Identifier
Created
Classification
Origin
08STATE121011
2008-11-14 15:11:00
SECRET
Secretary of State
Cable title:  

BLUE LANTERN OUTREACH TO PRAGUE: DISCUSSIONS WITH

Tags:  ETTC KOMC EZ 
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VZCZCXYZ0000
RR RUEHWEB

DE RUEHC #1011 3191523
ZNY SSSSS ZZH
R 141511Z NOV 08
FM SECSTATE WASHDC
TO RUEHPG/AMEMBASSY PRAGUE 0000
INFO RHMCSUU/FBI WASHINGTON DC 0000
RUEAIIA/CIA WASHINGTON DC 0000
RUCPDOC/USDOC WASHINGTON DC 0000
RUEKJCS/SECDEF WASHINGTON DC
RUEPINS/HQ BICE INTEL WASHINGTON DC
S E C R E T STATE 121011 

SIPDIS
PRAGUE FOR DAN GELMAN AND PATRICK ELLSWORTH

E.O. 12958: DECL: 11/13/2018
TAGS: ETTC KOMC EZ
SUBJECT: BLUE LANTERN OUTREACH TO PRAGUE: DISCUSSIONS WITH
EMBASSY, GOVERNMENT OF CZECH REPUBLIC OFFICIALS, AND
INDUSTRY

REF: 2006 BLUE LANTERN GUIDEBOOK

Classified By: Classified By: David Trimble, PM/DTCC

S E C R E T STATE 121011

SIPDIS
PRAGUE FOR DAN GELMAN AND PATRICK ELLSWORTH

E.O. 12958: DECL: 11/13/2018
TAGS: ETTC KOMC EZ
SUBJECT: BLUE LANTERN OUTREACH TO PRAGUE: DISCUSSIONS WITH
EMBASSY, GOVERNMENT OF CZECH REPUBLIC OFFICIALS, AND
INDUSTRY

REF: 2006 BLUE LANTERN GUIDEBOOK

Classified By: Classified By: David Trimble, PM/DTCC


1. (U) Summary: Representatives from the Bureau
of Political-Military Affair,s Directorate of
Defense Trade Controls met September 8-9 with
Embassy Prague, Czech Ministry of Defense (CMOD),
Ministry of Trade and Industry officials (MTI) and
local defense industry to discuss the Blue Lantern
end-use monitoring program and related defense trade
issues. DDTC team met with Embassy staff to discuss
end-use monitoring best practices and receive
insights on how recent developments in the
bilateral relationship, such as missile defense
and the new SOFA regime, will impact DDTC,s Blue
Lantern objectives. DDTC team briefed CMOD
officials on Blue Lantern and discussed Czech
Republic,s defense acquisition and export control
systems. Embassy and DDTC also conducted a
Blue Lantern site visit to Lom Praha, a private
company, to discuss their business relationship
with CMOD and inquire about a pending export
license involving a large quantity of navigational
component parts for the Mi-171 helicopter.
Washington believes that the outreach visit
achieved goals of improving CMOD,s understanding
of U.S. export control laws and regulations,
strengthening country team,s knowledge of Blue
Lantern program, and enhancing DDTC,s
knowledge of Czech defense industry and military
procurement system.

-------------- -
PURPOSE OF TRIP AND MEMBERS
OF BLUE LANTERN TEAM
-------------- -


2. (U) Administered by the Office of Defense
Trade Controls Compliance (PM/DTCC) and
pursuant to the Arms Export Control Act (AECA),
Blue Lantern is a global program designed to
verify the end-use, end-users, and final
destinations of commercially exported defense
articles, technology and services under control
of the International Traffic in Arms Regulations
(ITAR). This visit was part of PM/DDTC,s
ongoing efforts to improve the effectiveness of
Blue Lantern through outreach visits with
Embassies and host governments. The DDTC
Blue Lantern team consisted of Tim Watkins,
Compliance Specialist, PM/DTCC/RAD and
Tim Mazzarelli, Compliance Specialist, PM/DTCC/RAD.



