STEYR-MANNLICHER: RELOADING AFTER SANCTIONS

S E C R E T VIENNA 003028 SIPDIS NOFORN SIPDIS DEPT FOR ISN/CATR, EUR/PRA, ISN/MTR, EUR/AGS, NP/ECNP, INR/SPM E.O. 12958: DECL: 10/10/2016 TAGS: PREL PARM ETTC AU SUBJECT: STEYR-MANNLICHER: RELOADING AFTER SANCTIONS REF: A) STATE 133170 B) VIENNA 0232 Classified By: DCM Scott F. Kilner. Reasons: 1.4 (b) and (d). ¶1. (S//NF) Summary. EconPolCouns and Poloffs delivered ref A points to Steyr-Mannlicher CEO Wolfgang Fuerlinger on September 28 to discuss ref A questions. Fuerlinger claimed his business in the U.S. has dried up as a result of the sanctions and complained that the USG unfairly targeted Steyr-Mannlicher. Fuerlinger remained silent on the road ahead for Steyr-Mannlicher, saying only that the company is "interested in doing things abroad." ¶2. (S//NF) EconPolCouns also delivered ref A points to Helmut Krehlik, Head of the Ministry of Economy's Import and Export Control Division on August 30. Krehlik appreciated the update and welcomed any further information. End Summary. -------------- Fuerlinger Shoots from the Hip -------------- ¶3. (S//NF) EconPolCouns and Poloff met Steyr-Mannlicher CEO Wolfgang Fuerlinger on September 28 at the company headquarters in Kleinraming, Upper Austria, to discuss ref A questions. EconPolCouns said that Washington may look favorably on Fuerlinger,s continuing cooperation as it discusses the possibility of lifting sanctions. Fuerlinger provided the following answers to ref A questions: -- What are the total production numbers of the 12.7mm military sniper rifles? At first, Fuerlinger could not recall the total production run of the HS .50 rifles, but promised to follow-up with post. Fuerlinger subsequently made an off-hand estimate that his company produced "1,500 or 2,000" of the rifles. -- In addition to Iran, what other customers have bought or received the 12.7 mm military sniper rifles? Fuerlinger said Steyr-Mannlicher's primary customers for 12.7 mm sniper rifles include Canada, the U.S., Germany, and France, and, "to my knowledge no other Middle Eastern country." Fuerlinger told Poloff that he would not answer any questions about Steyr-Mannlicher,s current business activities that do not have a relation to the Iran deal. He said the company has spent the last year weathering the storm in the aftermath of U.S. sanctions and that it is now "interested in doing things abroad." -- What material related to the HS .50 (ammunition, sights, production technology, etc.) has Steyr or its subsidiaries sold to Iran, or had sales negotiations with the Iranians on? Fuerlinger said his company sold only ready-made rifles with sights to Iran. These weapons came with an operating manual. The company provided weapons brochures to the Iranians, but did not supply Iran with any production technologies or technical drawings. Fuerlinger added that Steyr-Mannlicher did not provide training on the HS .50 to the Iranians. -- What guarantees has Steyr received, if any, that Iran will not reverse-engineer the HS .50? Steyr-Mannlicher received no such guarantees, according to Fuerlinger. -- Are there any critical HS .50 components that Iran would not be able to manufacture (bolts, trunnions, etc.)? Fuerlinger showed us an HS .50 and explained that the design is very simple. He added that the company was aware, via the internet, of Iranian attempts to copy the HS .50. According to Fuerlinger, the most technically sophisticated component of the HS .50 is the barrel. He doubted that Iran could reverse-engineer the barrel to the same high standard. -- Did Steyr provide Iran with the Technical Data Package needed to produce the HS .50 or any other rifle? Fuerlinger said that Steyr did not provide any technical data packages. -- How many spare parts kits did Iran purchase with the rifles? What components are included in these kits? After double-checking with an associate, Fuerlinger said Steyr-Mannlicher did not provide any spare parts kits with the rifles, nor did it make any spare parts deliveries. Fuerlinger said the company provided only "fast-moving parts" (e.g. pins and locking screws) as part of the standard package with each weapon. He said the company did not provide any additional gun barrels to Iran. -- Has Steyr or any other company provided Iran with the equipment needed to hammer-forge 50 caliber barrels? Fuerlinger