This record is a partial extract of the original cable. The full text of the original cable is not available.

S E C R E T  ROME 003842 
 
SIPDIS 
 
 
STATE FOR PM/DTCP, NP/NPC/ECNP, EUR/WE 
DOD FOR SPACE POLICY - RITCHESON; DEFENSE TECHNOLOGY 
SECURITY/SPACE DIVISION - WALDING; C3I - MANNO 
JOINT STAFF FOR J-5 - WHALEN 
 
E.O. 12958: DECL: 08/25/2013 
TAGS: ETTC PREL IT CH EXPORT CONTROLS
SUBJECT: U.S.-ITALY DUAL USE EXPORT CONTROL CONSULTATIONS, 
JULY 21-23, 2003 
 
REF: ROME 2827 
 
Classified By: Economic Minister Counselor Scott Kilner for reasons 1.5 
 (b) and (d) 
 
¶1. (S) Summary: U.S. and Italian government delegations held 
consultations on dual use export controls in Rome July 21-23, 
in order to increase mutual understanding of each country's 
controls and to further bilateral cooperation.  Flexibility 
is a key component of each country's controls - in Italy 
through the use of catch-all procedures, and in the U.S. by 
means of broad lists of categories that prompt USG attention 
to proposed exports.  Exports of space technology are 
addressed differently - Italy through dual use controls, the 
U.S. through defense trade controls.  Both Italy and the U.S. 
confront the difficulty of controlling intangible transfers 
of technology.  The U.S. uses technical assistance agreements 
and manufacturing licensing agreements as key tools to define 
the scope of a company's work and what technology may be 
transferred. Both sides agreed to hold future bilateral 
meetings every six months, to foster further information 
exchange, to increase transparency and to avoid 
misunderstandings.  In the course of the talks, the U.S. 
delegation also raised continuing U.S. concerns about the 
M-code overlay issue as part of the EU's implementation of 
the Galileo program.  The U.S. also provided a briefing on 
the new U.S. remote sensing policy. 
 
¶2. (S) Summary continued: Top executives from Italian firm 
Alenia Spazio (AS) joined the government delegations for a 
discussion of five projects of interest to the companyin 
China.  The GOI and the company reiterated tht AS had 
terminated all cooperation with the PRCon the two projects 
for which it had completed fasibility studies in 2000 
(reftel).  Cancellation of the Atlantic Bird launch had 
caused serious financial difficulties for AS. Thus the 
company was interested in pursuing cooperation in five other 
areas suggested by the PRC: 1) data relay satellite; 2) 
Sinosat II; 3) China's manned space program; 4) interactive 
telecom satellite; and 5) navigation systems.  The GOI 
confirmed that it would not authorize AS to cooperate with 
China on the projects without the USG's assent. The U.S. 
delegation promised to provide official responses on all five 
projects soon. End summary. 
 
Participants 
------------ 
 
¶3. (U) U.S.: Robert Maggi, Deputy Assistant Secretary of 
State for Political Military Affairs; Ann Ganzer, Director, 
Office of Defense Trade Controls Policy (PM/ DTCP); Lisa 
Beames, Office of Export Controls and Conventional Arms 
Nonproliferation Policy (NP/NPC/ECNP); Philip Ritcheson, 
Assistant for Space Policy, DOD; J. Walding, Chief Engineer, 
Defense Technology Security Administration/Space Division, 
DOD; Martin Whelan, Division Chief, Space and Missile Defense 
Policy, J-5, Joint Staff; Salvatore Manno, Director, 
International Affairs, DOD; Scott Kilner, Minister-Counselor 
for Economic Affairs, U.S. Embassy Rome; David Mulenex, 
Science Counselor, U.S. Embassy Rome; John Finkbeiner, 
Economic Officer, U.S. Embassy Rome; Kelly Degnan, 
Political-Military Officer, U.S. Embassy Rome. 
 
