(S) IRAN'S MISSILE PROGRAM ACQUIRES MACHINE TOOLS FROM ROK VIA TURKISH INTERMEDIARY

S E C R E T STATE 050260



SIPDIS



E.O. 12958: DECL: 05/15/2034

TAGS: PARM, MTCRE, PREL, IR, TU, KS

SUBJECT: (S) IRAN'S MISSILE PROGRAM ACQUIRES MACHINE TOOLS

FROM ROK VIA TURKISH INTERMEDIARY



REF: A. STATE 028283

B. SEOUL 000504

C. SEOUL 000677



Classified By: ISN/MTR Director Pam Durham;

REASONS 1.4 (B),(C) AND (D).



1. (U) This is an action request. Embassy Seoul, please

see paragraph 5.



2. (S) Background/Purpose/Objective: In March 2009, the

United States advised the ROK that Turkey-based intermediary

Ak Makina was working to supply Iran's Ardalan Machineries

Company with a variety of computer numerically controlled

(CNC) machine tools produced by the South Korea firm

Hyundai-Kia (Ref A). We brought this matter to the attention

of ROK authorities because Ardalan Machineries is associated

with Iran's liquid propellant ballistic missile developer

Shahid Hemmat Industrial Group (SHIG) and appeared to be

acting as a false end-user to circumvent South Korea's export

controls. Although not controlled by any of the multilateral

export control regimes, the machine tools sought by Ardalan

Machineries could be used by SHIG to support its production

of liquid rocket engine components.



3. (S) In April 2009, South Korea responded that it was

unable to corroborate the U.S. information and that its

investigation did not find any irregularities with this

export (Ref C). While the ROK determined that the

transaction raised by the United States occurred in December

2008, it reported that Hyundai-Kia did not apply for an

export license because the machine tools were not controlled

under any of the multilateral export control regimes or by

the ROK's export regulations. ROK officials added that

neither Hyundia-Kia nor Ak Makina is on a "watch list" and,

because Ak Makina is located in Turkey, which is a member of

the multilateral export control regimes, there was no basis

for the ROKG to question the efficacy of Turkey's

nonproliferation efforts. Finally, the ROKG indicated that

it could only intervene in export control cases that involve

one of the following circumstances: the purchaser is the

subject of a denial by the Missile Technology Control Regime

(MTCR) or Nuclear Suppliers Group (NSG);

the item being exported is controlled; the seller or buyer

has made false declarations to obtain an export license; or

the purchasing firm is located in a country that is not a

member of any of the multilateral control regimes.





4. (S) We want to follow-up with the ROKG on this case to

stress that this transaction involved an Iranian firm acting

as a false end-user in order to acquire South Korean-origin

machine tools on behalf of Iran's SHIG. As ROK authorities

are aware from numerous MTCR Information Exchange

presentations, Iran's missile program routinely uses front

companies and false end-users to procure items it cannot

acquire directly due to export control restrictions. SHIG is

the lead agency for Iran's liquid propellant missile program

and an entity of significant proliferation concern. It has

been sanctioned repeatedly, most recently in February 2009,

by the United States for its missile-related trading

activities and has been designated under United Nations

Security Council Resolution (UNSCR) 1737. Because Iran's

SHIG was the ultimate end-user in this transaction and used a

false intermediary to acquire South Korean-origin machine

tools, we believe this transaction meets the criteria

specified by the ROK that would ju

stify its intervention to prevent such an export. Based on

the proliferation risks associated with this transaction, we

want to ask the ROK to closely monitor any future dealings

between South Korean firms and Turkey's Ak Makina to ensure

that South Korean-origin technology is not being diverted to

Iran to support its ballistic missile development efforts.

We also want to note that taking such actions would be

consistent with UNSCR 1737 and our shared missile

nonproliferation goals.



5. (S) Action Request: Request Embassy Seoul approach

appropriate host government authorities to deliver talking

points/non-paper in paragraph 6 below and report response.

Talking points also may be provided as a non-paper.



6. (S) Begin talking points/non-paper:



(SECRET REL SOUTH KOREA)



-- In March 2009, the United States advised your government

that the Turkey-based intermediary Ak Makina was working to

supply Iran's Ardalan Machineries Company with a variety of

South Korean-origin computer numerically controlled (CNC)

machine tools.



