[Senate Hearing 105-289]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 105-289


 
 IRAN AND PROLIFERATION: IS THE U.S. DOING ENOUGH? THE ARMING OF IRAN: 
                          WHO IS RESPONSIBLE?

=======================================================================

                                HEARINGS

                               BEFORE THE

                    SUBCOMMITTEE ON NEAR EASTERN AND
                          SOUTH ASIAN AFFAIRS

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION

                               __________

                        APRIL 17 AND MAY 6, 1997

                               __________

       Printed for the use of the Committee on Foreign Relations



                     U.S. GOVERNMENT PRINTING OFFICE
 40-187 CC                 WASHINGTON : 1998




                     COMMITTEE ON FOREIGN RELATIONS

                 JESSE HELMS, North Carolina, Chairman

RICHARD G. LUGAR, Indiana            JOSEPH R. BIDEN, Jr., Delaware
PAUL COVERDELL, Georgia              PAUL S. SARBANES, Maryland
CHUCK HAGEL, Nebraska                CHRISTOPHER J. DODD, Connecticut
GORDON H. SMITH, Oregon              JOHN F. KERRY, Massachusetts
CRAIG THOMAS, Wyoming                CHARLES S. ROBB, Virginia
ROD GRAMS, Minnesota                 RUSSELL D. FEINGOLD, Wisconsin
JOHN ASHCROFT, Missouri              DIANNE FEINSTEIN, California
BILL FRIST, Tennessee                PAUL D. WELLSTONE, Minnesota
SAM BROWNBACK, Kansas

                     James W. Nance, Staff Director

                 Edwin K. Hall, Minority Staff Director

                                 ______

          SUBCOMMITTEE ON NEAR EASTERN AND SOUTH ASIAN AFFAIRS

                    SAM BROWNBACK, Kansas, Chairman

GORDON H. SMITH, Oregon              CHARLES S. ROBB, Virginia
ROD GRAMS, Minnesota                 DIANNE FEINSTEIN, California
JESSE HELMS, North Carolina          PAUL D. WELLSTONE, Minnesota
JOHN ASHCROFT, Missouri              PAUL S. SARBANES, Maryland

                                  (ii)





                            C O N T E N T S

                              ----------                              
                                                                   Page

           Iran and Proliferation: Is the U.S. Doing Enough?
                        Thursday, April 24, 1997

D'Amato, Hon. Alfonse M., U.S. Senator from New York.............     5
    Prepared statement...........................................     8
Einhorn, Robert J., Deputy Assistant Secretary of State for 
  Political-Military Affairs.....................................    15
    Prepared statement (jointly with David Welch)................    17
Spector, Leonard, Senior Associate and Director of Nuclear Non-
  Proliferation Project, Carnegie Endowment for International 
  Peace..........................................................    34
Welch, David, Acting Assistant Secretary of State for Near 
  Eastern Affairs................................................    12
    Prepared statement (jointly with Robert J. Einhorn)..........    17
Woolsey, R. James, Former Director of Central Intelligence.......    30
    Prepared statement...........................................    31

                The Arming of Iran: Who Is Responsible?
                          Tuesday, May 6, 1997

Bertsch, Dr. Gary, Director of the Center for International Trade 
  and Security, Professor of Political Science, University of 
  Georgia, Athens, Georgia.......................................    50
Carus, Dr. W. Seth, Visiting Fellow, National Defense University, 
  Washington, D.C................................................    54
Milhollin, Dr. Gary, Director, Wisconsin Project on Nuclear Arms 
  Control, Washington, D.C.......................................    43
    Prepared statement...........................................    46

                                Appendix

Prepared statement of Leonard S. Spector.........................    77
Export Controls in the People's Republic of China (PRC): Findings 
  and Considerations.............................................    88
Russia's Interests in Iran: Issues, Implications, and Policy 
  Tools for the United States....................................    92
Chinese and Russian Suppliers to Iran............................    96
Iranian Nuclear, Biological, and Chemical Weapons: Implications 
  and Responses..................................................    99
Statement submitted by Senator John Ashcroft.....................   107




           IRAN AND PROLIFERATION: IS THE U.S. DOING ENOUGH?

                              ----------                              


                        THURSDAY, APRIL 24, 1997

                           U.S. Senate,    
          Subcommittee on Near Eastern and,
                               South Asian Affairs,
                     of the Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:05 p.m. In 
room SD-419, Dirksen Senate Office Building, Hon. Sam Brownback 
(chairman of the subcommittee) presiding.
    Present: Senators Brownback, Smith, and Robb.

  OPENING STATEMENT OF HON. SAM BROWNBACK, U.S. SENATOR FROM 
                             KANSAS

    Senator Brownback. We will call the committee hearing to 
order. Thank you all for joining us today on a hearing in the 
Foreign Relations Committee Subcommittee on Near Eastern and 
South Asian Affairs, a hearing on Iran and Proliferation: Is 
the U.S. Doing Enough? We certainly appreciate all the people 
in attendance and we have got an excellent set of witnesses and 
some tough questions to ask about U.S. policy toward the 
Iranians.
    Washington is a town where people can and will disagree on 
just about anything. It is therefore my great pleasure to hold 
a hearing on a topic about which there is little disagreement. 
In the years since the Islamic revolution, Iran has developed 
into a militant nation intent on exporting its particular brand 
of Islam and using terror both internally and externally to 
achieve its aims. It is a rogue state, seemingly unsusceptible 
to reason, uninterested in international norms, and committed 
to the development of weapons of mass destruction.
    In the 19 years since the revolution, notwithstanding the 
blandishments of its most important trading partners in Europe, 
Iran has not lessened its support for international terrorism. 
The German courts recently confirmed as much, branding Iran's 
top leadership with responsibility for the gangland-style 
slaying of four Kurdish dissidents living in Berlin.
    The executive branch and the Congress, Republicans and 
Democrats, we all agree that Iran represents a significant 
threat to the American people, to our friends, and to our 
interests in the Middle East and the world over. Yet, despite 
broad agreement, our various policy prescriptions do not seem 
to be working. The European policy of critical engagement has 
proven ineffective and misguided. But our policy is not being 
implemented as well as it should be, either.
    President Clinton has stated on a number of occasions that 
the proliferation of weapons of mass destruction poses an 
extraordinary danger to the United States. Clearly, the 
Congress agrees and has helped put in place a set of laws aimed 
at stemming the proliferation of weapons of mass destruction to 
rogue states such as Iran. Yet only twice in recent memory, 
twice, has any president invoked those laws to sanction nations 
that sell missiles and nuclear weapons technology to Iran, and 
neither sanctions case involved either Russia or China, the two 
main proliferators to Iran.
    I have in front of me a list of transfers to Iran of 
everything from conventional cruise missiles to chemical 
precursors to full-blown nuclear reactors. Obviously, there is 
a substantial amount of classified material on these subjects, 
but many of the details are available in the open press, and it 
is upon open sources only that we have relied in preparing for 
today's discussion.
    I will cite only a few of these cases in the interest of 
time.
    Case No. 1: China, a signatory to the Chemical Weapons 
Convention, reportedly sold chemical precursors, chemical 
production equipment, and production technology to Iran. In a 
hearing on Chinese proliferation just last week, the 
administration admitted these were destined to Iran's chemical 
weapons program.
    It would be natural to conclude that such transfers were a 
violation of Executive Order 12938, the Chemical and Biological 
Weapons Control and Warfare Elimination Act, or the Iran-Iraq 
Nonproliferation Act. Yet none of the applicable sanctions have 
been imposed.
    Case No. 2: Russia is allegedly assisting Iran's missile 
program and has supplied technology and parts of the SS-4 
missile system. The SS-4 has a range of 1250 miles and can be 
loaded with a nuclear warhead. If this report is true, it would 
be a violation of provisions of the Arms Export Control Act, 
the Iran-Iraq Nonproliferation Act, as well as the Foreign 
Assistance Act.
    Case No. 3: In mid-1995 reports surfaced about the transfer 
by China of sophisticated missile guidance equipment to Iran. 
It was later reported that there was unanimous agreement among 
experts who had seen the evidence that the transfer constituted 
a violation of the Missile Technology Control Regime.
    In the unclassified material, I can see the United States 
demarched China on this issue and that U.S. officials traveling 
to China discussed it. All of the reading I have done on the 
subject, however, suggests no decision on sanctions was ever 
made. If not, why not?
    Case No. 4: In January and March 1996, both Vice Admiral 
John Redd, Commander of the Fifth Fleet, and General Peay, 
Commander of Central Command, told reporters that China had 
supplied Iran with C-802 anti-ship cruise missiles against 
which the U.S. Navy has no defense, and which clearly 
endangered the men and women serving in the Gulf.
    The sale of these missiles is clearly de-stabilizing, to 
use the language of the Iran-Iraq Nonproliferation Act. The 
administration appears to have concluded, however, that the 
known transfers are not of a de-stabilizing nature. That is 
certainly poor comfort and support for our sailors in the Gulf.
    Case No. 5: In 1995 Russia and Iran signed a contract for 
the Russian Ministry of Atomic Energy to complete work on an 
unfinished nuclear reactor in Iran. I understand that there are 
ongoing discussions between Tehran and Moscow for three more 
reactors. The administration has clearly stated its opposition 
and asked the Russians to call off the deal. The Russians, 
however, have indicated they will proceed.
    Is this a sanctionable act? The transfer of reactors by 
itself is not, because the Nonproliferation Treaty allows such 
transfers to take place. But given that the administration has 
told us again and again that Iran is aiming for a nuclear 
weapon and that they are afraid that technology transfers 
associated with the reactors will speed up Iran's quest for 
nuclear weapons, there seem to be several laws that apply, 
including the Nuclear Proliferation Prevention Act, the Export-
Import Bank Act, and others. The administration apparently has 
chosen not to impose sanctions.
    Now, I have mentioned only five cases, but there are many 
more, involving not only non-conventional weapons, but 
conventional ones as well. While China is Iran's No. 1 supplier 
of unconventional arms, Russia, according to the Department of 
State, will be Iran's No. 1 supplier of conventional arms, and 
will reportedly sell $1 billion worth of arms to Iran in 1997 
and 1998.
    It was just last Friday that President Yeltsin stated that 
Russia has ``good positive cooperation with Iran, which shows a 
tendency to grow.''
    If it is indeed one of this administration's top priorities 
to isolate Iran and to strangle Iran's ability to earn foreign 
exchange that buys these weapons of mass destruction, why are 
we not doing more about the suppliers? How, in the face of 
almost overwhelming evidence, can the administration have 
stated in a recent hearing that China and the United States 
``recognize a shared interest in preventing the proliferation 
of weapons of mass destruction and related technologies''?
    Now, I recognize that the use of sanctions is not always as 
effective as engagement. But where do we draw the line? The 
German government last week recalled its Ambassador to Iran 
after the verdicts in the trial. The judge in the case stated 
clearly that Iran's leadership was behind the plot and that it 
was Germany's policy of engagement with the regime that led 
Tehran to feel it could act with impunity on German soil.
    Do we not at a certain point recognize what was recently 
brought home so clearly to the German government, that Iran and 
those who supply Iran with weapons of mass destruction believe 
that because we have been so appeasing that they can continue 
on with their programs with impunity?
    What will happen when inevitably some companies violate the 
terms of the Iran and Libya Sanctions Act? In front of me I 
have several articles describing the French firm Total's intent 
to invest in Iranian oil fields to the tune of $850 million. 
The Malaysian firm Petronas will be making a similar 
investment, and what are we going to do? Will this 
administration, for good reasons or bad, fudge on imposing 
sanctions because they do not want to get into a tiff with 
France or Malaysia?
    Congress has passed a good deal of legislation to counter 
the dangers of terrorist states like Iran getting nuclear, 
chemical, and biological weapons and the means to deliver them. 
The President has signed that legislation into law. Yet those 
laws are for the most part lying around gathering dust.
    I have got charts of both of those that we have up to my 
right, to your left, about applicable laws that exist and the 
sanctions that have been imposed, about weapons sales to Iran, 
the countries of China and Russia involved with those. I have 
to my left and to your right just a list of the headlines that 
have taken place in recent newspaper articles about all of this 
occurring. And if that is not enough, then we have the 
Wednesday, April 16th edition of the Washington Times, 
headlined ``Russia Sells Missiles to Iran, Terrorists to Get 
Latest Arms.''
    Is it just that sanctions are not useful? After all, that 
is a valid answer, though not one I would agree with. Are the 
laws not clear enough or not written tightly enough? Is there a 
reason that the administration uses the loopholes that exist?
    Take the recent case of Moscow's agreement to provide Iran 
with nuclear reactors. Congress made clear its view that the 
sale was not compatible with a continued U.S. assistance 
program. The President disagreed and waived sanctions 
associated with the reactor deal.
    I am certain there are Members of Congress who are asking 
themselves whether we should have given the President the 
loophole he used. For my part, I believe that selling reactors 
to Iran and receiving aid from the United States are mutually 
exclusive. After all, why should Russia spend U.S. tax dollars 
to support our avowed enemy?
    The administration has told us again and again that Iran is 
a threat, that we must contain that threat and stem Iran's 
quest for a nuclear weapon. What are we waiting for? Is it not 
time to ask ourselves whether our policy is really working?
    That is what I look forward to exploring in this hearing 
with the various witnesses that will be present to testify. I 
think we have to have and need to have a good discussion, a 
frank discussion, of what we are doing to contain Iran from 
getting weapons of mass destruction. We will pursue that in 
depth in this hearing.
    I would like to turn to my colleague, Mr. Smith from 
Oregon, if he would have an opening statement. The mike is 
yours.

  STATEMENT OF HON. GORDON H. SMITH, U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Senator. I am pleased to be here 
with you and congratulate you on your first hearing of this 
subcommittee. I am honored to be a member of it. I welcome 
Senator D'Amato and am anxious to hear his testimony. I know I 
share the concern he has about the prospective sales of new 
NATO members to Iran and the impact that may have on Israel and 
other neighbors.
    So I look forward to these and am glad to be here.
    Senator Brownback. Thank you, Senator Smith. We will have 
others joining us.
    I would call first to the witness stand Senator Alfonse 
D'Amato from New York. I am well aware that we could sit here 
and threaten Iran, decry their weapons program, sanction their 
suppliers, and the Iranians would pay us little heed. That was 
why we needed my esteemed colleague from New York to join us 
today. Now at least we can be sure that President Rafsanjani 
will sit up and take notice.
    Senator D'Amato deserves kudos and gratitude from the 
American people. At a time when the administration was 
uninterested in confronting the growing problem in Iran and was 
unwilling to prevent even U.S. companies from investing in 
Iran, Senator D'Amato was out there calling for an investment 
ban and sanctions. The Iran-Libya Sanctions Act which he 
authored is a blow to Iran's source of foreign exchange and a 
much needed wakeup call to the regime.
    The United States cannot sit back and permit one of the 
world's most dangerous regimes to operate with impunity.
    So therefore I welcome my esteemed colleague here today. I 
congratulate you on the work that you have already done in this 
area, and I look forward to your testimony of what else we need 
to do to make sure to get this threat to our security and our 
interests under control. Senator D'Amato.

  STATEMENT OF HON. ALFONSE M. D'AMATO, U.S. SENATOR FROM NEW 
                              YORK

    Senator D'Amato. Mr. Chairman, thank you for the 
graciousness of your introduction, and I am very pleased to be 
here with you and Senator Smith and Senator Robb.
    Mr. Chairman, at the outset let me thank you for calling 
these hearings. I think it is very important to focus on 
exactly what has taken place, because little is really known 
about the circumstances and how the legislation, which 
basically says that we cannot nor should we do business with 
those countries who permit unrestricted trade, and particularly 
in the oil and gas production, of Iran and Libya as if all is 
well.
    The fact of the matter is that Iran is conducting a naval 
buildup in the Persian Gulf. It is building and buying Chinese-
made C-802 cruise missiles, a danger to our Navy, and our 
people are very, very concerned in that area. They are building 
weapons of mass destruction, chemical weapons, as the chairman 
has alluded. It is because of this and those things, Iran's 
continued sponsorship of terrorism, that the legislation, the 
Iran-Libyan Sanctions Act of 1996, was passed overwhelmingly 
and enacted into law.
    Now, Mr. Chairman, let me divert from the very carefully 
prepared remarks of my staff--and it is a great staff and they 
have me engaged in all these nuances which very few people 
understand--and get right to the issue. You know, you cannot 
say to a rogue nation that, you are outside of the scope of 
dealing with us and we are not going to do business as usual 
and make international credits available to you and have you 
continue to use these great resources that we, directly and/or 
indirectly through our allies, help to finance. And I am 
talking about the oil and gas resources that both Libya and 
Iran have.
    That is why we passed the Iran-Libyan sanctions act. Make 
no mistake about it; that bill was destined to die in the House 
of Representatives. It was going to die because of the interest 
of the corporate structure, not only here in America but 
throughout the world--business, business. People are willing to 
do business with just about anything to make money--greed.
    We have seen it in the past. We have seen people do 
business with the most despicable characters in the world. With 
the Swiss bankers, they were not neutral; they were the Nazis' 
bankers during World War Two. Little has really changed.
    Multinational corporations in the countries where the 
various corporations operate, and particularly their own 
national companies, seem to forget the lessons of the past and 
so they deal with these petty tyrants and dictators and those 
people who export revolution even in those countries 
themselves.
    We just recently had the case that the chairman alluded to, 
in which the German court found four Iranian-Kurds who were 
killed by the Iranians on orders of--and the court said 
specifically--from the highest levels of the Iranian 
Government. These executions took place on German soil, in 
Berlin. This is the verdict of the German court.
    I have to tell you, we would never have passed that bill 
were it not for a terrible tragedy, the crash of TWA 800. It 
was at that point in time when the bill had passed the Senate 
and was being held in the House and being worked over, worked 
over, being worked down, watered down, so that there would 
really be nothing left of it.
    That is just the same kind of policy that we had with Iran 
and Libya for years, where we said we are not going to permit 
their oil to come into this country, but we let our foreign 
subsidiaries bring it in through the back door. Finally the 
President put a stop to that. I proposed legislation to do it. 
He did it by executive order. Fine, we did it.
    But how do we sound to our allies when we say one thing and 
do another? Are we really serious? What does that mean to the 
people who we are attempting to get to act as responsible 
citizens in the world, in the world community, and to stop 
exporting to Iran and Libya?
    Well, I have to tell you something. I think the American 
people expect more of us, and I think this is more important 
than that. I think that the recent killings demonstrate what is 
taking place and how bold the Iranians are in exporting their 
revolution even to the territories of those countries who have 
been very sympathetic to them regarding trade.
    Now let me tell you, there are some people who say, this 
act is not worth anything, it is just divisive. Well, they are 
wrong. Just look at this past January when Mohsen Yahyavi, a 
senior Iranian Parliamentarian, was quoted as saying that this 
act is having a very profound and detrimental impact, and he 
says ``there is little or no foreign investment in the Iranian 
petroleum industry.'' We want them to get that message. But if 
you continue to do business with the killers and those people 
who promote this kind of activity, well, why should they stop?
    We are not suggesting that we go in and bomb them. We are 
suggesting that we withhold the money from them with which they 
pay for their aggression and terrorism.
    Now, with respect to the oil-producing rogue states like 
Iran and Libya, the sanctions policy should be viewed in terms 
of U.S. national security. Any increase in Iranian and Libyan 
petroleum revenues should be viewed as a threat to the national 
security and foreign policy interests of the United States.
    I hope that our allies begin to understand this. But they 
are not going to understand unless we show some determination. 
U.S. sanctions against Iran and Libya are part of an ongoing 
effort by our country and by Congress to fill the gaps in U.S. 
policy. Congress through its law-making powers has passed 
legislation against investment in Iran and Libya and sanctions 
against countries that deal with Cuba, otherwise known as the 
Helms-Burton Act.
    It is this prerogative of Congress to do so--and I think we 
have to remember that, despite a reluctance to deal with the 
issue, eventually the President did in fact sign both measures.
    I think we have to also remember that that law is really 
only as good as its enforcement. Now, fortunately the 
administration has reached an agreement with the European Union 
regarding the implementation of the Helms-Burton Act and the 
Iranian-Libyan Sanctions Act. This agreement was accomplished 
due to the diligent work of Ambassador Stuart Eizenstadt, the 
Under Secretary of Commerce for International Trade. His 
commitment to easing relations between the U.S. and the 
European Union is unending, and it is important. We want to 
keep our allies with us. And his work on this issue as well as 
the question of the Holocaust victims' assets in Swiss banks 
has been untiring and vital.
    The agreement as it relates to the Iranian-Libyan Sanctions 
Act is quite clear. It states:

    The United States will continue to work with the European 
Union toward objectives of meeting the terms: One, granting EU 
member states a waiver under section 4 of the act with regard 
to Iran; and two, for granting companies with the EU waivers 
under section 9[c] of the act with regard to Libya.

    Now, I think it should be clear that the terms in the law 
for granting a waiver specifically with regard to Iran are very 
simple. If the country where the company to be sanctioned is 
situated imposes substantial measures, including the imposition 
of economic sanctions--in other words, our allies have to join 
with us--then and only then can a waiver be granted.
    Any suggestion that the European Union should be granted a 
blanket waiver without following the stipulations of the bill, 
that is to join in this boycott, is simply mistaken. There is 
no blanket waiver here.
    In passing the legislation, Congress intended for this law 
to be implemented in full, and if blanket waivers are provided 
without just cause only Iran will benefit, and they will laugh 
at us and they will continue their policy. So it comes down to 
a question of how far our nation will go in implementing its 
tools to defend itself, and I think using the great economic 
power that we do have and hopefully to get our allies to work 
with us is the proper way.
    Now, there are some people what are talking about the 
principles of dual containment and they argue that isolating 
Iran will only radicalize the regime. They argue that through 
the policy of dialog we can moderate the behavior of this rogue 
regime. Yet despite all of its criticisms of our efforts, our 
allies, with all of their moderate talk, with doing business 
with them, with supplying them credits, have not been able to 
moderate their policy. It is a flawed policy.
    I think we had better learn the lessons of the past, and as 
recently as the incident that took place in Germany. I think we 
have to remember that terrorists are against all of the 
principles that we stand for, and that if we, because of 
economic expedience, look the other way so that we can continue 
business and rack up profits, in the long run this policy will 
become self-defeating.
    Our allies can join with us and hopefully work with us and 
become part of the solution in moving Iran into a civilized 
nation that respects the rights of its neighbors.
    I thank the chair.
    [The prepared statement of Senator D'Amato follows:]

             Prepared Statement of Senator Alfonse D'Amato

    I would like to thank Chairman Brownback for inviting me to speak 
here today about Iran before the Subcommittee.
    The United States has chosen to attempt to deny the two foremost 
sponsors of international terrorism the hard currency to fund their 
support of terrorism and their attempts to obtain weapons of mass 
destruction.
    Iran is conducting a naval buildup in the Persian Gulf, buying 
Chinese-made C-802 cruise missiles, which pose a direct threat to our 
ships in the Gulf and this worries me. It is because of this and 
because of Iran's continued sponsorship of terrorism that I introduced 
and passed the Iran-Libya Sanctions Act of 1996.
    I am pleased to say the Act is working. Even a senior member of the 
Iranian Parliament was quoted in January as saying the sanctions are 
working. There is little or no foreign investment in the Iranian 
petroleum industry.
    Last week's conviction in Germany of four Iranian agents for the 
killing of four Iranian Kurdish dissidents in Berlin in 1992, and the 
courts' determination that the top Iranian leadership ordered the 
assassination, European nations are hardly in a position to suggest 
that the United States is being too harsh on Iran. The fact that 
Iranian sponsored terrorism is being conducted on European soil should 
make the Europeans rethink their opposition to economic sanctions on 
Iran.
    With respect to oil-producing, rogue states like Iran and Libya, 
U.S. sanctions policy should be viewed in terms of U.S. national 
security. Any increase in Iranian and Libyan petroleum revenues should 
be viewed as a threat to the national security and foreign policy 
interests of the United States.
    Our allies are providing Iran and Libya with the hard currency 
enabling them to fund their aggression and are contributing to the 
menace of terrorism. Through continued trade, extension of credits, 
loan rescheduling at concessionary rates, and a stubborn adherence to 
the misguided principle of ``critical dialogue,'' Iran has been 
enriched by our allies who are themselves targets of Iranian terrorism.
    Iran's aggression and support of terrorism is never really 
considered by our allies when they engage in business deals with them. 
For our part, we have chosen not to do business with these terrorist 
states. We wish that our allies would do the same.
    Unfortunately, in Europe, many politicians do not view the matter 
this way. Many Europeans have suggested that the Iran-Libya Sanctions 
Act was a political ploy, or a result of the recent American election 
campaign. Nothing can be further from the truth. U.S. sanctions against 
Iran and Libya are part of an ongoing effort by the United States 
Congress to fill gaps in U.S. policy. Congress, through its law-making 
powers, has passed legislation against investment in Iran and Libya and 
sanctions against countries that deal with Cuba, otherwise known as 
Helms-Burton. It is the prerogative of Congress to do so, and we must 
remember, that despite a reluctance to deal with the issue, the 
President did in fact sign both measures. We must also remember that a 
law is really only as good as its enforcement.
    Fortunately, the Administration has reached an agreement with the 
European Union regarding the implementation of the Helms-Burton Act and 
the Iran-Libya Sanctions Act. This agreement was accomplished due to 
the diligent work of Ambassador Stuart Eizenstat, Undersecretary of 
Commerce for International Trade, who negotiated this agreement. His 
commitment to easing relations between the U.S. and the EU is unending. 
His work on the issue of Holocaust victims assets in Swiss banks has 
also played a vital role in settling that problem. I am honored to work 
with him on both counts.
    The agreement, as it relates to the Iran-Libya Sanctions Act, is 
quite clear. It states,

        The U.S. will continue to work with the EU toward the 
        objectives of meeting the terms 1) for granting EU Member 
        States a waiver under Section 4.C of the Act with regard to 
        Iran, and 2) for granting companies from the EU waivers under 
        Section 9-C of the Act with regard to Libya.

    It should be clear that the terms in the law for granting a waiver, 
specifically with regard to Iran are very simple. If the country where 
the company to be sanctioned is situated, imposes substantial measures, 
including the imposition of economic sanctions, then a waiver can be 
granted. Any suggestion that the European Union should be granted a 
blanket waiver without following the stipulations of the Iran-Libya 
Sanctions Act is a mistake. In passing the legislation Congress 
intended for this law to be implemented in full. If blanket waivers are 
provided without just cause then only Iran will benefit.
    It comes down to the question of how far a nation will go and what 
tools it will use to defend itself. The United States as well as its 
allies today face a new kind of war. This is not the kind of war that 
comes with declarations of war by one nation upon another, but a 
covert, cowardly attack on the institutions that we all once thought 
were immune from attack.
    Twenty years ago, no one rightly thought that someone would try to 
blow up the World Trade Center, or blow up airliners full of innocent 
men, women, and children. Attacks today are indiscriminate and devoid 
of purpose. Even these acts are not without supporters and we know who 
provides aid to these faceless terrorists. We know who trains them, we 
know who supplies them, and we know who pays them.
    Supporters of the principle of ``dual containment'' argue that 
isolating Iran will only radicalize the regime. They argue that through 
the policy of dialogue we can moderate the behavior of this rogue 
regime. Yet, despite all of its criticism of our efforts, our allies 
have thus far been unable to offer an example in which Iran's support 
of terrorism has been lessened through talking to them.
    We must remember that the terrorists are against all that we stand 
for. No one is immune from attack, no one is safe. If our allies wish 
to deal with the devil, then so be it. Our allies can either be part of 
the problem, or part of the solution.

    Senator Brownback. Thank you very much, Senator D'Amato. We 
appreciate that statement.
    Let me ask you. I outlined five cases where weapons have 
been or precursor chemicals or ingredients to missile guidance 
systems have found their way to Iran from China and Russia and 
some other places as well and yet nothing has happened. The 
sanctions have not been imposed. What has been our failing to 
date? Why are these items still finding their way to a nation 
who is clearly considered a rogue regime and who is exporting, 
officially exporting terrorism, even as is found by outside 
courts? Why is that continuing to occur?
    Senator D'Amato. Mr. Chairman, I think it is because we 
have not pursued, not only this administration but past 
administrations, a policy which says that you cannot say one 
thing and then do another. You cannot say that you want to 
normalize your relations with us and work with us as a nation, 
whether it be China, whether it be Russia, and then undertake 
the very activities that undermine this principle by supplying 
various munitions and chemical weapons precursor materials that 
are necessary to Iran, that will be used in a manner--and they 
know it; the Russians know it, the Chinese government knows 
it--in a manner to destabilize and create tremendous problems 
throughout the world.
    Now, how do you approach this? Do you approach it by making 
public ultimatums? I do not think so. I think that would be a 
mistake, and I do not suggest that. But by gosh, behind the 
scenes when we are dealing with the Chinese and where they are 
racking up $47 to $50 billion a year surpluses in trading with 
us, we have the economic leverage to say to their leadership--
and I hope it has been done. Maybe the Vice President did it. I 
do not know. But I think at the very highest levels they have 
to be told: You cannot trade with us and work with us, as we 
would like to build a relationship of mutual respect, and then 
because you are going to receive a half a billion dollars in 
hard currency sell weapons technology to Iran; and if you do 
that you will be jeopardizing the mutuality of interests in 
terms of commerce, in terms of mutual respect, because you are 
imperiling our safety. You would not expect us to supply your 
enemies with materials that would be dangerous and threatening 
to you and to your people. We expect the same.
    It never happens. And what happens when we talk about doing 
something and using our vast power? My gosh, every single 
business group comes running in: Oh no, you will cost the 
American consumer money. Incredible, myopic.
    We have not done this for years. And indeed, not only do 
these groups come in and lobby, they lobby and just do business 
as if every--just do business with them and they are going to 
be nice and they are going to respect you. The fact that they 
are selling, again, a half a billion dollars here and a half a 
billion dollars there to the rogue nations of the kinds of 
materials that will cause death and destruction and destabilize 
this world, we just simply forget. It is on the altar of 
economic greed.
    Some of our own corporate boardrooms, the most wonderful, 
outstanding citizens of America who make all kinds of 
contributions--very little with their own money, generally from 
their own corporations--to every kind of wonderful event there 
is, they are the very people coming in and talking about, oh, 
we are worried about the consumer.
    Hell they are. They are just worried about their own 
profits. I think that is a heck of a thing. But that is 
democracy. You and I and the others have an obligation of 
standing up and going beyond that, and sometimes it means some 
of the interests that are in our own States and people that we 
know who have businesses, good and decent people, and get 
blinded because they want that business, they want those cheap 
goods that come in because they are selling them at great 
markups and they are making lots of money.
    You think they are really worried about the American 
consumer? That is a lot of nonsense.
    Senator Brownback. We treat it as too much of a secondary 
issue?
    Senator D'Amato. Oh, yes, totally. In other words, this is: 
So what? So they are selling a half a billion dollars a year of 
chemical weapons and/or missile systems or nuclear technology 
and, you know, we do not want to rock the boat.
    I have heard about what a great basket of opportunity it is 
and we should not do anything to imperil those trade relations. 
I have had friends come to me, tell me that: Do not rock the 
boat.
    Well, I think there comes a point in time when behind the 
scenes we have to say to them: Let me tell you, if you make 
these sales, if your generals who are running some of these 
plants both in Russia and in China are going to conduct this 
kind of surreptitious sale, some of it not so surreptitious, to 
these various countries, then you are going to imperil our 
normal relationship and we are going to stop the business 
intercourse between the two that normally flows.
    I do not think that that is threatening. That is just 
setting the record straight. That is protecting U.S. and world 
interests for our security. It seems to me that makes sense.
    Senator Brownback. I want to welcome to the committee 
Senator Robb, who is the ranking on this committee, has a vast 
amount of experience in the foreign relations field, one that I 
am delighted to serve with you on this committee, am looking 
forward to working with you, and I look forward to turning the 
mike over to Senator Robb.

 STATEMENT OF HON. CHARLES S. ROBB, U.S. SENATOR FROM VIRGINIA

    Senator Robb. Thank you, Mr. Chairman.
    I thank our colleague from New York for joining us today. 
He has never been one to hold back when he has some thoughts 
that are relevant to a particular question, and certainly this 
is one he has been very passionate about. There were several 
comments that he made today that could lead to an interesting 
followup, but I think, rather than keep our colleague here, 
knowing that he has other business--indeed, I have two other 
committees that are meeting as we meet here at the moment--I 
will defer those questions until the matter comes up on the 
floor of the Senate, where we may have opportunity to debate 
this or other policy, and I want to hear from both the 
administration panel and the other panel that follows. But I 
join you in thanking our colleague for sharing his views with 
us on this important topic today.
    Senator D'Amato. Thank you, Senator Robb.
    Thank you, Mr. Chairman.
    Senator Brownback. Thank you very much, Senator D'Amato.
    Our second panel will be Mr. David Welch, Acting Assistant 
Secretary of State for Near Eastern Affairs, and Mr. Robert J. 
Einhorn, Deputy Assistant Secretary of State for Proliferation 
from the administration.
    We are looking forward to a good dialog presentation. I 
think there have been a number of points made. I hope the two 
panelists, if at all possible, can address some of those points 
that are made, some of the questions that have been out there. 
I think it would be most--certainly to me most illuminating if 
you can address those items, because these are matters that 
come up frequently.
    We do have your written testimony. We can take that into 
the record. You can summarize it if you would like. I would 
hope you could address some of these cases that have come up.
    I know you both have a very difficult job, as Senator 
D'Amato was just pointing out about the difficulties that 
consecutive administrations have faced since 1979 dealing with 
Iran. This has not been an easy issue.
    I think also you know how strongly Congress has felt about 
this and the number of laws that we have passed and how 
frustrated we are that we do not seem to be making better 
progress.
    So Mr. Welch, the microphone is yours. We welcome you to 
this committee hearing. Thank you for coming.

 STATEMENT OF DAVID WELCH, ACTING ASSISTANT SECRETARY OF STATE 
                    FOR NEAR EASTERN AFFAIRS

    Mr. Welch. Thank you, Mr. Chairman. I am pleased to be one 
of your first witnesses in this new capacity for you. It is a 
rookie event for me, too, in front of the Senate Foreign 
Relations Committee, and I am glad you picked such an easy 
topic for us to work on today.
    If I might, I would like to take a few minutes to talk in a 
general way about our policy. I am going to take advantage of 
this opportunity because it is our first session together and I 
think, when seen in the context of our overall effort, you will 
discern a common purpose in what we are doing with respect to 
Iran and with some of the ideas and efforts made by Senator 
D'Amato.
    Iran in our view poses a significant threat in a region 
where we have vital national interests. Its policies have not 
changed for the better over the last 4 years. It still seeks to 
project its regional influence through a conventional military 
buildup and through the development of weapons of mass 
destruction and their means of delivery.
    We are particularly concerned by Iran's continued pursuit 
of nuclear technologies, chemical and biological weapons 
components, and production materials and missile technology. 
Iran's acquisition of ever more sophisticated missile 
technology from North Korea and China presents an increasing 
threat to our friends and to our own military presence in the 
Gulf.
    Let me say, though, that Iran's threat is not limited to 
the military arena. It seeks to expand its influence by 
promoting violence around the world. It has used terror to 
disrupt the Middle East peace process and against its own 
people. Iran seeks to gain influence through disaffected 
elements in neighboring countries and by promoting subversion 
of neighboring governments.
    It has supported terrorist activity in places as far away 
as South America to the Far East. Its use of terror recognizes 
neither allies nor frontiers, age nor sex, religion nor 
ethnicity.
    Not even Iran's own people are protected from its violence. 
Its human rights record is among the worst in the world. Iran's 
ethnic and religious minorities and women regularly feel the 
lash of Iran's repressive system. Its disrespect for the right 
of free expression is vividly demonstrated by the regime's 
continuing public offer of money for the murder of another 
country's citizen, Salman Rushdie, because of what he wrote.
    Others who dare stand for freedom of ideas, like Iranian 
writer Faraj Sarkuhi, also suffer for their courage. Iranian 
oppositionists face less public but equally dire threats. 1 
week ago, as you know, a German court found that the 
assassination of four Iranians of Kurdish extraction at the 
Mykonos restaurant in Berlin was ordered by the highest levels 
of the Iranian government. These murders are part of a broad 
pattern of state murder that has claimed the lives of 50 
Iranian dissidents since 1990. What more tangible evidence 
could I offer of Iran's willingness to use terror and violence 
in pursuit of state goals?
    As you know, we are also investigating an incident at the 
Al-Khobar apartment complex in Saudi Arabia. We have not 
reached any conclusions on that investigation. If the evidence 
were to demonstrate involvement by Iran or, for that matter, 
any other state, we will take appropriate action to ensure that 
justice prevails.
    What is the goal of U.S. policy on Iran? We seek to change 
Iranian behavior through economic and political pressure, while 
directly limiting Iranian capabilities. In the interim, we want 
to constrain the resources Iran has to pursue activities that 
threaten us and our allies. We seek neither to permanently 
isolate Iran nor to overthrow the Iranian regime. We do not 
object to Islamic government. We want Iran to abandon those 
policies that have made it an international pariah.
    Our approach includes nonproliferation and counterterrorism 
efforts combined with economic and political pressure. To 
combat global terrorism, we are developing a common agenda with 
our European allies based on P-8 counterterrorism measures.
    On nonproliferation, current legislation enables the U.S. 
to pursue our objectives toward Iran. International cooperation 
curtails, but has not eliminated, Iran's access to the 
technology and equipment of proliferation concern. Current 
sanctions covering the proliferation of nuclear, chemical, and 
biological weapons, missile equipment technology, advanced 
conventional weapons, and lethal military assistance to 
terrorist list countries allow us to punish those who ignore 
this international consensus. Nonetheless, some governments do 
indeed continue to assist Iran with its weapons of mass 
destruction and missile program.
    That is why we have combined our nonproliferation efforts 
with economic and political pressure. We want to demonstrate to 
Iran that its policies will not only fail, but will bring a 
significant cots to Iran's economic and political interests and 
to the wellbeing of its own people.
    Targeting weaknesses in Iran's economy, particularly its 
need for technology and foreign capital, our unilateral efforts 
have limited Iran's policy options. For example, as Senator 
D'Amato noted, Iran has had difficulty attracting foreign 
investment into its oil industry because of the threat of U.S. 
sanctions. Iran must therefore choose, in effect, between 
development of its resources and funding the very policies to 
which we object. Similarly, our success in limiting Iran's 
international influence and activity contrasts starkly with its 
desire to be a regional power.
    I have outlined to you our response to the threat posed by 
Iran. Now I would like to discuss how I believe we could be 
more effective. Our current legislative tools reach the limits 
of effective unilateral initiatives. We would be much more 
successful if we had a cooperative effort beyond 
counterterrorism and nonproliferation with our allies to use 
common political and economic clout to have a real impact on 
Iran.
    We have pressed our allies to adopt such an approach and to 
restrict Iran's access to foreign capital and technology. We 
seek a coordinated multilateral response that imposes clear 
consequences on Iran for its choices. What would that common 
approach look like? Steps taken on April 10 by the European 
Union, including the recall of Ambassadors, suspension of the 
so-called critical dialog, expulsion of certain Iranian 
intelligence operatives, these are solid initial steps, 
Senator.
    A common strategy that brings us closer together with 
Europe would obviously have a greater impact. It would make 
clear to Iran that support for terrorist groups is 
unacceptable, period. We must be perfectly clear on that point: 
No support for terrorism for any reason, at any time, in any 
place.
    We must take an equally firm stand on proliferation of 
weapons of mass destruction. While the world community is 
working to reduce and eliminate these weapons, we cannot remain 
silent while Iran develops its own capabilities.
    The Europeans have said that they will meet April 29 to 
consider additional measures. We hope that the European Union's 
decision will move our approaches closer together by including 
measures that pose a tangible cost to Iran.
    We want to create an impetus for Iran to change. What do I 
mean by meaningful change? Not dialog for its own sake. Efforts 
to engage Iran have not achieved any notable successes. Has 
dialog stopped assassinations? No. Has dialog ended Iranian-
supported terrorism? No. Has dialog stopped Iran's use of its 
embassies to coordinate arms procurement and terrorist action? 
No. Has dialog even succeeded in limiting the threat against 
Salman Rushdie? No. Current approaches have not conferred 
immunity from terrorism nor caused Iran to change.
    Iran's revolution continues to evolve. Periodically there 
are internal voices that are raised which criticize the 
regime's policies, internal and external, that put at risk 
Iran's own development and stability. Unfortunately, those 
voices are not being given a serious opportunity for expression 
in next month's Presidential election in Iran. The candidates 
in that election share a common investment in the status quo 
and Iran's unacceptable policies.
    As long as Iran continues to seek to project Iranian power, 
violence, and terror in a way that threatens our interests in 
international stability, we will work to isolate Iran and to 
limit that threat. We will use all the tools at our disposal to 
protect our friends and our interests, responding as we need to 
to Iranian actions.
    We call on our allies to join us in applying a real cost to 
Iran. We hope that U.S. leadership and the growing realization 
of European nations that Iran's behavior is unacceptable will 
provide us an opportunity to work more closely together. We are 
confident, however, that Iran will not prevail and that the 
Iranian people will in their own interests eventually compel 
their revolution to evolve and yield a regime that respects 
international standards of behavior in the interest of all 
Iranians and their government.
    My colleague Bob Einhorn, who represents our Bureau of 
Political-Military Affairs and is one of the State Department's 
preeminent experts on nonproliferation issues, has some 
comments about how the nonproliferation concerns apply in the 
case of Iran.
    Senator Brownback. Thank you very much, Mr. Welch, for your 
testimony. I look forward to some discussion of our statements 
and some questions that I have.
    Mr. Einhorn, welcome to the committee. I noted your 
testimony last week, I believe in front of the Government 
Affairs Subcommittee, on this same topic. We look forward to 
your discussion here today.

