FINMECCANICA STILL PURSUING RADIO CONTRACT WITH

C O N F I D E N T I A L SECTION 01 OF 02 ROME 002034 SIPDIS SIPDIS NOFORN STATE PLEASE PASS TO ISN/CATR, EUR/PRA, AND EUR/WE E.O. 12958: DECL: 07/18/2021 TAGS: ETTC PARM PREL IR IT SUBJECT: FINMECCANICA STILL PURSUING RADIO CONTRACT WITH IRANIAN POLICE REF: A. SECSTATE 110041 ¶B. ROME 01824 Classified By: Kathleen Reddy, Acting Minister Counselor for Economic A ffairs, for reasons 1.4 (b) and (d) ¶1. (C) Summary. Finmeccanica contacted Embassy officials July 14 to inform us they intend to bid on a contract to provide TETRA radios to two municipal police forces in Iran. Finmeccanica's decision is reportedly driven solely by business considerations, and was taken after delivery of Ref A talking points July 7. Embassy has begun engaging the GOI (Ministry of Trade) on this issue in an effort to dissuade Finmeccanica from pursuing the contract, worth an estimated 6.5 million euros. End summary. ¶2. (C) Finmeccanica informed us July 14 it will bid on a contract to provide TETRA radios to two municipal police forces in Iran. According to the firm, Italian law does not prohibit the export of TETRA radios. Finmeccanica will consult further with the USG, if its bid for the contract is successful. We noted again the bad timing and risks to Finmeccanica's reputation, should it pursue this sale, especially in view of the firm's sizable U.S. business. We said even if the TETRA radio export is legal under Italian law, "now is not the time for business as usual with Iran." Camillo Pirozzi, Finmeccanica's Head of Public Affairs and Institutional Relations, said that Finmeccanica understands the USG's policy concerns over Finmeccanica's bid for this contract, but that from a business perspective, it is not a contract that Finmeccanica can afford to pass up. Pirozzi promised to send us detailed technical specifications of the radios in question by July 21. ¶3. (C) Finmeccanica's decision comes on the heels of a meeting July 7 between A/Ecmin, Simone Bemporad, Finmeccanica's Senior Vice President for Media Relations and International Affairs, and Pirozzi, during which Ecmin orally delivered Ref A talking points concerning the proposed sale of a TETRA radio system to two Iranian municipal police forces. A/Ecmin noted that while it is not clear if the TETRA technology is controlled by the Wassenaar Arrangement or, on the U.S. side, by the Iran/Syria Non-Proliferation Act, now is not the time for "business as usual" with Iran. She further noted that Iran is defying the international community's policies on non-proliferation, terrorism, and human rights, and concluded by commenting that Finmeccanica needs to be careful about technology transfers to Iran. ¶4. (SBU) Comparing the TETRA technology to that found in a GSM cell phone, Pirozzi asserted repeatedly that "TETRA is absolutely not included in Wassenaar" and cited consultations with the Ministry of Foreign Trade. Bemporad added that there are no U.S. components in the systems that Finmeccanica wants to export to Iran, that the systems are not being sold to military end-users, and that TETRA will be the world-wide standard for secure civilian radio systems. Pirozzi concluded by noting that the encryption of the TETRA radio system, less than 40-bits, is below the level of encryption that is considered for military use. A/Ecmin requested model numbers and technical specifications for the TETRA systems from Finmeccanica. ¶5. (C) A/Ecmin also contacted Trade Ministry Director General Amadeo Teti, responsible for international trade and export controls. Teti was unaware of the proposed transaction, but said "maybe the technology is harmless." He said the he would contact Finmeccanica's Pirozzi immediately to (i) get the TETRA system's technical specifications to the Embassy for onward transmittal to Washington agencies; and (ii) underscore that this is not the time to be doing business with Iran. Teti said he would call A/Ecmin July 18 with Finmeccanica's response. ¶6. (C) Comment: Finmeccanica's decision to proceed with a bid on the contract in Iran is based on Finmeccanica's belief that the TETRA radios are not controlled by the Wassenaar Arrangement, and is being made on purely commercial grounds with little thought to the political ramifications the bid will have or its possible impact on Finmeccanica's image in the United States. The decision to proceed with a bid for this contract, worth only 6.5 million euros, is a sharp contrast to Finmeccanica's decision, reported septel, not to pursue a 50 million euro contract for the sale of naval guns to the Venezuelan navy. It may be the case that ROME 00002034 002 OF 002 Finmeccanica's decision was influenced by the possibility of follow-on contracts in Iran or concern that not bidding on this contract will have an adverse effect on other contracts in Iran, worth 600 million euros (reported ref B),in which Finmeccanica is interested. ¶7. (SBU) Comment continued: Post will transmit to the Department the technical specifications of the TETRA radio system upon receipt from Finmeccanica and advise whether the Ministry of Trade (Teti) has been successful in getting Finmeccanica to cease and desist from bidding on the TETRA contract. Depending on Finmeccanica's response to Teti on the firm's intentions to move forward with its bid, the Department may wish to raise the issue with Ambassador Castellaneta. End comment. SPOGLI