Tag Archives: Divest Terror/Terror-Free Investing

HERE WE GO AGAIN: AFTER IRAQI DEBACLE, WILL SYRIA BE LET OFF THE STATE SPONSORS OF TERRORISM LIST?

(Washington, D.C.): Articles in
today’s New York Times and Washington
Post report that Secretary of State
Warren Christopher is prepared to offer
Syria a major concession — in exchange
for little more than a Syrian commitment
to return to the negotiating table with
Israel. Specifically, Secretary
Christopher is said to have pledged that
Syria would be removed from the official
U.S. government list of state sponsors of
terrorism, a status that
precludes listed nations from receiving
certain preferential trade benefits and
access to sophisticated, militarily
relevant technologies.

A Reprise of the 1982
Concession to Iraq?

Such an initiative bears an appalling
resemblance to an earlier, misbegotten
decision by the U.S. government. In 1982,
the Reagan Administration decided — at a
time when it was legitimately concerned
that Islamic revolutionary Iran might
prevail over Iraq — to tilt toward
Saddam Hussein. Central to the
implementation of that decision was the
removal of Iraq from the list of state
sponsors of terrorism, despite
Baghdad’s continued, vigorous support to
international terrorist organizations.

The rest is history: Saddam exploited
the opportunity thus afforded to him to
acquire state-of-the-art manufacturing
technology and componentry critical to
his efforts to obtain weapons of mass
destruction, advanced conventional
armaments and other dangerous
capabilities.

Ultimately, the United States and its
allies wound up having to go to war to
undo the damage thus done — damage that
flowed directly from the short-sighted
and expediency-driven decision to corrupt
the state sponsors of terrorism list. The
Clinton Administration now appears poised
to make the same mistake with respect to
an even more dangerous actor: Hafez
Assad.

This is all the more ironic since the
Clinton-Gore campaign roundly condemned
the Reagan-Bush administrations for the
initial decision to favor Iraq and the
subsequent policy errors that greatly
exacerbated the ultimate costs of that
“tilt.” As then-Sen. Gore said
on 29 September 1992: “…For
strategic reasons, the Reagan/Bush
Administration would overlook virtually
any unpleasant reality in Iraq and
apparently subvert U.S. laws in
order to prop up Saddam’s brutal
regime.”

Syria Remains a State
Sponsor of Terrorism

Damascus is still very much in the
business of supporting international
terrorism. Some twenty-six terrorist
organizations have headquarters or other
facilities in Syria or in
Syrian-controlled Lebanon. Assad — and
his apologists in the Clinton State
Department (i.e., the Bureau of Near East
and Asian Affairs) and elsewhere — try
to finesse this inconvenient fact by
averring that Syria’s hospitality toward
the likes of Ahmad Jabril, George Habash
and Carlos “the Jackal” does
not constitute support for terrorism — as
long as these organizations do not target
Americans. href=”#N_1_”>(1)

Whether Syrian-based terrorist groups
have, in fact, plotted or engaged in
attacks against U.S. citizens in recent
years is a matter of lively debate. What
is indisputable, however, is that
terrorist organizations enjoying direct
support from Damascus remain actively
engaged in attacks against U.S. interests
and allies overseas. To cite but
a few examples:

  • Syrian-backed terrorist
    organizations have been routinely
    used to intensify pressure on
    Israel, notably through last
    summer’s attacks on the Israeli
    security zone in Southern Lebanon
    and the increasingly violent
    campaign being mounted against
    Jewish settlers in the disputed
    territories.

    • Importantly, in connection with
    the latter, Assad explicitly told
    PLO Chairman Yasser Arafat that
    he would support the actions of
    Palestinian factions — like the
    Popular Front for the Liberation
    of Palestine-General Command and
    the Islamic fundamentalist Hamas
    — that are determined to oppose
    the Israeli-PLO accord.

  • Syria is simultaneously
    supporting a deadly campaign of
    terror against another critical
    U.S. ally in the region —
    Turkey.     “Apo”
    Ocalan, the leader of the Marxist
    Kurdish Workers Party (PKK) has
    long been based in the Syrian
    controlled Bekaa Valley and Syria
    itself. Turkey has also announced
    that Syrian transports are
    ferrying PKK terrorists to
    Armenia from which they make
    their way to Turkey via Iran.

    • The Turks’ understandable fury
    over such blatant support for
    forces waging war against the
    Turkish state has prompted Ankara
    to threaten direct retribution
    against Syria:

    “If Syria persists
    in supporting PKK
    terrorism, then Turkey
    will as a first step
    cut-off her water supply.
    As a second stage of the
    operations, military
    activities will be
    undertaken against PKK
    concentrations in
    Syria.” href=”#N_2_”>(2)

    Turkey has also proposed to
    conclude an agreement on
    cooperation with Israel against
    terrorism. Such pressure has
    prompted Syria in recent days to
    make some conciliatory noises
    about expelling Ocalan and
    otherwise constraining PKK
    operations. Such promises have
    been heard before, however, and
    their value this time very much
    remains to be seen.

