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. -------------- BACKGROUND -------------- ¶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. -------------- REPORTING DEADLINE AND POC -------------- (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 NNNN End Cable Text