SALE OF FAST BOATS TO IRAN

S E C R E T ROME 005680

SIPDIS


NOFORN

STATE FOR EUR/WE, EUR/PRA, NP/ECNP, INR/SPM, NEA/NGA,
PM/RSAT

E.O. 12958: DECL: 12/22/2013
TAGS: PARM ETTC PREL EIND IR IT EXPORT CONTROLS
SUBJECT: SALE OF FAST BOATS TO IRAN

REF: A. ROME 5552


B. STATE 338477

C. ROME 5202 AND PREVIOUS

Classified By: Acting Economic Minister Kathleen Reddy for Reasons 1.5
(A) (B) and 1.6X6.

Summary
--------------


1. (S) Embassy continues to press the GOI both to stop any
shipments of FB Design fast boats still in Italian territory,
and to institute legal means immediately to stop any future
export of such technology. The GOI still insists it has no
legal authority to stop such shipments. However, Foreign
Minister Frattini reportedly has written to Trade Minister
Marzano to suggest that the Trade Ministry draft a decree law
banning the export of these boats. End Summary.

MFA: No Legal Authority to Stop Fast Boat Export.
-------------- ---


2. (S) Economic Counselor called on Ugo de Mohr, MFA
Coordinator for Non-Proliferation, to follow up on Ref A
report of Embassy's conversations with other senior GOI
officials on 1) the need to stop delivery of any fast boats
still in Italian territory; and 2) Italy's efforts to
institute dependable legal mechanisms to block any future
sale of fast boats.


3. (S) de Mohr opened by recounting his personal efforts to
find a way to block fast boats sales to Iran. First, he had
tried (unsuccessfully) to add high speed boats to Italy's
export control list. He then explored whether Italy might
apply the EU "catch-all principle" (permitting Members to
control technology not controlled by Member state law, but
which could be used for "mass destruction"). He had to
discard this possiblity since, he said, technology capable of
"mass destruction" under the principle would be technology
that could be used in nuclear, missle, biological, or
chemical weaponry; and fast boats did not fall in any of
these categories.


4. (S) He then explored whether he might use the EU's "catch
more" principle (permitting Members to control technology not
controlled by Member state law, but which could be used for
conventional military purposes). Even though fast boats
might be used for such purposes, he said, the country of
concern (here, Iran) must be under a UN or EU conventional
arms embargo. Iran, he added, was not under such an embargo.

However, MFA Has Suggested the GOI Could Pass a Decree Law.
-------------- --------------


5. (S) De Mohr admitted he was "embarassed" that it had been
so difficult to find the legal authority to prevent the
export ofQuch technology. He implied, however, that Ref A
demarches and representations with the Foreign Minister, the
Foreign Minister's Chief of Staff, and the Prime Minister's
closest advisor, had been helpful. Still, however, it was
not the Foreign Ministry that had the "power" to institute
the necessary legal mechanism, but the Ministry of Productive
ActiviQes (MPA) (i.e., the Industry Ministry),and the
Foreign Trade Ministry. (Note: under Italy's system, the
Foreign Trade Ministry is actually part of the Industry
Ministry). de Mohr said (strictly protect) that he had
drafted letters yesterday from Foreign Minister Frattini to
Minister of Productive Activities Marzano and to the Prime
Minister's office strongly suggesting that the MPA draft a
decree law forbidding the export of fast boat technology. He
did not know whether the letters had been transmitted yet.
Stressing he was speaking "off the record," he suggested the
Embassy should raise our concerns with the MPA Minister's
cabinet to see if the Minister could agree to having such a
decree law drafted and bringing it immediately to the Council
of Ministers for approval. If this approached worked, de
Mohr noted, a decree law could be drafted in as little as 24
hours. However, time was short because there was only one

more Council meeting before the Christmas/New Year holiday
(on December 23) - and because of the impending shipment of
the fast boat from Venice.

Stopping the Shipments from Genoa and Venice
--------------


6. (S) Given the imminent departure of the Venice ship
(December 19) and with no further information on the
whereabouts of the one (or two?) other fast boats known to be
aboard the Iran Makin December 7, de Mohr questioned whether
the USG was really interested now in having new legal
controls in place for any future transactions - or whether we
were still interested in stopping whatever shipments we
could. Econ counselor replied firmly that our instructions
contined to be the same - that we must urge Italy to take
whatever steps necessary to stop the shipments still in
Italian territory.

FB Design's Role
--------------


7. (S) Econ Counselor questioned why FB Design could no
longer live up to its verbal commitment to the GOI not to
ship its high-speed boats indefinitely while the political
situation in the Gulf area continued to be so volatile. de
Mohr replied that FB Design had told the GOI 1) the firm had
incurred a large cost in building the four boats in question;
and 2) the firm would subject itself to a very large fine
(from Iran) if the firm did not fulfill its contractual
obligation to deliver the boats as promised. Reportedly, to
recover its costs for building the four boats, FB Design
principals had asked the GOI if either Italy or the USG would
be interested in buying the boats. (Italy is not interested,
de Mohr said.) On the penalty for failing to fulfill its
contractual obligation, FB Design said the contract
stipulated that the firm could avoid the fine if there were a
law in place preventing delivery of the boats. de Mohr said
this fact prompted him even more to press for the decree law;
however, he admitted his solution was only a partial one for
the firm because the firm might be "stuck" with the boats if
it could not find another customer looking for the exact
design of the fast boats bound for Iran.

Ministry of Trade Is Energized to Find a Solution.
-------------- --------------


8. (S) Econ Counselor then made an appointment immediately to
see Gabriele Checchia, Diplomatic Advisor to the Ministers of
Trade and of Productive Activities Antonio Marzano. She made
the same points to Checchia as she had at the MFA. She also
said that Italy's Embassy in Washington had recently
accompanied a large delegation of Italian business
representatives on calls on the USG in Washington to press
for access to more sophisticated technology for Italian
business. She said that while further access to technology
would be judged on the merits of a specific transfer, any
future USG decisions on technology transfer to Italy would
certainly reflect Italy's record in protecting sensitive
technology already in hand, including, of course, the
technology that the USG was now asking Italy to protect.
Checchia said he was very familiar with the delegation and
its mission.


9. (S) On the decree law, Checchia said he would see Minister
Marzano immediately and would see if such a draft law could
be drafted in time for the Council of Ministers to review it
December 23. Checchia hinted this would not be an easy task.



10. (S) On stopping the shipments from Venice and Genoa,
Checchia took detailed notes, but said this task would be
difficult. He said the authority to stop such shipments
would rest with Italy's customs service, which falls within
the Finance Ministry's authority. If the customs service
could not be energized to act quickly, he said, "some other
way would have to be found."

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2003ROME05680 - Classification: SECRET