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Cablegate: Brazil: Petrobras and Iran

VZCZCXRO7595
PP RUEHDE RUEHRG
DE RUEHBR #0544 0871100
ZNY CCCCC ZZH
P 281100Z MAR 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 8503
INFO RUEHRG/AMCONSUL RECIFE 6421
RUEHRI/AMCONSUL RIO DE JANEIRO 4095
RUEHSO/AMCONSUL SAO PAULO 9495
RUEHDE/IRAN RPO DUBAI
RUEHKB/AMEMBASSY BAKU 0002
RHEHNSC/NSC WASHDC
RHEBAAA/DOE WASHDC
RUEHCV/AMEMBASSY CARACAS 3651

C O N F I D E N T I A L BRASILIA 000544

SIPDIS

SIPDIS

NSC FOR FEARS
STATE FOR EB/ESC AND NEA

E.O. 12958: DECL:03/26/17
TAGS: ETTC EPET EINV BR IR
SUBJECT: BRAZIL: PETROBRAS AND IRAN

REF: A) STATE 22311

B) 06 RIO 0445
C) 05 RIO 0615

Classified by Ambassador Clifford Sobel, reasons 1.4 (b) and (d).

1. (C) Summary: Drawing on ref A, the Ambassador raised USG
concerns over potential Petrobras investments in oil and gas
exploration in Iranian waters on the Caspian Sea with Energy
Minister Silas Rondeau, Petrobras Southern Cone Manager Deccio
Oddone and Foreign Ministry Under Secretary for Political
Affairs Everton Vargas in a series of meetings March 25 and 26.
These meetings followed up on an August 22, 2006 one-on-one
conversation with Petrobras President Sergio Gabrielli in which
the Ambassador made the same points. Our interlocutors
acknowledged the seriousness of the issue to the international
community and, although they did not say Petrobras would halt
its Petrobras activities in Iran, they did make it clear that
they understand the sensitivity of the political moment.
Gabrielli also stated that Petrobras investments would not
exceed Iran Sanctions Act limits over the next two years. End
Summary.

2. (C) At an August 22, 2006 meeting with the Petrobras
President and CEO Sergio Gabrielli (ref B) the Ambassador
underscored with Gabrielli the importance of not investing in
Iran, and particularly not at this moment, when Iran was defying
the international community's efforts to stop uranium enrichment
activities. Gabrielli responded that he understood the U.S. was
exerting pressure on other countries, including Japan, to not
proceed with significant investments in Iran at this time. He
added that he understood that Japan had deferred its planned
investment as a result. Gabrielli affirmed that Petrobras'
investments in Iran over the next two years would not exceed the
Iran Sanctions Act (ISA) ceiling. However, he emphasized that
Petrobras believes it is important to build up a presence in
Iran in hopes of improving its international position in the
long-term trade. He expected any future investments to be
focused on deep-water exploration and production, which were
Petrobras' strengths. Gabrielli argued that were Petrobras or
other major international energy companies not to invest, it
would simply open the door for Chinese investment in Iran. The
Ambassador closed the meeting by underscoring that, particularly
with sanctions pending before the UNSC, it was important that
the international community send a unified message to the
Iranian regime by not pursuing investment in Iran.

3. (C) In a March 26, 2007 meeting, Minister of Mines and Energy
Silas Rondeau -- who sits on the Board of Directors of the
partially privatized parastatal -- told the Ambassador that
Petrobras and the GoB understood that this was a "cautious
moment" for the international community with regard to Iran.
While Petrobras believed it was in its interest to open up new
investment horizons, he understood that the GoB must also take
into account the concerns of its strategic partners as it
proceeded, and the U.S. was still Brazil's biggest strategic
partner.

4. (C) In separate meetings with Petrobras Southern Cone
Director Oddone and Itamaraty Under Secretary for Political
Affairs Vargas, the Ambassador was assured that Petrobras and
the GoB, respectively, took seriously USG concerns over Iran.

SOBEL

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