 STATEMENT OF ROBERT J. EINHORN, DEPUTY ASSISTANT SECRETARY OF 
              STATE FOR POLITICAL-MILITARY AFFAIRS

    Mr. Einhorn. Thank you very much, Mr. Chairman, and thank 
you for the opportunity to testify before your subcommittee.
    Despite its avowed support for nonproliferation and 
disarmament, Iran is actually seeking the full range of weapons 
of mass destruction, missile delivery systems, as well as 
advanced conventional weapons. It has a clandestine nuclear 
weapons development program that has sought to procure 
facilities and technologies that have no plausible 
justification in Iran's declared nuclear energy plans. Its 
chemical warfare program is among the largest in the developing 
world, producing some 1,000 tons of CW agent per year. It has 
placed a high priority on acquiring biological weapons and is 
capable of producing many different kinds of BW agent. It has 
imported Scud missiles as well as components and technology 
that would help them produce longer range missiles 
indigenously, and it is buying conventional arms to give it the 
means to intimidate its neighbors and threaten commercial and 
military navigation in the Gulf.
    Impeding Iran's acquisition of these capabilities has been 
one of the Clinton Administration's highest priorities. We have 
waged a vigorous campaign both bilaterally and multilaterally 
to sensitize supplier governments to the growing threat and to 
persuade them to adopt effective measures to ensure that 
neither they nor exporters operating under their jurisdiction 
will assist Iran's programs.
    In the nuclear area, we have successfully urged all but a 
very few suppliers not to engage in any nuclear cooperation 
with Iran. At the highest levels we have pressed Russia to join 
this near-consensus. While Russia continues to pursue 
construction of the Bushehr nuclear power reactor, it has 
agreed to limit significantly the scope of its nuclear 
cooperation with Iran and in particular will not meet Iran's 
request for a gas centrifuge enrichment plant or a plutonium-
producing heavy water research reactor. Nonetheless, we 
continue to urge Russia to forego all nuclear cooperation with 
Iran.
    We urge the same of China. So far China has suspended its 
sale of two power reactors to Iran, probably because of siting 
and financing difficulties. Whatever the reason, it is a 
positive step, and we will continue to call on Chinese leaders 
to curtail nuclear cooperation with Iran.
    Multilaterally, the Nuclear Suppliers Group, at U.S. 
initiative, put in place in 1992 a regime to control nuclear-
related dual-use exports, a regime which has substantially 
increased the obstacles to Iran acquiring the equipment and 
technology it seeks. Also, learning from the Iraq experience, 
the IAEA, the International Atomic Energy Agency based in 
Vienna, next month is expected to adopt more rigorous 
safeguarding procedures aimed at detecting undeclared nuclear 
activities.
    Cumulatively, we believe the steps we have taken are real 
impediments to Iran's nuclear weapons aspirations. They have 
significantly slowed the Iranian program and posed obstacles to 
its ultimate success.
    In the chemical area, the U.S.-supported tightening of the 
Australia Group's controls over chemical-related exports has 
largely closed off European chemical and equipment companies as 
a source of supply and forced Iran to look elsewhere, 
particularly to China. The Chemical Weapons Convention will 
also play a major role. It will outlaw any assistance to Iran's 
CW program. If Iran joins the CWC, it will be subject to 
challenge inspections. If it does not join, it will be subject 
to sanctions and political isolation.
    We are deeply concerned that various Chinese entities have 
transferred dual-use chemicals, production equipment, and 
production technology to Iran, which we expect will use them 
for its CW program. We have urged Chinese leaders to take 
strong steps to prevent these entities from assisting Iran's 
program and to strengthen China's still inadequate export 
control system. We have also told them that we are actively 
examining the transactions of which we are aware, to determine 
whether they meet the requirements of our sanctions law.
    In the missile area, our continuing efforts to strengthen 
the Missile Technology Control Regime have effectively denied 
Iran's access to most of the world's leading producers of 
missile technology. We are extremely concerned, however, by 
North Korea's supply of Scud missiles and Scud-related 
technology to Iran, as well as by reports of missile-related 
cooperation between Iran and Russian and Chinese entities. We 
will be meeting bilaterally with North Koreans next month to 
discuss their missile exports and will continue to press with 
Russia and China at the highest levels to avoid any 
contribution to Iran's long-range ground to ground missile 
program.
    We are also disturbed by Iran's efforts to buildup its 
conventional force capabilities. We have persuaded the other 32 
members of the Wassenaar Arrangement to join us in agreeing not 
to transfer armaments to Iran and other countries of concern. 
In connection with Wassenaar, President Yeltsin publicly 
pledged in 1994 that Russia would not enter into new arms 
contracts with Iran and that it would also close out existing 
contracts within a few years.
    Any transfers to Iran of advanced anti-aircraft missile 
systems, such as those in the S-300 series, would violate 
Russia's commitments. We have raised the issue of reported 
transfers of such missiles with the most senior officials of 
the Russian Government and have received firm assurances that 
such transfers would not occur. Indeed, we have not determined 
that any such transfers have taken place. But we will monitor 
this issue very carefully.
    We have also expressed strong concerns to Chinese leaders 
about the transfer to Iran of C-802 anti-ship cruise missiles. 
These missiles add to Iran's maritime advantage over other Gulf 
states, put commercial shipping at risk, and pose a direct 
threat to U.S. forces. We do not believe the C-802 transfers to 
date meet the standards for imposing sanctions under our law, 
but we are continuing to monitor this situation as well for any 
additional transfers that might cross the threshold of 
sanctionable activity.
    Mr. Chairman, we have used a wide range of policy tools to 
promote our goal of impeding Iran's acquisition of weapons of 
mass destruction and other dangerous capabilities. Among those 
tools are multilateral export control regimes like the Nuclear 
Suppliers Group, international agreements like the Chemical 
Weapons Convention, and active bilateral diplomacy. Another 
tool we have used is U.S. nonproliferation sanctions laws. We 
have sanctioned Iran twice for missile-related imports and 
imposed sanctions on entities providing assistance to Iran's CW 
program.
    The threat or imposition of sanctions can under certain 
circumstances be an effective complement to other 
nonproliferation policies, but they are not a substitute. 
Indeed, with all the laws currently on the books, we believe we 
have reached the limits of effective unilateral initiatives in 
this regard.
    What is most needed is close cooperation among the world's 
leading suppliers of sensitive goods and technologies and other 
interested states. Fortunately, we have already managed to 
build wide international support for the need to constrain 
Iran's programs. Even in the cases where we have some 
differences, such as with China and Russia, we believe there is 
fundamental agreement on the need to prevent Iran from further 
development of weapons of mass destruction.
    We need to continue building on this foundation.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Welch and Mr. Einhorn 
follows:]

          Prepared Statement of David Welch and Robert Einhorn

    Mr. Chairman, and Members of the Subcommittee, I would like to 
thank you for the opportunity to testify before you today on an issue 
of vital national interest, U.S. policy on Iran. I want to review with 
you Iran's pattern of unacceptable behavior, our response to that 
behavior, our work to bring our friends and allies into closer harmony 
with that response, and some prospects for the future.
    Iran poses a significant threat in a region where we have vital 
national interests. Its policies have not changed for the better over 
the last four years. The Iranian regime still seeks to project its 
regional influence through a conventional military build-up and through 
the development of weapons of mass destruction and their means of 
delivery. We are particularly concerned by Iran's continued pursuit of 
nuclear technologies, chemical and biological weapons components and 
production materials and missile technology. Iran's acquisition of ever 
more sophisticated missile technology from North Korea and China 
presents an increasing threat to our friends and our military presence 
in the Gulf.
    Iran's threat is not limited to the military arena. Iran seeks to 
expand its influence by promoting violence around the world. Iran has 
used terror to disrupt the Middle East Peace Process. Iran seeks to 
gain influence through disaffected elements in neighboring countries 
and by promoting subversion of neighboring governments. It has 
supported terrorist activity from South America to the Far East. Iran's 
use of terror recognizes neither allies nor frontiers, age nor sex, 
religion nor ethnicity.
    Not even Iran's own people are protected from its violence. Iran's 
human rights record is among the worst in the world. Iran's ethnic and 
religious minorities and women regularly feel the lash of Iran's 
repressive system. Its disrespect for the right to free expression is 
vividly demonstrated by the regime's public offer of money for the 
murder of another country's citizen, Salman Rushdie, because of what he 
wrote. Others who dare stand for freedom of ideas, like Iranian writer 
Faraj Sarkuhi, also suffer for their courage.
    Iranian oppositionists face less public, but equally dire threats. 
One week ago, a German court found that the assassination of four 
Iranian Kurds at the Mykonos restaurant in Berlin was ordered by the 
highest levels of the Iranian government. These murders were part of a 
broad pattern of state murder that has claimed the lives of some 50 
Iranian dissidents since 1990. What more tangible proof could I offer 
of Iran's willingness to use terror and violence in pursuit of state 
goals?
    Meanwhile, the Al-Khobar investigation continues; we have not yet 
reached any conclusions. If the evidence demonstrates involvement by 
Iran or any other state, we will take appropriate action to ensure that 
justice prevails.
    What is the goal of U.S. policy on Iran? We seek to change Iranian 
behavior through economic and political pressure while directly 
limiting Iranian capabilities. In the interim, we seek to constrain the 
resources Iran has to pursue activities that threaten us and our 
allies. We seek neither to permanently isolate Iran, nor to overthrow 
the Iranian regime. We do not object to Islamic government. We want 
Iran to abandon those policies which have made it an international 
pariah. To achieve that, we are, and always have been, willing to have 
a dialogue with an authorized representative of the Iranian government.
    Our approach includes counter terrorism and non-proliferation 
efforts combined with economic and political pressure. To combat global 
terrorism, we are developing a common agenda with our European allies 
based on the P-8 counter-terrorism measures.
    In the non-proliferation arena, Iran has demonstrated a determined 
effort to develop and acquire weapons of mass destruction (WMD), 
ballistic missiles capable of delivering them and dangerous advanced 
conventional weapons. In the nuclear arena, Iran has dedicated civilian 
and military organizations that are acquiring nuclear facilities and 
technologies that are inconsistent with a purely peaceful nuclear 
program. Iran's chemical warfare program is among the largest in the 
Third World, producing some 1,000 tons of CW agent per year, on top of 
already existing stockpiles of CW agents. In the missile area, Iran has 
a vigorous program to acquire completed ballistic missile systems as 
well as the goods and technology that would allow Tehran to develop an 
indigenous missile production capability.
    Clearly, Iran poses one of the greatest proliferation threats. The 
U.S. has pursued a vigorous international campaign to prevent the 
transfer to Iran of facilities and technologies that could further that 
country's efforts to develop WMD and their means of delivery as well as 
advanced conventional weapons. Preventing such development remains one 
of our top foreign policy priorities. We have worked closely with other 
governments to sensitize them to the scope of the problem and we have 
often cooperated with supplier governments to ensure that exporters 
operating within their borders do not unwittingly cooperate with Iran's 
WMD and missile programs.
    The U.S. has been active in all the multilateral nonproliferation 
regimes to make other states aware of the nature of Iran's procurement 
practices as well as to strengthen international export controls. A 
number of changes have been made in the way these regimes operate as a 
result. The Nuclear Suppliers Group (NSG), for example, has adopted a 
``Non-proliferation Principle'' calling on suppliers to authorize 
transfers of nuclear components and technology ``only when they are 
satisfied that the transfers would not contribute to the proliferation 
of nuclear weapons or other nuclear explosive devices.'' In other 
words, suppliers have agreed to exercise caution in considering 
transfers to states such as Iran even though they are parties to the 
NPT with full-scope IAEA safeguards. The U.S. has similarly worked 
within the Australia Group and the Missile Technology Control Regime 
and we are actively opposing efforts by Iran to delegitimize Australia 
Group export controls.
    The U.S. has addressed the issue of conventional transfers to Iran 
primarily in the context of the Wassenaar Arrangement where thirty-
three countries, including Russia, have agreed not to transfer 
conventional armaments and sensitive dual-use technologies to countries 
whose behavior is a cause for serious concern. Iran is one such 
country. Further to Russia's participation in Wassenaar, President 
Yeltsin publicly pledged in 1994 that Russia would not enter into new 
arms contracts with Iran and would close out existing contracts within 
a few years. The details of that commitment were finalized in 1995 
during meetings between Vice President Gore and Prime Minister 
Chernomyrdin.
    Any transfers to Iran of advanced anti-aircraft missile systems 
such as those in the S-300 series, as has been reported in the press, 
would provide Iran with new dangerous capabilities and would violate 
the 1995 agreement. We have raised the subject of reported transfers of 
missiles from Russia to Iran at the highest levels of the Russian 
government and have received firm assurances that such transfers would 
not occur. We continue to monitor this closely.
    We remain concerned by the transfer from China to Iran of C-802 
anti-ship cruise missiles. Such missiles, whether installed on land or 
on patrol boats, will add to the maritime advantage that Iran already 
enjoys over other Gulf states and will put commercial shipping in the 
Gulf at risk. Especially troubling is that these cruise missiles pose 
new, direct threats to deployed U.S. forces. We have concluded that the 
C-802 transfers that have occurred so far do not meet the standards 
defined in the Iran-Iraq Arms Non-proliferation Act and have not, 
therefore, imposed sanctions on China because of the sale. Nonetheless, 
we are very concerned about these transfers, and will continue to 
monitor Chinese and Iranian activity for any additional transfers that 
might cross the threshold of sanctionable activity.
    The U.S. is working to strengthen other global agreements as well. 
For instance, we have worked closely with the IAEA in developing the 
so-called 93+2 enhanced safeguards program which will give the IAEA an 
increased ability to detect undeclared nuclear activities. We expect 
the IAEA Board of Governors to approve that program in May. The 
Chemical Weapons Convention will provide important new tools to impede 
Iran's CW activities. It will outlaw any assistance to anyone's CW 
program and either subject Iran to challenge inspections if it joins 
the CWC or subject it to sanctions and political isolation if it does 
not. On the Biological Weapons Convention, the U.S. is working with 
other states on a protocol that will provide transparency and build 
confidence in the BWC's provisions.
    In the bilateral context, we approached a number of supplier 
governments when we had information to suggest that companies that 
operate within their borders might be exporting technologies, equipment 
or materials that would contribute to Iran's WMD and missile programs. 
We have been particularly active in the nuclear area. We have found 
most supplier governments to be responsive to our approaches and our 
actions have prevented the transfer of a number of items to Iran that 
we believed were to be used in WMD and missile development. Most have 
adopted policies of not cooperating with Iran's WMD and missile 
programs. Most have also opted not to pursue any peaceful nuclear 
cooperation with Iran, with Russia and China being notable exceptions, 
because of the risk that such cooperation would be misused to advance 
Iran's nuclear weapons program.
    The U.S. has pursued a senior level dialogue with Russian and 
Chinese leaders on this issue. Vice President Gore and Russian Prime 
Minister Chernomyrdin have discussed in detail on a number of occasions 
Russia's planned nuclear cooperation with Iran. Presidents Clinton and 
Yeltsin have also dealt with the issue on several occasions, most 
recently at the Helsinki Summit. While Russia continues to pursue 
construction of the Bushehr nuclear power reactor, Russian officials 
have agreed to limit the scope of nuclear cooperation with Iran. We 
will, however, continue to make clear to Russian officials our 
opposition to any nuclear cooperation with Iran.
    The U.S. has also engaged in a dialogue with Chinese leaders both 
at the senior political and experts level and urged them to curtail 
nuclear cooperation with Iran. While there continue to be differences 
between our governments on the issue of nuclear cooperation with Iran, 
we can point to some successes such as China's decision to terminate 
negotiation for the supply to Iran of two power reactors, probably for 
siting and financing reasons. Whatever the reason, we consider this to 
be a positive step. China is currently seeking to put in place a 
national nuclear export control regime that will allow China to have 
the necessary political review of sensitive nuclear-related exports to 
countries of concern. We have pressed Chinese officials to put in place 
this revamped regime as quickly as possible.
    On missile-related exports, we have, over the years, worked 
successfully to bring Russia into the MTCR. We are, of course, 
concerned by reports of Russia-Iran missile cooperation. We have 
pursued this issue at the highest levels of the Russian government and 
will continue to do so. Similarly, we have frequently raised with 
Chinese officials information we have received about missile-related 
cooperation by Chinese entities with Iran and urged Beijing to take 
effective steps to avoid any Chinese contribution to Iran's missile 
programs.
    Because of Iran's determined effort to develop WMD and their means 
of delivery and their continuing support for terrorism, we have 
combined non-proliferation and anti-terrorism efforts with economic and 
political pressure. We seek to demonstrate to Iran that its policies 
will not only fail but will bring a significant cost to Iran's economic 
and political interests and to the well-being of its people. Targeting 
weaknesses in Iran's economy, particularly its need for technology and 
foreign capital, our unilateral efforts have limited Iran's policy 
options. For example, Iran has had difficulty attracting foreign 
investment into its oil industry in part due to the threat of U.S. 
sanctions, enacted by Congress last year in the Iran and Libya 
Sanctions Act. Iran must, therefore, choose between development and 
funding the very policies to which we object. Similarly, our success in 
limiting Iran's international influence and activity contrasts starkly 
with its desire to be a leading regional power.
    I've outlined for you our response to the threat posed by Iran. 
Now, I'd like to discuss how we could be more effective. Our current 
tools--economic sanctions such as the Iran and Libya Sanctions Act and 
the President's embargo, the missile and CBW sanctions laws, the Iran-
Iraq Nonproliferation Act, the sanctions for lethal military assistance 
to terrorist-list countries and the many nuclear sanctions laws--reach 
the limits of effective unilateral initiatives. The U.S. has already 
imposed sanctions on Iran for transfers in the WMD and missile areas. 
We sanctioned Iran for missile-related transfers from North Korea and 
we have imposed sanctions on entities providing assistance to its CW 
program. The fact that very few supplier governments cooperate with 
Iran's WMD and missile programs is testament to the strength of our 
efforts and to the fact that most governments have developed a common 
policy on the need to prevent the further development of these 
programs. Even in cases where we have some differences, such as with 
China and Russia, we believe there is fundamental agreement on the need 
to prevent Iran from further WMD development.
    We would be much more successful if we had a cooperative effort, 
beyond counter-terrorism and non-proliferation, with our allies to use 
our common political and economic clout to have a real tangible impact 
on Iran. We have pressed our allies to adopt such an approach and to 
restrict Iran's access to foreign capital and technology. We seek a 
coordinated, multilateral response that imposes clear consequences on 
Iran for its choices.
    What would a successful common approach look like? The steps taken 
on April 10, the recall of EU ambassadors, suspension of the Critical 
Dialogue, expulsion of certain Iranian intelligence operatives, are 
solid initial steps. A common strategy that brings us closer together 
would have a greater impact. It would make clear to Iran that support 
for terrorist groups is unacceptable, period. We must be perfectly 
clear on that point. No support for terrorism for any reason, at any 
time, in any country. We must take an equally firm stand on 
proliferation of weapons of mass destruction. While the world community 
is working to reduce and eliminate these horrible weapons, we can not 
remain silent while Iran develops its capabilities.
    The Europeans have said they will meet April 29 to consider 
additional measures. We hope that the EU's decision will move our 
approach closer together by including measures that pose a tangible 
cost on Iran. We want to create an impetus for Iran to change.
    What do I mean by meaningful change? I don't mean dialogue for its 
own sake. Efforts to engage Iran have not achieved any notable 
successes. Has dialogue stopped assassinations in Europe? No. Has 
dialogue ended Iranian supported terrorism? No. Has dialogue stopped 
Iran's use of its embassies to coordinate arms procurement and 
terrorist action? No. Has dialogue even succeeded in lifting the threat 
against Salman Rushdie? Again, no. Simple engagement has not conferred 
immunity from terrorism, nor caused Iran to change.
    Iran's revolution continues to evolve. Periodically, internal 
voices are raised to criticize the regime's internal and external 
policies that put at risk Iran's own development and stability. 
Unfortunately, those voices are not being given a serious opportunity 
for expression in next month's presidential election. The candidates in 
that election share a common investment in the status quo and its 
unacceptable policies.
    As long as Tehran continues to seek to project Iranian power, 
violence and terror in a way that threatens our interests and 
international stability, the U.S. will work to isolate Iran and limit 
that threat. We will use all of the tools at our disposal to protect 
our friends and our interests, responding forcefully to Iranian 
actions.
    We call on our allies to join us in applying a real cost to Iran 
for its policies. We hope that U.S. leadership and the growing 
realization of European nations that Iran's murderous behavior is 
unacceptable will provide an opportunity for us to work more closely 
together. We are confident that Iran will not prevail and that the 
Iranian people will, in their own interests, force their revolution to 
evolve and yield a regime that respects international standards of 
behavior in the interests of all Iranians and their regime.

    Senator Brownback. Thank you, Mr. Einhorn. We appreciate 
your testimony.
    Senator Robb, if you would not mind, I thought what we 
could do is 7 minutes each and we will bounce back and forth on 
that until either you are exhausted or it is time to move on.
    We have got a series of questions, if I could, Mr. Welch. 
So if we can get the time clock and make sure of the timing.
    Mr. Welch, as you look around the world would you say that 
Iran as a nation is our No. 1 security threat presently to this 
Nation and to our interests, or is there another country that 
you would deem more of a present security threat than the 
Iranians are?
    Mr. Welch. I would not want too many more to join those 
ranks, but I would see Iran as a substantial security threat to 
the United States, given the interests that we have in the 
immediate neighborhood of Iran, in the Gulf in particular, but 
also given the fervor by which they pursue their own perceived 
national interests, which takes them further afield than the 
Gulf, both practically and politically.
    To use a political example as well as a practical one, 
consider their position on the peace process. The leadership of 
Iran has in effect targeted the peace process both in political 
terms by its own actions in denouncing almost anything positive 
that goes on and supporting almost anything negative that goes 
on, and by practical steps, by its allegiance and support of, 
allegiance with and support of groups that themselves conduct 
actions of violence and terror against those involved in the 
peace process.
    So while I do have responsibility for a couple of other 
places that fall into the category of rogue states, Iran is 
certainly one that we regard as a very, very important national 
security threat and a serious long-term one as well. I think 
that is a judgment that many of our allies in the region and 
outside it share.
    Senator Brownback. So you are saying it may not be the only 
one, but it is certainly in the class A category as far as our 
most difficult security threats we presently have around the 
entire world?
    Mr. Welch. Graduated from class A to the pro leagues, yes.
    Senator Brownback. I would judge that as well, it seems to 
me. So what is so troubling to me, as I raised a number of 
examples--and even you can go to this Wednesday's Washington 
Times, as I did: ``Russia sells missiles to Iran.'' If they are 
in the pro leagues for our difficult security interests that we 
have, why are we not taking even further steps to try to limit 
them, whether it is in the specifics of the missile sale or, if 
you can enlighten me that these are not actually occurring, we 
have additional sanctions that you do have available to use? 
Why are we not stepping it up?
    Mr. Welch. Senator, let me take a stab at this and then ask 
Bob to comment about the specifics raised by, among other 
things, that newspaper article.
    First, we agree this ought to be a priority foreign policy 
concern of the United States. We think that in very real terms 
this administration and those that preceded it have 
demonstrated that Iran is a very fundamental concern of ours. 
We have in unilateral sanctions and in unilateral policy 
probably the most robust and vigorous effort against Iran's 
behavior of any nation in the world.
    We are also seeking to expand that in both the 
nonproliferation and other areas, by reaching greater areas of 
common agreement with our allies that will enable us to target 
those behaviors that are specifically of concern to us. We have 
in some cases chosen to extend our unilateral reach. The Iran-
Libya Sanctions Act is an excellent example of that. The 
administration worked very closely with the House and Senate in 
order to forge a consensus behind this measure. It is a 
powerful deterrent to foreign investment in Iran's oil and gas 
sector. That in turn denies Iran the ability to get resources 
that it can use for some of the things that we find 
problematic.
    While it is a new piece of legislation, I think Senator 
D'Amato is absolutely right in saying that it seems to be 
working, that those who are attracted to the idea of investment 
in Iran's petroleum sector are having second thoughts about 
doing that as a result.
    We need to go beyond that. We would like further economic 
and political steps by our friends.
    Senator Brownback. Let us talk about ones that we can do. I 
do not mean to interrupt, but I want to get to this point if I 
could. We have aid that we give to Russia. They are providing 
nuclear reactors into that region. According to this and other 
articles, they are selling missiles into that region. We could 
step up pressure on those suppliers of these sort of weaponry, 
whether conventional or unconventional, to the Iranians. And we 
are not.
    Mr. Einhorn. Mr. Chairman, could I comment on that?
    Senator Brownback. Please, because I want to get on that 
point toward the suppliers, because we have done a lot toward 
Iran itself, but we are not getting at the people getting the 
items into Iran.
    Mr. Einhorn. First of all, you cited the newspaper story. 
As I mentioned in my statement, we have not concluded that any 
of these transactions have taken place, these transfers of 
advanced missiles have taken place. But we need to watch that 
very carefully.
    But on your general point, the suggestion you make I think 
is that because we have not invoked sanctions in all of these 
cases or even in many of these cases we are not pursuing 
conscientiously and vigorously a nonproliferation policy. In my 
view the premise of that question puts too much reliance, 
expects too much of our sanctions laws. Our sanctions laws have 
a variety of very specific requirements that have to be met in 
order for sanctions to be triggered. They are very technical 
and they are very detailed.
    One, for example, in the chemical weapons sanctions law is 
that the exporting entity needs to know, to be conscious that 
its export is going to a chemical weapons program. Now, what 
happens is that a lot of these chemical weapon aspiring states 
use front companies and intermediaries, and it may be very 
difficult for us to know whether the exporter in fact was 
knowledgeable about the destination. So we have to look at that 
very carefully, examine it very carefully.
    So the requirements of the sanctions law may not be 
triggered even when we know that a worrisome transaction has 
taken place.
    Now, that does not mean we do not take action. Because we 
are aware of such transactions and their destabilizing impact, 
we will take very vigorous action, and we have even without 
invoking sanctions. So sanctions are not synonymous with an 
effective nonproliferation policy.
    In terms of, you mentioned the Russia-Iran transfer of a 
power reactor. This has been one of our highest priorities 
since 1993. This has been dealt with by President Clinton with 
President Yeltsin, Vice President Gore with Prime Minister 
Chernomyrdin. It is a constant topic in our discussions, and we 
have put a lot of pressure on Russia.
    As a result, Russia has constrained significantly the scope 
of that transaction and it has canceled the transfer of some 
very sensitive technologies, like a gas centrifuge enrichment 
plant. It has cut it way back, and it is because of the effort 
that we have put into this.
    I can go down the list, but we are concerned about these 
transfers and we put a lot of effort into persuading suppliers 
not to make them.
    Senator Brownback. I appreciate that, but I could also go 
down the list of items that have made their way into Iran and 
have, so that this has not worked today.
    Senator Robb, and I look forward to some additional 
questions.
    Senator Robb. Thank you, Mr. Chairman. You made reference 
to an article today in the Washington Times. I am going to 
start with a reference to one that appeared in the Washington 
Post by Jim Hoagland, who frequently writes on issues of this 
sort, and it is a particularly provocative piece, entitled 
``Iran, Murder by Proxy,'' in today's Washington Post that I am 
sure both of you have seen.
    I take advantage of this opportunity because, particularly 
looking directly behind Mr. Welch, I see a former DCI and, 
since I serve also on the Intelligence and Armed Services 
Committees, I do not have to even take a chance on referring to 
any matters that would not be appropriate. Some of the 
questions, frankly, that I would like to ask would be more 
appropriate for closed sessions. But a couple have come to mind 
immediately.
    If, as Mr. Hoagland writes in this morning's Washington 
Post, there are, quoting him, ``emerging indications'' that 
Iran was behind the Khobar Towers bombing, and if this 
characterization is correct, murder by proxy or something along 
those lines--and I would say, having just returned from the 
region and met with a number of officials--I will not be more 
specific because I do not know how specific they wanted to be 
with some of their comments, but certainly, the comments that I 
received in the country where it happened in particular were 
not inconsistent with some of the things in this particular 
article--the question I have for you is: Are retaliatory 
military strikes against terrorist targets inside Iran 
appropriate, using as the premise the article that appeared in 
today's Washington Post?
    Mr. Welch. Senator, on this one I am going to have to 
apologize. I am in a different position in answering your 
question than you are in asking it.
    Senator Robb. I understand the difference. And I am not 
asking you, incidentally, for targeting lists or intentions. I 
am simply asking a broader question, about whether or not that 
is an--an--appropriate response if the predicate is satisfied.
    Mr. Welch. Setting aside for a moment the predicate, and my 
answer will have no reference to that, in general were we 
confronted with a situation of this sort, where an action has 
been taken against Americans, official or unofficial, we have a 
range of options to respond. We take a look at all those things 
in such circumstances. None are discarded a priori or accepted 
a priori. We do not rule anything in or anything out. That is 
our general response.
    With respect specifically to the incident in question, I am 
obliged to say, as I did in my prepared testimony, knowing that 
this question might come up, that this is a matter that is 
still under investigation. We have not reached any conclusions 
yet. But when we do we will take an appropriate action.
    Senator Robb. Again without committing you to a particular 
response, and given the fact that there is still some 
uncertainty, at least in terms of the official position of the 
United States with respect to the cause or the perpetrators of 
this particular action, the question I would ask you has to do 
with what you think the reaction of such an action on the part 
of the United States might be within the Arab world.
    Mr. Welch. I think that is a difficult hypothetical 
question to answer, Senator. A lot depends on what provoked our 
response, the nature of our response.
    Senator Robb. Well, again I am using the provocation as 
some clear finding that indeed this was, using the author's 
terminology, ``murder by proxy'' that was carried out by the 
Iranian government.
    Mr. Welch. You are asking me a question that, because it is 
hypothetical and on a sensitive subject, I am simply not 
prepared to go into in open session. I would like to be able to 
talk to you about that and we have other ways we can do that.
    Senator Robb. Let me just ask another question. I realize 
these are sensitive and I have got others that I was thinking 
about asking that I have decided not to, so you can imagine 
what I am not going to put to you at this point.
    I will ask another question, though, that probably falls in 
the same general category, and I cannot help but noting 
editorially a smile on the face of the former DCI, that he is 
glad that you are in the seat this time and he is not with 
respect to any official response.
    In that same article, reference is made to the possibility 
of an idea that has been circulating in some circles about 
extending the naval blockade that is now in force against Iraq 
to cover Iran as well. The question: Is that logical? Is it 
feasible in your judgment?
    Mr. Welch. Again, setting aside that this is a matter that 
remains under investigation, to answer the kinds of 
hypothetical questions that you are asking, I am simply not 
comfortable doing that in public, in an open session.
    We have a variety of tools that we can use in these 
situations. We are not ruling any of them in, any of them out.
    Senator Robb. Let me move to a different area then that 
might be easier to deal with. Moscow pledged during past 
meetings of the Gore-Chernomyrdin Commission that it would 
cease further arms sales to Iran after current contracts were 
fulfilled in 1999. Mr. Einhorn, I believe you made reference to 
the fact that Russia has transferred SS-4 missile technology to 
Iran.
    My question is, if that is the case, would not that be a 
violation of the U.S.-Soviet INF Treaty and the MTCR which 
Moscow has agreed to abide by?
    Mr. Einhorn. Senator Robb, I alluded to the reports that we 
have both seen about possible cooperation on the SS-4-related 
technology. I cannot comment on that. This is difficult in open 
session, but we are concerned about the point.
    Senator Robb. The only question I said is if. If that is 
true, would not that be a violation? I am not asking you 
whether it is true, but I am just asking for an interpretation 
of the agreements.
    Mr. Einhorn. The MTCR--Russia's MTCR obligations would 
prohibit--Russia's MTCR's obligations would indicate that they 
have to exert extreme caution in dealing with items that are on 
the MTCR list. SS-4 components would be on the MTCR list. 
Whether they would be so-called Category I or Category II 
items, you would have to know what items you are talking about.
    In the case of Category I items or Category I technology, 
MTCR says there would be a presumption to deny such exports. So 
it is very difficult to talk about this in the abstract. It 
depends. You need to know what kind of technology, what kind of 
items may have been transferred. But as I say, we are concerned 
about these reports, and the reports apply not just to SS-4-
related technology, but other kinds of missile equipment and 
technology, and we are examining them and we are approaching 
Russia leaders at the highest levels.
    Obviously, if such reports were to be true there would be 
very real concern, because they would add to Iran's ability to 
produce long-range ground to ground missiles indigenously. So 
we are following this very carefully.
    Senator Robb. Mr. Chairman, my time is expired. I thank 
both of our witnesses for their circumspect and diplomatic 
responses.
    Senator Brownback. I have a few more questions, and if you 
have some we will try that as well.
    Mr. Einhorn, I want to be very specific on one question. If 
C-802 transfers do not meet the standards defined in the Iran-
Iraq Proliferation Act, Nonproliferation Act, would you support 
an amendment to that Act that would change the standard for 
imposition of those sanctions?
    Mr. Einhorn. Mr. Chairman, I am not suggesting any change 
in the law. I am just saying that the standard for sanction 
ability at this time has not been met in our view. The standard 
is destabilizing numbers and types, does the transfer so far 
constitute a destabilizing number and type? And we say so far 
no, but we will monitor the situation for any additional 
transfers that would cross that threshold of sanction ability.
    Senator Brownback. So you do not think those transfers, the 
C-802 transfers, meet that standard yet of destabilizing?
    Mr. Einhorn. The administration does not believe transfers 
to date meet that standard. More importantly, the Department of 
Defense in analyzing this very carefully--and of course, DOD 
has a tremendous stake in this--has concluded that so far these 
are not sanctionable transfers.
    Senator Brownback. Mr. Welch, you mentioned that--I gather 
in your testimony you are saying that we have reached the 
limits of what we can do unilaterally and we need to go 
multilateral. I have some question of, if that is indeed the 
premise which you operate under, you do have additional grounds 
that you could cover unilaterally, that we can take against 
particular supplier nations. We have identified a number of 
those that are up on these boards.
    If you dispute that, I would certainly want to know how or 
where, or how we might change the law to give you more tools. 
But taking your premise that we need to go more multilateral at 
this point in time, are you committed, is the administration 
committed, to doing something with the EU before April 29th 
when they meet on this issue to prod and to push them as 
aggressively and as hard as possible to tighten their sanctions 
in working with us against the Iranians?
    Mr. Welch. The simple answer is yes. We want to work with 
our allies on this. We think we have a moment of opportunity, 
given the Mykonos verdict. We believe that their steps so far 
have been good ones. We would like to do more. We will have 
those discussions with them.
    In fact, Senator, they have been under way, both before and 
in the immediate aftermath of the verdict, and there will be 
more. We have a variety of ways we do that. And let me add that 
it is done at a variety of levels, too, up to and including the 
senior leadership of this administration.
    Senator Brownback. Mr. Welch, if I understand your 
testimony correctly, you would agree with me that we have not 
been effective in limiting the Iranians' ability to get either 
precursor chemicals, items that could lead toward a nuclear 
weapons development program, that we have not been effective to 
date in getting their access? Maybe, Mr. Einhorn, you are the 
correct person to answer that.
    Mr. Einhorn. Thank you, Mr. Chairman. No, I would not agree 
with that. I would state that we have been quite effective in 
limiting Iranian access to sources of supply. In the chemical 
area, I pointed out the Australia Group, that is a multilateral 
export group, has tightened its controls. And we see it, that 
Iran has shifted its procurement efforts away from Europe 
because of the effectiveness of these controls. It now is 
relying primarily on cooperation with Chinese entities as a 
source of foreign supply.
    Senator Brownback. So are they getting the items?
    Mr. Einhorn. Well, yes, we do see transactions in dual-use 
chemicals, production equipment, production technology. We see 
this happening. Now we are working very hard with the Chinese, 
trying to persuade them to take very seriously the Chemical 
Weapons Convention obligation they are about to assume and to 
clamp down, to develop good export controls, and to prevent 
Chinese entities from engaging in this kind of cooperation.
    Senator Brownback. So the products remain getting into 
Iranian hands?
    Mr. Einhorn. Yes, for the time being they are getting into 
Iranian hands. And similarly in the nuclear area. The United 
States has launched a major diplomatic campaign to get nuclear 
suppliers not to engage in nuclear cooperation with Iran. We 
have gotten near-unanimous support for that campaign. So now 
you have essentially two nuclear suppliers, Russia and China, 
still engaged in nuclear cooperation with Iran. But even those 
two we have persuaded to constrain that cooperation, and we 
will continue to work on that in the hope that they will agree 
to terminate that cooperation.
    Senator Brownback. Is it not time to take action against 
those two suppliers, whatever force and effect the United 
States has, economic sanctions, whatever, to stop those 
products from reaching Iranian hands?
    Mr. Einhorn. If you are talking about nuclear cooperation, 
we are taking action.
    Senator Brownback. With all due respect, I understand what 
you are saying with that, but you do have additional unilateral 
tools available to you toward supplier nations, whether those 
toward Russia, aid issues, whether it is Eximbank issues or 
funding, or toward the Chinese, the amount of trade that we 
heard Senator D'Amato talking about.
    I am not suggesting you link those together, but I am 
saying that, if you look at the set of tools and resources you 
have and you look at the products that are getting into one of 
our major opponent's hands, they are coming from a couple of 
places and you do have additional tools.
    Mr. Einhorn. Mr. Chairman, let me give you an example of 
how we use carrots as well as sticks. In the area of nuclear 
cooperation, a government needs a special agreement for 
cooperation with the United States if the U.S. is to supply 
nuclear reactors, major components, nuclear fuel, and so forth. 
Neither Russia nor China has such an agreement in effect now. 
Both Russia and China would like to engage in nuclear 
cooperation with the United States because they respect 
American reactor technology. We have told the Russians that we 
are not prepared to enter into a negotiation with them for 
nuclear cooperation unless we could resolve this question of 
cooperation with Iran.
    Similarly, we do have with China an agreement, negotiated 
in 1985 but never implemented because of legislation that 
requires the President to make certain certifications that 
China is not assisting non-nuclear weapons states to acquire 
nuclear weapons. We are been working very hard with the Chinese 
on this. They have begun to deal seriously with our concerns, 
and one of our concerns is their cooperation with Iran, and 
they have begun to curtail that cooperation. We want to 
continue pushing that and using the inducement of this, of 
implementing this agreement for cooperation, as an incentive.
    Hopefully, we will be able to use this effectively to 
encourage a curtailment of this nuclear cooperation with Iran.
    Senator Brownback. Senator Robb.
    Senator Robb. Thank you, Mr. Chairman.
    I will turn to some economic questions that might be a 
little less prickly. The state of the revolution in Iran--your 
testimony in both cases and by Senator D'Amato and others would 
indicate that things are not going well. There is high 
unemployment, lower petrodollar income certainly compared to 10 
years ago, an outdated oil production infrastructure, 
widespread poverty, et cetera.
    The question is, in light of these deteriorating economic 
conditions, can the ideological cohesion remain in Iran? And I 
guess the broader question: Is the revolution in the process of 
imploding in your judgment?
    Mr. Welch. Well, you are right, Senator, that economic 
conditions there are worse. In fact, this is one of their 
significant vulnerabilities over the longer term. In a word, 
the revolution has done a lousy job in using the rich natural 
resources of this country. Oil production in 1979 I think was a 
couple times higher than it is today, just to give you one 
example. That is one of the reasons that our legislation has 
targeted this sector.
    More broadly, I think they have benefited in the last year 
actually from slightly higher oil prices, and that has given 
them a bit of a cushion, a cushion that they have used to 
respond in a number of ways to what they perceive as the 
economic warfare being waged on them by the United States.
    How has the revolution survived despite this? The 
revolution, after all, has been in Iranian terms more or less 
broadly popular for years. It has begun to decay in popularity 
in recent years, to the extent that some Iranians today 
describe it as sort of hollow.
    That said, they have a strong, fairly authoritarian 
political establishment. Their method of governance is 
sufficiently strict to avoid the emergence of any credible 
local opposition inside Iran. They have used the tools that a 
modern state has very effectively in denying their people those 
opportunities. And, you know, even though they hold elections, 
they are very carefully designed to assure that the types of 
candidates that come forward to run for those seats are sort of 
one frame of mind, and they have managed to get along.
    Is this a situation that is sustainable over the long term? 
I am not able to make a judgment on that right now. Let me say, 
though, that quite apart from whether it is or not, the things 
that they are doing which are a problem for us are the focus of 
our attention. We have not got a candidate in their 
Presidential race one way or the other. In our mind, the 
Iranian people ought to have a greater freedom of expression 
than they have today. That would be very good, if that 
happened. But the key issue for us at the moment is what this 
current Iranian regime is doing. That is the focus of our 
policy.
    Senator Robb. Well, given the eternal quest for finding the 
``Iranian moderates,'' is there any alternative emerging that 
is viable in your judgment?
    Mr. Welch. We do not subscribe to the theory that there are 
emerging Iranian moderates. We do not subscribe to it today. We 
have not before.
    Senator Robb. You made reference to the election that will 
be held next month. The leading candidate, as I understand it, 
is the speaker, although there may be others. Is there any 
sense that anyone who is elected would bring about a 
substantial change in terms of the relationship with the United 
States? Is there any likelihood under any circumstances that 
you can foresee that that would improve? Certainly, anti-
American sentiment is frequently used by campaigns and/or 
appeal to nationalism, if not fundamentalism, in many countries 
quite successfully in stirring up the population or in 
achieving a particular electoral result.
    But do you see any possibility of a positive change or do 
you see any inevitability in a decline if the most likely 
victor is successful?
    Mr. Welch. I see little prospect for meaningful change. On 
the contrary, I think there is substantial continuity in what 
this leadership and its likely successors want to do, and they 
are likely to continue doing it unless there are substantial 
costs to them for what they are doing.
    I do not want to give Mr. Nateknuri or any of his 
competition a campaign plug, so I will avoid specific comment 
on them. But I do not see any important attraction in any of 
the candidates.
    Senator Robb. Do you want to speculate on why Mr. 
Rafsanjani may have consented to an interview that turned out 
to be interpreted by defense folks in defense ways, what his 
postelection plans might be?
    Mr. Welch. They from time to time give interviews, and I 
think it is part of an effort to influence and in some cases 
more than that, propaganda. I think their actions are more 
important than their words, though I would like a few of their 
words changed as well. I think that some of those are 
gratuitous. For example, on the peace process I cannot see what 
Iranian national interest that particularly serves.
    That said, what they are doing is more important than what 
they are saying.
    Senator Robb. I think that is an appropriate place, Mr. 
Chairman, to leave it. I thank you and I thank the witnesses.
    Senator Brownback. Thank you, Senator Robb. I appreciate 
that.
    You have stated that China's nuclear cooperation with Iran 
is suspended. Is that truly the case? We can certainly say 
that?
    Mr. Einhorn. Let me clarify, Mr. Chairman.
    Senator Brownback. I would love a yes on that.
    Mr. Einhorn. I would love a yes on it, too. But 
unfortunately, what I have to say is that it has cut back 
certain planned cooperation. It has rejected Iran's request 
that it provide a heavy water research reactor optimized for 
the production of plutonium. It has also suspended the sale of 
two power reactors, I pointed out, probably as much for siting 
and financial reasons than because of our urgings. But 
regardless, it is a good step.
    There are certain other elements of cooperation we have 
urged them to suspend as well. I think they are taking our 
concerns seriously. We hope to see further curtailment, but 
there is still some ongoing cooperation.
    Senator Brownback. Thank you very much, panel members. You 
have a tough job and we share an objective. I have to tell you, 
I am disappointed with where we are today with this threat. I 
will keep watching. The committee will keep watching. We may 
have you back up again near-term on this, because I just do not 
think we are getting the job done, as witness what actually is 
occurring.
    I do appreciate your commitment to working this issue 
aggressively. I know your concern and you view the threat very, 
very seriously, and I appreciate that.
    Thank you very much.
    Mr. Welch. Thank you.
    Senator Brownback. Next, our third panel will be the 
Honorable James Woolsey, the former Director of the Central 
Intelligence Agency, and Mr. Leonard Spector, the Senior 
Associate Director of Nuclear Non-Proliferation Project for the 
Carnegie Endowment for International Peace, will be the two 
gentlemen we will call up.
    I would state to them and to others watching that at 4 
o'clock we have a vote that will be taking place on the floor. 
So what I would like to do if we could, Senator Robb and 
members of the panel, is try to conclude by that time, so that 
we would not be interrupting things as we bring things on back. 
So that would give us about 30 minutes to do that.
    Senator Robb. Mr. Chairman, that would be fine with me. As 
a matter of fact, I was going to have to depart anyhow. I want 
to catch the end of the Intelligence hearing that is taking 
place right now in the budget that I should attend. If the 
witnesses make relatively brief opening statements, I was going 
to wait for them. If they are not, I will have to look to the 
record for their statements. But I can certainly do everything 
to assist you in meeting that deadline.
    Senator Brownback. Well now, there is a motivation.
    Mr. Woolsey, would you care to give us your brief opening 
statement.

