Identifier
Created
Classification
Origin
09STATE37028
2009-04-15 15:07:00
CONFIDENTIAL
Secretary of State
Cable title:  

LEBANON LOAN AGREEMENT WITH U.S.-DESIGNATED

Tags:  EFIN ETTC KNNP IR PREL PARM XF LE 
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VZCZCXYZ0018
OO RUEHWEB

DE RUEHC #7028 1051526
ZNY CCCCC ZZH
O 151507Z APR 09
FM SECSTATE WASHDC
TO AMEMBASSY BEIRUT IMMEDIATE 0000
C O N F I D E N T I A L STATE 037028 

SIPDIS

E.O. 12958: DECL: 04/15/2019
TAGS: EFIN ETTC KNNP IR PREL PARM XF LE
SUBJECT: LEBANON LOAN AGREEMENT WITH U.S.-DESIGNATED
EXPORT DEVELOPMENT BANK OF IRAN

REF: A. BEIRUT 442

B. STATE 114408

Classified By: ISN Acting A/S C.S. Eliot Kang,
for reasons 1.4 (b) and (d).

C O N F I D E N T I A L STATE 037028

SIPDIS

E.O. 12958: DECL: 04/15/2019
TAGS: EFIN ETTC KNNP IR PREL PARM XF LE
SUBJECT: LEBANON LOAN AGREEMENT WITH U.S.-DESIGNATED
EXPORT DEVELOPMENT BANK OF IRAN

REF: A. BEIRUT 442

B. STATE 114408

Classified By: ISN Acting A/S C.S. Eliot Kang,
for reasons 1.4 (b) and (d).


1. (U) This is an action request. Please see paragraph 3.

--------------
SUMMARY/BACKGROUND
--------------


2. (SBU) In reftel A, Embassy Beirut alerted Washington that
Lebanon signed a Memorandum of Understanding (MOU) March 12
with the Export Development Bank of Iran (EDBI) for the
reactivation of a 45 million euro loan originally signed in

2003. EDBI was designated by the U.S. under Executive Order
(E.O.) 13382 on October 22, 2008 for providing financial
services to multiple Ministry of Defense and Armed Forces
Logistics (MODAFL)-subordinate entities (ref B). The U.S.
urges Lebanon to cancel this loan with EDBI due to its
demonstrated support for proliferation-related activities.


--------------
OBJECTIVES/ACTION REQUEST
--------------


3. (C) Washington requests Embassy Beirut pass the attached
nonpaper in paragraph 4 to appropriate government officials
and pursue the following objectives:

-- Remind the Government of Lebanon of the need to implement
UNSCR 1803, which calls for UN member states to exercise
vigilance over financial institutions' activities with all
banks domiciled in Iran.

-- Urge the Government of Lebanon to end contacts with EDBI
based on its activities in support of MODAFL. Elements of
MODAFL were listed in the Annexes to UN Security Council
Resolutions 1737 and 1747.

-- Emphasize the role that EDBI plays in Iran's
proliferation-related activities.

-- Remind the Government of Lebanon that EDBI was designated
by the U.S. under E.O. 13382 on October 22, 2008.

-- Recall the Financial Action Task Force's (FATF) call for
members to advise their financial institutions to give
special attention to business relationships and transactions
with Iran and apply effective counter-measures to protect
their financial sectors from the money laundering and
financing of terrorism risks inherent in financial dealings

with Iran.

-- Explain to the Government of Lebanon that maintaining the
MOU with EDBI could place the Government and/or the
jurisdiction at risk of losing other international financial
relationships.

--------------
BACKGROUND AND NONPAPER
--------------


4. BEGIN UNCLASSIFIED NON-PAPER FOR LEBANON

-- (U) It is our understanding that your government signed a
Memorandum of Understanding (MOU) March 12 with the Export
Development Bank of Iran (EDBI) for the reactivation of a 45
million euro loan originally signed in 2003.

