US embassy cable - 04ROME1594

S E C R E T  ROME 001594 
 
SIPDIS 
 
 
STATE FOR EUR/WE, EUR/PRA, INR/SPM, NEA/NGA, PM/RSAT, 
PM/DTCP 
 
E.O. 12958: DECL: 04/21/2014 
TAGS: ETTC, EIND, PARM, PREL, IT, IR, EXPORT CONTROLS 
SUBJECT: BRIEFING ITALY ON MILITARY/DUAL-USE PROCUREMENT 
EFFORTS BY STATE SPONSORS: FAST BOATS TO IRAN AT CENTER OF 
DISCUSSION 
 
REF: ROME 776 
 
Classified By: Economic Minister-Counselor Scott Kilner for Reasons 1.5 
 (a)(b)(d) and 1.6 x6 
 
SUMMARY 
------- 
 
1. (S) INR Analyst Dr. Thomas Zarzecki, EUR/PRA officer Mark 
Cassayre, and Emboffs met with Italian officials March 30 to 
provide an intelligence briefing on military/dual-use 
procurement efforts in Europe by Iran and other state 
sponsors of terrorism.  The briefing included information 
about the threat to Coalition forces in the Persian Gulf 
posed by such acquisitions and offered examples of how other 
European states have halted similar transfers to Iran.  The 
goals of the briefing were to reiterate USG concerns, 
encourage greater GOI flexibility towards stricter controls 
over exports of concern, and highlight the potential impact 
of the example set by Italy on broader conventional arms 
non-proliferation efforts in Europe. 
 
2. (S) The USG team met with policy makers from the MFA, MOD, 
Ministry of Productive Activities (MPA), and the Prime 
Minister's office -- all key players in the GOI's efforts to 
address the transfer of FB Design fast boats to Iran. Italian 
officials were grateful for the briefing and welcomed further 
dialogue with USG policy, intelligence, and defense trade 
control representatives.  Our interlocutors confirmed that 
the GOI had halted the export of the last fast boat to Iran. 
They highlighted, however, the ongoing constraints of Italian 
law in halting the transfers of items not subject to 
multilateral sanctions or regimes, like the fast boats. 
Nevertheless, the GOI's interagency Consultative Committee on 
Dual-use Goods Exports was studying potential new legal 
mechanisms to block future transfers of such items. They also 
suggested that such exports be addressed in the Wassenaar 
Arrangement or other multilateral fora.  End summary. 
 
Facing a Tough Challenge With Open Minds... 
------------------------------------------- 
 
3. (S) Interlocutors from the Prime Minister's office, MFA, 
and MPA welcomed the briefing and listened intently.  They 
said the GOI took seriously the threat posed by certain 
articles going to military end-users in the state sponsors of 
terrorism, especially Iran. Paolo Dionisi, Assistant 
Diplomatic Advisor to Prime Minister Berlusconi, focused in 
particular on the U.S. information (released to the GOI for 
the first time in this briefing) that some of the fast boats 
were built with reinforced cockpits capable of mounting 
weapons.  Dionisi said he would investigate whether the new 
information would affect the GOI's future approach to the 
issue.  He said the GOI's initial evaluation of the export of 
FB Design fast boats to Iran did not raise any red flags, and 
the firm was a legitimate company seeking markets abroad for 
a superior product. Dionisi acknowledged the weakness of 
Italian law with regard to controlling such exports, though 
he said the GOI attempted to be as flexible as the law 
allowed, and was willing to halt exports that could hurt 
Italian companies if circumstances so warranted.  Dionisi 
also mentioned the U.S.-Italian defense trade dialogue as a 
potential means of pressing Italian companies to cut off 
relations with countries of concern. 
 
4. (S) In a separate briefing, MFA Non-proliferation 
Coordinator Carlo Tripepi was joined by MFA Office of Persian 
Gulf Affairs Director Luigi Maccotta, MPA Director of 
Dual-Use Export Licensing Aldo Doria, and MPA 
consultant/expert Giulio de Martino, as well as Ecmin and 
econoff. Tripepi also confirmed that the GOI had halted the 
final boat transfer. (Note - reftel provides details of the 
GOI's action to halt the final boat, which consisted of a 
formal letter signed by MPA Directors General Amedeo Teti and 
Massimo Goti that directed FB Design to halt the final boat 
 
transfer. End note.)  Maccotta noted that the Iranian 
government had already been pressuring the GOI to rescind its 
action and allow the final boat shipment to proceed; he 
pointed out that such pressure would not sway the GOI from 
its decision to further halt such exports, notwithstanding 
the costs to be borne by FB Design. 
 