STATEMENT OF HON. R. JAMES WOOLSEY, FORMER DIRECTOR OF CENTRAL 
                          INTELLIGENCE

    Ambassador Woolsey. I would be delighted, Mr. Chairman. As 
Senator Robb knows, I do not read opening statements except 
when absolutely required to as an administration witness, and I 
certainly am not that now.
    Senator Robb. Mr. Chairman, I might also add, however, that 
he is not easily intimidated.
    Ambassador Woolsey. But I would be delighted, if it is all 
right, to talk through a few points briefly that are in my 
opening statement and have it inserted in the record and try to 
integrate some answers to one or two questions that you asked 
other witnesses as I go. It might save a little bit of time for 
the two of us.
    I think, Mr. Chairman, the key issue with respect to Iran 
is that its combination of support for terrorism around the 
world and its program of acquiring advanced conventional 
weapons, and particularly weapons of mass destruction and the 
means to carry them, ballistic missiles, that together--and 
they are very much part of a militant spirit and an attitude 
toward the West and toward many other countries in the East and 
Mideast as well which is a product of the Iranian revolution.
    But it is also a set of views, particularly with respect to 
terrorism, that is not widely supported in Iran. I compare in 
my statement the situation in Iran today to the situation in 
Spain in the 1490's at the time of the Spanish Inquisition 
under Ferdinand and Isabella and Tomas de Torquemada. The 
clerics who support the terror--and that is the word for it--in 
Iran today have strong critics within the Shia clergy in Qum, 
in Iranian society. They are not real representatives of the 
spiritual tradition of Iran or of the clergy of Iran or 
certainly of the people of Iran.
    What we have is a regime which, as Mr. Welch said, there 
are no moderates stepping forward. And the attitude which some 
of our European colleagues have fostered from time to time, 
that we had the moderate Rafsanjani and the hard line clerics, 
I think is nonsense. I think that approach has been 
substantially undercut by what the court has set forth in the 
Mykonos verdict in Berlin.
    The government and those clerics that work with it are 
indeed very much the enemies of the West and common sense, and 
of the people of Iran.
    I do believe that if we find that something as clear-cut as 
Iranian government support for the terrorist act at Khobar 
Towers can be shown convincingly to be the case, the United 
States has no real option but to take extremely decisive 
action. The sort of action that I would think should be 
seriously considered would be, as you suggested, perhaps what 
Jim Hoagland wrote about in the Post this morning or perhaps 
the mining of their harbors.
    But that, if it was carried out by the Iranian state 
through its intelligence services, was as close as one can come 
to an act of war, and we should treat it as forcefully as we 
possibly can. We are the world's superpower and no Iranian 
state should get away with that kind of conduct against the 
United States.
    Now, in the circumstances that we are in with respect to 
the export of weapons of mass destruction, particularly from 
Russia and China--and they are now the problem. Other countries 
have been a problem in the past, but, as the two administration 
witnesses pointed out, there has been progress with respect to 
other countries, and there has been some progress with respect 
to Russia and China, but not nearly enough, as I think the 
chairman and you, Senator Robb, both suggested.
    I believe that it is important to consider seriously taking 
other legal steps in the current circumstances. One reasonable 
one was mentioned by the chairman, such as amending the recent 
statute to clearly include such steps as the cruise missiles, 
the C-802's that now are quite threatening to U.S. Naval forces 
in the Gulf.
    It would be feasible, I think, to look at some of the 
provisions that dropped out of the legislation when it was 
being considered in the House and Senate and to bring 
unilateral sanctions to bear on a secondary basis as the 
statute operates in cases other than investment in the oil and 
gas industry in Iran, to broaden it to include other 
investments there, because their Achilles heel really is their 
economy.
    The mullahs have done a terrible job of managing the 
economy, and we have helped them do a terrible job with the 
sanctions. Our sanctions have not been totally successful, but 
they certainly have been in some cases useful to crippling the 
Iranian economy or at least making it limp a bit.
    I think that if we focus on substantial steps that we can 
take to affect the Iranian economy, even in the absence of a 
judgment about Khobar Towers, and if it turns out that they 
were responsible for Khobar Towers strong and very decisive 
acts to cripple the Iranian economy, I believe we will be 
operating with tools that we can use better than most, tools 
that will be ones that we can bring allied and other support to 
bear on, and I think that we have a reasonable chance of 
turning this ridiculous policy of the Iranian government, its 
support for terror and its acquisition of weapons of mass 
destruction, around, not in short order, not in a few months, 
probably not even in a very few years. But with resolution and 
firmness, I think we do have some reasonable chance of success 
here.
    I very much commend the committee for its interest and for 
holding these hearings.
    [The prepared statement of Ambassador Woolsey follows:]

                 Prepared Statement of R. James Woolsey

    Mr. Chairman, Members of the Committee, it is an honor to be asked 
to testify before you on this important subject.
    The current American policy toward Iran--containing it, using 
economic sanctions against it, and pressing others to join us--is not 
rooted merely in disagreement with Iran's foreign policy and the 
rhetoric of some of its leaders. Even less is the current policy 
grounded in opposition to Iranians' religious beliefs, or to Iran's 
being an Islamic state. The United States has cordial and cooperative 
relations with many countries with whom it has major disagreements. It 
has close and friendly relations with states where Islam, including 
Islam of a fundamentalist character, is the predominant, even the 
governing, religion. Of course we will always strongly promote respect 
for basic human rights. But unless such are threatened, Iran's internal 
affairs are its own business.
    American policy is heavily driven by a key decision that the 
government of Iran has made: to be the world's principal state sponsor, 
encourager, and bankroller of terrorism. It is a shame that George 
Orwell is not still around to write a second installment of ``Politics 
and the English Language'', because until the verdict last Thursday in 
Berlin in the 1992 Mykonos Cafe killings--in which the German court 
forthrightly set out the evidence that terror from Iran emanates from 
the ``highest levels'' of its government--a number of European and even 
American observers were showing substantial phraseological creativity 
in subtly disparaging the notion that the Iranian government has 
actually chosen a terrorist role for itself. These writings and 
speeches--urging a ``critical dialogue'' with Iran and promoting 
various types of economic and political openings to it--would have 
given Orwell a rich array from which to select fresh examples of the 
lengths to which some people will go to avoid unpleasant political 
facts.
    Until the verdict last Thursday many of these individuals were 
calling for more ``hard evidence'' of Iranian government sponsorship of 
terrorism than had been made public up to that point. Such demands of 
course run into an obvious problem: some of the convincing detail (hard 
evidence indeed) must remain in the hands of governments in order to 
protect intelligence sources and methods. Unfortunately, if governments 
were to inform the public about a number of details regarding Iranian-
sponsored terrorism they would also perforce inform Mr. Fallahian, the 
head of Iranian Intelligence, who would promptly see to it that we 
didn't learn any more about how the Iranian terror apparatus does 
business.
    But there is plenty of information available publicly now, despite 
the absence of some details, to satisfy any unbiased observer. Both 
former Iranian President Banisadr and a recent important defector 
testified at the trial of those who carried out the assassinations of 
four Kurdish dissidents in 1992 that such killings are routinely 
approved not only by Mr. Fallahian, but also by President Rafsanjani 
and Ayatollah Khamenei through a ``Council for Special Operations.'' 
The German court made public many facts about the Iranian government's 
terror and assassination apparatus. The embarrassment among the Iranian 
government's apologists in Europe mirrored that of its apologists in 
Near East last fall when, according to a number of press reports, 
Mahmoud Abbas, senior member of the PLO's Executive Committee, 
identified Iranian Intelligence as being involved in an attempt to kill 
Yassir Arafat, and the PLO consequently found it necessary to dismiss 
seventeen of Mr. Arafat's bodyguards.
    The Iranian government's denials about its responsibility for 
terrorism should not be credited: Iran controls Hezbollah, funds Hamas, 
Islamic Jihad, the Popular Front for the Liberation of Palestine-
General Command and other violent terrorist groups, and it generally 
oversees, encourages, helps plan, and provides several different types 
of support for a wide range of terrorist actions around the world. 
Incidents of assassination abroad by Iran have substantially increased 
under Rafsanjani and Khamenei compared to the days of rule by Ayatollah 
Khomeini. The press has reported some facts which suggest Iranian 
government involvement in the Khobar Towers bombing in Saudi Arabia. 
When this choice to use terror is made by a government (as was the case 
when the former South African government used terror abroad to support 
its policy of apartheid), such an act legitimately makes that nation 
subject to ostracism and to the admittedly imperfect but sometimes 
justified weapon of international economic sanctions. Sanctions are not 
a silver bullet, nor is Iran the only source of support for 
international terror. If Iran changed its policy international 
terrorism would not evaporate. But it would be substantially reduced 
and crippled.
    The policies of the Iranian government, supported by some Iranian 
clerics, have produced much domestic resentment within Iran both 
because of repression and because of mismanagement of the economy. The 
destructive collaboration between the Iranian government and a sub-set 
of clerics, including in the support of terror, has also drawn 
articulate dissent from some prominent and brave Iranians, including 
several leading Shia clerics.
    It is a major mistake for Western observers to blame Islam, or Shia 
Islam, for this state of affairs in Iran today. The problem is rather 
that a few men, in the government and among Iranian clerics, have 
chosen terror to be a major tool of the Iranian State. Just as it would 
be unfair to tar the entire Catholic Church of the time with the 
outrages of the fifteenth century Spanish Inquisition under Tomas de 
Torquemada and some of his fellow Dominicans (whose close partnership 
with Ferdinand and Isabella has some parallel to the collaboration 
today between the Iranian government and a portion of Iran's clerics), 
so it would be most unfair to blame Islam, Shia Islam, Iranian Twelver 
Shia Islam, or the majority of Iran's Shia clerics for the outrages of 
those who have brought about and who implement the policy of terror.
    In her fine recent book, God Has Ninety-nine Names, Judith Miller 
clearly describes the widespread resentment in Iran today against those 
who sponsor terror both at home and abroad and the courageous 
resistance of important clerics and other public figures. Prestigious 
Ayatollahs, heads of Islamic Institutes in Qum, academics, and others 
are calling for those clerics who manage and support the government's 
terror apparatus to abandon that path and to ``return to Qum'', to the 
traditional role of advising and providing moral guidance to the people 
and the government. But it would seriously undercut the possibility 
that this popular resentment and these brave individuals will prevail 
in moving Iran toward sanity if we were to move now to accommodate the 
sponsors of terror before they change their ways.
    Iran is also involved in a buildup of certain extremely troubling 
military capabilities. Although the state of its economy--partially 
attributable to its own mismanagement, partially to the effect of the 
various steps that the U.S. has taken and urged others to take--
somewhat limits the resources available to it, Iran has focused on 
acquiring technologies and systems that pose serious threats to U.S. 
forces and to friends and allies of the U.S., especially to Israel and 
the states of the Gulf. In these efforts Iran has been the beneficiary 
of Russian, Chinese, and North Korean willingness to proliferate these 
systems and technologies.
    One of the more dangerous developments in this line has been 
Russian assistance, since January of 1995, to complete Iran's Bushehr 
nuclear reactor, begun by Germany in 1974; through the operation of 
this reactor the Iranians will develop substantial expertise which will 
be relevant to the development of nuclear weapons. Russia completed its 
shipment of three Kilo-class diesel submarines to Iran a little over a 
year ago. Russia pledged in June 1995 not to enter any new arms 
contracts with Iran and not to transfer any uranium enrichment or other 
technology or advice that could assist a nuclear weapons program. The 
Washington Times reported yesterday, however, in an article by Bill 
Gertz, that Russia is in the process of selling advanced air defense 
systems to Iran, including the latest version of a hand-held anti-
aircraft missile that will be given to Hezbollah terrorists. And I know 
from his background and from personal experience that Russia's Foreign 
Minister, Mr. Primakov (who was head of the SVRR, the successor to the 
foreign side of the old KGB, during the time I was Director of Central 
Intelligence), is extremely interested in building a close relationship 
between Russia and Iran. Clearly we need to stay tuned to the Russian-
Iranian relationship.
    According to press reports, Mr. Robert Einhorn, Deputy Assistant 
Secretary of State for Non-proliferation, whom I understand will appear 
before this committee, testified last week that China has now become 
the number one supplier of conventional weapons to Iran, replacing 
Russia. Most serious in this regard are the advanced C-802 cruise 
missiles that can threaten U.S. naval forces in the Gulf. China is also 
supplying components for chemical weapons to Iran as well as technology 
and advice to help with missile tests. Although China has promised not 
to proceed with a 1993 contract to provide two nuclear reactors to Iran 
and also not to provide a uranium enrichment device, clearly the 
Chinese-Iranian arms relationship requires constant monitoring. 
Moreover, like the Russian-Iranian relationship, it requires us to 
continue to search for leverage to exert against Russia and China in 
order to dissuade them from at least the most damaging and 
destabilizing transfers toward which those two nations and their 
military-industrial firms seem repeatedly to incline.
    North Korea has long been in a class by itself in many ways--in the 
pathological weirdness of its ideology and its leaders, in the total 
failure of its economy, in the immediacy of the military threat that it 
poses to an important U.S. ally, South Korea, and U.S. forces located 
there, and in its willingness to be a source of proliferation. Press 
reports earlier this year suggest that North Korea has promised not to 
deliver Nodong I missiles to Iran; the range of these would come very 
close to bringing Israel within range of Iranian missile attack. Our 
leverage over North Korea is small, but whatever we have we should use 
to block such a transfer.
    We may have some opportunity in the aftermath of the Mykonos 
verdict in Germany and the European nations' reaction to it to rally 
support for increased leverage against Iran to discourage its support 
both for terror and for proliferation of weapons of mass destruction 
and ballistic missiles. Security Council action to, for example, ban 
flights to and from Iran, cut its diplomatic representation abroad, or 
ban exports to it of petroleum-based technology should be considered. 
But realistically, the almost certain opposition of Russia and China in 
the Security Council would probably doom such efforts--not to speak of 
the even more ambitious (but potentially far more effective) notion of 
a comprehensive embargo on Iranian oil exports. It may be worth 
proposing one or more of these steps, even if we are likely to fail in 
the LTN, as a precursor to taking further unilateral steps of our own.
    Generally speaking, I believe that secondary sanctions should be a 
tool of last resort in international relations; in my judgment the 
stresses they produce with friends and trading partners should mean 
that they are used only in very extreme cases. But this is such a case. 
Iran today, by its clear adoption of terror as a consistent tool of the 
state, has put itself in a different category than any other nation in 
the world. In my view, this is the key issue. If we were to be able to 
bring enough pressure on Iran to get it to halt its support for terror, 
it would be evidence of such a major change in the culture of the 
government of Iran that I believe other issues--such as proliferation--
would be considerably easier to deal with. Thus terror is, in my view, 
at the heart of the matter. Under these circumstances, not only do I 
believe that secondary sanctions are justified against what it is now 
clear to any objective observer is the world's primary terror state, I 
believe it would be worth considering a strengthening of such steps--
for example, by applying sanctions to foreign persons that export 
energy-related technology to Iran or even to those that conduct a range 
of commercial relations with Iran beyond the energy sector.
    Iran is a wonderful country with a rich history and a talented 
people who follow a great religion. There are no fundamental strategic, 
religious, or other reasons why Iran and the United States should not 
have cordial, even friendly, relations. If those who govern Iran will 
stop murdering those who disagree with them, the path could and should 
be open to move toward both the removal of sanctions and progress on 
other issues as well. But if the United States loses its resolve before 
the terror stops, it will thereby tell Iran's contemporary Torquemadas 
that their support of terror is no longer a major issue with us--it 
will tell them that, essentially, they've won. As is the case on many 
difficult security issues, the rest of the world will not act 
constructively on this matter unless we lead. On the issue of Iranian 
terror the U.S. government has an obligation to Americans and to the 
rest of the world to be firm, resolute, unswerving, and uncompromising.

    Senator Brownback. Thank you, Mr. Woolsey. I appreciate 
that and appreciate your service to your country and your 
continued service. Mr. Spector, a brief opening statement.

STATEMENT OF LEONARD SPECTOR, SENIOR ASSOCIATE AND DIRECTOR OF 
   NUCLEAR NON-PROLIFERATION PROJECT, CARNEGIE ENDOWMENT FOR 
                      INTERNATIONAL PEACE

    Mr. Spector. Thank you. I will attempt to summarize my 
statement and I would request that the entire statement be put 
in the record.
    Senator Brownback. Without objection.
    Mr. Spector. Thank you.
    I think I would like to sort of pick up in a certain sense 
on some of the themes that Bob Einhorn was presenting, 
especially the notion that there are many tools in the tool kit 
that the administration has and the United States has to try to 
curtail the availability of weapons of mass destruction to 
Iran.
    He mentioned a number of them, but there are others as 
well. In particular, we have got a very solid inspection regime 
in the nuclear side. We are going to have a new Chemical 
Weapons Convention, whether we join it or not, that is going to 
be available, that is going to put certain constraints on the 
chemical weapons side for Iran. And we have, of course, these 
multilateral regimes to try to control exports going into Iran.
    In addition, there are other tools which I would like to 
come back to, and these are the cooperative threat reduction 
and Nunn-Lugar programs, which are critical in containing 
nuclear and other very dangerous materials in the former Soviet 
Union so that they do not leak out. And also I think it is 
important to appreciate the counter-proliferation program of 
the Department of Defense, which really has to be brought to 
bear in these instances where the adversary is over the hump, 
where they have chemical weapons or biological weapons or 
missiles, and we are confronting not just an effort to stop the 
next stage in their development, but we are confronting actual 
capabilities that may be used against our forces.
    A second point to make is that it really is worthwhile 
going down a list--and I happen to have 11 items on my list; I 
will not go through all of them now--which sort of 
differentiate the different programs. We know in the nuclear 
fuel, for example, that Iran is trying along three different 
routes, I would say, to advance its nuclear capabilities. It 
wants to acquire these reactors and so forth openly, and maybe 
it will learn a lot of the tricks of the trade by open nuclear 
energy development. It wants to acquire material clandestinely 
from Russia, and that is why controlling that material in 
Russia is so important. And it also is trying to develop 
clandestine facilities in Iran to manufacture this material on 
its own, and there I think we have pretty much stopped things 
as far as I can tell.
    If you go down the list, biological weapons is another 
area. There is a program I guess where they are part way home. 
They seem to have stocks of biological weapons which the CIA 
has acknowledged. But there are many advances to be made yet. 
So it is important to differentiate sort of where we are and 
what we should be targeting.
    I think the important target on BW is to make sure they do 
not learn how to mate it with missiles, and that is a difficult 
thing to do. Maybe we can be intervening through export 
controls and other measures.
    In the chemical area, there are two programs, really. There 
is sort of the World War One style chemicals, which they have 
in large supply. And when Bob Einhorn mentioned 1,000 tons per 
year, I think it was, those are the old-fashioned gases, as I 
understand it. The more dangerous nerve gases--VX, Sonan, 
Teblin, and some of the others--are still under development. So 
in some ways we have lost the game, on the simple weapons. They 
are dangerous, they could be used in the battlefield. The more 
dangerous chemical weapons are still there for us to try to 
prevent the acquisition of.
    I think the same is true in the missile area. Short-range 
Scuds they have got in large numbers, but they want to go to 
longer range systems, sophisticated systems, and we have a 
chance to fight the battle.
    If I can just say a few more words about the nuclear area. 
I would say a point that really we would want to emphasize is 
the critical importance of American programs dealing with 
Russia to gain control over the Russian nuclear arsenal and 
over these materials. There are hundreds of tons of nuclear 
materials under poor security in Russia. The major push in 
Russia to get these under control is coming from us by virtue 
of the Nunn-Lugar and Nunn-Lugar-Domenici programs. It is 
really, really critical that those be sustained.
    There is a report that I was just part of a panel at the 
National Academy of Sciences which goes into this in some 
detail. It commends the administration for some very important 
work it has done, urges a couple of changes, but the 
fundamental message of a year's work is we have got to keep up 
the effort, it must have Congressional support to continue with 
this. The report is called ``Nuclear Concerns'' and in my 
testimony I have got a footnote giving some additional details. 
It is being released today by the National Academy of Sciences.
    In the biological and chemical areas, I think we do have to 
look a little bit at the counter proliferation options, 
defenses that we can have, vaccines, various chemical 
equipment. We have to anticipate that we are going to be 
confronting these in the battlefield.
    I think this is also true in the missile area. I know there 
is a big debate over national missile defenses, but I think 
there is a national consensus that theater missile defenses are 
a useful tool in dealing with a threat that already exists and 
perhaps anticipating some types of threats that will be coming 
along.
    You focused on sanctions with great emphasis. I have to say 
some of the information I have had is that a number of the 
cases that you have been alluding to--the Chinese transfers of 
chemical weapons, Russian transfers of missile technology, and 
so forth--are not sort of getting the first once-over now in 
the administration. Some of these cases have been around for a 
long time and they have gotten a lot of attention, and what we 
have seen is in a way deliberate inaction, perhaps for 
political reasons in terms of wanting to maintain a high level 
dialog with the Chinese with the summit coming up and so forth.
    But the impression I have is that some internal decisions 
have been made about how serious the cases are, who is 
involved, what might be done, what sanctions laws might be 
triggered, and there has been a reluctance to carry forward and 
actually bite the bullet and impose sanctions in some of these 
cases.
    Let me just make one final point, and that is to sort of 
put on the table an area that we have used as an incentive in 
the past to gain support from the Chinese and the Russians in 
the area of missile controls. This is our willingness to give 
them access to the commercial satellite launch market. In other 
words, we export satellites to them, our industry does, and 
they get the launch, they get the payment for launching this 
into space. They have, both the Chinese and the Russians, very 
excellent space launches, despite some recent setbacks.
    But this is something of real value, and it benefits their 
missile industry. In the Chinese case the same firms are 
involved that are making some of the exports we are unhappy 
with. In the case of the Russians, although different entities 
are involved, if we in a sense threaten the ones that are 
making money off of this, they may put pressure on the other 
entities that are trying to sell a few missiles on the side.
    We have done this in the past. There was a big episode in 
1990 to 1993 where the Soviets and the Russians were selling 
something to India and we sort of said: If you stop that, we 
are going to open up all this commercial stuff. But the deal 
was they were supposed to be very disciplined, and I think we 
have seen some slackening on the Russian side, and in China as 
well. I think this would be a very useful, targeted sanction. 
It can be applied discretionarily. It does not have to have 
statutory authority, and I think it is a good area to explore 
as you push forward on the missile question.
    Thank you.
    [The prepared statement of Mr. Spector appears in the 
Appendix.]
    Senator Brownback. Thank you. And thank you, Mr. Robb, for 
joining us as well.
    Let me just followup on this. It strikes me that, looking 
at this from the outside, that what we have done particularly 
concerning China and Russia, a number of known, known and 
publicly reported instances of products and items going to Iran 
that we do not want going there, that we have basically treated 
it as a secondary issue. We have said it is more important to 
us for our relationship with China or Russia than it is to stop 
these items from going on forward.
    That is an outsider's observation. Is that an accurate one?
    Mr. Spector. Well, it is. I think it may be a legitimate 
observation and it may be a legitimate policy. I am certainly 
committed to non-proliferation. This is sort of what I have 
spent my professional career on. But you also have to realize 
that the overarching American interest, let us say vis-a-vis 
Russia, is to have a democratic Russia sustained, moving 
forward, getting some economic stability, and growing in a way 
that we want. So one could imagine totally pulling the plug on 
Russia with no foreign aid, for example, which is how one of 
the laws is framed. There is a waiver provision which the 
President has exercised so that foreign can continue.
    On the other hand, you know, we want to pull the plug if 
there was absolutely no response from the Russians. But there 
has been. The worst elements of the nuclear collaboration have 
eased off and we are dealing with one item still, this nuclear 
power plant that will be under inspection. There will be some 
safeguards in terms of the kind of plant it is. So I would 
hesitate to say now is the time to cutoff foreign aid.
    But let us go over to the missile area. In the missile 
area, you could identify a targeted sanction that would affect 
one sector that is getting a lot of income from the United 
States, and you might say: We are going to penalize you there. 
Maybe that is not the right sector. Maybe we would find a 
different one, and sort of try to make the punishment fit the 
crime a little bit and catch their attention in a more focused 
fashion.
    I think you can do that with a couple of these areas.
    When we try to deal with the Chinese and Pakistan, maybe it 
is a different issue. There there is much more at stake for 
China than money. They have a relationship with Pakistan and it 
is harder to push them away. But in a lot of these other cases 
it is really money, and if there is money, a penalty that is 
threatened to the Chinese or the Russians which is much greater 
than the financial benefit they get from some of these exports, 
I think you may be able to prevail without having to do the 
wholesale pulling back of foreign aid and so forth that I think 
can be very tricky.
    Senator Brownback. Mr. Woolsey, you care to comment on 
that, whether we treated it secondarily?
    Ambassador Woolsey. Over the last 2 years, I probably would 
not be the best witness on that, Mr. Chairman. I have a general 
impression in some of the areas that I have followed, such as 
ballistic missile defense issues with Russia, that we have 
soft-pedaled our objections to them too much and that we have 
been unwilling to be as forceful and clear as I think it is 
normally productive to be when negotiating with the Russian 
government.
    I think it is fair to say, though, as Mr. Spector said and 
the two administration witnesses, that with respect to Russia 
on this nuclear issue there has been some progress. We would 
very much like to see them just stop on Bushehr, because 
Bushehr will let the Iranians develop an expertise in managing 
nuclear programs that will redound to their benefit and will 
help them in their illegal nuclear weapons programs, and we 
would very much like to see Bushehr stop.
    But it is in fact the case that we have gotten something 
done, the U.S. Government has gotten something done with Russia 
with respect to the nuclear exports to Iran.
    Senator Brownback. What about Mr. Spector's suggestion, 
which I found intriguing? What about the commercial satellite 
launches? Is that a way that--we have heretofore used a carrot 
and stick approach, but we failed to pull the stick out because 
I guess we feel like the stick is too big or it whacks us when 
we use it. But here is a narrower one.
    Ambassador Woolsey. One has to look at specific cases. For 
some--I am not familiar with the whole range of our cooperation 
with Russia on propulsion, but there are some cases in which 
the joint ventures and cooperation between American companies 
and Russian companies work in such a way that a Russian 
component has become important for American purposes as well. 
This has been part of the sort of growing partnership in some 
technological areas.
    So we would want to make sure that if we did something like 
that, we did not do it in such a way that we undercut some 
capability that we as the United States wanted and needed. But 
as a general proposition, I think the thrust of his remarks are 
on the money.
    Senator Brownback. I want to thank both of you for laying 
out this basis, because what I was curious to get at was other 
assessments of what is taking place in the region and other 
options that we might have that are available to us. I view 
this as an extremely serious present threat that we have for 
the United States.
    I appreciate particularly, Mr. Woolsey, your statement that 
if these terrorist activities are directly linked to the 
government of Iran that clear and decisive action on our part, 
including a potential for military action, be considered. I 
think that is a brave and a good recommendation on your part.
    Ambassador Woolsey. If I could just add one point, Mr. 
Chairman. I think what we should not do is put a few cruise 
missiles on a building or a radar in the middle of the night, 
or even a terrorist camp. Terrorists have a way of being able 
to move out of camps and tents and the like. We should do 
something that would seriously hurt the Iranian economy.
    The two things that come to mind are one that Mr. Hoagland 
mentioned, the blockade, and that requires constant 
maintenance, constant patrols, confrontations with other, ships 
of other countries. It might be worth it. We might have to do 
it. But I must say the notion of mining Iranian ports and 
harbors strikes me as a very interesting and potentially 
appropriate response to the murder of a number of American 
servicemen if it in fact turns out to be the case that they did 
it.
    Senator Brownback. Mr. Spector, do you have any thoughts on 
that that you care to put forward?
    Mr. Spector. I think I would like to be a little cautious 
on this, but I do think there is a tendency to imagine that, 
because we have this enormous military capability in the region 
and globally, that we can take action without a response. We 
are dealing in this particular instance with a nation, Iran, 
that seems to have a global reach of its own, and we have seen 
episodes in Argentina, the bombings of the Israeli embassy 
there, we have seen activity in Europe, assassinations.
    We will not necessarily be able to make our response and 
have that be the end of the issue. We may have a further 
response and we may find ourselves embroiled in more.
    Not to respond is unthinkable if this in fact how things 
emerge, that we have a smoking gun. But I think as we take such 
action we also have to appreciate that we are doing this at 
some risk of further continuation of a dangerous relationship.
    Senator Brownback. So if we can establish undeniably that 
this is attached to the Iranian government's decision, this 
bombing that took place, in your estimation we must respond, 
but that there are consequences even in our response? Am I 
hearing you correctly?
    Mr. Spector. Well, I think to the extent that we can 
respond with others, perhaps. I do not know how much further we 
can take the economic blockade. We might find that that was 
more decisive in the certain sense that there was no way for 
Iran to respond. If you take a very precise military action--
mining--it gives them a focus. We again become the target, and 
they have measures they can take back if they care to take the 
risk.
    So I think as one measures out the punishment one has to be 
aware of the fact that there may be further steps that go 
beyond and try to develop a response that deals with that as 
well.
    Senator Brownback. Are economic sanctions sufficient for a 
bombing activity?
    Mr. Spector. Well, I do not know if you had--these are 
difficult questions, so I do not mean to suggest a decisive 
response. But if you could imagine a total, a global embargo or 
a virtual global embargo on the purchase of Iranian oil that 
all of our allies supported, including Japan and the Western 
Europeans, because they too are outraged by this, that would 
have a devastating effect on the Iranian economy of the kind 
that we were just talking about, but it would not have a 
military dimension and it would not be only America.
    If you take military action and you risk lives of, let us 
say, Iranian sailors or what have you, and you have only the 
United States acting, you do create a target. I am not saying 
that you might not decide it was appropriate to do it anyway. 
You might very well decide it was appropriate to do a 
unilateral military act. But as you weigh that decision, you 
need to appreciate the other dimension.
    Ambassador Woolsey. That would be preferable, I agree. But 
given their behavior over the last several years, I rather 
despair of our European friends being willing to pay higher oil 
prices in order to effectively retaliate against the killing of 
American servicemen.
    Senator Brownback. I just pose an interesting question. Do 
you think that other Security Council members would go along 
with economic or military actions if this bombing is laid at 
the feet of the Iranians?
    Mr. Spector. Well, I think it is very hard to speculate. My 
fear is that, although we may be convinced--and do not forget, 
some of the evidence that is going to be coming before you, let 
us say, and before the President will be very classified 
evidence. We are not going to have the whole story out before 
the public that we can display and build a case the way we did, 
let us say, when Saddam Hussein invaded Kuwait. It is going to 
be a different matter, and I think we are going to have 
difficulty going to the Security Council.
    But in other means behind the scenes, working with allies, 
we might at least imagine an alternative. And you might reject 
the alternative. You might decide military action was best. But 
as I say, it may not be cost-free.
    Senator Brownback. Gentlemen, I appreciate this very much. 
This has been the opening hearing for me as chairman of this 
subcommittee. I think it has been very enlightening. It is 
certainly a tough subject, but it is one that we agree upon for 
action. Maybe we do not agree quite which actions to take, but 
I hope we can continue to move forward.
    I continue to be disappointed about how ineffective I think 
we have been to date in stopping the things we want to. We have 
had some success, but we have not gotten near where we need to 
get to.
    So we are going to keep watching this issue, and we would 
appreciate any further input that you might be willing to give 
and I would look forward to that.
    Ambassador Woolsey. Thank you, Mr. Chairman.
    Senator Brownback. Thank you very much. Thank you all for 
attending.
    This hearing is adjourned.
    [Whereupon, at 4 p.m., the subcommittee was adjourned.]


                THE ARMING OF IRAN: WHO IS RESPONSIBLE?

                              ----------                              


                          TUESDAY, MAY 6, 1997

                           U.S. Senate,    
          Subcommittee on Near Eastern and,
                               South Asian Affairs,
                     of the Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:03 a.m. In 
room SD-419, Dirksen Senate Office Building, Hon. Sam Brownback 
(chairman of the subcommittee) presiding.
    Present: Senators Brownback and Feinstein.
    Senator Brownback. We will go ahead and proceed with this 
hearing. Thank you all for joining us this morning.

  OPENING STATEMENT OF HON. SAM BROWNBACK, U.S. SENATOR FROM 
                             KANSAS

    Senator Brownback. On April 17, this subcommittee held a 
hearing on the problem of Iran and proliferation. As a result 
of the testimony heard at that hearing, I concluded that the 
United States has not, is not doing enough about the problem of 
proliferation to Iran.
    Our approach to the problem I believe must be two-fold. 
First, we must seek to deny the Iranians the foreign exchange 
they need to promote terrorism abroad and continue with their 
massive military buildup. The United States has done its part 
toward that with an embargo on trade with Iran. I commend 
Senator D'Amato for forcing the administration to take that 
step.
    We have also tried to create disincentives for other 
nations to invest in Iran's oil sector. But the truth is that, 
in a world thirsty for oil, we will never succeed in stopping 
all trade with Iran.
    Any doubts about the limits of this policy should have been 
put to rest by the recent criminal verdict in Germany. A German 
court has told the people of the world that the highest 
leadership of Iran was behind the assassination on foreign soil 
of regime opponents. But the European Union, despite 
exhortations from the United States to take a hard line, 
decided to do nothing more than end the so-called critical 
dialog and suspend high level diplomatic contacts.
    In other words, there were no economic sanctions, just a 
frown, and a diplomatic slap on the wrist.
    This explains why it is essential that we have a second 
prong in our strategy for dealing with Iran. In addition to 
denying Iran hard currency, we must also deny Iran the 
possibility of purchasing arms and weapons of mass destruction. 
The Europeans have an arms embargo in place. But the Chinese 
and the Russians do not.
    The Clinton Administration has done too little to impress 
upon China and Russia that our relationship cannot remain the 
same if those nations continue to arm Iran.
    It is little wonder the Europeans pay the United States no 
heed on what to do about Iran. They see us pushing our own 
companies around but continuing to coddle the nations that 
persist in directly arming the Iranians.
    The message we are sending could not be clearer: cutting 
off Iran's access to arms and weapons of mass destruction is 
less important to us than maintaining good relations with 
Russia and China.
    Consider that the United States is aware that Russia is 
selling a nuclear reactor to Iran, that Russia is contemplating 
a major new arms deal, that Russia has discussed the delivery 
of ballistic missiles to Iran, and more and more.
    Yet the President, who is required by law to cutoff the 
hundreds of millions in assistance the United States provides 
Russia every year without a waiver, has granted that waiver. 
Consider, in addition, that China has negotiated the delivery 
of nuclear reactors to Iran, provides Iran with chemical 
weapons precursors, has delivered missile guidance equipment, 
and more.
    We cannot pretend that we have a policy aimed at isolating 
Iran if we continue to aid and abet Iran's suppliers.
    Before us today we have three experts on proliferation. I 
have asked them here because I want to hear about the Russian, 
Chinese, and North Korean companies that are arming Iran and 
the governments that are doing nothing to stop them.
    As in our first hearing, we will work only from 
unclassified information. You may also notice that there are no 
representatives from the administration here today. Let me 
assure you they were invited and requested to come, but they 
decided not to attend and testify. I hope they are here 
monitoring the hearing to hear what the testimony of these 
three witnesses has to say.
    Finally, I will ask our witnesses and others to think about 
these names: China Precision Engineering Institute, China 
Precision Machinery Import-Export Corporation; MINATOM; 
Rosvoorouzhenie; Aviaexport; Lyongaksan Import Corporation; 
Changgwang Sinyong Corporation.
    Between them, these companies have helped Iran move closer 
to a successful confrontation with the United States or with 
our allies.
    Now think about this. In at least one instance I am aware 
of, the U.S. Government was licensing sales to a company we 
knew was engaged in proliferation of nuclear technology. How 
can we pretend to have a serious nonproliferation policy?
    I do not believe these companies should do business with 
the United States. I do not believe their executives should be 
allowed into the United States, and I do not believe these 
companies should benefit from U.S. subsidies. I do not think 
there is a man or woman in this Congress who would disagree 
with me.
    Either way, I intend to test that premise because in the 
coming weeks I intend to offer legislation that will affect 
some of the steps I believe must be taken to address this 
problem.
    We have a panel of experts joining us today to testify 
about the issue of proliferation and who is supplying the 
Iranians with these weapons, both conventional and those of 
mass destruction. I am delighted to have this panel with us 
today.
    They are: Dr. Gary Bertsch, the Director of the Center for 
International Trade and Security, Professor of Political 
Science, University of Georgia; Dr. Gary Milhollin, Director of 
the Wisconsin Project on Nuclear Arms Control; and Dr. W. Seth 
Carus, Visiting Fellow with the National Defense University.
    By prior discussion and arrangement, Dr. Milhollin will be 
the first to testify and then Dr. Bertsch, and Dr. Carus will 
be the last.
    What we would like to do, gentlemen, is to invite your 
testimony, either as written or you can summarize if you would 
like. We will take the full written testimony into the record. 
Then we would like to have an exchange regarding questions. 
Particularly, at the end of it, once we site to who is doing 
the supplying of these arms, what then should the response of 
the U.S. Government be to this situation?
    I am thankful for all of you joining us. I very much 
appreciate it.
    Dr. Milhollin, you are first up and the microphone is 
yours. Welcome to the committee.

STATEMENT OF DR. GARY MILHOLLIN, DIRECTOR, WISCONSIN PROJECT ON 
             NUCLEAR ARMS CONTROL, WASHINGTON, D.C.

