CIVIL AVIATION: SYRIAN PEARL, SARG RATCHET UP

S E C R E T DAMASCUS 000429


NOFORN

DEPT FOR NEA/ELA, COMMERCE FOR CHRISTINO/SONDERMAN/JUST,
NSC FOR SHAPIRO, PARIS FOR WALLER, LONDON FOR TSOU/SREEBNY

E.O. 12958: DECL: 06/21/2019
TAGS: EAIR ECON PREL SY
SUBJECT: CIVIL AVIATION: SYRIAN PEARL, SARG RATCHET UP
CAMPAIGN AGAINST SANCTIONS

REF: A. MADRID 489

B. DAMASCUS 345

C. STATE 49690

D. STATE 47933

E. MADRID 439

F. DAMASCUS 286

G. DAMASCUS 279

H. 08 DAMASCUS 661


Classified By: Charge d'Affaires Maura Connelly, for reasons 1.5 (b) an
d (d).


1. (S/NF) SUMMARY. The demise of the Syrian Pearl-Orion Air
deal, due primarily to USG enforcement of sanctions, has been
elevated to the highest levels in the SARG, with Syrian
President Bashar al-Asad briefly raising the issue directly
with SE Mitchell during their June 13 meeting, as outlined in
official SARG press reports. The Spanish Ambassador in
Damascus has been "called in" to discuss the issue with the
Ministry of Foreign Affairs. EU interlocutors are asking why
the USG chose enforcement against Syrian Pearl while
ostensibly looking the other way when Cham Wings charter
airline began operating with an MD-80 aircraft in 2008. The
SARG reportedly detained the one aircraft that Spanish
company Orion Air had delivered to Syrian Pearl under the
original contract, and it also briefly detained its Spanish
flight crew. Meanwhile, all sides are taking their story to
the press, with Syrian Pearl running a full-page
advertisement in four major newspapers blaming the U.S.
"embargo" for interruptions in service, and vowing to lease
new aircraft from "international" partners. In interviews
with the Spanish press, Orion Air claimed the Spanish
Ministry of Industry, Trade and Tourism had advised the lease
"breaks no international trade law," and -- though having
suspended its Syrian contract -- the company maintained that
the lease arrangement does not constitute an export
transaction. Separately, Syrian press reports indicate
representatives of Airbus may have met with the Syrian
Minister of Transportation in Paris recently, and Airbus may
be preparing a formal request to Commerce for a license to
sell aircraft to Syria. END SUMMARY.

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ASAD RAISES SYRIAN PEARL WITH SE MITCHELL
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2. (S/NF) During the June 13 meeting between Asad and SE
Mitchell, the Syrian President briefly raised the issue of
the U.S. Department of Commerce's action against Orion Air of
Spain which culminated in the termination of Orion's contract
with the start-up private airline, Syrian Pearl (reftel
NOTAL).


3. (S/NF) Asad's compliant, as outlined by official Syrian
news reports after the meeting, has echoed loudly on the
Damascus social circuit, where diplomats and Syrian business
contacts have sought clarification and additional details
regarding the U.S. action against Orion. One Syrian lawyer
reportedly representing Syrian Pearl cornered Emboff at a
chance encounter and complained bitterly about U.S.
interference in Syrian affairs. Told the matter was simply a
case of the U.S. government enforcing a law that had been on
the books since 2004, the lawyer replied, "This shows you're
not really for establishing normal relations." He added,
"Obama can talk all he wants about engagement, but his
policies are not different from (those of) Bush."

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SYRIAN PEARL LAUNCHES MEDIA CAMPAIGN
--------------


4. (SBU) Syrian Pearl Airlines hit the press this week,
taking out a full-page advertisement in Al Watan, Al Baath,
Tishreen and Al Thawra newspapers to apologize to its
customers for the temporary suspension of flights "due to
issues pertaining to the American embargo against Syria."
The ad reassures the Syrian public that the company "will
continue to set up operation plans and programs" through
"ongoing contacts with international companies to procure new
replacement aircraft." A separate article on the Syria Steps
website calls on the SARG to re-examine the possibility of
buying Russian aircraft, given that "the U.S. didn't grant
its approval to the Europeans to sell Airbus to Syria
"despite the American and European dtente with Syria."

