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Cablegate: Germany - State/Treasury Delegation Discusses

VZCZCXRO3427
OO RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHRL #0424/01 0951106
ZNY SSSSS ZZH
O 041106Z APR 08
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0830
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
INFO RUCNFRG/FRG COLLECTIVE PRIORITY
RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHBK/AMEMBASSY BANGKOK PRIORITY 0248
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0945
RUEHBY/AMEMBASSY CANBERRA PRIORITY 0702
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 0523
RUEHGO/AMEMBASSY RANGOON PRIORITY 0026
RUEHUL/AMEMBASSY SEOUL PRIORITY 0549
RUEHGP/AMEMBASSY SINGAPORE PRIORITY 0198
RUEHKO/AMEMBASSY TOKYO PRIORITY 1561
RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 0002

S e c r e t section 01 of 04 <> 000424

Sipdis

Sipdis, p, t, e, eap, nea, isn, eur, eeb

E.o. 12958: decl: 03/31/2018
Tags: efin, knnp, phum, pgov, prel, parm, ettc, bm, ir, gm
Subject: germany - state/treasury delegation discusses
burma and iran <>


<> 00000424 001.2 of 004


Classified By: EMIN Robert A. Pollard for reasons 1.4 (b)
and (d).

1. (S) SUMMARY. German officials in the MFA, Economics
Ministry, and Finance Ministry, while initially skeptical
about the effectiveness of EU and U.S. trade and financial
<> on Burma, agreed to consider U.S. suggestions as to
how the EU might more effectively target <>. On Iran,
German interlocutors were unusually circumspect about the
status of efforts to adopt further EU autonomous <>.
Officials at the Economics Ministry expressed concern that
targeted Iran-related <> are moving in the direction
of a general trade embargo. While Economics Ministry
officials insisted that ambiguities in <> could expose
German banks and exporters to criminal penalties -- even in
cases of negligence -- MFA and Finance Ministry officials
pointed out that Government agencies operate telephone
hotlines/help desks for exporters and banks and reported that
negligence-based violations generally result in civil fines,
which can be appealed in a court of law. END SUMMARY.

2. (U) Deputy Assistant Secretary of State for International
Organization Affairs Brian Hook, Treasury Office of Foreign
Assets Control (OFAC) Director Adam Szubin, and OFAC
Associate Director John Smith visited <> March 27 to
discuss Burma and Iran <> with officials from the
German MFA, Economics Ministry, and Finance Ministry. In
addition, the delegation participated in a roundtable session
with representatives of German industry and banking
associations.

Burma <>
---------------

3. (C) Hook and Szubin told interlocutors at the MFA,
Economics Ministry, and Finance Ministry that the GAERC's
April review of the EU's Common Position on Burma presented
an opportunity to discuss ways to more effectively target EU
<> on Burma. They reported that EU and U.S. targeted
financial <> have had an impact on both the regime and
its supporters and recounted specific examples to that
effect. Szubin noted that UN Special Envoy Gambari, whose
mission appears to be yielding diminishing returns, had
recommended that the EU and U.S. adopt additional targeted
<>, which have had an impact on the regime and have
not hurt the Burmese people.

4. (C) MFA Deputy Director General for International Economic
Affairs Victor Elbling said Germany views <> as a tool
that supplements diplomacy, but added that careful
consideration must be given to application. The MFA assesses
that Burma <> have had a mixed impact, but have not
yet induced the desired behavior change. Elbling added that
the MFA has received inquiries from the Bundestag, where
parliamentarians are concerned that <> are hitting
innocents too hard. Elbling said it is important to enlist
the support of Burma's major trading partners in the region.

