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RUEKJCS/JOINT STAFF WASHDC
RUEAIIA/CIA WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEHUNV/USMISSION UNVIE VIENNA 0160
RUEHUNV/USMISSION UNVIE VIENNA 0161
RUCNDT/USMISSION USUN NEW YORK 0312

C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 000928 
 
SIPDIS 
 
STATE FOR WHA/BSC, NEA AND NP 
 
E.O. 12958: DECL: 07/21/2019 
TAGS: MNUC PREL BR
SUBJECT: BRAZIL: NO AGREEMENT WITH IRANIAN EXPORT 
DEVELOPMENT BANK...YET 
 
REF: A. BRASILIA 847 
     ¶B. BRASILIA 477 
 
Classified By: DCM Lisa Kubiske.  Reason: 1.4(d) 
 
¶1. (C) Summary: Brazil,s Ministry of External Relations 
(Itamaraty) was quick to dismiss claims made in Istoe 
magazine titled "Secret Agreement between Brazil and Iran," 
which reported on a memorandum of agreement between the 
Brazilian Ministry of External Relations (MRE) and Iran aimed 
at promoting economic cooperation and trade (ref a). 
According to Itamaraty contacts, no agreement has been 
signed, and no mechanism to facilitate trade between the two 
countries -- in particular, to help Iran obtain letters of 
credit -- has been established.  Itamaraty does support 
creating such a mechanism, but still needs buy-in from other 
entities within the Brazilian government.  According to 
Itamaraty contacts, if such a mechanism were to be 
established, Brazil would carefully consider each trade 
financing opportunity on a case-by-case basis and maintain 
tight controls to avoid trading with any Iranian entities 
banned by the UN, though not those banned unilaterally by the 
United States.  Since Itamaraty supports such an agreement, 
it will likely  likely try to garner support within the GOB 
in order to present it as a deliverable in a future 
presidential meeting. End summary. 
 
------------------------- 
No Agreement, No Secrets 
------------------------- 
 
¶2. (SBU) Following the June 30 publication of the Istoe 
article, poloff met with First Secretary Carlos Leopoldo 
Goncalves de Oliveira (Iran desk officer in Itamaraty,s 
Middle East Division II) and Counselor Rodrigo de Azeredo 
Santos, head of the Division of Trade Promotion Programs. 
According to Azeredo, there is no accord, much less a "secret 
accord" as the Istoe article alleged.  The text shown on the 
Istoe article represents an "ata" (or official record; 
minutes) of conversations held in March between Iranian and 
Brazilian trade authorities with the purpose of increasing 
trade between the two, a long standing goal of both 
governments (ref b).  The "ata" registered the preliminary 
contacts that took place between the two sides to learn about 
each country,s respective export financing systems and noted 
an agreement to discuss the possibility of establishing 
mechanisms to facilitate trade. 
 
¶3. (SBU) Furthermore, noted Azeredo, there was nothing 
secretive about the meetings.  They involved various 
government entities that participate in the Brazilian 
Committee for the Financing of Exports (COFIG) and other 
private entities and information about the meetings were 
disseminated to the press in various articles in Valor 
Economico and Estado de Sao Paulo. 
 
------------------------ 
But Itamaraty Wants One 
------------------------ 
 
¶4. (SBU) The Brazilian Government is considering establishing 
a mechanism to assist in the financing of exports to Brazil, 
which have been hurt by the economic crisis, but it has not 
done so yet, noted Azeredo.  The government entities that 
play a role in COFIG have to weigh in as well, and that has 
not happened.  Azeredo openly stated that Itamaraty, which is 
part of COGIF, supports establishing such a mechanism and 
added that Brazil has been open and forthcoming about its 
 
BRASILIA 00000928  002 OF 003 
 
 
views that Iran represents an important market for Brazilian 
products.  With 71 million people, average GDP growth of 5.5 
percent in the last few years, and international reserves of 
over US$80 million, Iran represents the second largest 
economy in the Middle East, after Saudi Arabia, Azeredo 
observed.  He also defended Brazilian trade with Iran, noting 
that Brazilian exports to Iran are small compared to those of 
China (USD 9.3 billion), Germany (USD 6.3 bn), Italy (USD 3.5 
bn), France (USD 3 bn) or India (USD 2.6 bn). 
 
