EU/BURMA SANCTIONS: HOW U.S. CAN HELP

C O N F I D E N T I A L USEU BRUSSELS 000814

NOFORN
SIPDIS

STATE FOR EAP/MLS, DRL/MLGA, IO AND EUR/ERA
NSC FOR ELIZABETH PHU
TREASURY FOR OFAC AND TFFC

E.O. 12958: DECL: 04/05/2019
TAGS: ETTC EFIN PGOV ETRD EMIN PHUM KDEM BM EUN FR
UK, IT, SW, NL
SUBJECT: EU/BURMA SANCTIONS: HOW U.S. CAN HELP

REF: A. 2007 STATE 137644

B. 2007 STATE 155019

C. 2007 STATE 164893

D. EMAIL 4/3/08 COPE-SNYDER ET AL "OFAC PAPER ON
BURMA SANCTIONS"

E. 2008 STATE 83719

F. 2008 STATE 125635

G. RANGOON 120

H. RANGOON 96

Classified By: USEU Econ Minister-Counselor Peter H. Chase for reasons
1.4 (b) and (d).


1. (U) Action Request: Please see paragraphs 6 and 12.


2. (C//NF) SUMMARY: EU ministers will discuss options for
the EU Burma sanctions policy at the June 15 GAERC. No final
decision is expected before a verdict is issued in the
current Aung San Suu Kyi (ASSK) trial. Bank designations are
still possible, but the majority of EU Member States (EUMS)
are not forward-leaning. The UK believes the USG can assist
with "gentle, careful" discussions with key hold-outs:
France, Germany, Italy, the Netherlands, and Sweden. Post
recommends Washington phone calls to these countries'
respective foreign ministry Asia Directors in advance of the
GAERC to encourage a robust response, bringing the EU closer
to the U.S. approach. The USG should also consider sharing
information with the EU on ASSK's comments to us in support
of sanctions. EUMS and institutions have cautiously
expressed interest in meeting with U.S. sanctions experts to
better understand technical implementation mechanics. END
SUMMARY.

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GAERC: COASI Keeps "All Options on the Table"
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3. (C//NF) A UK contact (please protect) provided a read-out
of the June 10 Council Working Party on Asia (COASI)
discussion. Following a major push by the UK, COASI agreed
to keep all options on the table for ministerial discussion
June 15. Despite "lots of reluctance" to expand sanctions
measures, there is general EU recognition of the "need for a
robust response, probably including relatively small further
measures," in the event of a verdict against ASSK. "If there
is a verdict, the EU will want to respond the same day."
Assuming the verdict is not issued before Monday's GAERC,
there should be time to lay the proper technical groundwork
for a final decision. Capitals will circulate feedback on
the joint Commission-Council General Secretariat options
paper -- which drew heavily from previously provided U.S.
demarches and nonpapers on possible technical improvements to
the EU Burma sanctions program (Refs A-F) -- via COREU
(internal EU communications network) in advance of the GAERC.
Absent a verdict, the EU will most likely remain in a
holding pattern.


4. (C) Likely additional measures would include the U.S.
ideas concerning retargeting the existing EU sanctions
annexes and adding certain new individuals. A small
minority, led by the UK, would favor listing the three
foreign exchange banks with carve-outs for humanitarian
activities, as advocated by the USG (Reftels). The
Commission and UK expressed concerns to USEU regarding the
technical plausibility of restricting correspondent banking
relationships, even in the event of designation of the three
banks. UK contacts in Brussels are under the impression that
restricting the correspondent relationships would be less
important than the bank designations themselves. (COMMENT:
USEU countered that this is in fact an important facet, but
the point may need to be explained further by U.S. sanctions
enforcement experts once the EU decides to move forward.
USEU offered to reach out again to U.S. sanctions experts to
further explain the mechanics of how this works in the U.S.
system. END COMMENT.)

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Politics: How U.S. Can Help Persuade EU
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5. (C) EUMS are "instinctively" not in favor of additional
sanctions. Those most forceful in speaking out against
designating the foreign exchange banks at the June 10 COASI
meeting were France, Germany, Italy, the Netherlands, and to
a lesser extent Sweden. Italy claimed that their objection
to further sanctions is in deference to the "UN context,"
claiming Ban Ki Moon does not want additional sanctions
measures.


6. (C//NF) A UK negotiator (strictly protect) requested, "It
could be helpful if the U.S. were to push these countries
regarding the financial sanctions options." He asked that we
especially "straighten out the Italians" regarding our
understanding of what UN officials privately believe could be
helpful on the sanctions front. The U.S. need not "overdo
it" with a massive or heavy outreach, nor target the full
GAERC in advance of the June 10 meeting. But a few "gentle,
careful" conversations would be useful. Our contact
recommends that such conversations should explain what the
USG is considering in reaction to the trial and encourage
that the EU and U.S. remain in step with each other. The UK
appreciates the State and Treasury outreach in recent days to
the Commission, who have been unusually constructive on the
issue lately as a result. Continuing to "stroke" these
officials will reinforce the hand of those who seek alignment
of U.S. and EU policies and believe sanctions are an
important potential foreign policy tool.