5. (C) Wolfgang Piecha, MFA Director for South East Asia,
said that Foreign Minister Steinmeier, during his recent
visit to Singapore, Indonesia, and Vietnam, had heard from
his counterparts that the only country with any influence
over the Burmese regime is China. Steinmeier left the region
with the impression that autonomous <> had been
largely counterproductive, had helped to forge solidarity
within the military, had increased China's influence, and had
given the regime excuses for legitimizing its rule. Piecha
said Germany supported UNSYG Ban's proposal for a UN-ASEAN
summit and said Germany does not believe Gambari's mission
has run its course, although he acknowledged that it was not
currently yielding results. Piecha said Germany had doubts
about the effectiveness of EU <>, which have already
been in place for 12 years. He added that Germany is
reluctant to support expansion of the EU's <> lists,
noting that restrictions on trade in gems and timber only
went into effect in late 2007/early 2008. He reiterated that
the Bundestag does not want to see ordinary people hurt by
<>.

6. (C) In a separate meeting, Economics Ministry Director for

<> 00000424 002.2 of 004


Foreign Trade Law Ursina Krumpholz supported the idea of
waiting to see the effects of the 2007 changes to EU
<> before discussing new steps. She said Germany also
wants to wait for the results of the May referendum.
Krumpholz also expressed skepticism about the effectiveness
of EU and U.S. restrictions on the import of Burmese gems and
timber, noting that the EU and U.S. are not Burma's major
trading partners. Like Elbling, she suggested that the EU
and the U.S. must do more to engage China and other major
Burmese trading partners in the region.

7. (C) Szubin said the U.S. shares Germany's assessment that
<> are not a "silver bullet," but a tool to facilitate
diplomacy. Szubin's interlocutors reacted with surprise when
he stated that the delegation was visiting not to suggest
another round of new measures, but to offer suggestions on
how the EU might target its <> more effectively.
Szubin recommended implementing an asset blocking requirement
on entities listed in Annex 7 of the EU Common Position. He
also suggested considering lifting investment restrictions on
the 1,207 companies listed in Annex 5. While this Annex is
aimed at facilitating the trade ban, the investment
restrictions have led banks to screen against this list,
resulting in a high number of false positives and prompting
financial institutions to either let all transactions through
or block the transactions of a large number of innocents.
Instead, he suggested using Annex 5 as a guide for importers.
Szubin noted that limited identifier information was the
reason U.S. designations on Burma included only 40 names. He
said the U.S. was willing to work with the EU to fill in gaps
in identifier information. Finally, Szubin recommended that
the EU consider listing the two major regime-owned
companies-- the Myanmar Gems Enterprise and the Myanmar
Timber Enterprise -- which are the main collectors of gem and
timber revenue, for asset blocking.

8. (C) Elbling and Krumpholz said Germany would consider the
U.S. suggestions, but again stressed the need to engage China
and other key players in South East Asia. Krumpholz noted
that it is difficult to get German companies to accept
<> -- not just in Burma, but in other countries, such
as Iran -- particularly autonomous <>. Hook stated
that the U.S. also prefers a multilateral approach, but
stressed that further action on Burma in the UN Security
Council would be difficult. Szubin agreed, stressing the
need to consider other options in the absence of the
preferred UN option. He added that the impact of EU-US
financial <> could be very significant, given the
centrality of the dollar, euro, and pound in international
trade, and that these effects should not be underestimated.

9. (C) Finance Ministry Deputy Director General for
International Financial Policy Berthold Leber noted that the
Finance Ministry plays a limited role on the issue, given
that there are "virtually no" payment transfers between Burma
and Germany. Michael Findeisen, Finance Ministry Director
for Terrorism Finance and Financial Crimes, agreed that
incomplete identifier information on UN and EU lists
(terrorism, Iran, Burma, etc.) was an obstacle to effective
implementation of financial <>. He argued that
informal financial transfer arrangements, such as hawala,
also posed difficulties. Szubin noted that the Burmese
regime needs access to major international financial centers,
both to finance sales of natural gas and to facilitate
transfers to companies' international operations. Findeisen
welcomed the delegation's suggestions on how to target EU
<> more effectively and said the Finance Ministry
would lobby the MFA in this regard. Findeisen said the
Finance Ministry was open to a further exchange of
information, as well as a cooperative endeavor to fill gaps
in identifier information.

