[House Document 108-92]
[From the U.S. Government Publishing Office]




108th Congress, 1st Session - - - - - - - - - - - - - House Document 
                                                          108-92

 
   EMERGENCY REGARDING PROLIFERATION OF WEAPONS OF MASS DESTRUCTION

                               __________

                             COMMUNICATION

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

A 6-MONTH PERIODIC REPORT ON THE NATIONAL EMERGENCY WITH RESPECT TO THE 
   PROLIFERATION OF WEAPONS OF MASS DESTRUCTION THAT WAS DECLARED IN 
   EXECUTIVE ORDER 12938 OF NOVEMBER 14, 1994, PURSUANT TO 50 U.S.C. 
                     1703(c) AND 50 U.S.C. 1641(c)




July 7, 2003.--Referred to the Committee on International Relations and 
                         ordered to be printed
                                           The White House,
                                          Washington, July 3, 2003.
Hon. J. Dennis Hastert,
Speaker of the House of Representatives,
Washington, DC.
    Dear Mr. Speaker: Consistent with 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), I transmit herewith a 6-month periodic report prepared 
by my Administration on the national emergency with respect to 
the proliferation of weapons of mass destruction that was 
declared in Executive Order 12938 of November 14, 1994.
            Sincerely,
                                                    George W. Bush.
    Periodic Report to Congress on the National Emergency Regarding 
              Proliferation of Weapons of Mass Destruction

    This report to the Congress addresses the developments over 
the past 6 months concerning the national emergency with 
respect to the proliferation of weapons of mass destruction 
(WMD)--nuclear, chemical, and biological weapons--and the means 
of delivering such weapons, that was declared in Executive 
Order 12938 on November 14, 1994, as amended by Executive Order 
13094 of July 28, 1998. This report is submitted pursuant to 
section 204(c) of the International Emergency Economic Powers 
Act (IEEPA), 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 only during the period of November 13, 2002 through 
May 14, 2003.
    To address the dangers posed by the proliferation of WMD 
and their delivery systems, on November 14, 1994, President 
Clinton issued Executive Order 12938, declaring a national 
emergency under the International Emergency Economic Powers Act 
(50 U.S.C. 1701 et seq.). On July 28, 1998, President Clinton, 
pursuant to the provisions of IEEPA, issued E.O. 13094 to amend 
E.O. 12938 in order to respond more effectively to the 
worldwide threat of WMD proliferation. 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 period to each anniversary 
date, the President publishes a Continuation of Emergency 
Regarding Weapons of Mass Destruction in the Federal Register 
and transmits the notice to the Congress. The national 
emergency was extended on November 14, 1995; November 12, 1996; 
November 13, 1997; November 12, 1998; November 10, 1999; 
November 12, 2000; November 9, 2001; and November 12, 2002.
    Weapons of mass destruction in the hands of potential 
adversary states and terrorists are among the top threats to 
U.S. security in the Post-Cold War world. In such hands, these 
weapons pose direct threats to the United States and its 
forces, friends, and allies.
    This Administration has given a high priority to dealing 
with the threat of WMD and missile proliferation. The September 
11, 2001 terrorist attacks in New York and Washington, D.C. and 
subsequent anthrax crimes reinforce theimportance of efforts to 
prevent the proliferation of these weapons, especially to terrorists 
and countries that harbor terrorists. Likewise, arrests in Europe 
during the second half of 2002 lend support to the validity of our 
concerns that terrorists are actively plotting to conduct chemical and 
biological attacks.
    Additional information on nuclear, missile and/or chemical 
and biological weapons nonproliferation efforts may be found in 
the following reports: (a) the most recent annual Report on the 
Proliferation of Missiles and Essential Components of Nuclear, 
Biological and Chemical Weapons, 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;'' (b) the most recent semi-
annual Report to Congress on the Acquisition of Technology 
Relating to Weapons of Mass Destruction and Advanced 
Conventional Munitions, provided to Congress pursuant to 
Section 721 of the Intelligence Authorization Act for Fiscal 
Year 1997; (c) the most recent annual report entitled 
``Adherence to and Compliance with Arms Control and Disarmament 
Act, 22 U.S.C. 2593a; (d) the most recent report on Nuclear 
Nonproliferation Policy in South Asia, provided pursuant to 
Public Law 102-391, Section 585; (e) the most recent Report on 
Regional Nonproliferation in South Asia, submitted pursuant to 
Section 620F(c) of Foreign Assistance Act; (f) the most recent 
Nuclear Nonproliferation Report known as the ``Section 601 
Report,'' submitted pursuant to Section 601 of the Nuclear 
Nonproliferation Act of 1978 (Public Law 95-242), as amended by 
the Nuclear Proliferation Prevention Act of 1994; (g) the most 
recent semiannual report on proliferation-related transfers to 
Iran, submitted pursuant to the Iran Nonproliferation Act of 
2000; and (h) the most recent report on Libya sanctions, 
provided pursuant to Iran and Libya Sanctions Act of 1996, 
section 5(b).

