S E C R E T STATE 039690

SIPDIS


E.O. 12958: DECL: 04/15/2033
TAGS: PARM MTCRE PREL ETTC CH IR

SUBJECT: (S) CONTINUED ASSISTANCE TO IRAN'S MISSILE
PROGRAM BY SHANGHAI TECHNICAL BY-PRODUCTS INTERNATIONAL
CORPORATION

REF: A. 06 STATE 193753

B. 06 BEIJING 24237

C. 07 STATE 028429

D. 07 STATE 035579

E. 07 STATE 095930

F. 07 BEIJING 004643

G. 07 BEIJING 005361

H. 07 STATE 135722

I. 07 BEIJING 006398

Classified By: ISN/MTR DIRECTOR PAM DURHAM
REASONS 1.5 (B), (C) AND (D).


1. This is an action request. Embassy Beijing, please see
paragraph 6.


2. (S) Background/Objectives: Since November 2006, we have
discussed with PRC authorities extensive cooperation between
the Chinese company Shanghai Technical By-Products
International Corporation (STBPI) and Iran's ballistic
missile program (Reftels). In our most recent discussions of
this case in September 2007, we alerted the PRC to efforts by
STBPI to supply integrated circuits, specialty aluminum, and
stainless steels to the Iranian entities Ecxir Trading
Company and Sabalan Company (Ref H). Both Ecxir Trading
Company and Sabalan Company are associated with Iran's
liquid-propellant ballistic missile developer Shahid Hemmat
Industrial Group (SHIG), an entity designated under United
Nations Security Council Resolution (UNSCR) 1737.


3. (S) We now would like to provide China with additional
details regarding STBPI's dealings with Ecxir Trading Company
and Sabalan Company. Specifically, since our September 2007
discussions, we have learned that STBPI has continued its
efforts to supply Ecxir Trading Company with 23 tons of
Chinese-origin LF6 aluminum bars. As indicated in Ref H, we
previously shared information with the PRC that STBPI had
offered 23 tons of this same type of aluminum, which can be
used to produce a variety of ballistic missile components, to
Ecxir Trading Company in June 2007. More recently, Ecxir
Trading Company has submitted additional orders for specialty
steels to STPBI in December 2007 and January 2008.


4. (S) We also understand that STPBI shipped U.S.-origin

integrated circuits and offered Chinese-origin, PVC insulated
wire to Sabalan Company in mid-October 2007. These
integrated circuits are suitable for use in the analog flight
computers of Scud-based missile systems and this type of
insulated wire has been associated with missile applications.
Some of these integrated circuits are U.S.-origin and this
order is likely related to an order that we brought to
China's attention in September 2007 (Ref H). Some of these
dealings between SPTBI and Iran were coordinated by Doostan
International, a firm we have previously discussed with
Chinese authorities due to its longstanding role as an
intermediary for transactions involving missile-related
entities in Iran (Refs A, C and D).


5. (S) We now want to share additional details concerning
this case with the PRC, noting that these transactions appear
to be inconsistent with UNSCR 1737 and that, since one of
these deals involves U.S.-origin items, STBPI may also be
violating U.S. export control restrictions regarding Iran.
We want to strongly urge Chinese officials to immediately
investigate this activity and take measures to end further
assistance by STBPI to Iran's ballistic missile program.


6. (U) Action Request: Request Embassy Beijing approach
appropriate host government officials to deliver talking
points in paragraph 7 and report response. Talking points
also may be provided as a non-paper.


7. (S) Begin talking points/non-paper:

(SECRET REL CHINA)

-- Since November 2006, we have been providing your
government information regarding extensive cooperation
between Shanghai Technical By-Products International
Corporation (STBPI) and Iran's ballistic missile program.

-- Most recently in September 2007, we alerted you to efforts
by STBPI to supply integrated circuits, specialty aluminum,
and steel to the Iranian entities Ecxir Trading Company and
Sabalan Company.

-- You will recall that both Ecxir Trading Company and
Sabalan Company are associated with Iran's liquid-propellant
ballistic missile developer Shahid Hemmat Industrial Group
(SHIG), an entity designated under United Nations Security
Council Resolution (UNSCR) 1737.

-- Since our September 2007 discussions, we are not aware of
any actions you have taken to curtail STBPI's business
dealings with missile-related customers in Iran.

-- In the spirit of our nonproliferation cooperation, we now
would like to provide you with additional details regarding
STBPI's dealings with Ecxir Trading Company and Sabalan
Company.

-- Specifically, we understand that in August 2007, STBPI
submitted a revised offer to Ecxir Trading Company regarding
the sale of 23 tons of Chinese-origin type LF6 aluminum bars.

-- You will recall from our last discussions of this case
that STBPI offered 23 tons of this same type of aluminum to
Ecxir Trading Company in June 2007.

-- LF6 aluminum, which is also known by the designators 5A06
or AlMg6, could be used by Ecxir Trading Company to produce
fittings, flanges, fuel control valves, or structural
components for ballistic missiles. In other forms, LF6
aluminum is suitable for use in ballistic missile airframes.

-- In addition, our information indicates that Ecxir Trading
Company has continued to approach STPBI concerning purchases
of specialty steels, submitting orders to STBPI in December
2007 and January 2008.

-- STBPI has also continued its efforts to supply U.S.-origin
integrated circuits to Sabalan Company, shipping over 100 of
these items to Iran via Hong Kong in mid-October 2007.

-- You will recall that we alerted you that approximately
$26,000 worth of integrated circuits, some of which were
U.S.-origin, had been ordered from STBPI by Sabalan Company
in July 2007.

-- Although not controlled by the Missile Technology Control
Regime (MTCR), we believe the integrated circuits exported by
STBPI to Iran in October 2007 are suitable for use in the
analog flight computers of Scud-based missile systems.

-- During the same time period, STBPI also offered
Chinese-origin, PVC-insulated wire to Sabalan Company. Known
as ASTVR wire, this material is resistant to high-heat and
abrasions and commonly used in aircraft and missile
applications.

-- Some of these dealings between SPTBI and Iran's ballistic
missile program were coordinated by Doostan International, a
firm we have also previously brought to your attention as an
entity that routinely acts as an intermediary for
transactions involving missile-related entities in Iran,
including SHIG and the solid-propellant ballistic missile
developer Shahid Bakeri Industrial Group (SBIG).

-- As we have noted previously in our discussions of this
case, the transfer to Iran of U.S.-origin items without
authorization is not permitted under U.S. export control
regulations. Moreover, given that these goods are being
supplied to affiliates of Iran's SHIG, we believe these
transactions are inconsistent with UNSCR 1737.

-- We therefore strongly urge you to immediately investigate
this activity and take measures to end further assistance by
STBPI to Iran's ballistic missile program.

-- We look forward to continuing cooperation with your
government on nonproliferation matters.

End talking points/non-paper.


8. (U) Washington POC is ISN/MTR James Mayes (Phone:
202-647-3185). Please slug any reporting on this issue for
ISN and EAP.


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


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End Cable Text