  • Assad also recently hosted the
    Commander of Iran’s Revolutionary
    Guards, General Mohsen Rezaei, in
    Damascus — fresh evidence of the
    malevolent strategic alliance
    that he has forged with Teheran.
    General Rezaei reportedly met
    with Ahmad Jibril and other
    terrorist leaders while in Syria.

The Bottom Line

The Center for Security Policy
believes that the Clinton
Administration’s apparent willingness to
rehabilitate Hafez Assad’s regime by
removing it from the list of state
sponsors of terrorism is no more prudent,
responsible or consistent with U.S. law
than was the earlier U.S. decision to
ignore the terrorist activities of Saddam
Hussein and his friends. The
United States is already in significant
danger of dignifying and facilitating the
spread of terrorism as a result of its
confusing stance with respect to the
terrorist/peace-making Palestine
Liberation Organization; it should not
make matters worse by ignoring Assad’s
continuing use of terrorism and support
for its perpetrators.

The U.S. government must in particular
not repeat its earlier mistake of
allowing narrow, tactical objectives to
blind it to the larger, strategic
complexities involved in Middle East
diplomacy. Syria responds constructively
only to pressure, not blandishments. The
sole basis upon which it should be
removed from the state sponsors of
terrorism list is if it ceases to be
such a sponsor — in every sense of
the word. Doing otherwise will
not only make a further mockery of U.S.
law; it will also embolden Syria to
believe it can have its cake and eat it,
much as Saddam Hussein did throughout
most of the 1980s.

– 30 –

1. Importantly,
the relevant law — the Export
Administration Act of 1979, Section
(6)(j) does not stipulate that sponsors
of terrorism need only be listed if the
terrorists’ targets are Americans.
Instead, it uses universal terms:
“[A country must be listed if the
Secretary of State determines that] such
country has repeatedly provided support
for acts of international
terrorism.”

2. Cited
in the Turkish Press Review, 27 October
1993.

A ‘No-Brainer’: Rep. Berman’s ‘Free Trade In Ideas’ Bill Must Not Be Allowed To Strengthen Tyrants

Congressman Howard Berman (D-CA) pulled a fast one last week — a bit of legislative derring-do that despots around the world must be hoping he will be able to repeat when the State Department’s FY94 authorization bill goes before the full House Foreign Affairs Committee next week. Cheers will be heard from all corners of the "Radical Entente" if amendments attached to this bill at Rep. Berman’s initiative are allowed to undermine fatally the President’s ability to restrict certain economic and financial activities of foreign target countries, notably states like Cuba, Libya, Iraq and Serbia.

It is ironic that Congressman Berman of all people would be the sponsor of a measure like H.R. 1579, "The Free Trade in Ideas Act" — a free-standing bill which he succeeded in getting affixed (on an 8-7 vote) to the State Department authorization bill when it was marked up by the House Foreign Affairs International Operations Subcommittee on 26 May 1993. Rep. Berman has, after all, traditionally subscribed to the view that economic and political sanctions can be valuable tools of foreign policy.

The Berman language would, nonetheless, prevent the president from enforcing certain multilateral U.N embargoes — as well as some bilateral sanctions — even in war time. What is more, if enacted, this legislation would provide a convenient cover for a host of illegal and undesirable financial and trade transactions.

An Idea Whose Time Has Not Come

While Mr. Berman describes the bill benignly as a means to "eliminate restrictions on educational, scientific and cultural exchanges" and an avenue to promote "the free exchange of information and ideas," its sweeping provisions would actually have, among others, the following deleterious effects:

  • The Trading with the Enemy Act would be amended to prohibit the President from interfering in any way in the transfer of any information between someone in the United States and any other country in the world;

    •  

  • The President would be prevented from restricting the travel of American citizens under any conditions, including in the event of a congressionally-declared war. (For example, U.S. oil workers, now restricted from working in Libya, could not be prevented from returning there);

    •  

  • As a result, the United States could be obliged to violate existing obligations mandated by the U.N. Security Council concerning sanctions on Iraq and the former Yugoslavia (e.g., those prohibiting business travel to these states);

    •  

  • The Cuban Democracy Act overwhelmingly passed by the Congress last year and supported by then candidate Bill Clinton would be undermined by, among other things, the Berman legislation’s proposed lifting of restrictions on U.S. tourism in Cuba. The Castro regime would thus be offered a desperately needed new vehicle for earning hard currency. Similarly, major television networks could not be prevented from transferring royalties to Fidel in connection with the broadcasting of sports and other events;

    •  

  • The Berman legislation would prohibit the President from regulating any transactions related to the transmission, creation or circulation of "informational materials." These are defined broadly to include — but not be limited to — "publications, films, posters, records, photographs, microfilms, microfiche, audiotapes, videotapes, artworks, telephone conversations, other voice data communications, telecasts, news wire feeds, and other forms of telecommunications;"

    •  

  • The President could not prevent any group presenting itself as a foreign news organization from establishing a news bureau in the United States — even though such entities have long been utilized by hostile powers as fronts for espionage;

    •  

  • Any banking or financial transactions, including wire transfers, between the United States and a targeted country that involved the transfer of funds for the tourist industry, movie productions, publishing operations, travel, scientific exchanges, or other "informational activities" could not be regulated; and

    •  

  • Because the legislation is so broadly defined, "scientific exchanges" could not be impeded by the President, even in time of war. Since the content of these exchanges are not defined, presumably the legislation could even be interpreted to permit the transfer of dual-use technologies, military secrets or other information vital to U.S. national security interests.

