SYRIAN PEARL COMPLAINS ABOUT INCLUSION IN

C O N F I D E N T I A L DAMASCUS 000465 SIPDIS DEPT FOR NEA/FO, NEA/ELA, NEA/EX, EEB/ESC/TFS NSC FOR SHAPIRO/MCDERMOTT COMMERCE FOR BIS/SONDERMAN/CHRISTINO MADRID FOR HIGGINS PARIS FOR MILLER LONDON FOR TSOU E.O. 12958: DECL: 06/30/2019 TAGS: EAIR ECON ETRD ETTC PGOV PREL SP SY SUBJECT: SYRIAN PEARL COMPLAINS ABOUT INCLUSION IN TEMPORARY DENIAL ORDER REF: A. DAMASCUS 429 ¶B. MADRID 489 ¶C. DAMASCUS 345 ¶D. SECSTATE 49690 ¶E. SECSTATE 47933 ¶F. MADRID 439 ¶G. DAMASCUS 295 ¶H. DAMASCUS 286 ¶I. DAMASCUS 279 ¶J. 08 DAMASCUS 661 ¶K. 08 DAMASCUS 438 Classified By: Charge d'Affaires Maura Connelly for reasons 1.4(b,d) -------------- Summary -------------- ¶1. (C) The CEO of Syrian Pearl Airways complained to Post that the Commerce Department's May 7 Temporary Denial Order (TDO) had unfairly targeted Syrian Pearl for Orion Air's failure to perform due diligence in obtaining all necessary licenses before sending a BAE 146-300 to Syria, as their wet-lease contract had stipulated. The airline executive further contended that Washington had used trade sanctions as "an excuse" to target "somebody who is unpopular in Washington, but who has nothing to do with this airline," although he couldn't quite bring himself to name Presidential cousin Rami Makhlouf. Emboffs listened but provided no comment on the legal issues involved. By contrast, the normally media-shy Makhlouf told the news website "Syria Steps" on July 2 that he was confident the improving U.S.-Syrian political relationship would reflect positively on "his airline ) Syrian Pearl," and publicly laid blame for the start-up airline's failure at the feet of Orion Air, which "should have obtained U.S. permission before sending a plane to Syria." The CEO confirmed that Syrian authorities would not allow the grounded BAE 146-300 to depart Damascus until Orion Air refunded a 590,000 Euro earnest money deposit that Syrian Pearl had paid. He acknowledged that Orion Air had probably "already spent the money," and offered no insight into how this dispute might eventually be resolved. End summary. -------------- Syrian Pearl CEO Complains About TDO -------------- ¶2. (C) At the request of Syrian Pearl Airways (a.k.a. Cham Pearl or Loulouat as-Sham),Econoffs met June 30 with Syrian Pearl CEO Finn Thaulow and Flight Operations Director (and former Syrian Air 747 pilot) Captain Samir Imam. Cordial and to-the-point, Thaulow said his purpose in requesting the meeting was to ask Econoffs to explain why Syrian Pearl was included in the Commerce Department's May 7, 2009, Temporary Denial Order (TDO). Thaulow presented a copy of the March 27, 2009, ACMI (aircraft, crew, maintenance and insurance -- commonly referred to as a "wet lease") contract between Syrian Pearl and the Spanish company Orion Air and pointed to para 13.1.7, which he claimed had placed the burden of obtaining all necessary licenses and governmental approvals on Orion Air before sending the two BAE 146-300 aircraft to Syria. The TDO unfairly targeted Syrian Pearl, he complained, for Orion Air's lack of due diligence. Syrian Pearl's contract, he maintained, demonstrated the airline's intent to be compliant with all international legal requirements. ¶3. (C) Thaulow then said Syrian Pearl could not have violated U.S. sanctions law because the airline had not "imported or exported anything." He said the wet-lease contract put the full burden on the Spanish company to provide the aircraft, crew, maintainenance and insurance. Emboffs explained to the airline officials that they should have their Washington-based legal counsel direct these questions to the relevant authorities at the Commerce Department's Bureau of Industry and Security. -------------- Update On EC-JVO -------------- ¶4. (C) When asked the current location of the one Orion Air aircraft that had been delivered to Syria (EC-JVO),Captain Imam said the plane had been grounded at the Damascus airport due to maintenance issues. The aircraft's insurance, he explained, expired on June 30. The mechanics, who were employed by a company known as Pan Air (reportedly owned by an Australian cargo airline called TNT),would need to return to Syria and certify the plane's airworthiness before it could be moved. Thaulow, however, said Syrian authorities would keep the plane at the Damascus airport as an ad hoc performance bond until Orion Air refunds Syrian Pearl's deposit of 590,000 Euros. Shrugging, Thaulow said he assumed Orion Air had "already spent the money" and doubted Syrian Pearl would ever get its money back. He claimed Syrian Pearl had already invested USD 3.5 million in the failed enterprise -- USD 1 million (590,000 Euros) to Orion Air and USD 2.5 million in overhead costs. Shaking his head, he said he had been involved in civil aviation for over 20 years and this was the first airline that had been built "completely backwards." -------------- TDO "An Excuse" to Target Rami Makhlouf -------------- ¶5. (C) Continuing, the clearly frustrated Thaulow said it was "obvious" that U.S. trade sanctions are "just being used as an excuse" to target "one person who isn't very popular in Washington" -- presumably President Asad's maternal first cousin and Specially Designated National Rami Makhlouf -- even though "that person has nothing to do with operating this airline." (Note: Two days later, the normally media-shy Makhlouf told the news website "Syria Steps" that he was confident the improving U.S.-Syrian political relationship would reflect positively on "his airline -- Syrian Pearl." Makhlouf publicly laid blame for his start-up airline's failure at the feet of Orion Air, which "should have obtained U.S. permission before sending a plane to Syria." End note.) -------------- Comment -------------- ¶6. (C) The Orion Air saga underscores the universal lack of Syrian understanding at all levels about recent USG policy actions regarding its civil aviation sector. A possible reason for Syrian Pearl to allege that it is being unfairly targeted by U.S. sanctions enforcement is that two other airlines are operating unlicensed, leased aircraft in Syria and they have not been subjected to a TDO. As reported in ref G, Syrian Air is reportedly still flying an Airbus A320 leased from Jordan Aviation in March 2009. Per ref K, a charter airline called Sham Wings has offered charter flights from Damascus to Istanbul, Iraq, and Sharm el-Sheikh since 2008 aboard an MD-80 that is reportedly leased from an Egyptian company called AMC. Given the SARG's repeated requests for assistance with sanctions-related civil aviation problems, and our indications that we would do what we could to help, Washington might consider clarifying which aviation-related transactions are permissable under existing export regulations. CONNELLY