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S E C R E T STATE 098975

SIPDIS E.O. 12958: DECL: 09/16/2033

TAGS: ECON EFIN KNNP PARM PTER IR UK CH SK HK

SUBJECT: URGING COALITION ALLIES TO APPROACH BEIJING ON CHINESE PROLIFERATION

Classified By: ISN Patricia A. McNerney for reasons 1.4 (b) and (d).

1.(U) This is an action request. Please see paragraph 3

. ------------------ SUMMARY/BACKGROUND ------------------

2.(S) Getting China to aggressively implement United Nations Security Council resolutions as well as more effectively enforce its own export controls regarding transfers of dual-use and military items to Iran is an essential component of our overall diplomatic strategy to thwart Iran's pursuit of nuclear weapons and delivery systems for weapons of mass destruction. We are therefore approaching key countries to enlist their cooperation in convincing Beijing to stop Chinese entities from selling commodities used in Iran's weapons programs or munitions that could be retransferred by Iran to terrorists or insurgents in the Middle East and Afghanistan. Posts are instructed to present the enclosed nonpaper outlining our concerns, to ascertain to what degree they share our assessment, and to request they approach China on our shared proliferation concerns.

------------------------ OBJECTIVE/ACTION REQUEST ------------------------

3.(S/REL BULGARIA, CZECH REPUBLIC, ITALY, POLAND, ROMANIA, SLOVAKIA, SLOVENIA, SPAIN) Washington requests Posts deliver the non-paper in paragraph 4 to appropriate host government officials in the ministries of foreign affairs and finance. Post should pursue the following objectives: -- Approach host government officials to enlist their cooperation in convincing Beijing to stop Chinese entities from selling commodities used in Iran's nuclear and missile programs or munitions that could be retransferred by Iran to terrorists and insurgents in the Middle East and Afghanistan; -- Present the nonpaper in paragraph 4 outlining our concerns, ascertain to what degree they share our assessment, and request they approach China with our concerns on these proliferation issues; -- Note that such interventions with Beijing should highlight the shared concern of the international community that China needs to do more to counter the international security threat presented by Iran; -- Advise that in raising their concerns with China, they should highlight the importance of Beijing setting a good example as a responsible international stakeholder on nonproliferation issues; and, -- Note that perceptions within their countries that Beijing has become a supporter or defender of Iran, a country widely viewed as a sponsor of terrorism and one that refuses to address international concerns over its nuclear programs, could ultimately damage China's reputation and its bilateral relationship with addressee countries.

---------------- NONPAPER FOR BULGARIA, CZECH REPUBLIC, ITALY, POLAND, ROMANIA, SLOVAKIA, SLOVENIA, SPAIN ----------------

¶4. (SECRET//REL BULGARIA, CZECH REPUBLIC, ITALY, POLAND, ROMANIA, SLOVAKIA, SLOVENIA, SPAIN) BEGIN POINTS: -- We are sharing information with a number of key allies to develop a concerted diplomatic approach to China to (1) persuade China to enforce its export control laws more effectively and to aggressively implement relevant UNSCRs to prevent transfers and transshipment of items to Iran's nuclear and ballistic missile programs or of conventional arms to Iran; (2) obtain an agreement from China to thoroughly verify the bona fides of Iranian end users; (3) persuade China to conduct an inventory of those arms already transferred to Iran to determine the extent of diversion and prevent future diversions; and (4) obtain China's agreement to strictly enforce end-use requirements placed on Iran in order to prevent onward transfers of conventional arms to militants in Iraq and Afghanistan.

-- Over the past several years, the U.S. has made repeated approaches to Beijing at all levels regarding transfers by Chinese entities of weapons-related items to Iran, as well as transshipments of concern via Chinese sea ports.

-- We are particularly concerned that Iran has in turn supplied weapons purchased from China to militants fighting against U.S. and Coalition forces in Iraq and Afghanistan.

-- While China's nonproliferation record has improved in some areas, certain state-owned Chinese entities and private firms continue to export or transship key items and/or dual-use technology needed to develop weapons of mass destruction or their means of delivery, as well as conventional weapons to Iran.

-- Chinese companies continue to deal with companies that are fronts for entities designated under UNSCRs 1737, 1747, and 1803, which require Member States to "ensure that any funds, financial assets or economic resources are prevented from being made available by their nationals or by any persons or entities within their territories, to or for the benefit of" persons and entities designated in these sanctions. Any transaction involving UNSCR-designated entities or those acting on their behalf would likely be contrary to the asset freeze provision.

