CZECH GOVERNMENT ALLOWS AIRCRAFT MANUFACTURER TO

C O N F I D E N T I A L PRAGUE 001343

SIPDIS

SIPDIS

EUR/NCE FOR FICHTE, PM FOR DOWLEY, OSD FOR SADOWSKA

E.O. 12958: DECL: 10/25/2016
TAGS: PGOV PREL EZ NATO EAIR MARR VE
SUBJECT: CZECH GOVERNMENT ALLOWS AIRCRAFT MANUFACTURER TO
TALK TO VENEZUELA

Classified By: Acting Political Economic Counselor Karen Reider
for reasons 1.4 (b) and (d)


1. (C/NF) Summary: The Czech Government has given L-159
subsonic fighter manufacturer Aero Vodochody permission to
begin discussions about Venezuelan financing for the
production of a new version of the L-159, which would have no
U.S. content. This decision by Czech authorities stems from
heavy domestic political pressure in advance of the 20-21 and
27-28 October Senate elections, in which the Czech Foreign
Minister is a candidate. A senior Czech MFA official predicts
that the MFA will reverse course after the elections and that
any application by Aero Vodochody for permission to sign a
deal with Venezuela will be rejected. He also believes that
the recently-selected future buyer of AeroVodochody plans to
phase out the entire subsonic fighter program. End summary.


2. (C/NF) Poloff met October 26 with MFA Director for Common
Foreign and Security Policy Vaclav Balek. Balek shared that
Czech licensing authorities (in an interagency process led by
the Ministry of Industry and Trade) had decided to accede to
Czech aircraft manufacturer AeroVodochody's request to
negotiate with Venezuela about the financing of a subsonic
fighter. It was not clear whether this meant Venezuelan
Government or private financing. Such an aircraft would be
similar to the L-159 that was developed as part of a
now-defunct collaboration with Boeing, but would differ in
that the U.S. avionics and engines would be replaced with
non-U.S. content. Balek said that this decision had recently
been taken at the ministerial level, but was not a Czech
cabinet decision. Balek believes the MFA decided to give its
consent to hedge against possible criticism from opposition
left-wing parties that the ruling Civic Democrat government
was favoring U.S. interests over local job creation. (Note:
Czech Foreign Minister Alexander Vondra is a candidate in the
current election. He is expected to win, despite criticism
from the left for supporting the U.S. on missile defense. End
note.)


3. (C/NF) Balek emphasized that the license authorized Aero
Vodochody only to talk, not sign a deal or begin production.
Any deal would require a full license application that would
likely receive a negative answer. Balek agreed with Poloff
that the Czech Government is in no doubt about USG attitudes
to any kind of military cooperation with Venezuela. He agreed
to provide any new information as it developed. Balek also
observed that Penta, the recently-selected future buyer of
Aero Vodochody, had declared three objectives: Aero
Vodochody's airport close to Prague, continued parts
manufacturing for firms such as Sikorsky, and continued
cooperation with the Czech armed forces. The objectives did
not include continuation of the subsonic fighter program.


4. (C/NF) Comment: Balek implied that the decision would have
been different if it involved a deal rather than a mere
negotiation. The Czech Government is itself no friend of the
Chavez regime. It strongly opposed Venezuela's candidacy for
a seat on the UN Security Council, it has turned down
requests from Venezuela to purchase Czech arms, and it is
conducting an ongoing criminal investigation based on
U.S.-provided intelligence relating to Venezuelan production
of Czech handguns. This does appear to be a case of domestic
political pressure during an election cycle leading to an
unfortunate, though limited result. FM Vondra, a former
Ambassador to Washington, has been politically vulnerable in
recent days to allegations that he is too close to the United
States. By issuing this instruction he may have sought to
avoid adding to the difficulty of his Senate race. Even so
the Czech Government knows that this sends an unfortunate
message and that the United States is watching closely. End
comment.
GRABER