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80–604 PDF 2003

S. Hrg. 107–557

RUSSIA AND CHINA: NONPROLIFERATION

CONCERNS AND EXPORT CONTROLS

HEARING

BEFORE THE

INTERNATIONAL SECURITY, PROLIFERATION AND

FEDERAL SERVICES SUBCOMMITTEE

OF THE

COMMITTEE ON

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

JUNE 6, 2002

Printed for the use of the Committee on Governmental Affairs

(

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

JOSEPH I. LIEBERMAN, Connecticut, Chairman

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

FRED THOMPSON, Tennessee

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

THAD COCHRAN, Mississippi

ROBERT F. BENNETT, Utah

JIM BUNNING, Kentucky

PETER G. FITZGERALD, Illinois

JOYCE A. RECHTSCHAFFEN, Staff Director and Counsel

RICHARD A. HERTLING, Minority Staff Director

DARLA D. CASSELL, Chief Clerk

INTERNATIONAL SECURITY, PROLIFERATION AND FEDERAL SERVICES

SUBCOMMITTEE

DANIEL K. AKAKA, Hawaii, Chairman

CARL LEVIN, Michigan

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

THAD COCHRAN, Mississippi

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

ROBERT F. BENNETT, Utah

PETER G. FITZGERALD, Illinois

RICHARD J. KESSLER, Staff Director

DENNIS M. WARD, Minority Staff Director

BRIAN D. RUBENS, Chief Clerk

(III)

C O N T E N T S

Opening statements: Page

Senator Akaka .................................................................................................. 1

Senator Thompson ............................................................................................ 2

Opening prepared statement:

Senator Cochran ............................................................................................... 33

WITNESSES

THURSDAY, JUNE 6, 2002

John S. Wolf, Assistant Secretary, Bureau of Nonproliferation, Department

of State .................................................................................................................. 4

Matthew S. Borman, Deputy Administrator, Bureau of Industry and Security,

Department of Commerce .................................................................................... 6

Leonard S. Spector, Deputy Director, Center for Nonprolifeation, Monterey

Institute for International Studies ..................................................................... 19

David Albright, President, Institute for Science and International Security ..... 21

Gary Milhollin, Executive Officer, Wisconsin Project for Nuclear Arms Control ......................................................................................................................... 23

ALPHABETICAL LIST OF WITNESSES

Albright, David:

Testimony .......................................................................................................... 21

Prepared statement .......................................................................................... 51

Borman, Matthew S.:

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 39

Milhollin, Gary:

Testimony .......................................................................................................... 23

Prepared statement .......................................................................................... 56

Spector, Leonard S.:

Testimony .......................................................................................................... 19

Prepared statement with an attachment ....................................................... 44

Wolf, John S.:

Testimony .......................................................................................................... 4

Prepared statement .......................................................................................... 34

APPENDIX

Questions for Assistant Secretary Wolf from:

Senator Akaka .................................................................................................. 61

Senator Cochran ............................................................................................... 67

Questions for Mr. Borman from:

Senator Akaka .................................................................................................. 71

Senator Cochran with attachments ................................................................ 74

Questions for Mr. Albright from:

Senator Cochran ............................................................................................... 88

Questions for Mr. Milhollin Albright from:

Senator Cochran ............................................................................................... 91

(1)

RUSSIA AND CHINA: NONPROLIFERATION

CONCERNS AND EXPORT CONTROLS

THURSDAY, JUNE 6, 2002

U.S. SENATE, INTERNATIONAL SECURITY, PROLIFERATION AND

FEDERAL SERVICES SUBCOMMITTEE, OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS, Washington, DC.

The Subcommittee met, pursuant to notice, at 2:35 p.m., in room

SD–342, Dirksen Senate Office Building, Hon. Daniel K. Akaka,

Chairman of the Subcommittee, presiding.

Present: Senators Akaka, Carper, and Thompson.

OPENING STATEMENT OF SENATOR AKAKA

Senator AKAKA. The Subcommittee will please come to order.

Good afternoon, and welcome to our witnesses and all of you here

this afternoon.

Today’s hearing will examine how well Russia and China comply

with nonproliferation agreements and enforce export controls. We

are holding this hearing on the eve of what the whole world fears

could be a nuclear war between India and Pakistan. These states

conceivably would have never developed nuclear weapons or the

means to deliver them without assistance from Russia and China.

President Bush has labeled Iran, Iraq, and North Korea an axis

of evil, because of their weapons of mass destruction and their aspirations. Last month, John Bolton, Undersecretary of State for Arms

Control, singled out Syria, Libya, and Cuba in his speech entitled

‘‘Beyond the Axis of Evil.’’ Naming names of rogue states is only

one side of the story.

For every state seeking to buy or build a WMD capability, there

is also a state enabling it to do so. We have and should spend some

time discussing emerging proliferant states and second-tier suppliers. But to make a real difference, nonproliferation must start

with Russia and China, the major suppliers to proliferant countries.

Since 1992, the United States has sanctioned Russian entities

more than six times for the illegal export of missile and nuclear

technology, and chemical and biological dual-use equipment. The

United States has sanctioned Chinese entities at least six times, including a few weeks ago for violations of the 2000 Iran Nonproliferation Act. Some of the named Chinese entities have been

sanctioned before.

Multilateral export control agreements, diplomacy, and sanctions

are the tools the United States has used to address the supply side

2

of proliferation. They are imperfect instruments in fighting the

spread of weapons of mass destruction, in part because two countries, Russia and China, do not seem to share our view of the dangers, nor are they willing to enforce their pledges to prevent proliferation.

Both Russia and China claim to have export controls and agencies in place. Both can legitimately claim that the sheer size of

their industrial base, new administrative agencies, growing private

export companies, and confusion over new laws make it hard for

them to implement controls. But time and time again, the United

States identifies the same companies and the same individuals involved in illegal activities. It is these companies, these individuals,

and occasionally government officials, who proliferate.

Sometimes they do so illegally, but in many instances, we are

discussing transfers of restricted items that have been condoned by

official agencies.

Our witnesses today will discuss the different issues surrounding

this important topic. I would like to thank our administration witnesses on the first panel for being with us today. Ambassador John

Wolf is the Assistant Secretary of State for Nonproliferation. He

has been asked to discuss Russian and Chinese participation in

multilateral export control agreements and whether current proliferation concerns are consistent with their compliance to these

agreements.

Matthew Borman is the Deputy Administrator for the Bureau of

Industry and Security in the Department of Commerce. He will address the export control regimes of Russia and China, and U.S. assistance to their programs.

These are difficult issues, especially in light of our expanding

diplomatic relations with both of those countries. But these are

questions that need to be asked if we are to find ways to make it

better.

Senator AKAKA. At this time, I would like to yield to my friend

and colleague Senator Thompson.

OPENING STATEMENT OF SENATOR THOMPSON

Senator THOMPSON. Thank you, Mr. Chairman, and thank you

for that excellent opening statement. I think you are right on point.

And with your indulgence, I will make a couple of comments.

I think this is an extremely important hearing. Back a few years

ago, back in the 1990’s, when we would have hearings in this Subcommittee, the Judiciary, and other committees to talk about a fellow by the name of Osama bin Laden and al Qaeda, and the threat

that he posed to this Nation, and the fact that the American people

were not being told all that they needed to hear about that. The

attendance by Members of the Committee was not very great. The

attendance by the press was not very great. There may have been

some mention in the press the next day following the hearing. That

is kind of the pattern of what was going on back in those days.

I hope that we are not having a replay of that. I hope that in

years to come we do not look back and, instead of Osama bin

Laden, we can substitute the name of any particular rogue nation

that could do to us what bin Laden did to us on September 11.

3

This hearing is important because it goes to the heart of the

issue of terrorism. While September 11 apparently was not carried

out by a nation state, all of the threats that we have been hearing

about for many years now, and we will hear about again today, are

still as prevalent and more so than ever before. Just because we

were attacked one way one time does not mean that we will not

be attacked in a much more devastating way at another time by

a nation state or those who are working in concert with a nation

state.

Russia and China are clearly proliferators. They are clearly making this a more dangerous world. They are proliferating technology,

know-how, and capability for nuclear programs and missile programs to rogue states and others. They have outfitted Pakistan

soup-to-nuts as far as their missile program is concerned, entire

missile systems.

We would not have a crisis today in Pakistan had it not been for

Chinese policies over the last several years. They continue to supply Iran, who may be as dangerous to us. In retrospect, we may

conclude that Iran is as dangerous to us as Iraq. And they continue

apace in their activities, continuing to develop long-range missile

capabilities, with the carrying out of their Shahab III missile and

other nuclear capabilities, which they claim they need domestically

in that sea of oil that they are sitting on, for their energy supply,

which can so easily be diverted.

But I think the hearing is also important because it is going to

point the finger at some of our policies in this country that we have

had now for some years and continue. It is as if we really do not

know what to do about this situation, because clearly we know

what these countries are doing. We are trying to be friends with

Russia and China, and we are also trying to get them to move toward more moderate behavior.

And we sanction their companies from time to time. It has done

absolutely no good. We catch the same companies doing the same

thing. They are not concerned with our sanctions. Our sanctions do

not even address the things that might even concern these companies.

Clearly, with regard to at least some important parts, the nations themselves, the leaders of China and Russia, are aware of

very important things that are going on in terms of proliferation

activities.

A second set of policy issues has to do with our own export controls. The United States supplies technology in the form of highspeed supercomputers that, as one of our witnesses will point out,

is very helpful in terms of designing nuclear weapons and missiles.

We send that to China. China in turn assists Pakistan and Iran

with regard to their nuclear and missile capabilities. So maybe

someone can explain to me what sense that makes. But that has

been our Nation’s policy now for some time, and it is today.

So I think the American people should know this. The American

people should understand what Russia and China are doing, that

they continue apace, that they will continue to do this. They will

continue as we reach out to them and try to assist them, in the

case of Russia; as we try to bring them into 21st Century trade

patterns, in the case of WTO in China; that they are becoming

4

1The prepared statement of Mr. Wolf appears in the Appendix on page 34.

more and more a threat to world peace; and that our policies in attempting to deal with this are simply not working; and that we

need to get about the business of trying to figure out what might

work.

So for all these reasons, this is a very important hearing. And

I appreciate your having it, Mr. Chairman, and I thank you.

Senator AKAKA. Thank you very much, Senator Thompson. Senator Carper.

Senator CARPER. Thank you, sir. I have no comments, and I am

just here to hear these witnesses. I look forward to their testimony.

