ORION AIR: TRANSFER OF AIRCRAFT TO SYRIA

C O N F I D E N T I A L MADRID 000439 SIPDIS FOR NEA/ELA A.MONZ, AND EUR/WE S.ZERDECKI/E.SAMSON DEPARTMENT ALSO FOR EEB/ESC/TFS C.BACKEMEYER COMMERCE FOR BIS T.CHRISTINO E.O. 12958: DECL: 05/04/2019 TAGS: EAIR ETRD ETTC PGOV PREL SP SY SUBJECT: ORION AIR: TRANSFER OF AIRCRAFT TO SYRIA REF: A. MONZ-DUDLEY E-MAIL 5/4 ¶B. MADRID 413 ¶C. SECSTATE 41098 ¶D. DAMASCUS 295 Classified By: A/DCM William Duncan for Reasons 1.4 (b,d) ¶1. (U) This is an action request. See paragraph 6. ¶2. (SBU) Following receipt of ref A e-mail, econoff contacted Orion Air on May 4 and spoke with Director General Arancha Merino on May 5. Merino confirmed that Orion had sent one aircraft to Syria in accordance with Orion's contract with Syrian Pearl Airways and planned to send the second one May 15. ¶3. (C) Merino stated that Orion was very concerned after receiving ref B demarche and had consulted with Spanish authorities (NFI),who assured her that leasing the aircraft to Syrian Pearl would not violate Spanish or international law. (She did not say that the Spanish authorities had made any assurances about U.S. law.) She acknowledged that the aircraft contain more than 10 percent U.S.-origin content but reiterated the company's belief that a wet lease does not constitute an export. Econoff referred to telcons with Orion Manager Jose Maria Orea and attorney George Hunter and extensive discussion with the two of the Export Administration Regulations (EAR),and to statements by Orea and Hunter suggesting that the company had no immediate plans to move the aircraft in light of our demarche. Merino stated that failure to comply with the contract would subject Orion to legal action by the Syrian party and possible damages, and that in absence of specific written documentation by the USG of what law was being violated (beyond the link to the EAR provided by post),she felt she had no choice but to follow the contract. (Comment: Post had given company officials the name of the statute and had later told Orea and Hunter how to seek an advisory opinion from Commerce. End Comment.) ¶4. (C) Merino also cited pressing economic reasons that led Orion to maintain the Syrian contract despite USG warnings. She claimed that for the time being the aircraft in Syria is grounded "out of prudence," but stressed that she couldn't keep it from operating for long. (Note: Per ref A e-mail, the plane made its first flight in Syria on May 4. End Note.) She requested that post share USG concerns over the transactions in writing, including specifying the grounds on which the USG deems the transaction an export. In response to econoff's request to see the contract between Orion and Syrian Pearl, Merino said post would need to submit a written request. The company will then determine whether it can share the contract with us, given that it contains a confidentiality clause. While acknowledging that the company had transferred the aircraft in the face of strong USG warnings, Merino expressed a desire to cooperate with the USG and hoped to avoid trouble. ¶4. (SBU) Econoff spoke separately on May 4 with attorney George Hunter, who appeared unaware of the transfer of the aircraft and said he could not confirm it. Hunter, who works for the country's most prominent law firm and represents Orion's principal shareholder, said that he had previously referred the matter to a Washington law firm (NFI) and had urged Orion Air to work with that firm to determine if there was a legal way to transfer the aircraft to Syria. ¶5. (SBU) Action requested: Post requests Department provide written guidance we can share with Orion, or, alternatively, permission to share a copy of reftel talking points with Orion. Post will seek guidance via e-mail to State and Commerce on Merino's request that we put in writing our request for a copy of the contract. CHACON