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 SIPDIS SIPDIS 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 SIPDIS 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 SIPDIS 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 -------------- ¶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 -------------- ¶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 MADRID 00000289 002 OF 003 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 -------------- ¶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 SIPDIS 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 -------------- ¶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 -------------- ¶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 MADRID 00000289 003 OF 003 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 -------------- ¶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