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### Viewing cable 08TELAVIV2760, U/S LEVEY REASSURES GOI THAT NO MOMENTUM WILL BE

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Reference ID | Date | Classification | Origin
--- | --- | --- | ---
08TELAVIV2760 | 2008-12-10 08:08 | SECRET | Embassy Tel Aviv

`

    VZCZCXRO1721
    PP RUEHC RUEHSD
    DE RUEHTV #2760/01 3450810
    ZNY SSSSS ZZH ZUI ZDK RUEHZC SVC 4078
    P 100810Z DEC 08
    FM AMEMBASSY TEL AVIV
    TO RUEHC/SECSTATE WASHDC PRIORITY 9530
    INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
    RUEHAD/AMEMBASSY ABU DHABI PRIORITY 4716
    RUEHTH/AMEMBASSY ATHENS PRIORITY 0552
    RUEHRL/AMEMBASSY BERLIN PRIORITY 0461
    RUEHRO/AMEMBASSY ROME PRIORITY 6800
    RUEHDIA/AMCONSUL DUBAI PRIORITY 0096
    RUEHJM/AMCONSUL JERUSALEM PRIORITY 0970
    RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

` `

    S E C R E T SECTION 01 OF 04 TEL AVIV 002760

    SIPDIS

    TREASURY FOR LEVEY, S.
    ATHENS FOR PURCELL, A.

    E.O. 12958: DECL: 12/10/2018
    TAGS: KTFN EFIN ECON KWBG IR IS
    SUBJECT: U/S LEVEY REASSURES GOI THAT NO MOMENTUM WILL BE
    LOST IN THE FIGHT AGAINST TERROR FINANCE

    Classified By: A/DCM Marc Sievers for reasons 1.4 (b) and (d)

    -------
    SUMMARY
    -------

    1.(S) In a visit to Israel on 16-17 November, Treasury Under
    Secretary for Terrorism and Financial Intelligence, Stuart A.
    Levey, reassured GOI officials that no momentum would be lost
    in USG efforts to combat terrorist financing or to pressure
    Iran during the transition to a new US administration in
    January. In meetings with Foreign Minister Tzipi Livni,
    Mossad Director Meir Dagan, National Security Council
    Chairman Dani Arditi, and others, U/S Levey emphasized recent
    U.S. designations against the Union of Good, the Islamic
    Republic of Iran Shipping Lines (IRISL), and the recent
    revocation of Iran's "U-Turn" license. In response to GOI
    officials' pressure to have the U.S. designate the Central
    Bank of Iran (CBI), Levey underscored the importance of
    international, multilateral concurrence for such an effort to
    be a success.

    2.(S) Israeli officials were keen to outline an "escalation"
    in CBI programs that they believed pose a danger to the
    international financial system. Several key Israeli officials
    identified Reza Raei, Vice Governor of the CBI, as a key
    figure in masterminding new ways to help the Iranian
    commercial and banking sectors circumvent sanctions. Levey
    promised to continue pushing the Gulf states on adopting
    stronger regulation until the last day of his appointment.

    3.(S) Mossad Chief Meir Dagan informed Levey that sanctions
    were beginning to have a negative effect on Iran's regime.
    NSC Chairman Arditi also told him that the PA was performing
    well in its renewed fight against terror finance in the West
    Bank. END SUMMARY.

    --------------------------------------------- -----
    GOI CONCERNED ABOUT COUNTER TERROR FINANCE POLICY CONTINUITY
    --------------------------------------------- -----

    4.(S) National Security Council (NCS) Chairman, Dani Arditi,
    in a November 16 meeting with U/S Stuart Levey, asked whether
    Levey thought his efforts would continue into the next U.S.
    administration. Even though he said he planned to resign as
    required in January, Levey told Arditi that he believed the
    Obama team would be committed to continuing the ambitious
    program against terrorism finance that he has shepherded over
    the last several years. Saying counter- terrorism finance was
    not a partisan issue in the U.S., Levey subsequently
    confirmed these sentiments to Foreign Minister (FM) Tzipi
    Livni and Mossad Director Meir Dagan in separate meetings
    that occurred on the following day, November 17.

