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O 051640Z MAY 03
FM SECSTATE WASHDC
TO AMEMBASSY BEIJING IMMEDIATE

S E C R E T STATE 115323 
 
E.O. 12958: DECL: 1.6 (X1, X6) 
TAGS: PARM PREL ETTC CBW CH IR
SUBJECT: S37-03: IRANIAN PROCUREMENT OF GLASS-LINED 
CHEMICAL PROCESSING EQUIPMENT FROM CHINESE FIRMS (S) 
 
CLASSIFIED BY: NP/CBM DIRECTOR VANN VAN DIEPEN. REASON: 1.5(C AND D). 
 
¶1. (U) THIS IS AN ACTION REQUEST. PLEASE SEE PARAGRAPH 4. 
 
¶2. (S) BACKGROUND: WE WANT TO SHARE WITH CHINESE AUTHORITIES 
FURTHER INFORMATION CONCERNING IRANIAN PROCUREMENT OF 
GLASS-LINED CHEMICAL PROCESSING EQUIPMENT AND TECHNOLOGY, AS 
WELL AS BW-USEFUL JET MILLS/MICRONIZERS, FROM THE FOLLOWING 
CHINESE ENTITIES: 
 
(1) MR. HUO SHIHONG, WHO: 
 
- IN 2002 REPRESENTED THE CHINESE FIRM ZIBO CHEMICAL 
EQUIPMENT PLANT (ZCEP) (IN MAY 2002 ZCEP WAS SANCTIONED 
PURSUANT TO THE IRAN NONPROLIFERATION ACT) 
 
- IN 2003 IS REPRESENTING CHINESE FIRMS: 
 
- ZIBO CHEMET EQUIPMENT COMPANY, LTD., 
 
- ZIBO INTERNATIONAL ECONOMIC AND TECHNICAL COOPERATION 
CORPORATION, AND 
 
- SOUTH INDUSTRIES SCIENCE AND TECHNOLOGY TRADING 
COMPANY, LTD.; 
 
(2) JIANGSU YONGLI CHEMICAL AND TECHNOLOGY IMPORT AND EXPORT 
COMPANY (SANCTIONED IN MAY 1997 AND JULY 2002 PURSUANT TO THE 
CHEMICAL AND BIOLOGICAL WEAPONS CONTROL AND WARFARE 
ELIMINATION ACT, AND IN JUNE 2001 PURSUANT TO THE IRAN 
NONPROLIFERATION ACT); 
 
(3) SUMEC ENGINEERING COMPANY, LTD.; AND 
 
(4) TANGSHAN DACHANG CHEMICALS COMPANY, LTD. 
 
¶3. (S) HUO SHIHONG IS OF PARTICULAR NOTE BECAUSE HE IS 
ATTEMPTING TO EVADE CHINESE EXPORT CONTROLS BY PROVIDING 
MISLEADING DESCRIPTIONS OF THE EQUIPMENT FOR EXPORT TO IRAN 
AND FALSIFYING THE NAME OF THE ACTUAL IRANIAN END-USER. WE 
WANT THE CHINESE AUTHORITIES TO EXERCISE SPECIAL SCRUTINY 
OVER ALL SHIPMENTS BY THE ENTITIES PREVIOUSLY MENTIONED -- 
PARTICULARLY SERIAL PROLIFERATOR HUO SHIHONG AND HIS 
AFFILIATED ENTITIES -- GIVEN THE RISK THAT THEY ARE 
CONCEALING THE TRUE NATURE OF THEIR TRANSFERS OR ASSISTANCE 
TO IRAN. 
 
¶4. (S) ACTION REQUEST: REQUEST POST IMMEDIATELY CONVEY THE 
POINTS IN PARAGRAPH 5 TO APPROPRIATE HOST GOVERNMENT 
OFFICIALS, AND REPORT RESPONSE. 
 
¶5. BEGIN TALKING POINTS/NONPAPER: 
 
(S - REL CHINA) 
 
-- IN THE SPIRIT OF OUR NONPROLIFERATION COOPERATION, WE WANT 
TO SHARE WITH YOU INFORMATION OF CONCERN. 
 
-- WE HAVE INFORMATION THAT SEVERAL CHINESE ENTITIES CONTINUE 
TO SEEK TO PROVIDE IRAN -- AND IN AT LEAST ONE CASE THUS FAR 
THIS YEAR DID PROVIDE -- GLASS-LINED CHEMICAL PROCESSING 
EQUIPMENT AND TECHNOLOGY CONTROLLED BY CHINA'S EXPORT 
REGULATIONS, AS WELL AS DUAL-USE BIOLOGICAL EQUIPMENT. 
 
-- ACCORDING TO THIS INFORMATION, AT LEAST ONE OF THESE 
CHINESE ENTITIES IS ATTEMPTING TO EVADE CHINESE EXPORT 
CONTROLS BY PROVIDING MISLEADING DESCRIPTIONS OF THE 
EQUIPMENT FOR EXPORT TO IRAN AND FALSIFYING THE NAME OF THE 
ACTUAL IRANIAN END-USER. 
 
