THE D8 AND IRAN: EVEN WORSE THAN "BUSINESS AS

C O N F I D E N T I A L SECTION 01 OF 03 ISTANBUL 000085

SIPDIS

SIPDIS

LONDON FOR GAYLE; BERLIN FOR PATEZOLD; BAKU FOR HAUGEN;
DUBAI FOR IRPO

E.O. 12958: DECL: 02/15/2018
TAGS: PREL PGOV ETRD PINR ECON IR TU OIC
SUBJECT: THE D8 AND IRAN: EVEN WORSE THAN "BUSINESS AS
USUAL"

Classified By: Acting Consul general Sandra Oudkirk; reason 1.5 (d)


1. (C) Summary: A tour d,horizon with the Secretary General
of the "D8 Developing Countries" revealed an organization
trying to find its niche in a crowded arena of multilateral
economic organizations. The Secretary General has high hopes
of using the D8 to foster "growth and developing across the
board" in its eight member states (Turkey, Iran, Indonesia,
Egypt, Malaysia, Nigeria, Pakistan, and Bangladesh) despite
many internal challenges, while shunting off to member states
themselves the task of dealing with the "messy politics" of
UNSC sanctions against Iran. Iran, for its part, is actively
using its D8 membership -- under the guiding hand of the D8
Secretariat's Director, a former Iranian nuclear negotiator

SIPDIS
-- to militate against its growing international isolation,
particularly in the fields of tourism, telecommunications,
and most recently petrochemical cooperation. Comment:
Washington may want to consider a demarche to D8 capitals
before its "Commissioners" meeting in April, to caution the
D8 that its credibility depends in part on how firmly its
member states are pressing Iran to meet UNSCR 1737 and 1747
obligations and to highlight the risks of deepening economic
and trade relations with the regime. End Summary.

The D8's 2008 Priorities
========================


2. (C) D8 Secretary General Dipo Alam, a former Indonesian
Deputy Economic Minister, gave Consulate Istanbul's "Iran
watcher" on February 13 a tour d,horizon of the D8's
near-term goals and priorities and longer-term ambitions.
Alam, who has been based in Istanbul as D8 Secretary General
since 2006, said he was looking ahead to the D8's July 7-8
Summit in Kuala Lumpur as an opportunity to show the world
how effective the D8 has become. The D8's top priority this
year is to secure member state ratification of the D8
"Preferential Trade Agreement" signed at the last D8 Summit
in Bali in May 2006, intended to gradually reduce tariffs on
"intra-D8" trade in sectors and products to be negotiated.
In order to achieve that, D8 experts will first meet in
Islamabad in late March to agree to "rules of origin" for the
specific goods and sectors to be covered, followed by a
full-court press to persuade remaining member states to
ratify it this year. Alam is optimistic that this tight
schedule can be met, "as long as we can stop some members
from trying to add silly hobby horses to the agreement." He
gave one example: "A big member state that happens to have
the world's largest grower of saffron" -- Iran -- "insists
that the agreement must eliminate all tariffs on D8 saffron
exports. It is taking up so much time on this one product
that no other D8 state even grows that it has slowed down
discussions on more important sectors."


3. (C) Alam said another goal of the 2008 Summit will be to
clarify what the D8's relationship should be with other
multilateral organizations. He agreed, for example, that the
D8 has overlap in its membership and mission with the
"Economic Cooperation Organization" (ECO),though he pointed
out the ECO is tailored to address specific regional
(Caucuses and Central Asian) concerns. Alam has been
spending time recently with the UN and associated UN bodies
to raise the D8's profile. He had just returned from
meetings in Rome with the UN's Food and Agriculture Agency
(FAO) to discuss how the D8 and FAO, "without reinventing the
wheel", can work together on food security and improving
biotechnology capacity in D8 states. He hopes leaders at the
Summit will ask him to reach out to ASEAN, and to invite
India and China as "observers" to the D8. (No D8 members
currently support expanding D8 membership.)