5. (S) Tripepi said the GOI would continue to seek a 
permanent mechanism to control future exports of items that 
do not fall clearly under current Italian dual-use 
regulations. The interagency dual-use committee was already 
considering further measures to deal with such exports. 
Tripepi also suggested that such exports might warrant 
discussion within the Wassenaar Arrangement (he recalled 
Wassenaar Arrangement members becoming involved with a 
non-controlled export from Russia to Eritrea several years 
ago). Although the GOI realizes that a formal multilateral 
approach might have trouble gaining traction, added Tripepi, 
it was important that other countries' firms not be able to 
move into a market closed to Italian companies. 
 
...And MOD Defends Past Actions 
------------------------------- 
 
6. (S) At a briefing for MOD actors (also attended by Embassy 
assistant DATT), Italian Defense General Staff Director for 
Intelligence and Security Admiral Andrea Campregher and four 
staffers (Lucio Lepore, Massimo Poli, Ettore Chirico, and 
Luigi Mario di Cesare) focused on past MOD actions related to 
the FB Design exports. MOD officials did not dispute the 
threat posed by Iranian acquisition efforts, as outlined in 
the briefing.  However, upon first mention of FB Design, 
Admiral Campregher announced that he had "authorized" the 
transfer of the company's fast boats to Iran.  His staffer 
explained that when FB Design initially engaged with Iran on 
the potential boat sales, the GOI had reviewed the blueprints 
and determined that the boats had solely civilian 
applications and therefore did not require an export license. 
(Note: It was left unclear whether any agency or agencies 
outside MOD reviewed the plans; if the review constituted an 
official decision; or when such a review took place. End 
note.) 
 
7. (S) Admiral Campregher appeared surprised upon hearing the 
information about the strengthened boat cockpits, and claimed 
that FB Design would have violated Italian law if this were 
true.  He inquired as to the source of the information and 
requested "evidence" of such modifications that would allow 
the GOI to justify in a court of law (if necessary) its hold 
on the transfer. Campregher emphasized the importance of the 
U.S. sharing such information with the GOI much earlier so 
that Italian officials would be made aware of the potential 
military application of items that otherwise did not appear 
to require a license. 
 
8. (S) Campregher stressed that GOI officials had no 
authority to impede a transfer or require a licensing 
determination if the item was not on a control list or if the 
end-user was not subject to multilateral sanctions.  MOD 
officials also cited concerns about their personal liability 
for damages if a court decided the GOI had blocked a transfer 
without legal justification.  The Wassenaar Arrangement, the 
EU, or another body, they said, should establish a 
multilateral standard by which Italy and all member states 
would have to abide. 
 
9. (S) MOD further confirmed that the Italian firm Isotta 
Fraschini was providing new engines for Iran,s three Parvin 
class gunboats, as described in the briefing.  As with the FB 
Design boats, the MOD said that the engines did not meet 
Wassenaar dual-use control standards, and that the GOI had 
therefore let the deal proceed.  Regarding the briefing,s 
mention of the Italian firm Galileo Avionica,s supply of 
modern fire control systems for Syrian T-72 tanks, MOD noted 
that Rome had approved the sale of what were clearly military 
 
vice dual-use items in the late 1990s. 
 
Comment 
------- 
 
10. (S) The GOI officials attending the briefings all noted 
the strict legalistic nature of the existing Italian export 
control process, which generally does not provide for the 
consideration of broader policy goals in the export license 
process.  Finding a legal mechanism within that perspective 
may prove difficult for the GOI, hampering its ability to 
impede other transfers of concern in the future, except 
through less orthodox means as was recently done to stop the 
final boat export.  However, the newly appointed Tripepi, who 
recently replaced long-time MFA Non-proliferation Coordinator 
Ugo de Mohr, appears to favor a more flexible approach to 
controlling the export of sensitive items going to countries 
of concern.  His MPA counterpart Aldo Doria along with 
Doria's boss, DG Teti, have already demonstrated their 
commitment to seriously addressing our concerns. Although 
they may find challenges in Italian law and possible 
resistance from some ministries and industry, the willingness 
of these key GOI actors to seek creative solutions to 
dual-use transfer issues should help our efforts to convince 
the GOI to more tightly control such transfers in the future. 
 
11. (S) Despite examples in the briefing of other European 
countries' unilateral actions to stop similar sales, 
virtually everyone the U.S. team spoke with expressed concern 
that, absent a multilateral approach, any GOI effort to halt 
sales would result in Italian economic losses, while similar 
deals from firms in other countries would go forward.  As we 
continue to persuade the GOI to strengthen its domestic 
export controls on fast boats or other items that straddle 
the dual-use/commercial divide, we may need to emphasize the 
difficulties inherent in a multilateral solution, which 
likely would require long and difficult negotiations. End 
comment. 
 
12. (U) Zarzecki and Cassayre cleared this report. 
 
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SKODON 
 
 
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 2004ROME01594 - Classification: SECRET