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Carol X Weakley  11/27/2006 02:28:49 PM  From  DB/Inbox:  Carol X Weakley

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S E C R E T        TEL AVIV 04604

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CXTelA:
    ACTION: POL
    INFO:   IPSC PD IMO RES ECON DCM DAO AMB AID ADM RSO
            CONS

DISSEMINATION: POL
CHARGE: PROG

APPROVED: CHG:GCRETZ
DRAFTED: POL:MCKEAYS
CLEARED: POL/C:MJSIEVERS, POL/RES:PHUSSEY

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S E C R E T TEL AVIV 04604

SIPDIS
CXTelA:
ACTION: POL
INFO: IPSC PD IMO RES ECON DCM DAO AMB AID ADM RSO
CONS

DISSEMINATION: POL
CHARGE: PROG

APPROVED: CHG:GCRETZ
DRAFTED: POL:MCKEAYS
CLEARED: POL/C:MJSIEVERS, POL/RES:PHUSSEY

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DE RUEHTV #4604/01 3281302
ZNY SSSSS ZZH
P 241302Z NOV 06
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC PRIORITY 7788
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
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07/t Text/Tags: TAGS: PTER ECON OVIP AMGT ASEC SY LE IR IS
07/s Text/Subject: SUBJECT: APHSCT TOWNSEND'S NOVEMBER 12 MEETING WITH <>
07/r Text/Ref: 
07 Text: *** Maschinell erstellte Kleinschreibung, nur Satzanfaenge gross. ***

S e c r e t section 01 of 04 tel aviv 004604

Sipdis

The white house for aphsct frances fragos townsend
treasury for under secretary stuart levey
nsc for malvesti
state for nea, nea/ipa (maher), s/ct (ambassador crumpton)
joint staff for j-5
hq useucom for ecj-5 (klothe)
pentagon for osd <> desk (anderson)

E.o. 12958: dng: co 11/24/2026
Tags: pter, econ, ovip, amgt, asec, sy, le, ir, is
Subject: aphsct townsend's november 12 meeting with <>
chief focuses on lebanon, syria and iran

Classified By: Classified by Charge Gene Cretz. Reasons: 1.4 (b) (d).


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summary
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¶1. (S) During a November 12 meeting, <> Chief Meir
Dagan told Assistant to the President for Homeland Security
and Counterterrorism (APHSCT) Frances Fragos Townsend that
USG efforts to designate Iranian banking facilities have
proven effective and are forcing the Iranians to move their
funds to banks in the Gulf States and the Far East. Dagan
urged the U.S. to continue activity in this direction,
noting that Swiss and Japanese banks are forgoing business
with Iran. Dagan warned that Iran and the Hizballah are
trying to bring the Siniora government down in Lebanon, and
that Hizballah's next step is to rally Shiites in the
streets to put more pressure on the GOL. Dagan said he
anticipates that this current effort will ultimately lead
to violence and the murder of some of Siniora's political
allies. On Syria, Dagan said that Asad is comfortable with
the current situation and has no intent of breaking from
his strategic alliance with Iran, or stopping his support
of Hizballah and Hamas. Dagan expressed frustration with
European attempts to engage Asad with the hope of bringing
him around, predicting that these attempts will fail, and
only encourage Asad to engage in more bad behavior. Dagan
said that the best way to change Asad's behavior is to
threaten force. He encouraged the U.S. to ratchet up
pressure on Syria by designating its Commercial Bank, and
asking the Saudis to put pressure on banks in Europe and
Dubai. Dagan expressed frustration with European
reluctance to designate Hizballah as a terrorist group.
End summary.

--------------------------------------------- -
dagan: keep up the financial pressure on iran
--------------------------------------------- -

¶2. (S) Dagan said that Treasury Department designation of
Iranian banking facilities has succeeded in its aims and
has proven very effective. The Iranians are now
preoccupied with this problem and trying to move funds to
banks in the Gulf States and Far East, specifically India,
China ((MLM: Dagan specifically noted Hong Kong)), Taiwan,
and Singapore. He added that the Iranians
are also encountering difficulties with European banks.
Dagan urged the U.S. to continue to move in this
direction. He noted that the <> has sent some of its
own people to Europe to keep up the bank pressure on Iran.
He said that Iran's economic situation is weak, and that
this is causing bankers and the Iranian middle class to
increase their criticism of Ahmadinejad and his regime. He
said that they are increasingly concerned that
Ahmadinejad's policies are going to lead Iran into
"financial disaster." Dagan added that Credit Suisse, UBS
and a number of Japanese banks have asked Iran not to do
business with them anymore.

