems with financing their refined products from
India. Simultaneously, they had stimulated debate on the
diplomatic front. There are some positive signs of Iran's
interestin negotiating. "I definitely think the pain is
good." Regarding Iran's theory that it should await the next
U.S. president for negotiating, Cooper said it was a bad
strategy as Iran risks being bombed by that time. It would
be better to negotiate with the end of the current
Administration, whoever wins. With McCain, negotiating would
be "no easier than now;" whereas "Obama might be vulnerable
to accusations of being soft." Therefore the EU is preparing
the ground for next year in stimulating debate. Though Iran
is "far from doing what Libya did," there are signals that
they do want to engage. He said unfortunately it is hard to
know if the process will take forever or if Iran is really
committed to engage because the behavior in either case looks
the same.


7. (S//NF) Cooper said the "most sensible and practical
conversation he ever had" with Iran was regarding the way
forward on the freeze-for-freeze proposal: Iran tipped its
hand by noting that unilateral sanctions "actually hurt us
more," especially the Melli designation, than UN sanctions.
In response to Levey's overview of next steps on the U.S.
sanctions horizon, Cooper said he'd need to check whether the
scope of the EU Common Position would need to be broadened to
take actions on the insurance sector. He also asked for
information regarding Mellat's illicit activities (shared
separately in a follow up meeting with the Ambassador on
September 11).


8. (S//NF) Cooper said he needs to think now about how to
approach the EU's next steps. "It would be easiest and most
convenient" if the UNSC passed a new resolution, providing
the EU with an action-forcing trigger. He said he will try
for this first, even a non-substantial but "quick" UNSCR --
something straight-forward that does not cost the Chinese.
He will assess the "spirit" of Russia separately. After a
fourth UNSCR he could take the case against Mellat to the EU
and say, "by the way, here's evidence against this bank." He
expects to assess the feasibility of this approach (at the
next P5 1 meeting) on September 18. "If not, we'll see what
else we can do." As Ambassador Silverberg cautioned against
waiting for indeterminate amounts of time before taking
action under existing resolutions, Cooper reassured that "If
I think a UNSCR cannot happen quickly, then we need to act

BRUSSELS 00001468 003 OF 005


independently -- it will just make the process more
difficult." He will consult the UK and France about what to
do.


9. (C//NF) Andreas Strub, SG/HR Solana's Deputy Personal
Representative for Nonproliferation, added, "EU Member States
are playing a game awaiting further action by UNSC. We are
now looking at measures which will be costly and harder to
sell back home. Members will ask if others will also be
forced to take action." He said banking measures have
incurred costs for Italy, Germany, France, and the UK.
(Cooper wondered aloud: "If nothing in Luxembourg, why are
they making such a fuss?") Levey noted these same countries
bearing the costs are the ones pushing for further measures.


10. (C//NF) Cooper also asked whether the United States was
making progress in the Gulf, the obvious route for
circumventing sanctions? Cooper said the 3 3 can underline
this at an upcoming meeting with the GCC. Levey assured him
the highest levels are engaged in grappling with this; at
least the route has been reduced to one main conduit via
Dubai. Given their fears of both a nuclear Iran and of
standing up to the regime, Gulf states are quietly pressuring
without press announcements.

--------------
PSC Ambassadors
--------------


11. (C) In Levey's informal meeting with fifteen EU
Political and Security Ambassadors (PSC),UK PSC Ambassador
Tim Barrow agreed that the EU must keep working on sanctions
now; Iran is just stalling for time through the U.S.
elections. He urged that the United States remain engaged
both in pressuring Iran and in offering incentives. This is
essential for the credibility of the process; otherwise Iran
doubts the offer's veracity. U.S. participation in Geneva
was "significant" and helped change the debate in Tehran.
"Only the Soviets" had more stamina than Iranian negotiators
in postponing the substance of a meeting to the bitter end;
keeping up the pressure makes the process easier, so both
tracks are key. He agreed that Tehran's fascinating debate
is strong and changing the regime's calculus, even if our
ultimate goal was not yet reached. Other issues we should
remain concerned by are the executing of juveniles and human
rights. In reply to Ambassador Silverberg's question, Barrow
said the EU is now debating how to best balance carrots and
sticks, analyze the cause of the shifting debate in Iran, and
how to live up to UNSCR obligations. He said some EU Member
States worry that autonomous EU actions would "shatter the
broad international consensus which must be sustained." On
this point, Levey countered that he has never heard a
complaint, besides Iran's, over actions beyond the UNSCRs
undermining diplomacy. To the contrary, partners are joining
the voluntary territory.


