RUSSIANS DEFEND ARMS TRANSFERS TO IRAN, SYRIA

S E C R E T SECTION 01 OF 03 MOSCOW 000402

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/31/2017
TAGS: PARM MCAP PREL ETTC RS
SUBJECT: RUSSIANS DEFEND ARMS TRANSFERS TO IRAN, SYRIA

REF: A. MOSCOW 275


B. STATE 7445

Classified By: Minister-Counselor for Political Affairs Alice G. Wells.
Reasons 1.4 (B/D).


1. (S) SUMMARY: Visiting Moscow January 18-19, EUR/PRA
Director Anita Friedt told Foreign Ministry officials that
increased Russian transparency on arms transfers to sensitive
countries could lessen the possibility of sanctions under
U.S. law. Washington was willing to work with the Russian
side, but Moscow would have to share more information about
prospective transfers to address U.S. concerns. MFA
officials emphasized that the sanctions' effect was more
political than practical. The officials:

-- Defended the transfer of the Tor-M1 air defense system to
Iran as permissible under existing national law and
international agreements;

-- Explained that the vehicle-mounted Strelets system under
consideration for Syria had been built exclusively for export
and could not be modified;

-- Requested additional information on the justification for
sanctions, noting that they were unable to investigate
allegations against the sanctioned individual Aleksandr
Safanov; and

-- Asked that the U.S. continue to consult with Russia on
ballistic missile defense deployments in Europe.

In separate meetings, defense analysts noted that it would be
difficult for the sanctioned entities, particularly
Rosoboronexport, to respond to U.S. requests for
clarification. One analyst asserted that Russia's growing
arms export industry had become increasingly profitable while
undermining U.S. interests -- both were goals that appealed
to a rising number of GOR and Kremlin officials. END SUMMARY.
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EFFECTS OF SANCTIONS MORE POLITICAL THAN PRACTICAL
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2. (S) Foreign Ministry officials decried the December 28
imposition of U.S. sanctions against four Russian entities
and asserted that the arms transfers to Iran and Syria, which
had triggered the sanctions, conformed with Russian law and
export control regulations, as well as Moscow's international
obligations. Igor Neverov, Director of the North America
Department, said Russia viewed the sanctions as a "political"
action done more for U.S. domestic consumption. There was
little practical effect upon the Russian companies'
operations and, in fact, the sanctions against
Rosoboronexport might actually undermine U.S. companies that
seek cooperation with that firm. Neverov noted that the
sanctions would make it more difficult for the Foreign
Ministry to tamp down rising anti-U.S. sentiment and calls
for retaliatory action against the U.S. He added, however,
that the Ministry would continue to argue within the GOR
interagency community to avoid blowing the issue out of
proportion.


3. (S) Sergey Petlyakov, Chief of the Foreign Ministry's
Arms Technology and Transfer Policy Section, reiterated the
GOR policy that, in addition to legal constraints, Russia's
arms transfer decisions were guided by an analysis of the
weapons system's effects upon regional stability. He added
that Moscow shared U.S. concerns about man-portable systems
(MANPADS) falling into the hands of terrorists, which was the
reason behind Russia's investigation last summer into the
diversion of Russian-origin anti-tank guided missiles (ATGMs)
from Syria to Hizballah. The GOR had tightened its export
control regime as a result of the ATGM case; among other
measures, Russia will incorporate provisions for stricter
end-use checks in future arms transfer contracts.


4. (S) In the case of the Tor-M1 transfer to Iran, Petlyakov
said the system was a tactical-level system that could be
used only for self-defense and would not destabilize the
region. He acknowledged that the S-300 system, whose
transfer to Iran was still under review, was more advanced
but still permissible under Russian law and international
regimes. Instability in Iran was of great concern to Russia
because of that country's geographic proximity, Petlyakov
continued, and was a major factor in Russia's security
calculations when transferring weapons systems.


5. (S) Svyatoslav Tsukanov, Chief of the Ministry's Export

MOSCOW 00000402 002 OF 003


Control Policy Section, stressed that the Strelets missile
system was a vehicle-mounted weapon built exclusively for
export, with separately deployed aiming and guidance systems
designed so that it could not be easily deployed by
terrorists. Tsukanov asserted that removing one of the
launching tubes, as the U.S. had suggested, would not
effectively modify the system. In any case, both he and
Petlyakov acknowledged that Russia harbored misgivings about
obtaining "U.S. approval" of its arms transfers and noted
that firms were reluctant to share potentially proprietary
information in response to U.S. requests for clarification
concerning pending transfers.