said Steyr-Mannlicher did not provide this equipment to the Iranians. He said he did not know if any other firm had. -- What contacts has Steyr had with Iran since the sanctioned transfer? Fuerlinger said that Steyr-Mannlicher had contacts with Iran in "May, June, or July" 2005 to discuss further deliveries. He added that the Iranian allowed him to view the production line at JS Industries and he also discussed the HS .50, AUG assault rifle, and other equipment with the Iranian Ministry of Defense. Fuerlinger said Steyr-Mannlicher applied for a license to export 50 AUGs to Iran, but the GoA denied the request. After the USG imposed sanctions, Fuerlinger said the Iranian Embassy in Vienna contacted his company once or twice. Fuerlinger also told us that he spent two days in Tehran last year, but provided no details. Fuerlinger said he has had no contact with Iran in the last six months. (Comment: We have no further details on Fuerlinger's meeting last year in Iran. End Comment) -------------- More on Sniper Rifle Deliveries to Iran -------------- ¶4. (S//NF) Fuerlinger recounted the history of the HS .50 deliveries to Iran. Initially, Steyr-Mannlicher delivered two sample rifles, plus seventy rounds of ammunition to Iran in March 2004. The company followed up with five shipments of 154 rifles each, which it delivered every second week between November 2005 and January 2005, and a final shipment of 30 rifles. Fuerlinger did not specify the date of the final shipment. These six shipments did not include ammunition, he said, but did include standard scopes. Fuerlinger could not recall what type of scopes Steyr-Mannlicher delivered. Since Steyr-Mannlicher does not produce scopes, it buys the scopes according to the customer's needs. Fuerlinger added that scopes are available "anywhere" and that several varieties fit the HS. 50. Fuerlinger claimed that the type of scope does not make a big difference in the operation of the weapon. He maintained that Iran uses American scopes. Fuerlinger stressed that his company received a valid license from the GoA to deliver these weapons. Fuerlinger claimed he knew nothing about the Wassenaar Arrangement or about any GoA agreement with Wassenaar. -------------- Serial Number System -------------- ¶5. (C//NF) Fuerlinger explained to Poloff that each HS .50 has an internal and external serial number. The company assigns these numbers in-house. The external serial number is easy to alter, Fuerlinger said, which is why the company places the internal serial number inside the barrel. Fuerlinger explained that Steyr-Mannlicher can check this number with an infrared device. -------------- Status of Malaysian Subsidiary -------------- ¶6. (C//NF) When Poloff asked about the status of Steyr-Mannlicher,s subsidiary in Malaysia -- which is still listed on the company website -- Fuerlinger said that he is suing his Malaysian partner in a Malaysian court. The case has been ongoing for 18 months. He added that he has won one case and has two cases pending. The company produced an AUG A1 version, which it sold exclusively to the Malaysian armed forces. He said the Malaysian subsidiary has not produced anything in twelve months. -------------- Sanctions Killing Sales to U.S. Market -------------- ¶7. (C//NF) Fuerlinger complained that the Americans, French, Germans, Belgians, and Austrians all delivered weapons to Iran at the same time, according to a UN database. He added that he thought the USG choose Steyr-Mannlicher as the easiest available target. Fuerlinger told Emboffs that Steyr-Mannlicher,s business in the U.S. "is dead" and that he will soon close down the company,s office in Georgia. "You guys really destroyed our business there," Fuerlinger said. Following the imposition of sanctions, Fuerlinger said he received hundreds of emails and letters from customers angry about Steyr-Mannlicher,s dealings with Iran. Fuerlinger told Emboffs that Steyr-Mannlicher's sales of hunting and military weapons in North America usually total 10-20 million euros per year. To date, however, its 2006 sales have been only 460,000 euros. Steyr-Mannlicher,s business in Austria, by comparison, amounts to 2.5 million euros per year. Fuerlinger told Poloff that its U.S. subsidiary has no plans to exhibit at the annual Shot Show gun exhibition in Las Vegas next year. McCaw