¶4. (U) Italy: Giandomenico Magliano, Director General for 
Multilateral Economic and Financial Cooperation (DGCE), MFA; 
Ugo de Mohr, Nonproliferation Coordinator, DGCE, MFA; 
Gerolamo Schiavoni, Director, North America Affairs, MFA; 
Diego Ungaro, Director, Office of Defense Industry and 
Sensitive Technology Transfers, MFA; Aldo Doria, Director, 
Office of High Technology Products, Ministry of Productive 
Activities - Foreign Trade (MPA); Giulio De Martino, 
Consultant, MPA; Alfonso Spatola, Consultant, MPA; Carlo 
Magrassi, General Secretariat, MOD; Luca Fontana, Defense 
Staff; Antonio Agostini, Prime Minister's Office; Roberto 
Aristei, Prime Minister's Office; Paola Pera, Prime 
Minister's Office. 
 
¶5. (U) Alenia Spazio: Maurizio Tucci, CEO; Carlo Alberto 
Penazzi, Director General; Roberto Somma, Engineer; Paolo 
 
 
Piantella, Engineer. 
 
¶6. (C) Magliano opened the consultations by noting 
longstanding U.S.-Italy cooperation on security issues, 
industrial development, and the proper use and transfer of 
technology. The GOI hoped this would be the first of a series 
of consultations. DAS Maggi agreed that this important 
meeting was the first in a series of steps that the U.S. and 
Italy would take to help create an even more transparent and 
cooperative relationship in a very sensitive area. The U.S. 
was happy with recent discussions with GOI officials on these 
issues. 
 
Italian Dual Use Export Controls 
-------------------------------- 
 
¶7. (U) De Mohr informed USDEL that Italian Legislative Decree 
96, enacted April 9, 2003, implemented the EU's dual use 
regulation (EU Regulation 1334/2000) while updating the GOI's 
controls on the export of dual use goods and technologies. 
The Italian decree gives the Ministry of Productive 
Activities authority to implement Italian dual use export 
regulations, including the issuance of export licenses (in 
practice, this authority is devolved to the International 
Department in the MPA's Foreign Trade Unit, under Vice 
Minister Adolfo Urso).  The MPA's Aldo Doria told us the GOI 
hopes to have an English version of Decree 96 available 
shortly.  (See para. 42-45 for further background on Italy's 
implementation of dual use export controls.) 
 
¶8. (C) The GOI views the "catch-all" provision of GOI law as 
a flexible approach to dealing with those exporters that do 
not voluntarily seek licenses, according to De Mohr.  A 
"catch-all" clause provides the "maximum opportunity" to 
control what needs to be controlled.  Information exchange 
with other countries is essential and needs to be improved to 
make maximum use of the "catch-all", he said.  Italian law 
does not provide for the use of blacklists of sensitive goods 
and technologies for which exporting is prohibited, but 
relies on catch-all to make determinations on a case-by-case 
basis, De Mohr said.  However, the GOI does use "U.S. 
blacklists" as a factor in determining whether to initiate 
catch-all.  Watch lists are also problematic for Italy, De 
Mohr said, because they create a third category that might 
minimize the importance of the catch-all clause. 
 
U.S. Dual Use Export Controls 
----------------------------- 
 
¶9. (SBU) DAS Maggi explained that flexibility is a key 
component of U.S. export controls.  The U.S. maintains lists 
of categories, rather than of individual items, in order to 
ensure flexibility and broad attention to exports. The U.S. 
uses both a blacklist and a watchlist as additional tools. 
Blacklists prohibit some or all exports to a select number of 
countries.  The U.S. also checks all potential end users 
against a watchlist of close to 50,000 names. 
 
¶10. (C) China and Chinese entities are the most common 
subjects of both the blacklist and watchlist, Maggi said - 
mostly due to human rights concerns after the Tiananmen 
Square crackdown and to subsequent missile proliferation 
sanctions. De Mohr noted that the USG and Italy should 
develop a common approach to China on arms control issues. 
Italy does not want to do anything in China in this area 
without being in agreement with the USG, he said. 
Transparency and mutual understanding are Italy's priorities. 
 
