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