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### Viewing cable 07THEHAGUE566, UNSCR 1737/IRAN: DUTCH RECEPTIVE TO TREASURY UNDER

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07THEHAGUE566 | 2007-03-27 15:03 | 2011-01-19 20:08 | SECRET | Embassy The Hague

`

    VZCZCXRO6601
    OO RUEHAG RUEHROV
    DE RUEHTC #0566/01 0861521
    ZNY SSSSS ZZH
    O 271521Z MAR 07
    FM AMEMBASSY THE HAGUE
    TO RUEHC/SECSTATE WASHDC IMMEDIATE 8641
    INFO RUEATRS/DEPT OF TREASURY WASH DC IMMEDIATE
    RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
    RUEHTC/AMCONSUL AMSTERDAM PRIORITY 2545
    RUEHFT/AMCONSUL FRANKFURT PRIORITY 3698
    RUEHUNV/USMISSION UNVIE VIENNA PRIORITY 0121
    RHEHNSC/NSC WASHDC PRIORITY
    RUCNDT/USMISSION USUN NEW YORK PRIORITY 4253

` `

    S E C R E T SECTION 01 OF 04 THE HAGUE 000566

    SIPDIS

    SIPDIS

    STATE FOR EB, ISN, IO, NEA
    STATE ALSO FOR EUR/UBI, EUR/PGI
    TREASURY FOR TFFC AND OFAC

    E.O. 12958: DECL: 03/12/2017
    TAGS: EFIN KTFN PTER PREL ETTC IR NL
    SUBJECT: UNSCR 1737/IRAN: DUTCH RECEPTIVE TO TREASURY UNDER

    SECRETARY LEVEY'S MESSAGE

    SIPDIS

    Classified By: Economic Counselor Karen Enstrom,
    reasons 1.4 (b) and (d)

    ¶1. (S) SUMMARY. In meetings March 8 in The Hague, senior
    GONL officials told visiting Treasury Under Secretary Levey
    that a nuclear-armed Iran would be unacceptable. While
    supporting USG aims for a second UN resolution on Iran, these
    officials stressed the need for practical and
    non-discriminatory measures. Dutch banks ING and ABN Amro
    asserted that they are fully compliant with USG regulations,
    with ABN Amro reporting that it is in the process of
    eliminating its business with Iran in all currencies. This
    message has been cleared by U/S Levey. END SUMMARY.

    ¶2. (SBU) Treasury Under Secretary for Terrorism and
    Financial Intelligence Stuart Levey visited the Netherlands
    March 8 for talks on Iran and UNSCR 1737, specifically to
    encourage an inclusive reading of the resolution and to
    discuss with the financial sector the risks of doing business
    with Iran. The following reports on U/S Levey's discussions
    with officials from the Dutch Ministries of Foreign Affairs
    (MFA) and Finance (MOF), as well as the management of Dutch
    banks ABN Amro and ING. U/S Levey was accompanied to these
    meetings by Senior Advisor to U/S Levey Amanda Curtis, Senior
    Analyst Mike Madon, State Department (NEA) Deputy Director
    for Iranian Affairs Henry Wooster, and Econoff.

    -------------------------------------------
    Levey's Introductory Message: Iran a Threat
    -------------------------------------------

    ¶3. (C) U/S Levey told MFA officials he traveled to the
    Middle East to talk with governments about efforts to
    financially isolate Iran. Iran was viewed as a real threat
    in the region, and there was great concern about Iran's
    pursuit of nuclear weapons, he said. Most in the region also
    saw UNSCR 1737 and reduced investment in Iran affecting the
    Iranian elite, leading to questioning of their government's
    policies and harsher criticism of the Iranian regime in the
    news. U/S Levey said the USG believed Iran was surprised
    that the impact from UNSCR 1737 was greater than originally
    thought.

    ¶4. (C) U/S Levey noted the USG remains interested in, and
    countries have to commit to finding, a peaceful solution.
    The USG is trying to increase awareness of Iran's business
    risks, and U/S Levey noted that many companies are realizing
    this is not the right time to do business with Iran.

