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03ROME5202 2003-11-17 16:56:00 SECRET//NOFORN Embassy Rome
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					  S E C R E T  ROME 005202 




E.O. 12958: DECL: 11/17/2013


Classified By: Economic Minister-Counselor Scott Kilner for reasons 1.5

1. (S) Summary. Italian export control officials are looking
for a way to make permanent the "informal hold" placed on FB
Design fast boat exports to Iran, according to the Ministry
of Industry and Foreign Trade's senior licensing official.
Two approaches are under consideration: 1) formally adding
high-speed patrol boats to Italy's national export control
list, and 2) compensating the company for losses it would
suffer for breach of contract with Iran. The official argued
that since September 11, 2001, there has been a fundamental
shift in attitude within the GOI toward taking export
controls seriously, even if much remains to be done to make
the system more efficient. End Summary

2. (S) Ecmin met with Dr. Aldo Doria (strictly protect
throughout) November 12 for a one-on-one lunch discussion of
ongoing efforts to prevent Italian company FB Design from
exporting additional high-speed patrol boats to Iran. Within
the Ministry of Productive Activities (MPA) (i.e., Ministry
of Industry and Foreign Trade), Doria is Director for Export
Licensing in the Directorate General for Trade Policy (Div.
IV). He represents the Ministry on the GOI's interagency
export control committee (chaired by MFA Export Control
Coordinator Ugo de Mohr). It is Doria's signature that goes
on the final export license granted by the MPA after review
by the interagency committee.



3. (S) Doria expressed optimism that, following quiet
conversations with "someone in the government," FB Design had
"gotten the message" that exporting its remaining four boats
to Iran was not acceptable. He believed that, had the
company really wanted to evade GOI strictures, it would have
done so by now. He thought FB Design had concluded that it
was not in the company's interest "to end up on an
international black-list" of pariah firms.

4. (S) With respect to resolving this case definitively,
Doria said that GOI export control officials were currently
examining two approaches. The first was simply to add high
speed patrol boats to Italy's national export control list,
so that they would be subject to mandatory licensing review
in the future. However, Italian officials -- especially in
his own ministry -- were struggling with how to avoid doing
so in an overly broad manner that would impose excessive
administrative burdens on Italy's important shipbuilding
sector. The issue was one of definition, but finding
sufficient precision was not proving easy.

5. (S) The second approach was more informal: finding a
mechanism for the government to compensate FB Design for the
commercial loss it would sustain from not delivering the
final four boats Iran had contracted for. Ecmin offered
that, while the second approach might be the quickest and
easiest way out, it would not exclude the possibility of
similarly awkward cases arising in the future. Doria agreed,
observing that perhaps the GOI needed to move forward on both
tracks at once: the latter as a quick fix for this case; the
former as a longer-term systemic solution. In any event, he
said he would be discussing these options with Foreign Trade
Vice Minister Urso's cabinet in the coming days.

6. (S) Returning to the "informal arrangement" employed by
the government so far to hold up FB Design deliveries, Doria
stressed that the GOI desperately wanted to avoid having the
case taken to court. He thought that the company itself was
unlikely to file a suit; much more probable was that the
trade association of Italian shipbuilders would do so. The
GOI feared that if an Italian magistrate took on the case,
the government would lose control completely and that
"anything could happen." This was a main reason why the GOI
had tread so gingerly. (Comment: Given the capriciousness of
the Italian judicial system, this fear is justified. End

Italian Export Control System


7. (S) In discussing Italy's system of controlling the
export of sensitive technologies more generally, Doria
lamented that (absent a U.N. resolution) Italian law
prevented the use of country-specific controls like those the
U.S. employs toward states of concern. He noted that the GOI
interagency committee applies three basic criteria when it
reviews an export license request: 1) the
sensitivity/technology of the item to be exported; 2) the
bona fides of the end-user; 3) the geographic sensitivity of
the destination. Particularly given that the third criterion
provided a means for inserting foreign policy concerns into
the evaluation, Doria felt that the Italian approach -- while
formally avoiding country-specific controls -- effectively
ends up with much the same thing. "I can tell you that when
the destination is Iran or other states of concern, red flags
automatically go up, and we ask for lots of additional
information." The problem, in his view, was that the Italian
process was much more cumbersome and time consuming --
requiring numerous back-and-forth requests to the company and
perhaps Italian embassies abroad -- before reaching a
conclusion. This approach wasted both time and resources for
the company and government alike. Country-specific control
lists, on the American model, were much more efficient, Doria

8. (S) Finally, Doria (who came to his current position from
the private sector in 1998) stressed that GOI attitudes
toward export controls had undergone a fundamental shift
since September 11, 2001. "They are now taken much more
seriously," he said. Resources had been added to the
process; integration of intelligence information into the
review had also improved. While more clearly needed to be
done in both areas (resources and intelligence), Doria was
convinced that the trend was in the right direction.

9. (S) Comment: Embassy believes that Doria's comments
represent an unusually honest look into the Italian export
control process generally, and the FB Design case in
particular. End comment.

2003ROME05202 - Classification: SECRET