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Cablegate: Nicaraguan Memorandum of Understanding with Iran

VZCZCXYZ0000
RR RUEHWEB

DE RUEHMU #0914/01 1011516
ZNR UUUUU ZZH
R 111516Z APR 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 9766
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1055
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS MANAGUA 000914

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/CEN, WHA/EPSC, EB/ESC

E.O. 12958: N/A
TAGS: PREL PGOV PINR PTER EAID EFIN EINV ETRD EPET
ENRG, EIND, VE, IR, NU
SUBJECT: NICARAGUAN MEMORANDUM OF UNDERSTANDING WITH IRAN

REF: A. MANAGUA 0725
B. MANAGUA 0639

1. (SBU) Summary. Three days after signing a series of
cooperation agreements with Venezuela, Nicaragua played host
to Islamic Republic of Iran President Mahmoud Ahmadinejad on
January 14. In a southern barrio of Managua, Ortega
informally presented Ahmadinejad to the public in a two-hour
event broadcast live to the rest of the country. Later at
Olaf Palme Convention Center, Ahmadinejad and Ortega signed a
Memorandum of Understanding, promising to reopen embassies in
their respective capitals, offering mutual support in
international fora, outlining potential areas for potential
cooperation, and creating a Joint Commission to supervise
bilateral cooperation. While the visit appears to have been
orchestrated to give Ahmadinejad greater international
credibility and regional visibility, the ultimate result may
have been simply to pull Nicaragua closer to Iran's low
international standing. End Summary.

2. (SBU) Three days after signing a series of Bolivarian
Alternative agreements with Venezuela on January 11, 2007
(Ref A), Nicaragua played host to Islamic Republic of Iran
President Mahmoud Ahmadinejad. A week before, the rumor
circulated that Ahmadinejad would attend Daniel Ortega's
January 10th presidential inauguration, but Ahmadinejad did
not arrive until late in the evening of January 13. On the
morning of January 14, Ortega informally presented
Ahmadinejad to the public in the "Barrio Cuba Libre," a
Sandinista stronghold district in Managua, in a two-hour
event broadcast live to the rest of the country. In lengthy
remarks, Ortega praised Ahmadinejad as a great revolutionary
leader. The fact that Nicaragua and Iran had initiated their
revolutions in 1979, said Ortega, created some bond of
kinship. Ortega spent the rest of the time describing social
and economic inequities facing Nicaragua, including poverty
and hunger, and praising Venezuelan President Chavez for his
support of Nicaragua and his vision. Speaking to the public
via consecutive translation, Ahmadinejad made a point of
saying that both countries shared "common interests, common
enemies, and common goals."

3. (SBU) Later at Olaf Palme Convention Center, Ahmadinejad
and Ortega signed a Memorandum of Understanding (MOU). The
MOU states that the two countries will reopen embassies in
their respective capitals, extend mutual support in
international fora, explore areas for potential cooperation
(See Paragraphs 8 and 12), and create a Joint Commission to
supervise future bilateral cooperation. Nicaragua also
promised to introduce Iran, for possible participation, to
projects financed by international institutions and bilateral
sources. Close to the bottom of the list is the possibility
of entering into some sort of bilateral free trade or
preferential tariff agreement. While the press billed the
visit as the moment when Iran would forgive its $152 million
debt with Nicaragua, the MOU only states that Iran will study
the possibility in the near term.

4. (SBU) We understand that the National Assembly will soon
consider the MOU, but its approval is uncertain. A number of
National Assembly politicians representing the opposition
Liberal Nicaraguan Alliance (ALN) party intend to vote
against it. They particularly object to Article 15, which
states that the parties agree to consult regarding mutual
support in international fora on principle topics relating to
the global agenda, fearing that Nicaragua will side with Iran
and alienate the United States. Some Liberal Constitutional
Party (PLC) lawmakers have told us they also oppose the
agreement, but we suspect they can be pressured to vote for
it if so ordered by PLC leader Arnoldo Aleman, whose
political pact with and reliance on President Ortega for his
medical parole/house arrest is likely to come into play.
Possibly, the PLC and FSLN (Sandinistas) will skirt the issue
by arguing that the agreement does not require a vote in the
National Assembly because it is only a memorandum, not a
treaty.

