VZCZCXRO0415
OO RUEHDE RUEHHT
DE RUEHC #5339/01 3311510
ZNR UUUUU ZZH
O 261502Z NOV 08
FM SECSTATE WASHDC
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UNCLAS SECTION 01 OF 04 STATE 125339 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KNNP MNUC IR GM
SUBJECT: INSURANCE AND REINSURANCE INDUSTRY AIDING IRAN,S 
PROLIFERATION ACTIVITIES 
 
 ¶1.  (U)  This is an action request.  Please see paragraph 
three. 
 
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SUMMARY 
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¶2.  (SBU)  The United Kingdom, France, Germany, Italy, and 
the U.S. (E4 1) have discussed the adoption of additional 
national measures to increase the pressure on Iran to end its 
proliferation-sensitive nuclear activities.  After a meeting 
on October 9, the E4 1 identified insurance and reinsurance 
as "financial services" for the purposes of sanctions imposed 
by the United Nations Security Council concerning Iran. 
These industries are vulnerable to Iranian deceptive 
practices regarding proliferation.  The E4 1 agreed to a 
joint demarche as a way to inform governments about the risks 
that Iran poses to the insurance and reinsurance industries 
in their jurisdictions.  Posts are requested to coordinate 
the delivery of the attached nonpaper to host governments 
with the local representatives of the United Kingdom, France, 
Germany, and Italy. 
 
 
------------------------- 
OBJECTIVES/ACTION REQUEST 
------------------------- 
 
¶3.  (SBU)  Washington requests Posts deliver the talking 
points and non-paper in paragraph 4 to appropriate host 
government officials in the foreign and finance ministries. 
Posts are requested to coordinate the delivery of the 
attached nonpaper with the local representatives of the 
United Kingdom, France, Germany, and Italy.  Post should 
pursue the following objectives: 
 
--  Remind host governments that full implementation of UN 
Security Council Resolutions (UNSCRs) by all members of the 
international community is critical to addressing the 
proliferation threat posed by Iran and that many European 
countries and firms have determined that the risk of doing 
business with Iran is too great and, as a result, have 
reduced their business with Iran. 
 
-- Commend the efforts of the European Union and Australia 
(The EU designated Bank Melli and Australia designated Banks 
Melli and Saderat) on additional national actions outside of 
those prescribed by the UN Security Council to curb Iranian 
proliferation activities. 
 
-- Note that Iran's use of front companies and other 
deceptive practices in purchases in commercial and financial 
activities makes it difficult to know the final end user or 
ultimate use of any goods or assets. 
 
-- Note that insurance, as a financial service, is included 
within the scope of UNSCR 1737 obligations requiring states 
to take measures to prevent the provision to Iran of any 
financial assistance or services related to the transfer of 
prohibited items to Iran. 
 
-- Urge host governments to ensure that their insurance 
companies do not provide insurance to any entities that are 
engaged in proliferation-related activities, specifically 
individuals and entities designated under UNSC resolutions 
1737, 1747 or 1803, as well as those designated by the USG 
under Executive Orders 13224 and 13382. 
 
-- Encourage host governments to warn their insurance 
companies about the risks of doing business with Iran, such 
as the Iranian regime using its state-owned firms to support 
terrorism and proliferation-related activity.  The Iranian 
state-owned banks also use deceptive financial practices to 
support this illicit activity. 
 
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BACKGROUND AND NONPAPER 
----------------------- 
 
STATE 00125339  002 OF 004 
 
 
 
¶4.  (SBU) BEGIN NON-PAPER 
 
-- Full implementation of UN Security Council Resolutions 
(UNSCRs) by all members of the international community is 
critical to addressing the threat posed by Iran.  UNSCR 1737 
(2006) requires UN Member States to take the necessary 
measures to prevent the provision to Iran of any financial 
assistance or services (including brokering)or services 
related to the transfer, manufacture, or use of prohibited 
items specified in that resolution. 
 
-- UNSCR 1747 (2007) calls upon States and international 
financial institutions not to enter into new commitments for 
providing financial assistance to the Government of Iran, 
except for humanitarian and developmental purposes. 
 
-- UNSCR 1803 (2008) calls upon States to exercise vigilance 
over the activities of financial institutions in their 
territories with all banks domiciled in Iran, including Banks 
Melli and Saderat, and in entering into new commitments for 
public-provided financial support for trade with Iran, 
including insurance, in order to avoid contributing to Iran's 
proliferation sensitive nuclear activities or to the 
development of nuclear weapon delivery systems. 
 
-- UNSCR 1803 also calls upon States, in accordance with 
their national legal authorities and consistent with 
international law, to inspect cargo to and from Iran of 
aircraft and vessels owned or operated by Islamic Republic of 
Iran Shipping Line (IRISL) when there is reason to believe it 
is carrying items prohibited under UNSCRs 1737, 1747 or 1803. 
 
-- In addition, UNSCRs 1737, 1747 and 1803 require all States 
to ensure that no financial assets or economic resources are 
made available by any persons or entities in their 
territories to or for the benefit of those designated by the 
UN Security Council in these resolutions or by those acting 
on their behalf. 
 
-- We have worked with the banking sector on implementation 
of the Iran-related UNSCRs, but other financial sectors - 
such as the insurance sector - are also vulnerable to the 
risk of facilitating Iranian proliferation activities and 
support for terrorism by providing insurance services to 
Iranian entities.  We understand that there are several areas 
where Iran would have a need for the type of reinsurance 
provided by companies in your jurisdiction - in particular, 
for coverage in the aviation and energy sectors. 
 