                            NUCLEAR WEAPONS

    Treaty on the Nonproliferation of Nuclear Weapons: The 
Treaty on the Non-Proliferation of Nuclear Weapons (NPT) is the 
cornerstone of the global effort to halt nuclear proliferation. 
The second meeting of the Preparatory Committee (PrepCom) for 
the 2005 NPT Review Conference took place in Geneva from April 
28 to May 9, 2003. NPT Parties used the session to address the 
Treaty's central tenets: nonproliferation; disarmament; and 
peaceful nuclear cooperation. PrepCom IItransmitted to PrepCom 
III (to be held in 2004) a factual summary of the session produced by 
the Chair.
    The primary U.S. objective leading up to and at PrepCom II 
was to make clear to responsible NPT Parties the threat to the 
Treaty and global security posed by those NPT Parties in 
noncompliance with, or threatening noncompliance with, their 
nonproliferation obligations. Close consultations with the 
PrepCom Chair began in June 2002 and continued throughout 
PrepCom II. The United States consulted actively with a wide 
range of NPT Parties in Washington, New York, Geneva, and 
capitals in an effort to make clear the depth of U.S. concern 
about the threat posed by noncompliance. The United States was 
generally successful in achieving its PrepCom II objective. 
More than 40 Parties addressed the compliance issue in their 
PrepCom statements, including specific references to DPRK and 
Iranian actions, and the Chair devoted a significant portion of 
his Factual Summary to the compliance issue.
    The United States will continue to highlight the importance 
of compliance as the Parties turn their attention to PrepCom 
III, which will convene on April 26, 2004 in New York. PrepCom 
III, unlike PrepCom I (2002) and II, is charged with attempting 
to make consensus recommendations to the 2005 Review Conference 
on ways to strengthen the NPT's implementation and achieve its 
universality.
    The United States will continue to meet all of its 
obligations under the NPT and notes that the conclusion of the 
Moscow Treaty for the reduction of strategic nuclear warheads 
demonstrates that the United States continues to meet its 
obligations under the nuclear disarmament-related provisions of 
Article VI of the NPT.
    North Korea's violation of the NPT and disabling of IAEA 
seals and cameras at Yongbyon, its expulsion of IAEA 
inspectors, its January 2003 notice of its intention to 
withdrawal from the NPT, and its restarting of the 5 MW (e) 
Yongbyon reactor--subsequent to its admission in October 2002 
of a covert uranium enrichment program--further underscore the 
nuclear proliferation challenges faced by the United States and 
the international community.
    Iranian compliance with the NPT also remains of primary 
concern. We assess Iran's nuclear program is aimed at 
developing the capability to produce fissile material for use 
in nuclear weapons. Recently disclosed nuclear-
relatedfacilities under construction at Natanz and Arak, for instance, 
would help Iran produce weapons-usable fissile material. The magnitude 
and completeness of Iran's nuclear fuel cycle programs are so 
disproportionate to its stated intention of developing a strictly 
civilian nuclear energy program that we are persuaded they are designed 
to support a clandestine nuclear weapons program. The IAEA is 
undertaking a rigorous examination of Iran's nuclear program and is 
expected to report its findings soon to the IAEA Board of Governors.
    The United States is increasingly concerned over statements 
by Libyan leaders about Arab nations' right to pursue nuclear 
weapons as well as Libya's development of its nuclear 
infrastructure.
    International Atomic Energy Agency: The International 
Atomic Energy Agency (IAEA), inter alia, verifies the 
compliance of non-nuclear weapons states with their NPT 
safeguards obligations. During this reporting period, the 
United States continued to provide significant technical and 
financial resources to support IAEA safeguards activities.
    The IAEA safeguards system helps deter or detect diversion 
of nuclear materials. However, it has become increasingly clear 
that the IAEA safeguards agreements have limitations that 
impede its ability to detect undeclared activities. The 
discovery after the Persian Gulf War of Iraq's extensive covert 
nuclear activities led to an effort to strengthen the IAEA 
safeguards system's ability to detect undeclared nuclear 
material and activities. The United States, along with a large 
number of other IAEA members, negotiated in the mid-1990s 
substantial safeguards strengthening measures, including the 
use of environmental sampling techniques, expansion of the 
information related to nuclear activities which states are 
required to declare, and expansion of IAEA access rights. Those 
measures are embodied in a Model Additional Protocol, approved 
in 1997. With these measures, the IAEA's capability to detect 
and assess a state's undeclared nuclear activity was 
substantially enhanced. As of June 2003, this Protocol had been 
signed by 73 states and has entered into force for 35 
countries.
    During the reporting period, the IAEA proposed a biennium 
budget for CY2004-2005 that includes a real increase for 
safeguards funding of around $21.5 million. The United States 
has engaged in substantial diplomatic activity over the past 6 
months in support of this increase. The IAEA and 
otherinternational organizations have been subject to stringent budget 
