VZCZCXYZ0000
RR RUEHWEB

DE RUEHSM #0077/01 0230936
ZNY CCCCC ZZH
R 230936Z JAN 07
FM AMEMBASSY STOCKHOLM
TO RUEHC/SECSTATE WASHDC 1596
RUCPDOC/USDOC WASHDC 2499
INFO RUEHLO/AMEMBASSY LONDON 0434
RUEHFR/AMEMBASSY PARIS 0259
RUEHRL/AMEMBASSY BERLIN 0413

C O N F I D E N T I A L STOCKHOLM 000077 
 
SIPDIS 
 
DOC FOR BIS A/S CPADILLA/MDIPAUL-COYLE 
DEPT FOR PM/DDTC 
SIPDIS 
 
E.O. 12958:  DECL: 01/23/2017 
TAGS: ETRD ETTC EINV KSTC SW
SUBJECT:  EXPORT CONTROL BILATS BETWEEN SWEDEN AND DOC 
ASSISTANTSECRETARY CHRISTOPHER PADILLA 
 
Classified by Keith Curtis for Reasons 1.4 (d) 
and (e). 
 
 
¶1. (C)  Summary:  On December 7, Assistant Secretary of Commerce for 
Export Administration Christopher Padilla met with a Swedish 
interagency group to discuss a variety of export control and 
strategic trade issues.  The two sides addressed the U.S. 
Government's proposed China licensing policy rule, a proposal to 
establish a working-level group to discuss controls regarding night 
vision technology, concerns over illicit diversion through the United 
Arab Emirates, and implementation of United Nations Security Council 
Resolution 1718.  End Summary. 
 
Export Controls and China 
 
¶2. (C)  Padilla began by noting that, in December 2003, the 33 
members of the Wassenaar Arrangement agreed upon a statement of 
Understanding (SOU) that requires member countries to take 
appropriate measures to ensure that a government authorization is 
required for exports of non-listed, dual-use items for military end 
uses in destinations that are subject to a binding United Nations 
Security Council (UNSC) arms embargo or any relevant regional or 
national arms embargo.  The USG is drafting two regulations to 
implement this SOU:  one for countries subject to arms embargoes, and 
one specifically for China.  In both regulations, the DOC will 
require a license for otherwise uncontrolled goods and technologies 
when the exporter knows that the export has a military end-use. 
 
¶3.  (C)  The first regulation will implement a military end-use 
control to countries against which the U.S. maintains arms embargoes. 
 These countries include Afghanistan, Belarus, Myanmar, Cote 
D'Ivoire, Cuba, Haiti, Iran, Liberia, Libya, North Korea, Somalia, 
Syria, Vietnam, and Zimbabwe.  Padilla noted that this regulation 
will apply to all items listed on the Commerce Control List, and that 
the Regulation will be published in interim final form later in 2006. 
 The USG reported on this regulation at the meeting of the Wassenaar 
Arrangement in December 2006. 
 
¶4.  (C)  The second Regulation would be focused only towards China. 
Padilla explained that the Commerce Department decided to implement a 
separate regulation towards China to better address the unique 
U.S.-China bilateral economic and political relationship.  It has 
been longstanding U.S. policy to encourage legitimate civilian high 
technology trade with China while restricting exports that could 
contribute to the country's military modernization.  The proposed 
China Rule both addresses U.S. commitments under the 2003 Wassenaar 
Arrangement SOU and further clarifies this long-standing U.S. policy. 
 Importantly, the proposed rule does not impose a broad military 
"catch all" on exports to China.  Rather, it is a "catch some" that 
will impost new licensing requirements on 47 specific items and 
technologies that could be incorporated into Chinese weapons systems. 
 Padilla urged the GOS to work with the USG to ensure that the 
Chinese Military could not obtain such systems from other Wassenaar 
countries, as it is the USG's view that the export of these 
technologies and their incorporation into weapons systems undermines 
the EU arms embargo.  He urged the GOS to implement similar controls 
as part of its Wassenaar Arrangement commitments.  He noted that he 
had traveled to Paris and Berlin and would be traveling to London, to 
urge other EU governments to implement similar controls. 
 
