MISSILE TECHNOLOGY CONTROL REGIME (MTCR): "SBIG'S

S E C R E T STATE 112061

SIPDIS
PARIS FOR EST: HELEN SMITH
LONDON FOR CHRIS PALMER
CANBERRA FOR CAROL HANLON AND JOHN CROWLEY

E.O. 12958: DECL: 10/21/2033
TAGS: MTCRE ETTC KSCA MNUC PARM TSPA FR UK AS
SUBJECT: MISSILE TECHNOLOGY CONTROL REGIME (MTCR): "SBIG'S
EFFORTS TO PROCURE ENVIRONMENTAL TEST CHAMBERS: A CASE
STUDY"

Classified By: ISN/MTR DIRECTOR PAM DURHAM FOR REASONS 1.4 (B),(D)
AND (H).


1. (U) This is an action request. Please see
paragraph 2.


2. (C) ACTION REQUEST: Department requests Embassy
Paris provide the interagency cleared paper "SBIG's
Efforts to Procure Environmental Test Chambers: A
Case Study" in paragraph 3 below to the French
Missile Technology Control Regime (MTCR) Point of
Contact (POC) for distribution to all Partners.
Department also requests Embassy London provide
paper to the MTCR Information Exchange (IE) Co-Chair
(John Andrews),and Embassy Canberra provide paper
to the Australian MTCR Plenary Chair for 2008/2009
and/or appropriate staff. Info addressees also may
provide to host government officials as appropriate.
In delivering paper, posts should indicate that the
U.S. is sharing this paper as part of our
preparation for the Information Exchange that will
be held in conjunction with the MTCR Plenary in
Canberra (November 3-7).


3. BEGIN TEXT OF PAPER:

SECRET//REL MTCR

U.S. Paper on SBIG's Efforts to Procure Environmental
Test Chambers: A Case Study

Introduction

Proliferators employ a variety of measures to
obtain items for their missile programs and other
activities. These activities include the use of
brokers, front companies, falsified documentation,
multiple intermediaries and transshipment points, and
covert payments. Some sophisticated proliferators make
use of several of these methods at the same time. In
one particular case, Iran's solid-fueled ballistic
missile program worked for over three years to procure
environmental test chambers from foreign sources. It
sought the chambers from two different manufacturers in
two source countries, utilized at least six different
front companies and intermediaries, listed false end-
uses and false countries of destination, and used
complicated routing in order to circumvent export
control regulations. Ultimately, these efforts were
unsuccessful.

Test chambers can be used in a missile program to
expose missile components, subsystems, and complete
systems to the extreme pressure, temperature,
vibrations, and acoustics that missiles experience
during flight. Depending on the specifications, they
can be controlled by the MTCR. However, even non-
controlled models are highly sought after by some
ballistic missile programs, as this paper will make
clear.

This is an abridged account of the efforts of an
Iranian intermediary - working on behalf of Iran's
solid-fueled ballistic missile program - to acquire
uncontrolled test chambers from several foreign sources
over the past three and a half years. This paper also
describes cooperative measures over the same time
period between the U.S. and other countries to prevent
this transaction. As the paper makes clear,
proliferation networks do not simply give up on
acquiring highly sought-after items when obstacles are
thrown up in front of them. Rather, they react to
these road blocks by seeking alternative routes to
procuring the items they need. This might involve
looking to other sources for the same or comparable
items, or employing some of the nefarious procurement
methods listed at the beginning of this paper. In this
particular case, the Iranian solid-fueled ballistic
missile program did both.


February - July 2005 - Iran seeks test chambers from
non-Partner country, but transaction does "not happen"

In early 2005, the U.S. learned that a firm in a
non-Partner country (Country A) was negotiating the
sale of test chambers to Iran's ballistic missile
program. The U.S. approached officials in Country A,
and asked them to investigate and take measures to
prevent this company from providing missile-relevant
items to Iran. We also indicated that sanctions
pursuant to U.S. law could be imposed on the company if
it were to supply these test chambers to Iran's missile
program. In July 2005, we advised Country A officials
of additional information indicating that Iran
sometimes used its automobile industry as a cover for
its missile program to disguise the actual end-use of
missile-applicable equipment. Country A officials
later told us that the government of another country
(Country B) had also contacted them with information
about the company's possible sale of test chambers to
Iran's missile program, and that the transaction did
not happen.


