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[House Document 107-93]
[From the U.S. Government Publishing Office]

107th Congress, 1st Session - - - - - - - - - - - House Document 107-93 

 
           A REPORT TO THE CONGRESS ON EXECUTIVE ORDER 12938

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

A REPORT ON EXECUTIVE ORDER 12938, AS REQUIRED BY SECTION 204 OF THE 
  INTERNATIONAL EMERGENCY ECONOMIC POWERS ACT AND SECTION 401(c) OF THE 
  NATIONAL EMERGENCIES ACT, PURSUANT TO 50 U.S.C. 1703(c) AND 50 U.S.C. 
  1614(c)

    July 10, 2001.--Message and accompanying papers referred to the 
     Committee on International Relations and ordered to be printed
                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
89-011                     WASHINGTON : 2001

To the Congress of the United States:
    Enclosed is a report to the Congress on Executive Order 
12938, as required by section 204 of the International 
Emergency Economic Powers Act (50 U.S.C. 1703(c)) and section 
401(c) of the National Emergencies Act (50 U.S.C. 1641(c)).

                                                    George W. Bush.
    The White House, June 28, 2001.
  Report to Congress on the Emergency Regarding the Proliferation of 
                      Weapons of Mass Destruction

    Weapons of mass destruction (WMD) (nuclear, chemical, and 
biological weapons) and their missile delivery vehicles are 
among the top threats to U.S. security in the post-Cold War 
world. In the hands of countries like Iran, Iraq, Libya, and 
North Korea, these weapons pose direct threats to U.S. forces 
and citizens overseas and to our friends and allies abroad. WMD 
already poses a threat to U.S. territory via terrorism and 
unconventional delivery means, and some countries of concern 
are already working on intercontinental-range missiles that 
would be able to deliver WMD against our territory directly.
    Since taking office in January 2001, my Administration has 
given high priority to dealing with the threat of WMD and 
missile proliferation. These issues figure prominently in a 
number of policy reviews (e.g., concerning North Korea), as 
well as in the Administration's reexamination of U.S. 
deterrence strategy and force posture.
    WMD and missile nonproliferation measures undertaken by the 
United States between November 2000 and May 2001 are the 
subject of this report. In November 1994, in light of the 
dangers of the proliferation of WMD and of the means of 
delivering such weapons, President Clinton issued Executive 
Order No. 12938, declaring a national emergency under the 
International Emergency Economic Powers Act (50 U.S.C. 1701 et 
seq.). Under section 202(d) of the National Emergencies Act (50 
U.S.C. 1622(d)), the national emergency terminates on the 
anniversary date of its declaration unless, within the 90-day 
period prior to each anniversary date, the President publishes 
in the Federal Register and transmits to the Congress a notice 
stating that such emergency is to continue in effect. The 
national emergency was extended on November 14, 1995; November 
12, 1996; November 13, 1997; November 12, 1998; November 10, 
1999; and November 12, 2000.
    The following report is made pursuant to Section 204(c) of 
the International Emergency Economic Powers Act (50 U.S.C. 
1703(c)) and Section 401(c) of the National Emergencies Act (50 
U.S.C. 1641(c)). It reports actions taken and expenditures 
incurred pursuant to the emergency declaration during the 
period November 12, 2000 through May 15, 2001. Additional 
information on nuclear, chemical, and biological weapons (CBW) 
and missile nonproliferation efforts is contained in the most 
recent annual Report on the Proliferation of Missiles and 
Essential Components of Nuclear, Biological and Chemical 
Weapons. This report was provided to Congress pursuant to 
Section 1097 of the National Defense Authorization Act for 
Fiscal Years 1992 and 1993 (Public Law 102-190), also known as 
the ``Nonproliferation Report.'' Additional information in this 
regard is also contained in the most recent annual report 
provided to the Congress pursuant to Section 308 of the 
Chemical and Biological Weapons Control and Warfare Elimination 
Act of 1991 (Public Law 102-182), also known as the ``CBW 
Report.''
    On July 28, 1998, in E.O. 13094, President Clinton amended 
section 4 of E.O. 12938 to broaden the type of proliferation 
activity that can subject entities to potential penalties under 
the Executive Order. The original Executive Order provided for 
penalties for contributions to the efforts of any foreign 
country, project or entity to use, acquire, design, produce, or 
stockpile chemical or biological weapons; the amended Executive 
Order also covers contributions to foreign programs for nuclear 
weapons and for missiles capable of delivering weapons of mass 
destruction. Moreover, the amendment expands the original 
Executive Order to include attempts to contribute to foreign 
proliferation activities, as well as actual contributions, and 
broadens the range of potential penalties to expressly include 
the prohibition of United States Government assistance to 
foreign persons, and the prohibition of imports into the United 
States and United States Government procurement. In sum, the 
amendment gives the United States Government greater 
flexibility in deciding how and to what extent to impose 
measures against foreign persons that assist proliferation 
programs.

