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### Viewing cable 09QUITO875, Mixed Ecuadoran reactions to USG concerns over planned deals

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09QUITO875 | 2009-10-08 22:10 | 2011-04-13 17:05 | CONFIDENTIAL//NOFORN | Embassy Quito
Appears in these articles: http://www.eluniverso.com/2011/04/12/1/1355/cable-229033.html

`

    VZCZCXYZ0001
    OO RUEHWEB

    DE RUEHQT #0875/01 2812256
    ZNY CCCCC ZZH
    O R 082256Z OCT 09
    FM AMEMBASSY QUITO
    TO RUEHC/SECSTATE WASHDC IMMEDIATE 0173
    INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
    RUEAIIA/CIA WASHINGTON DC
    RUEATRS/DEPT OF TREASURY WASHINGTON DC
    RUEHBO/AMEMBASSY BOGOTA
    RUEHBR/AMEMBASSY BRASILIA 0034
    RUEHCV/AMEMBASSY CARACAS 0054
    RUEHGL/AMCONSUL GUAYAQUIL
    RUEHLP/AMEMBASSY LA PAZ NOV LIMA 0060

` `

    C O N F I D E N T I A L QUITO 000875

    SENSITIVE
    SIPDIS
    NOFORN

    E.O. 12958: DECL: 2034/10/08
    TAGS: ECON EFIN EC IR PREL MNUC PARM KNNP
    SUBJECT: Mixed Ecuadoran reactions to USG concerns over planned deals
    with Iran's Export Developmen...

    id: 229033
    date: 10/8/2009 22:56
    refid: 09QUITO875
    origin: Embassy Quito
    classification: CONFIDENTIAL//NOFORN
    destination: 09QUITO863|09QUITO869|09STATE98748
    header:
    VZCZCXYZ0001
    OO RUEHWEB

    DE RUEHQT #0875/01 2812256
    ZNY CCCCC ZZH
    O R 082256Z OCT 09
    FM AMEMBASSY QUITO
    TO RUEHC/SECSTATE WASHDC IMMEDIATE 0173
    INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
    RUEAIIA/CIA WASHINGTON DC
    RUEATRS/DEPT OF TREASURY WASHINGTON DC
    RUEHBO/AMEMBASSY BOGOTA
    RUEHBR/AMEMBASSY BRASILIA 0034
    RUEHCV/AMEMBASSY CARACAS 0054
    RUEHGL/AMCONSUL GUAYAQUIL
    RUEHLP/AMEMBASSY LA PAZ NOV LIMA 0060

    ----------------- header ends ----------------

    C O N F I D E N T I A L QUITO 000875

    SENSITIVE
    SIPDIS
    NOFORN

    E.O. 12958: DECL: 2034/10/08
    TAGS: ECON EFIN EC IR PREL MNUC PARM KNNP
    SUBJECT: Mixed Ecuadoran reactions to USG concerns over planned deals
    with Iran's Export Development Bank

    REF: STATE 98748; JOHNSTON/LANDBERG EMAIL 10/01/09; QUITO 863
    QUITO 869

    CLASSIFIED BY: Heather M. Hodges, Ambassador, U.S. Department of
    State, EXEC; REASON: 1.4(B), (D)

    -------

    Summary

    -------

    ¶1. (C) Embassy delivered Ref A demarche on Ecuador's dealings with
    the Export Development Bank of Iran (EDBI), a USG-designated
    entity, to the Central Bank (CBE), Ministry of Foreign Affairs
    (MFA), Superintendent of Banks, and Financial Intelligence Unit.
    The CBE's General Manager expressed concern over the possible
    repercussions of doing business with EDBI, and asked to continue
    discussions directly with the U.S. Treasury.  The MFA's
    Multilateral Affairs Director General repeated the traditional GoE
    line that Ecuador respects UNSC resolutions with regards to nuclear
    disarmament and non-proliferation, but rejects "the
    extraterritorial application of another states' laws to Ecuador"
    and intends to "strengthen its purely civilian relations with
    Iran."  End Summary.

    ¶2. (C) Econoffs delivered Ref A demarche in coordination with
    Treasury and State's September 29 demarche in Washington to
    Ecuador's Ambassador to the U.S., Luis Gallegos.  Following
    Gallegos' warning that if Post did not communicate the demarche
    correctly it could precipitate a negative reaction from the GOE and
    mean the end of the U.S.-Ecuador bilateral dialogue (Ref B),
    Econoffs took great care to highlight that the U.S. is not
    threatening the GoE, but rather providing information and looking
    for Ecuadoran support.  The demarche was taken seriously by
    Embassy's interlocutors working in the financial sector, but less
    so by the MFA's lead on Iran issues.  (Comment: it is unclear
    whether GoE officials who understand that the risks outweigh the
    benefits will be able to influence internal deliberations on this
    highly political topic.)

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

    In the Hot Seat: CBE Worried About Exposure to Iran

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

    ¶3. (C) During a late evening meeting September 29, CBE General
    Manager Karina Saenz (STRICTLY PROTECT) expressed serious concern
    about the Central Bank's exposure under E.O. 13382 after hearing
    Econoffs' explanations of the possible repercussions of doing
    business with EDBI, a USG-designated entity.  She said the CBE is
    in effect serving as the GoE's financial agent in the arrangement
    where EDBI will provide an approximately US$150 million credit to
    Ecuador.  She said the CBE itself would not benefit financially
    from this deal, and noted wryly that even Venezuela's Central Bank
    is extremely careful about doing business directly with Iran.