 
¶11. (C) While the USG is concerned about the transfer of 
advanced technologies, small arms, conventional weapons and 
readily available technologies also need to be watched, Maggi 
said.  De Mohr noted that Italy controls small arms and 
conventional weapons transfers through its munitions 
legislation (Italian Law 185, which is implemented by a 
separate MFA office) - De Mohr's dual use committee does not 
address small arms transfers.  The EU also uses human rights 
violations as the basis for embargoes on the export of 
conventional arms that could be used for internal repression, 
 
De Mohr said. 
 
¶12. (SBU) Maggi suggested that it might be useful for Italy 
to review the Presidential Directive on Conventional Arms 
Transfer Policy that sets out 13 standards that the U.S. is 
required to take into account in assessing the possible 
granting of an export control license. Information from other 
USG agencies is an important resource, and the U.S. 
increasingly seeks scientific expertise, he said, adding that 
the Office of Defense Trade Control Policy recently hired a 
physicist to evaluate and advise on new technologies that may 
not be on existing lists. 
 
Space Technology Controls 
------------------------- 
 
¶13. (SBU) Ganzer explained that, pursuant to a 1999 
Congressional mandate, the U.S. controls almost all space 
technologies as defense articles rather than dual use items, 
even those that appear to have principally commercial 
applications.  This includes remote sensing technology. 
 
¶14. (SBU) De Mohr explained that in Italy, space technology 
is controlled on the dual use list rather than on Italy's 
munitions list.  Spatola pointed out that some MTCR items are 
governed by munitions list and some governed by dual use 
lists.  Space launch vehicles, for instance, are controlled 
as dual use items, in accordance with the Wassenaar 
Arrangement.  After a company applies for an export license, 
the interagency committee evaluates the possibility of the 
technology being diverted and advises the political 
authorities in charge of the licensing process, which makes 
the final decision, De Mohr said.  Where dual use 
conventional weapons are involved, the company applies for a 
license before proceeding with contract negotiations, he 
added.  An authorization to negotiate is not an authorization 
to export, he stressed.  Rather it lets the company know it 
is worth proceeding to the next stage of negotiations.  Italy 
has established a round table to explain the risks to 
companies of doing business involving certain technologies 
and countries. 
 
Controls on Intangible Transfers of Technology 
--------------------------------------------- - 
 
¶15. (SBU) Italy controls the intangible transfer of 
technology via mail, phone, Internet, and e-mail, as imposed 
under EU regulations, which also require that each member 
state draft specific legislation to prohibit technology 
transfer and provide for sanctions in cases of violations of 
such controls, De Mohr explained.  He said that enforcing 
such controls is difficult, frequently clashing with EU 
efforts to ease the freedom of movement of people within the 
EU.  Nevertheless, Italy does attempt to keep track of 
foreign students when possible. 
 
¶16. (SBU) Someone returning to his/her country after learning 
a new technology in the U.S. may "export" that technology by 
providing it to someone else after returning home, and 
existing export control regulations apply, Maggi said. 
Intangible technology transfers are difficult to regulate but 
vitally important, he added, citing the Joint Strike Fighter 
program as an example of joint development of new high-tech 
ideas by U.S. and non-U.S. companies and citizens.  Most of 
the design work for the JSF will be done completely on an 
international virtual private computer network, not on paper. 
 The U.S. uses a combination of high fines (which amounted to 
approximately 72 million dollars last year) and jail 
sentences to discourage people from passing on controlled 
technical data without a license, and to encourage exporters 
to comply with licensing requirements.  The U.S. increasingly 
publicizes such requirements to help potential U.S. exporters 
understand their responsibilities and forestall compliance 
problems as much as possible.  Compliance is in companies' 
best interests, not only to avoid prosecution, but also since 
controls can help protect intellectual property. 
 
