VZCZCXRO2044
PP RUEHAG RUEHBC RUEHDE RUEHDIR RUEHKUK RUEHROV
DE RUEHLO #1452 1441358
ZNY SSSSS ZZH
P 231358Z MAY 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 8738
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 0824

Friday, 23 May 2008, 13:58
S E C R E T LONDON 001452 
SIPDIS 
EO 12958 DECL: 05/22/2018 
TAGS ECON, ETTC, KNNP, PARM, PGOV, PHUM, PREL, IR, PK, UK 
SUBJECT: IRAN: FOREIGN SECRETARY SAYS UK TO LEAD FINANCIAL 
PRESSURE ON TEHRAN
REF: A. LONDON 1396  B. LONDON 1352  C. STATE 54639  D. STATE 51207
Classified By: Acting Political Counselor Leslie Tsou for reasons 1.4 ( b) and (d)
¶1. (C) Foreign Secretary Milliband is “very aware” of the centrality of financial measures, both multilateral and bilateral, to the creation of effective pressure on Tehran, and has told the FCO that HMG will be “at the forefront” of international financial efforts against Iran and will push its EU partners on Iran “as hard as possible,” FCO Iran contacts told London Iran Watcher (Poloff) May 21, following HMG’s recent engagement in Washington and London with senior Department of State officials. This FCO statement of the UK’s newly reinvigorated posture on financial measures reflects the judgments, and action recommendations, made in ref b.
Pushing UK banks and EU Partners
-------------------------------- 
¶2. (C) UK officials, including the Financial Services Authority, will “push the legal envelope” to limit Iranian banking activity by both Iranian and UK financial institutions in London and UK diplomats in Brussels will lead the charge for very tough language in the EU Common Position on Iran, Neil Kernohan, the Sanctions Officer for the FCO’s Iran Coordination Group, said. Kernohan noted the Common Position would be the first EU item of business once Iran has reacted to the P5 1 offer, and once the EU has designated Bank Melli. Reiterating the timing considerations (ref a) which led the date of the EU’s expected designation of Melli to be delayed from May 19 to mid-June, Kernohan said FCO sees June 17 as the most likely date for EU designation of Bank Melli, assuming Iran has by then rejected the P5 1 incentives package.
Bank Melli in Karachi, GAERC
---------------------------- 
¶3. (S) Kernohan’s comments came in the course of a call by Poloff to deliver USG points in ref d, on the need for vigilance on Bank Melli’s efforts to open a branch in Pakistan, as well as pre-GAERC points contained in ref c. Kernohan noted full HMG support for the content of both USG demarches, while noting the adjusted time frame for EU action per para. 2 above. Embassy also delivered ref d to HM Treasury on May 16.
¶4. (C) Embassy Comment: While there is inevitably an element of “telling us what we want to hear” in Kernohan’s very upbeat message, all the signals we have seen since the Secretary’s May 2-3 visit are that USG engagement with HMG on Iran, especially at senior levels, has gotten Foreign Secretary Milliband’s attention. This is particularly the case with respect to bilateral financial measures, where the UK has the most equities at risk, but also where it can provide the most meaningful leadership on the Iran nuclear issue to governments both in Europe and other regions.
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