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Viewing cable 07TELAVIV3515, PDAS MCNERNEY'S OCTOBER 24 DISCUSSIONS ON COUNTERPROLIFERATION FINANCE AND IRAN WITH THE ISRAELI MFA (CABLE 4 OF 5) REF: A. TEL AVIV 03385 B. TEL AVIV 03386 C. TEL AVIV 03514
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
07TELAVIV3515 | 2007-12-13 16:48 | 2011-02-02 21:00 | SECRET | Embassy Tel Aviv |
VZCZCXRO1140
PP RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHTV #3515/01 3471648
ZNY SSSSS ZZH
P 131648Z DEC 07
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC PRIORITY 4578
INFO RUCNIRA/IRAN COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUEKJCS/SECDEF WASHDC
S E C R E T SECTION 01 OF 05 TEL AVIV 003515
SIPDIS SIPDIS
E.O. 12958: DECL: 12/05/2017
TAGS: PREL PTER KNNP MNUC IR IS
SUBJECT: PDAS MCNERNEY'S OCTOBER 24 DISCUSSIONS ON COUNTERPROLIFERATION FINANCE AND IRAN WITH THE ISRAELI MFA (CABLE 4 OF 5) REF: A. TEL AVIV 03385 B. TEL AVIV 03386 C. TEL AVIV 03514
Classified By: Marc J. Sievers, Political Counselor. Reasons: 1.4 (b)(d).
------- SUMMARY -------
1.(S) In an October 24 meeting at the Israeli MFA, an Israeli inter-agency delegation led by MFA Deputy Director General (Strategic Affairs) Miriam Ziv made the following points concerning U.S. counterproliferation finance efforts towards Iran:
¶A. Financial sanctions are having an effect on Iran. It is trying to evade them by using personal bank accounts and bond accounts, and working with banks in the Persian Gulf and the Far East. Cooperation with the U.S. Treasury Department has been excellent.
¶B. Israel is compiling data on how other, key sectors of Iran's economy are tied to the Islamic Revolutionary Guard Corps (IRGC) and the IRGC-Qods Force, with the idea that such information could be deployed in a "whisper campaign" to discourage private entrepreneurs from doing business in Iran, or at least dissuade them from investing further.
¶C. In response to sanctions, Iran is reaching out to new, potential business partners in the Gulf States and the Far East. It is trying to encourage Sinopec to conclude a contract in Iran with the hope that this will cause other oil companies to abandon restraint and join in. Israel is particularly concerned with Iran's role in the Naboko project to provide oil and gas to Europe.
¶D. Israel is seeking a way to develop international consensus on a mechanism to prevent arms transfers to terrorist groups. It has raised this idea within the Geneva-based Conference on Disarmament, but is also discussing the idea bilaterally with other countries. Israel believes that Russia will continue to sell advanced weapons systems to countries like Iran and Syria, calling the weapons systems "defensive."
2.(S) The U.S. delegation, led by ISN PDAS Patricia McNerney, reviewed U.S. thinking on using Nuclear Suppliers Group dual-use trigger lists to encourage governments to consider how seemingly innocent purchases of items for the petro-chemical sector could be utilized in a nuclear weapons program. PDAS McNerney noted U.S. efforts to dissuade the Russians from the continued selling of weapons systems to Iran. She also updated the Israeli side on the status of the agreement reached with North Korea whereby it will dismantle its nuclear program. END SUMMARY.
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EXCHANGE ON FINANCIAL SANCTIONS EVASION
---------------------------------------
3.(S) The portion of the day's discussions devoted to counterproliferation finance efforts and Iran began with the U.S. side making a presentation on the ways in which Iran is trying to evade financial sanctions. Responding to the U.S. delegation's presentation, the representative from the Prime Minister's Office (PMO) said that Israel has seen most of the information covered in the briefing. Iran, she said, is trying to do more to evade sanctions, and is still taking many of the steps described in the briefing. Israel, she said, has not seen much activity involving brokers. Instead, it is focusing its efforts on personal bank accounts, where Israel sees increasing activity aimed at evading sanctions. The PMO representative said that there are indications that Iran is also trying to do business with banks in the Persian Gulf and Far East (especially China and the Philippines) regions. Israel is now trying to locate the specific banks and accounts. The PMO representative said that the sanctions against Bank Sepah made a difference and "meant something" to the Iranians. In addition to businessmen, bankers are now worried. The results, she said, are "getting to the government."
