IRAN NON-PROLIFERATION ACT (INPA) SANCTIONS ON

S E C R E T SECTION 01 OF 02 VIENNA 000232

SIPDIS

STATE FOR ISN/MTR, ISN/CWTR, EUR/PRA AND EUR/AGS

E.O. 12958: DECL: 01/25/2016
TAGS: PARM PREL MNUC ETTC AU MTCRE
SUBJECT: IRAN NON-PROLIFERATION ACT (INPA) SANCTIONS ON
STEYR-MANNLICHER -- COMPANY PRESIDENT WANTS TO "EARN"
REVERSAL OF SANCTIONS

REF: A. PHILLIPS-MITCHELL E-MAILS 1/5/06

B. STATE 2371

C. 05 VIENNA 3973

D. 05 VIENNA 3912

E. 05 STATE 226158

F. 05 VIENNA 406

G. 05 VIENNA 331

Classified By: Charge d'Affaires Scott F. Kilner. Reasons: 1.4 (b),(
d) and (h).


1. (S) Summary: Wolfgang Fuerlinger, president of the
Austrian arms firm Steyr-Mannlicher, has contacted the
Embassy to seek a lifting of INPA sanctions. Fuerlinger said
he would do whatever was necessary, including "signing a
contract" pledging that he would do no more business with
Iran. Fuerlinger wants to compete for the U.S. Army assualt
rifle contract. End Summary.


2. (SBU) Steyr-Mannlicher president Wolfgang Fuerlinger
called EconPol Counselor to ask what he can do to achieve a
lifting of INPA sanctions. Fuerlinger (disingenuously)
claimed to have been "completely unaware" of the prospect of
U.S. sanctions. He also said the shipment of 12.7 mm. (.50
cal.) high-power sniper rifles to Iran was "a one-time deal,"
and further asserted that he had made no new shipments and
done no new business with Iran after the November 2004
shipment of some 800 of the rifles. He claimed that his
company had made the strategic decision to stop sales to Iran
because of the furor the first sale caused, and because the
political changes which occurred in Iran made it inadvisable
to do further business with the country. Fuerlinger said he
would even consider "signing a contract" foregoing all
further business with Iran.


3. (SBU) On January 20, Fuerlinger said a U.S. supplier had
told him that the Commerce Department advised it not to do
business with Steyr-Mannlicher. Fuerlinger claimed that the
supplier provided "a common steel part" which was not on any
control list, and he said the deal was a commercial one.


4. (SBU) Fuerlinger said his main concern was his ability to
compete for the U.S. Army assault rifle contract. He said he
would like to have "a clear picture" of whether he should
proceed with a major investment in the U.S. with a view
toward securing the contract. Fuerlinger said he would be in
Washington in the next few weeks, and was eager to meet with
relevant U.S. officials to discuss what he could do to obtain
a lifting of sanctions.


5. (SBU) Note: Steyr-Mannlicher has recently done business
with the U.S. government. In Fall 2005, the Department of
the Army applied to procure 2,080 Steyr-Mannlicher pistols
(1,796 MA-1 and 284 MA-9, both 9 mm.) worth 396,000 dollars
for the Iraqi security forces. At the end of 2005, U.S.
Special Operations Command (USSOCOM) sought to purchase seven
12.7 mm. sniper rifles before it learned that USG sanctions
prevented the acquisition. Fuerlinger told us in February
2005 that he believes his product, the AUG-3, is the best fit
on the market for the U.S. Army's requirements. End note.


6. (S) Comment: Fuerlinger's latest statements about the
nature of his Iran business are a far cry from what he told
us in February 2005. At that time, he said he was "well
aware" of the provisions of the INPA, but that he would
choose his more lucrative business in Iran over his U.S.
operations -- unless we could deliver the assault rifle
contract to him as compensation (ref g.) (When we reminded
him of those earlier statements, he simply denied ever having
made them.) Fuerlinger, in fact, did his best to send more
shipments to Iran, filing for multiple Austrian export
permits. He stopped not because of an internal business
decision, but because the U.S. and Austrian governments
cooperated to block him. Fuerlinger was ready to take legal
action against the Austrian government as late as June 2005
to force approval of pending export permits. Now, however, a
series of circumstances has brought his Iran business
crashing down. Contract squabbles with his Malaysian
subsidiary, Austrian government holding actions to prevent
shipments to Iran, and the unreliability of his Iranian
interlocutors have interrupted his dreams of serving as the
primary supplier to the Iranian army.


7. (S) Comment continued: Embassy notes that Fuerlinger's
current posture is remarkably similar to that described in
ref (b),which concerns an entirely unrelated case in India:
Fuerlinger says he followed Austrian law and procedure in
making the sales, and hid nothing from the Austrian
government. He has now offered to make written assurances
that he will do no further business with Iran, and seems
intent to do everything he can to compete for U.S. government
business. End comment.


8. (SBU) Embassy requests Washington guidance on how to
respond to Fuerlinger's offers.
KILNER