                            nuclear weapons

    Since their May 1998 nuclear tests, India and Pakistan have 
openly pursued their respective nuclear weapon programs. They 
have continued production of fissile material for nuclear 
weapons and have flight-tested nuclear-capable ballistic 
missiles. Their continued production of weapons-grade fissile 
material coupled with possession of fighter aircraft capable of 
delivering nuclear weapons gives both India and Pakistan the 
ability today to conduct a nuclear exchange. Flight testing of 
nuclear capable ballistic missiles by both countries raises the 
prospect that more sophisticated and possibly destabilizing 
capabilities will be fielded in the coming years. We have 
sought to persuade New Delhi and Islamabad that open-ended 
nuclear and missile competition in South Asia would adversely 
affect both the subcontinent and other regions. We have 
pressedfor restraint, especially to not deploy nuclear weapons or 
nuclear-capable ballistic missiles.
    Since the mandatory imposition of U.S. statutory sanctions, 
we have worked unilaterally, with other P-5 and G-8 members, 
with the South Asia Task Force (SATF), and through the UN to 
urge India and Pakistan to move toward the international 
nonproliferation mainstream. Support for international 
sanctions by other countries continues to attenuate, however.
    We have supported calls by the P-5 and G-8, and UN Security 
Council on India and Pakistan to take a broad range of concrete 
actions designed to prevent a costly and destabilizing nuclear 
arms and missile race, with possible implications beyond the 
region. During the Clinton Administration, the United States 
focused most intensely on several objectives that it thought 
could be met over the short and medium term: an end to nuclear 
testing and adherence to the Comprehensive Nuclear-Test Ban 
Treaty (CTBT); constructive engagement in negotiations on a 
Fissile Material Cutoff Treaty (FMCT) and, pending its 
conclusion, a moratorium on production of fissile material for 
nuclear weapons and other nuclear explosive devices; restraint 
in the development of nuclear-capable missiles, particularly 
non-deployment; and adoption of controls meeting international 
standards on exports of sensitive materials and technology.
    Intensive high-level U.S. dialogues with Indian and 
Pakistani officials yielded only modest progress, principally 
on export controls. Indian and Pakistani leaders reaffirmed 
their countries' testing moratoria, declared in the wake of the 
tests. Indian Prime Minister Vajpayee announced during his 
visit to Washington in September 2000 that India would maintain 
its moratorium until CTBT entered into force. Pakistan's 
leaders have said Pakistan will not be the first to test.
    India and Pakistan both withdrew their opposition to 
negotiations on an FMCT in Geneva at the end of the 1998 
Conference on Disarmament session, and negotiations got 
underway for a brief time. However, these negotiations were 
unable to resume in 1999 or 2000 due to a deadlock over the 
negotiating mandate.
    Some progress was achieved in bringing Indian and Pakistan 
export controls, while non-specific, but generally effective, 
into closer conformity with international standards. In April 
2000, India instituted new, more specific regulations on many 
categories of sensitive non-nuclear equipment and technology, 
and has said that nuclear-related regulations will be 
forthcoming. In July 2000, Pakistan publicly announced 
regulations restricting nuclear exports and has indicated that 
further measures are being prepared. Both countries' steps 
still fall short of international standards, however. We have 
begun with India a program of technical cooperation designed to 
improve the effectiveness of its already extensive export 
controls, and to encourage further steps to bring India's 
controls in line with international standards. Similar 
assistance to Pakistan is prohibited by coup-related sanctions.
    The summer 1999 Kargil conflict and the October 1999 
military take-over in Pakistan resulted in the suspension of 
the Indo-Pakistani bilateral dialogue begun at Lahore. Tensions 
remain high, particularly over insurgent attacks in Kashmir. 
India unilaterally suspended offensive military operations in 
Kashmir in November of 2000, and India and Pakistan have all 
but ceased artillery barrages across the line of control.
    My Administration has an active review underway of U.S. 
nonproliferation related sanctions policy toward South Asia. 
The results of that review will be discussed in the November 