-- Chinese companies continue to transfer items to Iran, regardless of end-user, that are prohibited pursuant to UNSCRs 1737, 1747 and 1803 due to their possible use in Iran's nuclear or delivery vehicle programs. UNSCRs 1737 and 1803 also establish a requirement on states to prevent the transfer, directly or indirectly from their territories or by their nationals, to or for the benefit of Iran, of sensitive nuclear and missile-related items (including Nuclear Suppliers Group (NSG) and Missile Technology Control Regime (MTCR)-controlled items).

-- China has insisted that exports of non-listed, dual-use goods are outside the scope of UNSCRs 1737, 1747, and 1803 and has adopted a narrow interpretation of the asset freeze requirement that does not extend to freezing commodity shipments owned or controlled by UNSC-designated entities or those acting on their behalf.

-- When confronted with U.S. evidence that Iran provided Chinese-origin arms to militants in Iraq and Afghanistan, Beijing has asserted that it takes U.S. concerns seriously, but that it is winding down arms sales to Iran and respects Iran's end user guarantees. It has also insisted on physical inspection of seized weapons before accepting U.S. allegations that the weapons are of Chinese origin and were retransferred by Iran.

-- U.S. pressure does seem to have achieved some concrete results: Chinese arms sales to Iran dropped from roughly $45 million in 2006 to roughly $14 million in 2007. Given the lingering and potential threat to our Coalition troops, we want to maintain the pressure on China.

-- We also believe it is necessary to urge China to investigate and take steps to prevent Chinese companies from engaging in deceptive financial practices. To that end, we also urge your government to be vigilant to possible proliferation-related financial activities between China and Iran by entities under your jurisdiction.

-- We would be interested to learn whether your own intelligence assessments of China's dealings with Iran supports our experience and to what extent your government shares our concerns.

-- We ask that your government approach China on these proliferation issues and highlight the shared concern of the international community that Beijing needs to do more to counter the international security threat presented by Iran.

-- To counter Chinese insistence that it is following the "letter of the law" with regard to UNSCRs, we have attempted to drive home to Chinese officials that if China comes to be perceived within the U.S as a supporter or defender of Iran, a country widely viewed as a sponsor of terrorism and one that refuses to address international concerns over its nuclear programs, that this could ultimately damage China's reputation and its bilateral relationship with the United States. To the extent that your government thinks this might be effective in your own approach to China, we recommend this line of argument.

-- We urge your government to pressure China to cease arms sales to Iran given Tehran's unwillingness to prevent transfers to anti-Coalition forces.

-- Moreover, engagement with China should highlight the importance of Beijing setting a good example as a responsible international stakeholder and actor on nonproliferation issues in general.

-- The following section provide concrete examples of Chinese-made weapons found in Iraq.

CHINESE-PRODUCED WEAPONS IN IRAQ

-- Our military forces in Iraq have captured a number of new-condition Chinese produced small arms from Shia militants in Iraq. These weapons have been found together with newly-produced Iranian military materiel.

-- Our forces have also recovered one expended missile from a 2002-vintage Iranian Misagh-1 man-portable air defense system (MANPADS) that was fired at a Boeing 747 civilian airliner over Baghdad in August 2004. Based on U.S. examination of the Misagh-1, we have concluded that it is based on the Chinese QW-1 MANPADS and is assembled in Iran using a mix of Chinese and Iranian parts. In addition, we recently recovered two Chinese-origin QW-1 MANPADS that Iran had transferred to Iraqi insurgents.

-- We have also recovered in Iraq since mid-2006 hundreds of newly-produced Iranian PG-7-AT1 rocket-propelled grenades that contain Chinese-made base detonators manufactured as recently as 2004. Iraqi Shia militants repeatedly have fired these grenades at Coalition forces. -- We look forward to working with you on this and other related security and counter-proliferation matters, and are prepared to provide additional assistance as appropriate. END POINTS FOR BULGARIA, CZECH REPUBLIC, ITALY, POLAND, ROMANIA, SLOVAKIA, SLOVENIA, SPAIN.

------------------ REPORTING DEADLINE ------------------

¶5. (U) Posts should report results within seven days of receipt of cable. Please slug replies for ISN, T, Treasury, NEA and EUR. Please include SIPDIS in all replies.

---------------- POINT OF CONTACT ----------------

¶6. (U) Washington point of contact for follow-up information is XXXXXX XXXXXX

¶7. (U) Department thanks Posts for their assistance. 
RICE