-- We brought this information to your attention because



Ardalan Machineries is associated with Iran's liquid

propellant ballistic missile developer Shahid Hemmat

Industrial Group (SHIG).



-- We believe Ardalan Machineries is acting as a false

end-user in its dealings with Ak Makina to circumvent export

controls restrictions in both Turkey and South Korea.



-- Recently, you informed us that your investigation of this

activity did not uncover any evidence confirming our

information or find any irregularities with this transaction.





-- You noted that the sale raised by the United States

occurred in December 2008 and that the South Korean exporter,

Hyundai-Kia, has maintained a business relationship with Ak

Makina for over ten years.



-- You also indicated that Hyundai-Kia did not apply for an

export license in this case because the machine tools were

not controlled under any of the multilateral export control

regimes or your national control lists.



-- In addition, you stated that neither Hyundai-Kia nor Ak

Makina is on a "watch list" and, because Ak Makina is located

in Turkey, a member of the multilateral export control

regimes, there was no basis to question the efficacy of

Turkey's nonproliferation efforts.



-- Finally, your response indicated that your government can

only intervene to prevent such an export in one of the

following circumstances:



- the purchaser is subject to a denial by the Missile

Technology Control Regime (MTCR) or Nuclear Suppliers Group

(NSG);



- the item being exported is controlled;



- the seller or buyer has made false declarations to obtain

an export license; or



- the purchasing firm is located in a country that is not a

member of any of the multilateral export control regimes.



-- We appreciate your efforts to investigate this transaction

and your determining that the export raised by the United

States has already occurred.



-- However, we also believe this transaction raises clear

missile proliferation concerns and that there is sufficient

justification for your government to act in future such cases

involving these firms.



-- In particular, we note that this transaction involved the

Iranian firm Ardalan Machineries, which was acting as an

end-user in order to acquire South Korean-origin machine

tools on behalf of Iran's SHIG.



-- As you are aware from numerous MTCR Information Exchange

presentations, Iran's missile program routinely uses front

companies and false end-users to procure items it cannot

acquire directly due to export control restrictions.



-- This is exactly the role Ardalan Machineries was playing

in this transaction.



-- In addition, as the lead agency for Iran's liquid

propellant ballistic missile program, SHIG is an entity of

significant proliferation concern that has been sanctioned

repeatedly by the United States for its missile-related

trading activities, most recently in February 2009.



-- SHIG also is an entity designated under United Nations

Security Council Resolution (UNSCR) 1737.



-- Given that Ardalan Machineries was procuring these machine

tools for SHIG, we believe they were likely intended to

support Iran's ballistic missile development efforts and

therefore subject to your catch-all control authorities.



-- The use of your catch-all controls in such a case would be

consistent with the MTCR Partners 2009 agreement to consider

potential missile-related applications of machine tools in

their risk assessment of export licenses and to use catch-all

controls where applicable to prevent machine tools transfers

to missile programs of concern.



-- Because Iran's SHIG was the ultimate end-user in this

transaction and used a false intermediary to acquire South

Korean-origin machine tools, we believe this transaction

meets the criteria you cited as a basis for your government

intervening in a case.



-- Recognizing that this particular transfer has already

taken place, we ask that you closely monitor any future

dealings between South Korean firms and Ak Makina to ensure

that South Korean-origin technology is not being diverted to

Iran to support its ballistic missile development efforts.



-- Such action should include the use of pre-license checks

to verify the bona fides of an end-user and post-shipment

verifications to confirm that an item authorized for export

arrived at the stated destination.



-- We believe such actions would be consistent with UNSCR

1737 and our shared missile nonproliferation goals.



-- We look forward to future cooperation on nonproliferation

issues and to hearing of any measures you plan to take in

response to this information.



End talking points/non-paper



7. (U) Washington POC is ISN/MTR James Mayes (Phone:

202-647-3185). Please slug any reporting on this issue for

ISN/MTR.



8. (U) A word version file of this document will be posted

at www.state.sgov.gov/demarche.

CLINTON