VENEZUELA: IRAN SANCTIONS ACT

C O N F I D E N T I A L CARACAS 001525 SIPDIS HQ SOUTHCOM ALSO FOR POLAD TREASURY FOR MKACZMAREK NSC FOR DRESTREPO NSC FOR LROSSELLO USDOC FOR 4332 MAC/ITA/WH/JLAO E.O. 12958: DECL: 2019/12/04 TAGS: ECON PREL EPET VE SUBJECT: VENEZUELA: IRAN SANCTIONS ACT REF: STATE 121808; CARACAS 1352 CLASSIFIED BY: DUDDY, AMBASSADOR, DOS, AMB; REASON: 1.4(B),(D) ¶1. (C) SUMMARY: In a public speech on November 25, President Chavez touted the implementation of 129 joint projects with Iranian cooperation and called the Government of Iran (GOI) a "strategic ally." The same day, the Venezuelan Government (GBRV) signed an additional 45 agreements with Iran to facilitate economic independence, many in the field of energy cooperation. Some of these bilateral agreements ostensibly provide for cooperation between Petroleos de Venezuela (PDVSA) and the GOI, but Post's limited contact with PDVSA has made it difficult to verify progress. END SUMMARY. CHAVEZ CALLS IRAN A STRATEGIC ALLY ¶2. (SBU) On November 25, during Iranian President Ahmadinejad's most recent visit to Venezuela, President Chavez said that the GBRV and the GOI have implemented 129 joint projects. On November 26, the government-run Bolivarian News Agency (ABN) reported that Venezuela and Iran had signed 45 new agreements to further economic independence. During Ahmadinejad's visit, President Chavez called Iran a strategic ally and said that Venezuela had built "factories of factories" and "mother factories" thanks to Iranian cooperation. PDVSA'S COMMITMENTS TO IRAN ¶3. (C) According to an Embassy Caracas database that attempts to track Venezuela's public commitments to Iran, the two countries have signed the following agreements since December 2002 (Note: All of the information below is derived from open source reporting; Embassy Caracas has no access to PDVSA and cannot confirm the disposition of these investments. End Note.): B7 December 2005-PDVSA and Sadra Iram Marina Industrial Company signed an agreement for a feasibility study of joint shipbuilding operations in Venezuela and the transfer of shipbuilding technology. B7 September 2006-PDVSA and Petropars signed a joint venture for oil exploration and exploitation. B7 January 2007-PDVSA and Petropars agreed to form a joint venture for operations in Venezuela. PDVSA and Petropars reportedly signed a service contract in the same month. B7 March 2007-PDVSA purchased $43.8 million dollars worth of Iranian machinery. B7 December 2007-PDV Marine signed a contract with Iran's SADRA Iran Marine Industrial Company to purchase four 105,000 ton tanker vessels with a capacity of 650,000 barrels of crude oil. LOTS OF PAPER, LITTLE SUBSTANCE ¶4. (C) In addition to the agreements above, President Chavez announced a plan to export 20,000 barrels of gasoline per day (bpd) to Iran during a September visit to Tehran. According to the press, under the agreement, Venezuela would charge Iran USD 800 million per year for the gasoline, to be paid with imports of Iranian machinery and technology. The status of this agreement remains uncertain. In a press report on October 2, Iranian lawmaker Hamid Reza Katouzian denied the existence of a binding agreement. "The issue of gasoline export from Venezuela to Iran has just been a personal statement raised by Venezuelan President Hugo Chavez," he said. ¶5. (C) During the same visit, the GBRV and GOI signed two complementary memoranda of understanding (MOUs) for energy cooperation. Under the first agreement, Iran would provide USD 760 million in energy investment to develop Venezuela's Dobukubi field and the Ayacucho 7 block in the Orinoco heavy oil belt; under the second, Venezuela would supply USD 760 million to finance 10 percent of phase two of the Iranian South Pars field project. ¶6. (C) On October 18, Venezuelan oil sector consultant Ghassan Dagher (protect throughout) told PetAtt that Petropars has no future in Venezuela (ref B). Dagher said that PDVSA had asked Petropars to contribute USD 220 million to a refinery project in Venezuela, but that Petropars could not raise the money. Consequently, PDVSA would not move forward with plans to jointly develop the Ayacucho 7 block with Petropars. ¶7. (C) COMMENT: The GBRV will reject out of hand any obligation to cooperate with U.S. efforts to assess PDVSA's activities in support of the Iranian oil sector. Nor, as noted above, do we have access to PDVSA for anything other than the occasional meeting with technical level personnel -generally because the Consular Section has alerted the Petroleum AttachC) to the presence of PDVSA personnel in the visa line. Despite the fact that Chavez has trumpeted the benefits of Venezuela's relations with Iran, we are unsure about the actual progress that either government has made in implementing the agreements they have signed - and particularly in the energy area. END COMMENT. DUDDY