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OO RUEHBC RUEHDBU RUEHDE RUEHDIR RUEHFL RUEHKUK RUEHKW RUEHLA RUEHNP
RUEHROV RUEHSL RUEHSR RUEHTRO
DE RUEHLO #2479/01 3071638
ZNY CCCCC ZZH
O 031638Z NOV 09
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3872
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE
RUCNIRA/IRAN COLLECTIVE IMMEDIATE
RUEHBJ/AMEMBASSY BEIJING IMMEDIATE 1215
RUEHMO/AMEMBASSY MOSCOW IMMEDIATE 2986
RUEHNY/AMEMBASSY OSLO IMMEDIATE 0787
RUEHKO/AMEMBASSY TOKYO IMMEDIATE 1305
RUEHHT/AMCONSUL HAMILTON IMMEDIATE 0270
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RUEAIIA/CIA WASHINGTON DC IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
C O N F I D E N T I A L SECTION 01 OF 02 LONDON 002479
SIPDIS
E.O. 12958: DECL: 11/03/2019
TAGS: EFIN ECON KTFN IR UK
SUBJECT: (C) UK SANCTIONS ON IRAN FORCE IRISL TO SEEK
COSTLY AND INADEQUATE RUSSIAN INSURANCE
REF: LONDON 2351 LONDON 00002479 001.2 OF 002 Classified By: ECON COUNSELOR KATHLEEN DOHERTY, FOR REASONS 1.4 B & D Action Request in Paragraphs 4 and 10. 1. (C) SUMMARY: UK measures to prohibit British companies from doing business
with the Islamic Republic of Iran Shipping Lines (IRISL), combined with joint U.S.-UK diplomatic pressure on host
governments in other shipping insurance states, have forced IRISL to seek Russian services, which are more costly and
offers less coverage than the original UK insurance. Nine members of the International Group of P Clubs are now prohibited from serving IRISL, and the governments of the other four members have pressed their clubs to
deny coverage. Bank Mellat is discussing with HMT lawyers the legal ramifications of the order that British entities
cease business with the Tehran bank, but has not yet filed suit. The UK Parliament gave full cross-party backing to the
measures on November 2, ensuring the sanctions will be in place until October 12, 2010, when they can be renewed. END
SUMMARY
IRISL - Most Doors Close, Russia Opens ---------------- ---------------------
2. (C) HM Treasury (HMT) and Foreign Office (FCO) officials told us on November 3 their Counter Terrorism Act measures
(Ref A) have successfully forced two UK Protection & Indemnity Clubs (P) to cancel insurance services for IRISL. IRISL is no longer a member of either UK club, and receives no cover from
them. The UK clubs are currently working only on legacy issues, essentially winding down existing business in a way
consistent with the cease and desist order (i.e, ensuring money owed by IRISL to the clubs are actually paid, and
granting exemptions where necessary on a case-by-case basis.)
3. (C) In additional encouraging news, UK authorities learned that eight additional members of the International Group
of P Clubs are regulated by the UK's Financial Services Authority (FSA) due to historical UK links (i.e., Bermuda's London
Club originated in the UK and is still supervised by the FSA). This brings to nine (the U.S., plus eight clubs under
FSA) the number of members of the International Group prohibited by their home regulator from engaging in business with
IRISL. The remaining International Group members not currently restricted by sanctions are Japan, Norway (with two
clubs) and Luxembourg. IRISL does not have a business relationship with these four clubs, the British government told
us, and USG-UK diplomatic efforts have been successful so far in getting the host governments to pressure their domestic
clubs to refuse to replace the canceled UK coverage. The Norwegian government has actively lobbied its clubs but has not
yet imposed any official prohibitions on dealing with IRISL, according to HMT. The Japanese have been eager to help deny
coverage, according to HMT, but report they have not yet been approached by IRISL. Luxembourg is also asking its P Club not to pick up the UK business. FCO told us Luxembourg is often unreliable in keeping its financial promises,
however.
4. (C) Despite successfully keeping IRISL out of the pre-eminent International Group, HMT has learned the shipper
approached Russia and will obtain coverage this week that is much more expensive than its previous contract with the UK
clubs, but with less generous coverage. FCO has learned some western companies involved with IRISL, including firms from
Germany and the Isle of Man, may not accept the inferior Russian coverage. The British government has decided not to
approach Russia, as it feels unable to encourage the Russian government to step in. Moscow has already told the British
their unilateral measures have undermined the unity of the P5 1. ACTION REQUEST: The UK is eager for our views on
whether to approach Russia.
5. (C) The UK P Clubs have quietly pressed HMG to include sanctions against IRISL in a broader package of UN sanctions. The clubs have
been receptive to the British government's arguments about the threat posed by IRISL and Iran, HMT tells us, but are
concerned they are being forced to give up valuable business only to see it go to other providers who LONDON 00002479
002.2 OF 002 are not affected by sanctions. The FCO is drawing up a wish list for the next UNSCR round, which includes
sanctions against IRISL, Iran Air and all Iranian state-owned banks.
Bank Mellat -----------
6. (C) There is little existing business contact between Bank Mellat and UK entities, so most of the effects of the UK's
sanctions against the Tehran bank is on the London subsidiary, Persia International. UK regulators are working to cut
ties and wind down existing relationships and accounts. Only a few companies have requested licenses to finish up
business with Bank Mellat, and the UK will follow the same process used in applying UN sanctions on Bank Melli (i.e.,
case-by-case review of license requests and all Bank Mellat funds to go into a restricted account.)
7. (C) Bank Mellat has been instructed by the Iranian government to engage in discussions with HMT lawyers on the
process, but has not yet brought legal action against the measures - much to HMT's surprise. The discussions, announced
by the Iranian Ambassador to the UK in a letter to all UK Members of Parliament, are more information-gathering in
nature at this point.
8. (C) Parliament officially approved HMG's CT Act measures on November 2 with wide-spread, cross-party support (no
opposition), ensuring the sanctions will remain in place until October 12, 2010, unless the UK opts to withdraw them
beforehand due to a reduced threat from IRISL and Bank Mellat (reftel).
9. (C) Press reporting has been fairly quiet, and the few pieces have been fact-based. Public and political opinion has
been silent. 10. (C) ACTION REQUEST: HMT officials are planning an impact analysis in the next few months and have asked
for U.S. models and methodologies of assessing the impact of our various sanctions regimes. They are interested in how
we measure both big-picture political effectiveness and calculate the small-scale impact on specific companies and
players. Visit London's Classified Website: XXXXXXXXXXXX
LeBaron