REVIEW URGED ON ESTABLISHMENT OF JOINT BANK WITH

S E C R E T STATE 043381

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/11/2018
TAGS: ECON EFIN IR EZ KNNP PARM PTER
SUBJECT: REVIEW URGED ON ESTABLISHMENT OF JOINT BANK WITH
IRAN

REF: A. STATE 75291

B. BAGHDAD 2075

Classified By: NEA PDAS Jeffrey Feltman for
reasons 1.4 (b) and (d)


1. (U) This is an action request. Please see paragraph 4.

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SUMMARY/BACKGROUND
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2. (S) We have information that the Export Development Bank
of Iran (EDBI) was working, as of mid March 2008, with Iraqi
shareholders to establish a joint bank in Erbil, Iraq. We
are concerned that Iran could use the joint bank to conduct
proliferation-related payments in circumvention of UNSC
sanctions, and therefore want to urge Iraq to reconsider its
establishment.


3. (S) This is Iran's second known attempt to establish
banking ties in Iraq. In May 2007, Iran attempted to open a
branch of Bank Sepah, an Iranian state-owned bank designated
by the UN Security Council in resolution 1747 (March 2007)
for its involvement in Iran's missile programs. Allowing the
branch to operate in Iraq would have triggered a violation of
Iraq's obligations under UNSCR 1747 to freeze assets owned or
controlled by Bank Sepah and to ensure no funds are provided
to it. We urged Iraq to prevent the opening of the branch
(ref A) and received assurances from Central Bank of Iraq
(CBI) officials that Bank Sepah would not be allowed to
operate in Iraq (ref B).

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OBJECTIVE/ACTION REQUEST
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4. (S/REL IRAQ) Washington requests Post deliver the
non-paper in paragraph 5 to appropriate host government
officials in the ministries of foreign affairs and finance
and the Central Bank Head Office in Baghdad and the Kurdistan
Regional Government (KRG) ministry of finance and CBI Branch
Office in Erbil. Post should pursue the following objectives:

-- Urge Iraq's continued cooperation on implementation of the
obligations of UNSCRs 1737, 1747 and 1803.

-- Provide additional information in the non-paper on the
Export Development Bank of Iran's intention to establish a
joint bank in Erbil, Iraq.

-- Urge Iraq to reconsider this proposed joint bank in light
of UNSCR 1803's call for increased vigilance over the
activities of financial istitutions in their territories with
all banks domiciled in Iran and in recognition of Financial
Action Task Force (FATF) statements on deficiencies in Iran's
anti-money laundering and counter-terrorism finance (AML/CTF)
regime. Emphasize the growing international consensus on the
risks of engaging in Iran-related business.

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NONPAPER FOR IRAQ
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5. (SECRET//REL IRAQ)

BEGIN NON-PAPER FOR IRAQ:

-- We would like to raise concerns about Iranian financial
activities in Iraq.

-- The Export Development Bank of Iran (EDBI) was working, as
of mid-March 2008, with Iraqi shareholders to establish a
joint bank in Erbil, Iraq. The newly formed bank will be
named the Regional Bank for Investment and Development
(RBID). RBID shareholders would be responsible for obtaining
approval from the Central Bank of Iraq for the establishment
of the new bank.

-- We urge Iraq to reconsider this proposed joint bank in
light of UNSCR 1803, which calls on States to exercise
vigilance over the activities of financial institutions in
their territories with all banks domiciled in Iran, as well
as their branches and subsidiaries abroad, in order to avoid
activities contributing to proliferation sensitive nuclear
activities or to the development of nuclear weapon delivery
systems.

-- Exercising vigilance regarding the establishment of this
joint bank is also consistent with the Financial Action Task
Force (FATF) statements on deficiencies in Iran's anti-money
laundering and combating terrorist financing (AML/CFT) regime
(available at http://www.fatf-gafi.org). UNSCR 1803 and
FATF statements both underscore that engaging in Iran-related
financial transactions poses a risk of diversion to
proliferation, WMD programs or terrorist activities.

-- We look forward to working with you on this and other
related security and counterproliferation matters, and are
prepared to provide additional information and assistance as
appropriate.

END NON-PAPER FOR IRAQ

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REPORTING DEADLINE
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6. (U) Post should report results by close of business
within seven days of receipt of cable. Please slug replies
for ISN, T, Treasury, NEA. Please include SIPDIS in all
replies.

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POINT OF CONTACT
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7. (U) Washington point of contact for follow-up information
is Jennifer Chalmers, ISN/CPI, (202) 647-9715,
chalmersja@state.sgov.gov, or Anthony Ruggiero, ISN/CPI,
(202) 647-5181, ruggieroaj@state.sgov.gov.


8. (U) Department thanks Post for its assistance.
RICE