¶5. (SBU)  Padilla then explained that the China regulation would also 
include a new authorization for validated end users (VEU), or trusted 
customers.  This authorization would allow the export of certain 
controlled items to specified, pre-vetted end-users, without a 
license.  The trusted customer concept could greatly facilitate 
civilian commercial trade with PRC end-users that have an established 
record of engaging only in civil end-use activities.  The DOC and 
other relevant agencies will evaluate prospective validated end-users 
on a range of factors, including history of compliance with U.S. 
export controls and agreement to periodic visits by USG officials. 
 
¶6.  (SBU)  Commerce hopes to include a list of initial candidates 
that could be eligible for VEU status when the regulation is 
published in early 2007.  The VEU concept has the potential to take 
out of the licensing system several hundred routine licenses to China 
worth hundreds of millions of dollars.  If successful, this program 
could be expanded to other countries. 
 
¶7. (C)  Richard Ekwall, Director of Export Controls, the Ministry of 
Foreign Affairs, replied that Sweden had helped push the WA SOU in 
2003 and has a catch-all policy in place.  Sweden has an embargo on 
China, and treats dual-use items destined for military end use as a 
military item.  Swedish exporters must come forward to the government 
and ask whether they can make an export to a military end user before 
a license is formally submitted.  The Swedish Inspectorate of 
Strategic Products then takes a formal decision on whether the export 
 
should be controlled and will notify the exporters.  Swedish 
exporters generally do not request licenses for exports to the 
Chinese military because they know that they will be denied. 
 
¶8.  (C) Padilla noted that his appeared to be an informal approach, 
and not a list-based procedure, which Ekwall confirmed.  When 
pressed, Ekwall confirmed that the Swedish government had no plans to 
publish official regulations or rules codifying this catch-all. 
Padilla urged the GOS to take a more formal approach, and voiced USG 
concerns that the EU will implement the WA SOU differently from the 
United States.  Responding to a question from Ekwall, Padilla 
explained that while he did not expect the new China rule to have a 
significant impact on U.S. exports to China, U.S. industry was 
extremely concerned with the compliance and liability burdens of the 
rule, and the potential loss of market share to European competitors. 
 
¶9.  (SBU)  Turning to other issues, Ekwall noted that the Wassenaar 
Arrangement had been very successful this year, particularly the 
passage of best practices in Intangible Technology Transfer.  He 
believed that Wassenaar was becoming a more mature organization, 
noting that delegates are far more prepared now for Plenary sessions 
than in the past.  He is confident that there will be good groundwork 
for the upcoming assessment year, despite the continuing differences 
over transparency and denial consultations. 
 
Thermal Imaging Cameras 
 
¶10.  (SBU)  A/S Padilla turned to the issue of thermal imaging 
cameras, controls of which are particularly important given their 
variety and their military and potential terrorist uses.  Thermal 
imaging cameras provide significant advantage in the areas of 
targeting, surveillance, and force mobility, and DOC issued more 
licenses for thermal imaging cameras than any other product. 
However, civilian uses for thermal imaging cameras have grown 
considerably and are now used for such civil-end-uses as search and 
rescue and firefighting. 
 
¶11.  (C) The EU was the largest importer of U.S.-origin thermal 
imaging cameras, accounting for approximately 65 percent of all 
export applications.  Padilla noted some concerns over the export of 
certain cameras from the EU, citing British-origin sensitive 
night-vision equipment that had been recovered from Hezbollah 
fighters during the war in Lebanon.  Not all thermal imaging cameras 
were equally sensitive, and major exporting countries should 
coordinate to decide which low-end cameras did not require export 
controls, and which high-end ones should have stricter controls. 
 
¶12.  (C)  Padilla proposed a working level dialogue among U.S., 
French, British, German, and Swedish experts focused on sharing best 
practices and other information related to the licensing and 
enforcement of exports of thermal imaging cameras.  The dialogue 
could specifically address licensing conditions, controls on the most 
sensitive items, concerns related to specific end-users, 
transshipment concerns, and enforcement actions.  Padilla proposed 
organizing the first meeting in Europe during the first half of 2007, 
and noted that both the French and German governments had already 
agreed. 
 
¶13.  (C) Ekwall agreed with the proposal, stating that it could be 
"useful."  He did caution that if a handful of EU countries got 
together to discuss this issue, other countries in the Wassenaar 
Arrangement could feel excluded.  Padilla agreed, but countered that 
it would still be useful to discuss perspectives outside the 
Wassenaar arrangement, for example end users of concern. 
Nonetheless, Padilla agreed that we should be very sensitive to these 
concerns.  Ekwall agreed and Padilla promised to follow up with a 
formal proposal. 
 
