UPDATE ON IRAN SPECIFIC EXPORT CONTROL OUTREACH

UNCLAS STATE 104207


SENSITIVE

E.O. 12958: N/A
TAGS: KNNP PREL PARM IR MNUC UK GM FR BE IT SZ CH JP

SUBJECT: UPDATE ON IRAN SPECIFIC EXPORT CONTROL OUTREACH

REF: A. STATE 021770

B. STATE 039585

C. STATE 052030

D. STATE 083144

E. STATE 099666

F. STATE 104182


1. (U) This is an action request. Please see paragraph 3.

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BACKGROUND
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2. (SBU) BACKGROUND: On May 15, Washington provided all
Nuclear Suppliers Group
(NSG) Participating Governments (PGs) with detailed
information regarding critical commodities Iran will require
to support the deployment of the next generation of gas
centrifuges for their uranium enrichment program. The
information describes commodities that Iran can not
indigenously manufacture, and would therefore need to procure
from foreign suppliers (ref C). In ref D, E, and F we
provided host governments with information on major
manufacturers of these items in their respective countries
and informed them about the U.S. efforts to enhance Iran-
related industry outreach. We would now like to provide host
governments with further developments in the U.S.,s industry
outreach efforts to prevent Iranian procurement of critical
commodities and inform them of export guidance issued on
September 25.


3. (SBU) ACTION REQUEST: Posts are requested to approach
appropriate host government officials to deliver the
nonpapers in para 4 and 5. In doing so, posts should pursue
the following objectives:

-- Share information on the USG,s comprehensive
industry-outreach strategy to sensitize U.S. industry to
Iran,s deceptive procurement practices aimed as stopping the
diversion of U.S. origin goods to Iran via third countries.

-- Encourage the host government, if they have not already
done so, to develop a comprehensive industry outreach
strategy aimed at preventing Iran from procuring items both
directly and via front companies in third countries.

-- Urge host governments to share any relevant information
from their industry outreach activities with the USG, the
NSG, and the IAEA.


4. (U) BEGIN U.S. NON-PAPER.

-- We recently notified you that the U.S. government is
currently reaching out to U.S. manufacturers of critical
commodities that Iran will need to procure for its new gas
centrifuge design. We are alerting these U.S. manufacturers
to be cautious of unknown customers that may be procuring
items for Iran,s illicit programs.

-- We wanted to follow-up and provide you with information on
a recent action we took to alert U.S. industry of Iran,s
illicit procurement practices. Through such outreach, we
hope to help U.S. companies prevent illicit diversion of
their products, and thus prevent the unwitting transfer of
items to Iran that may contribute to Iran,s weapons of mass
destruction (WMD) programs, their means of delivery, or
advanced conventional weapons.

-- On September 25, 2008, the U.S. Department of Commerce
published guidance advising exporters of actions they can
take to avoid the illicit diversion of items to support
Iran,s nuclear weapons or ballistic missile programs.

-- This guidance alerts U.S. companies that Iran uses
deceptive tactics to make its procurement efforts for its WMD
programs appear to be commercial activities and establishes
that exporters need to be vigilant and recognize red flags in
order to help prevent their exports from being diverted to
Iran.

-- This guidance reminds exporters to take note of any
abnormal circumstances in a transaction that indicate that
the export is destined for an inappropriate end-use,
end-user, or destination and summarizes the steps that
exporters can take in order to prevent unauthorized transfers
to Iran.

-- Further, it notes that exporters should be cautious of
customers operating in transshipment countries or free trade
zones, as Iranian entities form front companies in third
counties for the sole purpose of sending dual-use items to
Iran. This allows Iran to receive these items that the
supplier country would normally deny under their export
control laws.

-- While the U.S. is working with transshipment countries to
try to stop such activities, it is important that major
supplier countries also work with their exporters to help
them recognize a potentially risky transaction.

-- This guidance was emphasized at the upcoming Department of
Commerce Update Conference on September 29, with
approximately 800 attendees from the exporting community, and
was emailed to approximately 8,500 members exporting
community.

-- Industry outreach is critical to ensuring that Iran cannot
procure items to advance its WMD programs. If you have not
already done so, we encourage you to conduct outreach to your
industry to ensure that they are aware of the implication of
export controls for Iran and alert companies about the
deceptive procurement practices of Iran.

-- We welcome your government,s suggestions on how key
suppliers can best work to prevent the supply of critical
items to Iran,s nuclear and missile programs. The United
States is open to further discussions at the expert level.