levels by the United States and other major donor nations for around 15 
years. However, the United States has decided that the IAEA is 
justified in seeking this increase, in view of a substantial growth in 
its safeguards responsibilities over that period. The IAEA Director-
General has warned that the IAEA cannot continue to provide credible 
safeguards under such financial limitations. The IAEA plays an 
essential role in preventing the spread of nuclear weapons and deserves 
these additional funds in order to fulfill its verification 
responsibilities under the NPT.
    The Zangger Committee: The purpose of the 35-nation NPT 
Exporters (Zangger) Committee (ZC) is to harmonize 
implementation of the NPT's requirement to apply IAEA 
safeguards to exports to non-nuclear-weapon states of (a) 
source or special fissionable material, and (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 of equipment and 
materials that may only be exported if safeguards are applied 
to the recipient facility (called the ``Trigger List'' because 
such exports trigger the requirement for safeguards).
    All of the NPT nuclear weapons states, including China, are 
members of the ZC. However, China is the only member of the ZC 
that is not also a member of the Nuclear Suppliers Group (NSG), 
which requires full-scope safeguards (FSS) as a condition of 
nuclear supply to non-nuclear weapons states. China has not 
been willing to accept the FSS policy, but its export control 
lists are comparable, if not virtually identical, to the NSG's.
    The ZC, because of its link to the NPT, is in a unique 
position to engage NPT-party non-member critics of the 
nonproliferation regimes, such as Egypt, Indonesia, Malaysia, 
and Mexico, and to present supplier government views to NPT 
meetings. It will continue to take the lead on possible Trigger 
List additions. The ZC is not currently able to control 
radioactive sources because most of these have no significance 
for nuclear weapons or fuel cycle activities. The ZC will be 
considering whether and how to expand its mandates for possible 
coverage. The ZC took the lead in developing supplier consensus 
to add enrichment, reprocessing, heavy water production 
equipment, and most recently, plutonium separation equipment 
and technology to the Trigger List.
    At its April 10, 2003 meeting, the ZC members welcomed the 
chair's announcement of inauguration of the ZC website hosted 
by the Austrian Government. The ZC also discussed elements that 
might be incorporated in the updated understandings 
(guidelines), including physical protection and the IAEA 
Additional Protocol. The Committee again discussed the 
application of Belarus for membership. The United States is 
still not prepared to join a consensus for acceptance of 
Belarus because of concern regarding that Government's 
commitment to nonproliferation. The Committee also continued 
discussion of possible outreach activities with non-member NPT 
Party countries, particularly Non-Aligned Movement countries.
    The Nuclear Suppliers Group: The NSG was formed in 1974 
following the Indian nuclear explosion, which demonstrated how 
nuclear technology and materials transferred for peaceful 
purposes could be misused. The NSG Guidelines, first published 
in 1978, require for exports of nuclear materials and 
equipment: (1) formal recipient government assurances 
confirming IAEA safeguards and no nuclear explosive use; (2) 
adequate physical protection; and (3) particular caution in the 
transfer of sensitive facilities, technology, and weapons-
usable materials.
    In 1992, the NSG added FSS as a condition of nuclear supply 
to non-clear weapons states, and established dual-use 
guidelines and a control list. In 1995, the NSG added controls 
on nuclear technology for items of the Trigger List (items 
which trigger the requirement for IAEA safeguards).
    NSG Chairmanship rotates annually. The Republic of Korea is 
the current chair and Sweden will assume the chairmanship in 
May 2004. Japan's Mission in Vienna serves as the NSG Point of 
Contract. The NSG Consultative Group (GC), currently chaired by 
the United States, meets at least twice a year under the 
mandate of the plenary.
    The NSG is considering how to make more transparent a 
``Common Understanding'' on the safety and grandfathering 
exceptions to the full-scope safeguards supply policy, in order 
to prevent new problems like those created by the Russian 
nuclear supply to India. It is also considering making the 
Additional Protocol a condition of supply, incorporating catch-
all control provisions in the dual-use guidelines, and expanded 
information sharing on denials of Trigger List items, as is 
currently done for nuclear-related dual-use exports.
    South Asia Nuclear: During the reporting period, India and 
Pakistan have continued to pursue their respective nuclear 
weapons programs and to increase their stockpiles of fissile 
material. Both maintain active ballistic missile programs and 
have flight-tested short- and medium-range ballistic missiles. 
The United States continued to raise its nuclear proliferation-
related concerns with Indian and Pakistani officials, calling 
on them to: maintain their nuclear testing moratoria, not 
assemble nuclear weapons, bring an early end to the production 
of fissile material, limit flight-tests of ballistic missiles, 
resume their bilateral dialogue, and bring their export 
controls in line with international standards to prevent 
transfers of sensitive goods or technologies to other 
