VZCZCXRO2310
OO RUEHFL RUEHKW RUEHLA RUEHROV
DE RUEHFR #1650/01 2431248
ZNY SSSSS ZZH
O 301248Z AUG 08
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4205
RHEHNSC/NSC WASHINGTON DC IMMEDIATE
RUEATRS/DEPARTMENT OF TREASURY WASHDC IMMEDIATE
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE

S E C R E T SECTION 01 OF 03 PARIS 001650 
 
SIPDIS 
 
E.O. 12958: DNG: CO 08/30/2018 
TAGS: ECON EFIN FR PREL RS IR
SUBJECT: TREASURY D/S KIMMITT, FRENCH NSA LEVITTE ON IRAN, 
GEORGIA, SYRIA, PAKISTAN 
 
REF: PEKALA/EUR 8/29 E-MAIL 
 
Classified By: Econ Counselor Stuart Dwyer for reasons 1.4 (b) and (d) 
 
¶1. (C) Summary: On August 29 President Sarkozy,s Diplomatic 
Advisor Jean-David Levitte and Deputy Advisor for Security 
Affairs Francois Richier outlined for Treasury D/S Robert 
Kimmitt GOF thinking on &quick, effective and sharp8 next 
steps on Iran.  The GOF would present its ideas more fully in 
a Quad meeting on September 17 in Washington.  On Georgia, EU 
heads of state on 9/1 would: discuss Chancellor Merkel,s 
&neighborhood meeting8 proposal, with a possible conference 
in late October; likely name a Georgia envoy; agree to send 
President Sarkozy back to Moscow to push cease fire points 
not fully implemented; agree on an ESDP observer mission 
under OSCE auspices; and possibly impose sanctions on 
companies/individuals doing business in Abkhazia and South 
Ossetia.  Kimmitt shared U.S. concerns with Pakistan,s 
economic policy, and urged France not to reward Syria with 
further engagement that did not follow on improved 
performance on key issues.   End summary. 
 
Iran 
- - - 
 
¶2. (C) Levitte asked Security Affairs Advisor Richier to 
present French thinking on next steps on Iran.  With 
prospects for additional Security Council action limited, 
France wanted to focus on &quick, effective and sharp8 
measures in finance, insurance and energy that could be 
started among the Quad, and then broadened to like-minded 
countries.  France would present detailed thinking in a Quad 
meeting it had proposed for September 17 in Washington. 
 
¶3. (S) Key financial elements would include: proposals to 
work for stronger action against Iran in the FATF, which 
would assist in building a case for countries to implement 
national measures; a commitment to enacting recommendations 
that banks exercise strong vigilance on all financial 
transactions with Iran; review of national legislation to 
better understand options in different jurisdictions for 
freezing assets in the absence of a UNSCR (Note: Richier said 
France had determined it did, in fact, have such a tool that 
dated to the 1950s. End note.); steps towards taking national 
measures on Bank Saderat.  On the latter, Richier said France 
understood the UK was ¬ enthusiastic,8 and it had taken 
convincing to get the French Ministry of Finance on board. 
But France hoped the combination of moral suasion and 
legally-binding measures could ratchet up financial pressure 
quickly on Iran. 
 
¶4. (S) Additional tracks in the French proposal related to 
insurance and energy.  Participating governments would: make 
joint approaches to discourage reinsurance companies from 
doing business with Iran (first in the UK, France, Germany 
and the United States, and subsequently to determine how best 
to approach the Swiss); use moral suasion to discourage 
insurance companies from engagement with Iran (Richier 
acknowledged this would be more difficult than reinsurance 
given easy substitutability among firms); and put pressure on 
transport insurance, where the limited number of firms should 
allow for maximum leverage.  On energy, France would propose 
halting exports of specific limited-source refinery spare 
parts, and technology related to LNG.  The combination of 
measures would have an impact on the Iranian economy in 
advance of the 2009 presidential elections in Iran, Richier 
said. 
 
