US embassy cable - 04ROME166

S E C R E T  ROME 000166 
 
SIPDIS 
 
 
NOFORN 
 
STATE FOR EUR/WE, EUR/PRA, NP/ECNP, INR/SPM, NEA/NGA, 
PM/RSAT, PM/DTCP 
 
E.O. 12958: DECL: 01/15/2014 
TAGS: ETTC, EIND, PARM, PREL, IT, IR, EXPORT CONTROLS 
SUBJECT: UPDATE ON SALE OF FAST BOATS AND BOAT ENGINES TO 
IRAN 
 
REF: A. ROME 59 
     B. 03 ROME 5680 
     C. 03 ROME 5552 
     D. 03 STATE 338477 AND PREVIOUS 
 
Classified By: Economic Minister-Counselor Scott Kilner for reasons 1.5 
 (a), (b) and 1.6x6 
 
1. (S) Summary. Italian Ministry of Productive Activities 
(MPA) officials outlined to us on January 14 a three-pronged 
strategy for dealing with the export of fast boats and 
related items to Iran. In the short term the MPA will inquire 
with Italian customs authorities about the status of the 
imminent shipment of one patrol boat to Iran, with an eye 
towards delaying such a shipment.  In the medium term, the 
MPA continues to pursue the issuance of a decree that would 
require GOI approval for future shipments of sensitive items 
to geographic regions of concern.  Looking down the road, our 
MPA contacts suggested that multilateral discussion of this 
type of export could take place in the context of the 
Wassenaar Arrangement. Embassy believes the fast boats case 
should be a prime subject for the next round of bilateral 
dual-use export control discussions. End summary. 
 
2. (S) On January 14 Ecmin and econoffs met with Gabriele 
Checchia, Diplomatic Advisor to Minister of Productive 
Activities (Industry) Antonio Marzano, and Amedeo Teti, 
Director General for Commercial Agreements in the Ministry's 
Foreign Trade Unit, to further discuss the export to Iran of 
FB Design fast boats and Isotta Fraschini Motori (IFM) 
engines. Checchia told us he called the meeting to underline 
the Ministry's ongoing efforts to devise and implement a 
legal solution that would meet U.S. concerns while taking 
into account the economic impact of any limits on exports 
from the Italian boat industry.  He said the Ministry 
continued to work on drafting a decree that would require 
that future shipments to a geographic region of concern would 
be subject to the GOI's approval. For political reasons, the 
decree would likely not name any particular country. Any 
decision to stop an export would take into account both 
political and economic factors.  Checchia stressed that the 
decree would need to be vetted by all interested ministries 
before being issued by Minister Marzano.  He suggested that a 
draft could be ready by the end of January. 
 
3. (S) Ecmin responded that the U.S. would greatly welcome 
the creation of a legal means for the GOI to impede exports 
of sensitive technology to countries like Iran. However, we 
also remained immediately concerned about the imminent 
shipment of the third fast boat (of the "final four") to 
Iran. Ecmin renewed our request that Italy take concrete 
action to impede that shipment, as well as the eventual 
delivery of a fourth and last vessel. Teti agreed to contact 
Italian customs authorities after the meeting to ascertain 
the status of the third boat and to explore any possible 
means to delay its export. He added that he understood that 
the fourth boat was scheduled for delivery in April. 
 
4. (S) Teti and Checchia both emphasized that the engines 
being supplied by IFM to Iran for use with the fast boats 
were medium-speed models that were not ideally suited for 
"hit-and-run" attacks on other vessels.  Ecmin responded that 
the U.S. remained strongly concerned about asymmetric threats 
to U.S. military forces in the Persian Gulf, and would 
welcome technical specifications for the engines in question, 
as well as any further technical details on the fast boats. 
Teti promised to ask IFM (which is a subsidiary of the 
GOI-controlled shipbuilding conglomerate Fincantieri) for 
such information.  He noted that IFM had a three-year 
contract to supply engines to Iran, and that around 60 
percent of the company's current revenues stem from that 
contract. Teti further stated that six FB Design boat molds 
had already been supplied to Iran, thus giving Iran an 
indigenous capability to manufacture boats. In Teti's view, 
the future export of boat engines was therefore becoming a 
more salient issue than the export of the boats themselves. 
 
 
5. (S) Ecmin predicted that, while the U.S. would continue to 
urge the GOI to impede shipments of both boats and boat 
engines to Iran, we would also seek consultations with the 
GOI in bilateral and/or multilateral fora in order to 
forestall similar problems in the future.  He suggested that 
our experience with the Iran boats case should be discussed 
at the next round of U.S.-Italy discussions on dual-use 
export controls.  Teti offered the Wassenaar Arrangement as 
the most appropriate multilateral forum to discuss this type 
of case, and added that inclusion of such boats on a 
multilateral export control list could be a key step in 
impeding such exports in the future. Comment: We are not 
certain that Teti has fully consulted with MFA officials 
regarding the possible discussion of these exports under the 
auspices of the Wassenaar Arrangement. End Comment. 
 
6. (S) Late note. Diplomatic Advisor Checchia called January 
15 to clarify the name of the vessel reportedly transporting 
the third fast boat from Venice harbor to Iran o/a January 
15.  He reported that the GOI (presumably customs 
authorities) was searching for the vessel at that moment. He 
would not specify what action Italian authorities would take 
if the boat were located. End note. 
 
7. (S) Comment. We will continue to press Italian authorities 
to impede the export of the two remaining fast boats, and to 
move forward with a ministerial decree. Regardless of what 
these efforts produce, we recommend that Washington agencies 
carefully consider Teti's proposal to address this problem 
within the Wassenaar Arrangement. Such an initiative, along 
with unilateral steps Italy might take to tighten its 
national controls, should be a top agenda item for bilateral 
talks on dual-use controls planned for the first quarter of 
this year.  End comment. 
SKODON 
 
 
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 2004ROME00166 - Classification: SECRET