US embassy cable - 04MADRID2909

UNCLAS SECTION 01 OF 02 MADRID 002909 
 
SIPDIS 
 
SENSITIVE 
 
SECDEF FOR OSD A.J. TORRES 
JOINT STAFF FOR MAJOR STACY YIKE 
 
E.O. 12958: N/A 
TAGS: MASS, MARR, SP, American - Spanish Relations, Trade Issues 
SUBJECT: SPAIN:  DEFMIN AND HIS DEPUTY ON S-80 SUBS WEAPONS 
PACKAGE COMPETITION 
 
1.  (SBU)  SUMMARY Ambassador Argyros phoned Spanish Defense 
Minister Jose Bono July 16 to reinforce USG concern that the 
bidding process for the Spanish S-80 submarine weapons 
package, in which two U.S. companies are involved, remained 
open and transparent.  Ambassador noted to Bono that the 
bidding deadline had closed during the previous Spanish 
government, but that it now appeared that the process was 
changing to allow French and German firms to compete.  Bono 
claimed the process remained open and transparent and 
expressed his confidence in the U.S. companies involved, but 
noted he had also received calls from the French and German 
Foreign Ministers.  Bono suggested DCM meet with Deputy 
Defense Minister Pardo to further discuss the bidding 
process; Charge met with Pardo July 27 and received a message 
similar to Bono's to the Ambassador.  Pardo said no final 
decision would be made until at least the fall of 2004.  END 
SUMMARY 
 
Ambassador's call to Defense Minister 
 
2.  (SBU)  Ambassador phoned Defense Minister Bono Friday 
July 16 regarding the S-80 warfare system for the Spanish 
S-80 Submarine project.  Ambassador urged Bono and the GOS to 
strongly consider the American companies as potential vendors 
(both Lockheed Martin and Raytheon are bidding for the 
contract). The Ambassador noted that he understood that the 
Minister was reviewing all contracts that were left without 
being executed by the previous administration.  The 
Ambassador noted that it was understandable the new 
government would wish to understand any contracts it would 
have to sign.  However, the Ambassador stressed he hoped the 
review process would be open and transparent and that there 
would be a level playing field.  The Ambassador raised the 
issue of allowing French or other companies to re-enter the 
bidding process as a concern because as he understood it the 
bidding process had already been closed and allowing new 
entries did not seem to be in the spirit of an open and 
transparent process. 
 
3.  (SBU)  Bono responded that he understood the Ambassador's 
concern about the U.S. companies and wanted the Ambassador to 
know that he felt the two that were bidding were good 
companies and that they were highly regarded by the GOS and 
the Spanish Navy.  Bono however added that he had had a 
similar conversation with the French and German Foreign 
Ministers.  Bono told the Ambassador that while the GOS may 
review the previous proposals submitted by the French neither 
the French nor the Germans will have favorable treatment at 
the review. 
 
4.  (SBU)  Bono volunteered that he would instruct his Deputy 
Defense Minister (MOD State Secretary) to call the Embassy 
and provide the details of how the review process will be 
conducted and when it will be decided.   Bono re-emphasized 
he understood why the Ambassador made the call. 
 
Charge's discussion with Deputy Defense Minister 
 
5.  (SBU)  As follow-up, Charge met with MOD State Secretary 
Pardo July 26 to review the issue, as Bono had promised. 
Pardo claimed the U.S. should be "absolutely unworried" by 
the process.  There is absolutely no anti-American bias in 
the effort, nor is there a tendency to favor European 
companies, Pardo claimed.  The GOS would decide on the basis 
of two criteria:  which system the armed forces considered 
the best technologically and which decision would best 
advance Spain's defense industry and its cooperative efforts. 
  In all of this, Pardo repeated, there is "nothing hidden" 
nothing "occult."  Charge emphasized the benefits for 
U.S.-Spain relations and for U.S.-Spanish defense ties if the 
Spanish defense firm Izar was able to do business with a U.S. 
firm on S-80 project.  Pardo responded that defense 
cooperation issues would be "fundamental" to the 
decision-making process on this contract. 
 
6.  (SBU)  Pardo noted that he himself had decided not to 
meet with any of the companies involved (he had turned down a 
meeting with Lockheed Martin reps last week), in order to 
maintain the integrity of the process.  He said that given 
the highly-charged atmosphere with companies vying for a 
lucrative contract, it was natural that "rumors" would arise 
about the process. Charge noted the U.S. concern that the 
technological specifications of the bid had changed in order 
to allow French and German companies to participate.  Pardo 
said there was no formal change in the technological 
specifications, but that the MOD had been or might be in 
touch with some of the companies involved to clarify 
questions or issues. 
 
7.  (SBU)  Pardo stressed the importance to the MOD of 
maintaining strong ties with the U.S., both on a personal and 
political level.  He said Spain wanted to maintain a 
cooperative and friendly relationship with the U.S., and 
noted the two companies involved in the S-80 contract were 
well-regarded. 
 
8.  (SBU)  Pardo told Charge that no decision would be made 
until after Spain's traditional August summer break (e.g. at 
the earliest in the fall). 
MANZANARES