    ¶4. (C) Saenz understood immediately that the CBE's involvement in
    this arrangement risks its operations in U.S. markets, would impact
    its relationships with international financial institutions, and
    could undermine the integrity of Ecuador's financial system,
    potentially affecting foreign private financial institutions'
    decisions to operate here.  Further complicating the situation, she
    noted, is that the CBE maintains its international reserve holdings
    in U.S. banks and owns U.S. licensed Pacific National Bank in
    Florida via its ownership of its parent company, Ecuador's Banco

    Pacifico.  This relationship makes the CBE directly responsible to
    U.S. bank regulators, she commented.

    ¶5. (C) Saenz promised to raise the issue with the CBE's Board of
    Directors.  She also asked for additional information and for the
    Embassy's help in arranging direct contact with Treasury officials.
    (Embassy helped arrange an October 3 bilateral with Treasury
    officials on the margins of the IMF/World Bank meetings in
    Istanbul.)  She recommended the Embassy address the issue with
    Coordinating Minister for Economic Policy Diego Borja, since
    "Ecuador's dealings with EDBI are more geopolitical than
    financial."  She couched the EDBI issue in terms of "President
    Correa's effort to diversify GoE foreign relations," which includes
    strengthening ties with countries like Iran, Russia, and China.
    EconCouns explained that the Embassy was first delivering USG
    concerns to sub-ministerial officials who have the technical
    background to understand the ramifications of E.O. 13382 and who
    can explain them to higher-level decision makers.

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

    MFA: "We Are Strengthening Relations with Iran"

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

    ¶6. (C) The reaction of MFA Multilateral Affairs Director General
    Lourdes Puma was markedly different, albeit expected and entirely
    consistent with Puma's past responses to Iran demarches (see Refs C
    and D).  In an emotional response, Puma, recently nominated as
    Ecuador's Ambassador to Malaysia, stated that Ecuador fully
    intended to strengthen relations with Iran, but that these
    relations were of a purely civilian nature.  She insisted that the
    GoE fully adheres to UNSC resolutions and completely supports
    global non-proliferation and universal disarmament efforts.

    ¶7. (C) Puma added that Ecuador would never collaborate with any
    Iranian effort to circumvent UNSC resolutions with the goal of
    developing WMDs (even though "Ecuador did not vote for the
    resolutions").  However, she argued that Ecuador does not accept
    the argument that Iran was a "terrorist country."  She also stated
    that Ecuador possessed no proof that EDBI was in any way involved
    with WMDs.  She said that UNSC resolutions were clear that the GoE
    could not provide assistance to Iranian entities.  However, she
    argued that the arrangement with EDBI did not violate these
    resolutions, because EDBI was helping Ecuador, not the other way
    around.  The EDBI credit is purely commercial and "we will only
    take their money to fund projects" in Ecuador.

    ¶8. (C) Puma said Ecuador does not accept other states' interference
    in Ecuador's sovereign decisions to develop peaceful, commercial
    relationships with whichever other countries it so chooses.  She
    also said the GoE rejects the "extraterritorial application" of
    another country's laws in Ecuador.  At the end of the conversation,
    Puma emphasized that this was not a personal issue between Ecuador
    and the U.S. and that countries can have different "visions of the
    world" and that "maintaining dialogue is what is important."  She
    highlighted Ecuador's commitment to supporting efforts to end
    terrorism, noting that a GoE priority is to pass counter-terrorism
    finance legislation.

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

    Financial Regulators Duck Responsibility

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

    ¶9. (C) Embassy also delivered a stripped down version of Ref A
    points (excising sensitive details of EDBI's activities) on October
    5 to Banking Superintendent Gloria Sabando and the new head of
    Ecuador's Financial Intelligence Unit, Victor Hugo Briones.  Both
    Sabando and Briones were quick to point out that the CBE was the
    entity that is managing financial dealings with EDBI.  Each clearly
    understood the implications of Ecuador doing business with a
    U.S.-designated entity, but both clarified that their institutions
    had no exposure to EBDI and no policy role on the issue of EDBI's
    entry into Ecuador.  While both had heard that the GoE was
    discussing the terms of a line of credit with EDBI, neither was
    aware of its interest in opening a branch in Ecuador.  Briones
    repeatedly emphasized his non-involvement, but noted that EDBI was
    offering the money at an attractive interest rate (near zero), and
    GoE officials would thus have to weigh whether the benefits they
    get from Iran outweigh what they could potentially lose from the
    U.S.

    -------

    Comment

    -------

    ¶10. (C) Even though this issue was not within their direct purview,
    Embassy raised it with financial regulators (FIU and
    Superintendent) because they are in close contact with the GoE's
    key legal and regulatory entities.  The idea is to get Ecuadoran
    officials thinking about what the country is risking for the sake
    of a $150 million loan and better relations with a distant country
    with which it has little in common and almost no chance of building
    a significant commercial relationship.  We are still seeking a
    meeting with the Ministry of Finance, after which we will assess
    whether it makes sense to raise to a higher level and/or pursue
    direct communication with Washington agencies (via DVC or a
    high-level Treasury visit).  The Finance Ministry straddles both
    the financial and political spheres, so its reaction should be
    useful to understanding whether financial or political
    considerations will win out within the GoE.
    HODGES

    =======================CABLE ENDS============================

`