VZCZCXRO1545
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHTC #2654/01 3551621
ZNR UUUUU ZZH
P 211621Z DEC 06
FM AMEMBASSY THE HAGUE
TO RUEHC/SECSTATE WASHDC PRIORITY 7753
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1966
RUEHIL/AMEMBASSY ISLAMABAD 0955
RUEHKL/AMEMBASSY KUALA LUMPUR 0143
RUEHMO/AMEMBASSY MOSCOW 1698
RUEHNE/AMEMBASSY NEW DELHI 0558
RUEHNY/AMEMBASSY OSLO 4955
RUEHOT/AMEMBASSY OTTAWA 5104
RUEHUNV/USMISSION UNVIE VIENNA 0114

UNCLAS SECTION 01 OF 02 THE HAGUE 002654 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/UBI (RREITER) 
 
E.O. 12958: N/A 
TAGS: ETTC EPET ENRG PREL NL CH IR
SUBJECT: ILSA: DUTCH, SHELL ON YADAVARAN, IRAN, SAKHALIN II 
 
REF: A. STATE 194960 
 
     ¶B. THE HAGUE 02316 
 
¶1. (SBU) Summary. The Dutch government supports targeted 
sanctions against Iran but not actions that limit Shell's 
activities there. Shell does not plan a final Yadavaran 
investment decision until 2008 and will keep State abreast. 
The government continues to follow negotiations between 
Gazprom and Shell over Sakhalin II, Shell's big natural gas 
project. End Summary. 
 
¶2. (U) Econoff raised U.S. concerns about the Iran's 
Yadavaran oilfield project with Ministry of Foreign Affairs 
(MFA) officials John Roosegaarde Bisschop, Gulf States 
division head, and senior policy officer Loek ten Hagen on 
December 15. On December 18, Econoff discussed Yadavaran and 
developments at Sakhalin II with John Crocker, Shell's head 
of international government relations. 
 
--------------------------------------- 
Iran Policy and Relationship with Shell 
--------------------------------------- 
 
¶3. (SBU) MFA's Roosegaarde Bisschop responded with three main 
points on Iran. First, he said MFA supports a UNSC resolution 
"with teeth," meaning reversible sanctions targeted against 
the assets and travel of individuals associated with Iran's 
nuclear program. Iran had "crossed the line." The Dutch, he 
said, fully support the P5 discussions, as part of a dialog 
aimed at a diplomatic solution. Harsher measures -- such as 
omnibus sanctions or those complicating Shell operations -- 
are not on the table and would be "very difficult" to get 
through the UN, he said. 
 
¶4. (SBU) Second, regarding Shell, Roosegaarde Bisschop noted 
that Shell briefs MFA on a regular basis about the Pars gas 
field development, but not Yadavaran. While MFA shares advice 
to ensure that Shell's activities "fall on the safe side" 
politically, the ministry refrains from voicing approval or 
disapproval over Shell projects, he said. MFA has become more 
involved with Shell, he said, because the energy security 
situation has forced shell to look at markets where the 
political environment is hazardous. 
 
¶5. (U) Third, Roosegaarde Bisschop noted that French and 
Italian oil companies were much more "advanced" in their 
efforts in the Iranian energy sector. He asked whether we had 
reached out to these countries with the same message. 
 
----------------------------------------- 
No Final Decision on Yadavaran Until 2008 
----------------------------------------- 
 
¶6. (SBU) In response to reftel A points, Shell's Crocker said 
that a deal on Yadavaran had been "imminent" for months. He 
added that Shell had recently seen a sense of urgency on the 
Iranian side and some signs that the Chinese were ready, but 
the two had yet to come to agreement. If they do agree, 
Crocker continued, Shell would examine it and decide whether 
to issue a statement of interest. After that it would take 
Shell 12-18 months of analysis to decide whether to invest. 
Such a decision would be taken in 2008 at the earliest, he 
said, adding that Shell would notify State -- which he visits 
on a regular basis -- before any decision is made. 
 
¶7. (SBU) Crocker expressed concern about USG efforts to 
discourage investment in Iran's energy sector. In the short 
run, he said, the volume of oil produced in Iran will remain 
unchanged, whether or not Shell participates in Iran oil 
projects. This is because phase I oil extraction -- a period 
that normally lasts 10 years -- is not "tricky," and the 
Iranians and Chinese have the requisite technology to proceed 
on their own. It is from the second phase onward, Crocker 
added, where the exclusion of foreign oil companies will have 
an impact. Since this is beyond 2020, it might make life 
difficult for ordinary Iranians at a time when the political 
environment hopefully may be more friendly toward the west, 
Crocker said. That said, he added that Shell views its 
relationship with the USG as important and that the company 
is very conscious of how its actions are perceived. 
 
 
THE HAGUE 00002654  002 OF 002 
 
 
--------------------------------------------- ------- 
Sakhalin II: Shell on Possible Gazprom Participation 
--------------------------------------------- ------- 
 
¶8. (SBU) On Sakhalin II, Crocker offered thoughts on 
Gazprom's potential involvement and helpful USG actions. 
First, Crocker said Shell had always thought having a Russian 
partner was a good idea, and had offered, in exchange for 
other assets, a 25% stake to Gazprom before discussions were 
disrupted by the potential revocation of Shell's Sakhalin II 
environmental permit (reftel B). The Russians, however, had 
offered less than 30% of what Shell considered fair. Talks 
have made some progress in the last week. Gazprom's 
participation could now go "either way," Crocker said, adding 
that Shell is open to a Gazprom stake at a different level as 
long as it was a commercially viable and defensible to 
shareholders. Failing this -- and if the Russian government 
continued to use "all means" to apply pressure -- Shell would 
be prepared to go to international arbitration. 
 
¶9. (SBU) Second, Crocker said G8 countries should emphasize 
to Russia that its treatment of Shell "does not fit" within 
internationally accepted norms. Crocker hoped that the G8 
message would include a discussion of the potential delays to 
Japanese, Korean, and U.S. consumers. A failure to deliver 
would hurt these countries as consumers and Russia as a 
supplier. In "one to two weeks," these countries may need to 
issue strong public statements to Russia -- but for now the 
messages should be delivered privately, Crocker said. 
BLAKEMAN