¶3. (S) Dagan said that <> is still having some problems
with banks in the UK, and noted that the Iranians are
trying to buy a Turkish bank there. The Iranians are
trying to move their foreign currency reserves from Europe
to the Far East. At the same time, they are also thinking
about how to do more work with the Euro, even while they
recognize that they need U.S. dollars. Dagan said that the
Iranians are finding it difficult now to transfer funds
from Sadarat Bank to Hizballah through Lebanon. They are
now transferring the money in cash using couriers that
carry it by suitcase from Iran to Hizballah recipients.
Dagan stressed that Treasury Under Secretary Stuart Levey's
direct discussions with bankers appears to yield better
results than when governments deal with one another.

-------------------------------------------
"we are on the edge of a crisis in lebanon"
-------------------------------------------
¶4. (S) Dagan warned that <> and the U.S. are on "the
edge of a crisis" in Lebanon as Syria, Iran and Hizballah
are trying to bring down the Siniora government "in stages"
through various tactical moves. The Hizballah ministers in
PM Siniora's government had resigned, and Hizballah is
planning to bring Lebanon's Shiites into the streets to
increase pressure on the GOL. Dagan said that Hizballah's
plan has been coordinated well with the Syrians, and that
Iran is aware of this plan and has had a part in
formulating the strategy.

¶5. (S) Dagan said that this effort has two aims:

A) To form a unity government and bring others into it in
order to overwhelm Siniora. Hizballah needs to do this
before Lebanese President Lahoud finishes his term. Dagan
said that Michel Aoun is trying to get elected president,
and is getting support from the Saudis to this end. Dagan
claimed that Aoun is trying to mediate between Siniora,
Samir Geagea and the West.

B) To increase Shia representation in the parliament by
changing the electoral law.

Dagan warned that <> and the U.S. are now witnessing
the beginning of a crisis in Lebanon. He said he would not
be surprised if the end involves violence and the murder of
people just below Siniora ("second echelon types") before
the UN finishes its investigation into the <> of
PM Hariri. Dagan said that he does not believe that
Hizballah would try to kill Walid Jumblat or Siniora, but
might try to kill Marwan Hamedi and others like him. "This
is the typical Lebanese way to solve problems," Dagan
added.

--------------------------------------------- --
syria: asad continues to back terrorist groups
--------------------------------------------- --

¶6. (S) Dagan said that based on the intelligence he has
collected, he would estimate that Syrian President Asad is
satisfied with the current situation in the region, and has
no intention of stopping his support for Hizballah, Hamas
and PIJ. Asad views his alliance with Hizballah and Iran
as strategic, a view that justifies allowing Palestinian
Islamic Jihad (PIJ) and Hamas to continue to operate from
Damascus, and to send radical Islamic fighters across the
border into Iraq. Dagan claimed that Asad is "happy to see
U.S. soldiers killed in Iraq."

¶7. (S) Dagan noted that a British delegation led by former
UK FM Douglas Hurd and former MI6 Chief John Scarlett had
visited Syria to talk with Asad. According to Dagan, Asad
made no concessions to the delegation, and instead asserted
that Lebanon is Syria's number one priority. Dagan noted
that Asad occasionally calls for peace negotiations with
<>, but then sets unrealistic conditions for starting
them. He explained that this pattern of behavior is done
to ease international pressure on Syria, and expressed his
view that he does not believe that Syria is willing to make
peace with <>. Instead, Dagan said, the Syrians are
now looking at different ways to engage <> by force.
Dagan acknowledged that <> is not aware of any Syrian
plans to attack <> in any way at this time, but
cautioned that, in comparison with the past, more of Asad's
advisors are talking about fighting <>, and using
terrorists in the fight. Dagan claimed that Asad has
appointed "ex-reservists" from the Golan Heights -- who are
in their eighties -- as "resistance fighters."