4. (C) Alam identified customs cooperation, civil aviation
cooperation and tourism expansion as key sectors for D8
cooperation in 2008. In June Alam will attend a meeting in
Jakarta of civil aviation organization directors from D8
member states to discuss establishing direct flights between
all D8 member state capitals. "Most members support this.
Only Iran and Egypt are the exceptions, because they cannot
agree to direct flights until their bilateral relations
improve." Alam noted the positive role played by Turkey's
airport authority, TAV, in encouraging D8 privatization of
their airline and airport management sectors. Tourism to
Turkey and Malaysia is booming (23 million tourists to
Malaysia last year, 21 million to Turkey),and Alam noted
that Iran since 2007 has taken a special interest in
promoting D8 investment in each other's tourist industries.



5. (C) Looking farther ahead, Alam said the D8

ISTANBUL 00000085 002 OF 003


"Commissioners" (i.e., A/S level MFA representatives in each
member state charged with encouraging host state compliance
with D8 agreements) are notionally planning to meet in
Jakarta in April to work on a "10-year roadmap for D8
cooperation." Alam hopes the road map will commit the D8
member states to achieving a target of 20% of total trade
volume on "intra-D8 trade", up from the current rate of only
8%.

6. (C) Warming to the topic of the D8's post-2008 work plan,
Alam offered a scattershot list of additional sectors and
challenges he would like to see the D8 take on, including:
regulating remittances from migrant workers outside D8
countries into the D8; widening the availability of
micro-financing to underdeveloped/rural areas throughout the
D8; and examining the issue of D8 cooperation on energy
diversification, including into biofuels.

What the D8 is, and what it is not
==================================


7. (C) Alam carefully described the D8 as "a global, not
regional, arrangement for fostering growth, development and
trade across the board in our eight member states, without
impacting member states' commitments to other international
organizations." When it was founded in 1997 by Turkey's
then-Prime Minister Erbakan, most member state economies were
comparable, still firmly in the "developing" camp. In the
past ten years some D8 economies and trade volumes have grown
far faster than others, creating an unexpectedly wide
spectrum of economic power within the group (and some
corresponding tension between the D8's "haves and
have-nots"). Alam noted that Malaysia, for example, had a
2007 trade volume of 300 billion dollars. Turkey had the
second highest 2007 trade volume at 267 billion dollars,
though with a 50 billion dollar trade deficit. At the other
end of the spectrum is Bangladesh, "the only D8 member that
is still officially a lesser developed country (LDC)" with a
2007 trade volume of only 26 billion dollars.


8. (C) All D8 member countries are also Organization of
Islamic Conference (OIC) members and, according to Alam,
"some important OIC members" -- like Saudi Arabia -- see the
D8 as superfluous and would prefer to see the group act under
OIC leadership and auspices. "But the OIC is 58 members who
can't agree on basic ideas, let alone try to negotiate
preferential trade agreements" Alam noted. Erbakan chose the
D8 members carefully, he added, making sure not to include
countries from the Gulf that would try to turn the D8 into a
small OIC or OPEC. "That is why Egypt is our only Arab
country." Alam suggested the D8's current geographical
spread afforded it something of a global perspective, so it
does not need to focus exclusively on the economic or
political challenges of any particular region.


9. (C) Indeed, when we asked how UNSC Chapter VII sanctions
are affecting D8 economic engagement with Iran, Alam said the
D8 tries not to become constrained by controversial
"political issues" involving its member states. "We are all
UN members, OIC members, and other international organization
members. Let those bodies deal with the politics. Our goal
is to expand trade and cooperation with each other. D8
Commissioners in each capital oversee member state compliance
with D8 pledges, and it is up to host governments to be aware
of UN obligations with regard to each other."

