MEICO AND ARMS DEALS IN ALBANIA

S E C R E T SECTION 01 OF 03 TIRANA 000480

SIPDIS

E.O. 12958: DECL: 07/15/2019
TAGS: PGOV PARM KCOR AL
SUBJECT: MEICO AND ARMS DEALS IN ALBANIA

Classified By: Ambassador John L. Withers for reason 1.4 (d).


1. (C) Summary. Due to its involvement in the Gerdec tragedy
and revealed arms scandals, the image of Albania's Military
Export-Import Company (MEICO) suffered a significant blow
last year. As result, MEICO Director Granit Leka claims that
arms sales from Albania have virtually dried up, although
Leka is working to revive MEICO's image and activity. To
this end, Leka has requested U.S. assistance in obtaining
legitimate arms sales to Afghanistan. Post discourages any
U.S. assistance. Leka also claimed to Poloff that MEICO has
not been involved in recent attempts to sell RDX stored
adjacent to Mjekes' demilitarization facility (ref a),but
that an Ardian Shashaj in the Ministry of Defense's Budget
Directorate has spearheaded this effort. An overview of
MEICO and its history will put these issues into perspective.
End Summary.

SELLING OFF ALBANIA'S INHERITANCE
--------------


2. (C) MEICO was created in October 1991, soon after the
fall of communism. On paper, its purpose was to "manage" the
gigantic store of equipment and munitions which the Albanian
Armed Forces had inherited from the paranoid, isolationist
communist regime. In practice, MEICO's purpose was to try to
sell these excess weapons and equipment off as a source of
state income. Indeed, current MEICO Director Granit Leka
admits that no importing was done during this first period
and that all activities were focused on export.


3. (C) MEICO's staff was rudimentary, consisting initially of
one director and one secretary. Hence, while in theory MEICO
managed all military exports, in practice individual entities
managed their own sales and merely used MEICO as the official
conduit. To enforce this, Defense Ministers would require
the intermediary of MEICO for other entities to receive
export licenses.

PINARI AND LEKA; INVOLVEMENT IN BOSNIAN WAR
--------------


4. (C) In 1991, the short-lived post-communist Socialist
Party-led government appointed Ylli Pinari as the first
director of MEICO. Pinari would continue to play an
intermittent role in MEICO until his arrest in 2008 for his
involvement in the Gerdec scandal. However, his first tenure
at MEICO lasted only one year, as the Democratic Party-led
government removed him in 1992. Along with a new director,
the Democrats brought in Granit Leka. Leka had served for
decades as the head of the Mjekes Explosives Factory. In the
1980s, he had developed close relations with the Swedish
government, who invested heavily in the modernization of
Mjekes, a rare success in communist Albania. Wanting to tap
into Leka's foreign contacts, the GOA put Leka in charge of
MEICO's external interactions.


5. (C) In 1994, Leka completed MEICO's first large
international sale. Croatia, heavily involved in the
Yugoslav and Bosnian wars, bought munitions propellant from
Leka for a total of USD 2 million. In reward, shortly after,
Leka was appointed MEICO director. Later, in 1995, Bosnia
also bought propellant from MEICO to use as barter with
Croatian forces in the ongoing war.


6. (S//NF) According to ref b, a Western EOD specialist
alleged that during the 1990s (possibly up until 1999),
Albania also sold RDX to Iran. In fact, one container of the
remaining 150 tons of RDX still stored at the Mjekes facility
contained a shipping label for the Ministry of Defense of the
Republic of Iran (ref c). Upon request, the MoD conducted an
informal investigation and confirmed that no sale of RDX to
Iran ever occured. US sources were also unable to find any
evidence of an Albanian sale of RDX to Iran.

1997 COLLAPSE AND RETURN OF PINARI
--------------


7. (C) The 1997 collapse discredited all in office during the
Democrats' tenure. Leka stated to poloff that in 1998
internationals were brought in to conduct an audit of MEICO.
Although the audit proved MEICO without fault, Leka was
removed from office and replaced by a brother of influential
Socialist Parliamentarian, Ermelinda Meksi (Leka did not give
the name of the brother). MEICO was all but inactive under
Meksi's brother, and sometime in the early 2000s, Pinari was
brought back in to replace Meksi.


8. (C) The return of Pinari was accompanied by growing media
suspicion about Albania's involvement in shady arms deals.

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One Albanian journalist has compiled the following list (most
of it unconfirmed by official sources):

- In 2003, Amnesty International reported that Albania was
transporting arms to Rwanda through the Rwandan company
Silverback Cargo.

- In 2005, media accused Albania of violating an arms embargo
on Congo.

- Media claim that from 2004 to 2006 Albania sold planes and
helicopters to Sudan.

