Submitted Testimony by Frank J. Gaffney, Jr. on The Application Of National Security Export Controls To The East Bloc

before the U.S. House of Representatives

Foreign Affairs Committee Subcommittee on

International Economic Policy and Trade

25 January 1990

Why Do Export Controls Still Matter?

As this Committee knows, historically the United States has relied upon the maintenance of a decided technological edge over the Soviet Union to deter the latter’s quantitatively superior military forces. I see no reason to believe that events now taking place in the Soviet bloc, incipient arms control agreements or any other factor currently in prospect will alter this longstanding reality.

Western export controls effected under the voluntary arrangement known as COCOM have been highly effective in safeguarding this qualitative edge. Indeed, I believe that a powerful impetus for the present Soviet effort to improve its relationship with the West has been to undo this control regime and to enable the USSR to secure with relative ease access to advanced Western dual-use technology.

Should the Soviets succeed in obtaining such technology at the present time, I fear the adverse impact on U.S. security will be especially pronounced. This is due to the fact that, in addition to the direct effect in enhancing Soviet military capabilities that will ensue, Moscow could benefit from three, indirect but synergistic phenomena of this era:

  • First, U.S. investment in its own research and development technology base is likely to be significantly reduced as a result of defense budget cuts.

  • Second, also as a result of those cuts, this country’s ability to redress the impact of improvements in the quality of Soviet forces will diminish greatly. The Committee will recall that the cost to the U.S. Navy of restoring its edge in anti-submarine warfare following Toshiba’s $18 million sale of quiet propeller manufacturing technology has been estimated to be upwards of $15 billion. Clearly, we can ill afford such unnecessary additional defense burdens at this time.

  • Finally, the United States is in the process of negotiating a series of arms control accords with the Soviet Union. If past experience is any guide, such agreements will impose significant constraints on U.S. abilities to introduce new military technologies. Examples of such constraints may be found in the START Treaty’s likely limitations on the performance of air-launched cruise missiles and its oblique — if not explicit — limits on pursuit of the Strategic Defense Initiative.


Taken together, these direct and indirect effects threaten to endanger the robustness and decisiveness of the technological advantage traditionally enjoyed by the U.S. military. I believe this is the backdrop against which decisions should be made to liberalize East bloc access to sophisticated Western dual-use technologies.

Eastern Europe is Still Part of the Technology Security Problem

As I mentioned earlier, I think improved access to Western high technology is very high on Gorbachev’s agenda. This can be seen in the priority he has attached in his diplomatic and economic forays into the West to encouraging the dissolution of COCOM. It can also be discerned in the redoubled effort being made by the Soviets — both directly and through their East European allies — to steal or acquire illegally a variety of controlled technologies.

The unhappy truth of the matter is that, despite the laudable popular demands for reform in the Soviet bloc and — to varying degrees — governmental steps being taken to satisfy those demands, every one of the East European nations continues to be a member of a hostile alliance. As a result, the close collaboration between the military, intelligence, and security agencies of the Soviet Union and those of its allies in Eastern Europe, all of which remain in the hands of local communists, continues apace.

A number of authorities on the subject have recently noted that, if anything, anti-Western activities (e.g., espionage and technology theft) are now being undertaken by Moscow’s allies in Eastern Europe more aggressively than before. To cite but a few:

  • On 14 November 1989, Senator William Cohen, co-chairman of the Senate Intelligence Committee, said on the Senate floor: "The intelligence services of Poland, East Germany, Czechoslovakia, Bulgaria, Hungary, and Cuba continue to conduct intelligence operations in this country, not only to serve their own national interests, but also as surrogates for Soviet intelligence. This appears to be one field where countries such as Poland continue to serve Soviet interests that directly injure the national security of the United States."

  • In remarks before the National Press Club on 29 November 1989, William H. Webster, director of the Central Intelligence Agency said: "Around the world, our stations are reporting more aggressive action [on the part of the Soviets and their allies] and a more robust intelligence collection effort, more effort to recruit our embassy and intelligence personnel than we have seen for a long time."

  • John C. Whitehead, former Deputy Secretary of State, said in an article published in the New York Times on 29 December 1989, "We’ve often found that changes have taken place in the East bloc countries without any similar changes taking place in those countries’ foreign intelligence gathering networks."(1)

  • This same article concluded that "Despite a democratic revolt that has shaken Communist rule in Czechoslovakia and five other Eastern bloc states, those nations’ espionage agencies have not slackened their vigorous efforts to steal Western technology and military secrets, often at Soviet direction….The KGB appears in some cases to have stepped up its "tasking" of Western bloc agencies for specific missions against Western targets."


