Journalicious Dots from Switzerland

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/15/2017
TAGS: PREL KNNP PARM UNSC SZ
SUBJECT: IRAN: SWISS POLDIR AMBUEHL TELLS EUR A/S FRIED HE
IS GOING TO TEHRAN

Classified By: Ambassador Peter Coneway, Reasons 1.4 b/d

——-  Summary  ——-

1.(C/NF) Swiss State Secretary of Foreign Affairs Michael Ambuehl told visiting EUR A/S Fried and Ambassador Coneway on  March 9 that he planned to visit Tehran the week of March 12,  claiming that IAEA DG El Baradei had encouraged Ambuehl to tell Iranian Nuclear Negotiator Ali Larijani that Iran was  facing its “last chance.” A/S Fried and the Ambassador  cautioned strongly against the visit, noting that a Swiss  visit could be misinterpreted and used by Iranian officials,  particularly given Bern’s status as U.S. protecting power in  Tehran. Ambuehl assured the USG that his message would be  identical to that of the UN Security Council and IAEA, namely  that Iran must suspend all enrichment activities and accept  its international obligations. Ambuehl’s staff informed  Embassy on March 12 that he was on his way to Tehran and  would provide a readout immediately upon return. End  summary.

——————————  “Last Chance” Message for Iran  ——————————

2.(C/NF) Swiss State Secretary Michael Ambuehl met with A/S  Dan Fried and the Ambassador on March 9 at ZURICH Airport,  joined by Swiss DFA Americas Desk official Urs Hammer and  Poloff. Ambuehl told A/S Fried that he planned to fly to  Tehran the week of March 12 to meet with Iranian Nuclear  Negotiator Ali Larijani. Ambuehl said that he wanted to  brief A/S Fried and the Ambassador in order to keep the USG  fully apprised of Swiss activities, per Ambassador Coneway’s  request. His purpose, he said, would be to push Iran to  accept the three “modalities” demanded by the UN Security  Council and IAEA, namely:   — Suspension of all enrichment activities, with “no tricks;”  — Transparency with the international community; and  — Acceptance of rights and obligations as defined by the  IAEA and UNSC resolutions.

3.(C/NF) Ambuehl said he had been encouraged to travel to  Iran by IAEA DG ElBaradei, with whom he had spoken three  times in recent days. ElBaradei told Ambuehl that he had  spoken with Secretary Rice and suggested that “we have to use  the Swiss” to urge the Iranians to abide by UNSC resolutions.  Notably, ElBaradei had not conveyed what the Secretary’s  response (if any) was. In any event, Ambuehl would tell the  Iranians that this was their “last chance.” He acknowledged  that a Swiss effort would have only a 30 percent chance of  success, but described the visit as low-risk, high potential  gain.

—————  Counterargument  —————

4.(C/NF) Ambassador Coneway challenged Ambuehl to describe  what if anything new the Swiss could tell the Iranians. It  was a delicate time in the stand-off between the P5 plus 1  and Iran; silence would be the best policy by Switzerland.  Moreover, Tehran would be unlikely to see this as a “last  chance.” A/S Fried told Ambuehl firmly that the USG had been  concerned by some Swiss actions. Side initiatives could  encourage the Iranians to game the unity of the international  community. Bern’s status as U.S. Protecting Power could also  cause Iran to misconstrue Swiss actions.

5.(C/NF) Ambuehl insisted that his prospective visit would  not undermine the P5 plus 1. His points would be exactly the  points agreed to by the UN Security Council and supported by  the IAEA. Iran’s rebuff of the Swiss initiative would be  recognized as further evidence of Tehran’s intransigence.

6.(C/NF) A/S Fried reiterated that the international  community had finally gained traction against Iran. It was  important to let the pressure work. A/S Fried urged Ambuehl  to make no firm plans until we could speak to officials in  Washington. In any event, Ambuehl should make clear to the  Iranians, if he does in the end go, that he did not speak for  the USG. Ambuehl said that this went without saying.  Ambuehl asked for understanding of the difficult situation he  was in (we surmise this means the directive from Foreign  Minister Calmy-Rey to engage with Iran on this issue).  Options other than a flat “no” would be appreciated. A/S  Fried and Ambassador Coneway agreed to get back to him as  soon as possible.

——————————————— –  Ambassador Coneway’s follow up call to Ambuehl  ——————————————— –

7.(C/NF) Using points provided by P staff, Ambassador Coneway  called Ambuehl that night with the message that the USG had  made its opinion clear. There was nothing new in the Swiss  proposal and the visit presented many opportunities for  misinterpretation. The decision to go would be a sovereign  Swiss decision to take. If Ambuehl chose to go, the  Ambassador stressed, it must be clear that he was not acting  on the USG’s behalf.

8.(C/NF) Ambuehl’s initial response was that he would  consider the USG points. However, his diplomatic advisor  Stephan Estermann called DCM on March 12 to announce that  Ambuehl was on his way to Tehran and would provide a briefing  upon his return.

——-  Comment  ——-

9.(C/NF) A/S Fried and Ambassador Coneway were very clear in  their expression of concern about Ambuehl’s planned travel to  Tehran. However, it is obvious that the Swiss think there is  at least the chance that the engagement of a “disinterested”  non-member of the P5 plus 1 could offer Tehran a face-saving  way to give into the UN Security Council – a belief  apparently reinforced by ElBaradei. Ambuehl was noticeably  uncomfortable not taking the USG’s advice. But, there is  little surprise in his decision to go forward with the visit,  given the clear mandate he has received from Swiss Foreign  Minister Calmy-Rey.

CONEWAY

XTAGS: XTAGPREL, XTAGKNNP, XTAGPARM, XTAGUNSC, XTAGSZ 07BERN258

SIPDIS

SIPDIS

DEPT FOR P (SGUHA), E, ISN/RA (KKESSLER), IO/T
(HVONBEHREN), AND EUR/AGS (YSAINT-ANDRE)

E.O. 12958: DECL: 09/10/2027
TAGS: MNUC KNNP ETTC IR SZ
SUBJECT: FM CALMY-REY “TAKES NOTE” OF USG CONCERNS
REGARDING IRAN/IAEA AND IRAN/EGL

REF: A. STATE 124823

¶B. GUHA-CARTER E-MAIL (07SEP07)
¶C. BERN 860
¶D. STATE 123352

Classified By: Charg d’Affaires a.i. Leigh Carter; reasons 1.4(b) and (d). 

——-  SUMMARY  ——-

¶1. (S) Per instructions in reftel A, CDA met FM Calmy-Rey on  the evening of September 7 to discuss USG concerns regarding  the handling of the Iran case at the September 10-14 IAEA  Board of Governors (BOG) meeting (reftels C/D). As requested  in ref B, CDA also took the opportunity to raise USG  objections to a pending natural gas deal between Swiss firm  EGL and Iran. Calmy-Rey replied that Switzerland does not,  as a general rule, discuss the Iran “dossier” in public,  given its broader commitments and roles in dealing with Iran  (e.g., as “protecting power” for the USG). Regarding the EGL  natural gas deal issue, she remarked that EGL is a private  company, and the Iran deal is very important to it. However,  she went on to say that she takes note of USG concerns,  particularly with regard to the timing of the deal in the  broader political context. Throughout the meeting, Calmy-Rey  was cordial but succinct and generally non-committal in her  reaction to our messages. (Meeting Participants: Poloff  accompanied CDA as notetaker. FM Calmy-Rey, also  concurrently the Swiss Federal President, was joined by  Yvonne Baumann, Head of the MFA’s Western Hemisphere  Division, and by Jean-Daniel Praz, Deputy Head of the MFA’s  Nonproliferation and Arms Control Division.) End summary.

———  IRAN/IAEA  ———

¶2. (S) CDA delivered the message in reftel A, noting that  Switzerland presumably would be elected to the IAEA Board of  Governors (BOG) later this month, and emphasizing the  importance of the international community speaking with one  voice in insisting that Iran meet it obligations on both the  IAEA and UNSC tracks. Calmy-Rey “took note” of USG concerns  and said that she would study the matter. She commented that  Switzerland was not yet on the BOG, so would not be in a  position to make a statement at the September 10-14 BOG  meeting. Poloff observed that public statements by   BERN 00000881 002 OF 002    like-minded states reiterating Iran’s obligations would be  useful, even outside of the context of the BOG. Calmy-Rey  replied that Switzerland does not, as a general rule, discuss  the Iran “dossier” in public, given its broader commitments  and roles in dealing with Iran (e.g., as “protecting power”  for the USG).

