VZCZCXRO9430
PP RUEHBC RUEHKUK RUEHTRO
DE RUEHRO #0150/01 0400711
ZNY CCCCC ZZH
P 090711Z FEB 10
FM AMEMBASSY ROME
TO RUEHC/SECSTATE WASHDC PRIORITY 3241
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 3378
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1405
RUEHBR/AMEMBASSY BRASILIA PRIORITY 0013
RUEHCV/AMEMBASSY CARACAS PRIORITY 0010
RUEHHI/AMEMBASSY HANOI PRIORITY 0008
RUEHKL/AMEMBASSY KUALA LUMPUR PRIORITY 0153
RUEHMO/AMEMBASSY MOSCOW PRIORITY 4630
RUEHVB/AMEMBASSY ZAGREB PRIORITY 0809
RUEHMIL/AMCONSUL MILAN PRIORITY 0463
RUEHNP/AMCONSUL NAPLES PRIORITY 4248
RUCNDT/USMISSION USUN NEW YORK PRIORITY 1062
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY 4894

C O N F I D E N T I A L SECTION 01 OF 02 ROME 000150 
 
NOFORN 
SIPDIS 
 
STATE FOR ECONOMIC, ENERGY, AGRICULTURE U/S HORMATS 
STATE FOR INTERNATIONAL ENERGY AFFAIRS COORDINATOR GOLDWYN 
STATE FOR EEB DAS HENGEL 
STATE FOR NEA/IR RAJEEV WADHWANI 
STATE FOR INR/EAP 
STATE FOR INR/NEA 
STATE PASS TO DEPARTMENT OF TREASURY U/S STUART LEVEY 
 
E.O. 12958: DECL: 2/2/2020 
TAGS: ECON ENRG EPET ETTC IR IT PREL
SUBJECT: ENI RUSHES TO FINISH ITS WORK FOR IRAN 
 
REF: A. ROME 00035 
     ¶B. ROME 00087 
     ¶C. ROME 00001 
     ¶D. REPORT 3/79/11-10 
 
ROME 00000150  001.2 OF 002 
 
 
Classified By: Classified By: Classified By: DCM Elizabeth Dibble 
for reasons 1.4 (b) and (d) 
 
¶1. (C/NF) Summary: In the latest of a series of letters to 
senior USG officials, the Italian energy company Eni claims 
that it will conclude its expansion work in Iran, including 
in the Darquain field, by the end of March. Eni officials 
told us that their work will end not as a result of USG 
pressure, but because Eni will have fulfilled its contractual 
obligations to Iran.  Eni remains fearful of ISA sanctions 
and will continue to lobby Washington for a pass.  Company 
officials will likely point to this impending halt in an 
effort to fend off possible U.S. sanctions.  PM Berlusconi 
and Foreign Minister Frattini have toughened their rhetoric 
on Iran, with both associating the GOI firmly with the U.S. 
approach on new sanctions.  Eni has been deceptive in the 
past about its Iran operations - its pledge to halt work 
within three months should be independently confirmed. End 
summary. 
 
¶2. (C/NF) Following up on mid-January meetings with senior 
USG officials in Washington, Eni CEO Paolo Scaroni asserted 
in letters to the Department of State that his company plans 
to end its "investment and activities" in Iran by the end of 
March, leaving in place only a small administrative team to 
collect the remaining $2 billion dollars in reimbursements 
Eni says it is owed.  Eni estimates it will recover those 
reimbursements by early 2014, "if all goes well."  Until 
those Washington meetings, Eni had maintained that its 
remaining investment work in the Darquain field would be 
finished by mid- to late-2010.  Eni officials had also 
previously claimed that the company retained the option of 
negotiating with Iran further extensions to its operations 
there in order to recover its investments. 
 
¶3.  (C/NF) Post met with Eni officials on January 27 to 
better understand this new three month deadline.  The Eni 
officials confirmed that Eni will conclude remaining work in 
Iran around the end of March.  They said this is based on a 
recent company assessment that revealed that work on the 
Darquain field could be finished within three months instead 
of later in 2010 as previously thought.  They added that at 
that point Eni will turn over the Darquain field operations 
to the Iranians and would not conduct any additional 
exploration and development drilling activities there, though 
the Iranians could on their own conduct more drilling. 
Pressed for further details, Eni officials said production 
from the Darquain field will reach 160,000 barrels of oil per 
day (up from 100,000 barrels per day in 2008), as specified 
in the contract, when the company concludes its work there. 
Eni officials did not provide a clear response when asked 
about their previous position on negotiating extensions of 
the Iran operations to recover investments, and referred back 
to the three month end-date of operations.  They stressed 
that Eni's decision to halt further expansion in Iran comes 
not as a result of USG pressure, but instead results from the 
company having already met its contractual obligations to the 
Iranians. They conceded however that this decision was also 
influenced by "the sensitive Iranian international 
situation." 
 
¶4. (C/NF) Significantly, both PM Berlusconi and Foreign 
Minister Frattini have made public statements regarding Eni's 
reduced role in Iran; Berlusconi's comments from Israel 
 
ROME 00000150  002.2 OF 002 
 
 
provoked a prompt Iranian response.  At a press conference 
during his February 1-3 visit to Israel, Berlusconi said that 
Eni had already canceled its participation in the third phase 
of "an important oil project" in Iran (i.e. the Darquain 
field).  Berlusconi, however, noted that Eni will remain in 
Iran to fulfill existing contracts that should not be the 
subject of sanctions, and suggested that the GOI's one-third 
ownership of Eni will keep the government looking after its 
interests in the company.  Berlusconi also told Secretary of 
Defense Gates on February 6 during his Rome visit that Eni 
CEO Scaroni would be traveling to Israel to meet with PM 
Netanyahu to brief him on Eni's activities in Iran.  FM 
Frattini similarly told the press that "Italy will be firm in 
blocking new investments in (Iran's) petroleum and gas 
sectors."  The Iranians fired back saying in press statements 
that negotiations continue with Eni over the third phase 
development of the Darquain field, and called Berlusconi a 
"servant of Israel."  Eni CEO Scaroni subsequently joined the 
fray to try to set the record straight.  The Associated Press 
(AP) quoted Scaroni on February 4 saying that Eni will pull 
out of Iran after current contracts to develop two gas fields 
there run out, and that Eni"...will continue to abstain in 
the future." 
 
 
COMMENT 
------- 
 
¶5. (C/NF) Eni's claim that it will halt its Darquain field 
expansion in three months can be seen as good news and bad 
news: If true, a major European energy company will be ending 
important support for Iran's energy sector, but it would be 
doing so only after having significantly increased Iranian 
energy production capabilities. 
 
¶6. (C/NF) Eni remains concerned about an investigation under 
ISA, as well as about proposed new Congressional sanctions 
legislation; the company will continue to lobby Washington. 
For example, Eni officials plan to meet House Foreign 
Relations Committee staffers during the week of February 16 
(Ref B).  They will almost certainly claim that this new 
three month deadline is evidence of Eni's desire to cooperate 
with us on Iran.  Scaroni's unusual trip to Israel may also 
be part of a lobbying effort aimed at avoiding U.S. 
sanctions.  Given the history of Eni's misleading statements 
regarding its Iran operations, all statements from the 
company should be independently verified (see Ref D).  End 
Comment. 
THORNE