(S) ADDITIONAL INFORMATION ON LIMMT SHARED WITH

S E C R E T BEIJING 002391 DEPT FOR ISN AND EAP E.O. 12958: DECL: 06/18/2033 TAGS: PARM MTCRE PREL ETTC CH IR SUBJECT: (S) ADDITIONAL INFORMATION ON LIMMT SHARED WITH CHINA REF: STATE 64254 AND PREVIOUS Classified By: Acting Political Section Chief Ben Moeling. Reasons 1.4 (b),(c) and (d). ¶1. (S) PolOffs delivered reftel message urging China to share substantive information on China's investigation of LIMMT before June 27 to MFA Arms Control and Disarmament Department Missile Division Director Zhang Junan on June 18. PolOffs also shared new information with Zhang indicating that LIMMT continues to supply sensitive items to Iran. ¶2. (S) Zhang said China is at the "final stage of punishing" LIMMT, but continues to investigate the firm's activities. The General Administration of China Customs has confiscated items from the firm, he noted. While the investigation is ongoing, Zhang said, Beijing has closed down LIMMT and prevented it from continuing to export, a step requested by the United States. Currently, LIMMT has no right to export and does not even lawfully exist as an enterprise under Chinese law. Because LIMMT did not apply for the required annual license renewal, it has no right to conduct business in China, and the MFA has convinced the Ministry of Commerce to prohibit Karl Lee from registering other new companies. LIMMT "no longer exists," he stated. ¶3. (S) Zhang said the PRC still lacks insufficient evidence to trigger legal procedures against Lee. Lee has a thorough understanding of Chinese export control laws, and is proving difficult to corner. "We have never come across anyone quite like this before," Zhang stated. He assured PolOffs that once China can "get something concrete," they will begin legal procedures against Lee. In the meantime, Lee will not be able to act as freely as he used to, Zhang said, noting that PRC law enforcement and intelligence officials are "watching him closely." Lee conducted business with people with whom he had developed close relations, and may continue to be in touch by fax or by phone with "his friends," Zhang said, but has no legal right to execute export transactions in China. ¶4. (S) Zhang acknowledged the June 27 deadline for providing additional details on the PRC investigation and expressed a willingness to share information. However, he did not anticipate being able to do so until the end of June or early July. He strongly urged the United States not to impose sanctions on LIMMT, saying it will not help "either politically or technically." Sanctions will "impede efforts greatly," he stated, because it will make it impossible for the MFA to obtain the continued cooperation of "other Chinese agencies" that object to U.S. sanctions policy. Sanctions also will not harm Lee, Zhang said. He assured PolOffs that China is taking steps to punish the firm and will be in touch soon with information on the PRC investigation. Among all of the nonproliferation cases that China is presently investigating, whether brought to the attention by the United States or any other country, the PRC investigation of LIMMT is China's "number one case of importance," said Zhang. PICCUTA NNNN End Cable Text