Senator AKAKA. Thank you very much. We are glad you are here.

At this time, I would like to call on Ambassador Wolf for your

statement. Will you please proceed?

TESTIMONY OF JOHN S. WOLF,1 ASSISTANT SECRETARY,

BUREAU OF NONPROLIFERATION, DEPARTMENT OF STATE

Mr. WOLF. Thank you very much, Mr. Chairman, Senators. It is

my privilege to testify on behalf of the Department of State on the

important subject of proliferation concerns with Russia and China.

I have a longer statement, that I would request be entered into the

record, that addresses a number of the questions that you posed.

Senator AKAKA. Your full statement will be included in the

record.

Mr. WOLF. But let me first mention a few of the highlights.

I have just returned from a most recent trip to Europe over the

weekend, and I was delighted to hear in Berlin and in Brussels at

the European Union and at NATO that they share our view that

proliferation is one of the two galvanizing threats that confront Europe. It is good to hear the views, but the challenge with our partners in Europe and around the world continues to translate to increasing understanding into a much more effective action, as Senator Thompson was describing, action that will complement and

supplement a variety of actions that the United States is taking in

multilateral regimes, in our plurilateral relationships, bilaterally,

and, in some cases, unilaterally.

Nonproliferation is one of the most important and complex of

America’s foreign policy challenges. The President describes nonproliferation not as one of many issues in our foreign policy but as

a central, focused issue around which other things revolve. And

this is one of those, like the war on terrorism, where one needs to

choose sides. You cannot sit on the fence.

Now both Russia and China have helped in important ways in

the fight against terrorism in the wake of the September 11 attacks. Yet, significant differences remain between us on critical

nonproliferation issues. I would like to outline our concerns and describe some of the steps that we have been taking to deal with the

problems.

I turn first to Russia, where the President’s visit last month cemented important parts of a new strategic arrangement that we

seek to reach. In addition to the dramatic treaty on reducing strategic offensive weapons, which will shortly be before the Senate,

Presidents Bush and Putin agreed to intensify efforts to combat the

5

spread of weapons of mass destruction. They went on to Rome for

the creation of the new NATO–Russia Council, which will also address proliferation questions. And in implementing our efforts, succeeding would be a major contribution to U.S. national security as

well as to global security.

But despite our deepening and our positive strategic dialog, we

remain concerned that Russian entities are providing proliferant

states with weapons of mass destruction and missile-related technology. Russian entities continue to engage in WMD and missilerelated cooperation with a number of programs in proliferant countries such as Iran, Libya, and Syria. In addition, Russia is also a

major supplier of advanced conventional weapons for these states.

We have been working with the Russian Government for several

years to help cement its export controls and enforcement. This assistance played a significant role in creating the legal foundation

for export controls that is now in place in Russia.

Ultimately, however, the Russian Government must demonstrate

the political will and devote the necessary priority and resources to

use these capabilities effectively to stop illicit transfers, as well as

to set responsible policies for what constitutes legitimate transfers.

It has not done so yet, and we continue to press Moscow to demonstrate such a commitment.

With regard to China, it too is a partner in the fight against terrorism. The President signaled this during his visit to Beijing this

spring, as well as his desire to develop a broader relationship. But

notwithstanding this and the important steps that Beijing has

taken through commitments to multilateral proliferation regimes

and bilateral arrangements with us, and the announcement that

they would promulgate a variety of chemical-, nuclear-, and missile-related controls, we continue to have concerns about their nonproliferation behavior. The controls that they have announced for

the most part are announcements, but they are not actual laws.

They need to be laws, they need to be known, and they need to be

enforced.

We are particularly concerned that China complies fully with its

various pledges not to provide assistance to any unsafeguarded nuclear facilities or programs anywhere. We are concerned as well

over possible interactions between Chinese and Iranian entities,

despite China’s 1997 pledge to end its nuclear cooperation with

Iran. Chinese entities’ assistance to chemical programs in Iran and

missile programs in Iran, Pakistan, and elsewhere has been a persistent problem.

In the past 6 months, we have imposed sanctions on five entities

for sale of items that assisted covert chemical or biological weapons

programs. There are other laws that come up periodically, and

there are other cases that are under active investigation.

China has failed to implement its November 2000 commitment

not to assist in any way any country in the development of Missile

Technology Control Regime-class missiles capable of carrying nuclear weapons. It continues to export dual-use missile-related items

to several countries of proliferation concern. This has been the subject of a number of high-level discussions between U.S. and Chinese officials.

6

1The prepared statement of Mr. Borman appears in the Appendix on page 51.

In short, there is a continuing gap between China’s commitments

and its implementation of those commitments. And we remain concerned about this, as we do about the gaps and loopholes in China’s

export controls and about China’s ability to effectively enforce

them. President Bush made clear at the time of his summit that

fulfillment of nonproliferation commitments would be a major factor in determining how far a new U.S.-China relationship can develop. It is the same point that the President made last month during the summit in Moscow.

We are expanding our broad relationship. There are many positive aspects. But with Russia, like with all of our friends, the

issues of nonproliferation are significant issues, and they limit the

ability of the United States to expand into new areas that would

be of mutual benefit.

The bottom line, Mr. Chairman, is that with both Russia and

China, we are working to develop broad, new relationships, among

other things, that will enable us to combat terrorism and the

spread of weapons of mass destruction.

We seem to agree that terrorism and weapons of mass destruction are threats to each of us and to the world collectively. The

United States and a number of its friends and allies are taking

concerted action in a variety of ways to stem these threats. We are

working to strengthen the export control regimes, like the Missile

Technology Control Regime. We are working for more effective enforcement of the Non–Proliferation Treaty and strengthened IAEA

safeguards.

But cooperation from China and Russia is inconsistent. Policy

implementation does not match public or private assurances, and

trade by entities in each country is contributing directly and significantly to precisely the threats that the Russian and Chinese

Governments say they oppose.

I would be delighted to expand further in questions and answers

and specifics in relation to your questions, Mr. Chairman, or in my

written text. Thank you very much.

Senator AKAKA. Thank you very much for your statement, Ambassador Wolf.

Mr. Borman, will you please proceed with your statement?

TESTIMONY OF MATTHEW S. BORMAN,1 DEPUTY ADMINISTRATOR, BUREAU OF INDUSTRY AND SECURITY, DEPARTMENT OF COMMERCE

Mr. BORMAN. Mr. Chairman and Members of the Subcommittee,

thank you for the opportunity to testify at this hearing.

The effectiveness of the export control systems of Russia and

China is an important subject made even more important by the

events of September 11. The Subcommittee is to be commended for

its attention to this topic.

My oral testimony will describe the dual-use export control systems of Russia and China and the status of our assistance efforts

with those countries. My descriptions are based on the Department

of Commerce’s involvement in those assistance programs.

7

Russia’s current dual-use export control system has continued to

evolve since its beginning in the early 1990’s. Russia is a member

of the Wassenaar Arrangement, the Nuclear Suppliers Group and

the Missile Technology Control Regime. Russia is also a member of

the Exporters Committee, commonly called the Zangger Committee, under the nuclear Non–Proliferation Treaty. Russia is not

a member of the Australia Group. Russia is a state party to the

Chemical Weapons Convention and the Biological Weapons Convention.

In summary, Russia has, for export controls an export control

law that covers the export of dual-use items; implementing regulations, including control lists and catchall controls; interagency review of export license applications; an outreach program to inform

exporters of their responsibilities under Russia’s export control system; and, I would say, limited enforcement capability.

Russia enacted its basic export control law in 1999. It provides

the authority to control the export of all the items that are on the

four multilateral regime lists, plus chemicals subject to the Chemical Weapons Convention. It also provides various other authorities, including the authority to have a catchall control, and, in the

related criminal administrative codes, penalties for violations.

Russia has put significant amount of effort into educating its defense enterprises on Russia’s export control requirements, and the

United States has worked with Russia and nongovernmental organizations to help facilitate that.

Russia’s export control system is currently enforced by a combination of agencies: The customs service, the intelligence service,

and the federal prosecutors. Russia has recently indicated to us

that they are interested in beefing up their enforcement and in

particularly looking at administrative enforcement mechanisms.

And in our own experience, administrative enforcement is a critical

part of an effective export control system.

As Ambassador Wolf has mentioned, we have had an ongoing export control cooperation program with Russia for several years

now. In the first few years, it was actually more of an exchange of

information. And certainly, we had to overcome some skepticism on

the part of Russian officials and exporters that the United States

was not really pushing export controls to preserve market shares

and market advantage for U.S. companies. I think we are well past

that, but clearly there is a lot that Russia still needs to do.

As I mentioned, a large part of the effort has been educating

Russian defense enterprises on Russia’s export control system.

Today under this program, several hundred Russian defense enterprises have at least gone through a first round of training, if you

will. And a recent study of that particular part of the program, the

outreach program, by the University of Georgia indicates that it

has had some effect. It has at least given exporters in the defense

enterprises a basic knowledge of Russia’s export control system.

Clearly, they need to do more training.

One other thing I would like to mention on our cooperation with

Russia, the Department of Commerce does have an export control

attache stationed in Russia. That person has several responsibilities, one of which is to do end-use checks when U.S. goods are exported into Russia. But another important responsibility of our atVerDate 11-MAY-2000 10:11 Jan 13, 2003 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 80604.TXT SAFFAIRS PsN: SAFFAIRS
8

tache is to work with Russian officials, particularly the export control enforcement officials, and provide information on ways that

they might improve enforcement of their own export control system.

Turning to China, I have less to say about China. The U.S. Government has not had an ongoing export control cooperation program with China. We have had some limited bilateral meetings

over the past few years, but those have really only been very basic

exchanges of information. China is not a member of any of the multilateral export control regimes, save the Zangger Committee,

which is for nuclear trigger list items.

As Ambassador Wolf has mentioned, China has promulgated

some export control regulations, but we have not really engaged in

any dialog with them as to what those really mean or how they are

implemented.

With that, I think I will conclude my oral testimony, and, again,

also be happy to answer questions.

Senator AKAKA. Thank you, Mr. Borman. Your full statement

will be included in the record.

Mr. BORMAN. Thank you, Mr. Chairman.

Senator AKAKA. We have some questions for you.

Ambassador Wolf, the 2001 unclassified report to Congress on

the acquisition of technology relating to weapons of mass destruction and advanced conventional munitions has a quote I would like

to read. The Central Intelligence Agency states that, ‘‘With respect

to Pakistan, Chinese entities in the past provided extensive support to unsafeguarded as well as safeguarded nuclear facilities,

which enhance substantially Pakistan’s nuclear weapons capability.