United Arab Emirates - Port of Diversion 
 
¶14.  (C) Turning to illicit diversion, Padilla briefed the Swedish 
group on USG concerns about the diversion and proliferation of dual 
use items transiting the United Arab Emirates (UAE).  The UAE lacks 
an export control system and is a key regional transshipment hub. 
The USG has found evidence of diversion of goods controlled by the 
multilateral regimes routinely diverted from Dubai to Syria and Iran. 
 He cited the case of Mayrow General Trading, which had acquired 
electronic components and devices capable of being used to construct 
improvise explosive devices (IEDS) that are being used against 
coalition forces in Iraq and Afghanistan.  The USG has worked with 
the UAEG since 2001 on capacity building, but the UAEG has not made 
progress on passing an export control law, despite repeated promises. 
 It has asserted for more than a year that its draft law is delayed 
in its legislature.  If the UAE makes no progress in the next month 
or two, the USG may impose more restrictive licensing on the UAE.  It 
would be useful for the GOS to weigh in with the UAEG over the 
latter's failure to pass an export control law, consistent with 
 
United Nations Security Council Resolutions 1540, 1696, and 1718. 
 
¶15.  (C)  Ekwall responded that Sweden also had serious concerns 
about diversion through the UAE and is working with the EU to help 
UAE improve its export controls.  Germany is leading the EU efforts, 
and in ongoing technical visits and exchanges, the EU has discovered 
that the UAE has virtually no controls or laws on sensitive items. 
 
¶16.  (C)  Padilla noted that he had discussed this issue with his 
German counterparts, who believe that federal authorities in Abu 
Dhabi understand the importance of having an export control system, 
but the ruler of Dubai seems strongly opposed.  Padilla had suggested 
that the Germans send a high-level message to the UAE about these 
concerns.  Germany officials in the Ministry of Foreign Affairs said 
that the State Secretary would be traveling to UAE and would deliver 
this message.  Padilla urged Sweden to also deliver a high-level 
message in the very near future. 
 
¶17.  (C)  Ekwall promised to pass along this request to the relevant 
levels of government, but noted that the EU should continue in its 
capacity building exchange.  While Padilla agreed that this was 
important, he stressed that the USG has been conducting such 
exchanges for over three years and has lost patience.  The USG now 
views these requests for technical assistance as an excuse to delay. 
 
Sanctions on North Korean Luxury Goods 
 
¶18.  (SBU)  Turning to North Korea, Padilla noted that on November 
13, the USG submitted its report to implementation of UNSCR 1718. 
This report included the list of luxury items that the USG was 
banning for export to North Korea.  The U.S. list does not include 
food items or those used by ordinary North Koreans, as President Bush 
has made it clear that the US would not use food as a weapon. 
Contrarily, the U.S. list included items used by Kim Jong-Il and 
those he used to award elites for their loyalty.  For example, motor 
scooters that many North Koreans used for transportation are not on 
the U.S. List, while Harley Davidson motor cycles, too expensive for 
all but the most politically well-connected, are.  The USG does not 
want the UN to debate a common list of luxury goods since such a 
process would be time-consuming and would provide an excuse to delay 
UNSCR 1718 implementation on more important provisions concerning the 
export of armaments, dual use, and other service items to North 
Korea. 
 
¶19.  (SBU)  Ekwall agreed, and noted that it was taking the EU quite 
some time to come up with its own list.  Doing so in the UN would 
also be time consuming and would take away from the more important 
elements of the resolution. 
 
Participants 
 
United States Government: 
 
Christopher Padilla, Assistant Secretary of Commerce for Export 
Administration 
Michael DiPaula-Coyle, Policy Advisor 
Keith M. Curtis, Senior Commercial Officer 
Tuula Javanainen, Commercial Specialist 
Government of Sweden: 
 
Richard Eckwall 
Andreas Ekman, Director General, Swedish Inspectorate of Strategic 
Prodcuts 
Egon Svensson, Engineering Director, Swedish Inspectorate of 
Strategic Products 
Jamal Alassaad, Desk Officer, Americas Department, Ministry of 
Foreign Affairs 
 
¶24. (U) Assistant Secretary Padilla cleared this cable. 
 
WOOD