OIL CONTINUES TO GREASE MOROCCO-IRAN RELATIONS,

C O N F I D E N T I A L SECTION 01 OF 03 CASABLANCA 000024

SIPDIS

STATE FOR NEA/MAG

E.O. 12958: DECL: 02/18/2020
TAGS: ECON PGOV PREL ENRG KISL MO IR
SUBJECT: OIL CONTINUES TO GREASE MOROCCO-IRAN RELATIONS,
BUT FRICTION REMAINS

REF: 09 CASABLANCA 47

Classified By: Consul General Millard for reasons 1.4 b and d.


1. (C) SUMMARY: Although Rabat broke diplomatic relations
with Tehran in March 2009, commercial links between the two
countries remain important, led by Iran's provision of more
than one quarter of Morocco's crude oil imports in 2009,
worth nearly USD 1 billion. At the same time, Morocco
exported to Iran about 12 percent of its production of
phosphoric acid, a dual-use item used to produce fertilizer
for the country's agriculture sector and potentially as a
secondary source of uranium. While 99 percent of Morocco's
exports to Iran are linked to phosphate, Iran's interest in
Morocco is extending to other industries like the
automotive sector. While advantageous exchanges continue
to boost bilateral trade, the disparate commercial
transactions are unlikely to lead to closer official
relations or Iranian influence in Morocco in light of
official uneasiness about Tehran's intentions. End
Summary.

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Phosphate and Oil
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2. (C) Morocco's official relations with Iran reached a
new low in March 2009 when Morocco broke off diplomatic
relations (Reftel). Notwithstanding the political tensions
between the two countries, trade flows continued to
flourish in the past year. From the Moroccan perspective,
Iran remains a key supplier of oil. The director of
Morocco's Oil Refinery (SAMIR),Jamal Mohammed Ba Amer,
issued a press statement following the diplomatic rupture
in which he made it clear that "Morocco will continue to
import crude oil from Iran." Indeed in 2009, Iran supplied
Morocco with more than a quarter of its crude oil imports,
with Saudi Arabia, Russia, and Iraq providing the
remainder. According to preliminary data from SAMIR,
Morocco's petroleum imports from Iran totaled close to USD
1 billion last year.


3. (C) From the Iranian perspective, phosphate, a product
used extensively to produce fertilizer for the country's
agriculture sector, is a highly valued commodity. Morocco
exports about 12 percent of its phosphoric acid and about 5
percent of its rock phosphate to Iran, making Tehran one of
Morocco's largest phosphate customers. In 2009, the value
of Morocco's phosphate-related exports to Iran totaled
close to 100 million. (Note: Morocco holds about
three-quarters of the world's reserve of phosphates and is
the largest exporter of phosphate rock and phosphate
derivatives, with about 38 percent of the overall world
market in those products. End Note.)


4. (SBU)The International Atomic Energy Agency places the
theoretically obtainable uranium resources in Morocco's
phosphate deposits at around six million tons, roughly
twice the world's conventional uranium resources. Although
phosphate exported to Iran reportedly is exclusively used
for agricultural use, it could conceivably also be a source
of natural uranium. Iran's Department of Atomic Energy has
facilities that can recover uranium from phosphate rock and
phosphoric acid, a technically mature but economically
unfavorable method for obtaining uranium. However, our
Moroccan contacts in the phosphate sector told us they have
no reason to believe that Iran is extracting or planning to
extract uranium from Moroccan phosphate imports.

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Other Areas of Trade
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5. (C) While Morocco's phosphate and Iran's oil make up a
large percentage of bilateral commerce between the two
countries, Iran's interest in Morocco is increasingly
extending to other sectors. In late 2008, Driss Houat,
President of the Federation of Morocco's Chamber of
Commerce, Industry, and Services, led a trade delegation to
Iran. During this visit, he met with the President of
Iran's Chamber of Commerce, Industries, and Mines, the
director of the Trade Promotion Organization, and the CEO
of Khodro, an Iranian automobile manufacturer. Houat told

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EconOff this year that in early 2009, an Iranian business
delegation also visited Morocco and signed five commercial
agreements with Morocco ranging from tourism to agriculture
to fisheries. The subsequent rupture of diplomatic
relations in March 2009 reportedly has had no negative
impact on these deals.


6. (C) Specifically, Houat explained that Iran's Khodro is
aggressively pursuing cooperation with Morocco in the
automotive sector. The Iranian-engineered vehicles would
not be imported, but manufactured in Morocco and sold to
sub-Saharan Africa, explained Houat. (Note: Morocco's
geographic position makes it a suitable export platform to
engage Africa and Latin America, regions that Tehran
reportedly is targeting for building political support for
Iran's nuclear program. End Note.)


7. (C) Agricultural products are another growing area of
bilateral commerce. Karim Abderrazak, General Manager of
ACIMA, one of Morocco's largest supermarket chains, told
EconOff that demand is high for Iranian raisins. Morocco's
External Trade office recorded that Morocco imported more
than six thousand metric tons of Iranian raisins in 2008,
and Abderrazak admits that ACIMA still has trouble
satisfying consumer demand.

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Domestic Concerns
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8. (C) Despite bilateral interest in growing commercial
exchanges between Iran and with Morocco, an Iranian
presence in Morocco elicits mixed sentiments and faces many
obstacles. On the one hand, the GOM relies heavily on Iran
to supply its energy needs. On the other hand, Moroccan
government and royal officials continue to harbor grave
concerns about Iranian influence in Moroccan society and
religion, watchful for foreign-promoted Shia activism that
could rock the boat of Morocco's relatively homogenous
Malikite Sunni religious landscape. Iran is hoping to
cultivate the support of other Muslim nations with offers
of oil, but in the long run that is not an appropriate
method for cultivating relationships, said Jawad Kerdoudi,
President of the Moroccan Institute for International
Relations. Morocco is very alert to Iran's geo-political
strategy, he added.



9. (C) Despite some mutually advantageous trade, it is
doubtful that Morocco will become too cozy with Iran. The
Palace is closely monitoring any rapprochement, and is
starting to look towards Iraq as an alternative for its
crude oil needs, confided Abdelmjid Tazlaoui, a close
confidant of the King and a high level official in the
royal family's financial holding group, ONA. Although
Palace sentiments could play a role in supply contract
decisions, SAMIR nominally selects its suppliers and
concludes contracts strictly on a commercial basis.
Diversifying away from Iranian crude supplies is not an
easy step, as SAMIR's refining capabilities are designed to
produce the needed ratios of refined products from the type
of crude found in Iran, some other Gulf suppliers (but not
Iraq),and Russia. Turning to other crude suppliers would
require refinery design changes.

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Comment
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10. (C) The two nations' positions as heavyweight oil and
phosphate producers, respectively, make it nearly
inevitable that commercial ties will continue to grow, in
spite of the severed official relations and the
difficulties Moroccan businesses tell us they experience
trying to work with Iranian banks. However, official and
royal antipathy to the Iranian government runs deep, and
any indication that Iran is seeking to exercise any
leverage over Morocco (for example through its prominent
role as an oil supplier) could be met by increased exertion
of political influence on SAMIR's contracting decisions,
with a willingness to absorb the costs of turning to less
ideal sources of crude oil.


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MILLARD