—————–  IRAN/EGL Gas Deal  —————–

¶3. (S) CDA underlined the points in ref B, observing that EGL  moving ahead with the Iran natural gas deal would have a  severe negative effect on the international community’s  efforts to keep the pressure on Tehran to achieve a  diplomatic solution. Calmy-Rey remarked that EGL is a  private company, and the Iran deal is very important to it.  However, she went on to say that she takes note of USG  concerns, particularly with regard to the timing of the deal  in the broader political context. She concluded by saying  that the GOS is “preoccupied” with the matter and would  review USG concerns.

——-  COMMENT  ——-

¶4. (C) Calmy-Rey agreed to the Friday evening meeting in  response to our request for an appointment before September  10 (reftel A). She was cordial but succinct and generally  non-committal in her reaction to our messages. Post will  continue to reiterate our concerns on these matters at  appropriate opportunities with other Swiss officials.

CARTER

EUR/FO FOR A/S FRIED, DAS GARBER, EUR/CE, CA FO, EUR/PPD,
EUR/EX

E.O. 12958: DECL: 12/05/2028
TAGS: PREL ECON ETRD PHUM EFIN SZ
SUBJECT: BILATERAL RELATIONSHIPS WITH SWITZERLAND AND THE
PRINCIPALITY OF LIECHTENSTEIN

Classified By: AMB. P. CONEWAY FOR REASON 1.4 (b) and (d)

(U) As I approach the end of my two and one-half year tenure  in Bern, I would like to share a few thoughts regarding our  relationship with Switzerland and Liechtenstein. I hope that  these observations will be helpful to my successor and others  concerned to better understand the opportunities and  challenges we face in dealing with these very successful, but  frequently frustrating alpine democracies.   (U) Special thanks to our dedicated staff of career  professionals at Embassy Bern and at the EUR/CE Switzerland  desk in Washington for their contributions to this document  and their important role in the bilateral relationship.

——————  Historical Context  ——————

(U) The quintessential element of Switzerland’s foreign  policy is its centuries-old tradition of neutrality. In  Liechtenstein’s case, neutrality was adopted after World War

¶I. This, alongside the country’s unique system of direct  democracy, is considered by the Swiss to be one of the two  main factors in the country’s remarkable historical success.  During the last century, when the rest of Europe suffered  horrific human and material losses in wars and revolutions,  Switzerland remained an island of democratic stability. In a  turbulent Europe, the Swiss were at peace. No Swiss  factories were bombed, the infrastructure was slowly  perfected, and the country’s banks (and even its real estate  agents) thrived on its proven track record as a safe haven.  Gradually over decades, such circumstances and traditional  Swiss industriousness transformed a resource-poor alpine  republic into one of the most prosperous societies on earth.

(U) Even now, in the 21st century, with its growing global  political, economic, and environmental challenges, neutrality  remains the cornerstone of Swiss foreign policy, a view  supported by all major Swiss political parties. Switzerland  is neither a member of NATO nor the European Union, and the  Swiss public does not aspire to join either, according to  public opinion polls. In a 2001 referendum, the Swiss voted  to reject full EU membership. Instead, the Swiss opted for a  series of so-called ‘bilateral treaties’ with Brussels to  increase Switzerland’s economic integration with the EU (by  liberalizing movements of capital, goods, and labor), but  preserve the country’s ultimate sovereignty.

(C) In a 2002 referendum, 55% of the Swiss voted to join the  United Nations. Proponents argued that UN membership would  allow Switzerland to make its discrete views better heard on  global issues. The decision was heavily opposed by the  conservative nationalist Swiss People’s Party (SVP) run by  Christoph Blocher, which argued it would weaken the country.  UN membership has forced Switzerland to take positions on a  range of issues on which it could have previously remained  silent. However, when faced with a particularly  controversial issue, the Swiss often abstain, such as in the  recent vote on whether to refer the question of Kosovo’s  independence to the ICJ.

———————  U.S.- Swiss Relations  ———————

(C) U.S.-Swiss relations are correct and cordial, but they  lack the natural intimacy and trust that stems from a shared  struggle against Fascism or Communism, a common language, or  linked history. U.S. and Swiss soldiers never fought  side-by-side in a war, no Swiss town felt an emotional bond  to the U.S. for a past liberation or economic assistance  program, and no flood of Swiss political dissidents or  economic migrants had to seek shelter on U.S. shores.

(C) Despite paying lip service to the useful democratizing  and stabilizing role the U.S. has played in modern Europe’s  history, the Swiss foreign policy establishment is at heart  convinced that Switzerland’s well-being and success is of its  own making, and the country owes a debt to no one. As a  result, the fabric of emotional and historical ties between  Switzerland and the United States is thinner than with many  other countries, and there is no store of historical goodwill  or accumulated political capital upon which to draw.   (C) This does not mean that the U.S. and Switzerland cannot  cooperate effectively in many areas. However, the ways in  which the Swiss choose to work with us (such as on global  economic, environmental or humanitarian issues) are those  where they believe our rational self-interest coincides and  which do not require Switzerland to abandon its strict  neutrality on international armed conflicts.

(C) Internal debates over Swiss foreign policy tend to focus  more on the ‘style and body language’ of its neutrality  rather than its substance. Swiss Federal Councilor for  Foreign Affairs Micheline Calmy-Rey is resented in some Swiss  circles for her high-profile attempts to offer Switzerland as  an intermediary in various disputes, which runs counter to  Switzerland,s tradition of discrete, low-profile diplomacy.  Thus, for example, Switzerland’s recent ‘offer’ to represent  Russia’s interests in Tbilisi came almost as soon as the hot  phase of the conflict ended. However, the Swiss Department  of Foreign Affairs (EDA) strategists believe the move was an  effective way to underline Switzerland’s status as neutral  and pose a counterpoint to its representation of U.S.  interests in Tehran and Havana. (It also represents Iran’s  interests in Washington).

(C) One of the most recent points of tension between the  United States and Switzerland was the decision of the Swiss  gas company EGL to enter into a long-term contract to buy  natural gas from Tehran. Swiss Foreign Affairs Councilor  Calmy-Rey has cited it as one of the achievements of her  activist style of diplomacy, which has allowed Switzerland to  win Iran’s trust. While Switzerland has supported UN  sanctions against states of proliferation, including Iran, in  Iran’s case, the Foreign Ministry has pursued its own “Swiss  Plan,” which has on several occasions sent the wrong message  to Iran given the Swiss protecting power mandate for the U.S.  (see Political Issues for important expanded history on the  Iran Dossier).

————-  Liechtenstein  ————-

(U) The United States enjoys excellent relations with the  Principality of Liechtenstein and its hereditary ruling royal  family. Despite having only 33,000 inhabitants, the  Principality is an important banking center, providing  ‘offshore’ financial services to thousands of foreign  clients. The numerous banks and holding companies located in  the Principality manage more than $150 billion of client  assets and generate roughly 30% of the country’s GDP. Like  Switzerland, Liechtenstein has adopted neutrality as its  foreign policy strategy and often follows Bern’s lead on  international issues. In many countries, Liechtenstein  relies on the Swiss Embassy to represent its interests. For  these reasons, the U.S. Embassy in Bern devotes only a  fraction of its time to managing bilateral relations with  Liechtenstein. Our most substantive interactions have  involved seeking ways to improve our cooperation in the fight  against money laundering and terrorist financing and on how  to prevent Liechtenstein’s bank secrecy laws from being used  by U.S. taxpayers to evade taxes.

Terrorist Financing

(U) Liechtenstein and the United States signed a mutual legal  assistance treaty in 2002 focused on jointly combating money  laundering and other illegal banking activities. Close  relations with our Liechtenstein counterparts, such as  Liechtenstein’s Financial Intelligence Unit (FIU), have  helped the embassy resolve issues before they become  problematic. For example, in April 2007, Liechtenstein  halted the transfer of Boeing MD-80 aircraft from Germany to  Iran via Liechtenstein. Since September 11, Liechtenstein  has also frozen approximately $150,000 in terrorist assets.  Liechtenstein is a party to the UN Convention on Terrorist  Financing and in March 2008, Liechtenstein hosted the working  meeting of the Egmont Group ) the worldwide association of  national Financial Intelligence Units.