2001 version of this report.
    In October 1994, the United States and the Democratic 
People's Republic of Korea (DPRK or North Korea) signed an 
Agreed Framework which, if fully implemented, will ultimately 
result in Pyongyang's full compliance with the International 
Atomic Energy Agency (IAEA) safeguards agreement, Under the 
Agreed framework, as it has been interpreted to date, the DPRK 
is not required to come into full compliance with its IAEA 
safeguards agreement until a significant portion of the light 
water reactor project is completed, but must do so before the 
delivery of key unclear components. As a first step, North 
Korea froze construction and operations at its declared nuclear 
facilities at Yongbyon and Taechon. The freeze remains in place 
and is monitored by the IAEA, which has maintained a continuous 
presence at the Yongbyon site since 1994.
    The United States and DPRK have also cooperated in the 
canning of spent fuel from the North's 5 megawatt nuclear 
reactor. Canning of all accessible spent fuel rods and rod 
fragments was completed in April 2000. The IAEA continues to 
monitor the canned fuel and has confirmed that any remaining 
rod fragments, which are currently inaccessible, do not 
represent a proliferation concern. The U.S. spent-fuel team 
regularlyreturns to the DPRK to continue clean-up operations 
and to look at maintenance.
    The Agreed Framework bars the DPRK from constructing any 
new graphite-moderated reactors or related facilities, 
including reprocessing plants. United States identification in 
mid-1998 of an underground site near Kumchang-ni in North 
Korea, which was suspected of being nuclear-related, led to an 
arrangement providing for U.S. access to the site as long as 
U.S. suspicions remained. On the basis of visits to the 
facility in May 1999 and May 2000, the United States concluded 
that the site as then configured was not suited to house a 
nuclear reactor or reprocessing operations and therefore was 
not a violation of the Agreed Framework. The U.S.- DPRK Joint 
Communique issued in October 2000, following the visit of DPRK 
Special Envoy Jo Myong Rok to Washington, stated that ``U.S. 
concern'' about Kumchang-ni had been ``removed.'' In that 
document, both sides pledged to ``redouble their commitment and 
their efforts to fulfill their respective obligations in their 
entirety under the Agreed Framework.'' The DPRK also reaffirmed 
its ballistic missile flight test moratorium.
    In March 2001, I met with ROK President Kim Dae-Jung. The 
resulting joint statement reaffirmed the commitment of the 
United States and the ROK to continue the 1994 Agreed 
Framework, while calling on North Korea ``to join in taking the 
needed steps for its successful implementation.'' Subsequently, 
in March 2001, My Administration began a full review of U.S. 
policy toward North Korea, with the purpose of determining the 
nature of any future U.S. dialogue with North Korea. My 
Administration is taking into account the views of key allies 
as it proceeds with the ongoing review. The results of the 
review will be discussed in the November 2001 version of this 
report.
    The Nuclear Non-Proliferation Treaty (NPT) is the 
cornerstone of the global nuclear nonproliferation regime. The 
April-May 2000 NPT Review Conference (REVCON) concluded 
successfully and provided an important boost to the NPT and to 
nuclear nonproliferation goals in general. In the Fall of 2000, 
the REVCON outcome was reinforced at the UN General Assembly 
and at the General Conference of the IAEA. The United States 
continued to pursue policies aimed at advancing the goals of 
the NPT, particularly those related to compliance with the 
Treaty's nonproliferation obligations. In March 2001, the 
United States met with other NPT Depository Governments (UK and 
Russia) in Geneva to discuss the procedural steps necessary to 
begin the review process leading to the next Conference of NPT 
Parties in 2005.
    The IAEA attempts to verify states' compliance with their 
safeguards agreement pursuant to their NPT obligations. The 
discovery at the time of the Gulf War of Iraq's extensive 
covert nuclear activities led to an international consensus in 
favor of strengthening the IAEA safeguards system's ability to 
detect undeclared nuclear material and activities. The United 
States and a large number of like-minded states negotiated in 
the mid-1990s substantial safeguards strengthening measures, 
including the use of environmental sampling techniques, 
expansion of the classes of nuclear activities states are 
