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### Viewing cable 06THEHAGUE2654, ILSA: DUTCH, SHELL ON YADAVARAN, IRAN, SAKHALIN II

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06THEHAGUE2654 | 2006-12-21 16:21 | 2011-01-20 07:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy The Hague

`

    VZCZCXRO1545
    PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
    DE RUEHTC #2654/01 3551621
    ZNR UUUUU ZZH
    P 211621Z DEC 06
    FM AMEMBASSY THE HAGUE
    TO RUEHC/SECSTATE WASHDC PRIORITY 7753
    INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
    RUEHBJ/AMEMBASSY BEIJING 1966
    RUEHIL/AMEMBASSY ISLAMABAD 0955
    RUEHKL/AMEMBASSY KUALA LUMPUR 0143
    RUEHMO/AMEMBASSY MOSCOW 1698
    RUEHNE/AMEMBASSY NEW DELHI 0558
    RUEHNY/AMEMBASSY OSLO 4955
    RUEHOT/AMEMBASSY OTTAWA 5104
    RUEHUNV/USMISSION UNVIE VIENNA 0114

` `

    UNCLAS SECTION 01 OF 02 THE HAGUE 002654

    SIPDIS

    SENSITIVE
    SIPDIS

    STATE FOR EUR/UBI (RREITER)

    E.O. 12958: N/A
    TAGS: ETTC EPET ENRG PREL NL CH IR
    SUBJECT: ILSA: DUTCH, SHELL ON YADAVARAN, IRAN, SAKHALIN II

    REF: A. STATE 194960 ...
    90574

    2006-12-21

    06THEHAGUE2654

    Embassy The Hague

    UNCLASSIFIED//FOR OFFICIAL USE ONLY

    06STATE194960

    UNCLAS SECTION 01 OF 02 THE HAGUE 002654

    SIPDIS

    SENSITIVE
    SIPDIS

    STATE FOR EUR/UBI (RREITER)

    E.O. 12958: N/A
    TAGS: ETTC EPET ENRG PREL NL CH IR
    SUBJECT: ILSA: DUTCH, SHELL ON YADAVARAN, IRAN, SAKHALIN II

    REF: A. STATE 194960

    ¶B. THE HAGUE 02316

    ¶1. (SBU) Summary. The Dutch government supports targeted
    sanctions against Iran but not actions that limit Shell's
    activities there. Shell does not plan a final Yadavaran
    investment decision until 2008 and will keep State abreast.
    The government continues to follow negotiations between
    Gazprom and Shell over Sakhalin II, Shell's big natural gas
    project. End Summary.

    ¶2. (U) Econoff raised U.S. concerns about the Iran's
    Yadavaran oilfield project with Ministry of Foreign Affairs
    (MFA) officials John Roosegaarde Bisschop, Gulf States
    division head, and senior policy officer Loek ten Hagen on
    December 15. On December 18, Econoff discussed Yadavaran and
    developments at Sakhalin II with John Crocker, Shell's head
    of international government relations.

    ---------------------------------------
    Iran Policy and Relationship with Shell
    ---------------------------------------

    ¶3. (SBU) MFA's Roosegaarde Bisschop responded with three main
    points on Iran. First, he said MFA supports a UNSC resolution
    with teeth, meaning reversible sanctions targeted against
    the assets and travel of individuals associated with Iran's
    nuclear program. Iran had crossed the line. The Dutch, he
    said, fully support the P5 discussions, as part of a dialog
    aimed at a diplomatic solution. Harsher measures -- such as
    omnibus sanctions or those complicating Shell operations --
    are not on the table and would be very difficult to get
    through the UN, he said.

    ¶4. (SBU) Second, regarding Shell, Roosegaarde Bisschop noted
    that Shell briefs MFA on a regular basis about the Pars gas
    field development, but not Yadavaran. While MFA shares advice
    to ensure that Shell's activities fall on the safe side
    politically, the ministry refrains from voicing approval or
    disapproval over Shell projects, he said. MFA has become more
    involved with Shell, he said, because the energy security
    situation has forced shell to look at markets where the
    political environment is hazardous.

    ¶5. (U) Third, Roosegaarde Bisschop noted that French and
    Italian oil companies were much more advanced in their
    efforts in the Iranian energy sector. He asked whether we had
    reached out to these countries with the same message.

    -----------------------------------------
    No Final Decision on Yadavaran Until 2008
    -----------------------------------------

    ¶6. (SBU) In response to reftel A points, Shell's Crocker said
    that a deal on Yadavaran had been imminent for months. He
    added that Shell had recently seen a sense of urgency on the
    Iranian side and some signs that the Chinese were ready, but
    the two had yet to come to agreement. If they do agree,
    Crocker continued, Shell would examine it and decide whether
    to issue a statement of interest. After that it would take
    Shell 12-18 months of analysis to decide whether to invest.
    Such a decision would be taken in 2008 at the earliest, he
    said, adding that Shell would notify State -- which he visits
    on a regular basis -- before any decision is made.

    ¶7. (SBU) Crocker expressed concern about USG efforts to
    discourage investment in Iran's energy sector. In the short
    run, he said, the volume of oil produced in Iran will remain
    unchanged, whether or not Shell participates in Iran oil
    projects. This is because phase I oil extraction -- a period
    that normally lasts 10 years -- is not tricky, and the
    Iranians and Chinese have the requisite technology to proceed
    on their own. It is from the second phase onward, Crocker
    added, where the exclusion of foreign oil companies will have
    an impact. Since this is beyond 2020, it might make life
    difficult for ordinary Iranians at a time when the political
    environment hopefully may be more friendly toward the west,
    Crocker said. That said, he added that Shell views its
    relationship with the USG as important and that the company
    is very conscious of how its actions are perceived.

    THE HAGUE 00002654 002 OF 002

    --------------------------------------------- -------
    Sakhalin II: Shell on Possible Gazprom Participation
    --------------------------------------------- -------

    ¶8. (SBU) On Sakhalin II, Crocker offered thoughts on
    Gazprom's potential involvement and helpful USG actions.
    First, Crocker said Shell had always thought having a Russian
    partner was a good idea, and had offered, in exchange for
    other assets, a 25% stake to Gazprom before discussions were
    disrupted by the potential revocation of Shell's Sakhalin II
    environmental permit (reftel B). The Russians, however, had
    offered less than 30% of what Shell considered fair. Talks
    have made some progress in the last week. Gazprom's
    participation could now go either way, Crocker said, adding
    that Shell is open to a Gazprom stake at a different level as
    long as it was a commercially viable and defensible to
    shareholders. Failing this -- and if the Russian government
    continued to use all means to apply pressure -- Shell would
    be prepared to go to international arbitration.

    ¶9. (SBU) Second, Crocker said G8 countries should emphasize
    to Russia that its treatment of Shell does not fit within
    internationally accepted norms. Crocker hoped that the G8
    message would include a discussion of the potential delays to
    Japanese, Korean, and U.S. consumers. A failure to deliver
    would hurt these countries as consumers and Russia as a
    supplier. In one to two weeks, these countries may need to
    issue strong public statements to Russia -- but for now the
    messages should be delivered privately, Crocker said.
    BLAKEMAN

`