12. (C) Irish PSC Ambassador Marie Cross noted Iran's
objective to be a major regional player, with nuclear weapons
providing a mean to that ultimate end. She asked whether
their support for Hizballah and other groups has waned or
increased, and what impact the Russia-Georgia dispute might
hold for further UN action? Levey replied that Iran's
support for terrorism is definitely increasing, and
overviewed their funding trends for Hizballah, Palestinian
Islamic Jihad, and the Taliban. He noted the resulting
nervousness of Gulf states, which continually inquire about
EU actions and leadership when meeting the United States.
Levey explained the current USG focus on taking all possible
action under current UNSCR authorities, although we will keep
working for further UN action. Ambassador Silverberg
stressed that the P5 1 would decide how to proceed. While
Russia remains an open question, she expressed hopefulness
that Russia might see Iran policy as a chance to demonstrate

BRUSSELS 00001468 004 OF 005


cooperation and relevance. Iran's debate seems focused on
timing (how quickly to weaponize) rather than whether to
pursue nuclear weapons. The regime's "openness to ideas" has
been demonstrated only upon the eve of any actions taken by
others. Therefore, she implored that the best way to get
Iran to the table remains actions taken in Brussels and New
York.


13. (C) Danish PSC Ambassador Lars Faaborg-Andersen agreed
we must keep up the pressure, adding that U.S. dialogue with
Iran is "very important." He asked whether the United States
showed any indication of willingness to engage in bilateral
dialogue, which was of fundamental importance to the
Iranians? Levey noted a U.S. official had participated
directly in Geneva, and so far "we got nothing." It should
not be too much to ask that Iran comply with its existing
mandatory UNSCR obligations for the United States to engage
in negotiations. It remains to be seen what type of
engagement the next U.S. administration will pursue.


14. (C) Finnish Ambassador Anne Sipilainen said Finland
shares the view that we must do as much as possible as soon
as possible, and asked what the USG would expect in concrete
terms regarding next steps and the insurance sector? Levey
replied that the EU could examine insurance, a core financial
service, for areas that might be benefiting Iran's missile
program. For example, should governments be insuring IRISL,
giving it legitimacy for global business? On reinsurance, a
small group of European companies cover the global market for
which Iran could be receiving benefits. This could be an
opportunity for European leverage. Furthermore, governments
could draw attention to IRISL's deceptive conduct:
falsifying names and documents, engaging in activity with
designated entities. On banking vigilance, designating Melli
was a tremendous EU step; the case against Mellat is at least
as strong as Melli and Saderat. He encouraged the EU to look
at where Iranian bank branches are in the EU or what banks
are doing business in Iran.


15. (C) Italian PSC Ambassador Andrea Meloni asked about
China's direction and partnership on Iran. Levey noted that
UNSCR 1803 took a "ridiculous" amount of time. If we are
serious, we must do something in the relevant timeframe on
Iran. The United States will continue to cooperate with
China and Russia. The countries see the risks to their
banks, which are cutting off business to protect their own
reputation.


16. (C) The Polish PSC Ambassador asked how closely can the
USG control the flow of dollars from Iran, particularly
through third countries? Levey explained that even where
Iran eventually works around the sanctions system, doing so
is difficult, time-consuming, complicated, and costly. The
business community has internalized the costs of the regime's
defiance as they are forced to become a nation of smugglers.
The bottom line is our governments must protect our banks
from being abused for proliferation purposes.

-------------- --
External Relations Commissioner Ferrero-Waldner
-------------- --


17. (C//NF) Levey thanked Commissioner Ferrero-Waldner for
her Directorate General's forward-leaning approach with
respect to EU autonomous measures, which is helping create a
sense of isolation for Iran's business elite. The
Commissioner agreed with his characterization of the
successful multilateral collaboration on Iran and focus on
sophisticated, targeted sanctions. She affirmed the dual
track was the "right approach." The Commission had been
adamant that it should not be the United States nor the U.S.
and EU acting alone; involving the other UNSC members sends a
"strong signal." She asked whether Russia was becoming more

BRUSSELS 00001468 005 OF 005


difficult in the UNSC. A military approach would be another
disaster in the Middle East; thus the EU will stand with the
United States as long as it is a diplomatic course. The EU's
latest Common Position included a few steps that went "beyond
1803, which wasn't easy." The Council must now decide on the
Commission's proposal for finalizing the August Common
Position annexes with regard to vigilance over banks. She
said she is "not sure things will go quickly, but it is for
the Council to decide." The Commissioner lamented that human
rights is overshadowed by the nuclear issue, except at the
European Parliament which is seized with Iran's executing of
minors. Iran had only conceded on the issue of stoning
women, which can't be easily verified. The Commission wanted
to open a Delegation in Iran, but the moment is still not
right. She also derided the slow pace of the EU's public
diplomacy effort to begin translating their works into Farsi,
especially Council conclusions. The Council does not focus
on the human rights angle, but Iran' people need to also do
things differently. In her prior travels to Iran as Austrian
Foreign Minister, where her every movement was filmed, she
deliberately but respectfully set an example as a woman who
must be respected by the regime.


18. (C) The Ambassador noted the difficulty of asking
protesters who are beaten to take more action against their
oppressors. The Secretary always personally emphasizes the
human rights problem. Levey stressed the importance of
timing to increase the odds of a diplomatic outcome; hence
our focus on actions under existing UNSCRs.


19. (U) U/S Levey has cleared this message.


20. (U) MINIMIZE CONSIDERED.

MURRAY
.