countries.
    We have made progress with India and Pakistan to bring 
their export control system and practices in line with 
international standards. Assistant Secretary of State John Wolf 
held nonproliferation and security talks in Washington with 
delegations from both countries in February 2003, during which 
Indian and Pakistani officials signaled their willingness to 
cooperate on export control reform. Indian officials outlined a 
number of steps they were planning to take to close loopholes 
in their export control laws and regulations and agreed to 
dates for a series of cooperative activities under the State 
Department's Export Control and Related Border Security 
Assistance (EXBS) program. Later in February, the EXBS program 
hosted a delegation of senior Pakistani export control 
officials to discuss best practices and chart a program of 
training activities to assist Pakistan to strengthen its export 
control system. We are now working with Pakistan on the content 
and timing of a number of activities in the areas of licensing 
and enforcement.
    North Korea Nuclear: In October 2002, Assistant Secretary 
of State James Kelly advised the North Koreans that we had 
recently acquired information that indicated North Korea had 
embarked on a covert uranium enrichment program for nuclear 
weapons. The DPRK acknowledged it has a covert uranium 
enrichment program and has since lifted the freeze on its 
plutonium production facilities at Yongbyon. North Korea's 
nuclear weapons program is a violation of the Agreed Framework, 
the NPT, North Korea's IAEA Safeguards agreement, and the Joint 
North-South Declaration on the Denuclearization of the Korean 
Peninsula. The United States has called on the DPRK to take 
immediate steps to eliminate its nuclear weapons program, 
including its uranium enrichment program. completely,verifiably 
and irreversibly, and has been consulting closely with Congress, 
friends, and allies on next steps to address this grave violation of 
North Korea's international commitments and threat to the future of the 
NPT.
    Under the 1994 Agreed Framework, North Korea was to receive 
500,000 tons of Heavy Fuel Oil (HFO) annually, purchased 
through the Korean Peninsula Energy Development Organization 
(KEDO). The U.S. contribution covers HFO and KEDO's 
administrative expenses. The United States and other members of 
the KEDO board decided in November 2002 to suspend shipments of 
HFO in light of North Korea's pursuit of a nuclear weapons 
program. Congress provided up to $5 million for KEDO's 
administrative account in FY03, should the President decide it 
is vital to the national security interests of the United Sates 
to so contribute. No part of this funding would go to fund 
heavy fuel oil shipments or light water reactor construction. 
The Administration is seeking no funds for HFO for 2004.
    During the reporting period, the DPRK announced it was 
lifting the freeze on its plutonium production facilities. It 
cut IAEA seals and disabled IAEA monitoring cameras at the 
``frozen'' facilities, and expelled the IAEA inspectors at 
Yongbyon. Subsequently, on January 10, 2003, the DPRK announced 
it was withdrawing from the NPT, and in February, the DPRK 
restarted its 5Mwe reactor at Yongbyon.
    In late April, North Korea engaged in multilateral talks 
with China and the United States in Beijing. At this meeting, 
North Korea declared that it has nearly completed the 
successful reprocessing of the 8,000 spent fuel rods at the 
Yongbyon facility. It also indicated that it possessed nuclear 
weapons, and threatened to demonstrate or transfer nuclear 
weapons or fissile material beyond North Korea's borders. 
During these talks, the United States made clear our objective 
remains the complete, verifiable, and irreversible elimination 
of the North Korean nuclear weapons program. The United States 
also stressed that the multilateral talks must be expanded to 
include other concerned parties, above all the Republic of 
Korea and Japan. We are consulting with friends and allies on 
next steps.
    Iran Nuclear: Despite its status as an NPT Party, Iran is 
aggressively pursuing a costly effort to acquire sensitive 
nuclear capabilities, including uranium enrichment, that only 
make sense as part of a surreptitious nuclear weapons 
program,not for energy-related purposes. Such an indigenous fuel cycle 
is not necessary to meet Iran's declared desire to have a civil nuclear 
power program to generate electricity, given Russia's offer to provide 
fresh fuel for the lifetime of the Bushehr reactor, Iran's only nuclear 
power reactor foreseeable for the next decade. Iran's claims to need 
nuclear power to meet its energy needs are also highly suspect, in 
light of Iran's abundant oil and natural gas resources.
    Until recently, virtually all of Iran's sensitive nuclear 
activities were secret, and many remain so. Iran's recent 
disclosures were made only because it had no choice, but were 
also accompanied by a specious cover story.
    Iran is trying to legitimize as ``peaceful and 
transparent'' its ambitious pursuit of nuclear fuel cycle 
capabilities that would give it the capability to produce 
fissile material for nuclear weapons. This includes uranium 
mining and extraction, uranium conversion and enrichment, 
reactor fuel fabrication, heavy water production, and 
``management'' of spent fuel--a euphemism for reprocessing 
spent fuel to recover plutonium.
    Iran's claim of transparency in its nuclear program is 