    ----------------------
    IRAN/NON-PROLIFERATION
    ----------------------

    5.(S) On November 16, Levey outlined for Ministry of Foreign
    Affairs Deputy Director General for Strategic Affairs Alon
    Bar, and Senior Deputy Director General Yossi Gal positive
    developments in the Iran effort. He told them that Treasury
    had been very successful in curtailing business with Iran by
    most "major players". Levey said that expanding the
    non-proliferation strategy into insurance, and putting
    pressure on Iran's oil refining capacity and Liquid Natural
    Gas (LNG) industry were next steps being pursued. He also
    reported that the recent IRISL designation has been unusually
    effective.

    CBI's Reza Raei Masterminds New Methods
    ---------------------------------------

    6.(S) During their November 16 meeting, Arditi told Levey
    that the Israeli intelligence community has continued to see
    an escalation in CBI efforts to help designated Iranian
    commercial banks circumvent international and U.S. sanctions.
     The NSC Chairman presented several recent examples of CBI
    behavior that he characterized as unusual for a central bank.
    Arditi identified Reza Raei, Vice Governor of the CBI for
    Foreign Exchange Affairs, as the mastermind of these new

    TEL AVIV 00002760  002 OF 004

    efforts.

    7.(S) Meir Dagan subsequently told Levey that the CBI had
    engineered a way for the UN-designated Iranian bank Sepah to
    conduct foreign business transactions through use of the
    Iranian Postal Bank. Bank Melli, a USG-designated bank, had
    also purchased shares in investment funds as a way to escape
    the effects of the sanctions, according to Dagan. Using these
    methods, Melli and Sepah have been able to fabricate a method
    of providing correspondent-like banking services to
    designated Iranian banks that find it increasingly difficult
    to deal in foreign currency. Arditi named the "Persia Equity
    Fund" as one such financial instrument being used by Melli.
    Levey commented that any such investment fund or financial
    instrument could be listed as a derivative designation of
    Melli if enough evidence could be shown linking the two
    organizations. Levey told Meir Dagan that he was in favor of
    pursuing a designation of Raei if GOI allegations were
    accurate.

    No International Support for Designation of the CBI
    --------------------------------------------- ------

    8.(S) Arditi and subsequently, Dagan, asked Levey whether the
    USG was considering a designation of the CBI. Although
    Treasury had looked into the possibility, said Levey, a
    designation of the CBI would be ineffective without a
    multilateral effort. International support for such an effort
    simply did not yet exist, Levey explained. He told Dagan that
    we need to build support by sharing info about the CBI's
    illicit conduct, similar to the support we built for cutting
    off the U-turn license. Levey said that it would be better to
    focus on limiting other central and commercial banks'
    business with the CBI. Noting that the banking industry
    relies heavily on reputation, Levey told Arditi that the
    right strategy is to continue exposing the illicit activities
    of Iranian banks and banking officials.

    European Banks' Business with Iran
    ----------------------------------

    9.(S) MFA interlocutors revisited the progress of European
    banks in non-proliferation efforts. In a November 16 meeting
    with Yossi Gal, Senior Deputy Director General, and Alon Bar,
    Deputy Director General for Strategic Affairs, Gal raised
    concerns that Italy and Germany were falling short in their
    commitment to enforce sanctions within their banking sectors.
    Gal told Levey that the MFA was planning a visit to Italy in
    December, but was unsure whether its attempt to persuade the
    politicians would filter down to action within the
    bureaucracy. Gal expressed the same concern about the banking
    sector in Germany, saying that resistance from the
    bureaucracy and the private sector often undermined attempts
    by political figures to improve German regulation. Bar and
    Gal encouraged Levey to join the GOI in pressing the
    governments and banking sectors of Germany and Italy to do
    more.

    Cautious Optimism on Gulf States
    --------------------------------

    10.(S) On the status of UAE efforts to stem Iranian finance,
    Levey told Gal and Bar that he was optimistic about the
    country's efforts. Among other examples, he mentioned that
    the UAE had decreased the number of visas it was issuing to
    Iranian nationals and that Emirati ministers were receptive
    to his requests for increased banking regulation.

