VZCZCXRO1781
OO RUEHBC RUEHDE RUEHDIR RUEHKUK RUEHRN
DE RUEHRO #0122/01 0181701
ZNY SSSSS ZZH
O 181701Z JAN 07
FM AMEMBASSY ROME
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6960
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHSS/OECD POSTS COLLECTIVE PRIORITY
RUEHRL/AMEMBASSY BERLIN PRIORITY 1714
RUEHFR/AMEMBASSY PARIS PRIORITY 2198
RUEHFL/AMCONSUL FLORENCE PRIORITY 2060
RUEHMIL/AMCONSUL MILAN PRIORITY 8221
RUEHNP/AMCONSUL NAPLES PRIORITY 2196
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0697
RUEHBS/USEU BRUSSELS PRIORITY 4468

S E C R E T SECTION 01 OF 02 ROME 000122 
 
SIPDIS 
 
SIPDIS 
 
TREASURY FOR D/S KIMMITT AND U/S LEVEY 
STATE FOR EB/IFD/ODF EX-IM BANK LIAISON LAWRENCE (LADD) 
CONNELL; EB/IFD/OMA JAMES GARRY; NEA/IR BRENDAN HATCHER; 
IO/T HEATHER VON BEHREN 
 
E.O. 12958: DECL: 01/18/2017 
TAGS: PREL EFIN MNUC EXIM UNSC OECD IR IT
SUBJECT: ITALY: BUSINESS AS USUAL - EXPORT CREDIT INSURANCE 
FOR IRAN 
 
REF: A. STATE 4760 
     ¶B. ROME 95 
     ¶C. 06 ROME 2970 
 
ROME 00000122  001.2 OF 002 
 
 
Classified By: Economic Minister Counselor Tom Delare for reasons 
1.4 (b) and (d). 
 
¶1. (S/NF)  SUMMARY:  In a discussion with Emboffs about Italy 
halting export credit insurance for Iran (Ref A), a Ministry 
of Finance official -- who also serves as the President of 
Italy's export credit agency (ECA) SACE -- replied that an 
internal review of SACE's business with Iran in 2006 had 
found "only" a few instances of suspicious activity and that 
SACE was working with other EU ECAs to ensure that Iran was 
complying with international regulations on weapons 
proliferation.  The official stated that any GOI move to halt 
business with Iran would harm Italy's economic bottom line, 
as other ECAs would fill the gaps.  In support of the U.S. 
position, the official reported that SACE is not renewing 
expired credit insurance for Iran, nor is SACE increasing 
existing exposure.  The official repeated several lines often 
heard from our SACE and Ministry of Finance counterparts -- 
e.g., SACE is decreasing its credit exposure to Iran; Italy 
has a unique and historical business relationship with Iran 
that it does not wish to upset.  The topic of Bank Sepah also 
emerged in our discussion.  According to the official, SACE 
board's will decide to not do any business with Sepah in the 
wake of the recent U.S. designation -- a move that does not 
appear to result in any significant GOI action against the 
bank.  The official finished with a strong request for any 
relevant U.S. intelligence on suspicious activities by 
SACE-insured firms in Iran.  End summary. 
 
¶2.  (C)  EcMin and Econoff met January 17 to discuss halting 
export credit insurance for Iran with Ignazio Angeloni, 
Director General for International Financial Relations at the 
Ministry of Finance (MOF) and President of SACE, and Filippo 
Giansante, a senior MOF advisor to Angeloni. 
 
¶3.  (C)  EcMin pressed Angeloni for SACE to suspend all 
business with Iran, focusing specifically on state-owned 
enterprises, as most Iranian producers of concern are 
government-owned entities.  Angeloni noted that his Ministry 
had discussed the issue of export credit insurance for Iran 
with Treasury Secretaries Paulson, Kimmitt, and Levey on 
several occasions the past six months.  After each discussion 
SACE had taken additional steps (unspecified by Angeloni 
during our conversation) to ensure that Iran was complying 
with international regulations on dual-use technologies and 
weapons proliferation.  Angeloni reported that SACE had 
recently finished a review of all of its business with Iran 
in 2006, and was now studying business done with Iran in 
¶2005.  SACE had found in its 2006 review that "only 2 or 3 
situations" merited further review, because of suspicious 
activities.  (Angeloni claimed that he had not yet seen the 
results of these reviews.) 
 
¶4.  (C)  EcMin asked if the GOI and SACE had been practicing 
due diligence in discerning whether Iran was using front 
companies to produce items of concern.  EcMin gave the 
example of former USSR firms using "conversion" schemes, 
whereby a seemingly innocuous business would be established 
within a weapons factory.  Foreign investment would be 
solicited to the civilian line, which, in reality, could also 
support the still "hot" armaments lines.  Angeloni reported 
that SACE and the GOI had detected no such activity by the 
Iranians. 
 
¶5.  (C)  EcMin also cited the case of an Italian firm being 
pressured by the Iranian government to provide dual-use 
items.  The mechanism of coercion was the threat to deny a 
very lucrative contract to the Italian firm in a different 
economic area.  Given the obvious inter-ministerial 
cooperation on the Iranian side, we urged Angeloni to be 
alert to pressure brought to bear on Italian firms. 
 
¶6.  (C)  Angeloni asserted that SACE was working with other 
 
ROME 00000122  002.2 OF 002 
 
 
EU ECAs to ensure due diligence and Iranian compliance with 
international regulations on WMDs and stated that SACE's work 
with other ECAs ensured a common "European line" on Iran. 
However, he added that any GOI decision to halt business with 
Iran would be detrimental to Italy's bottom line, since other 
ECAs -- SACE's "competitors" -- would fill the gaps.  As for 
steps taken that would support the U.S. position on export 
credit insurance to Iran, Angeloni and Giansante reported 
that SACE is not renewing expired credit insurance -- which 
has led to an estimated three percent decrease in overall 
exposure -- nor is SACE increasing its existing exposure to 
Iran. 
 
¶7.  (S/NF)  Angeloni reported that SACE's board would meet 
January 18 to discuss Iran and the recent U.S. designation of 
Bank Sepah, adding that the board will decide not to do any 
business with any Italian entities associated with Sepah, nor 
with any firms listed in UNSCR 1737.  (Note:  According to 
the Embassy's Bank of Italy contacts, Bank Sepah's Rome 
branch does no "significant" business with Italian 
individuals or firms (Ref B) -- something confirmed by 
Angeloni during out meeting.)  Angeloni made a strong appeal 
to the U.S. to share any intelligence it had regarding 
suspicious activities by Iranian and Italian firms with whom 
SACE had business dealings (Ref C, para 11).  (Comment:  Post 
is aware of strains within GOI intelligence services after 
recent leadership shake-ups that may complicate intel sharing 
with the GOI.  End comment.) 
 
¶8.  (S/NF)  COMMENT:  Angeloni repeated several lines often 
heard from our SACE and Ministry of Finance counterparts -- 
SACE is decreasing its credit exposure to Iran by letting old 
credit expire and not increasing its existing credit; Italy 
has a unique and historical business relationship with Iran 
that it does not wish to upset; and Italy is concerned about 
its economic bottom line in halting any business with Iran -- 
especially given the Italian economy's fragile state.  As for 
Bank Sepah, the impending SACE board decision to not do any 
business with Sepah is simply holding to the status quo and 
does not appear to result in any significant GOI action 
against the bank.  End comment. 
SPOGLI