AFTER BLOCKING SALE TO IRAN, ITALIAN MANUFACTURER

S E C R E T ROME 000017 SIPDIS E.O. 12958: DECL: 12/31/2010 TAGS: ETTC PARM PREL IR IT EXPORT CONTROLS SUBJECT: AFTER BLOCKING SALE TO IRAN, ITALIAN MANUFACTURER SEEKS USG HELP SELLING FAST BOATS IN U.S. MARKET REF: A. ROME 1591 AND PREVIOUS ¶B. SECSTATE 56208 AND PREVIOUS Classified By: Acting EcMin Kathleen Reddy for reasons 1.4 (b) and (d) ¶1. (U) This is an action request, see paragraph 7. ¶2. (SBU) Summary. Acting on instructions from Trade Vice Minister Adolfo Urso, Director General for Commercial Agreements Amadeo Teti called on Acting EcMin December 27 to seek USG assistance in finding U.S. buyers for fast boats manufactured by the Italian company Fabio Buzzi Design ("FB Design"). Teti will also contact the Italian Embassy in Washington to request that they help FB Design enter the U.S. market. End summary. ¶3. (S) Teti began by saying that in February 2004, the Ministry of Productive Activities (MPA) blocked the export to Iran of a fast boat built by FB Design. The boat was the last in a series of 14-15 fast boats purchased by Iranian government entities from FB Design. He noted that fast boats are not covered by any multilateral export regime, including the Wassenaar Arrangement, and that the GOI took the extraordinary step of acting on its own authority both to block the export and to arrange for the Guardia di Finanza (Italy's financial police) to purchase the boat. (FB Design's only loss was a 776 euro performance bond forfeited when the firm failed to deliver the final boat.) Teti alleges that the firm is now suffering financial problems, possibly due to the loss of its Iranian market. ¶4. (S) Since February, FB Design has pressed MPA to help the firm gain entry into new markets to compensate for the loss of sales to Iran. Teti, again on instructions from MPA Trade Vice Minister Urso, asked if the USG could help FB Design find U.S. customers for either the FB Design's leisure or patrol boats. In addition to contacting Embassy officials, Urso will write to Italian Ambassador to the United States Castellaneta, to ask that the Italian Embassy also assist FB Design. ¶5. (S) Comment. Although it moved slowly and stopped the export of only one boat, the GOI went outside its standard operating procedure to stop the export of the final fast boat to Iran because the GOI finally accepted the boats' potential threat to coalition forces. Teti would not be pinned down on whether FB Design wished to market its vessels as patrol boats or pleasure craft, but did say that the boats' high speed (reportedly as much as 70 knots/80 miles per hour) meant the boats would be most interesting to the military. According to FB Design's website (www.fbdesign.it),the company has previously sold boats to the U.S. Customs Service as harbor patrol craft and, we understand, the Turkish Coast Guard. Teti promised to provide us soon with the boats' specifications, though many of them are available on the FB Design website. ¶6. (S) Comment continued. It was interesting that neither Teti, nor probably FB Design in its earlier conversations with Teti, referred to the export from Norway to Iran of fast boats manufactured by Batservice A/S or to the boats' manufacture on Kish Island. As Ref A illustrates, differing political and economic considerations often mean that not all governments are able to stop similar exports. ¶7. (U) Comment continued and action requested. While the GOI request that the USG help an Italian company enter the U.S. market is unusual, GOI efforts to stop the shipment of the last boat, we believe, merit our consideration, even just to positively reinforce the GOI's cooperation on an export not covered by a multilateral regime. Post requests the Department consider assisting the Italian Embassy in helping identify for FB Design possible customers for its fast boats. As a first step, the Department may wish to consider contacting the economic/commercial sections(s) of the Italian Embassy with two/three names of possible customers and let the Italian Embassy follow up with these customers itself. (Teti advised us that with that alone, the GOI would consider that we -- and the GOI -- had done enough to compensate the firm for the loss of the Iranian market.) End comment and action request. BORG