Iran <>
--------------

10. (S) On Iran, Elbling and Krumpholz each noted that the EU
had completed implementation of the financial measures in
UNSCR 1803, but declined to give details about the state of
discussions in Brussels on EU post-1803 autonomous measures.
(COMMENT: Elbling and Krumpholz were considerably more

<> 00000424 003.2 of 004


circumspect than working-level colleagues in both ministries,
who have expressed frustration on other occasions with the
pace of Slovenia's efforts, as Council President, to move
discussions on Iran forward. END COMMENT). Elbling stated
that Germany and other EU member states are paying close
attention to the case before the European Court of Justice
(ECJ) on due process safeguards for individuals under
<>. He said there are concerns in Brussels that the
ECJ will even take a critical view on implementation of UNSCR
1803. Krumpholz expressed similar concerns.

11. (S) Hook, noting that the case before the ECJ concerns
individuals, not entities, suggested the case was
inapplicable to measures on financial insitutions. "Germany
takes the legal aspect seriously," Elbling said. "The EU
has to be more stringent than the UN." On Banks Melli and
Saderat, Krumpholz stated that the Economics Ministry had not
yet seen "proof of conscious support of Iran's proliferation
activities." In response to a question, Krumpholz said the
Economics Ministry had not been "comfortable" with the
evidence on Bank Sepah, either.

12. (S) Krumpholz said the Economics Ministry remains
concerned about perceptions that UN and EU <> are
leaving the area of nonproliferation and moving toward
general trade <>. She noted this sentiment wasshared
by German businesses, which are also concened that
ambiguities in trade and financial measres and gaps in
identifier information could expse banks and exporters to
legal jeopardy. She eplained that even negligence-based
violation of anctions could expose company compliance
officers-- who are personally liable under German law -- t
criminal penalties, including prison sentences f up to six
months. Krumpholz argued that German law does not provide
for civil penalties in such cases.

13. (S) In this regard, the assessment of MFA and Finance
Ministry officials on <> enforcement differed
considerably. MFA International Economic Policy officer
Claudia Schuett reported that the the German Federal Office
of Economics and Export Controls (BAFA) and the Bundesbank,
which is responsible for financial <> enforcement in
Germany, operate a telephone hotline/help desk for <>
and export control-related inquiries. The Finance Ministry's
Findeisen reported that German banks that violate <>
generally do so as the result of sloppiness, recklessness, or
negligence. In such cases, he said, the Bundesbank generally
levies a civil fine, which is subject to appeal in a court of
law. (NOTE: Trade <> violations are generally
investigated by state and federal prosecutors under Germany's
Foreign Trade and Payments Act and/or War Weapons Control
Act. END NOTE.) Findeisen agreed, however, that
<>-related violations are more easily avoided with
correct and complete identifier data.

Industry roundtable on iran
---------------------------

14. (C) In an industry roundtable discussion, Hook and Szubin
outlined the rationale behind U.S. <> policy on Iran,
as a means to facilitate international diplomatic efforts.
They stressed the U.S. preference for multilateral approaches
but the need for autonomous measures when multilateral
efforts fall short. They also emphasized that <> are
having an impact on influential constituencies in Iran. A
representative of the German Federation of Industry (BDI)
said business accepts that Iran's nuclear program is a
threat, but argued that only multilateral <> can be
effective. Otherwise, compliant firms in "responsible
countries" lose out while other countries simply pick up
market share. A German Chamber of Commerce (DIHK) official
disputed that <> are ratcheting up <> enough to
induce the regime to change its strategic position and cited
the Majles election results.

15. (C) A representative of the German Association of Banks
pointed out that German exporters waited for months for EU
clarification on implementation of UNSCR 1737 paragraph 15, a
situation that put its member banks in the "embarrassing
position" of having to decide whether to pay exporters and

<> 00000424 004.2 of 004


"eat the risk" in the interim. He added that German banks
are responsible to pay customers of the German branches of
Iranian banks who lack sufficient liquidity, as they are all
part of the same deposit insurance scheme.

16. (U) DAS Hook and Mr. Szubin have cleared this message.
Timken jr

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