 

Bottom Line

The drawbacks of the Berman legislation — were it to be adopted by the full House Foreign Affairs Committee and subsequently enacted into law — should be obvious. For one thing, it would enable economic and financial benefits to flow to such despots as Iraq’s Saddam Hussein, Libya’s Mohammar Gaddafi, Serbia’s Slobodan Milosovic, North Korea’s Kim Il Sung and Vietnam’s unreconstructed communist regime, notwithstanding multilateral or unilateral policies blocking such flows.

For another, the Berman bill would basically hamstring the President’s ability to conduct foreign policy. For example, by eroding the potential effectiveness of sanctions, this legislation would reduce U.S. options for responding to acts of international aggression, gross violations of human rights or dangerous proliferation activities to essentially two (probably) undesirable ones: 1) adopting meaningless sanctions or 2) authorizing military action.

What is more, the Berman bill is not only pernicious; it is unnecessary. Under existing laws, exceptions are already available to accommodate a broad range of humanitarian, educational, cultural and informational considerations. The fact that such exceptions must be authorized on a case-by-case basis, however, offers some basis for ensuring that they are made deliberately and on the basis of merit — and do not have the untoward effect of undermining the sanctions in place.

It would be undesirable for Congress to adopt such legislation at a less difficult moment for U.S. foreign policy than the present one. Enactment of such legislation is to be avoided at all costs, however, under present circumstances — when American leadership in punishing international pariahs is already being severely eroded by misbegotten and ineptly executed policies.(1)

– 30 –

1. On this point, see the Center’s Decision Briefs entitled "America, The Impotent? ‘Tarnoff Doctrine’ Begets The ‘Please Hold’ Military Strategy; Sets Stage for Abandoned Commitments, Future Combat Losses," (No. 93-D 43, 1 June 1993) and "It’s Official: U.S. Abdication of International Leadership is State Policy, Not Mere Ineptitude," (No. 93-D 42, 26 May 1993).

Over To You: Congressional Scrutiny Urgently Required On Aid To Russia

With over $28 billion in new credit and aid flows now promised to Russia — the result of just-concluded "emergency" G-7 ministerial meetings in Tokyo — the Congress will soon be pressed to appropriate $1.8 billion more this year in taxpayer grants, loans and guarantees to bolster President Yeltsin. Before doing so, however, there are a number of troubling developments which bear close scrutiny and Clinton Administration answers. Among them are the following:

ITEM: Conditionality (or Lack Thereof)

While aid to Russia has not been explicitly conditioned on concrete progress toward democratization and free market reform, Western officials have suggested that they expect these goals to be urgently pursued. In particular, some seem to believe that the absence of strict control over the money supply — notably the hemorrhaging of subsidized credits to bankrupt state-owned industries (read the military-industrial complex) — is accepted by the Russian government as the single greatest obstacle to true structural change and that corrective action is in the offing.

Symptomatic of the poor prospects for adequate Russian compliance with this and other conditions, however, is Russian Central Bank Chairman Victor Geraschenko’s statement over the week-end that the agreement between the Yeltsin government and the bank on limiting credit expansion is "meaningless" and "really a trap" for reformist Deputy Prime Minister Boris Fyodorov.

Of a piece with this problem is the growing politicization of the International Monetary Fund (IMF) by G-7 leaders. The Fund is under withering pressure to ease standard lending criteria for Russia on a preferential basis. Nothing short of the IMF’s institutional integrity is now on the line, with numerous other countries currently operating under IMF programs no doubt positioning themselves to demand "equal treatment."

Bottom Line: With nearly $5 billion in taxpayer losses from past unconditional U.S. lending to Moscow already virtually assured — due primarily to abuses of the statutory requirements of the Commodity Credit Corporation — Congress must now ensure that Russia does not continue to garner more funds as it merely pretends to reform.

ITEM: Scandal at the United Nations — Russia’s Role in Aiding and Abetting Serbian Genocide

Russia has unmistakably emerged as one of the most important international benefactors — and protectors — of the genocidal Serbs. Moscow’s adoption of this odious role has been placed in sharp relief as Russia has in recent weeks run political

interference for Belgrade in the United Nations, staving off, or at least postponing, tighter economic sanctions and thwarting needed military action. Among other de facto Russian support for Serbian genocide are the following:

  • Continuing reports of substantial covert Russian arms shipments to Serbia (principally via Romania and Greece);

    •  

  • Confirmed reports of Russian "volunteers" fighting alongside and advising the Bosnian Serbs;

    •  

  • