Order Code RL31555 Report for Congress Received through the CRS Web China and Proliferation of Weapons of Mass Destruction and Missiles: Policy Issues Updated February 26, 2003 Shirley A. Kan Specialist in National Security Policy Foreign Affairs, Defense, and Trade Division Congressional Research Service ˜ The Library of Congress China and Proliferation of Weapons of Mass Destruction and Missiles: Policy Issues Summary Congress has long been concerned about whether U.S. policy advances the U.S. interest in reducing the role of the People’s Republic of China (PRC) in the proliferation of weapons of mass destruction (WMD) and missiles that could deliver them. Recipients of China’s technology include Pakistan and countries that the State Department says support terrorism, such as Iran, North Korea, and Libya. The terrorist attacks on September 11, 2001, added an urgent U.S. interest in weapons nonproliferation. This CRS Report (superseding CRS Issue Brief IB92056) discusses the national security problem of China’s role in weapons proliferation and issues related to the U.S. policy response, including legislation, since the mid-1990s. The table at the end of this report summarizes the U.S. sanctions imposed on PRC entities for weapons proliferation. This CRS Report will be updated as warranted. Since 1991, China has taken some steps to mollify concerns about its role in weapons proliferation. Nonetheless, supplies from China have aggravated trends that result in ambiguous technical aid, more indigenous capabilities, longer range missiles, and secondary (retransferred) proliferation. As the Director of Central Intelligence (DCI) has reported, China remains a “key supplier” of weapons technology —particularly missile or chemical technology. Policy issues have concerned summits, sanctions, and satellite exports. On November 21, 2000, the Clinton Administration agreed to waive missile proliferation sanctions, resume processing licenses to export satellites to China, and discuss an extension of the bilateral space launch agreement, in return for another promise from China on missile nonproliferation. However, PRC proliferation activities again raised questions about sanctions. On five occasions, the Bush Administration has imposed sanctions on PRC entities for transfers (related to ballistic missiles, chemical weapons, and cruise missiles) to Pakistan and Iran, under the Arms Export Control Act, Export Administration Act, Iran Nonproliferation Act of 2000, and Iran- Iraq Arms Nonproliferation Act of 1992. Among the actions, on September 1, 2001, the Administration imposed missile proliferation sanctions (denying satellite exports), after a PRC company transferred technology to Pakistan, despite the November 2000 promise. During preparations for the October 2002 summit between Presidents Bush and Jiang at Crawford, TX, China, on August 25, 2002, published the missile export controls promised in November 2000. Washington and Beijing have held talks on the export controls. Depending on the enforcement of the regulations and reductions in proliferation practices, one issue for President Bush is whether to waive the missile proliferation sanctions imposed in September 2001. Since October 16, 2002, when the Bush Administration publicly disclosed that North Korea, on October 4, admitted to a secret uranium enrichment program for developing nuclear weapons, U.S. policy has sought China’s cooperation in a multilateral effort to achieve the elimination of North Korea’s nuclear weapons program. China has called for the United States to agree to bilateral talks with North Korea, rather than multilateral talks or actions by China or the United Nations (including sanctions). Contents Purpose and Scope .................................................1 PRC Proliferation Challenges ........................................1 Nonproliferation Commitments but Continued Concerns ...............1 Nuclear Technology Sales to Pakistan ..............................3 Ring Magnets .............................................3 Nuclear Cooperation .......................................4 Missile Technology Sales to Pakistan ..............................5 M-11 Missiles ............................................5 Missile Plants and MRBMs ..................................6 Nuclear Technology Sales to Iran .................................7 Missile Technology Sales to Iran ..................................9 Ballistic Missiles ..........................................9 Anti-Ship Cruise Missiles ..................................10 Chemical Sales to Iran .........................................12 North Korea’s Missile and Nuclear Weapons Programs ...............13 Missile Technology Sales to Libya ...............................16 Missile Technology Sales to Syria ................................16 Policy Issues and Options ..........................................16 Foreign and Defense Policies ........ ............................17 Summits ................................................17 Counter-Terrorism Campaign ...............................18 Missile Defense and Counterproliferation ......................18 Export Control Assistance ..................................19 Linkage to the Taiwan Issue ................................19 Economic Controls ............................................19 Satellite Exports ..........................................19 Sanctions ...............................................20 Capital Markets ..........................................21 Nuclear Cooperation Agreement .............................22 U.S. Import Controls ......................................22 U.S. Export Controls ......................................23 Nonproliferation and Arms Control ...............................23 Nonproliferation Regimes ..................................23 CTBT and Fissile Materials Production .......................24 International Lending and Japan .................................24 List of Tables PRC Entities Sanctioned for Weapons Proliferation ......................25 China and Proliferation of Weapons of Mass Destruction and Missiles: Policy Issues Purpose and Scope Congress has long been concerned about whether U.S. policy advances the U.S. interest in reducing the role of the People’s Republic of China (PRC) in the proliferation of weapons of mass destruction (WMD) and missiles. This problem refers to the threat of nuclear, chemical, or biological weapons and missiles that could deliver them. Some have argued that certain PRC transfers violated international treaties or guidelines, and/or have contravened various U.S. laws requiring sanctions to shore up those international standards. Even if no laws or treaties are violated, many view China’s transfers as threatening U.S. and regional security interests. This CRS Report (superseding CRS Issue Brief 92056) discusses the national security problem of the PRC’s role in weapons proliferation and issues related to the U.S. policy response, including legislation, since the mid-1990s. The table at the end of this Report summarizes the U.S. sanctions imposed on PRC entities for weapons proliferation. For a discussion of the policy problem in the 1980s to 1996, see CRS Report 96-767, Chinese Proliferation of Weapons of Mass Destruction: Background and Analysis, September 13, 1996, by Shirley A. Kan. See also, by the same author, CRS Report 98-485, China: Possible Missile Technology Transfers From U.S. Satellite Export Policy – Actions and Chronology. PRC Proliferation Challenges Nonproliferation Commitments but Continued Concerns Since 1991, Beijing has taken steps to address U.S. and other countries’ concerns by increasing its partial participation in international nonproliferation regimes and issuing export control regulations. However, questions have remained. China first promised to abide by the Missile Technology Control Regime (MTCR) in 1991-1992 and reaffirmed that commitment in an October 4, 1994 joint statement with the United States. The MTCR, set up in 1987, is not an international agreement and has no legal authority, leaving issues about U.S. sanctions to shore up the standards. It is a set of voluntary guidelines that seeks to control the transfer of ballistic and cruise missiles that are inherently capable of delivering at least a 500 kg (1,100 lb) payload to at least 300 km (186 mi), called “Category I” or “MTCR-class” missiles. It was unclear whether China adhered to the revised MTCR guidelines of 1993 calling for the presumption to deny transfers of any missiles capable of delivering any WMD (not just nuclear weapons). A 1996 Fact Sheet of the State CRS-2 Department said that China unilaterally committed to controlling exports “consistent with the MTCR Guidelines and Annex,” with the MTCR consisting of a common export control policy (Guidelines) applied to a common list of controlled items (Annex). However, a Senate Foreign Relations Committee report of September 11, 2000, said the State Department argued to Congress that China agreed to the MTCR Guidelines, but not the Annex. On November 21, 2000, Beijing said that it has no intention of assisting any other country in developing ballistic missiles that can be used to deliver nuclear weapons (missiles with payloads of at least 500 kg and ranges of at least 300 km) and promised to issue missile-related export controls “as soon as possible.” After a contentious period that saw new U.S. sanctions, the PRC finally published those regulations and the control list (modeled on the MTCR) on August 25, 2002, as Washington and Beijing prepared for a Bush-Jiang summit on October 25, 2002. China