DAM BREAKING ON SYRIAN SANCTIONS REGIME

C O N F I D E N T I A L DAMASCUS 000295

SIPDIS

DEPT FOR NEA/FO, NEA/ELA, EEB/ESC/TFS, L/EB
NSC FOR SHAPIRO/MCDERMOTT
TREASURY FOR U/S LEVEY
COMMERCE FOR BIS/CHRISTINO
PARIS FOR WALLER
LONDON FOR TSOU

E.O. 12958: DECL: 04/21/2019
TAGS: EAIR ETRD ETTC PGOV PREL JO SP SY
SUBJECT: DAM BREAKING ON SYRIAN SANCTIONS REGIME

REF: A. DAMASCUS 188

B. DAMASCUS 288

C. DAMASCUS 279

D. DAMASCUS 192

E. 08 DAMASCUS 646

F. 08 DAMASCUS 438

G. 17 APRIL 2009
MADRID-DAMASCUS-NEA/ELA-EEB/ESC/TFS E-MAIL

Classified By: Charge d'Affaires Maura Connelly for reasons 1.4(b,d)

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Summary
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1. (C) The U.S. sanctions regime against Syria has recently
taken two hits that, if left unanswered, could significantly
decrease a source of our leverage over the Syrian regime. In
what is likely the most blatant violation of U.S. trade
sanctions Post has observed, a Jordanian company delivered a
leased Airbus A320 to Damascus that Syrian Air immediately
put into service. Similarly, a Spanish company is scheduled
to deliver two BAE 146-300 aircraft with U.S. engines to a
private Syrian airline that is partially owned by Syrian Air
and by Specially Designated National Rami Makhlouf on April
27-29. End summary.

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Jordan Aviation First to Bust Sanctions
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2. (C) On March 12, Post reported Syrian Air's intention to
lease at least one Airbus A320 from Jordan Aviation (ref A).
Resident Airbus customer support manager in Damascus
Christian Rivet confirmed to Post on April 19 that Jordan
Aviation had indeed delivered an A320 to Damascus in late
March. According to Rivet, Syrian Air had immediately begun
operating the Jordanian plane on regional routes between
Damascus and other Arab countries, but not to European
destinations.


3. (C) Clearly concerned at being contacted by an embassy
officer, Rivet claimed that neither Syrian Air nor Jordan
Aviation had consulted with him, or with Airbus executives in
Paris, about the legality of the lease with respect to U.S.
trade sanctions. Rivet accepted responsibility for only the
six A320s that Syrian Air had purchased directly from Airbus,
of which four are currently operational (ref B). (Note:
Having been involved in negotiating Syrian Air's MOU with
Airbus for the sale or lease of new aircraft (ref B, E),
Rivet is well aware that leases are not exempt from U.S.
trade sanctions and that most Airbus aircraft contain well
over 10 percent content of U.S. origin. End note.)


4. (C) In the first official acknowledgement of the lease,
the government daily Tishreen reported on April 22 that the
Jordanian A320 was recently grounded after a safety device
designed to detect the close proximity of other aircraft
malfunctioned. Because a replacement part was "not
available" in Syria and the terms of the lease placed the
burden of maintenance on Jordan Aviation, the plane recently
returned to Amman to have a new device installed. The
plane's mechanical difficulties so soon after its delivery to
Damascus had been the source of scathing criticism from
Syrian journalists in Al Qandeel (The Lantern) newspaper, who
accused Syrian Air of leasing an unsafe aircraft. An unnamed
Syrian Air official responded to the criticism in Tishreen,
saying that the A320 had been overhauled in late 2008 and had
received an airworthiness certificate from the Jordanian
Civil Aviation Authority. "We need an urgent solution to
maintain Syrian Air's routes," the source told Tishreen. "We
have to provide airplanes by leasing them or any other
possible means, because once we lose these routes, it's very
difficult to get them back."

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Makhlouf Air Now Boarding
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5. (C) The chairman of Syrian Pearl Airways (SPA),a.k.a.
Cham Pearl, told the subscription-based website The Syria
Report on April 19 that Syria's first private airline would
take delivery of two 96-passenger, BAE 146-300 aircraft
between April 27-29. On April 15, the website Syria Steps
reported that Cham Pearl had signed a one-year "wet lease"
with the Spanish company Orion Air for the two planes. (Note:
We understand that the difference between a "wet lease" and a
"dry lease" is that a wet-leased aircraft comes with a crew,
whereas a dry lease only involves the aircraft. End note.)
SPA Chairman (and director of Syrian Arab Red Crescent) Dr.
Abdul Rahman Attar said that, in the airline's first three
months of operation, Cham Pearl intends to focus on domestic
service from Damascus to Aleppo, Qamishli, Lattakia, and Deir
ez-Zor. Soon, however, Cham Pearl intends to offer service
to Beirut, Kuwait, Baghdad, Mosul, Turkey, Cyprus, and
Armenia.


6. (C) Cham Pearl is a joint venture between Cham Holding
Company (40 percent),Syrian Air (25 percent) and the Kuwaiti
al-Aqeelah Investment Company. Cham Holding is the largest
private equity firm in Syria, founded by Specially Designated
National (and President Bashar al-Asad's maternal cousin)
Rami Makhlouf (refs A, F). Since the airline's 2007
licensing by the Ministry of Economy and Trade, Cham Pearl
had struggled to find a vendor willing to sell or lease them
aircraft due to the potential risk of violating U.S.
sanctions. According to ref G, Orion Air's BAE 146-300
operate U.S.-manufactured engines, so the leased aircraft are
likely to contain greater than 10 pecent component parts of
U.S. origin and would be subject to sanctions.

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Comment
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7. (C) While five years of U.S. sanctions have been
unsuccessful in changing Syrian regime behavior on our key
issues of concern, they have strengthened our hand as we
begin to re-engage the SARG. Of all sectors of the Syrian
economy, U.S. trade sanctions have had the greatest practical
impact on civil aviation: atrophying Syrian Air's operational
fleet from 16 aircraft to just four, preventing Rami
Makhlouf's airline from obtaining aircraft, and denying the
SARG the economic benefits of a regional boom in demand for
commercial aviation. In refs B and D, the SARG identified
civil aviation as a top priority in developing a better
relationship with the U.S. We are now in position to
leverage our dominant position over the aviation industry to
make progress on our political agenda. The regime, and the
international business community, will gauge our reaction to
these high-profile aviation leases as an indicator of the
seriousness with which we still take our sanctions policy.
If we turn a blind eye, we should do so expecting the Syrians
will continue to seek means of neutralizing the effect of
U.S. sanctions.
CONNELLY