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. -------------- SUMMARY/BACKGROUND -------------- ¶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). -------------- OBJECTIVE/ACTION REQUEST -------------- ¶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. -------------- NONPAPER FOR IRAQ -------------- ¶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 -------------- REPORTING DEADLINE -------------- ¶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. -------------- POINT OF CONTACT -------------- ¶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