ZCEP 
---- 
-- IN MARCH 2002 WE SHARED INFORMATION THAT IRAN WAS SEEKING 
A LARGE QUANTITY OF GLASS-LINED CHEMICAL PROCESSING EQUIPMENT 
FROM TWO CHINESE FIRMS, ONE OF WHICH WAS ZIBO CHEMET 
EQUIPMENT PLANT, ALSO KNOWN AS ZIBO CHEMICAL EQUIPMENT PLANT 
(ZCEP). 
 
-- ZCEP'S ADDRESS IS THE SOUTH END OF SHANQUAN ROAD, ZIBO 
CITY 255063, SHANDONG PROVINCE. THE COMPANY'S NAME IN PINYIN 
IS ZIBO SHI HUANGONG SHEBEI CHANG (STC: 3245 0590 1579 0553 
1562 6080 0271 0617). ZCEP MAY BE THE TRADING NAME OF THE 
ZIBO BAODING CHEMICALS (GROUP) CORPORATION AT THE SAME 
ADDRESS. 
 
-- IN JULY 2002, BEFORE PROMULGATION OF CHINA'S NEW CHEMICAL 
EXPORT CONTROLS, ZCEP PROVIDED IRAN WITH LARGE AUSTRALIA 
GROUP (AG)-CONTROLLED GLASS-LINED CHEMICAL REACTOR VESSELS 
AND ASSOCIATED COMPONENTS. 
 
-- IN MAY 2002, ZCEP ALSO PROVIDED IRAN WITH A DUAL-USE 
PNEUMATIC JET MILL WHICH, ALTHOUGH NOT AG-CONTROLLED, CAN 
MILL PARTICLES TO LESS THAN 5 MICRONS -- AN IDEAL SIZE FOR 
AEROSOL DELIVERY OF BW AGENTS. 
 
-- ZCEP WAS SANCTIONED BY THE UNITED STATES, PURSUANT TO U.S. 
LAW, IN MAY 2002 FOR TRANSFERS OF AG-CONTROLLED ITEMS TO IRAN. 
 
HUO SHIHONG 
----------- 
-- IN 2002, ZCEP'S PRINCIPAL REPRESENTATIVE IN TRANSACTIONS 
WITH IRAN WAS CHINESE NATIONAL HUO SHIHONG. 
 
-- WE NOW HAVE INFORMATION THAT, DESPITE CHINA'S NEW EXPORT 
CONTROLS, HUO CONTINUES TO SEEK TO PROVIDE IRAN WITH AG- AND 
CHINESE EXPORT REGULATION-CONTROLLED GLASS-LINED CHEMICAL 
PROCESSING EQUIPMENT. 
 
-- IN 2003, HUO APPARENTLY IS REPRESENTING THE FOLLOWING 
FIRMS -- ZIBO CHEMET EQUIPMENT COMPANY, LTD., ZIBO 
INTERNATIONAL ECONOMIC AND TECHNICAL COOPERATION CORPORATION, 
AND SOUTH INDUSTRIES SCIENCE AND TECHNOLOGY TRADING COMPANY, 
LTD. 
 
-- ZIBO CHEMET EQUIPMENT COMPANY'S ADDRESS IS 3RD FLOOR, 137 
NEW WORLD COMMERCIAL STREET, ZIBO CITY, 255000, SHANDONG 
PROVINCE. THE COMPANY'S NAME IN PINYIN IS ZIBO BEITE HUGONG 
SHEBEI YOUXIAN GONGSI (STC: 3245 0590 6292 3676 0553 1562 
6080 0271 2589 7098 0361 0674). 
 
-- ZIBO INTERNATIONAL ECONOMIC AND TECHNIC COOPERATION 
CORPORATION'S ADDRESS IS 191 ZHONGXIN ROAD, ZIBO CITY, 
SHANDONG PROVINCE. 
 
-- SOUTH INDUSTRIES SCIENCE AND TECHNOLOGY TRADING COMPANY, 
LTD. HAS TWO ADDRESSES: 
 
- 10 CHEDAOGOU, HAIDIAN DISTRICT, BEIJING 
 
- 38 HANGKONG BYSTREET, XICHENG, BEIJING 
 
-- HUO IS ATTEMPTING TO DISGUISE TRANSFERS OF CONTROLLED 
GLASS-LINED CHEMICAL REACTOR VESSELS FROM CHINESE AUTHORITIES 
BY DESCRIBING THEM AS "ANTI-ACID DISTILLATION UNITS" OR 
"ANTI-ACID VESSEL DISTILLATION UNITS." 
 
-- HUO HAS BEEN SUCCESSFUL ON AT LEAST ONE OCCASION SINCE 
CHINA'S NEW EXPORT CONTROLS WERE PROMULGATED IN TRANSFERRING 
CHINESE-CONTROLLED GLASS-LINED EQUIPMENT TO IRAN. IN LATE 
JANUARY OR EARLY FEBRUARY 2003, IRAN RECEIVED ONE 2000-LITER 
GLASS-LINED CHEMICAL REACTOR VESSEL AND ASSOCIATED COMPONENTS 
FROM HUO. 
 
