EFFORTS BY IRAN TO PROCURE TAIWAN-ORIGIN MACHINE

S E C R E T STATE 070163 SIPDIS E.O. 12958: DECL: 06/19/2033 TAGS: PARM MTCRE PREL TW IR IN SUBJECT: EFFORTS BY IRAN TO PROCURE TAIWAN-ORIGIN MACHINE TOOLS VIA AN INTERMEDIARY IN INDIA (S) REF: A. 07 STATE 136606 ¶B. 07 AIT TAIPEI 2273 Classified By: ISN/MTR DIRECTOR PAM DURHAM; REASONS 1.4 (C). ¶1. (U) This is an action request. AIT Taipei, please see paragraph 5. ¶2. (S) Background: In September 2007, we alerted Taiwan authorities to a shipment of four vertical machining centers by Taiwan's CNC Takang Company to Iran via an entity in the UAE (Ref A). Because this export appeared to be related to a license Taiwan had denied for a similar export involving CNC Takang Company, we believed this equipment was being shipped to an intermediary in the UAE to avoid Taiwan's export controls on machine tool transfers to Iran. Taiwan officials responded to this information by indicating they were unable to find a license related to this export and did not know whether the machines were actually re-exported to Iran (Ref B). However, they also agreed to investigate this matter further and closely scrutinize the activities of CNC Takang Company. ¶3. (S) We now have information indicating that CNC Takang Company may again be employing a third country intermediary to circumvent export control restrictions on machine tool transfers to Iran. Specifically, we understand that in May 2008, CNC Takang Company was working to supply a vertical machining center to the Indian company Supreme CNC Machines Pvt. Ltd. Supreme CNC Machines is coordinating this purchase on behalf of an Iranian customer named Condor Par Company Ltd. Although this machining center is not controlled, CNC Takang Company plans to equip this machine tool with a Fanuc 18i controller that would potentially allow 8-axis machining operations. Such a capability could support missile manufacturing efforts or the production of advanced conventional weapons in Iran. ¶4. (S) As in the September 2007 case, it appears CNC Takang Company is engaging in practices designed to evade Taiwan's export control laws. We want to provide this latest information to Taiwan officials and ask that they investigate this activity and use all available measures to ensure that third country intermediaries are not being used to facilitate machine tool exports from Taiwan to Iran. We also want to request an update on the status of Taiwan's investigation into previous efforts by CNC Takang Company to supply machine tools to Iran. ¶5. (S) Action Request: Request AIT Taipei approach appropriate authorities to deliver talking points/non-paper in paragraph 6 below and report response. Talking points also may be provided as a non-paper. ¶6. (S) Begin talking points/non-paper: (SECRET REL TAIWAN) -- The U.S. appreciates your continuing efforts to strengthen Taiwan's export control system by implementing the U.S. - Taiwan "Gameplan." -- As part of our cooperation on export control issues, we routinely raise with you our concerns regarding exports of computer numerically controlled (CNC) machine tools to countries that pose proliferation risks. -- One such case that we brought to your attention in September 2007 involved a shipment to Iran of four vertical machining centers by Taiwan's CNC Takang Company through an intermediary in the UAE. -- As we discussed at that time, we believe this transfer was likely an effort to evade Taiwan's restrictions on machine tool exports to Iran. -- We now have information indicating that CNC Takang Company may again be using a third country intermediary to facilitate machine tool transfers to Iran. -- Specifically, we understand that in May 2008, CNC Takang Company was working to supply a model VMC-1200 vertical machining center equipped with a Fanuc 18i controller to the Indian company Supreme CNC Machines Pvt. Ltd. -- Supreme CNC Machines is coordinating this purchase on behalf of an Iranian customer named Condor Par Company Ltd. -- Although this machining center is not controlled, the Fanuc 18i controller would enable the machine to potentially perform 8-axis machining operations. As such, the machine being sold by CNC Takang Company to Iran could be used to support missile manufacturing efforts or in the production of advanced conventional weapons. -- As in the September 2007 case we brought to your attention, it appears CNC Takang Company is engaging in practices designed to evade your export control laws. We therefore ask that you investigate this information and take all available measures to ensure that third country intermediaries are not used to facilitate machine tool exports from Taiwan to Iran. -- We also request that you provide an update on the status of your investigation into CNC Takang Company's exports to Iran at the earliest possible time. -- We look forward to future cooperation on export control and nonproliferation issues. End talking points/non-paper ¶7. (U) Washington POC is ISN/MTR James Mayes (Phone: 202-647-3185). Please slug any reporting on this issue for ISN and EAP. ¶8. (U) A word version file of this document will be posted at www.state.sgov.gov/demarche. RICE