INCREASING FINANCIAL PRESSURE ON IRAN

UNCLAS SECTION 01 OF 02 STATE 130200 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EFIN KNNP MNUC IR GM SUBJECT: INCREASING FINANCIAL PRESSURE ON IRAN REF: A) STATE 127040 ¶1. (U) This is an action request. Please see paragraph three. -------------- SUMMARY -------------- ¶2. (SBU) The United Kingdom, France, Germany, Italy, and the U.S. (E4 1) have agreed to pursue additional national measures to increase the pressure on Iran to end its proliferation-sensitive nuclear activities and ensure effective implementation of UNSC and EU sanctions. After meeting on October 9, the EU4 1 identified Iran's deceptive practices as a threat to the international financial sector and a conduit for Iran's proliferation activities. The E4 1 agreed to a joint demarche as a way to inform governments about the risks that Iran poses to the financial industries in their jurisdictions. Posts are requested to coordinate the delivery of the attached talking points to host governments with the local representatives of the United Kingdom, France, Germany, and Italy. -------------- OBJECTIVES/ACTION REQUEST -------------- ¶3. (SBU) Washington requests Posts deliver the talking points in paragraph 4 to appropriate host government officials in the foreign and finance ministries to host governments. To maximize the impact of this demarche, delivery should be coordinated with the local representatives of the United Kingdom, France, Germany, and Italy. For GCC posts: other GCC countries in addition to Oman and the UAE will be approached by our EU4 partners. Note to Embassy Riyadh and Manama: this demarche has already been delivered to a number of GCC countries (REF A). Post should pursue the following objectives: -- Remind host governments that full implementation of UN Security Council Resolutions (UNSCRs) concerning Iran by all members of the international community is critical to addressing the proliferation threat posed by Iran and that many European countries and firms have determined that the risk of doing business with Iran is too great and, as a result, have reduced their business with Iran. -- Note that Iran's use of front companies and other deceptive practices in commercial and financial activities makes it difficult to know who is involved in a transaction, or the final end user or ultimate use of any goods. -- Note that within the scope of UNSCR 1747, States are required to take measures to prevent the provision to Iran of ;any financial assistance, or services related to the transfer of prohibited items. -- Urge host governments to ensure that their financial institutions do not provide services to any entities that are engaged in proliferation-related activities, specifically individuals and entities designated under UNSC resolutions 1737, 1747 or 1803, as well as those designated by the USG under Executive Orders 13224 and 13382. -- Call upon host governments to implement UNSCR 1803's call for vigilance over the activities of their financial institutions with Iranian banks, including by adopting concrete financial vigilance measures, such as those adopted by the European Union (Common position 2008/652/CFSP of 7 August 2008, Regulation 2008/1110/EC of 10 November 2008), and/or those recommended by the Financial Action Task Force's (FATF) in its October guidance on UNSCR 1803. -- Encourage host governments to warn their financial institutions about the risks of doing business with Iran, such as the Iranian regime using its state-owned firms to support proliferation-related activities. The Iranian state-owned banks also use deceptive financial practices to support this illicit activity. STATE 00130200 002 OF 002 -------------- TALKING POINTS -------------- ¶4. (SBU) BEGIN TALKING POINTS -- Full implementation of UN Security Council Resolutions (UNSCRs) concerning Iran by all members of the international community is critical to addressing the threat posed by Iran. UNSCR 1737 (2006) requires States to take measures to prevent the provision to Iran of any financial assistance or services (including brokering) related to the transfer, manufacture, or use of prohibited items. UNSCR 1747 (2007) calls upon States and international financial institutions not to enter into new commitments for providing financial assistance to the Government of Iran, except for humanitarian and developmental purposes. UNSCR 1803 (2008) calls on States to exercise vigilance over the activities of financial institutions in their territories with all banks domiciled in Iran and in providing financial support for trade with Iran, including insurance, in order to avoid contributing to Iran's nuclear and missile programs. Finally, UNSCRs 1737, 1747 and 1803 require States to freeze the assets of and ensure that no economi c resources are provided by their nationals or from their territories to individuals or entities designated pursuant to these resolutions for their involvement in Iran's nuclear or ballistic missile programs. -- We have been discussing with the international banking sector the importance of implementation of the Iran-related UNSCRs, as this sector is vulnerable to the risk of unwittingly facilitating Iranian proliferation activities. We draw your attention to the reputational risk involved as well as the existing penalties in case of illicit activities. -- Financial vigilance measures are extremely important to defend against such risks. Key examples of measures targeted specifically against proliferation finance and Iran, including the EU Common position 2008/652/CFSP of 7 August 2008, Regulation 2008/1110/EC of 10 November 2008, and FATF guidance on implementation of financial measures contained in ¶1803. -- We are concerned that the financial sector is being exploited and used to facilitate activities prohibited by the UN, or that Iranian entities designated by the UN are using deceptive practices to evade sanctions or mask other activities of concern. -- To avoid providing financial services prohibited by the UN Security Council, we ask that you encourage your financial institutions to review among other things, services they may provide to Iranian companies and projects in Iran, as well as correspondent banking relationships with Iranian banks and financial institutions controlled by Iranian entities (cf. in the EU: Common position 2008/652/CFSP of 7 August 2008, Regulation 2008/1110/EC of 10 November 2008). END TALKING POINTS -------------- REPORTING DEADLINE -------------- ¶5. (U) Posts should report results within seven business days of receipt of this cable. Please slug replies for ISN, T, TREASURY, and NEA. Please include SIPDIS in all replies. -------------- POINT OF CONTACT -------------- ¶6. (U) Washington points of contact for follow-up information are Anthony Ruggiero, ISN/CPI, (202) 647-5181, ruggieroaj@state.sgov.gov and Kevin McGeehan, ISN/CPI, (202) 647-5408, McGeehanKJ@state.sgov.gov. ¶7. (U) Department thanks Post for its assistance. RICE