From: <a href="http://www.aftenposten.no/spesial/wikileaksdokumenter/article3985652.ece">Aftenposten</a><br>
Date: 20.11.2009
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S E C R E T BERLIN 001476 
SIPDIS
STATE FOR EUR/CE PETER SCHROEDER
STATE FOR ISN/MDSP DICK BUENNEKE
STATE FOR OES/SAT DAVID TURNER
NSC FOR PETER MARQUEZ 
E.O. 12958: DECL: 11/20/2034
TAGS: ETTC, PGOV, PINR, MCAP, PREL, TSPA, CH, FR, GM 
SUBJECT: OHB-SYSTEM TO BUILD GERMAN OPTICAL SPY SATELLITE;
LOOKING AT U.S. MARKET 
REF: A. BERLIN 1324 B. BERLIN 1207 C. 08 STATE 48069 
Classified By: Global Affairs Officer David L. Fisher
for reasons 1.4 (b), (c) and (d).

1. (C) SUMMARY: OHB-System, Germanys top satellite
manufacturer and third largest in Europe, will be the prime
contractor on Germanys planned High Resolution Optical
Satellite (HiROS) reconnaissance system -- a system that
France would like to see not happen because it would directly
compete with its own commercial satellites. In addition to
HiROS, OHB-System is investing in a follow-on to SAR-Lupe,
Germanys space-radar reconnaissance system, and a series of
cutting-edge laser communications satellites to support German
military/intelligence operations. OHB-System is placing
strategic importance on opening up opportunities to market its
space-based remote sensing, communications and missile
surveillance technologies in the US. END SUMMARY

2. (C) On October 2, EconOff met with OHB-System CEO, Mr.
Berry Smutny at the US Embassy in Berlin for general
consultations. Smutny became CEO of OHB-System in June of this
year and was previously the CEO of Tesat SpaceCom, a German
subsidiary of the European Aeronautical Defense and Space
Company (EADS). Smutny brings to OHB-System world class
expertise in satellite laser communications and is tasked with
broadening OHB-Systems market horizon beyond Germany.

OHB-SYSTEM TO BE PRIME CONTRACTOR FOR HIROS
-------------------------------------------

3. (C) Smutny acknowledged that OHB-Systems role as the
primary contractor on HiROS is out of political necessity to
ensure that a purely German owned firm, at least on paper,
leads the project development. The original plan was for
EADS-Astrium in Friedrichshafen, Germany in partnership with
the German Space Agency (DLR) to design, build and operate the
HiROS. However, when it became obvious to DLR and German
Astrium officials that the France, through its influence in
EADS-Astrium, would attempt to scuttle the project for fear
that HiROS would compete with French commercial satellite
business, the decision was made to bring OHB-System on board
as the primary contractor. Smutny said the current plan is for
OHB-System to build the HiROS satellite bus;
Astrium-Friedrichshafen, to assemble the payload
(Kayser-Threde GmbH will supply the optical cameras);
and DLR, to develop instruments and ground segment.

OHB-SYTEMS ASPIRATION TO JUMP INTO THE US MARKET
-------------------------------------------------

4. (C) Smutny said increasing OHBs footprint in the US market
is one of the reasons he was hired, but his company would make
its move "when the time is right." For starters, Smutny said
OHB-System would "love to offer US customers" SAR-Lupe data
and/or complete spacecraft. Recognizing that Astrium has
already offered US customers TerraSAR-X data/spacecraft, he
emphasized the SAR-Lupe technology is different and would be
complimentary to the existing USG systems, whereas the
TerraSAR-X systems would only be redundant. In addition to
SAR-Lupe, Smutny said his company is formulating plans to
offer US customers cutting-edge satellite communication and
missile surveillance technologies (NFI).

5. (C) Smutny noted that breaking into the US market is
particularly tricky these days, particularly with
defense-related exports. He said in order for a European
company to be successful doing so, it must provide product
that is 30 percent better and 30 percent cheaper than US
industry rivals to shake the stigma of not buying American and
also overcome the currency exchange rate disadvantages.

OHB-SYSTEM: GERMANYS HOUSE INTEL SATELLITE MANUFACTURER
--------------------------------------------------------

6. (C) OHB-System is Germanys preferred contractor for highly
sensitive intelligence satellites due to its 100 percent
German ownership and relative immunity to the French
interference. Although Astriums size, deeper pockets and vast
pool of resources give it a clear advantage over OHB-System
(fierce industry rivals) competing for contracts, OHB-System
smallish size allows it to minimize bureaucratic
inefficiencies resulting a well established history of
delivering product on-time and within budget; a reputation
that resonates very strongly with the German government.
Smutny, as well as Astrium officials, quietly acknowledge that
OHB-Systems cozy relationship with the German government is a
big reason why they beat out Astrium-Satellites for the
SAR-Lupe contract in 2001.

OHB-SYSTEM GOING GLOBAL WITH SMUTNY AT THE HELM
-----------------------------------------------

7. (C) OHB-System brought in Smutny, a well respected industry
veteran with expertise in satellite communications and
international marketing, to expand its international presence.
Smutny spoke proudly of the fact that while serving as the CEO
of Tesat-SpaceCom GmbH and earlier as managing director of
Bosch-SatCom, he led an effort that captured a 50 percent
world market share in space-based optical laser communications
equipment, an area of technical expertise for Smutny. He also
noted 70 percent of Tesats sales were to US customers.
(COMMENT: Tesat-SpaceCom is a subsidiary of EADS-Astrium and
purchased Bosch-SatCom in 2001. END COMMENT)

THE "FRENCHIES" STEAL MORE IPR FROM GERMANY THAN CHINA/RUSSIA
------------------------------------------------------------- 

8. (C) Smutny said his primary reason for leaving
Tesat-SpaceCom was that he was sick of developing world class
German-origin satellite technology only to have the
"Frenchies" swoop in via their influence in EADS and siphon
German intellectual property. Smutny frankly said "France is
the evil empire stealing technology and Germany knows this",
but Germanys decentralized government is not willing to do
much about it. Going on at length of his despise of the
French, Smutny said French IPR espionage is so bad that the
total damage done to the German economy is greater the that
inflicted by China or Russia. When asked about the possibility
of EADS acquiring OHB-System Smutny responded that OHB is a
special case and the German government is particularly careful
to ensure that OHB stays within Germanys sphere for German
military/intelligence reasons.

CUT THE CHINESE A LITTLE SLACK ON ITAR
-------------------------------------- 

9. (S) While Smutny spent a great deal of time accusing the
French of economic espionage, he took a much softer view on
Chinas espionage activities. Smutny said the International
Traffic in Arms Regulations (ITAR), though a good apparatus
for preventing illicit technology transfers and something that
he personally supports, is severely hurting US business
opportunities in China. Smutny opined the US should relax ITAR
restriction on the exports of goods with black box
technologies, such as that found in integrated circuits. He
reasoned the risk of technology transfer is very low because
these devises can not be easily reverse engineered. (COMMENT:
Per ref C, Chinese entities have attempted to procure German
satellite technology from Tesat-SpaceCom in the past under the
guise of the Galileo program. END COMMENT)

COMMENT
------- 

10. (S) Smutny painted a clear picture that French involvement
in German industry is not to be trusted and he feels that
German politicians are witting of this fact. On the other
hand, it was interesting that he somewhat downplayed the
severity of the Chinese economic espionage threat. Past
reporting captured procurement ties between Tesat and Chinese
military procurement entities affiliated with its military for
the same type of "black box" components that Smutny says
should be less ITAR restrictive.

MURPHY 
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