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)

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Summary
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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.

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Syrian Pearl CEO Complains About TDO
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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.

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Update On EC-JVO
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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."

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TDO "An Excuse" to Target Rami Makhlouf
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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.)

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Comment
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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