required to declare, and expansion of IAEA access rights. 
Measures requiring additional legal authority are embodied in a 
Model Additional Protocol approved in 1997. This Protocol has 
now been signed by 55 states and has entered into force for 19 
countries. Provided the IAEA is given the resources and 
political support it needs to implement its new safeguards 
measures effectively, proliferators who have ratified the 
Additional Protocol will likely find it harder to evade the 
system. However, to date, no country of concern/proliferator 
has adopted the Protocol.
    The purpose of the 35-nation Nuclear Non-Proliferation 
Treaty (NPT) Exporters (Zangger) Committee is to harmonize 
implementation of the Non-Proliferation Treaty's requirement to 
apply IAEA safeguards to nuclear exports. Article III.2 of the 
Treaty requires parties to ensure that IAEA safeguards are 
applied to exports to non-nuclear weapon states of (a) source 
or special fissionable material, or (b) equipment or material 
especially designed or prepared for the processing, use or 
production of special fissionable material. The Committee 
maintains and updates a list (the ``Trigger List'') of 
equipment that may only be exported if safeguards are applied 
to the recipient facility. The relative informality of the 
Zangger Committee has enabled it to take the lead on certain 
nonproliferation issues that would be more difficult to resolve 
in the Nuclear Suppliers Group (NSG).
    As its October 2000 meeting, the Committee discussed the 
results of the 2000 NPT REVCON. The Committee agreed to form 
two informal ``Friends of the Chair'' groups to: (1) consider 
preparations for the 2005 NPT REVCON; and (2) continue 
consideration of possible future adoption of a policy of 
requiring full-scope safeguards as a condition of supply to 
non-nuclear weapon states. At the meeting, members also agreed 
that the materials americium and neptunium fell outside the 
scope ofNPT Article III.2 for inclusion on the Trigger List, 
but no agreement was reached on the consideration of adding plutonium 
enrichment equipment to the Trigger List.
    All of the NPT nuclear weapon states, including China, are 
members of the Zangger Committee. However, unlike all of the 
other nuclear weapon states, China is not a member of the NSG, 
which requires its members to adhere to a policy of requiring 
non-nuclear weapon states to accept IAEA full-scope safeguards 
as a condition of supply. China has been reluctant to agree to 
this policy.
    With 39 member states, the NSG is a widely accepted and 
effective export-control arrangement, which contributes to the 
nonproliferation of nuclear weapons through implementation of 
guidelines for control of nuclear and nuclear-related exports. 
Members pursue the aims of the NSG through adherence to the 
Guidelines, which are adopted by consensus, and through 
exchanges of information on developments of nuclear 
proliferation concern.
    Slovenia became the newest member of the NSG in October 
2000. NSG members sometimes allow non-member nations deemed 
eligible for NSG membership to participate in Plenary meetings 
as observers. While not a NSG member, China has taken a major 
step toward harmonization of its export control system with the 
NSG Part 2 Guidelines by the implementation of controls over 
nuclear-related dual-use equipment, material, and related 
technology.
    A special meeting was held in Vienna in December 2000 on 
the issue of Russian nuclear supply to India. The United States 
and more than 30 other NSG members expressed strong concern 
over the proposed Russian supply of fuel to the Tarapur 
reactors. NSG members overwhelmingly agreed that such supply 
clearly does not qualify for the safety exemption to the NSG 
full scope safeguards policy and thus not only would seriously 
undercut the NSG Guidelines but also the global nuclear 
nonproliferation regime. Despite this, the Russians have made 
clear that they intend to proceed with the Tarapur transfer 
anyway, and we anticipate this issue will continue to be 
discussed at future NSG meetings.
    In April 2001, the NSG Implementation Working Group reached 
ad referendum agreement on proposed procedures including 
responsibilities of the Plenary, Chair, Consultative Group, and 
Point of Contact as well as procedures for consideration of new 
members, consultations, and amendment of the guidelines. Russia 
introduced a proposal to accord ``associate membership'' to 
certain countries which have not accepted IAEA full-scope 
safeguards but have nuclear weapons programs. Discussion has 
been deferred until the May 2001 Plenary.

