IRAN: FCO READOUT ON SOLANA IN TEHRAN AND PM

S E C R E T SECTION 01 OF 02 LONDON 001645

NOFORN
SIPDIS

E.O. 12958: DECL: 06/17/2018
TAGS: PREL ECON EFIN KTFN MNUC PINS IR UK
SUBJECT: IRAN: FCO READOUT ON SOLANA IN TEHRAN AND PM
BROWN'S STATEMENT ON IRANIAN BANKS

REF: A. UK EMB TEHRAN JUNE 15 E-GRAM 23175/08 "E3+3
VISIT TO IRAN" E-MAILED TO NEA/IR JUNE 16

B. EMB LONDON (GAYLE)-NEA/IR (HUMMEL/STANDAERT)
EMAIL JUNE 13

C. STATE 64530

D. LONDON 1595

Classified By: Political Minister Counselor Maura Connelly for reasons
1.4 (B) and (D).


1. (S/NF) Summary: Although Iran did not provide an
immediate response to the P5 1 refreshed offer, Iran NSC
Secretary Jalili unexpectedly agreed to "study the offer
carefully," and also agreed it is now up to Iran, rather than
the P5 1, to respond (ref a). A reference by Prime Minister
Gordon Brown to Bank Melli's designation during his joint
press conference with President Bush June 16 was a
"misstatement" which took the FCO and UK bank regulators by
surprise, Foreign and Commonwealth Office's (FCO) Iran
Coordination Group Multilateral Team Leader Will Gelling told
London Iran Watcher Poloff June 16. HM Treasury confirmed
that Brown was ahead of the EU on this statement. The FCO is
beginning work on an initial draft of another UNSC resolution
on Iran. End summary.

Iran Banks: PM's Slip of the Tongue
--------------


2. (S/NF) On the Prime Minister's statement, Gelling made it
clear the PM's Melli comment, that "Iran's largest bank"
would be designated by the EU, had not been coordinated in
advance with HMG ministries and that FCO and HM Treasury were
engaged in damage control, their fear being that the comment
might prompt capital flight in advance of the EU's
designation of Bank Melli, now scheduled for June 23 (ref b).
Gelling commented the Financial Services Authority was "even
more upset" than other UK officials. HMT officials, already
upset at EC and Washington comments signaling the EU,s
intent to sanction Bank Melli, were frustrated that their own
boss has added to the likelihood of further capital flight.


3. (S/NF) Gelling said that, to follow up the PM's
unexpected comments, Foreign Secretary Miliband would note at
the June 16 GAERC, without mentioning banks by name, that 27
EU governments are agreed on going forward soon on financial
sanctions, with "technical details" being worked out now.

UK Pol Dir Readout on Tehran Visit
--------------


4. (C) UK PolDir Mark Lyall Grant reported (ref a) that in
systematic, separate briefings June 14 for Iranian Foreign
Minister Mottaki and NSC Secretary Jalili by Solana all the
P5 1 Political Directors (USG excepted) participated
actively, presenting a united front. Mottaki reportedly
contended that the Iran offer of May 2008 was co-equal with
the P5 1 package, and did not commit to providing an answer
independent of a P5 1 response based on the Iran offer.
Jalili reportedly began his meeting with P5 1 reps making the
same point but, following Solana and Lyall Grant push-back,
agreed that Iran now owed the P5 1 an answer based on the
refreshed offer, which Jalili said Iran would "study
carefully."


5. (C) Lyall Grant reported widespread, though not
overwhelming, attention in Iranian media to the group's
visit, with some softening in the official Iranian position
during the course of the visit. The Iranian comments to
which President Bush referred from Paris on June 15 were,
according to Grant, those made by an Iranian government
spokesman before the Mottaki and Jalili meetings. Lyall
Grant reported Deputy Foreign Minister Safari attended both
June 14 multilateral meetings and, in a June 15 follow-up
bilateral meeting with Grant, reiterated that Iran would
examine the P5 1 offer carefully. In his report to London
(ref a),Lyall Grant commented that a major purpose of the
Tehran visit and offer was to stimulate wider internal
discussion in Iran of the regime's nuclear policies and
Iranian national interests.

HMG Focused On A Symbolic UNSCR
--------------


6. (C/NF) Also on June 16 Gelling once more noted to Poloff,
as previously reported ref (d),that HMG strongly believes
another UNSC resolution on Iran, even if only symbolic, will
be necessary, both to maintain pressure on Tehran and to
complement U.S., UK, French, and German efforts to obtain
farther-reaching substantive measures on Iran within the EU.
Gelling noted PolDir Lyall Grant had tasked the FCO Iran team

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to begin developing a new draft UNSC resolution, and that FCO
was likely to take early drafts of UNSCR 1803 as a beginning
point. Gelling said the substantive measures therein could
in the course of negotiations be discarded as agreement was
coaxed out of any reluctant P5 1 partners, such as China or
Russia, to support a symbolic fourth resolution.


7. (SBU) Poloff on June 17 provided Gelling a copy of the
USG background non-paper on the P5 1 package (ref c) and
described USG advocacy efforts in support of the package;
Gelling noted HMG is in full agreement with the approach.

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