U.S. Technical Assistance Agreements/Manufacturing 
--------------------------------------------- ----- 
 
 
Licensing Agreements 
-------------------- 
 
¶17. (SBU) Ganzer explained that technical assistance 
agreements (TAA) and the similar manufacturing licensing 
agreements are key licensing tools that define the scope of 
work and what technology may be transferred.  Companies 
wishing to partner would draft an agreement, which is then 
reviewed by the USG (State, Defense, Joint Staff, and other 
interested agencies) based on national interests, the 
technology involved, impacts on regional stability, human 
rights concerns and similar considerations.  State (Maggi, 
who has been delegated that responsibility by the Secretary 
of State) makes the final determination.  If there is a 
disagreement or a significant policy issues is involved, an 
interagency meeting would consider the case.  In rare cases, 
the Secretary of State would be the final arbiter. 
 
¶18. (SBU) TAAs and MLAs are not blank checks - a change in 
circumstances can cause the USG to reconsider agreements 
approved earlier, Ganzer explained.  The agreements also can 
be amended as warranted (such as the addition of a company's 
subsidiary to the activity covered by the agreement). 
 
¶19. (C) Diego Ungaro, director of the MFA's Office of 
Munitions and Dual Use Controls, suggested that the U.S. and 
Italy might wish to draft an intergovernmental agreement to 
facilitate exchange of information. Such an agreement could 
perhaps facilitate the drafting and approval of TAAs/MLAs, 
stemming potential revenue loss experienced by companies 
waiting for approval. The GOI could provide helpful 
information to the USG regarding Italian participants. 
 
¶20. (C) Maggi responded that the U.S. is committed to working 
harder with Italy to improve the exchange of information. He 
suggested setting a broad schedule for our technical experts 
to meet for further discussion.  Ganzer cautioned that any 
intergovernmental agreement would not remove the need for an 
export license, which is the legal mechanism for US companies 
to work with foreign partners. She also noted the keen 
interest of the U.S. Congress in export controls - some 
export licensing decisions require congressional 
notification, which can lengthen the approval process. 
 
Alenia Spazio - Five Pending China Projects 
------------------------------------------- 
 
¶21. (S) Alenia Spazio (AS) CEO Maurizio Tucci and several 
senior AS officials joined the government delegations for a 
discussion of five projects of interest to the company in the 
PRC.  The discussion followed a visit June 21 by the U.S. 
delegation to AS's L'Aquila facility, which manufactures 
electronic equipment, including antennas, for spacecraft and 
telecommunications satellites. The delegation also visited 
AS's Rome headquarters and satellite manufacturing facility 
on June 23. Tucci noted that the plant visits underscored the 
company's commitment to a transparent relationship, through 
the GOI, with the U.S.  He stated that AS will not undertake 
any future activity in the PRC without GOI approval.  Tucci 
also spoke of the company's restructuring efforts - in 2002 
AS reduced its payroll from 2880 to 2723 employees, and was 
planning a further 15 percent contraction.  (We later learned 
from our GOI interlocutors that the L'Aquila plant is closed 
one week a month due to its current lack of business.) 
 
¶22. (S) Magliano initiated this part of the discussions by 
noting the importance of Alenia Spazio's parent company, 
Finmeccanica, to Italian industry.  The GOI's ownership (32 
percent) including a "golden share" of Finmeccanica also 
contributed to the GOI's determination to work for the 
company's success.  Magliano reiterated the assurances 
contained in his letter of June 23, 2003 to Assistant 
Secretary of State Bloomfield that Alenia Spazio had 
 
SIPDIS 
terminated all cooperation with the PRC on the two projects 
for which it had completed feasibility studies in 2000. 
 
¶23. (S) Alenia Spazio Vice President for Marketing and 
Corporate Development Paolo Piantella said that after the 
cancellation of the Atlantic Bird launch, AS officials met 
 
 
with Chinese government officials in the fall of 2002 to 
discuss the possible restitution of the 25 million dollars 
that had been previously paid to the PRC (AS does not expect 
to receive any reimbursement from its insurance policy on the 
Atlantic Bird launch).  The PRC indicated that it was 
interested in pursuing the five projects currently under 
review.  AS did not undertake any technical discussions with 
the PRC about the projects and has refrained from doing so 
since then.  Piantella emphasized that this was a dinner 
party conversation, not a formal discussion between Alenia 
and the PRC. 
 
