GALP - IRAN: AGREEMENT UNLIKELY IN SHORT TERM

C O N F I D E N T I A L SECTION 01 OF 02 LISBON 000685

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/WE (OPSTRUP) AND EEB/ESC/TFS (COULTER)

E.O. 12958: DECL: 02/19/2018
TAGS: IR PO ENRG EPET ETTC PREL
SUBJECT: GALP - IRAN: AGREEMENT UNLIKELY IN SHORT TERM

REF: A. STATE 24254

B. LISBON 492

C. LISBON 251

D. LISBON 238

Classified By: Matthew Harrington, Pol-Econ Counselor, EMBASSY Lisbon,
Reasons 1.4 (b,d)


1. (C) Summary: The largest shareholder in Galp, Portugal's
largest energy company, told us that reports of a Galp deal
with Iran were overstated. He said Galp's discussions with
Iran were only to maintain contact for concrete collaboration
in the future, when the political environment is more
suitable. Galp officials told us that Foreign Minister Amado
had also expressed concern to them regarding Iran. Amado
subsequently told us that, while the GOP has no involvement
in Galp's contacts with Iran, he had told Galp's primary
shareholder that it would be dangerous to establish a deal
under current circumstances. Amado stressed that he shares
U.S. concerns and had encouraged the Minister of the Economy
to emphasize to all Portuguese companies the negative
consequences of doing business with Iran. End Summary.

Primary Galp shareholder: agreement unlikely
--------------


2. (C) During a lunch on March 13 with Americo Amorim, who
holds a third of the shares of Galp, Portugal's largest
energy company, the Ambassador expressed U.S. concerns about
the company's reported negotiations with Iran's national oil
company (NOIC). He cautioned that new investment in Iran
would send a very unhelpful signal at a time when the
international community is turning up the heat in response to
Tehran's continued refusal to suspend its nuclear weapons
program. Amorim assured the Ambassador that Galp has no
intention of signing an agreement in the current political
environment. The company is engaged in discussions with NOIC
only to keep the door open for concrete collaboration once
the time is right, and Galp would not move beyond the
exploratory phase without his full knowledge and approval.


3. (C) Amorim's aide, Carlos Gomes da Silva, said he was
aware the U.S. government had been paying close attention to
Galp's discussions with NOIC. Amorim Energy's General
Manager, Rui Paulo Goncalves, confided on the margins of the
lunch that Portuguese Foreign Minister Amado had also
expressed concern to Amorim about the Galp-NOIC discussions.

Amado on Iran
--------------


4. (C) In a separate conversation with FM Amado on March
19, Ambassador drew from ref A points to underscore U.S.
concerns about the potential for Galp investment in Iran's
petroleum sector. He informed Amado of his earlier
conversation with Americo Amorim.


5. (C) The GOP, Amado replied, "has no involvement" in
Galp's contacts with Iran, but he reported that he had told
Amorim directly that it would be "dangerous" to pursue
anything concrete under current circumstances. In addition,
he had also encouraged his counterpart at the Ministry of
Economy to emphasize to all Portuguese companies the negative
consequences of doing business with Iran.


6. (C) Amado reiterated what he has told us previously that
Portugal shares fully U.S. concerns about the threat posed by
Iran's nuclear ambitions. He said he had spoken very frankly
with Iranian FM Mottaki during the latter's visit to Lisbon
in January (ref D),stressing the need for Iran to comply
with UNSC resolutions. The Iranians "pose a tremendous
challenge for all of us," Amado said, adding that "they are
driving Solana crazy, with their constant cat and mouse
games."

View from Galp
--------------


7. (C) Tiago Vilas-Boas, a senior GALP official, separately
confirmed to us that the company's talks with NOIC are
exploratory and that no agreement has been signed. He said
the discussions have focused on the construction of a Light
Natural Gas (LNG) plant and terminal in Iran. He provided no
additional details on the proposed location of the LNG
plant/terminal, the cost of the project, the timeline, the
expected production capabilities of the plant, or other
players/investors involved.

Comment
--------------

LISBON 00000685 002 OF 002




8. (C) In light of these discussions, we are more confident
that Galp's talks with Iran are unlikely to result in any
concrete collaboration in the near term. It appears that
Galp's principal objective is to keep its foot in the door in
order to be able to move quickly should there be a positive
resolution of the nuclear question. Although the GOP does
not have the legal authority to prohibit Portuguese companies
from investing overseas, Amado has clearly been proactive in
trying to discourage Galp from going any further.
Stephenson