US embassy cable - 03ROME3178

C O N F I D E N T I A L  ROME 003178 
 
SIPDIS 
 
 
DEFENSE FOR U/S WYNNE (ACQUISITIONS); 
COMMERCE FOR BIS U/S JUSTER; 
USDOC 4220/MAC/EUR/DDEFALCO; 
STATE FOR PM DAS MAGGI AND FOR T; 
 
E.O. 12958: DECL: 07/09/2013 
TAGS: ETTC, PARM, PREL, IT, EXPORT CONTROLS 
SUBJECT: ITALIAN INDUSTRY MINISTRY HOPES TO EASE TECH 
TRANSFER RULES AT JULY 22 TALKS; AIRS COMPLAINTS ABOUT 
LOCKHEED-MARTIN 
 
Classified By: Acting Deputy Chief of Mission Scott Kilner for reasons 
1.5 (B) and (D). 
 
1. (C) Summary:  On July 8, Ministry of Productive Activities 
(MPA, i.e. Industry) U/S Mario Valducci met with ECMIN to 
discuss the possibility of easing U.S. export controls on 
technology to Italy, in the context of Italy's strong 
political support for the U.S., particularly during the 
recent Iraq war.  Valducci also aired complaints about 
Lockheed-Martin.  He noted that, during his June visit to 
Washington, he had made similar requests of DOD U/S Wynne, 
Commerce U/S Juster and State U/S Bolton. Valducci believed 
that he had been received with understanding in Washington 
and had established a political level dialogue that would 
lead to the transfer of more sophisticated technology to 
Italy.  The planned July 22-23 visit of State DAS Turk Maggi 
to Rome, said Valducci, would permit more in-depth 
discussions and, he anticipated, significant progress toward 
greater/improved tech transfer.  Valducci planned to present 
Maggi with a list of 22 technologies, which the Government of 
Italy would request be transferred in the near future.  ECMIN 
explained the genesis of the Maggi delegation visit and 
stressed the limited focus on dual-use export controls.  He 
also explained the complexities of the USG interagency 
process.  Nevertheless, post believes that Valducci and 
perhaps others in the GOI have unreasonably high expectations 
for Maggi's visit and the July 22-23 talks.  We would suggest 
planning for side discussions with Valducci on this issue, 
perhaps on July 21.  End Summary. 
 
2. (U) U/S Valducci (Ministry of Productive Activities) met 
with ECMIN and other Mission officers, including the Acting 
Chief of the Office of Defence Cooperation, on July 8. 
Valducci was joined by DG Goti, Deputy DG Cuzzoni, Dip 
Advisor Checchia, and Chief of Staff Raimondi.   Valducci had 
requested the meeting to follow up on his meetings during his 
June visit to Washington. 
 
3. (C) Valducci explained that Italy had long been an 
extremely close U.S. ally.  During the recent Iraq war, the 
Berlusconi government had faced down political and public 
opposition in order to support the U.S.  Italy's EU partners 
continually complained that Italy too often chose U.S. rather 
than EU weapons systems.   The decision to pull out of the 
A400M program, as well as other pro-U.S. choices, has meant 
increasing pressure from France and other EU  states.  Yet 
the GOI felt it had not received credit for this from the 
USG.   Italy saw itself left out of the top echelon of allies 
in terms of technology transfer.  The French, Cuzzoni 
alleged, were given access to U.S. technologies denied to 
Italy.  All Italy was asking, he said, was to be treated as 
well as America's other major European allies.   At the 
moment, the French were beginning a major new program (NFI), 
and pressing the Italians to enter.  Italy would prefer to 
work with the U.S., but found itself treated as an outsider. 
 
4. (C) Valducci recounted that he had visited Washington in 
June, and met with U/S Wynne of DOD, U/S Juster of DOC and 
U/S Bolton of State.  He had also met with Rep. Curt Weldon, 
House Appropriations Committee Chairman Young and Sen. Ted 
Stevens.  These meetings had given Valducci an opportunity to 
explain Italy's need for increased technology transfer from 
the U.S.   Valducci felt that he had been heard and 
understood, and that he had established a political dialogue 
that would result in an easing of export controls on 
technology transfer to Italy.  He noted that U/S Bolton had 
mentioned legal restrictions, but Valducci believed that 
these could be resolved via a high level political agreement. 
 The next step, he argued, would be the visit of State DAS 
Turk Maggi to Rome on July 22-23 for bilateral discussions. 
 Valducci would participate in the MFA discussions and 
planned also to meet separately with Maggi to discuss the 
transfer of 22 specific technologies.  A list would be 
provided to Maggi.   (Note:  Embassy requested a copy of the 
list at the meeting, but has not received it.) 
 
5. (C) DG Goti asked whether DAS Maggi could personally 
approve the transfer of such technologies to Italy.  ECMIN 
responded that the system was far more complicated.   While 
Maggi was a key person for the State Department, the export 
control process included several departments.  Moreover, the 
U.S. did not have category A, B, or C allies, each of which 
 
was approved access to broad categories of specified 
technologies.  Rather, specific requests were treated on a 
case-by-case basis, depending on how the narrowly defined 
technology was to be used, whether it might be re-exported 
and many other criteria.   The most successful strategy for 
Italy would be to take one specific case at a time and 
request approval through proper channels, rather than making 
a wholesale request. 
 