6. (S) Tsukanov noted that one of the sanctioned entities --
against the individual Aleksandr Safanov -- was a common name
in Russia, akin to "John Brown" in English and often used as
a pseudonym when an individual wanted to cover his tracks.
Consequently, he said that even with the background provided
by the U.S. in conjunction with the imposition of sanctions
on Safanov, the GOR had been unable to unearth information
related to any real individual with this name. He and
Petlyakov used this case as an example of the need for the
U.S. to provide more complete information to justify the
imposition of sanctions.


7. (S) In all of her meetings with MFA officials, Friedt
emphasized the need for dialogue. She noted that the U.S.
had repeatedly asked for clarification concerning a number of
transfer cases, including the Strelets and Tor-M1, but Moscow
had not responded adequately despite assurances from senior
officials. Friedt said increased transparency on arms
transfers to sensitive countries could lessen the possibility
of sanctions under U.S. law. Washington was willing to work
with the Russian side, but Moscow would have to share more
information about prospective transfers to address U.S.
concerns.
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SANCTIONS AS RUSSIAN ARMS SUCCESS
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8. (C) Ivan Safranchuk, a defense analyst with the World
Affairs Institute, told Friedt that many GOR officials
believed U.S. sanctions were aimed at undermining Moscow's
increasingly competitive market position in the arms trade,
especially in the case of Rosoboronexport. Safranchuk added
that the lifting of sanctions against Sukhoy had reinforced
the view of some observers that the U.S. lacked sufficient
evidence in the first place. Moreover, sanctions might
actually boost the reputation of the smaller sanctioned firms
because of the inadvertent "advertising." From a political
perspective, Safranchuk continued, Rosoboronexport would
never be able to respond to U.S. demands for clarification as
Sukhoy had done. As the country's leading arms exporter,
Rosoboronexport's reputation and prospective sales would
suffer if others perceived it as intimidated by U.S.
sanctions.


9. (C) Independent defense analyst Pavel Felgengauer agreed
that GOR and Kremlin officials were proud of Russia's growing
arms export industry, which had become increasingly
profitable, often at the expense of U.S. interests in various
parts of the world. Felgengauer said such a reality appealed
to many of these officials. Responding to Friedt's query
regarding the "cost" of sanctions to Rosoboronexport,
Felgengauer highlighted banking problems. According to
Felgengauer, Rosoboronexport is a "cash hungry" enterprise,
which relies on cash profits to pay for items such as much
needed refurbishment/upgrade of subsidiaries like Aftovaz.
Felgengauer pointed out that Rosoboronexport relied on the
Bank of New York for dollar transactions. As long as
Rosoboronexport is under sanctions, it will not be able to
use the Bank of New York, which provides the best transaction
rate, or acquire lower-interest rate Western loans. This
will not present a problem for "euro" transactions, but
Rosoboronexport's arms sales to the Middle East and Asia are
dollar transactions. Felgengauer estimated the financial
cost to Rosoboronexport would be approximately 1-2 percent of
its profits.
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CONSULTATIONS ON MISSILE DEFENSE WELCOME
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10. (S) Neverov requested that the U.S. continue to consult
closely on plans to deploy components of a missile defense
system in Europe. Although he made remarks before the
announcement of U.S. negotiations with Poland and the Czech
Republic (reftels),he said recent briefings in Moscow and

MOSCOW 00000402 003 OF 003


within the NATO-Russia Council in Brussels had been helpful
in alleviating concerns in Moscow. In this context, Neverov
said both countries needed to highlight progress in bilateral
relations more effectively.


11. (C) Both Safranchuk and Felgengauer viewed the missile
defense deployment issue in political terms. Safranchuk
predicted that the issue would become a major component of
Russia's "anti-American industry." He argued for close and
continuing consultation between Russia and the U.S. and
suggested that advance notice of any significant action by
the U.S. would derail to some extent the influence of
hard-liners who wished to highlight the issue for political
reasons. Speaking more broadly, Safranchuk lamented that
conservative forces in Russia were increasingly challenging
the view, held throughout most of the post-Soviet period,
that areas of agreement with the U.S. far outweighed areas of
disagreement.


12. (C) Felgengauer was even more emphatic that the issue
was political. Russian military officials know that
operational deployment of any system in Europe was years away
and, in any case, they believe an effective interceptor is
not currently available to meet the threat from the Persian
Gulf or North Korea. He suggested that Russia's armed forces
would not worry about deployment of a U.S. system until
construction actually began; in the meantime, senior defense
officials would complain about the proposed system for
political mileage.


13. (U) EUR/PRA Director Friedt cleared this message.
BURNS