acceded to the Nuclear Nonproliferation Treaty (NPT) on March 9, 1992. The NPT does not ban peaceful nuclear projects. On May 11, 1996, the PRC issued a statement promising to make only safeguarded nuclear transfers. China, on July 30, 1996, began a moratorium on nuclear testing and signed the Comprehensive Test Ban Treaty (CTBT) in September 1996, but (like the United States) has not ratified it. Premier Li Peng issued nuclear export control regulations on September 10, 1997. On October 16, 1997, China joined the Zangger Committee (on nuclear trade). On June 6, 1998, the U.N. Security Council (including China) adopted Resolution 1172, asking states to prevent exports to India or Pakistan’s nuclear weapon or missile programs. The PRC issued regulations on dual-use nuclear exports on June 17, 1998. In November 1995, China issued its first public defense white paper, which focused on arms control and disarmament. Also, China signed the Chemical Weapons Convention (CWC) in January 1993. On April 25, 1997, China deposited its instrument of ratification of the CWC, before it entered into force on April 29, 1997. From 1993-1998, the PRC issued export control regulations on chemicals. On October 14, 2002, on the eve of a Bush-Jiang summit, the PRC issued regulations for export controls over dual-use biological agents and related technology. Nevertheless, China is not a member of the MTCR, Nuclear Suppliers Group (NSG) (requiring full-scope safeguards), or Australia Group (AG) (on chemical and biological weapons). Although 93 countries signed the International Code of Conduct Against Ballistic Missile Proliferation in The Hague on November 25, 2002, China did not. PRC weapons proliferation has persisted, aggravating trends that result in more ambiguous technical assistance, longer range missiles, more indigenous capabilities, and secondary (retransferred) proliferation. The Director of Central Intelligence (DCI) noted that, for July-December 1996, “China was the most significant supplier of WMD-related goods and technology to foreign countries.” As required by Section 721 of the FY1997 Intelligence Authorization Act, the DCI’s semi-annual reports, “Unclassified Report to Congress on the Acquisition of Technology Relating to Weapons of Mass Destruction and Advanced Conventional Munitions,” have named the PRC (plus Russia and North Korea) as “key suppliers” of dangerous technology. CRS-3 Nuclear Technology Sales to Pakistan Ring Magnets. In early 1996, some in Congress called for sanctions after reports disclosed that China sold unsafeguarded ring magnets to Pakistan, apparently in violation of the NPT and in contradiction of U.S. laws, including the Arms Export Control Act (P.L. 90-629) and Export-Import Bank Act (P.L. 79-173), as amended by the Nuclear Proliferation Prevention Act of 1994 (Title VIII of P.L. 103-236). On February 5, 1996, the Washington Times first disclosed intelligence reports that the China National Nuclear Corporation, a state-owned corporation, transferred to the A.Q. Khan Research Laboratory in Kahuta, Pakistan, 5,000 ring magnets, which can be used in gas centrifuges to enrich uranium. Reportedly, intelligence experts believed that the magnets provided to Pakistan were to be used in special suspension bearings at the top of rotating cylinders in the centrifuges. The New York Times, on May 12, 1996, reported that the shipment was made after June 1994 and was worth $70,000. The PRC company involved was China Nuclear Energy Industry Corporation, a subsidiary of the China National Nuclear Corporation. The State Department’s report on nonproliferation efforts in South Asia (issued on January 21, 1997) confirmed that “between late 1994 and mid-1995, a Chinese entity transferred a large number of ring magnets to Pakistan for use in its uranium enrichment program.” The Clinton Administration’s decision-making was complicated by considerations of U.S. corporations doing business in China. Officials reportedly considered imposing then waiving sanctions or focusing sanctions only on the China National Nuclear Corporation, rather than large-scale sanctions affecting the entire PRC government and U.S. companies, such as Westinghouse Electric Corporation (which had deals pending with China National Nuclear Corporation) and Boeing Aircraft Company. At the end of February 1996, Secretary of State Christopher instructed the Export-Import Bank to suspend financing for commercial deals in China for one month, reported the New York Times (February 29, 1996). Christopher reportedly required time to try to obtain more information to make a determination of whether sanctions would be required. Meanwhile, DCI John Deutch reportedly said at a White House meeting that PRC officials at some level likely approved the sale of magnets. Defense Secretary Perry supported