    Dr. Milhollin. Thank you very much, Senator. I am honored 
to be here.
    I hope I can shed some light on this very important, but 
difficult, question.
    I would like to start by saying that I don't think there is 
any doubt that Iran is aggressively trying to develop weapons 
of mass destruction and the missiles to deliver them. I think 
there is a general consensus on that subject, at least in this 
country.
    Second, Iran's progress in this domain, her progress has 
depended on outside help and will continue to depend on it in 
the future, just as Iraq's did. So this is kind of the classic 
case of export control. Can you isolate a country 
technologically and keep its program from developing?
    So far, we have made some progress, but it is not nearly 
good enough.
    In my testimony, I have listed several specific cases, and 
I have attached them as an appendix to the testimony. I will 
just go through them briefly here.
    Who is supplying Iran? Well, first, the question of anti-
ship missiles has come up. I think you, Senator, have alluded 
to this previously. We know that China Precision Machinery 
Import-Export Corporation is supplying or has supplied the 
anti-ship missiles to Iran. What we don't know or at least I 
have not seen anywhere yet, is the fact that the United States 
actually approved a series of dual-use exports to that very 
company during the time when its missiles were being developed. 
I have listed those in my testimony in the appendix.
    One of them is a computer work station for the simulation 
of wind effects. That would be quite useful in designing an 
anti-ship missile. These exports are of sensitive technology 
controlled for export purposes by the Commerce Department and 
approved to Iran and to this particular company.
    My project publishes a data base called ``The Risk 
Report,'' which gives details on foreign companies that 
contribute to the building of weapons of mass destruction. I 
have included a printout in the appendix which describes China 
Precision Machinery Import-Export Corporation. It is Case 
Number 1. Also, I have listed there the exports by the United 
States to that company.
    So if the question is who is helping Iran build anti-ship 
missiles that threaten our sailors, the answer may well be the 
U.S. Commerce Department because it approved those exports.
    The second case I would like to describe is a case of air 
surveillance radar.
    Iran recently imported a powerful surveillance radar from 
the China National Electronics Import-Export Corporation. It 
can detect targets 300 kilometers away, and if the United 
States ever comes to blows with Iran, American pilots will have 
to contend with that radar.
    When that radar was being developed, that is, from 1989 to 
1993, the U.S. Government approved the export of $9.7 million 
worth of sensitive equipment to China National Electronics. The 
approvals included equipment for microwave research, a large 
scale system for testing integrated circuits, and $4.3 million 
worth of computer gear. All of this equipment seems to me quite 
useful for developing radar. But it was all licensed to this 
Chinese company, which then turned around and supplied a 
surveillance radar to Iran.
    So, again, it seems that our own Commerce Department may be 
one of the culprits in this drama in which Iran is getting 
important outside supplies.
    I would like to point out that in these two cases the 
exports were all approved under the Bush Administration. I urge 
this subcommittee, and I have urged the full committee for some 
time, to obtain the exports approved, the records of the 
exports approved under the Clinton Administration. Since the 
Clinton Administration has become more pro-export than the Bush 
Administration was, I suspect that, if the committee looks at 
the record, it will see that many Chinese companies are 
receiving U.S. products and then turning around and marketing 
things to Iran and Pakistan.
    One of the reasons why Iraq was able to import so much 
dual-use equipment before the Gulf War was the absence of 
Congressional oversight of the export licensing process. I urge 
the committee not to let this happen again and to exercise its 
very important role of oversight on the export licensing 
process. The committee should get the records, it should look 
at them and evaluate them, and see whether the Chinese 
companies that are supplying Iran are getting U.S. products.
    I am very strongly suspicious that they are.
    The third case in my testimony is a fusion reactor. It was 
supplied to the Iranians by the Chinese Academy of Sciences. 
The fusion reactor is used for nuclear training. But, as we 
know, the Iranians are using their nuclear knowledge to build 
nuclear weapons.
    The Academy of Sciences also helped develop the DF-5 
intercontinental ballistic missile, which is the only Chinese 
missile that can reach the United States. Despite these 
activities and despite its supply of Iran, the Chinese Academy 
managed to import an American super computer just last year. 
That super computer is now in a network at the disposition of 
any Chinese scientist or engineer who is designing a long-range 
missile for a nuclear weapon.
    Case number 4 is uranium exploration. I have attached to my 
testimony some pictures from our data base, ``The Risk 
Report,'' which shows the Beijing Research Institute of Uranium 
Geology prospecting for uranium in Iran. Any uranium that this 
Chinese institute finds will go into Iran's nuclear weapon 
program.
    There is also another picture with some individuals, which 
is fairly interesting. It shows the head of the Iranian nuclear 
program standing next to the deputy chief of the China National 
Nuclear Corporation. The China National Nuclear Corporation is 
the same company that just sold the ring magnets to Pakistan 
that got so much press attention. It will be the key player in 
any nuclear cooperation between the United States and China.
    Right now, the administration and Westinghouse are trying 
very hard to get the agreement for cooperation, which has lain 
dormant since 1984, revived so that the United States can begin 
supplying nuclear technology to this company--this company that 
has just supplied the ring magnets to Pakistan and that is 
prospecting for uranium in Iran now.
    So if we look at this pattern, we see that the United 
States itself could do a lot more just in controlling our own 
exports and in controlling our own cooperation to control the 
success of Chinese companies that we know are helping Iran, or, 
I guess, to restrict the growth and success of Chinese 
companies we know are helping Iran.
    Also I would like to just mention, if I could, patterns of 
supply.
    It has now been admitted by the State Department that China 
is continuing to supply poison gas ingredients, equipment, and 
so forth, to Iran. I know that this has been going on for at 
least 5 years.
    It would be nice to think that we are doing something about 
this, but we are not. The policy of constructive engagement we 
have been following toward China is basically out of gas.
    There are a number of studies the State Department has done 
which analyze the facts and the law necessary to impose 
sanctions on China for its exports to Iran. Those studies have 
lain dormant for at least 6 months.
    The State Department does not want to finish the 
administrative process because, if it did, it would have to 
apply sanctions which would disrupt, and perhaps end, its 
engagement policy.
    I urge the committee to get copies of these studies and to 
query the State Department. Ask the State Department why it is 
that these studies have simply been ignored, are not being 
implemented, and why it is that the administrative process is 
not being completed.
    In the nuclear domain, I think we are looking at blackmail. 
It is a gentle, sort of constructive engagement type of 
blackmail, but there it is nevertheless. The Chinese have 
threatened, in effect, to supply the Iranians with a plant to 
produce uranium hexafluoride and with a research reactor. Those 
two deals are now suspended, or on hold, pending the outcome of 
China's talks with us about a nuclear cooperation agreement. I 
think the message is fairly clear: if the agreement does not 
happen, that is, if we do not start selling China American 
nuclear technology, then China will go through with the deals 
for the uranium hexafluoride plant and the research reactor.
    Russia is playing the same game. It agreed to give the 
Iranians a plant for actually enriching uranium and also a 
research reactor. Those two deals, as well, did not go through. 
But they still could.
    In effect, we are being told if you don't like what's going 
on now, it could be worse.
    The final point I would like to make is that our export 
controls are not realistic.
    The administration has taken the position that you can open 
the doors to exports of sensitive technology to everybody in 
the world except a few countries that you designate as 
``rogues'' and that that kind of system will work. Well, it 
does not work. The rogues can get things through retransfers, 
and if you are not going to be credible with respect to China, 
then other countries are going to use that lack of credibility 
to justify their own behavior with respect to Iran.
    For us, Iran is a rogue. For Germany, Iran is a top 
customer. We are following an engagement policy toward China, 
which amounts to holding your nose and exporting.
    The Germans look at us and say well, why can't we follow 
the same policy toward Iran? ``We will hold our nose and export 
to Iran.'' We are following the same policy, in my opinion, now 
toward Iran--I'm sorry, toward China--excuse me. We are 
following the same policy toward China now that we, the United 
States, followed toward Iraq before the Gulf War. It was 
basically constructive engagement then. The idea was that we 
could bring Saddam into the mainstream of nations if we just 
did not isolate him; and if we isolated him and cutoff U.S. 
exports, then the Europeans would just get the business. That 
policy failed. But we are still using that policy with respect 
to China today, and I think it is also failing with respect to 
China.
    Thank you.
    [The prepared statement of Dr. Milhollin follows:]

                  Prepared Statement of Gary Milhollin

    I am pleased to appear today before this distinguished 
Subcommittee, which has asked me to discuss the question of who is 
helping Iran build weapons of mass destruction. The Subcommittee has 
also asked whether the United States needs to do more to discourage 
Iran's helpers.
    There is no doubt that Iran is aggressively trying to develop 
nuclear weapons and the missiles to deliver them. There is also no 
doubt that Iran has already built chemical weapons. Iran's progress in 
all these efforts has depended almost entirely on outside help, and 
will continue to depend on it in the future.
Specific cases
    A great deal is known about who is supplying Iran. I would like to 
begin by looking at some specific cases. I have listed them in the 
appendix to my testimony:
Case #1: The C-801 and C-802 anti-ship missiles
          Iran recently imported this new anti-ship missile from the 
        China Precision Machinery Import-Export Corporation (CPMIEC). 
        Admiral John Redd, our naval commander in the Persian Gulf, 
        took the unusual step of complaining publicly about the sale. 
        Iran appears to have up to 60 of these missiles so far, plus 
        fast attack boats to carry them. The missiles are a threat to 
        our sailors and to commercial shipping in the Gulf.
          Unfortunately, these missiles may have been built with help 
        from the United States. In the appendix to my testimony, I have 
        listed the sensitive equipment that the U.S. Commerce 
        Department approved for export to China Precision Machinery 
        from 1989 to 1993. It includes things like computer 
        workstations for the simulation of wind effects, flight data 
        recorders, and navigational instruments. The ability to 
        simulate wind effects is something the designer of an anti-ship 
        missile could find quite useful. I would like to emphasize that 
        all of this equipment was deemed so sensitive that it required 
        an individual validated export license to leave the United 
        States.
          I have also attached a print-out from the database that my 
        Project publishes. It is called the Risk Report. It lists the 
        companies around the world that are suspected of contributing 
        to the proliferation of weapons of mass destruction. It 
        includes China Precision Machinery Import-Export Corporation, 
        which was sanctioned in 1993 by the United States for exporting 
        missile components to Pakistan. It markets the M-family of 
        nuclear-capable missiles.

    If the question is: Who has been helping Iran build anti-ship 
missiles to threaten our sailors? The answer may well be: The U.S. 
Commerce Department.
Case #2: Air surveillance radar
          Iran recently imported a powerful surveillance radar from the 
        China National Electronics Import-Export Corporation. The radar 
        is now part of Iran's air defense system, and it can detect 
        targets up to 300 kilometers away. If the United States ever 
        comes to blows with Iran, American pilots will have to contend 
        with it.
          This radar too seems to have been built with help from the 
        United States. In the appendix to my testimony, I have listed 
        the sensitive, controlled equipment that the U.S. Commerce 
        Department approved for export to China National Electronics 
        from 1989 to 1993. It totals $9.7 million. It includes things 
        like equipment for microwave research, a very large scale 
        integrated system for testing integrated circuits, equipment 
        for making semiconductors, and a shipment of computer gear 
        worth $4.3 million. All of this equipment appears highly useful 
        for developing radar, and all of it was deemed so sensitive 
        that it required an individual validated export license to 
        leave the United States.

    If the question is: Who has been helping Iran build air defenses? 
The answer again, may well be: The U.S. Commerce Department.
    I would like to point out that in these two cases, the exports were 
all approved under the Bush Administration. I urge the Subcommittee to 
obtain and study the exports approved under the Clinton Administration. 
This Subcommittee has the right to obtain all Commerce Department 
records on export licensing. The generally pro-export stance of the 
Clinton Administration leads one to suspect that China is importing 
even more sensitive high-technology from the United States today. I 
cannot emphasize too strongly the need for effective Congressional 
oversight of our export licensing process. The lack of Congressional 
oversight was one of the main reasons why so the Commerce Department 
approved so many sensitive American exports to Iraq before the Gulf 
War.
Case #3: A fusion reactor.
          In 1993-94, the Institute of Plasma Physics of the Chinese 
        Academy of Sciences transferred a nuclear fusion research 
        reactor to the Azad University in Tehran. The reactor is a 
        training device ostensibly used for peaceful purposes. As we 
        know, however, Iran is using its nuclear knowledge to build 
        nuclear weapons. In addition to supplying Iran, the Academy has 
        helped develop the flight computer and the nose cone for the 
        Chinese DF-5 intercontinental missile, which can target U.S. 
        cities with nuclear warheads. The Academy has also studied the 
        effects of underground nuclear weapon tests and ways to protect 
        against nuclear explosions.
          Despite all these activities, and despite being a well-known 
        contributor to Iran's nuclear program, the Academy of Sciences 
        managed recently to import an American supercomputer. In March 
        1996, California-based Silicon Graphics Inc., sold the Academy 
        a powerful supercomputer without bothering to obtain a U.S. 
        export license. The computer is now part of a network linking 
        all of China's high-tech institutes and universities, which 
        means the computer is accessible to anyone in China who is 
        designing a nuclear weapon or a strategic missile.

    So if the question is: what happens to a Chinese organization that 
helps Iran do nuclear research? The answer is: It can import an 
American supercomputer.
Case #4: Uranium exploration
          The Beijing Research Institute of Uranium Geology (BRIUG) 
        prospects for uranium around the world. Attached to my 
        testimony is a picture of this Institute prospecting in Iran. 
        Any uranium, it finds is likely to go directly into Iran's 
        nuclear weapon program. This Institute is part of the China 
        National Nuclear Corporation (CNNC). I have also included a 
        picture of the Deputy Chief of the China National Nuclear 
        Corporation posing with Reza Amrollahi, Vice President of Iran 
        and President of the Atomic Energy Organization of Iran.
          CNNC has been implicated in the sale of ring magnets to the 
        A. Q. Khan Research Laboratory in Pakistan, which enriches 
        uranium for nuclear weapons. CNNC is also involved in the 
        development of Pakistan's secret nuclear reactor at Khusab and 
        a CNNC subsidiary is currently constructing a power reactor for 
        Pakistan at Chashma. CNNC would be the key player in any 
        nuclear cooperation agreement that might be implemented between 
        the United States and China. Right now, the Administration, 
        under pressure from Westinghouse, is planning to revive the 
        cooperation agreement that has been stalled since 1984 because 
        of China's bad proliferation behavior.

    If the question is: What happens to a Chinese organization that 
helps Iran prospect for uranium and helps Pakistan make nuclear 
weapons? The answer is: Westinghouse and the Clinton Administration try 
to find a way to sell it American nuclear technology.
Patterns of supply
    In addition to these specific cases, there are patterns of supply. 
These too are well known. In 1995 I discovered, and wrote in the New 
York Times, that the United States had caught China exporting poison 
gas ingredients to Iran, and that the sales had been going on for at 
least three years. The State Department sanctioned the front companies 
that handled the paperwork, but did nothing to the Chinese sellers for 
fear of hurting U.S. trade relations.
    China's poison gas shipments have only become worse since then. In 
1996, the press reported that China was sending entire factories for 
making poison gas to Iran, including special glass-lined vessels for 
mixing precursor chemicals. The shipments also included 400 tons of 
chemicals useful for making nerve agents.
    The result is that by now, in 1997, China has been outfitting Iran 
with ingredients and equipment to make poison gas for at least five 
years. When I spoke to U.S. officials recently, I asked them whether 
there was any change in China's export behavior on poison gas. They 
said that the poison gas sales had continued to the present time, 
unabated. On April 10, 1997, in testimony before a subcommittee of the 
Senate Committee on Governmental Affairs, Deputy Assistant Secretary of 
State Einhorn confirmed this fact.
    There is no reason to think this pattern will change as long as the 
United States follows its current policy of ``constructive 
engagement.'' Last fall, the executive branch finished a number of 
studies on China's missile and chemical exports to Iran and Pakistan. 
The studies contained all the legal and factual analysis necessary to 
apply sanctions, but they have lain dormant since then. The State 
Department has chosen not to complete the administrative process 
because if it did, it would have to apply sanctions and give up its 
engagement policy. At present, the sanctions law is not achieving 
either deterrence or punishment, as Congress intended.
    This lack of an American reaction has encouraged China to harden 
its position. China is now saying, explicitly, that it will not even 
talk to us about missile and chemical proliferation unless we are 
willing, at the same time, to discuss restraints on our arms sales to 
Taiwan. The arms sales, of course, are caused by China's threat to 
Taiwan. And to make matters worse, the Chinese are beginning to 
complain about our policy of providing theater missile defenses to 
countries like Japan that might be vulnerable to Chinese missile 
attacks. The Chinese say that this is another form of missile 
proliferation.
Nuclear blackmail
    In addition to poison gas technology, China is also helping Iran in 
the nuclear domain. China has agreed to sell Iran a 25 to 30 megawatt 
nuclear reactor, which is an ideal size for making a few nuclear 
weapons per year. And China has also agreed to sell Iran a plant to 
produce uranium hexaflouride from uranium concentrate.
    The hexaflouride plant is essential to enrich uranium for use in 
atomic bombs. Bombs fueled by enriched uranium have become the holy 
grail of developing countries trying to join the nuclear club. Such 
bombs are easier to make than those fueled by plutonium because uranium 
is easier to work with, less toxic, and easier to detonate with 
confidence that a substantial nuclear yield will result. Iraq was close 
to making a uranium bomb when the Gulf War began. The first bomb ever 
dropped was a uranium bomb that the United States released over 
Hiroshima without having to test it.
    There is no peaceful use for enriched uranium in Iran. Enriched 
uranium is used to fuel reactors, but the only reactors in Iran that 
could use such fuel are being supplied by Russia, which is also 
supplying their fuel. The conclusion has to be that Iran wants to use 
this plant to make atomic bombs. The fact that China is even 
considering this deal shows that China is quite ready to put nuclear 
weapon-making capability into the hands of what the United States 
regards as a terrorist nation.
    These two sales have not been finalized. In effect, they are being 
held over our heads like swords. If we don't agree to implement our 
stalled nuclear cooperation agreement with China, which would allow 
China access to American nuclear technology, then China will complete 
these two dangerous export deals with Iran. This is essentially nuclear 
blackmail.
    Russia is Iran's other main nuclear supplier. In 1995, Russia 
agreed to supply Iran two light water power reactors plus a string of 
``sweeteners.'' The 44 ``sweeteners'' are sensitive items that should 
not in good conscience be exported, but which suppliers throw in to 
sweeten a larger deal. In this case, the sweeteners were a centrifuge 
plant to enrich uranium, a 30-50 megawatt research reactor, 2000 tons 
of natural uranium, and training. The centrifuge plant was canceled; 
the training is apparently going forward; the status of the research 
reactor and the uranium is unclear.
    This deal too included some blackmail. The enrichment plant would 
only serve to make nuclear weapons, for the reasons I have already 
stated, and the same is true of the natural uranium. The research 
reactor would have been ideal, like the Chinese one, for making a bomb 
or two per year. Minatom, the Russian Nuclear Energy Ministry, was 
quite prepared to supply all of these items. Minatom only agreed to 
cancel or suspend them in a ``compromise'' to make the power reactor 
deal look better. The message from the Russians is clear: If you don't 
like the reactor deal, how would you like a centrifuge deal?
Missiles
    Both China and Russia are helping Iran make missiles. In June, 
1995, the New York Times reported that the Central Intelligence Agency 
had concluded that China had supplied ``dozens and perhaps hundreds'' 
of missile guidance systems to Iran, along with computerized machine 
tools. In July, Jane's Defense Weekly reported that U.S. officials had 
confirmed that China had sold Iran rocket propellant ingredients as 
well as the guidance components. This case is the subject of one of the 
studies that is now languishing in the State Department.
    In February of this year, the Washington Times reported that Russia 
had sold Iran plans for building the 1,240-mile range SS-4 missile, 
together with guidance components, and that U.S. Vice President Al Gore 
protested the sale during talks with Russian Prime Minister Viktor 
Chernomyrdin. If this report is true, it could help Iran take an 
important step forward in its nuclear missile program. According to the 
Nuclear Weapons Databook, the SS-4 is a single-stage, liquid-fueled 
missile capable of carrying a one megaton nuclear warhead. Its diameter 
is 1.65 meters (65 inches), almost twice that of Iran's existing Scud-
B. The larger diameter of the SS-4 would allow Iran to mount a much 
larger warhead, thus reducing the problem of miniaturization for a 
first-generation nuclear device.
Realistic export controls
    Because the United States has little diplomatic leverage with Iran, 
export controls are the main vehicle for impeding Iran's efforts. 
Unfortunately, the Clinton Administration's decision to slash export 
controls had made it much easier for Iran to get what it needs.
    Dubai is an example. In our database, we have listed 22 Iranian 
companies operating in Dubai's free trade zone, the main purpose of 
which is to handle re-exports, frequently to Iran. These companies are 
legally off-limits to American exporters because of the U.S. embargo 
against Iran, but the companies are probably getting U.S. goods anyway 
because U.S. exporters have no way of knowing the companies are 
Iranian. The U.S. Commerce Department has never published a list of 
Iranian companies operating in Dubai. In fact, after the Commerce 
Department's recent decontrol of high-speed computers, U.S. companies 
can now ship powerful supercomputers (operating at up to 7 billion 
operations per second) to buyers in Dubai without an export license. 
And because Dubai has no effective export control system, there is 
nothing to prevent these supercomputers from going on to Iran or 
anywhere else. Iran now imports more goods through Dubai than through 
its own ports. The lesson here is that you cannot slash controls on 
exports to everyone in the world except the ``rogue nations'' and 
expect the rogues not to get things through retransfers.
    We need a global policy on export controls, but we don't have one. 
The United States is following the same policy toward China today that 
it followed toward Iraq before the Gulf War. It can be summed up as: 
``Hold your nose and export.'' China's nuclear, chemical and missile 
exports to Iran and Pakistan have been greeted by the same American 
silence that greeted Iraq's effort to smuggle nuclear weapon triggers 
out of the United States before the Gulf War. Rather than apply 
sanctions, or even complain publicly about Iraq's violation of the 
Nonproliferation Treaty, the State Department chose ``constructive 
engagement.'' It would be better to maintain our influence with Saddam 
Hussein through trade, the State Department argued. By selling him what 
he wanted, we would bring Saddam into the mainstream of nations. 
Sanctions would only hurt American exporters and allow the Europeans 
and the Japanese to get all the business. It is now clear what that 
strategy produced. The United States was lucky. If Saddam had not been 
foolish enough to invade Kuwait, we would be facing a nuclear-armed 
Iraq with its shadow over most of the world's oil supply.
    America's European allies are also following this same policy of 
constructive engagement toward Iran--a policy that the United States 
officially deplores. The United States now maintains a complete trade 
embargo against Iran, but our European allies have refused to join. 
They have refused in part because they want the export earnings, but 
also because they regard the U.S. position as hypocritical. They justly 
observe that the Clinton Administration, while giving lip-service to 
arms control and nonproliferation, routinely subordinates these 
objectives to commercial interests. The Administration decided at the 
outset of its tenure to promote U.S. exports as its primary foreign 
policy objective. But if the United States can hold its nose and trade 
with China, why can't the Europeans and the Russians hold their noses 
and trade with Iran? In fact, most of the countries that worry 
Washington are interconnected, so the failure to confront proliferation 
by one usually means there will be a failure to confront proliferation 
by others.
    I believe that Iran will acquire nuclear weapons within the next 
ten years unless something intervenes to stop the current effort. If 
the Gulf War had not intervened to stop Iraq, Saddam Hussein would have 
had nuclear weapons by now. When Iran does get the bomb, the Clinton 
Administration's decision to slash export controls will be one of the 
main reasons for Iran's success.

    [Additional information submitted by Dr. Milhollin appears 
in the appendix.]
    Senator Brownback. Thank you very much, Dr. Milhollin. I 
appreciate the specificity of your testimony. We will engage in 
some discussion about that a little bit later.
    Dr. Bertsch, we are delighted to have you here at the 
committee as well. As I stated earlier, if you would like to 
submit your full statement for the record, you can, and you can 
just discuss or summarize. Or, if you would like to present it 
by reading it, that would be fine as well. It is up to you, 
your choice. Welcome to the committee.

   STATEMENT OF DR. GARY BERTSCH, DIRECTOR OF THE CENTER FOR 
   INTERNATIONAL TRADE AND SECURITY, PROFESSOR OF POLITICAL 
        SCIENCE, UNIVERSITY OF GEORGIA, ATHENS, GEORGIA

    Dr. Bertsch. Thank you, Senator. I wish to thank you for 
the invitation to appear today.
    My colleagues and I at the University of Georgia are 
involved in studies of issues being addressed by this 
subcommittee. Former Secretary of State Dean Rusk, Ambassador 
Martin Hillenbrand, and I put together a program at the 
University of Georgia looking in depth at American and 
international export control policy. We are pleased to share 
our work with you and Members of the Congress today.
    In addition to my formal statement, the associate directors 
of our center, Dr. Richard Cupitt and Dr. Igor Khripunov, have 
prepared separate statements on the Chinese-Iranian and 
Russian-Iranian issues respectively. I ask that these reports 
also be entered into the record.
    Senator Brownback. Without objection.
    [The information referred to appears in the appendix.]
    Dr. Bertsch. Finally, I am releasing two new University of 
Georgia Center reports. The first is entitled ``Restraining the 
Spread of the Soviet Arsenal.'' The second is a special issue 
of our quarterly report, ``The Monitor,'' on ``Terrorism and 
Weapons of Mass Destruction.'' Both reports contain 
considerable research and reporting of relevance to your 
hearings today.
    I am happy to make copies of both of these new reports 
available to you and your staff.
    Senator Brownback. Thank you. We would accept those and 
appreciate them.
    Dr. Bertsch. Last week, Secretary of Defense William Cohen, 
Senator Richard Lugar, Sam Nunn, Jim Woolsey, and others joined 
us at the University of Georgia to address the issues of 
terrorism, weapons of mass destruction, and U.S. security. All 
agreed that we are dealing with a major threat, that Iran is a 
critical problem, and that China and Russia are parts of the 
problem, and, I might add, can be important parts of the 
solution.
    I commend you and your colleagues for keeping attention on 
these issues, for promoting a fuller understanding of the 
problem, and for reassessing what the United States can do and 
should do to address these problems. I read with interest the 
transcript of your April 17 hearing. The issues addressed there 
and at today's hearing are critical and require ongoing, long-
term attention.
    I appreciate Gary Milhollin and Seth Carus providing some 
of the details on these issues. I would like to address two 
questions briefly: what is happening, and what is and what can 
the United States do about it?
    First is the Chinese, Russian, and Iranian connections. In 
order to assess what is happening, we have to understand how 
Russia and China view Iran and what they are doing or not doing 
to control strategic exports into the region.
    First, as for Russia and Iran, you know and I know, but it 
is still important to remember, that Russia views Iran 
differently than does the United States. Although some informed 
Russian officials are aware of and concerned about the security 
threats emanating from Iran, most Russian officials view Iran 
as a neighbor with common economic, political, and security 
interests.
    For example, many Russian officials consider Iran a 
valuable asset in resisting the northward influence of the 
Taliban religious forces in Afghanistan and as an ally in other 
regional security issues. Most see Russia as having a large 
stake in economic relations with Iran, including billions of 
dollars in oil and gas deals, military contracts, and nuclear 
energy projects.
    While the United States sees much of this as the arming of 
Iran, Russia sees it as energy and economic cooperation with a 
close neighbor.
    Although Russia is less sensitive to the security threat 
from Iran than is the United States, it is not oblivious to its 
national and international nonproliferation responsibilities 
and interests. On the nuclear issue, it intends to verify the 
peaceful uses of equipment supplied to Iran. It is attempting 
to further develop its nonproliferation export control system.
    For example, in 1996, it approved two new sets of 
procedures that are intended to reduce proliferation risk. 
Government edicts numbers 574 and 575 were intended to enhance 
Russian controls on the export and import of nuclear materials, 
dual-use equipment, and related technology.
    Furthermore, just last month, Russia and Iran signed a 
memorandum of understanding on export controls.
    As I am suggesting and as my colleague, Dr. Khripunov, 
details in his statement submitted for the record, Russia wants 
to maintain close economic, political, and security relations 
with a neighbor. This does and will continue to raise 
legitimate security and proliferation concerns in the United 
States and West. We should be concerned and we should do 
everything possible to lessen the risk.
    Keeping attention on these issues is critical and 
continuing to engage Russian officials at all levels about 
nonproliferation in the region is very, very important.
    Now I believe it should be noted that the U.S. Government 
has done much to heighten proliferation concerns and bolster 
export control responsibilities in Russia and the other new 
states of the former Soviet Union. A committee of the National 
Research Council, a part of the U.S. Academy of Sciences on 
which I served, released 2 weeks ago this report, entitled 
``Proliferation Concerns.'' This report, I might note, gives 
high marks to U.S. governmental programs and efforts to promote 
nonproliferation export controls and policies in Russia and the 
other post soviet states.
    Although much remains to be done, progress is being made. 
The United States is promoting, I think it is fair to say, more 
responsible, nonproliferation behavior in Russia and the other 
former Soviet states through its national security policy of 
engagement and enlargement.
    Now I have a few words about China and Iran.
    China is clearly not adequately concerned about the 
proliferation threat in Iran. It is interested in expanding its 
economic and political relations with Iran. It is seeking 
political favor, hard currency, and oil.
    It views its relations with Iran as, and I quote, ``Normal 
cooperation in peaceful areas.'' This is troubling for a number 
of reasons, including the following.
    There are numerous strategic exports from China to Iran, 
some of which Gary Milhollin referred to, and of which members 
of this subcommittee are fully aware, that are reasons for 
proliferation concern. These exports raise doubts about 
Beijing's commitment to nonproliferation norms and their 
capacity to control the export of sensitive items from Chinese 
territory.
    The U.S. Congress, executive agencies, and intelligence 
communities have responsibilities to follow these developments 
closely. U.S. Government officials should continue to express 
their concern to Chinese authorities.
    Second, as my colleague, Dr. Cupitt, indicates in his 
statement for the record, China has much to do to develop more 
effective export controls. Our research at the University of 
Georgia shows that PRC export controls remain far from being 
complementary in practice to Western standards and to the 
systems of neighbors in its region, including Russian. Russia 
has a far stronger export control system than China.
    At the same time, it is fair to report some positive 
developments in Chinese export controls. These include an 
improved legal framework, development of control lists, 
administrative regulations, and governmental structures to 
review and approve licenses, and, third, use of administrative 
sanctions to punish Chinese individuals and enterprises that 
have violated export control procedures.
    Yet many problems in Chinese nonproliferation export 
controls exist. These include: (1) an overwhelming lack of 
export control knowledge and transparency; (2) suspicion that 
the United States, Japan, and others are pushing export control 
measures on China to undermine Chinese sovereignty and 
commercial interests; and (3) waning Chinese governmental 
control over industries and enterprises. This is placing 
immense pressures on their underdeveloped export control 
system.
    Chinese strategic transfers to Iran and elsewhere are 
matters of significant U.S. concern. Washington should continue 
to engage Chinese leaders and officials at all levels on these 
issues and do all that they can to encourage and support the 
development of more effective export controls in China.
    Finally, what about U.S. responses? There is much that the 
United States can do and is doing to address the arming of 
Iran. It has been vigilant and it has regularly raised its 
concerns with high level Russian and Chinese authorities. Its 
bilateral and multilateral nonproliferation efforts are 
important and their impact should not be underestimated.
    For example, through U.S. influence, Ukraine pulled out of 
the Bushehr nuclear power project in Iran. And, while Russia 
remains unwilling to forego much of its nuclear cooperation 
with Iran, it has agreed to limit its scope and to be more 
vigilant.
    The same can be true for China. Multilaterally, U.S. 
leadership has brought about a broad international consensus on 
the need to limit Iran's programs to develop weapons of mass 
destruction.
    It has helped put multilateral nonproliferation export 
control regimes in place that have imposed serious obstacles 
for Iran. The Iranians are finding it increasingly difficult to 
acquire the WMD related equipment and technology that they 
want. The Chemical Weapons Convention outlaws any assistance to 
Iran's chemical weapons program. The Nuclear Suppliers Group 
and IAEA have created real impediments to Iran's nuclear 
weapons aspirations.
    The Missile Technology Control Regime and the Wassenaar 
arrangement are doing the same in missile and conventional 
weapons areas.
    Regrettably, some Chinese and Russian items that raise 
proliferation concerns are still flowing to Iran. We should do 
all that we can to persuade the Chinese and Russians to refrain 
from this. But I do not believe that sanctions on Russia and 
China now are the best instrument.
    Considerable scientific research shows sanctions to be 
ineffective in most cases such as these. Sanctions are unlikely 
to change Chinese and Russian behavior in the specific Iranian 
case, and there are more effective ways to bring about their 
cooperation.
    I believe the United States can convince the Chinese and 
Russians that the costs of arming Iran with nuclear or chemical 
weapons or increasing Iranian missile capabilities exceed the 
economic return resulting from the export of such items.
    I am confident that the United States can make persuasive 
arguments that will demonstrate to the Chinese and Russians, as 
we have done with the Ukrainians, that their futures are 
brighter if they are part of an international consensus 
resisting the development of weapons of mass destruction in 
Iran.
    In this environment, the United States can engage the 
Russians and Chinese further in improving their 
nonproliferation export control systems and in complying with 
the International Export Control Regimes.
    Much has been accomplished with Russia in recent years. 
More remains to be done. Much more needs to be done with China. 
In a policy of engagement enlargement, U.S. pressure and 
encouragement will do more to tighten Chinese and Russian 
nonproliferation export controls than any sanctions are likely 
to do at this point.
    In conclusion, I believe the United States should continue 
to lead and build an international consensus restraining WMD 
transfers to Iran. It should encourage Chinese and Russian 
participation in this consensus and responsibility in their 
behavior.
    Finally, it should work with China, Russia, and other 
potential proliferants to build effective national export 
control systems and multilateral regimes that will insure that 
proliferation related transfers do not take place.
    Thank you very much.
    Senator Brownback. Thank you very much, Dr. Bertsch. I 
appreciate your testimony and look forward to engaging you in 
questions as we look at this.
    Dr. Carus, thank you very much for joining us and being 
with us in the committee. We can take your written statement, 
if you would like, or you can summarize, or you can present 
your written statement. The choice is yours and we welcome you 
to the committee.

   STATEMENT OF DR. W. SETH CARUS, VISITING FELLOW, NATIONAL 
              DEFENSE UNIVERSITY, WASHINGTON, D.C.

