(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