WIKILEAKS: IRAN SANCTIONS ACT: EMBASSY EXPRESSES CONCERN OVER REPORTED IRAN/MALAYSIA GAS DEAL

Observers attribute his later rise to Syed's close connections with former Prime Minister Mahathir. Syed's business interests include plantations, property development, construction, engineering, power generation, mining, seaport construction and operation, airport management, railways, hotels, manufacturing, retail, and defense technologies. Syed Mokhtar has been the recipient of countless Malaysian government contracts and coveted licenses. According to press reports, in 2006 Saudi Arabia awarded a $30 billion contract to one of Syed's companies for development and management of "Jizan economic city," together with the Bin Laden Group.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

UNCLAS SECTION 01 OF 02 KUALA LUMPUR 000061

SIPDIS

SENSITIVE

FOR EB/ESC AND EAP/MTS

E.O. 12958: N/A

TAGS: PREL, ENRG, EPET, ETTC, EFIN, IR, MY

SUBJECT: IRAN SANCTIONS ACT: EMBASSY EXPRESSES CONCERN OVER REPORTED IRAN/MALAYSIA GAS DEAL

REF: EB-ESC AND EAP-MTS EMAILS OF 8 JAN 07

1. (SBU) Summary: Embassy raised concerns with the Malaysian Government regarding a reported $16 billion gas development deal between a Malaysian firm, SKS Ventures, and Iran, noting possible implications under the Iran Sanctions Act and pointing out the particularly poor timing given recent UN sanctions against Iran.

Foreign Ministry officers highlighted Malaysia's more benign view of Iran, growing trade relations with Teheran, and the difficulty of acting against a private firm based on another country's law. They reiterated, however, Malaysia's intention to abide by UNSCR 1737 sanctions against Iran.

A representative from the Ministry of International Trade and Industryresponded that he only knew what he had read in the press about the deal.

SKS Ventures is owned by Syed Moktar Al-Bukhary, one of the country's wealthiest ethnic Malay businessmen with connections to former Prime Minister Mahathir. End Summary.

2. (SBU) A/DCM called on desk officers in the Malaysian Foreign Ministry's Americas and Multilateral Affairs divisions on January 10 to express concern over press reports of the signing of a $16 billion Memorandum of Understanding between Malaysia's SKS Ventures and the National Iranian Oil Company (NIOC).

According to press accounts, SKS Ventures' upstream project would help to develop the Golshan and Ferdos gas fields, including building LNG production units, based on a buyback contract. NOIC expects this to be followed by another contract for downstream cooperation over a period of 25 years.

The volume of the Golshan and Ferdows gas fields is estimated at 50 trillion and ten trillion cubic feet, respectively, making them the largest gas fields outside of Russia. Production is expected to yield 70 million and 25 million cubic meters daily from the Golshan and Ferdows fields.

3. (SBU) A/DCM noted that the US continues to have deep concerns about Iranian policies and actions, in particular, at this time, Iran's nuclear activities, which we believe are aimed at establishing a nuclear weapons capability. In light of Iran's policies and actions, we have long opposed investment in Iran's petroleum sector, and our Iran Sanctions Act, with provisions that were recently reauthorized by Congress, provides for sanctions for certain such investments.

Against the backdrop of recently-imposed UNSC sanctions on Iran, this was a particularly unfortunate time to be entering into agreements for gas development projects in Iran, even if these were not directly related to Iran's nuclear and missile programs.

A/DCM urged the Malaysian Government to weigh in with SKSV to reconsider plans to move forward with its reported agreement on the Ferdos and Golshan gas fields, particularly at this sensitive time.

4. (SBU) Foreign Ministry desk officers, unfamiliar with the reported SKSV deal, expressed appreciation for the information and the background on the Iran Sanctions Act. They explained that Malaysia had a different perception of Iran's nuclear development program and did not share the U.S. view of Iran's program as a security threat.

Malaysia and Iran enjoyed a strengthening trade relationship. The Malaysian Government, even if it were so inclined, would have a difficult time restricting private Malaysian investment in Iran on the basis of another country's law. UNSC sanctions on Iran's nuclear and missile programs, however, constituted another matter.

The GOM would respect and implement UNSCR 1737 sanctions. The desk officers note that the Ministry of International Trade and Industry (MITI) would play an important role in such issues. The desk officers said they would share our concerns with senior Ministry officials, who were unavailable to meet at short notice.

5. (SBU) EconOff contacted Dato Ooi Say Chuan at MITI who responded that he only knew what he had read in the press, but that the Ministry would look into the matter.

6. (SBU) SKS Ventures is owned by Tan Sri Syed Mokhtar Al-Bukhary, a Malaysian businessman considered to be one of the richest ethnic Malay corporate figures. Syed built his original fortune through rice trading, land deals and state government contracts.

Observers attribute his later rise to Syed's close connections with former Prime Minister Mahathir.

Syed's business interests include plantations, property development, construction, engineering, power generation, mining, seaport construction and operation, airport management, railways, hotels, manufacturing, retail, and defense technologies.

Syed Mokhtar has been the recipient of countless Malaysian government contracts and coveted licenses. According to press reports, in 2006 Saudi Arabia awarded a $30 billion contract to one of Syed's companies for development and management of "Jizan economic city," together with the Bin Laden Group.

7. (U) Press reports quote an unnamed source close to Syed Mokhtar as saying, "We don't worry about the sanctions. There's so much liquidity, you don't have to go to New York," and pointing out that funds can be raised in the Middle East or in Iran itself.

8. (SBU) Comment: In light of Malaysia's friendly relations with Iran and its strong opposition to sanctions in general, we should not expect a supportive response from the GOM. Also, with Syed Mokhtar's broad holdings both within and outside of Malaysia, it is not clear to us that U.S. sanctions against SKS Ventures would have significant impact on his bottom line.

SHEAR