MEETING WITH SWISS HEAD OF EXPORT CONTROL POLICY AND SANCTIONS ERWIN BOLLINGER ON COLENCO

S E C R E T STATE 101981



SIPDIS



E.O. 12958: DECL: 09/30/2034

TAGS: IR, MNUC, PARM

SUBJECT: MEETING WITH SWISS HEAD OF EXPORT CONTROL POLICY

AND SANCTIONS ERWIN BOLLINGER ON COLENCO



REF: A. BERN 000268

B. BERN 000273

C. STATE 064514



Classified By: EUR/PRA: Kathleen Morenski, reasons 1.4(b) and (d)



1. (U) Information only, no action.



2. (S) On 15 September 2009, Erwin Bollinger Head of Export

Control Policy and Sanctions (SECO) met with Acting ISN DAS

Tony Foley to discuss Colenco on the margins of broader

export control talks with the United States.



3. (S) Acting DAS Foley began the meeting by delivering the

key points of the script containing IC-cleared non-paper (see

paragraph 7). The Swiss head of delegation, Erwin Bollinger,

responded with a brief recitation of U.S.-Swiss exchanges on

Colenco. Bollinger noted the following key points: 1.)

Switzerland has been in close contact with Colenco for many

years, but did not see any wrongdoing, only received

&hints8 that technology provided by Colenco could be

misused by the Iranians. 2.) Switzerland could not have

accomplished its goals of stopping Colenco under current

Swiss export control laws. 3.) The Swiss were contacted by

their Swedish colleagues who indicated that the transactions

would not be allowed under EU law.



4. (S) Bollinger indicated that Colenco had been very

cooperative and provided thousands of pages to the Swiss

Government in response to the requests for more information

on the contracts. The documents were then sent to the Swiss

Federal Nuclear Safety Inspectorate (ENSI) for technical

evaluation, and the Swiss nuclear safety experts agreed that

the information provided to Iran from Colenco was in the

public domain. Bollinger further stated that the decision

was made to deny the export based on the catch-all clause

from the Nuclear Suppliers Group (NSG) export control

regulations and using U.S.-origin information. The loss of

income to Colenco would be approximately 40 million dollars.



5. (S) Bollinger stated that exports to Iran have decreased

in recent years, and Switzerland is 4th on the list of

countries denying exports to Iran. There is a new revision

to the export control law currently in the Upper House of

Parliament to allow the Swiss government the ability to deny

an export based on the NSG &catch-all8 caveat. Previously,

export denials had to be associated with an international

sanction or explicitly stated by an international export

control regime. In years past, Swiss Government and

industrial leaders went through military service together and

developed personal relationships. Senior government

officials used their network to resolve an export control

issue before the Government issued a denial. This personal

network between government and industrial officials is

becoming decreasingly less prevalent. Legitimate areas of

business are suffering and the Swiss Government is having an

increasingly difficult time imposing export controls on the

industry.



6. (S) Bollinger welcomed our cooperation on this matter and

said that the GOS would keep us informed of any further

developments, including any requests for additional U.S.

information or questions resulting from this latest non-paper.



7. (S//REL SWITZERLAND) BEGIN U.S. NONPAPER (which Embassy

Bern is welcome to convey to other Swiss officials if

necessary during the course of its ongoing consultations on

this issue).



We applaud Switzerland's decision to suspend Colenco's

support for Iran's nuclear program and welcome the

opportunity

to provide you with additional information regarding the

nature of this support.



Specifically, Switzerland has requested the following

information:



Details regarding whether Colenco assistance exceeded that

which could be credibly considered "public domain";



The nature and role of Iranian firms MASNA, Ofogh, and

ESNICO; and,



"Proof" of diversion from Colenco's assistance to the Arak

heavy water research reactor.





Public Domain



During our technical experts' discussion in Budapest in June

2009, Swiss officials noted that Colenco contends its

support did not exceed information available in the public

domain. This view was reflected in the non-paper provided

to Secretary Clinton on 31 July.



The Nuclear Suppliers' Group (NSG) definition of "public

domain" is "technology that has been made available without

restrictions upon its further dissemination."



We have information that Colenco provided Iran information

which would not be permitted under this definition.



Colenco was contracted by Iran to provide custom design and

engineering support for the reactor project at Darkhovin.



