NIAG 9041: IRANIAN ENTITIES ASSOCIATED WITH

S E C R E T STATE 037478


E.O. 12958: DECL: 04/16/2034
TAGS: PARM PREL MNUC IR JA
SUBJECT: NIAG 9041: IRANIAN ENTITIES ASSOCIATED WITH
NUCLEAR PROGRAM SEEK JAPANESE-ORIGIN GENERATORS

Classified By: ISN A A/S C.S. ELIOT KANG,
REASONS 1.4 (B),(C),AND (D)

SUMMARY/BACKGROUND
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1. (S) We have received information that Iranian entities
with ties to Iran's missile program seek to procure
Japanese-origin diesel generators, ostensibly for a planned
light-water moderated nuclear reactor to be built near
Darkhovin, Iran. While Iran is not prohibited from
constructing light-water reactors under UN Security Council
Resolution 1737, we believe the generators are probably for
the proscribed heavy-water reactor at Arak, which is now
under construction. Additionally, we cannot rule out a
possible intent to apply these generators to gas centrifuge
activities in Iran. The generators serve an important role as
backup power supply at a gas centrifuge plant in the event of
a loss of power supply from the grid.


2. (S) The customer for these generators is supposedly
Iran's Surena Company. However, our information indicates
that the actual buyer for this equipment is the Iranian firm
ESNICO, a subsidiary of Iran's Novin Energy Co. and a sister
company of Kalaye Electric Company (KEC). Both Novin Energy
and KEC are involved with Iran's nuclear program and are
designated under UN Security Council resolutions.
Additionally, available information links ESNICO to the
Iranian entity Modern Industries Technique Company (MITEC),
which is responsible for building Iran's IR-40 heavy-water
reactor. Such reactors are of proliferation concern due to
their ability to produce plutonium. The generators in
question are not controlled by the Nuclear Suppliers, Group.
They are, however, on the U.S.-supplied gas centrifuge and
petrochemical procurement watch lists provided to the NSG.
The involvement of entities designated under UNSCRs for their
involvement in Iran's nuclear activities raises proliferation
concerns regarding this transfer.

ACTION REQUEST
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3. (S//REL Japan) Post is requested to approach appropriate
host-nation officials and request that they investigate and
prevent this transfer. Post may draw from objectives and
talking points/non-paper below.

OBJECTIVES
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4. (S//REL Japan) Post should:

-- Encourage Japanese officials to investigate the transfer
of Japanese-origin items to Iranian entities of proliferation
concern, and take necessary steps to prevent the transfer.

-- Encourage Japanese officials to share with the USG the
results of any investigation they may undertake regarding
this transfer.

-- Highlight the fact that the Iranian entity involved in
this transfer is owned or controlled by entities designated
under UN Security Council Resolutions for their involvement
in Iran's nuclear program.

-- Emphasize that now is not the time for business as usual
with Iran.

TALKING POINTS/NON-PAPER
--------------


5. (S//REL Japan) Begin talking points/non-paper:

-- In the spirit of our nonproliferation cooperation, we
would like to share with you information we have received
regarding efforts by an Iranian company to procure diesel
generators, ostensibly for construction of a 360-megawatt
light-water reactor, from Japan's Mitsubishi Heavy Industry.

-- The customer for these generators is supposedly Iran's
Surena Company. However, our information indicates that the
buyer of this equipment is the Iranian firm ESNICO, which is
a subsidiary of (and therefore owned and controlled by)
Iran's Novin Energy and a sister company of Kalaye Electric
Company. Both entities are owned by the Atomic Energy
Organization of Iran and are involved with Iran's nuclear
program and are designated for this involvement under UN
Security Council Resolutions--Kalaye Electric under UNSCR
1737 and Novin Energy under UNSCR 1747.

-- According to our information, ESNICO is the exclusive
supplier of equipment for a proposed 360-megawatt light-water
nuclear power plant being planned for construction near
Darkhovin, Iran. However, our information suggests that
ESNICO has, in the past, been linked to the Iranian entity
Modern Industries Technique Company (MITEC),which is
responsible for building Iran's IR-40 heavy-water reactor,
which is currently under construction near Arak.

-- We understand that diesel generators typically are not
controlled by the Nuclear Suppliers, Group. These items are
included on the U.S. gas centrifuge and petrochemical
procurement watch lists as catch all items, which we provided
to all NSG members. However, based on ESNICO's involvement
in this transaction, and its past affiliation with entities
involved with Iran's efforts to build a heavy-water reactor,
we cannot rule out the possibility that this equipment might
be diverted to the IR-40 project. We believe the generators
are being sought for the IR-40 reactor under construction and
not for the IR-360 project, which is still in the early
planning stages. Additionally, we also cannot rule out the
possible application of such diesel generators as backup
power supply for a gas centrifuge enrichment plant.

-- Moreover, any assistance given to Iranian entities that
are owned or controlled by entities designated under UNSCRs
carries an inherent risk of contributing to Iranian
proliferation, and such nuclear cooperation at this time
defeats the spirit of the UN
Security Council resolutions.

-- Given the involvement of entities designated under two
Chapter VII UN Security Council Resolutions, we urge your
government to investigate this transfer and take all
necessary measures to prevent it. We also encourage you to
share with us the results of any investigation you may
conduct.

END POINTS/NON-PAPER.

REPORTING REQUIREMENT
--------------


6. (U) Please report results of this effort within five
business days of receipt of this cable.

POINT OF CONTACT
--------------


7. (U) Washington point of contact for follow-up and
additional information is Mark Felipe, ISN/CPI, 202-647-5376,
felipem2@state.sgov.gov.


8. (U) Department thanks Post for its assistance. Please
slug all responses for EAP, ISN, and T.


CLINTON