1. (S) On August 16 and, following receipt of ref A, on
August 24, Econ Unit Chief met with Helmut Krehlik, Head of
the Ministry of Economy's Import and Export Control Division,
to discuss developments in the Daniel Frosch Export (DFE)
Industrial Spare Parts case. Krehlik confirmed that on
August 17 the Public Prosecutor had ordered the arrest of DFE
CEO, Daniel Frosch, and his father, Erich. Erich Frosch is
in custody, but Daniel Frosch has disappeared. Krehlik said
that there are indications Daniel Frosch is still in Austria.



2. (S) Krehlik said his office and the Austrian domestic
intelligence service (BVT) are scouring DFE records to obtain
sufficient evidence to charge the Frosches. According to
Krehlik, the Public Prosecutor had been hesitant to issue an
arrest warrant and has requested further evidence by August
31 in order to charge the Frosches. Krehlik said that, after
initial review, it appears DFE has been extremely careful to
excise any written information that would indicate a
connection between DFE exports and a military application.
Krehlik stated that the MoE will need to prove that DFE
exported a "licensed good," or that DFE knowingly exported an
"unlicensed good" with the knowledge that the importer would
use the goods for military, including WMD, purposes. Krehlik
added that the GoA has identified some U.S.-origin goods,
which DFE has apparently shipped to Iran, so his office and
the BVT are working closely with DHS/ICE officials from the
Embassy.



3. (S) Regarding the June 4 Neue Kronen-Zeitung article on
the confiscation of a friction tester at Schwechat Airport
(ref B), Krehlik said this was "an old story" from August


2005. According to Krehlik, an Austrian customs official,
Erich Fleckl, had given the story to the press in June 2006
as part of intra-office politics. He promised to give us the
friction tester's specifications and invited USG officials to
view the tester in Graz. The friction tester is apparently
of German origin.



4. (S) Krehlik said he was unaware of any visits by Daniel
Frosch to Iran this summer (ref A). However, he repeated his
assessment that Daniel Frosch wants to move his business to
the UAE (ref C). According to Krehlik, Erich Frosch
reportedly has a 6-month Chinese visa, implying that the
elder Frosch would like to move to China. (Note: As
reported in ref C, Erich Frosch is married to a Chinese
national whose father owns Wuhan Star. End Note
McCaw