this view, but officials of the Commerce and Treasury Departments and the U.S. Trade Representative argued there was lack of solid proof, according to the Washington Post (April 1, 1996). On May 10, 1996, the State Department announced that China and Pakistan would not be sanctioned, citing a new agreement with China. Clinton Administration officials said China promised to provide future assistance only to safeguarded nuclear facilities, reaffirmed its commitment to nuclear nonproliferation, and agreed to consultations on export control and proliferation issues. The Administration also said that PRC leaders insisted they were not aware of the magnet transfer and that there was no evidence that the PRC government had willfully aided or abetted Pakistan’s nuclear weapon program through the magnet transfer. (Congress responded that year by adding language on “persons” in the Export-Import Bank Act.) Thus, the State Department announced that sanctions were not warranted, and Export-Import Bank considerations of loans for U.S. exporters to China were returned to normal. On May 11, 1996, China’s foreign ministry issued a statement that “China will not provide assistance to unsafeguarded nuclear facilities.” In any CRS-4 case, China since 1984 has declared a policy of nuclear nonproliferation and requirement for recipients of its transfers to accept IAEA safeguards, and China acceded to the NPT in 1992. Nuclear Cooperation. On October 9, 1996, the Washington Times reported that a September 14, 1996 CIA report said that China sold a “special industrial furnace” and “high-tech diagnostic equipment” to unsafeguarded nuclear facilities in Pakistan. In September 1996, PRC technicians in Pakistan reportedly prepared to install the dual-use equipment. The deal was allegedly made by the China Nuclear Energy Industry Corporation, the same firm which sold the ring magnets. Those who suspect that the transfer was intended for Pakistan’s nuclear weapons program say that high temperature furnaces are used to mold uranium or plutonium. The CIA report was said to state that “senior-level government approval probably was needed” and that PRC officials planned to submit false documentation on the final destination of the equipment. According to the press, the report said that the equipment was set to arrive in early September 1996. The Washington Post, on October 10, 1996, reported that the equipment was intended for a nuclear reactor to be completed by 1998 at Khushab in Pakistan. On October 9, 1996, the State Department responded that it did not conclude that China violated its May 11, 1996 statement. However, the State Department did not publicly address whether the reported transfers occurred before May 11, 1996, violated the NPT, or contradicted U.S. laws (including the Arms Export Control Act, Export-Import Bank Act, and the Nuclear Proliferation Prevention Act). Concerns have persisted about PRC assistance to Pakistan’s nuclear facilities. As reported by Pakistani and PRC news sources in 1992, China began to build a nuclear power plant at Chashma and was suspected in 1994 of helping Pakistan to build an unsafeguarded, plutonium-producing reactor at Khushab.1 Operational since 2001, the Chashma reactor has IAEA safeguards but not full scope safeguards.2 Referring specifically to Pakistan’s efforts to acquire equipment, material, and technology for its nuclear weapons program, the DCI’s June 1997 report for the last half of 1996 (after China’s May 1996 pledge) stated that China was the “principal supplier.” Then, on May 11 and 13, 1998, India conducted nuclear tests, citing China’s nuclear ties to Pakistan, and Pakistan followed with nuclear tests on May 28 and 30, 1998. China, as Pakistan’s principal military and nuclear supplier, failed to avert the tests and has not cut off nuclear aid, but condemned the tests at the U.N. The Arms Control and Disarmament Agency’s annual report on arms control for 1998 stated that “there continued to be some contacts between Chinese entities and Pakistan’s unsafeguarded and nuclear weapons program.” In 2000, news reports said that some former U.S. nonproliferation and intelligence officials suspected that China provided equipment for Pakistan’s secret heavy water production plant at Khushab, where an unsafeguarded reactor allegedly has generated weapons-grade plutonium. Clinton Administration officials at the White House and State Department reportedly denied China’s involvement but said 1 Nucleonics Week, June 19, 1997 and February 26, 1998. 