                 chemical and biological weapons (cbw)

    The export control regulations issued under the Expanded 
Proliferation Control Initiative (EPCI) remain fully in force 
and continue to be administered by the Department of Commerce, 
in consultation with other agencies, in order to control the 
export of items with potential use in chemical or biological 
weapons or unmanned delivery systems for weapons of mass 
destruction.
    Chemical weapons (CW) continue to pose a very serious 
threat to our security and that of our allies. On April 29, 
1997, the Convention on the Prohibition of the Development, 
Production, Stockpiling and Use of Chemical Weapons and on 
Their Destruction (the Chemical Weapons Convention or CWC) 
entered into force with 87 of the CWC's 165 States Signatories 
as original States Parties, including the United States, which 
ratified on April 25, 1997. Russia ratified the CWC on November 
5, 1997, and became a State Party on December 8, 1997. As of 
the end of this reporting period, 143 countries have become 
States Parties.
    The implementing body for the CWC, the Organization for the 
Prohibition of Chemical Weapons (OPCW), was established on 
April 29, 1997. The OPCW, located in The Hague, is comprised of 
States Parties and international civil servants that are 
responsible for implementing the CWC. The OPCW consists of the 
Conference of the States Parties, the Executive Council (EC), 
and the Technical Secretariat (TS). The TS carries out the 
verification provisions of the CWC, and presently has a staff 
of approximately 500, including about 200 inspectors trained 
and equipped to inspect military and industrial facilities 
throughout the world. To date, the OPCW has conducted over 940 
routine inspections in some 48 countries. No challenge 
inspections have yet taken place. The OPCW maintains a 
permanent inspector presence at operational U.S. CW destruction 
facilities in Utah and elsewhere. Accordingly, approximately 70 
percent of the inspection days have been at U.S. declared 
facilities.
    The United States is determined to seek full implementation 
of the concrete measures in the CWC designed to raise the costs 
and risks for states or other entities attempting to engage in 
chemical weapons-related activities. Receiving accurate and 
complete declarations from all States Parties will improve our 
knowledge of possible chemical weapons-related activities. The 
CWC's inspection provisions provide for access by international 
inspectors to declared and potentially undeclared facilities 
and locations, thus making clandestine chemical weapons 
production and stockpiling more difficult, more risky, and more 
expensive.
    The Chemical Weapons Convention Implementation Act of 1998 
was enacted into U.S. law on October 21, 1998, as part of the 
Omnibus Consolidated and Emergency Supplemental Appropriation 
Act for Fiscal Year 1999 (P.L. 105-277). The Clinton 
Administration issued Executive Order 13128 on June 25, 1999, 
and Presidential Decision Directive/NSC-70 on December 17, 1999 
to facilitate implementation of the Act and the Convention. 
Regulations regarding declarations and inspections of 
industrial facilities were published on December 30, 1999. The 
United States commenced its submission of industry declarations 
at the end of April 2000, and hosted its first industry 
inspection on May 8, 2000. Industry inspections continue with 
excellent support from affected companies. Our submission of 
the industry declarations to the OPCW and commencement of 
inspections have strengthened U.S. leadership in the 
organization as well as our ability to encourage other States 
Parties to make complete, accurate, and timely declarations.
    Countries that refuse to join the CWC are increasingly 
isolated politically and denied access by the CWC to certain 
key chemicals from States Parties. The relevant treaty 
provisions are specifically designed to penalize countries that 
refuse to join the rest of the world in eliminating the threat 
of chemical weapons.
    The United States agreed in 1994 to participate in an Ad 
Hoc Group to negotiate a Protocol to the 1972 BWC that would 
``enhance confidence in compliance.'' Negotiations continued 
during the reporting period. My Administration is in the late 
stages of a comprehensive review of U.S. policy toward the BWC 
protocol exercise.
    The United States continues to be a leading participant in 
the 32-member Australia Group (AG) chemical and biological 
weapons (CBW) nonproliferation regime. The United States 
attended the most recent annual AG Plenary Session from October 
2-5, 2000, during which the Group reaffirmed the members' 
continued collective belief in the AG's viability, importance 
and compatibility with the CWC and BWC. Members continue to 
agree that full adherence to the CWC and BWC by all governments 
will be the only way to achieve a permanent global ban on 
chemical and biological weapons and that all states adhering to 
these Conventions must take steps to ensure that their national 
activities support these goals. At the 2000 Plenary, the Group 
welcomed its newest members, Cyprus and Turkey. The regime 
continued to focus on strengthening and refining AG export 
controls and sharing information to address the CBW threat, 
including from terrorism. The AG also reaffirmed its commitment 
to continue its active outreach program of briefings for non-AG 
countries, and to promote regional consultations on export 
controls and nonproliferation to further awareness and 
understanding of national policies in these areas. The AG 
discussed ways to be more proactive in stemming attacks on the 
AG in the CWC and BWC contexts.
    During the last six months, we continued to closely examine 
intelligence and other information of trade in CBW-related 
material and technology that might be relevant to sanctions 
provisions under the Chemical and Biological Weapons Control 
and Warfare Elimination Act of 1991. No new sanctions 
determinations were reached during this reporting period. The 
United States also continues to cooperate with its AG partners 
and other countries in stopping shipments of proliferation 
concern.