We cannot rule out some continued contacts between Chinese entities and entities associated with Pakistan’s nuclear weapons program subsequent to Beijing’s 1996 pledge and during this reporting

period.’’ If there are such contacts between Chinese entities and Pakistan

on nuclear weapons, Ambassador Wolf, do you believe such contacts would have to involve official Chinese entities and individuals? Do you believe that China continues to provide assistance to

Pakistan’s nuclear weapons program? And if so, what type of assistance?

Mr. WOLF. I think, Mr. Chairman, that I will stand with what

you read from the 721 report. This is an open hearing. And the Department of State certainly concurs with the sentence that you

read that we cannot rule out some unspecified contacts between

Chinese entities and entities involved in Pakistan’s nuclear weapons development program.

Nuclear weapons tend to be a fairly regulated activity. But here,

it would not be helpful, I think, to speculate beyond the language.

We are concerned. We have had conversations with China. We do

believe that it is absolutely essential that China live up to all of

the nonproliferation commitments it has given, none more important than the set of nuclear commitments, not only in terms of providing no help to any program or activity that is absent safeguards,

but also its commitments vis-a-vis Iran not to provide any assistance to Iran beyond the two very limited projects that were, for all

intents and purposes, grandfathered in 1997.

9

As long as you have read from the Central Intelligence Agency’s

report, I think it is important to note, Mr. Chairman, that it does

actually provide an encyclopedic view unclassified, sometimes with

classified and sometimes not classified annexes to the Congress.

But I think we are one of the few countries in the world that actually puts its cards down on the table.

It does not solve the problems that you and Senator Thompson

have described, but I think it helps in the education of the public.

And that has been one of our challenges as we work our way

through our allies, trying to raise their appreciation of the risks

that proliferation poses to them. So we use this report and we use

our contacts to try and get this up in the agenda dealing with nonproliferation.

To go back to what you all were saying, it is not something we

will achieve alone, because the dual-use technology that is available not only from the United States or Western Europe but increasingly from middle-tier countries makes the challenges that we

all face that much more difficult. Countries that were receivers of

technology, buyers of technology, now some have become exporters

of technology.

Senator AKAKA. I do not think you have covered that part on

whether you believe that China is assisting Pakistan.

Mr. WOLF. We believe that—we are still concerned that entities

may be involved in their nuclear weapons development.

Senator AKAKA. Ambassador Wolf, the same report states that, ‘‘President Putin, in May 2000, amended the presidential decree on

nuclear exports to allow the export in exceptional cases of nuclear

materials, technology, and equipment to countries that do not have

full-scope IAEA safeguards. The move could clear the way for expanding nuclear exports to certain countries that do not have fullscope safeguards, such as India.’’ Are there any indications of continued Russian official contact

with the Indian nuclear weapons program or assistance to the military side of the Indian nuclear program?

Mr. WOLF. Mr. Chairman, I think it is important to clarify that

India is a rather different case on various lists than the way in

which it appears in the 721 report.

But it is clear India developed and, for the most part, developed

its own indigenous nuclear capability. This paragraph has to do

specifically with Russian assistance to the civilian side of India’s

nuclear establishment.

There is nothing in this report that suggests that there is Russian assistance to India’s nuclear weapons capability. There is ongoing contact, both in terms of nuclear fuel supply and items below

the NSG trigger list level, between Russia and India. There are

contracts for the sale of additional nuclear reactors.

But India does not have full-scope safeguards. This has been an

item of very active discussion in the Nuclear Suppliers Group, and

we will not let it go.

Senator AKAKA. Before I defer to Senator Thompson for his questions, I have a question for Mr. Borman.

In your testimony, you state that discussions between the United

States and China on export controls have been limited. Why have

only modest steps been taken to help China identify problems in

10

their export control systems? Is it because of Chinese reluctance to

seek outside advice? Or have we been reluctant to take action?

Mr. BORMAN. Well, in my experience at least, it is probably been

more the former. Clearly, to have this kind of cooperation program,

you have to have two governments that are interested in moving

forward. And I have not seen that indication, although the State

Department may want to comment on that as well.

Mr. WOLF. I might add a little bit, Mr. Chairman, because I have

had an active dialog with certain Chinese officials, but it has not

gotten as far as we would like.

In the context of our discussions, and especially about the November 2000 Missile Technology Control Agreement, China agreed

to publish comprehensive export controls for missiles. During the

course of our dialog about the lapse or breach of that agreement,

we have also had a chance to hear that China intends to expand

its current controls on Australia Group-related export items and,

indeed, to make their export lists compatible with the Australia

Group. We are not aware that the law or a regulation on CBW has

been promulgated.

Similarly, they have told us that they intend to publish lists that

would be compatible with the MTCR annex items. That had been

tied up in the discussions of the November 2000 agreement. In fact,

in some conversations, it has appeared that maybe it is not now.

The point for us is that China does not promulgate new export

control lists as a favor to the United States or to the Australia

Group or to the MTCR partners. China’s policy, as declared from

the highest levels, is a policy that opposes proliferation. And a policy that opposes proliferation needs to be backed by rigorous regulations and rigorous enforcement of the regulations. It is not

enough just to have the regulations; they need to be enforced. By

enforcement, it is not enough to just catch somebody and tell them

not to do it again; there need to be judicial sanctions.

So as we look at the direction that China is going, we are encouraged by what we hear from every level of the Chinese Government

about commitment to nonproliferation. But we are not as encouraged by the fact of what is there in terms of the legislative and administrative arrangements. And we are certainly quite less satisfied with the enforcement, because, as in the CIA’s report, Chinese

entities are active all around the world.

Now, does that or does that not have the government’s endorsement or support? We cannot answer that question as easily as we

can answer the point that enforcement is insufficient to prevent

Chinese entities from selling goods and services to proliferators in

a way that significantly enhances those proliferators’ programs.

Senator AKAKA. Are there any other comments you would like to

make, Mr. Borman?

Mr. BORMAN. Well, I guess to amplify a little bit of what Ambassador Wolf said. In the program we have had, at least with Russia

and some other countries, you initially have a political commitment

to engage in cooperation and then from that flows the more technical discussions. As you have heard, we are not to that point yet

with China.

Mr. WOLF. With Russia, for instance, we have experts who sit

down. They review the list. We are working with Russia in a variVerDate 11-MAY-2000 10:11 Jan 13, 2003 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 80604.TXT SAFFAIRS PsN: SAFFAIRS
11

ety of ways, in terms of working with the export control part of the

economic development ministry on things like enhancing communications, expanding export control outreach, as Mr. Borman described, but also education for judges and prosecutors and legislators. We are helping to install specialized radiation detection equipment at a number of border posts. And we are engaging in a broader set of export control talks, including on nuclear-related exports.

With Russia, we have that opening. With China, we are interested in expanding our discussion, but it takes two hands to clap.

Senator AKAKA. Thank you, Senator Thompson, for your questions.

Senator THOMPSON. Thank you, Mr. Chairman.

I hardly know where to start. It is clear that the State Department and our export folks are doing what they can in order to try

to get Russia and China to come up with some regimes of enforcement. Of course, I guess it was 1999 that Russia passed an export

control law. China has issued some regulations and so forth.

Ambassador, I realize that you have to be diplomatic. You are

working with these people. And to the extent that you can get them

to come up with these regimes and comply maybe sometimes with

these regimes, more power to you.

And the same with you, Mr. Borman.

But we have seen here for several years now the State Department and their export folks in Commerce and so forth proceed

along on the basis of taking at apparently face value these political

statements made from the highest authority. Taking at face value

their statements that they really do want to control all this stuff.

Apparently, this administration is adopting that same approach.

And I find it disconcerting, to say the least.

We have all seen the classified information. We have to rely on

what is on the public record, and I look at the public record and

see things like this. According to a February 2002 unclassified

summary of the Director of the Central Intelligence report to Congress on the acquisition of technology relating to weapons of mass

destruction, Russian entities continue to supply a variety of ballistic missile-related goods and technical know-how to countries

such as Iran, India, China, and Libya. Iran’s earlier success in

gaining technology and materials from Russian entities has helped

to accelerate Iranian development of Shahab III, a missile with a

capability to hit Israel. And continuing Russian assistance likely

supports Iranian efforts to develop new missiles and to increase

Tehran’s self-sufficiency in missile production.

In January 2000, Moscow approved a draft cooperative program

with Syria that included civil use of nuclear power. Broader access

to Russian scientists and Russia’s large nuclear infrastructure

could provide opportunities to solicit fissile material production expertise and other nuclear-related assistance if Syria decided to pursue nuclear weapons. During the first half of 2001, Russian entities

remained a significant source of dual-use biotechnology, chemicals,

production technology, and equipment for Iran.

With regard to China, obviously they do not view export controls

as a national priority, to say the least. They use them as a bargaining chip and have basically told us that as long as we continue

supporting Taiwan, and we will not approve satellite sales and satVerDate 11-MAY-2000 10:11 Jan 13, 2003 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 80604.TXT SAFFAIRS PsN: SAFFAIRS
12

ellite launches, they are going to continue to do pretty much as

they please and have.

The administration in September 2001 imposed sanctions on two

companies that were found to have transferred ballistic missile

goods and technologies to Pakistan. More recently, in January of

this year, the administration imposed sanctions on three more Chinese companies for transferring chemical and biological technology

to Iran. The CIA Director reports that the PRC remains a key supplier of technology inconsistent with proliferation goals, particularly missile or chemical technology transfers. China contributes toward trends and more ambiguous technical assistance, indigenous

capabilities, and longer range missiles and secondary proliferation.

Most recently, China has reportedly assisted Pakistan in the development of its Shaheen II two-stage solid fuel medium-range ballistic missile. In addition, firms in China have provided dual-use

missile-related items, raw materials, and/or assistance to several

other countries of proliferation concerns such as Iran, North Korea,

and Libya. Chinese firms continue to be suppliers of dual-use

chemical weapons production equipment and technology to Iran.

I submit to you that is not cause for optimism. It is clearly a continuation, if not acceleration, of what we have been seeing over a

period of years now.

It is clear that, in terms of Russia’s situation, they lack resources. They lack expertise. I think you point those things out.

And specialists, in some ways. We are trying to help them there.

We should. It is not like every item that they made, they send to

someone who is a bad actor. We are assisting them with our Nunn–

Lugar program and trying to do something with regard to the nuclear stockpile.

But when it comes to the bottom line and they are making

money, they clearly continue to do these things and make the

world a more dangerous place.