The D8 and Turkey
=================


10. (C) Alam shared his personal view that Turkey's current
Justice and Development Party (AKP) government is uncertain
how to deal with the D8. Because the D8 was founded by
then-Prime Minister Erbakan, leader of the Islamist Refah
(Welfare) party only months after the Turkish military had
arranged his ouster in a "soft" coup in 1997, there remains
"some baggage" burdening the AKP's institutional view of the
D8. "The AKP also supports better relations with the
countries that make up the D8, but perhaps they do not want
to associate too closely with Erbakan's brainchild. We are
less of a priority than the Black Sea Economic Cooperation
(BSEC) group, the Iraq Neighbors group, and other groups
where they can interact with bigger players." Still, Alam
pointed out, the GOT continues to host the D8 Secretariat,
providing the D8's headquarters on the 24th floor of a nice
building in a well-heeled Istanbul neighborhood. And
President Gul, who played a helpful role creating the D8
while a member of the Turkish national assembly in 1997, met
several times as Foreign Minister with Alam in 2007.


ISTANBUL 00000085 003 OF 003




11. (C) Alam revealed that the D8 website
(www.developing8.org) had recently been attacked by hackers,
and a fake D8 website briefly appeared with false information
about the D8. He believed these cyber attacks originated
within Turkey and were intended "to discredit the D8 and to
discredit Islam." He has reported these incidents as
cyber-crimes to the Turkish MFA. Trying to put a positive
spin on it, he characterized the cyber-attacks as "a
necessary evil that successful organizations must get used
to."

Iran's ulterior motive
======================


12. (C) Although SG Alam did not suggest it, Iran appears to
be actively leveraging its D8 membership to counter the
toughening international sanctions efforts against the
regime, to militate against its growing isolation, and to
portray itself both to outside and domestic audiences as an
important player in the arena of international organizations.
The fact that Iran has asked to lead D8 efforts in the
sectors of tourism and telecommunications reinforces this
conclusion. Alam noted that Iran had just added to the D8
agenda a February 17-19 meeting in Tehran of D8 petrochemical
industry representatives, nominally to encourage D8-wide
"investment in and privatization of member state
petrochemical industries." Rather than raise a red flag with
SG Alam, he described Iran's motives behind hosting the
petrochemical industry meeting positively, praising Iran's
willingness to provide Indonesia with the bulk of its
fertilizer imports and to work with Malaysia on a joint
project to build petrochemical refineries.

13. (C) Also illustrative is Iran's appointment of
Ambassador Kia Tabatatabaee as the Director of the D8
Secretariat (and thus Alam's deputy). Before joining the D8

SIPDIS
in December 2006, Tabatabaee served as Iran's ambassador to
Moscow, Switzerland, and to the UN Missions in Geneva, as
well as MFA DG for Political Affairs. He also acted as a
"light heavyweight" on Iran's nuclear negotiating team prior
to 2006. Given Tabataee's recent MFA stature, it is not
unreasonable to assume that he still takes his marching
orders from Tehran, and that he is using his position to
exert a pro-Iranian influence over the D8 Secretariat's
agenda-setting efforts.

Comment
=======


14. (C) Alam was happy for the opportunity to brief a U.S.
diplomat about the D8, eager to present the D8 as an
organization to be taken seriously. His own future is
uncertain, with his term provisionally expiring at the July
Summit, though he hopes Summit leaders will reappoint him.
His corresponding desire for quick progress on intra-D8
cooperation may explain in part his apparent self-denial
about the hazards of using the D8 to significantly expand
economic and trade links with Iran. As a result, the D8's
relationship with Iran appears even cozier than "business as
usual." At the risk of giving the D8 more attention than it
may deserve, Washington might consider a demarche to D8
capitals before its "Commissioners" meeting in April to
caution D8 governments that D8 credibility depends in part on
how firmly its member states are pressing Iran to meet UNSCR
1737 and 1747 obligations and to highlight the risks of
deepening economic and trade relations with the Iranian
regime.


15. (C) Bio note: Alam described himself as a "real
Washingtonian", noting that he had studied engineering at
George Washington University, and still owns a house nearby.
He was friendly and engaging throughout the meeting, but he
was most enthusiastic when talking about his artwork; Alam is
an avid painter, and has sold many paintings to donate the
proceeds to refugee-related charities. (Many of his
paintings can be seen on the "gallery" section of the D8
website). He is well-known to the Consulate, and is eager to
maintain cordial contacts with us. End Comment.
OUDKIRK