¶8. (S) Dagan said that Asad's new policy and guidelines
towards <> drive his relations with the Palestinians as
well. He is now encouraging Hamas to "behave" vis-a-vis
Palestinian President Mahmud Abbas in his drive to form a
national unity government. At the same time, Asad is
encouraging Khaled Meshal to adopt more radical positions.
¶9. (S) Dagan claimed that Syrian-Iranian intelligence
cooperation is enhancing, and pointed to "joint command
posts" staffed by Syrian and Iranian intelligence officers,
including personnel from the Iranian Revolutionary Guard
Corps (IRGC) and Hizballah.

¶10. (S) Dagan said that Asad is also allowing weapons to be
transferred from Iran to Turkey and then to Syria, with
their ultimate destination being Hizballah. He
acknowledged that <> suspects this only, and has no
"smoking gun" or hard evidence to prove it.

--------------------------------------------- -
dagan: talking with syria rewards bad behavior
--------------------------------------------- -

¶11. (S) Dagan said the GOI shares the USG's frustration
with the hesitation of European governments to designate
Hizballah as a terrorist organization. He noted recent
visits by European foreign ministers to Damascus, and said
they reflect a view -- held by Spanish Foreign Minister
Moratinos, as well as the Germans -- that dialogue with
Asad is the key to luring him away from Iran's influence.
He added that the Egyptians are trying to convince other
Arabs to reach out to Asad. Dagan said that he is
convinced they are doomed to failure. He praised the Gulf
States for understanding the threat posed by the
"Iran-Hizballah-Syria" axis: "They see it as a threat, and
as a sign of an oncoming Shia-Sunni conflict. It is not
really a religious war, but that is how they see it, and
they are right to view it as a threat." Dagan credited the
French for being less sympathetic to Syria than other
Europeans, but added that they do not want to cooperate on
Hizballah as their troops are deployed in Lebanon.

¶12. (S) Dagan cautioned that engaging with Asad in
negotiations on the Golan Heights or a Free Trade Agreement
with Europe would only reward aggression. He asserted that
all previous attempts to open dialogue with the Syrians
were misread and viewed by the ruling regime as a reward
for behaving badly. <>, he stressed, has engaged with
the Syrians for the past fifty years: "The only thing the
Syrians understand is force and pressure." As an example,
he pointed to Syria's withdrawal from Lebanon, asserting
that it happened only because Asad feared that the
international community would attack Syria in the wake of
the Hariri <>. "Retreat was not due to
dialogue, but due to fear of brute force," Dagan said.
Dagan added that Syria dropped its support for the PKK when
Turkey threatened to go to war over it.

--------------------------------------------
dagan urges striking at syrians' pocketbooks
--------------------------------------------

¶13. (S) Dagan said that even though the Syrian economy is
collapsing, he does not envision a real change in Syria any
time soon. Townsend commented that we must continue to work
with financial institutions to create problems for the Syrian
banking system similar to those now facing Iran. In response
to a question, Dagan said it would
help if the U.S. would increase pressure on the Commercial
Bank of Syria, and that he would recommend this himself to
Treasury Under Secretary Stuart Levey when they next meet.
Clamping down on the Commercial Bank of Syria would be
effective especially as key Syrian government ministers are
trying to invest outside of Syria. Dagan added that the
timing of this effort is very important, and said he
expects that the results of the UN's investigation into the
Hariri <> will implicate Syria.

¶14. (S) Dagan suggested the U.S. could also bring more
pressure to bear on Syria by encouraging the Saudis to
pressure Europe. Noting that the Saudis are considering
buying 70 Tornado fighter-bombers from the UK, he wondered
aloud if the USG could encourage the Saudis to buy their
arms from the U.S. instead of from the Europeans. Townsend
said that the USG will encourage the Saudis to put pressure
on banks in Dubai, as they are clearinghouses for
proliferation activity. Dagan agreed that pressuring Dubai
would be helpful, especially as the Iranians are trying to
buy up property there. He cautioned, however, that not all
Saudis would be inclined to help -- securing King
Abdullah's support would be vital: "If you can get the
King to support you, others will follow. If he threatens
to take his money somewhere else, that would be a serious
threat." Dagan asked Townsend to have the USG put more
banking pressure on the Syrians: "By hitting Syrian banks,
you also hit Hizballah and Iran. It is a very effective
tool that has proven itself."

¶15. (S) Dagan concluded the meeting by noting that
cooperation between his staff and POL/RES is excellent.

¶16. (U) APHSCT Frances Fragos Townsend cleared on this
cable.

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