          missiles for delivery of weapons of mass destruction

    The United States continues to carefully control exports 
that could contribute to unmanned delivery systems for weapons 
of mass destruction, and to closely monitor activities of 
potential missile proliferation concern. We also continue to 
implement U.S. missile sanctions laws.
    On November 21, 2000, the United States determined that 
Chinese entities engaged in transfers of missile-related 
equipment and technology to Iran and Pakistan are sanctionable 
under U.S. law. As mandated by U.S. law, the United States 
imposed MTCR Category I missile sanctions on the Iranian and 
Pakistani entities involved. The United States waived sanctions 
against the participating Chinese entities in consideration of 
China's November 21, 2000 commitment not to assist other 
countries in developing nuclear-capable ballistic missiles in 
any way and to put in place comprehensive export 
controls.However, this waiver does not apply to any sanctionable 
transfers that occur after November 21, 2000. We are continuing to 
monitor this situation closely and will press China for full 
implementation of its November 21 commitments.
    In January 2001, pursuant to the Iran Nonproliferation Act 
of 2000, the United States imposed missile sanctions on a North 
Korean entity for its involvement in the transfer from North 
Korea to Iran of missile equipment and technology controlled by 
the MTCR Annex.
    During this reporting period, the Missile Technology 
Control Regime (MTCR) Partners (members) continued to share 
information about proliferation problems with each other and 
with other potential supplier, consumer, and transshipment 
states. Partners also emphasized the need for implementing 
effective export control systems. This cooperation has resulted 
in the interdiction of missile-related materials intended for 
use in missile programs of concern. In addition, the Partners 
reached consensus to admit the Republic of Korea to membership 
in the MTCR, effective March 26, 2001. The United States 
strongly supported this decision and believes ROK membership 
will strengthen the Regime. The ROK has been committed since 
1995 to controlling missile-related exports consistent with the 
MTCR Guidelines and Annex, and has a demonstrated track record 
of implementing such controls. In addition, the ROK committed 
in January 2000 not to possess MTCR Category I offensive 
military missiles. With the admission of the ROK, MTCR 
membership now stands at 33.
    As agreed at the October 2000 Helsinki MTCR Plenary, the 
MTCR Partners held a Reinforced Point of Contact (RPOC) meeting 
in Paris in March 2001 to discuss next steps on the draft 
International Code of Conduct Against Ballistic Missile 
Proliferation (ICOC), intended to become a new multilateral 
mechanism that would complement the MTCR and eventually include 
the participation of all interested countries, both MTCR and 
non-MTCR. The MTCR Partners agreed to continue their national 
and regional efforts to multilateralize the draft ICOC, 
including by Poland holding a round table meeting for several 
non-members in Warsaw in May, and to intensify their efforts to 
obtain non-Partner support for, and reaction to, the draft ICOC 
text. They also agreed to decide at the September 24-28 Ottawa 
MTCR Plenary whether and when to hold an international 
conference for the official launching of the ICOC.
    In preparation for the Ottawa Plenary, the Partners also 
agreed to hold a special meeting for licensing and enforcement 
officers in conjunction with the Regime's annual Information 
Exchange. The United States strongly supports this decision. 
Having such a meeting will further strengthen the Partners' 
efforts to cooperate on stopping or impeding specific shipments 
of missile proliferation concern.
    During this reporting period, the United States continued 
to work unilaterally and in coordination with its MTCR Partners 
to combat missile proliferation and to encourage non-members to 
export responsibly and to adhere to the MTCR Guidelines. Since 
the last report, the United States continued holding missile 
nonproliferation dialogues with China and raising with Indian 
and Pakistani leaders our continuing strong interest in this 
issue. In the course of normal diplomatic relations, we also 
have pursued such discussions with other countries in Central 
Europe, South Asia, and the Middle East.
    Although regular discussions with Pakistan at the expert 
level have not proceeded since the Fall 1999 coup, we remain 
engaged at the diplomatic level and continue to address our 
nonproliferation concerns. On November 21, 2000, the United 
States Government imposed missile sanctions on the Pakistani 
Ministry of Defense and the Space and Upper Atmosphere Research 
Commission (SUPARCO) for their knowing engagement in missile 