false. Until February 2003, Iran was the only state with an 
IAEA safeguards agreement that had not accepted the IAEA 
Board's 1992 call to declare new nuclear facilities prior to 
construction, i.e., ``early declaration.'' Iran's stalling 
allowed it to build a well-advanced, sophisticated nuclear 
infrastructure in secret, including the huge uranium enrichment 
facility at Natanz, without IAEA knowledge or input on 
effective safeguards. Iran only acknowledged the uranium 
enrichment plant under construction at Natanz, and the heavy 
water production plant under construction at Arak, after their 
existence was made public by an Iranian opposition group.
    In August 2002, that group publicly revealed the existence 
of what was confirmed to be a gas centrifuge enrichment plant 
under construction at Natanz, and a heavy water production 
plant under construction at Arak. In February 2003, IAEA 
Director General ElBaradei and his senior safeguards staff 
visited Iran to examine these sites and undertake a more 
rigorous examination of Iran's nuclear program. The IAEA is 
continuing monthly inspections of Iran's program. As the IAEA 
has characterized, Iran's nuclear program appears to be 
significantly more advanced than the IAEA had previously known, 
while the Iranian regime has recently publicly acknowledged 
anambitious (and extremely costly) pursuit of indigenous fuel-cycle 
capabilities, including enrichment and reprocessing.
    It is highly unlikely that Iran could have achieved such an 
apparent state of technical progress in its gas centrifuge 
enrichment program without having conducted experiments with 
nuclear material, an activity which Iranian officials deny. 
Such experiments would be a serious violation of Iran's IAEA 
safeguards obligations. The Director General is expected to 
provide a detailed report of inspections in Iran to the next 
IAEA Board of Governors meeting in June 2003.
    The United States has played the leading role in developing 
and maintaining a broad international consensus against 
assisting Iran's foreign procurement efforts. The United States 
denies Iran access to U.S. nuclear technology and material, and 
China and all major Western suppliers have agreed not to 
provide sensitive nuclear technology to Iran. A number of 
supplier states have abandoned potentially lucrative sales to 
Iran's nuclear program. Russia remains the most significant, 
but not only, exception to this virtual embargo on nuclear 
cooperation with Iran. The Administration is actively engaged 
with Russia in an attempt to resolve differences over the 
nature and scope of Russian cooperation with Iran's nuclear 
programs. In addition, we are concerned that some interactions 
between Chinese and Iranian entities may run counter to 
Beijing's bilateral commitments to the United States.
    The United States is engaged intensively, at senior levels, 
with the Russian Government regarding Russia's nuclear 
cooperation with Iran. Russia has been assisting Iran in 
nuclear areas since at least 1995, including with the 
construction of the Bushehr-1 light water reactor. The United 
States has urged Russia to suspend all nuclear cooperation with 
Iran until concerns about the Iranian nuclear program are fully 
resolved.
    The United States believes that Iran must immediately halt 
its pursuit of a full nuclear fuel cycle capability and 
verifiably abandon its weapons ambitions.
    Iraq Nuclear: On November 8, 2002, the U.N. Security 
Council unanimously passed UNSCR 1441, which gave Iraq a final 
opportunity to comply with its disarmament obligations. UNSCR 
1441 called for Iraq to file a ``currently accurate, full, and 
complete'' declaration of its WMD and missile programs, and for 
``full and immediate'' cooperation by Iraq with 
weaponsinspectors. Finally, the resolution warned of ``serious 
consequences'' should Iraq fail to comply with its disarmament 
obligations. Thus, UNSCR was designed to test the Iraqi regime's 
commitment to abandon WMD and illegal missile efforts.
    In the wake of Iraq's refusal to voluntarily disarm, 
Operation IRAQI FREEDOM began on March 19, 2003 with the 
primary goal of disarming Iraq. Key objectives of military 
action are to locate, defeat, secure, disable, and dispose of 
Iraqi WMD, infrastructure, and scientific and engineering 
expertise; redirect select dual-use facilities and key 
personnel; and prevent reconstitution and proliferation. 
Exploitation/elimination of WMD will take place concurrent with 
military operations when possible. However, this is a time-
consuming task; the Iraqi regime may well have hidden WMD to 
thwart coalition forces' efforts to capture WMD. We remain 
concerned about WMD ``leakage'' and are focused on ensuring 
that no WMD or WMD-related materiel leaves Iraq.
    Libya Nuclear: An NPT party with full-scope IAEA 
safeguards, Libya retains its long-standing nuclear weapons 
ambitions and continues to develop its nuclear infrastructure. 
There is increasing concern over statements by Libyan leader 
Muamar Qhadafi that Arab countries have the right to pursue 
nuclear weapons as a deterrent against other weapons in the 
region. Our concerns are sharpened when considered in the 
context of Libya's development of its nuclear infrastructure 
and an ongoing pattern of suspicious Libyan procurement 
attempts of nuclear related material and technology. The 
suspension of U.N. sanctions in 1999 has provided Libya the 
means to enhance that infrastructure.

                    CHEMICAL AND BIOLOGICAL WEAPONS

    Enhanced Proliferation Control Initiative (EPCI) 
Regulations: The export control regulations issued under the 
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 WMD or missile programs. In particular, EPCI 
is being applied to items with potential use in chemical or 
biological weapons or unmanned delivery system for WMD.
    Chemical Weapons Convention: Chemical weapons continue to 
pose a serious threat to the security of the United States and 
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 (known as the 
Chemical Weapons Convention or CWC) entered into force, with 87 
of the CWC's 165 signatories as original States Parties--
including the United States, which ratified the Convention on 
April 25, 1997. As of the end of this reporting period, 151 
countries have become States Parties.
    The implementing body for the CWC--the Organization for the 
Prohibition of Chemical Weapons (OPCW)--carries out the 
verification provisions of the CWC, and its Technical 
Secretariat presently has a staff of approximately 500 
international civil servants, including about 200 inspectors 
trained and equipped to inspect military and industrial 
facilities throughout the world. To date, the OPCW has 
conducted over 1,400 routine inspections at over 580 sites in 
51 countries. No challenge inspections have yet taken place. 
The OPCW maintains an inspector presence at operational 
chemical weapon destruction facilities. Due to the significant 
level of chemical weapon destruction activity in the United 
States, U.S. facilities have hosted approximately one-third of 
OPCW inspections and two-thirds of total inspection days.
    The United States is determined to seek full implementation 
of and compliance with the CWC. This includes submission of 
accurate and complete declarations for all States Parties and 
compliance with the CWC's inspection provisions. The United 
States pursues compliance with the Convention through several 
means, including bilateral consultations and site visits, 
consistent with Article IX of the CWC, with several States 
Parties that it believes may not be meeting their commitments. 
In addition, the United States is actively taking steps to 
strengthen the OPCW's ability to implement effectively the CWC, 
including a $2 million voluntary contribution to the OPCW made 
in FY 2002 as a follow-up to the recent, much-needed change in 
OPCW leadership.
    We are continuing our work to ensure that countries that 
refuse to become party to the CWC are increasingly isolated 
politically. Under the CWC, States Parties are prohibited from 
transferring certain key chemicals to non-Parties. The relevant 
treaty provisions are specifically designed to penalize 
countries that refuse to become party to the CWC.
    Biological Weapons Convention: The United States agreed in 
1994 to participate in an Ad Hoc Group to negotiate a Protocol 
to the 1972 Biological Weapons Convention (BWC) that would 
``strengthen the effectiveness and improve the implementation 
of the Convention.'' On July 25, 2001, after a thorough United 
States Government policy review, the United States announced 
that the approach embodied in the draft Protocol is not capable 
of strengthening the BWC. ``The traditional approach [facility 
investigations and declarations] that has worked well for many 
other types of weapons is not a workable structure for 
biological weapons.'' On November 1, 2001, the Administration 
offered a number of alternative measures that would contribute 
to combating the threat of biological weapons proliferation and 
in strengthening the BWC. The resumed RevCon in November 2002 
adopted a work program for the period until the next RevCon in 
2006. Under that work program, the BWC States Parties will 
discuss, and promote effective action on, several of the 
practical measures proposed by the United States. The United 
States is actively engaged in preparing for the first annual 
meeting of States Parties in August 2003, preceded by a meeting 
of experts. The items to be addressed are national 
implementation measures and biosecurity, and we are hopeful 
that the August 2003 meeting will result in encouraging 
national efforts that could contribute to reducing the BW 
threat.
    In addition, the United States is pursuing measures to 
combat the biological weapons threat on multiple fronts in a 
number of forums such as NATO's Defense Group on Proliferation, 
the Global Health Security Action Group, and the World Health 
Organization.
    Australia Group: The United States continues to be a 
leading participant in the 33-member Australia Group (AG) 
chemical and biological weapons nonproliferation regime. At the 
June 3-6, 2002 AG Plenary Session, the Group significantly 
expanded its export controls and strengthened its ability to 
counter both nation-state and terrorist chemical and biological 
weapons efforts. Responding to the terrorist events of 
September 11, 2001, AG participants adopted common export 
control guidelines that include chemical and biological 
terrorism as an explicit focus of the regime.
    Participants also adopted the U.S.-proposed gameplan on 
regional nonproliferation and the Group agreed that members are 
to have ``catch-all'' and intangible technology controls, the 
first multilateral nonproliferation regime to do so. The 
AGcontrol lists were amended to include technology for the development 
and production of listed biological agents and equipment, and to add 
eight new biological toxins. To better combat biological weapons 
proliferation, the Group reduced the control level for listed 
fermenters from 100 to 20 liters and decided to require licenses for 
exports of biological agents to all countries, including other AG 
members (except for intra-EU trade).
    Participants also continued to agree that full compliance 
with the CWC and BWC by all countries will be a key to 
achieving a permanent global ban on chemical and biological 
weapons, and that the States Parties to these Conventions must 
take steps to ensure that their national activities support 
these goals. The Group 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 raise awareness and understanding 
of national policies in these areas.
    During the February 2003 Australia Group intersessional 
meeting in Paris, AG partners agreed to discuss the following 
topics at the June 2003 plenary: strengthened outreach to non-
AG countries; adding additional chemicals and biological agents 
to the AG control list; new formats for information sharing on 
a variety of export and other control topics; and overall 
enhancements to the AG partnership.
    Sanctions/Interdiction: During the reporting period, we 
continued to examine closely intelligence and other information 
concerning trade in material and technology related to chemical 
and biological weapons.
    In February, 2003, pursuant to the Chemical and Biological 
Weapons Control and Warfare Elimination Act of 1991, the United 
States imposed sanctions on NEC Engineers Private, Ltd. (an 
Indian company originally based in India but also operating in 
the Middle East and Eurasia) ahd Hans Raj Shiv (an Indian 
citizen previously residing in India and believed to be in the 
Middle East) for knowingly and materially contributing to 
Iraq's CBW program. Shiv was previously sanctioned in July 2002 
pursuant to the Iran-Iraq Arms Nonproliferation Act of 1992.
    In March 2003, the United States imposed sanctions on the 
Indian entity Protech Consultants Private Ltd, as well as the 
Jordanian national Mohammed Al-Khatib, under the Iran-IraqArms 
Nonproliferation Act of 1992 for their knowing and material 
contribution to Iraq's CBW program.
    The United States continues to cooperate with its AG 
partners and other like-minded countries in stopping shipments 
and exchanges of chemical and biological weapons proliferation 
concern.
    CBW Country Issues: Iran continues to seek precursors and 
production technology to create a more advanced and self-
sufficient CW infrastructure, and continues actively to pursue 
BW capabilities. Evidence suggests that Syria and Libya 
continue to make improvements to their chemical weapons 
infrastructure and both are pursuing offensive biological 
weapons research and development. North Korea has a dedicated, 
national-level effort to achieve a biological warfare 
capability and has developed and produced, and may have 
weaponized, biological warfare agents. North Korea is also 
assessed as having a long-standing offensive chemical weapons 
program, which includes the ability to produce bulk quantities 
of nerve, blister, blood, and choking agents. Sudan has 
received foreign assistance in the development of a chemical 
weapons program and may be actively pursuing a more advanced 
capability. The United States believes that Cuba has at least a 
limited, developmental, offensive biological warfare research 
and development effort; Cuba has provided dual-use 
biotechnology to rogue states. Operation IRAQI FREEDOM is 
underway to disarm Iraq's CBW program.