6. (C)  Goti responded that he was willing to explain to 
Maggi GOI intentions for all 22 technologies, and accept his 
limitations on the use and/or re-export of each.  The 
important thing, stressed Goti, was to get all 22 
technologies quickly -- not in three or four years, when it 
would be too late.  (Comment: The MPA, on behalf of Italian 
industry, appears to be looking for a political level 
agreement that would significantly streamline procedures and 
shorten the time frame associated with individual tech 
transfers.  End Comment.) 
 
7. (C) ECMIN reiterated that a broad request was unlikely to 
be approved.  He clarified for Valducci that the July 22-23 
meetings at the MFA had been set up for a different -- albeit 
related -- purpose.  The discussions had arisen out of 
concerns expressed by the USG regarding some sensitive 
exports to third countries, especially China.  These 
discussions are an effort to establish a transparent and open 
dialogue between our two governments on how export controls 
are applied and how we can work together.  If we can move 
toward a common understanding on how to deal with sensitive 
technologies, this would be an important first step toward 
closer defense-industrial cooperation. 
 
8. (C) Valducci went on to explain that, in discussions with 
Rep. Weldon, a proposal had emerged for a two-day U.S./Italy 
aerospace workshop in Washington in the fall of 2003 or 
spring of 2004.  All Italian defense companies would be 
represented, and it would allow Italy to show that -- aside 
from close political ties -- Italy cooperates closely with 
the U.S. in defense and industrial areas.   ECMIN asked if 
this proposal had been discussed with any of the Executive 
Branch officials he had met. Valducci thought not.  He 
believed, however, that Ambassador Vento had discussed it 
with U/S Bolton in recent days.  Valducci added that the 
workshop had the support of the Italian defense and research 
ministers. 
 
Lockheed Martin and JSF 
 
9. (C) The other issue raised by Valducci during this meeting 
was his sense that Lockheed Martin had not met Italy's 
expectations as a partner in JSF or in earlier projects. 
While Boeing had been an excellent partner and met all its 
commitments, LM had continually disappointed the GOI. 
Valducci referred to the C27J program, arguing that LM had 
done nothing to sell the product, leaving Italy to do it all. 
 Italy hoped to sell the C27Js to the Coast Guard deep water 
program or to the U.S. national guard, but nothing was 
concluded.  LM was late on meeting its offset commitments for 
the C130J program.  The offset was to be 50 percent over 14 
years, but LM had only complied with 33 percent to date. 
 
10. (C) Italy was committed to JSF, stressed Valducci.  As a 
level two partner, the GOI was putting one billion dollars 
into the program, and saw itself as a real partner in this 
effort.  However, LM didn't seem to have the same view.  LM, 
he charged, did not seem at all interested in using Italian 
industry in the JSF program, despite early promises.  While 
countries such as Canada, that would not even commit to 
buying JSF, had reportedly earned a 67 percent return on 
investment, and the Netherlands had reportedly gotten 45-50 
percent return, Italy had seen no more than a 24 percent 
return.  Of course, noted Valducci, these figures were press 
reports, because LM does not provide any information to the 
Ministry of Productive Activities.  (Note:  LM deals only 
with the Ministry of Defense on JSF, at the insistence of the 
National Armaments Director Adm. Di Paola.) 
 
11. (C) Valducci and Cuzzoni both emphasized that Italy was 
coming close to another key decision point on JSF 
participation (not further identified), and that LM's 
disappointing performance might be a factor in this decision. 
 
  While Adm. Di Paola had, according to Goti, persuaded LM to 
promise some additional contracts would be given to Italian 
firms, no results had yet been seen.  Goti added that "We 
want to continue with JSF and with the United States.  Help 
us to help you."  He asked that the USG press LM to treat 
Italian firms more fairly. 
 
Comment: 
 
12. (C)  We have found that GOI officials in other Italain 
ministries (MFA, MOD and MOI, as well as some in the MPA) 
have a more realistic understanding of U.S. tech 
transfer/export control processes than that expressed by 
Valducci.  Despite our efforts to dampen expectations, 
Valducci (perhaps under the influence of para-statal 
Finmeccanica -- septel) appears to maintain unrealistic views 
regarding the Maggi visit and the July 22-23 discussions.  We 
recommend that DAS Maggi consider separate meetings at the 
MPA. 
 
14. (C) On the JSF/Lockheed issue, the MPA will have a major 
voice in any new funding decisions for JSF, as does Adm. Di 
Paola.  The JSF program decision to give certain sole source 
contracts to strategic partners, including Italy, may be a 
first step in meeting the GOI's concerns.  However, the total 
lack of contact between LM and the MPA on JSF has caused a 
shaky relationship to deteriorate further.  The Embassy will 
work to provide reliable and complete information on the JSF 
program to MPA officials as they evaluate their next steps. 
Sembler 
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	2003ROME03178 - Classification: CONFIDENTIAL