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. -------------- Phosphate and Oil -------------- ¶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. -------------- Other Areas of Trade -------------- ¶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 CASABLANCA 00000024 002 OF 003 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. -------------- Domestic Concerns -------------- ¶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. -------------- Comment -------------- ¶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. CASABLANCA 00000024 003 OF 003 MILLARD