[Senate Hearing 107-557]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 107-557
 
    RUSSIA AND CHINA: NONPROLIFERATION CONCERNS AND EXPORT CONTROLS
=======================================================================



                                HEARING

                               before the


INTERNATIONAL SECURITY, PROLIFERATION AND FEDERAL SERVICES SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION


                               __________

                              JUNE 6, 2002

                               __________

      Printed for the use of the Committee on Governmental Affairs









                           U.S. GOVERNMENT PRINTING OFFICE
80-604                          WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001







                   COMMITTEE ON GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 FRED THOMPSON, Tennessee
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
RICHARD J. DURBIN, Illinois          SUSAN M. COLLINS, Maine
ROBERT G. TORRICELLI, New Jersey     GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia                 THAD COCHRAN, Mississippi
THOMAS R. CARPER, Delaware           ROBERT F. BENNETT, Utah
JEAN CARNAHAN, Missouri              JIM BUNNING, Kentucky
MARK DAYTON, Minnesota               PETER G. FITZGERALD, Illinois
           Joyce A. Rechtschaffen, Staff Director and Counsel
              Richard A. Hertling, Minority Staff Director
                     Darla D. Cassell, Chief Clerk

                                 ------                                

INTERNATIONAL SECURITY, PROLIFERATION AND FEDERAL SERVICES SUBCOMMITTEE

                   DANIEL K. AKAKA, Hawaii, Chairman
CARL LEVIN, Michigan                 THAD COCHRAN, Mississippi
ROBERT G. TORRICELLI, New Jersey     TED STEVENS, Alaska
MAX CLELAND, Georgia                 SUSAN M. COLLINS, Maine
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
JEAN CARNAHAN, Missouri              ROBERT F. BENNETT, Utah
MARK DAYTON, Minnesota               PETER G. FITZGERALD, Illinois
                   Richard J. Kessler, Staff Director
                Dennis M. Ward, Minority Staff Director
                      Brian D. Rubens, Chief Clerk




                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Akaka................................................     1
    Senator Thompson.............................................     2
Opening prepared statement:
    Senator Cochran..............................................    33

                               WITNESSES
                         Thursday, June 6, 2002

John S. Wolf, Assistant Secretary, Bureau of Nonproliferation, 
  Department of State............................................     4
Matthew S. Borman, Deputy Administrator, Bureau of Industry and 
  Security, Department of Commerce...............................     6
Leonard S. Spector, Deputy Director, Center for Nonprolifeation, 
  Monterey Institute for International Studies...................    19
David Albright, President, Institute for Science and 
  International Security.........................................    21
Gary Milhollin, Executive Officer, Wisconsin Project for Nuclear 
  Arms Control...................................................    23

                     Alphabetical List of Witnesses

Albright, David:
    Testimony....................................................    21
    Prepared statement...........................................    51
Borman, Matthew S.:
    Testimony....................................................     6
    Prepared statement...........................................    39
Milhollin, Gary:
    Testimony....................................................    23
    Prepared statement...........................................    56
Spector, Leonard S.:
    Testimony....................................................    19
    Prepared statement with an attachment........................    44
Wolf, John S.:
    Testimony....................................................     4
    Prepared statement...........................................    34

                                Appendix

Questions for Assistant Secretary Wolf from:
    Senator Akaka................................................    61
    Senator Cochran..............................................    67
Questions for Mr. Borman from:
    Senator Akaka................................................    71
    Senator Cochran with attachments.............................    74
Questions for Mr. Albright from:
    Senator Cochran..............................................    88
Questions for Mr. Milhollin Albright from:
    Senator Cochran..............................................    91


    RUSSIA AND CHINA: NONPROLIFERATION CONCERNS AND EXPORT CONTROLS

                              ----------                              


                         THURSDAY, JUNE 6, 2002

                                   U.S. Senate,    
              International Security, Proliferation and    
                           Federal Services Subcommittee,  
                  of the Committee on Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:35 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Daniel K. 
Akaka, Chairman of the Subcommittee, presiding.
    Present: Senators Akaka, Carper, and Thompson.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. The Subcommittee will please come to order. 
Good afternoon, and welcome to our witnesses and all of you 
here this afternoon.
    Today's hearing will examine how well Russia and China 
comply with nonproliferation agreements and enforce export 
controls. We are holding this hearing on the eve of what the 
whole world fears could be a nuclear war between India and 
Pakistan. These states conceivably would have never developed 
nuclear weapons or the means to deliver them without assistance 
from Russia and China.
    President Bush has labeled Iran, Iraq, and North Korea an 
axis of evil, because of their weapons of mass destruction and 
their aspirations. Last month, John Bolton, Undersecretary of 
State for Arms Control, singled out Syria, Libya, and Cuba in 
his speech entitled ``Beyond the Axis of Evil.'' Naming names 
of rogue states is only one side of the story.
    For every state seeking to buy or build a WMD capability, 
there is also a state enabling it to do so. We have and should 
spend some time discussing emerging proliferant states and 
second-tier suppliers. But to make a real difference, 
nonproliferation must start with Russia and China, the major 
suppliers to proliferant countries.
    Since 1992, the United States has sanctioned Russian 
entities more than six times for the illegal export of missile 
and nuclear technology, and chemical and biological dual-use 
equipment. The United States has sanctioned Chinese entities at 
least six times, including a few weeks ago for violations of 
the 2000 Iran Nonproliferation Act. Some of the named Chinese 
entities have been sanctioned before.
    Multilateral export control agreements, diplomacy, and 
sanctions are the tools the United States has used to address 
the supply side of proliferation. They are imperfect 
instruments in fighting the spread of weapons of mass 
destruction, in part because two countries, Russia and China, 
do not seem to share our view of the dangers, nor are they 
willing to enforce their pledges to prevent proliferation.
    Both Russia and China claim to have export controls and 
agencies in place. Both can legitimately claim that the sheer 
size of their industrial base, new administrative agencies, 
growing private export companies, and confusion over new laws 
make it hard for them to implement controls. But time and time 
again, the United States identifies the same companies and the 
same individuals involved in illegal activities. It is these 
companies, these individuals, and occasionally government 
officials, who proliferate.
    Sometimes they do so illegally, but in many instances, we 
are discussing transfers of restricted items that have been 
condoned by official agencies.
    Our witnesses today will discuss the different issues 
surrounding this important topic. I would like to thank our 
administration witnesses on the first panel for being with us 
today. Ambassador John Wolf is the Assistant Secretary of State 
for Nonproliferation. He has been asked to discuss Russian and 
Chinese participation in multilateral export control agreements 
and whether current proliferation concerns are consistent with 
their compliance to these agreements.
    Matthew Borman is the Deputy Administrator for the Bureau 
of Industry and Security in the Department of Commerce. He will 
address the export control regimes of Russia and China, and 
U.S. assistance to their programs.
    These are difficult issues, especially in light of our 
expanding diplomatic relations with both of those countries. 
But these are questions that need to be asked if we are to find 
ways to make it better.
    Senator Akaka. At this time, I would like to yield to my 
friend and colleague Senator Thompson.

             OPENING STATEMENT OF SENATOR THOMPSON

    Senator Thompson. Thank you, Mr. Chairman, and thank you 
for that excellent opening statement. I think you are right on 
point. And with your indulgence, I will make a couple of 
comments.
    I think this is an extremely important hearing. Back a few 
years ago, back in the 1990's, when we would have hearings in 
this Subcommittee, the Judiciary, and other committees to talk 
about a fellow by the name of Osama bin Laden and al Qaeda, and 
the threat that he posed to this Nation, and the fact that the 
American people were not being told all that they needed to 
hear about that. The attendance by Members of the Committee was 
not very great. The attendance by the press was not very great. 
There may have been some mention in the press the next day 
following the hearing. That is kind of the pattern of what was 
going on back in those days.
    I hope that we are not having a replay of that. I hope that 
in years to come we do not look back and, instead of Osama bin 
Laden, we can substitute the name of any particular rogue 
nation that could do to us what bin Laden did to us on 
September 11.
    This hearing is important because it goes to the heart of 
the issue of terrorism. While September 11 apparently was not 
carried out by a nation state, all of the threats that we have 
been hearing about for many years now, and we will hear about 
again today, are still as prevalent and more so than ever 
before. Just because we were attacked one way one time does not 
mean that we will not be attacked in a much more devastating 
way at another time by a nation state or those who are working 
in concert with a nation state.
    Russia and China are clearly proliferators. They are 
clearly making this a more dangerous world. They are 
proliferating technology, know-how, and capability for nuclear 
programs and missile programs to rogue states and others. They 
have outfitted Pakistan soup-to-nuts as far as their missile 
program is concerned, entire missile systems.
    We would not have a crisis today in Pakistan had it not 
been for Chinese policies over the last several years. They 
continue to supply Iran, who may be as dangerous to us. In 
retrospect, we may conclude that Iran is as dangerous to us as 
Iraq. And they continue apace in their activities, continuing 
to develop long-range missile capabilities, with the carrying 
out of their Shahab III missile and other nuclear capabilities, 
which they claim they need domestically in that sea of oil that 
they are sitting on, for their energy supply, which can so 
easily be diverted.
    But I think the hearing is also important because it is 
going to point the finger at some of our policies in this 
country that we have had now for some years and continue. It is 
as if we really do not know what to do about this situation, 
because clearly we know what these countries are doing. We are 
trying to be friends with Russia and China, and we are also 
trying to get them to move toward more moderate behavior.
    And we sanction their companies from time to time. It has 
done absolutely no good. We catch the same companies doing the 
same thing. They are not concerned with our sanctions. Our 
sanctions do not even address the things that might even 
concern these companies.
    Clearly, with regard to at least some important parts, the 
nations themselves, the leaders of China and Russia, are aware 
of very important things that are going on in terms of 
proliferation activities.
    A second set of policy issues has to do with our own export 
controls. The United States supplies technology in the form of 
high-speed supercomputers that, as one of our witnesses will 
point out, is very helpful in terms of designing nuclear 
weapons and missiles. We send that to China. China in turn 
assists Pakistan and Iran with regard to their nuclear and 
missile capabilities. So maybe someone can explain to me what 
sense that makes. But that has been our Nation's policy now for 
some time, and it is today.
    So I think the American people should know this. The 
American people should understand what Russia and China are 
doing, that they continue apace, that they will continue to do 
this. They will continue as we reach out to them and try to 
assist them, in the case of Russia; as we try to bring them 
into 21st Century trade patterns, in the case of WTO in China; 
that they are becoming more and more a threat to world peace; 
and that our policies in attempting to deal with this are 
simply not working; and that we need to get about the business 
of trying to figure out what might work.
    So for all these reasons, this is a very important hearing. 
And I appreciate your having it, Mr. Chairman, and I thank you.
    Senator Akaka. Thank you very much, Senator Thompson. 
Senator Carper.
    Senator Carper. Thank you, sir. I have no comments, and I 
am just here to hear these witnesses. I look forward to their 
testimony.
    Senator Akaka. Thank you very much. We are glad you are 
here.
    At this time, I would like to call on Ambassador Wolf for 
your statement. Will you please proceed?