IRISL Activities: 
 
-- We have discussed the activities of IRISL with your 
government.  The United States designated IRISL and 18 
subsidiaries and foreign joint ventures under national 
authorities (Executive Order 13382) on September 11, 2008 for 
facilitating shipments of military cargo destined for the 
Ministry of Defense and Armed Forces Logistics (MODAFL) and 
its subordinate entities, including organizations that have 
been designated as subject to targeted sanctions by the 
United Nations Security Council in Resolutions 1737 and 1747. 
 
-- We remain concerned about the activities of the Islamic 
Republic of Iran Shipping Lines (IRISL), which we understand 
acquires liability insurance and other services from P&I 
Clubs.  We would like to discuss with you the risks 
associated with providing such financial services and 
insurance coverage to an Iranian entity. 
 
-- Even if P&I Clubs in your jurisdiction may not cover a 
loss determined to have occurred in the context of illicit 
activity, the act of providing coverage to Iranian companies 
like IRISL both legitimizes their operations and enhances 
those companies' ability to engage in nefarious activity.  We 
have seen evidence that such illicit activity continues. 
 
-- IRISL continues to carry cargo destined for entities 
designated by the United Nations Security Council.  Several 
IRISL vessels had cargo impounded in 2007 because they were 
transporting dual-use items to designated entities or to 
entities acting on their behalf. 
 
-- IRISL is increasingly employing deceptive practices to 
 
STATE 00125339  003 OF 004 
 
 
disguise its involvement in shipping operations and the 
destination of its cargo.  This includes modifying documents, 
changing ship names or registration, and developing schemes 
to shroud IRISL's involvement in order to secure bank 
cooperation. 
 
-- Such deceptive conduct allows Iran to abuse coverage 
provided by P&I Clubs in your jurisdiction that participate 
in an insurance pool, even if all reasonable due diligence is 
done by that Club. 
 
Reinsurance Sector: 
 
-- We are increasingly concerned that reinsured Iranian 
activity in these and other sectors is being exploited for 
activities prohibited by the UN or that reinsured activity 
may be controlled by Iranian entities designated by the UN. 
We want to discuss the risks associated with providing such 
financial services to Iran. 
 
-- Even if the reinsurance company may not cover a loss 
determined to have occurred in the context of illicit 
activity, the existence of coverage for Iranian companies 
enhances their ability to conduct illicit activity. Iranian 
entities continue operating with the financial security 
achieved by having their operations reinsured on the global 
reinsurance market, and we have seen evidence that illicit 
activity continues. 
 
-- Deceptive conduct allows Iran to abuse coverage provided 
by the global insurance industry, even if all reasonable due 
diligence is done by the insurance company. 
 
-- To avoid providing financial services prohibited by the UN 
Security Council, we ask that companies in your jurisdiction 
review coverage and/or brokering services they may provide to 
Iranian companies or projects in Iran operated by other 
companies, consider rescinding reinsurance policies under 
contract, and not provide coverage to Iran or to projects in 
Iran in the future. A first step could be ending existing 
relationships and refraining from beginning new relationships 
with the Central Iranian Insurance Organization and the Iran 
Insurance Company. 
 
-- Swiss Re, a global reinsurance firm, recognized the risk 
of providing coverage to the Iranian regime and stated that 
it will no longer insure Iranian activities.  We ask that 
companies in your jurisdiction take similar steps which would 
contribute to international efforts to address Iranian 
illicit activity. 
 
Iran Insurance Company: 
 
-- We are concerned about the activities of the Iran 
Insurance Company. 
 
-     Iran Insurance Company insured 16 shipments of 
materials between February and August of 2008 that were 
consigned to Bank Melli, Bank Saderat and Bank Mellat. 
-     Iran Insurance Company in October 2007 insured a 
shipment of an emissometer for a Malaysia-based Iranian 
procurement to Iran Communications Industries (ICI) in Iran 
via Malaysia.  This emissometer is sophisticated U.S.-origin 
technology capable of being used in a ballistic missile 
program.  The freight forwarding company used for this 
shipment is heavily utilized by the procurement front company 
to transship materials from suppliers to Iran in 
circumvention of sanctions and end-user requirements on 
dual-use goods. 
-     Iran Communications Industries is a communications 
technology production, research and development company and 
is a subsidiary of Iran's Ministry of Defense and Armed 
Forces Logistics (MODAFL). 
-     In March 2008, Iran Insurance Company insured a 
shipment of aluminum alloy sheets to Iran Aircraft 
Manufacturing Industries Company.  Aluminum alloy sheets can 
be used to produce airframes for ballistic missiles and 
aircraft. 
-     In September 2007, the Iran Insurance Company insured a 
shipment of Australia Group-controlled equipment, 
specifically glass-lined chemical reactors, from China to 
Iran.  Glass-lined chemical reactors are useful in the 
production of chemical warfare agents. 
 
STATE 00125339  004 OF 004 
 
 
 
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REPORTING DEADLINE 
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¶5.  (U) Posts should report results within seven business 
days of receipt of this cable.  Please slug replies for ISN, 
T, TREASURY, and NEA.  Please include SIPDIS in all replies. 
 
---------------- 
POINT OF CONTACT 
---------------- 
 
¶6.  (U)  Washington point of contact for follow-up 
information is Kevin McGeehan, ISN/CPI, (202) 647-5408, 
McGeehanKJ@state.sgov.gov. 
 
¶7. (U) Department thanks Post for its assistance. 
RICE