UKRAINE: RESPONSE TO BLUE LANTERN PRE-LICENSE END-USE CHECK

UNCLAS KYIV 001268 SIPDIS STATE FOR PM/DTCC - BLUE LANTERN COORDINATOR E.O. 12958: N/A TAGS: ETTC KOMC UP SUBJECT: UKRAINE: RESPONSE TO BLUE LANTERN PRE-LICENSE END-USE CHECK ON LICENSE 050104685: EUROPA ARM SPORT REF: State 63378 ¶1. This is a reply to a Blue Lantern action request (reftel). ¶2. Post was requested to conduct a pre-license check on DDTC license application number 050104685 for the export of rifles to Ukraine (applicant: Marlin Firearms Co., 100 Kenna Drive, North Haven, CT). The foreign end-user is Europa Arm Sport, Blvd. Druzhby Narodiv 7, Office 106, Kyiv. ¶2. Economic Officer Matthew Habinowski (U.S. citizen) and FSN Economic Specialist Yevgeniya Ignatenko (Ukrainian national) conducted a pre-license check at subject firm's offices in Kyiv on June 26, 2008. The firm's contact telephone number is 380-44-529-8381 or 9522. Post met with Larisa Grunskene, President, and Igor Lukiants, Chief Product Manager, and other company representatives. ¶3. Europa Arm Sport (EAS) is a wholesaler established in the year 2000 by Grunskene to complement her existing "Ibis" hunting and fishing retail outlets. Ibis is a well-known high-end chain in Kyiv, with five locations on some of Kyiv's main thoroughfares. Grunskene is the President of both companies and told Econoff that the two companies share management, office space and resources, and differ only on paper. In addition to its retail operations, EAS/Ibis also operate a shooting range and gun repair shop and produce a magazine for sportsman, "Okhota & Oruzhiye" ("Hunting and Weapons"). Grunskene estimated that, in total, her operations employed 250 people. ¶4. Grunskene noted that EAS had in the past purchased Marlin rifles from European wholesalers and this purchase marked the first time that EAS would buy directly from the manufacturer. Lukiants told Econoff that he anticipated that a majority of the 910 rifles Europa Arm Sport hopes to purchase from Marlin will be sold through Ibis retail outlets. The remainder will be sold to retailers outside of the capital that have been certified by the Ministry of Interior. Lukiants explained that the Marlin rifle was growing in popularity in Ukraine due to its low cost (Note: Retail prices for Marlin rifles at the Ibis store visited by Econoff ranged from USD 300-1000. It appeared that other manufacturers' rifles started at USD 1000. End note.). Ukrainians had previously purchased inexpensive Russian rifles, he claimed, but now Russian producers were experiencing difficulties in supplying the Ukrainian market due to limited production capacity and high domestic demand. Further, Lukiants told Econoff that Marlin rifles were gaining popularity in Ukraine because they were reliable, relatively small and use high caliber ammunition, all of which is ideal for hunting wild boar, a common target of Ukrainian sportsmen. ¶5. When asked about the size of the EAS order, Grunskene admitted to Econoff that the volume was higher than usual, but it was done in reaction to news that U.S. manufacturer Remington would be purchasing Marlin. She feared that the acquisition and subsequent reorganization of Marlin would cause supply disruptions leading up to Ukraine's August/September wild boar hunting season, so EAS placed one large order to have a year's worth of inventory. ¶6. In response to questions in reftel paragraph 4, Post learned the following: -- Europa Arm Sport was established in 2000. Ibis opened its first retail location in 1994. The owner and president of both companies is Larisa Grunskene. -- Europa Arm Sport's primary customer is Ibis, which, in turn, sells the guns to individuals in Kyiv. EAS also sells guns to retail stores outside of Kyiv. -- Grunskene and Lukiants showed Econoff the database where, in accordance with Ukrainian law, EAS/Ibis maintain a database of all customers, including the purchaser's name, license number, and address. -- Weapons purchased by EAS for sale are stored at a central storage facility in Kyiv (also at Blvd. Druzhby Narodiv 7) or, to a lesser extent, at the Ibis locations. All EAS/Ibis facilities, according to Grunskene, comply with Ukrainian law and feature metal storage lockers, combination locks, an alarm system, and police patrol. -- Company representatives appeared well-informed of U.S. export controls, and demonstrated an understanding of re-export restrictions. ¶7. Post was able to schedule a site visit without delay from the company. Representatives appeared friendly, transparent, and willing to accommodate any of Post's requests for information. Much to Econoff's surprise, all of Grunskene's senior staff spoke English, possibly an indication of work or travel overseas. Grunskene herself mentioned visiting the SHOT Show convention in Las Vegas. Company offices at Blvd. Druzhby Narodiv 7 were lively, with busy employees at well-equipped workstations, and appear to have undergone renovation to replicate the look and feel of a hunting lodge. The Ibis store around the corner from the corporate office was comparable in appearance to similar stores in the U.S. and seemed to be doing a brisk business at mid-day during the workweek. ¶8. Recommendation: Post recommends issuing a license to the company for the purchase of Marlin rifles. Taylor