(C) IRAN AND SYRIA NONPROLIFERATION ACT --

S E C R E T STATE 048928


E.O. 12958: DECL: 04/12/2032
TAGS: PARM MTCRE PREL MNUC ETTC CH IR

SUBJECT: (C) IRAN AND SYRIA NONPROLIFERATION ACT --
NOTIFICATION OF SANCTIONS AGAINST THREE CHINESE ENTITIES

REF: A. BEIJING 1625

B. STATE 28429

C. BEIJING 186

D. 06 BEIJING 14992

E. 06 STATE 112901

F. 05 STATE 171986

G. 05 BEIJING 15646

H. 05 BEIJING 20654

I. 05 STATE 228152

Classified By: EAP DAS THOMAS CHRISTENSEN FOR REASONS 1.4 (B),
(D),AND (H).


1. (U) This is an action request. Embassy Beijing
please see paragraph 6.


2. (S) Background: The Iran and Syria
Nonproliferation Act (ISNA) requires periodic reports
to Congress identifying foreign entities for which
there is credible information indicating that they have
transferred to or acquired from Iran or Syria items on
multilateral control lists (Australia Group (AG),
Chemical Weapons Convention (CWC),Missile Technology
Control Regime (MTCR),Nuclear Suppliers Group (NSG),
and the Wassenaar Arrangement (WA)) or other items with
the potential to make a material contribution to
missile, WMD, or certain other weapons programs. The
USG has determined that the China National Precision
Machinery Import/Export Corporation (CPMIEC),Zibo
Chemet Equipment Company, and the Shanghai Non-Ferrous
Metals Pudong Development Trade Co. Ltd. have engaged
in activities, as noted above, that warrant the
imposition of measures pursuant to Section 3 of
the ISNA.


3. (S) We have raised the activities of these three
entities previously with the Chinese government.
Specifically, we have discussed Zibo Chemet Equipment
Company's transfers of glass-lined chemical processing
equipment to Iran, most recently in July 2006 (Refs D
and E). The Chinese have not provided any additional
information on this case. We approached the Chinese
government in March 2007 about CPMIEC's transfer of
actuators to Mehr Engineering and Industrial Group,
Iran's main solid-fueled ballistic missile developer
(Ref B). In response, Chinese officials said that they
were not aware of the new allegations against CPMIEC,
but would convey the information to China's relevant
experts for review (Ref A). To date, we have not
received a substantive response from the Chinese
government on CPMIEC's activities. Finally, in
September 2005, we informed China that Shanghai Non-
Ferrous Metals Pudong Development Trade Co. Ltd.
shipped approximately 5 tons of Chinese-origin titanium
sponge in mid-June 2005 to the Atomic Energy
Organization of Iran (AEOI) (Ref F). We warned China
that this completed transaction could result in
potential sanctions against the transferring entity
pursuant to the then-applicable Iran Nonproliferation
Act of 2000 (subsequently amended and renamed the Iran
and Syria Nonproliferation Act (ISNA)). We also told
China that we would factor any information they shared
into our potential sanctions determination, but China
has not provided any substantive information, despite
repeated USG requests, most recently in January 2007
(Ref C).


4. (S) Accordingly, pursuant to the provisions of the
ISNA, the following penalties are imposed on these
entities, their subunits, subsidiaries, and successors:

a. No department or agency of the United States
Government may procure, or enter into any contract for
the procurement of any goods, technology, or services
from them;

b. No department or agency of the United States
Government may provide any assistance to them, and they
shall not be eligible to participate in any assistance
program of the United States Government;

c. No USG sales to them of any item on the United
States Munitions List are permitted, and all sales to
them of any defense articles, defense services, or
design and construction services under the Arms Export
Control Act are terminated; and

d. No new individual licenses shall be granted for the
transfer to them of items, the export of which is
controlled under the Export Administration Act of 1979
or the Export Administration Regulations, and existing
such licenses are suspended.

These measures, which will take effect shortly, will
remain in place for two years. We want to provide
advance notice to the Chinese Government of this
decision, note that this determination will be
published soon in the Federal Register, and make clear
that the penalties are only on the entities or
individuals, not the PRC government. End Background.


