PROVIDING ADDITIONAL INFORMATION TO THE GOS ON

S E C R E T SECTION 01 OF 02 STATE 132055 SIPDIS E.O. 12958: DECL: 12/17/2033 TAGS: PARM MTCRE PREL MNUC ETTC SZ IR AE SUBJECT: PROVIDING ADDITIONAL INFORMATION TO THE GOS ON ACTIVITIES OF THE SWISS FIRM QUARTZCOM (S) REF: A. STATE 101519 ¶B. BERN 514 ¶C. STATE 122304 ¶D. BERN 594 Classified By: ISN/MTR DIRECTOR PAM DURHAM FOR REASONS 1.4 (B),(C),AND (D). ¶1. (U) This is an action request. Embassy Bern, please see paragraph 4. ¶2. (S) Background: In late September 2008, we shared with the Swiss government information indicating that the Malaysian-based procurement firm Evertop Services was working to acquire crystal oscillators from Switzerland's Quartzcom AG on behalf of the Iranian firm Farezeh Tajhiz Gostar Co. Ltd., a firm affiliated with Evertop's Iran-based parent company, the Farazeh Equipment Distributor Company (FEDCO) (Refs A & B). Although located in Malaysia, Evertop Services is an Iranian-run firm that has facilitated many transactions on behalf of Iranian end-users of proliferation concern, including entities affiliated with Iran's ballistic missile and unmanned aerial vehicle programs. In mid-November, we advised Swiss officials that Quartzcom and Evertop - probably in response to GOS measures to restrict sales to Evertop - were discussing the use of alternative intermediaries in order to circumvent Swiss export controls (Ref C). In response, Swiss officials requested additional information on Quartzcom's complicity in these efforts to skirt Swiss export restrictions, and also asked if we knew of any other intermediaries or shipping addresses that might be used by Iranian entities of concern to procure goods from Quartzcom (Ref D). ¶3. (S) In response, we want to reiterate and confirm the information we previously provided to Swiss officials, which indicated that Quartzcom and Evertop were exploring ways of getting around Swiss export laws, and to assure the GOS that we will try to share any additional information that becomes available on this subject. We also want to share new information indicating that in late October/early November, FEDCO had procured approximately $150,000 worth of products - including crystal oscillators - from Quartzcom via FEDCO's newest front company, the United Arab Emirates- based Alkaen Equipment and Industrial Supplies LLC. We are unable to confirm or dismiss the possibility that Quartzcom was witting of the identity of the actual end-user of these items. ¶4. (S) Action Request: Request Embassy Bern approach appropriate Swiss authorities to deliver talking points/non-paper in paragraph 5 below and report response. Talking points also may be provided as a non-paper. Some of this information will also be shared with the UAEG. ¶5. (S) Begin talking points/non-paper: (SECRET//REL SWITZERLAND) -- We would like to follow-up with you on a matter of proliferation concern and request your government's continued assistance in investigating this activity. -- We recently discussed with you information indicating that the Malaysia-based, Iranian-run procurement firm Evertop Services Sdn Bhd had sought a large quantity of crystal oscillators from the Swiss firm Quartzcom AG on behalf of the Iranian firm Farezeh Tajhiz Gostar Co. Ltd. Farezeh Tajhiz is affiliated with Evertop's Iran-based parent company, the Farazeh Equipment Distributor Company (FEDCO). -- During these discussions, you advised us that you had temporarily halted a shipment of crystal oscillators that Quartzcom was preparing for shipment to Evertop, and that an investigation was underway. -- You also indicated that Quartzcom has been placed on an internal "watch list," and that SECO has imposed catch-all licensing requirements for any Quartzcom exports to Malaysia or Iran. STATE 00132055 002 OF 002 -- In addition, you asked if we had any information indicating that Quartzcom was complicit in efforts to circumvent Swiss export controls, and if we knew of any other intermediaries or shipping addresses that might be used by Iranian entities of concern to procure goods from Quartzcom. -- We appreciate your excellent cooperation on this issue, and want to offer the following information: -- We do in fact have information indicating that Quartzcom has discussed with Evertop the use of Asia- based intermediaries in order to circumvent Swiss export controls, likely in response to restrictions your government had put in place on sales to Evertop. -- We will share additional information on this subject when it becomes available. -- We also want to inform you of the following new information related to this matter: -- Specifically, we understand that as of early November 2008, FEDCO had procured approximately $150,000 worth of products - including crystal oscillators - from Quartzcom. -- This equipment was delivered by air from Switzerland to FEDCO's newest front company, the United Arab Emirates-based Alkaen Equipment and Industrial Supplies LLC in late October/early November. -- Alkaen, in turn, transshipped the goods to FEDCO in Iran. -- We believe that Alkaen was used in order to disguise the fact that the goods were actually destined for an Iranian end-user. -- As we have discussed with you previously, firms affiliated with FEDCO, such as Evertop, have acted as brokers for Iran's ballistic missile and unmanned aerial vehicle programs. -- We will soon be sharing some of the above information with the government of the United Arab Emirates. -- We greatly appreciate your continued support and look forward to hearing of any actions your government takes in response to this information. End talking points/non-paper. ¶6. (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. ¶7. (U) A word version file of this document will be posted at www.state.sgov.gov/demarche. RICE