¶5. (S) D/S Kimmitt welcomed the presentation and thanked 
France for its leadership in reaching the August 7 EU Common 
Position.  The United States also favored targeted, 
multilateral measures, but agreed that we cannot await 
further UNSC authority before taking additional actions.  The 
sooner initial proposals hatched among the Quad could be 
expanded to the G-7 the better, and preferably well in 
advance of the G7 finance ministers meeting on October 10 in 
connection with the annual World Bank/IMF meetings.  Kimmitt 
observed that insurance companies are regulated financial 
institutions and would be in no position to argue against the 
extension of authorities that already cover their banking 
counterparts.  He agreed with a Richier observation that the 
OECD,s upcoming review of Iran,s risk rating provided an 
opportunity to ensure that all risk factors were fully 
internalized in the OECD rating. 
 
Georgia 
- - - - 
 
¶6. (C) Kimmitt thanked Levitte for France,s leadership on 
Georgia.  Georgia had been a model for its macro performance 
 
PARIS 00001650  002 OF 003 
 
 
with 12% GDP growth and a high ranking on the World Bank,s 
list for ease of doing business.  The U.S. was prepared to 
mobilize $1 billion for Georgia,s proposed &Phoenix Fund,8 
the EU needed to step up with an equal contribution.  Kimmitt 
said he had heard concerns from EU External Relations about 
Georgia,s absorptive capacity.  Based in part on Georgia,s 
strong record with implementing its current MCC Compact, the 
United States was convinced Georgia could absorb $2 billion, 
apply necessary the safeguards and use the resources 
effectively. 
 
¶7. (C) Looking towards the September 1 Heads of State 
Meeting, Levitte touched on what he saw as key themes (ref): 
the status of humanitarian aid, which was well underway; how 
to work more effectively with refugees; reaching agreement on 
an observer mission (a civilian ESDP mission under OSCE 
auspices, the latter serving as the &international 
mechanism8 referred to in point 5 of the cease-fire); 
appointment of a special envoy for Georgia to improve the 
coherence and effectiveness of EU policy; and, probably, a 
request that President Sarkozy return to Moscow the week of 
September 1 to push cease-fire points that remain 
unfulfilled. The EU may also consider delaying preparatory 
work on the Nice November 14 EU ) Russia Summit until Russia 
fully implements the six-point plan. 
 
¶8. (C) Levitte said the leaders also would discuss Chancellor 
Merkel,s proposed &neighborhood meeting8 to support 
Georgia, with a possible conference in late October.  The 
ministerial-level meeting would include Turkey, Ukraine, and 
the Caucasus and Central Asian states.  Consideration would 
be given to inviting Russia, conditioned on the GOR,s full 
implementation of the six-point plan.  Levitte &did not see 
difficulty8 in getting to $1 billion in support for Georgia 
(including support mobilized from ®ional banks8). 
 
¶9. (C) Kimmitt pressed hard to move up the date of the 
proposed ministerial.  Assessment missions had been completed 
and the United States would be ready to go with its 
stepped-up assistance in two weeks.  Moreover, if 
implementation of the six-point plan was Russia,s condition 
for participation, late October would give the GOR an excuse 
to drag its feet for another two months.  Levitte said 
President Sarkozy had asked Commission President Barroso to 
speed up existing assistance flows, and the neighborhood 
conference would be a &crowning event8 at the end of a 
process of expanding support for Georgia.  But he 
acknowledged Kimmitt,s point and said that if the conference 
could take place at the end of September instead, &why 
not?8 
 
¶10. (C) On possible sanctions on Russia, Kimmitt emphasized 
the importance of close U.S.-EU coordination. He cautioned 
against consideration of excessively broad measures that 
could backfire on efforts to integrate the GOR into 
rule-based institutions.  However, targeted measures, such as 
visas and restrictions on putative governments in Abkhazia 
and South Ossetia, might be appropriate for consideration. 
Levitte agreed, saying it was too early to discuss sanctions 
when efforts to implement the six-point plan had not been 
exhausted. However on September 1 the heads of state would 
consider banning entities investing in Abkhazia or South 
Ossetia from doing business in the EU. 
 