- Media claim that in February 2008, MEICO sold 3,200
Chinese-made 107mm Katyusha rockets to a private
American-Israeli company.

GERDEC AND AEY
--------------


9. (C) Sometime after the Democrats came back to power in
2005, Leka was brought back into MEICO as a consultant,
although Pinari stayed as director. According to Leka,
relations between him and Pinari were poor and communication
all but nonexistent. Leka claims to have known almost
nothing about Gerdec. After the March 15, 2008 explosion at
Gerdec, media also revealed MEICO's involvement in illegal
sales of Chinese ammunition to Afghanistan through American
company AEY. Pinari was arrested for his involvement in
Gerdec and is now standing trial, along with 27 others, for
abuse of office. After Pinari's arrest, Leka was reinstalled
as MEICO director. (Note. The U.S. company AEY is also
facing criminal charges in Florida. Their trial is set to
begin in September. End Note.)

MEICO TODAY
--------------


10. (C) Leka has complained that the Gerdec and AEY scandals
have made it all but impossible for him to complete foreign
sales. First, the scandals have severely tarnished MEICO's
image. Second, Pinari sold ammunition to AEY at ridiculously
low prices (e.g. USD 4 per 1000 7.2mm bullets),and foreign
companies are demanding the same prices (Leka feels he cannot
sell for a profit at less than USD 12 per 1000 bullets). He
claims his only sale this year has been machine gun tripods
to Macedonia and some trophy Kalashnikovs.


11. (S//NF) An internal MoD source has confirmed an April 28
Defense Ministerial Order to transfer the following items to
MEICO for sale to Montenegro: 420 machine gun tripods, 86
12.7mm machine gun frames, and approximately 800 tons of
Amatol (civilian grade) explosives. A truck reportedly
arrived June 8 to pick up 35 of the frames and 225 tripods
for shipment.


12. (C) In order to revive MEICO's image and activity, Leka
has increased the staff to 12 and has also developed MEICO's
role in importing. According the Leka, the Ministry of
Interior is forbidden from making supply purchases from
foreign agents, so MEICO has taken on this role, buying
foreign flak vests, pistols, etc, and then selling them to
the Ministry of Interior for a commission.


13. (U) MEICO is a strange hybrid - an autonomous state
entity. It controls its own internal budget and decision
making, but is subordinate to the Ministry of State. In
essence, it acts as a sales agent for the Ministry of Defense
and Interior. MEICO does not control the money from sales,
but instead receives a percentage commission for each sale.


14. (U) MEICO has access to the MoD's entire invenory for
selling purposes. Indeed, MEICO's websie declares, "We can
offer for sale military equiment (functional or not) a nd
spare parts, such a MiG 17, 19, and 21 jets, helicopters,
tanks andsubmarines." A sale is made in the following way:
Whhen a foreign company approaches MEICO with intee st in a
certain item, MEICO requests that the Mnnister of Defense
release that item for sale. Te DefMin convenes a
categorization committee, which declares whether or not the
item can be sold (this step is usually pro forma),then he
convenes a pricing committee to determine the price. The item
is then released to MEICO for sale. (Note. Many of the
members of the pricing committee have been indicted in the
Gerdec scandal, which has paralyzed work on this committee.
End Note.)

RDX
---


TIRANA 00000480 003 OF 003



15. (C) This model, however, has not been followed in the
current case involving 150 tons of RDX (hexogen) stored at
Area C in Mjekes. Over the last year, U.S. experts have
repeatedly raised concern about the presence of this RDX so
close to the demil line at Mjekes and have requested it be
removed. The MoD has stalled on its removal as some have
sought to sell the RDX. When asked, Leka replied that
neither he nor MEICO have been involved in efforts to sell
the RDX, and he blamed an Ardian Shashaj in the MoD budgeting
directorate. Reportedly, last year a Czech firm sent a
Hungarian and Kosovar representative separately to Albania to
inquire into the RDX. When Leka met with them, he deemed
their offer un-serious and turned them away. Since then they
have repeatedly met with Shashaj to push this. Shashaj has
allegedly sought to circumvent MEICO to reach an agreement on
this deal. To date, no deal has been completed, but the
Minister of Defense has still not signed an order to destroy
the RDX as requested by U.S. advisors.

LEKA SEEKS ASSISTANCE
--------------


16. (C) In order to boost MEICO's image, Leka requested any
assistance in sealing a deal to legitimately sell ammunition
or weapons to Afghanistan. Post strongly discourages U.S.
assistance in this matter for the following reasons. First,
there is serious concern over the reliability of Albanian
ammunition, most of which is of Chinese or Soviet make and
over 30 years old. Second, efforts to sell ammunition could
increase MOD staff's reluctance to proceed with its
demilitarization and destruction, which is one of our highest
national security priorities for Albania.
WITHERS