TREASURY DEPUTY SECRETARY KIMMITT'S MEETING WITH

C O N F I D E N T I A L SECTION 01 OF 03 MADRID 000289

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TREASURY FOR DEPUTY SECRETARY KIMMITT'S OFFICE AND
DO/W.LINDQUIST; STATE FOR EUR/WE AND EEB/ESC

E.O. 12958: DECL: 03/06/2018
TAGS: EINV AF CU IR IZ KV SP
SUBJECT: TREASURY DEPUTY SECRETARY KIMMITT'S MEETING WITH
NATIONAL SECURITY ADVISER CASAJUANA

REF: STATE 21770

Classified By: DCM Hugo Llorens for Reasons 1.5(b) and (d)


1. (C) Summary: Deputy Secretary Kimmitt, accompanied by
DCM, discussed Iran, Iraq, Cuba, Afghanistan, and sovereign
wealth funds with Spanish National Security Adviser Carles
Casajuana in a March 6 meeting. Casajuana expressed pleasure
that bilateral relations had evolved positively in recent
years but noted an important disagreement on Kosovo. He was
pleased with the adoption of UNSCR 1803 on Iran sanctions and
understood the need to keep pressure on Iran. The Deputy
Secretary highlighted the importance of the resolution's call

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for special vigilance on dealings with certain Iranian
state-owned banks, and he emphasized the problems that
Spanish banks investing in the U.S. could face if they were
unwittingly used for Iranian proliferation transactions.
While saying our two governments had the same long-term aim
for Cuba of full democracy, Casajuana did not support
conditionality and expected that Spain would support more
patience with the regime than would the USG. The Deputy
Secretary emphasized the importance of making clear the

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expectation of movement by the GOC. He highlighted economic
progress in Iraq and the upcoming one-year review conference
on international cooperation on Iraq. He said there had been
less economic progress in Afghanistan, and Casajuana stressed
the necessity of success of the NATO mission. In response to
statements from DCM Llorens, Casajuana said the GOS would
study the possibility of having Civil Guards train Afghani
police, but he warned that the Civil Guards were stretched
too thin to do so. End Summary.

KOSOVO
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2. (C) The Deputy Secretary opened the meeting by thanking
Casajuana for his and the GOS' openness in working with the
USG. Our relations were strong and had evolved in recent
years in a way that we could constructively discuss our
differences. Casajuana expressed his pleasure that relations
had evolved, and he emphasized the significant amount of
bilateral cooperation on many issues. He noted that our two
governments had an important difference on Kosovo, where
Spain's position was in the minority. He added that the
timing (Note: just before Spain's March 9 elections) was not
ideal and had magnified the differences. He added, however,
that foreign policy had not been much of an election issue,
or at least not present and future foreign policy as opposed
to the participation of Spanish forces in Iraq under the
previous government and their withdrawal by the Zapatero
government in 2004.

IRAN
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3. (C) Casajuana expressed his pleasure that the UNSC had
adopted resolution 1803 on Iran sanctions (reftel) earlier in
the week. He was glad to see that the role of the EU's
Javier Solana (Note: a Spaniard) had been strengthened. He
hoped negotiations with Iran would still be pursued, but he
understood the need to keep the pressure on Iran. It was
especially important that the entire international community
be united; even though the US and EU could go farther on
their own, it was important to have China and Russia involved
so the Iranians would realize this was not just the West
opposing Iran. The Deputy Secretary agreed, saying that the
U.S. National Intelligence Estimate showed that Iran pays
close attention to international community views. It knows
the UNSCR represents a global rejection of its pursuit of
nuclear weapons. He highlighted the importance of the
resolution's call for special vigilance on dealings with
Iranian banks, particularly Banks Melli and Saderat, and
export credit programs. He explained that financing
difficulties were affecting the regime's views. The USG
wanted legitimate Iranian business leaders to tell their
government that its stance was hurting them. This could
encourage the GOI to make the decision to focus on domestic
matters and on doing what is best for its people.


4. (C) In response to a question about what the EU would do
to implement UNSCR 1803, Casajuana said it was working on a
common position on pressuring the two banks. The position
may be adopted at the March 10 GAERC or in two weeks at the
next ministerial. The Deputy Secretary cited the Financial
Action Task Force's statements about Iran's lack of
anti-money laundering capacity. He said that governments
should ensure that banks understood the risks to their
businesses of dealing with Iran. He noted that Spanish banks
were interested in investing in the U.S., and nothing could
be more harmful to them than unintentionally facilitating

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payments for proliferation. He added that he would be
surprised if there were any problem in Madrid, saying that
money launderers normally used less central, lower-profile
sites (e.g., North Korea using a bank in Macao). He ended
the discussion of Iran by emphasizing that if Iran were to
suspend its enrichment program, the USG would come to the
table and speak directly to Iran despite the domestic
political controversy that might cause.