¶11. (C) Levitte said the Balts and Poles were pushing hard 
for broader sanctions, now.  He had warned that the Russians 
were chess players, it was critical to think several steps 
ahead and avoid precipitous action.  If Russia cut off gas 
shipments to Eastern Europe in response to sanctions, France 
would not want to have to go to Moscow with minimal leverage 
to argue for a reopening of the spigots.  France has asked 
the Commission to prepare a chart of key elements of the 
Russia ) EU trade relationship for the September 1 meeting 
to inform discussions on possible responses.  In this 
connection, Levitte noted that, while many in Europe (but not 
France) are dependent on Russian gas, Russia also depends on 
Europe for FDI, technology and markets for non-energy 
exports. 
 
Syria, Pakistan 
- - - - - - - - 
 
¶12. (C) Turning to Syria, Kimmitt acknowledged that some 
progress had been made as a result of French engagement.  But 
he warned that any additional engagement with Syria must be 
based on performance on the Syrian side, including cessation 
of support for armed groups in Lebanon, border demarcation, 
and halting the flow of weapons and terrorists into Iraq. 
Some of France,s EU partners had helpfully pushed for Syrian 
action on the key issues that are the sine qua non of the 
 
PARIS 00001650  003 OF 003 
 
 
respectability Syria covets.  Levitte argued that, for the 
moment, France does see progress.  In Lebanon Suleiman is 
president, the government is in place following proper 
elections, and genuine diplomatic relations have been 
established despite outstanding issues on the border 
demarcation issue.  Indirect discussions between Israel and 
Syria are &working quite well8 (though those discussions 
should be into direct negotiations, he noted).  And Syria had 
released a number of political prisoners at France,s request 
(France had honored Assad,s request not to go public, he 
said).  The moment the progress stops, the engagement would 
stop.  &That,s what we did on December 30 of last year, 
we,re ready to do it again.8 
 
¶13. (C) Syria would turn away from its alliance with Iran 
only when it felt securely accepted in &its8 Sunni orbit, 
Levitte posited.  The challenge on that score was with Saudi 
Arabia and Egypt, including the former,s support of Salafist 
terrorists.  Kimmitt underscored that security was certainly 
not enhanced by Syrian allowance of transit of armed groups 
to Iraq and Lebanon.  Kimmitt also said France should not 
hesitate to raise human rights with Syria, even beyond 
prisoner releases. Levitte emphasized that France had passed 
U.S. points to Syria on July 12 during the Euro-Med Summit. 
He understood that Syria had, to some degree, curbed the flow 
of insurgents across the Iraqi border (though support to 
Hezbollah continued). 
 
Pakistan 
- - - - - 
 
14.(C) Kimmitt warned Levitte that the U.S. had concluded a 
balance of payments collapse in Pakistan was a matter of 
when, not if, should the GOP not pursue stronger economic 
reform measures, specifically eliminating subsidies, raising 
interest rates, and restarting privatizations.  Pakistan was 
miscalculating by counting on an unconditional Saudi oil loan 
to bail it out. The security implications of a crisis were 
considerable and the issue needed to be moved higher on the 
U.S.-EU and U.S.-France agendas. 
 
G13/14 
- - - - 
 
¶15. (C) In closing, Kimmitt noted he had read carefully 
President Sarkozy,s 8/27 foreign policy speech in which the 
president had reiterated his support for transforming the G8 
into a G13/14.  He encouraged Levitte to consider the 
effectiveness of the G20, and cautioned that trying to 
replace the eight with a larger body that left out key 
players would be problematic.  Levitte said the eight no 
longer &represents the world as it exists.8  The 
international community,s insufficient anticipation of -- 
and response to -- the global food crisis illustrated what 
can happen when the key players are not brought together in a 
single, effective forum.  Kimmitt said the U.S. was thinking 
in similar terms with respect to the global financial 
architecture.  One option for improving coordination might be 
to call for dialogue among the chairs of the G8, G20, EU, 
APEC and related institutions. 
 
¶16. (U) D/S Kimmitt has cleared this cable. 
Please visit Paris' Classified Website at: 
http://www.intelink.sgov.gov/wiki/Portal:Fran ce 
 
PEKALA