 TESTIMONY OF JOHN S. WOLF,\1\ ASSISTANT SECRETARY, BUREAU OF 
             NONPROLIFERATION, DEPARTMENT OF STATE

    Mr. Wolf. Thank you very much, Mr. Chairman, Senators. It 
is my privilege to testify on behalf of the Department of State 
on the important subject of proliferation concerns with Russia 
and China. I have a longer statement, that I would request be 
entered into the record, that addresses a number of the 
questions that you posed.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Wolf appears in the Appendix on 
page 34.
---------------------------------------------------------------------------
    Senator Akaka. Your full statement will be included in the 
record.
    Mr. Wolf. But let me first mention a few of the highlights.
    I have just returned from a most recent trip to Europe over 
the weekend, and I was delighted to hear in Berlin and in 
Brussels at the European Union and at NATO that they share our 
view that proliferation is one of the two galvanizing threats 
that confront Europe. It is good to hear the views, but the 
challenge with our partners in Europe and around the world 
continues to translate to increasing understanding into a much 
more effective action, as Senator Thompson was describing, 
action that will complement and supplement a variety of actions 
that the United States is taking in multilateral regimes, in 
our plurilateral relationships, bilaterally, and, in some 
cases, unilaterally.
    Nonproliferation is one of the most important and complex 
of America's foreign policy challenges. The President describes 
nonproliferation not as one of many issues in our foreign 
policy but as a central, focused issue around which other 
things revolve. And this is one of those, like the war on 
terrorism, where one needs to choose sides. You cannot sit on 
the fence.
    Now both Russia and China have helped in important ways in 
the fight against terrorism in the wake of the September 11 
attacks. Yet, significant differences remain between us on 
critical nonproliferation issues. I would like to outline our 
concerns and describe some of the steps that we have been 
taking to deal with the problems.
    I turn first to Russia, where the President's visit last 
month cemented important parts of a new strategic arrangement 
that we seek to reach. In addition to the dramatic treaty on 
reducing strategic offensive weapons, which will shortly be 
before the Senate, Presidents Bush and Putin agreed to 
intensify efforts to combat the spread of weapons of mass 
destruction. They went on to Rome for the creation of the new 
NATO-Russia Council, which will also address proliferation 
questions. And in implementing our efforts, succeeding would be 
a major contribution to U.S. national security as well as to 
global security.
    But despite our deepening and our positive strategic 
dialog, we remain concerned that Russian entities are providing 
proliferant states with weapons of mass destruction and 
missile-related technology. Russian entities continue to engage 
in WMD and missile-related cooperation with a number of 
programs in proliferant countries such as Iran, Libya, and 
Syria. In addition, Russia is also a major supplier of advanced 
conventional weapons for these states.
    We have been working with the Russian Government for 
several years to help cement its export controls and 
enforcement. This assistance played a significant role in 
creating the legal foundation for export controls that is now 
in place in Russia.
    Ultimately, however, the Russian Government must 
demonstrate the political will and devote the necessary 
priority and resources to use these capabilities effectively to 
stop illicit transfers, as well as to set responsible policies 
for what constitutes legitimate transfers. It has not done so 
yet, and we continue to press Moscow to demonstrate such a 
commitment.
    With regard to China, it too is a partner in the fight 
against terrorism. The President signaled this during his visit 
to Beijing this spring, as well as his desire to develop a 
broader relationship. But notwithstanding this and the 
important steps that Beijing has taken through commitments to 
multilateral proliferation regimes and bilateral arrangements 
with us, and the announcement that they would promulgate a 
variety of chemical-, nuclear-, and missile-related controls, 
we continue to have concerns about their nonproliferation 
behavior. The controls that they have announced for the most 
part are announcements, but they are not actual laws. They need 
to be laws, they need to be known, and they need to be 
enforced.
    We are particularly concerned that China complies fully 
with its various pledges not to provide assistance to any 
unsafeguarded nuclear facilities or programs anywhere. We are 
concerned as well over possible interactions between Chinese 
and Iranian entities, despite China's 1997 pledge to end its 
nuclear cooperation with Iran. Chinese entities' assistance to 
chemical programs in Iran and missile programs in Iran, 
Pakistan, and elsewhere has been a persistent problem.
    In the past 6 months, we have imposed sanctions on five 
entities for sale of items that assisted covert chemical or 
biological weapons programs. There are other laws that come up 
periodically, and there are other cases that are under active 
investigation.
    China has failed to implement its November 2000 commitment 
not to assist in any way any country in the development of 
Missile Technology Control Regime-class missiles capable of 
carrying nuclear weapons. It continues to export dual-use 
missile-related items to several countries of proliferation 
concern. This has been the subject of a number of high-level 
discussions between U.S. and Chinese officials.
    In short, there is a continuing gap between China's 
commitments and its implementation of those commitments. And we 
remain concerned about this, as we do about the gaps and 
loopholes in China's export controls and about China's ability 
to effectively enforce them. President Bush made clear at the 
time of his summit that fulfillment of nonproliferation 
commitments would be a major factor in determining how far a 
new U.S.-China relationship can develop. It is the same point 
that the President made last month during the summit in Moscow.
    We are expanding our broad relationship. There are many 
positive aspects. But with Russia, like with all of our 
friends, the issues of nonproliferation are significant issues, 
and they limit the ability of the United States to expand into 
new areas that would be of mutual benefit.
    The bottom line, Mr. Chairman, is that with both Russia and 
China, we are working to develop broad, new relationships, 
among other things, that will enable us to combat terrorism and 
the spread of weapons of mass destruction.
    We seem to agree that terrorism and weapons of mass 
destruction are threats to each of us and to the world 
collectively. The United States and a number of its friends and 
allies are taking concerted action in a variety of ways to stem 
these threats. We are working to strengthen the export control 
regimes, like the Missile Technology Control Regime. We are 
working for more effective enforcement of the Non-Proliferation 
Treaty and strengthened IAEA safeguards.
    But cooperation from China and Russia is inconsistent. 
Policy implementation does not match public or private 
assurances, and trade by entities in each country is 
contributing directly and significantly to precisely the 
threats that the Russian and Chinese Governments say they 
oppose.
    I would be delighted to expand further in questions and 
answers and specifics in relation to your questions, Mr. 
Chairman, or in my written text. Thank you very much.
    Senator Akaka. Thank you very much for your statement, 
Ambassador Wolf.
    Mr. Borman, will you please proceed with your statement?