November 2005 - Iranian procurement firm seeks similar
test chambers from MTCR Partner; SBIG front company
listed as end-user

In November 2005, the U.S. acquired information
indicating that the Iranian procurement firm Rakin Ltd.
was negotiating the purchase of similar test chambers
from a broker (Broker X) in an MTCR country (Country C)
on behalf of a front company (Front Company 1) for the
Shahid Bakeri Industrial Group (SBIG),Iran's primary
developer of solid-fueled ballistic missiles. We also
noted that Rakin had expressed interest in test
chambers manufactured by two different producers in
Country C, that Iran had previously sought similar
chambers from Country A, and that this activity
appeared to be a broad effort by Rakin and Front
Company 1 to acquire these environmental chambers for
use in Iran's missile program. Country C officials
later advised us that in response to the information we
shared with them, they had contacted representatives of
Broker X, and sensitized them to their concerns about
dealings with Rakin. Broker X pledged to apply for a
license before exporting these commodities to Iran.
(Country C officials later advised us that one of the
manufacturers approached by Rakin was already under
investigation for previous suspected violations of
export control laws in a case involving efforts to ship
vibration test equipment to Iran's Shahab missile
program. This case later resulted in convictions of
two of the firm's representatives.)


March - June 2006 - Same chambers sought on behalf of
second SBIG front company; Partner country denies
broker export license

In March 2006, we approached Country C officials
with new information indicating that Rakin was now
working with Broker X to obtain the same type of test
chambers on behalf of a supposedly different Iranian
end-user. As in the case involving Front Company 1, we
advised Country C officials that this end-user (Front
Company 2),was also using a false name, and was
actually a cover name for SBIG. In May, we told
Country C that it appeared that Broker X had agreed to
a site visit to its facilities by Iranian technical
experts prior to delivery of the test chambers and to
install the equipment in Iran if the sale went through.
Broker X would be applying for an export license.
Country C officials advised that they would share the
information with their inter-agency export control
group, but that the group would not grant a license to
Broker X to export this equipment to Iran. In June,
Country C reported that, based on information supplied
by the U.S government, it had officially denied a
license application by Broker X to export the test
chambers to Front Company 2. Country C officials also
indicated that Rakin had listed the end-use as "product
improvement and standardization," and stated that the
test chambers would only be put to civilian use.


June 2007 - Rakin attempts to acquire test chambers for
SBIG by means of third front company, plans to route
shipment via third country

In June 2007, we shared with Country C officials
additional information involving new efforts by Rakin
and Broker X to procure test chambers for SBIG. In
this instance, Rakin referred to the end-user by using
yet another cover name (Front Company 3) for SBIG.
However, in order to facilitate the transfer and avoid
Country C export restrictions on sales to Iran, Broker
X suggested to Rakin that the shipment be routed to a
firm in a third country (Country D),which would be
falsely listed as the country of end-use. The test
chambers would then be forwarded to their final
destination in Iran. As we indicated to Country C
officials, the country D firm was aware that its role
in this transaction was to evade Country C export
control regulations. Country C officials noted that if
Broker X were trying to circumvent Country C export
controls by shipping the test chamber to a firm in a
country for which no license were required while
knowing that the equipment would be shipped on to Iran,
they would be in violation of Country C laws. Because
of the potential criminal nature of this transaction,
Country C officials advised that they would pass this
information to investigators. We also notified Country
D officials of this potential shipment.


November - December 2007 - Country C officials
sensitize manufacturer of test chambers; Rakin
representative plans trip to visit Broker X and
manufacturer of test chambers

Country C officials notified the U.S. government
in December 2007 that they had contacted
representatives of the manufacturer of the test
chambers to sensitize them to Country C government's
concerns. The manufacturer confirmed that it had
received a request for a thermal shock chamber, and
assured Country C officials that it would not follow up
on the request. Shortly thereafter, we shared with
Country C government information indicating that a
representative of Rakin was planning a trip to Country
C in order to meet with representatives of Broker X and
the manufacturer of the test chambers. We do not know
if this trip occurred.


February 2008 - Broker X and Rakin consider routing
thermal shock chamber through yet another third country
and listing central Asian country as end-use site

While we have not confirmed that Rakin and/or
Broker X canceled their plans to route the test
chambers to Iran via a firm in country D, in February
we provided information to Country C officials
indicating that Rakin and Broker X had devised yet
another scheme to circumvent Country C export controls
and supply the test chambers to SBIG. In this ploy,
the equipment would be sent from Country C to a firm in
country E, but the export documentation would falsely
list a final end-user in country F (a country in
central Asia). In reality, the items would be sent
from country E directly to Iran.

As of September 2008, we do not believe that the
transfer has occurred. However, SBIG will almost
certainly continue to seek these or similar test
chambers by other means. Moreover, although we have
learned something about the workings of proliferation
networks as a result of this case, it is also true that
with each thwarted attempt to acquire the test
chambers, SBIG learned something about the efforts of
those of us working to stop them, and future efforts by
SBIG will be informed by the lessons learned in this
case.


4. (U) Please slug any reporting on this or other MTCR
issues for ISN/MTR. A word version of this document
will be posted at www.state.sgov.gov/demarche.
RICE