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Cablegate: Netherlands/Iran Sanctions Act: Shell Confident

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DE RUEHTC #0725/01 3361729
ZNY CCCCC ZZH
R 021729Z DEC 09
FM AMEMBASSY THE HAGUE
TO RUEHC/SECSTATE WASHDC 3527
INFO RUEHAK/AMEMBASSY ANKARA 0766
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RUEHVB/AMEMBASSY ZAGREB 2019
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC
RUEAHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUCNDT/USMISSION USUN NEW YORK 4625
RUEHBS/USEU BRUSSELS 0710

C O N F I D E N T I A L THE HAGUE 000725

SIPDIS

STATE FOR EEB/ESC/IEC THAMMANG, EEB/ESC/TFS CBACKEMEYER
STATE ALSO FOR NEA/IR RWADHWANI

E.O. 12958: DECL: 12/02/2019
TAGS: ENRG EPET ETTC PREL IR NL
SUBJECT: NETHERLANDS/IRAN SANCTIONS ACT: SHELL CONFIDENT
ITS ACTIVITIES SHOULD NOT TRIGGER ISA

REF: A. STATE 121808
B. THE HAGUE 2
C. BACKEMEYER-CANAVAN E-MAIL 11/27/2009

Classified By: Head of Economic Unit Shawn Gray, reason 1.4 (b), (d)

1. (C) SUMMARY: Royal Dutch Shell executives told EconOff
December 2 the company's activities should not trigger action
under the Iran Sanctions Act (ISA). The Department's review
process has grabbed Shell's attention. With in-house counsel
looking on, Shell executives described the status of the
Soroosh and Nowruz oil development project and Persian LNG
gas project. More broadly, Shell reiterated its view that
sanctions targeting Iran's energy sector must also apply to
Chinese and Russian firms in order to have any effect on the
regime. END SUMMARY.

2. (C) EconOff discussed the Department's ISA review per ref
A with John Crocker, Shell's Head of International Government
Relations, on December 2. Roelof van Ees, Government
Relations Advisor seconded from the Dutch Foreign Ministry;
Ayman Hamza, Middle East Regional Advisor; and Joseph Babits,
in-house counsel, also attended. Separately, EconOff
informed Foreign Ministry energy official Roeland Kollen
about the ISA review as it relates to the Netherlands.

--------------------------------------------- --
STATUS OF SHELL'S INVESTMENT ACTIVITIES IN IRAN
--------------------------------------------- --

3. (C) Soroosh and Nowruz: Crocker confirmed Shell handed
this project over to Iran several years ago and no longer has
any personnel working on it. He said Shell's only remaining
involvement in the project is cost recovery, which is
approaching its end. Referring to the U.S. government's May
1998 decision to waive sanctions for Total's investment in
the South Pars gas field, Crocker said Shell proceeded with
the Soroosh and Nowruz development with the unambiguous
understanding that the same waiver applied to this project.
He conceded that relying on a waiver agreement made in the
1990s with a previous U.S. administration carried risks, but
said Shell felt it was on strong legal ground to contest any
attempt to apply ISA to Soroosh and Nowruz.

4. (C) Persian LNG (PLNG): Crocker said Shell has received
clear advice from external counsel that ISA does not apply
to pre-final investment decision (FID) activities in Iran.
He said PLNG's time horizon has slipped again, with 2011 as
the latest possible FID date if political negotiations over
bringing in a Chinese partner and technical assessment work
proceeded without interruption. Crocker added PLNG's FID has
consistently remained two years away since the parties signed
Qconsistently remained two years away since the parties signed
an initial agreement in 2004.

--------------------------------------------- --------------
SHELL: IRAN SANCTIONS WITHOUT CHINA'S BUY-IN DOOMED TO FAIL
--------------------------------------------- --------------

5. (C) Crocker reiterated Shell's long-standing position on
Iran sanctions. The firm is not opposed to a broad set of
sanctions imposed on all energy sector participants,
including Chinese and Russian firms. But if only western

energy companies adhere to them, Chinese firms will
enthusiastically fill the void. (Note: As in prior meetings
- see ref B - he said Iran's downstream oil and gas sector
was crawling with Chinese. End note.) Crocker said recent
conversations with U.S. officials have encouraged him that
the USG increasingly shares this view. However, he was
concerned by the one-month gap between Assistant Secretary
Feltman's testimony before the House Foreign Affairs
Committee and this last-minute outreach to affected
companies. After November 9-10 meetings at the Department,
Crocker had the impression that the ISA review was nothing
to worry about. He asked whether the USG's strategy on ISA
had changed in recent weeks and expressed Shell's strong
interest in Congressional developments and the outcome of
this review.

LEVIN

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