NETHERLANDS: TREASURY DAS GLASER PREPARES DUTCH

S E C R E T SECTION 01 OF 04 THE HAGUE 000075

NOFORN
SIPDIS

E.O. 12958: DECL: 02/04/2020
TAGS: EFIN PREL KTFN IR NL
SUBJECT: NETHERLANDS: TREASURY DAS GLASER PREPARES DUTCH
FOR ACTION ON IRAN

REF: STATE 9124

Classified By: Pol/Econ Counselor Andrew Mann, reasons 1.4(b,d)


1. (S/NF) SUMMARY: Treasury DAS Glaser engaged key Dutch
decision makers on Iran policy across three ministries
January 26. The Dutch expressed support for increasing
pressure on the Tehran regime. They assured Glaser the
Netherlands would support tougher sanctions within the EU,
although officials remain concerned that foreign companies
will fill the void when individual Dutch businesses pull out
of Iran. Glaser also shared specific information regarding
Dutch companies doing business with IRGC front companies,
potentially in violation of EU sanctions. The Dutch feel
excluded when senior U.S. officials discuss sensitive policy
issues in more prominent EU capitals, bypassing The Hague, so
they appreciated Glaser's consultations, precisely the type
of outreach that earns goodwill and support from this close
ally. END SUMMARY.

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FOREIGN MINISTRY / ECONOMIC AFFAIRS MINISTRY
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2. (S/NF) Treasury Deputy Assistant Secretary for Terrorism
Finance and Financial Crimes Danny Glaser and NEA Senior
Advisor Elisa Catalano met January 26 with Henne Schuwer,
Foreign Ministry Director for Middle East and North African
Affairs (NEA A/S equivalent); Rene van Hell, Economic Affairs
Ministry Deputy Director for Trade Policy and Globalization
(oversees export control system); and other officials who
handle Dutch sanctions and Iran policy. Schuwer prefaced the
discussion by saying the Netherlands had long been clamoring
within the EU to begin preparing for tougher "second track"
steps against Iran. The Netherlands argued P5-plus-1 actions
should not catch the EU by surprise. He conceded that within
the Government of the Netherlands (GONL),the Ministries of
Foreign Affairs (MFA),Economic Affairs (EZ),and Finance
(MoF) each had its own interests to protect, but Foreign
Minister Maxime Verhagen was committed to sanctions that
"bite" and are "pinpointed where they will hurt" the Iranian
regime. He mentioned he had received Tehran's new ambassador
to the Netherlands January 25 and, dispensing with usual
diplomatic pleasantries, had read him the scathing EU
position regarding the human rights situation in Iran.
Schuwer said he does not have high hopes for a new, strong UN
Security Council Resolution (UNSCR) on Iran. Therefore, he
said, the U.S., EU, and some like-minded countries would need
to coordinate on second track action.


3. (S/NF) DAS Glaser agreed with Schuwer's assessment and
said the international community had reached a point in its
relations with Iran where it needed to emphasize the pressure
track, while keeping open the option of engagement. He said
the primary forum for this pressure remains the UN, and to
that end the U.S. is pressing for a new resolution by the end
of March. Glaser added he, too, did not expect UN action
would be strong or fast enough to change Iran's behavior.
Therefore, the U.S. will also look to the EU and coordinated
national measures among partner countries as means for more
effective pressure on the Iranian regime. Glaser explained
the U.S. had narrowed its focus to three primary Iranian
vulnerabilities that could yield meaningful impact: the Iran
Revolutionary Guard Corps (IRGC); financial system; and
transport. Glaser also acknowledged broad interest and
discussion of measures targeted at energy, and Catalano
provided a summary of discussions with the U.S. Congress on
Qprovided a summary of discussions with the U.S. Congress on
that issue.

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IRGC
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4. (S/NF) Glaser said the U.S. had already designated the
IRGC as a whole along with its primary business conglomerate
Khatam al-Anbya and eight of its subsidiaries, and was
currently reviewing information related to a longer list of
other Khatam al-Anbya entities for future designation. He
said he hoped to include as many of these companies as
possible and that the EU would designate them by name as well.


