US embassy cable - 03THEHAGUE1722

C O N F I D E N T I A L THE HAGUE 001722 
 
SIPDIS 
 
EUR/UBI, EB/ESC FOR DAS BORG AND J. EIGHMIE 
 
E.O. 12958: DECL: 07/02/2008 
TAGS: ENRG, ETTC, IR, JA, NL, PREL 
SUBJECT: ILSA - READOUT FROM AMBASSADOR'S JULY 2 MEETING 
WITH ROYAL DUTCH (SHELL) PRESIDENT JEROEN VAN DER VEER 
 
REF: A. STATE 180247 
 
     B. EIGHMIE-GREEN EMAIL 6/26 
 
Classified By: Ambassador Cliffor M. Sobel for reasons a.5 (b) and (d) 
 
1.  (C) On July 2 the Ambassador met with Jeroen van der 
Veer, President of the Dutch side of Royal Dutch Shell, to 
deliver demarche ref A regarding the Azadegan oil fields in 
Iran.  Van der Veer was accompanied by Senior Regional 
Adviser Dr. Gavin Graham, who recently met with EB/ESC 
officials in Washington on June 25 (ref B). 
 
2.  (C) Graham confirmed that Shell had urged the Japanese 
consortium to seek an extension of the MOU, arguing that 
politically this was not good time to be signing agreements. 
Graham noted that he found that the Japanese did not fully 
understand the potential international repercussions of a 
deal with Iran.  "They did not appreciate the seriousness of 
the situation."  However, commercial negotiations between 
Iran and the Japanese were "far from resolved," and this was 
likely also a factor in the Japanese decision to suspend for 
now.  Graham said he did not expect the commercial 
negotiations to be completed soon.  He noted that the June 30 
deadline had passed without comment by Iran, perhaps showing 
a willingness not to force the issue. 
 
Shell's Role 
------------ 
 
3.  (C) Shell does not have daily contact with the Japanese, 
and to date has provided only advice on the logistical 
aspects of the plan, not technology itself.  Graham said the 
Japanese group initially approached Shell due to the 
company's experience in "heavy" oil, good record of 
cooperation with Japanese firms, and the fact Shell is a 
major supplier to Japan.  Shell has no formal role in the 
Japanese proposal nor in discussions between Iran and the 
Japanese.  However, Graham confirmed that it if the Japanese 
reached agreement with Iran, Shell would consider 
involvement, first looking at the commercial feasibility of 
the agreement:  "We are a commercial company, after all".  If 
the pact was deemed to be commercially viable for Shell, it 
would then consider the political implications. Shell 
reiterated that its policy is to keep the USG informed of its 
actions, and that it follows a credo of "no surprises." 
Graham surmised that other companies would be willing to step 
in based on Shell's analysis. 
 
4.  (C) Graham said Shell is looking at Iran today for its 
prospects 5 years down the road as a major player in oil and 
gas.  Japan has similar long term interests:  it is dependent 
on energy imports and Iran is a logical future source due to 
its geography.  The Japanese will likely extend discussions 
with Iran with a view to signing an agreement at a point of 
time when political conditions are better.  One way to remain 
involved while waiting for political conditions to improve 
might be to work on demining activity and on handling 
dangerous environmental problems. 
 
Bangestan Field 
--------------- 
 
5.  (C) Van der Veer said Shell initially looked positively 
at the Bangestan Field, but now sees environmental and social 
challenges, so they have dropped it from consideration. 
Furthermore, the terms offered by the Iranians were not good. 
 Shell has closed its study group. 
 
6.  (C) The Ambassador complemented Shell on its 
transparency, underlined the importance of the issue to the 
USG, and thanked them for their willingness to engage in 
frank dialogue. 
SOBEL