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

    Mr. Borman. Mr. Chairman and Members of the Subcommittee, 
thank you for the opportunity to testify at this hearing.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Borman appears in the Appendix on 
page 51.
---------------------------------------------------------------------------
    The effectiveness of the export control systems of Russia 
and China is an important subject made even more important by 
the events of September 11. The Subcommittee is to be commended 
for its attention to this topic.
    My oral testimony will describe the dual-use export control 
systems of Russia and China and the status of our assistance 
efforts with those countries. My descriptions are based on the 
Department of Commerce's involvement in those assistance 
programs.
    Russia's current dual-use export control system has 
continued to evolve since its beginning in the early 1990's. 
Russia is a member of the Wassenaar Arrangement, the Nuclear 
Suppliers Group and the Missile Technology Control Regime. 
Russia is also a member of the Exporters Committee, commonly 
called the Zangger Committee, under the nuclear Non-
Proliferation Treaty. Russia is not a member of the Australia 
Group. Russia is a state party to the Chemical Weapons 
Convention and the Biological Weapons Convention.
    In summary, Russia has, for export controls an export 
control law that covers the export of dual-use items; 
implementing regulations, including control lists and catchall 
controls; interagency review of export license applications; an 
outreach program to inform exporters of their responsibilities 
under Russia's export control system; and, I would say, limited 
enforcement capability.
    Russia enacted its basic export control law in 1999. It 
provides the authority to control the export of all the items 
that are on the four multilateral regime lists, plus chemicals 
subject to the Chemical Weapons Convention. It also provides 
various other authorities, including the authority to have a 
catchall control, and, in the related criminal administrative 
codes, penalties for violations.
    Russia has put significant amount of effort into educating 
its defense enterprises on Russia's export control 
requirements, and the United States has worked with Russia and 
nongovernmental organizations to help facilitate that.
    Russia's export control system is currently enforced by a 
combination of agencies: The customs service, the intelligence 
service, and the federal prosecutors. Russia has recently 
indicated to us that they are interested in beefing up their 
enforcement and in particularly looking at administrative 
enforcement mechanisms. And in our own experience, 
administrative enforcement is a critical part of an effective 
export control system.
    As Ambassador Wolf has mentioned, we have had an ongoing 
export control cooperation program with Russia for several 
years now. In the first few years, it was actually more of an 
exchange of information. And certainly, we had to overcome some 
skepticism on the part of Russian officials and exporters that 
the United States was not really pushing export controls to 
preserve market shares and market advantage for U.S. companies. 
I think we are well past that, but clearly there is a lot that 
Russia still needs to do.
    As I mentioned, a large part of the effort has been 
educating Russian defense enterprises on Russia's export 
control system. Today under this program, several hundred 
Russian defense enterprises have at least gone through a first 
round of training, if you will. And a recent study of that 
particular part of the program, the outreach program, by the 
University of Georgia indicates that it has had some effect. It 
has at least given exporters in the defense enterprises a basic 
knowledge of Russia's export control system. Clearly, they need 
to do more training.
    One other thing I would like to mention on our cooperation 
with Russia, the Department of Commerce does have an export 
control attache stationed in Russia. That person has several 
responsibilities, one of which is to do end-use checks when 
U.S. goods are exported into Russia. But another important 
responsibility of our attache is to work with Russian 
officials, particularly the export control enforcement 
officials, and provide information on ways that they might 
improve enforcement of their own export control system.
    Turning to China, I have less to say about China. The U.S. 
Government has not had an ongoing export control cooperation 
program with China. We have had some limited bilateral meetings 
over the past few years, but those have really only been very 
basic exchanges of information. China is not a member of any of 
the multilateral export control regimes, save the Zangger 
Committee, which is for nuclear trigger list items.
    As Ambassador Wolf has mentioned, China has promulgated 
some export control regulations, but we have not really engaged 
in any dialog with them as to what those really mean or how 
they are implemented.
    With that, I think I will conclude my oral testimony, and, 
again, also be happy to answer questions.
    Senator Akaka. Thank you, Mr. Borman. Your full statement 
will be included in the record.
    Mr. Borman. Thank you, Mr. Chairman.
    Senator Akaka. We have some questions for you.
    Ambassador Wolf, the 2001 unclassified report to Congress 
on the acquisition of technology relating to weapons of mass 
destruction and advanced conventional munitions has a quote I 
would like to read. The Central Intelligence Agency states 
that, ``With respect to Pakistan, Chinese entities in the past 
provided extensive support to unsafeguarded as well as 
safeguarded nuclear facilities, which enhance substantially 
Pakistan's nuclear weapons capability. We cannot rule out some 
continued contacts between Chinese entities and entities 
associated with Pakistan's nuclear weapons program subsequent 
to Beijing's 1996 pledge and during this reporting period.''
    If there are such contacts between Chinese entities and 
Pakistan on nuclear weapons, Ambassador Wolf, do you believe 
such contacts would have to involve official Chinese entities 
and individuals? Do you believe that China continues to provide 
assistance to Pakistan's nuclear weapons program? And if so, 
what type of assistance?
    Mr. Wolf. I think, Mr. Chairman, that I will stand with 
what you read from the 721 report. This is an open hearing. And 
the Department of State certainly concurs with the sentence 
that you read that we cannot rule out some unspecified contacts 
between Chinese entities and entities involved in Pakistan's 
nuclear weapons development program.
    Nuclear weapons tend to be a fairly regulated activity. But 
here, it would not be helpful, I think, to speculate beyond the 
language.
    We are concerned. We have had conversations with China. We 
do believe that it is absolutely essential that China live up 
to all of the nonproliferation commitments it has given, none 
more important than the set of nuclear commitments, not only in 
terms of providing no help to any program or activity that is 
absent safeguards, but also its commitments vis-a-vis Iran not 
to provide any assistance to Iran beyond the two very limited 
projects that were, for all intents and purposes, grandfathered 
in 1997.
    As long as you have read from the Central Intelligence 
Agency's report, I think it is important to note, Mr. Chairman, 
that it does actually provide an encyclopedic view 
unclassified, sometimes with classified and sometimes not 
classified annexes to the Congress. But I think we are one of 
the few countries in the world that actually puts its cards 
down on the table.
    It does not solve the problems that you and Senator 
Thompson have described, but I think it helps in the education 
of the public. And that has been one of our challenges as we 
work our way through our allies, trying to raise their 
appreciation of the risks that proliferation poses to them. So 
we use this report and we use our contacts to try and get this 
up in the agenda dealing with nonproliferation.
    To go back to what you all were saying, it is not something 
we will achieve alone, because the dual-use technology that is 
available not only from the United States or Western Europe but 
increasingly from middle-tier countries makes the challenges 
that we all face that much more difficult. Countries that were 
receivers of technology, buyers of technology, now some have 
become exporters of technology.
    Senator Akaka. I do not think you have covered that part on 
whether you believe that China is assisting Pakistan.
    Mr. Wolf. We believe that--we are still concerned that 
entities may be involved in their nuclear weapons development.
    Senator Akaka. Ambassador Wolf, the same report states 
that, ``President Putin, in May 2000, amended the presidential 
decree on nuclear exports to allow the export in exceptional 
cases of nuclear materials, technology, and equipment to 
countries that do not have full-scope IAEA safeguards. The move 
could clear the way for expanding nuclear exports to certain 
countries that do not have full-scope safeguards, such as 
India.''
    Are there any indications of continued Russian official 
contact with the Indian nuclear weapons program or assistance 
to the military side of the Indian nuclear program?
    Mr. Wolf. Mr. Chairman, I think it is important to clarify 
that India is a rather different case on various lists than the 
way in which it appears in the 721 report.
    But it is clear India developed and, for the most part, 
developed its own indigenous nuclear capability. This paragraph 
has to do specifically with Russian assistance to the civilian 
side of India's nuclear establishment.
    There is nothing in this report that suggests that there is 
Russian assistance to India's nuclear weapons capability. There 
is ongoing contact, both in terms of nuclear fuel supply and 
items below the NSG trigger list level, between Russia and 
India. There are contracts for the sale of additional nuclear 
reactors.
    But India does not have full-scope safeguards. This has 
been an item of very active discussion in the Nuclear Suppliers 
Group, and we will not let it go.
    Senator Akaka. Before I defer to Senator Thompson for his 
questions, I have a question for Mr. Borman.
    In your testimony, you state that discussions between the 
United States and China on export controls have been limited. 
Why have only modest steps been taken to help China identify 
problems in their export control systems? Is it because of 
Chinese reluctance to seek outside advice? Or have we been 
reluctant to take action?
    Mr. Borman. Well, in my experience at least, it is probably 
been more the former. Clearly, to have this kind of cooperation 
program, you have to have two governments that are interested 
in moving forward. And I have not seen that indication, 
although the State Department may want to comment on that as 
well.
    Mr. Wolf. I might add a little bit, Mr. Chairman, because I 
have had an active dialog with certain Chinese officials, but 
it has not gotten as far as we would like.
    In the context of our discussions, and especially about the 
November 2000 Missile Technology Control Agreement, China 
agreed to publish comprehensive export controls for missiles. 
During the course of our dialog about the lapse or breach of 
that agreement, we have also had a chance to hear that China 
intends to expand its current controls on Australia Group-
related export items and, indeed, to make their export lists 
compatible with the Australia Group. We are not aware that the 
law or a regulation on CBW has been promulgated.
    Similarly, they have told us that they intend to publish 
lists that would be compatible with the MTCR annex items. That 
had been tied up in the discussions of the November 2000 
agreement. In fact, in some conversations, it has appeared that 
maybe it is not now.
    The point for us is that China does not promulgate new 
export control lists as a favor to the United States or to the 
Australia Group or to the MTCR partners. China's policy, as 
declared from the highest levels, is a policy that opposes 
proliferation. And a policy that opposes proliferation needs to 
be backed by rigorous regulations and rigorous enforcement of 
the regulations. It is not enough just to have the regulations; 
they need to be enforced. By enforcement, it is not enough to 
just catch somebody and tell them not to do it again; there 
need to be judicial sanctions.
    So as we look at the direction that China is going, we are 
encouraged by what we hear from every level of the Chinese 
Government about commitment to nonproliferation. But we are not 
as encouraged by the fact of what is there in terms of the 
legislative and administrative arrangements. And we are 
certainly quite less satisfied with the enforcement, because, 
as in the CIA's report, Chinese entities are active all around 
the world.
    Now, does that or does that not have the government's 
endorsement or support? We cannot answer that question as 
easily as we can answer the point that enforcement is 
insufficient to prevent Chinese entities from selling goods and 
services to proliferators in a way that significantly enhances 
those proliferators' programs.
    Senator Akaka. Are there any other comments you would like 
to make, Mr. Borman?
    Mr. Borman. Well, I guess to amplify a little bit of what 
Ambassador Wolf said. In the program we have had, at least with 
Russia and some other countries, you initially have a political 
commitment to engage in cooperation and then from that flows 
the more technical discussions. As you have heard, we are not 
to that point yet with China.
    Mr. Wolf. With Russia, for instance, we have experts who 
sit down. They review the list. We are working with Russia in a 
variety of ways, in terms of working with the export control 
part of the economic development ministry on things like 
enhancing communications, expanding export control outreach, as 
Mr. Borman described, but also education for judges and 
prosecutors and legislators. We are helping to install 
specialized radiation detection equipment at a number of border 
posts. And we are engaging in a broader set of export control 
talks, including on nuclear-related exports.
    With Russia, we have that opening. With China, we are 
interested in expanding our discussion, but it takes two hands 
to clap.
    Senator Akaka. Thank you, Senator Thompson, for your 
questions.
    Senator Thompson. Thank you, Mr. Chairman.
    I hardly know where to start. It is clear that the State 
Department and our export folks are doing what they can in 
order to try to get Russia and China to come up with some 
regimes of enforcement. Of course, I guess it was 1999 that 
Russia passed an export control law. China has issued some 
regulations and so forth.
    Ambassador, I realize that you have to be diplomatic. You 
are working with these people. And to the extent that you can 
get them to come up with these regimes and comply maybe 
sometimes with these regimes, more power to you.
    And the same with you, Mr. Borman.
    But we have seen here for several years now the State 
Department and their export folks in Commerce and so forth 
proceed along on the basis of taking at apparently face value 
these political statements made from the highest authority. 
Taking at face value their statements that they really do want 
to control all this stuff. Apparently, this administration is 
adopting that same approach. And I find it disconcerting, to 
say the least.
    We have all seen the classified information. We have to 
rely on what is on the public record, and I look at the public 
record and see things like this. According to a February 2002 
unclassified summary of the Director of the Central 
Intelligence report to Congress on the acquisition of 
technology relating to weapons of mass destruction, Russian 
entities continue to supply a variety of ballistic missile-
related goods and technical know-how to countries such as Iran, 
India, China, and Libya. Iran's earlier success in gaining 
technology and materials from Russian entities has helped to 
accelerate Iranian development of Shahab III, a missile with a 
capability to hit Israel. And continuing Russian assistance 
likely supports Iranian efforts to develop new missiles and to 
increase Tehran's self-sufficiency in missile production.
    In January 2000, Moscow approved a draft cooperative 
program with Syria that included civil use of nuclear power. 
Broader access to Russian scientists and Russia's large nuclear 
infrastructure could provide opportunities to solicit fissile 
material production expertise and other nuclear-related 
assistance if Syria decided to pursue nuclear weapons. During 
the first half of 2001, Russian entities remained a significant 
source of dual-use biotechnology, chemicals, production 
technology, and equipment for Iran.
    With regard to China, obviously they do not view export 
controls as a national priority, to say the least. They use 
them as a bargaining chip and have basically told us that as 
long as we continue supporting Taiwan, and we will not approve 
satellite sales and satellite launches, they are going to 
continue to do pretty much as they please and have.
    The administration in September 2001 imposed sanctions on 
two companies that were found to have transferred ballistic 
missile goods and technologies to Pakistan. More recently, in 
January of this year, the administration imposed sanctions on 
three more Chinese companies for transferring chemical and 
biological technology to Iran. The CIA Director reports that 
the PRC remains a key supplier of technology inconsistent with 
proliferation goals, particularly missile or chemical 
technology transfers. China contributes toward trends and more 
ambiguous technical assistance, indigenous capabilities, and 
longer range missiles and secondary proliferation.
    Most recently, China has reportedly assisted Pakistan in 
the development of its Shaheen II two-stage solid fuel medium-
range ballistic missile. In addition, firms in China have 
provided dual-use missile-related items, raw materials, and/or 
assistance to several other countries of proliferation concerns 
such as Iran, North Korea, and Libya. Chinese firms continue to 
be suppliers of dual-use chemical weapons production equipment 
and technology to Iran.
    I submit to you that is not cause for optimism. It is 
clearly a continuation, if not acceleration, of what we have 
been seeing over a period of years now.
    It is clear that, in terms of Russia's situation, they lack 
resources. They lack expertise. I think you point those things 
out. And specialists, in some ways. We are trying to help them 
there. We should. It is not like every item that they made, 
they send to someone who is a bad actor. We are assisting them 
with our Nunn-Lugar program and trying to do something with 
regard to the nuclear stockpile.
    But when it comes to the bottom line and they are making 
money, they clearly continue to do these things and make the 
world a more dangerous place.
    I understand the position of both of you gentlemen. That is 
why I am doing what I hate for us to do, and that is to make 
statements instead of asking questions. But I can just express 
that I hope that deep down inside you really do understand that 
what these high-level officials of these two countries say 
about proliferation is virtually meaningless, and what they 
agree to do is virtually meaningless when it comes to them and 
their national interests.
    Over the years, you could almost say the same thing about 
our European friends. I am glad you feel optimistic coming back 
from talking to our EU friends, but their history there, when 
profits were at stake, has been terrible. I mean, some of our 
friends in the EU are in the process now of helping break 
sanctions on Saddam Hussein.
    I just think that it is good to have these public forum 
