Cablegate: Blue Lantern Level 3: Completed Pre-License End-Use Check

VZCZCXYZ0005
RR RUEHWEB

DE RUEHMO #0503 0570331
ZNR UUUUU ZZH
R 260331Z FEB 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 6789
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEKJCS/SECDEF WASHDC
RHMFIUU/FBI WASHINGTON DC

UNCLAS MOSCOW 000503

SIPDIS

DEPARTMENT FOR PM/DDTC - BLUE LANTERN COORDINATOR

SIPDIS

E.O. 12958: N/A
TAGS: ETTC RS KOMC
SUBJECT: BLUE LANTERN LEVEL 3: COMPLETED PRE-LICENSE END-USE CHECK
ON LICENSE 05-050077022

REF: A. STATE 2021

B. 07 MOSCOW 4189

1. (U) Summary: Ref A requested a pre-license end-use check to
confirm the bona fides of Barnaul Cartridge Plant, the foreign
end-user on application 05-050077022. The commodities in question
are 10.103000 components for ammunition (.224-.355 caliber) valued
at USD 909,270.00. A Barnaul Cartridge Plant official with whom we
met told us his company plans to use the ammunition components in
this license to manufacture cartridges which will be re-exported to
the United States. Barnaul Cartridge Plant has been doing business
with U.S. companies for approximately 15 years. We confirm the bona
fides of Barnaul Cartridge Plant as a reliable recipient of USML
items. End Summary.

2. (U) In a February 22 meeting Yuriy Belko, the Moscow Office
Director of the Barnaul Cartridge Plant, confirmed to us his
company's plans to re-export to the U.S. ammunition that will be
purchased from Hornady Manufacturing Company under license
05-050077022. According to Belko, U.S. bullets are more accurate
than anything made in Russia, but the other cartridge components,
such as the case, gunpowder, and primer, can be manufactured in
Russia much cheaper and of sufficient quality. His company plans to
combine U.S. bullets with Russian-made cases, gunpowder, and primer
to produce cartridges at one-third the cost of U.S.-made ammunition.
These cartridges will then be sold in the United States.

3. (U) Belko told us Barnaul Cartridge Plant was first established
in 1941. His company has been doing business with U.S. companies
for about 15 years. Barnaul Cartridge Plant has been working with
Hornady Manufacturing Company for approximately 4 years.

4. (U) Barnaul Cartridge Plant sells only to distributors and
sporting goods stores; not to individual customers. It regularly
sells its products to companies around the world. In Russia, this
includes Kolchuga Limited, a company we last inspected on August 16,
2007 (ref B). In the U.S., Barnaul Cartridge Plant sells many of
products to DKG Trading, Incorporated and Academy, Limited. It is
primarily to these two companies that Barnaul Cartridge Plant
intends to sell bullets under this license.

5. (U) Belko told us Barnaul Cartridge Plant did not have any
purchase orders for cartridges to be manufactured under this
specific license. He instead showed us a contract his company
signed with DKG Trading, Incorporated under which Barnaul Cartridge
Plant will provide 305,823,700 rounds of ammunition. He said the
10,103,000 bullets ordered from Hornady Manufacturing Company will
largely go toward fulfilling this contract.

6. (U) Belko told us Barnaul Cartridge Plant was familiar with the
restrictions governing the import of USML commodities, and in
particular the prohibition of unauthorized re-export. We recommend
Barnaul Cartridge Plant as a reliable recipient of USML items.

BURNS

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