5. (S/NF) Schuwer said the Dutch parliament and Minister
Verhagen were concerned about Iranian authorities blocking
cell phone and Internet access to quell the opposition
movement, possibly by using Dutch hardware and software
products. He said the GONL was trying to find a way to block
the export of such products to Iran. Glaser acknowledged
that the IRGC has expanded its influence and control over the
Iranian economy and noted that Khatam al-Anbya maintains

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extensive ties within the EU. He also provided information
illustrating business relationships between Khatam al-Anbya
and its subsidiaries with Dutch and Dutch-related companies
and highlighted the EU's own designation of Khatam al-Anbya
as a "group of companies." Glaser offered that the existing
international sanctions regime provides authorities under
which some additional targeted measures can already be taken.



6. (S/NF) Schuwer noted the need for EU coordination on such
measures to prevent member states from undercutting each
other. For example, the Dutch are concerned if they shut
down exports to Iran of a particular product, a German or
Italian company will pick up the business instead. Schuwer
added that although Minister Verhagen does not adhere to the
logic that if China and others do not "play along" with Iran
sanctions then the Netherlands should not either, from
parliament's and the business community's perspective, the
more countries "playing" the better.

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FINANCIAL
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7. (S/NF) Glaser told Schuwer financial measures against Iran
have had the greatest impact since the targeted measures
process began in 2006, with informal pressure on and dialogue
with the international financial community as important as UN
action (e.g., UNSCR 1803). He indicated Iran's direct links
to Europe's formal banking sector had been severed with a few
exceptions where small institutions continue to provide Iran
with access to Euros. To counteract this, Glaser said the
U.S. wanted to cut off all correspondent banking
relationships with Iran through either UN or EU action. He
explained it should not be difficult to gain support for this
measure as all large banks have already severed their
business ties with Iran. Glaser added that some countries
have said they are prepared to take this step, others do not
like to focus exclusively on correspondent banking
relationships, and others still need to be convinced these
measures are necessary. He said the U.S. would participate
in any effort to cut off these relationships. Because the
prospect for this type of financial measure against Iran from
the UN is dim, EU action in this regard would be important
and could be aided by the call for countermeasures from the
Financial Action Task Force (FATF),especially its warning of
the risks of correspondent banking relationships with Iran.


8. (S/NF) Femke Kramer, the Economic Affairs Ministry's
export control policy advisor, said concern remained within
the EU that financial measures would harm legitimate exports
to Iran. Glaser responded that the cost of doing business
with Iran will inevitably rise as a result of a new round of
sanctions, but he emphasized the U.S. was not calling for a
trade embargo. He said each jurisdiction would have to
decide how comprehensive to make its export controls and when
to grant export licenses.

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TRANSPORT
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9. (S/NF) Glaser highlighted the effect of pressure to date
on Iranian transportation sector, noting in particular the
UK's October 2009 designation of Islamic Republic of Iran
Shipping Lines (IRISL) that cut off its ships from accessing
British Protection and Indemnity (P and I) clubs where they
had previously obtained insurance coverage. He said this
move left IRISL scrambling to find appropriate insurance
coverage for its ships, which it found in a Bermuda P and I
club. However, Bermuda quickly enacted similar legislation
to the UK's and took the same action against IRISL in
Qto the UK's and took the same action against IRISL in
mid-January, putting IRISL in a position of potentially not
being able to procure viable insurance coverage for its
shipping operations. Glaser speculated the next logical step
for the Iranian government would be to self-insure its ships,
although it has not yet done this. He suggested if Iran does
assume the risk of self-insuring, it will be interesting to
see how the shipping industry reacts.

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ENERGY
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10. (S/NF) Glaser cautioned that energy has attracted too
much attention as the sine qua non for serious action on
Iran, but should not be ignored because the threat of
energy-related sanctions has a great psychological impact on
the regime. Schuwer noted the Netherlands had a special

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interest in measures targeting Iran's energy sector and moves
by the U.S. Congress to apply "extraterritorial sanctions" on
European companies dealing with Iran's energy sector. (Note:
Royal Dutch Shell, based in The Hague, is the largest Dutch
multi-national corporation and has proportional influence on
Dutch foreign economic policy. End note.) Catalano
responded the U.S. considers sanctions on gasoline suppliers
to the Iranian market to be a relatively unattractive toll
that is hard to implement. She added, however, that
targeting foreign investment in Iran's energy sector more
broadly could still be a useful measure. Catalano told
Schuwer the Administration had successfully delayed final
Congressional action on the Iran Sanctions Act (ISA) and
related legislation, but could not stall much longer. She
said the U.S. Senate was "highly likely" to pass legislation
enforcing sanctions on companies selling refined products to
Iran. She said the Administration was meeting with key Hill
staffers to fine tune the language in the bills to allow for
exemptions for "cooperative countries" in taking on Iran,
although Congress would determine what qualifies as
"cooperative." She predicted language would remain allowing
the Administration to waive the application of sanctions on
companies dealing with Iran's energy sector, but with a
tougher standard than currently exists in ISA.