2 Nucleonics Week, April 26, 2001; IAEA Annual Report 2001. CRS-5 that they did not know the origins of the plant.3 The DCI reported in January 2003 that the PRC previously provided “extensive support” to Pakistan’s nuclear weapons programs and that, in the second half of 2001, “continued contacts” between PRC entities and Pakistani nuclear weapons entities cannot be ruled out, despite the 1996 promise not to assist unsafeguarded nuclear facilities. Missile Technology Sales to Pakistan M-11 Missiles. Transfers of the PRC’s M-11 short range ballistic missiles (SRBMs) or related equipment exceed MTCR guidelines, because the M-11 has the inherent capability to deliver a 500 kg (1,100 lb) warhead to 300 km (186 mi). Issues about U.S. sanctions have included the questions of whether PRC transfers to Pakistan involved M-11 missile-related technology (Category II of the MTCR) or complete missiles (Category I). Sanctions are mandated under Section 73(a) of the Arms Export Control Act (AECA) and Section 11B(b)(1) of the Export Administration Act (EAA) (as amended by the FY1991 National Defense Authorization Act). In June 1991, the Bush Administration first imposed sanctions on entities in China for transferring M-11 technology to Pakistan. Sanctions affected exports of supercomputers, satellites, and missile technology. The Administration later waived the sanctions on March 23, 1992. On August 24, 1993, the Clinton Administration determined that China had again transferred M-11 equipment (not whole missiles) to Pakistan and imposed new sanctions (affecting exports of some satellites). On October 4, 1994, Secretary of State Warren Christopher and Foreign Minister Qian Qichen signed a joint statement, saying that Washington would waive the August 1993 sanctions and Beijing would not export “ground-to-ground missiles” “inherently capable” of delivering a 500 kg warhead 300 km. The sanctions were waived on November 1, 1994. However, contentious policy questions about imposing sanctions for the 1992 transfer of complete M-11 SRBMs (not just components) persisted until 2000. The Washington Times (March 14, 1997) said “numerous” intelligence reports indicated that M-11 missiles were “operational” in Pakistan, but these findings were disputed by some policymakers. Secretary of Defense William Cohen issued a Pentagon report in 1997 stating that Pakistan acquired “SRBMs” as well as related equipment from China in the early 1990s.4 In a 1998 report to Congress on nuclear nonproliferation in South Asia, the Department of State acknowledged its concerns about “reports that M-11 missiles were transferred from China to Pakistan” but added that it had not determined that such transfers occurred, “which would be sanctionable under U.S. law.”5 Gordon Oehler, former head of the CIA’s Nonproliferation Center, testified on June 11, 1998, to the Senate Foreign Relations Committee that in 3 Hibbs, Mark, “CIA Knew About Khushab D2O Plant But Not Source, Officials Claim,” Nucleonics Week, March 23, 2000; “Pakistani Separation Plant Now Producing 8-10 Kg Plutonium/Yr,” Nuclear Fuel, June 12, 2000. 4 Office of the Secretary of Defense, Proliferation: Threat and Response, November 1997. 5 Department of State, “Report on Nuclear Nonproliferation in South Asia,” March 17, 1998. CRS-6 November 1992, “the Chinese delivered 34 M-11s to Pakistan.” In July 1998, the Rumsfeld Commission reported that China had transferred complete M-11s to Pakistan.6 Some said that sanctions were not imposed for transfers of complete M-11s, because the missiles remained inside crates at Sagodha Air Base, according to the Wall Street Journal (December 15, 1998). Critics, especially in Congress, said the Clinton Administration avoided making determinations of whether to impose sanctions, by delaying tactics, re-writing reports, and setting high evidentiary standards. The Senate Foreign Relations Committee issued a report in September 2000, saying that the Administration avoided such determinations through the use of “bureaucratic maneuvers” to delay the drafting of “Statements/Findings of Fact” by the intelligence community and to not schedule interagency meetings to consider those findings.7 On September 9, 1999, the intelligence community publicly confirmed for the first time that “Pakistan has M-11 SRBMs from China” and that they may have a nuclear role.8 However, the State Department argued on September 14, 1999, that it required a “high standard of evidence” and had not yet determined that Category I sanctions were warranted, despite the intelligence judgment. (Category I sanctions would deny licenses for exports of Munitions List items, among other actions, and Congress transferred satellites back to the Munitions List, effective March 15, 1999.) The Far Eastern Economic Review reported on May 18, 2000, that the Clinton Administration and Senator Helms of the Foreign Relations Committee struck a deal in 1999 that required a decision on sanctions for the PRC’s M-11 transfer to Pakistan in exchange for the confirmation of Robert Einhorn as Assistant Secretary of State for Nonproliferation (approved on November 3, 