I understand the position of both of you gentlemen. That is why

I am doing what I hate for us to do, and that is to make statements

instead of asking questions. But I can just express that I hope that

deep down inside you really do understand that what these highlevel officials of these two countries say about proliferation is virtually meaningless, and what they agree to do is virtually meaningless when it comes to them and their national interests.

Over the years, you could almost say the same thing about our

European friends. I am glad you feel optimistic coming back from

talking to our EU friends, but their history there, when profits

were at stake, has been terrible. I mean, some of our friends in the

EU are in the process now of helping break sanctions on Saddam

Hussein.

I just think that it is good to have these public forum discussions. You may disagree with most of what I say, but I am talking

about the public record and similar hearings that we have over the

years, and I am saying that the world continues to be a more dangerous place. We continue to try to figure what to do about it, but

we are not making much headway with regard to the two most

prominent and persistent proliferators in the world, Russia and

China.

13

I am not saying that you gentlemen need to come in here within

a year or so and solve all these problems that have been developing

over several years. I am just saying that we would be very naive,

and it would be very dangerous for us to assume that things are

getting better, because things are getting worse.

Mr. WOLF. Maybe I should take that as a question: Do we agree?

Senator THOMPSON. That’ll do. [Laughter.]

Mr. WOLF. Let me say that I think some things are different in

this administration, and we are not particularly diplomatic. I will

refer you to our European friends, or I will have John Bolton come

up and explain.

But we are not particularly diplomatic. The President has been

very clear, starting with his speech at the State of the Union, and

in every contact that we have with our friends on whom we are

hard, and those who are not as friendly, and those who are on the

other side. And we are not diplomatic with them. There are no

game preserves. We do not rule certain countries in and out. We

did sanction China a month before the President was to go to

Shanghai. We have sanctioned entities.

Senator THOMPSON. Chinese companies.

Mr. WOLF. We are continuing to sanction entities. I do not believe, actually, that Russia lacks resources or expertise. I think

they lack will. But I think things have changed in Russia.

Two years ago, I was the negotiator for Caspian energy. On Caspian energy, the reception that the United States received in the

Caspian region is unlike the reception that the U.S. military receives in Central Asia today.

Russia is moving, but has it made a decision at the highest level

to tell every other level to stop it? It is clear that has not happened.

And that is why the President engaged directly with President

Putin at the summit 2 weeks ago, to make it clear that nonproliferation for the Bush Administration is a core, central issue.

And it is not tempered by cooperation in the war on terrorism. It

is not tempered by the desire to develop an economic relationship.

It is not tempered by a personal friendship.

For us, support for countries—which, you are right, Iran poses a

direct threat not just to Israel and not just to Russia. Iran and the

programs that it has now, including the Shahab missile, pose a direct threat to the United States by the ability of that missile to hit

U.S. forces in Turkey and a direct threat to NATO by its ability

to hit forces from NATO countries in the Gulf region.

And that is the conversation we have with the Europeans. Do not

take wrong what I said about ‘‘I come back optimistic.’’ I came back

hearing that there is a greater recognition that proliferation is one

of two threats to European security, the other being regional disintegration.

But we will be able to tell how real that appreciation is when we

see things like whether the Europeans tie their trade relations

talks to their concerns about nonproliferation.

We will see if Russia’s commitment to ban the weapons of mass

destruction plays out in the marketplace. I was told by the head

of the space agency that they have a number of cases under investigation, and I told them, ‘‘That’s good. That is encouraging. We

look forward to hearing how you proceed with those investigations.’’

14

He said, ‘‘We found one guilty. We fired him.’’ I said, ‘‘That’s not

enough. You must not slap him on the wrist. Slap him in jail.’’

For Russia and China, the question is whether or not the government sends signals through the judicial process that are sufficient

to tell these renegade entities that the government is serious. They

have not done that yet. Our eyes are wide open.

Senator THOMPSON. You are not suggesting they all are renegade, are you?

Mr. WOLF. It is hard to discern whether or not they are done

with the support of the upper levels, or whether or not they are

done with the support of the entities.

Senator THOMPSON. Well, it is, I guess, most times hard to discern, Ambassador Wolf. But I guess that is what I am getting at.

Our primary overriding concern is the safety of our Nation and

our friends and our allies. If you have a pattern over the years of

this activity coming out of a country that we have a relationship

with and an improving relationship with, with regard to a lot of

other areas. If this pattern continues, and you sanction a company

here and a company there and maybe a subsidiary or affiliated

company does the work instead, where should the burden lie?

Should the burden be on us to prove beyond a reasonable doubt

in a court of law? Or should we say to them, ‘‘We cannot prove beyond a reasonable doubt in a court of law who exactly knew what,

but it is your responsibility.’’

And in many of these cases, they do not make any bones about

it. I mean, they say this is for peaceful nuclear purposes and use

these loopholes in the law to do things on top of the table, not to

mention the other.

But where should the burden lie? Should we not put the burden

on them, say regardless of who knew what, your policies need to

be directed toward stopping this or making substantial progress towards stopping that?

Mr. WOLF. Senator, your talking points are exactly the ones we

use. The burden is with their leadership; their burden is with their

administrators.

We will be able to judge their commitment—either country—

their commitment to their nonproliferation rhetoric by the degree

to which they enforce and put in place wide-ranging laws and then

enforce them. If we do not see a pattern of enforce—and we have

laws and we have companies that try to violate our export laws.

And we count on a variety of U.S. administrative means to identify

those people, prosecute them, and hopefully convict them, and

that’s what we count on.

In our dialog with the Russians, for instance, we say that, ‘‘We

understand you will not turn this off overnight. You are right. This

is years of behavior. But what we do not see is a pattern of prosecutions, a pattern of companies being found in violation’’——

Senator THOMPSON. What does that tell you?

Mr. WOLF. It tells you that the political will is not there yet.

Senator THOMPSON. Does that tell you that the leadership is surprised and shocked to find that these companies are doing this? Or

does it tell you that perhaps they realize that these companies

needed funding, and it was in these countries’ interests to have

15

these entities survive. And they were all up against it financially,

so they at least turned a blind eye. What does that indicate to you?

Mr. WOLF. What it indicates to us is that they are not effectively

implementing their law. And what the President has made clear,

Senator, is that even as we try to move forward on a broad relationship, and there are other areas with much more economic significance than these sales, that we will not be able to move in that

direction, because the administration will not choose to and the

Senate and House will not support it.

And we are very clear that to expand the relationship, for instance, with Russia, to take on a number of new activities in terms

of nuclear research or space cooperation, that there needs to be an

end to support for sensitive nuclear cooperation—for instance, in

Iran, an end to missile cooperation in Iran, an end to advanced conventional weapons sales.

Senator THOMPSON. Well, I am assuming that the President had

some very direct conversations with Mr. Putin, for example. I feel

confident that that is the case. And I like most of what you say in

our discussion, quite frankly.

I got kind of a different impression from your statement. The

President needs support from the State Department in carrying out

this message. And I would just urge you to consider whether or not

in your public statements, which they are all very much aware of,

that the thrust of what you are saying is that things are looking

up, we are going to watch them carefully, but we are making

progress, and we are encouraged and all of that—in the face of our

own CIA telling us what has happened. I mean, I fear that the

other side thinks perhaps that we may be patsies somewhere up

or down the line.

And I just would encourage you to consider that in your public

pronouncements, with regard to these issues.

We have a vote on. We will stand in recess until Senator Akaka

comes back.

[Recess from 3:33 p.m. to 3:38 p.m.]

Senator AKAKA. The Committee will be in order.

Mr. Ambassador, I understand that Assistant Secretary of Defense Peter Rodman will be traveling to China shortly to hold bilateral talks with the Chinese on military and defense issues. The

question is, will the Departments of State and Commerce be advising Secretary Rodman on issues concerning proliferation and enforcement of export controls, which he should raise with the senior

Chinese officials? I think this would be a good opportunity to reinforce the administration’s concerns, especially given Mr. Borman’s

testimony today, indicating that we have had problems getting Chinese attention on export control enforcement.

Is he going to raise some of these questions with the senior Chinese officials?

Mr. WOLF. Mr. Chairman, I know that as one of his first acts,

President Bush promulgated a national security presidential directive that established a nonproliferation working group at the assistant secretary level. I am one of the people on it, and so is Mr.

Rodman, when issues come up related to his activities.

And I am sure that Assistant Secretary Rodman will welcome

the advice of the ‘‘PRO–STAT–PCC,’’ we call it, on those issues that

16

are not directly defense—inherently defense. We try to coordinate

our activities, as we do when Defense has its various dialogues.

I participated in a meeting a couple of weeks ago over at the Department of Defense when there was a visiting delegation, and I

am sure Mr. Rodman will welcome advice from Commerce and

State. In any event, we will provide it.

Senator AKAKA. Russian officials have stated that the United

States has a double standard when it comes to Russian assistance

to Iran. They claim that we condemn certain exports from Russia

but support sales of the same items from other countries to Iran.

They also claim that Russian work on the Iranian nuclear power

plant is the same as our assistance to North Korea, through the

Agreed Framework. Could you please comment on these claims?

Mr. WOLF. We disagree. I’ll expand.

Where we can identify American companies that are exporting

dual-use technology to prohibited entities and enemies, we certainly rigorous enforcement action. Where we identify, for instance,

European entities that are exporting dual-use technology to Iranian

entities, we take rigorous action.

I can think of one case for one Western European country in particular where I met with the ambassador, and I told him very specifically that that company needed to choose: Was it going to try

to develop a market in Iran, or was it going to continue to develop

its market in the United States? It could not do both.

Secretary Powell raised the same issues in his conversation with

the foreign minister and the economic minister of that country.

And in the end, the country chose to use its catchall regulations to

stop the export of an item which was not even actually on the Australia Group list but which could have contributed to a BW program in Iran.

We do that with our friends. We do it wherever we have information. And where we can use the information without compromising

our sources in a serious way, we use that information to try to halt

the export.

Now, we have clear information—this is not just a guesstimate—

that Russian entities are providing critical support for nuclear fuel

cycle development in Iran. And Russian entities or individuals are

providing critical support for missile development in Iran. And

Russian entities and Russia are selling advanced conventional

weapons to Iran. And it is our belief that that has to stop.

On the question of Bushehr, Bushehr is much more complicated.

Bushehr is in fact a light-water reactor. It is in a country that is

clearly conducting efforts outside of its IAEA safeguards to acquire

the capability to make fissile material. It is a country where the

program is moving forward. It does not have an additional protocol.

