US embassy cable - 05VIENNA331

S E C R E T SECTION 01 OF 03 VIENNA 000331 
 
SIPDIS 
 
STATE FOR EUR/AGS, EUR/PRA, NP/ECNP 
 
E.O. 12958: DECL: 02/04/2015 
TAGS: PARM, PREL, ETTC, AU 
SUBJECT: AUSTRIA:  SNIPER RIFLES TO IRAN:  COMPANY HEAD 
REMAINS HARD OVER 
 
REF: STATE 9770 AND PREVIOUS 
 
Classified By: AMBASSADOR W.L. LYONS BROWN.  REASONS:  1.4 (B) AND (D). 
 
1.  (S) Ambassador and DCM called on Ambassador Hans-Peter 
Manz, the Chancellor,s diplomatic advisor, at Manz,s 
request on February 2 to discuss the Steyr-Mannlicher sale of 
sniper rifles to Iran (reftels).  Manz said his government 
wanted to avoid creating any wrong impressions in Washington: 
 the Austrians took the issue very seriously and the 
Chancellor had been informed of the U.S. concerns and 
requests for information and assurances. Although U.S. and 
Austria views differed on the question of how best to promote 
the emergence of a democratic and peaceful Iran, Manz said 
the Austrian government clearly understood the U.S. concern 
to protect coalition troops in Iraq. 
 
2.  (S) The Ambassador agreed that neither country wanted a 
disruption in our relations, but said he wanted to leave no 
doubt about the U.S.,s profound sensitivity to weapons 
transfers to Iran. He outlined the sequence of U.S. 
engagement with the Austrian government regarding the rifle 
transfer; explained the U.S. legislation that could result in 
sanctions against the GoA or Steyr-Mannlicher; and reiterated 
our request for information on the sales and assurances the 
Austrians would not allow future transfers. He told Manz that 
the Austrians could expect intense U.S. interest in any sales 
to Iran, especially but not only if weapons were involved, 
and they could also expect us to protest vigorously any 
transaction or overtures we found worrisome.  The Ambassador 
pointed out that he was still waiting for and expected a high 
level authoritative answer to the questions he had presented 
to the Interior Minister on January 17. 
 
3.  (S) Manz said that the ministries of Foreign Affairs, 
Interior, and Economics had carefully scrutinized 
Steyr-Mannlicher,s original application for an export 
license when it was submitted about a year ago.  The 
company,s request totaled over two thousand sniper rifles. 
The Iranian border guard was listed as the end user.  The 
Austrians agreed that that the weapons would be useful in 
Iran,s efforts to control its porous borders, and the 
transfer fit into Europe,s campaign to enhance Iran,s 
anti-narcotics capabilities.  The Austrian reviewers also 
concluded, however, that 2000 weapons were too many for the 
stated purpose and therefore restricted the license to only 
800 rifles. They had also incorporated safeguards that Manz 
claimed would make sure that the weapons went and stayed 
where the Iranian end use certificate said they were to go 
to. 
 
4.  (S) Turning to the U.S. request for information on the 
serial numbers of the weapons already shipped, Manz said that 
Austrian data privacy laws applied to the serial numbers. 
Steyr-Mannlicher would have to waive these rights before the 
numbers could be conveyed to the U.S.  The Austrian 
government had, however, been urging Steyr-Mannlicher to 
agree to provide the serial numbers.  Manz appeared confident 
the company would hand over the list in a meeting scheduled 
February 3 between the company president and representatives 
of the U.S. Embassy and the Interior Ministry. 
 
5.  (S) On the issue of future transfers, Manz said flatly 
that the government would not license the sale of more 
rifles.  (Note:  see apparent discrepancy with statements of 
Steyr-Mannlicher president, para 8 below).  When pressed by 
the Ambassador whether this constituted the official and 
authoritative answer to one of the U.S. queries, Manz said 
no; he expected the government to respond formally after 
inter-ministerial consultations following the February 3 
discussions with Steyr-Mannlicher. 
 
--------------------------------------- 
MEETING WITH STEYR-MANNLICHER PRESIDENT 
--------------------------------------- 
 
6.  (S) EconPolCouns met with Steyr-Mannlicher president 
Wolfgang Fuerlinger at the latter's request on February 3. 
Two representatives attended from Austria's Federal Office 
for the Protection of the Constitution and Anti-Terrorism 
(BVT).  Fuerlinger had asked to meet with Emboffs and 
Austrian officials in order to respond to the U.S. request 
for the number of sniper rifles already shipped to Iran, 
their serial numbers, and a halt to all further shipments. 
 
