VZCZCXRO8737
PP RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHLO #2283/01 2531606
ZNY CCCCC ZZH
P 091606Z SEP 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 9688
INFO RUCNIRA/IRAN COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 02 LONDON 002283 

SIPDIS

 E.O. 12958: DECL: 09/09/2018 

TAGS: PGOV PREL KNNP IR UK

SUBJECT: IRAN: UK'S INFORMAL COMMENTS ON EU DYNAMICS AND IRAN SANCTIONS PROSPECTS REF: A. SECSTATE 95257 B. SEPT 2 LONDON EMAIL (GAYLE) TO NEA/IR 

Classified By: Political Counselor Rick Mills for reasons 1.4 (b) and ( d)

¶1. (C) Summary: Recent Embassy conversations on Iran with regular Foreign and Commonwealth Office (FCO) contacts suggest the UK's approach on Iran nuclear policy will continue to be tough-minded and practical, favoring direct engagement if feasible, but not optimistic on prospects either for broad EU support for further Iran sanctions or for a near-term change in Iran's stance. FCO Iran Coordinator and another FCO Iran officer separately commented on EU/P5 1 dynamics, German reluctance, FCO's view of Khamenei's cooling support for Ahmedinejad, and the large economic potential, but limited diplomatic time frame, in which expanded sanctions could work. End Summary. 

U.S./UK Still Agree: Need More Pressure, More Sanctions -----------------------------

¶2. (C) During a courtesy call by newly arrived Political Minister-Counselor, accompanied by London Iran Watcher (Poloff), FCO Iran Coordinator Antony Phillipson covered familiar ground, noting both USG and HMG remain close partners on the urgent need to increase pressure on the regime via new sanctions. UK leadership had helped produce a broad package of EU sanctions August 7, Phillipson said, with EU work to implement that package now going forward. 

Real Target Is UAE; Only Five EU Members Are Serious on Iran; Elusive Impact of Sanctions --------------------------------------------

¶3. (C) Phillipson also provided his personal assessments on Iran policy and prospects. P5 1/Multilateral/Collective Efforts: -- Phillipson sounded a hopeful note on the replacement of Russian political director Kislyak's replacement by Sergey Ryabkov; Phillipson said FCO's view is that Ryabkov is said to be "very pragmatic" and "as good as they come;" -- P5 1 efforts should now focus on a "coalition of the willing," which Phillipson said now consists of Spain, Italy, France, UK, Germany, and the U.S.; and -- The real target for those wanting effective international cooperation is the UAE; Phillipson argued the problem of Dubai transshipments to Iran is a function of both technical incapacity as well as lack of political will, with both factors of roughly equal importance. Iran internal: -- Phillipson said Khamenei's recent comments to Ahmedinejad, that he should plan, as the President, beyond 2008, were in HMG eyes intended less as an endorsement of a second term for Ahmedinejad than as a request that the current president should make policy according to Iran's longer term interests, rather than according to shorter term tactical considerations. Sanctions: -- Phillipson believes the economic impact of sanctions should be measured not only directly but also in terms of opportunity costs (e.g., foreign direct investment would be enormous but for sanctions). At the same time, Phillipson argued economic and even diplomatic opportunity costs are still poorly understood by Iranians themselves; -- He quoted with apparent approval former National Security Advisor Tony Lake as saying the U.S. will "sharpen the choices" for Iran, and said the purpose of sanctions is to compel the regime to engage directly, with enrichment suspension being the vital prerequisite; -- The long-term internal consequences of engagement are a great unknown for the regime, which is focused on its own survival; -- Hydrocarbons sanctions, beginning with LNG, must in HMG view be on the table; Phillipson said hydrocarbons are central to core regime equities and calculations; -- But Phillipson also gave a gloomy personal assessment that the P5 1 has "about twelve months," after which "many (Phillipson declined to be more specific) will begin to LONDON 00002283 002 OF 002 consider other options;" he opined twelve months is not enough time for a complete range of sanctions options to develop and have their full economic and political effect.

 German Reluctance: Not A Temporary Condition --------------------------------------------

¶4. (C) Separately, FCO Iran Coordination Group's Sanctions Officer Neil Kernohan on September 8 commented at length on the negative impact German hesitation is having on prospects for further EU sanctions on Iran. Kernohan's comments came during Poloff's call to deliver USG demarche (ref a), with which HMG fully agrees, on Polish and Croatian oil investments.

¶5. (C) Kernohan pointed to hydrocarbon investment and reinsurance as the areas where HMG wants to push the EU hardest for new sanctions. He said, however, FCO fears Germany may soon draw a firm, final line on further EU action, limiting it to the extent of existing UNSC action and authority, and no more. Kernohan opined that a variety of factors seem to produce chronic German reluctance inside EU deliberations: commercial interests, infighting within German ministries, and a fundamental unwillingness to use the institution of the EU in a forward-leaning way.

¶6. (C) Kernohan said he was not optimistic there will be sufficient consensus within the E3 on Iran to enable an effective push against Chinese or Russian reluctance within the P5 1 on the margins of UNGA meetings this month.

 Comment -------

¶7. (C) Part of the FCO Iran Coordination Group's brief is to manage the expectations of its closest ally, the United States; FCO therefore can be expected to magnify the difficulties it faces in leading 27 EU member governments toward coherence on Iran. The FCO's evident cumulative fatigue as it continues to channel the EU's Iran deliberations, however, suggests any further EU expansion of Iran sanctions may be a long slog with limited results, with continuing, visible USG support and appreciation for UK efforts a key to success. Visit London's Classified Website: XXXXXXXXXXXX
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