ALENIA SPAZIO CEO MAURIZIO TUCCI'S MEETING WITH

C O N F I D E N T I A L ROME 005468

SIPDIS


STATE FOR PM/DTCP, NP/NPC/ECNP, EUR/WE
DID FOR SPACE POLICY - RITCHESON; DEFENSE TECHNOLOGY
SECURITY/SPACE DIVISION - WALDING; C3I - MANNO
JOINT STAFF FOR J-5 - WHALEN

E.O. 12958: DECL: 12/04/2008
TAGS: PREL ETTC MASS IT CH TSPA EXPORT CONTROLS
SUBJECT: ALENIA SPAZIO CEO MAURIZIO TUCCI'S MEETING WITH
THE AMBASSADOR

REF: A. A. ROME 3842

B. B. ROME 4744

C. C. STATE 283728

Classified By: AMBASSADOR MEL SEMBLER FOR REASONS 1.5 (B) AND (D)


1. (C) Summary. Alenia Spazio CEO Maurizio Tucci described
for the Ambassador on November 28 his keen interest in
ensuring that nothing undermine the growing relationship of
trust fostered by recent Italy-U.S. discussions on dual-use
export controls and technology transfer. Tucci said he was
eager to prevent the European Commission's agreement on
Galileo with China from souring Alenia's relationship with
the USG. He underscored that there was a distinct difference
between Alenia's direct commercial engagement with China and
efforts by Galileo Industries to explore cooperative
activities with the Chinese. Tucci could control the former
but not the latter; however, he would urge Alenia personnel
to take a narrow view of technology sharing on all fronts.
Tucci repeatedly promised to keep the Embassy fully informed
of the Alenia-China relationship, especially because
Alenia--hit hard by the downturn in the European commercial
satellite sector--was placing great hope in the company's
ability to expand in the U.S. market. End Summary.


Space Sector in Crisis
--------------


2. (C) Alenia Spazio CEO Maurizio Tucci called on the
Ambassador in his office on November 28. The Ambassador was
joined by ECMIN, ODC Chief, and PolMiloff (notetaker). Tucci
opened the conversation by lamenting the current crisis in
the European commercial satellite market. The Italian space
sector is
suffering, he said bluntly. To spur a recovery, Alenia
Spazio wants to reinvigorate its partnership with Italy's
public institutions, in particular the Italian Space Agency
(ASI). Tucci made clear, however, that his company's
relations with ASI (and especially ASI Director Sergio
Vetrella) has been strained. At the moment, there is a clash
of visions, with Tucci interested in working more closely
with NASA and capturing additional U.S. market share.
Vetrella (according to Tucci) remains skeptical about this
approach. Tucci said that Alenia Spazio had hired Booze
Allen to conduct a technical assessment of Alenia's
capabilities and ability to capture niche markets in the U.S.
He repeatedly underscored his view that, "the key market for
space technology is in the United States".

China Cooperation
--------------


3. (C) Following this introduction, Tucci told the Ambassador
that the prime motivation for his visit was China, and
specifically his concern that nothing occur to upset the new
understanding between Italy and the U.S. that developed from
bilateral discussions on dual-use export controls and
technology transfer in Rome this past July (ref A). Tucci
said he was worried that the European Commission's recent
agreement to include China in the development of Galileo
could create misunderstandings about Alenia's intentions.
Tucci claimed that he would not be able to assert operational
control over Italian managers' engagement with China on
Galileo cooperation. (Comment: We believe Tucci meant that
because these managers will be working for the Galileo
consortium, he as the Italian head of Alenia Spazio will not
have direct control over their activities. End Comment) He
alerted the Ambassador that Alenia Spazio Vice Chairman
Giuseppe Viriglio is interested in traveling to China soon to
discuss Galileo. Tucci assured the Ambassador that he had
cautioned Viriglio about the importance of maintaining the
new foundation of trust that the July meeting had fostered.


4. (C) Continuing, Tucci said he would urge Viriglio to
strictly limit his discussions with the Chinese to
Galileo-related matters, but indicated that he was worried
about losing control over the process. He has given clear


instructions to Alenia Spazio managers "not to be open" to
technology transfer with the Chinese, but noted that if China
is a Galileo partner, it will inevitably have access to
information about project development. Tucci claimed that he
"had always been clear about what Alenia was doing with
China," and would maintain a policy of transparency with the
U.S., promising to keep the Embassy fully informed of future
developments.


5. (C) Tucci, turning to Alenia's direct commercial
engagement with China in the space sector, said company
managers had done a thorough scrub of Alenia's prior
relations with the Chinese. He told the Ambassador that two
Alenia managers, whom Tucci said he fully trusted, will
travel to China in December to explore cooperative
opportunities, but they will operate "within the framework of
the July agreements" (Ref C). He said that if the U.S.
should come across information about any other senior manager
traveling to China it should rest assured that he would be
discussing only/only Galileo.