Comment
-------
5. (SBU) Ahmadinejad's visit appears to have been
orchestrated to give Iran greater international credibility
and regional visibility, but it may simply have pulled
Nicaragua closer to Iran's low international standing. Among
major foreign investors, events surrounding the inauguration
-) especially Ahmadinejad's visit -- clearly rubbed the
wrong way. One by one, CEOs filed into Nicaragua to reassess
the political environment for their investments here, and one
by one, the new government managed to assuage their fears.
That said, with the great exception of increased interest
from Venezuelan state-run enterprises, we have not seen much
new foreign investment interest since the inaugural events
with Presidents Hugo Chavez, Evo Morales (along with Cuban
Vice President Jose Ramon Machado), and the subsequent visit
by Mahmoud Ahmadinejad. Quite the reverse, we have seen
existing investors, both domestic and foreign, begin to
examine ways to reduce their exposure to increasing
Nicaraguan political risk. End Comment.

The MOU
-------
6. (U) The remainder of this cable reports on the particulars
of a signed copy of the MOU obtained by the Embassy.

Preambular Language
-------------------
7. (SBU) Preambular language states that the purpose of
Ahmadinejad's visit was to congratulate Ortega on his
democratic election. In addition, the two countries declare
their desire to strengthen traditional ties of friendship and
recognize common interests, such as the need to coordinate
forces to achieve common goals. The two countries assert the
importance of effective, reciprocal cooperation, based on
solidarity and mutual respect.

Articles 1-2: Friendship and Cooperation
----------------------------------------
8. (SBU) Nicaragua and Iran agree to "perfect" the mechanism
for cooperation, exchange, and understanding on matters of
common interest. Parties pledge to develop, strengthen, and
promote bilateral cooperation. To strengthen ties of
friendship, cooperation, and improve social well-being, Iran
and Nicaragua promise to exchange experiences in the areas of
economics, energy, trade, finance, infrastructure, and
technical matters.

Article 3: Complementing Agreements
-----------------------------------
9. (SBU) If suitable, the areas of cooperation mentioned in
this MOU shall be the subject of complementing agreements,
which should specify objectives, timelines for execution, and
feasibility studies by experts from both parties.

Articles 4-5: New Projects and Facilitating Cooperation
--------------------------------------------- ----------
10. (SBU) The execution of this MOU will be reviewed annually
by the Presidents of a Joint Commission created for this
purpose. They should specify desired projects, their form of
financing, their timeline for execution, and the obligations
of each of the parties. When state financing is employed,
concessionary terms should apply in accord with the laws and
obligations of both countries. To facilitate cooperation,
the parties shall grant privileges and necessary facilities
in accord with internal legislation of each country.

Article 6: Joint Commission
---------------------------
11. (SBU) The parties agree to establish a Joint Commission,
headed by the ministers from each party, to follow up on this
MOU and other points of common interest. The Joint
Commission will meet every year, alternatively in Iran and
Nicaragua, or wherever the parties so agree.

Article 7: Areas for Cooperation
--------------------------------
12. (SBU) Iran expresses interest in supporting and assisting
Nicaragua in the areas mentioned in Article 2, as well as
expresses readiness to study and for its part execute all
related projects that are economically justified, subject to
agreement by the parties. Common areas of cooperation
include the following:

a. Hydroelectric dams and irrigation systems;
b. Study on port development on the part of Iran to
the advantage of both parties;
c. Cooperation in fishing through the supply of boats,
technology, and industry;
d. Development of the energy sector and energy
production networks and overall generators of
electricity and electrical centers;
e. Housing construction, especially low income;
f. Assembly and export of industrial and agricultural
machinery, as well as buses, autos, motorcycles,
bicycles, and all kinds of motors for irrigation
and marine, with a view to reaching the regional
market;
g. Development of the cement sector through the
construction of cement plants;
h. Development and industrialization of agricultural
production;
i. Study of potable water systems and treatment of
waste water for industrial use;
j. Study of the application of energy needs, including
petroleum and its derivatives, natural gas,
electricity, etc.;
k. Media for technical education;
l. A free trade agreement and a preferential tariff
agreement;
m. Investment projects among private sectors of each
state; and
n. Information exchange between parties.