    Dr. Carus. Thank you very much. It is an honor to testify 
before this subcommittee.
    I think there are very few issues of greater national 
security interest to the United States than Iran's acquisition 
of nuclear weapons.
    Senator Brownback. Would you get a little closer to the 
microphone and lower it a bit, please? Thank you. The 
microphone is pretty directional.
    Dr. Carus. Let me know if you can hear me now?
    Senator Feinstein. That's better. Thank you.
    Dr. Carus. There are very few issues of greater 
significance, national security significance, to the United 
States than Iran's efforts to acquire nuclear, biological, and 
chemical weapons. For that reason, I am grateful for this 
opportunity to present my views to the subcommittee.
    Before continuing, let me note that my testimony does not 
necessarily reflect the views of the National Defense 
University where I am a Visiting Fellow or the Center for Naval 
Analyses, which is my home organization, or the Department of 
Defense. In addition, the comments I am going to make today 
summarize a presentation I prepared earlier this year for the 
Nixon Center for Peace and Freedom. With your permission, I 
will submit a copy of that paper for the record and will just 
focus on some key issues.
    Senator Brownback. Without objection, that will be put in 
the record.
    [The information referred to appears in the appendix.]
    Dr. Carus. Specifically, I want to focus on four main 
issues to provide a somewhat broader framework for our national 
security concerns about what is going on with Iran.
    The first thing is I think we have to continue to assign a 
high priority to countering Iranian efforts to acquire NBC 
armaments and the means to deliver them. The available evidence 
convincingly suggests that Iran wants to acquire such weapons. 
Moreover, it appears they are attempting to expand both the 
size and sophistication of their activities. As a result, I 
would agree with what the previous speakers have said, that we 
have to accord a very high priority to our efforts to constrain 
Iranian efforts.
    In general, the United States has taken an appropriately 
hard line against Iran's activities. Despite the general 
weakening of export control policies by the United States and 
this administration, the imposition of sanctions specifically 
against Iran ensures that we maintain tighter controls on Iran 
than for other proliferation countries of concern.
    Fortunately, there is little controversy about the need to 
take such steps. This policy has bipartisan support in this 
country that dates back to the early 1980's, when we first saw 
evidence of Iranian interest in resuming efforts to develop NBC 
capabilities.
    Our allies, who generally do not support U.S. policies 
toward Iran, actually do agree in principle on the need to 
constrain Iran's weapons of mass destruction programs. Even 
Russia, which has been willing to supply sensitive technology 
to Iran, appears to accept in principle that we do not want 
Iran to acquire such capabilities.
    The only real exceptions to the international consensus on 
constraining Iran are North Korea and China, which I think is a 
significant point.
    Second, the most serious problem we face in constraining 
Iran's weapons programs is the support they receive from 
foreign individuals, organizations, and governments. Without 
such support, Iran would be limited in the size and 
sophistication of its programs. With such support, they could 
potentially develop highly capable NBC weapons and pose a 
serious threat to the interests of the United States and its 
friends and allies in the region.
    As a result, we must be willing to devote considerable 
political capital in our efforts to persuade other countries to 
limit their support for Iranian NBC activities.
    The importance of external assistance to the success of the 
NBC and missile programs in Iran reflects the difficulties that 
Iran appears to face in developing indigenous weapons 
capabilities. Many of the most talented Iranian scientists and 
engineers left Iran at the time of the revolution, and efforts 
to convince such people to return to Iran have had limited 
success. Those remaining in Iran appear to lack the range of 
skills needed to support large-scale efforts to develop NBC 
weapons and missile delivery systems.
    In addition, the Iranians have shown limited ability to 
manage large weapons development programs. In this regard, I 
believe it is significant that Iran has had to turn to North 
Korea for missile production technology. The SCUD type missiles 
that Iran is producing are relatively unsophisticated, and one 
would think that Iran would be able to produce them on its own.
    The fact that the Iranians had to turn to a country as 
technologically backward as North Korea is a significant signal 
of the management problems that the Islamic Republic appears to 
face.
    An additional problem with covert assistance is that it 
might make it difficult to ascertain the true capabilities of 
Iran's weapons programs. This is especially troubling with 
regard to Iran's nuclear weapons program since, if Iran 
acquires fissile material through covert purchases from 
existing stocks in a third country, Iran could hide its weapons 
capabilities since the fissile material will not necessarily 
present the kind of obvious signature of, say, a production 
facility.
    As a result, we might have to treat Iran as a nuclear 
capable state if we discover that it has covertly acquired even 
a small quantity of fissile material since we may not be able 
to ascertain the true quantity involved.
    It is for these reasons that we should worry about foreign 
assistance to Iran's NBC programs and their missile programs. 
Unfortunately, Iran has been able to receive extensive 
assistance in these areas from several suppliers, especially in 
the area of nuclear technology, including Russia, China, and 
North Korea. Moreover, Iran has considerable experience in 
developing overseas networks for the illicit acquisition of 
technologies and supplies.
    In the past, the Iranians have been able to acquire 
equipment even out of U.S. military stockpiles so that we know 
they can evade even the tightest security in their acquisition 
efforts.
    Finally, we should worry about the possibility that we may 
not know the full extent of Iranian successes in technology 
acquisition. Recent experience with Iraq has demonstrated the 
potential weaknesses of our proliferation intelligence.
    Accordingly, the intelligence community needs to continue 
to treat Iran's weapons acquisition programs as one of our 
highest priorities.
    Third, we should also not exaggerate the extent of Iran's 
accomplishments. While Iran has significantly enhanced its NBC 
capabilities since the end of the Iran-Iraq War, these 
capabilities do not yet pose a strategic threat to U.S. 
interests in the region. According to public statements by U.S. 
officials, Iran is years away from acquiring nuclear weapons. 
While Iran may possess a substantial chemical weapons 
inventory, we are also told that it includes agents like 
hydrogen cyanide, which are virtually ineffective.
    Indeed, the fact that Iran has acquired agents like 
hydrogen cyanide suggest that it lacks the manufacturing 
infrastructure needed to produce more sophisticated agents and 
has to rely on agents that are normal byproducts of commercial 
chemical manufacturing.
    Moreover, there is no reason to believe that the Iranian 
military has the expertise to effectively employ its chemical 
weapons. Given the limited employment of chemical agents 
attributed to the Iranians during the Iran-Iraq War, there is 
no reason to believe that the Iranians gained the operational 
experience at that time.
    And, indeed, if we look at one recent report, where we have 
been told that Iran deployed chemical artillery rounds on the 
island of Abu Musa in the Persian Gulf, it appears to be 
extremely puzzling because the island is so small that it would 
be difficult to use artillery rounds against hostile military 
forces. While you could fire them against ships, it is not a 
very effective thing to do. It is so difficult to hit moving 
ships that most of the rounds would fall harmlessly into the 
water. You really don't get much compared with conventional 
weapons.
    Now these comments are not offered to minimize our concerns 
about Iran's NBC capabilities. Clearly, we should be worried 
about what they are doing. But we do not want to impute to Iran 
capabilities they do not possess.
    Indeed, to the extent that such weapons would be used by 
Iran to fulfill political objectives, actual possession may be 
less important to them than the appearance of possession. By 
imputing capabilities to Iran that they do not possess, we can 
actually provide Tehran with a tool that it can use in its 
efforts to coerce other countries in the region.
    Accordingly, it is critical that we neither ignore nor 
exaggerate Iran's real capability.
    Fourth, I think we have to realize that eliminating Iranian 
capabilities is going to take a long time. They are not going 
to disappear, even when the Islamic Republic finally 
disappears. While we may abhor and fear the Islamic Republic, 
these parts of these programs originated before the revolution, 
clearly in the case of the nuclear program.
    Moreover, many of the concerns that probably motivate 
Iranian acquisition of NBC weapons are unlikely to disappear 
any time soon. Specifically, any Iranian regime is likely to 
desire such capabilities out of fear of Iraq, the country 
responsible for killing and maiming hundreds of thousands of 
Iranian soldiers and civilians.
    In addition, insofar as all Iranians view possession of 
such weapons as a key indicator of Iran's status as an 
important regional power, the motivation to pursue such 
capabilities will remain.
    We also cannot allow the Iranians to believe that by 
possessing NBC weapons they can deter the United States. We 
don't want Iran's leaders to believe that NBC weapons can keep 
the United States from using military force against them, 
whatever the provocation. If we let them believe that, then we 
insure that Iran will remain committed to the possession of NBC 
weapons.
    Only by convincing the Iranians that their weapons 
ultimately do not contribute to their national security will we 
be able to achieve the elimination of these capabilities.
    Now what steps should the United States take to enhance our 
security and that of our friends and allies in the region? 
First, and I think this is really critical, we have to continue 
with the multilateral and unilateral efforts to constrain 
Iran's acquisition programs. Even if such steps create friction 
with other countries, they are an essential first element in 
any effort to curtail Iran's ambitions.
    Let me diverge a little bit from my prepared testimony to 
recall our experience with the Rabta chemical plant in Libya. 
Back in 1989, it was reported in the press that a small German 
company was responsible for designing and managing the 
construction of this particular facility.
    Even though the Government of Germany was fully aware that 
the United States had hard intelligence confirming this, German 
officials vehemently and officially denied that there was any 
possibility that a German company was involved. It was only by 
taking a hard stance and pressing the case that eventually the 
Germans were forced to admit that, in fact, German companies 
had been involved and to take steps to prosecute those 
involved.
    I think the Rabta case is a good example of how it is 
possible to push the issue of illicit exports with a friendly 
country without ultimately disrupting our relations with that 
country but also without sacrificing either our principles or 
our national security interests. I think it is a lesson that 
this administration might do well to study carefully.
    Unfortunately, I also do not believe that we are going to 
be able to solve the problem totally through export controls. 
It is something we have to do, but it is not guaranteed to 
resolve the problem. As a result, I think we also have to 
strengthen our military responses.
    If the United States intends to operate in the Persian 
Gulf, we need to provide our military forces with the full 
range of counter proliferation tools being developed by the 
Department of Defense. This means developing missile defenses 
to counter Iran's ballistic missiles. It means improved 
chemical and biological defenses. It means improved 
counterforce capabilities to destroy NBC capabilities before 
they are used, even if the weapons are hidden in heavily 
protected bunkers. And it means strengthening our ability to 
detect NBC assets, even if Iran tries to hide them.
    Finally, we must understand the extent to which Iran's NBC 
programs present the potential threat to our friends and allies 
in the region, especially the potentially vulnerable countries 
of the Gulf Cooperation Council.
    The United States needs to develop an integrated policy of 
deterrence and reassurance. This means convincing the GCC that 
we will take whatever steps necessary to protect them from 
Iran's NBC weapons. It also means convincing them that we will 
take no actions that will unnecessarily expose them to Iranian 
retaliatory attacks.
    If we take actions that frighten our allies to such an 
extent that they feel a need to distance themselves from the 
United States, we will have allowed the Iranians to win.
    Ultimately, our success in the region depends on the extent 
to which our allies continue to rely upon us to enhance their 
security.
    I will conclude with that remark.
    Senator Brownback. Thank you, Dr. Carus. I appreciate that.
    Thank you all for your testimony.
    Senator Feinstein, if you would not mind, I thought we 
would each have 7 minutes of questions and we will just bounce 
back and forth until we are done. I appreciate very much your 
joining the committee for this good panel.
    Senator Feinstein. Thank you.
    Senator Brownback. Let me start off.
    We have sighted in on three nations, China, Russia, and 
North Korea. Does any of the three of you know of any other 
nations that are supplying weapons, either conventional or mass 
destruction weapons to the Iranians? Is any of the three of you 
familiar with any other nations or companies within those 
nations?
    Dr. Milhollin. I think you cannot disregard the export of 
dual-use equipment which is not specifically intended to be 
used for military purposes but which can be, if diverted.
    Iraq is an example. Iraq built up its mass destruction 
capabilities with dual-use equipment, most of it from Germany 
but a lot from Switzerland, a lot from England, and it bought 
its electronics from us.
    U.S. computers went into almost every known weapon of mass 
destruction site in Iraq. So to answer that question 
thoroughly, you would have to look at dual-use exports of 
sensitive equipment, controlled commodities, from Iran's main 
suppliers. And Iran's main supplier is Germany.
    So if you really wanted to answer your question, you'd have 
to look at German exports to Iran.
    I know that a few years ago, controlled commodities going 
to Iran from Germany were worth about $1 billion a year. Now $1 
billion a year of controlled commodities is a lot of controlled 
commodities. You would have to build a lot of big buildings to 
hold that many machine tools.
    I don't know what the numbers are recently, but I cannot 
believe that they are a lot lower than that.
    Senator Brownback. Dr. Milhollin, after the recent German 
court ruling, do you know, has there been any communication you 
have received or are aware of of a shift in that sort of policy 
of supplying from Germany?
    Dr. Milhollin. I am not aware of any. One can only hope 
that it might have had an effect. I don't want to label the 
Germans unfairly here, but the numbers are there and the policy 
is clear. The Germans do have a policy of constructive 
engagement toward Iran.
    So if it were possible to look at the record of German 
exports, I think it would be a very interesting thing to do.
    Senator Brownback. Indeed, you suggest that we should be 
looking at our own exports and what has taken place there.
    Dr. Milhollin. I suggest that we look at our own exports.
    You know, if you are building a nuclear weapon or you are 
building a long-range missile, 90 percent of what you need to 
do that is dual-use equipment. There are very few things that 
only have one purpose, machine tools being an example.
    Senator Brownback. Is there another comment?
    Dr. Carus, please.
    Dr. Carus. May I make a comment to that? I think there is a 
lot of reason to be concerned about this dual-use category.
    We know the Iranians have an extremely large acquisition 
network in Western Europe and I don't think we really know a 
great deal about what they do.
    We know during the Iran-Iraq War that they were able to buy 
very sensitive military components globally. They were quite 
good at that.
    As a result, one has to worry about what it is we don't 
know that this network is doing.
    There have been some other examples that have come to light 
over the last few years where other countries have been 
involved in things that we would worry about here. For example, 
a few years ago, a facility in Switzerland was struck by an 
arson, done by somebody who apparently did not like the idea 
that a Swiss company was supplying what appeared to be a 
turnkey biological warfare facility to the Iranians.
    Similarly, there have been concerns about exports by the 
Indians of chemical precursors that people worried would go 
into chemical weapons.
    So, while the countries that I think we focus on as being 
the most egregious actors are clearly Russia, China, and North 
Korea, the Iranians are capable of operating globally and that 
compounds our problem.
    Senator Feinstein. What was that, please?
    Dr. Carus. I'm sorry. The Iranians are capable of operating 
globally. That means we cannot just afford to focus on the 
worst actors.
    Senator Brownback. Let me ask you this. On those three 
countries--and I do want to focus there because we have tied 
direct weaponry shipments from China, Russia, and North Korea 
to the Iranians and I think we should be looking at this dual-
use technology. I appreciate your raising that. But of those 
three nations, how much is the government control of supplier 
companies, how extensive is that? I am hearing mixed statements 
from some of you. Some are saying it is extensive. Dr. Bertsch, 
you seem to suggest that the Chinese are a little too loose on 
that so that maybe, if I am interpreting your statement 
correctly, the Chinese are not actually agreeing to supply this 
equipment to the Iranians. It just sort of happens as a process 
of commercial business transaction in that they are not a bad 
actor here, it is just a loose system.
    Dr. Bertsch. Well, I think there is evidence both of state 
complicity, that is, where the Chinese or Russian Governments 
have permitted exports that we will disagree with in this 
country. In addition to that, because of the chaotic economic 
and political environment, particularly in Russia but also with 
emerging freedom to export in the changing Chinese economy, it 
is difficult for these state controlled bodies to make sure 
that nothing gets from individuals of enterprises on Russian 
and Chinese territory into Iran.
    I mean, there is a terrible problem with corruption and 
smuggling in both of these countries. The most important thing 
that could be done to help cut down on the possibility for 
smuggling is for healthy economies and stable governments. That 
is why it is so important that Russia stabilize its economic/
political situation and why China not allow things to go out of 
control.
    But this is complicated. It requires a lot of good 
intelligence both from governmental and nongovernmental 
researchers to try to piece this together.
    I would say the United States ought to keep the pressure on 
both state decisions and where, states do not have control, 
over their private entrepreneurs that exist both in China and 
Russia, and ``private'' in the sense of the new entrepreneurs 
who are out there who want to make money.
    Senator Brownback. Thank you.
    Senator Feinstein, I am glad you could join us.
    Senator Feinstein. Thank you, Mr. Chairman. That was very 
interesting and I very much appreciate the comments of the 
three gentlemen.
    I would like to talk for a moment about our export 
controls. Dr. Milhollin, as you pointed out, many of the things 
on your list attached to your comments are off-the-shelf, dual-
use, computer related technologies. I come from a state, 
California, which is a big producer of a lot of these 
technologies and which generates a lot of pressure to ease our 
export controls.
    I particularly ran into this in the MTCR discussion. Hughes 
had three major communication satellites involving encryption 
for commercial purposes in China that got caught up in this. Of 
course, the Germans were right there, ready to sell these same 
satellites to the Chinese.
    The question I have for all of you is what should we do to 
toughen our export controls and, at the same time, to develop a 
situation where one of our allies is not simply going to move 
in and replace these sales, which, to me, seems to be the case 
today.
    Dr. Bertsch. I feel very strongly about this issue, and if 
I can jump in first, I think it is a very good question.
    We have been studying U.S. export control policies for 20 
years at the University of Georgia. I think if there is one 
thing we have learned--and that is to respond to your very 
important question what can we do to be tough but not allow 
Germans, Japanese, or others to go in and get these deals--I 
think we have to continue to work multilaterally with these 
countries, to say to Germany, Japan, and others listen, we are 
following your export policy very carefully and we will just 
not tolerate it when we deny an export to a country for 
proliferation reasons and you go in. A lot of that has gone on 
in the cold war and even into the post cold war period.
    But I would give the United States high marks--the Bush 
Administration, the Clinton Administration--on really pressing 
this case, to make sure that not only Germany and Japan are on 
board--and I think they are; I think by and large we have a 
very effective multilateral consensus on this--but the new 
challenge in the post cold war period is to bring Russia and 
China on board. Then we will not be dealing with this kind of 
issue today.
    I think we have made tremendous progress in the last 3 or 4 
years to get Russia on board with the United States, Germany, 
and Japan. Now we have to keep them on board. The Ukrainians 
are a little more on board. That is why they pulled out of this 
nuclear project, Bushehr, in Iran. Now we have to bring China 
in. We are only just beginning.
    We have begun in our program discussions with the Defense 
Department here in Washington, and the State Department and 
Commerce Department about how we can do more to bring about the 
cooperation that we need from China.
    I am optimistic that, while it won't happen overnight, it 
can be done.
    Senator Feinstein. Thank you.
    Dr. Milhollin?
    Dr. Milhollin. You will get a somewhat different response 
from me and less optimistic, probably.
    First of all, I think you need to look at export controls 
with the perspective of how important they are and why we have 
them. The amount of goods controlled now is about $10 billion a 
year. If you do the arithmetic, you will see that that is a 
fraction of 1 percent of our economy, a fraction of 1 percent.
    The total amount denied--I'm sorry. Of the amount 
controlled, 98 percent of that is approved. That is, if you 
control this really economically minuscule amount of technology 
for exports, you make people get licenses, 98 percent of the 
licenses applied for are granted, or only 2 percent are turned 
down.
    Senator Feinstein. Are you saying the controls are tough 
enough, that it is just the administration of the controls?
    Dr. Milhollin. I am saying that the idea that we are 
hurting our economy or cutting jobs in order to have export 
controls is wrong. There is no way you can measure the 
insignificant impact on our economy of export controls. But the 
impact of the controls on our security is very high because an 
instrument that may not cost very much can really enable 
somebody else to move a program forward rapidly.
    So that is why it makes sense to control exports.
    The first point is that it is not really a jobs issue. 
There is no measurement sensitive enough to measure the jobs 
impact of our export controls. I think it is about 4 percent of 
1 percent of our economy that is even controlled. The total 
amount denied, the last time I looked at it, was about half the 
cost of a single B-2 bomber.
    That is what we are talking about in terms of denied 
technology, the worth of it. It is insignificant.
    The second point is that it makes sense to have unilateral 
controls for a number of reasons. First is just an ethical 
reason.
    The United States is the only country I think that controls 
the export of torture equipment--thumb screws, that sort of 
thing. If you want to sell torture equipment, you have to get a 
license in the United States.
    Now it is true, theoretically, that other countries could 
rush in and sell these torture devices that we are not selling. 
It is also true that we don't sell missiles, for example, to 
Iran, or to Syria. Other people do. They get the missiles 
anyway. Our guys, our people, lose out on the sales of these 
missiles.
    We make better missiles than the North Koreans. We could 
supply the Iranian market. We make better chemical weapons 
plants than anybody. We could put those in Libya, but we don't. 
The Germans got the business.
    I don't hear anybody complaining that our industry missed 
out on the two chemical weapon plants that Libya is building.
    The third reason it is important to have unilateral 
controls is leadership. The way it really works internationally 
is somebody has to step out and do it first, and be the leader, 
and have international controls, and other people join. That is 
what we did in Iraq.
    If we had waited until everybody, all of our allies had 
agreed what to do about Iraq, we would still be talking. So you 
have to have unilateral controls.
    To make export controls stronger, we need to stop cutting 
them. The Clinton Administration's export controls are a tenth 
of what we controlled under President Bush. I think we have cut 
it down to the bone and we are going into the bone. We need to 
stop.
    Senator Feinstein. Thank you.
    Thank you, Mr. Chairman.
    Senator Brownback. Thank you, Senator.
    Let me look now at China and Russia. Dr. Bertsch, you are 
saying we should continue and increase pressure there to try to 
bring them into the kind of ``league of nations'' in dealing 
with the Iranians.
    Dr. Milhollin, I am certain you would agree with that 
statement as well, that we need to focus a lot there. Dr. 
Carus, is that correct, as well? Russian and Chinese exports 
are our clearest present danger on arming further the Iranians, 
conventional and mass destruction as a present issue.
    Dr. Carus. I think there are several reasons to focus on 
those two countries. One is they have the largest capacity to 
supply the kinds of things that Iran wants of all the potential 
supplier countries out there.
    For the kinds of reasons that Gary Milhollin just 
mentioned, people in most countries will not sell Iran a 
complete chemical weapons factory. Unfortunately, there are 
people in China who are willing to supply them with such 
facilities.
    Senator Brownback. And then the directions on how to put 
them together.
    Dr. Carus. That's correct.
    While I have a little bit of optimism that national 
interest concerns will lead the Russians to be somewhat 
constrained, I am less optimistic about the Chinese. The 
history is just not very comforting in this regard.
    Again, dredging up a little bit of ancient history, if you 
recall back in 1987-1988, the United States was busy fighting a 
little mini-war with Iran in the Persian Gulf. Remarkably, the 
Chinese, who apparently considered themselves a friend of the 
United States, were selling the Iranians anti-ship cruise 
missiles at that same time. So they were perfectly willing to 
supply weapons that they knew had the objective of sinking 
American ships at a very critical point in time. And, while we 
demarched the Chinese over this, it did not matter to them.
    I am not sure things have changed that much in the 
intervening decade.
    Senator Brownback. Well, I am not sure that they have 
changed that much, either, particularly--and I can direct your 
focus on the charts and the boards that we have up here--- from 
what we know has gone to Iran and from which countries, and 
with no sanctions then involved toward those suppliers. I mean, 
this is known, unclassified information.
    Dr. Milhollin, you cited specific examples. And yet, we 
have not stepped up to do anything further.
    Now what is it we should be doing? What further should we 
do, particularly toward the Chinese and the Russians, to cause 
them to stop this arming of the Iranians?
    Dr. Milhollin, please?
    Dr. Milhollin. Well, I think the first thing we could do is 
just implement our own law. We do have laws on the books.
    Senator Brownback. And your contention is those have not 
been implemented?
    Dr. Milhollin. Yes. I think it is clear that they are not 
being implemented today.
    The State Department is basically admitting that the 
Chinese are continuing to supply Iran with chemical weapon 
technology. They somehow have convinced themselves that the 
evidence is not sufficient. Well, it is sufficient. The studies 
are done. They are adequate.
    What we have is just a policy at the top of continuing to 
pursue trade at the expense of national security. And until the 
White House changes its view on that, I think we won't get any 
progress in implementing the laws that exist.
    Senator Brownback. Now if the White House will not 
implement these laws, should we tighten them further to not 
allow loopholes and to simply state if this occurs, this 
sanction will happen?
    Dr. Milhollin. I think the Congress ought to consider that 
very seriously. Also, I think the Congress ought to look at the 
whole group of sanctions laws.
    There have been so many sanctions laws passed, sort of ad 
hoc, that if you try to make a big chart of all the sanctions 
laws, it is a redoubtable task.
    Chemical sanctions, for example, are not very strong; that 
is, even if we sanctioned the Chinese for chemical weapon 
proliferation, what are the penalties? The companies cannot 
sell things to the U.S. Government. How much does the U.S. 
Government buy from Chinese chemical companies? Nothing. They 
cannot import into the United States or export to the United 
States from China. That is not a serious penalty.
    I think we have to look at making the penalties more severe 
and changing the triggering mechanism so that it is more 
automatic. But that is going to take dissecting the present 
labyrinth of sanctions laws and putting them back together in a 
more rational form.
    Senator Brownback. Dr. Carus, would you agree with that 
statement, that they need to be tightened and made more 
specific and workable if they are not currently?
    Dr. Carus. Unfortunately, I think the ultimate problem is 
the intent of whatever administration is in government at the 
time.
    I think this is demonstrated most starkly if you look at 
what happened in the case of Pakistan with the M-11 missiles. 
If the U.S. Government had said officially that Pakistan had 
received M-11 missiles from China, we would have had to impose 
sanctions.
    What happens in those cases is everybody knew the M-11 
missiles went to Pakistan. But because of the implications of 
that decision, the intelligence process was corrupted. And, as 
you followed in the press, somehow there was never a 
determination that those missiles had ever gone there. And my 
suspicion is effectively there never will be, even if you were 
able to walk up to one, open it up, and see that it is a 
missile. This is simply because if the executive branch decides 
that they do not want to impose sanctions, they will start 
corrupting the intelligence process to make sure there is never 
a determination that some egregious event has happened.
    Senator Brownback. Do you have to somehow design the law 
such that the determination is not built or cannot be corrupted 
by corrupting the intelligence system?
    Dr. Carus. If there is a way to do it, it certainly would 
be essential in the process.
    Senator Brownback. Dr. Bertsch, I want to make sure to get 
you in on this. I gather from your testimony that this is not 
the way to go; that we need to get Russia and China in, but 
that the current route is the route you would prefer to 
continue.
    But I want to challenge you on that. This current route has 
produced substantial weaponry going to the Iranians from those 
two nations.
    Dr. Bertsch. It has, Senator. You are right, and I think we 
should all be concerned with that.
    However, in the absence of the present U.S. policy, to 
which I give high marks, I think the problem would be much 
worse.
    I think we are fortunate that we have not seen more 
transfers, and I say the reason why is a relatively effective 
U.S. policy. I think we should not underestimate how effective 
the U.S. Government is with U.S. congressional leadership, in 
putting together a set of policies, and you have listed many of 
them on the board. I also think that when we think about new 
and tougher sanctions, and we should do that, we have to 
recognize that many of our close allies, not to mention Russia 
and China, look at their relations with other countries 
differently because they are neighbors and because they feel 
that economic and technological cooperation is in their 
national interest.
    They would also say that they think more of this is 
peaceful cooperation. I think we have to continue to question 
and do our intelligence work so that we know exactly what is 
peaceful and what is not peaceful.
    But I think that our most effective policy involves 
sanctions but in a multilateral way, where we are not the only 
ones imposing them. We need to have the Germans, the Japanese, 
and ideally the Russians and the Chinese on board. I think we 
are making some progress on that.
    Just let me conclude by saying that sometimes during the 
cold war years, we lost the cooperation of some of our allies 
and things went too easily from countries like Germany to Iran, 
or even to the Soviet Union at that time. Where we have been 
more effective is where we can go to a country like Iran and 
say there is a broad international consensus that your efforts 
to develop weapons of mass destruction are going to be very 
costly to you and we want you to recognize that this is not 
just the United States unilaterally imposing very tough 
sanctions that make us feel good but may not be as effective in 
terms of the final goal of stopping WMD programs in Iran.
    Dr. Milhollin. Could I respond to that?
    Senator Brownback. Dr. Milhollin.
    Dr. Milhollin. I think history teaches the opposite. If you 
talk to Japanese export control officials, they say that export 
control in Japan is divided into two epochs--before Toshiba and 
after Toshiba. The sight of U.S. Members of Congress destroying 
radios on the Capitol steps deeply shocked the Japanese, and 
they changed their export laws.
    I have talked to the Japanese regularly, and, believe me, 
they have not forgotten that incident.
    If you talk to the Germans about export controls--and I 
talk to them, too--they say that the universe is divided into 
two epochs: before Rabta and after Rabta. Their company, 
Imhausen, was nailed publicly on television in Germany and in 
the U.S. media as supplying, willfully, the chemical weapon 
plant to Libya despite U.S. objections.
    That only changed, that is, the big disaster only befell 
the Germans when it all got into the newspapers and it was in 
``Der Spiegel'' every week, and it was all over German 
television. Finally, the Germans were humiliated publicly, and 
they caved and changed their export laws.
    That's what it took in those two cases.
    The English are now going through the same experience. It 
is called Matrix Churchill. The British say well, there is 
before Matrix Churchill and after Matrix Churchill. Matrix 
Churchill was a large machine tool scandal that has just been 
the subject of an investigation and a long report in England. 
The folks who regulate export controls are still under the 
immediate shock of that experience.
    So from my perspective, and I have been following this very 
closely and working hard on convincing other countries to do 
better, it takes a lot to get people to change their practices. 
But it can be done. But it needs confrontation very often in 
order to overcome the really very strong and consistent motive 
for a profit.
    Senator Brownback. Yes.
    Senator Feinstein.
    Senator Feinstein. Just following along, Mr. Chairman, it 
takes not only confrontation, I think it takes transparency. I 
wanted to ask about two things, one being the United Nations 
and the second China.
    I thought one of the best things that President Bush did 
was to begin that effort for increased transparency in the sale 
of arms in the United Nations. As you gentlemen know, he had 
great success. I think the vote was 150 to nothing in the 
General Assembly. Then, of course, the F-16's were sold to 
Taiwan and China vetoed this effort in the Security Council. So 
it ended up going nowhere.
    I have asked both Secretary Christopher and Secretary 
Albright, and I think this is really worthy of an effort to 
pursue in the United Nations, to get that kind of multilateral 
alliance that you gentlemen were speaking about.
    With respect to China, China originally denied that it had 
sent the 3 dozen or so M-11's to Pakistan. I happen to believe 
they were sent. But, nonetheless, there was to be a second load 
which has never gone, to the best of my knowledge.
    I think that when China knew that we knew, it triggered 
some action on the part of Beijing.
    Then we got into the ring magnet situation, $75,000 worth 
of ring magnets, which are not complicated things. But 
apparently--and I tend to believe this--some of the ministries 
in China really operate in a much more uncontrolled and 
unsupervised way than the world would like to believe they do, 
and a lot of these transfers can take place really without 
Beijing's full knowledge.
    Do you find any substance in that? Could you inform us what 
is the extent of governmental controls over supplier companies 
in Russia, China, and North Korea? I am talking about 
individual sales now. And at which level of the national 
government are these controls exercised?
    Dr. Bertsch. I will begin, if you would like, Senator.
    I think you are absolutely right. That transparency is a 
very important element to effective export controls and 
nonproliferation, and that we should insist on it. If countries 
can be too secretive, it will be very costly in terms of our 
nonproliferation goals.
    Let me remark first on Russia which I know the best. We 
have had our researchers on the ground there for some years. We 
have a lot of exchange with Russian export control officials, 
both trying to understand better what is going on there and 
also trying to assistant them in cooperation with the U.S. 
Government in developing their export controls.
    One of the bits of good news is that we, in the U.S. 
Government, have launched an industrial outreach program into 
Russian military-industrial enterprises to bring about more 
export control compliance.
    With the export imperatives in Russia today, there is the 
possibility that these enterprises will export things and try 
to ignore what Moscow and the government wants them to do. We 
feel it is very important that, like American firms who are 
very well informed, as in California, about U.S. export control 
laws, Russian firms must be so equally well informed.
    I think the Russians and America, Russia, and other 
countries are working to make sure that Russian industry 
follows international and national law. However, in a country 
as large as Russia, with the military-industrial complex of the 
size they have, this will be an ongoing challenge.
    We have found even in America that, on occasion, some of 
our firms will export something that is counter to U.S. law and 
restrictions and they get into trouble. We want to see more of 
these firms in Russia getting in trouble.
    We know much less about China, but my colleague Richard 
Cupitt, who has prepared a separate statement that we have 
entered into the record, has been in China talking with 
government officials, talking with industry and nongovernmental 
groups to get to the bottom of this.
    We think there is a lot that we ought to know more about, 
and the U.S. Government and the Chinese Government first and 
foremost can be concerned with it. Our feeling is that we could 
probably bring about greater Chinese compliance if we could say 
to the government we know that you, government officials in 
China, are concerned about some of the things that your 
enterprises are doing.
    They sometimes feel in Beijing that they are losing control 
over the provinces and the economic zones, and we can say to 
them look, we have been dealing with the same problem in the 
privatized American economy for decades and why don't we share 
our expertise as we are doing with the Russians so that we can 
work together.
    We learn from one another. We learn more about what they 
are doing and not doing when we engage them, anyway.
    North Korea is the worst case, of course, because we have 
no real knowledge of what is going on there. Fortunately, they 
do not have the export capabilities and the military-industrial 
equipment and weapons systems that will have as big an impact 
as Russia and China.
    Senator Feinstein. Thank you.
    Dr. Milhollin?
    Dr. Milhollin. I would say that lack of government control 
over people and things has not really been thought of as a big 
problem in China--yet. Maybe we should start a rumor that 
dissidents have infiltrated China's export corporations. Then 
there would be total control overnight.
    I think the problem in China is not lack of control, it is 
a problem of corruption at high levels. People are making money 
out of these exports who control these corporations from the 
top.
    The Chinese companies that are in our data base and that we 
have talked about are state controlled companies.
    Senator Feinstein. May I stop you right there?
    Dr. Milhollin. Sure.
    Senator Feinstein. Let me ask you something. Let's take 
Pakistan.
    I happen to believe that the Chinese have helped them 
develop an indigenous nuclear capability by enriching uranium 
above the 5 percent level.
    Dr. Milhollin. Without a doubt.
    Senator Feinstein. Having said that, it would just seem to 
me that China at some point has to realize that having two 
competing indigenous nuclear powers, India and Pakistan, right 
over their border is not in their national interest.
    Dr. Milhollin. I don't think China sees it that way. For 
many years, China has used Pakistan as its window on the world. 
That costs a certain amount.
    Also, China has received the reactor order from Pakistan. 
It is building a couple of power reactors which are quite 
valuable.
    You know, you mentioned the ring magnets. The ring magnets 
follow a pattern. They are what are called ``sweeteners.'' They 
are little things that you would not export by themselves 
because they are very sensitive and they get you in a lot of 
trouble. But what you do is you throw them into a larger deal. 
That happens all the time.
    If you look at the Russian deal with Iran, the enrichment 
plant, the natural uranium, the little research reactor, these 
are all things that are not very valuable on their own. But 
when you are bargaining for a couple of big power reactors, you 
want the sweeteners.
    It is very hard not to provide the sweeteners.
    So getting back to your question, I think that explains the 
ring magnets. They don't make sense by themselves. But as part 
of this relationship and as part of a big transfer of power 
reactor technology, they make sense.
    So China still uses Pakistan as a window on the world and 
that costs a certain amount. And China is willing to pay that.
    I don't think China is concerned about India's program. 
India cannot threaten China now and it never has been able to 
threaten China. And India is not doing the things that would be 
necessary to really threaten China in the future. It does not 
have an active testing program. It is not pushing its 
intermediate range missile. India is not a threat to China.
    Senator Feinstein. No, I didn't mean to imply that. But 
with the India-Pakistan situation, the nondeployment of the 
Prithvi missile, for example, our sale of some of the missiles 
that could be carried on the plane which is part of the 
leftover package of arms for Pakistan, that is potentially a 
very dangerous situation between the two of them.
    Dr. Milhollin. It is. But the Pakistanis are in a reaction 
position with respect to India. India is much stronger 
conventionally. India has a stronger economy. The Pakistanis 
are always a step behind. They are always trying to catch up 
and they are always trying to maintain some kind of balance 
with India.
    The first place they go when they get into trouble is to 
the Chinese. Up to now, the pattern has been that the Chinese 
have helped them, and I don't see this changing.
    Senator Feinstein. Thank you.
    Senator Brownback. If I could, there are a number of people 
in Congress who would say we have bad actors in China, clearly 
in the government, and in the private sector. So let's just 
terminate MFN because it is too difficult to get at the 
specific company or the specific group that is providing 
weaponry to the Iranians.
    I happen to really question that way to go at it. But 
answer me this--and I am not sure who would be appropriate for 
this. Can we target the specific company in China or the 
extension of the government if it is that case that is 
providing weaponry to the Iranians? Can we get in with that 
narrow specific?
    You have given several examples, Dr. Milhollin. Will we be 
able to do that or will they shift it just to another shell 
company before exporting it?
    Dr. Milhollin. I think you could target specific companies. 
The China National Nuclear Corporation is not going away. It is 
going to be the source of nuclear technology for a long time in 
China. It is going to be the entity that cooperates with us.
    I think if you are convinced that they are continuing to 
help Pakistan, you can easily sanction that company. And many 
of the other companies that we have mentioned here are big, 
established companies. They have sales networks. It would be 
hard for them just to suddenly become something else.
    If you imagine McDonnell Douglas suddenly becoming some 
other company overnight, it is possible but there would be a 
cost.
    So by sanctioning those companies, we could impose a 
significant cost on them.
    Senator Brownback. And do you think that would be an 
appropriate step to take?
    Dr. Milhollin. I think it would. If the company is willing 
to defy the world and supply a country we consider as a threat 
to us and as a rogue, then I think we should basically 
blacklist them and just not deal with them--not export to them, 
not import from them--and do everything we can to discourage 
their behavior.
    Senator Brownback. Dr. Milhollin, you have provided a list 
of a number of those companies in your specific examples. Is 
that an all-inclusive list, or are there others that you 
believe we should blackball in our dealing with them?
    Dr. Milhollin. No. I think this is just, to invent a 
metaphor, the tip of the iceberg here.
    There are lots of other companies which I could provide to 
the committee.
    Senator Brownback. I wish you would. What I would like to 
see us do is to target in specifically on the bad actors in 
those nations, and particularly as we are approaching, again, 
the China MFN debate, let's focus in and narrow in on that 
specific company that is providing this sort of weaponry or 
technology to the Iranians.
    So if you could provide that to us really as soon as 
possible, it would be most appreciated.
    [The information referred to appears in the appendix.]
    Senator Brownback. I don't know if either of the other 
gentlemen would care to comment on this issue of narrowing in 
on the specific company and bad actor.
    Dr. Bertsch. I think there is value in that, and I think 
that sanctions should be focused and targeted on those most 
responsible.
    I caution sanctions imposed on Russia and China of the MFN 
character because we have to remember that we have much larger 
security and strategic interests with these countries. We are 
working with Russia right now on getting through this difficult 
NATO negotiation, and if we were to impose sanctions of a broad 
sort or withdraw MFN from them, in a way that would jeopardize 
our larger strategic interests. It would be very, very costly.
    I think that there are better ways of working on these 
proliferation leaks and transfers, both in Russia and in China, 
than imposing broad-scale economic sanctions on either of these 
countries.
    Senator Brownback. And you believe it to be doable as well, 
that we could target in on that company, and you would support 
such a policy that did target in and, if I could use the term, 
essentially blackball a company?
    Dr. Bertsch. I think so. I think in some cases that is 
justified.
    Senator Brownback. Dr. Carus?
    Dr. Carus. Let me make two comments. In general, I am very 
suspicious of sanctions that Congress imposes on the executive 
branch simply because you get a corruption of the process, as I 
described in the case of the Pakistan missiles, the 
administration never admits the truth of what has happened.
    Having said that, unfortunately, sometimes the only tools 
you have available in terms of a dialog with an administration 
are very blunt instruments. I think the history on export 
controls has been that administrations have only reacted when 
Congress has raised enough of a fuss that the administration 
has been forced to take seriously things that they would rather 
ignore.
    Senator Brownback. That is what we are trying to do here, 
raise enough of a fuss.
    Dr. Carus. So having said that I am not particularly fond 
of sanctions, under some circumstances, and I think we are in 
that kind of situation today, it is the only option available 
and should be pursued.
    I think from this point of view, making it as targeted as 
possible is the right way to go. Hopefully, the result would be 
a dialog with the executive branch that would lead to perhaps a 
modification in policy.
    If you recall, in the early days of the Bush 
Administration, it was willing to let Iraq buy just about 
anything. By the end of its term, they had a much different 
view on things. But, it didn't just happen overnight. It 
happened over time because of pressure on the administration.
    Senator Brownback. Senator Feinstein.
    Senator Feinstein. It would seem to me that if we were to 
follow this course, then we would also have to apply the same 
standards to Germany or the same standards to Russia and really 
do it across the board to make it meaningful--not select one 
country and impose a pinpointed sanction, but, really, all of 
those businesses and corporations that do this kind of thing 
with impunity.
    Would you not agree?
    Dr. Milhollin. I would certainly agree. It is always more 
awkward, of course, to impose a sanction on a close ally. But 
if the case is clear, as it was in the Imhausen case for Rabta, 
then the world is better off if you take a strong position.
    I think that case shows that to be true.
    Senator Feinstein. Let me ask this question.
    Iran is a member of the Nuclear Nonproliferation Treaty and 
IAEA inspections have never turned up any prohibited activity. 
Nonetheless, everyone is certain that Iran is pursuing nuclear 
weapons.
    Iran has also signed, although not yet ratified, the 
Chemical Weapons Convention, and we believe Iran has a chemical 
weapons program. What should we do in this situation about a 
state like Iran, that is a member of arms control treaties, 
that passes inspections, but that we believe is cheating? If we 
cannot prove it, how do we get other nations to join us in 
combating it?
    Dr. Carus. Senator, if I may respond to that, I think we 
are actually relatively fortunate in that in the broad outlines 
I think most of our friends agree with us on this.
    If you look at the nuclear issue, it is true that nobody 
has ever found a violation of IAEA safeguards in Iran. Yet we 
have now, essentially, a 15 year track record of convincing 
other governments that it would be a bad idea to support 
Iranian nuclear development programs. So, for example, back in 
the early 1980's, when the Revolutionary Government wanted to 
resume building the Bushehr reactors, we convinced the Germans 
not to do it.
    Over the years we have approached many governments and 
convinced them that it would be a bad idea. So, in fact, I 
think in this particular case we are quite fortunate that most 
governments accept our arguments and, in fact, are concerned 
about what Iran might do. This gives us a real leg up in the 
case of Iran.
    Unfortunately, there are a few major exceptions, and we 
have been focusing on them today.
    Senator Feinstein. May I ask you gentlemen to also provide 
the subcommittee with any lists of the sales, with specificity 
as to the companies or corporations in both Germany and Russia 
as well?
    Senator Brownback. Anywhere around the world, actually, if 
you would not mind.
    Senator Feinstein. That would be just fine.
    Senator Brownback. Let's say if you know of bad actors in 
this, let's get at it.
    [The information referred to appears in the appendix.]
    Senator Brownback. Have you anything further, Senator 
Feinstein?
    Senator Feinstein. Yes. Let me just ask you a status 
question. Last year, we all had concern that China was going to 
proceed with a nuclear enrichment facility in Iran. To my 
knowledge, that has not taken place.
    Do you have any information about this proposed sale? Do 
you have any information as to why it has not gone forward? Is 
Iran's inability to pay the reason, or has China really decided 
it would be a better idea not to go ahead?
    What is the status of the proposed sale of the two nuclear 
reactors to Iran?
    Dr. Milhollin. Are you speaking of the Chinese reactors?
    Senator Feinstein. Yes.
    Dr. Milhollin. If I could start, my impression is that the 
Chinese arrangements with Iran are in a state of suspension at 
this time pending the outcome of Iran's hope that it will be 
able--I'm sorry. Let me start over.
    China's sale of the hexafluoride plant and China's sale of 
research reactors and so forth to Iran seems to be in a state 
of suspension pending the outcome of our talks with China about 
the nuclear cooperation agreement with the United States.
    I think the Chinese recognize that if tomorrow they 
announce that the hexafluoride plant was going forward, there 
would be no hope of an agreement with us.
    So as I said in my testimony, I think it is sort of a 
gentle form of blackmail. The Chinese supply pipeline is in a 
state of remission at the moment, awaiting the outcome of our 
discussions with them. That is my impression of what the status 
is today of the nuclear cooperation between China and Iran.
    Senator Feinstein. Does anyone have any other comments on 
that?
    Dr. Bertsch. I don't think I really have anything to add 
beyond that and what was discussed at the April 17 hearing. But 
it can be viewed as a policy of blackmail, although it also can 
be viewed as a policy of U.S. influence on China, that if this 
opportunity for expanded cooperation with the United States on 
the nuclear front, China-U.S., keeps this deal in a state of 
suspense, then we are serving our nonproliferation objectives.
    Senator Feinstein. I have two other questions.
    Last year, Congress passed and the President signed the 
Iran-Libya Oil Sanctions Act which requires sanctions against 
foreign companies that invest more than $40 million in Iran's 
oil and gas industry.
    How effective has this law been in depriving Iran of funds 
generated by these oil and gas development contracts?
    How much hard currency would you estimate Iran has lost so 
far and are there companies who have invested in Iran's oil and 
gas sector despite the threat of U.S. sanctions?
    Have we imposed any sanctions against any of them? How 
effective a tool do you believe this law is in preventing 
proliferation in Iran?
    I am sorry there are so many questions in one.
    Dr. Carus. Senator, I do not consider myself an expert on 
these issues, but I have followed them. My sense is that the 
law and the U.S. pressure has been quite effective. They made 
what appeared to be an already very unpromising market and made 
it even less attractive for doing business.
    If you look at the cases that have taken place, such as 
Total's oil deal, the impression outsiders have is that because 
the gas produced cannot be sold into the UAE, that it is a 
money losing proposition for Total.
    There are some other companies that are looking to get into 
Iran, including a Malaysian company. But these are small actors 
that cannot bring Iran the technology and the resources they 
need.
    Given that the Iranians need to spend an enormous amount of 
money in their energy sector in order just to meet domestic 
demand, if you consider sanctions as one of several negative 
factors that are facing them, I think it has had an important 
contribution.
    Clearly, to the extent that the Iranians do not get 
alternative sources of resources to pay for infrastructure, it 
means that it is money that they do not have for their NBC 
acquisition program.
    Dr. Milhollin. I just have one comment on that.
    It seems to me that the United States has two, big, 
important, strategic assets. One of them is our market. 
Everybody wants access to it. I think we should withhold it 
from folks who do not merit access. And if you force them to 
choose between access to the U.S. market and access to the 
market of selling a few missiles and chemical weapon plans here 
and there, the choice will always be the U.S. market.
    Second, we have high technology, which everybody wants. I 
think we should also restrict that to companies and countries 
that we can rely on, that share our values.
    Senator Feinstein. Those are two good points. I agree.
    Doctor, do you have any comment on that?
    Dr. Bertsch. No.
    Senator Feinstein. Let me ask--I'm sorry. My red light is 
on.
    Senator Brownback. I was just going to wrap up the hearing. 
So if you have another, please ask it.
    Senator Feinstein. I just have one more question about 
Europe.
    Senator Brownback. Please go ahead.
    Senator Feinstein. The EU has insisted on conducting what 
they have called a ``critical dialog'' with Iran despite United 
States efforts to get EU nations to isolate Iran.
    In the wake of last month's German court decision, which 
held that senior Iranian officials were responsible for the 
Mykonos bombing that killed three Iranian dissidents in Berlin 
in 1992, the EU has suspended its critical dialog.
    What do you think the significance of this decision is? How 
much has this dialog hindered our efforts to isolate Iran? How 
much of a difference can the new EU policy make? Can we expect 
more vigorous European efforts to isolate Iran or combat its 
use of terrorism and weapons of mass destruction?
    Dr. Bertsch. I would not expect too big a change in 
European policy. I suspect that they are committed to their 
basic policy of dialog and that this will go on, and that these 
temporary developments are rather temporary.
    Senator Feinstein. I don't mean to interrupt you, but the 
problem I have is this is deeply troubling to me. If our 
European allies, for whom we maintain NATO, with whom we have 
this close relationship, won't support these policies, the 
effect of that is to subvert them. I think that is a major 
problem.
    I happen to agree with what Dr. Milhollin said. But if 
Europe won't provide the kind of support we need and will just 
simply move in behind and sell some of these products, then our 
efforts are somewhat wasted.
    Dr. Bertsch. I agree, Senator. We have had a good bit of 
problem with our European allies for some decades. But by and 
large, they listen to the United States and they will work with 
us.
    I think that over a period of time, they are going to make 
their own judgments about the terrorist threats emanating from 
Iran.
    I think this recent case in Germany helped better inform 
the German public and German officials, and I think will make 
it easier to work with our German and European allies.
    At the same time, they look at economic cooperation and 
political relations with countries such as Iran somewhat 
differently than we do. We have to deal with that. We don't 
always like it, but I think we cannot underestimate the value 
of trying to bring a cooperative front with our European allies 
and bringing other countries, as well, into it.
    Dr. Milhollin. Senator, I would say that this court 
decision has just produced a very strong shot of what you said 
was good and necessary, which is transparency.
    The public all know now that the Iranians are perfectly 
capable of doing what the court said they did. I think that to 
influence the Europeans over time on the subject of supplying 
Iran, we have to start using the policy we used with respect to 
Libya and the Imhausen case, which I mentioned before.
    Our intelligence agencies know which German companies are 
selling what to Iran. We, I think--I hate to say this--but I 
think, until we start putting that out in the media, as we did 
in the case of the Libyan poison gas plant, we are not going to 
create the kind of public pressure that is necessary in order 
to change the behavior of the European companies.
    But I promise you that if our intelligence agencies did put 
out what they know about what is going into Iran, it would 
change behavior. It is just, I guess, that the powers that be 
have decided that the diplomatic cost is not worth it. So we 
don't see this information coming out.
    Senator Feinstein. If you send it to us, we can put it out.
    Senator Brownback. Yes.
    Thank you all very much. I appreciate the panel and those 
who have participated, and Senator Feinstein for her excellent 
questions and participation in this hearing. I appreciate that 
a great deal.
    It strikes me that we may have a moment here where we can 
step up the focus and the pressure on those who are supplying 
the Iranians, who many have identified as our erstwhile present 
danger that we have in the world, and that we can do something 
of a targeted, specific, and efficient and effective measure. 
The German court ruling I think is a part of that. With the 
desires here on Capitol Hill, our relationships with Russia and 
China, the upcoming China MFN debate, we may have a moment 
where we can step forward and hopefully do something good and 
constructive on this.
    Thank you all for your attendance.
    We are adjourned.
    [Whereupon, at 11:50 a.m., the subcommittee adjourned.]


