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Cablegate: Blue Lantern Broker Inquiry -- Case No. K-1623

VZCZCXYZ0016
OO RUEHWEB

DE RUEHTV #2235/01 2861402
ZNR UUUUU ZZH
O 131402Z OCT 09
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3772
INFO RUEKJCS/SECDEF WASHDC PRIORITY
RUCPDOC/USDOC WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUCNFB/FBI WASHDC PRIORITY
RUETIAA/DIRNSA FORT GEORGE G MEADE MD PRIORITY
RUEAIIA/CIA WASHDC PRIORITY

UNCLAS TEL AVIV 002235

SIPDIS
SENSITIVE

STATE FOR PM/DTTC

E.O. 12958: N/A
TAGS: ETTC KOMC IS
SUBJECT: BLUE LANTERN BROKER INQUIRY -- CASE NO. K-1623

REF: STATE 94746

1. (SBU) Summary: American Aviation LTD is a
representative/intermediary well-known in Israeli defense
industry circles. According to American Aviation General
Manager Avi Ezra, the company primarily represents U.S. and
Western European companies. Ezra said that American Aviation
does possess an Israeli brokering license, and has renewed
its U.S. brokering license several times. He noted little
contact with the Israeli MOD Defense Export Control
Directorate, as American Aviation does not export or
re-export any controlled defense-related items. Ezra said,
however, that many of American Aviation's Israeli partners do
re-export; he claimed a basic knowledge of U.S. defense
export control regulations and stated he relies on these
larger Israeli defense companies to strictly adhere to U.S.
regulations. Speaking candidly, Ezra described the U.S.
defense export control system as time-consuming and cited
several scenarios in which Israeli companies might choose to
pursue business ventures with companies that do not require
end-use statements, or opt to develop a capability
indigenously. End summary.

2. (SBU) Per reftel, Polmiloff and FCS senior commercial
specialist met with American Aviation LTD General Manager Avi
Ezra at the company's offices on 17 Hatidhar Street,
Ra'anana, on October 7. American Aviation LTD CEO Amnon Ezra
(Avi's older brother) briefly joined the meeting near its
conclusion. According to Avi Ezra, American Aviation was
formed in 1973, and currently maintains 12 employees,
including a full-time employee dedicated to export control
licenses. American Aviation is well-known in the Israeli
defense industry; Post does not possess any information
regarding criminal or other derogatory background.

3. (SBU) Avi Ezra noted that American Aviation
(www.america-aviation.co.il) acts as an
intermediary/representative for Western European and U.S.
companies, and maintains one small business contract with a
South Korean firm. According to Ezra, almost all of American
Aviation's business is unrelated to Foreign Military Sales
(FMS). A third of American Aviation's business is devoted to
defense industry -- according to Ezra, "90 percent of such
sales" are made to Israeli companies such as Elta, Elbit, and
New Biotechnology (NBT) LTD. Based on the end-user
statements, Ezra said these large Israeli companies re-export
a majority of these sales. He noted that an additional third
of his business focuses on civil aviation, including Israel
Aerospace Industries' Gulfstream project. The final third
entails the high-tech industry, specifically the medical
sector. Ezra said American Aviation often partners with
General Electric (GE) and Phillips in these cases.

4. (SBU) Avi Ezra noted more activity with European than U.S.
companies with regard to controlled items. He explained that
in principle, there are few differences between U.S. and EU
export control regulations. In fact, obtaining end-use
statements from some EU countries can be more laborious than
the U.S. -- as an example, he noted that France requires the
authentication of each signature on an end-use statement at
its embassies and consulates. However, in practice, he said
there was a gap between the United States and the EU in terms
of implementing and enforcing export control regulations.
When doing business with the U.S., Ezra said, Israeli
companies follow the export control regulations closely as
they "expect to be audited." European countries are more lax
when it comes to enforcement; "there are gaps and holes in
the net," Ezra said, which make European firms more
attractive to Israeli companies to do business with, even if
the end-use statement takes longer. He noted, however, that
these gaps are slowly closing.

5. (SBU) Avi Ezra noted that American Aviation possesses a
brokering license registered in his brother Amnon's name with
the MOD Defense Export Control Directorate. As an
intermediary, American Aviation does not export or re-export
any controlled items, and therefore has little contact with
the Defense Export Control Directorate, nor has it attended
any of the Directorate's defense export control seminars.
Avi Ezra acknowledged that a vendor had asked American
Aviation to obtain a U.S. brokering license, which the vendor
initially paid for, but American Aviation has subsequently
renewed "two or three times." He questioned the value-added
of the U.S. brokering license, noting that American Aviation
does not appear to derive any benefits from the hefty license
fee.

6. (SBU) Avi Ezra claimed to have a "basic" understanding of
U.S. defense export control regulations and restrictions on
United States Munitions List (USML) controlled items. He
admitted, however, that he often relies on the larger Israeli
defense companies when re-export is concerned -- these
companies are "very disciplined" when it comes to defense
export control regulations, although he always asks to see an
end-user statement. American Aviation does not possess
facilities to secure controlled items; "we do not keep
stock," Ezra said. On occasion, he acknowledged that he will
take into possession a "prototype" when "expediency is
warranted" -- but such products typically involve the medical
or high tech sector, and never defense industry.

7. (SBU) Avi Ezra also noted that some companies --
especially those from Singapore -- contractually request
suppliers that do not require end-use statements. Ezra
explained that obtaining a DSP-83 takes a great deal of time,
especially if some of the companies involved are located in
third world countries. Moreover, U.S. firms will not begin
to work on a contract until the DSP-83 is complete, again
costing the buyer more time. Ezra said that in order to
expeditiously compete for such business, Israeli companies
honor the contract request to find vendors that do not
require end-use statements, or they develop the capability
indigenously.

8. (SBU) Avi Ezra argued that Israel has the technical
capability to produce locally; it is just a question of
whether it makes sense economically to do so. In addition,
he noted that embargoes sometimes do not have the effect
intended, as the embargoed country develops a capability
indigenously as a result. If a request is answered locally,
Ezra said the Israeli company would only need to "deal with
Eli Pincu," the Director of the MOD Export Control
Directorate. Ezra described Pincu as "a difficult man," but
suggested that producing locally and facing Israel's defense
export control regulations was a less onerous option than
navigating U.S. defense export control regulations.
CUNNINGHAM

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