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LOOKING FOR AIRCRAFT
--------------


5. (S/NF) EU contacts tell us that at least one European
airline has been approached by Syrian Pearl to supply
aircraft. Separately, we have heard reports that the Syrian
Minister for Transport met in Paris recently with
representatives of Airbus, and that the company may be
readying a request to Commerce for a license to sell aircraft
to either Syrian Air, Syrian Pearl, or both. Presumably,
these anticipated deals are the fruit of the MOUs signed
during French President Sarkozy's September 2009 visit to
Damascus.

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ORION: CONTRACT DOES NOT CONSTITUTE AN EXPORT
--------------


6. (SBU) The Spanish company Orion is taking its side of the
story to the media, as well. On June 17, Spanish news agency
Efe reported that the SARG continued to detain the first
aircraft delivered under the original Orion contract. The
article quoted an Orion spokesman as saying that, though the
U.S. Embassy in Madrid had warned the company that its
contract with the SARG would violate U.S. sanctions law,
Orion had decided to deliver the first of two planes to Syria
on the advice of the Spanish Industry, Tourism and Trade
Ministry, which had determined that the "sovereignty and
territory" of the plane were Spanish, and that Orion would be
"breaking no international law." The Orion spokesman
maintained the company had sought only to provide services to
a Syrian airline, and that the contract with Syrian Pearl did
not constitute a sale or export transaction "as the U.S.
alleges." (Note: Nevertheless, Orion suspended its contract
with Syrian Pearl and has asked for the return of the
aircraft. End note.) As an interesting aside, we have also
heard that there may have been commercial tensions between
Orion and Syrian Pearl in addition to the sanctions issue
that made Orion want to back out.

-------------- --
EU: WHY PURSUE SYRIAN PEARL AND NOT CHAM WINGS?
-------------- --


7. (S/NF) Meanwhile, our EU interlocutors in Damascus have
asked for background information on the ill-fated Syrian
Pearl-Orion Air deal. They claim that the Spanish did not
inform the EU of the ongoing situation, and that the EU
Mission in Damascus only became aware of it last week when
the SARG briefly detained the Spanish flight crew at Damascus
International Airport. (According to the EU, the
seven-person team has since been allowed to leave Syria --
albeit without their aircraft.)


8. (S/NF) Our EU contacts have inquired pointedly as to why
the USG chose to pursue Syrian Pearl while ostensibly looking
the other way in the earlier case of Cham Wings, a charter
air company that uses an MD-80 to fly intermittently to
various locations both in and outside of Syria. (Note: Post
exchanged emails with the Department and with Commerce on the
emergence of Cham Wings in 2008. End note.) Our
interlocutors suggest Rami Makhlouf's part ownership of
Syrian Pearl could have motivated the USG to act, or that
Cham Wings had somehow found a way to effectively use their
Kuwaiti partner as a screen for their operations. We assured
them the Syrian Pearl-Orion deal was pursued because the
Department of Commerce considered the "wet" lease constituted
an export of an aircraft with more than 10 percent American
content, and that Cham Wings could be subject to the same
enforcement in the future. We were also careful to point out
that the Syrian Pearl issue is not/not a safety of flight
issue, and therefore there is presently no waiver available
for the export of this aircraft under the SAA.

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SPANISH AMBASSADOR CALLED IN BY SARG
--------------


9. (S/NF) Lastly, the Spanish Ambassador in Damascus informed
Pol/Econ Chief on July 16 that he was being "called in" by
the SARG over the Syrian Pearl-Orion Air debacle. Post does
not yet have a read-out on the meeting.


10. (S/NF) COMMENT: The Syrian Pearl issue remains very much
in the headlines, and very much on the minds of SARG
interlocutors, high-level business contacts and the general
public. Confusion over the provisions of the SAA (including
safety of flight exemptions),the (perhaps unrealistic)
prospect of a new Presidential waiver for civil aviation
exports, and lack of USG enforcement against earlier,
high-profile aviation imports (Cham Wings) has contributed to
misconceptions on all sides. The demise of the Syrian
Pearl-Orion deal has potential to remain a major irritant in
the U.S.-Syrian relationship in the medium term. In the
short term, we continue to experience fallout from our EU
(particularly Spanish) counterparts in Damascus, who are
being raked over the coals by a very unhappy SARG.
Separately, Washington may wish to prepare for a possible
forthcoming request by Airbus to export aircraft to Syria.
As Washington moves forward, it may be useful to know that
Boeing is also reportedly interested in the Syrian market.


CONNELLY