                                APPENDIX

                              ----------                              


                Prepared Statement of Leonard S. Spector

    It is an honor to testify before the committee this afternoon on 
U.S. efforts to halt weapon of mass destruction (WMD) and missile 
programs in Iran.
    Iran's growing capabilities in these spheres already pose a grave 
risk to U.S. allies and U.S. forces in the Persian Gulf region, but 
this threat could greatly worsen in coming years, as Iran graduates to 
even more potent weapons than it currently possesses, enlarges its 
missile arsenal, builds longer-range systems, and learns to mate its 
weapons of mass destruction with these advanced delivery systems.
    As an independent observer who has not had access to classified 
information on these issues, it is possible for me to offer only a 
rough appreciation of the status of Iran's military programs and of 
U.S. efforts to constrain them. Nonetheless, using published reports 
and statements of U.S. and foreign officials, it is possible to develop 
a framework for assessing the successes and failures of U.S. policy. I 
hope the Committee will be able to employ this framework as it 
evaluates the more complete information at its disposal.
    The United States has many instruments in its tool kit to fight the 
spread of WMD and advanced delivery systems. These include:
   building and sustaining international non-proliferation 
        regimes and norms;
   slowing the spread of dangerous technology through 
        unilateral and multilateral export controls;
   employing targeted diplomatic initiatives, including 
        security guarantees, incentives, and sanctions;
   working to reduce the regional security threats that spawn 
        interest in special weapons;
   applying military resources through ``counter-
        proliferation'' initiatives;\1\ and
---------------------------------------------------------------------------
    \1\ In using this term, I have in mind the use of passive defenses, 
active defenses (against theater-based threats), deterrence based on 
the threat of massive conventional retaliation, and adjustments to 
military operations and planning.
---------------------------------------------------------------------------
   implementing the ``Cooperative Threat Reduction'' program, 
        also known as the Nunn-Lugar program, aimed at helping to 
        secure weapon of mass destruction and WMD materials in the 
        former Soviet Union.
    Like its predecessors, the Clinton Administration has attempted to 
use all of these mechanisms, at various times and in various 
combinations, to restrain Iran's WMD and missile advances. In the end, 
whether one or another of these mechanisms has been used to its fullest 
extent is less important than whether, by taking advantage of its 
entire tool kit, the Administration has obtained results.
    From my perspective, the record is mixed. There have been some 
important successes with respect to Iran's nuclear program and, 
possibly, with respect to aspects of its missile program. But there 
have also been some serious setbacks, especially with respect to Iran's 
development of biological and chemical weapons.
    One useful way for filling in the Administration's non-
proliferation scorecard vis-a-vis Iran is to identify the principal 
Iranian programs of concern and assess the results of the 
Administration's efforts in each case.
    Based on the open record, Iran can be thought of as pursuing WMD 
and missile programs along at least eleven distinct paths, including:
    1. Nuclear weapons (clandestine production of nuclear weapons 
material)
    2. Nuclear weapons (purchase of nuclear weapons material)
    3. Nuclear weapons (open, civil nuclear energy program)
    4. Biological weapons (domestic production, with some outside 
assistance)
    5. Basic chemical weapons (domestic production, including sulfur 
mustard, phosgene, and cyanide, with outside assistance)
    6. Advanced chemical weapons (domestic production of agents such 
as, Soman, Tabun, Sarin, and VX, with outside assistance)
    7. Scud missiles (purchases--including Scud-Cs with a range of 500 
km)
    8. Longer range ballistic missiles (purchases--North Korean 1,000 
km No-Dong)
    9. Scud and other short range missiles (indigenous production--
including Scud-Cs with a range of 500 km--with outside assistance)
    10. Longer range 1,000 to 1,400 km ballistic missiles (indigenous 
production, with outside assistance)
    11. Cruise missiles (acquisition of the Chinese C-802 and the 
domestic development of land-attack derivatives)
    To keep my remarks brief, I will only outline developments in each 
of these areas, but I would be pleased to expand my comments on 
particular points in response to questions from the Committee. For the 
convenience of the Subcommittee, I have appended to my testimony an 
annotate table, prepared by my colleague Gregory Koblentz, listing 
alleged transfers of nuclear, biological, chemical, and missile 
equipment and technology and the U.S. response, with particular 
reference to the imposition of sanctions.
    1. Nuclear weapons (clandestine production of nuclear weapons 
material). Despite reports dating back a number of years that Iran is 
seeking to develop the ability to manufacture nuclear weapons material, 
to date it has not been reported that Iran is building any of the key 
installations needed for this purpose. Iran is constrained by its 
status as a party to the Nuclear Non-Proliferation Treaty (NPT) to 
accept comprehensive International Atomic Energy Agency (IAEA) 
inspections and has voluntarily allowed wide-ranging monitoring that 
goes beyond the IAEA's normal oversight. To date, although the IAEA is 
now privy to U.S. intelligence, it has not unearthed any clandestine 
facility in Iran needed for the manufacture of nuclear weapons, and, as 
I noted earlier, there have been no reports that such a facility 
exists. Several reports indicate, moreover, that Iran's efforts to 
import equipment for a clandestine nuclear effort have been thwarted in 
particular cases, suggesting that U.S. intelligence and Western export 
controls are being used to advantage in this battle.\2\ Recently, U.S. 
Arms Control and Disarmament Agency Director John Holum testified that 
in the past two years, Iran has made little or no progress down this 
path--or any other path--toward nuclear arms.\3\
---------------------------------------------------------------------------
    \2\ Con Coughlin, ``Britain Seizes Bomb-Grade Steel Cargo,'' 
Washington Times, August 12, 1996, p. 8; Mark Hibbs, ``No German 
Nuclear Equipment Getting to Iran, Bonn Vows,'' Nuclear Fuel, April 10, 
1995, p. 5; Thomas W. Lippman, ``Stepped-Up Nuclear Effort Renews Alarm 
About Iran,'' Washington Post, April 17, 1995; Elaine Sciolino, ``Iran 
Says It Plans 10 Nuclear Plants But No Atom Arms,'' op. cit.; 
PPNNNewsbrief, Third Quarter 1995, p. 17; Mark Hibbs, ``Investigators 
Deny Iran Smuggled Weapons Material From Germany,'' Nucleonics Week, 
February 1, 1996, p. 14.
    \3\ ``Testimony of John Holum, Director, Arms Control and 
Disarmament Agency,'' before the House International Relations 
Committee, Subcommittee on International Operations and Human Rights on 
the FY 1998 Authorization for the U.S. Arms Control and Disarmament 
Agency, March 5, 1997.
---------------------------------------------------------------------------
    On the other hand, it is also generally accepted that Iran is 
conducting suspicious research and is attempting to import equipment 
and technology relevant to the production of nuclear-weapons material.
    Tentative conclusion. This facet of Iranian activities remains a 
continuing danger. However, the Clinton Administration's efforts to 
assist the IAEA in implementing inspections under the NPT, together 
with multilateral efforts (supported by U.S. intelligence) to restrict 
clandestine nuclear equipment and technology transfers to Iran, have 
kept Iran on the defensive and have significantly constrained this 
Iranian effort.
    2. Nuclear weapons (purchase of nuclear weapons material). It is 
widely understood that security over nuclear weapons materials in the 
former Soviet Union falls far short of international standards and that 
the risk of diversion and smuggling of such materials out of the Soviet 
successor states remains high, particularly from Russia, where the vast 
proportion of the materials are stored. U.S. officials have testified 
that Iran has been seeking to obtain such materials at installations in 
the former Soviet Union. So far, however, Iran is not known to have 
succeeded in this effort.
    The Clinton Administration, with the strong support of Congress, 
has worked aggressively to cooperate with Russia and other successor 
states to upgrade security at facilities housing such materials. The 
United States is also purchasing some 500 tons of weapons usable 
uranium from Russia for conversion into reactor fuel (which will take 
it out of harm's way) and, in an extraordinary initiative known as 
Operation Sapphire, the United States quietly removed 500 kilograms of 
highly enriched uranium from an insecure facility in Kazakhstan.
    Very serious dangers remain, however. As highlighted in a National 
Academy of Sciences report being released today, the U.S. program to 
work with Russia to enhance material protection, accounting, and 
control is now starting to bear fruit and ``tons'' of weapons material 
are now under world-class security in Russia as a result of the 
program. But, the report continues, ``tens of tons'' are under only 
partial control and adequate security for ``hundreds of tons'' has yet 
to be provided. The report concludes that it is essential that the 
program, which has now built substantial momentum, continue with 
funding at least at current levels--or higher if new opportunities to 
enhance security arise.\4\
---------------------------------------------------------------------------
    \4\ Proliferation Concerns: Assessing U.S. Efforts to Help Contain 
Nuclear and Other Dangerous Materials and Technologies in the Former 
Soviet Union (Washington, D.C.: National Research Council of the 
National Academy of Sciences, April 17, 1997.)
---------------------------------------------------------------------------
    Tentative conclusion. Iran's bid to purchase weapons-grade nuclear 
materials clandestinely remains a grave threat. U.S. programs are 
beginning to make important headway in addressing this danger, but 
years will be needed to bring it under control. Continued Congressional 
support is essential.
    3. Nuclear weapons (civil nuclear energy program). Inasmuch as all 
facilities in the open Iranian nuclear energy program will be subject 
to IAEA monitoring, the concern in this sphere is not that particular 
installations will be misused for nuclear weapons, but that a large 
civil nuclear energy program will indirectly support the Iranian 
nuclear weapons effort by training scientists, technicians, and 
engineers in nuclear specialties. These individuals, in turn, could 
then switch over to work in a clandestine nuclear weapons program and 
use their training to help in the construction and operation of 
possible parallel undeclared nuclear installations.
    In 1992, Washington succeeded in persuading China to postpone 
indefinitely the sale to Iran of a plutonium-producing research 
reactor.\5\ In addition, in 1995, China suspended its plans, announced 
three years earlier, to supply two 300-megawatt nuclear power reactors 
to Iran.\6\ More recently, China canceled plans to transfer to Iran a 
sensitive uranium ``conversion'' plant, able to produce uranium 
hexafluoride--a feedstock for the process used to produce weapons-grade 
uranium. This decision is apparently the result of the diplomatic 
intervention of the Clinton Administration.\7\
---------------------------------------------------------------------------
    \5\ See Mark Hibbs, ``Iran Sought Sensitive Nuclear Supplies from 
Argentina, China,'' Nucleonics Week, September 24, 1992, p. 2; Steve 
Coll, ``U.S. Halted Nuclear Bid by Iran,'' Washington Post, November 
17, 1992.
    In December 1996, there were indications that China might revive 
the sale of the research reactor to Iran. See Mark Hibbs, ``China Has 
Far to Go Before U.S. Will Certify, Agencies Now Say,'' Nucleonics 
Week, December 12, 1996, p. 1.
    \6\ Supplementary materials submitted by Barbara Larkin, Acting 
Assistant Secretary for Legislative Affairs, U.S. State Department, 
Hearings on Current and Projected National Security Threats to the 
United States and its Interests Abroad, Select Committee on 
Intelligence, U.S. Senate, February 22, 1996 (supplementary materials 
supplied May 23, 1996), p. 135.
    \7\ Interview with Chinese official, Washington, D.C., March 1997.
---------------------------------------------------------------------------
    Russian assistance to the Iranian nuclear program has also slowed. 
Moscow's plan for the sale to Iran of a sizable research reactor, 
suitable for the production of plutonium, appears to have been 
suspended. Secondly, under U.S. pressure in mid-1995, Russia canceled a 
contract to supply a highly sensitive uranium enrichment plant to Iran. 
Russia, however, remains committed to its sale of nuclear power 
reactors to that country, the first of which it is now building at 
Bushehr. This sale is consistent with international rules. However, the 
Administration continues to emphasize its opposition to the sale to the 
Russian government.\8\ Recently, the United States placed another 
obstacle in the path of the project--which is already far behind 
schedule--by persuading Ukraine not to sell Iran the (non-nuclear) 
turbine for the facility.\9\ At the same time, the Administration has 
been reluctant to undermine other elements of U.S. relations with 
Russia by treating this as the most important issue between our two 
countries; as a result, the Administration has twice waived the 
provisions of the Foreign Operations Appropriations Act that would 
require a termination of U.S. foreign assistance to Russia unless it 
ceased all transfers of nuclear equipment and technology to Iran.
---------------------------------------------------------------------------
    \8\ One aspect of the Russian reactor sale of particular concern to 
the United States are the arrangements for the disposition of the 
plutonium-bearing spent fuel that the Bushehr unit will produce. 
According to U.S. officials, as of December 1996, Russia and Iran had 
not yet concluded an agreement for the return of the spent fuel to 
Russia, a valuable non-proliferation measure traditionally included in 
Russian nuclear reactor sales contracts. Mark Hibbs, ``Iran May Keep 
Russian Spent Fuel Or Take Plutonium, REPU, Waste,'' Nuclear Fuel, 
December 18, 1995, p. 1; Mark Hibbs, ``Iran, Russia Still Settling 
Countertrade Terms for PWRS,'' Nucleonics Week, October 5, 1995, p. 9.
    \9\ Michael Gordon, ``Ukraine Decides Not to Provide Reactor Parts 
to Iran,'' New York Times, April 7, 1997.
---------------------------------------------------------------------------
    Tentative conclusion. By diplomatic interaction with China, the 
Administration persuaded Beijing to suspend the transfer of the most 
sensitive of the civilian nuclear plants that Iran has recently sought 
to purchase. Although Russia has delayed plans to build a sensitive 
research reactor in Iran, Washington has enjoyed less success in 
halting Russia's construction of the Bushehr nuclear power plant, but, 
at least, it has slowed this project somewhat.
    4. Biological weapons (BW). Controlling the spread of this weapon 
of mass destruction is probably the most daunting non-proliferation 
challenge facing the United States and its friends. The necessary 
technology is widespread in civilian industry, the manufacture of BW is 
relatively less difficult, and, because BW can be manufactured rapidly 
and in small-scale facilities, detecting BW programs can be extremely 
demanding. International controls lag far behind those currently 
covering nuclear weapons or those that will shortly cover chemical arms 
under the Chemical Weapon Convention.
    The U.S. intelligence community believes Iran has been developing a 
substantial biological warfare program, and that, as of May 1996, it 
had acquired its first stocks of biological weapons. If true, this 
would be the most disturbing act of WMD proliferation during that year. 
The agency estimates that Iran currently possesses a limited stockpile 
of biological weapons that it could deploy using artillery, mortars, 
rockets, and aerial bombs.\10\ The Central Intelligence Agency (CIA) is 
concerned that Iran has the potential to develop a biological warhead 
for its ballistic missiles, but does not expect this to occur before 
the end of the century.\11\
---------------------------------------------------------------------------
    \10\ The CIA has stated that while Iran's BW program is mostly in 
the research and development stages--likely investigating both toxins 
and live organisms as BW agents--Iran has ``the technical 
infrastructure to support a significant BW program and needs little 
foreign assistance.'' ``Supplementary Materials Submitted by John H. 
Moseman, Director of Congressional Affairs, Central Intelligence 
Agency,'' Hearings of the Current and Projected National Security 
Threats to the United States and Its Interests Abroad, Select Committee 
on Intelligence, U.S. Senate, February 22, 1996 (supplementary 
materials supplied May 10, 1996), p. 82.
    \11\ Ibid.
---------------------------------------------------------------------------
    China has been implicated in supporting aspects of Iran's BW 
activities, but the extent of such involvement is murky and, 
apparently, has not raised the issue of sanctions.\12\
---------------------------------------------------------------------------
    \12\ U.S. officials have not publicly indicated whether China is 
implicated in Iran's BW program, but has apparently received 
intelligence that BW-related transfers have been made. Bill Gertz, 
``Albright Concedes `Concern' Over China-Iran Transfers,'' Washington 
Times, January 24, 1997.
---------------------------------------------------------------------------
    Let me point out that at the time of the 1991 Gulf War, Saddam 
Hussein possessed twenty-five missiles with BW warheads, which he 
considered a part of his ``strategic'' arsenal--able to cause mass 
casualties if used against the cities of an adversary. It is possible 
that Iranian efforts to achieve a parallel capability will be detected 
and might be discouraged or deterred.
    Given Iran's progress in the area of biological weapons, the United 
States and its friends must be prepared with counter-proliferation 
measures to contain this threat--especially, defenses, deterrence, and 
adjustments in military doctrine and strategy.
    Tentative conclusion. The Iranian BW threat is already very serious 
and is likely to worsen. However, Iran still has far to go to develop a 
mature, missile-based BW capability, and it may yet be possible to 
block these advances. New strategies need to be developed to address 
this threat.
    5. Basic chemical weapons (including sulfur mustard, phosgene, and 
cyanide). The CIA has stated that Iran is continuing to expand and 
diversify its chemical weapons program, already among the largest in 
the Third World. The agency estimates that Tehran currently controls a 
CW stockpile of several thousand tons that includes sulfur mustard, 
phosgene, and cyanide agents, and has the potential of producing 1,000 
tons of these agents each year. The delivery means for these agents 
include ``artillery, mortars, rockets, aerial bombs, and, possibly, 
even Scud warheads.''\13\ Importantly, the chemical agents that Iran 
possesses are World War I era weapons; it has yet to produce more 
advanced nerve agents, such as Soman, Tabun, Sarin, or VX.\14\
---------------------------------------------------------------------------
    \13\ ``Supplementary Materials Submitted by John H. Moseman, 
Director of Congressional Affairs, Central Intelligence Agency,'' 
Hearings on Current and Projected National Security Threats to the 
United States and Its Interests Abroad, op.cit, p. 82. The DIA has 
projected that Iran may have as much as 2,000 tons of CW agents in its 
stockpile. ``Supplementary Materials Submitted by Lieutenant General 
Patrick M. Hughes, Director of the Defense Intelligence Agency,'' 
Hearings on Current and Projected National Security Threats to the 
United States and Its Interests Abroad, op. cit., p. 206.
    \14\ W. Seth Carus, ``Iran's Weapons of Mass Destruction,'' 
presented at the Nixon Center for Peace and Freedom, February 20, 1997.
---------------------------------------------------------------------------
    Based on technology dating back to World War I, these CW agents are 
easy to manufacture. Chinese firms have apparently played a role in 
supplying CW precursors to Iran, leading to the imposition of sanctions 
against several firms and persons in 1994 and 1995.\15\ In November 
1995, referring to Iran's CW program, Deputy Assistant Secretary of 
Defense for Near East and South Asia Bruce Reidel testified:
---------------------------------------------------------------------------
    \15\ Gary Milhollin and Meg Dennison, ``China's Cynical 
Calculation,'' New York Times, April 24, 1995, p. A17.

          In the chemical arena, we have seen some evidence that China 
        has provided some assistance or Chinese firms have provided 
        some assistance, both in terms of the infrastructure for 
        building chemical plants and some precursors for developing 
        agents. I would point out here that the Chinese chemical 
        industry is very rapidly growing at this time, and not all 
        facets of it may be under the fullest scrutiny of the Chinese 
        government.\16\
---------------------------------------------------------------------------
    \16\ ``Testimony of Deputy Assistant Secretary of Defense for Near 
East and South Asia Bruce Reidel,'' Hearings before the House 
International Relations Committee, U.S. Policy on Iran, November 9, 
1995.

    Chinese assistance for either the Iranian basic or advanced CW 
program is apparently continuing, inasmuch as Deputy Assistant 
Secretary of State Robert Einhorn recently testified that the 
Administration is reviewing the possible imposition of CW sanctions 
against Chinese entities. It is not clear to an outsider how extensive 
Chinese assistance may have been, nor is it clear to what extent the 
transfers to Iran have been deliberate Chinese policy or have been the 
result of unscrupulous exporters and a poorly differentiated Chinese 
export control system.
    Tentative conclusion. Obviously, the Administration has not been 
successful in halting Iran's basic CW program. It is possible that with 
more active enforcement of the U.S. chemical weapons sanctions 
legislation the Clinton Administration might have achieved more, but 
the details needed to make this assessment have not been made public. 
It is also important to note that, as yet, Iran has not graduated to 
the more modern and more potent CW agents that Saddam Hussein 
possessed. In addition, the entry into force of the Chemical Weapon 
Convention later this month will reinforce the norm against the 
possession of chemical armaments and will enhance multilateral export 
controls, developments that will provide added support for U.S. efforts 
to curb Iran's activities in this sphere. To meet the challenge posed 
by Iran's existing CW capabilities, the United States and its friends 
will have turn to counter-proliferation measures: defenses, deterrence, 
and adjustments in military planning to account for this threat.
    6. Advanced chemical weapons (such as, Soman, Tabun, Sarin, and 
VX). In the case of Iraq, VX nerve gas, mated with Al-Hussein missiles 
formed the second component of Saddam Hussein's strategic arsenal. 
Fortunately, Iran has yet to produce these agents, but it is 
undoubtedly attempting to do so. As noted in item 5, above, China may 
be assisting this effort.
    It is important to stress that Saddam Hussein made the transition 
from basic CW agents to more advanced ones in the course of four to 
five years, with few restraints on his access to outside assistance. 
Iran, ten years after acquiring basic CW agents, still has not achieved 
a more advanced capability, suggesting that U.S.-led international 
efforts to curtail its access to needed technologies may be 
succeeding.\17\
---------------------------------------------------------------------------
    \17\ Proliferation: Threat and Response (Washington, D.C.: U.S. 
Department of Defense, 1996), p. 15.
---------------------------------------------------------------------------
    Tentative conclusion. Given the greater difficulty in producing 
these agents and the fact that Iran apparently does not yet possess 
them, assertive U.S. diplomatic efforts--including the imposition of 
sanctions against supplier states--could make the critical difference 
in arresting this dangerous aspect of Iran's WMD program.
    7. Scud missiles (purchases--including Scud-Cs with a range of 500 
km). Iran possesses two versions of the nuclear-capable, North Korea-
supplied, Scud ballistic missile--the Mod. B (300-km range) and the 
Mod. C (500-km range).\18\
---------------------------------------------------------------------------
    \18\ It also has in its inventory the Chinese-supplied CSS-8 missile 
with an estimated range of 150 kms. ``Statement by Joseph S. Bermudez 
Jr.,'' before the House Committee on Foreign Affairs, Subcommittee on 
International Security, International Organizations and Human Rights, 
September 14, 1993; William C. Potter and Harlan W. Jencks, eds., The 
International Missile Bazaar (Boulder, CO: Westview Press, 1994), p. 
65; Office of the Secretary of Defense, Proliferation: Threat and 
Response, op. cit., p. 16; Also see ``Iran Said Seeking Scud Know-How 
in Germany,'' Reuters, December 15, 1994; Barbara Starr, ``Iran Gets 
`Scud' TELs From North Korea,'' Jane's Defense Weekly, May 13, 1995, p. 
5.
    Iran has in its possession a contingent of strike aircraft which 
could be modified to carry nuclear weapons, including U.S.-origin F-4s, 
F-5s and F-14s, as well as Soviet-origin MiG-29s and SU-24s. See Office 
of Technology Assessment, Technologies Underlying Weapons of Mass 
Destruction (Washington, DC: U.S. Government Printing Office, December 
1993), pp. 237-242; International Institute of Strategic Studies, The 
Military Balance 1993-1994 (London: International Institute for 
Strategic Studies, 1993), p. 116.
---------------------------------------------------------------------------
    On March 6, 1992, the United States imposed sanctions under missile 
non-proliferation provisions of the Arms Export Control and Export 
Administration Acts against the Iranian Ministry of Defense and Armed 
Forces Logistics and against two North Korean entities for engaging in 
``missile proliferation activities.''\19\ According to U.S. officials, 
the activities involved were the transfer by North Korea to Iran of 
Scud missiles and production technology for such missiles, which 
resulted in the imposition of ``Category I'' sanctions, the harsher 
sanctions under the above-noted laws.\20\ On May 24, 1996, Washington 
imposed less severe Category II sanctions against the Iranian Ministry 
of Defense Armed Forces Logistics, the Iranian State Purchasing Office, 
and the Korea Mining Development Trading Bureau for engaging in missile 
technology proliferation activities.\21\ The precise nature of the 
activities leading to the sanctions remains classified, but U.S. 
officials have indicated that they involved the provision by North 
Korea of missile components, equipment, and materials rather than 
complete missiles, production technology, or major subsystems.
---------------------------------------------------------------------------
    \19\ ``Imposition of Missile Proliferation Sanctions Against North 
Korean and Iranian Entities,'' Federal Register, April 7, 1992, p. 
11767. The North Korean entities were Lyongakasan Machineries and 
Equipment Export Corporation (North Korea) and the Changgwang Credit 
Corporation (North Korea). The sanctions expired twenty-four months 
later.
    \20\ Interview, March 6, 1997, Washington, D.C.
    \21\ Federal Register, June 12, 1996, p. 29785; ``Daily on U.S. 
Government Notice of Sanctions Against DPRK,'' Chosen Ilbo, June 30, 
1996, in FBIS-EAS-96-127, July 3, 1996.
---------------------------------------------------------------------------
    In the period between the two episodes, the United States and North 
Korea engaged in an extended dialogue, as they negotiated and 
implemented the October 1994 Agreed Framework, aimed at curtailing 
North Korea's nuclear weapon program. As one element of this dialogue, 
the United States has made clear that it considers North Korea's 
missile exports and development of longer range missiles to be issues 
of great concern. Washington and Pyongyang have yet to hold more than 
preliminary discussions on this matter, however. Nonetheless, it would 
appear that between 1992 and 1996, North Korean exports of complete 
Scud missiles ended and, judging from the fact that the United States 
imposed only ``Category II'' sanctions in 1996, it would seem that 
North Korean missile related exports to Iran slackened.
    Even as it tries to slow further expansion of Iran's arsenal of 
Scud's, the United States must come to terms with the threat currently 
posed by Iran's existing Scud-B and Scud-C missiles. In this respect, 
U.S. theater missile defense programs will play a critically important 
role and need to be sustained.
    Tentative conclusion. For reasons that remain unclear, but which 
may include the impact of U.S. diplomacy, North Korea is apparently no 
longer exporting Scud's to Iran.
    8. Longer range missiles (purchases--North Korean 1,000 km No-
Dong). Another component of the Iranian missile program is its effort 
to acquire the 1,000-km range Nodong missile from North Korea, a 
capability that would enable Iran to target Israel for the first time.
    The status of the Nodong is not certain at this time. There have 
been some indications that Pyongyang's efforts to develop the system 
have stalled; according to the published literature, for example, it 
has been flight tested only once. A recent report in the Japanese press 
however, states that North Korea has now deployed the system. There 
have been no reports that North Korea has exported the Nodong, however.
    Despite U.S. expressions of concern about the system to North 
Korea, U.S. officials assume that technical or financial factors, 
rather than U.S. diplomacy, have delayed the production and/or transfer 
of the system. The Administration is hoping to halt production and 
transfer of the Nodong as part of its on-going talks with North Korea 
on missile exports.
    Tentative conclusion. A window of opportunity remains for halting 
this transfer. With the United States enlarging its diplomatic 
engagement with North Korea, it may be possible to reach an 
understanding with Pyongyang to kill this project.
    9. Scud and other short-range missiles (indigenous production). 
Iran is thought to be developing the capability to manufacture the 
Scud-C indigenously. Presumably, elements of this capability were 
originally provided by North Korea, and Pyongyang may be supporting 
this effort through continued exports of missile-related equipment and 
technology.
    However, U.S. officials have indicated that China and Russia may 
also be contributing to this Iranian effort.
    Chinese assistance. In June 1995, U.S. intelligence reports were 
quoted in the press as stating that evidence ``strongly implicates'' 
China in the transfer to Iran of equipment, materials and scientific 
know-how that could be used in the manufacture of advanced ballistic 
missiles--possibly a missile similar to the Chinese M-9 or M-11.\22\ In 
July 1995, China was reported to have transferred ``dozens, perhaps 
hundreds, of missile guidance systems and computerized machine tools'' 
to Iran, as well as rocket propellant ingredients that could be used on 
its current stockpile of Scud Mod. Bs and Cs, as well as on Scud 
variants that Iran may produce domestically in the future.\23\
---------------------------------------------------------------------------
    \22\ R. Jeffrey Smith, ``Iran's Missile Technology Linked to China, 
Report Says,'' Washington Post, June 17, 1995; Barbara Opall, ``U.S. 
Queries China on Iran,'' Defense News, June 19-25, 1995, p. 1; ``China 
Denies Violating Missile Treaty,'' United Press International, June 20, 
1995; Jim Mann, ``U.S. Says China May Have Aided Iran Missile 
Program,'' Los Angeles Times, June 23, 1995; ``Testimony of Michael 
Eisenstadt,'' before the Committee on International Relations, U.S. 
House of Representatives, September 12, 1996.
    \23\ Elaine Sciolino, ``CIA Report Says Chinese Sent Iran Arms 
Components,'' New York Times, June 21, 1995; ``Chinese Shipments 
Violate Controls,'' Jane's Defense Weekly, July 1, 1995, p. 3.
---------------------------------------------------------------------------
    All such transfers would violate pledges that China made to the 
United States in February 1992 and reaffirmed in October 1994, in which 
China agreed to abide by missile technology transfer restrictions of 
the MTCR. These transfers could also violate U.S. missile non-
proliferation laws.\24\ I am told that the analysis of these cases has 
been completed, but that the Administration is refusing to take action, 
apparently because of concern that the reimposition of sanctions 
against China would adversely affect overall bilateral relations at a 
time when the Administration is attempting to conduct a ``high-level'' 
dialogue with Beijing.
---------------------------------------------------------------------------
    \24\ China pledged to the United States in February 1992 that it 
would abide by the standards and parameters of the MTCR and reiterated 
this pledge in October 1994, when it also declared that it would not 
transfer surface-to-surface missiles inherently capable of carrying a 
500 kg payload to a distance of 300 km or more. U.S. officials fear 
that Beijing interprets these undertakings as permitting transfers of 
missile-production technology and missile components, however.
---------------------------------------------------------------------------
    Russian assistance. I have been told that there are a number of 
transactions involving support for the Iranian Scud production 
capability that have been traced to Russia but that the Russian 
government has not been responsive to U.S. efforts to obtain a serious 
investigation of U.S. concerns.\25\
---------------------------------------------------------------------------
    \25\ Interview with U.S. official April 1997.
---------------------------------------------------------------------------
    It appears that the Clinton Administration believes it lacks 
sufficiently clear evidence to invoke U.S. sanctions laws against 
Russia or against the Russian entities that may be involved. The matter 
is made more complicated by the fact that Russia is a member of the 
MTCR, a status which exempts properly authorized missile-related export 
activities from U.S. missile-export sanctions laws. The United States 
can, however, impose sanctions under these laws against Russian 
entities which make exports not authorized by the Russian government or 
which fraudulently obtain such authorizations. To encourage Russia to 
resolve the cases that the United States has brought to its attention, 
the Clinton Administration should remind Russia of this provision of 
U.S. sanctions law.
    On the other hand, if Russia is authorizing missile-related exports 
to Iran, the United States has other mechanisms for penalizing its 
behavior. These include the selective denial, as a matter of executive 
policy, of export licenses benefiting the Russian aerospace sector 
(such as licenses of U.S. communications satellites for launch on 
Russian launch vehicles) or the refusal to extend current agreements 
granting Russia access to the international commercial space launch 
market. The Clinton Administration originally permitted Russia access 
to this market on condition that it adhere to the MTCR; Russia's 
apparent deviations from MTCR rules should provide grounds for 
revisiting this question.\26\
---------------------------------------------------------------------------
    \26\ Even though the Russian firms that may be exporting missile 
technology to Iran may not be those that are the beneficiaries of 
access to the commercial satellite launch market, the latter 
organizations are powerful players within Russia and would have much to 
lose if their access to that market were foreclosed. As occurred in 
1993, these organizations could be expected to exert pressure within 
the Russian bureaucracy and the Russian space/missile industry to halt 
improper sales that could jeopardize their lucrative commercial launch 
business.
---------------------------------------------------------------------------
    Tentative conclusion. Iran's ability to manufacture Scud type 
missiles is apparently dependent in important respects on outside 
assistance that appears to be continuing at this time. Intensified U.S. 
diplomatic efforts, backed up by the threat of new sanctions against 
the Chinese and Russian aerospace sectors, are needed to help contain 
this danger. The development of theater missile defenses must also be 
an important element of the U.S. strategy for meeting this challenge, 
if non-proliferation efforts fail.
    10. Longer range 1,000 to 1,400 km missiles (indigenous production, 
with outside assistance). Israel has expressed increasing concern about 
Iranian efforts to develop this system. Again, Russia is alleged to be 
assisting this program.
    A number of recent press reports suggest that Russia is assisting 
in this endeavor, possibly providing technology from its retired SS-4 
strategic nuclear missile.\27\
---------------------------------------------------------------------------
    \27\ Robin Wright, ``Russia Warned on Helping Iran Missile 
Program,'' Los Angeles Times, February 12, 1997.
---------------------------------------------------------------------------
    The application of U.S. sanctions laws and policy is comparable to 
that outlined in item 9, above: Russia, though largely exempt from such 
laws, appears to be violating the rules of the MTCR, creating a basis 
for discretionary sanctions by the United States in the form of 
suspension of export licenses, especially those directed at the Russian 
aerospace sector and commercial space launch industry.
    Tentative conclusion. Iran's ability to manufacture this longer 
range system appears to be dependent in important respects on outside 
assistance, and Iran appears to be receiving such assistance at this 
time from Russia. Intensified U.S. diplomatic efforts, backed up by the 
threat of new sanctions, are needed to help contain this danger. Given 
the new dangers that Iranian longer-range missiles would bring to the 
Middle East, halting this program must remain a top priority of the 
Clinton Administration.
    11. Cruise missiles (acquisition of the C-802 and the development 
of land-attack derivatives). China is the supplier of Iran's inventory 
of land-based and shipborne anti-ship cruise missiles and is believed 
to be assisting Iran in the development of anti-ship missiles based on 
Chinese prototypes.
    Because the range/payload capabilities of the C-802 are below the 
thresholds of the MTCR these transactions do not appear to violate U.S. 
missile-export sanctions laws. Nor do the exports appear to violate the 
Iran-Iraq Arms Non-Proliferation Act. Deputy Assistant Secretary of 
State Robert Einhorn testified last week that the number of missiles 
transferred does not appear to be sufficient to trigger the sanctions 
provisions of that legislation.
    It is apparent that Iran's WMD and missile capabilities are 
growing, in some areas dramatically, and along with them, the dangers 
that Iran is posing to U.S. forces and friends in the Middle East.
    Using a wide variety of non-proliferation tools, the Clinton 
Administration has had a measure of success in containing Iran's bid to 
acquire nuclear weapons. Its job has been made somewhat more manageable 
because nuclear arms are very difficult to manufacture, requiring 
considerable time, expense, and difficult-to-conceal facilities. 
Moreover, the tools in the nuclear non-proliferation tool kit--
treaties, export controls, inspections, and international norms--are 
more potent than those applicable to other weapons of mass destruction 
or to missiles. The single most important measure needed to continue to 
constrain the Iranian nuclear weapons program is sustained 
implementation of the U.S. Nunn-Lugar program in Russia and other NIS 
states.
    U.S. efforts to curb the Iranian BW threat--an extremely demanding 
task--have not succeeded. However, Iran has yet to achieve a mature, 
missile-based BW capability, and it may yet be possible to block these 
advances. U.S. counter-proliferation efforts will also play an 
important role in containing the Iranian BW challenge.
    Similarly, although Iran now possesses a substantial arsenal of 
basic chemical weapons, it still has far to go before acquiring a 
modern, fully developed chemical arsenal, and preventive, non-
proliferation diplomacy can still be effective in slowing or blocking 
Iranian progress in this sphere. Stricter enforcement of U.S. sanctions 
laws is needed to achieve this result, and the Chemical Weapon 
Convention will also help to limit Iranian advances. Continued 
development of counter-proliferation measures to address the existing 
Iranian CW threat will also be needed.
    Iran's existing Scud-B and Scud-C missiles already pose a serious 
threat to U.S. forces and friends in the Persian Gulf. Iran is 
apparently not purchasing additional missiles, however. To deal with 
the existing threat, the Clinton Administration must continue its 
efforts to develop robust theater missile defenses. The Administration 
must push China and Russia more aggressively to halt their support for 
Iran's efforts to produce missiles indigenously, especially longer-
range systems. Stricter enforcement of existing sanctions laws against 
China and the threat of discretionary sanctions against the Russian 
aerospace sector are essential if these efforts are to succeed.
    Finally, the 1996 Iran-Libya Sanctions Act. which imposes sanctions 
on foreign entities that invest $40 million or more in Iran's energy 
sector, seeks to limit the funds available to Iran's WMD programs by 
limiting Iran's future energy sector revenues. Recent reports suggest 
that the sanctions law is curtailing foreign investment in this sector. 
Given the great costs of WMD and missile programs, it is possible that 
this legislation will make an important contribution to slowing Iran's 
bid for unconventional arms and advanced delivery systems.

 Chronology of Alleged Transfers of Nuclear, Biological, Chemical and 
       Missile Technology, Equipment and Material Involving Iran

Nuclear Episodes
   January 8, 1995: Russia and Iran sign an agreement on the 
        completion of the two partially constructed nuclear reactors at 
        Bushehr. In December 1995, Congress approved legislation that 
        would prevent the United States from providing any economic 
        assistance to Russia unless Russia halted the reactor deal or 
        the President certifies every six months that the aid was 
        ``important to the national security interests of the United 
        States.'' The President issued that certification on May 9, 
        1996 and November 9, 1996.
Missile Episodes
   March 6, 1992: The United States imposes sanctions on the 
        North Korean entities, Lyongaksan Machineries and Equipment 
        Export Corporation and Changgwang Credit Corporation, and 
        Iran's Ministry of Defense and Armed Forces Logistics for 
        missile proliferation activities. The sanctions include a two-
        year ban on all government contracts with, export licenses to, 
        and imports from, the entities listed above as well as all 
        North Korean firms in the missile, electronics, space systems 
        and military aircraft industries. These sanctions were imposed 
        for the transfer of items in Category I of the MTCR Annex which 
        substantially contributed to Iran's missile program. The 
        sanctions expired March 6, 1994.
   March 1992: China pledges in writing to abide by the MTCR.
   September 1993: Russia signs an agreement pledging to abide 
        by the MTCR.
   October 1994: China promises not to export any surface-to-
        surface missiles ``inherently capable'' of delivering a 500 
        kilogram payload to at least 300 kilometers and to abide by the 
        guidelines and parameters of the MTCR.
   May 13, 1995: Jane's Defense Weekly cites a CIA report that 
        North Korea recently shipped 4 Scud Transport-Erector-Launchers 
        (TELS) to Iran.\1\
---------------------------------------------------------------------------
    \1\ Barbara Starr, ``Iran Gets `Scud' TELs From North Korea,'' 
Jane's Defense Weekly, May 13. 1995, p. 5.
---------------------------------------------------------------------------
   June 1995: Reports emerge that the CIA had concluded that 
        China had delivered guidance systems, rocket fuel ingredients, 
        production technology, and computerized machine tools to Iran 
        to assist that country in improving imported ballistic missiles 
        and producing its own missiles.\2\
---------------------------------------------------------------------------
    \2\ Barbara Opall, ``US Queries China on Iran,'' Defense News, June 
14-25, 1995, p. 1; Elaine Sciolino, ``CIA Report Says Chinese Sent Iran 
Arms Components,'' New York Times, June 21, 1995, p. A1. ``Chinese 
Shipments Violate Controls,'' Jane's Defense Weekly, July 1, 1995, p. 
3.
---------------------------------------------------------------------------
   August 1995: Russia joins the MTCR.
   January 1996: Iran is reported to have tested a C-802 anti-
        shipping cruise missile provided by China. The United States 
        examines the sale of the C-802s for sanction ability under the 
        Iran-Iraq Non-Proliferation Act and determines that the 
        transaction did not cross the threshold of ``destabilizing 
        types and numbers.''\3\
---------------------------------------------------------------------------
    \3\ Barbara Starr, ``Iran Adds New Threat With Cruise Missile 
Test,'' Jane's Defense Weekly, February 7, 1996, p. 14; Bill Gertz, 
``China Sold Iran Missile Technology,'' Washington Times, November 21, 
1996, p. 1.
---------------------------------------------------------------------------
   May 24, 1996: The United States imposes sanctions on the 
        North Korean firm Changgwang Sinyong Corporation (aka the Korea 
        Mining Development Trading Bureau) and Iran's Ministry of 
        Defense Armed Forces Logistics and the State Purchasing Office. 
        The sanctions include a two-year ban on all missile-related 
        government contracts with, and export licenses for, the listed 
        entities as well as North Korea's entire missile, electronic, 
        space, and military aircraft industry. These sanctions were 
        imposed for the transfer of items in Category 11 of the MTCR 
        Annex. These sanctions are still in effect.
   July 1996: Iran's Defense Industries Organization reportedly 
        transfers equipment to Syria for the production of solid-fuel 
        rocket motors.\4\
---------------------------------------------------------------------------
    \4\ Bill Gertz, ``China Sold Iran Missile Technology,'' Washington 
Times, November 21, 1996, p. 1.
---------------------------------------------------------------------------
   August 1996: China Precision Engineering Institute 
        reportedly agrees to sell gyroscopes, accelerometers and test 
        equipment that could be used to build and test missile guidance 
        systems to Iran's Defense Industries Organization.\5\
---------------------------------------------------------------------------
    \5\ Ibid.
---------------------------------------------------------------------------
   December 1996: An Israeli article states that Iran is 
        developing a missile based on the 2,000 km range SS-4 with the 
        help of Russian scientists.\6\ Israeli intelligence revealed, 
        and the United States verified, that detailed plans on how to 
        build the SS-4 as well as some of its parts, reportedly 
        guidance components, were acquired by Iran.\7\ The United 
        States protested the transfers during a meeting between Prime 
        Minister Chernomyrdin and Vice President Gore in February and 
        during the Clinton-Yeltsin summit in March.
---------------------------------------------------------------------------
    \6\ ``Iran Said to Be Developing Long-Range Missile,'' Deutsche 
Presse-Agentur, December 5, 1996.
    \7\ Robin Wright, ``Russia Warned on Helping Iran Missile Program,'' 
Los Angeles Times, February 12, 1997, p. A1; Bill Gertz, ``Gore Raises 
Sale to Iran With Chernomyrdin,'' Washington Times, February 13, 1997, 
p. A10.
---------------------------------------------------------------------------
   March 1997: An Israeli press report states that Iran had 
        transferred 50 Scud-C missiles and 50 aircraft to Syria. The 
        aircraft were transferred in December 1996, but the date of the 
        missile transfer is not given.\8\
---------------------------------------------------------------------------
    \8\ ``Israel: Intelligence Sources Report Growing Iran-Syria 
Cooperation,'' Yedi'ot Aharonot, March 27, 1997, p. 19 in FBIS-TAC-97-
086, March 28, 1997.
---------------------------------------------------------------------------
   April 1997: According to an unnamed White House official, 
        Russians are assisting Iran in upgrading the guidance systems 
        and engines of the Scud missiles in its inventory.\9\
---------------------------------------------------------------------------
    \9\ Philip Finnegan and Steve Rodman, ``Israel Tries to Curb Russian 
Aid to Iran,'' Defense News, April 14-20, 1997, p.1.
---------------------------------------------------------------------------
   April 1997: Israeli sources report that Iran recently 
        ground-tested the engine for a 1,000 kilometer-range missile 
        being developing with Russian assistance and is also developing 
        a missile with a range of about 1,500 kilometers with Russian 
        help.\10\
---------------------------------------------------------------------------
    \10\ ``Israel Says Iran, Russia Ground Test Missile,'' Reuters, 
April 13, 1997; ``Israel-Iran,'' Reuters, April 13, 1997.
---------------------------------------------------------------------------
CW Episodes
   July 1993: The United States protests to China about the 
        shipment of CW precursors for mustard gas to Iran aboard the 
        vessel, Yin He. In late August, the ship was inspected jointly 
        by Saudis, Americans, and Chinese and no CW precursors were 
        found.\11\
---------------------------------------------------------------------------
    \11\ Arms Control Reporter 1994, p. 704.E-2.104.
---------------------------------------------------------------------------
   July 16, 1994: The United States imposes sanctions an 
        Israeli for using British and Polish front companies to ship CW 
        precursors, strongly suspected to be from China, to Iran.\12\
---------------------------------------------------------------------------
    \12\ Gary Milhollin and Meg Dennison, ``China's Cynical 
Calculation,'' New York Times, April 24, 1995, p. A17.
---------------------------------------------------------------------------
   November 19, 1994: The United States imposes sanctions on 
        Manfred Felber (Austrian), Luciano Moscatelli (Australian) and 
        Gerhard Merz (German) for shipping Chinese CW ingredients to 
        Iran.\13\
---------------------------------------------------------------------------
    \13\ Ibid.; State Department official.
---------------------------------------------------------------------------
   February 18, 1995: The United States bars three Hong Kong 
        companies from selling goods in the US for at least one year 
        for shipping CW ingredients from China to Iran. The companies 
        are Asian Ways Ltd., WorldCo Ltd., and Mainway 
        International.\14\
---------------------------------------------------------------------------
    \14\ Ibid.; State Department official.
---------------------------------------------------------------------------
   March 1995: An article states that the United States has 
        been monitoring shipments of CW precursors to Iran over the 
        past three years.\15\
---------------------------------------------------------------------------
    \15\ Ibid.
---------------------------------------------------------------------------
   November 1995: Referring to Iran's chemical weapons program, 
        Bruce Reidel, Deputy Assistant Secretary of Defense for Near 
        East and South Asia, testifies, ``In the chemical arena, we 
        have seen some evidence that China has provided some assistance 
        or Chinese firms have provided some assistance, both in terms 
        of the infrastructure for building chemical plants and some 
        precursors for developing agents. I would point out here that 
        the Chinese chemical industry is very rapidly growing at this 
        time and not all facets of it may be under the fullest scrutiny 
        of the Chinese government.''\16\
---------------------------------------------------------------------------
    \16\ ``Testimony of Deputy Assistant Secretary of Defense for Near 
East and South Asia Bruce Reidel,'' Hearings before the House 
International Relations Committee, US. Policy on Iran, November 9, 
1995.
---------------------------------------------------------------------------
   January 1996: An unconfirmed report in a Hong Kong paper 
        states that the Customs Department is investigating a Chinese 
        state-owned arms manufacturer for smuggling arms, including 
        chemical weapons, to the Middle East.\17\ Another report 
        indicates that the Hong Kong firm, Rex International 
        Development Co., Ltd., is 52% owned by state-owned arms 
        manufacturer China North Industries Group (Norinco).\18\
---------------------------------------------------------------------------
    \17\ ``Hong Kong: SAR `Definitely Not' Arms Smuggling Transit 
Center,'' Hongkong Standard, January 21, 1997, p. 4 in FBIS-CHI-97-013, 
January 22, 1997.
    \18\ ``Customs Probe China-Linked Arms Sales to Middle East: 
Report,'' Agence France Presse, January 20, 1997.
---------------------------------------------------------------------------
   March 1996: An article reports that the United States had 
        been tracking shipments of chemical weapons-related equipment 
        from China to Iran for more than a year. The trade is described 
        as ``recent and ongoing.'' The issue will be raised by National 
        Security Advisor Anthony Lake with his Chinese counterpart, Liu 
        Huaqiu. In February, China passed legislation to tighten 
        chemical exports.\19\
---------------------------------------------------------------------------
    \19\ R. Jeffrey Smith, ``Chinese Firms Supply Iran With Gas 
Factories, U.S. Says,'' Washington Post, March 8, 1996, p. A26.
---------------------------------------------------------------------------
   Summer of 1996: Iran reportedly takes delivery from China of 
        400 metric tons of chemicals, including carbon sulfide, a 
        precursor for some nerve agents.\20\
---------------------------------------------------------------------------
    \20\ Bill Gertz, ``China Sold Iran Missile Technology,'' Washington 
Times, November 21, 1996, p. 1.
---------------------------------------------------------------------------
   June 1996: An article reports that an Indian firm agreed in 
        early 1996 to build a plant in Iran capable of producing 
        phosphorous pentasulfide, a precursor to tabun and other nerve 
        agents.\21\
---------------------------------------------------------------------------
    \21\ Con Coughlin, ``Iran Secures Aid To Make Poison Gas In Deal 
With India,'' Washington Times, June 23, 1996, p. A7.
---------------------------------------------------------------------------
   January 1997: Secretary of State Madeline Albright tells a 
        Senate committee that the US has not determined whether or not 
        to impose sanctions on the Chinese entities shipping CW-related 
        equipment, technology and material to Iran.\22\
---------------------------------------------------------------------------
    \22\ Bill Gertz, ``Albright Concedes `Concern' Over China-Iran 
Transfers,'' Washington Times, January 24, 1997, p. A6.
---------------------------------------------------------------------------
   April 1997: According to Robert Einhorn, Deputy Assistant 
        Secretary of State for Non-Proliferation, the United States is 
        actively investigating sales of precursors, production 
        equipment, and production technology by Chinese entities to 
        Iran's chemical weapons program.\23\
---------------------------------------------------------------------------
    \23\ Senate Governmental Affairs Committee, International Security, 
Proliferation and Federal Services Subcommittee, Proliferation: Chinese 
Case Studies, April 10, 1997.
---------------------------------------------------------------------------
BW Episodes
   November 1995: According to Secretary of State Madeline 
        Albright, the United States received reports in November 1995 
        that Chinese firms had supplied Iran with dual-use equipment 
        that could be used in a biological weapons program.\24\
---------------------------------------------------------------------------
    \24\ Bill Gertz, ``Albright Concedes `Concern' Over China-Iran 
Transfers,'' Washington Times, January 24, 1997, p. A6; Carol Giacomo, 
``Albright Sees China Concerns, Russia initiative,'' Reuters, January 
20, 1997.