proliferation activities with Chinese entities. We have 
indicated we are prepared to discuss with Pakistan the 
nonproliferation conditions under which a waiver might be 
warranted.
    As noted in the previous report, former Secretary Albright 
met with Chairman Kim Jong-Il in Pyongyang October 23-24, 2000. 
They discussed the full range of U.S. concerns on missiles, 
including both the DPRK's indigenous missile programs and 
exports. They also explored Chairman Kim's idea of restraining 
DPRK missile capabilities in exchange for launches of DPRK 
satellites on foreign boosters. Following up on the Secretary's 
discussions, the United States and DPRK held the sixth round of 
missile talks in Kuala Lumpur November 1-3, 2000. The talks 
covered the full range of missile issues under consideration by 
the two countries and were useful in clarifying positions. 
However, significant issues remained to be resolved.
    No further dialogue between the United States and DPRK has 
taken place since the November 2000 round of talks. My 
Administration is currently undertaking a thorough review of 
U.S. policy vis-a-vis the DPRK on this and other key issues 
related tothe Korean Peninsula. My Administration will 
carefully consider its options, taking into account the views of key 
allies before deciding whether and how to proceed.
    In May, a European Union delegation visited Pyongyang and 
met with DPRK leader Kim Jong-I1. During those meetings, Kim 
informed the delegation that he would extend North Korea's 
missile launch moratorium until 2003. (North Korean officials 
subsequently linked continuation of the moratorium to Bush 
Administration policy toward Pyongyang.) Kim also commented, 
however, that North Korea would continue to export missiles and 
related technology.
    In response to Iranian efforts to acquire sensitive items 
from Russian entities for use in Iran's missile and nuclear 
development programs, the United States has pursued a high-
level dialogue with Russia aimed at finding ways to work 
together to cut off the flow of sensitive goods to Iran's 
ballistic missile development and nuclear weapon programs. 
Russia's Government has created institutional foundations to 
implement a newly-enacted nonproliferation policy and passed 
laws to punish wrongdoers. It also has passed new export 
control legislation to tighten government control over 
sensitive technologies and continued working with the United 
States to strengthen export control practices at Russian 
aerospace firms.
    In April 2000, the United States announced its intention to 
lift the administrative penalties imposed on the Russian 
entities Inor and Polyus in July 1998 for their missile-related 
cooperation with Iran. They were removed on November 17, 2000. 
However, penalties imposed in July 1998 against five other 
Russian entities and in January 1999 against three additional 
entities remain in effect.
    Consistent with the Russian Government's April 2000 
announcement of administrative action against the Rector of the 
Baltic State Technical University (BSTU) for his involvement in 
training Iranian specialists at BSTU, and following our own 
assessment, the United States also announced on April 24, 2000, 
plans to impose trade and administrative penalties on the 
Rector for his involvement with the Iranian missile program. 
However, the United States has not moved forward with these 
penalties as the Russian Government has since taken its own 
actions against the Rector. Specifically, the Russian Ministry 
of Education initiated an investigation of the Rector. We 
understand that this investigation resulted in administrative 
action against the Rector and cancellation of specialized 
courses for Iranian students at BSTU. (BSTU itself remains 
under U.S. administrative penalties.)
    However, despite the Russian Government's nonproliferation 
and export control efforts, some Russian entities continued to 
cooperate with Iran's ballistic missile program and engaged in 
nuclear cooperation with Iran beyond the Bushehr Unit 1 nuclear 
power reactor project, which could further Iran's nuclear 
weapon aspirations. The United States has made clear to Russia 
our strong objection to these activities. My Administration is 
currently engaged in a review of U.S. nonproliferation policy 
toward Russia.
    On November 17, 2000, the United States Government imposed 
missile sanctions on two Iranian entities, the Shahid Hemmat 
Industrial Group (SHIG) and the Sanam Industrial Group, for 
knowingly engaging in missile-related transfers. In addition, 
on November 21, 2000, the U.S. imposed missile sanctions on the 
Iranian Defense Industries Organization (DIO) and the Ministry 
of Defense and Armed Forces Logistics (MODAFEL) for knowingly 
engaging in missile proliferation activities with Chinese 
entities.