There will be no wide-ranging IAEA inspection of all of the facilities, as would be the case in North Korea.

The Iranian nuclear program and the nuclear fuel cycle is not

frozen, as we believe but we cannot confirm. And we remain very

vigilant, because we do not know whether it is or it is not, the

North Korean.

But Russia did not get any of those things, and Russian entities

are continuing to support the development of elements of the nuVerDate 11-MAY-2000 10:11 Jan 13, 2003 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 80604.TXT SAFFAIRS PsN: SAFFAIRS
17

clear fuel cycle which are incompatible with a light-water reactor

at Bushehr.

So the situations are completely different. And we believe that

with political will that we should be able to expect to see much

more consistent, much more effective implementation of export controls. I mean, it is true for Russia, but it is true for a number of

countries.

There is a belief among some that if a country is, for instance,

an adherent to the NPT, and if it is a member of the International

Atomic Energy Agency, and if safeguards appear to be intact, then

therefore that recipient country is entitled to all of the benefits of

participation. We do not believe that. There are countries that are

wannabes, which are in compliance with IAEA safeguards on the

one hand, but which are conducting clandestine activities on the

other hand.

As the 721 report makes very clear, the CIA’s report on mass

weapons and nonproliferation, Iran is one of those countries. And

therefore, one needs to be highly vigilant, whether one is Russia,

whether one is a member of the European Union, or whether one

is the United States of America, or whether one is an island just

to the south of us, because exports of dual-use technology which

can be diverted may well be diverted. And without consistent, constant monitoring right on the spot, one can never know. That is

particularly true for BW-related items, because they can be converted back and forth in a matter of minutes.

Senator AKAKA. Let me raise another possible issue. We are concerned, as you have testified, about Russian assistance to Iran’s civilian nuclear program. Shouldn’t we also be concerned about the

military implications of India’s civilian nuclear program?

Mr. WOLF. India’s program?

Senator AKAKA. Yes.

Mr. WOLF. We have been concerned, and our cooperation with

India is limited to three tiny safety projects, and we have not cooperated with them for a very long time.

In 1998, when there was another explosion, we put in place sanctions. When we lifted sanctions last fall, we said to the Congress

that we remained concerned about nuclear developments in South

Asia, and the events now make clear that we should be.

India is a quite different case than countries that are mentioned

in other parts of the 721 report. But we are concerned about India’s

nuclear program, and we have raised in the Nuclear Suppliers

Group concerns about Russia’s provision of technology and fuel to

India, absent full-scope safeguards and in breach of the NSG guidelines.

We did not win that battle. The Nuclear Suppliers Group was

united with us; Russia chose to do otherwise.

But we will continue to try to maintain the NSG guidelines. We

believe full-scope safeguards are the only way that we can limit the

risks that are out there. And even with those guidelines, the

wannabes have found other ways to acquire technology and expertise that help them move forward.

Mr. BORMAN. Mr. Chairman, if I could follow up a little bit on

the double standard issue. Certainly as far as U.S. origin goods go,

of course we have a unilateral embargo on Iran, so there are very

18

few things that go from the United States to Iran, and those controls also extend to some extent to the re-export of U.S. origin

goods.

And as far as India’s nuclear power program goes, even when the

sanctions were lifted to some extent, all of their nuclear power activities remain on entity lists.

Mr. WOLF. And we do not supply them.

Mr. BORMAN. Correct.

Senator AKAKA. Thank you.

The United States, Great Britain, and Norway are financing a

computer system for other nations to track nuclear components and

materials in real time, called Tracker. It is employed in nine countries, including several former Soviet bloc countries. This system

relies on participating governments to input information on export

licenses into a computer. Each country owns its own information

and is solely responsible for its accuracy.

The question is, have the United States and our partners offered

this system to Russia or China? If not, are there plans to do so?

Mr. WOLF. That is one of my systems, Mr. Chairman, and I

should know the answer to whether we have offered it to Russia.

I believe we may have.

I have raised it in discussions with the Chinese. We would be

prepared to do that. The system is not quite as omniscient as your

first couple of sentences suggested. The system is, in its current

stage, basically a tool which we provide to governments to help

automate and give transparency to their export control licensing

process by inputting data and making it available to the various

entities around a government, the various agencies that are involved in the export decision. It is possible for the person in charge

to know the status of an export license. It adds a great deal of

transparency.

Now, ultimately, if linked together—and I think this takes it a

little further than it is now—it would provide us a means of exchanging information. We try to do that in a variety of other ways.

And we rely on other assets of the U.S. Government for our own

individual look at what is happening in the nuclear trafficking

world through the NSG or through our own intelligence.

Senator AKAKA. Thank you very much for your responses.

Senator do you have any questions?

Senator THOMPSON. Nothing further, thank you. Thank you, gentlemen.

Senator AKAKA. Thank you so much, Ambassador Wolf and Mr.

Borman, for your testimony. The Members of the Subcommittee

may submit questions in writing to you, and we would appreciate

a timely response to any of those questions. So thank you very

much. We really appreciate your responses.

Mr. WOLF. Thank you.

Mr. BORMAN. Thank you.

Senator AKAKA. We will now proceed to our next panel of witnesses.

I would like to call Leonard Spector, David Albright, and Gary

Milhollin to take their places at the witness table.

Mr. Spector is Deputy Director of the Center for Nonproliferation

Studies in the Monterey Institute for International Studies. Mr.

19

1The prepared statement of Mr. Spector with an attachment appears in the Appendix on page

44.

Albright is President of the Institute for Science and International

Security. And Mr. Milhollin is Executive Officer of the Wisconsin

Project for Nuclear Arms Control.

I want to thank you gentlemen for being with us today. You have

been asked to discuss recent proliferation activity from Russia and

China, and how well their export systems address these concerns,

and how well both nations are complying with their international

commitments to nonproliferation.

I want you to know that your full testimony will be submitted

into the record, and we look forward to hearing your statements.

Mr. Spector, will you proceed?

TESTIMONY OF LEONARD SPECTOR,1 DEPUTY DIRECTOR,

CENTER FOR NONPROLIFERATION, MONTEREY INSTITUTE

FOR INTERNATIONAL STUDIES

Mr. SPECTOR. Thank you, Mr. Chairman, and thank you for the

opportunity to testify this afternoon on this topic. I will confine my

remarks to the Russia case.

Sadly, Mr. Chairman, history is repeating itself, and it seems

that Moscow has failed to absorb the unmistakable lessons of the

past. Just like the careless, profit-hungry exporters of the 1960’s,

1970’s and 1980’s that we had in the West, Russia today is driven

by the desire for income and is engaged in a wide range of unwise

exports, placing profits over proliferation concerns. I have attached

a table to my testimony that highlights a number of these exports.

I will mention only the most troubling ones, and I will leave out

Iran, since we have just had testimony from the administration on

that. Russia has opened a nuclear Pandora’s box in Syria, providing Syria with its first research reactor; it now will expand this

cooperation to include power reactors. It has enhanced the prestige

of the military junta in Myanmar by selling that country its first

research reactor. It has agreed to help refurbish the Tajoura research reactor in Libya. And most troubling, at a time when the

international community is intensely concerned about the threat of

nuclear war in South Asia, Russia is assisting India to develop nuclear-capable cruise and ballistic missiles and is seeking to cash in

through major sales to India’s civilian nuclear power program,

sales all other nuclear suppliers have renounced.

These activities with India violate the long-standing rules of the

Missile Technology Control Regime (MTCR) and the Nuclear Suppliers Group (NSG).

I would underscore, Mr. Chairman, that these exports that I am

describing are not inadvertent or the result of smuggling or activities that bypass official controls. As explained in greater detail in

my written statement, not only are these exports all blessed by officials in Moscow, but these same officials have deliberately manipulated Russian export control laws to permit the sales.

Apart from the case I have cited, of course, there are smuggling

cases to be concerned about. And I want to underscore a point

made by Assistant Secretary Wolf about the lack of prosecutions.

This is a very serious matter in the Russian case. And it really is

20

a pity that, at a time when we are spending so much and working

so hard to stop leakage of nuclear materials from Russia, we do not

have the benefit of being reinforced by a tough Russian compliance

effort.

In view of these patterns, it seems clear that the fundamental

problem is a lack of political will. Here I am also echoing Assistant

Secretary Wolf. It is a lack of political will in Moscow to enforce

a disciplined export control system.

How can we change the situation? The Bush Administration, like

the Clinton Administration, has tried a number of approaches but

with only limited success. It has raised U.S. concerns at the highest political level, most recently at the May 2002 summit. It has

imposed sanctions against specific Russian entities involved in improper exports. It has publicized Russia’s departures from international norms. It has spent millions training Russians export control officials. But despite these activities, the problems persist.

I would like to suggest several new avenues that might reinforce

these efforts to improve Russian export behavior and give them additional substance.

The first is that I think it is time to indicate forcefully that members of the Missile Technology Control Regime and the Nuclear

Suppliers Group are dissatisfied with Russia’s behavior. My first

thought was to propose that the United States actually seek to

expel Russia from these groups for a period of time. The Australia

Group, after all, which harmonizes chemical and biological weapon

related export controls, does not have Russia as a member, and it

seems to operate pretty effectively.

Administration officials pointed out to me that expelling Russia

from the MTCR and the NSG would involve quite a few diplomatic

headaches, not the least of which is the fact that neither the MTCR

nor the Nuclear Suppliers Group has established rules for removing or suspending members.

So, at a minimum, I think a process is needed for the future, so

that these groups can discipline their wayward members. A U.S.

call for the establishment of such procedures would be a step that

everyone would know was initiated with Russia in mind. I think

it would be one more signal, even if we did not go the full extent

of expulsion, one more signal to Russia of how serious we take the

issue.

In the meantime, we might want to reinforce the public shaming

of Russia through what might be called the equivalent of a nonproliferation ‘‘scarlet letter.’’ The idea, basically, would be to make

clear whenever we discuss the membership of the MTCR and the

NSG that Russia is not necessarily a member in good standing and

that issues have been raised about its compliance.

A second approach that might help reinforce U.S. nonproliferation efforts would be to take a leaf from domestic law enforcement.

Here it is common for Federal officials, through the seizure of

wrongdoers’ assets or the imposition of fines, to seek to deprive

malefactors of the ill-gotten gains of their illicit endeavors.