discussions. You may disagree with most of what I say, but I am 
talking about the public record and similar hearings that we 
have over the years, and I am saying that the world continues 
to be a more dangerous place. We continue to try to figure what 
to do about it, but we are not making much headway with regard 
to the two most prominent and persistent proliferators in the 
world, Russia and China.
    I am not saying that you gentlemen need to come in here 
within a year or so and solve all these problems that have been 
developing over several years. I am just saying that we would 
be very naive, and it would be very dangerous for us to assume 
that things are getting better, because things are getting 
worse.
    Mr. Wolf. Maybe I should take that as a question: Do we 
agree?
    Senator Thompson. That'll do. [Laughter.]
    Mr. Wolf. Let me say that I think some things are different 
in this administration, and we are not particularly diplomatic. 
I will refer you to our European friends, or I will have John 
Bolton come up and explain.
    But we are not particularly diplomatic. The President has 
been very clear, starting with his speech at the State of the 
Union, and in every contact that we have with our friends on 
whom we are hard, and those who are not as friendly, and those 
who are on the other side. And we are not diplomatic with them. 
There are no game preserves. We do not rule certain countries 
in and out. We did sanction China a month before the President 
was to go to Shanghai. We have sanctioned entities.
    Senator Thompson. Chinese companies.
    Mr. Wolf. We are continuing to sanction entities. I do not 
believe, actually, that Russia lacks resources or expertise. I 
think they lack will. But I think things have changed in 
Russia.
    Two years ago, I was the negotiator for Caspian energy. On 
Caspian energy, the reception that the United States received 
in the Caspian region is unlike the reception that the U.S. 
military receives in Central Asia today.
    Russia is moving, but has it made a decision at the highest 
level to tell every other level to stop it? It is clear that 
has not happened. And that is why the President engaged 
directly with President Putin at the summit 2 weeks ago, to 
make it clear that nonproliferation for the Bush Administration 
is a core, central issue. And it is not tempered by cooperation 
in the war on terrorism. It is not tempered by the desire to 
develop an economic relationship. It is not tempered by a 
personal friendship.
    For us, support for countries--which, you are right, Iran 
poses a direct threat not just to Israel and not just to 
Russia. Iran and the programs that it has now, including the 
Shahab missile, pose a direct threat to the United States by 
the ability of that missile to hit U.S. forces in Turkey and a 
direct threat to NATO by its ability to hit forces from NATO 
countries in the Gulf region.
    And that is the conversation we have with the Europeans. Do 
not take wrong what I said about ``I come back optimistic.'' I 
came back hearing that there is a greater recognition that 
proliferation is one of two threats to European security, the 
other being regional disintegration.
    But we will be able to tell how real that appreciation is 
when we see things like whether the Europeans tie their trade 
relations talks to their concerns about nonproliferation.
    We will see if Russia's commitment to ban the weapons of 
mass destruction plays out in the marketplace. I was told by 
the head of the space agency that they have a number of cases 
under investigation, and I told them, ``That's good. That is 
encouraging. We look forward to hearing how you proceed with 
those investigations.'' He said, ``We found one guilty. We 
fired him.'' I said, ``That's not enough. You must not slap him 
on the wrist. Slap him in jail.''
    For Russia and China, the question is whether or not the 
government sends signals through the judicial process that are 
sufficient to tell these renegade entities that the government 
is serious. They have not done that yet. Our eyes are wide 
open.
    Senator Thompson. You are not suggesting they all are 
renegade, are you?
    Mr. Wolf. It is hard to discern whether or not they are 
done with the support of the upper levels, or whether or not 
they are done with the support of the entities.
    Senator Thompson. Well, it is, I guess, most times hard to 
discern, Ambassador Wolf. But I guess that is what I am getting 
at.
    Our primary overriding concern is the safety of our Nation 
and our friends and our allies. If you have a pattern over the 
years of this activity coming out of a country that we have a 
relationship with and an improving relationship with, with 
regard to a lot of other areas. If this pattern continues, and 
you sanction a company here and a company there and maybe a 
subsidiary or affiliated company does the work instead, where 
should the burden lie?
    Should the burden be on us to prove beyond a reasonable 
doubt in a court of law? Or should we say to them, ``We cannot 
prove beyond a reasonable doubt in a court of law who exactly 
knew what, but it is your responsibility.''
    And in many of these cases, they do not make any bones 
about it. I mean, they say this is for peaceful nuclear 
purposes and use these loopholes in the law to do things on top 
of the table, not to mention the other.
    But where should the burden lie? Should we not put the 
burden on them, say regardless of who knew what, your policies 
need to be directed toward stopping this or making substantial 
progress towards stopping that?
    Mr. Wolf. Senator, your talking points are exactly the ones 
we use. The burden is with their leadership; their burden is 
with their administrators.
    We will be able to judge their commitment--either country--
their commitment to their nonproliferation rhetoric by the 
degree to which they enforce and put in place wide-ranging laws 
and then enforce them. If we do not see a pattern of enforce--
and we have laws and we have companies that try to violate our 
export laws. And we count on a variety of U.S. administrative 
means to identify those people, prosecute them, and hopefully 
convict them, and that's what we count on.
    In our dialog with the Russians, for instance, we say that, 
``We understand you will not turn this off overnight. You are 
right. This is years of behavior. But what we do not see is a 
pattern of prosecutions, a pattern of companies being found in 
violation''----
    Senator Thompson. What does that tell you?
    Mr. Wolf. It tells you that the political will is not there 
yet.
    Senator Thompson. Does that tell you that the leadership is 
surprised and shocked to find that these companies are doing 
this? Or does it tell you that perhaps they realize that these 
companies needed funding, and it was in these countries' 
interests to have these entities survive. And they were all up 
against it financially, so they at least turned a blind eye. 
What does that indicate to you?
    Mr. Wolf. What it indicates to us is that they are not 
effectively implementing their law. And what the President has 
made clear, Senator, is that even as we try to move forward on 
a broad relationship, and there are other areas with much more 
economic significance than these sales, that we will not be 
able to move in that direction, because the administration will 
not choose to and the Senate and House will not support it.
    And we are very clear that to expand the relationship, for 
instance, with Russia, to take on a number of new activities in 
terms of nuclear research or space cooperation, that there 
needs to be an end to support for sensitive nuclear 
cooperation--for instance, in Iran, an end to missile 
cooperation in Iran, an end to advanced conventional weapons 
sales.
    Senator Thompson. Well, I am assuming that the President 
had some very direct conversations with Mr. Putin, for example. 
I feel confident that that is the case. And I like most of what 
you say in our discussion, quite frankly.
    I got kind of a different impression from your statement. 
The President needs support from the State Department in 
carrying out this message. And I would just urge you to 
consider whether or not in your public statements, which they 
are all very much aware of, that the thrust of what you are 
saying is that things are looking up, we are going to watch 
them carefully, but we are making progress, and we are 
encouraged and all of that--in the face of our own CIA telling 
us what has happened. I mean, I fear that the other side thinks 
perhaps that we may be patsies somewhere up or down the line.
    And I just would encourage you to consider that in your 
public pronouncements, with regard to these issues.
    We have a vote on. We will stand in recess until Senator 
Akaka comes back.
    [Recess from 3:33 p.m. to 3:38 p.m.]
    Senator Akaka. The Committee will be in order.
    Mr. Ambassador, I understand that Assistant Secretary of 
Defense Peter Rodman will be traveling to China shortly to hold 
bilateral talks with the Chinese on military and defense 
issues. The question is, will the Departments of State and 
Commerce be advising Secretary Rodman on issues concerning 
proliferation and enforcement of export controls, which he 
should raise with the senior Chinese officials? I think this 
would be a good opportunity to reinforce the administration's 
concerns, especially given Mr. Borman's testimony today, 
indicating that we have had problems getting Chinese attention 
on export control enforcement.
    Is he going to raise some of these questions with the 
senior Chinese officials?
    Mr. Wolf. Mr. Chairman, I know that as one of his first 
acts, President Bush promulgated a national security 
presidential directive that established a nonproliferation 
working group at the assistant secretary level. I am one of the 
people on it, and so is Mr. Rodman, when issues come up related 
to his activities.
    And I am sure that Assistant Secretary Rodman will welcome 
the advice of the ``PRO-STAT-PCC,'' we call it, on those issues 
that are not directly defense--inherently defense. We try to 
coordinate our activities, as we do when Defense has its 
various dialogues.
    I participated in a meeting a couple of weeks ago over at 
the Department of Defense when there was a visiting delegation, 
and I am sure Mr. Rodman will welcome advice from Commerce and 
State. In any event, we will provide it.
    Senator Akaka. Russian officials have stated that the 
United States has a double standard when it comes to Russian 
assistance to Iran. They claim that we condemn certain exports 
from Russia but support sales of the same items from other 
countries to Iran. They also claim that Russian work on the 
Iranian nuclear power plant is the same as our assistance to 
North Korea, through the Agreed Framework. Could you please 
comment on these claims?
    Mr. Wolf. We disagree. I'll expand.
    Where we can identify American companies that are exporting 
dual-use technology to prohibited entities and enemies, we 
certainly rigorous enforcement action. Where we identify, for 
instance, European entities that are exporting dual-use 
technology to Iranian entities, we take rigorous action.
    I can think of one case for one Western European country in 
particular where I met with the ambassador, and I told him very 
specifically that that company needed to choose: Was it going 
to try to develop a market in Iran, or was it going to continue 
to develop its market in the United States? It could not do 
both.
    Secretary Powell raised the same issues in his conversation 
with the foreign minister and the economic minister of that 
country. And in the end, the country chose to use its catchall 
regulations to stop the export of an item which was not even 
actually on the Australia Group list but which could have 
contributed to a BW program in Iran.
    We do that with our friends. We do it wherever we have 
information. And where we can use the information without 
compromising our sources in a serious way, we use that 
information to try to halt the export.
    Now, we have clear information--this is not just a 
guesstimate--that Russian entities are providing critical 
support for nuclear fuel cycle development in Iran. And Russian 
entities or individuals are providing critical support for 
missile development in Iran. And Russian entities and Russia 
are selling advanced conventional weapons to Iran. And it is 
our belief that that has to stop.
    On the question of Bushehr, Bushehr is much more 
complicated. Bushehr is in fact a light-water reactor. It is in 
a country that is clearly conducting efforts outside of its 
IAEA safeguards to acquire the capability to make fissile 
material. It is a country where the program is moving forward. 
It does not have an additional protocol. There will be no wide-
ranging IAEA inspection of all of the facilities, as would be 
the case in North Korea.
    The Iranian nuclear program and the nuclear fuel cycle is 
not frozen, as we believe but we cannot confirm. And we remain 
very vigilant, because we do not know whether it is or it is 
not, the North Korean.
    But Russia did not get any of those things, and Russian 
entities are continuing to support the development of elements 
of the nuclear fuel cycle which are incompatible with a light-
water reactor at Bushehr.
    So the situations are completely different. And we believe 
that with political will that we should be able to expect to 
see much more consistent, much more effective implementation of 
export controls. I mean, it is true for Russia, but it is true 
for a number of countries.
    There is a belief among some that if a country is, for 
instance, an adherent to the NPT, and if it is a member of the 
International Atomic Energy Agency, and if safeguards appear to 
be intact, then therefore that recipient country is entitled to 
all of the benefits of participation. We do not believe that. 
There are countries that are wannabes, which are in compliance 
with IAEA safeguards on the one hand, but which are conducting 
clandestine activities on the other hand.
    As the 721 report makes very clear, the CIA's report on 
mass weapons and nonproliferation, Iran is one of those 
countries. And therefore, one needs to be highly vigilant, 
whether one is Russia, whether one is a member of the European 
Union, or whether one is the United States of America, or 
whether one is an island just to the south of us, because 
exports of dual-use technology which can be diverted may well 
be diverted. And without consistent, constant monitoring right 
on the spot, one can never know. That is particularly true for 
BW-related items, because they can be converted back and forth 
in a matter of minutes.
    Senator Akaka. Let me raise another possible issue. We are 
concerned, as you have testified, about Russian assistance to 
Iran's civilian nuclear program. Shouldn't we also be concerned 
about the military implications of India's civilian nuclear 
program?
    Mr. Wolf. India's program?
    Senator Akaka. Yes.
    Mr. Wolf. We have been concerned, and our cooperation with 
India is limited to three tiny safety projects, and we have not 
cooperated with them for a very long time.
    In 1998, when there was another explosion, we put in place 
sanctions. When we lifted sanctions last fall, we said to the 
Congress that we remained concerned about nuclear developments 
in South Asia, and the events now make clear that we should be.
    India is a quite different case than countries that are 
mentioned in other parts of the 721 report. But we are 
concerned about India's nuclear program, and we have raised in 
the Nuclear Suppliers Group concerns about Russia's provision 
of technology and fuel to India, absent full-scope safeguards 
and in breach of the NSG guidelines.
    We did not win that battle. The Nuclear Suppliers Group was 
united with us; Russia chose to do otherwise.
    But we will continue to try to maintain the NSG guidelines. 
We believe full-scope safeguards are the only way that we can 
limit the risks that are out there. And even with those 
guidelines, the wannabes have found other ways to acquire 
technology and expertise that help them move forward.
    Mr. Borman. Mr. Chairman, if I could follow up a little bit 
on the double standard issue. Certainly as far as U.S. origin 
goods go, of course we have a unilateral embargo on Iran, so 
there are very few things that go from the United States to 
Iran, and those controls also extend to some extent to the re-
export of U.S. origin goods.
    And as far as India's nuclear power program goes, even when 
the sanctions were lifted to some extent, all of their nuclear 
power activities remain on entity lists.
    Mr. Wolf. And we do not supply them.
    Mr. Borman. Correct.
    Senator Akaka. Thank you.
    The United States, Great Britain, and Norway are financing 
a computer system for other nations to track nuclear components 
and materials in real time, called Tracker. It is employed in 
nine countries, including several former Soviet bloc countries. 
This system relies on participating governments to input 
information on export licenses into a computer. Each country 
owns its own information and is solely responsible for its 
accuracy.
    The question is, have the United States and our partners 
offered this system to Russia or China? If not, are there plans 
to do so?
    Mr. Wolf. That is one of my systems, Mr. Chairman, and I 
should know the answer to whether we have offered it to Russia. 
I believe we may have.
    I have raised it in discussions with the Chinese. We would 
be prepared to do that. The system is not quite as omniscient 
as your first couple of sentences suggested. The system is, in 
its current stage, basically a tool which we provide to 
governments to help automate and give transparency to their 
export control licensing process by inputting data and making 
it available to the various entities around a government, the 
various agencies that are involved in the export decision. It 
is possible for the person in charge to know the status of an 
export license. It adds a great deal of transparency.
    Now, ultimately, if linked together--and I think this takes 
it a little further than it is now--it would provide us a means 
of exchanging information. We try to do that in a variety of 
other ways. And we rely on other assets of the U.S. Government 
for our own individual look at what is happening in the nuclear 
trafficking world through the NSG or through our own 
intelligence.
    Senator Akaka. Thank you very much for your responses.
    Senator do you have any questions?
    Senator Thompson. Nothing further, thank you. Thank you, 
gentlemen.
    Senator Akaka. Thank you so much, Ambassador Wolf and Mr. 
Borman, for your testimony. The Members of the Subcommittee may 
submit questions in writing to you, and we would appreciate a 
timely response to any of those questions. So thank you very 
much. We really appreciate your responses.
    Mr. Wolf. Thank you.
    Mr. Borman. Thank you.
    Senator Akaka. We will now proceed to our next panel of 
witnesses.
    I would like to call Leonard Spector, David Albright, and 
Gary Milhollin to take their places at the witness table.
    Mr. Spector is Deputy Director of the Center for 
Nonproliferation Studies in the Monterey Institute for 
International Studies. Mr. Albright is President of the 
Institute for Science and International Security. And Mr. 
Milhollin is Executive Officer of the Wisconsin Project for 
Nuclear Arms Control.
    I want to thank you gentlemen for being with us today. You 
have been asked to discuss recent proliferation activity from 
Russia and China, and how well their export systems address 
these concerns, and how well both nations are complying with 
their international commitments to nonproliferation.
    I want you to know that your full testimony will be 
submitted into the record, and we look forward to hearing your 
statements.
    Mr. Spector, will you proceed?