               Value of Nonproliferation Export Controls

    United States national export controls, both those 
implemented pursuant to multilateral nonproliferation regimes 
and those implemented unilaterally, play an important part in 
impeding the proliferation of WMD and missiles. (As used here, 
``export controls'' refer to requirements for case-by-case 
review of certain exports, or limitations on exports of 
particular items of proliferation concern to certain 
destinations, rather than broad embargoes or economic sanctions 
that also affect trade.) As noted in this report, however, 
export controls are only one of a number of tools the United 
States uses to achieve its nonproliferation objectives. Global 
nonproliferation treaties and norms, multilateral 
nonproliferation regimes, interdictions of shipments of 
proliferation concern, sanctions, export control assistance, 
redirection and elimination efforts, and robust U.S. military, 
intelligence, and diplomatic capabilities all work in 
conjunction with export controls as part of our overall 
nonproliferation strategy.
    Export controls are a critical part of nonproliferation 
because every emerging WMD/missile program seeks equipment and 
technology from other countries. Proliferators look to other 
sources because needed items are unavailable within their 
country, because indigenously produced items are of substandard 
quality or insufficient quantity, and/or because imported 
itemscan be obtained more quickly and cheaply than domestically 
produced ones. It is important to note that proliferators seek for 
their WMD and missile programs both items on multilateral lists (like 
gyroscopes controlled on the MTCR Annex and nerve gas precursors on the 
Australia Group list) and unlisted items (like lower-level machine 
tools and very basic chemicals). In addition, many of the items of 
interest to proliferators are inherently dual-use. For example, key 
precursors and technologies used in the production of fertilizers or 
pesticides also can be used to make chemical weapons; bio-production 
technology can be used to produce biological weapons.
    The most obvious value of export controls is in impeding or 
denying proliferators access to key pieces of equipment or 
technology for use in their WMD/missile programs. In large 
part, U.S. national export controls, and similar controls of 
our partners in the Australia Group, Missile Technology Control 
Regime, and Nuclear Suppliers Group, have denied proliferators 
access to the largest sources of the best equipment and 
technology. Proliferators have mostly been forced to seek less 
capable items from non-regime suppliers. Moreover, in many 
instances, U.S. and regime controls and associated efforts have 
forced proliferators to engage in complex clandestine 
procurements even from non-member suppliers, taking time and 
money away from WMD/missile programs.
    United States national export controls and those of our 
regime partners also have played an important role in 
increasing over time the critical mass of countries applying 
nonproliferation export controls. For example: the seven-member 
MTCR of 1987 has grown to 33 member countries; the NSG adopted 
full-scope safeguards as a condition of supply and extended new 
controls to nuclear-related dual-use items; several non-member 
countries have committed unilaterally to apply export controls 
consistent with one or more of the regimes; and most of the 
members of the nonproliferation regimes have applied national 
``catch-all'' controls similar to those under the U.S. Enhanced 
Proliferation Control Initiative. (Export controls normally are 
tied to a specific list of items, such as the MTCR Annex. 
``Catch-all'' controls provide a legal basis to control exports 
of items not on a list, when those items are destined for WMD/
missile programs.)
    The United States maintains a global program, funded by the 
Nonproliferation, Antiterrorism, Demining and Related 
Activities (NADR) account and Freedom Support Act (FSA) funds 
for the New Independent States, to assist other countries' 
efforts to strengthen their export control systems. Assistance 
world-wide is focused on helping weapons-source countries and 
countries along potential smuggling routes to develop effective 
export control regimes, including effective capabilities to 
control illicit weapons trafficking across their borders; to 
establish the necessary legal and regulatory basis for 
effective export controls; to improve licensing procedures and 
practices; to coordinate, train, and equip export enforcement 
agencies, including customs agents and border security and 
enforcement authorities; to develop and install automated 
information systems to licensing and enforcement; and to foster 
effective interaction between government and industry on export 
controls. The program has placed over 20 advisors in countries 
around the world to coordinate export control/border security 
activities.
    United States export controls, especially ``catch-all'' 
controls, also make important political and moral contributions 
to the nonproliferation effort. They uphold the broad legal 
obligations the United States has undertaken in the Nuclear 
Non-proliferation Treaty (Article I), Biological Weapons 
Convention (Article III), and Chemical Weapons Convention 
(Article I) not to assist anyone in proscribed WMD activities. 
They endeavor to assure there are no U.S. ``fingerprints'' on 
WMD and missiles that threaten U.S. citizens and territory and 
our forces, friends, and interests overseas. They place the 
United States squarely and unambiguously against WMD/missile 
proliferation, even against the prospect of inadvertent 
proliferation from the United States itself.
    Finally, export controls play an important role in enabling 
and enhancing legitimate trade. They provide a means to permit 
dual-use exports to proceed under circumstances where, without 
export control scrutiny, the only prudent course would be to 
prohibit them. They help build confidence between countries 
applying similar controls that, in turn, results in increased 
trade. Each of the WMD nonproliferation regimes, for example, 
has a ``no undercut'' policy committing each member not to make 
an export that another has denied for nonproliferation reasons 
and notified to the rest, unless it first consults with the 
original denying country. Not only does this policy make it 
more difficult for proliferators to get items from regime 
members, it establishes a ``level playing field'' for 
exporters.

                            threat reduction

    The potential for proliferation of WMD and delivery system 
expertise has increased in part due to continued economic and 
political instability in Russia and other Newly Independent 
States. The human dimension proliferation continues to present 
a serious threat and is addressed through programs that support 
the transition of former Soviet weapons scientists to civilian 
research and technology development activities. These programs 
currently are under review by my Administration.

                                expenses

    Pursuant to Section 401(c) of the National Emergencies Act 
(50 U.S.C. 1641 (c)), I report that there were no specific 
expenses directly attributable to the exercise of authorities 
conferred by the declaration of the national emergency in 
Executive Order 12938, as amended, during the period from 
November 12, 2000 through May 15, 2001.

                                  
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