1. (S) Summary: A/DCM and Poloff delivered Ref A demarche to
MEA officials, who promised to provide the additional
information to concerned GOI agencies and report the status
to us at an early date. New Delhi remains concerned by Ref C
decision to sanction Indian entities for INPA violations,
particularly the Sabero case, where the GOI feels it and
Sabero cooperated to the fullest extent possible. The MEA
has not yet decided on its public response to the sanctions
announcement. End summary.

Mayurakshi Case


--------------------------





2. (S) A/DCM and Poloff, meeting with MEA Joint Secretary
(Disarmament and International Security Affairs) Hamid Ali
Rao and Deputy Secretary (DISA) Naveen Srivastava on December
28, delivered Ref A talking points and emphasized that
Mayurakshi officials may attempt to conceal evidence of
planned transfers of controlled equipment to Iran now that
they are aware of USG interest in the shipment. We also
passed on BIS documentation proving Mayurakshi's
misrepresentation of the intended end-user. Srivastava
replied that he would convey the additional information on
Mayurakshi to GOI agencies investigating the transaction, and
undertook to provide us with a status update as soon as
feasible. Srivastava also noted that re-export of both the
AHRS and gyroscopes would fall under India's new export
controls.

Sabero Sanctions


--------------------------





3. (S) Rao expressed the GOI's displeasure with Ref C
decision to sanction Indian entities Sabero and Sandhya
Organics, and emphasized New Delhi's belief that with respect
to the Sabero case, both the GOI and Sabero had done
everything possible to respond to USG requests, including
Sabero's voluntary decision to desist from further
transactions with the Iranian entities. Echoing Foreign
Secretary Saran's comments in Washington, Rao lamented that

SIPDIS
the Administration had not acknowledged the GOI's
cooperation. This cooperation went beyond anything justified
under Indian law or international regimes, Rao reiterated,
adding "we cooperated, and the company cooperated" by
stopping further exports after the request. "How do we
approach the company now," he complained, when the US imposed
sanctions after the company acted on the GOI's behest?



4. (S) Rao further noted that the transaction triggering
sanctions was not illegal under Indian law at the time, nor
would it be illegal prima facie under current law. The
Sabero transaction could fall under catch-all provisions of
the new WMD law, but that would require more detailed
information on the Iranian end-user than the USG had provided
in the Sabero case, he continued. The Sabero discussions in
2003 had ended with the GOI asking for further information to
provide a legal basis for Indian action, but the US did not
respond, Rao recalled. Srivastava pointed out that without
more detailed information, the GOI would not be able to
defend any actions to block the shipments under the catch-all
provisions if the company challenged it in court. "We would
lose that case," he observed, and set a bad precedent for
future export control actions.



5. (S) After A/DCM again encouraged the GOI to focus on the

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positive working relationship that led to rescission of
sanctions on Dr. Surendra (Ref B), Rao responded that MEA had
not yet determined what type of public response to the
sanctions may be forthcoming. However, he worried, the
sanctions announcement could provide a "cudgel" to the US
"non-proliferation lobby" opposed to the July 18 nuclear
agreement, which would argue that India's non-proliferation
record is not as good as claimed. Srivastava noted that INPA
procedures provide for waivers, and requested that the USG
consider waiving the Sabero sanctions in light of the firm's
cooperation. Rao further suggested USG review of the case of
YSR Prasad (sanctioned along with Surendra), whose trips to
Iran had been "under IAEA aegis," and therefore should not
trigger sanctions, he asserted.

Comment: Damage Control


--------------------------





6. (S) This is not the first time that the GOI has expressed
its frustration with INPA sanctions, as New Delhi believes
that even after taking steps that the US has requested to
block transfers, Indian entities are nonetheless the subject
of punitive sanctions. In this context, Srivastava's request
for consideration of a waiver is an attempt to distinguish
Sabero for its voluntary cooperation. We will continue to
work with MEA interlocutors to find the best way to manage
the public reaction to this sanctions announcement to
minimize its impact on the broader, cooperative engagement on
non-proliferation.



7. (U) Visit New Delhi's Classified Website:
(http://www.state.sgov.gov/p/sa/newdelhi/)
BLAKE