In addressing Russian export controls, the United States should

adopt a parallel policy, a strategy that would reduce, dollar for dollar, assistance or benefits provided to Russia, so as to offset the

profits that it gains from the sale of the Bushehr reactor to Iran,

21

1The prepared statement of Mr. Albright appears in the Appendix on page 51.

or the other various things that we have been speaking about, including nuclear and missile sales to India.

It might be possible, for example, when the United States periodically rolls over Russia’s sovereign debt, to reduce the amount of

debt that is postponed by an amount equal to Russia’s profits, so

that, in the end, Russia would have to expend funds to pay off a

portion of its debt. Thus it would be disgorging the illicit gains it

had received, in order to pay off the amount of debt accelerated.

This would be the flip side of what is receiving considerable discussion now, that is, forgiveness of debt, if Russia adopts strong

nonproliferation policies. My approach would be acceleration of

debt to offset ill-gotten gains from improper nonproliferation policies.

Finally, we have to ask ourselves, how do we lead Russian officials to place nonproliferation over profit? In the end, the issue is

one of education.

For more senior officials, it seems, education must be conducted

in public, exposing them collectively to international calumny for

their inappropriate policies. But more junior officials, those training to become officials, and journalists who track this issue in Russia, can be taught through more traditional means, for example,

through mid-career training efforts, degree-granting programs that

stress nonproliferation values, and through exchanges with Western countries that have embraced and implemented such values.

So those are three fresh ideas to bolster existing U.S. efforts: Do

more public shaming through the processes of the two multilateral

groups; try to go after ill-gotten gains; and reinforce nonproliferation education.

Thank you, Mr. Chairman. That concludes my remarks.

Senator AKAKA. Thank you very much, Mr. Spector.

Mr. Albright, will you please proceed with your statement.

TESTIMONY OF DAVID ALBRIGHT,1 PRESIDENT, INSTITUTE

FOR SCIENCE AND INTERNATIONAL SECURITY

Mr. ALBRIGHT. Mr. Chairman and Members of the Subcommittee,

thank you for the opportunity to testify today.

Nuclear proliferation today depends on illicit foreign assistance.

Proliferant states are adept at exploiting weak or poorly enforced

export controls and supplier states. In the past, many Western

countries have been the source of items vital to the nuclear weapons programs of developing countries including Pakistan, India,

Iraq, and Iran.

Russia must unfortunately be viewed as the current target for

proliferant states and terrorist groups in their quest to obtain the

ability to make nuclear weapons. Russia has made great progress

in creating nuclear and nuclear-related export control laws and

regulations following the demise of the Soviet Union. And this legal

structure has been developed with extensive assistance from the

U.S. Government and the nongovernmental community.

Despite these positive steps, there are serious problems in implementing this system. And I would like to just go through some of

22

the problems that in our own work we have been able to identify

in Russia; some of them have been identified before, some not.

The first is overemphasis on obtaining sales and exports without

adequately weighing the security problems that could be caused by

a sensitive export.

There is a shortage of effective internal compliance systems at

Russian enterprises. Larger enterprises, particularly those with nuclear exports, are creating internal compliance systems, but they

remain in need of assistance to make them effective. Many smaller

companies and enterprises, particularly those outside Moscow,

often lack rudimentary knowledge of the laws and regulations of

the state.

There is inadequate education and training opportunities for employees at enterprises who must ensure that the exports of their

enterprise are legal.There is a dearth of information at Russian enterprises that would enable sellers to check on the end-users in foreign countries. One Russian export control official told me that

more than 90 percent of all Russian enterprises do not have books

or other resources to research the companies buying their items.

Thus, the seller has a difficult time checking whether the information provided by a customer is true or reliable.

There is also the inadequate enforcement of violators of export

control laws, which I think has been covered several times.

Given all these problems, significant illicit or questionable sales

are bound to occur in Russia unless more is done to strengthen its

system. And at the minimum, one can say that, under current conditions, the Russian Government may be inadvertently encouraging

the export of sensitive items to clandestine nuclear weapons programs.

U.S. assistance has been critical to improving the export controls

in Russia. This assistance has reduced the risks that states such

as Iran and Iraq will obtain nuclear weapons.

Toward the goal of further improving export controls, the United

States and other Western governments need to continue stressing

that stopping the spread of nuclear weapons, other weapons of

mass destruction, and ballistic missiles is a key goal of the United

States and the international community, and that effective national

export control systems are a necessary part of working toward that

goal.

The United States also needs to commit additional funding and

expertise to help Russia implement its export control system. I

would disagree that there is sufficient expertise or resources to

deal with this problem in the places where it counts most, namely

within the entities, enterprises, and in the bureaucracy in the government that deals with export controls.

U.S. nonproliferation interests motivate cooperation with Russian officials and experts to build a strong Russian nuclear and nuclear-related export control system. Developing adequate controls

in Russia is challenging and will require extensive U.S. assistance.

The major benefit is that states such as Iran and Iraq will not

find Russia the most attractive nuclear supermarket as they shop

the world for items needed in their quest to build nuclear weapons.

Thank you.

Senator AKAKA. Thank you very much, Mr. Albright.

23

1The prepared statement of Mr. Milhollin appears in the Appendix on page 56.

Mr. Milhollin, will you proceed with your statement?

TESTIMONY OF GARY MILHOLLIN,1 EXECUTIVE OFFICER,

WISCONSIN PROJECT FOR NUCLEAR ARMS CONTROL

Mr. MILHOLLIN. Thank you very much, Mr. Chairman. I am

pleased to appear before the Subcommittee to discuss the important subjects of export control and arms proliferation.

I was going to do two things. First, give an overall view of what

China and Russia has been exporting, but that’s been pretty much

accomplished here already. Second, I would like to make some recommendations concerning our sanctions laws.

The long list of exports by both Russia and China, I think, elicited a sigh from Senator Thompson, and I have a lot of sympathy

for that. I look back over my own work, and I think I have been

testifying before this and other Congressional committees for the

better part of a decade and listing outrages, and the list just keeps

getting longer.

And our policy is failing. We are not succeeding in changing this

behavior. And it is simply not a rhetorical or political-diplomatic

problem. It has real effects on the ground.

If we just look at India and Pakistan now, millions of people are

really facing the threat of mass annihilation in those countries because of nuclear weapon and missile programs that were produced

by, primarily, Russian and Chinese exports. If you subtract Russian and Chinese exports from these programs, certainly they

would not have progressed to the extent that they did. It would

have taken a lot longer, and some of them might not have succeeded at all.

So these actions, even though they are incremental and they

happened over a long period of time, can work a great change in

world security. And if there is a nuclear war in South Asia, it is

a world problem. It is not going to be a regional problem. There is

no such thing as a regional problem any more, if there ever was

such a thing in the nuclear domain.

So what I would like to do is recommend some things that Congress can do, some things that would be fairly straightforward, that

would show some commitment and might make things a little more

difficult for the proliferators.

First, I would recommend that we change the sanctions law to

forbid all trade with companies that commit violations. Today, we

do not forbid all trade with these companies. A company that is on

the list of companies sanctioned—for example, the ones that have

just been sanctioned last month—are still free today to buy highperformance U.S. computers and free today to buy high-performance U.S. machine tools and a whole list of other very useful technologies for making nuclear weapons and ballistic missiles because

these products operate just under the level that is controlled for export. The proliferators are perfectly free to import this equipment,

and we do not even have a record-keeping system that tells us

what they are buying or what they are doing with it.

So step one would be just cut off all trade with these companies

and also cut off all of their exports to the United States.

24

Second, we need to sanction more than just the organization that

commits the offense; very often, it is a subsidiary.

And I know of cases where we sanction a subsidiary or indict a

subsidiary, and the parent orders the same thing through a different subsidiary in the same organization. This has happened.

And I am sad to say the Commerce Department lobbied in favor

of the export. It was blocked because, I’ll modestly claim, our organization publicized it.

But the point is that the sanctions do not have enough teeth. If

you want to discourage this behavior, you are going to have to punish the parent company of these organizations rather than just

punishing the organization and its subsidiaries. You need to go up

the corporate chain as well as down.

Third, we need to extend the duration of the sanctions. Under

the present law, the sanctions that we just applied to the Chinese

companies—many of whom were recidivists; they had already been

sanctioned or indicted before for the same conduct. We need to extend the duration. Rather than just forgetting about them after 2

years, we need to put them on what is called the ‘‘Entities List.’’

That is a list that the Commerce Department maintains of companies that require an export license before anything significant can

be sent to them. It would be a simple matter to put their names

on the list.

In the case of China, there are only 14 company names on the

list now. I gave this Subcommittee about a year ago a list of 50

companies that I think ought to be on the list. They are still not

on the list.

It would be very simple to put more Chinese companies and more

Russian companies on the list.

Fourth, we could bar the employees of these companies from entering the United States. In one case, one of the companies that

was just sanctioned had already been indicted for diverting U.S.

machine tools. Before it bought those machine tools, it sent a team

over to the United States, to Columbus, Ohio, to look at the machine tools. That was the famous CATIC case. It would have been

better for us if those officials had been stopped at the border.

One of the penalties for proliferation ought to be that you cannot

send your folks to the United States.

Fifth, when we sanction somebody, we should ask our allies and

trading partners to sanction them as well. We need to get support.

We need to make these companies into international pariahs. And

we need to ask for immediate assistance from our trading partners.

These are all simple things we could do to show that we are serious about this. There are other things that would be more Draconian, more expensive, more attention-provoking, which we probably

should do, too.

But I think the solution to this problem is first to acknowledge,

as Senator Thompson has pointed out, that what we are doing now

is not enough; and, second, to look for things that we can do that

will make the existing laws more effective.

Thank you very much.

Senator AKAKA. Thank you very much, Mr. Milhollin.

We have some questions for you, Mr. Spector.

25

Mr. Spector, other nations such as India have used the civilian

nuclear power capability to develop a nuclear weapons program.

Are there similarities in the development of India’s nuclear program in the 1970’s to Iran’s today? And how critical to Iran’s nuclear weapon program is Russian assistance to their civilian nuclear reactors?

Mr. SPECTOR. Well, I think there are some similarities, and there

are some differences. India took technology that it acquired without

oversight, without inspections or safeguards, and then did use it

very deliberately to develop a nuclear weapon capability. I’m referring specifically to a research reactor and plutorium separation

technology. Later, I think that they took advantage of again

uninspected power reactors to at least have the opportunity to

produce plutonium for the weapons program.

I think the situation is slightly different in Iran because in Iran

the power plant will be under inspection, so it will be difficult to

abuse that particular facility for a weapons program.