-------------- --------------
EMBASSY PRAGUE TEAM MEETINGS
-------------- --------------


3. (U) DDTC team provided a background
briefing on Blue Lantern for DCM Mary Thompson-Jones,
Defense Attache Col. Lindemann, FCS Senior
Commercial Officer Greg O,Connor, POLEC Counselor
Charles Blaha, and Political Officer Dan Gelman
and discussed the Blue Lantern environment in
Czech Republic. DCM briefed team on policy
priorities facing post and explained how
they may impact end use monitoring efforts.
Missile defense, the visa waiver program, and
the Republic,s pending assumption of the EU
presidency in 2009 are the three main issues
affecting the bilateral relationship. For the
Czechs, these issues are inter-related to a
certain degree in that all serve to raise the
profile of the Republic as a medium-sized
country that &punches above its weight class8
in matters of national security. DCM urged
DDTC to emphasize this status when explaining
to the Czechs that important defense trade
partners are often the focus of more end-use
monitoring checks and should be viewed as a
result of its growing military partnership
with the United States. Discussion focused
on the low number of unfavorable Blue Lanterns
in Czech Republic. The unfavorable cases
included parties involved in a defense trade
transaction but not listed on the license
application (Note: Under ITAR Section 126.13(b)
all parties to a license must be listed on the
license application.) and one incidence of
unauthorized brokering. The Blue Lantern team
reiterated that it is a legal obligation of the
U.S. applicant to be familiar with and account
for every foreign party on a license application.
Foreign parties are obligated to possess knowledge
of ITAR requirements, and both Embassy Prague
(in the course of Blue Lantern engagements with
industry) and CMOD (through its regulatory role)
should be encouraged to educate local defense firms
on these requirements.


4. (S) The Blue Lantern team met with Defense
Attache Col. Lindemann, ODC Chief Carl Muehlheuser,
and Political Officer Dan Gelman to discuss
retransfers and authorizations which govern both
foreign military and commercial sales to Czech
Republic. The team explained that it is responsible
under AECA Section 3 for notifying Congress of
unauthorized retransfer or re-exports involving
U.S.-provided military equipment acquired via
government-to-government channels (e.g., FMS, EDA, MAP).
According to Lindemann, the Czechs are striving
to implement a new procurement system to manage
purchases from many vendors, including requests from
U.S. suppliers. The system is facing challenges,
in fact, in the course of Enhanced End-Use Monitoring
checks for Golden Century, ODC notes that one
office within CMOD was not familiar with a
purchase to support a program in another office.
In general, the Czechs implement excellent physical
security standards for storing and safeguarding
U.S.-provided military hardware, particularly Night
Vision Devices(NVDs). Lindemann explained that it
is important to keep in mind the Czech,s historical
relationship with Russia. Local defense contractors
were once state-owned, while officers in the
Czech military were trained in Moscow, which impacts
the behavior and outlook of the defense community
to this day. The Republic,s history with Russia
may be manifest in the CMOD,s reticent attitude
towards acting with complete openness and transparency.
DOD had encountered a CMOD inclination to often only
provide &the bare minimum or just enough8 information.
Lindemann advised DDTC to be prepared for similar
challenges and to be vigilant in following up with
the Czechs to receive satisfactory responses when
conducting Blue Lanterns.


5. (SBU) The group reviewed the commercial retransfer
notification process, which is handled via General
Correspondence letters submitted to PM/DDTC, and
noted that this arrangement differs from the approval
process for FMS arms re-transfers. ODC Chief Muehlheuser
understood that any retransfer requests involving FMS
defense articles must be submitted to PM/RSAT. ODC
pledged to keep CMOD officials alert to the re-transfer,
end-use and security requirements governing FMS-acquired
military hardware and technology in order to prevent
triggering reports to Congress pursuant to Section 3
of the AECA.

-------------- --------------
BRIEFING WITH LEGAT AND STATION
-------------- --------------


6. (S) DDTC team met with Station and Mark D.
Ferbrache, Legal Attache, to provide an overview of
the Blue Lantern end-use monitoring program and to
discuss specific Blue Lantern end-use monitoring
efforts in the Czech Republic. Blue Lantern team
inquired about the high numbers of small arms license
requests received by DDTC on behalf Czech commercial
firms. Embassy confirmed that the majority of these
requests were for hunting and sport-shooting
purposes. DDTC also briefed Station and Legat on
the pending site visit to Lom Praha and sought
further information regarding the firm,s general
business practices, reputation and relationship
with CMOD. DDTC indicated that the visit was
not an investigation but rather a diplomatic
effort to determine the company,s reliability
as a recipient of USML articles. DDTC expressed
concern over possible Russian involvement with
Lom Praha, particularly the potential transfer
of technical data associated with U.S.-origin
military hardware or technology. Station and
Legat were unable to confirm Russian involvement
in this specific transaction but were, however,
able to confirm a significant and active Russian
interest in restricted USML articles. Post also
noted that China continues to send large trade
delegations to the Czech Republic, which have
expressed interest in mostly dual-use technologies,
but are likely targeting ITAR-controlled technologies
such as radar, missile defense, and UAV systems.


