US embassy cable - 04YEREVAN794

S E C R E T SECTION 01 OF 02 YEREVAN 000794 
 
SIPDIS 
 
DEPT FOR EUR/CACEN; INR 
 
E.O. 12958: DECL: 03/31/2014 
TAGS: PTER, PREL, PGOV, AM 
SUBJECT: ARMENIAN INSTITUTE OF APPLIED CHEMISTRY 
 
Classified By: Charge Vivian Walker for reasons 1.5 (B) and (D). 
 
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SUMMARY 
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1. (S) Emboff visited the Armenian Institute of Applied 
Chemistry (ARIAC) for an update on its activities.  The 
chemical institute is going strong, boasting about USD 
270,000 in export sales and USD 50,000 in domestic sales of 
chemical compounds in 2003.  ARIAC's client base includes 
companies from Japan, the United States, Canada, Europe, 
Egypt and Jordan.  AIRAC anticipated an approximate 80 
percent growth in 2004.  ARIAC officials claim to adhere to 
international guidelines concerning the export of dual use 
chemicals.  END SUMMARY. 
 
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ARIAC SOON TO PRIVATIZE 
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2. (S) ARIAC director Gagik Hasratyan claimed that the 
company will soon privatize, noting that ARIAC receives no 
government funding and relies totally on sales of its 
chemical compounds to various international and domestic 
clients.  Hasratyan told us that technically the Government 
of Armenia (GOAM) still owns AIARC but that the financial 
relationship ended in 1994.  Hasratyan hoped that by the end 
of 2004 ARIAC would be fully privatized and then could 
entertain international investment opportunities and possibly 
a public stock offering.  ARIAC had some investment interest 
from Jordanian and Israeli companies but Hasratyan plans to 
hold off on any serious discussion until the privatization 
process is completed. 
 
3. (S) ARIAC has approximately 77 employees of which about 39 
are technical specialists.  Hasratyan said that he wanted to 
expand and was looking for at least 10 more good chemists. 
Salaries were approximately USD 200 a month plus bonuses, 
which Hasratyan felt was competitive for Armenia.  Hasratyan 
showed us ARIAC's web site, WWW.ARIAC.CO.UK., an ARIAC color 
catalog and an export products list which showed the chemical 
compounds for sale along with their international 
identification numbers.  Our tour of the ARIAC featured 
working laboratories with Soviet-era equipment.  Hasratyan 
explained that he wanted to buy new equipment, but in the 
meantime his chemists were able to continue to create 
European quality chemical compounds owing to their experience 
and high expertise.  He said that after ARIAC chemists create 
a chemical compound for a client, they then utilize a nuclear 
magnetic resonance spectroscopy located at a neighboring 
institute to ensure the quality of the compound.  After 
privatization of ARIAC, Hasratyan also would like to receive 
an international certification to manufacture and sell 
pharmaceutical products. 
 
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ARIAC'S CLIENTS 
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4. (S) Hasratyan told us that ARIAC had sold compounds to 
well-known trans-national chemical companies to include 
Lancaster, Oldridge, and Sigma for about 25 percent of what 
they in turn were sold on the world market.  ARIAC was also 
currently negotiating an exclusive contract with a Japanese 
company for a long term supply of chemical compounds. 
Hasratyan said that previously he had negotiated with 
Pakistani and Indian chemical companies without any positive 
results.  ARIAC was also interested in buying and selling 
chemicals with Chinese Chemical companies, but Hasratyan 
stated he was cautious as Chinese companies do not have a 
good reputation for reliability and quality. 
 
5. (S) Hasratyan noted candidly that in 1993 his company was 
involved in the sale of a dual use item to a Syrian entity 
which caught the attention of the U.S. government and was 
subsequently stopped.  Hasratyan said that he understood the 
reasoning but lamented that this had cost his company a great 
deal of money and time and wished those concerns had been 
raised by the GOAM before he put money into the sale. 
Hasratyan told us that he has had limited business contact 
with Syrian entities since then.  Hasratyan added that he 
wanted to do business with Iranian chemical companies but has 
been unsuccessful.  He told us that twice in 1994, the 
Iranian government discussed possible projects with ARIAC; 
once ARIAC lost interest, and another time the Iranians 
simply disappeared from the negotiating table.  Hasratyan has 
a current interest in starting a joint venture with an 
Iranian chemical company to produce food preservatives but 
has had little success in moving it forward. 
 
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SAFEGUARDS IN EXPORTING CHEMICALS 
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6. (S) When asked about export safeguards, Hasratyan 
explained that ARIAC strictly follows UN guidelines 
concerning dual use chemicals.  Before any sale was 
considered, ARIAC had to submit an application to the GOAM 
for approval.  After receiving GOAM approval, ARIAC exports 
then had a final check by customs before being exported. 
Hasratyan added that since most of his sales were a kilogram 
or less, he generally shipped through an overnight delivery 
company.  Hasratyan's only complaint was that the GOAM 
sometimes took too long to approve an export and as a 
consequence ARIAC occasionally lost sales.  Hasratyan also 
said that ARIAC requires its clients to adhere to regulations 
concerning dual use chemicals. On three occasions, he noted, 
European companies had asked for potential dual use chemical 
compounds.  When ARIAC officials asked for the required 
documentation for approval to receive these chemicals, the 
companies never followed up. 
WALKER