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Technicalities: How U.S. Sanctions Experts Can Help
-------------- --------------


7. (SBU) Following a GAERC political decision, the issue
will be returned to COASI to begin ironing out the technical
details for necessary changes to implementing legislation.
EU External Relations counselors (RELEX) will negotiate the
final implementing legislation, who in turn will send a
consensus text to COREPER II for approval and final agreement
again by the GAERC. (NOTE: This process can take three or
four weeks, and may be approved by silence procedure in the
absence of a formal Council meeting. END NOTE.)


8. (C) Following up on long-standing, sensitive discussions
over how the U.S. and EU can better exchange technical
sanctions expertise, USEU offered to the Commission, the
Council Secretariat, and the UK that we would seek a visit to
E
Brussels by U.S. sanctions experts to meet with any
appropriate body working through the technical details. All
interlocutors appreciated this offer and promised to consider
whether this would be useful. The UK expressed a reservation
that such an exercise "might slow down" the momentum toward
EU consensus. (NOTE: In a recent similar exercise for
Trasury and the EU on Iran sanctions, some worried that a
U.S. intervention would be used to stall by sanctions-skeptic
EU capitals wanting to further "study" the U.S. position.
END NOTE.)


9. (C) COMMENT: Few EUMS have large human resources
dedicated to sanctions policy-making or implementation; the
Commission has just two full-time staff. Working level
experts recognize the limitations of effective sanctions
implementation and policy-making given this lack of
resources. EU political hierarchies do not share an
understanding of how this impedes one of the few effective
non-military foreign policy tools.


10. (C) Pervasive EU sensitivities have prevented direct
U.S. access to political discussions over EU sanctions
decision-making through the relevant working groups.
However, there seems to be growing willingness to sacrifice a
degree of EU separation from the U.S. on sanctions policy in
exchange for learning from our well established sanctions
enforcement experts. Certain German Foreign Ministry
sanctions officials said they could probably speak in support
of such an exchange if the USG were to secure buy-in from the
UK, France, and incoming EU Presidency Sweden, despite
opposition from the German trade and finance ministries. END
COMMENT.


11. (C//NF) An indication of potential technical sticking
points for EU sanctions experts is the questions the
Commission Burma desk asked State and Treasury OFAC officials
via a backchannel conference call on June 9. Head of Unit
for Southeast Asia Seamus Gillespie is concerned about
finding a solid legal basis for EU action in order to avoid
the EC court annulling a decision for insufficient grounds.
The Commission lacks expertise in how correspondent banking
relationships can be addressed and the mechanics of blocking
property or transactions. The Commission is curious how
third parties, such as Singapore and China, can be engaged;
how the informal banking (hawala) system factors in; how the
EU could allow humanitarian aid and bonafide exports from
SMEs or non-designated Burmese entities whose products are
not banned under EU law (NOTE: In 2007, Burmese exports to
the EU totaled EUR 400 million. END NOTE.); how the
mechanics and timing work for the OFAC response hotline; how
to monitor compliance with the banks; and the state of play
for renewing the 2008 Lantos Act, which the Commission finds
"interesting" and muses it "would be nice if there were more
of an international coalition" on the gemstones measures to
certify the supply chain with a burden of proof on the
importer. The latter "would take time and international
pressure" to come into fruition, the Commission expects.
(NOTE: One of the two full-time Commission sanctions
officers is dedicated to fulfilling the EC's duties in the
Kimberley Process. END NOTE.)

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Action Request: USEU Recommendation
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12. (C) Post believes it could be useful for appropriate
State or NSC officials to place a phone call to Foreign
Ministry Asia Directors from France, Germany, Italy,
Netherlands, and Sweden, as well as to EU Burma Special Envoy
Piero Fassino, in advance of the June 15 GAERC meeting to
explain the direction of U.S. Burma policy in light of
current events, our likelihood of maintaining existing U.S.
sanctions measures, and our continued support for the EU
adopting similar measures to our own. This could help the
GAERC outcome to be as forward-leaning as possible, and lay
political groundwork following emerging events in Burma.
Following the GAERC, post recommends the USG consider sharing
information with key EUMS and officials, if not all EU-27,
regarding the desire of ASSK and the NLD for the
international community to continue ratcheting up the
sanctions pressure on the regime. We do not believe EU
interlocutors are entirely aware of ASSK's wishes in this
regard, which have typically been relayed to us privately
(e.g., Refs G, H). Longer term, when a new U.S. Special
Envoy for Burma is appointed, we recommend early
consultations with Fassino and key EU interlocutors. We
should also identify experts to discuss gemstones with UK and
Commission officials, who are keenly interested in exploring
options to multilateralize the 2008 Lantos JADE Act. END
ACTION REQUEST.

MURRAY
.