Accordingly, the question is not: Could the East Europeans revert to being handmaidens of the Soviet campaign to acquire strategic technologies? They have not stopped playing this role to date and we would be naive and irresponsible to believe otherwise.

Dubious East European Assurances about Technology Safeguards

This is not to suggest that assurances being offered by East European governments that Western high technology will be safeguarded are necessarily disingenuous. To the extent that bonafide democratic reformers are pressing for such technology — and I believe they are less insistent on this form of assistance than are others whose credentials as reformers and motives are more suspect — they may simply not know how serious the technology security problem is. They certainly do not appreciate how powerless they are to prevent diversions under present circumstances.

Several anecdotes serve to illustrate this problem:

  • On 17 January, the head of Hungary’s state security service, Major General Jozsef Horvath, was forced to resign when members of the opposition discovered that agents of his organization were still intercepting mail and using telephone taps and informants against individuals and opposition groups.(2)

  • The German government of Hans Modrow nearly fell a few days ago over the reports that he was reinstituting the hated "Stasi" secret service. Despite the sacking of its headquarters in East Berlin and assurances that the organization would not be resuscitated until after the April elections, there is ample reason to be suspicious of the actual status of the Stasi.

  • Czechoslovakia’s spy agency, the Office for the Protection of State Secrets, continues to operate. It has long been derided for being the "two-Czech" service: Its agents are said to get one check from Prague, and another from their real bosses in Moscow.


Indeed, as the New York Times report noted above disclosed, notwithstanding government shakeups, reform agitation and governmental disclaimers, the East European intelligence services are "demonstrating an increasingly sophisticated ability to fine-tune their technology acquisition requirements." (It is worth noting parenthetically that they are almost certainly exploiting as well the marvelous opportunities afforded by the new international environment to infiltrate active intelligence operatives and so-called "sleepers" into Western societies and industries.)

Under these circumstances, it would be wholly unjustified to think that diversions of significant dual-use technologies made available to Eastern Europe will not find their way to Moscow.

How to Protect Against the Loss of Sensitive Technologies through Eastern Europe

Unless and until changes occur that have not been in evidence to date, namely the rupture of the Warsaw Pact and the complete severing of its sundry military, security, intelligence and espionage relationships (involving among other things the complete removal of all Soviet military and KGB forces from these countries), we must continue to operate on the assumption that such relationships will be used to serve Soviet technology theft functions.

For the interim, we should help with the upgrading of Eastern Europe’s industrial base on a selective, disciplined basis. I believe , however, that our doing so does not require the transfer of state-of-the-art dual-use technology, the most important of which is controlled by COCOM. Indeed, a number of reformers have made clear their misgivings about having Western assistance take the form of high technology sales; they appreciate it is not essential to their economic recovery, that it can result in Soviet pressure for diversions and that it will likely displace other forms of assistance that are more needed and less susceptible to abuse.

We at the Center for Security Policy would like to propose an alternative approach that promises both to assist the East Europeans in an appropriate manner and to serve U.S. domestic as well as foreign policy objectives. Machine tools offer an illustration of how such an approach might work.

It is estimated that 90+ percent of U.S. industry is utilizing machine tools with accuracies at or inferior to the COCOM standard of plus-or-minus 10 microns. The impulse for greatly relaxing that standard — reportedly down to plus-or-minus 2.5 microns — comes not from a determination that such machines are indispensable to the economic revitalization of East Europe. Rather, it is driven by the quality of machines West German manufacturers have to sell. The Germans simply no longer make machines with the relatively poor performance largely used by U.S. industry.

Under these circumstances, there may be an alternative to selling the East Europeans state-of-the-art machine tools whose potential for militarily significant abuse is considerable, while at the same time encouraging the necessary retooling of the American industrial base. We would urge Congress to consider enacting legislation that would provide tax incentives for U.S. industry to replace existing equipment that conforms to current COCOM standards. Such equipment could then be provided to East European end-users identified as potentially significant contributors to the economic and political reform and revitalization of their respective nations.

Such an approach offers a winning solution for everyone — everyone except the Soviets, that is: Manufacturers of controlled technologies could obtain new, "safe" markets for their sensitive equipment. Legitimate entities and enterprises in Eastern Europe that contribute to the genuine transformation of their respective economic and political systems could get access to technology that would greatly improve the quality and efficiency of their manufacturing processes — without jeopardizing Western security interests. And the U.S. taxpayer, who is inevitably going to be stuck with a substantial portion of the bill for bailing out the failed economies of Eastern Europe can at least have the satisfaction of knowing that this is being done in a targeted way, one with the ancillary benefit of doing something for the health of our own economy — in contrast to the present approach of providing outright grants.

