(S) SWISS FIRM EXPORTS MACHINE TOOLS TO IRAN,

S E C R E T STATE 013055

SIPDIS


E.O. 12958: DECL: 02/07/2033
TAGS: PARM MTCRE PREL MNUC ETTC SZ IR

SUBJECT: (S) SWISS FIRM EXPORTS MACHINE TOOLS TO IRAN,
COULD FACE SANCTIONS

Classified By: ISN/MTR ACTING DIRECTOR RALPH PALMIERO FOR
REASONS 1.4 (B),(D),AND (H).


1. (S) Background: The U.S. has information indicating
that in July 2006, the Swiss firm Schaublin Machines SA
sold a model 180-CCN high-precision lathe to Iran's
Schiller Novin, an entity with a history of procuring
items on behalf of Iran's defense industry (including
the Shahid Hemmat Industrial Group (SHIG),Iran's
primary developer of liquid-fueled ballistic missiles).
We believe that this lathe is controlled by the
Wassenaar Arrangement, and that it could potentially be
controlled under the Nuclear Suppliers Group. We also
understand that in August 2006, Schaublin was
finalizing delivery arrangements regarding the shipment
of another lathe to Schiller Novin. Like the machine
shipped to Iran in July 2006, we believe this lathe is
Wassenaar-controlled. High precision machine tools
such as those produced by Schaublin are capable of
producing a wide array of structural components for
missiles.


2. (S) Objectives: While these activities occurred in
2006, we want to share this information with Swiss
officials now because of the possibility that
Schaublin could be sanctioned pursuant to the Iran,
North Korea and Syria Nonproliferation Act (INKSNA).
We also want to advise the GOS that, in reviewing
these cases, the U.S. Government will take into
consideration any information the Swiss government can
provide, including actions it takes to prevent further
such transactions by Schaublin.


3. (U) Action Request: Department requests Embassy
Bern approach appropriate host government officials to
deliver talking points in para 4 and report response.
Points may also be left as a non-paper.


4. (S//REL SWITZERLAND)

-- We would like to raise with you a matter of
proliferation concern involving an Iranian
intermediary's business dealings with two Swiss
machine tool manufacturers.

-- Specifically, we understand that in July 2006, the
Iranian company Schiller Novin procured one model 180-
CCN high-precision lathe from Schaublin Machines SA of
Bevilard, Switzerland. Schiller Novin purchased this
machine - which we believe to be controlled by the
Wassenaar Arrangement, and could potentially be
controlled by the NSG - on behalf of Iran's Hamid Die-
Manufacturing Co.

-- Similarly, in August 2006, Schaublin Machines was
in the process of finalizing delivery arrangements
regarding the shipment of another lathe to Schiller
Novin. Like the machine shipped to Iran in July 2006,
we believe this lathe is Wassenaar-controlled.

-- We are concerned that the machines purchased from
Schaublin by Schiller Novin could potentially have
been diverted to support military- or missile-related
projects in Iran.

-- Schiller Novin regularly acts as an intermediary
for defense sector entities in Iran. In 2004,
Schiller Novin purchased machine tools from Schaublin
Machines that were intended for the Shahid Hemmat
Industrial Group (SHIG),the organization responsible
for developing Iran's liquid-fueled ballistic missile
program.

-- We hope you will use this information to
investigate these transactions and use all appropriate
measures to ensure that Schaublin is not acting as a
supplier of high-end machine tools to unauthorized
end-users in Iran.

-- Although these activities occurred in 2006, we are
sharing this information with you now because of the
possibility that Schaublin could be sanctioned
pursuant to the Iran, North Korea and Syria
Nonproliferation Act (INKSNA).

-- Under the INKSNA (formerly the Iran
Nonproliferation Act of 2000),transfers to Iran of
items on a multilateral control list, such as machine
tools controlled by the NSG and Wassenaar Arrangement,
must be reported to the U.S. Congress and can
potentially result in sanctions being imposed against
the entities involved.

-- The U.S. Government will consider any information
your government provides as part of our sanctions
review.

-- Such information could include enforcement actions
taken by your government to prevent future such
transfers by Schaublin to Iranian entities of concern.

-- We look forward to continued close cooperation on
nonproliferation matters and would appreciate hearing
the results of any actions your government takes in
response to this information.

End points/non-paper


5. (U) Please contact ISN/MTR's John Paul Herrmann
with any questions or follow-up issues related to this
case (202-647-1430 - herrmannjp@state.sgov.gov) and
slug reporting on this issue for ISN/MTR.


6. (U) A word version of this document will be posted
at www.state.sgov.gov/demarche.
RICE


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