                          WMD-CAPABLE MISSILES

    Export Controls: The United States rigorously controls 
exports that could contribute to unmanned delivery systems 
(ballistic missiles, cruise missiles, and unmanned aerial 
vehicles) for WMD, and monitors closely activities of potential 
missile proliferation concern.
    Missile Technology Control Regime: During the reporting 
period, the 33 Missile Technology Control Regime (MTCR) 
Partners continued to share information about proliferation 
problems with each other and with other potential supplier, 
consumer, and transshipment states. The Partners also 
emphasized the need for implementing effective export control 
systems. In January 2003, the Partners amended the MTCR 
Guidelines to make preventing terrorists from acquiring WMD 
delivery systems a specific focus of the Regime.
    In April 2003, the MTCR held an intersessional Technical 
Experts Meeting (TEM) in Vienna to discuss new proposals and 
additions to strengthen control of MTCR Annex items. In 
addition, the MTCR held an intersessional meeting in Paris in 
May 2003 to discuss regional nonproliferation outreach to 
nonmembers, transparency, and other issues of priority 
nonproliferation concern. These discussions will result in 
decisions at the September 2003 Plenary, which will be held in 
Buenos Aires.
    International Code of Conduct Against Ballistic Missile 
Proliferation: The United States is one of 102 subscribing 
states to the International Code of Conduct Against Ballistic 
Missile Proliferation (ICOC--or ``The Hague Code of Conduct''), 
which was launched on November 25-26, 2002. The ICOC creates a 
widely subscribed international predisposition against 
ballistic missile proliferation. It consists of a broad set of 
principles, general commitments, and modest confidence building 
measures. It is a voluntary political commitment, not a treaty, 
and is open for subscription by all countries. The ICOC 
supplements, but does not supplant, the important work of the 
MTCR.
    Such a large and diverse group of subscribing countries 
(including countries in Africa, the EU, South America, Central 
Asia, and the Pacific) shows that there is widespread support 
for the ICOC and objectives of (1) stemming the proliferation 
of WMD capable delivery systems; and (2) encouraging countries 
to voluntarily cooperate to address missile proliferation. It 
should be noted, however, that several countries with programs 
of missile proliferation concern have not subscribed to the 
ICOC.
    The ICOC Launching Conference was extremely successful and 
was followed by the first meeting of Subscribing States on 
November 26, 2002. The Subscribers agreed to hold an ad-hoc 
technical intersessional meeting (scheduled for June 23, 2003) 
to further elaborate issues relating to the Code's 
implementation, including pre-launch notifications and 
Subscribing States' annual declarations on space and ballistic 
missile policies.
    Sanctions: On March 24, 2003, the United States imposed 
Category I missile sanctions on the North Korean entity 
Changgwang Sinyong Corporation for the knowing transfer of 
Missile Technology Control Regime (MTCR) Category I items from 
North Korea that ``substantially contributed'' to an 
MTCRCategory I program in Pakistan. Also on March 24, the United States 
imposed penalties on the Pakistani governmental entity Khan Research 
Laboratories (KRL), under Executive Order 12938, as amended, for making 
a material contribution to a WMD-capable missile program by receiving 
transfers from Changgwang. The sanctions on the North Korean and 
Pakistani entities were for a specific missile-related transfer. These 
sanctions do not pertain to any other activity, including nuclear-
related ones.
    South Asia Missile: India has an extensive, largely 
indigenous ballistic missile development and production 
program. Nevertheless, India's ballistic missile program have 
benefited from the acquisition of foreign material, equipment 
and technology, which it continues to acquire.
    Pakistan also has an active ballistic missile program and, 
during the last several years, has received considerable 
assistance from Chinese and North Korean entities in these 
efforts. Continued development of nuclear-capable ballistic 
missiles by both India and Pakistan raises the prospect that 
more sophisticated and possibly destabilizing capabilities will 
be fielded in the coming years. Such an arms race constitutes a 
threat to regional and international security. Both India and 
Pakistan conducted missile tests during this reporting period. 
The United States continued to urge India and Pakistan to 
exercise restraint in their missile programs.
    DPRK Missile: Although the DPRK has maintained its 
September 1999, voluntary moratorium on flight tests of long-
range ballistic missiles, it has been extremely active in the 
research, development, testing, deployment, and export of 
missiles and related materials, equipment, and technologies. 
The DPRK also is working to increase the capability of its 
missile systems. During a September 2002 meeting with Japanese 
Prime Minister Junichiro Koizumi, DPRK President Kim Jong-il 
stated that North Korea would maintain its long-range ballistic 
missile flight-test moratorium until after 2003. However, the 
DPRK has since announced it may reconsider its offer to extend 
the moratorium.
    During his October 2002 visit to North Korea, Assistant 
Secretary of State James Kelly expressed serious U.S. concerns 
about the negative impact of the DPRK's missile- and WMD-
related activities on regional and global peace and stability, 
for the North's relations with the United States and its 
neighbors, and for its own future. Making progress on these 
issues remains a high priority for this Administration.
    Iran Missile: Iran has substantial missile inventories and 
an indigenous ballistic missile production capability. In 
recent years, North Korean, Russian, and Chinese entities have 
continued to supply Iran with a wide variety of missile-related 
goods, technology, and expertise. The United States continues 
to pursue a high-level dialogue with Russia aimed at finding 
ways to cut off the continuing flow of sensitive goods and 
expertise to Iran's ballistic missile development and nuclear 
weapons programs. The Russian Government has created 
institutional foundations to implement its nonproliferation 
commitments and passed laws to punish wrongdoers. It also has 
passed new export control legislation and adopted implementing 
regulations to tighten government control over sensitive 
technologies and continued a dialogue with the United States 
aimed at strengthening export control practices at Russian 
aerospace firms. However, while there has been some movement, 
we remain concerned that Russian entities continue to supply 
missile technology and equipment to Iran. The United States has 
also imposed sanctions against Chinese and North Korean 
entities under both the AECA and the Iran Nonproliferation Act 
for their assistance to the Iranian missile program.
    Other Countries: A number of other countries also are 
pursuing missile programs. Iraq exceeded the U.N. range limit 
of 150 km with its existing ballistic missiles and sought to 
develop specialized facilities, which would suggest that it 
intended to develop a medium-range ballistic missile 
capability, largely through foreign assistance in rebuilding 
its missile production capability. Iraq also developed its 
unmanned aerial vehicle capability as a delivery system for 
biological and, perhaps, chemical agents. Libya is continuing 
to seek technology and assistance for its missile program from 
foreign sources. Syria continues to acquire missile-related 
equipment and materials and has received considerable foreign 
production assistance.

