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.



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IRAN

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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

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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

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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.



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SHEIKH ABDULLAH

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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.

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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.



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AF/PAK ILLICIT FINANCE

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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