    -------------------------------------
    MFA: A Nuclear Iran is Unacceptable
    -------------------------------------

    ¶5. (C) Wim Geerts, MFA Deputy Director General for
    Political Affairs, told U/S Levey that a nuclear Iran was
    not an option and that a regime that denies the Holocaust
    cannot be trusted with nuclear weapons. Geerts added that
    while the Netherlands had changed governments, there would be
    no softening toward Iran and that he expected the MFA to
    continue its three track approach. First, he said, is the
    effort to maintain pressure on Iran concerning its support of
    terror and violations of human rights, support for UNSCR
    1737, and reaching common ground on a new resolution.
    Second, Geerts advocated dialogue, and noted his pleasure
    with the USG participation in the Iraq security meeting.
    Third, the MFA intends to continue efforts to advance Iranian
    civil society and stimulate media diversity.

    ¶6. (S) Responding to Geerts' queries about a second UN
    Security Council resolution, Wooster said it was important to
    demystify what the resolution and other diplomatic actions
    such as financial measures were intended to accomplish, which
    is to bring the Iranians back to the negotiating table.
    Thus, the P5 plus 1 package remains on the table.

    ¶7. (S) Geerts said the proposed elements of a second
    resolution are clear and make sense, and the Dutch support
    efforts at negotiations, citing North Korea as an example
    where peaceful pressure can work. He said the MFA would
    support additional sanctions under four conditions: that they
    are targeted against institutions to really make a
    THE HAGUE 00000566 002 OF 004
    difference, and not broadly applied to hurt the Iranian
    people, and that they are gradual, proportional, and
    reversible. On specifics, Geerts predicted new Dutch Foreign
    Minister Maxime Verhagen would concur with the travel ban.
    He added the Dutch would support the arms sales ban,
    financial restrictions, if they are specific, and export
    credit restrictions, if they are applied collectively. On
    the Islamic Revolutionary Guard Corps (IRGC), Geerts stressed
    the importance of keeping Russia and China on board and
    praised U.S. efforts at doing so.

    ---------------------------------------------
    Levey Calls for Broader Reading of UNSCR 1737
    ---------------------------------------------

    ¶8. (C) U/S Levey called on the Dutch to take a fair
    reading of UNSCR 1737 in two ways. First, he encouraged
    taking action against the IRGC, whose Chief Commander --
    General Safavi -- is designated under the UNSCR. U/S Levey
    said the EU should take action against companies controlled
    by the IRGC to give UNSCR 1737 real effect. He provided a
    list to MFA and MOF officials. U/S Levey encouraged the GONL
    to see if banks were aware that these organizations were
    IRGC-controlled. Second, U/S Levey advocated for a greater
    focus on UNSCR 1737 paragraph 6, which seeks to ensure
    financial services are not provided to support Iran's nuclear
    and missile programs. Financial services should be
    interpreted to include transactions and letters of credit,
    U/S Levey said, stressing that governments should encourage
    financial institutions to deny services unless they are
    sure that the recipient is not aiding Iran's nuclear or
    missile programs. Furthermore, if any Iranian entity is found
    trying to acquire WMD items, then all financial support
    should be withheld from that entity, he added.

    ¶9. (C) In response to U/S Levey's call for a fair reading
    of UNSCR 1737, Geerts outlined recent Dutch and EU efforts.
    The EU released a Common Position in February, and he
    expected implementing regulations to be finalized the week of
    March 12. The Dutch, he added, have already implemented
    national measures, including financial sanctions and a visa
    policy preventing Iranians from studying
    proliferation-sensitive subjects. MFA official Sitte Noland
    said starting in summer 2006, the EU began requiring export
    licenses for products sold to Iran that could be used for the
    WMD program. If there is any doubt that the product will
    be used for peaceful purposes, the export license is denied
    and the products held. To address re-exports and shipments
    using secondary routes to avoid detection, the GONL works
    with other transit hubs -- such as those in the UAE and
    Malaysia -- to share customs information, she added.