Tax Evasion

(C) Like Switzerland, Liechtenstein draws a fine line between  banking privacy and secrecy and exempts individuals for tax  evasion, but not tax fraud, from criminal prosecution. These  technical differences have hindered efforts to obtain banking  information on U.S. citizens suspected of tax evasion.  Liechtenstein’s largest bank, LGT, which is operated by the  royal family, is under scrutiny (and pressure from the U.S.  Senate) for allegedly encouraging U.S. citizens to commit tax  evasion and tax fraud. As a result, the U.S. and  Liechtenstein are currently negotiating a Tax Information  Exchange Agreement, which should provide more open access to  information and additional avenues for legal cooperation  where tax fraud is concerned.

————–  Private Sector  ————–

(U) Leaders in the private sector (CEOs, CFOs, public affairs  officers, etc.) and NGO arenas can wield considerable  influence in political matters when they choose to get  engaged.

(U) Typically, they are less involved in Switzerland than our  experience in the U.S., but it is a good investment for the  COM, DCM, Pol/Econ, Public Affairs, and Commercial officers  to develop relationships in these sectors. From programs and  panels at the WEF, Swiss-American Chamber events, programs,  and issues, and underwriting of exchange programs like the  U.S.Fulbright-Swiss Scholarship Program, to general support  of our Embassy and mission, the private sector and NGOs can  positively influence our success.   (U) The private sector can also enhance the public’s positive  perception of the U.S. and our policies.

—————-  Political Issues  —————-

(C) The decentralized nature of political power in  Switzerland is unique in Europe. Far from having a unitary  Executive, the Swiss government is led by a seven-member  cabinet — the Federal Council. The Swiss presidency is  largely ceremonial and rotates annually between different  members of the Federal Council. Even for those accustomed to  dealing with the complex political geometries of European  coalition governments, the Swiss form of decision making can  be disorienting. With the exception of the rightist Swiss  People’s Party that opted for an opposition role last year,  all the major political parties are represented on the  Federal Council, spanning a broad spectrum from left to  right. Each Federal Councilor (Minister) serves at his or  her own pleasure and enjoys an ill-defined but generally high  degree of autonomy. While key policy decisions are taken by  the entire Council — sometimes via vote -) its  deliberations are strictly secret, and the Swiss have a  long-standing tradition whereby Federal Councilors avoid  publicly criticizing each other. The end result is a  seemingly amorphous policy-making process in which decisions  are implemented with considerable freedom of interpretation  by senior representatives of political parties having often  diverging interests.

(C) An additional “x factor” in Swiss decision making is the  ability of the Swiss people to initiate or to strike down  legislation via an expansive and oft-used referendum  mechanism. It only takes 50,000 certified Swiss signatures  to force a public vote. The threat of a referendum is a fact  of Swiss political life that no politician here can ignore,  and something that Swiss officials frequently flag for us)  particularly when we ask them to do something difficult.

(C) Dealing with these unique elements of the Swiss  political system demands patience and flexibility but can pay  important dividends. Given its international reputation for  mediation and diplomatic competence, Switzerland,s influence  on the international stage is significantly greater than one  would otherwise assume for a country of its size. Standing  outside of the EU and NATO, Switzerland sees its comparative  advantage as working the seams via diverse and variable  coalitions of convenience. With enough effort and  coordination, the Swiss advantage in this respect can  sometimes become our own, as was the case with the strong  supportive roles the Swiss have played on Kosovar  independence, on obtaining the release of American citizens  wrongfully detained in Iran, on addressing interoperability  concerns with the Oslo Accord on cluster-munitions, on the  establishment of the Forum for the Future, and with the  resolution of the Magen David Adom dispute. But getting  successful outcomes requires strategic patience on our part  and a willingness to take the time to cultivate relationships  with each of the Federal Councilors, as well as with industry  leaders. In doing so, I have come to appreciate that the  extensive horse-trading endemic to the Swiss tradition of  political compromise sometimes gives unlikely actors  influence on issues of interest to us.

(C) As noted above, the Swiss penchant for equidistance  sometimes works to our advantage. However, on one key issue  of the past two years ) the Iran nuclear problem )  Switzerland,s instinct “not to take sides” has harmed  international efforts. While many Swiss clearly understand  and take seriously the threat that Iran’s dangerous nuclear  program represents to our mutual interests, FM Calmy-Rey has  apparently seen in this dispute an opportunity to raise her  own profile. While we and the members of the P5 1 group, the  EU, and other like-minded states have made considerable  progress in increasing the pressure on Iran, Calmy-Rey’s  ministry has undercut these efforts at several turns by  offering an alternative “Swiss Plan” for resolving the  dispute. The Swiss Plan and Calmy-Rey’s infamous trip to  Tehran in March to secure a major new gas deal with Iran for  Swiss firm EGL, have surely given Iran some reason to believe  that it can continue to resist pressure to meet its  international obligations.

(C) Swiss behavior regarding Iran is of particular concern  because Switzerland has been our Protecting Power in Iran  since 1980, and since Switzerland was re-elected to the IAEA  Board of Governors last fall. It has required much effort on  our part to contain Swiss activism on Iran, culminating with  a public endorsement in July of the P5 1 proposal by  President Couchepin, along with assurances that Switzerland  would no longer promote its own initiatives for resolving the  Iran nuclear dispute. At the same time, the Swiss have taken  increasingly firm and constructive stances regarding Iran at  the IAEA, thanks in no small part, I believe, to our lobbying.

(C) However, President Couchepin’s recent declaration, which  received broad press coverage (see July NZZ Sonntag article),  “For several weeks the Swiss position in the Iran-Nuclear  dispute is completely clear. There is no special initiative  any more. We do not look for a special mediation/way.  Instead we support the position of the P5 plus 1 countries,  and we hope that Iran will give in,” has effectively muzzled  the Foreign Ministry’s determination to pursue its own “Swiss  Plan.”

(C) If and when this or the new administration wishes to  explore a diplomatic dialogue on the Iranian nuclear  proliferation issue, perhaps we could engage the Swiss at the  outset to truly represent us, with the understanding at that  point, that they would only deliver our message, and not  something diluted by independent Swiss thinking. If and when  such a dialogue is in our best interests, I believe the Swiss  and their Foreign Ministry would jump at the chance to truly  represent us without prejudice and with strict guidelines.  This idea is worth exploring if an appropriate opportunity  presents itself.

(SBU) To reinforce our ability to identify and pursue goals  of mutual interest, in 2006 we signed a MoU with the EDA  initiating a so-called “Political Framework for Intensified  Cooperation.” Though such instruments are always at risk of  becoming merely talk-shops, the EDA places high importance on  the Framework, making it a potentially useful tool for us to  define and achieve USG goals, including in such areas as  promoting civil society in the Broader Middle East and North  Africa, human rights, peace support operations in the Balkans  and Africa, and counterterrorism.

—————  Economic Issues  —————

(U) Switzerland’s highly advanced and diversified economy  has so far proven comparatively resilient in the global  financial crisis. The Swiss government estimates that GDP  growth will fall from roughly 1.9% in 2008 to a maximum 1.0%  in 2009. Switzerland,s GDP in 2007 totaled 512 billion CHF  ($450 billion), resulting in a per capita GDP of about  $60,000, according to the IMF. Only three percent of Swiss  wage-earners take home less that 3,000 CHF per month, and one  out of five Swiss pensioners has a net worth of more than  1,000,000 CHF. Unemployment is 2.3%. Switzerland is home to  a disproportionate number of large European multinationals,  and global companies such as Nestle, Novartis, Roche, Credit  Suisse and UBS gave the Swiss Stock Exchange a market  capitalization equal to roughly 2/3 that of Germany’s.

(U) U.S.-Swiss economic ties are robust and long-standing,  and they contribute most positively to our political  relationship with Switzerland. The economic sphere is an  area where both sides perceive a clear win/win situation.  Swiss firms have collectively invested over $140 billion in  the United States and employ nearly 500,000 U.S. workers,  ranking Switzerland seventh among all foreign investors in  the U.S. On the other side, more than 600 U.S. enterprises  have together invested more than $90 billion in Switzerland,  providing jobs for 70,000 people (or about 2% of the nation’s  entire labor force.) Switzerland is a preferred location for  the European headquarters of a number of top U.S.  multinationals (Caterpillar, GM, Dow Chemical, DuPont,  Colgate-Palmolive, etc.), while U.S. citizens head up some of  Switzerland,s bluest of blue chip companies. These include  Brady Dougan at Credit Suisse, Michael Mack at Syngenta, and  James Schiro at ZURICH Financial Services. The Swiss bank  UBS actually has more employees in the United States (32,000)  than it does in Switzerland (27,000).

