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Cablegate: Scenesetter for Staffdel Kessler's Visit to Spain

VZCZCXYZ0000
RR RUEHWEB

DE RUEHMD #0004/01 0051219
ZNR UUUUU ZZH
R 051219Z JAN 10
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1636
INFO RUEHRL/AMEMBASSY BERLIN 0674
RUEHLO/AMEMBASSY LONDON 1096
RUEHFR/AMEMBASSY PARIS 1556
RUEHRO/AMEMBASSY ROME 2545

UNCLAS MADRID 000004

SENSITIVE
SIPDIS

STATE/H PASS HCFA FOR KESSLER
STATE ALSO FOR EUR/WE
POSTS' KESSLER CONTROL OFFICERS PLASE PASS TO DELEGATION

E.O. 12958: N/A
TAGS: ETTC KTFN KNNC PREL SP IR
SUBJECT: SCENESETTER FOR STAFFDEL KESSLER'S VISIT TO SPAIN

REF: A. 09 STATE 131483
B. 09 STATE 130513

SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY

Summary
-------

1. (SBU) Embassy Madrid welcomes your visit, which comes at
an auspicious moment as Spain assumes the European Council
Presidency for a six-month period. U.S.-Spain relations are
strong and based on shared global interests, including our
association in NATO, the fight against terrorism, and growing
economic ties. Spaniards are enthusiastic about President
Obama, and the GOS is optimistic about the prospect for
closer bilateral relations and enhanced engagement. Spain
enforces existing Iran sanctions and would likely be willing
to implement additional measures if they were consensus
actions after other options had been exhausted; however,
there is division within the government on whether stronger
sanctions would be constructive.

Bilateral Relations
-------------------

2. (U) We value Spanish cooperation on security issues and in
the fights against terrorism and narcotics. Spain is a
strong bilateral defense partner, despite differences in the
past over its sudden withdrawal from Iraq in 2004 and its
poorly coordinated withdrawal in 2009 from the NATO force in
Kosovo. Spain operates a Provincial Reconstruction Team in
Afghanistan with about 1,000 troops participating in ISAF,
and President Zapatero has announced his intention to support
President Obama's call for more NATO ally participation by
sending more Spanish troops. Specifically, Spain has
proposed to increase its contribution by 50 percent in 2010.
Spain also allows us the use of two military bases that are
crucial transit points between the U.S. and Afghanistan and
Iraq. Counter-terrorism and law enforcement cooperation is
strong, as are business ties.

Political Context
-----------------

3. (U) President Zapatero won re-election to a second term in
2008. His center-left Spanish Socialist Workers Party (PSOE)
is seven seats shy of a Congressional majority and fared
poorly in regional and European Parliament elections in 2009.
Zapatero's popularity has suffered because of the long
recession and what are viewed as the government's ineffective
efforts to address it. The conservative opposition Popular
Party (PP) has not capitalized on Zapatero's unpopularity, as
it has suffered internal divisions and has been dogged by
corruption accusations. That said, recent polls suggest that
the PP could win an election over the Socialists if the vote
were held today. Zapatero has sought to show that he is
taking a leading international role in the response to the
economic crisis, and the EU Presidency gives the GOS an
opportunity to play up its international role.

Economic Context
----------------

4. (U) Spain grew much faster than the EU average over the 15
years through 2007 and now has the world's 9th largest
economy. The rapid growth was driven by a housing boom that
ended in 2007, after which the world economic crisis
aggravated the economy's woes. Spain has been in recession
for almost two years. The economy is expected to continue
contracting until later in 2010, which would make it the last
large economy to begin to recover. Unemployment, now over
19%, is expected to pass 20% this year. The GOS has
responded with a major fiscal stimulus. This has boosted the
budget deficit to around 10% of GDP, and the GOS will have to
curb spending in the next few years to get back within
eurozone-mandated parameters by 2013. Zapatero's government
is working to reorient Spain's economy towards more
sustainable sectors, with renewable energy a key priority.
Spain, the 10th largest foreign investor in the U.S., is
especially active in renewables, banking, road
construction,food, and others. The U.S. is also a major
investor in Spain.

EU Presidency
-------------

5. (SBU) The GOS has named a wide range of issues as
priorities for its presidency. Its most frequently mentioned
priorities are coordinating economic recovery and reform
measures, coordinating implementation of the Lisbon Treaty
(including adjusting to the new roles of President Van Rompuy
and High Representative Ashton), and promoting gender
equality. President Zapatero and other GOS officials often
cite strengthening transatlantic relations as another top
priority. Foreign Ministry officials have acknowledged that
during Spain's presidency, the EU will face important
decisions on Iran sanctions.

Iran Sanctions
--------------

6. (SBU) While the GOS agrees with the objective of
preventing Iran from building a nuclear weapon, it generally
prefers to focus on the carrot and engagement side of the
relationship with Iran. GOS officials state that they fully
implement existing sanctions, but they also stress the
importance of exhausting other options before imposing more
restrictive sanctions and have expressed some skepticism
about the efficacy of additional pressure on the Iranian
government. At times other EU countries' officials identify
Spain as one of the member states resisting increasing
sanctions. Nonetheless, Spain implements UN Security Council
Resolutions fully, and if additional sanctions are approved
by the UN and/or the EU, Spain will implement them. Spanish
officials have told us in the past, however, that they do not
favor restrictions on investment in the oil and gas sector.
In 2008, Repsol and the Dutch firm Shell, after U.S.
pressure, decided not to pursue a joint venture to develop an
Iranian gas field. That project remains very much on hold.
Repsol is fully aware of the Iran Sanctions Act, pending
legislation, and the strongly held U.S. view that now is not
the time to do anything that would suggest business as usual
with Iran. However, the company maintains frequent contact
with the Iranian government and retains a long-term interest
in developing the country's resources.

7. (SBU) The Embassy and visiting U.S. officials have urged
Spanish banks to be very careful about business with Iran. We
believe Spanish banks are, in fact, monitoring their
activities carefully, and that the Bank of Spain is providing
vigilant oversight. The Ministry of Industry, Tourism, and
Trade (MITYC) heads an inter-ministerial committee that
carefully looks into possible dual-use exports to Iran.

Non-Proliferation
-----------------

8. (SBU) Spain was a founding member of the Proliferation
Security Initiative (PSI), is on the IAEA Board of Governors
during 2008-2010, and will hold the EU Presidency during the
first half of 2010, during which time President Obama's
Nuclear Security Summit and the 2010 NPT RevCon will convene.
Spain participates in the Container Security Initiative (CSI
- in the ports of Algeciras, Barcelona, and Valencia), and
the Megaports Initiative to detect radioactive cargo (in the
port of Algeciras, with expansion to Valencia and Barcelona
to begin later this year). Spain has also been very active in
hosting a number of events related to the Global Initiative
to Combat Nuclear Terrorism (GICNT).

Personal Security
-----------------

9. (U) In general, Spain is safe. However, Madrid and other
large cities attract a large number of criminals and
pickpockets, and frequent crimes of opportunity against the
unwary do occur. It is best to carry only essential items,
including a photocopy of your passport's photo page.
Visitors can protect themselves against crime by being
street-smart, alert, and aware of their surroundings.
Travelers are encouraged to review the most recent Worldwide
Caution issues by the Department of State. As the Department
of State continues to develop information on any potential
security threats to Americans overseas, it shares credible
threat information through its Consular Information Program,
available on the Internet at http://travel/state.gov.
Additional information regarding safety and security in Spain
is available on the U.S. Department of State's website
(www.embusa.es).
DUNCAN

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