                     Alleged Transfers of Nuclear, Biological, Chemical, and Missile Equipment and Technology, and the U.S. Response                    
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Episode                       Supplier                  Date               Relevant laws          U.S. response              Status       
--------------------------------------------------------------------------------------------------------------------------------------------------------
Nuclear                                                                                                                                                 
Nuclear Reactors...................  Russia................  Jan 1995..............  `96 For Ops App......  Waiver/Protest.......  Delayed              
--------------------------------------------------------------------------------------------------------------------------------------------------------
Missile                                                                                                                                                 
Missiles & Production..............  DPRK..................  Mar 1992..............  AECA/EAA.............  Sanctions imposed....  Talks Pending        
Missile TELs.......................  DPRK..................  May 1995*.............  AECA/EAA.............  ?....................  ?                    
Missile Components & Production      China.................  June 1995*............  AECA/EAA.............  ?....................  ?                    
 Technology.                                                                                                                                            
Cruise Missiles....................  China.................  Jan 1996*.............  IINA.................  Protest..............  No Sanctions         
Missile Components.................  DPRK..................  May 1996..............  AECA/EAA.............  Sanctions imposed....  Talks Pending        
Missile Production Equipment.......  Iran (to Syria).......  July 1996.............  AECA/EAA.............  ?....................  ?                    
Missile Components.................  China.................  Aug 1996..............  AECA/EAA & IINA......  ?....................  ?                    
Missile Components & Technology....  Russia................  Dec 1996*.............  AECA/EAA & IINA??....  Protest..............  Promise to stop?     
Missiles...........................  Iran (to Syria).......  Mar 1997*.............  AECA/EAA.............  ?....................  ?                    
Missile Technology.................  Russia (Scud).........  April 1997*...........  AECA/EAA & IINA??....  ?....................  ?                    
Missile Technology (1,000+ km        Russia................  April 1997*...........  AECA/EAA & IINA??....  ?....................  ?                    
 range).                                                                                                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
Chemical Weapons                                                                                                                                        
CW Precursors......................  China.................  July-Aug 1993.........  AECA/EAA.............  Inspection of Yin He.  No precursors found  
CW Precursors......................  China.................  July 1994.............  AECA/EAA.............  Sanctions on front     ?                    
                                                                                                             company.                                   
CW Precursors......................  China.................  Nov 1994..............  AECA/EAA.............  Sanctions on front     ?                    
                                                                                                             company.                                   
CW Precursors......................  China.................  Mar 1995..............  AECA/EAA.............  Sanctions on front     ?                    
                                                                                                             company.                                   
CW Precursors & Infrastructure.....  China.................  Nov 1995*.............  AECA/EAA.............  ?....................  ?                    
CW Equipment.......................  China.................  Mar 1996*.............  AECA/EAA & IINA......  ?....................  ?                    
CW Precursors......................  China.................  Summer 1996...........  AECA/EAA & IINA......  ?....................  ?                    
CW Plant...........................  India.................  June 1996*............  AECA/EAA & IINA......  ?....................  ?                    
--------------------------------------------------------------------------------------------------------------------------------------------------------
Biological Weapons                                                                                                                                      
BW Equipment.......................  China.................  Nov 1995..............  AECA/EAA & IINA......  ?....................  ?                    
--------------------------------------------------------------------------------------------------------------------------------------------------------
*=Date Reported                                                                                                                                         
1996 For Ops App: The FY96 Foreign Operations Appropriations contains a measure to cut-off aid to Russia for its support of Iran's nuclear program.     
AECA/EAA: Arms Export Control Act/Export Administration Act sanctions for missile and CBW proliferation.                                                
IINA: Iran-Iraq Nonproliferation Act sanctions for shipments of advanced conventional weapons to Iran and, after February 10, 1996, for assistance to   
  Iran's NBC programs. ??=Unclear whether IINA applies to Iran's ballistic missile acquisitions efforts.                                                
Italicized entries indicate sanctions imposed by the United States.                                                                                     
Prepared by Gregory Koblentz for the Carnegie Endowment for International Peace                                                                         

                               __________

 Export Controls in the People's Republic of China (PRC): Findings and 
                           Considerations\1\

[Prepared by Richard T. Cupitt, Associate Director for Research, Center 
for International Trade and Security, University of Georgia, Athens, 
Georgia.]

                   The PRC: Proliferator or Partner?

    With its ratification of the Chemical Weapons Convention on April 
7, the People's Republic of China (PRC) took another step toward 
integrating itself into the nonproliferation community. For decades the 
PRC denounced international efforts to stem proliferation. More 
recently, the PRC has begun to seek a new voice in shaping the norms, 
rules and procedures of various nonproliferation regimes. Consequently, 
the PRC is now a party to all the major nonproliferation treaties and 
conventions, and it supports some additional measures favored by the 
United States, such as a comprehensive test ban.\2\
    Integration into the nonproliferation community carries many 
obligations with it--some explicit, some implied. Among the most 
important responsibilities facing each country is insuring that its 
exports do not foster nuclear, chemical, biological weapons programs in 
other countries. Allegations that military goods and dual-use nuclear, 
chemical, and missile items have gone from the PRC to countries of 
proliferation concern, particularly Iran and Pakistan, raise doubts 
about the commitment of Beijing to nonproliferation norms and the PRC's 
capacity to control the export of sensitive items from its 
territory.\3\ In addressing these concerns, some questions to consider, 
among others, are:
   How does the PRC control trade in military and dual-use 
        (goods, services, and technologies with both military and 
        commercial applications) items?
   What factors inhibit effective development or implementation 
        of PRC export controls?
Current PRC Export Controls
    Chinese officials assert that the PRC maintains strict control over 
the export of military and sensitive dual-use items. Certainly, before 
the central government began experimenting with market-oriented 
economic reforms in 1979, the PRC had direct control over the 
production and distribution of all sensitive goods. The transformation 
of the economy, however, gave new responsibilities and authority to 
individual enterprises and local officials. This undermined the old 
communist command economy-style system of export controls. In response 
to this situation, and to international pressure, the PRC began to 
adopt new regulations on the transfer (import or export) of sensitive 
technology as early as 1985.
    From a nonproliferation perspective, the export control systems of 
most members of the four key supplier groups--the Australia Group, the 
Nuclear Suppliers Group (NSG), the Missile Technology Control Regime 
(MTCR), and the Wassenaar Arrangement--share similar standards of 
effective protection, including comparable legal frameworks, licensing 
practices, interagency processes, control lists, verification 
practices, customs authority, penalties, and more. PRC export controls 
remain far from being ``complementary in practice'' to multilateral 
standards and to the systems of some of their neighbors. Based on an 
assessment methodology developed at the University of Georgia, PRC 
export controls include about 38% of the common policies, structures, 
and practices of supplier group members. This number increases to about 
50% when those policies, structures, and practices are weighted for 
importance (see Table 1).
    Despite these discrepancies, the PRC is developing a more 
comparable export control system, even if the pace is deliberate. Some 
positive cues include:
   An improving legal framework. The Foreign Trade Law of 1994 
        already specifies that the government can restrict trade for 
        national security reasons or to fulfill its international 
        obligations. It requires enterprises to get government licenses 
        to trade in restricted items, such as heavy water, dual-use 
        chemicals, materials associated with the production of toxins. 
        Allegedly, the Science and Technology Department of the 
        Ministry of Foreign Trade and Economic Cooperation (MOFTEC) 
        currently approves about 100 such export licenses a year, 
        conforming to this legislation. Reportedly, the State Council 
        and various departments are preparing specific legislation on 
        nonproliferation export controls for the next National People's 
        Congress.
   The development of ``catalogues'' or lists of controlled 
        chemical, nuclear and other items of proliferation concern. 
        China, for example, already appears to have a list of 
        controlled chemicals roughly in line with the Verification 
        Annex of the Chemical Weapons Convention.
   The existence of bureaucratic structures to review and 
        approve licenses of military and dual-use items. For military 
        items, the Ministry of Foreign Affairs (MOFA), the Headquarters 
        of the General Staff of the PLA, the Commission of Science, 
        Technology and Industry for National Defense (COSTIND), MOFTEC 
        and others have a voice on the coordinating body (the State 
        Administrative Committee on Military Products Trade), with 
        guidance from the Central Military Commission and the State 
        Council. For dual-use items, MOFTEC coordinates with other 
        appropriate bodies, such as the Ministry of the Chemical 
        Industry and the General Administration of Customs, to review 
        and approve licenses, under the authority of the State Council. 
        Reportedly, the State Council is forming a new body 
        specifically for arms control issues that will likely have an 
        impact on nonproliferation export control policy.
   The punishment of violators. Allegedly MOFTEC has used 
        administrative sanctions to punish enterprises and individuals 
        that have violated export control procedures. Punishments 
        ranged from warnings, cessation of trading rights, confiscation 
        of items, and firings, although these are difficult to verify.
   Increasing attention to export control issues. Although very 
        resistant to threats, Chinese officials have made some 
        concessions to the United States on the transfer of nuclear and 
        missile items. The PRC also began attending the annual Asian 
        Export Control Seminar sponsored by Australia, Japan, and the 
        United States in 1996. This year, the PRC raised the level of 
        its delegation to the 4th Asian Export Control Seminar, which 
        is one of the few settings in which both representatives from 
        Beijing and Taipei sit at the same table and discuss security 
        issues. Contacts with the Chinese Academy of Engineering 
        Physics and other key organizations in the Chinese nuclear 
        community about export controls have also increased.
Obstacles to Effective PRC Export Controls
    Many concerns mitigate many of these positive developments. Often, 
these hurdles reflect fundamental differences between policy-making in 
democratic, market-oriented societies and the Chinese policy process. 
Some of these problems include:
   An overwhelming lack of transparency. Within government, 
        only a tiny fraction of officials appears to have even 
        rudimentary knowledge of either Chinese or multilateral export 
        controls. Almost complete lack of knowledge about export 
        controls exists, for example, in the small community of experts 
        in nuclear nonproliferation issues, many of whom are involved 
        in the transfer of nuclear goods and technologies. Export 
        regulations are not freely available, often limited to a small 
        circle of officials or the staff of a few trading companies, or 
        not published at all. Government officials also provide little 
        information on export controls to representatives of other 
        governments or multilateral corporations.
   Suspicions about the purpose of export controls. Many 
        Chinese believe that the United States, Japan, and other 
        nations use export controls and the supplier groups to subvert 
        Chinese national sovereignty and thwart its legitimate military 
        and commercial interests. The many practitioners of Realpolitik 
        in the PRC point to sanctions against China, leaks of 
        inaccurate intelligence information on violations, demands for 
        pre-license checks and post-shipment verification, arms 
        shipments to Taiwan, discrimination between the ``haves'' and 
        ``have-nots'' in nonproliferation regimes and other behaviors 
        as evidence that export controls are meant to keep China weak. 
        Supporting a strict view of sovereignty also makes Chinese 
        officials reluctant to verify the assurances of end-users of 
        its own technology exports.
    Other problems stem from the transformation of the Chinese economy:
   Increasing numbers of entities with authority to conduct 
        foreign trade. According to Chinese officials, only a few 
        foreign trading corporations (FTCS) have rights to trade in 
        sensitive items (i.e., four-five in chemicals, two in nuclear, 
        and one-two in missile items), which helps China maintain 
        control on sensitive exports. These numbers apparently include 
        not only large enterprises such as Great Wall, but also 
        research institutes that first gained FTC status in 1993. This 
        seems to underestimate the current number of entities involved 
        in the transfer of dual-use items. Moreover, the number of 
        entities gaining FTC status seems likely to grow at a rapid 
        pace. As central control over many industries and enterprises 
        wanes, the increase in private sector activity will no doubt 
        put immense strains on the modest capabilities of the current 
        export control system.
   The increasing commercialization of many defense enterprises 
        and research institutes has had some pernicious effects. To 
        increase working capital, some enterprises look to increase 
        exports of military or sensitive dual-use items. Although the 
        ratio of civilian to military production in defense enterprises 
        has shifted dramatically in favor of civilian production (now 
        about 80% civilian), this increased problems in verifying the 
        end-use of sensitive items as military and civilian production 
        lines can share many facilities, equipment and personnel. In 
        addition, many Chinese assume that at least some defense 
        officials transferred control over newly-created subsidiaries 
        to family members, who then operate outside emerging legal and 
        regulatory constraints with little fear of reproach.
Eliciting PRC Compliance in Nonproliferation Export Controls
    Integration of the PRC into the nonproliferation community through 
constructive engagement, as Ambassador James R. Lilley noted at a 
recent hearing, faces some severe limits. When the United States has 
sought to impose its views unilaterally or through threats of unlikely 
economic sanctions, we have failed to gain their cooperation. Even 
where well-focused sanctions proved effective (as in response to the 
initial M-11 transfers), the impact was transitory.
    Given the differences in the political and economic systems in the 
PRC and the United States, close coordination on nonproliferation 
export controls is unlikely. Cooperation, however, remains a 
possibility. In the past, more permanent cooperation has emerged where 
the United States and the PRC share common security concerns, as in 
Afghanistan and North Korea. As for cooperation on nonproliferation 
issues with Iran and Pakistan, the United States might pursue some 
supplemental tactics in its current strategy to increase this sense of 
mutual interest.
   Foster those elements of the Chinese government that see 
        export controls as a means of reaffirming some central control 
        over an increasingly decentralized economy. Despite the risk of 
        slowing the process of economic reform, proliferation is a 
        higher priority on the U.S. national security agenda in the 
        short and long term. In addition, the exercise of at least 
        minimal control over exports is a prerequisite for even the 
        most liberal of governments.
   Seek a more compelling rationale for China to control its 
        sensitive exports. Many Chinese officials see the proliferation 
        consequences of the transfer of arms and dual-use items outside 
        East Asia as removed from its core military security interests. 
        What is more important, proliferation concerns raised by these 
        transfers are quite remote from its primary interest in 
        strengthening the Chinese economy. If the United States could 
        make a more compelling case that proliferation in the Middle 
        East or South Asia, as well as in East Asia, would weaken the 
        demand for Chinese exports and reduce foreign investment in 
        China, then PRC officials might address the problem more 
        aggressively.
    Developing more U.S.-PRC cooperation will be more difficult than 
working with Russia in the post-Cold War era. Russia, in whatever 
rudimentary form, has become a democratic, market-oriented nation. 
Building a cooperative relationship with the PRC, however, should be 
less contentious than the U.S.-Soviet relationship. An exact Chinese 
equivalent to the successful Nunn-Lugar (Cooperative Threat Reduction) 
program for Russia is inappropriate, for example. Unlike Russia, the 
PRC has a booming economy coupled with an underdeveloped technology 
sector, military or civilian. Chinese officials are unlikely to adopt 
export control standards common to members of the suppliers groups 
because it identifies with a U.S. led security community (which it does 
not), nor because the United States or its friends and allies offer 
economic side-payments. The PRC might do so, however, if it sees that 
proliferation directly threatens its military security or its overall 
economic prosperity.
    Fully integrating the PRC into the nonproliferation community, 
other than by transforming the PRC into a democratic, market-oriented 
country, requires the creation of a culture of nonproliferation in the 
PRC. Nurturing this culture will take considerable time, effort, and 
persistence by the United States and its allies, and success is not 
assured. At the same time, failing to draw the PRC into the 
nonproliferation community, much less driving it into the arms of rogue 
states, will sabotage nonproliferation efforts to great cost to the 
United States, its allies, and its friends.
Endnotes
    \1\ Much of the evidence outlined here comes from interviews 
conducted by the author and a colleague in Chengdu and Beijing in 
November 1996. For a more detailed view of export controls in the PRC, 
see Richard T. Cupitt and Yuzo Murayama, Export Controls in the 
People's Republic of China, Occassional Paper (Athens, GA: Center for 
International Trade and Security, forthcoming). The Japan Foundation 
Center for Global Partnership and the University of Georgia provides 
support for this research.
    \2\ See Wendy Freiman, ``New Members of the Club: Chinese 
Participation in Arms Control Regimes, 1980-1995,'' The 
Nonproliferation Review, 3, 3 (Spring-Summer 1996), pp. 15-30 for an 
excellent overall view of PRC nonproliferation policies.
    \3\ For an excellent, and succinct, discussion of these issues, see 
Joshua Michael Boehm and Zachary S. Davis, ``The 1985 U.S.-China 
Agreement for Nuclear Cooperation: Moving Towards Implementation?'' CRS 
Report for Congress, 97-440 ENR, Washington, DC: Congressional Research 
Service, The Library of Congress.

 Table I: Comparison With Model Nonproliferation Export Control Systems 
                          (Based on 1996 data)                          
------------------------------------------------------------------------
                                                          Percent of    
                                      Percent of      elements in common
                                  elements in common   with model system
         Political unit            with model system  (weighted score by
                                      (raw score)      importance of the
                                                           element)     
------------------------------------------------------------------------
PRC.............................               38.2                50.1 
Taiwan..........................                 66                74.9 
Hong Kong.......................               86.1                91.6 
Japan...........................               96.5                96.8 
South Korea.....................               89.6                90.5 
Russia..........................               79.9                82.1 
------------------------------------------------------------------------
Source: Richard T. Cupitt, ``Nonproliferation Export Controls in East   
  Asia,'' The Journal of East Asian Affairs (forthcoming) and Richard T.
  Cupitt and Yuzo Murayama, Export Controls in the People's Republic of 
  China, Occasional Paper, Athens, GA: Center for International Trade   
  and Security (forthcoming).                                           

                               __________

Russia's Interests in Iran: Issues, Implications, and Policy Tools for 
                           the United States

[Prepared by Igor Khripunov, Associate Director, Center for 
International Trade and Security, University of Georgia, Athens, 
Georgia.]

    Iranian parliament speaker Ali Akbar Nateq-Nouri's visit to Russia 
in April of 1997 provides an insight into a web of increasingly 
intertwined interests of these two countries. In the wake of the German 
court's decision implicating Iran in terrorism, President Yeltsin's 
statement that the present level of bilateral contacts with Iran 
``gives reason to believe that these relations will grow stronger and 
further develop'' must be taken seriously as reflecting Russia's 
emerging geopolitical priorities. In addition to President Yeltsin, the 
Iranian guest--who is the most likely winner of the presidential 
election scheduled for May 23--was warmly received by a host of other 
high government officials and the leadership of the Federal Assembly. 
Potential benefits of Russia's evolving relations with Iran are readily 
acknowledged both by communists and nationalists, on the one hand, and 
by liberal reformers, on the other.
Close Neighbors
    Signs of rapprochement between these two countries which are 
neighbors geographically despite the recent disintegration of the 
Soviet Union should not come as a surprise. However, the most recent 
visibly revived interest in Iran can be traced to the stage of 
relations between Russia and the West which is often referred to as 
``the end of the honeymoon.'' In January 1996 the then Russian Foreign 
Trade Minister said--echoing other similar statements--that Russia's 
new ``strategic line'' approved by President Yeltsin would focus on 
enhanced trade relations with China, India and Iran. Below is a list of 
the geopolitical and other realities that have driven and keep driving 
Russia closer to Iran:
   Faced with the prospect of NATO expansion Russia has been 
        looking for other countries willing to share its sense of 
        frustration and disapproval. While speaking on Moscow's 
        television, Ali Akbar Nateq-Nouri condemned ``the West's 
        intrigue against the East'' and backed Moscow's opposition to 
        NATO expansion. According to a statement by Yeltsin's spokesman 
        during the Russian-U.S. summit in Helsinki ``If NATO expansion 
        continues under the harshest and most negative scenario for us, 
        Russia will have to review its foreign policy priorities. We 
        are developing good relations with China and India and on some 
        issues with Iran.''
   Iran is a valuable asset to Russia in halting the northward 
        march of the Taliban religious army in Afghanistan. Jointly 
        with Russia, Tehran is supporting Afghanistan's northern 
        warlords separating the Talibans from the former Soviet 
        republics of the Southern tier. Iran has accused Taliban rulers 
        of following a brand of Islam not in accord with the teachings 
        of Koran. Also, Iran's current and future role in settling down 
        the internal conflict in Tadjikstan is highly appreciated by 
        Russia.
   Moscow views Iran as a natural ally in countervailing the 
        emerging Azerbaijan-Georgia-Ukrainian alignment supported by 
        Turkey. This alignment has a pro-Western and anti-Russian 
        thrust. In this context Iran backs Moscow's position on the 
        status of the Caspian Sea, limits the impact of Turkey in 
        Central Asia and maintains increasingly good relations with 
        Armenia with which Russia has successfully negotiated an 
        agreement on its military presence.
   Russia's most influential nonmilitary interest groups have a 
        stake in expanding economic and trade relations with Iran. The 
        oil and gas industry--which is the largest contributor to the 
        federal budget and has enjoyed, until very recently, the 
        unchallenged protection of Prime Minister Victor Chernomyrdin--
        is about to receive a lucrative $2 billion deal in Iran. 
        Russia's aerospace industry is gaining ground in Iran including 
        building a plant for the construction of IL-114 turbo-prop 
        passenger planes. Samara-based Russian aircraft manufacturer 
        Aviakor will sell to Iran Tupolev transport aircraft TU-154M 
        and TU-154-100 for a total of $100 million. It is estimated 
        that Russian-designed or manufactured aircraft may soon account 
        for about 70 percent of Iran's entire fleet. These two groups 
        undeniably have a strong clout in the domestic politics.
Nuclear Cooperation
    Nuclear cooperation with Iran presents a special challenge. The 
Russian government is determined to move ahead with the construction of 
a nuclear power plant at Bushehr. The overwhelming majority of Russia's 
officials--especially those representing the nuclear industry--
vehemently deny that this bilateral project may enhance Iran's 
potential in developing nuclear weapons. U.S. objections to the deal 
are dismissed as unreasonable and aimed at depriving Russia's nuclear 
industry of lucrative cash generating contacts. The relative influence 
of the Ministry of Atomic Energy, a principal promoter of nuclear 
cooperation with Iran, is based, among other things, on its being an 
important exporter of high-tech items which still constitute a small 
fraction of Russia's total. The Ministry symbolizes one of the few 
remaining trappings of Russia's former status as a great power. One of 
the very few critics of the Iranian deal is Aleksei Yablokov, a well 
known Russian environmentalist who believes that the completion of the 
nuclear station at Bushehr in combination with the training of the 
personnel could give Iran access to the technology that would 
facilitate the development of nuclear weapons.
    In the view of other Russian observers, the threat of nuclear 
proliferation in Iran should be taken quite seriously but there is no 
need for Russia to rescind the contract worth $800 million or more 
because eventually other potential contractors may step in. According 
to this line of thinking, Russia, as an exporter of reactors, has the 
right to insist on tough conditions for the verification of peaceful 
uses of equipment supplied to Iran as provided for under the IAEA 
safeguards or even its own stricter standards. This should primarily 
involve a thorough detailing of procedures for overseeing the process 
of loading and unloading the nuclear fuel. Russia should also demand 
that spent fuel assemblies be sent to Russia for reprocessing and 
should require continuous monitoring by Russian specialists of the 
operation of the Bushehr nuclear power station, and Russian inspections 
of other Iranian nuclear facilities. Russia's intelligence and security 
services must focus on Iran and cooperate with their counterparts in 
the West in sharing information on Iran's nuclear projects.
    There have been two recent developments that potentially mitigate 
the impact and future risks. The Russian government approved in 1996 
two sets of export procedures, one for controlling the export of 
nuclear dual-use equipment and materials (government edict No. 575 of 
May 6, 1996) and the other for controlling the export and import of 
nuclear materials, equipment, special nonnuclear materials and relevant 
technologies (No. 574 of May 8, 1996), as a result of which Minatom has 
lost its previously unchallenged role. In the past, this ministry 
played the ``first fiddle'' in approving nuclear export operations 
while other interagency participants played secondary roles or were 
even kept in the dark. In 1992, taking advantage of its monopoly 
position under previous government edicts, the Ministry of Atomic 
Energy entered into negotiations with Iran on completing the Bushehr 
nuclear power station. The first Russian-Iranian MOU was concluded by 
minister Victor Mikhailov on his own authority. Now, it is the 
interagency EXPORT CONTROL commission, rather than the Ministry of 
Atomic Energy, that is responsible in the framework of the new 1996 
procedures for issuing findings as to the eligibility of exporting 
items with a high risk of proliferation.
    Secondly, Russia and Iran finalized and signed in April 1997 a 
memorandum of understanding on export controls which according to 
Russian Foreign Minister Evgenii Primakov would finally dispel fears 
that Moscow's relations with Iran ``contradict international 
standards.'' Of course, it remains to be seen how effective these 
arrangements will be in practice and to what extent Russia will be 
willing to enforce their provisions.
Weapons Deals
    Russian arms exporters consider Iran one of their best customers 
after India and China. In 1996, Russia's military contracts with Iran 
reached $1 billion. According to a source in Russia's weapons exporting 
agency ``Rosvooruzhenie,'' Iran has been traditionally oriented toward 
Russia as weapons supplier and the Russian government intends to 
maintain this course. ``Rosvooruzhenie'' has its full-time 
representative in Tehran. By comparison, in 1996 Russia exported 
conventional weapons worth more than $3.4 billion--continuing the 
increase from $1.7 billion in 1994 to $3 billion in 1995. Last year the 
Russian government announced a special program aimed at boosting 
weapons export before the end of the century to $10 billion.
    However, under the existing tradeoff, Russia was admitted to the 
Wassanaar Arrangement (COCOM's replacement) as a founding member in 
exchange for its commitment not to sign new weapons deals and to halt 
weapons exports to Iran after the expiration of the ongoing agreements, 
i.e., by 1999. Currently, export licenses for weapons are considered 
and issued by the Ministry of Foreign Economic Relations and Trade in 
coordination with the Ministry of Defense. However, smuggling and 
unauthorized deals are rampant. One recent example is illegal 
deliveries to Armenia in 1996 of over $1 billion worth of heavy weapons 
including tanks and, reportedly, SCUD missiles and launchers. Russia's 
General Prosecutor's Office is investigating this case.
    It has also been reported that small quantities of ready-made 
missiles (S-4 Sandal or SS-23) along with the technology, components, 
material and expertise to expedite Iranian indigenous efforts were 
delivered to Iran ``from the North.'' Russian officials denied this 
charge claiming that ``no contracts on a government-to-government level 
involving the sales to Iran of missile technologies of any type ever 
existed.'' Any evidence challenging this statement would put into 
question Russia's compliance with the INF Treaty and/or the Missile 
Technology Control Regime (MTCR) to which it is a party. Otherwise, 
three other explanations are possible: Iran's technological espionage; 
smuggling from Russia; transfers of SS-4 technologies from Ukraine, 
Belarus, Kazakstan or Uzbekistan (none of these latter states are 
parties to the MTCR).
Russia's Export Controls
    Because Russia inherited the Soviet nonproliferation bureaucracy, 
it has had export control structures, personnel and policy upon which 
to build. Since 1992 it has developed an impressive array of decrees, 
control lists, and agencies tasked to control weapons and weapons 
related exports. Russia has harmonized its export control lists 
(nuclear, missile, chemical, biological, and dual-use) with those of 
the international regimes and has joined all of them (Nuclear Suppliers 
Group, Missile Technology Control Regime, and the Wassenaar 
Arrangement), except the Australia Group, as a full-fledged member.
    In April 1992 an interagency commission on export control (Russia's 
EXPORT CONTROL) was established to provide coordination as well as 
organizational and methodological supervision over export control 
operations. The key ministries and agencies, such as the Ministry of 
Foreign Affairs, Ministry of Defense, Ministry of Foreign Economic 
Relations and Trade, Ministry of Economics, Foreign Intelligence 
Service, Federal Security Service and others are represented in the 
Commission at the level of heads or deputy heads. A First Deputy Prime 
Minister chairs the Commission. The working body of Russia's export 
control mechanism providing technical support for EXPORT CONTROL is the 
Federal Service for Currency and Export Control which currently enjoys 
the status of a ministry.
    Though there is no specific export control legislation, the Law on 
State Regulation of Foreign Trade Activity adopted in 1995 filled in 
some gaps as an umbrella law. Article 16 of this law specifies that the 
export control system was established to defend Russia's national 
interests while conducting foreign economic activity, and for 
compliance with Russia's international obligations on nonproliferation 
of WMD and other weapons. According to the law, selected types of arms, 
military hardware, some types of raw materials, and equipment, 
technologies, scientific and technical information and services that 
are or can be used for developing WMD, missile delivery systems and 
other weaponry, are determined by the lists established by presidential 
decrees. The decrees come into force not earlier than three months 
after their official publication. The procedures for implementing these 
decrees are approved by decisions of the government. These two types of 
documents constitute the normative and legal basis of Russia's export 
control.
    All commercial entities, regardless of form of ownership, are 
required to receive permission for exporting controlled goods and 
services. This entails the issuance of an export license necessary for 
customs clearance. The Ministry of Foreign Economic Relations and Trade 
or its agents issues export licenses in different regions of the 
country. The decision to issue an export license depends upon the 
finding of Russia's EXPORT CONTROL as to the eligibility to export 
controlled goods or services. Specialists of the Federal Service for 
Currency and Export Control or outside experts prepare findings after 
required interdepartmental analyses of necessary documents and 
circumstances surrounding the export deal are submitted.
    As specified by current regulations, the exporter must produce a 
guarantee from an importer to utilize dual-use goods and services 
strictly for declared purposes not related directly or indirectly to 
designing and developing weapons of mass destruction or their missile 
delivery systems, and not to re-export them to third countries. These 
requirements constitute one of the necessary conditions for receiving 
Russia's EXPORT CONTROL permission to export dual-use goods or 
services.
    The system of providing such guarantees for domestic use in Russia 
includes procedures for issuing a Russian Import Certificate, Delivery 
Verification Certificate, and End-User Certificate which would formally 
register the obligations of Russian enterprises and organizations as to 
the import of dual-use goods and services into the Russian Federation, 
their use for the declared purposes, nontransfer to other business 
entities on the Russian territory, and nonreexport to third countries.
    Despite Russia's laudable efforts to create an interagency system 
for export licensing and the execution of export control policy, the 
system is the scene of continuous revamping and bureaucratic in-
fighting. Russia's system of export control continues to be severely 
under financed and understaffed. In a state with so much weaponry and 
weapons-related trade to license and control, there is insufficient 
money and well trained personnel for export control. The legitimation 
and overall status of Russian nonproliferation export control 
institutions and policy have to be enhanced in order to perform as 
required.
    The enforcement side of Russia's export control system is still 
weak. Article 189 of the new Criminal Code makes punishable illegal 
export of technologies, scientific-technical information and service 
which can be used for developing weapons of mass destruction, their 
delivery means, weapons and military hardware with regard to which 
special export controls have been established. The punishment as 
specified by this article is a fine equivalent to a minimum of seven 
hundred to one thousand dollars, or the total salary or other income 
drawn by the convicted person for a period of seven months to one year, 
or imprisonment from three to seven years. Although the previously 
enacted Criminal Code contained a similar provision, there has been 
little evidence of prosecutions.
    There is also a problem of transparency in the export control 
arena. Whether the opacity stems from fear that admitting weakness 
would threaten Russia's status or just a legacy of Soviet sensitivities 
remains unknown. However, little information is available on statistics 
surrounding license applications and denials. The Russian 
representative to the NSG from MINATOM has yet to report even one 
denial to the regime, which maintains a database of denials to ensure 
that NSG partners do not undercut one another. The lack of transparency 
also leaves exporters confused and frustrated at overcoming numerous 
and unexpected bureaucratic hurdles.
    Other major obstacles in the way of efficient export controls are 
organized crime and corruption, as well as porous borders.
    Reintegration trends manifesting themselves throughout the CIS may 
further complicate things. Kyrgyzstan has joined the recent customs 
union between Russia, Belarus and Kazakstan, with Uzbekistan and 
possibly Tajikistan joining. Both Uzbekistan and Tajikistan have 
controls that are even less sophisticated. The original CIS 
configuration comprising sovereign states posed considerable 
proliferation risks, and the same can be said for turning the CIS into 
a single economic space with some of its parts seriously lacking export 
control expertise and systems. According to certain Russian Customs 
Committee sources, eliminating Russian customs posts would open the 
floodgates to drugs from Central Asian republics and the unrestricted 
export of Russian strategic materials. Once goods flow into Kazakstan 
and Central Asia, it is difficult to determine where they will go. The 
Caspian Sea and other Central Asian borders are particularly accessible 
to smuggling operations to Iran.
    Russia and other NIS lack a culture of nonproliferation that helps 
restrain individuals and enterprises from transferring sensitive items 
to countries or groups of concern. Russia will need to undertake major 
education and outreach programs within the Military Industrial Complex 
(MIC) as more and more enterprises receive the freedom to export. 
Export controls under the former system of state monopoly were much 
easier to enforce than they will be within a privatized system with 
hundreds of aggressive, export dependent firms. Russian officials have 
recently acknowledged the importance of developing export compliance 
programs in such firms, but they clearly lack money and manpower for 
the implementation of such vitally important programs.
    Undoubtedly, the Russian export controllers will have a difficult 
sell. Many industrialists view export control as a tool that was once 
used by the West to deny Russia critical technologies and now one that 
is being used by the West to deny Russian companies foreign market 
share. Despite arguments that export controls will allow Russian firms 
to trade internationally and elevate Russia to the status of a reliable 
partner in global nonproliferation efforts, many industrialists and 
some members of the Duma see Russia emerging as the loser because many 
of its old client states including Iran are now the target of 
multilateral export control regimes.
Conclusions
    Russia will continue to gravitate toward the East including Iran, 
unless the controversy over the NATO expansion is resolved to the 
mutual satisfaction of both sides. If, concurrently with the signing of 
a NATO-Russia charter, efforts are made in a consistent manner to get 
Russia fully integrated into other institutions (e.g., G7, World Trade 
Organization and Paris Club) there will be powerful incentives for the 
Russian government to be sensitive to Iran-related concerns and 
leverages for the West to downsize Russian-Iranian cooperation.
    As to the Bushehr project specifically, halting Russia's 
involvement may be a difficult challenge unless hard evidence is 
produced implicating Iran in the development of nuclear weapons. In the 
absence of this, two possible options can be explored. First, the 
United States will make available to Russia adequate funding and 
sophisticated instruments in order to develop and deploy at Bushehr an 
unprecedently stringent monitoring system. Increased presence of 
Russian personnel on a continuous basis would be, among other things, 
an additional hedge against possible diversion. Secondly, Russia has 
expressed its willingness to participate in the Korean Energy 
Development Organization (KEDO) whose objective under the agreement 
between Washington and Pyongyang is to replace heavy-water reactors 
built earlier in North Korea under the Soviet assistance with light-
water ones. Russia's Nuclear Energy Minister Victor Mikhailov set two 
conditions for such participation: that all Russia's previous 
investments of about $50 million in the development of North Korea's 
nuclear energy sector be counted as its contribution to this 
international project and that Russia be accorded a deputy chairman 
position on the equal footing with South Korea and Japan. There are 
grounds to believe that if the Bushehr project for some reasons slows 
down, Russia will be even more willing to seek a compromise in the KEDO 
framework backing off from the Bushehr project.
    Reports on missiles and missile technologies transfers to Iran from 
the former Soviet Union must be treated with utmost seriousness as 
possible violations of the INF Treaty and/or MTCR. The United States 
has the right to seek information and raise these issues through 
established channels. If this case is proved to be a result of the 
ineffectual operation of Russia's export control system or negligence, 
efforts could be made to rectify the situation and until then the West 
may be willing to go as far as freezing Russia's membership in the 
international fora requiring as a precondition effective export 
controls.
    It is unlikely that strictly unilateral actions by the United 
States against a Russian producer or supplier involved in a 
questionable deal (similarly to the arrangements against Glavcosmos in 
the framework of Soviet/Russian-Indian cryogenic agreement) would 
produce results consistent with the U.S. security interests. For 
example, any sanction against MINATOM would potentially halt security 
assistance under the Nunn-Lugar program covering a wide range of 
important projects including the fissile materials storage facility. 
Also, unilateral sanctions against Russia would give rise to anti-
American feelings, play into the hands of communists and nationalists 
and risk to wreck a NATO-Russian charter should it materialize in the 
near future. Conversely, agreed upon multilateral sanctions have a much 
better chance for success given Russia's good record of compliance with 
them.
                               __________

                  Chinese and Russian Suppliers to Iran

[Information submitted by Gary Milhollin, Wisconsin Project on Nuclear 
Arms Control, Washington, D.C.]