4.(S) The MFA representative applauded the presentation, noting that it presents "the big picture." He said Israel has new data that it could add, but otherwise is not seeing any new kind of evasive activities in the region. He added TEL AVIV 00003515 002 OF 005 that the Central Bank of Iran is coordinating money transfers. This by itself implies a certain link to the Iranian government. PDAS McNerney replied that we plan to use the presentation to focus interlocutors' attention on the role that additional banks are playing in sanctions evasion. She stressed that the Germans require specific attention in this area.
5.(S) The Mossad representative signaled agreement, and identified as "the big story" the movement of money within Iran, and the use of individuals' bank accounts, to hide Bank Sepah's role. He said that pressure needs to be applied to the Germans and the Chinese, and suggested that the U.S. also look at the use of bonds in sanctions evasions. The Iranians have either 5 or 15 billion dollars worth of bonds cleared through accounts XXXXXXXXXXXX. They are using their bond accounts to shift money around. The Mossad representative noted that they do not have to assign names to the accounts, which makes the transactions anonymous. He felt it would be possible to connect the accounts to illegal Iranian operations.
6.(S) The Mossad representative characterized cooperation with the U.S. Treasury Department as excellent. Israel would like to move on to cooperation on other sectors of Iran's economy, including the automobile and oil sectors. Indicating that Israel is preparing intelligence for next steps, he said that the Israeli side would like to see the same kind of briefing the U.S. presented on financial institutions, but instead devoted to another sector linked to Iran's missile program or the IRGC's suspect activities.
-----------------------------------------
IDF INTEL FOCUSING ON AUTO SECTOR IN IRAN
-----------------------------------------
7.(S) An Israeli Defense Intelligence (IDI) officer then made a presentation on the automobile sector in Iran, showing how vehicles made by Mercedes, Fiat, Toyota and Honda are being used by Iranian regime elements associated with the Iranian missile program, including the IRGC and IRGC-Qods Force. All the information in the Israeli presentation came from open sources. Photographs of clearly identifiable vehicles with missile systems mounted on them or in tow were produced. The IDI officer said that material could be presented in a way to show companies that what they see as a simple business transaction has become part of Iran's weapons of mass destruction (WMD) program. PDAS McNerney recommended that IDI establish a timeline of the business transactions after a third UN sanctions resolution is passed.
8.(S) Regarding the IRGC, the IDI officer said that Israel can connect it to dozens of different sectors. At least fifty percent of the vehicles in the Israeli presentation are purchased and used by the IRGC. The IDI officer claimed that Israel can also link the IRGC to dozens of construction companies that supply building materials to the IRGC. The IRGC, he said, is now the main contractor for Tehran's metro system. He pointed out that the Chinese are helping the IRGC on this project. PDAS McNerney replied that this information might prove useful once the USG designates the IRGC for its proliferation activities, and the IRGC-Qods Force for support to terrorists. The two sides agreed to share their lists of companies tied to the IRGC at some future point.
9.(S) The IDI officer noted that Iran is also trying to evade sanctions through cutout individuals and entities affiliated with the IRGC. These cutouts are not holding the majority of a company's shares.
10.(S) The Mossad representative noted that two large car manufacturers, Renault and Peugeot, are manufacturing cars in Iran. He urged that the U.S. make the case to them that their activities are contributing to Iran's WMD program. He acknowledged that legally they are not doing anything wrong, but it might be worthwhile to show them how their business is helping proliferators. The MFA representative suggested asking companies like Renault and Peugeot to "join in the effort" to stop any more investment that helps the IRGC, as opposed to asking them to cease operations. This might be more palatable to them, and thus a more effective approach. He observed, however, that any such approach is bound to face opposition, with European companies saying that whatever field they cede will be taken up by business from the Gulf states. He said that the UAE has managed to swallow up half of the UK's exports to Iran. The Mossad representative added that there is some indication that as pressure increases on TEL AVIV 00003515 003 OF 005 the UAE, Iran is seeking to do more business with Bahrain and Qatar.
