US embassy cable - 03ROME5202

S E C R E T  ROME 005202 
 
SIPDIS 
 
 
NOFORN 
 
STATE FOR EUR/WE, EUR/PRA, NP/ECNP, INR/SPM, NEA/NGA, 
PM/RSAT 
 
E.O. 12958: DECL: 11/17/2013 
TAGS: ETTC, IR, IT, PARM, PREL, EXPORT CONTROLS 
SUBJECT: IRAN/FAST-BOATS: INDUSTRY MINISTRY VIEWS 
 
REF: ROME 3977 AND PREVIOUS 
 
Classified By: Economic Minister-Counselor Scott Kilner for reasons 1.5 
(B)(C)(D) 
 
1. (S)  Summary. Italian export control officials are looking 
for a way to make permanent the "informal hold" placed on FB 
Design fast boat exports to Iran, according to the Ministry 
of Industry and Foreign Trade's senior licensing official. 
Two approaches are under consideration:  1) formally adding 
high-speed patrol boats to Italy's national export control 
list, and 2) compensating the company for losses it would 
suffer for breach of contract with Iran.  The official argued 
that since September 11, 2001, there has been a fundamental 
shift in attitude within the GOI toward taking export 
controls seriously, even if much remains to be done to make 
the system more efficient.  End Summary 
 
2. (S)  Ecmin met with Dr. Aldo Doria (strictly protect 
throughout) November 12 for a one-on-one lunch discussion of 
ongoing efforts to prevent Italian company FB Design from 
exporting additional high-speed patrol boats to Iran.  Within 
the Ministry of Productive Activities (MPA) (i.e., Ministry 
of Industry and Foreign Trade), Doria is Director for Export 
Licensing in the Directorate General for Trade Policy (Div. 
IV).  He represents the Ministry on the GOI's interagency 
export control committee (chaired by MFA Export Control 
Coordinator Ugo de Mohr).  It is Doria's signature that goes 
on the final export license granted by the MPA after review 
by the interagency committee. 
 
FB DESIGN CASE 
-------------- 
 
3. (S)  Doria expressed optimism that, following quiet 
conversations with "someone in the government," FB Design had 
"gotten the message" that exporting its remaining four boats 
to Iran was not acceptable.  He believed that, had the 
company really wanted to evade GOI strictures, it would have 
done so by now.  He thought FB Design had concluded that it 
was not in the company's interest "to end up on an 
international black-list" of pariah firms. 
 
4. (S)  With respect to resolving this case definitively, 
Doria said that GOI export control officials were currently 
examining two approaches.  The first was simply to add high 
speed patrol boats to Italy's national export control list, 
so that they would be subject to mandatory licensing review 
in the future.  However, Italian officials -- especially in 
his own ministry -- were struggling with how to avoid doing 
so in an overly broad manner that would impose excessive 
administrative burdens on Italy's important shipbuilding 
sector.  The issue was one of definition, but finding 
sufficient precision was not proving easy. 
 
5. (S)  The second approach was more informal:  finding a 
mechanism for the government to compensate FB Design for the 
commercial loss it would sustain from not delivering the 
final four boats Iran had contracted for.  Ecmin offered 
that, while the second approach might be the quickest and 
easiest way out, it would not exclude the possibility of 
similarly awkward cases arising in the future.  Doria agreed, 
observing that perhaps the GOI needed to move forward on both 
tracks at once:  the latter as a quick fix for this case; the 
former as a longer-term systemic solution.  In any event, he 
said he would be discussing these options with Foreign Trade 
Vice Minister Urso's cabinet in the coming days. 
 
6. (S)  Returning to the "informal arrangement" employed by 
the government so far to hold up FB Design deliveries, Doria 
stressed that the GOI desperately wanted to avoid having the 
case taken to court.  He thought that the company itself was 
unlikely to file a suit;  much more probable was that the 
trade association of Italian shipbuilders would do so.  The 
GOI feared that if an Italian magistrate took on the case, 
the government would lose control completely and that 
"anything could happen."  This was a main reason why the GOI 
had tread so gingerly.  (Comment: Given the capriciousness of 
the Italian judicial system, this fear is justified.  End 
comment.) 
 
Italian Export Control System 
----------------------------- 
 
7. (S)  In discussing Italy's system of controlling the 
export of sensitive technologies more generally, Doria 
lamented that (absent a U.N. resolution) Italian law 
prevented the use of country-specific controls like those the 
U.S. employs toward states of concern.  He noted that the GOI 
interagency committee applies three basic criteria when it 
reviews an export license request: 1) the 
sensitivity/technology of the item to be exported;  2) the 
bona fides of the end-user; 3) the geographic sensitivity of 
the destination.  Particularly given that the third criterion 
provided a means for inserting foreign policy concerns into 
the evaluation, Doria felt that the Italian approach -- while 
formally avoiding country-specific controls -- effectively 
ends up with much the same thing.  "I can tell you that when 
the destination is Iran or other states of concern, red flags 
automatically go up, and we ask for lots of additional 
information."  The problem, in his view, was that the Italian 
process was much more cumbersome and time consuming  -- 
requiring numerous back-and-forth requests to the company and 
perhaps Italian embassies abroad -- before reaching a 
conclusion.  This approach wasted both time and resources for 
the company and government alike.  Country-specific control 
lists, on the American model, were much more efficient, Doria 
concluded. 
 
8. (S)  Finally, Doria (who came to his current position from 
the private sector in 1998) stressed that GOI attitudes 
toward export controls had undergone a fundamental shift 
since September 11, 2001.  "They are now taken much more 
seriously," he said.  Resources had been added to the 
process; integration of intelligence information into the 
review had also improved.  While more clearly needed to be 
done in both areas (resources and intelligence), Doria was 
convinced that the trend was in the right direction. 
 
9. (S)  Comment:  Embassy believes that Doria's comments 
represent an unusually honest look into the Italian export 
control process generally, and the FB Design case in 
particular. End comment. 
SKODON 
 
 
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2003ROME05202 - Classification: SECRET