CZECH MFA REPORTS AERO VODOCHODY PLANS TO GO AHEAD

C O N F I D E N T I A L PRAGUE 000428 SIPDIS SIPDIS NOFORN EUR/NCE FOR ERIC FICHTE E.O. 12958: DECL: 04/19/2016 TAGS: PREL PGOV MASS MARR EZ VE SUBJECT: CZECH MFA REPORTS AERO VODOCHODY PLANS TO GO AHEAD WITH LEASE OF CZECH L-39 AIRCRAFT TO VENEZUELA REF: IIR 6 824 0116 07 Classified By: Ambassador Richard Graber for reasons 1.4 (b) and (d) ¶1. (C/NF) Poloff met April 19 with the Czech MFA's Director of Common Foreign and Security Policy Director Vaclav Balek (please protect). Balek shared his astonishment that, despite the MFA's previous assurances to the contrary, Czech firm Aero Vodochody had successfully signed an MOU with representatives of the Government of Venezuela for the lease of nine L-39 aircraft for training purposes. Balek said the MFA only learned about the deal when Aero Vodochody submitted a request for a license. ¶2. (C/NF) Balek said the MFA will oppose the deal and deny the license. Under normal circumstances, this would be sufficient to prevent the deal from going forward. However, Balek said that he has since learned Minister of Industry and Trade Martin Riman personally supported the deal and attended the MOU signing ceremony. Balek expressed concern that Riman's support for the deal could overrule the MFA arms licensing section's denial of the license request. He strongly hinted that U.S. attention focused on the Ministry of Industry and Trade might pay dividends in ensuring that the deal does not go forward. ¶3. (C/NF) Balek believes this lease is part of a three-stage business plan. The first stage would involve the leasing of the L-39s, the second stage would involve the development of a new aircraft without U.S. content, and the third stage would involve transfer of the rights to produce the new aircraft in Venezuela. Balek said the business plan is consistent with information published in the local press in fall 2006. He offered to provide more information as it becomes available. ¶4. (C/NF) Balek noted that he believes the U.S. has leverage over Aero Vodochody: namely, if the Venezuelan deal goes forward, the U.S. can refuse to grant Aero Vodochody the right to export equipment with U.S. content to other countries with whom Aero Vodochody plans to conduct business, such as Nigeria. ¶5. (C/NF) A meeting has been scheduled with Balek during the week of April 23, and Post will report additional information obtained at that meeting front channel. Based on that information, Post will request language to be used in a demarche to the Czech Government. GRABER