 TESTIMONY OF LEONARD SPECTOR,\1\ DEPUTY DIRECTOR, CENTER FOR 
 NONPROLIFERATION, MONTEREY INSTITUTE FOR INTERNATIONAL STUDIES

    Mr. Spector. Thank you, Mr. Chairman, and thank you for the 
opportunity to testify this afternoon on this topic. I will 
confine my remarks to the Russia case.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Spector with an attachment 
appears in the Appendix on page 44.
---------------------------------------------------------------------------
    Sadly, Mr. Chairman, history is repeating itself, and it 
seems that Moscow has failed to absorb the unmistakable lessons 
of the past. Just like the careless, profit-hungry exporters of 
the 1960's, 1970's and 1980's that we had in the West, Russia 
today is driven by the desire for income and is engaged in a 
wide range of unwise exports, placing profits over 
proliferation concerns. I have attached a table to my testimony 
that highlights a number of these exports.
    I will mention only the most troubling ones, and I will 
leave out Iran, since we have just had testimony from the 
administration on that. Russia has opened a nuclear Pandora's 
box in Syria, providing Syria with its first research reactor; 
it now will expand this cooperation to include power reactors. 
It has enhanced the prestige of the military junta in Myanmar 
by selling that country its first research reactor. It has 
agreed to help refurbish the Tajoura research reactor in Libya. 
And most troubling, at a time when the international community 
is intensely concerned about the threat of nuclear war in South 
Asia, Russia is assisting India to develop nuclear-capable 
cruise and ballistic missiles and is seeking to cash in through 
major sales to India's civilian nuclear power program, sales 
all other nuclear suppliers have renounced.
    These activities with India violate the long-standing rules 
of the Missile Technology Control Regime (MTCR) and the Nuclear 
Suppliers Group (NSG).
    I would underscore, Mr. Chairman, that these exports that I 
am describing are not inadvertent or the result of smuggling or 
activities that bypass official controls. As explained in 
greater detail in my written statement, not only are these 
exports all blessed by officials in Moscow, but these same 
officials have deliberately manipulated Russian export control 
laws to permit the sales.
    Apart from the case I have cited, of course, there are 
smuggling cases to be concerned about. And I want to underscore 
a point made by Assistant Secretary Wolf about the lack of 
prosecutions. This is a very serious matter in the Russian 
case. And it really is a pity that, at a time when we are 
spending so much and working so hard to stop leakage of nuclear 
materials from Russia, we do not have the benefit of being 
reinforced by a tough Russian compliance effort.
    In view of these patterns, it seems clear that the 
fundamental problem is a lack of political will. Here I am also 
echoing Assistant Secretary Wolf. It is a lack of political 
will in Moscow to enforce a disciplined export control system.
    How can we change the situation? The Bush Administration, 
like the Clinton Administration, has tried a number of 
approaches but with only limited success. It has raised U.S. 
concerns at the highest political level, most recently at the 
May 2002 summit. It has imposed sanctions against specific 
Russian entities involved in improper exports. It has 
publicized Russia's departures from international norms. It has 
spent millions training Russians export control officials. But 
despite these activities, the problems persist.
    I would like to suggest several new avenues that might 
reinforce these efforts to improve Russian export behavior and 
give them additional substance.
    The first is that I think it is time to indicate forcefully 
that members of the Missile Technology Control Regime and the 
Nuclear Suppliers Group are dissatisfied with Russia's 
behavior. My first thought was to propose that the United 
States actually seek to expel Russia from these groups for a 
period of time. The Australia Group, after all, which 
harmonizes chemical and biological weapon related export 
controls, does not have Russia as a member, and it seems to 
operate pretty effectively.
    Administration officials pointed out to me that expelling 
Russia from the MTCR and the NSG would involve quite a few 
diplomatic headaches, not the least of which is the fact that 
neither the MTCR nor the Nuclear Suppliers Group has 
established rules for removing or suspending members.
    So, at a minimum, I think a process is needed for the 
future, so that these groups can discipline their wayward 
members. A U.S. call for the establishment of such procedures 
would be a step that everyone would know was initiated with 
Russia in mind. I think it would be one more signal, even if we 
did not go the full extent of expulsion, one more signal to 
Russia of how serious we take the issue.
    In the meantime, we might want to reinforce the public 
shaming of Russia through what might be called the equivalent 
of a nonproliferation ``scarlet letter.'' The idea, basically, 
would be to make clear whenever we discuss the membership of 
the MTCR and the NSG that Russia is not necessarily a member in 
good standing and that issues have been raised about its 
compliance.
    A second approach that might help reinforce U.S. 
nonproliferation efforts would be to take a leaf from domestic 
law enforcement. Here it is common for Federal officials, 
through the seizure of wrongdoers' assets or the imposition of 
fines, to seek to deprive malefactors of the ill-gotten gains 
of their illicit endeavors.
    In addressing Russian export controls, the United States 
should adopt a parallel policy, a strategy that would reduce, 
dollar for dollar, assistance or benefits provided to Russia, 
so as to offset the profits that it gains from the sale of the 
Bushehr reactor to Iran, or the other various things that we 
have been speaking about, including nuclear and missile sales 
to India.
    It might be possible, for example, when the United States 
periodically rolls over Russia's sovereign debt, to reduce the 
amount of debt that is postponed by an amount equal to Russia's 
profits, so that, in the end, Russia would have to expend funds 
to pay off a portion of its debt. Thus it would be disgorging 
the illicit gains it had received, in order to pay off the 
amount of debt accelerated.
    This would be the flip side of what is receiving 
considerable discussion now, that is, forgiveness of debt, if 
Russia adopts strong nonproliferation policies. My approach 
would be acceleration of debt to offset ill-gotten gains from 
improper nonproliferation policies.
    Finally, we have to ask ourselves, how do we lead Russian 
officials to place nonproliferation over profit? In the end, 
the issue is one of education.
    For more senior officials, it seems, education must be 
conducted in public, exposing them collectively to 
international calumny for their inappropriate policies. But 
more junior officials, those training to become officials, and 
journalists who track this issue in Russia, can be taught 
through more traditional means, for example, through mid-career 
training efforts, degree-granting programs that stress 
nonproliferation values, and through exchanges with Western 
countries that have embraced and implemented such values.
    So those are three fresh ideas to bolster existing U.S. 
efforts: Do more public shaming through the processes of the 
two multilateral groups; try to go after ill-gotten gains; and 
reinforce nonproliferation education.
    Thank you, Mr. Chairman. That concludes my remarks.
    Senator Akaka. Thank you very much, Mr. Spector.
    Mr. Albright, will you please proceed with your statement.

