FOLLOWING-UP WITH INDIA ON THE NICKUNJ GRAPHITE

S E C R E T STATE 049730


E.O. 12958: DECL: 05/09/2033
TAGS: PARM PREL ETTC MTCRE KSCA IN IR

SUBJECT: FOLLOWING-UP WITH INDIA ON THE NICKUNJ GRAPHITE
CASE (S)

REF: A. 07 STATE 141892

B. 07 STATE 158831

C. 07 NEW DELHI 5058

D. 07 NEW DELHI 5107

E. 07 STATE 167377

F. 07 NEW DELHI 5333

G. LOWE E-MAIL (JAN 02 2008)

H. STATE 023763

I. TIMES OF INDIA ARTICLE - 22 APRIL 2008

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


1. (U) This is an action request. Please see
paragraph 6.


2. (S) Background: In October 2007, we shared with
Indian officials information indicating that India's
Nickunj Eximp Enterprises had offered French-origin,
MTCR-controlled graphite blocks to Iran's Ward
Commercial Company (Ref A). Ward had previously been
involved in the procurement of items on behalf of the
Shahid Hemmat Industrial Group (SHIG - Iran's primary
liquid propellant ballistic missile developer).


3. (S) In November, we advised the GOI that Nickunj
was working to ship additional consignments of graphite
to Ward, that Indian officials were holding a shipment
of potentially nuclear-grade graphite blocks at the
international airport in Mumbai, and that Nickunj was
readying follow-on shipments of graphite for Ward (Ref
B). In December, we shared with the GOI information
indicating that four to five tons of graphite being
readied at a Nickunj warehouse for shipment to Ward had
been moved from that location (Ref E). This graphite -
like the shipment at the Mumbai airport - had been
placed on hold by Indian authorities, preventing its
onward shipment. Indian authorities advised us that
they had not cleared the graphite shipment for export
because its investigation was not yet complete, and
that they were working to locate the missing graphite
(Ref F). As of early January, the GOI informed us that
none of the graphite had shipped, and that India was
taking unspecified action on the case (Ref G). (Note:
In March 2008, we learned that a SHIG-affiliated entity
- Sahand Aluminum Parts Industrial Company (SAPICO) -
was the intended end-user of this graphite. This
information was shared with Indian officials. (Ref H)
End note.)


4. (U) On April 22, the Times of India (TOI) in an
article entitled "Mumbai Firm in Dock" reported that in
October 2007, Indian Customs in Mumbai prevented
Nickunj from shipping 1,150 kg of graphite to Ward, and
that a second consignment of Nickunj graphite bound for
Dubai was subsequently stopped (Ref I). According to
the TOI, Indian experts confirmed that this was
nuclear-grade graphite, the export of which to Iran is
prohibited by Indian law.


5. (S) Objectives: We now want to follow-up with
Indian officials on this case, and request information
concerning the conditions of the impoundment of the
graphite. We also want to ask if the second seized
consignment of graphite (ostensibly destined for Dubai,
according to the TOI article) could be linked to the
four to five tons of graphite that reportedly went
missing from the Nickunj warehouse. In addition, we
want to advise the GOI that although the TOI article
indicated that the intended destination of the second
seized consignment was Dubai, proliferators have been
known to use false shipping labels and other fraudulent
documentation in order to avoid scrutiny, circumvent
export controls, and engage in proscribed trade.
Finally, we want to urge Indian authorities to remain
vigilant against ongoing attempts by Nickunj and others
to secure the release of this material for onward
shipment to Iran.


6. (U) Action Request: Department requests Embassy New
Delhi approach appropriate host government officials to
deliver the talking points in Paragraph 7 and report
response. Talking points may be left as a non-paper.


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

(SECRET REL INDIA)

-- We would like to follow-up on a matter of potential
proliferation concern we discussed with you previously.

-- In October 2007, we shared information with you
indicating that in July 2007, the Indian company
Nickunj Eximp Enterprises Pvt. Ltd. offered to provide
255 blocks of French-origin high density graphite to
Iran's Ward Commercial Company.

-- Ward Commercial Company has previously worked to
procure items on behalf of Iran's liquid-fueled
ballistic missile developer, the Shahid Hemmat
Industrial Group (SHIG),an entity designated in UN
Security Council Resolution 1737.

-- On November 20, we expressed our concerns that
Nickunj was working to ship additional consignments of
graphite to Ward, and that we were aware that Indian
officials were holding a shipment of potentially
nuclear-grade graphite blocks in the Mumbai Air Cargo
Complex near the international terminal.

-- We also advised you that Nickunj was likely readying
additional graphite shipments to Iran.

-- We were pleased to hear on November 21 that your
government had prevented the onward shipment to Iran of
the graphite being held at the Mumbai Air Cargo Complex
Terminal, and that you were investigating this matter.

-- In December 2007, we informed you that four to five
tons of graphite being readied for shipment to Ward had
been removed from Nickunj's warehouse.

-- You subsequently informed us that your government
had not cleared the graphite shipment for export
because your investigation was not yet complete, and
that the graphite had likely been moved to a location
where it could be stored for a longer period of time.

-- In early January 2008, your government advised the
U.S. Embassy in New Delhi that nothing had gone to the
final destination, and that your government had taken
unspecified action on the case.

-- In March we shared information identifying the
intended end-user of the graphite as the Sahand
Aluminum Parts Industrial Company (SAPICO),a cover
name for SHIG.

-- We now would like to discuss recent developments in
this case.

-- On April 22, the Times of India (TOI) reported that
in October 2007, Indian Customs in Mumbai prevented
Nickunj from shipping 1,150 kg of graphite to Ward, and
that a second consignment of Nickunj graphite bound for
Dubai was subsequently stopped.

-- The article also noted that Indian experts confirmed
that this was nuclear-grade graphite, the export of
which to Iran is prohibited by Indian law.

-- We commend Indian authorities for stopping these
shipments, and would like to inquire about the status
of the impounded graphite and what measures your
government is taking to ensure that it is not released
to Nickunj for onward shipment to Iran.

-- In addition, we are concerned that the second seized
consignment of graphite mentioned in the TOI article
(which the TOI indicated was destined for Dubai) is
linked with the four to five tons of graphite that went
missing from the Nickunj warehouse. Are you aware of
any such linkage?

-- We also want to raise the possibility that the
graphite that was ostensibly destined for Dubai could
actually have been intended for Iran. Proliferators
have been known to use false shipping labels and other
fraudulent documentation in order to avoid scrutiny,
circumvent export controls, and engage in proscribed
trade.

-- We appreciate your continued vigilance to thwart
ongoing attempts by Nickunj and others to secure the
release of this material for onward shipment to Iran.

-- We greatly appreciate your cooperation in the
matter, and the measures your government has taken thus
far to prevent this graphite from being supplied to
Iran - and to Iran's ballistic missile program in
particular. We would welcome any additional
information you could share with us related to your
investigation of this case and to any legal
developments that may ensue.

End talking points/non-paper.


8. (U) Washington POC is ISN/MTR John Paul Herrmann
(Phone: 202-647-1430). Please slug any reporting on
this issue for ISN and SCA.


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


NNNN




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