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### Viewing cable 08MADRID836, IRAN FOCUS OF TREASURY UNDER SECRETARY LEVEY TRIP

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08MADRID836 | 2008-07-28 16:29 | 2010-12-12 12:00 | CONFIDENTIAL | Embassy Madrid

`

    VZCZCXRO7860
    RR RUEHAG RUEHROV
    DE RUEHMD #0836/01 2101629
    ZNY CCCCC ZZH
    R 281629Z JUL 08
    FM AMEMBASSY MADRID
    TO RUEATRS/DEPT OF TREASURY WASHDC
    INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
    RUEHC/SECSTATE WASHDC 5174

` `

    C O N F I D E N T I A L SECTION 01 OF 03 MADRID 000836

    SIPDIS

    TREASURY FOR CCLARK AND DFERNADEZ

    E.O. 12958: DECL: 07/17/2018
    TAGS: ECON EFIN EINV ETRD KTFN PREL PARM PTER IR SP
    SUBJECT: IRAN FOCUS OF TREASURY UNDER SECRETARY LEVEY TRIP
    TO MADRID

    Classified By: Deputy Chief of Mission, Hugo Llorens, reasons: 1.5 (b)
    and (d)

    ¶1. (C) Summary: Treasury Under Secretary Stuart A. Levey,
    accompanied by Chief of Staff Christy Clark and Policy
    Advisor DeAnna Fernandez, traveled to Madrid, Spain July
    15-17, 2008 to press for Spanish support for implementation
    of UNSCR 1803 per the EU-3 1 proposal and to provide
    information on the Iranian shipping line IRISL and on threats
    to the insurance industry. Spanish officials said they had
    no "substantive" objections with the EU-3 1 proposal,
    although they did not unequivocally commit to support
    implementation of the proposal prior to the August holidays.
    Spanish officials received the information U/S Levey provided
    on IRISL and insurance with great interest. The Under
    Secretary, together with Ambassador Aguirre, thanked a Repsol
    representative for the company decision not to pursue the
    South Pars Block 13 gas deal. U/S Levey also participated in
    an AmCham hosted lunch and engaged in press outreach. End
    Summary

    --------------------------------------------- -----
    UNDER SECRETARY LEVEY'S MESSAGE WITH GOS OFFICIALS

    --------------------------------------------- -----

    ¶2. (C) The Under Secretary stressed in all of his meetings
    the USG's commitment to a diplomatic solution to the Iranian
    nuclear issue, underscored by the decision to send Under
    Secretary Burns to participate in the Geneva meeting with
    Iran as one more indication of the USG's firm commitment to
    reach a diplomatic solution. In order to facilitate that
    solution, it was necessary to present Iran with a "stark"
    choice, either conform to UNSCR resolutions or face isolation
    and stronger economic sanctions. Levey emphasized that the
    EU's decision in June to designate Bank Melli was a strong
    action that sent an important signal that the EU was prepared
    to be firmer with Iran. This was why it was so necessary for
    Spain to support implementation of UNSCR 1803 per the EU-3 1
    proposal prior to the August vacation. The Under Secretary
    also provided information on the Iranian shipping line,
    IRISL. He said that in 2007, IRISL ships had been
    interdicted, and that in several instances, the ships had
    been carrying prohibited items to Iran. IRISL had also
    engaged in deceptive practices involving, among other things,
    the falsification of shipping documents and operating through
    a company called Seibow Limited. Additionally, Levey noted
    that UNSCR 1737 requires measures to prevent the provision of
    financial services related to the transfer of prohibited
    items to Iran. There had been a great deal of success in
    convincing the banking sector to be extremely vigilant in
    dealing with Iran. The U.S. now wants to expand vigilance to
    the insurance industry as well. The Under Secretary also
    raised questions regarding the possible collaboration between
    Iran and a Libyan-owned bank.

    -----------------------------------
    MINISTRY OF FOREIGN AFFAIRS MEETING
    -----------------------------------

    ¶3. (C) The Under Secretary met with International Economic
    Relations and Energy Affairs Director General Rafael Conde de
    Saro and two staff members. The MFA officials said that
    Spain has no "substantive" problems with the EU-3 1 UNSCR
    1803 implementation proposal, but it was not clear whether
    Spain would support implementation of the proposal prior to
    the August holidays. The MFA officials added that perhaps
    other EU members might have problems with the substance
    and/or timing. Levey indicated that there was a very clear
    reduction of Iranian activity in Spain deriving from various
    sanctions adopted at different levels. Spain had been
    scrupulous in its application of sanctions. De Saro and his
    staff received the Under Secretary's information on IRISL and
    insurance with interest. Conde indicated that he was not
    aware of any Spanish operations with IRISL or of Spanish
    insurance for IRISL, but that the appropriate Spanish
    authorities would be informed.