END U.S. NON-PAPER.


5. (U) BEGIN NON-PAPER.

Guidance on Actions Exporters Can Take to Prevent Illicit
Diversion of Items to
Support Iran,s Nuclear Weapons or Ballistic Missile Programs

It is the policy of the United States to counter Iran,s
pursuit of technology that could enable it to develop nuclear
weapons and missiles capable of delivering them. In support
of this effort, the United States maintains comprehensive
economic sanctions on Iran.

IRAN,S ILLICIT PROCUREMENT EFFORTS

- Iran is currently trying to procure items for its uranium
enrichment centrifuge program. For this program, Iran will
need to procure items on the Commerce Control List (CCL) such
as carbon fiber (controlled under Export Control
Classification Numbers (ECCNs) 1A002, 1C010, 1C210, 1C990)
and filament winding machines (ECCNs 1B001, 1B101, 1B201),as
well as items classified as EAR99, such as epoxy resin.
Epoxy resin and related hardening/accelerator agents are
necessary to bind the carbon fibers used in both uranium
centrifuge and missile structures. Thus, U.S. manufacturers
of such items should be particularly vigilant.

- As outlined in International Atomic Energy Agency (IAEA)
Director General El Baradei,s report of February 22, 2008,
Iran has admitted to attempting to evade international
sanctions to procure sensitive items, using deceptive
procurement tactics to obtain items that can contribute to
its weapons of mass destruction (WMD) programs.

- Specifically, Iranian entities form front companies in
other countries for the sole purpose of exporting dual-use
items, including U.S. origin items, to Iran that it can use
in its nuclear and missile programs. These companies appear
to be procuring dual-use items for commercial activities and
enable Iran to obtain materials that would typically be
prevented by export control restrictions in supplier
countries. They make it difficult for businesses to know
that the end-user is in Iran. Furthermore, these front
companies are often in third countries where U.S. companies
have strong trading relationships.

EXPORTER DILIGENCE

- Not all items that Iran could use for weapons of mass
destruction-development activities are listed on the CCL.
Therefore, exporters must be vigilant on the potential
end-use of all items exported from the United States. (e.g.,
epoxy resin).

- The exportation of any item that is subject to the EAR
(including an EAR99 item) to Iran without a license is
prohibited under regulations maintained by the Department of
the Treasury,s Office of Foreign Assets Control (OFAC).
This includes any exports to a third country if the exporter
knows or has reason to know that the item will be reexported
to Iran.

- Exporters should screen parties to a transaction against
the Denied Persons List, Entity List, Unverified List, BIS
General Orders, and the Specially Designated Nationals and
Blocked Persons List.

- Exporters should take note of any abnormal circumstances in
a transaction that indicate that the export may be destined
for an inappropriate end-use, end-user, or destination. For
example:

unusual quantity requests;
paying above market prices or using unusual payment
methods;
waivers of normal installation, training or maintenance
agreements; and
requests for delivery to one country with original
orders from a second country or
direct delivery to a freight forwarder.

- When such "red flags" arise, you should check out the
suspicious circumstances and inquire about the end-use,
end-user, or ultimate country of destination.

- If you encounter &red flags8 that you are unable to
resolve with reasonable inquiry, contact BIS.

- Companies should have in place compliance and/or business
procedures to be immediately responsive to theft or
unauthorized delivery.

- If you believe a previous shipment has been diverted and
may have gone to an end user in Iran, we encourage you to
report it to BIS.

SUMMARY OF STEPS U.S. EXPORTERS CAN TAKE TO PREVENT
UNAUTHORIZED EXPORTS TO IRAN

- Remain vigilant and know your customer.
- Understand &Red Flag8 indicators.
- Be cautious of customers operating in transshipment
countries or free trade zones.
- Be familiar with U.S. Government screening lists.
- Contact BIS if something does not seem right about the
transaction or if you suspect a shipment may have been
diverted to Iran.
- Subscribe to the BIS listserv to receive e-mail
notifications of changes to the BIS published list to
entities of concern.
- Subscribe to the Department of the Treasury, Office of
Foreign Assets Control,s service to receive notifications of
changes to the List of Specially Designated Nationals and
Blocked Persons.


END U.S. NON-PAPER.

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REPORTING DEADLINE AND POC
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(U) Posts are requested to report any substantive responses
within seven (7) days of receipt of this cable. Lisa Meyers
(ISN/CPI, 202-736-7939, MeyersLA@state.sgov.gov) is the
Department's POC for this activity.
RICE


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