¶A. Data Relay Satellite: 
 
¶24. (S) Piantella noted that some technical discussions on 
the data relay satellite project had occurred in the past, 
under AS' contract for the phase A study, before Atlantic 
Bird was canceled. The PRC had indicated that the purpose of 
this satellite was to deploy an operational system to cover 
China's manned space missions, and that AS could help define 
the system and the specifications of the subsystems. AS 
admitted that its mission, if it signed on to the project, 
would be to produce the payload hardware for China to launch 
a data relay satellite.  The experimental satellite would 
consist of a Chinese DFH-3 bus with a S/Ka-band payload 
(based upon Artemus), with two RF crosslinks only 
(terminals).  Alenia said the RF links may be Ka-band with 
S-band downlink. A ground-to-satellite/satellite-to-ground 
link will probably be Ka-band with baseband processing.  The 
satellite would be located at 110 degrees east longitude in a 
geosynchronous orbit. 
 
¶25. (S) Piantella continued that the project's Phase B study 
would take 12-18 months to complete, and would not involve 
the exchange of technical data. Phase B would define the 
areas in which Italy and China would cooperate to provide the 
hardware for Phase C, he said.  Delivery of hardware under a 
potential Phase C would take 2-3 years, except for some 
off-the-shelf material.  AS has not discussed with the PRC 
potential hardware delivery under a Phase C and did not know 
whether China had approached other companies since Italy 
suspended discussions in mid-2001.  France's Alcatel is 
another potential supplier of such hardware to China, he 
noted.  It was difficult to speculate about the details of a 
potential Phase C given that Phase B has not yet started. 
Integration of the satellite would be expected to take place 
in China. AS has not offered a launch platform for the DRS. 
China plans to use either its older model DFH-3 bus, which 
would need substantial modification to be used with a 
satellite payload, unless the new DFH-4 platform China is 
working on is ready in time, he said. Piantella told us AS 
would not agree to the use of the Long March rocket for this 
or any other of its projects. 
 
¶26. (S) Tucci said AS is not sure where things stand since 
mid-2001 with regard to China's pursuit of other companies in 
other countries. He noted that he stopped AS from undertaking 
even informal exchanges on DRS in early 2003, following 
consultations with the MFA.  De Mohr added that US and 
Italian security interests are the GOI's top concerns.  The 
GOI wants to support AS initiatives with China in space but 
the MFA will not authorize joint projects without the USG's 
agreement, he said.  Italy's goal is to promote the maximum 
commercial interests for Italian companies compatible with 
our common security interests. 
 
¶B. Sinosat II: 
 
¶27. (S) Piantella said AS has had no discussions with China 
on this project for nine months.  The Chinese had expressed 
an interest in launching more telecommunications satellites 
to meet growing domestic demand.  Sinosat I was purchased 
from Alcatel and launched in 1997.  It is old and saturated. 
Sinosat II is a civilian commercial satellite with a DFH-4 
bus (assuming China's new DFH-4 platform is ready).  China 
may contract again with Alcatel for the payload, he said, 
although AS is also interested.  Piantella said Sinosat II 
would utilize the "skyplex" method of multiplexing. The 
project is for a commercial capability.  As with the DRS, 
 
 
Sinosat II integration would occur in China.  A Request for 
Proposals was supposed to have been released in early 2003 
but AS had not yet seen it, he said. 
 
¶C. Manned Space Program: 
 
¶28. (S) Piantella told us the PRC raised possible AS 
cooperation in this program last fall, apparently drawing on 
AS's work on the International Space Station and gravity free 
environment.  Experimentation elements would include modules 
for cabinets and service capsules, with modules or racks for 
performing experiments that would continue to operate after 
the manned phase, he said.  Power, environmental and data 
elements would also be likely. Any AS cooperation would 
involve the use of data relay from the spaceship to the 
ground. 
 