-------------------------------------
DISCUSSION ON IRAN'S TRADING PARTNERS
-------------------------------------
11.(S) The MFA representative observed that as the volume of trade between the Gulf States and Iran increases, it, in an ironic way, gives the Gulf States more leverage. He noted that Iran has more than 20 billion in investments in the Gulf States. He added that Israel has picked up on some information that there have been talks of opening a Free Trade Zone including the GCC States and maybe eventually Iran. He said the MFA does not believe this will happen, but that it was, nevertheless, a worrying signal. The Mossad representative said he had some information on Iranian and foreign banks that are doing business on Kish Island. He agreed that Iranian banks are trying to evade sanctions on Iran with the Iranian Central Bank's help, but opined that Kish Island is not a major Iranian banking center.
12.(S) The Mossad representative said Iran is feeling the effects of sanctions. He noted that tenders for oil and gas blocks are stuck. Iran is now looking for second- and third-tier participants, and is also trying to put pressure on Shell, Total and a number of German oil firms to get them to complete their work by the summer of 2008. He also said that there are indications that Lukoil has sold its stake in a major deal, and that some French companies have been having difficulty moving spare parts to Iran. The latter, he said, is significant, as Iran is a sizable market for France. He said what is needed now is to persuade China and the UAE to increase pressure on Iran. To date, the Chinese have not volunteered to take any action on any data Israel has shown them. He noted, however, that the Chinese have sometimes reacted to information Israel shared with them concerning Chinese banks.
13.(S) The Mossad representative continued: "It is important that when you present energy companies with information about how their activities support Iran's WMD program, you also present them with alternative projects, like the Naboko pipeline. They need to know about alternative sources for gas that they are presently planning to buy from Iran. This also applies to Japan and China." Iran, he said, is trying to spread its net wider to Asia, Latin America, Africa, Belarus, and Algeria. In Latin America, it is focusing on Venezuela, Nicaragua, Uruguay. Its interest in countries in Asia and Africa is not solely as a result of sanctions, but also because of Ahmadinejad's policy of "shifting the focus to Iran's backyard."
14.(S) On the Naboko project, the Mossad representative said that Israel is very worried about it. Most of the European deals and MOUs that are being signed are around this project. Initially, it was supposed to bring gas from various Central Asia sources to Europe. But it is increasingly focused on Iran. The Mossad representative urged that the U.S. work to convince the Europeans that Iran not be allowed to participate in the project. In doing so, the U.S. should stress that Europe can get its gas from Azerbaijan, Turkmenistan, and Egypt. The Mossad representative pointed out that the Europeans say that they are not doing business with Iran. When they work on this project, he stressed, Iran is talking to them about investment in Iran's energy sector. He lamented that the Europeans have no energy policy. This leaves Washington with two options -- either approaching each country in Europe, or encouraging Europe to develop an energy policy, and trying to influence that policy. PDAS McNerney cautioned in response that the USG has no authority at this time to target Iran's oil sector.
------------------------------------
REVIEWING NSG DUAL-USE TRIGGER LISTS
------------------------------------
15.(S) The MFA representative reported that the Open-Ended Session on Nuclear Suppliers Group (NSG)-type issues in Vienna led the Israelis to believe that most countries have weak standards with respect to dual-use and petrochemical transactions. He went away with the impression that there is no attempt to verify end-users. In response, ISN Bureau Middle East Team Leader Kurt Kessler made a presentation on a strategy to review NSG dual-use trigger lists. He explained that the lists display items that could be used in a so-called petro-chemical transaction, but really be utilized TEL AVIV 00003515 004 OF 005 for a nuclear program. Kessler said that the U.S. plans to circulate the lists to the NSG during the next Consultative Group Meeting (which took place in November). In the meantime, the U.S. would welcome Israel's thoughts on the draft lists. He wondered, for instance, if they should be presented to the UN Sanctions Committee. They could also be circulated as an IAEA circular, using the IAEA as a type of mailman. The U.S. and Israel could also deploy the lists bilaterally with governments and to petro-chemical and gas firms. The IDI representative considered it an interesting and useful idea, and said that his technical group could probably add some ideas to the list. He then handed to PDAS McNerney a list of companies that may be supplying such dual-use parts to Iran.