               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 noted in this report, however, export controls are just 
one of a number of tools the United States uses to achieve its 
nonproliferation objectives. Global nonproliferation 
treatiesand multilateral nonproliferation regimes, interdiction of 
shipments of proliferation concern, sanctions, redirection and 
elimination efforts, and robust U.S. military, intelligence, and 
diplomatic capabilities all work in conjunction with export controls 
and export control assistance as part of our overall nonproliferation 
strategy.
    Export controls are a critical part of nonproliferation 
because every emerging WMD and missile program seeks materials, 
equipment, and technologies from other countries. Proliferators 
look to other sources because needed items are unavailable 
within their countries, because indigenously produced items are 
of substandard quality or insufficient quantity, and/or because 
imported items can be obtained more quickly and cheaply than 
domestically produced ones. Increased focus has been put on 
encouraging transit/transshipment countries to adopt new and/or 
strengthened export controls consistent with international 
nonproliferation norms as a means to halt transfers of WMD-
useful materials, equipment, and technologies. Export controls 
have their limitations, however; export controls have a limited 
ability to address the growing problem of secondary 
proliferation (e.g., transfers between countries such as the 
DPRK and Iran).
    It is important to note that proliferators seek for their 
WMD and missile programs both items on multilateral lists (such 
as gyroscopes controlled on the MTCR Annex and nerve gas 
precursors controlled on the AG list) and unlisted items (such 
as 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 missile propellant and 
chemical weapons; vaccine production technology can be used to 
produce biological weapons.
    The most obvious value of export controls is in impeding or 
denying proliferators and terrorists access to key pieces of 
equipment and technology for use in their WMD and/or missile 
programs. In large part, U.S. national export controls--and 
similar controls of our AG, MTCR, and NSG partners--are aimed 
at denying proliferators and terrorists access to the largest 
sources of the best material, equipment, and technology. If 
denied, proliferators might then turn to non-regime suppliers 
to seek less capable items. Moreover, in many instances, U.S. 
and regime controls and associated efforts have 
forcedproliferators to engage in complex clandestine procurements, 
taking time and money away from their WMD and 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. EPCI. 
(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 it is 
believed that those items could be destined for WMD and/or 
missile programs.)
    The United States maintains a global Export Control and 
Related Border Security Assistance (EXBS) program to assist 
over 30 countries to prevent transfers of sensitive goods to 
end-users of proliferation concern, and strengthen their export 
control systems. Assistance is focused on helping weapons-
source countries and transit/transshipment countries along 
high-risk smuggling routes to develop effective export and 
related border controls. The EXBS program is funded and managed 
by the State Department's Bureau of Nonproliferation and draws 
on expertise from a number of U.S. agencies and the private 
sector. The program assists governments in strengthening their 
export controls by improving their legal and regulatory 
frameworks, licensing processes, border control and 
investigative capabilities, outreach to industry, and 
interagency coordination.
    This program has placed 21 program advisors in 14 countries 
to assist the coordination of export control/border security 
activities. The program continues to register successes: new 
cooperative relationships have been established with key 
transit/transshipment and potential supplier states; a number 
of countries have adopted, or are adopting, export and 
transshipment control laws and regulations, including ``catch-
all'' controls and controls on arms brokering, largely based on 
U.S. advice; the EXBS program has contributed to a significant 
increase of border security capabilities in former Soviet 
states, and Central and SouthernEurope; and various countries' 
enforcement agencies have used U.S. equipment and training to interdict 
the movement of arms, related items, and radioactive materials across 
the borders.
    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 and missile 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 also establishes a ``level 
playing field'' for exporters.

 THREAT REDUCTION AND NONPROLIFERATION ASSISTANCE TO THE FORMER SOVIET 
                                 STATES

    The President has made clear repeatedly that his 
Administration is committed to strong, effective cooperation 
with Russia and the other former Soviet states to reduce WMD 
and prevent their proliferation. Programs geared towards the 
former Soviet states include the Cooperative Threat Reduction 
Program (CTR), Department of Energy nuclear nonproliferation 
programs, and State Department programs, including the Science 
and Technology Centers in Russia and Ukraine. These programs 
seek to reduce weapons and materials of mass destruction, 
secure those which remains, and redirect former Soviet WMD 
scientists towards peaceful projects and away from rogue states 
and terrorists.
    Under the relevant legislation, CTR assistance may be 
provided to the independent states of the former Soviet Union 
only if the President (whose authority has been delegated to 
the Secretary of State) certifies to Congress, for each fiscal 
year, that the proposed recipient country is committed to 
certain courses of action. Beginning in FY 2003, Congress gave 
the President the authority to waive CTR (as well as FREEDOM 
Support Act Title V) certification requirements for any 
recipient state if he certifies to Congress that the waiver is 
important to the national security interests of the United 
States and submits a report.
    The Secretary of State did not certify Russia for CTR and 
FREEDOM Support Act (FSA) Title V assistance for FY 2002 and FY 
2003 because of concerns regarding Russia's commitment to 
complying with all relevant arms control agreements and 
foregoing any military modernization program that exceeds 
legitimate defense requirements. In January 2003, the President 
exercised his authority to waive the CTR and FSA Title V 
certification requirements for Russia for FY 2003, and new 
obligations for Russia under CTR and FSA Title V have resumed.
    The Secretary subsequently certified the following 
countries for CTR and FSA Title V assistance for FY 2003: 
Armenia, Azerbaijan, Georgia, Kyrgyzstan, Tajikistan, and 
Uzbekistan on February 19, 2003; Ukraine and Kazakhstan on 
March 19, 2003; ;and Moldova on April 5, 2003.

                              EXPENDITURES

    Pursuant to Section 401(c) of the National Emergencies Act 
(50 U.S.C. 1641(c)), there were no specific expenditures 
incurred, which are directly attributable to the exercise of 
authorities conferred by the declaration of the national 
emergency in Executive Order 12938, as amended, during the 
reporting period from November 13, 2002 through May 14, 2003.

                                
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