D/S Wolin Presses UAE for More Cooperation on Iran - Af/Pak

S E C R E T SECTION 01 OF 04 ABU DHABI 000107 NOFORN SIPDIS E.O. 12958: DECL: 2035/02/25 TAGS: PREL PTER EFIN AE IR AF SUBJECT: D/S Wolin Presses UAE for More Cooperation on Iran - Af/Pak CLASSIFIED BY: Richard G. Olson, Ambassador, State Department, U.S. Embassy Abu Dhabi; REASON: 1.4(B),(D) TREASURY FOR WOLIN, LEVEY, COHEN, BAUKOL, MENDELSOHN STATE FOR S/SRAP, SCA, AND NEA/ARP CENTCOM FOR GEN PETRAEUS, GEN MCCHRYSTAL ¶1. (S) Summary. On 15-16 February 2010, Treasury Deputy Secretary Neal Wolin met with UAE officials to press for continued cooperation on illicit finance issues with respect to Iran and the Taliban. UAE officials noted progress made and yet to come, and expressed concern about international resolve to confront Iran. Wolin met with Foreign Minister Sheikh Abdullah bin Zayed al Nahyan, Minister of State for Financial Affairs Obaid al Tayer, Minister of Foreign Trade Sheikha Lubna al Qasimi, Minister of Cabinet Affairs Mohammed al Gergawi, Central Bank Governor Sultan bin Nasser al Suweidi, and Ahmed al Tayer, who serves as Governor of the Dubai International Financial Centre (DIFC) and Chairman of Emirates - National Bank of Dubai (E-NBD). End Summary. -------------- IRAN -------------- ¶2. (S/NF) Deputy Secretary Wolin noted that attempts to address the Iranian threat through diplomatic engagement have thus far been unsuccessful and expressed the intention of the U.S. government to increase financial pressure on the Iranian regime. He thanked UAE officials for their government's strong partnership on Iran and encouraged further cooperation and economic measures to protect against Iranian abuse of the financial sector. Wolin praised UAE officials for the significant restrictions placed on Persia International Bank (PIB) and urged further vigilance with respect to the DIFC-licensed entity. He expressed concerns about Iranian financial institutions operating within the UAE (Bank Melli and Bank Saderat),as well as the UAE's largest bank, Emirates NBD, which continues to maintain substantial relationships with Iran. Wolin highlighted new U.S. sanctions targeting the IRGC and IRISL. ¶3. (S/NF) With respect to Bank Melli and Bank Saderat, Governor Suweidi said that the UAE Central Bank has stepped up examinations to twice per week and that the overall size of banking activity was "shrinking, not growing." He said the Central Bank is watching all transfers over 100,000 (not clear if dollars or dirhams),but that shutting down these institutions was a "sovereign decision" to be taken "by a higher authority." He described these banks as "quite isolated" in that many UAE banks will not deal with them. ¶4. (S/NF) On Emirates NBD, the Governor stated that the bank had 14 correspondent accounts for Iranian banks that originated with the National Bank of Dubai before its merger with Emirates Bank International. He said facilities at the bank for Iran were shrinking and alluded to a $500 million facility that now stands at $50 million (nfi). He asked for more time to close the Iranian accounts, stating that some had already been closed. The Governor assessed that working with the U.S., the UAE has put tremendous pressure on Iran and will continue to work with the U.S. to put more pressure on Iran. ¶5. (S/NF) Minister of State for Financial Affairs Obaid al Tayer noted the progress made by the UAE resulting from close cooperation with the Treasury Department, citing regular visits by Under ABU DHABI 00000107 002 OF 004 Secretary Levey as an important catalyst. He referenced reductions in overall levels of Iran-related financial activity and restrictions placed on Iranian institutions. Obaid al Tayer stressed the confluence of interests between the U.S. and the UAE on Iran, but also mentioned the legitimate trade that takes place between the UAE and Iran as well. ¶6. (S/NF) Minister of Cabinet Affairs Mohammed al Gergawi emphasized the quiet but effective role played by UAE with respect to Iran sanctions, noting enforcement of UNSCRs, heightened caution by UAE banks, that the DIFC's recent steps against Persia International Bank. However, he also pointed to the UAE's security vulnerability saying the UAE must be careful. He added "please inform us before shifting positions; don't embarrass us, our position is quite sensitive," expressing concern that the U.S. will ultimately cut a deal with Iran leaving the UAE exposed. Gergawi said Iran often fires back publicly at the UAE, specifically mentioning the U.S. Consulate's Iran Regional Presence Office (IRPO) as placing the UAE in an uncomfortable situation. Nonetheless, he reaffirmed the UAE's resolve to continue working together with the U.S. on Iran. ¶7. (S/NF) Gergawi said the internal struggle in Iran needs to be watched closely, but he dismissed expectations that Mousavi would pursue a different policy course, noting that Mousavi was of the "old ideology" and "part of the problem, not the solution." He pointed to Mousavi's tenure as prime minister in the 1980s, underscoring his troubling track record. Gergawi said that Ahmedinejad has been successful in making the opposition an upper class movement, with demonstrations largely confined to Tehran, Esfahan and Shiraz. He cautioned the U.S. against overly supporting the opposition, which would discredit them. ¶8. (S/NF) DIFC Governor and Emirates NBD Chairman Ahmed al Tayer confirmed the shared interests between the U.S. and the UAE on Iran, adding that the region has suffered for 30 years from Iran. DFSA Chief Executive Paul Koster described the DFSA's recent actions against Persia International Bank. (Note: Koster first explained that he was sharing the information under the umbrella of the DIFC Governor, not as DFSA CEO which would be inconsistent with his regulatory obligations. End Note). Koster explained that PIB in the DIFC is organized as a branch of the UK parent. He said that PIB's DIFC branch was specifically excluded from the UK FSA's decree banning activity between PIB and its majority owner Bank Mellat. He described this exclusion as "unusual," and said the DFSA approached the UK FSA to rectify the situation as its effect was to push financial activity from London to Dubai. The UK regulator dismissed the DFSA complaints, so the DFSA elected to unilaterally extend the UK FSA decree to cover the activities of PIB's DIFC branch. Koster said the DFSA has also stepped up oversight of PIB to bi-monthly inspections. (NOTE: In a subsequent conversation, the DFSA Director of Supervision said the new restriction would cut out at least 30% of PIB's local activity. END NOTE.) ¶9. (S/NF) Shifting the conversation to Ahmed al Tayer's role as Chairman of Emirates NBD, Wolin raised concerns about the bank's ties to Iran. Ahmed al Tayer said that with respect to Iran "your concern is our concern." He noted the bank's enforcement of UNSCRs and a general scaling down of credit exposure to Iran. He asked about the exchange of letters between Emirates NBD and OFAC and stated the bank's intention to strictly comply with OFAC regulations. When asked about the numerous correspondent accounts held at Emirates NBD for Iranian banks, Ahmed al Tayer could not provide a substantive response. CEO Rick Pudner requested a follow up meeting with the Treasury AttachC) to review the matter. (NOTE: In a subsequent meeting with Treasury AttachC),Pudner asked ABU DHABI 00000107 003 OF 004 detailed questions about U.S. concerns over Iranian correspondent accounts and letter of credit activity. He noted a lack of guidance from the UAE Central Bank and asked where his bank stood in relation to other international financial institutions in dealings with Iran. Pudner took detailed notes and pledged to further review the matter with Ahmed al Tayer and respond. END NOTE.) ¶10. (S/NF) Sheikha Lubna stressed the need for multilateral measures against Iran, as bilateral pressure was "awkward" for the UAE considering its demographic size and geographic location. She pointed to export controls as a successful and effective area where the UAE plays significant role. -------------- SHEIKH ABDULLAH -------------- ¶11. (S/NF) Responding to Deputy Secretary Wolin's review of the current state of play on Iran and issues of concern in the UAE, Foreign Minister Sheikh Abdullah stated the UAE hope for a new UN resolution and the need to project a clear, bold and unified position on Iran. Sheikh Abdullah said that "stalling is very dangerous." He said