(U) Despite the lack of a free trade agreement, U.S. trade  with Switzerland is largely free outside of agriculture, and  Switzerland is a strong supporter of global services and  manufacturing trade liberalization. In 2007, U.S.  merchandise exports to Switzerland rose 18.5 percent to $17.0  billion (making the alpine country our 17th largest export  market). At the same time, merchandise imports from  Switzerland rose 3.7 percent to $14.8 billion. Key U.S.  exports to Switzerland included precious stones and metals,  pharmaceutical products, art and antiques, optical and  medical instruments, and aircraft, while top U.S. imports  from Switzerland included pharmaceutical products, clocks and  watches, machinery, optical and medical instruments, and  chemicals. Although most trade and business activity takes  place entirely in the private sector, the Mission must still  occasionally intervene with Swiss authorities to defend U.S.  commercial interests.

(U) In 2005, Switzerland’s Federal Council decided to  propose exploration of a free trade agreement with the United  States. The attempt foundered on opposition from  Switzerland,s highly-protected farm sector. Instead, the  U.S. and Swiss governments agreed to establish a bilateral  Trade and Investment Cooperation Forum to address small yet  sensitive trade issues. Under its auspices, in October 2008  the two governments signed an ‘E-Commerce Declaration,’ which  provides a framework for cooperation to improve trade  conditions for these services. In addition, a ‘Safe Harbor  Agreement’ to allow free flow and effective protection of  personal data is in the final states of negotiations and is  likely to be concluded before the end of 2008.

(U) Also this year, the U.S. and Switzerland concluded an  expanded Open Skies Agreement, and are exchanging  discussion drafts on a ‘Multilateral Convention on  International Investment in Airlines.’ The U.S.,  Switzerland, and several other countries are also engaged in  negotiating the Anti-Counterfeiting Trade Agreement,  (ACTA), which held its last negotiating round in Tokyo in  October 2008 and is intended to increase international  cooperation and strengthen the framework of practices that  contribute to effective IPR protection.

(U) Another tool utilized by the Mission to promote trade is  the U.S.-Swiss Joint Economic Commission (JEC). The JEC meets  once a year to discuss and resolve bilateral  misunderstandings. The JEC also holds a panel at the World  Economic Forum at Davos, the premier international event of  its kind, as documented in the World Economic Forum section  below.   (U) The JEC panel, which is organized by the Mission in  cooperation with the Swiss Department of Foreign Affairs, the  Swiss-American Chamber of Commerce, and EconomieSuisse,  allows the mission to publicize USG messages to an  influential global audience, such as supporting the Doha  Round at the 2008 panel and addressing the impact on trade of  the global financial crisis, the topic of the upcoming 2009  panel.

——————–  World Economic Forum  ——————–

(U) The World Economic Forum (WEF) annual meeting in Davos,  Switzerland, is unlike any other event of its kind. Over a  five-day span at the end of January each year, 2,000 world  leaders, Fortune 500 chief executive officers, international  media moguls and nongovernmental organization (NGO) leaders  gather in the small alpine village of Davos to participate on  panels, in industry meetings and in “off the record”  sessions. The WEF meetings in Davos have been a ripe target  for public diplomacy efforts over the past 38 years, and the  WEF’s founder, Dr. Klaus Schwab, has preserved the original  intent of the forum in maintaining its focus as a place for  informal dialogue and debate on major social and economic  problems.

(U) Davos 2008 was an important milestone for the United  States. During the final year of the Bush presidency, the  administration dispatched five cabinet secretaries, three  deputy secretaries, and numerous undersecretaries to Davos.  Secretary of State Condoleezza Rice, Secretary of Homeland  Security Michael Chertoff, Secretary of Energy Samuel Bodman,  Secretary of Education Margaret Spellings, U.S. Trade  Representative Susan Schwab, and Deputy Secretary of the  Treasury Robert Kimmitt, participated in five days of panels  and discussions that covered topics ranging from Middle East  peace, climate change, and educational reform to immigration,  financial market stability, and trade liberalization.   (U) Embassy Bern has worked closely with Klaus Schwab and his  WEF team to include U.S. delegations that not only speak with  strength and conviction on the global issues of our time, but  are also internationally recognized experts on the pressing  issues of the day.  During the last three years, our Mission has helped shape six  panels for Klaus and his team. The environment, challenges in  the global financial arenas, energy security, global  prosperity, and Muslim outreach are among the topics on which  we have collaborated with Dr. Schwab. No other nation works  so closely with the WEF on topics and participants, and no  other nation has our record of success in organizing panels  for key officials.   (U) Engaging a skeptical world is not an easy task. Public  diplomacy is vital if the United States is to correct skewed  impressions. Communication and public diplomacy are major  reasons for the success of the World Economic Forum’s annual  meeting in Davos. Klaus Schwab has made Davos media-friendly.  One of his primary goals each year is to expand the media’s  reach. As a result, world leaders travel to the Swiss Alps to  deliver addresses aimed at their constituents around the  world. It has been an effective platform for the United  States Government and private sector leaders to support and  advance America’s missions and values.

————————–  Foreign Commercial Service  ————————–

(U) The U.S. Foreign Commercial Service (FCS) has the lead on  providing promotional support and advocacy for U.S. exporters  and on attracting Swiss business investment to the United  States. Thus, it intervened with Swiss authorities in the  telecom sector to obtain regulatory approvals and in the  pharmaceutical sector to expand insurance reimbursements. In  aerospace, FCS and Mission management facilitated export  licenses leading to millions of dollars in U.S. exports. Over  the past year, FCS developed programs with multiple U.S.  universities to attract Swiss students to the U.S.A. In  October 2008, it mounted a USDOC-certified U.S.A. Pavilion at  WorldDidac (an educational fair in Basel). These activities  took place at the same time as we were consolidating the  operations of our FCS ZURICH office into the new Embassy in  Bern.

(U) Our strong relationship with the Swiss-American Chamber  of Commerce is a vital asset in our efforts to promote U.S.  business. The 41-person board of directors of the Chamber is  a Who,s Who of the Swiss business community led by Executive  Director Martin Naville who is one of our biggest friends and  assets in-country. Virtually every board member is a CEO or  senior officer of a major corporation in his/her own right.  There is probably no better high-level, pro-U.S. audience in  Switzerland with which to promote investment in the U.S. In  June 2008, I rolled out the Commerce Department’s Invest in  America Initiative in a speech to nearly 400 Swiss AmCham  members and guests. In November 2008, the Chamber and FCS  will co-host an Invest in U.S.A. Seminar with speakers from  Commerce, Treasury, State, and Homeland Security. Finally, in  June 2008 FCS consummated its “Transformational Commercial  Diplomacy” initiative for Switzerland by integrating its  ZURICH office with the Embassy in Bern.

———-  Management  ———-

(U) In June 2008, the Mission completed the sale of the  government-owned chancery complex and moved to a  newly-renovated, short-term lease property. It represents a  substantial upgrade in embassy habitability, and the new  building occupies a geographically central location in Bern  that minimizes transportation movements in our daily  business. The USG-owned Chief of Mission Residence (CMR) is  located next to the new chancery.

————-  Post Security  ————-

(C) The Mission’s overall security posture significantly  improved with the relocation of the Embassy. The physical  security of the building is excellent; it is outfitted with  modern hardline doors, windows and barriers, and we achieved  significantly more “setback” from the street. Moreover, we  now control all vehicles entering and exiting the compound,  which was not the case in the previous location. Technical  security also improved with better-constructed and  well-defined CAAs.