    11.(S) FM Livni told Levey that Israel continues to encourage
    the Gulf states to more publicly outline their actions
    against Iranian finance within their banking sectors despite
    the countries' reasons for keeping such actions secretive.
    She asked Levey to join in this effort. Levey affirmed that
    the USG was encouraging sanctions in all sectors and posited
    that the Iranians were beginning to feel the pressure. Livni
    asked if the declining price of oil was becoming leverage in
    the efforts to thwart Iranian financial efforts. Levey said
    that it was and that the Iranian private sector was becoming
    more vocal in its criticisms of the government.

    12.(S) Levey outlined for his GOI interlocutors recent

    TEL AVIV 00002760  003 OF 004

    efforts by Treasury to broaden its sanctioning of Iran to the
    shipping, insurance, and reinsurance industries. He cited the
    designation of IRISL as a positive first step and mentioned
    that Treasury had found willing partners in Europe and the UK
    to further efforts in this area.

    Effect of Sanctions on Iran
    ---------------------------

    13.(S) Dagan told Levey that the economic problems Iran is
    experiencing as a result of sanctions are encouraging debate
    within the regime. He said that in order to preserve the
    revolution, some key figures have begun to consider the need
    for change. The pressure is on, Dagan said, but he could not
    estimate when Iran would hit the brink. He noted that the
    lower cost of oil at the moment would likely prompt Iran to
    increase its production, thereby encouraging more business
    through the CBI. With oil prices low everywhere, however,
    Dagan and Levey agreed that Iran was a less attractive place
    for investment. Levey told Dagan that the present low oil
    prices provide a critical opportunity to convince other
    members of the international community to apply more
    pressure.

    14.(S) Livni asked Levey if there was a risk of Iran
    regaining a foothold in certain markets as a result of the
    world financial crisis. Levey said that the market turmoil
    has worked to the USG's advantage: the crisis has made
    financial institutions even more risk-averse, thereby
    lessening Iran's attractiveness even further. Additionally,
    while Iran's banks are isolated, its economy is not.

    U.S. Engagement with Iran
    -------------------------

    15.(S) FM Livni asked Levey during their November 17 meeting
    why the USG was considering a rapprochement with Iran through
    a U.S. Interests section in Tehran. She questioned whether
    the tactic would have a net positive outcome when measured
    against the negative perceptions such a move would be bound
    to create. Levey told Livni that this was a question better
    posed to the State Department, but that her concern was the
    central issue being debated by policy makers in Washington.
    In Levey's previous meeting with MFA officials Bar and Gal,
    he said that engagement with Iran would not work without
    leverage, indicating that sanctions would need to be in place
    no matter what the USG decides to do.

    --------------------------------------------- -------------
    STEMMING PALESTINIAN TERROR FINANCE: GOI PLEASED WITH PA'S
    PROGRESS
    --------------------------------------------- -------------

    16.(S) Levey told Arditi that Treasury's recent designation
    of the "Union of Good" was proof of the USG's commitment to
    continue to work against Hamas and Palestinian terrorists.
    Levey said, however, that while the USG supported efforts at
    thwarting terrorism in the territories, the USG wished to
    keep humanitarian goods flowing to the needy within the
    population.

    17.(S) Arditi told Levey that Palestinian Authority (PA)
    efforts at stemming terrorism within the territories were
    going quite well. He said the PA's positive efforts
    "surprised" his staff and that he "never thought" the PA
    would do so well. Levey said that Treasury coordinated with
    Prime Minister Fayyad on the Union of Good designation and
    was pleased to hear that PA efforts were held in high regard
    by the GOI.

    18.(S) When Levey inquired about efforts to prevent
    correspondent banking relations in Gaza from being severed,
    Arditi said that the Postal Bank "was on the agenda". Arditi
    lamented that the services provided by the Postal Bank would
    not be as good because of its small size and limited
    capacity. He expressed his hope that the central bank
    governor would be able to delay the commercial banks'
    decision to end their relationship with the Palestinians
    until a permanent solution was ensured.

    19.(S) This cable has been cleared by Under Secretary Stuart

    TEL AVIV 00002760  004 OF 004

    Levey.

    ********************************************* ********************
    Visit Embassy Tel Aviv's Classified Website:
    http://www.state.sgov.gov/p/nea/telaviv

    You can also access this site through the State Department's
    Classified SIPRNET website.
    ********************************************* ********************
    CUNNINGHAM

`