The Future of COCOM

In my view, the most serious threat to COCOM arises not from the greed of German machine tool manufacturers and their counterparts in other industries and other countries who are appear bent on making sales irrespective of the security consequences of doing so. These are often cited as sources of pressure that, unless appeased by liberalization of the current export control regime, will seek to destroy that regime altogether.

Instead, I think the real threat to COCOM — and to the collective security it exists to safeguard — comes from words and actions of leaders of the West, first and foremost those here in Washington. Unless we are able to articulate a clear and consistent vision of the threat the Soviet Union continues to pose, there is little reason to believe that COCOM (or for that matter NATO and Western defense budgets and establishments) will be properly sustained. President Bush’s frequent assertion of his commitment to help Gorbachev succeed, to be a "partner" in perestroika, is precisely the wrong signal to send if such institutions and capabilities are to be preserved. As long as this signal is the preeminent — not to say exclusive — one being sent from Washington, I believe no amount of salami-like erosion in export controls is going to "save" COCOM.

I am convinced that Congress can — and should — play a helpful role in defining and conveying a sensible vision of the continuing challenge posed by the USSR. For a model, we need look no further than to the initiative taken by Congress in 1987 by which Toshiba was put on notice, in the aftermath of its deplorable, illegal technology transfer to the Soviet Union, that its future access to U.S. markets would be jeopardized by such behavior. We should offer the Germans and others a similar choice: Our hard-currency, real market versus the possibilityprobably on credit at that. of sales to Eastern Europe and the Soviet Union,

Needed Changes in the Technology Security System

In addition, I believe several changes are urgently needed in the way U.S. and Western technology security is being handled.

First, a greater effort clearly needs to be mounted to enforce COCOM restrictions. In early October, Ambassador Alan Wendt of the State Department and the director of the Defense Technology Security Agency, William Rudman, made an important tour of European capitals. Its purpose was to demonstrate the serious problem arising from lax enforcement of COCOM guidelines by member nations.

One striking example of this problem is the fact that, since 1983, over 6,000 COCOM-embargoed machine tools were sold to the USSR, nearly all of them funneled directly to projects run by the Soviet Military Industrial Commission. Half of those 6,000 machine tools were of West German origin. The machine tools allegedly sold by the Italian firm, Olivetti, to a Soviet aeronautics factory where they were used to build the YAK 41 fighter-bomber.

Given this sorry track record, I am very leery of commitments now being offered that enforcement will improve if only the COCOM list is shortened. In fact, I would seem to me that a prerequisite for altering the list of controlled items in ways that entail assuming additional security risks (e.g., the relaxation of controls on highly accurate machine tools) should be a demonstrated willingness and ability by all member nations to enforce existing controls.

Second, there is an urgent need for Congress to correct a problem that has arisen as a result of the Commerce Department’s interpretation of an amendment to the 1988 Omnibus Trade bill designed to modify the Export Administration Act. The original intent of the amendment, you will recall, was to ensure that due consideration was given to "foreign availability" in determining the utility of retaining certain export controls.

The Center has, in a series of papers which I would ask permission to have inserted in the record at the conclusion of my testimony, established that instead of serving this sensible purpose, the amendment has become a device for the wholesale and irresponsible decontrol of extremely sensitive technologies. In a case governing advanced personal computers last summer and the recent decision to decontrol virtually all wire-bonders, the Commerce Department is allowing the most flimsy of evidence to serve as grounds for a finding of foreign availability — even where the evidence is contested by the Defense Department and the intelligence community.

I urge the Committee as it takes up the matter of the reauthorization of the Export Administration Act to establish the requirement for the consent of the Secretary of Defense on such findings. This is a vital check on the sort of arrogant and high-handed decision-making that has come to characterize recent Commerce Department decisions in this area. Ironically, it is precisely the sort of prescription that Commerce sought last year in the notorious FSX controversy when it was at the receiving end of similar treatment from the Defense Department.

Finally, I believe the Committee must look into the whole manner in which the executive branch is staffing and acting upon technology security issues. My own conviction is that the only way to ensure that all agencies and all points of view are properly represented in these sensitive decisions is to ensure that an effective interagency mechanism is in place and rigorously utilized.

Thank you for this opportunity to contribute to the Committee’s deliberations in this vital national security area.

1. "It’s Still Business as Usual for Spies, Even as the Eastern Bloc Rises Up," New York Times, 31 December 1989.

2. As reported in a Radio Free Europe/Radio Liberty Daily Report, 17 January 1990.

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