CORREA'S POLEMICAL VISIT TO IRAN

C O N F I D E N T I A L QUITO 001162 SIPDIS E.O. 12958: DECL: TWENTY YEARS TAGS: PREL PGOV ECON EFIN MASS EC IR SUBJECT: CORREA'S POLEMICAL VISIT TO IRAN REF: A. QUITO 1145 ¶B. QUITO 1046 ¶C. QUITO 777 ¶D. QUITO 301 ¶E. STATE 114408 Classified By: Ambassador Heather M. Hodges for Reasons 1.4 (b&d) ¶1. (C) Summary: President Rafael Correa's December 5-9 visit to Iran, the first by an Ecuadorian president, resulted in 12 agreements and a $40 million line-of-credit. Our assessment is that GOE actions defy the spirit, but not the letter, of UN Security Council sanction resolutions. During the trip, Correa lashed out against "U.S. imperialism", using some of the harshest anti-American rhetoric we have heard from him. His statement disagreeing with controls by international organizations on nuclear energy, even when used "for war", was also worrisome. On his return, Correa stopped in Libya where he met with Mohamar Gadafi, announcing that the two countries would establish diplomatic relations in 2009, and also briefly in Sierra Leone where he met with President Ernest Bai Koroma. (End Summary) Deepening Ties ¶2. (C) President Rafael Correa traveled to Iran on December 5-9, the first visit by an Ecuadorian president to that country, with an impressive delegation of over 95 people, including 13 ministers and 17 business representatives. Ministers from Finance, Petroleum and Mining, Electricity, Strategic Sectors, Defense, Agriculture, Production, and the MFA were joined by officials from Ecuador's internal revenue service, Planning Office, Customs, and Armed Forces, among others. The two governments signed 12 memoranda of understanding (MOUs) in areas ranging from energy to health and a joint declaration signed by both presidents (see paras 6 and 7). ¶3. (C) The visit to Iran culminates an ongoing effort by the GOE to deepen ties with Iran. The GOE and Iran exchanged notes on May 29 confirming the opening of commercial offices in Teheran and Quito. Former Foreign Minister Maria Isabel Salvador visited Teheran on July 31 to inaugurate the opening of the Ecuadorian commercial office and held a bilateral meeting with Iran Foreign Minister Manouchehr Mottaki following the Non-Aligned Movement (NAM) Foreign Ministers meeting July 27-30. During the NAM, Salvador supported the passage of the Statement on Iran's Nuclear Issue (Ref C). An Iranian mining mission visited Ecuador in November with the goal of helping to develop Ecuador's mining sector. 
¶4. (C) In November, it was heavily reported in the press that Ecuador voted in favor of Iran to take a rotating seat on the UN Security Council instead of Japan, despite its considerable development assistance to Ecuador. Former Foreign Minister Jose Ayala Lasso called the decision "incomprehensible", saying that such an ideological decision must have been President Correa's, that "without a doubt, the MFA could not have made such a proposal." The MFA has been unwilling to comment publicly or privately on the vote. Political analyst Carlos Espinosa told Embassy officials only two weeks before the visit that the GOE's efforts with Iran were primarily an attempt to broaden its economic ties and would allow for more radical rhetoric, but that the GOE would not change its policies. However, the GOE has decided to pursue full diplomatic relations and political ties with Iran. On December 6, former Foreign Minister Salvador announced that Ecuador would open an embassy in Teheran in January 2009, and Correa called on the same day Ecuador's relations with Iran as "strategic... beyond trade relations." Anti-Imperialism Takes a Front Seat ¶5. (C) Clearly playing to an Iranian audience, Correa employed some of his harshest rhetoric against the U.S., referring to international relations as the only way to overcome the imperialist yoke (of the U.S.). In a televised interview, Correa said that "U.S. foreign policy has always had a double standards issue... If we are friends, everything is permitted. If they think a country is an enemy, then everything is different." ¶6. (C) When asked about Ecuador's stance on Iran's nuclear program given the International Atomic Energy Agency (IAEA) and UN Security Council (UNSC) decisions, Correa spoke out against the IAEA, noting that he disagreed with the idea that only a few countries can have nuclear energy for specific reasons, and even for war, and that "the problem is there at the Agency (IAEA)." (Note: The Embassy has made several requests to meet with officials at the MFA about Correa's statements, but the MFA responded first that it had to wait for FM Salvador's return to confirm the remarks, and then that it was unable to meet due to the recent change in Foreign Minister (Ref A). End Note) Economic Cooperation ¶7. (C) Correa's economic goals for the trip included technology transfer in the energy sector, investment in Ecuador, and diversifying Ecuador,s exports into Iran. Although Ecuador's private sector for the most part is skeptical about Iran's market potential, Ricardo Estrada, head of Ecuador's Export Promotion Agency and one of the business people on the trip, claimed that some business people are "taking precautions" against the possible loss of ATPA or EU preferences by seeking other markets such as Iran. However, he also noted that they are "very afraid" of doing anything that might jeopardize their U.S. business opportunities. ¶8. (C) The 17-member business delegation was focused largely on promoting Ecuadorian exports, which were zero in 2006 and ¶2007. Vice Minister for Trade Eduardo Egas said that Ecuador could sell bananas, cacao, coffee, tea, and sugar to the Iranian market. Businesspeople in the delegation also discussed exporting edible oils and dried tropical fruit, as well as importing inputs for plastic bottles, nuts such as pistachios, and fertilizer from Iran. A "pre-accord" was signed to export 250,000 boxes per month of bananas to Iran. According to Estrada, Ecuador and Iran have since begun bilateral tariff negotiations and an Iranian team is to visit Ecuador in early January to attempt to finalize new tariff rates. Correa said that subsidies for transportation to Iran could be available for various products, which