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Cablegate: Increasing Financial Pressure On Iran

VZCZCXRO8739
OO RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHC #2095/01 3521703
ZNR UUUUU ZZH
O 171655Z DEC 08
FM SECSTATE WASHDC
TO RUEHDO/AMEMBASSY DOHA IMMEDIATE 0208
INFO IRAN COLLECTIVE IMMEDIATE
RUEHRL/AMEMBASSY BERLIN IMMEDIATE 8714
RUEHLO/AMEMBASSY LONDON IMMEDIATE 1260
RUEHFR/AMEMBASSY PARIS IMMEDIATE 2225
RUEHRO/AMEMBASSY ROME IMMEDIATE 8940
RUEHTV/AMEMBASSY TEL AVIV IMMEDIATE 6684

UNCLAS SECTION 01 OF 02 STATE 132095

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN KNNP MNUC IR GM
SUBJECT: INCREASING FINANCIAL PRESSURE ON IRAN

REF: A. A) STATE 127040
B. B) STATE 130200

1. (U) This is an action request. Please see paragraph
three.

-------
SUMMARY
-------

2. (SBU) The United Kingdom, France, Germany, Italy, and
the U.S. (E4 1) have agreed to pursue additional national
measures to increase the pressure on Iran to end its
proliferation-sensitive nuclear activities and ensure
effective implementation of UNSC and EU sanctions. After
meeting on October 9, the EU4 1 identified Iran's deceptive
practices as a threat to the international financial sector
and a conduit for Iran's proliferation activities. The E4 1
agreed to a joint demarche as a way to inform governments
about the risks that Iran poses to the financial industries
in their jurisdictions. Posts are requested to coordinate
the delivery of the attached talking points to host
governments with the local representatives of the United
Kingdom, France, Germany, and Italy.


-------------------------
OBJECTIVES/ACTION REQUEST
-------------------------

3. (SBU) Washington requests Post deliver the talking
points in paragraph 4 to appropriate host government
officials in the foreign and finance ministries to the host
government. Washington understands that Germany has
approached Post to coordinate delivery of this demarche.
Please coordinate delivery of this demarche with the local
representatives of the United Kingdom, France, Germany, and
Italy. This demarche has already been delivered to a number
of GCC countries (REFTEL). Post should pursue the following
objectives:

-- Remind host government that full implementation of UN
Security Council Resolutions (UNSCRs) concerning Iran by all
members of the international community is critical to
addressing the proliferation threat posed by Iran and that
many European countries and firms have determined that the
risk of doing business with Iran is too great and, as a
result, have reduced their business with Iran.

-- Note that Iran's use of front companies and other
deceptive practices in commercial and financial activities
makes it difficult to know who is involved in a transaction,
or the final end user or ultimate use of any goods.

-- Note that within the scope of UNSCR 1747, States are
required to take measures to prevent the provision to Iran of
any financial assistance, or services related to the transfer
of prohibited items.

-- Urge host government to ensure that their financial
institutions do not provide services to any entities that are
engaged in proliferation-related activities, specifically
individuals and entities designated under UNSC resolutions
1737, 1747 or 1803, as well as those designated by the USG
under Executive Orders 13224 and 13382.

-- Call upon host government to implement UNSCR 1803's call
for vigilance over the activities of their financial
institutions with Iranian banks, including by adopting
concrete financial vigilance measures, such as those adopted
by the European Union (Common position 2008/652/CFSP of 7
August 2008, Regulation 2008/1110/EC of 10 November 2008),
and/or those recommended by the Financial Action Task Force's
(FATF) in its October guidance on UNSCR 1803.

-- Encourage host government to warn their financial
institutions about the risks of doing business with Iran,
such as the Iranian regime using its state-owned firms to
support proliferation-related activities. The Iranian
state-owned banks also use deceptive financial practices to
support this illicit activity.


STATE 00132095 002 OF 002


--------------
TALKING POINTS
--------------

4. (SBU) BEGIN TALKING POINTS

-- Full implementation of UN Security Council Resolutions
(UNSCRs) concerning Iran by all members of the international
community is critical to addressing the threat posed by Iran.
UNSCR 1737 (2006) requires States to take measures to
prevent the provision to Iran of any financial assistance or
services (including brokering) related to the transfer,
manufacture, or use of prohibited items. UNSCR 1747 (2007)
calls upon States and international financial institutions
not to enter into new commitments for providing financial
assistance to the Government of Iran, except for humanitarian
and developmental purposes. UNSCR 1803 (2008) calls on States
to exercise vigilance over the activities of financial
institutions in their territories with all banks domiciled in
Iran and in providing financial support for trade with Iran,
including insurance, in order to avoid contributing to Iran's
nuclear and missile programs. Finally, UNSCRs 1737, 1747 and
1803 require States to freeze the assets of and ensure that
no economi
c resources are provided by their nationals or from their
territories to individuals or entities designated pursuant to
these resolutions for their involvement in Iran's nuclear or
ballistic missile programs.

-- We have been discussing with the international banking
sector the importance of implementation of the Iran-related
UNSCRs, as this sector is vulnerable to the risk of
unwittingly facilitating Iranian proliferation activities. We
draw your attention to the reputational risk involved as well
as the existing penalties in case of illicit activities.

-- Financial vigilance measures are extremely important to
defend against such risks. Key examples of measures targeted
specifically against proliferation finance and Iran,
including the EU Common position 2008/652/CFSP of 7 August
2008, Regulation 2008/1110/EC of 10 November 2008, and FATF
guidance on implementation of financial measures contained in
1803.

-- We are concerned that the financial sector is being
exploited and used to facilitate activities prohibited by the
UN, or that Iranian entities designated by the UN are using
deceptive practices to evade sanctions or mask other
activities of concern.

-- To avoid providing financial services prohibited by the UN
Security Council, we ask that you encourage your financial
institutions to review among other things, services they may
provide to Iranian companies and projects in Iran, as well as
correspondent banking relationships with Iranian banks and
financial institutions controlled by Iranian entities (cf. in
the EU: Common position 2008/652/CFSP of 7 August 2008,
Regulation 2008/1110/EC of 10 November 2008).

END TALKING POINTS

------------------
REPORTING DEADLINE
------------------

5. (U) Posts should report results within seven business
days of receipt of this cable. Please slug replies for ISN,
T, TREASURY, and NEA. Please include SIPDIS in all replies.

----------------
POINT OF CONTACT
----------------

6. (U) Washington points of contact for follow-up
information are Anthony Ruggiero, ISN/CPI, (202) 647-5181,
ruggieroaj@state.sgov.gov and Kevin McGeehan, ISN/CPI, (202)
647-5408, McGeehanKJ@state.sgov.gov.

7. (U) Department thanks Post for its assistance.
RICE

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