7.  (S) Fuerlinger asserted that he was in full compliance 
with Austrian law:  he had applied for the appropriate export 
permits and had received the requisite approval.  Now the 
U.S. was asking him to forego the Iran deal, which had 
implications for future deals with Iran.  Business with Iran 
represented "by far" the largest part of his global business, 
he said, and if we wanted him to give it up, he wanted 
compensation.  He said that the best way to compensate him 
would be for the U.S. Army to select his new AUG-A3 assault 
rifle in the ongoing acquisition process.  He claimed the 
specifications applied perfectly to his product, adding that 
U.S. troops in Iraq had seen his AUG-A2 in the hands of 
Australian troops and wanted the same thing.  He said he 
should win an open competition in any event.  Fuerlinger said 
that he would give us the quantity of weapons in Iran, the 
serial numbers of those weapons, and access to all his files 
regarding Iran contracts, as well as halt all future dealings 
with Iran in exchange for "compensation" in the form of the 
assault rifle contract. 
 
8.  (S) There was no legal obligation to provide the U.S. 
with the number of weapons now in Iran or with their serial 
numbers, Fuerlinger said.  (Note:  The GOA agrees that the 
serial numbers are covered by Austrian data protection laws. 
Manz told the Ambassador that the numbers of rifles shipped 
was not covered.  End note.)  If he decided to do so -- which 
he would do only in the context of the "deal" he was 
proposing -- it would be entirely voluntary.  Regarding the 
numbers of weapons, he claimed the current contract -- which, 
he said, was for more than 800 rifles -- represented some 20 
percent of his total projected sale to Iran.  Some 25-28 
million euros in contracts remained.  He said, however, that 
the sniper rifle contract was only a small part of the entire 
arms relationship he was developing with Iran.  "If you don't 
like the sniper rifles, you'll really hate what comes next," 
he said. 
 
9.  (S) The serial numbers presented a problem, he claimed, 
because anyone could acquire one of the sniper rifles from a 
legitimate source elsewhere in the world (they are available 
in the U.S., Canada and Britain, he said).  Fuerlinger 
asserted it was "very easy" to erase and alter the serial 
number because the numbers are laser engraved.  If the 
altered number of a weapon found in Iraq matched one of those 
in Iran, he would then be in trouble.  (Note:  one of the 
Austrian BVT officials who accompanied us told us later that 
something similar had really happened with regard to other 
Steyr-Mannlicher weapons in another country.  End note.)  He 
said, however, that his company would respond "immediately" 
to any request to verify the serial number of any weapon we 
found in the wrong hands. 
 
10.  (S) Fuerlinger said he was well aware of U.S. law, 
including the Iran Non-Proliferation Act.  He said that in 
terms of current orders, the Iran market was "ten times" as 
large as his U.S. business.  He would "much rather" do 
business with the U.S., but if it came to a choice between 
cutting off his business with the U.S. or cutting off his 
business with Iran, he would choose to keep his business with 
Iran.  This might foreclose his long term prospects in the 
west, he said, but he would then "close up shop and sell the 
company." 
 
11.  (S) Fuerlinger, who has been the president of 
Steyr-Mannlicher for five years, lamented how difficult it 
was becoming to sell war materiel on the international 
market.  In the last five years, he said, Austria had made it 
impossible to transfer technology.  As a result, he had set 
up shop in Malaysia in a joint venture with the Malaysian 
state arms company.  Fuerlinger maintained a 51 percent 
share, and would make business decisions.  (For instance, he 
said that if the U.S. were to acquire the AUG-A3, he could 
guarantee that no further business would go to Iran from 
Malaysia or any of Steyr-Mannlicher's worldwide operations.) 
 
12.  (S) In a FAX to the Embassy delivered February 4, 
Fuerlinger reiterated that Steyr-Mannlicher would not provide 
the serial numbers.  He also renewed his desire to obtain a 
share of the U.S. market to compensate the company for a 
withdrawal from the Iranian market.   On the serial numbers, 
he said, 
 
"We cannot agree to the release of serial numbers for two 
reasons: 
 
1.  Seriousness and confidentiality are central business 
values which we hold in high regard in relation to all our 
business partners. 
 
2.  Even the release of serial numbers could endanger our 
business relationships with the referenced customer as well 
as with clients in the entire region.  The consequences for 
the well-established Steyr Mannlicher and its employees would 
be incalculable." 
 
Fuerlinger goes on to note that the region is the primary 
source of contracts, which was the reason for the 
establishment of a production facility in Southeast Asia.  He 
says that this is because the U.S. government has put 
barriers to the company's products, citing an import "ban" on 
the Steyr AUG assault rifle.  He complains that the company 
has received no support for its efforts establish a factory 
in the U.S.  He concludes, 
 
"Finally, we would like to stress once more that we are 
extremely interested in fair access to the U.S. market.  In 
the U.S., our product line, which is in heavy demand, would 
certainly put us in a position to compensate for a possible 
withdrawal of our company from the Middle Eastern market." 
 
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COMMENT 
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13.  (S) In his discussion with the Ambassador, Manz 
indicated he expected the company to surrender the serial 
numbers (note:  Amb. Hans Winkler, deputy Secretary General 
of the Foreign Ministry, suggested the same to the Ambassador 
last week.  End note.)  The GOA is on the hook to get back to 
the Ambassador with a final response to the demarche. 
Ambassador intends to give them a brief period to digest or 
turn around the disappointing results of the Fuerlinger 
meeting but will press Manz again next week. 
Brown