JAPANESE VIEWS ON IRAN AND BURMA SANCTIONS

C O N F I D E N T I A L TOKYO 000274

SIPDIS

SIPDIS

PARIS FOR USOECD
TREASURY FOR DUVIVIER AND THOMPSON

E.O. 12958: DECL: 01/28/2018
TAGS: ENRG PGOV PREL XC XF JA
SUBJECT: JAPANESE VIEWS ON IRAN AND BURMA SANCTIONS

Classified By: Ambassador J. Thomas Schieffer. Reasons 1.4(b/d).


1. (C) Summary. EEB DAS Hengel discussed Iran and Burma
related sanctions with Japanese government officials January
23-24. The GOJ will continue to support the international
community on Iran sanctions, but urged caution regarding
Iran's central bank. The Japanese are concerned Iran's
increasing trade with China will undermine international
sanctions. On Burma, the GOJ will continue its policy of
engagement. End Summary.


2. (C) Japanese banks are extremely cautious in dealings with
Iran and MOF is working diligently to ensure there are no
"unhappy transactions," MOF International Bureau Deputy
Director General Masashi Nagaosa told EEB DAS Doug Hengel
January 24. Oil, however, is Japan's "lifeline" and asset
freezing measures targeting Iran's central bank (Bank
Markazi) are "untouchable," he asserted, reiterating the
strong position previously taken by MOF officials with
Treasury U/S Levey in November. Nagaosa asked for details
regarding the proposed new resolution adopted by the P5 1 in
Berlin and was encouraged to learn China and Russia have also
agreed to the proposal. Convincing Japanese businesses to
cease dealings with Iran is difficult, Nagosa claimed, but
added that sharing the new resolution with them could help.


3. (C) While Japanese banks have suspended relationships with
Iranian banks Melli, Mellat and Saderat, activity-based
sanctions are technically difficult and costly to implement,
according to MOF International Bureau Director Hiroshi Naka.
MOF issued an advisory to Japanese banks based on the
Financial Action Task Force's (FATF) October 11 statement on
Iran which requires every transaction be checked to verify
its legitimacy. Japan would prefer a list-based or
entity-based approach, Naka commented. In addition, the UNSC
provides scant information about why it is freezing a
particular entity's assets which could pose a legal risk
should a freeze be challenged. DAS Hengel cited Iran's
tendency to create front companies to hide illicit
transactions as requiring close scrutiny of transactions.


4. (C) Regarding export credit financing for Iran, Naka
stated the Japan Bank for International Cooperation (JBIC)
will provide no new credits or guarantees, but must honor
contractual obligations for those provided before the
sanctions were in place. Naka concluded by underscoring the
need for a UN mandate for further financial measures against
Iran, citing concerns for "third countries" to benefit from
patchwork sanctions.


5. (C) The GOJ is "very proud" of its work to comply with
UNSC resolutions on Iran but is concerned Iran's increasing
trade with China will undermine international sanctions, MOFA
Economic Affairs Director-General Yoichi Otabe told DAS
Hengel January 23. Japan shares the U.S. belief that Iran
presents a real danger to the world and will work quickly to
implement any new UNSC resolution.


6. (C) The U.S. and Japan have differed for some decades
about the approach to resolving the situation in Burma, Otabe
observed. Japan believes engagement is key, and that
sanctions will not force the ruling junta to change. The GOJ
used to have considerable leverage with the Burmese
government, but China has taken advantage of the vacuum
created by the sanctions to increase its dealings in Burma.
Otabe believes China and ASEAN are best placed to increase
pressure on the junta to improve the human rights situation.


7. (U) EEB/ESC DAS Hengel cleared on this message subsequent
to his return to Washington.
SCHIEFFER