    ---------------------------------
    MINISTRY OF INDUSTRY, TOURISM AND
    TRADE MEETING
    ---------------------------------

    ¶4. (C) U/S Levey met with Ministry of Industry, Tourism and
    Trade Secretary General for Foreign Trade Alfredo Bonet and
    staff. Bonet expressed support for vigilance and caution
    with respect to transactions with Iran. He said that Repsol
    had made a "tough decision" not to pursue the South Pars

    MADRID 00000836 002 OF 003

    deal. With respect to export credits, a staff member said
    that Spain was "freezing" export credit levels to Iran.
    Responding to U/S Levey' questions regarding what a "freeze"
    means, the official said that it meant capping export credit
    levels to Iran. New deals can be approved, although the
    staff member said that export credit transactions with Iran
    were decreasing because it was difficult to find a bank
    willing to finance the deal. Bonet received the information
    U/S Levey provided with respect to IRISL and insurance with a
    great deal of interest. He said that recently, the ministry
    had imposed new information requirements for companies
    seeking to export possible dual use items. Now, the firms
    have to specify the means of transportation (including the
    identity of the shipping company) and for information on
    transit countries. For shipments to Iran, it was common
    practice to have the Centro Nacional de Inteligencia (CNI -
    Spain's main intelligence organization) check the end user
    and middlemen links for some operations, often delaying them
    for up to a month. If there is a potential risk or doubt
    about the information Iran provides, the Ministry requests
    further information or denies the operation. Ministry staff
    also noted that Spanish banks have closed representative
    offices in Iran.

    -------------------
    MEETING WITH REPSOL
    -------------------

    ¶5. (C) Ambassador Aguirre and Under Secretary Levey thanked
    Repsol YPF General Counselor and Secretary to the Board Luis
    Suarez de Lezo for Repsol's decision not to go ahead with the
    South Pars Block 13 deal. Suarez said that Repsol's decision
    had been a "cruel" one. However, Spain was "sensitive" to
    the problem of terrorism. Suarez said that the company had
    delayed making a decision for as long as possible, and that
    it still has hopes for business in Iran once the nuclear
    issue is dealt with. Suarez said that, so far, Repsol had
    not been lucky in developing business in Iraq, mostly because
    the competition from bigger rivals was too tough. However,
    Repsol had been very successful in making new discoveries in
    Brazil and Libya.

    ------------------------------------
    MEETING WITH THE MINISTRY OF ECONOMY
    ------------------------------------

    ¶6. (C) U/S Levey and DCM met with Economy Ministry Secretary
    of State David Vegara and staff. The U/S stressed the
    importance of Spain supporting the EU-3 1 UNSCR
    implementation proposal. One Vegara staff member suggested
    that Spain was already largely implementing the proposal
    through increased banking vigilance, but Levey pointed out
    that the EU-3 1 proposal contained other important elements
    as well. The staff member said that Spain was working with
    the U.S. within the Financial Action Task Force (FATF) to
    develop guidance on how to implement UNSCR 1803 (including on
    "counter-measures"), and U/S Levey thanked him for that
    support. Vegara said that Spain was on the right side of
    this issue, and on the matter of containing export credit
    operations, Spain had reduced export credits by 30 percent.
    The Secretary of State expressed a great deal of interest in
    the IRISL and insurance information provided by U/S Levey.
    Vegara noted, however, that while Spain has large banks, it
    does not have large insurance companies, so he doubted that
    they were involved in insuring cargo destined for Iran, but
    the government would look into it. Secretary of State Vegara
    underscored that Spain was committed to the Iran financial
    sanctions issue, but that Spain had to coordinate with other
    EU members. He expressed a great deal of interest in Under
    Secretary Burns' meeting with Iranian officials. DCM
    emphasized in this context the need for the international
    community to continue to make clear the "stark" choice that
    Iran faces precisely in order to give diplomacy a better
    chance to work. There was also a discussion of the risk
    posed by possible collusion between Libyan-owned banks and
    Iran. Vegara and his staff indicated that there was only one
    such bank in Spain and they would look into the matter.

    -----------------------------
    MEETING WITH THE CENTRAL BANK
    -----------------------------

    ¶7. (C) U/S Levey and DCM met with Deputy Governor Jose Vinals
    and staff. He too demonstrated great interest in the
    material the U/S provided. Vinals agreed with Levey that
    Spanish banks were increasingly unwilling to take any risks
    with respect to Iran. He said that Banks Santander and
    Sabadell had ceased Iran-related operations, and that, as far
    as he knew, Spanish banks had closed their representation

    MADRID 00000836 003 OF 003

    offices in Iran. When Levey raised concerns about the risk
    posed by possible collusion between Libyan-owned banks and
    Iran, Vinals and his staff also indicated that there was only
    one Libyan-owned bank in Spain, Aresbank. They noted that
    while Aresbank was Libyan-owned, it was managed by Spanish
    officials. They indicated that the majority of Aresbank's
    business was financing equipment and transport to Libya,
    which was necessary since roughly 30 percent of Spain's oil
    imports come from Libya. Vinals, nonetheless , noted that
    any Libyan-owned bank merited extra scruitiny.

    -------
    COMMENT
    -------

    ¶8. (C) Under Secretary Levey's trip was very timely given the
    upcoming EU decision on the EU-3 1 UNSCR 1803 implementation
    proposal. We do not know whether Spain will support
    implementation prior to the summer holidays. However,
    although the Spaniards, especially the Ministry of Foreign
    Affairs, played the perennial Brussels-Member State dance,
    i.e. suggesting that others might be to blame for an outcome
    not desired by the USG, we think the GOS understands that we
    are monitoring Spain's stance on this issue very carefully.

    ¶9. (U) Under Secretary Levey has cleared this message.

    Aguirre

`