US embassy cable - 03THEHAGUE2290

C O N F I D E N T I A L THE HAGUE 002290 
 
SIPDIS 
 
EUR/UBI, EB/ESC FOR DAS BORG AND J.EIGHMIE 
 
E.O. 12958: DECL: 09/10/2008 
TAGS: ENRG, EPET, ETTC, IR, JA, NL, UK 
SUBJECT: ILSA:  IRAN-AZADEGAN DEMARCHE DELIVERED TO ROYAL 
DUTCH SHELL 
 
REF: STATE 256533 
 
Classified By: AMBASSADOR CLIFFORD M. SOBEL FOR REASONS 1.5 (B) AND (D) 
 
1.     (C) Summary.  Senior Shell Advisor Gavin Graham 
confirmed that Shell has no plans to make a proposal or 
tender for the Azadegan oil field independent of the 
Japanese.  Shell does not feel the time is right to make 
deals in Iran, and is wary of undermining its relationship 
with the Japanese companies.  Shell hopes to be a player in 
Iran on an estimated horizon of five years from now, but only 
if conditions are right.  End Summary. 
 
2.     (C)  On September 10, EconCouns delivered ref demarche 
on Azadegan oil field investment to Dr. Gavin Graham, Senior 
Regional Adviser to Middle East, CIS, and South Asia at Royal 
Dutch Shell's Exploration and Production Division.  EconCouns 
conveyed the Department's appreciation for the "heads up" 
from Shell's Washington representatives and passed a copy of 
Ambassador Brill's September 9 statement to the IAEA to 
illustrate USG concerns, also noting the parallel European 
proposals to the IAEA board.  Graham confirmed that the 
Iranians had asked Shell and a number of other companies 
(Russian/Chinese/other) to bid on the Azadegan oil field. 
Shell will not take up the Iranians' invitation for an 
independent bid due to (a) USG sensitivities, and (b) a 
desire not to undercut the Japanese companies with whom Shell 
has been working on the project. 
 
3.     (C) Graham speculated that the Iranian move, which 
came as a surprise, was intended to turn up the competitive 
pressure on the Japanese consortium (confirming points in ref 
A).  Graham commented that the Japanese were concerned about 
the development, but should not be because they had perhaps a 
2-year head start on any potential newcomer into the project. 
 Graham said the move shows the Iranian government's tendency 
to try to bargain with foreign entities -- not just on 
energy, but on a variety of matters.   At the same time, 
Iran's oil industry decisionmakers are by and large highly 
competent technocrats eager to "get things right," that is, 
to conduct business at a level and in a manner fitting of the 
developed world. 
 
4.     (C)  Graham explained that Shell has a long-range 
perspective:  it wants to remain engaged ("keep the balloon 
in the air") and hoped that in 5  years Iran would be a much 
more promising environment, but that for now Shell was 
looking at prospects warily.  Iran is attractive to Shell for 
its massive reserves, educated workforce, and need for 
foreign investment.  However, in order for Shell to 
participate in an Azadegan deal, Graham reiterated that three 
conditions must be in place:  the deal must be commercially 
viable, and Iran must have better internal and external 
political environments. 
SOBEL