(C) The Regional Security Officer (RSO) faces a challenging  audience when dealing with Swiss authorities on Post  security. Many Swiss authorities do not consider the United  States Embassy in Bern as a high-value target for terrorists;  this fallacy and its resulting challenges require frequent  intervention and lobbying by the RSO. Recurring conversations  and education resulted in positive instances of excellent  security support. We succeeded in persuading Swiss  authorities not to cut the number of posts currently manned  by either Swiss law enforcement or military. In addition, we  have requested and received security support for dozens of  high-level U.S. officials either visiting or transiting  Switzerland. The response of Swiss authorities to security  incidents has been commendable. They sent a well-trained  professional team to the Embassy to deal with a “white  powder” incident, and on several occasions have controlled  and mitigated suspicious individuals or vehicles in the area  of the Embassy. They sent appropriate support for  demonstrations directed at the Embassy and for special events  such as the July 4th celebration. On occasion, the RSO has  requested and received close protection for me at large  public events.

(C) The most disappointing security issue was the rejection  by the Swiss government of our request to deploy a  surveillance detection team. The decision was made at the  highest levels (the Federal Council) and was conveyed to us  by the Foreign Ministry. The chances of reversing that  decision are poor considering the high level of political  attention it received. The RSO will continue to work with his  resources and coordinate with Swiss authorities to provide  appropriate levels of security support.

———————-  Defense Attach Office  ———————-

State of the Partnerships

(U) Switzerland’s continued presence in the Balkans, level  of engagement in NATO’s Partnership for Peace, and its recent  decision to withdraw the two military officers assigned to  ISAF reflect a military willing and at least superficially  able to contribute to regional security but severely  constrained politically. As Switzerland tries to find its  niche on the geo-strategic security stage, it has begun to  focus limited efforts towards Africa. Given the current  turmoil within the Defense Ministry and the recent abrupt  resignation of the current Defense Minister Samuel Schmid,  Swiss engagement abroad will increasingly be under the  auspices of the Foreign Ministry.   Greatest Challenges

(U) The Swiss military is limited by law to participating  only in peace support operations (PSOs) — as opposed to  peacekeeping or peace enforcement — and only under the  auspices of either a UN or an OSCE mandate. Furthermore, the  standing posture of the military’s involvement in PSOs and  other military engagements is participation under a  multilateral umbrella, equally avoiding bilateral  involvement’s with either NATO or the EU.   Contribution to Regional Stability, Democracy, and Foreign  Assistance

(U) On September 20, 2007, the Swiss parliament voted to  double the number of peace support operations troops from 250  to 500. While the actual realization of this effort will  most likely occur beyond the 2010 timeline originally  attached to the bill, it nevertheless provides insight into  the Swiss desire to be seen as contributing to regional  security and stability. Currently, Switzerland is  coordinating though DAO Bern to donate medical equipment to  the Afghan National Army. And, as mentioned previously,  Switzerland is increasingly focused on disarmament,  democratization, and reintegration efforts on the African  continent.

(U) Our engagement initiatives with the Swiss military will  continue to emphasize U.S. desires for them to maintain their  250-strong peacekeeping contingents deployed in Kosovo and  Bosnia and broaden their NATO-partnership activities beyond  Europe, and we will continue to explore cooperative ventures  for improved regional security and stability in Africa.  Towards that end, we will work in concert with both U.S.  European Command (USEUCOM) and African Command (USAFRICOM).   We will continue to maintain a robust defense procurement  relationship with the Swiss military, even as Swiss budgetary  constraints manifest themselves in less outlay for  acquisition. We will also continue to encourage the Swiss  military to further utilize military assets — particularly  excess defense articles — in humanitarian relief/aid efforts.

—————  Law Enforcement  —————

Counterterrorism and Law Enforcement Efforts

(U) The Federal Bureau of Investigation (FBI), Department of  Homeland Security (DHS), and Drug Enforcement Administration  (DEA) are the law enforcement entities represented at post.  Other law enforcement offices are represented through  regional offices. Ongoing efforts continue with the  government of Switzerland to grant the Regional Security  Office (RSO) law enforcement status.

(U) Switzerland strictly forbids investigative activity  within its territory by U.S. law enforcement. Thus, a high  reliance exists on the Swiss authorities to conduct  investigations on behalf of the U.S. in Switzerland.  Obstacles that have continued to hinder full cooperative  efforts and the free exchange of information in this regard  include an unfavorable Mutual Legal Assistance Treaty (MLAT)  that requires Swiss notification to the subject and  disclosure, and Switzerland,s strict personal privacy  statutes.

(U) This has reinforced the importance of the development of  liaison and rapport with Swiss law enforcement authorities by  U.S. law enforcement agencies at a working level, as well as  efforts at the ministerial level to invigorate information  sharing, particularly as it relates to counterterrorism and  money laundering.

(U) As a result of these efforts, we have seen a measured  improvement in overall Swiss cooperation with U.S. law  enforcement authorities at the federal, cantonal, and local  level. In addition, we remain optimistic concerning a new  version of the Operative Working Arrangement (OWA) recently  ratified by the Swiss parliament, which allows the formation  of joint U.S.-Swiss investigative teams to address criminal  and counterterrorism investigations with a U.S.-Swiss nexus.

(U) Our current challenge exists in continuing to enhance law  enforcement cooperation, intelligence sharing, and efforts to  apply the OWA in joint cases.

(U) Liechtenstein continues to be a model of cooperation for  U.S. law enforcement, having offered legal assistance on  important money laundering investigations and the arrest of  significant U.S. fugitives. The principality continues to be  in full compliance with the Financial Action Task Force  requirements.

—————-  Public Diplomacy  —————-

(U) The Public Affairs Section (PAS) is lean, with one  officer and three staff members. The budget supports limited  programming, two IVLPs, and one to one-and-one-half I-Bucks  speakers. Public Diplomacy outreach focuses on enhancing  public support for the United States and its goals and on  improving counterterrorism cooperation. Mutual understanding  is advanced through intensive use of the Fulbright and IV  Programs and alumni; actively engaging media in  Switzerland,s three major languages; increasing educational  advising and university relationships; presenting  multi-culturalism in the United States through Iftar, Black-  and Women’s History Month speakers; and programming American  terrorism experts in all language regions.

(U) The last published media survey addressing Swiss  anti-Americanism was Q1 2007. It ranked Switzerland as  having the most anti-American levels in Western Europe.  Moreover, a September 2008 interview with Swiss Ambassador to  the United States Urs Ziswiler said he was concerned by the  anti-American attitude of the Swiss. PAS believes  anti-Americanism remains high: Inaccurate and/or negative  stories about the United States or the Embassy continue in  tabloids, free commuter papers and in the Geneva dailies.  However, the investment in ramped-up outreach has yielded  results, including dramatic increases in the number and  diversity of Fulbright applicants; the number of universities  hosting Embassy programming; the number of media inquiries  and accurate stories; and alumni group participation and  activity.

——–  Consular  ——–

(U) In 2008, the Consular Section led an interagency effort  to convince the Swiss government to begin negotiations on the  Terrorist and Criminal Information-Sharing Agreement. To  date, the Swiss have shown little interest in this proposal,  arguing that such an agreement would be incompatible with  Swiss privacy laws. The Consular Section is now attempting  to get Swiss authorities to suggest their own version of such  an agreement that would be consistent with Swiss privacy laws  and still fulfill the intent of the U.S. proposal. We hope  to lay the groundwork for a Swiss negotiating team to visit  Washington in early 2009.

(U) The January 12, 2009, deadline for mandatory use of the  Electronic System for Travel Authorization (ESTA, a DHS  program for advance registration of travel to the U.S. so far  aimed at Visa Waiver Program (VWP) travelers) is fast  approaching. The Bern Consular Section has been active in  getting the word out to airlines, tourist agencies, leading  business groups, and the Swiss traveling public at large that  ESTA is out there and that its use will be required for all  Visa Waiver travel as of January 12. These outreach efforts  have been assisted by FCS and PAS.   (U) The early arrival (August 2008) of the new Consular  Section chief, permitting a 3-month overlap with the  departing Section Chief, temporarily brought the Section’s  officer complement to the full staffing of four officers.  This enabled Post to greatly reduce its large backlog of NIV  appointments, which had occurred due to staffing gaps.  Currently, the waiting period for an appointment is one week.  As of early November, the Consular Section has found itself  again short one officer, and only the seasonal drop in NIV  applications has prevented the backlog from again approaching  high levels. The next entry level officer is due to arrive  in March 2009. Post is seeking TDY/WAE support in the  meantime to keep the situation from assuming the unacceptable  Spring-Summer 2008 proportions.