-------------- --------------
BLUE LANTERN BRIEFING TO CZECH REPUBLIC
MINISTRY OF DEFENSE
-------------- --------------


7. (U) The Blue Lantern team visited the Czech
Republic Ministry of Defense (CMOD) to discuss
end-use monitoring and CMOD,s defense procurement
system. DDTC team briefed about 30 officials from
CMOD and the participants demonstrated general
familiarity with U.S. export control laws.
The team stressed the importance of understanding
that prior authorization from the Department is
necessary before the retransfer or re-export of
U.S.-origin defense articles, regardless of whether
they were received via foreign military sales
or commercial channels. The team provided a
detailed explanation of the two channels for
acquiring U.S. military technology, distinguishing
between Direct Commercial Sales (DCS),where
the USG licenses and vets requests but is not
directly involved in matching buyer to seller,
and foreign military sales (FMS),where
DOD/DSCA is closely involved in arranging all
aspects of a transaction and collects a fee for
services. However, the team stressed that each
procurement path requires end-use monitoring by
USG. The CMOD briefing highlighted licensing
requirements for its vendors and importers, such
as mandating a clear statement of end-use and
ensuring that such end-use is consistent with
the end-user,s area of business. The Blue
Lantern team briefed CMOD on the AECA and
its implementing regulations, the International
Traffic in Arms Regulations (ITAR).
After reviewing the organizational structure
and regulatory mission of DDTC, the Blue Lantern
team provided an overview of its end-use monitoring
program and cases specific to Czech Republic.

-------------- --------------
BLUE LANTERN BRIEFING TO CZECH MINISTRY OF INDUSTRY AND TRADE
-------------- --------------


8. (U) DDTC team met with Czech Ministry of
Industry and Trade (CMIT) representatives to
provide a background briefing on the Blue
Lantern end-use monitoring program. Head of the
Export Control Unit Libuse Cudova and her
colleague Zora Ondrejcikova were in attendance.
DDTC stressed the U.S. restrictions against the
unauthorized retransfer and re-export of USML items.
Ms. Cudova explained that her Export Control Unit
dealt strictly with dual-use items which are
governed by EU regulations prohibiting unauthorized
third-country transfers. Cudova commented further
that CMIT was the final arbiter of all defense
licensing decisions. In the past year CMIT
reviewed 1,060 applications for the export of
military items, and 150 dual use applications.
Ms. Cudova also stated that all enforcement issues
were turned over to the State Office for Nuclear
Safety indicating that CMIT does not have an
internal policing mechanism. CMIT officials
also explained that the Czech Republic has its
own national munitions list (established in 1994)
which is based on the ITAR in its content and
control mechanisms, including treatment of
Significant Military Equipment (SME),while Wassenaar
standards were adopted to address any overlaps.
The dual-use control lists and licensing requirements
are based on EU standards.

--------------
BLUE LANTERN SITE VISIT
TO LOM PRAHA
--------------


9. (U) DDTC team conducted a site visit to
Lom Praha S. P. (LP) in order to verify its
relationship with Czech Ministry of Defense and
establish the bona fides of an export involving
communication and navigation equipment for the
Mi-171 helicopter. On September 9, 2008 Embassy
team met with LP officials and concluded that the
company displayed a general knowledge of ITAR
regulations/restrictions and was able to establish
the bona fides of the transaction. Despite concerns
over the presence of Russian technicians at the
Mi-171 worksite, Embassy team views LP as a reliable
recipient of U.S.-origin defense articles
and technology (See STATE 120692 13 November 2008
for more details)


10. (U) DDTC would like to express its gratitude
to Embassy Prague and especially control officers
Dan Gelman and Patrick Ellsworth for their assistance
in arranging and executing this highly
productive visit.
RICE