¶5. (SBU) Azeredo continued that Iran has been the largest 
trading partner for Brazil in the Middle East and there is 
great potential to expand trade further.  Commodities 
currently dominate Brazilian exports to Iran, but Brazil and 
Iran are interested in Brazilian machinery for the oil and 
gas industry, medical equipment, and engineering and 
construction services.  Although trade in commodities has not 
been greatly affected by the credit crunch, trade in 
value-added products has been, he noted.  From 2007 to 2008, 
exports from Brazil to Iran fell from US$1.8 billion to 
US$1.1 billion. 
 
--------------------------- 
UN Ban OK, US Ban Not OK 
--------------------------- 
 
¶6. (SBU) The text of UNSCRs call for "vigilance in 
establishing new mechanisms to finance exports to Iran", 
observed Azeredo.  Therefore, he noted, any export financing 
mechanism, if established by Brazil, would carefully consider 
each potential financing opportunity on a case by case basis, 
and would study in each instance whether any of the entities 
in the venture are listed under the UN sanctions in 
compliance with the UN,s call for vigilance.  Azeredo 
explained, in reference to the article,s claims that 
"accord" deals with re-exportation in order to the "ata" 
regarding to re-exportation comes from the desire of 
Brazilian businessmen to export to Central Asian markets 
through Iranian channels and from Iranian businesses 
interested in exporting to Mercosul countries through Brazil. 
 
 
¶7. (SBU) Both Azeredo and de Oliveira stated that Brazil will 
fully comply with UNSC resolutions regarding Iran and will 
not do business with any entity listed under those 
resolutions.  According to them, these UNSCRs have been 
issued in Brazil as presidential decrees (Decree 6.448 7 May 
2008) and are now the law of the land in Brazil.  They took 
pains to note, however, that Brazil does not abide by any 
additional sanctions imposed unilaterally by other countries. 
 
 
--------------------------------------------- ------ 
Comment: Istoe was right even while being inacurate 
--------------------------------------------- ------ 
 
¶8. (C) Brazil,s response to the Istoe article is their 
standard boilerplate: Brazil wants to expand business with 
Iran, it will abide fully by any UN resolutions, but not any 
unilateral ones.  Brazil uses the behavior of other countries 
towards Iran to deflect any criticism of its actions. Unlike 
France or Germany, however, the GOB has no intention of 
balancing its intensifying relations with public criticism of 
Iran.  Even in the midst of post-election repression in Iran, 
the best Itamaraty managed was mild expression of support for 
the recount.  Despite Itamaraty officials, quick denials and 
dismissal of the Istoe article, Itamaraty is really only 
taking issue with the implication of nefarious and 
 
BRASILIA 00000928  003 OF 003 
 
 
underhanded dealing with Iran.  While there is no "secret 
accord", the underlying idea of the  accord as reported in 
the article -- to establish a mechanism to facilitate trade 
between the two countries due to Iran,s inability to gain 
letters of credit -- is accurate, and openly supported by 
Itamaraty.  Furthermore, Itamaraty officials quite bluntly 
tell us that they are perfectly willing to work with an 
entity facing U.S. sanctions, or those of any other 
individual country, including the Iranian Export Development 
Bank.  Since Itamaraty supports such an accord, and both FM 
Amorim and President Lula have reiterated interest in 
reciprocal presidential visits (Folha de Sao Paulo, on 21 
July, reported that, according to the Iranian Ambassador to 
Brazil, Ahmadinejad's first international trip after the 
beginning of the Iranian President' s second term would be to 
Brazil) it is probably only a matter of time before such an 
agreement appears as a visit deliverable. 
 
SOBEL