CUBA
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5. (C) The Deputy Secretary said the USG had noted Spain's
efforts to reach out to Latin American moderates, reflected
in its warm receptions of Presidents Uribe and Garcia. On
Cuba, he acknowledged that Spain would have an important
role, but he did not believe President Bush's speech last
year had received enough attention in Europe. The Deputy
Secretary mentioned that President Bush was willing to lift

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all sanctions and would set up a multi-billion-dollar fund,
to which the USG would be a big contributor, if the Cuban
government was willing to move forward on political and
economic reform. The President's speech did not criticize
existing aid or relations, but we did not want to make it
easier for Raul Castro to continue the practices of the past.
If he would start changing, the world community would be
prepared to respond.


6. (C) Casajuana said Spain shared the U.S. long-term
objective of full democracy for Cuba. Spain differed on
tactics and was more patient on the timetable, however.
Casajuana was sure there would be situations in which the USG
would find GOC actions to be insufficient and Spain would
counsel patience. Spain was trying to position itself to be
able to help Cuba. Real political change had not started and
probably would not while Fidel was still alive, but Spain
thought Raul had the will to move ahead in the economic
sector and that there were people in the regime who would
like to change.


7. (C) The Deputy Secretary urged against any major new
unconditional aid, saying that it would reinforce incentives
for lack of movement. He acknowledged that the U.S. and
Spain would differ on timing, but he argued that providing
unconditional new aid would only reinforce those who wanted
to hold on to the past. Casajuana acknowledged that
unconditional aid might not help change the minds of
opponents. However, he argued that any contact and effort to
influence the Cuban government's thinking was potentially
positive. The Deputy Secretary noted that the U.S. had done
a lot of new thinking on Cuba over the past 6 to 9 months and
said we should think about sequencing. He again argued that
we needed to make clear our common expectation of movement by
the GOC. He added that the USG and Spain needed to intensify
our dialogue on Cuba.

IRAQ
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8. (C) The Deputy Secretary noted the importance of the
upcoming one-year review conference on international
cooperation on Iraq, which would examine what both the GOI
and the international community had achieved. He noted that
Spain had launched the international effort to aid Iraq by
hosting the original conference in Madrid. He outlined
Iraq's significant economic progress - reasonable growth,
inflation around ten percent, significant oil revenues, and
debt relief. Capacity and the ability to execute budgets
were more important issues than the availability of money.
Spanish and other European efforts to build capacity were
important. He hoped there would soon be agreement on a
location for the conference and that it could be held no
later than mid-May. He added that the GOI could use the need
for results to report at the conference as a lever to
encourage its parliament to get things done. Casajuana said
that while Spain could not do anything on security, the USG
could count on Spain's help - and there was a lot Spain could
do on the economic and development side.

AFGHANISTAN
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9. (C) The Deputy Secretary said there was less economic
progress in Afghanistan. There had not been much movement
toward economic reform. The country would be a net aid
recipient for many years, and we needed to focus on reform.
He added that USG security officials appreciated Spain's
contribution of forces. Casajuana agreed that "all of us"
needed to pay attention to Afghanistan, which he knew would
be a major event at the upcoming NATO summit. He said we all
had to make sure that NATO succeeds in Afghanistan. The

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subject was becoming controversial in Spain, and the
government needed to show humanitarian results, as that was
the justification the GOS had used for the mission. The
January detention of a terrorist cell in Barcelona was an
opportunity to show how important Afghanistan was to Spanish
security, as the detainees had been in close contact with
Afghanistan.


10. (C) DCM Llorens acknowledged that major Spanish promises
at the NATO summit would be difficult for Spain during an
electoral period, but he knew the GOS had ready a package of
ongoing and planned actions. He reminded Casajuana that an
issue of particular importance to Secretary Gates, who had
written Defense Ministers, was training of police. He asked
if the incoming government could study the possibility of
having the civil guard train the Afghan police. Casajuana
said the GOS (Note: He was assuming a PSOE victory) would
seriously study the request but that the civil guard was
overstretched within Spain because of ETA and that it would
not be possible to obtain enough units.

Sovereign Wealth Funds and Investment
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11. (SBU) The Deputy Secretary also explained the USG view of
sovereign wealth funds (SWFs). He believed that they would
continue to grow in size and number and would increasingly be
the subject of political discussion. He expressed concern
that Congressional action aimed at funds from certain
countries could have a broad impact. He expressed interest
in EC action and said he would meet with Commissioners in
Brussels the following week. He agreed that Brussels had an
important say on the topic of keeping barriers low, but
investment review authorities were at the member state level.
He was interested in member state reaction to Brussels'
statements. Many individual governments were considering
taking action on SWFs, and he hoped barriers would not rise
too much. He cited the Foreign Investment and National
Security Act of 2007 as a balance between national security
concerns and the desire to attract investment. This law
required close scrutiny of proposed foreign investments in
infrastructure; it was aimed at ports but also covered areas
of interest to Spanish investors such as roads and tollways.
While he would like investment in both the U.S. and Spain to
grow, he was concerned by rising investment protectionism.


12. (U) Deputy Secretary Kimmitt has cleared this cable.
AGUIRRE