RESPONSE TO CANADIAN REQUEST FOR ADVICE ON

S E C R E T SECTION 01 OF 02 STATE 097505 SIPDIS E.O. 12958: DECL: 09/11/2033 TAGS: KNNP IR PREL PARM PINR EFIN CA XS SUBJECT: RESPONSE TO CANADIAN REQUEST FOR ADVICE ON BLOCKING IRANIAN TRADE REF: REF: A) OTTAWA 968 Classified By: ISN PDAS Patricia A. McNerney for reasons 1.4 (b) and (d). ¶1. (U) This is an action request. Please see paragraph 4. -------------- SUMMARY -------------- ¶2. (S//REL CANADA) On July 15, Canadian Department of Foreign Affairs and International Trade Deputy Director for Nuclear Non-Proliferation, Shawn Caza, told Embassy Ottawa that he was interested in U.S. advice on how Canada could enhance its non-proliferation efforts directed at Iran. In response, the Department would like to pass the following nonpaper to Caza with suggestions on how to enhance Canada's non-proliferation efforts with regard to Iran and possibly form the basis for further discussions, which the Department would like to propose for the margins of the upcoming Financial Action Task Force (FATF) Intersessional. -------------- OBJECTIVES -------------- ¶3. (S//REL CANADA) Washington requests Embassy Ottawa approach Shawn Caza to discuss this issue. Post should pursue the following objectives: -- Present the following nonpaper to host government officials. -- Notify host government officials that U.S. government officials are willing to meet with their counterparts during the September 14-15 FATF Intersessional in Ottawa to discuss the issue. -------------- BACKGROUND AND NONPAPER -------------- ¶4. (S//REL CANADA) BEGIN NONPAPER FOR CANADA In response to Canada's request for suggestions on steps to increase pressure on Iran to change course, the U.S. would like Canada to consider the following recommendations. Ideas for consideration: -- Catch-all Controls. We understand that Canada has WMD catch-all authority, but the U.S. is unsure about how often Canada uses its catch-all controls to restrict exports to Iranian end users. In order to augment catch-all controls, the U.S. and the EU have taken additional measures to name end users and commodities that invoke license requirements. Additionally, a robust industry outreach program regarding Iranian procurement for its WMD programs should lead to increased catch-all inquiries from industry. The U.S. recommends that Canada use its catch-all controls more frequently and expansively when warranted. -- End User List for Exporters. Recognizing that exporters, despite their best efforts, are not always in a position to know their end users, the U.S. and Japan publish lists of end users in various countries that are involved in WMD programs and whose presence in a transaction triggers additional licensing requirements. For example, the U.S. list is composed of entities whose specified activities carry a risk of diverting exported and reexported items to WMD programs. In order to make this list more effective, the U.S has recently expanded the scope of the Entity List to include entities involved in other activities contrary to U.S. national security and foreign policy, such as supporting terrorism or conventional arms proliferation. The UK has a slightly different list used to inform industry of Iranian end-users to which the UK has denied a license in the past 3 years by either involving the WMD end-use control or refusing licenses under the WMD end-use control. The U.S. recommends that Canada explore the creation of a similar list to control exports to Iran. The U.S. list can be found at: http://www.bis.doc.gov/entities/default.htm. STATE 00097505 002 OF 002 -- Iran-specific list-based controls. As part of the regulations published under UNSCR 1737's Iran-specific list-based controls, the EU composed a list of items that, while not controlled by the multilateral regimes, could nevertheless contribute to Iran's enrichment, reprocessing or heavy water related activities, or nuclear weapons delivery systems. Items on this list would require a license for export. Further, the EU Common Position for UNSCR 1803 implementation adds a prohibition on the export of items, not otherwise controlled by the regimes, that the EU has determined to be able to contribute to those activities. The U.S. urges Canada to consider imposing additional list-based controls for exports to Iran. Canada could also consider placing Iran on the Area Control List (ACL) which includes any country deemed to require an export permit for any good. -- Outreach to Industry. Iran uses deceptive tactics and front companies to disguise the intent of its proliferation activities. The U.S. is currently enhancing its industry outreach efforts to further impede Iranian procurement and recommends that Canada engage with its private sector firms to educate them about Iran's use of deceptive tactics. Iranian efforts to acquire uranium and items for its IR-2 centrifuge program, such as carbon fiber and filament winding machines, are of particular interest. -- Creation of legal authority to freeze assets. Executive Order (E.O.) 13382, signed by the President on June 28, 2005, is an authority that allows the U.S. to block the assets of WMD proliferators and their supporters. The E.O. prohibits U.S. persons from engaging in transactions with entities and individuals targeted by the Order, thereby denying proliferators and their supporters access to the U.S. financial and commercial systems. Persons sanctioned under this authority are identified publicly and can be found in the U.S. Treasury Department's, Office of Foreign Assets Control list of Specially Designated Nationals and Blocked Persons (SDN list). This list can be found on http://www.treas.gov/ofac. The U.S. recommends that Canada explore the creation of a similar type of legal authority. The U.S. is prepared to discuss its non-proliferation related legal framework with Canadian authorities and could offer assistance. U.S. government officials are also willing to meet with their counterparts in Ottawa during the FATF Intersessional September 14-15 to discuss the issue. END NONPAPER FOR CANADA -------------- REPORTING DEADLINE -------------- ¶5. (U) Post should report results within seven (7) business days of receipt of this cable. Please slug replies for ISN, IO, T, TREASURY, and NEA/IR. Please include SIPDIS in all replies. -------------- POINT OF CONTACT -------------- ¶6. (U) Washington point of contact for follow-up information is Kevin McGeehan, ISN/CPI, (202) 647-5408, McGeehanKJ@state.sgov.gov. ¶7. (U) Department thanks Post for its assistance. RICE