———–  Conclusion  ———–

I would like to thank the following dedicated and talented  career officers at Embassy Bern who have worked with me in  advancing our mission in Switzerland and Liechtenstein. They  contributed significantly to this memorandum and remain  committed to working under the leadership of Deputy Chief of  Mission and Charg, Leigh Carter, until the next ambassador  arrives.   Deputy Chief of Mission, Leigh Carter  Political/Economic section: Richard Rorvig, Chris Buck,  Leslie Freriksen, Meg Goldfaden, and Diane O,Guerin  Foreign Commercial Service: Donald Businger  Management: Jonathan Schools  Regional Security Office: Brian Murphy  Defense Attach Office: Colonel Dorothea Cypher-Erickson  Department of Homeland Security: Michael McCool  Drug Enforcement Administration: E. Joe Kipp  Federal Bureau of Investigation: Danny Boyd  Public Diplomacy: Lisbeth Keefe  Consular: Ed Birsner   Thank you for this opportunity to serve my country.   Ambassador Peter R. Coneway

CONEWAY

MOSCOW 005585

SIPDIS

SIPDIS

DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT EUR/CARC, SCA (GALLAGHER, SUMAR) DOE FOR HARBERT, HEGBORG, EKIMOFF DOC FOR 4231/IEP/EUR/JBROUGHER E.O. 12958:DECL: 11/26/2017

TAGS: EPET ENRG ECON PREL PINR RS

SUBJECT: “SECURE GAS SUPPLY FOR EUROPE” — NORD STREAM MOVING FORWARD

REF: A. THE HAGUE 1999 B. MOSCOW 5399 C. TALLINN 737 D. HELSINKI 785 E. WARSAW 1975 F. RIGA 430

Classified By: Ambassador William J. Burns for Reasons 1.4 (b/d)

——- SUMMARY ——-

1. (C) In a November 15th meeting with emboffs, Nord Stream executives said they expect construction of the gas pipeline across the Baltic to the EU to start mid-2009, with completion of the first of two pipelines in 2010 and deliveries to begin in 2011. Various other contacts with whom we discussed the project also believed the project would likely move forward, though not on this timetable.

2. (C) Hurdles remain, however, including potentially laborious permit processes in environmentally conscious Finland and Sweden, and political opposition from Poland, Estonia, and Latvia. Finnish and Swedish Embassy representatives told us the permit processes in their countries would follow the law but that neither government was opposed to the pipeline in principle. The EC Delegation’s energy officer told us the pipeline is welcome in that it would provide route diversification, if not supply diversification, provided that it “follows the rules,” something Nord Stream insists it is doing to the fullest.

—————————— “SECURE GAS SUPPLY FOR EUROPE” ——————————

3. (U) Nord Stream was established in 2005 as a joint venture between Gazprom (51%) and two German companies, BASF subsidiary Wintershall (24.5%) and E.On-Ruhrgas (24.5%). This November, Dutch energy company Gasunie joined the project (ref A), taking a 4.5% stake from each of the German partners. Nord Stream is headquartered in ZUG, Switzerland but the majority of the work is done from the Moscow office. The company will build and operate two gas pipelines, each with a capacity of 27.5 billion cubic meters (bcm), from the Russian port of Vyborg, 1200 km across the Baltic Sea to Greifswald, Germany. The project timeframe sees the first line completed by 2010 and the second by 2012.

4. (SBU) On November 15th and November 22nd respectively, Nord Stream and Wintershall representatives gave us different versions of the same Nord Stream presentation, outlining the project and its status. Quite aware of Western European anxiety over Russia’s renewed might and its position as the dominant foreign supplier of energy to the region, Nord Stream’s presentation is titled: “Secure Gas Supply for Europe.” According to the Nord Stream and Wintershall officials, by 2015, 75% of EU gas consumption will be supplied by imports (up from about 60% today), amounting to an additional annual 230 billion cubic meters (bcm) of imported gas needed by 2015. Much of the company’s presentation is devoted to such facts, with the punch line that the EU needs Russian gas and that Russia is a capable and reliable gas supply partner for the EU.

———————– MONEY AND GAS AVAILABLE ———————–

5. (SBU) By Nord Stream’s own estimates the project will cost “at least” 5 billion euros. Yet Finance Director Paul Corcoran was confident that financing would not be an issue. He told us the current credit crunch has actually made the project more appealing to banks. “It fulfills new credit criteria,” he said, explaining that it gives banks a long-term energy infrastructure project backed by guarantees from credible and established shareholders with reliable customers for the shipped gas. He said shareholders have already contributed $150 million in capital and that the company will significantly ramp up spending in the coming MOSCOW 00005585 002 OF 004 months so that the partners’ combined equity contribution will amount to about $1.5 billion. The remainder will be borrowed. He said company staff, currently numbering about 70, will rise to 100 or more by the end of the year.

6. (SBU) The Nord Stream and Wintershall executives stressed that gas for the pipeline will not come from a dedicated source, but that the pipeline would simply be connected to Russia’s existing gas supply system, with Gazprom guaranteeing supply. They added, however, that possible sources of the additional gas to feed the system will come from the Yuzhnoe-Russkoe field, expected to produce 25 bcm annually, and, later, the Shtokman field, expected to produce over 70 bcm per year. Corcoran observed that the operators of the Yuzhnoe-Russkoe had surprised everyone by meeting its deadlines and that it will be on-stream by the end of 2007. By contrast, he admitted that 2015 is “optimistic” for Shtokman gas, but that Nord Stream was not dependent on Shtokman coming on-line by a specific date.

—————————- ENVIRONMENTAL CONSIDERATIONS —————————-

7. (SBU) Currently, Nord Stream is in the permit phase of the project, which it had hoped to conclude by the end of 2008. The process is complex, given the need to consult with 9 different national governments and receive specific permits from at least 5. Both Vitaly Yusufov, head of Nord Stream’s Moscow office, and Tatiana Krylova, the Deputy Director of Wintershall’s Russia office, told us that although Nord Stream has already ordered pipe and begun construction of the Russian land-based facilities, no off-shore construction would begin until all needed permits were in hand. Nord Stream’s Corcoran said the company expects to have all permit applications complete by April 2008 and to receive all approvals by “mid-2009” (about six months later than projected in the timeline in the company’s presentation).

8. (C) Swedish and Finnish environmental permits are expected to be the most time consuming to obtain. Finnish Embassy Economic Officer Antti Helantera told us November 14th that the Finnish government has no political opposition to Nord Stream (ref D), but that the permit process would have to run its proper legal course. He described the process as one of Nord Stream’s potential major roadblocks, calling it “unpredictable.” According to Helantera, permits were needed from two different authorities, each with its own appeals process, neither with a time limit for decision-making, and both open to input from the public. He said the Russians would automatically think delays are “political,” but only because “they don’t understand the process.”

9. (C) Swedish Embassy Economic Counselor Stefan Gullgren described Sweden’s role and position as similar to Finland’s. He said the Swedish government was not opposed to the project, as long as it passed strict Swedish environmental review. “The environment is important to Swedes; there will no special deals and no political intervention,” Gullgren said. He specifically highlighted concern over possible disturbance of chemical munitions thought to lie on the seabed, and the pipeline’s effect on sensitive breeding grounds for fish. According to Corcoran, there is no deadline under Swedish law for review of Nord Stream’s application, but Nord Stream expects the process to take 12-15 months. Gullgren also noted that a proposed “service platform” (to examine and repair the pipeline as needed) to be built in Swedish waters would become, in effect, “Swedish territory” and subject to Swedish laws and regulations.

10. (SBU) In its presentation, Nord Stream went to great lengths to demonstrate its interest in minimizing potential environmental impacts as well as incorporating stakeholders’ input. Corcoran and Yusufov described the company’s studies of the Baltic Sea as “the most extensive undertaken by anybody, ever.” Relevant to the stranded munitions question, they claimed that through various technologically sophisticated scanning techniques they identified just 22 “objects of concern.” Through further analysis, they determined that 12 of those are harmless debris (e.g. anchors), and they were currently using submersible research vessels to investigate the remaining ten. In the end, Nord Stream predicts that only “2 or 3” objects will turn out to be munitions or other troubling discoveries. According to the Nord Stream presentation, the company has also used over 170 different monitoring stations to study various physical and biological parameters that may be affected by the pipeline.

