ITALIAN SHIPPING COMPANY TO CUT TIES WITH IRAN

C O N F I D E N T I A L SECTION 01 OF 02 ROME 000066 SIPDIS STATE FOR ISN, T, NEA/IR STATE FOR CHALMERS IN ISN/CPI E.O. 12958: DECL: 01/14/2019 TAGS: KNNP ECON EFIN ETRD EWWT PARM PREL SUBJECT: ITALIAN SHIPPING COMPANY TO CUT TIES WITH IRAN REF: A. 08 SECSTATE 104496 ¶B. ROME 1304 ¶C. ROME 1392 ¶D. ROME 1475 ¶E. ROME 1500 ¶F. ROME EMBASSY DAILY REPORT 17 DEC 2008 Classified By: Deputy Chief of Mission Elizabeth Dibble for reasons 1.4 (b) and (d) ¶1. C) Summary: Italian MFA officials told Post that the Italian owners of the Irital shipping firm are seeking to divest from their Iranian partners due to concerns about the application of U.S. sanctions. End Summary. ¶2. (C) Italian MFA Deputy Director General for Economic and Financial Cooperation Claudio Spinedi told Econoff on 14 January that the Italian owners of Irital, a US-designated entity, were in the process of divesting themselves of their Iranian partners -- Islamic Republic of Iran Shipping Lines (IRISL) -- and that the legal process could be complete within one month. ¶3. (C) Italian policy has evolved substantially since the September 2008 imposition of US sanctions on Irital, a Genoa-based joint venture between the Cosulich brothers (a long-established shipping family in Genoa) and IRISL. Following our initial demarche (ref A) MFA officials quickly understood that Italian exporters could be subject to U.S. sanctions for doing business with Irital (ref B). GOI interlocutors later expressed anger about the sanctions, calling them "extra-territorial" and "a serious irritant that undercuts Italy's relations with the USG." (ref C). ¶4. (C) On December 4, GOI officials informed Post that due to Italian government "moral suasion," the Cosulich brothers had agreed not to sign any new contracts with Italian businesses (ref D). This was an attempt to reduce the risk of Italian exporters running afoul of U.S. sanctions. It did not, however, constrain Irital's existing business partners, nor was it clear whether existing contracts would be grandfathered for indefinite renewal following their expiration over the following two to three years. The GOI claimed its "moral suasion" had borne dividends, but told us that it was legally unable to go further, absent an EU or UN decision to place sanctions upon Irital (ref E). ¶5. (C) In an effort to learn more about the Cosulich-Iranian relationship, and to highlight our concern, on December 15 Post tried to arrange a visit by ECONOFF to the Cosulich offices in Genoa. Antonio Cosulich told our Consular Agent in Genoa that he was willing to meet with Post "anytime, anyplace" and said that he was willing to open his books, share bills of lading and give access to his ships to officers at Post in order to explain their business. Cosulich told the Consular Agent that business with Irital accounted for less than five percent of the family's total shipping revenue. ¶6. (C) At this point MFA Deputy DG Spinedi weighed in requesting that Post not meet with any of the Cosulich brothers. Spinedi said the GOI had, "other things underway...an ongoing action (concerning Irital)," the details of which he was unwilling to divulge. Spinedi requested that Post postpone meeting with the Cosulich brothers until after the holidays to allow time for his initiative to bear results (ref F). Post agreed to Spinedi's request and continued to monitor the situation. ¶7. On January 14 Spinedi called to inform us that within one month, the Cosulich brothers will have essentially severed their ties with the IRISIL. ¶8. (C) Comment: Under pressure from the USG, the GOI appears to have engineered the kind of solution we wanted. We hope this severing of ties with the Iranians will make it more difficult for Teheran to ship materials needed for WMD development. If the Cosulich Brothers follow through, and if this results in sanctions being withdrawn from their company, a potential problem in the U.S.-Italy bilateral relationship will have been de-fused. The GOI and the firm appear to have acted pragmatically: work with IRISL seems to have been producing a small fraction of Cosulich Brothers' revenue, while putting a much larger share of their business at risk. ROME 00000066 002 OF 002 SPOGLI