¶29. (S) Maggi said the USG would like to have similar 
discussions with AS before any decisions are made on programs 
of this size with China.  These are the type of inquiries the 
USG would make with any companies involved in programs like 
this before approving export licenses, he explained. 
 
¶D. Interactive Telecom Satellite: 
 
¶30. (S) According to Piantella, this project would involve 
joint development of interactive terrestrial applications, 
such as tele-medicine (transmission of medical information 
from remote field hospitals to a central location), 
tele-instruction (instruction to students in remote areas) 
and internet via satellite.  Ground based architecture and 
hardware would be developed initially, with satellite 
development at some later point. 
 
¶E. Navigation Systems: 
 
¶31. (S) Chinese industry is interested in working on ground 
applications of navigation systems for air and maritime 
traffic management as well as fleet management for tracking 
of goods and vehicles, Piantella said.  It is not related to 
the PRC's interest in pursuing a role in the development of 
the EU's Galileo program, with which AS is also involved as 
part of Galileo Industries, he explained.  AS has had no 
direct contact with China on the navigation systems project, 
but is aware that China has an interest and a need in 
pursuing this technology, and we can probably expect to see 
this in the future. 
 
¶32. (S) DAS Maggi thanked Alenia Spazio for its candidness 
and its willingness to respond to detailed U.S. questions, 
adding that this information was the type we would like to 
have in the future. The U.S. delegation would hold further 
consultations in Washington, but he hoped that we would be 
able to provide responses for all five projects soon. 
 
¶33. (C) At Magliano's request, Tucci provided a summary of 
AS's active interest in expanding into a number of other 
markets, including Arabsat, Vietnam, Nigeria, and Russia.  He 
said the company would welcome U.S. advice and guidelines (as 
conveyed through the GOI) on such activity to avoid any 
misunderstandings or obstacles to AS cooperation with the USG 
and US companies in the future. Ganzer responded that U.S. 
companies have received licenses to participate in the 
Arabsat and Vietnamese projects, and AS thus could assume 
that the U.S. would not necessarily be concerned about AS 
activity with those projects.  The USG has technology 
safeguards agreements with Russia and there is extensive 
space cooperation between the US and Russia.  She cautioned, 
however, that the USG still has proliferation concerns with 
Russia, and each application is carefully scrutinized before 
an export license is granted.  She encouraged AS to contact 
her office with any questions about specific Russian 
programs. She advised she is not aware of any Nigerian 
programs, and could not comment. 
 
Galileo 
------- 
 
¶34. (C) Noting the candidness that characterized these 
 
 
discussions, DAS Maggi raised continued U.S. concerns 
regarding EU development of the Galileo program. The U.S. 
wants to see Galileo succeed, Maggi said, but the M-Code 
overlay is a serious impediment to war-fighting capabilities. 
He reiterated U.S. views that a technical solution to the 
M-code overlay issue could be reached, provided there was 
political will within the EU.  Manno added that EC officials 
have rejected U.S. proposed technical solutions.  At the 
political level, the EU seems convinced that moving off 
M-Code would not meet Galileo's requirements, though there 
has been no clear statement as to why. Technical-level 
discussions we have had with the EC indicate technical 
concerns can be overcome.  Our mutual security would be 
enhanced if Galileo and GPS were to use different 
frequencies.  If Galileo is launched with a signal for PRS 
overlapping the M-Code, and that signal is used by an 
adversary against Allied forces, Manno stressed that the 
Allied forces will be forced to jam that signal, compromising 
both PRS and the M-Code. 
 
¶35. (C) Galileo is an EC issue, De Mohr replied, but the GOI 
understands the USG concerns regarding the M-Code overlay and 
will make an effort to be helpful.  He asked for some 
additional information on the overlay issue that the GOI 
interagency committee could review (Manno agreed to provide 
such information and did so in the form of a paper passed by 
 
emboffs to MFA on August 8). De Mohr promised to work with 
technical experts on the committee to see if they could help 
move the Italian side, at least, beyond the focus on 
technical issues. One such technical expert, the MPA's 
Spatola, said he personally agreed with the U.S. points, 
adding it was unclear to him why a technical solution could 
not be reached.  The MOD's Magrassi said he would coordinate 
with DOD representatives to evaluate the operational impact 
as well as possible technical solutions. 
 
