VZCZCXRO0118
OO RUEHLA
DE RUEHMD #1113/01 1591646
ZNR UUUUU ZZH
O 081646Z JUN 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2725
INFO RUEHLA/AMCONSUL BARCELONA 2787
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEPINS/HQ BICE INTEL WASHINGTON DC
RUCNFB/FBI WASHDC
RUEKJCS/SECDEF WASHDC

UNCLAS SECTION 01 OF 02 MADRID 001113 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
PM FOR A/S MULL 
EUR FOR DAS VOLKER 
PENTAGON FOR OUSD/AT&L VOLKMAN 
 
E.O. 12958: N/A 
TAGS: PREL ETTC SP
SUBJECT: SPAIN: EMBASSY REQUEST FOR DEPARTMENT ASSISTANCE 
IN RESOLVING TECHNICAL DISAGREEMENT SLOWING MAJOR DEFENSE 
TRADE DEAL 
 
REF: A. MADRID 296 
 
     ¶B. SECSTATE 77110 
     ¶C. SUCHAN-LLORENS PHONECON 5/9/07 
 
¶1. (U) Please see Action Request in paragraph six. 
 
¶2. (SBU) SUMMARY:  A $1.2 billion frigate construction 
program involving Spain, Norway, and Lockheed Martin has been 
on hold for months because of a technical disagreement 
between Spanish MOD and USG regarding a signature on an 
export control form.  To help resolve this issue, post 
requests that the USG's lead office, State/PM's Directorate 
of Defense Trade Controls (DDTC), substantively engage its 
MOD counterparts at the technical level.  Our concern is that 
failure to resolve this technical disagreement could be 
prejudicial to US defense and trade interests with Spain and 
other European countries and could jeopardize future 
cooperation. END SUMMARY. 
 
¶3. (SBU) Spanish shipbuilder Navantia and Lockheed Martin are 
building frigates, based on Spain's advanced F-100 design and 
incorporating US AEGIS weapons system technology, for Norway. 
 An existing Technical Assistance Agreement between Navantia 
and Lockheed Martin must be amended because of a corporate 
name change.  A Spanish official had erroneously signed an 
earlier version of that document, but MOD says that person 
had no authority to sign on behalf of the GOS.  Furthermore, 
MOD says that it is unable to sign USG form DSP-83 because a 
2004 Spanish law limits the Spanish National Armaments 
Director from signing any form other than Spain's own end-use 
certificate. 
 
¶4. (SBU) Post requested in February (ref A) that DDTC review 
both the disagreement holding up the frigate program and the 
larger issues involved in MOD's inability to satisfy all of 
the USG's requirements.  Post proposed that DDTC technical 
experts meet with their Spanish counterparts during an annual 
bilateral defense industrial cooperation review in Madrid in 
May in which DDTC has been a regular participant.  Post was 
surprised that, after scheduling conflicts prevented DDTC 
from attending the May meeting, we received a demarche 
instruction cable in the guise of a Blue Lantern (ref B), 
tasking Post to once again explain the current USG position 
to MOD.  Based on high-level consultations several weeks ago 
(ref C), Post had expected that DDTC would send technical 
experts to Madrid for discussions as soon as possible before 
we received formal instructions. 
 
-- COMMENT -- 
 
¶5. (SBU)  Spain is a NATO ally whose defense priorities align 
closely with the US.  Spain is also a major Foreign Military 
Sales customer that has recently spent approximately $1.5 
billion on AEGIS for its own frigates, in addition to 
purchasing other weapons systems including Tomahawk missiles. 
 MOD just announced that it will buy $100-200 million of 
General Electric engines for its helicopter fleet.  The 
Spanish Navy and Air Force have expressed intent to purchase 
(via FMS) the Joint Strike Fighter.  MOD officials have told 
the DCM that they need to resolve the present impasse over 
the Norway frigate program in a way that meets US export 
control requirements and Spanish law, that their letters to 
DDTC have not brought results, and that they were 
disappointed by DDTC's failure to participate in the recent 
bilateral defense cooperation meeting.  The frigate 
construction program, on its own merits, needs to move 
forward before the delay affects not only relations with 
Spain and Norway but also clouds potential additional sales 
of the Spanish frigates to other key allies including 
Australia and Greece.  At the same time, the broader 
disagreement between MOD and USG over signature authority 
needs to be reviewed to ensure that it does not taint the 
overall defense industrial cooperation.  Post understands 
that France has already raised this case with the Spanish 
Deputy Defense Minister as an example of why it is not in 
Spain's interest to do business with the US. 
 
-- ACTION REQUEST -- 
 
¶6. (U)  Post requests that the Department put ref B demarche 
request on hold and that DDTC send technical staff with the 
expertise and authority to craft a win/win solution to Madrid 
 
MADRID 00001113  002 OF 002 
 
 
for discussions with their MOD counterparts. 
AGUIRRE