6. (C) ECMIN noted that the Embassy had recently told the
Italian Foreign Ministry that the U.S. would not object to
Alenia's moving forward on each of the five proposed China
projects (Refs B and C),provided certain conditions were
met. ECMIN asked Tucci how Alenia Spazio planned to proceed.
Tucci confirmed that the MFA had communicated the USG
position on the projects. Alenia, he continued, had
interpreted our responses as reflecting continuing USG
concern over the data relay satellite; the company had
therefore decided to forego that project, Tucci stated. More
generally, Tucci said that Alenia was facing a business
challenge because it had broken off relations with the
Chinese. "We don't really know if the Chinese are still
interested in the type of work they were originally
requesting," he said. A first step would be to explore the
lay of the land and assess whether business opportunities
were still available in China. Tucci underscored that the
type of projects Alenia would be evaluating were at the low
end of the technology spectrum, e.g., telemetry, low
frequency band applications, scientific satellites without
military applications, receivers, and antennas. He concluded
by again promising to keep the Ambassador fully informed of
developments. Transparency, Tucci insisted, is the basis of
Alenia's relations with the U.S. in the space sector.

Targeting the U.S. Market
--------------


7. (C) Tucci expressed to the Ambassador his hope that Alenia
had established enough credibility with the USG to help it
gain a stronger foothold in the U.S. market. Alenia is
trying to convince the USG that the company has high quality
niche products that are worthy of consideration. In
particular Tucci claimed that Alenia had developed SAR
technology capable of processing 1,900 images daily, which
could be used on U.S. Air Force platforms and USG satellite
constellations. The U.S. does not have similar technology,
he asserted. He confirmed that the SAR technology Alenia had
developed would be used in its Cosmos Skymed earth
observation satellite constellation. Alenia would provide a
turnkey system to ASI. Alenia Telespazio would provide
competence for the earth segment in terms of integration of
digital images.


8. (C) Interestingly, Tucci described Cosmos Skymed as mainly
a military project; however, Alenia would be promoting SAR
plus data manipulation capabilities to both military and
civilian users (Comment: This was the first time we had heard
the military applications of Cosmos Skymed played up so
forthrightly. In the past, the constellation had always been
pitched to us as a dual-use satellite system with a
predominantly civilian focus in areas such as environmental
monitoring, crop control, and coastal management. End
Comment). Tucci explained that Alenia's U.S. business targets
were primarily the National Security Agency and other DoD
elements. Tucci told the Ambassador that he had discussed
Alenia's strategy with Nicolo Pollari, Chief of External


Intelligence (SISMI). He confirmed that Alenia was
considering U.S. (Boeing Delta Rocket),Russian, and French
launch service options for Cosmos Skymed. ECMIN urged Tucci
to ensure that there was a level playing field for all
competitors.


9. (C) Tucci told the Ambassador that Alenia still placed a
high priority on civil space cooperation with NASA. Alenia
had built nodes two and three of the International Space
Station (ISS) and wants very much to be involved in the
Orbital Space Plan. However, Tucci again asserted that ASI
President Sergio Vetrella does not consider cooperation with
the U.S. a priority and therefore is not supporting Alenia's
involvement with NASA projects. Tucci claimed that NASA
wants Alenia's participation in the ISS for its expertise in
orbital infrastructure, but ASI was simply not providing the
necessary attention to make sure this was nailed down. Tucci
did not offer any insight into what lay behind Vetrella's
alleged position. Nevertheless, he asked the Ambassador to
raise this issue with Letizia Moratti, Minister for
Education, Science, and Research and PM Berlusconi should the
opportunity arise. The Ambassador took the request on board,
without making any commitment. Tucci said that Alenia's
interest in cooperation with NASA was so deep that the
company had recently shipped a piece of equipment for the ISS
worth 32 million Euros without guarantee of payment. Neither
ASI, NASA, nor ESA had indicated a willingness to take
responsibility for compensating Alenia; an issue that Tucci
said was in need of resolution.


10. (C) Comment. Tucci, who replaced CEO Giorgio Zappa as
Alenia's CEO last year, struck us as genuinely committed to
continuing the transparancy and information-sharing regarding
his company's relations with China, which he demonstrated in
the July 2003 dual-use bilateral talks in Rome. He clearly
believes access to the U.S. space sector is critical to
Alenia Spazio's long-term economic health. End Comment.

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2003ROME05468 - Classification: CONFIDENTIAL