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