   TESTIMONY OF DAVID ALBRIGHT,\1\ PRESIDENT, INSTITUTE FOR 
               SCIENCE AND INTERNATIONAL SECURITY

    Mr. Albright. Mr. Chairman and Members of the Subcommittee, 
thank you for the opportunity to testify today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Albright appears in the Appendix 
on page 51.
---------------------------------------------------------------------------
    Nuclear proliferation today depends on illicit foreign 
assistance. Proliferant states are adept at exploiting weak or 
poorly enforced export controls and supplier states. In the 
past, many Western countries have been the source of items 
vital to the nuclear weapons programs of developing countries 
including Pakistan, India, Iraq, and Iran.
    Russia must unfortunately be viewed as the current target 
for proliferant states and terrorist groups in their quest to 
obtain the ability to make nuclear weapons. Russia has made 
great progress in creating nuclear and nuclear-related export 
control laws and regulations following the demise of the Soviet 
Union. And this legal structure has been developed with 
extensive assistance from the U.S. Government and the 
nongovernmental community.
    Despite these positive steps, there are serious problems in 
implementing this system. And I would like to just go through 
some of the problems that in our own work we have been able to 
identify in Russia; some of them have been identified before, 
some not.
    The first is overemphasis on obtaining sales and exports 
without adequately weighing the security problems that could be 
caused by a sensitive export.
    There is a shortage of effective internal compliance 
systems at Russian enterprises. Larger enterprises, 
particularly those with nuclear exports, are creating internal 
compliance systems, but they remain in need of assistance to 
make them effective. Many smaller companies and enterprises, 
particularly those outside Moscow, often lack rudimentary 
knowledge of the laws and regulations of the state.
    There is inadequate education and training opportunities 
for employees at enterprises who must ensure that the exports 
of their enterprise are legal.There is a dearth of information 
at Russian enterprises that would enable sellers to check on 
the end-users in foreign countries. One Russian export control 
official told me that more than 90 percent of all Russian 
enterprises do not have books or other resources to research 
the companies buying their items. Thus, the seller has a 
difficult time checking whether the information provided by a 
customer is true or reliable.
    There is also the inadequate enforcement of violators of 
export control laws, which I think has been covered several 
times.
    Given all these problems, significant illicit or 
questionable sales are bound to occur in Russia unless more is 
done to strengthen its system. And at the minimum, one can say 
that, under current conditions, the Russian Government may be 
inadvertently encouraging the export of sensitive items to 
clandestine nuclear weapons programs.
    U.S. assistance has been critical to improving the export 
controls in Russia. This assistance has reduced the risks that 
states such as Iran and Iraq will obtain nuclear weapons.
    Toward the goal of further improving export controls, the 
United States and other Western governments need to continue 
stressing that stopping the spread of nuclear weapons, other 
weapons of mass destruction, and ballistic missiles is a key 
goal of the United States and the international community, and 
that effective national export control systems are a necessary 
part of working toward that goal.
    The United States also needs to commit additional funding 
and expertise to help Russia implement its export control 
system. I would disagree that there is sufficient expertise or 
resources to deal with this problem in the places where it 
counts most, namely within the entities, enterprises, and in 
the bureaucracy in the government that deals with export 
controls.
    U.S. nonproliferation interests motivate cooperation with 
Russian officials and experts to build a strong Russian nuclear 
and nuclear-related export control system. Developing adequate 
controls in Russia is challenging and will require extensive 
U.S. assistance.
    The major benefit is that states such as Iran and Iraq will 
not find Russia the most attractive nuclear supermarket as they 
shop the world for items needed in their quest to build nuclear 
weapons.
    Thank you.
    Senator Akaka. Thank you very much, Mr. Albright.
    Mr. Milhollin, will you proceed with your statement?