16.(S) The Mossad representative said that the U.S. and Israel need to consider how to approach the Europeans at some point to prohibit the Europeans from being "used" in transactions. He suggested that we could go through either the French head of the European Central Bank, or bilaterally through European countries themselves at the bank and government level.
-------------------------
THE IRGC AND WMD TRANSFER
-------------------------
¶17. (S) PDAS McNerney then presented a briefing on the IRGC, noting its role in supporting Iraqi militants, as well as Hizballah and the Taliban. She stressed that we need to keep pressure on the Europeans to list Hizballah as a foreign terrorist organization, despite European hesitancy to address Iranian support for terrorism, as well as to press for multilateral designation of the IRGC-Qods Force as a terrorist group. PDAS McNerney added that Under Secretary Burns shared the information contained in the briefing in a note to P5 1 Political Directors.
¶18. (S) MFA DDG Ziv said that she raised IRGC support for terrorism with the Russians and the Chinese, and that the Israelis have also raised it within the Conference on Disarmament (CD) in Geneva. Israel wants a mechanism to deal with WMD transfer to and among terrorists. Israel wants to use this as a way to discuss both Hizballah and Hamas. She wondered how we plan to use the briefing. PDAS McNerney replied that designation of the Qods Force and IRGC as entities that support terrorism will hamper arms transfers to Iran. Ziv said that an Israeli team would reach out to the Europeans to discuss the "real face of Hizballah" in Lebanon, and show Iran's primary role in supporting Hizballah. She said she would inform the U.S. before approaching each European country.
¶19. (S) Regarding arms transfers, PDAS McNerney noted that we raised the issue during Secretary Rice and SecDef Gates' two-plus-two meeting in Moscow in early October. She noted that we are preparing to issue another demarche on equipment supply to Iran.
¶20. (S) Ziv said she believes that the Russians will continue to sell arms to Iran, explaining to Israel and other concerned parties that they are defensive systems. The Russians, she said, claim that they have applied more stringent controls on the equipment.
--------------------------------------------- --
U.S. SIDE BRIEFS ON AGREEMENT REACHED WITH DPRK
--------------------------------------------- --
¶21. (S) PDAS McNerney briefed the Israeli side on the status of negotiations with the North Koreans. The U.S. has reached agreement in plenary, although there were not details yet to report. The parties agreed on a list of actions they are all willing to take by the end of the year. Dismantlement could be achieved in 3-6 months. The key questions that remain concern fuel, the DPRK's designation as a state sponsor of terror, and the DPRK's declaration and revealing of all of its nuclear facilities. McNerney cautioned that verification of the agreement will be a challenge. The DPRK does not want the IAEA to do it, but wants the U.S. to do it. The U.S. wants the IAEA involved. Plans are to have inspectors on the ground in November using Nuclear Disarmament Fund (NDF) funds. The Department of Energy (DOE) will do the actual work. McNerney observed that the DPRK has marked up costs by 100 percent; this threatens to use up all of the funding that the U.S. has. TEL AVIV 00003515 005 OF 005
¶22. (S) Ziv asked if the U.S. has any concerns about DPRK proliferation abroad. McNerney replied that the North Koreans claim they have not engaged in any proliferation. They denied all such activities and re-asserted previous pledges. Ziv said that Israel has always been unhappy with the agreement with the DPRK, as there are, in her view, many holes in it.
¶23. (S) Regarding full declaration, the IDI officer asked how certain the USG is in its ability to verify the amount of components in Yongbyon and at the unfinished reactors. McNerney replied by noting that fresh fuel would be the first focus for the USG. The aim would be to set up the situation so that the North Koreans would not be able to be in a position to produce fuel.
¶24. (U) ISN PDAS McNerney did not review this cable. ********************************************* ******************** Visit Embassy Tel Aviv's Classified Website: XXXXXXXXXXXX You can also access this site through the State Department's Classified SIPRNET website. ********************************************* ******************** JONES