    ¶10. (C) Geerts said he expected Foreign Minister Verhagen
    to pressure Iran in the area of human rights, starting with
    Iranian Foreign Minister Mottaki at the next Human Rights
    Council in Geneva. Verhagen recently extended spending to 15
    million euros -- allocated through NGOs -- to support Iranian
    civil society and alternative media sources, Geerts said.
    Verhagen will also put Iran high on the agenda when he
    meets Secretary Rice on April 2, he added.

    ----------------------------------------
    Dutch on Shell: Keep Playing Field Level
    ----------------------------------------

    ¶11. (C) Geerts told U/S Levey any measures to sanction
    companies with business ties to Iran should be comprehensive
    in order to maintain a level playing field. The GONL
    maintains regular contact with Shell, he added, so the
    company is informed and considers consequences before making
    a decision.

    ------------------------------------
    MOF asks for Practical Iran Measures
    ------------------------------------

    ¶12. (C) At a subsequent meeting with Bernard ter Haar,
    Deputy Treasurer General and Director of the Financial
    Markets Policy Directorate, U/S Levey said the Wolfsburg
    Group -- an independent group of major banks advising on
    financial best practices -- is voluntarily developing
    THE HAGUE 00000566 003 OF 004
    recommendations regarding the use of cover payments. These
    best practices will include a recommendation that the
    underlying beneficiary be identified in all transactions.
    U/S Levey said that banks have found that Iran asks for the
    underlying data to be stripped off transactions, as a matter
    of course, and the Wolfsburg initiative is a private-sector
    effort to increase the transparency of the international
    financial system and to protect responsible financial
    institutions. Ter Haar agreed identifying names was
    important, but said solutions should consider administrative
    burden and carefully weigh costs and benefits.

    ¶13. (C) U/S Levey noted that countries should use paragraph
    6 of UNSCR 1737 to take action against entities supporting
    Iran's nuclear or missile programs - even if they are not
    listed in the annex. However, the MOF opined that the
    paragraph was too vague and that a broader interpretation
    would require governments to provide specific names and
    identifiers in order to implement. They also suggested that
    there should be a globally shared definition of broader
    interpretation. U/S Levey suggested issuing an advisory --
    at either the national or EU level -- that encouraged banks
    to exercise vigilance and to avoid business with
    questionable entities. U/S Levey said an advisory would be a
    very powerful message. He noted that avoiding business is
    a much less aggressive approach than accepting it and
    freezing assets later.

    --------------------------------------------- --------------
    Export Credit Policy: No Transactions Over 25 Million Euros
    --------------------------------------------- --------------

    ¶14. (C) Maarten Masselink, Policy Officer, International
    Financial Relations Directorate and responsible for export
    credits, said the GONL has a very restrictive policy on
    Iran. MOF assesses every Iran-related transaction, and
    current policy is to refuse transactions over 25 million
    euros. In the past, Masselink added, the GONL has provided
    export credits for harbor dredging equipment, where the Dutch
    are global leaders, and a cookie factory. U/S Levey welcomed
    these measures, noting export credits distort the market and
    that the U.S. is shouldering the burden because it has no
    business in Iran.

    ----------------------------------------
    ABN Amro Cuts Off All Business with Iran
    ----------------------------------------