the UAE tried talking to the Chinese several times regarding its position on Iran, but saw no improvement. Noting the composition of the UN Security Council, he doubted the possibility of serious UN action. Expressing deep pessimism, Sheikh Abdullah said that he does not see enough countries relevant to Iran willing to act, noting that the EU has been talking about action for 18 months with no movement. He asked about Austria's posture with respect to Iran and offered to use the UAE's influence there, derived through its ownership stake in Austrian energy firm OMV. ¶12. (S/NF) Sheikh Abdullah said it is premature to talk about the GCC countries with all these holes remaining, and reiterated security concerns felt by the UAE when it acts without sufficient international cover. That said, he pointed to the recent bold steps taken by the DIFC to limit the activity of PIB, and credit limits coming down at Emirates NBD. He acknowledged that the UAE still has more to do on Bank Melli and Bank Saderat, which was a bit more "tricky" for the UAE. He said the UAE needs other countries to act simultaneously. ¶13. (S/NF) Sheikh Abdullah cited China - Iran trade at $50 billion in 2009. He said the issue there is energy and that China views the U.S. presence in Central Asia as a threat to its energy security. He asked about the impact, timing and motivations behind U.S. arms sales to Taiwan and the Dalai Lama visit with the President. He recommended approaching Australia about putting pressure on China and asked out loud, "are the Chinese trying to get something in return?" Sheikh Abdullah stated that the UAE has noticed increased transactions from Iran to the Chinese Military Bank (nfi). ¶14. (S/NF) When asked about formalizing Iraq debt relief, Sheikh Abdullah said that the UAE will take the necessary steps after the elections. He said the issue is being handled by the joint commission between the UAE and Iraq, even though the debt technically belongs to the Emirate of Abu Dhabi. Sheikh Abdullah said that he will ultimately sign on behalf of the UAE and Abu Dhabi. ABU DHABI 00000107 004 OF 004 ¶15. (S/NF) On aid to the Palestinian Authority, Sheikh Abdullah cited UAE assistance at $250 million for 2009, but added that 2010 would be much lower - $100 million tops. He said if other countries don't pay up early in the year, March/April is going to be a problem, and added that the UAE wants Prime Minister Salam Fayyad to focus on more serious issues than how to collect money. ¶16. (S/NF) Sheikh Abdullah asked about the Taliban integration fund and specifically where the Saudis stood. He said firmly that the UAE is only interested in contributing if it is involved in oversight and management for financial and domestic Afghani reasons. Moving to Pakistan, Sheikh Abdullah raised a series of commercial disputes between the UAE and Pakistan, including UAE telecom Etisalat and Abu Dhabi SWF International Petroleum Investment Company (IPIC). He said if the issues were not resolved, the UAE would not go forward with the Khalifa Port refinery, a $5-7 billion project. He added that because of these issues, the UAE is not going forward with its Pakistan commitments at this time. -------------- AF/PAK ILLICIT FINANCE -------------- ¶17. (S/NF) Wolin commended the UAE on its cooperation with the U.S. in addressing terrorist finance issues in the UAE, and urged deeper cooperation and additional attention on funding to the Taliban and other violent extremist groups in Afghanistan and Pakistan. He noted the recently begun effort by GPRO and Treasury to increase information sharing with the UAE security services focused on Taliban finance matters, and urged the UAE to commit further resources. He thanked the UAE for its partnership on bulk cash training and exercises, to commence during the week of 21 February. ¶18. (S/NF) Wolin noted that the UAE lacks regulations requiring declaration of cash leaving the country. He cited this lapse as a strategic vulnerability and encouraged the UAE to immediately implement a remedy. Foreign Minister Sheikh Abdullah, Finance Minister Obaid al Tayer and Minister of Cabinet Affairs Mohammed al Gergawi all pledged to look into the issue. This cable has been cleared by Treasury. OLSON