1999). On November 21, 2000, the Clinton Administration said it determined that PRC entities had transferred Category I and Category II missile-related items to Pakistani entities, and sanctions would be waived on the PRC for past transfers, given its new missile nonproliferation promise. Missile Plants and MRBMs. While China promised not to transfer missiles, it has reportedly helped Pakistan to achieve an indigenous missile capability. U.S. intelligence reportedly concluded in a National Intelligence Estimate that China provided blueprints and equipment to Pakistan to build a plant for making missiles that would violate the MTCR, according to the Washington Post (August 25, 1996). Analysts disagreed, however, about whether the plant would manufacture some major missile components or whole copies of the M-11 missile. Construction of the plant allegedly began in 1995. On August 25, 1996, Vice President Al Gore acknowledged concerns about the plant. Time reported on June 30, 1997, that the Clinton Administration would not discuss possible sanctions based on intelligence on the missile plant. The November 1997 report of the Secretary of Defense also confirmed 6 Commission to Assess the Ballistic Missile Threat to the United States (popularly known as the Rumsfeld Commission), report, July 15, 1998. 7 Senate Foreign Relations Committee, “Chairman’s Overview of China’s Proliferation Track Record,” September 11, 2000. 8 National Intelligence Council, “Foreign Missile Developments and the Ballistic Missile Threat to the United States Through 2015,” September 1999. CRS-7 Pakistan’s facility “for the production of a 300 kilometer range ballistic missile.” By 1998, the missile plant in Fatehjung was almost finished, awaiting delivery of crucial equipment from China, reported the Wall Street Journal (December 15, 1998). On April 6, 1998, Pakistan first tested its nuclear-capable Ghauri (Hatf-5) medium-range ballistic missile (MRBM), which is based on the North Korean No Dong missile. U.S. intelligence was said to suspect that China Poly Ventures Company delivered, perhaps in 1999, U.S.-made specialized metal-working presses and a special furnace to Pakistan’s National Development Center, a missile plant, reported the Washington Times (April 15, 1999). China reportedly was building a second missile plant and providing specialty steel, guidance systems, and technical aid, said the Far Eastern Economic Review (June 22, 2000) and New York Times (July 2, 2000). Apparently confirming these stories, the DCI reported in August 2000 that, besides North Korean help, PRC entities provided “increased assistance” to Pakistan’s ballistic missile program in the second half of 1999. Also, China has assisted Pakistan with development of the Shaheen-2 two-stage, solid-fuel MRBM, reported Jane’s Defense Weekly (December 13, 2000). DCI George Tenet confirmed U.S. concerns about such assistance in testimony on February 7, 2001, before the Senate Intelligence Committee, and in his February 2001 report on proliferation. Despite the PRC’s November 2000 missile nonproliferation pledge, in the first several months of 2001, a PRC company reportedly delivered 12 shipments of missile components to Pakistan’s Shaheen-1 SRBM and Shaheen-2 MRBM programs, according to the Washington Times (August 6, 2001). On September 1, 2001, the State Department imposed sanctions on China Metallurgical Equipment Corporation (CMEC) for proliferation of missile technology (Category II items of the MTCR) to Pakistan. In January 2003, the DCI reported that, in the second half of 2001, PRC entities provided “significant assistance” to Pakistan’s ballistic missile programs, including serial production of solid-fuel SRBMs (e.g., Shaheen-1 and Haider-1) and the Shaheen-2 MRBM. Nuclear Technology Sales to Iran Suspecting that Iran uses nuclear technology to build the technical infrastructure for its clandestine nuclear weapon program, Washington has urged Beijing (and Moscow) not to transfer any nuclear technology to Iran. In 1995, China suspended a sale of nuclear reactors to Iran. Showing Israeli influence, Prime Minister Benjamin Netanyahu publicly stated in August 1997 that PRC Vice Premier Li Lanqing said that China canceled plans to build the reactors. However, there were other controversial PRC nuclear deals with Iran pointing to an Iranian nuclear weapon program. PRC technicians built a calutron, or electromagnetic isotope separation system, for enriching uranium at the Karaj nuclear research facility, according to “confidential reports” submitted to Iranian President Rafsanjani by his senior aides, according to the London Sunday Telegraph (as reported in the September 25, 1995 Washington Times). As reported, the PRC system was similar to the one used in Iraq’s secret uranium enrichment program. Secretary of Defense