 TESTIMONY OF GARY MILHOLLIN,\1\ EXECUTIVE OFFICER, WISCONSIN 
                PROJECT FOR NUCLEAR ARMS CONTROL

    Mr. Milhollin. Thank you very much, Mr. Chairman. I am 
pleased to appear before the Subcommittee to discuss the 
important subjects of export control and arms proliferation.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Milhollin appears in the Appendix 
on page 56.
---------------------------------------------------------------------------
    I was going to do two things. First, give an overall view 
of what China and Russia has been exporting, but that's been 
pretty much accomplished here already. Second, I would like to 
make some recommendations concerning our sanctions laws.
    The long list of exports by both Russia and China, I think, 
elicited a sigh from Senator Thompson, and I have a lot of 
sympathy for that. I look back over my own work, and I think I 
have been testifying before this and other Congressional 
committees for the better part of a decade and listing 
outrages, and the list just keeps getting longer.
    And our policy is failing. We are not succeeding in 
changing this behavior. And it is simply not a rhetorical or 
political-diplomatic problem. It has real effects on the 
ground.
    If we just look at India and Pakistan now, millions of 
people are really facing the threat of mass annihilation in 
those countries because of nuclear weapon and missile programs 
that were produced by, primarily, Russian and Chinese exports. 
If you subtract Russian and Chinese exports from these 
programs, certainly they would not have progressed to the 
extent that they did. It would have taken a lot longer, and 
some of them might not have succeeded at all.
    So these actions, even though they are incremental and they 
happened over a long period of time, can work a great change in 
world security. And if there is a nuclear war in South Asia, it 
is a world problem. It is not going to be a regional problem. 
There is no such thing as a regional problem any more, if there 
ever was such a thing in the nuclear domain.
    So what I would like to do is recommend some things that 
Congress can do, some things that would be fairly 
straightforward, that would show some commitment and might make 
things a little more difficult for the proliferators.
    First, I would recommend that we change the sanctions law 
to forbid all trade with companies that commit violations. 
Today, we do not forbid all trade with these companies. A 
company that is on the list of companies sanctioned--for 
example, the ones that have just been sanctioned last month--
are still free today to buy high-performance U.S. computers and 
free today to buy high-performance U.S. machine tools and a 
whole list of other very useful technologies for making nuclear 
weapons and ballistic missiles because these products operate 
just under the level that is controlled for export. The 
proliferators are perfectly free to import this equipment, and 
we do not even have a record-keeping system that tells us what 
they are buying or what they are doing with it.
    So step one would be just cut off all trade with these 
companies and also cut off all of their exports to the United 
States.
    Second, we need to sanction more than just the organization 
that commits the offense; very often, it is a subsidiary.
    And I know of cases where we sanction a subsidiary or 
indict a subsidiary, and the parent orders the same thing 
through a different subsidiary in the same organization. This 
has happened. And I am sad to say the Commerce Department 
lobbied in favor of the export. It was blocked because, I'll 
modestly claim, our organization publicized it.
    But the point is that the sanctions do not have enough 
teeth. If you want to discourage this behavior, you are going 
to have to punish the parent company of these organizations 
rather than just punishing the organization and its 
subsidiaries. You need to go up the corporate chain as well as 
down.
    Third, we need to extend the duration of the sanctions. 
Under the present law, the sanctions that we just applied to 
the Chinese companies--many of whom were recidivists; they had 
already been sanctioned or indicted before for the same 
conduct. We need to extend the duration. Rather than just 
forgetting about them after 2 years, we need to put them on 
what is called the ``Entities List.'' That is a list that the 
Commerce Department maintains of companies that require an 
export license before anything significant can be sent to them. 
It would be a simple matter to put their names on the list.
    In the case of China, there are only 14 company names on 
the list now. I gave this Subcommittee about a year ago a list 
of 50 companies that I think ought to be on the list. They are 
still not on the list.
    It would be very simple to put more Chinese companies and 
more Russian companies on the list.
    Fourth, we could bar the employees of these companies from 
entering the United States. In one case, one of the companies 
that was just sanctioned had already been indicted for 
diverting U.S. machine tools. Before it bought those machine 
tools, it sent a team over to the United States, to Columbus, 
Ohio, to look at the machine tools. That was the famous CATIC 
case. It would have been better for us if those officials had 
been stopped at the border.
    One of the penalties for proliferation ought to be that you 
cannot send your folks to the United States.
    Fifth, when we sanction somebody, we should ask our allies 
and trading partners to sanction them as well. We need to get 
support. We need to make these companies into international 
pariahs. And we need to ask for immediate assistance from our 
trading partners.
    These are all simple things we could do to show that we are 
serious about this. There are other things that would be more 
Draconian, more expensive, more attention-provoking, which we 
probably should do, too.
    But I think the solution to this problem is first to 
acknowledge, as Senator Thompson has pointed out, that what we 
are doing now is not enough; and, second, to look for things 
that we can do that will make the existing laws more effective.
    Thank you very much.
    Senator Akaka. Thank you very much, Mr. Milhollin.
    We have some questions for you, Mr. Spector.
    Mr. Spector, other nations such as India have used the 
civilian nuclear power capability to develop a nuclear weapons 
program. Are there similarities in the development of India's 
nuclear program in the 1970's to Iran's today? And how critical 
to Iran's nuclear weapon program is Russian assistance to their 
civilian nuclear reactors?
    Mr. Spector. Well, I think there are some similarities, and 
there are some differences. India took technology that it 
acquired without oversight, without inspections or safeguards, 
and then did use it very deliberately to develop a nuclear 
weapon capability. I'm referring specifically to a research 
reactor and plutorium separation technology. Later, I think 
that they took advantage of again uninspected power reactors to 
at least have the opportunity to produce plutonium for the 
weapons program.
    I think the situation is slightly different in Iran because 
in Iran the power plant will be under inspection, so it will be 
difficult to abuse that particular facility for a weapons 
program.
    But what the Russians are doing in Iran is training 
hundreds of Iranians in the construction and management of 
sophisticated nuclear facilities. You are training them in 
operations. And all of that know-how can be transferred over to 
other parallel programs that are behind the scenes. And that is 
the process we saw in Brazil, for example.
    So I think that remains a very serious case for concern.
    As far as the details of what is being transferred to the 
Iranians apart from the Bushehr facility, I do not have 
additional details that I can provide. There was a case 
involving lasers that were stopped at U.S. request. And I think 
there was a mention of fuel-cycle facilities of one kind or 
another that are getting support from Russia, which Secretary 
Wolf mentioned just a while ago. I think the fine points are 
still classified, so I really cannot discuss them.
    Senator Akaka. Thank you.
    Mr. Milhollin, I asked our administration witnesses about 
the Tracker computer system used to track nuclear components 
and materials. This system relies on participating governments 
issuing export licenses to input information into a computer.
    Do you believe that this type of system would be useful in 
Russia or China? And do you think they would agree to adopt it?
    Mr. Milhollin. Well, the Tracker system, as I understand it 
now, is a computerized export control and processing tool that 
countries use to simply decide which licenses to grant and then 
to keep track of those licenses. So if you give this system to 
the Russians and the Chinese, it is entirely possible that it 
might improve their export control performance. That is, they 
might be more efficient and effective at deciding what to 
license and not to license.
    But I must say that the problem in those countries is not 
one of having enough tools. The problem is one of having the 
will. And I think it is better to condition assistance to those 
countries on a change in attitude, rather than go forward with 
the assistance and hope that gratitude will produce the change 
in attitude. I think we need to have them come over to our side 
first in attitude and will, before we give them more export 
control assistance.
    Senator Akaka. Mr. Albright, in your testimony, you state 
that you have observed the need for improved controls over the 
sale of Minatom nuclear assets and tracking of items sold 
within Russia that may be exported.
    What nuclear assets is Minatom selling? And would they 
cooperate with efforts to improve controls?
    Mr. Albright. Yes. The example really refers to parts of a 
reactor that were being sold to a person in Russia. It turned 
out that, in this case, the officials discovered they did not 
have adequate controls over what that buyer would do with the 
item. There is a problem in Russia where things get bought by 
somebody, and are sold, or passed on, and then the government 
loses track of the item. It can end up God knows where. And so 
the idea was to try to focus on developing a system that 
creates a legal process that obligates the buyer, and a chain 
of documents that then would allow an item to be tracked.
    This is not policy across Minatom, as far as I understand. 
It has been implemented at one nuclear site. But it is an issue 
that the Russians need to address.
    Can I add one thing on a slightly different subject? I 
think it is very important when we look at Russia that we 
distinguish between what may be deliberate decisions or, as 
Senator Thompson put, turning a blind eye to exports to Iran or 
other places. I think there is a much greater risk that Russia 
is going to become a shopping market for illicit exports that 
will be directly sought by proliferant states, such as Iraq and 
Iran, that the Russian Government will not know about. And I 
think if you look at the history of illicit procurement, those 
types of sales typically are much more dangerous than 
deliberate exports.
    I mean, Sandy mentioned the issue of Canada providing India 
a reactor, which they had then used to make its----
    Senator Thompson. What is more dangerous?
    Mr. Albright. I think it is more dangerous that exports 
will happen out of Russia that the Russian Government will not 
even know about and will be directly going to nuclear weapons 
programs for that purpose.
    And that was the concern in Germany in the 1980's. The 
German Government turned a blind eye to many exports. It 
supported the Bushehr reactor; it was building the Bushehr 
reactor. It was a real problem.
    But if you look at the Iraqi case, the real danger was what 
was happening under the surface. That was direct aid to the 
Iraqi nuclear weapons program that the German Government and 
the export control officials were not knowledgeable about and, 
because they had such a lousy system, were in no position to 
catch.
    And I think that I would like to distinguish here between 
attempts to get Russia to do the right thing. I mean, we had to 
force Germany to do the right thing, and I think they came 
along. Russia needs to do the right thing on Bushehr and in 
other cases--the Burmese reactor, several examples have been 
given.
    But at this time, we should not lose sight that Russia's 
export control system needs help. And it could very well turn 
out that the Iranian or Iraqi nuclear weapons program are going 
to be directly benefited by the agents of those countries 
working secretly in Russia to acquire the items they need to 
make nuclear weapons. And those items will turn out to be much 
more significant than some of the direct items that the Russian 
Government has approved.
    Senator Akaka. Before I defer to Senator Thompson, Mr. 
Albright, in Mr. Borman's testimony, he stated that the 
Department of Energy has an official in Moscow working with 
Minatom to focus on export controls on nuclear technology.
    Will this type of coordination and assistance improve some 
of the controls and tracking over Minatom sales?
    Mr. Albright. Yes, I think it can. I was hoping the 
government witnesses would talk more about what they have 
accomplished. We tend to see things more at the level of some 
of the enterprises or some of the nuclear export control 
laboratories in Russia. And what we see is that not enough is 
being provided. There are real needs that the United States can 
meet.
    And I mentioned end-use. It is a serious issue, if you are 
trying to do the right thing. You may have a bad attitude and 
you may weigh sales over security. But if you are trying to do 
the right thing, at least in principle, if you do not have any 
idea about end-users, then a buyer comes to you, you are very 
unlikely to disapprove that sale.
    So there are some basic resource questions that I think 
need to be addressed. I do not think the U.S. Government is 
doing enough on that. And some of this, I think, is beyond what 
Russia can do. I mean, they do not have a history of commercial 
relationships with the rest of the world, and a lot of the 
people who are getting into this business are seeking to make 
money and need to be informed and held accountable.
    Senator Akaka. Thank you. Senator Thompson.
    Senator Thompson. Thank you, Mr. Chairman. You mentioned 
the end-users, and the fact that Russia does not have any 
ability to keep up with the end-users. But we do not either, do 
we? I mean, are we doing much of a job at all in keeping up 
with end-users of some of the dual-use technology that we are 
exporting to China, for example?
    Yes, Mr. Milhollin?
    Mr. Milhollin. Could I respond to that? We could do a lot 
better job than we do. We could help our exporters do a lot 
better job.
    The list I suggested to the Subcommittee is a list of end-
users. If the Commerce Department put that in the Federal 
Register, our exporters would know who these people are.
    Actually, many of the exporters already know who they are. 
They have made a rather cold-blooded decision that they do not 
officially know who they are until they are in the Federal 
Register. Unfortunately, that is true for some companies--not 
for many.
    I have spent a lot of time on export controls, talking to 
companies. And I have learned that there is a vast difference 
among companies. There are companies that will skate right out 
on the edge of what's legal and go over it, and other companies 
who do not want any problems, and they will be conservative.
    I have a friend who defends these companies. He has a case 
right now in which a company made $15,000 on an export sale, 
and they have already spent $250,000 on lawyers' fees, dealing 
with the Federal Government. An intelligent company would want 
to know who the bad guys are and would make the decision not to 
go down that road, because it is not worth it economically.
    But our government, for some reason, is not filling out 
that list. And I was kind of hoping you would ask the Commerce 
Department that when they were here, ``How come this list has 
so few names on it?''
    That would be a very easy thing to do. We can do it 
overnight, and it should be done. In fact, we had a long list 
of Indian and Pakistani end-users that we put on the list after 
their tests.
    Senator Thompson. But what about when we ship something to 
a company that's not a designated company, not on your list, 
but then is transferred from the company it is shipped to, to 
one of these other companies, and we do not know about it? We 
really do not have many people at all on the ground over there 
doing any kind of inspections in terms of end use, do we?
    Mr. Milhollin. We pick that up through intercepts. We pick 
up the transactions through all of the tax dollars that we are 
spending on listening to people. That is the only way we pick 
those re-transfers up. We pick them up through intercepts or 
penetration of a company or on the ground. But it is an 
intelligence question. That is our only defense.
    Mr. Albright. And one thing, what we do is much better than 
what Russia has done.
    Mr. Milhollin. Well, we at least want to do it.
    Mr. Albright. Yes.
    Mr. Milhollin. That's the big difference. We want to do it. 
Some of the Chinese do not want to do it.
    Senator Thompson. Our much-maligned intelligence 
capabilities apparently are able to pick up all these transfers 
that are taking place that the Russian Government and Chinese 
Government say that they do not know about.
    Mr. Milhollin. That is true.
    Senator Thompson. We have apparently much better 
intelligence than they do.
    Mr. Albright. Than they do?
    Senator Thompson. I doubt it, in China's case.
    Mr. Milhollin. Sir, if I could make another point in 
response to a previous question? I think there is an analogy 
between Germany in the 1980's and China and Russia today. That 
is, Germany in the 1980's, as we have already heard, was a 
giant proliferation export problem. They supplied Iraq, they 
supplied Iran, they supplied everybody.
    What we did finally was humiliate the Kohl Government in 
public over its sales to Libya of poison gas equipment, and 
that changed the German Government's view of the subject from 
the top. And when the view changed from the top, suddenly the 
German export control agency hired 100 new full-time 
equivalents. They had 1.5 FTEs working on export control before 
we went public with the horribles about the exports to Libya.
    And so I think the lesson there is that you have to change 
the message at the top. And I think that's what Assistant 
Secretary Wolf was implying, is that once the guy at the top 
decides to send the message out, then it is a question of 
implementation. But the first step is to change the message at 
the top, which is what happened in Germany. We changed the 
attitude at the top.
    Senator Thompson. You would think it might have some effect 
when we catch the Chinese sending cable systems to help shoot 
down our airplanes in the no-fly zone. Doesn't seem to be 
working there.
    Mr. Spector, on the issue of what the Russian officials 
know and when they know it, you seem to think, I hear in your 
statement, that not only are some of these export activities 
blessed by Russian officials in Moscow, but they have 
deliberately manipulated Russian export controls to also permit 
these sales.
    Mr. Spector. Yes, I think that is true. I think all of us 
are familiar with the case of the Tarapur fuel, the fuel for 
the Indian nuclear power plant. Here there is a very, very 
limited loophole that is permitted under the Nuclear Suppliers 
Group basically to deal with an imminent radiological 
catastrophe.
    The Russians said, ``Well, fuel is something you need to 
keep a reactor going, and we think a fuel export is really a 
safety export.'' So that was a very deliberate 
misinterpretation of the rules.
    There is also a pattern here of skirting the MTCR 
regulations in the case of some of their cruise missile 
exports. The cruise missiles have capabilities that are just a 
fraction below, what would be very heavily regulated under the 
Missile Technology Control Regime. And it is not just missiles 
that are being exported; it is the manufacturing know-how for 
the missiles that is going as well.
    We have a long history in India of taking that kind of 
technology and then upgrading it to obtain greater capability. 
Everyone is aware of this.
    And I think, Russian officials, when they just fine-tune an 
export to be below the threshold, that's not an accident. That 
is done on purpose.
    Thus I think I would really underscore the point that Gary 
Milhollin made about some public shaming of some of the 
officials and organizations involved. It was extremely 
effective in dealing with Germany's exports to Libya's Rabta 
chemical weapons plant, and I cite that episode, in fact, in my 
testimony as well.
    Senator Thompson. I agree with you. And that is kind of 
what I was trying to suggest to our friends from the 
administration, that putting a smiley face on all this stuff is 
not the kind of message you ought to be giving. Just exactly 
the opposite, they ought to be held accountable.
    This is a little off-track, I guess, but we mentioned 
Germany's history and so forth. How are our European friends 
doing nowadays, as far as these issues are concerned? I 
mentioned what is going on in terms of the Iraqi sanctions and 
that sort of thing. I guess it is a slightly different issue. 
But European countries are still exporting some troublesome 
dual-use items, are they not, to some troublesome countries?
    Mr. Albright. I think it is relative. I think they are 
doing much better in places like Germany, Austria, and 
Switzerland. And they have implemented pretty effective systems 
within companies to try to help catch illicit exports or 
discourage illicit exports.
    The unfortunate thing is it is always a problem where, if 
it is not getting better, it is getting worse. And so I think 
vigilance is required, so I would not be surprised if there are 
problems in some European----
    Senator Thompson. Well, I am not talking really about 
things that are slipping through the cracks. I am talking about 
policies of countries that seem to, up until recently anyway, 
not agree on the nature of the threat.
    Mr. Milhollin. I might be able to respond.
    Senator Thompson. Mr. Milhollin, what do you think?
    Mr. Milhollin. My organization did a study recently of what 
Saddam Hussein was able to get. The Iraqis, during the period 
of the embargo against Iraq, broke the embargo by going to 
Eastern Europe. The inspectors in Iraq went through the 
documents there to see where Iraq was getting help. The lion's 
share came from Eastern Europe. There was a little bit from 
Western Europe but not much.
    I think what happened was that the Western Europeans really 
got burned as a result of what they sold before the Gulf War. 
And so they have been more careful with respect to Iraq.
    I am not so sure that is true in other cases. I think the 
Germans are still selling a lot to Iran. I do not know the 
details, but if you look at the statistics, a lot of controlled 
commodities are going out of Germany to Iran, and they are not 
making bubble gum.
    So I think that is something, if I were a member of a 
Senate sommittee that could be briefed with intelligence 
information, I would ask that question. I would ask for a 
briefing on what Germany is selling to Iran.
    Finally, in the case of France, the French have pushed hard 
against our holding up of things to Saddam Hussein under the 
oil-for-food program. And I think that now that we have a new 
regime in effect with looser controls, it would be nice to know 
what the French sell between now and a year from now under the 
oil-for-food program. I think that is another thing I would ask 
to be briefed on, because I suspect that there are a lot of 
companies waiting to get well as a result of the smoothed 
sanctions on Iraq.
    Mr. Albright. Can I add one thing? I think this threat 
question on Iraq is a problem with the Europeans. They have 
often resisted believing that Iraq could be getting nuclear 
weapons any time soon.
    I know when some have given their intelligence assessment, 
they essentially discount the option that Iraq could obtain 
fissile material in Russia and then relatively quickly, within 
several months to a year, turn it into a nuclear explosive or a 
weapon.
    So I do think there is always a need to educate our 
European allies about these threats, and I think it is 
unfortunately much worse when these discussions happen in 
Russia. I think Mr. Wolf mentioned, and I think others, that if 
you bring it up in Russia, they say exports that are illegal 
are not going to happen. I mean, forget the sanctioned ones. 
They say that their system is perfect and, even if violations 
do happen, those countries that would get them could not turn 
those things into nuclear weapons in any case.
    Senator Thompson. Thank you, Mr. Chairman.
    Senator Akaka. Thank you.
    Mr. Spector, some have suggested offering major financial 
incentives to compensate Russia for the economic losses it 
would suffer by ending assistance to Iran. Do you believe that 
increased aid to offset financial losses could convince Russia 
to end all nuclear cooperation with Iran? Could other Russian 
interests, such as support for early entry into the World Trade 
Organization or debt relief, be used instead of direct 
financial assistance?
    Mr. Spector. Well, I think one of the challenges that we 
have had in dealing with some of the Russian exports is that 
they are, in fact, very lucrative, and so we need to find a 
financial mechanism for pulling Russia away from this. There 
has been discussion of trying to provide compensation and a 
couple of these ideas are not bad ones.
    One idea that I thought deserved attention was the idea of 
permitting Russia to import spent fuel for storage from places 
like Taiwan or South Korea and charging a fairly high fee for 
this, Russia is hoping to implement this program. We control a 
lot of that fuel, and we could authorize these imports, if, in 
return, Russia would stop their export activities with Iran.
    So there might be a way to create new revenue streams for 
Russia to compensate for some of these losses.
    But I think there is a second approach we could also take, 
which I was recommending today, and that is that, if they 
persist in these exports, to deprive them of their ill-gotten 
gains by, in effect, increasing their debt requirement. That 
is, we would not allow them to roll over some of the sovereign 
debt or, perhaps, find other aid programs that might be cut 
back in a way that would make them no better off for having 
engaged in these activities.
    I want to be very careful before suggesting that our 
nonproliferation aid programs is trimmed, because some of them 
are really crucial to American security. But other areas could 
be cut back.
    Senator Akaka. Otherwise, Mr. Albright, the Russian export 
control regime and entities authorized to implement the regime 
have changed several times over the past decade. Do you believe 
that it has become more effective through these changes?
    Mr. Albright. I think that, given where they started from 
in the early 1990's, I think the system is more effective, 
although I think what you really have in place is a set of laws 
and regulations, but it has not been implemented. I think that 
is going to be the difficult challenge, to implement this 
system so it becomes effective.
    Senator Akaka. Mr. Milhollin, in your testimony, you list 
several steps that Congress should take to punish Chinese 
entities that continue to export sensitive material. You 
suggest barring all American exports to those companies and 
extending the duration of the sanctions. Would you suggest the 
same steps for sanctioned Russian companies?
    Mr. Milhollin. Yes. In my testimony, I did not mean to 
limit that to Chinese companies. I think our law should apply 
across the board to any company that is caught in an export 
control violation. So, yes, I would apply that to Russian 
companies, Chinese companies, Indian companies, companies from 
any country.
    Senator Akaka. Mr. Albright, do you think these measures 
would be useful with sanctioned Russian companies?
    Mr. Albright. I am not sure how useful they would be if 
they were expanded. I do not see that as a way to force Russian 
action. There may be no other choice, but I think it is 
something that the Bush Administration has to press very hard 
on with the Russian Government and make it clear that continued 
cooperation with the United States will depend on how they 
respond.
    I worry a little bit on sanctions. You can sanction NIKIET, 
for example. I guess it is still under sanctions. They live 
with it. They are mad, but they live with it and continue. It 
is sending one good signal, however, which is NIKIET becomes an 
example to companies that want to do the right thing to not end 
up like NIKIET. But I do not think it is changing the situation 
dramatically.
    And so I think it has to be dealt with directly between the 
U.S. Government and Russia, and then see how Russia performs 
and then take stock.
    In any case, I think we do need to provide assistance to 
the effort to improve the export controls in Russia. And I 
would hate to see these things become intertwined to where, 
unless Russia performs in a certain way, we cut off the 
assistance.
    Senator Akaka. I would like to thank all our witnesses for 
their time and testimony.
    Both Russia and China have pledged their support in the war 
on terrorism. However, I am not convinced of their commitment 
to nonproliferation.
    I am concerned that they still believe that the war on 
terrorism and the spread of weapons of mass destruction are not 
linked. Granted, it took the events of September 11 to convince 
many in this Nation and several of our international allies of 
this link.
    Do the leaders of Russia and China believe that it is in 
their national interests to enable state supporters of 
terrorism to development WMD? Do they believe that their 
citizens will be immune from a terrorist attack with chemical 
weapons or a radiological bomb?
    I understand it would be easier to set aside many of these 
issues discussed today while we are trying to define new 
relationships with former adversaries. But we must raise the 
difficult questions. Both Russia and China have established 
laws and agencies to implement export control, but do they have 
the will to forego a short-term economic gain and enforce their 
export control regimes? As Mr. Milhollin suggested in his 
testimony, Russia and China may lack the will to enforce their 
own laws.
    The United States should not have to stand alone in 
convincing Russian and Chinese leaders of these dangers.
    I agree with Mr. Milhollin's statement that, when we cut 
off trade with a company because of an export violation, we 
should ask our allies to do the same. Mr. Albright has told us 
that many in Russia do not believe that proliferation is 
possible or that the consequences are so grave. Then we must do 
all we can to convince Russia and China that proliferation is 
occurring and that the threat is real.
    Gentlemen, we have no further questions at this time. 
However, Members of this Subcommittee may submit questions in 
writing for any of our witnesses. We would appreciate a timely 
response to any questions. The record will remain open for 
these questions and for further statements from my colleagues. 
I would like to express my appreciation to all the witnesses 
for their time and for sharing their insights with us. This 
hearing is adjourned.
    [Whereupon, at 4:40 p.m., the Committee was adjourned.]




