Cablegate: Response to Blue Lantern Level 3 Post-Shipment

VZCZCXYZ0006
OO RUEHWEB

DE RUEHTV #2430/01 3091013
ZNR UUUUU ZZH
O 051013Z NOV 09
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4105
INFO RUETIAA/DIRNSA FORT GEORGE G MEADE MD PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUCNFB/FBI WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RUCPDOC/USDOC WASHINGTON DC PRIORITY

UNCLAS TEL AVIV 002430

SENSITIVE
SIPDIS

PM/DTCC - BLUE LANTERN COORDINATOR

E.O. 12958: N/A
TAGS: ETTC KOMC IS
SUBJECT: RESPONSE TO BLUE LANTERN LEVEL 3 POST-SHIPMENT
END-USE CHECK, LICENSES 050121146 AND 050098938

REF: STATE 68122

1. (SBU) Summary: Emboffs conducted site surveys at Israel
Aerospace Industries (IAI) and Silver Arrow/Elbit to verify
the receipt of gyroscopes from U.S. suppliers to be installed
in Israeli-made unmanned aerial vehicles (UAVs). Both IAI
and Silver Arrow acknowledged receipt of the gyroscopes,
noting that some of the gyroscopes had been installed in UAVs
and delivered to the Israel Air Force (IAF), while the
remaining gyroscopes are stored either in the companies'
secure facilities or with the IAF. Both IAI and Silver Arrow
maintain sophisticated computer tracking systems that
allegedly prevent the gyroscopes from being used in any other
project than as stated on the export license. Neither
company conducts maintenance or repairs the gyroscopes; in
one instance, Silver Arrow sent one of its gyroscopes back to
the U.S. supplier for maintenance. Both companies are quite
familiar with U.S. defense export regulations. End summary.

IAI
---

2. (SBU) Polmiloff conducted a site visit at Israel Aerospace
Industries (IAI) at its facilities at Ben Gurion Airport on
September 16; Kobi Fogler from the MOD's Directorate of
Security Defense Establishment (MALMAB) was present during
the visit. IAI MALAT Procurement and Logistics Director Rami
Cohen briefed on is division's work. He noted that the
MALAT divsion was founded in 1974, and currently is
resposible for USD 330 million in annual sales with a
wo-year backlog. Cohen said MALAT has produced an
delivered over 800 unmanned aerial vehicles (UAs), and
employs over 900 persons dedicated to UA design,
development, production, and integratio. He listed 42
customers from around the world, including 17 branches in
India. In response to polmiloff's question regarding
potential sales to Georgia and Russia, Cohen declined to
mention some country clients due to clauses in their
contracts preventing public disclosure.

3. (SBU) Cohen acknowledged IAI/MALAT's receipt of 15
vertical VG700MB dynamic measurement unit (DMU) gyroscopes
from Crossbow Technology, Inc., and provided copies of
documents in support of the transaction, including the
purchase order, end-use certificate, and export license.
According to Cohen, three gyroscopes were installed in Heron
UAVs and delivered to the Israel Air Force (IAF). An
additional gyroscope was sent to the IAF as a spare part.
Cohen stated that the remaining 11 gyroscopes have yet to be
assembled in UAVs; five of the gyroscopes remain in IAI
storage, while the last six gyroscopes are currently with the
IAF. Fogler confirmed this account from the MOD's
perspective.

4. (SBU) Cohen walked polmiloff through IAI's elaborate
computer accountability and tracking system, which includes
the gyroscopes' serial numbers, purchase orders, project
numbers, and whether a component is a controlled item.
According to Cohen, controlled items are logged into this
computer system for tracking, marked with three separate
end-use stickers, and stored in a secure, controlled-access
facility. He noted that the computer system tracks the
project for which the gyroscopes are intended. In order to
remove the gyroscopes from storage, an individual must access
the computer system. If the component is used for a project
for which it is not intended, the computer system locks down
after sending a system wide alert.

5. (U) Cohen confirmed that IAI conducts no maintenance or
repair of the gyroscopes, nor possesses the facilities or
knowledge to repair the gyroscopes. He explained that the
gyroscopes are essentially closed-components -- if IAI were
to try and crack the component open, it would harm the
component further. He stressed that any component requiring
maintenance would be sent to Crossbow Technology for repair.
Cohen was intimately familiar with regulations government the
import of U.S.-origin defense articles, including
restrictions on re-transfer or re-export.

Silver Arrow/Elbit
------------------

6. (SBU) Polmiloff and senior commercial specialist conducted
a site visit of Silver Arrow at its facilities in Nes Tziona
on November 2. MALMAB's Kobi Fogler was present for this

site visit, as well. Silver Arrow General Manager Shimon
Sarid explained that Silver Arrow was formed in 1987; Elbit
Systems assumed 100 percent control of Silver Arrow in 2000.
According to Sarid, Silver Arrow, or Elbit's Unmanned Aerial
Systems (UAS) division, sells its services to Elbit and does
not directly interface with customers.

7. (SBU) Sarid said the UAS division employs over 1,000
persons, and maintains strategic partnerships with Thales UK,
General Dynamics, and UEL (UK-based rotary engines plant).
Silver Arrow's primary UAVs are the Skylark and Hermes
models; the Hermes 450 is the backbone of the IAF's UAV
fleet. Silver Arrow also provides Hermes 450s to the United
Kingdom (Watchkeeper and Lydian programs) and Singapore.
According to Sarid, other Silver Arrow UAV customers include
Macedonia, Mexico, France, Canada, Australia, and Sweden.
Sarid said Georgia was a previous customer; following the
Russia-Georgia conflict, the MOD instructed Silver Arrow to
cease its relationship with Georgia, Sarid said.

8. (SBU) Silver Arrow Purchasing Manager and export control
officer Ayelet Rott presented a thorough brief on Silver
Arrow export control compliance, citing regulations and
restrictions governing the import of U.S.-origin defense
articles. She explained that export controlled items are
managed and traced through Silver Arrow's BAAN-ERP
computerized system. Rott said the BAANN-ERP system is
interactive through all stages of the supply process,
including product number definition, purchase order,
inventory, and production issuance/final inspection. All
items requiring an export license/end-use statement are
defined in the BAAN-ERP system as a controlled item, Rott
said -- each tab on the interactive BAAN-ERP "windows-based"
system includes a "pop-up" window alerting that the item in
question requires an export license.

9. (SBU) Rott explained that once export licenses for
controlled items are received and filed, the item's export
license number is entered into the BAAN-ERP computer system
along side the item's purchase order number. Silver Arrow's
warehouse receives the controlled items, and enters the
item's lot and designated project information. The warehouse
also marks the stored item with an export-control sticker.
Once an item is designated to a lot and project, the BAAN
system will block any attempt to use the item for another
project.

10. (SBU) Rott confirmed Silver Arrow's receipt of 22
vertical VG34-0803 gyroscopes from Goodrich Corporation, and
produced copies of documents in support of the transfer,
including the purchase order, export license, and end-use
certificate. She noted that two of the gyroscopes have been
installed in Hermes 450 UAVs, and have subsequently been
delivered to the IAF. Rott noted that one gyroscope was
returned to Goodrich Corporation for maintenance, as Silver
Arrow does not repair any gyroscopes. Rott said the repaired
gyroscope has since been returned to Silver Arrow; the 20
remaining gyroscopes are stored with Elbit/Silver Arrow, and
are expected to be installed in Hermes 450 UAVs and delivered
to the IAF in the near future. Fogler confirmed this account
from the MOD's perspective.

CUNNINGHAM

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