Estrada claimed would take the form of fuel subsidies for planes or ships. ¶9. (SBU) In the energy sector, Ecuador and Iran created a mixed company to work on expanding Ecuador's petroleum fields, repairing and upgrading Ecuador's pipelines and refineries, and building a fertilizer plant. In addition, Iran agreed to provide Ecuador technological assistance for the exploration of natural gas in the gulf of Guayaquil. The two countries also agreed to cooperate on hydroelectricity and mining. ¶10. (C) The Export Development Bank of Iran (EDBI) approved a $40 million line-of-credit for Ecuador, and is considering offering another of up to $80 million. The EDBI Director commented on the importance of bilateral cooperation, saying that the credit could be repaid over either the short or medium term and was guaranteed by President Correa. (Note: According to Estrada, Correa went to Iran seeking financing of $140 million; the amount received was a lot less than expected. Estrada also mentioned that the two countries had planned to sign agreements between their central banks for a trade payment mechanism, but he was uncertain whether this had taken place.) Defense Cooperation Too? ¶11. (C) Correa met with Iranian Defense Minister Mostafa Mohamad Najar, attended an exhibition organized by the Iranian Defense Ministry, and became familiar with the country's defense equipment. Correa considered Iran's defense technology and equipment advanced and inexpensive, and said that Iran had radars like those that Ecuador needed for its northern border. The discussion of purchase of radars, however, is far from reaching an agreement. The Ecuadorian military is currently reviewing a $70 million commercial purchase of radars from various possible companies through a confusing procurement process that has twice been extended beyond its bid submission deadlines. ¶12. (C) Defense Minister Ponce commented on December 7 that Ecuador could purchase arms from Iran to modernize the Ecuadorian military. He clarified that nothing had been agreed upon, but added that Iran would send representatives from the three armed services in January to determine Ecuador's needs, and that the two countries would establish defense attache offices. A former Interior Minister, Mauricio Gandara, called the possibility of purchasing arms from Iran "unthinkable, especially during a major economic crisis." Out of Compliance with the UN? ¶13. (C) The line of credit and purchase of radars appear to skirt violation of Chapter VII sanctions imposed by UN Security Council resolutions (UNSCRs) 1737, 1747, and 1803. The UN Security Council has not designated EDBI, but UNSCR 1803 "calls upon states to exercise vigilance in entering into new commitments for public-provided financial support of trade with Iran" and "over the activities of financial institutions in their territories with all banks domiciled in Iran," Our understanding is that "calls upon" language is not binding. ¶14. (C) On a different front, UNSCR 1747 "decides that Iran shall not supply, sell or transfer ... any arms or related materiel, and that all States shall prohibit the procurement of such items from Iran by their nationals." Although radars are not listed as prohibited items, they might be considered a defense item given the intent by the GOE for the Armed Forces to use the radars to help secure Ecuador's borders. ¶15. (C) The MFA has continued to emphasize that it complies fully with all UNSCRs (Refs C and D). However, although not explicitly in violation of the Chapter VII sanctions in the UNSCRs against Iran, pursuing economic, political and defense cooperation with Iran, and Correa's comments against the IAEA, clearly defy the spirit of the resolutions. Embassy will continue to monitor Ecuador's bilateral developments with Iran and its compliance with the Iran-related UNSCRs. ¶16. (C) The Embassy does not know if the EBDI disbursed any funds to Ecuador. Reftel E about the U.S. designation of EDBI was provided to working level contacts in the Foreign Ministry and Superintendency of Banks in early November. EconCouns provided a copy of the points to the U/S for Trade at the Foreign Ministry again on December 18, noting Correa's recent trip to Iran and our interest in ensuring that the designation was known at senior policy levels in the GOE. The U/S replied that he was already aware of the designation. Two "Unplanned" Stops ¶17. (C) En route back to Ecuador, Correa stopped in Tripoli, Libya, where he was received by Muhamar Gadafi for an approximately one hour meeting. Gadafi invited Correa to attend an Africa-Latin America summit in Caracas in March. An Ecuadorian delegation will travel to Libya in January, and the two presidents discussed opening commercial offices in ¶2009. Vice Minister of Trade Eduardo Egas stated on December 10 that the announcement was fitting as "Libya buys Ecuadorian banana, coffee, cacao and wood, among other products." Subsequently, in a brief stop in Sierra Leone to refuel, Correa met with President Ernest Bai Koroma for approximately 20 minutes, during which the two discussed expansion of economic ties. The press termed both these visits unplanned, and the MFA had made no previous announcements regarding the visits. Comment ¶18. (C) Arguments cited here as justification for pursuing relations with Iran are that Ecuador needs to diversify its commercial relations and that Iran represents a large potential market. However, the energy agreements reached with Iran are not likely to amount to much. Ecuador signed similar accords and created joint companies with Venezuela, Indonesia, and others, but the agreements have been largely political and little activity has taken place. On the commercial side, Correa appears to be pushing trade with Iran in spite of logistical and other concerns, by offering possible fuel subsidies and negotiating greater market access. Some commentators believe that Correa is pursuing a stronger relationship with Iran to curry favor with Chavez or to appeal to a nationalistic domestic audience, and point to more radical voices within the GOE that increasingly exert influence over Correa. We will continue to try to better understand what is driving Correa. HODGES