VZCZCXRO4086
PP RUEHBC RUEHCHI RUEHDE RUEHDIR RUEHDT RUEHHM RUEHKUK RUEHNH
DE RUEHKL #0061/01 0101029
ZNR UUUUU ZZH
P 101029Z JAN 07
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC PRIORITY 8271
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 2259
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 0679
RUEHTC/AMEMBASSY THE HAGUE PRIORITY 0177
RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 02 KUALA LUMPUR 000061 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FOR EB/ESC AND EAP/MTS 
 
E.O. 12958: N/A 
TAGS: PREL ENRG EPET ETTC EFIN IR MY
SUBJECT: IRAN SANCTIONS ACT: EMBASSY EXPRESSES CONCERN OVER 
REPORTED IRAN/MALAYSIA GAS DEAL 
 
REF: EB-ESC AND EAP-MTS EMAILS OF 8 JAN 07 
 
¶1.  (SBU) Summary: Embassy raised concerns with the Malaysian 
Government regarding a reported $16 billion gas development 
deal between a Malaysian firm, SKS Ventures, and Iran, noting 
possible implications under the Iran Sanctions Act and 
pointing out the particularly poor timing given recent UN 
sanctions against Iran.  Foreign Ministry officers 
highlighted Malaysia's more benign view of Iran, growing 
trade relations with Teheran, and the difficulty of acting 
against a private firm based on another country's law.  They 
reiterated, however, Malaysia's intention to abide by UNSCR 
1737 sanctions against Iran.  A representative from the 
Ministry of International Trade and Industry responded that 
he only knew what he had read in the press about the deal. 
SKS Ventures is owned by Syed Moktar Al-Bukhary, one of the 
country's wealthiest ethnic Malay businessmen with 
connections to former Prime Minister Mahathir.  End Summary. 
 
¶2. (SBU) A/DCM called on desk officers in the Malaysian 
Foreign Ministry's Americas and Multilateral Affairs 
divisions on January 10 to express concern over press reports 
of the signing of a $16 billion Memorandum of Understanding 
between Malaysia's SKS Ventures and the National Iranian Oil 
Company (NIOC).  According to press accounts, SKS Ventures' 
upstream project would help to develop the Golshan and Ferdos 
gas fields, including building LNG production units, based on 
a buyback contract.  NOIC expects this to be followed by 
another contract for downstream cooperation over a period of 
25 years.  The volume of the Golshan and Ferdows gas fields 
is estimated at 50 trillion and ten trillion cubic feet, 
respectively, making them the largest gas fields outside of 
Russia.  Production is expected to yield 70 million and 25 
million cubic meters daily from the Golshan and Ferdows 
fields. 
 
¶3.  (SBU) A/DCM noted that the US continues to have deep 
concerns about Iranian policies and actions, in particular, 
at this time, Iran's nuclear activities, which we believe are 
aimed at establishing a nuclear weapons capability.  In light 
of Iran's policies and actions, we have long opposed 
investment in Iran's petroleum sector, and our Iran Sanctions 
Act, with provisions that were recently reauthorized by 
Congress, provides for sanctions for certain such 
investments.  Against the backdrop of recently-imposed UNSC 
sanctions on Iran, this was a particularly unfortunate time 
to be entering into agreements for gas development projects 
in Iran, even if these were not directly related to Iran's 
nuclear and missile programs.  A/DCM urged the Malaysian 
Government to weigh in with SKSV to reconsider plans to move 
forward with its reported agreement on the Ferdos and Golshan 
gas fields, particularly at this sensitive time. 
 
¶4.  (SBU) Foreign Ministry desk officers, unfamiliar with the 
reported SKSV deal, expressed appreciation for the 
information and the background on the Iran Sanctions Act. 
They explained that Malaysia had a different perception of 
Iran's nuclear development program and did not share the U.S. 
view of Iran's program as a security threat.  Malaysia and 
Iran enjoyed a strengthening trade relationship.  The 
Malaysian Government, even if it were so inclined, would have 
a difficult time restricting private Malaysian investment in 
Iran on the basis of another country's law.  UNSC sanctions 
on Iran's nuclear and missile programs, however, constituted 
another matter.  The GOM would respect and implement UNSCR 
1737 sanctions.  The desk officers note that the Ministry of 
International Trade and Industry (MITI) would play an 
important role in such issues.  The desk officers said they 
would share our concerns with senior Ministry officials, who 
were unavailable to meet at short notice. 
 
¶5.  (SBU) EconOff contacted Dato Ooi Say Chuan at MITI who 
responded that he only knew what he had read in the press, 
but that the Ministry would look into the matter. 
 
¶6.  (SBU) SKS Ventures is owned by Tan Sri Syed Mokhtar 
Al-Bukhary, a Malaysian businessman considered to be one of 
the richest ethnic Malay corporate figures.  Syed built his 
original fortune through rice trading, land deals and state 
government contracts.  Observers attribute his later rise to 
Syed's close connections with former Prime Minister Mahathir. 
 Syed's business interests include plantations, property 
development, construction, engineering, power generation, 
mining, seaport construction and operation, airport 
management, railways, hotels, manufacturing, retail, and 
 
KUALA LUMP 00000061  002 OF 002 
 
 
defense technologies.  Syed Mokhtar has been the recipient of 
countless Malaysian government contracts and coveted 
licenses.  According to press reports, in 2006 Saudi Arabia 
awarded a $30 billion contract to one of Syed's companies for 
development and management of "Jizan economic city," together 
with the Bin Laden Group. 
 
¶7. (U) Press reports quote an unnamed source close to Syed 
Mokhtar as saying, "We don't worry about the sanctions. 
There's so much liquidity, you don't have to go to New York," 
and pointing out that funds can be raised in the Middle East 
or in Iran itself. 
 
¶8.  (SBU) Comment:  In light of Malaysia's friendly relations 
with Iran and its strong opposition to sanctions in general, 
we should not expect a supportive response from the GOM. 
Also, with Syed Mokhtar's broad holdings both within and 
outside of Malaysia, it is not clear to us that U.S. 
sanctions against SKS Ventures would have significant impact 
on his bottom line. 
SHEAR