Remote Sensing Briefing 
----------------------- 
 
¶36. (C) Beames presented a detailed explanation of the new 
U.S. policy on remote sensing to an appreciative GOI 
audience.  Following the briefing, Magliano noted his 
government's appreciation that the new policy would involve 
more integration with foreign governments.  Beames said the 
U.S. was committed to working with its key allies on remote 
sensing, and there were only a few, highly sensitive kinds of 
exports in which a government-to-government agreement might 
be necessary.  The U.S. would welcome such an agreement with 
the GOI, especially given the type of activity being pursued 
by Alenia Spazio. We envisioned a broad, flexible agreement, 
to be followed by increased cooperation between our 
industries. Though we could in theory reach multilateral 
agreements, the U.S. believed bilateral agreements could be 
reached more easily and were probably more practical.  Ganzer 
said the U.S. would welcome future bilateral consultations 
among technical experts to set the stage for a future 
U.S.-GOI agreement.  The Italian delegation expressed strong 
interest in pursuing a bilateral accord on remote sensing. 
 
 
Future Bilateral Exchanges 
-------------------------- 
 
¶37. (SBU) DAS Maggi suggested that follow-up bilateral 
consultations be held every six months or so, to which 
Magliano agreed. Maggi added that the USG would be available 
to answer industry concerns at any time, however, in order to 
keep information flowing at industry's pace. De Mohr agreed 
that such "intersessional" work would be an important means 
of keeping communications lines open.  Maggi suggested that 
we also consider the use of videoconferences in lieu of 
face-to-face encounters, when practical. He said the U.S. was 
committed to making future exchanges possible, and would 
follow up with the GOI after consulting other relevant 
agencies in Washington. 
 
¶38. (S) Magliano suggested that both sides pursue 
opportunities for joint Italian-American cooperation that 
could also include third countries.  Italy has no intention 
 
 
of working with China or other sensitive countries without 
coordinating with the USG, he said.  Italy wants to balance 
the business needs of its industries with the security needs 
it shares with the US.  Magliano raised the possible drafting 
of a proposal on U.S.-Italy cooperation regarding exports to 
third countries.  The aim would be to assist U.S. and Italian 
industry, while also helping us to meet our mutual security 
concerns. Maggi indicated the U.S. side would need to discuss 
this proposal further. He noted that any such bilateral 
cooperation would only make sense if US and Italian 
industries thought it would be profitable.  US industries 
usually prefer that the USG be involved as little as 
possible, he explained. 
 
¶39. (SBU) Magliano reinforced the GOI's hope for further 
bilateral cooperation in third country markets, as good 
business, political, and security policy. He said the GOI 
looked forward to the U.S. implementing its revised remote 
sensing policy, and welcomed the convening of an experts' 
meeting that would work towards the possibility of a 
bilateral agreement. 
 
¶40. (S) Ganzer stressed that the USG is committed to 
increased transparency to allow better understanding of US 
and Italian procedures and policies, and will remain 
available at all levels (including the experts' level).  The 
USG wants to be a reliable partner, which means there must be 
sound business reasons for joint ventures and  compliance 
with applicable laws and regulations, she said.  Better 
communication will ensure more accurate and timely USG 
responses to Italians, she added.  She pledged to get back to 
the GOI on the five China projects being considered by Alenia 
Spazio as soon as we have an answer on each project.  The USG 
may need more information before producing a remote sensing 
framework agreement for GOI review, Ganzer said.  She 
suggested bilateral technical experts meet first before 
pursuing work on a possible intergovernmental agreement. 
 
