GOI CONCERNED ABOUT IRITAL SANCTIONS

C O N F I D E N T I A L ROME 001304 SIPDIS STATE FOR ISN, T, NEA/IR STATE FOR CHALMERS IN ISN/CPI E.O. 12958: DECL: 10/27/2018 TAGS: ECON EFIN ETRD EUN EWWT KNNP PARM PREL SUBJECT: GOI CONCERNED ABOUT IRITAL SANCTIONS REF: SECSTATE 104496 Classified By: Economic Counselor William R. Meara for reasons 1.4 (b) and (d). ¶1. (C) Summary: GOI officials expressed concerns that Italian firms may be subject to US sanctions through inadvertent use of Irital, a U.S.-designated Iranian shipping company based in Genoa. End summary. - - - - - - - - - - - - - - - - - - - - - - - New Hazard for Italian Non-Dual Use Companies - - - - - - - - - - - - - - - - - - - - - - - ¶2. (C) While Italian companies involved in the production or shipment of dual use goods are accustomed to seeking government approval to export on a case-by-case basis, ordinary manufacturers of consumer goods are not. MFA Counselor Roberto Liotto and his deputy, Pierfrancesco De Cerchio, said they are concerned that an Italian company that unwittingly uses a shipping company listed by the USG could be barred from the U.S. market and have its assets frozen. They expressed concern that it would be difficult to inform the approximately two million Italian enterprises of this new regulation. This danger would be especially acute for exporters near Genoa, who might unwittingly use Irital - a US designated entity linked to IRISL - and therefore expose their companies to E.O. 13382 sanctions designations. - - - - - - - - - - - - - - - - - - - - - - No Country-Level Action beyond EU Sanctions - - - - - - - - - - - - - - - - - - - - - - ¶3. (C) When asked whether the GOI would designate the entities listed in reftel, Liotto and De Cerchio said that sanctions decisions must be made at the EU, vice national, level. If the GOI were to act independently, going beyond those entities and individuals designated in Brussels, the Italian government could find itself subject to a legal challenge. Romana Piscitelli, Third Secretary in the Terrorist Financing and Financial Sanctions Unit of the Italian Treasury, said Brussels would likely not decide whether to freeze additional Iranian assets under UNSCR 1803 until the end of October or beginning of November. - - - - - - - - - - - - - - - - - - - - - - - - GOI Claims to Pursue Counter-Pro Moral Suasion - - - - - - - - - - - - - - - - - - - - - - - - ¶4. (C) Although Liotto and De Cerchio claimed to be prevented by legal restrictions from taking action against those companies designated by the USG but not by the EU, they nevertheless said that they would be willing to use moral suasion and outreach of a non-legal nature against those companies. They said all four relevant institutions of government - the Ministry of Economic Development, the Customs Agency, the Ministry of Defense, and the Presidency of the Council of Ministers (NSC equivalent) - would participate. - - - - - - - - - - - - - - - - - - - - - GOI Concerns about Implementation Persist - - - - - - - - - - - - - - - - - - - - - ¶5. (C) Liotto, De Cerchio, and Piscitelli wondered how other countries, particularly those in the EU, had responded to the latest IRISL sanctions. The GOI is aware that sanctions designations for companies that do business with Irital are not automatic and can be appealed; nevertheless the GOI remains very concerned that a major exporter in northern Italy may find itself subject to U.S. sanctions and lose access to the American market. Liotto requested a comprehensive non-paper detailing the implications of IRISL sanctions on Italian businesses that are not involved in dual use products. He also requested the legal basis for US counter-proliferation sanctions (Executive Order 13382); Post has provided him with information on E.O. 13382. GOI officials said that they would bring this policy to the attention of senior policymakers within the MFA and Treasury because of its potential to harm Italian-American diplomatic and trade relations. ¶6. (C) Post requests guidance on how to respond to GOI concerns regarding the possibility that non-dual use Italian firms might face US sanctions if they use Irital to ship their products. SPOGLI