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