To do this, Colenco used published reactor design and

probabilistic risk assessment methodologies. Those original,

published methodologies would be considered "public domain."



However, the application of those published methodologies by

Colenco through its analysis is not. Further, the results

were conveyed to Iran as a commercial, proprietary, and

confidential product.



This "value-added" response by Colenco likely constituted the

heart of what Iran was intending to purchase when it

contracted with Colenco.



As noted previously, Colenco's assistance involved primarily

design support and at a very detailed level.



At least one of the documents provided by Colenco in this

regard was marked "highly confidential data," indicating

assistance above the level of information in the public

domain.



This document contained detailed reactor core design

specifications derived from output of a Dutch computer code.





Colenco also trained MASNA personnel in Switzerland on

probabilistic safety analysis and may have provided technical

consultations on specific Darkhovin reactor design issues.



Discussion of specific design issues with the Darkhovin

reactor (the design of which is not public) would go well

beyond a credible definition of "public domain."





Nature and role of Iranian firms MASNA, Ofogh, and ESNICO



We have information that links each of these firms to Iran's

nuclear program, the Atomic Energy Organization of Iran

(AEOI) and the Darkhovin reactor project.



Management Company for Nuclear Power Plant Construction

(MASNA)



MASNA was established in 2006 by the AEOI to manage future

nuclear power plant construction. It is an AEOI-owned firm.





AEOI is a UNSCR 1737-designated entity.



The firm was tasked to provide engineering work and support

in the areas of fuel, dosimetry, and neutronic calculations

on the IR-40 Arak Heavy Water Research Reactor (HWRR) and the

future nuclear reactor located near Qazvin, which we

assess is probably the IR-360 reactor at Darkhovin.



We have information that, as of fall 2008, MASNA was

responsible for conceptual planning, design, and project

engineering for the Darkhovin reactor.



Ofogh Consulting Engineers (OCE)



We have information that OCE is a subcontractor to MASNA on

the Darkhovin reactor that has conducted site selection,

design, and building layout services for the reactor.



Ofogh was established during a reorganization of AEOI's

Nuclear Power Plant Division in 2000 to provide the AEOI with

technical and engineering services.



Equipment Supplier for Nuclear Industries Corporation

(ESNICO)



We have information that ESNICO is responsible for

procurement for the Darkhovin reactor project.



ESNICO has also been previously affiliated with procurement

for MITEC, the firm responsible for the construction of

the HWRR.



Proof of diversion



The United States does not have proof of diversion from the

Darkhovin reactor to the Arak reactor, nor do we believe

that such proof is necessary to demonstrate a proliferation

risk.



We have already informed you that we have information that

Iran has intentionally concealed work related to its Arak

reactor by instead associating it with the Bushehr Nuclear

Power Plant.



Further, as we have demonstrated above, the firms responsible

for the Darkhovin reactor project are owned or controlled

by the AEOI, which has management responsibilities over both

the Arak and Darkhovin reactor projects.



One example of this is the involvement of Seyed Hossein

Hosseini, designated in UNSCR 1803 for his involvement at a

managerial level in the Arak reactor project, in Colenco's

dealings with Iran.



We have also demonstrated that assistance that could be

useful for Darkhovin could be applied in the Arak reactor.

Areas in which such diversion is possible include: design and

analysis assistance; balance-of-plant equipment; and,

application of computer codes and other computational tools.

Colenco could even be mislead by Iran into helping to

design sub-systems specifically for the Arak reactor.



AEOI's involvement, as well as the involvement of firms with

direct association to both projects, lends credence to

our view that it would be impossible for Colenco to put in

sufficient protection mechanisms to ensure non-diversion and

thereby assistance being provided to proscribed activities in

Iran.



Further, the absence of any clear information demonstrating

past diversion should not be considered an indicator that

such diversion has not taken place or that it will not take

place.



Summary



We look forward to continued collaboration on this issue as

well as others of mutual, nonproliferation concern.



END U.S. NONPAPER



8. (U) Any substantive questions can be addressed to Richard

Nephew (ISN/RA, 202-647-7680, NephewRM@state.sgov.gov) or

Judee Allen-Close (ISN/RA, 202-647-8366,

CloseJA@state.sgov.gov).

CLINTON