ITALIAN GOVERNMENT PLEDGES TO FOLLOW-THROUGH ON

C O N F I D E N T I A L SECTION 01 OF 02 ROME 001035 NOFORN SIPDIS DEPT FOR EEB DAS HENGEL E.O. 12958: DECL: 09/03/2019 TAGS: IT IR FR SUBJECT: ITALIAN GOVERNMENT PLEDGES TO FOLLOW-THROUGH ON EDISON'S IRAN PROJECT REF: A. A) ROME 928 B) 08 ROME 247 C) 08 SECSTATE 16620 D) CONGEN MILAN E-MAIL OF FEB 29 ¶B. 2008 ROME 00001035 001.2 OF 002 ¶1. (C/NOFORN) SUMMARY: On August 28, Italian Embassy officials in Washington cited the case of the Edison company as an example of GOI "moral suasion" efforts to stop investments in Iran, implying that the company's project in that country has been halted. But a senior Edison official told us on August 31 that he is unaware of any effort by the GOI to stop their project; he told us that the company's Iran effort is moving forward. Edison's Iran project was raised during U/S Burns' September 3 meetings in Rome -- senior Italian officials told us they will "take care of" this matter. END SUMMARY BACKGROUND - - - - - ¶2. (C) In January 2008, the Italy-French company Edison signed a contract with the Iranians for the exploration of Iran's Dayyer offshore block. The USG immediately objected to the deal. Post demarched the GOI, asking them to use their influence to halt the project (REFTELS B and C). Edison officials later told us that they believed the contract enjoyed the full support of the GOI, noting that the Italian Ambassador in Iran had been present for the signing ceremony (REF D). Edison moved forward with the project in spite of our demarche; in a February 13, 2009 Reuters report an Edison official said the company thought the Dayyer field offers "good prospects" and said the company hopes to start drilling by the end of 2009 or early in 2010. The official said Edison had come under no political pressure to stay out of Iran since signing the deal. ¶3. (C) During his June 15, 2009 meeting in Washington with President Obama, PM Berlusconi pledged to prevent Italian companies from undertaking any new projects in Iran. The Italian parastatal ENI was clearly part of Berlusconi's pledge. We later learned from GOI officials that a major project by the Italian engineering firm Maire Technimont was the subject of successful GOI "moral suasion" (REFTEL A). On August 28, 2009, Italian Embassy officials in Washington, in a follow-up to a conversation between Charge Cardi and State Department EEB DAS Hengel, stated that Edison's Iran project had also been the target of Italian moral suasion, implying ;(it seemed to us) that that project, like Maire Technimont's, had been put on hold. EDISON: MORAL SUASION, WHAT MORAL SUASION? - - - - - - - - - - - - - - - - - - - - - - ¶4. (C/NOFORN) On August 31,2009 Post spoke with Edison's Exploration and Production Manager Nicola Monti (protect) about the company's Iran activities. Monti said he was not aware of any GOI request to suspend its activities, stressing that he was one of the officials within the company to whom that information would have been conveyed. Monti stated that Edison would fulfill its contractual obligations with Iran and continue the exploration activities as called for under its January 2008 agreement. Asked for details on Edison's current activities in Iran, Monti said that Edison had conducted seismic tests, worth between 6 and 9 million dollars, in the Dayyer block. Monti added that these tests have so far revealed one potential area of hydrocarbon deposits that Edison plans to drill later this year or early in 2010. If the company confirms the presence of commercially viable deposits of hydrocarbons, the company could move to the development phase. Monti estimated the value of such development phase in the billions of dollars. He said that Edison would make the final decision on whether to invest in this development phase only after close consultations with the company's shareholders. He added that Edison would also consult the Italian Government. Monti asserted that the January 2008 exploration agreement is the only deal the company has right now with Iran. SENIOR GOI OFFICIALS PLEDGE TO "TAKE CARE OF THIS" -------------- -------------- ¶5. (C) On September 2, DCM Dibble raised the Edison matter with senior Berlusconi staffer Marco Carnellos. On September 3, the GOI's National Security Advisor Bruno Archi told visiting U/S Burns that the GOI would "take care of" the ROME 00001035 002.2 OF 002 Edison matter. COMMENTS - - - - ¶6. (C) The Italian Embassy officials who pointed to the Edison case may have been technically correct in asserting that the company was the target of GOI "moral suasion" but they should have told us that the GOI effort was unsuccessful. From our conversations with Monti, it appears that even if there was such a GOI effort, it was so low-key that even the company's Iran project manager never heard of it. We think the GOI does have the influence to stop this Edison project. Edison desperately needs Italian government diplomatic support for its Turkey-Greece-Italy pipeline project (in fact the company often seeks USG support for this effort),and in a more general sense the GOI has the power to make life very difficult for a company like Edison. We expect the GOI to use its influence to bring a halt to Edison's Iran project. An already scheduled September 16 meeting between our Consul General in Milan and Edison CEO Quadrino will provide an excellent opportunity to check on follow-through.