-- (U) The United States designated the Export Development
Bank of Iran (EDBI) and three affiliated entities under E.O.
13382 ("Blocking the Property of Weapons of Mass Destruction
Proliferators and their Supporters") on October 22, 2008.

-- (U) E.O. 13382, signed by the President on June 28, 2005,
is an authority aimed at freezing the assets of proliferators
of weapons of mass destruction and their supporters, and at
isolating them from the U.S. financial and commercial
systems. Designations under the Order prohibit all
transactions between the designees and any U.S. person, and
freeze any assets the designees may have under U.S.
jurisdiction.

-- (U) Any entity found to be conducting business with EDBI
and its affiliates and any other designated entities, or any
entity that is owned or controlled by, or acting for or on
behalf of EDBI and its affiliates, may be subject to
designation under E.O. 13382.

-- (U) UNSCR 1803, adopted on March 4, 2008, "(c)alls on
all member states to exercise vigilance over the financial
activities of banks in their territories with all banks
domiciled in Iran, and their branches and subsidiaries
abroad, particularly Bank Melli and Bank Saderat."

-- (U) According to information available to the U.S.
Government, the EDBI provides financial services to multiple
Ministry of Defense and Armed Forces Logistics
(MODAFL)-subordinate entities; these services permit these
entities to advance Iran's WMD Programs.

-- (U) Furthermore, the EDBI has facilitated the ongoing
procurement activities of various front companies associated
with MODAFL-subordinate entities.

-- (U) MODAFL controls Iran's Defense Industries
Organization (DIO),an Iranian entity designated in UNSCR
1737 and by the U.S. under E.O. 13382 on March 30, 2007. The
U.S. also sanctioned MODAFL pursuant to the Arms Export
Control Act and the Export Administration Act in November
2000 for its involvement in missile technology proliferation
activities.

-- (U) MODAFL has ultimate authority over Iranian ballistic
missile activities and organizations, including the Shahid
Hemmat Industries Group (SHIG) and the Shahid Bagheri
Industries Group (SBIG),which were both designated under
UNSCR 1737, and by the U.S. in the annex of E.O. 13382.
MODAFL has publicly indicated its willingness to continue
work on ballistic missiles. Iran's Defense Minister
Brigadier General Mostafa Mohammad Najjar said that one of
Iran's major projects is the manufacturing of Shahab-3
missile and it will not be halted. The Defense Minister has
also commented on MODAFL's readiness to supply these missiles
to Iran's armed forces.

-- (U) Since the United States and United Nations designated
Iran's Bank Sepah in early 2007, the EDBI has served as one
of the leading intermediaries handling bank Sepah's
financing, including WMD-related payments. In addition to
handling business for Bank Sepah, the EDBI has facilitated
financing for other proliferation-related entities sanctioned
under U.S. and UN authorities.

-- (U) We know MODAFL representatives are acting as
facilitators for Iranian assistance to an E.O. 13382
designated entity and, over the past two years, brokered a
number of transactions involving materials and technologies
with ballistic missile applications.

-- (U) On February 25, 2009, the Financial Action Task
Force (FATF)reaffirmed its call on members to advise their
financial institutions to give special attention to business
relationships and transactions with Iran and apply effective
counter-measures to protect their financial sectors from the
money laundering and financing of terrorism risks inherent in
financial dealings with Iran.

-- (U) In light of EDBI's demonstrated relationship with
MODAFL and its affiliates, as well as UNSCR 1803 and the
FATF's call for countermeasures to protect against the risk
of doing business with Iranian banks, we urge you to cancel
this loan agreement with EDBI.

--------------
REPORTING DEADLINE
--------------


5. (U) Post should report results within seven business days
of receipt of this cable. Please slug replies for ISN, T,
EAP, TREASURY, and NEA. Please use the caption SIPDIS in all
replies.

--------------
POINT OF CONTACT
--------------


6. (U) Washington point of contact for follow-up information
is Kevin McGeehan, ISN/CPI, (202) 647-5408.


7. (U) Department thanks Post for its assistance.
CLINTON