Articles 9-10: Feasibility Studies
----------------------------------
13. (SBU) To facilitate cooperation with Iran, Nicaragua
promises to submit for consideration and study information
necessary to justify various projects with respect to
feasibility studies in areas so mentioned, so that possible
execution may be based upon international norms. For its
part, Iran agrees to consider and study presented projects,
with priority, and to assist Nicaragua with experts, whom may
be sourced from the private sector.

Article 11: Trilateral Cooperation with Venezuela
--------------------------------------------- ----
14. (SBU) The parties agree to create and define the form,
with the cooperation of the friendly, fraternal government of
the Bolivarian Republic of Venezuela, of a joint fund that
will contribute to the execution of projects of interest to
the three parties, through a trilateral consortium to
facilitate the execution of projects. In addition, Nicaragua
shall request access to the joint fund created by the
President of the Islamic Republic of Iran Mahmoud Ahmadinejad
and President Hugo Chavez of the Bolivarian Republic of
Venezuela to support Latin America and Africa, once that fund
has been ratified and confirmed.

Article 12: Debt Forgiveness
----------------------------
15. (SBU) Considering its critical economic situation and
existing crisis, the Nicaragua has requested that Iran
forgive bilateral debt totaling $152 million dollars. Taking
into account the various interests of state in this matter,
such as Parliament, Iran has expressed its willingness to
study this request in shortest timeframe possible.

Article 13: Incorporating Iran in Existing Projects
--------------------------------------------- ------
16. (SBU) Nicaragua agrees to introduce Iran, for its
consideration and possible participation, to projects whose
financing has been provided by international organizations
and other countries.

Article 14: Project Development
-------------------------------
17. (SBU) Upon prior consultation, Iran will send to
Nicaragua an expert technical delegation to study ways -- be
they public, private, or mixed ownership -- to execute
various projects of common interest, especially those
concerning technical, engineering, and financial services.
The creation of this delegation and the date of this trip
will be defined beforehand through agreement by the parties.

Article 15: Mutual Support in International Fora
--------------------------------------------- ---
18. (SBU) The parties agree to consult regarding mutual
support in international fora on principle topics relating to
the global agenda.

Article 16: Reopening Embassies
-------------------------------
19. (SBU) The parties agree to reopen their embassies in
their respective capitals.

Articles 17-19: Education and Training
-------------------------------------
20. (SBU) Iran agrees to facilitate the installation of
technical and professional education centers in Nicaragua to
improve opportunities for work in Nicaragua. Iran agrees to
host ten young diplomats from Nicaragua, without charge, to
contribute to their training. Iran expresses its interest in
cooperating with Nicaragua on improving its system of middle
and higher education.

Article 20: Trade
-----------------
21. (SBU) The parties promise to exchange information lists
of traded products so that they may take maximum advantage of
their capacity for bilateral trade, with the view of also
reaching potential regional markets. (Also see Paragraph 12,
Item L.)

Article 21: Construction of a Refinery with Venezuela
--------------------------------------------- --------
22. (SBU) With prior consultation with the fraternal
Government of the Bolivarian Republic of Venezuela, the
parties agreed to Iranian cooperation in the construction of
a refinery in Nicaragua, as recently agreed upon by Nicaragua
and Venezuela (Ref B).

Article 22: Dispute Settlement
------------------------------
23. (SBU) Doubts that may arise concerning the interpretation
and execution of this agreement shall be resolved through
diplomatic means.

Articles 23-25: Entry into Force, Renewal,
and Termination
------------------------------------------
24. (SBU) This MOU will enter into force upon signature.
Either party may withdraw from this MOU after providing
six-months' prior notification. Withdrawal shall not affect
the development of programs and projects that may be in
execution on the date of withdrawal. This MOU will be in
effect for two years and automatically renewed for equal
periods, unless one of the parties provides prior
notification in writing of its intention not to renew three
months before the agreement lapses.

Signatures
----------
25. (SBU) Signed in Managua, Nicaragua on the 14th day of
January in 2007, the 24th of the month Dey of the year 1385
(Hegira Solar), in two copies, one in Spanish and the other
in Persian, each equally authentic.
TRIVELLI

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