                            A P P E N D I X

                              ----------                              

             PREPARED OPENING STATEMENT OF SENATOR COCHRAN
    Mr. Chairman, I'm pleased to join you today for this very important 
hearing. This Subcommittee has a long history of examining the threat 
from the proliferation of weapons of mass destruction and missile 
technology and especially the transfers of technology and knowledge 
from Russia and China.
    In all of our past hearings we received testimony about the 
positive steps Russia and China were taking to curb and halt 
proliferation from their countries. These steps included bilateral 
promises to the United States and Russia and China's commitment to 
abide by the international nonproliferation regimes. Despite this, 
Russia and China continue to proliferate weapons of mass destruction 
and ballistic missile technology in direct contravention of their 
political commitments and legal obligations.
    The threat from this proliferation and its consequences can clearly 
be seen today in South Asia. Pakistan and India are dangerously close 
to war. Because of technical assistance from Russia and China, both 
countries are armed with ballistic missiles and nuclear weapons.
    China has been and continues to be the main supplier of technology 
to Pakistan. It is directly responsible for Pakistan's nuclear weapons 
and ballistic missile programs. Despite our repeated efforts, we 
continue to see troubling transfers and contacts between Pakistan and 
China.
    Russia is the main supplier of technology to India. Last year, 
Russia began transferring nuclear fuel to India, in direct 
contravention of its Nuclear Suppliers Group commitments, and Russia 
remains a major source of technology for India's ballistic missile 
programs.
    And South Asia is only one manifestation of the problem. This 
proliferation continues elsewhere, and if left unchecked, in 5 or 10 
years, transfers of technology from Russia and China will result in 
nations like Iran and Iraq gaining nuclear weapons and long-range 
ballistic missiles. We must also be concerned about recipient nations, 
like Iran, becoming secondary suppliers, something that is already 
occurring.
    I look forward to hearing from our witnesses and discussing what 
actions can be taken to reduce this proliferation.

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                    