¶41. (C) Comment: Embassy thanks Washington participants for a 
very well-prepared, instructive and forward-leaning 
discussion with the GOI delegation and with Alenia Spazio. 
The U.S's and Italy's somewhat divergent approaches to export 
controls have created bilateral tension from time to time, 
but the consultations' constructive atmosphere appears to 
have engendered mutual trust that should encourage further 
GOI transparency when issues of concern arise again. We look 
forward to assisting in the development of follow-up 
discussions. 
 
Background on Italian Decree No. 96 of April 9, 2003 
--------------------------------------------- ------- 
 
¶42. (C) NOTE: Italian Decree No. 96 formally tasks the GOI's 
interagency "Consultative Committee on Dual Use Goods 
Exports" to provide an opinion on every license application. 
Each ministry is provided beforehand the entire dossier of a 
license application. An opinion technically could be approved 
by majority vote (6 out of 11 votes), but in practice is 
reached by consensus.  The opinion is non-binding on the 
Minister of Productive Activities, who makes the final 
decision on license applications. However, current committee 
president Ugo De Mohr  (MFA) has told us that in his four 
years coordinating the committee the MPA has never issued a 
license against the Commission's recommendation.  However, on 
a few occasions the Minister has declined to issue a license 
despite a positive assessment by the committee. The committee 
reviews approximately 600-1000 export applications each year. 
 
¶43. (U) Although the Italian decree provides for the 
committee to operate under the auspices of the MPA, the 
committee president must be an official of the Ministry of 
Foreign Affairs (currently De Mohr). The director of the 
MPA's Office of Export Controls is vice-president of the 
committee and also runs the committee's secretariat 
(including the receipt and dissemination of license 
applications).  Other agencies represented on the committee 
include the Ministries of Defense; Finance (including 
Customs); Interior; Communication; Education, University and 
Research; and Health.  Four non-government technical experts 
 
also attend committee meetings as necessary, one for each 
multilateral regime overseen by the committee (MTCR, Nuclear 
Suppliers Group, Australia Group, and the Wassenaar 
Arrangement). 
 
¶44. (C) De Mohr has told us that the committee relies to some 
extent on intelligence reports of the potential export of 
sensitive goods and technology (though the Italian decree 
does not formalize a role for the Italian intelligence 
services).  Such information is particularly relevant to the 
invocation of catch-all procedures, when the exporter has not 
applied for a license.  The Ministries of Foreign Affairs, 
Defense, and Productive Activities each can invoke the 
catch-all provision (these three ministries are the most 
active ones on the committee). The relevant company will then 
be informed that it must be granted a license before it may 
proceed with the proposed export. 
 
¶45. (C) De Mohr and other consultative committee members have 
told us they weigh a variety of factors in reaching opinions 
on export license applications.  Some exports will not be 
recommended due to policy reasons - de Mohr noted, for 
example, that Italy looks particularly carefully at export 
licenses where the end user is in one of the "countries of 
concern" to the U.S. The views of the committee's four 
experts are of particular importance in evaluating the 
potential threat from a proposed export. In some cases the 
GOI consults other governments and international 
organizations for previous experience with a particular type 
of export, or particular exporters or end-users. The GOI's 
"no-undercut" policy compels it to check for clarification 
with any partner nation that previously has denied export 
authorization for an essentially identical transaction. 
Italian firms that have previously received licenses are 
scrutinized for their adherence to requirements of the prior 
license, including acquiescence to any GOI post-shipment 
checks (generally done by Italian embassies).  However, lack 
of resources generally impedes follow-up efforts, meaning the 
GOI must get good information before any license decision. 
End-user certificates may be required for particularly 
sensitive technologies.  Though Italian law does not compel 
Italian firms to disclose the U.S. components in proposed 
exports, the GOI advises such firms to contact appropriate 
USG websites (Treasury's Office of Foreign Assets Controls) 
for the possible applicability of U.S. controls whenever it 
identifies U.S. components in a proposed export. END NOTE. 
 
¶46. (U) This cable has been cleared by Washington 
participants. 
Skodon 
 
 
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 2003ROME03842 - Classification: SECRET