But what the Russians are doing in Iran is training hundreds of

Iranians in the construction and management of sophisticated nuclear facilities. You are training them in operations. And all of that

know-how can be transferred over to other parallel programs that

are behind the scenes. And that is the process we saw in Brazil,

for example.

So I think that remains a very serious case for concern.

As far as the details of what is being transferred to the Iranians

apart from the Bushehr facility, I do not have additional details

that I can provide. There was a case involving lasers that were

stopped at U.S. request. And I think there was a mention of fuelcycle facilities of one kind or another that are getting support from

Russia, which Secretary Wolf mentioned just a while ago. I think

the fine points are still classified, so I really cannot discuss them.

Senator AKAKA. Thank you.

Mr. Milhollin, I asked our administration witnesses about the

Tracker computer system used to track nuclear components and

materials. This system relies on participating governments issuing

export licenses to input information into a computer.

Do you believe that this type of system would be useful in Russia

or China? And do you think they would agree to adopt it?

Mr. MILHOLLIN. Well, the Tracker system, as I understand it

now, is a computerized export control and processing tool that

countries use to simply decide which licenses to grant and then to

keep track of those licenses. So if you give this system to the Russians and the Chinese, it is entirely possible that it might improve

their export control performance. That is, they might be more efficient and effective at deciding what to license and not to license.

But I must say that the problem in those countries is not one of

having enough tools. The problem is one of having the will. And I

think it is better to condition assistance to those countries on a

change in attitude, rather than go forward with the assistance and

hope that gratitude will produce the change in attitude. I think we

need to have them come over to our side first in attitude and will,

before we give them more export control assistance.

Senator AKAKA. Mr. Albright, in your testimony, you state that

you have observed the need for improved controls over the sale of

26

Minatom nuclear assets and tracking of items sold within Russia

that may be exported.

What nuclear assets is Minatom selling? And would they cooperate with efforts to improve controls?

Mr. ALBRIGHT. Yes. The example really refers to parts of a reactor that were being sold to a person in Russia. It turned out that,

in this case, the officials discovered they did not have adequate

controls over what that buyer would do with the item. There is a

problem in Russia where things get bought by somebody, and are

sold, or passed on, and then the government loses track of the item.

It can end up God knows where. And so the idea was to try to focus

on developing a system that creates a legal process that obligates

the buyer, and a chain of documents that then would allow an item

to be tracked.

This is not policy across Minatom, as far as I understand. It has

been implemented at one nuclear site. But it is an issue that the

Russians need to address.

Can I add one thing on a slightly different subject? I think it is

very important when we look at Russia that we distinguish between what may be deliberate decisions or, as Senator Thompson

put, turning a blind eye to exports to Iran or other places. I think

there is a much greater risk that Russia is going to become a shopping market for illicit exports that will be directly sought by

proliferant states, such as Iraq and Iran, that the Russian Government will not know about. And I think if you look at the history

of illicit procurement, those types of sales typically are much more

dangerous than deliberate exports.

I mean, Sandy mentioned the issue of Canada providing India a

reactor, which they had then used to make its——

Senator THOMPSON. What is more dangerous?

Mr. ALBRIGHT. I think it is more dangerous that exports will

happen out of Russia that the Russian Government will not even

know about and will be directly going to nuclear weapons programs

for that purpose.

And that was the concern in Germany in the 1980’s. The German

Government turned a blind eye to many exports. It supported the

Bushehr reactor; it was building the Bushehr reactor. It was a real

problem.

But if you look at the Iraqi case, the real danger was what was

happening under the surface. That was direct aid to the Iraqi nuclear weapons program that the German Government and the export control officials were not knowledgeable about and, because

they had such a lousy system, were in no position to catch.

And I think that I would like to distinguish here between attempts to get Russia to do the right thing. I mean, we had to force

Germany to do the right thing, and I think they came along. Russia

needs to do the right thing on Bushehr and in other cases—the

Burmese reactor, several examples have been given.

But at this time, we should not lose sight that Russia’s export

control system needs help. And it could very well turn out that the

Iranian or Iraqi nuclear weapons program are going to be directly

benefited by the agents of those countries working secretly in Russia to acquire the items they need to make nuclear weapons. And

27

those items will turn out to be much more significant than some

of the direct items that the Russian Government has approved.

Senator AKAKA. Before I defer to Senator Thompson, Mr.

Albright, in Mr. Borman’s testimony, he stated that the Department of Energy has an official in Moscow working with Minatom

to focus on export controls on nuclear technology.

Will this type of coordination and assistance improve some of the

controls and tracking over Minatom sales?

Mr. ALBRIGHT. Yes, I think it can. I was hoping the government

witnesses would talk more about what they have accomplished. We

tend to see things more at the level of some of the enterprises or

some of the nuclear export control laboratories in Russia. And what

we see is that not enough is being provided. There are real needs

that the United States can meet.

And I mentioned end-use. It is a serious issue, if you are trying

to do the right thing. You may have a bad attitude and you may

weigh sales over security. But if you are trying to do the right

thing, at least in principle, if you do not have any idea about endusers, then a buyer comes to you, you are very unlikely to disapprove that sale.

So there are some basic resource questions that I think need to

be addressed. I do not think the U.S. Government is doing enough

on that. And some of this, I think, is beyond what Russia can do.

I mean, they do not have a history of commercial relationships with

the rest of the world, and a lot of the people who are getting into

this business are seeking to make money and need to be informed

and held accountable.

Senator AKAKA. Thank you. Senator Thompson.

Senator THOMPSON. Thank you, Mr. Chairman. You mentioned

the end-users, and the fact that Russia does not have any ability

to keep up with the end-users. But we do not either, do we? I

mean, are we doing much of a job at all in keeping up with endusers of some of the dual-use technology that we are exporting to

China, for example?

Yes, Mr. Milhollin?

Mr. MILHOLLIN. Could I respond to that? We could do a lot better

job than we do. We could help our exporters do a lot better job.

The list I suggested to the Subcommittee is a list of end-users.

If the Commerce Department put that in the Federal Register, our

exporters would know who these people are.

Actually, many of the exporters already know who they are. They

have made a rather cold-blooded decision that they do not officially

know who they are until they are in the Federal Register. Unfortunately, that is true for some companies—not for many.

I have spent a lot of time on export controls, talking to companies. And I have learned that there is a vast difference among companies. There are companies that will skate right out on the edge

of what’s legal and go over it, and other companies who do not

want any problems, and they will be conservative.

I have a friend who defends these companies. He has a case right

now in which a company made $15,000 on an export sale, and they

have already spent $250,000 on lawyers’ fees, dealing with the Federal Government. An intelligent company would want to know who

28

the bad guys are and would make the decision not to go down that

road, because it is not worth it economically.

But our government, for some reason, is not filling out that list.

And I was kind of hoping you would ask the Commerce Department that when they were here, ‘‘How come this list has so few

names on it?’’

That would be a very easy thing to do. We can do it overnight,

and it should be done. In fact, we had a long list of Indian and

Pakistani end-users that we put on the list after their tests.

Senator THOMPSON. But what about when we ship something to

a company that’s not a designated company, not on your list, but

then is transferred from the company it is shipped to, to one of

these other companies, and we do not know about it? We really do

not have many people at all on the ground over there doing any

kind of inspections in terms of end use, do we?

Mr. MILHOLLIN. We pick that up through intercepts. We pick up

the transactions through all of the tax dollars that we are spending

on listening to people. That is the only way we pick those re-transfers up. We pick them up through intercepts or penetration of a

company or on the ground. But it is an intelligence question. That

is our only defense.

Mr. ALBRIGHT. And one thing, what we do is much better than

what Russia has done.

Mr. MILHOLLIN. Well, we at least want to do it.

Mr. ALBRIGHT. Yes.

Mr. MILHOLLIN. That’s the big difference. We want to do it. Some

of the Chinese do not want to do it.

Senator THOMPSON. Our much-maligned intelligence capabilities

apparently are able to pick up all these transfers that are taking

place that the Russian Government and Chinese Government say

that they do not know about.

Mr. MILHOLLIN. That is true.

Senator THOMPSON. We have apparently much better intelligence

than they do.

Mr. ALBRIGHT. Than they do?

Senator THOMPSON. I doubt it, in China’s case.

Mr. MILHOLLIN. Sir, if I could make another point in response to

a previous question? I think there is an analogy between Germany

in the 1980’s and China and Russia today. That is, Germany in the

1980’s, as we have already heard, was a giant proliferation export

problem. They supplied Iraq, they supplied Iran, they supplied everybody.

What we did finally was humiliate the Kohl Government in public over its sales to Libya of poison gas equipment, and that

changed the German Government’s view of the subject from the

top. And when the view changed from the top, suddenly the German export control agency hired 100 new full-time equivalents.

They had 1.5 FTEs working on export control before we went public with the horribles about the exports to Libya.

And so I think the lesson there is that you have to change the

message at the top. And I think that’s what Assistant Secretary

Wolf was implying, is that once the guy at the top decides to send

the message out, then it is a question of implementation. But the

29

first step is to change the message at the top, which is what happened in Germany. We changed the attitude at the top.

Senator THOMPSON. You would think it might have some effect

when we catch the Chinese sending cable systems to help shoot

down our airplanes in the no-fly zone. Doesn’t seem to be working

there.

Mr. Spector, on the issue of what the Russian officials know and

when they know it, you seem to think, I hear in your statement,

that not only are some of these export activities blessed by Russian

officials in Moscow, but they have deliberately manipulated Russian export controls to also permit these sales.

Mr. SPECTOR. Yes, I think that is true. I think all of us are familiar with the case of the Tarapur fuel, the fuel for the Indian nuclear power plant. Here there is a very, very limited loophole that

is permitted under the Nuclear Suppliers Group basically to deal

with an imminent radiological catastrophe.

The Russians said, ‘‘Well, fuel is something you need to keep a

reactor going, and we think a fuel export is really a safety export.’’

So that was a very deliberate misinterpretation of the rules.

There is also a pattern here of skirting the MTCR regulations in

the case of some of their cruise missile exports. The cruise missiles

have capabilities that are just a fraction below, what would be very

heavily regulated under the Missile Technology Control Regime.

And it is not just missiles that are being exported; it is the manufacturing know-how for the missiles that is going as well.

We have a long history in India of taking that kind of technology

and then upgrading it to obtain greater capability. Everyone is

aware of this.

And I think, Russian officials, when they just fine-tune an export

to be below the threshold, that’s not an accident. That is done on

purpose.

