NETHERLANDS/IRAN SANCTIONS ACT: SHELL CONFIDENT

C O N F I D E N T I A L THE HAGUE 000725 SIPDIS STATE FOR EEB/ESC/IEC THAMMANG, EEB/ESC/TFS CBACKEMEYER STATE ALSO FOR NEA/IR RWADHWANI E.O. 12958: DECL: 12/02/2019 TAGS: ENRG EPET ETTC PREL IR NL SUBJECT: NETHERLANDS/IRAN SANCTIONS ACT: SHELL CONFIDENT ITS ACTIVITIES SHOULD NOT TRIGGER ISA REF: A. STATE 121808 ¶B. THE HAGUE 2 ¶C. BACKEMEYER-CANAVAN E-MAIL 11/27/2009 Classified By: Head of Economic Unit Shawn Gray, reason 1.4 (b),(d) ¶1. (C) SUMMARY: Royal Dutch Shell executives told EconOff December 2 the company's activities should not trigger action under the Iran Sanctions Act (ISA). The Department's review process has grabbed Shell's attention. With in-house counsel looking on, Shell executives described the status of the Soroosh and Nowruz oil development project and Persian LNG gas project. More broadly, Shell reiterated its view that sanctions targeting Iran's energy sector must also apply to Chinese and Russian firms in order to have any effect on the regime. END SUMMARY. ¶2. (C) EconOff discussed the Department's ISA review per ref A with John Crocker, Shell's Head of International Government Relations, on December 2. Roelof van Ees, Government Relations Advisor seconded from the Dutch Foreign Ministry; Ayman Hamza, Middle East Regional Advisor; and Joseph Babits, in-house counsel, also attended. Separately, EconOff informed Foreign Ministry energy official Roeland Kollen about the ISA review as it relates to the Netherlands. -------------- -- STATUS OF SHELL'S INVESTMENT ACTIVITIES IN IRAN -------------- -- ¶3. (C) Soroosh and Nowruz: Crocker confirmed Shell handed this project over to Iran several years ago and no longer has any personnel working on it. He said Shell's only remaining involvement in the project is cost recovery, which is approaching its end. Referring to the U.S. government's May 1998 decision to waive sanctions for Total's investment in the South Pars gas field, Crocker said Shell proceeded with the Soroosh and Nowruz development with the unambiguous understanding that the same waiver applied to this project. He conceded that relying on a waiver agreement made in the 1990s with a previous U.S. administration carried risks, but said Shell felt it was on strong legal ground to contest any attempt to apply ISA to Soroosh and Nowruz. ¶4. (C) Persian LNG (PLNG): Crocker said Shell has received clear advice from external counsel that ISA does not apply to pre-final investment decision (FID) activities in Iran. He said PLNG's time horizon has slipped again, with 2011 as the latest possible FID date if political negotiations over bringing in a Chinese partner and technical assessment work proceeded without interruption. Crocker added PLNG's FID has consistently remained two years away since the parties signed Qconsistently remained two years away since the parties signed an initial agreement in 2004. -------------- -------------- SHELL: IRAN SANCTIONS WITHOUT CHINA'S BUY-IN DOOMED TO FAIL -------------- -------------- ¶5. (C) Crocker reiterated Shell's long-standing position on Iran sanctions. The firm is not opposed to a broad set of sanctions imposed on all energy sector participants, including Chinese and Russian firms. But if only western energy companies adhere to them, Chinese firms will enthusiastically fill the void. (Note: As in prior meetings - see ref B - he said Iran's downstream oil and gas sector was crawling with Chinese. End note.) Crocker said recent conversations with U.S. officials have encouraged him that the USG increasingly shares this view. However, he was concerned by the one-month gap between Assistant Secretary Feltman's testimony before the House Foreign Affairs Committee and this last-minute outreach to affected companies. After November 9-10 meetings at the Department, Crocker had the impression that the ISA review was nothing to worry about. He asked whether the USG's strategy on ISA had changed in recent weeks and expressed Shell's strong interest in Congressional developments and the outcome of this review. LEVIN