11. (S/NF) Schuwer expressed concern that Congress is also
pressing the Administration to review past conduct of
companies that may have run afoul of the ISA. Catalano
explained the Administration was committed to this ongoing
review and would soon have to tell Congress its
determinations with respect to specific companies' energy
investments in Iran since 1996. She also praised Shell as a
model of excellent cooperation with the U.S. government to
date. Schuwer stated, perfunctorily, the Dutch government
would "protest vigorously the extraterritorial application of
ISA."

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DUTCH ADVICE ON WORKING IRAN ISSUE WITH EU
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12. (S/NF) When Glaser solicited advice on engaging the EU on
Iran sanctions, Schuwer said the U.S. must reach out beyond
the "big 3" (France, Germany, UK) to Italy, Sweden, and
Austria -- member states that typically resist stronger
action against Iran during internal EU deliberations. He
added the U.S. and Europe have different concepts of what
"consultations" entail. He said while it is certainly
helpful for senior U.S. officials to visit Brussels and share
specific information about Iran policy, the conversation must
be a two-way exchange rather than coming across as a U.S.
dictation of its strategy. Schuwer concluded that type of
consultation only plays into the hands of the EU member
states trying to torpedo a tougher EU line on Iran.

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FINANCE MINISTRY
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13. (S/NF) Separately, Glaser and Catalano discussed Iran
sanctions January 26 with Klaas Knot, Deputy Treasurer
General and Director of Financial Markets at MoF. Given the
MoF's role, the meeting focused on financial measures
targeting Iran. Knot opened by underscoring that the
Netherlands was as keen as the U.S. to implement effective
sanctions aimed at altering the Iranian regime's behavior.
Glaser described the current U.S. outreach plan in Europe and
summarized the status of multilateral efforts to secure
quickly a new round of strong sanctions targeting Iran. He
Qquickly a new round of strong sanctions targeting Iran. He
noted the relative effectiveness of financial sanctions to
date and described the search for additional measures that
would squeeze Iran even more tightly. Glaser explained
cutting off correspondent banking remains the most attractive
target because: a) an international framework to do this
already exists via the FATF, and b) most large banks have
already eliminated these relationships with Iran. Knot
described his sense of greater willingness within the EU now
to adopt stronger Iran sanctions, not just out of
non-proliferation concerns but also to change the broader
strategic calculations of the regime in Tehran. He thanked
Glaser for coming to The Hague to share U.S. intentions on
Iran firsthand. He added the U.S. could "always count on us"
with respect to Iran and that Dutch policy was "not too far"
from U.S. policy.


14. (S/NF) Knot was joined by Reijer Janssen, MoF Deputy
Director of Foreign Financial Relations who also oversees the
GONL's export credit and investment guarantee program.
Janssen said the MoF had decided in December 2009 to "review"

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all of its export credits and investment guarantees involving
Iran -- code speak meaning the GONL will not support any new
business with Iran. He said the MoF did support a few "small
transactions" in 2009 and wanted to recoup payment on these
liabilities. If Iranian entities knew the GONL was pulling
out all future support for exports/investments to Iran, they
would have less incentive to pay their Dutch counterparties.


15. (S/NF) Glaser also met January 26 with Henk Swarttouw,
Foreign Ministry Director for Security Policy. The
discussion touched on Iran sanctions briefly before
addressing terrorism finance broadly. Glaser described the
various funding sources that terrorists try to access and
U.S./multilateral efforts to shut off this access. Glaser
encouraged Swarttouw to inform post when he or his key staff
are in Washington so that Treasury could arrange a detailed
briefing on terrorism finance issues.


16. (U) DAS Glaser has cleared this cable.
LEVIN