    ¶15. (C) During a meeting with Rijkman Groenink, Chairman of
    the Managing Board, and ABN Amro's senior compliance
    officers, Groenink told U/S Levey that ABN Amro is ceasing
    all business with Iran and will not process U-turn
    transactions for any Iranian bank. According to Carin
    Gorter, Senior Vice President Compliance and Legal, ABN Amro
    has closed all but 16 Iran-related accounts, and that these
    will be closed in a few months. Groenink said that ABN
    Amro's policy will exclude Iranian government persons and
    entities and it deliberately excludes all Iranian people
    because of the deceptive practices of their regime. He
    explained their reasoning for cutting off trade in all
    currencies by noting, there isn't a difference in terms of
    risk between trade in Dollars and trade in Euros. At some
    point, you have to make a decision based on your own moral
    judgement. Regarding UNSCR 1737 implementation, the bank is
    waiting for guidance from the EU, but has already begun to
    filter and reject any questionable transactions. According
    to Gorter, when an Iranian transaction is submitted, the bank
    reaches out to the local government with jurisdiction over
    the transaction. If that government gives them permission to
    freeze, then the money is frozen. If the government does not
    authorize a freeze, then the transaction is rejected.

    ¶16. (C) U/S Levey complimented Groenink for ABN Amro's
    efforts. U/S Levey stressed the importance of financial
    sector participation in countering proliferation, since --
    unlike terrorism finance -- it is more often the case that
    proliferators use banks to move and store money (since
    proliferators typically engage in ostensibly legitimate
    commercial transactions). He added that these bank meetings
    were consultative, not regulatory, in nature and inquired
    about the reaction of Dutch customers to denied Iran
    THE HAGUE 00000566 004 OF 004
    business. Groenink said it is not difficult to explain,
    and that the policy also applies to Syria and Sudan, for
    example. It is a small problem, he added, as customers face
    exposing their interests in Iran by seeking financial
    services from ABN Amro.

    ¶17. (C) Groenink said that the 2005 cease and desist order
    and fine from U.S. regulators and the Dutch Central Bank was
    a shock to the system. (NOTE: In 2005, Treasury and the
    Federal Reserve fined ABN Amro $80 million for a series of
    banking violations, including failing to adequately report
    suspicious transactions and knowingly deleting originator
    information from Iranian and Libyan transactions bound for
    the U.S. END NOTE.) This led to large investments in global
    filtering, information technology, and increasing awareness
    among employees. As a result of these changes, Groenink said
    ABN Amro is now fully OFAC compliant worldwide and has
    adopted a strict policy against cover payments.

    ¶18. (U) Dutch-founded ABN Amro has 105,000 employees. It is
    the eighth largest bank in Europe and the thirteenth largest
    in the world based on total assets.

    --------------------------------------
    ING Cuts Off Dollar Business with Iran
    --------------------------------------

    ¶19. (C) In a separate meeting with ING compliance officers
    and their general council, U/S Levey said that Iran engages
    in three categories of deceptive practices. First, Iran uses
    its state-owned banks to hide its illicit activities. For
    example, Iran funnels funds through Bank Saderat to Hizbollah
    and uses Bank Sepah for missile proliferation. Second, Iran
    uses front companies to procure items for its nuclear missile
    programs. Third, Iran uses cover payments to obscure
    transactions when there is no good, legitimate reason to do
    so. U/S Levey encouraged ING to carefully evaluate the risk
    of business with Iran. He pointed out that the reputational
    risk to the bank is the same, regardless of the currency of
    the transaction.

    ¶20. (C) ING's Deputy Chief Risk Officer, Koos Timmermans,
    told U/S Levey ING opposes cover payments, and thought that a
    new SWIFT field could address complications such as chain
    payments that cross international boundaries. He added ING
    has less than a basis point of business in Iran, there is
    no retail business, and ING has no branch office in the
    country. The remaining business is based on contractual
    obligations with customers having global export operations,
    he said. ING is also not actively seeking Iran business.
    He added ING would be reluctant to step into the Iranian
    market if all other banks were departing, and that ING's
    compliance department was carefully involved in monitoring
    the risks of Iran business, including reputational risk.
    Timmermans said ING had blocked all accounts with Bank Sepah.
    Jan-Willem Vink, ING General Counsel, said by policy ING
    allows no dollar transactions, with non-dollar transactions
    subject to restrictions.

    ¶21. (U) Dutch origin ING has 120,000 employees and is
    ranked among the top 20 banks worldwide and top 10 in Europe
    based on market capitalization.
    BLAKEMAN

`