-- HUO ALSO IS SEEKING TO PROVIDE IRAN WITH OTHER DUAL-USE 
ASSISTANCE SUCH AS: 
 
- CHINESE-EXPORT-CONTROLLED TECHNOLOGY TO REPAIR 
GLASS-LINED CHEMICAL REACTOR VESSELS WITH CAPACITIES OF 
1500 LITERS TO 10,000 LITERS; 
 
- CENTRIFUGES THAT CHINESE EXPORT REGULATIONS MAY CONTROL 
DEPENDING ON THEIR TECHNICAL SPECIFICATIONS; AND 
 
- DUAL-USE JET MILLING SYSTEMS/MICRONIZERS THAT, WHILE NOT 
CONTROLLED, MAY BE CAPABLE OF MILLING PARTICLES TO AN 
APPROPRIATE SIZE FOR BW AGENT DISSEMINATION. 
 
JIANGSU YONGLI 
-------------- 
-- WE ALSO HAVE INFORMATION CONCERNING OTHER CHINESE FIRMS 
THAT ARE SEEKING TO SUPPLY IRAN WITH CONTROLLED GLASS-LINED 
CHEMICAL PROCESSING EQUIPMENT. 
 
-- IN FEBRUARY 2003, THE CHINESE FIRM JIANGSU YONGLI CHEMICAL 
AND TECHNOLOGY IMPORT AND EXPORT COMPANY -- WHICH IS A 
SUBSIDIARY OF THE NANJING CHEMICAL INDUSTRIAL GROUP -- SOUGHT 
TO PROVIDE IRAN WITH CHINESE-CONTROLLED DUAL-USE CHEMICAL 
PRODUCTION EQUIPMENT INCLUDING 5000-LITER GLASS-LINED REACTOR 
VESSELS AND 500-LITER GLASS-LINED RECEIVERS. 
 
-- ON THREE SEPARATE OCCASIONS (1997, 2001, AND 2002), THE 
U.S. IMPOSED SANCTIONS, PURSUANT TO U.S. LAW, ON JIANGSU 
YONGLI FOR ITS KNOWING AND MATERIAL CONTRIBUTIONS TO CBW 
PROGRAMS AND ITS TRANSFER OF AG-CONTROLLED ITEMS TO IRAN. 
 
SUMEC, TANGSHAN DACHANG CHEMICALS 
--------------------------------- 
-- IN JANUARY 2003, THE CHINESE FIRM SUMEC ENGINEERING 
COMPANY, LTD., NANJING, AGREED TO SUPPLY GLASS-LINED AND 
OTHER CHEMICAL REACTOR SPARE PARTS FOR A TURNKEY POLYALUMINUM 
CHLORIDE PRODUCTION LINE IT HAD PROVIDED TO IRAN. 
 
-- IRAN ALSO WAS SEEKING A GLASS-LINED CHEMICAL REACTOR 
VESSEL -- PROBABLY WITH A CAPACITY OF 5000 LITERS AND THUS 
CONTROLLED BY CHINESE EXPORT REGULATIONS -- FROM SUMEC AND 
ANOTHER CHINESE FIRM, TANGSHAN DACHANG CHEMICALS COMPANY, 
LTD. (ADDRESS: 116 XINHUA WEST ROAD, TANGSHANG CITY, HEBEI 
PROVINCE). IRAN ALSO SOUGHT SPARE PARTS FOR THE GLASS-LINED 
REACTOR, INCLUDING A REACTOR AGITATOR BLADE, FROM TANGSHAN 
DACHANG CHEMICALS COMPANY. 
 
CONCLUSION 
---------- 
-- SPECIAL SCRUTINY OF ALL SHIPMENTS BY THE ENTITIES 
PREVIOUSLY MENTIONED -- PARTICULARLY SERIAL PROLIFERATOR HUO 
SHIHONG AND HIS AFFILIATED ENTITIES -- IS MERITED GIVEN THE 
RISK THAT THEY ARE CONCEALING THE TRUE NATURE OF THEIR 
TRANSFERS OR ASSISTANCE TO IRAN. 
 
-- WE HOPE THIS INFORMATION IS OF ASSISTANCE IN IMPLEMENTING 
AND ENFORCING YOUR EXPORT CONTROLS, INCLUDING THROUGH THE USE 
OF CATCH-ALL EXPORT CONTROL AUTHORITY. 
 
-- WE WOULD WELCOME ANY INFORMATION YOU CAN SHARE ON THESE 
MATTERS. 
 
END TALKING POINTS/NONPAPER. 
 
¶6. (U) PLEASE BEGIN RESPONSES WITH S37-03 AND SLUG FOR 
NP/CBM, EAP/CM, NEA/NGA, AND INR/SPM. 
POWELL