BLUE LANTERN LEVEL 3: POST-SHIPMENT END USE CHECK

UNCLAS BUCHAREST 001461

SIPDIS

SIPDIS

PM/DTCC -- BLUE LANTERN COORDINATOR

E.O. 12958: N/A
TAGS: ETTC KOMC RO AE
SUBJECT: BLUE LANTERN LEVEL 3: POST-SHIPMENT END USE CHECK
ON LICENSE 05924967

REF: STATE 135617


1. This message responds to reftel tasker, to conduct
post-shipment, on-site verification on export of Personal
Locator Systems to United Arab Emirates involving a Foreign
Consignee, IAR S.A., Brasov in Romania. On September 14,
POLMILOFF visited IAR, S.A. and met with President and CEO
Adviser Catalin Constantinescu, Export and Marketing Manager
Anca Mihaela Ichim, Purchasing Manager Corneliu Pauleanu,
among others involved with the contract with the United Arab
Emirates Armed Forces. IAR reviewed the history, partners
and principal import and export clients. IAR also provided
POLMILOFF with the "Statement of Work Agreement" for the
upgrading of 25 UAE PUMA SA 330s with Cubic Defense systems
of San Diego, California. IAR allowed POLMILOFF to examine
the contract, inventory, customs and export licensing
documents related to the commodities in question. Following
the paper review, POLMILOFF was given a tour of the plant
facilities where IAR was building, refurbishing, and
upgrading airframes and avionics for several military, Search
and Rescue, and Medevac rotary-wing Puma aircraft. The PUMAs
were individually identified by client, including NATO,
EUROFOR. Government of South Africa, United Arab Emirates,
and the Romanian Ministries of Defense. POLMILOFF also
toured the blade assembly and repair area, and the fiberglass
and aluminum press and construction areas.

When was IAR Brasov established and who are its principals?


2. Industria Aeronautica Romana (IAR) S.A. Brasov was founded
in 1925, mainly as a manufacturer of fixed-wing aircraft,
including the critically acclaimed IAR-80 combat plane which
saw action from 1942 until Allied bombing hit the first IAR
assembly plant in 1944. After WWII, the communist government
decided to use the former factory site to manufacture
tractors, but continued to dabble in aeronautics, when in the
1950s, one of the engineers started designing gliders and
single engine planes, in hope of reconstituting the Aerospace
industry in Brasov. By 1965, was making fixed wing crafts,
including experimental gliders, having moved the assembly out
of the city of Brasov proper (where the tractor factory still
exists),to its present location in Ghimbav, just a few
kilometers out of the city but in the county of the same name
("Judetul Brasov"). Since 1968, IAR has increasingly
concentrated on the rotary-wing aircraft market and is
currently partnered with EADS subsidiary Eurocopter. In
December 2000, IAR and Eurocopter signed an MOU that formed
Eurocopter Romania S.A. IAR S.A. claims it holds exclusive
Eurocopter contracts for the upgrade, maintenance and supply
of Puma and Alouette helicopters. IAR also is the exclusive
designer and provider of the upgraded PUMA "SOCAT" combat
helicopters to the Romanian MOD. IAR and Eurocopter Romania
are collocated. The President and General Director of IAR is
Gen. Ion Gerogescu (ret.). Andrei Lorincz is listed as the
Development and Production Executive and Ion Dumitrescu is
the Commercial Financial Executive. They claim 925
employees, and about twenty-five percent of the stock is held
privately.

Who are IAR Brasov's typical customers and where are they
located?


3. Domestic customers are the Romanian MOD/Air Force,
Interior (including the Romanian Intelligence Service),and
Romanian Utility Aviation. Primary foreign customers are
Eurocopter (France),Denel-Atlas Aviation (South Africa),
United Arab Emirates Ministry of Defense, Pakistani Ministry
of Defense. A sample of their importers include Eurocopter,
Sagem Avionics, CMC Canada, Rockwell Collins, HR SmithGroup.

Does IAR Brasov have adequate on-site security?


4. IAR said it uses picture identification cards with
electronic key access for its employees. From the main
office entrance, though the front door was locked, there was
no sign of a security guard. Throughout the compound,
POLMILOFF did not observe any uniformed security nor any
electronic or video security measures. The main gate to the
assembly area had a guard booth but POLMILOFF could not see
any guards in the vicinity. That said, the location of IAR
S.A. Brasov is off a remote road, roughly a kilometer from
the Brasov to Ghimbav road. The firm is not easy to locate,
and in fact, attempting to find the location, the embassy
driver tried two Ghimbav locals without success. The third
time, a taxi driver pointed us in the right direction.

Does IAR Brasov understand the restriction on UML articles?


5. POLMILOFF reviewed in the meeting both the End-Use

monitoring policy, legal authority and re-exporting
limitations. IAR explained the Romanian government's own
export controls and procedures.

What is the nature of IAR Brasov's dealing with UAE?


6. IAR delivered 10 rotary wing aircraft to UAE in 1994 as
part of a contract signed in 1992. IAR is contracted to
begin upgrades to those original 10, and are contracted to
provide 25 second-hand PUMA helicopters, including
maintenance and spare parts. The first aircraft of this new
contract was delivered in 2005 and is to be concluded in 2007.

What is the nature of Brasov's dealings with Rockwell Collins
France (RCF)?


7. RCF is one of the primary suppliers to IAR S.A. Brasov.

Conclusion


8. IAR S.A. Brasov is a serious company, though on-site
security needs improvement. IAR S.A. Brasov officials
appeared unsettled by the visit, but went out of their way to
be responsive to POLMILOFF's inquiries. They seemed
surprised when POLMILOFF requested a tour of their assembly
plant. One of the executives said they were not prepared for
that, but left the room to obtain and subsequently receive
permission. POLMILOFF noticed only a a few Pumas equipped
with machine gun turrets and rocket pods. Of the 12 Pumas in
various stages of upgrade in the main assembly area, some
were getting new motors, others new cockpits and interiors.
The paper documentation, particularly those required by the
GOR were all in order, with good cross-referencing of serial
numbers on the export documents, customs sheets, inventories
and order forms for each shipment. Most of the activity
appeared to be in the manufacturing area, where air frames
were being cut and welded, and rotors made.
Taubman