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.

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Fuerlinger Shoots from the Hip
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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)

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More on Sniper Rifle Deliveries to Iran
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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.

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Serial Number System
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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.

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Status of Malaysian Subsidiary
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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.

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Sanctions Killing Sales to U.S. Market
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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