5. (S) Purpose/Objective: To inform the PRC of the
sanctions determination prior to its publication in the
Federal Register early in the week of April 16. Post
should make clear that the U.S. will continue to raise
cases of proliferation concern with the Government of
China and look for opportunities to cooperate in
halting proliferation.


6. (S) Action request: Post is requested to provide
the following suggested talking points to appropriate
Chinese government officials and report response.
Talking points also may be provided as a non-paper.


7. (S//REL CHINA) Suggested Talking Points:

-- The United States appreciates the regulatory and
enforcement measures that China has taken to strengthen
its export control regime. We want to continue our
bilateral consultations and cooperation on
nonproliferation issues for the benefit of both of our
nations and of the rest of the international community.

-- Supplementing bilateral efforts with China and other
nations, the United States will continue to take direct
actions where warranted against entities from any
country that engages in proliferation-related activity
with Iran and Syria.

-- The United States has determined that there is
credible information indicating that Zibo Chemet
Equipment Company, the China National Precision
Machinery Import/Export Corporation (CPMIEC),and the
Shanghai Non-Ferrous Metals Pudong Development Trade
Co. Ltd. transferred to Iran items on a multilateral
control list, or other items that have the potential to
contribute materially to WMD, missile, or certain other
weapons programs in Iran.

-- Based on these transfers, we have imposed certain
measures against these entities as provided in the Iran
and Syria Nonproliferation Act (ISNA).

-- We have raised on past occasions our concerns about
Zibo Chemet Equipment Company's transfer of chemical
weapons-related equipment to Iran, including glass-
lined chemical processing equipment, most recently in
July 2006.

-- We also discussed with you in March 2007 CPMIEC's
role in providing missile-related actuators to Mehr
Engineering and Development Group, Iran's main solid-
fueled ballistic missile developer. To date, we have
not received a response from your government on these
activities.

-- Furthermore, we informed your government in
September 2005 that Shanghai Non-Ferrous Metals Pudong
Development Trade Co. Ltd. shipped approximately five
tons of Chinese-origin titanium sponge in mid-June 2005
to the Atomic Energy Organization of Iran (AEOI).

-- We have repeated our request for information on this
transfer over the last year and a half, most recently
in January 2007. China has not provided any further
information on this transfer.

-- As we have discussed on numerous occasions, we view
military and proliferation-related transfers to Iran
very seriously, particularly in light of Iran's
continuing refusal to meet IAEA and UN requirements
with regard to its nuclear program.

-- Continued proliferation to Iran undermines our
joint, diplomatic efforts to resolve the Iranian
nuclear weapons issue and the crisis in the Middle
East.

-- Accordingly, pursuant to the provisions of the ISNA,
the following measures are imposed on these entities,
and their successors, subunits, and subsidiaries:

a. No department or agency of the United States
Government may procure, or enter into any contract for
the procurement of any goods, technology, or services
from them;

b. No department or agency of the United States
Government may provide any assistance to them, and they
shall not be eligible to participate in any assistance
program of the United States Government;

c. No United States Government sales to them of any
item on the United States Munitions List are permitted,
and all sales to them of any defense articles, defense
services, or design and construction services under the
Arms Export Control Act are terminated: and

d. No new individual licenses shall be granted for the
transfer to them of items, the export of which is
controlled under the Export Administration Act of 1979
or the Export Administration Regulations, and existing
such licenses are suspended.

-- These measures will take effect shortly and will
remain in place for two years.

-- The determination against these three entities, as
well as determinations against entities from six other
countries, will be published soon in the Federal
Register.

-- We would like to reiterate that in determining
whether to impose ISNA sanctions, the USG considers all
relevant information, including any information
provided by your government on the results of its
investigative and enforcement actions in these cases.

-- We look forward to continuing cooperation on export
control and nonproliferation issues.

End suggested talking points


8. (U) Please slug any reporting on this issue for
ISN/MTR and EAP/CM. A response is requested as soon as
possible. Department point of contact is Matt
Hardiman, ISN/MTR, 202-647-3176
(hardimanmx@state.sgov.gov).
RICE


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