O 121803Z DEC 08
FM AMEMBASSY LONDON
TO SECSTATE WASHDC IMMEDIATE 0674
INFO IRAN COLLECTIVE PRIORITY

S E C R E T LONDON 003110 
 
 
NOFORN 
 
E.O. 12958: DECL: 12/12/2018 
TAGS: EFIN ENRG IR KTFN MNUC PTER UK
SUBJECT: IRAN: FCO QUIETLY URGES PRESSURE ON GERMANS FOR EU 
DESIGNATION OF IRANIAN BANKS, DISCUSSES NEW UK TOOLS 
AGAINST IRAN 
 
REF: A. USEU DAILY TO DEPT 12/10/08 (NOTAL)      B. EMB LONDON (GAYLE) EMAIL TO NEA/IR 12/10/08         (NOTAL)      C. LONDON 2798  

Classified By: Political Counselor Rick Mills for reasons (b) and (d)   

¶1.  (S/NF)  Summary:  Germany has deep political reservations over bank designations proposed against Iran under the EU's Common Policy, and is making legal and intelligence arguments within E4 against UK and French proposals to designate several Iranian banks, according to a UK Foreign and Commonwealth Office (FCO) Iran Coordination Group contact, speaking informally with London Iran Watcher (Poloff).  The FCO contact suggested any intelligence readout the USG could provide to the E4 on the banks would help the French and British case.  Indispensable in his view, however, was immediate USG political pressure on the Germans at senior levels; he asked that such pressure not reference the E4 discussions he had described to Poloff.  

¶2.   (S/NF) This FCO contact also sketched some of the political background to the newly passed UK counterterrorism bill (ref c), the implementation of which he said HMG has not yet planned -- beyond ministers'  agreement the bill should be used in an EU context against Iran.  FCO also said HMG is beginning to press UK companies harder to forego any new hydrocarbon sector investment in Iran.  End Summary.  

Iranian Banks for Designation 
-----------------------------  

¶3.  (S/NF) FCO Iran Coordination Group Team Leader Will Gelling (strictly protect) on December 10 passed to Poloff the names of several Iranian banks Gelling said are being proposed, separately by HMG and the French, within the E4 and the EU for an EU designation under the Common Plan.  The banks named (with some overlap between UK and French lists) are:  -- (UK-proposed) Bank Saderat, Export Development Bank of Iran, Bank Mellat; and  -- (France-proposed): Bank Mellat, Persia International Bank PLC, Bank Tejarat and Bank Saderat.  

¶4.  (S/NF) Gelling had met with E4 reps December 8 in Brussels where, Gelling said, there was serious German resistance to further bank designations in the EU proposed by UK and France.  Gelling said Italy was generally supportive of designation but was "absolutely silent" on the specifics. Gelling said the Germans' real concerns seemed political, but German officials are clothing their reluctance in objections of legal insufficiency and intelligence gaps -- i.e., insufficient connections have been demonstrated to proliferation.  Gelling said that when challenged whether they could support designation should any intelligence gaps be filled in, German interlocutors responded they might still be unwilling.  

UK and France Will Lobby All Other EU Members Individually -----------------------------  

¶5.  (S/NF) Gelling said UK and France, given Germany's stance, and keenly aware the clock is running on the Iran nuclear issue, plan to do everything they can to end-run and/or wear down Berlin, including separately shopping the names of the above banks to all 23 other EU members.  Gelling said UK and France hope thereby to identify problem governments and to encourage otherwise apathetic members to support a listing of the recommendations experts will produce at a December 17 meeting; political decisions on these recommendations would (ref a) be made by the EU Council at a later date.  

USG Please Share With Germans Anything You Have on These Banks --------------------------------  

¶6.  (S/NF)  Gelling said any additional intelligence on the banks proposed for designation USG can provide would help, even if it is not decisive.  The Germans, according to Gelling, argued the existence of "intelligence gaps" strongly on December 8, stating at one point they in effect have "no intel at all of their own" about Iranian banks.  

¶7.  (S/NF) In describing German intransigence and possible division within the German government, Gelling harkened back to an Iran-focused meeting he had had at German intelligence headquarters in 2007, where resistance among German intelligence  officials had appeared to Gelling so systematic and active as to suggest fundamental, policy-based disagreement (by BND) with P5 1 policy goals and presumptions.  

¶8.  (S/NF)  Gelling argued that Germans in many ministries now have deep-seated political objections to further bank designations; he argued for immediate pressure from the USG on Germany at all levels but especially Chancellor, Foreign Minister and Political Director levels in support of current UK/French pressure on banks.  

Embassy Comment 
---------------  

¶9.  (S/NF)  Gelling, a frequent interlocutor who leads the FCO Multilateral Team on Iran, claimed several times to be speaking somewhat "out of school," and asked not to be personally associated with his suggestions of USG assistance with intelligence and political pressure.  He, however, works at a desk immediately adjacent to that of his boss, HMG's Iran Coordinator, Antony Phillipson, and Gelling passed Poloff the above bank names at his desk and in front of colleagues.  

¶10.  (S/NF) The FCO suggestion of pressure on the Germans may have been passed to the U.S. as an informal suggestion from the FCO working level because of the unspoken but distinct reluctance in more senior UK officials working on Iran to be seen as inviting USG assistance or advice in managing EU processes.  Such UK officials have in the past spoken pointedly to Poloff about what they see as the counterproductive aspects of "uncoordinated" USG lobbying within the EU on Iran.  Having laid down such a marker previously on Iran-related issues, it is possible UK officials may not now want to be seen as backing off earlier tough statements.  

HMG's New CT Bill: A Tool Against Iran with Unexplored Potential ---------------------------------  

¶11.  (S/NF) In response to Poloff's questions about when or how HMG might begin to implement the broad new financial sanctions powers codified in its counter-terrorism bill (ref C), Gelling repeated earlier information he had given Poloff, that "Ministers have agreed" to using the powers against Iran and primarily "in an EU context, where they will be most effective."  He then further explained that the bill, which had many unrelated, hotly debated chapters, had after the insertion of the Iran-specific provisions discussed ref c, gone through Parliament so rapidly that, according to Gelling, UK "financial authorities have not had the time to think through" how the new powers can best be used.  

Beyond Law: Jaw-Boning UK Companies on Iran Oil Investment -----------------------------------  

¶12.  (S/NF) Gelling added that HMG, though it is exploring all the new legal tools it may have available to raise pressure on Iran, is simultaneously directly engaging with UK firms which, even though operating legally, are nevertheless at odds with UK foreign policy interests by being heavily invested in Iran.  Gelling said that, though he could not share most names, HMG is "beginning to work through a short list" of UK companies with oil interests in Iran.  The HMG message, Gelling said, would go beyond appeals to "reputational risk" and include HMG statements of "severe displeasure" with any investment "inconsistent with UK foreign policy interests."  Gelling said UOP, a UK subsidiary of Honeywell, is the first firm HMG officials have aproached in this way; Gelling said current investment is being noted but not challenged, but "any and all" new investment "will be deemed unacceptable," even if permitted by UK law.  

Comment 
-------  

¶13.  (S/NF) The above information on HMG jaw-boning of UK companies active in Iran is a far stronger statement of activist intent in this area from HMG officials than Embassy has previously heard.  Poloff expressed appreciation of HMG's new efforts to Gelling.  End comment.   Visit London's Classified Website: XXXXXXXXXXXX
TUTTLE