11. (SBU) Wintershall’s Krylova said Nord Stream has actively consulted with NGOs and the public in all Baltic Sea countries and would continue to do so. She said company representatives have participated in numerous public hearings in Baltic Sea countries and that they do monthly visits to each affected country to meet with potential stakeholders. As part of its intensive public relations effort, Nord Stream maintains a website in five languages, prints project-related documents in ten languages, and publishes a newsletter in four languages.

——– POLITICS ——–

12. (SBU) Nord Stream’s PR efforts are partly aimed at defusing political opposition, as the already complex permit process is further complicated by Russian political relations with the various Baltic Sea littoral states. Poland has been among the most vocal opponents of the project (ref E), which is designed to bypass Poland as a transit state, depriving it of some of its leverage over Russia. Poles reportedly refer to it as the “modern Molotov-Ribbentrop Pact,” recalling the division of Eastern Europe between Hitler and Stalin. Dismissing Poland’s opposition, Russian MFA European Cooperation Director Dmitry Polyanskiy recently told us (ref B) “Nord Stream is an EU priority and one EU member, even a large one like Poland, cannot hold it up.”

13. (SBU) Estonia has been another vocal detractor of Nord Stream. Finland had at first asked Nord Stream to explore a more southern route through Estonian waters. However Estonia, with which Russia’s relations are particularly tense, refused to give permission (ref C) for even the studies needed to evaluate the possible alternative route. This refusal caused Nord Stream to revert to its original plan to go through Finnish waters.

14. (C) Latvian Embassy DCM Janis Zamlets told us November 27th that his government’s position on Nord Stream is “gray.” He explained that Latvians are generally opposed to Nord Stream “in solidarity with Estonia against Russia.” Given its “100% dependence” on Russia for gas (ref F), Latvia also fears Nord Stream would allow Russia to cutoff gas to Latvia. Right now, Russia uses gas from storage facilities in Latvia to supply Kaliningrad and St. Petersburg. Nord Stream could provide gas directly to those regions. However, Zamlets said, Latvia could support the pipeline if the company would agree to use Latvia’s massive natural underground storage capabilities, a proposal that has gained little traction. Zamlets said Latvia may “make some noise” against Nord Stream, but he conceded it is unlikely to be able to stop progress on the pipeline.

—————————– FIRST GAS DELIVERIES BY 2011? —————————–

15. (SBU) Despite public claims by Polish Prime Minister Donald Tusk that the project may be abandoned, everyone with whom we discussed the prospects of Nord Stream, including German Embassy and EC Delegation representatives, felt the pipeline would be built, even if not on the company’s timetable. Nord Stream officials Corcoran, Yusufov, and Krylova were all confident that although the project is behind schedule, gas would begin flowing more or less according to plan — if not by the end of 2010, then in the first half of 2011. Company CEO Matthias Warnig and other project and government leaders have recently publicly claimed the same — the first gas out of Nord Stream would flow by the end of 2010.

16. (SBU) Yusufov and the other Nord Stream officials added that while hurdles remain, the project “cannot be arbitrarily stopped.” They predicted that Nord Stream’s environmental assessments would reveal no major effects that cannot be mitigated and explained that under the Espoo Convention, which governs the process of building a cross-border project such as Nord Stream, countries must adequately justify denials of needed permits. Moreover, Corcoran explained that under the EU’s “10-E” status, conducted by member states in 2000 and reaffirmed in 2006, securing energy supplies from the northeast (as well as several other directions) was deemed to be in the EU’s energy security interest, and thus it would be more difficult for any disgruntled state to block such a project.

17. (C) Torsten Wollert of the EC Delegation in Moscow confirmed as much to us on November 28. Wollert told us that Nord Stream is perfectly acceptable to the EU provided it “follows the rules.” He pointed out that regardless of the rhetoric, Nord Stream will essentially replace the long-planned “Yamal-to-Europe 2” pipeline that would have paralleled Yamal-to-Europe 1 through Belarus and Poland. Europe needs the gas, Wollert explained, and Europe’s principal concern about Nord Stream is whether there will be sufficient production to fill it.

18. (SBU) Once it lands at Germany’s shore, Nord Stream gas is destined to be distributed via Germany’s OPAL and NEL internal pipelines. Nord Stream believes that under German law, and given an EU designation that the project is in Europe’s energy security interest, Germany can waive third-party access requirements to these pipelines, thus guaranteeing Nord Stream a path to the customers, easing the path for financing. Corcoran pointed out that the consortium’s partners have already firmed-up commitments to sell 20-22 bcm/y all the way out to 2035, with WinGas (the Wintershall-Gazprom distribution company in Germany) alone taking 9 bcm/y of this amount.

——- COMMENT ——-

19. (C) Given the clever inclusion of partners and beneficiaries from a host of EU countries, including a UK subsidiary of Italian company ENI to build the pipeline, the project indeed appears politically well-covered. If built, Nord Stream will trade the murky world of Belarusian transit for the more transparent realm of Scandinavian and northern European regulations, and as such help integrate Russia into the global marketplace. The bypassed countries are justifiably concerned about weakened checks against Russian misbehavior, but the principal route for Russian gas will remain overland for the time being so they will not be without influence. Even with the construction of Nord Stream, Russia will still need its overland routes for the foreseeable future.

——— BIO NOTES ———

21. (C) Nord Stream brings together a collection of old energy, intelligence, political, and financial hands in the panorama of Russian-German relations. Nord Stream’s Chairman of the Board is, of course, former German Chancellor Gerhard Schroeder. Matthias Warnig, Nord Stream’s CEO, is a long-standing personal friend of President Putin who came to know Putin when the latter served in East Germany. Vitaly Yusufov, who heads the Moscow office of Nord Stream, also has ties to Putin through his father, former Energy Minister Igor Yusufov, who is still Special Advisor to Putin for International Energy Cooperation. Prior to joining Nord Stream, Yusufov was a senior advisor to Aleksander Medvedev, the Deputy CEO of Gazprom and the head of Gazprom’s subsidiary Gazpromexport.

BURNS

XTAGS: 07MOSCOW5585

C O R R E C T E D C O P Y (TEXT PARA 10)

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AF/E FOR SUSAN DRIANO, INL FOR JAVIER CORDOVA AND ANDY
BURNETT

E.O. 12958: DECL: 11/25/2018
TAGS: PREL PGOV KCRM KCOR KJUS SNAR UK UG KE
SUBJECT: DRUG TRAFFICKING ON THE RISE IN KENYA

REF: NAIROBI 2035

NAIROBI 00002671 001.4 OF 004

Classified By: Ambassador Michael E. Ranneberger, reasons 1.4 (b,d).

¶1. (SBU) SUMMARY: On November 21, the British High Commission convened a mini-Dublin Group meeting in Nairobi to discuss the state of the drug problem in Kenya. The meeting was attended by representatives of one of Kenya’s three police services, the director of the Kenyan government’s anti-drug program, and a number of interested diplomatic missions. Trafficking of narcotics through Kenya continues to grow, as does the number of local addicts. Police often lack the capacity and training to interdict illegal drugs. Those officers who do make drug-related arrests are often thwarted by corrupt members of their own departments. The government appears to lack political will to address the subject, especially on the supply side. End summary.

¶2. (C) At the mini-Dublin Group meeting convened at the British High Commission on November 21, government of Kenya (GOK) officials made presentations about the state of the drug problem. Unfortunately, representatives from the Kenya Police Service (KPS), which has the primary responsibility for counter-narcotics efforts, did not attend the meeting. Once the Kenyan representatives departed, the international missions had a candid discussion about what assistance could usefully be absorbed, the potential drawbacks and benefits in providing such assistance, and the extent to which official corruption contributes to drug trafficking in Kenya.

————————————– TRAFFICKING AND DRUG ABUSE ON THE RISE ————————————–

¶3. (SBU) Staff Officer XXXXXXXXXXXX, presenting for the Kenya Administration Police (AP), attributed the rise in drug use by Kenyans in part to the economy, saying that users turn to drugs as an escape from increasingly desperate personal situations. (Note: Following the post-election violence and resulting economic downturn, an estimated 55 percent of Kenyans live on less than a dollar a day; the official unemployment rate is 50 percent and is markedly higher among youth. End note.) XXXXXXXXXXXX noted a marked increase in drug trafficking by sea to a number of remote islands in the Lamu archipelago off Kenya’s north coast (including Faza and Pate islands), as well as in smaller coastal towns like Shimoni and Vanga on the south coast. He also cited the Kenya-Uganda border as another significant entry point, especially for locally-grown marijuana. XXXXXXXXXXXX expressed concern that, when police made drug arrests, judges were often imposing only fines (which traffickers can easily pay) or very minimal sentences. He noted the need for all law enforcement officers nationwide to be trained in identification of illicit drugs, as well as the need for additional detection equipment. At present, XXXXXXXXXXXX added, only the 100-person KPS Anti-Narcotics Unit (which has to cover the entire country) is regularly trained in drug identification.