CASE #1
Product: C-801 and C-802 Anti-Ship Missiles
Supplier: China Precision Machinery Import-Export Corporation (CPMIEC)
    Comments: Iran has been steadily increasing its military presence 
in the Persian Gulf, and according to Admiral John Redd, Commander of 
U.S. naval forces attached to the Central Command, has tested a ship 
borne C-802 anti-ship cruise missile in January 1996. These missiles 
are deployed on Hudong Fast Attack Craft also supplied by China in 
1994. Iran is believed to have obtained about 60 of the missiles, which 
are capable of destroying a warship, and could also pose a significant 
threat to commercial shipping in the Gulf Iran reportedly tested a 
shore-launched C-802 in December 1995.
    The China Precision Machinery Import-Export Corporation (CPMIEC) 
manufactures and markets the C-802. It is a long range, sea-skimming, 
multi-purpose anti-ship missile, powered by a turbojet engine. It can 
be deployed on warships, coastal bases, and aircraft. It can carry a 
warhead at high subsonic speed (Mach 0.9) to a range of 120 kilometers 
(75 miles) and is considered to be more sophisticated than the older 
Silkworm.
    Iran has also obtained and deployed the C-801 anti-ship missile 
from CPMIEC. The smaller C-801 has a range of 40 kilometers and can 
also travel at high subsonic (Mach 0.9) speeds.
    China Precision Machinery was sanctioned by the U.S. government in 
August 1993 for missile proliferation activities.
    U.S. Exports: U.S. Commerce Department records show that the 
following items were approved for export to CPMIEC from 1989 to 1993:
   computer equipment for color enhancement--$19,502
   modems for data transmission--$32,628
   modems for data transmission--$6,630
   replacement parts for a numerical control system--$11,698
   controller--$455,000
   cables and adapters for a macro ware system--$45,834
   mechanical seals for pumps--$11,949
   spare navigational instruments--$83,762
   machine parts--$385,000
   computer workstation for simulation of wind effects--$43,700
   flight data recorder and spare parts--$28,442
   analyzers--$4,876
   computer equipment--$7,707
   Total: $1,136,728
CASE #2
Product: JY-14 Three-Dimensional Tactical Air Surveillance Radar
Supplier: China National Electronics Import-Export Corporation (CEIEC)
    Comments: According to U.S. Naval Intelligence, Iran recently 
acquired this tactical air surveillance radar from China. It can 
provide long-range tactical surveillance as part of an automated 
tactical air defense system. It can detect targets up to 300 kilometers 
away and at altitudes up to 75,000 feet, even when subjected to high 
electronic clutter or jamming. The system also provides automatic 
tracking and reporting of up to 100 targets. CEIEC also manufactures 
cryptographic systems, radars, mine detection equipment, fiber and 
laser optics, and communications technologies and is overseen by the 
Ministry of Electronics Industry (NMI), which is also known as the 
China Electronics Industry Corporation (CEIC) or Chinatron.
    U.S. Exports: U.S. Commerce Department records show that the 
following items were approved for export to CEIEC from 1989 to 1993:
   radio communication service monitor--$21,754
   computer equipment and software--$4,375,000
   personal computers and processor boards--$1,579,830
   protocol tester for telecommunications--$4,100
   equipment for basic microwave research--$10,916
   traveling wave tube amplifier--$33,600
   microwave frequency counter--$6,124
   statistical multiplexer systems and accessory boards--
        $75,632
   statistical multiplexers for use in data communications 
        network--$65,120
   integrated circuits--$17,326
   computer equipment--$46,022
   computer equipment--$29,094
   equipment for circuit board design--$9,580
   computer chips--$1,820
   computer software--$105,000
   equipment for semiconductor manufacture--$107,000
   equipment for sweep generators for resale to Ministry of 
        Machine Building and Electronics Industry--$32,000
   equipment for semiconductor wafer testing--$82,610
   computer equipment--$1,924
   computer equipment--$10,457
   computer equipment for oil reservoir numerical simulation--
        $92,916
   computer equipment--$32,500
   switching exchanges--$1,269,047
   phosphorus oxychlofide (nerve gas precursor) for transistor 
        manufacture--$7,397
   export telephone system--$15,000
   circuit design software--$243,160
   VLSI system to test integrated circuits--$1,315,000
   transistors and amplifiers--$13,648
   electronic equipment--$32,610
   equipment for electronic component testing--$60,000
    Total: $9,696,117
CASE #3
Product: Tokamak Nuclear Fusion Reactor
Supplier: Chinese Academy of Sciences, Institute of Plasma Physics
    Comments: The Chinese Academy of Sciences' Institute of Plasma 
Physics transferred a HT-6B Tokamak nuclear fusion research facility to 
the Azad University in Tehran in 1993-94. The Institute designed and 
developed the Tokamak in the mid-1980s and successfully operated the 
unit for 10 years, after which it was transferred to Azad. In 1994, the 
Institute sent technicians and engineers to Azad to assist in the 
unit's installation and debugging, with the understanding that the two 
sides would continue joint nuclear fusion research in the future.
    U.S. Exports: Despite being a well-known contributor to Iran's 
nuclear program, the Academy of Sciences managed recently to import an 
American supercomputer. In March 1996, California based Silicon 
Graphics Inc., sold the Academy a powerful supercomputer without 
bothering to obtain a U.S. export license. In addition to supplying 
Iran, the Academy has helped develop the flight computer for the 
Chinese DF-5 intercontinental missile, which can target U.S. cities 
with nuclear warheads. The Academy's Mechanics Institute has also 
developed advanced rocket propellant, developed hydrogen- and oxygen-
fueled rockets, and helped develop the nose cone for the nuclear 
warhead of the DF-5. Its Shanghai Institute of Silicate successfully 
developed the carbon/quartz material used to shield the tip of the DF-
5's reentry vehicle from the heat created by friction with the earth's 
atmosphere. The Academy's Institute of Electronics has built synthetic 
aperture radar useful in military mapping and surveillance, and its 
Acoustic Institute has developed a guidance system for the Yu-3 
torpedo, together with sonar for nuclear and conventional submarines.
    In the nuclear field, the Academy has developed separation 
membranes to enrich uranium by gaseous diffusion, and its Institute of 
Mechanics has studied the effects of underground nuclear weapon tests 
and ways to protect against nuclear explosions. It has also studied the 
stability of plasma in controlled nuclear fusion. Its Institute of 
Electronics has developed various kinds of lasers used in atomic 
isotope separation.
CASE #4
Product: Uranium Mining Exploration
Supplier: Beijing Research Institute of Uranium Geology (BRIUG)
    Comments: BRIUG conducts scientific exchanges with Iranian and 
Pakistani nuclear scientists.
    As part of the China National Nuclear Corporation (CNNC), BRIUG 
carries out research on radio metrical and conventional geophysical 
uranium prospecting methods and conducts geological interpretations 
throughout China using satellite images. It develops and designs 
spectrometers, laser fluorometers for trace uranium analysis, mineral 
inclusion analyzers, scintillation radon analyzers, scintillation 
spectrometers, laser analyzers for trace substances, and high and low 
frequency dielectric separators. BRIUG also conducts research on 
geological disposal of nuclear waste, and possesses scientific 
equipment including neutron activation analyzers, electron microscopes, 
electron microprobes, mass spectrometers, X-ray fluoro-spectrometers, 
X-ray diffractometers, infrared spectrophotometers, ultraviolet 
spectrophotometers, atomic absorption spectrophotometers, laser raman 
spectrophotometers, fluoro-spectrophotometers, gas chromatography 
analyzers, fluid chromatography analyzers, image processing system and 
computer and color plotter systems.
    BRIUG's parent, CNNC has been implicated in the sale of ring 
magnets to the A. Q. Khan Research Laboratory in Pakistan, which 
enriches uranium for nuclear weapons. CNNC is also involved in the 
development of Pakistan's secret research reactor at Khusab and a CNNC 
subsidiary is currently constructing a power reactor for Pakistan at 
Chashma.
CASE #5
Product: High-Grade Seamless Steel Pipes
Supplier: Rex International (Hong Kong)
    Comments: Owned by China North Industries (Norinco), Rex is known 
to have acted as a broker for numerous deals between Norinco and the 
Middle East. Rex reportedly handled a shipment of high-grade seamless 
steel pipes, suitable for use in chemical or explosives manufacturing, 
to an Iranian chemical weapon plant. The consignee was Iran's Defense 
Industries Organization (DIO), a notoriously bad destination. The pipes 
were reportedly shipped from Spain to Hong Kong and then to the Iranian 
port of Bandar Abbas.
    Rex International Development was founded in 1982 as a joint 
venture between Hong Kong entrepreneur T. T. Tsui and Norinco. It 
functioned as a broker for Norinco's business in commercial high 
explosives, served as Norinco's window on the world arms markets and as 
a link to the international financial system through Hong Kong.
    Employees of Norinco were indicted in 1996 by the United States for 
illegally conspiring to import 2,000 fully automatic AK-47 assault 
rifles into California intended for street gangs. In addition to AK-
47s, Norinco develops and manufactures armored fighting vehicles, 
howitzers, mortars, rocket launchers, antiaircraft weapons, anti-tank 
missile systems, small arms, ammunition, radars, sighting and aiming 
systems, high-performance engines, and nuclear/biological/chemical 
warfare protection systems, sensor-fuzed cluster bombs, optical-
electronic products, explosives and blast materials, light industrial 
products, fire-fighting equipment, and metal and non-metal materials. 
Norinco was established in 1980 with the approval of the State Council 
of China, and is overseen by the Commission on Science, Technology and 
Industry for National Defense (COSTIND). Norinco subsidiaries in the 
U.S. include: Beta Chemical, Beta First, Beta Lighting, Beta Unitex, 
China Sports (California), Forte Lighting, Larin, NIC International 
(New Jersey).
CASE #6
Product: ``Silkworm'' Anti-Ship Missiles
Supplier: China Nanchang Aircraft Manufacturing Corporation
    Comments: Iran has deployed Chinese HY-2 ``Silkworm'' anti-ship 
missiles along the Iranian coast of the Persian Gulf, on the island of 
Abu Musa in the middle of the Persian Gulf, on Qeshm Island and Sirri 
Island. The missiles are Chinese modifications of the Soviet SS-N-2 
Styx missile, and can carry 1000 lb. warheads over a range of 50 miles 
at high subsonic (Mach 0.85) speeds. They can be equipped with either 
radar or infrared guidance systems, and thus can threaten U.S. and 
other ships transiting the Persian Gulf and the Strait of Hormuz, 
through which one-fifth of the world's oil supply passes. Iran used 
Silkworms during its war with Iraq to attack shipping in the Gulf. 
Iranian forces fired an improved version of the Silkworm missile during 
military exercises in late November 1996.
    U.S. exports: U.S. investigators believe that CATIC (China National 
Aero-Technology Import-Export Corporation), a powerful state-owned 
Chinese company, intentionally misled American officials in order to 
import sensitive American machine tools that were later diverted to 
forbidden military purposes. CATIC, China National Aero-Technology and 
China National Supply and Marketing Corporation imported the machines 
under export licenses issued by the U.S. Commerce Department with the 
stated purpose of making civilian aircraft. The machines had been used 
previously to make parts for the B-1 strategic bomber. The machines 
were shipped to China between September 1994 and March 1995 by the 
McDonnell-Douglas Corporation and were destined for CATIC's Beijing 
Machining Center. The Machining Center, however, did not exist at the 
time the licenses were granted and was never created. Instead, the 
tools were illegally sent to other locations, including the China 
Nanchang Aircraft Manufacturing Company, maker of the Silkworms.
                               __________

  Iranian Nuclear, Biological and Chemical Weapons: Implications and 
                               Responses

[This paper was prepared by Dr. W. Seth Carus for presentation on 
February 20, 1997, before the Iran study group of the Nixon Center for 
Peace and Freedom. It represents the views of the author, and not 
necessarily those of the Center for Naval Analyses, the Department of 
the Navy, or the Department of Defense.

    The United States currently characterizes Iran as one of several 
so-called ``rogue'' states that possess programs to develop weapons of 
mass destruction, which include nuclear, biological, and chemical (NBC) 
weapons. Since the 1990-1991 confrontation with Iraq, these weapons are 
viewed in Washington as a threat to the security of the United States 
and its friends and allies.
    Iran is said to possess chemical and biological weapons, and the 
means to deliver them, and is reportedly working to acquire nuclear 
weapons. Given the enmity that exists between the United States and 
Iran, and the possibility that military hostilities could erupt between 
the two countries, these Iranian weapons programs are a source of 
serious concern to policy-makers in Washington.
    In this short essay, I will briefly examine three issues that help 
provide a better understanding of the implications of the Iranian NBC 
program for the security of the United States and of the Middle East.
    First, what is Iran doing in the NBC and delivery system arena, and 
why is it pursuing those objectives?
    Second, what are the implications of these capabilities for the 
United States, for its allies and friends in the region, and for 
others?
    Third, what steps should the United States take in response to 
Iranian activity?
Iranian NBC and Missile Programs
    What follows is a summary of what is known about Iran's NBC 
programs, focusing primarily on U.S. government assessments. There have 
been numerous surveys of Iranian activities; no effort will be made 
here to repeat what others have done more thoroughly.\1\ Rather, I will 
concentrate on the officially stated views of the U.S. government, 
since such statements reflect the intelligence reporting that guides 
policymaking. However, I will assess the validity of the official 
assessments to determine whether there is reason to be skeptical of the 
official views.
---------------------------------------------------------------------------
    \1\ Excellent accounts have appeared in the works of Anthony 
Cordesman, Michael Eisenstadt, Ahmid Akhim, and Leonard Spector.
---------------------------------------------------------------------------
Official assessments
    Iran's nuclear weapons program originated prior to the 1979 
revolution. It fell apart during the revolution, and was resuscitated 
only in 1989 after the end of the Iran-Iraq War. According to a recent 
Department of Defense estimate:

          At this stage, Iran's scientific and technical base remains 
        insufficient to support major nuclear programs. The Iranians 
        recognize their dependence on foreign assistance and are 
        encouraging younger Iranians to study abroad to gain needed 
        technical assistance.\2\
---------------------------------------------------------------------------
    \2\ Office of the Secretary of Defense, Proliferation: Threat and 
Response (Washington: Government Printing Office, April 1996), p. 14.

    Similarly, ACDA gave the following assessment of Iran's nuclear 
activities: ``Although Iran's rudimentary program has apparently met 
with limited success so far, we believe Iran has not abandoned its 
efforts to expand its nuclear capabilities with a view to supporting 
nuclear weapons development.''\3\ In 1993, the Central Intelligence 
Agency calculated that Iran could develop a nuclear weapon in eight to 
ten years. More recently, the Secretary of Defense stated that it might 
take Iran from seven to fifteen years to develop a weapon.
---------------------------------------------------------------------------
    \3\ Arms Control and Disarmament Agency, Adherence to and compliance 
with Arms Control, May 1996.
---------------------------------------------------------------------------
    The Department of Defense reports that Iran's chemical weapons 
program started in 1983 as a response to Iraq's use of chemical 
weapons. They produced their first chemical agent in 1984, but 
cumulative production is ``a minimum several hundred tons of blister, 
blood, and choking agents.''\4\ Some sources have claimed that the 
Iranians might have as much as 2,000 tons of chemical agent, possibly 
including nerve agent.\5\
---------------------------------------------------------------------------
    \4\ Office of the Secretary of Defense, Proliferation: Threat and 
Response (Washington: Government Printing Office, April 1996), p. 15.
    \5\ Andrew Rathmell, ``Chemical weapons in the Middle East--Lessons 
from Iraq,'' Jane's Intelligence Review, December 1995.
---------------------------------------------------------------------------
    Iran's biological weapons program also was initiated in the early 
part of the war with Iraq. According to the Department of Defense, Iran 
``is conducting research on toxins and organisms with biological 
warfare applications.''\6\ According to the Arms Control and 
Disarmament Agency, Iran probably has produced biological warfare 
agents and apparently has weaponized a small quantity of those 
agents.\7\
---------------------------------------------------------------------------
    \6\ Office of the Secretary of Defense, Proliferation: Threat and 
Response (Washington: Government Printing Office, April 1996), p. 16.
    \7\ Arms Control and Disarmament Agency, Adherence to and Compliance 
with Arms Control, May 1996.
---------------------------------------------------------------------------
Assessing the assessments
    What are we to make of these assessments?
    Notwithstanding the official assessments, I remain intensely 
skeptical about the ability of the Iranians to match their achievements 
to their ambitions.
    My skepticism reflects in part the singular lack of success of the 
Iranians in pursuing ballistic missile programs. The Iranian ballistic 
missile program dates to at least 1987. Although Iranian officials 
claimed that the program had a high priority in early 1988 during the 
so-called ``War of the Cities,'' there is no evidence to suggest that 
Iran has been able to produce a single guided missile of indigenous 
design. Indeed, Iran's entire inventory is composed of foreign-supplied 
missiles, except for some missiles assembled in Iran from kits provided 
by North Korea. Clearly Iran has ambitions to produce its own ballistic 
missiles, including more accurate systems with greater range. Equally 
clearly, however, it has found it difficult to make significant 
progress in its efforts to do so.
    Iran initiated a Scud production program in 1987. The Scud missile 
is based on primitive technology dating to the 1940s. Indigenous 
efforts to develop the Scud failed, and in the end the Iranians were 
forced to go to North Korea for assistance. Given that there is nothing 
in Scud technology that should be inaccessible to the Iranians, this 
strongly suggests that Iran has considerable difficulty in systems 
integration. Accordingly, one should be skeptical of blithe claims that 
Iran will quickly implement design efforts to develop more 
sophisticated systems.
    This is evident from what appears to be a diminished level of 
concern regarding the immediacy of Iran's efforts to acquire nuclear 
weapons. This reflects the extent of the problems that face Iran as it 
attempts to develop an indigenous nuclear weapons program. Iran lacks 
the infrastructure needed to produce fissile material, and it will take 
some time for it to acquire both the facilities and the expertise to do 
so. Thus, the primary threat comes from illicit acquisition of either 
fissile material or complete weapons from the stockpiles of the former 
Soviet Union. It is impossible to assess the possibility that Iran 
could acquire a nuclear capability through this route. U.S. 
policymakers have given a high priority to efforts to forestall such 
attempts.
    Unfortunately, it will be difficult to verify Iranian possession of 
nuclear weapons if it uses covert means to acquire the fissile material 
or the complete weapon. As a result, we may be faced with a 
circumstance in which Iran might have a nuclear weapons capability and 
we would have no means of confirming the claim. This could be 
especially problematic if the Iranians allowed rumors of nuclear 
weapons to reach other countries, while publicly maintaining that it 
had no such capabilities. Conversely, the Iranians could try to make 
people think that they had nuclear weapons, even without actually 
having them. In either case, the United States should expect to face an 
increasingly ambiguous military and diplomatic challenge arising from 
Iran's nuclear program.
    Iran is credited with more success in its efforts to acquire 
chemical and biological weapons. It has a stockpile of chemical agents, 
and may have weaponized biological weapons. Estimates of Iranian 
chemical weapons stockpiles should be treated with some caution. While 
the size of the stockpile is potentially of military significance, the 
quality of it is uncertain.
    Some portion of Iran's chemical weapons inventory is reported to be 
composed of hydrogen cyanide.\8\ There is only one problem with this 
attribution: there is no evidence that anyone ever made hydrogen 
cyanide into an effective chemical agent. Cyanide gas was extensively 
used by the French during World War One, but German accounts suggest 
that it probably caused no casualties. Indeed, the body naturally 
detoxifies hydrogen cyanide and it is lighter than air, so that it is 
difficult to produce concentrations sufficiently great to incapacitate. 
Equally important, the US found that the burster charges in aircraft 
bombs needed to disperse the hydrogen cyanide often ignited the 
agent.\9\
---------------------------------------------------------------------------
    \8\ Office of the Secretary of Defense, Proliferation: Threat and 
Response (Washington: Government Printing Office, April 1996), p. 15.
    \9\ For the First World War experience with hydrogen cyanide, see L. 
F. Haber, The Poisonous Cloud: Chemical Warfare in the First World War 
(Oxford: Clarendon Press, 1986), and Augustin Prentiss, Chemicals in 
War: A Treatise on Chemical Warfare (New York: McGraw-Hill Book 
Company, 1937), p. 17. World War Two research is discussed in Stanford 
Moore and Marshall Gates, ``Hydrogen Cyanide and Hydrogen Chloride,'' 
pp. 7-16, in Division 9, National Defense Research Committee, Office of 
Scientific Research and Development, Chemical Warfare Agents and 
Related Chemical Problems, parts I-II, Washington, D.C.: 1946).
---------------------------------------------------------------------------
    There is one other significant point to make about hydrogen cyanide 
as a chemical agent. It is significantly less effective than other 
chemicals. According to one estimate, twenty tons of hydrogen cyanide 
is needed to equal the military effectiveness of one ton of sarin nerve 
agent. Thus, if Iran possessed 100 tons of hydrogen cyanide, it would 
have the operational significance of only five tons of sarin.
    This discussion of hydrogen cyanide illustrates an important point. 
Possessing a chemical agent is not the same as possessing a militarily 
useful war fighting capability. Indeed, the history of chemical warfare 
is replete with examples of technical surprises, where the chemical 
agent does not operate as anticipated, or operational ineptitude, where 
the employment of the agent significantly reduced its operational 
effectiveness.
    Moreover, the Iraqi experience also suggests some caution in 
evaluating chemical weapons inventories. Iraq apparently had great 
difficulty manufacturing and storing sarin, its standard nerve agent. 
UNSCOM reporting suggests that the sarin deteriorated after production 
because of impurities in the agent and poor storage techniques. For 
that reason, it adopted a binary combination that was storable and 
could be used to generate an extremely impure version of sarin 
immediately prior to use.
    There is no reason to believe that the Iranians would not face 
similar obstacles in their efforts to produce chemical weapons 
capabilities. Given the limited employment of chemical agents 
attributed to the Iranians during the Iran-Iraq war, there is no reason 
to believe that the Iranians gained the operational experience needed 
to teach them how to effectively use their chemical weapons.
    This discussion suggests several conclusions. The Iranians have 
been forced to rely on an ineffective agent that probably is for some 
(unknown) part of its chemical agent inventory. It also illustrates the 
extent to which it is possible to exaggerate the operational 
significance of a chemical inventory if sufficient attention is not 
given to the technical details of the arsenal in question.
    These comments are not intended to minimize concerns for Iranian 
efforts to develop NBC capabilities. Rather, they are intended to put 
those efforts into some kind of reasonable perspective. NBC 
capabilities should be evaluated with the same critical eye that any 
military capabilities are considered. Just as we do not equate 
possession of advanced weapons with possession of real military 
capabilities, so should we attempt to carefully assess the real 
military significance of Iranian chemical weapons inventories.
    Very little can be said about the allegations of Iranian biological 
weapons development. We believe that biological weapons, if properly 
utilized, should pose a lethality similar to that of nuclear weapons. 
What we do not know is the extent to which the Iranians have solved all 
the problems associated with production and dissemination of biological 
agents. Without such knowledge, it is impossible to assess the true 
threat posed by Iran's biological weapons.
Motivations
    There is limited data to support any sophisticated evaluation of 
Iranian motivations for developing NBC weapons. While there have been a 
few revealing statements by senior Iranian officials, we know little 
about the inner decision making process involving Iran's NBC program. 
As a result, we must rely primarily on imputed motives based on 
analysis. The one key exception to this are Iranian views of missiles. 
We have some interesting insights into Iranian thinking about missiles, 
because at one point (March 1988) the senior Iranian leadership was 
quite open about its views on these matters.
    I would suggest that there are three factors that motivate Iran's 
NBC and missile programs.
    First, it appears that the chemical and biological weapons programs 
and its efforts to acquire ballistic missiles were initiated in 
response to the Iraqi threat. Given subsequent revelations about the 
size and sophistication of Iraq's weapons programs, it is highly likely 
that concern for Iraq continues to motivate Iranian efforts.
    Second, Iranians probably view NBC programs as affirmations of 
Iran's status as a regional power. Thus, there is a critical prestige 
element in the activities.
    Finally, Iran also probably views its programs as a potential 
response to military threats from the United States and Israel.
    The relative weight of these three items is difficult to assess. 
What is clear is that Iran has powerful motivations to maintain NBC and 
missile programs. In the absence of a potent security umbrella, Iran is 
likely to pursue NBC capabilities even in the absence of hostile 
relations with the United States and Israel. In particular, until 
Iran's security concerns regarding Iraq are rectified, there is little 
prospect that Iran will unilaterally abandon its NBC programs.
    If this assessment is correct, Iran's weapons programs may be 
targeted at the United States, but not exclusively. This suggests that 
even if there is a rapprochement between the United States and Iran, 
the rationale for the weapons programs will remain.
Implications of Iranian NBC capabilities
    What are the implications of Iran's efforts to acquire NBC weapons, 
especially for the United States and its friends and allies in the 
Middle East?
For the United States
    Iran has several alternative uses for its NBC capabilities against 
the United States. Iran could use the weapons to deter the United 
States from getting involved in a conflict with Iran. To implement such 
a strategy, Iran could threaten to use its weapons against U.S. forces 
deployed in the region, or it could threaten covert use of weapons 
against targets in the United States.
    If deterrence fails and the United States attacks Iran, the weapons 
could be used to limit the scope of actions against Iran and the 
regime. Thus, Iran could threaten use of its arsenal if certain 
thresholds were crossed. In this way Iran could ensure that a limited 
war remained limited.
    The weapons also could be used to drive a wedge between the United 
States and its friends and allies in the region. By suggesting that 
countries hosting the United States might come under attack from 
Iranian NBC weapons, Iran could ensure that no countries support U.S. 
military actions and that they do not allow the United States to 
operate from facilities in the region.
    Finally, the weapons could be used as part of a war fighting 
strategy to compensate for Iranian conventional weapons deficiencies. 
Thus, Iran could target U.S. military forces, key facilities supporting 
U.S. operations in the Gulf, or critical reinforcement nodes.
    There are limits on Iran's ability to employ these alternative 
strategies. Iran's leadership is certainly aware of the military 
capabilities of the United States, and would need to find an approach 
that minimized the risks of retaliation. Given the gross disparity in 
military power between the United States and Iran, this will certainly 
be evident to all but the most obtuse member of the regime. This tends 
to suggest that Iranian use of NBC weapons is most likely to be 
carefully considered and will involve a considerable degree of 
subtlety.
For U.S. friends and allies
    The possession of NBC weapons adds to the threat that Iran already 
can pose to the GCC countries. These countries lack the military 
capability to oppose Iran on their own, and are heavily dependent on 
the protective shield offered by the U.S. military presence. Iran 
presumably would seek to use its NBC weapons to undermine the 
credibility and acceptability of the U.S. military presence. In 
particular, Iran would want the GCC countries to believe that by 
hosting the United States they are opening themselves up for NBC 
strikes.
    Iran would have to adopt a carefully modulated approach, since the 
GCC countries will not want to become puppets of the Iranians. For 
their own survival, they must find ways of protecting their 
independence of action. If Iran is too blunt in its actions, the GCC 
countries would have incentives to side with the United States despite 
the risks. Thus, Iran needs to couple their threats with diplomatic 
initiatives that give the GCC countries some reason to believe that it 
will be possible to establish an acceptable relationship with Tehran.
U.S. Responses
    What steps should the United States take in response to Iranian NBC 
efforts?
    Generically, the United States takes three approaches to the 
proliferation of NBC weapons. First, it seeks to rollback existing 
capabilities. Second, it tries to inhibit further proliferation. 
Finally, attempts to manage the consequences of proliferated 
capabilities. All three approaches are relevant to United States 
approaches towards Iran.
Rollback existing capabilities
    Efforts to roll back existing NBC programs have a higher priority 
today than in the past. This includes both the voluntary and 
involuntary destruction of capabilities. Current examples of such 
efforts include verification of the elimination of the Soviet BW 
program, of the Iraqi CBW and ballistic missile programs, and the South 
African nuclear program. A new requirement during the 1990s will be 
implementation of the Chemical Weapon Convention which will require 
such programs for the numerous countries with arsenals of chemical 
munitions. Depending on circumstances, it may be necessary to ensure 
the elimination of nuclear, biological, and missile capabilities in 
other countries as well.
    Rollback initiatives may be the primary responsibility of 
international agencies, such as the IAEA or the planned implementing 
agency for the CWC, or of the United States as party to bilateral and 
multilateral initiatives, as is the case with the Soviet BW program. 
Even when international agencies are involved, however, the United 
States will often take a leading role in providing support, or in 
monitoring the success of the international initiative.
    Specialized resources are needed for inspection and destruction of 
equipment and facilities. This process needs to be tailored to the 
specific circumstances of each case. In most circumstances, there will 
be gaps in our knowledge of past activity, and as a result rollback 
efforts cannot be based on pre-set target lists. In addition, it is 
possible that concealment and deception will be used to protect 
selected aspects of programs. For these reasons, it is critical that 
experts intimately familiar with the activities of a program over an 
extended period of time be included in rollback efforts.
    Recent experience indicates that it can be extremely difficult to 
uncover illicit weapons activities, even with highly intrusive 
verification efforts. While the UN inspectors in Iraq have accomplished 
much in the effort to control Iraq's NBC and missile programs, six 
years of intrusive inspections have yet to reveal the full scope of 
Iraqi activity. This suggests that we should not expect that arms 
control measures will be able to bring Iranian programs under control 
unless the Tehran regime wants to terminate those activities.
Inhibit further proliferation
    A traditional focus of U.S. nonproliferation policy are efforts to 
prevent countries from acquiring nuclear, chemical, or biological 
weapons, or missiles capable of delivering such weapons. Because of the 
extent to which countries have acquired capabilities, however, a 
growing focus of such efforts are initiatives to prevent countries from 
enhancing the size and sophistication of existing arsenals.
    Despite some failures, there have been considerable successes in 
our efforts to stem proliferation. Although more than two dozen 
countries might be capable of developing nuclear weapons capabilities, 
the actual number of nuclear capable states is relatively small. 
Similarly, we have successfully slowed the spread of chemical, 
biological, and missile capabilities.
    In some cases, it may be possible to convince or force a country to 
stop programs before they become operational. This is the importance of 
the initiatives to halt the nuclear programs of Iran, Iraq, and North 
Korea, and was the reason for the importance of the efforts to stop the 
Argentinian and Brazilian nuclear programs and to prevent the spread of 
nuclear weapons among the newly independent states of the former Soviet 
Union.
    In other cases, inhibiting proliferation means slowing programs, 
even though there is little reason to believe that they can be stopped. 
Thus, much of our activity in the chemical arena is intended to deny 
easy access to precursor chemicals needed to produce chemical agents, 
thus raising the costs and slowing pace of capabilities acquisition.
    Often we are trying to buy time, hoping that changing circumstances 
will alter the cost-benefit assessment that encouraged the 
proliferation activity in the first place. Alternatively, the time 
allows us breathing space which can be used to develop counters to the 
capability.
    These approaches are particularly relevant in the case of Iran. 
While the Iranians have made some progress in developing chemical and 
biological weapons, as well as missile delivery systems, their existing 
capabilities appear relatively rudimentary. Presumably, they have an 
incentive to acquire more sophisticated agents and better delivery 
mechanisms.
Managing the consequences of proliferated weapons capabilities
    We may fail in our efforts to forestall proliferation. When that 
happens, it is necessary to manage the potentially deleterious 
consequences of the proliferation. In many cases, the task is primarily 
diplomatic. Thus, we have conducted an active diplomacy to manage the 
dangers posed by nuclear proliferation in South Asia, and may need to 
do more during periods of intense conflict.
    In some cases, we may wish to adopt diplomatic initiatives intended 
to increase the costs or reduce the perceived benefits of possessing 
such weapons. This could entail providing defense assistance to allies 
(or even neutral and hostile countries, if appropriate), including CBW 
defenses and missile defenses. Alternatively, it could involve use of 
sanctions or military action by the U.S., depending on the 
circumstances.
    With the Defense Counter Proliferation Initiative, the Clinton 
Administration recognized that it is possible that hostile third world 
nations might be willing to use their NBC arsenals against the United 
States or its friends and allies. This means we must be prepared to 
operate in localities where our forces may be vulnerable to such 
weapons.
Iran specific policies
    Efforts by the United States to constrain Iranian NBC activities 
are consistent with general U.S. nonproliferation and counter 
proliferation policies. Since the early 1980s, the United States has 
used a range of diplomatic tools to against Iran. Working with other 
members of the international community, through such multilateral 
institutions as the Nuclear Suppliers Group and the Australia Group, 
the united States has attempted to limit Iran's access to the 
technology and materials it needs to develop NBC weapons. In addition, 
the United States has conducted aggressive bilateral diplomacy aimed at 
countries still providing support for the Iranians.
    These efforts have been remarkably successful. While some countries 
continue to do business with Iran in the NBC arena (including Russia 
and China), most countries have come to accept that efforts need to be 
made to constrain Iranian NBC activities. Thus, Iran has only limited 
access to the foreign suppliers that it needs to support its 
activities.
Rollback
    The ultimate objective of any nonproliferation program aimed at 
Iran should be ensuring the termination of its NBC and missile 
programs. This is not an easy task, but it is not impossible. This is 
evident from examining the track record of the international community 
in tackling nuclear proliferation.
Conditions for success
    Nearly five years ago, Joseph Yager of SAIC conducted an 
interesting study of what he called ``nuclear rollback,'' which he 
defined as a ``voluntary and credible renunciation of efforts to move 
closer to a nuclear weapons capability.''\10\ According to Yager's 
study, twenty countries have made serious attempts to acquire nuclear 
weapons capabilities. This total includes the five declared nuclear 
weapons states, five additional countries deemed current 
``proliferation problem cases'' (India, Israel, Libya, Pakistan, and 
North Korea), four countries that abandoned programs due to military 
defeat or revolution (Germany, Iran, Iraq, and Japan) and six cases of 
rollback (Argentina, Brazil, South Africa, South Korea, Sweden, and 
Taiwan). In his study, Yager focused on four of the rollback countries, 
treating South Korea and Taiwan as special cases due to the leverage 
exercised by the United States over their national security. Note that 
Yager treated both Iran and Iraq as solved problems, a view that was 
perhaps excessively optimistic based on our current knowledge of the 
two countries.
---------------------------------------------------------------------------
    \10\ This analysis is based on data provided by Joseph A. Yager, 
Prospects for Nuclear Proliferation Rollback, Discussion Paper, McLean, 
Virginia, Science Applications International Corporation, July 2. See 
also Joseph A. Yager, Prospects for Nuclear Proliferation Rollback, 
Seminar Report, McLean Virginia, Science Applications International 
Corporation, August 14, 1992.
---------------------------------------------------------------------------
    Based on his study, Yager concluded that his four cases of rollback 
shared five conditions essential for rollback. First, in each case the 
leadership of the country reassessed the military utility of nuclear 
weapons. Second, favorable domestic political developments enabled the 
leadership to abandon weapons development programs. Third, external 
pressures and inducements played a role in the decisions to rollback. 
Fourth, none of the countries openly acknowledged an interest in 
acquiring nuclear weapons. Finally, all the countries faced economic 
constraints that limited their pursuit of nuclear weapons.
    Several interesting conclusions can be drawn from Yager's analysis. 
First, it is evident that nonproliferation activities do not defeat 
nuclear weapons programs. Rather, they serve primarily to delay the 
completion of nuclear programs and to raise the costs of public 
declarations favoring acquisition of nuclear weapons. Second, the 
domestic political context is critical in the termination of programs. 
Rollback can occur only if those individuals or groups favoring 
renunciation have the desire and the political power to enforce such 
action. Finally, the international context is critical in the 
evaluation of the military utility of nuclear weapons.
    I would argue, however, that there are several other factors 
significant in the decision to abandon nuclear weapons programs that 
are of significance to countries like Iran. Yager chose to ignore five 
countries (Germany, Iraq, Japan, South Korea, and Taiwan) that I 
believe provide an important insight into decisions regarding nuclear 
weapons. Consider the three defeated countries, Germany, Iraq and 
Japan. While it is true that military defeat led to immediate 
termination of nuclear weapons programs, that is not a complete 
explanation. The Germans and the Japanese have had ample opportunities 
to review their non-nuclear posture, and both have decided not to 
pursue nuclear weapons programs. This, I believe, reflects an accurate 
calculation that the benefits of acquisition are far outweighed by the 
costs. In particular, the special importance that they assigned to 
their security relationship with the United States and the Western 
countries, as well as the anticipated reaction of other countries made 
nuclear weapons both undesirable and counterproductive. This is 
significant in the context of Iraq, also a defeated country but one 
that appears reluctant to abandon its ability to pursue NBC and missile 
programs. This suggests that when a leadership believes that it needs 
such capabilities, military defeat is not a sufficient condition to 
cause abandonment of the efforts.
    It appears that these same considerations were significant in the 
case of South Korea and Taiwan. While it is true that the United States 
had extraordinary leverage over these two countries, this leverage 
resulted largely from the import role that the United States played in 
ensuring the security of those two countries. Thus, I would argue that 
essentially the same conditions that applied to Yager's four cases of 
rollback also are pertinent in other examples.
    Whether these conclusions also apply to chemical and biological 
weapons programs is less certain. There has been no effort made to 
study rollback in the chemical and biological arena, although it is 
known that some countries have abandoned their programs (Germany and 
Japan had programs during the Second World War; the United States, 
Britain, and Canada abandoned their programs when they adhered to the 
BTWC). The context also is decidedly different. There is a treaty that 
bans possession of biological weapons (the 1972 Biological and Toxin 
Weapons Convention), and there will soon be a similar treaty for 
chemical weapons (the Chemical Weapons Convention, scheduled to enter 
into force this year). In contrast, possession of nuclear weapons is 
not generally proscribed, except for those countries adhering to the 
Nuclear Non-Proliferation Treaty (and even it permits a country to 
withdraw from the treaty).
    From these additional observations, I would draw an additional 
conclusion: that NBC programs can be terminated only with willing 
agreement. There is no military solution to NBC programs. Despite 
unfavorable conditions, a country will pursue NBC capabilities if they 
appear sufficiently important.
Applying the criteria to Iran
    It appears that three of the five criteria identified by Yager 
apply to Iran, but that two do not.
    The Iranians have never officially acknowledged an interest in 
possessing NBC weapons. Despite some rather direct statements made by 
Iranian officials about the value of NBC weapons, Iran cannot afford to 
officially acknowledge such intentions. As a signatory to the NPT, 
BTWC, and the CWC, Iran cannot adopt any other position without 
undermining efforts to acquire NBC weapons. This is most clearly 
evident in the case of nuclear weapons since, if Iran stated that its 
ultimate aim was acquisition of nuclear weapons, then China and Russia, 
both signatories to the NPT, would be forced to terminate their nuclear 
assistance programs. Finally, Iran is faced by severe economic 
constraints that limit its ability to pursue NBC programs.
    While it is clear that three of Yager's factors appear positive for 
rollback in the Iranian case, the other two factors are decidedly 
negative. There is no reason to believe that Iran will decide that it 
has no military rationale for its NBC capabilities, and there is little 
reason to believe that the existing clerical regime will be inclined to 
take steps to terminate these programs.
    Accordingly, I would argue that two conditions are essential to an 
Iranian decision to terminate its NBC programs. First, a regime must 
come to power that can establish better ties to other countries in the 
region. Specifically, the regime must be able to reconcile major 
differences with the United States and with the GCC and other 
significant Arab states. Second, the regime must be willing and able to 
enter into regional security arrangements that accomplish many of the 
same objectives as the NBC programs.
    Yet, it is also true that the United States lacked leverage in many 
of the cases where successes ultimately emerged. Crucial to the 
ultimate success was persistence, ensuring that when the opportunity 
arose we were positioned to pursue nonproliferation objectives. Thus, 
the true objective is delay by preventing a country from acquiring 
capabilities through raising costs.
U.S. military pressure on Iran
    Note that threats of military response to Iranian NBC activities 
can have either negative or positive consequences, depending on the 
reaction in Tehran. The prospect that the United States might attack 
Iran increases its sense of threat, and thus potentially makes NBC 
capabilities more useful as a deterrent. At the same time, to the 
extent that a small NBC capability increases prospects for a preemptive 
attack, Iran's overall security is reduced.
    From this perspective, the United States could pursue radically 
different policies in the context of its broader approach towards Iran. 
For example, if we believed that Iran was motivated to pursue NBC 
capabilities because of the threat of U.S. military action, then we 
could pursue a conciliatory policy intended to reduce Iran's sense of 
threat from the United States, and to make it believe that it can cope 
with regional threats using its own resources.
    If, however, we believe that it has additional motivations to 
pursue NBC capabilities, then a conciliatory approach might do little 
to reduce the motivations to acquire such capabilities. This suggests 
that NBC issues should not drive U.S. policy, but should be integrated 
into the foreign policy objectives that the United States adopts 
towards Iran.
Bottom Line
    In conclusion, I would advance several observations about Iran's 
NBC programs.
    First, the United States has been remarkably successful in 
constraining Iranian capabilities. While we have not stopped Iran from 
pursuing development NBC weapons and missile delivery systems, the 
capabilities that Iran has acquired so far are remarkably rudimentary, 
and the time line for major successes appears lengthy.
    Second, the real threat these capabilities pose is to the security 
of our friends and allies in the region. These countries, and 
especially the GCC countries, must believe that the United States will 
protect them from Iran. This also means convincing them that the United 
States will not provoke the Iranians. So long as they have confidence 
in the United States, I believe that they have strong incentives not to 
be coerced by Iran.
    Third, we need to continue to pursue a strategy that mixes 
multilateral and bilateral approaches. This is not a problem that can 
be solved by unilateral U.S. action. We need the full support of like 
minded governments around the world.
    Finally, the problem is not uniquely tied to the current regime. A 
fundamental shift in Iranian policy might facilitate rollback efforts, 
but it is also possible that a new regime might pursue the same 
policies. Moreover, while the United States might be willing to accept 
a pro-Western regime in control of existing Iran's NBC programs, it is 
unlikely that other countries in the region would feel similarly. 
Hence, the problem is likely to outlast the current regime.
                               __________

              Statement Submitted by Senator John Ashcroft

    Mr. Chairman, I greatly appreciate you holding this hearing on 
weapons proliferation to Iran. This is certainly a subject of utmost 
importance for America's national security. We live in a complex world 
today where threats to our national security are not easily identified. 
We cannot afford to take for granted the victories we have won; we have 
advanced freedom's cause and increased international stability 
throughout the world. In this dawn of a new era, rising security 
threats dot the horizon and must be addressed.
    The proliferation of weapons of mass destruction is one of the 
greatest national security threats we face in the post-Cold War world. 
While weapons proliferation is a problem that involves numerous nations 
around the globe, I am most troubled by Iran's efforts to acquire these 
weapons. Iran is the worst state sponsor of terrorism in the world, 
violently opposes the Middle East peace process, and poses a constant 
threat to regional stability in the Persian Gulf.
    Mr. Chairman, it may seem obvious to you and I that the strongest 
measures are needed to isolate such regimes, but President Clinton 
continues to overlook these arms transfers and refuses to impose 
sanctions required by US law on the foreign governments who proliferate 
these weapons.
    While Iran has received weapons and weapons technology from 
numerous states, let me focus on the sordid tale of China's involvement 
in the Iranian arms sector. China is arguably Iran's leading supplier 
of weapons of mass destruction technology and the missiles required to 
deliver such weapons to distant targets. China has apparently had a 
secret nuclear cooperation agreement with Iran since 1985, has trained 
Iranian nuclear engineers, and has built a calutron system for uranium 
enrichment in Iran similar to the system used by Iraq to develop its 
nuclear program. China is also interested in building two 300-Megawatt 
reactors in Iran in the next ten years. China hides behind the cloak of 
the Nuclear Nonproliferation Treaty which permits peaceful nuclear 
transfers, but there is no doubt that Iran is diverting this nuclear 
technology for military uses.
    China has also been deeply involved in Iran's chemical weapons 
program. In commenting on Chinese chemical weapons assistance to Iran, 
Deputy Assistant Secretary of Defense Bruce Reidel testified in 
November, 1995 that ``Chinese firms have provided some assistance. both 
in terms of the infrastructure for building chemical plants and some of 
the precursors for developing agents.'' The assistance continued in 
1996 as China reportedly transferred mixing vessels and an air 
filtration system for producing chemical weapons.
    As if the transfer of weapons of mass destruction technology to 
Iran were not enough, China has also given Iran the missiles needed to 
deliver these weapons to distant targets. China has transferred missile 
guidance systems, advanced machine tools for the manufacture of 
missiles, and complete missile systems to Iran. One of these missile 
systems, the C-802, has a range which places 15,000 US soldiers at risk 
in the Persian Gulf. Vice Admiral John Redd, Commander of the US Fifth 
Fleet, has repeatedly expressed concern over the destabilizing effect 
of these missiles in the hands of Iran.
    Chinese involvement in Iran's arms program violates the Nuclear 
Nonproliferation Treaty and China's commitment to abide by the Missile 
Technology Control Regime. I have come to expect this behavior from 
Beijing--dictators will be dictators. But what can be said of the 
President's silence? In spite of all the evidence that China is 
assisting the weapons program of the terrorist state of Iran, President 
Clinton has refused to impose sanctions on China for the weapons 
transfers. I see a disturbing trend in President Clinton's efforts to 
confront these nations which threaten our national security. In 
addition to an abysmal performance in enforcing US laws against the 
proliferation of weapons of mass destruction, President Clinton has 
eviscerated provisions in the US Anti-terrorism Act of 1996 designed to 
prohibit financial transactions with state sponsors of terrorism. 
President Clinton claimed in an August, 1996 speech at George 
Washington University that business as usual cannot proceed with 
terrorist states, but issued regulations for the Anti-terrorism Act 
that same month which allowed financial dealings to continue with 
terrorist states like Sudan. Sudan has joined Iran as the worst of 
state sponsors of terrorism, and I can assure you we will be exploring 
the President's antiterrorism policy in the Africa Subcommittee.
    Mr. Chairman, I am an original co-sponsor of a Senate Resolution 
introduced this week urging President Clinton to enforce our laws to 
prevent weapons proliferation to Iran. It is unfortunate that the 
Senate is having to confront the President of the United States about 
getting tough on rogue states like Iran and the communist dictators in 
China. I applaud your efforts in bringing this critical issue to light 
and hope that the attention will result in a positive change in U.S. 
policy.