Thus I think I would really underscore the point that Gary

Milhollin made about some public shaming of some of the officials

and organizations involved. It was extremely effective in dealing

with Germany’s exports to Libya’s Rabta chemical weapons plant,

and I cite that episode, in fact, in my testimony as well.

Senator THOMPSON. I agree with you. And that is kind of what

I was trying to suggest to our friends from the administration, that

putting a smiley face on all this stuff is not the kind of message

you ought to be giving. Just exactly the opposite, they ought to be

held accountable.

This is a little off-track, I guess, but we mentioned Germany’s

history and so forth. How are our European friends doing nowadays, as far as these issues are concerned? I mentioned what is

going on in terms of the Iraqi sanctions and that sort of thing. I

guess it is a slightly different issue. But European countries are

still exporting some troublesome dual-use items, are they not, to

some troublesome countries?

Mr. ALBRIGHT. I think it is relative. I think they are doing much

better in places like Germany, Austria, and Switzerland. And they

have implemented pretty effective systems within companies to try

to help catch illicit exports or discourage illicit exports.

The unfortunate thing is it is always a problem where, if it is not

getting better, it is getting worse. And so I think vigilance is reVerDate 11-MAY-2000 10:11 Jan 13, 2003 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 80604.TXT SAFFAIRS PsN: SAFFAIRS
30

quired, so I would not be surprised if there are problems in some

European—— Senator THOMPSON. Well, I am not talking really about things

that are slipping through the cracks. I am talking about policies of

countries that seem to, up until recently anyway, not agree on the

nature of the threat.

Mr. MILHOLLIN. I might be able to respond.

Senator THOMPSON. Mr. Milhollin, what do you think?

Mr. MILHOLLIN. My organization did a study recently of what

Saddam Hussein was able to get. The Iraqis, during the period of

the embargo against Iraq, broke the embargo by going to Eastern

Europe. The inspectors in Iraq went through the documents there

to see where Iraq was getting help. The lion’s share came from

Eastern Europe. There was a little bit from Western Europe but

not much.

I think what happened was that the Western Europeans really

got burned as a result of what they sold before the Gulf War. And

so they have been more careful with respect to Iraq.

I am not so sure that is true in other cases. I think the Germans

are still selling a lot to Iran. I do not know the details, but if you

look at the statistics, a lot of controlled commodities are going out

of Germany to Iran, and they are not making bubble gum.

So I think that is something, if I were a member of a Senate

sommittee that could be briefed with intelligence information, I

would ask that question. I would ask for a briefing on what Germany is selling to Iran.

Finally, in the case of France, the French have pushed hard

against our holding up of things to Saddam Hussein under the oilfor-food program. And I think that now that we have a new regime

in effect with looser controls, it would be nice to know what the

French sell between now and a year from now under the oil-forfood program. I think that is another thing I would ask to be

briefed on, because I suspect that there are a lot of companies waiting to get well as a result of the smoothed sanctions on Iraq.

Mr. ALBRIGHT. Can I add one thing? I think this threat question

on Iraq is a problem with the Europeans. They have often resisted

believing that Iraq could be getting nuclear weapons any time soon.

I know when some have given their intelligence assessment, they

essentially discount the option that Iraq could obtain fissile material in Russia and then relatively quickly, within several months

to a year, turn it into a nuclear explosive or a weapon.

So I do think there is always a need to educate our European allies about these threats, and I think it is unfortunately much worse

when these discussions happen in Russia. I think Mr. Wolf mentioned, and I think others, that if you bring it up in Russia, they

say exports that are illegal are not going to happen. I mean, forget

the sanctioned ones. They say that their system is perfect and,

even if violations do happen, those countries that would get them

could not turn those things into nuclear weapons in any case.

Senator THOMPSON. Thank you, Mr. Chairman.

Senator AKAKA. Thank you.

Mr. Spector, some have suggested offering major financial incentives to compensate Russia for the economic losses it would suffer

by ending assistance to Iran. Do you believe that increased aid to

31

offset financial losses could convince Russia to end all nuclear cooperation with Iran? Could other Russian interests, such as support for early entry into the World Trade Organization or debt relief, be used instead of direct financial assistance?

Mr. SPECTOR. Well, I think one of the challenges that we have

had in dealing with some of the Russian exports is that they are,

in fact, very lucrative, and so we need to find a financial mechanism for pulling Russia away from this. There has been discussion

of trying to provide compensation and a couple of these ideas are

not bad ones.

One idea that I thought deserved attention was the idea of permitting Russia to import spent fuel for storage from places like Taiwan or South Korea and charging a fairly high fee for this, Russia

is hoping to implement this program. We control a lot of that fuel,

and we could authorize these imports, if, in return, Russia would

stop their export activities with Iran.

So there might be a way to create new revenue streams for Russia to compensate for some of these losses.

But I think there is a second approach we could also take, which

I was recommending today, and that is that, if they persist in these

exports, to deprive them of their ill-gotten gains by, in effect, increasing their debt requirement. That is, we would not allow them

to roll over some of the sovereign debt or, perhaps, find other aid

programs that might be cut back in a way that would make them

no better off for having engaged in these activities.

I want to be very careful before suggesting that our nonproliferation aid programs is trimmed, because some of them are really crucial to American security. But other areas could be cut back.

Senator AKAKA. Otherwise, Mr. Albright, the Russian export control regime and entities authorized to implement the regime have

changed several times over the past decade. Do you believe that it

has become more effective through these changes?

Mr. ALBRIGHT. I think that, given where they started from in the

early 1990’s, I think the system is more effective, although I think

what you really have in place is a set of laws and regulations, but

it has not been implemented. I think that is going to be the difficult challenge, to implement this system so it becomes effective.

Senator AKAKA. Mr. Milhollin, in your testimony, you list several

steps that Congress should take to punish Chinese entities that

continue to export sensitive material. You suggest barring all

American exports to those companies and extending the duration

of the sanctions. Would you suggest the same steps for sanctioned

Russian companies?

Mr. MILHOLLIN. Yes. In my testimony, I did not mean to limit

that to Chinese companies. I think our law should apply across the

board to any company that is caught in an export control violation.

So, yes, I would apply that to Russian companies, Chinese companies, Indian companies, companies from any country.

Senator AKAKA. Mr. Albright, do you think these measures would

be useful with sanctioned Russian companies?

Mr. ALBRIGHT. I am not sure how useful they would be if they

were expanded. I do not see that as a way to force Russian action.

There may be no other choice, but I think it is something that the

Bush Administration has to press very hard on with the Russian

32

Government and make it clear that continued cooperation with the

United States will depend on how they respond.

I worry a little bit on sanctions. You can sanction NIKIET, for

example. I guess it is still under sanctions. They live with it. They

are mad, but they live with it and continue. It is sending one good

signal, however, which is NIKIET becomes an example to companies that want to do the right thing to not end up like NIKIET.

But I do not think it is changing the situation dramatically.

And so I think it has to be dealt with directly between the U.S.

Government and Russia, and then see how Russia performs and

then take stock.

In any case, I think we do need to provide assistance to the effort

to improve the export controls in Russia. And I would hate to see

these things become intertwined to where, unless Russia performs

in a certain way, we cut off the assistance.

Senator AKAKA. I would like to thank all our witnesses for their

time and testimony.

Both Russia and China have pledged their support in the war on

terrorism. However, I am not convinced of their commitment to

nonproliferation.

I am concerned that they still believe that the war on terrorism

and the spread of weapons of mass destruction are not linked.

Granted, it took the events of September 11 to convince many in

this Nation and several of our international allies of this link.

Do the leaders of Russia and China believe that it is in their national interests to enable state supporters of terrorism to development WMD? Do they believe that their citizens will be immune

from a terrorist attack with chemical weapons or a radiological

bomb?

I understand it would be easier to set aside many of these issues

discussed today while we are trying to define new relationships

with former adversaries. But we must raise the difficult questions.

Both Russia and China have established laws and agencies to implement export control, but do they have the will to forego a shortterm economic gain and enforce their export control regimes? As

Mr. Milhollin suggested in his testimony, Russia and China may

lack the will to enforce their own laws.

The United States should not have to stand alone in convincing

Russian and Chinese leaders of these dangers.

I agree with Mr. Milhollin’s statement that, when we cut off

trade with a company because of an export violation, we should ask

our allies to do the same. Mr. Albright has told us that many in

Russia do not believe that proliferation is possible or that the consequences are so grave. Then we must do all we can to convince

Russia and China that proliferation is occurring and that the

threat is real.

Gentlemen, we have no further questions at this time. However,

Members of this Subcommittee may submit questions in writing for

any of our witnesses. We would appreciate a timely response to any

questions. The record will remain open for these questions and for

further statements from my colleagues. I would like to express my

appreciation to all the witnesses for their time and for sharing

their insights with us. This hearing is adjourned.

[Whereupon, at 4:40 p.m., the Committee was adjourned.]

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A P P E N D I X

PREPARED OPENING STATEMENT OF SENATOR COCHRAN

Mr. Chairman, I’m pleased to join you today for this very important hearing. This

Subcommittee has a long history of examining the threat from the proliferation of

weapons of mass destruction and missile technology and especially the transfers of

technology and knowledge from Russia and China.

In all of our past hearings we received testimony about the positive steps Russia

and China were taking to curb and halt proliferation from their countries. These

steps included bilateral promises to the United States and Russia and China’s commitment to abide by the international nonproliferation regimes. Despite this, Russia

and China continue to proliferate weapons of mass destruction and ballistic missile

technology in direct contravention of their political commitments and legal obligations.

The threat from this proliferation and its consequences can clearly be seen today

in South Asia. Pakistan and India are dangerously close to war. Because of technical assistance from Russia and China, both countries are armed with ballistic missiles and nuclear weapons.

China has been and continues to be the main supplier of technology to Pakistan.

It is directly responsible for Pakistan’s nuclear weapons and ballistic missile programs. Despite our repeated efforts, we continue to see troubling transfers and contacts between Pakistan and China.

Russia is the main supplier of technology to India. Last year, Russia began transferring nuclear fuel to India, in direct contravention of its Nuclear Suppliers Group

commitments, and Russia remains a major source of technology for India’s ballistic

missile programs.

And South Asia is only one manifestation of the problem. This proliferation continues elsewhere, and if left unchecked, in 5 or 10 years, transfers of technology

from Russia and China will result in nations like Iran and Iraq gaining nuclear

weapons and long-range ballistic missiles. We must also be concerned about recipient nations, like Iran, becoming secondary suppliers, something that is already occurring.

I look forward to hearing from our witnesses and discussing what actions can be

taken to reduce this proliferation.

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