¶4. (C) XXXXXXXXXXXX of the GOK’s National Campaign Against Drug Abuse Authority (NACADAA), then made a presentation focusing on the GOK’s demand reduction and treatment efforts. XXXXXXXXXXXX ‘s staff is currently working with other government ministries and departments to develop anti-drug units to conduct awareness programs in the workplace, as well as specialized programs in the Ministries of Education, Defense, Health, and Youth Affairs. To date, they have trained officials in Western, Nairobi, and Central provinces to run awareness programs; additional training is scheduled in December in North Eastern and Coast provinces. XXXXXXXXXXXX stressed the urgent need to involve policy makers and politicians in national anti-drug efforts. XXXXXXXXXXXX described a notable lack of political will and public silence from leaders on the issue, which she attributed in part to official complicity in and profit from drug trafficking.

¶5. (C) XXXXXXXXXXXX confirmed the assessment of AP colleagues that the extent of drug abuse among Kenyans is growing quickly. Narcotics in Kenya are highly pure (usually above 80 percent), readily available, and relatively inexpensive. A quarter gram of heroin costs between 100 and 200 Ksh ($1.25-$2.50). Even at these low prices, however, most addicts quickly have to turn to crime to support their habits. XXXXXXXXXXXX cited the example of tiny Faza island, where in recent months about 10 people per week have either died of heroin overdoses or been killed because they were stealing to get money for drugs. Since 2005, NACADAA has been monitoring approximately 25,000 intravenous drug users (IVDUs) in Kenya. In a recent survey, ten percent of them admitted to injecting drugs in the last six months. XXXXXXXXXXXX said that the GOK’s political leaders had “completely refused to deal with the drug issue.” NACADAA was established in 2001; its highest budget before this fiscal year (in which it received 210 million Ksh or $1.5 million) was 60 million Ksh ($760,000).

—————————- MIRAA: KENYA’S GATEWAY DRUG? —————————-

¶5. (SBU) The GOK representatives agreed that Kenyans involved in the domestic miraa or khat industry do not generally trade in illegal drugs. (Khat, or miraa as it is called in Kiswahili, is legal in Kenya.) Most miraa grown in Kenya is exported to Somalia or Djibouti, but some is consumed domestically, including by long-distance truckers, bus drivers, and members of the security forces. In the Mount Kenya miraa growing region, the trade is accompanied by heavy alcohol use (including the illegal brewing of changa or homemade beer) and an associated increase in domestic violence and family instability. XXXXXXXXXXXX and XXXXXXXXXXXX agreed that miraa users sometimes progress to other drug use.

——————————————– POLICE UNDERSTAFFED, UNDERTRAINED, UNDERPAID ——————————————–

¶6. (SBU) The KPS, which has primary jurisdiction over counter-narcotics efforts, has only 100 officers in its national Anti-Narcotics Unit. The AP does not have an official mandate for counter-narcotics, but often is the first police agency to uncover problems due to its extensive deployment at the local level as well as its coverage of Kenya’s borders, airports, and ports. The GOK has recently doubled the intake of new trainees into the police services (the KPS, AP, and Kenya Wildlife Service) to try and close the gap between the current and desired police to citizen ratio, but much work remains to ensure these new recruits (and current officers) have adequate training and equipment to intercept illegal drugs.

—————————- INCREASED SEIZURES IN EUROPE —————————-

¶7. (C) The UK representative reported interdiction of significant amounts of heroin and cocaine in Europe via Nairobi’s Jomo Kenyatta International Airport (JKIA). The purity of the heroin and cocaine trafficked through Kenya typically exceeds 80 percent. At a local wholesale price of just $12,000-16,000 per kilo versus $50,000 in the UK (before the drugs are cut with fillers for retail sale), trafficking in Kenya’s low risk, high profit environment is an attractive proposition for drug smugglers. In 2006 and 2007, law enforcement authorities in a number of European countries, Canada, the United States and Australia seized 250 kilos of heroin and cocaine imported by drug couriers. To date in 2008, European authorities have intercepted 12 mules (two of whom were Americans) who traveled via JKIA. The mules were carrying an average of three to ten kilos of narcotics (mostly cocaine) per person. Drug traffickers in Kenya are mainly recruiting white expatriate residents of Kenya and Uganda as mules because they are believed to attract less attention from western law enforcement authorities. (Note: However, traffickers have also recruited non-white Kenyans who possess valid U.S. visas. For example, in April a middle-aged Kenyan employee of the Peace Corps, was arrested at John F. Kennedy International Airport carrying 2 kilograms of heroin and convicted of trafficking. End Note.) The mules generally travel business class and take indirect routes to their destinations (i.e. Nairobi-ZURICH-Berlin-London instead of Nairobi-London). They are paid about $6,000 per trip. Most couriers who have been intercepted have admitted to making five or more trips in the last year.

—————————————- COCAINE, METHAMPHETAMINE ON THE INCREASE —————————————-

¶8. (C) Although Kenya has traditionally been a transit country for heroin, cocaine seizures have increased steadily since 2004. Cocaine arrives in west Africa via sea and air, and is then distributed onwards to Kenya and elsewhere with easier access to the west. According to the UK, Guinea in particular is becoming an “international narcostate” with an economy increasingly based on drug smuggling. The UNODC estimates that 300 tons of cocaine a year enter sub-Saharan Africa, and an additional 70 tons were seized by European law enforcement agencies in international waters in 2007. Smuggling of pseudoephedrine (a precursor drug for the manufacture of methamphetamine) from India and China is also on the rise, as is the proliferation of local labs producing methamphetamine for export in Kenya, Uganda, Tanzania, and the Democratic Republic of Congo (DRC). In 2007, officials seized 40 tons of pseudoephedrine from a lab in DRC.

———- CORRUPTION ———-

¶8. (C) Western law enforcement officials believe that corruption is definitely a factor in drug trafficking in Kenya. One mule was interdictd in the UK with nothing in his carry-on bag except 9 kilos of cocaine. He had either bribed airport officials at JKIA to bypass security checks, or had passed through two security checks without attracting attention. Representatives of the UN Office on Drugs and Crime (UNODC) noted that most traffickers pay local officials for protection. Officers in places like Lamu who arrest traffickers may be threatened or killed. Traffickers can easily afford to bribe law enforcement officials, and the highly lucrative legal miraa trade benefits local politicians financially, removing any incentive to combat the problem.

———- NEXT STEPS ———-

¶9. (C) When asked about the most critical next steps in tackling drugs in Kenya, XXXXXXXXXXXX and XXXXXXXXXXXX agreed that, in order of importance, the GOK needs to: (1) demonstrate high-level political commitment to dealing with the seriousness of the problem and its negative impact on Kenyan society; (2) focus on supply issues by strengthening the criminal justice system and toughening legislation; and, (3)provide more resources for treatment and rehabilitation for addicts.

——- COMMENT ——-

¶10. (C) While Kenyan law enforcement bodies clearly need to build capacity, there is a very real concern that the extent of corruption is so pervasive that increased law enforcement training may have the perverse effect of assisting traffickers to refine their methods to better avoid detection and prosecution. The dismal human rights records of both the AP and KPS during the post-election violence and in other operations against local militias in the Nairobi, Mount Elgon and Mandera regions also raise questions about the international community’s ability to support Kenyan law enforcement organizations. The Ambassador and Mission team will continue to raise the issue of drug trafficking at the highest levels of the GOK (including urging high-level participation at the next International Day against Drug Abuse. In addition to INL’s forthcoming training for drug treatment counselors in Kenya, we continue to support coastal and port security initiatives and training for police and prosecutors. We also continue to lobby for the passage of the anti-money laundering bill currently under consideration in Parliament. End comment.

RANNEBERGER

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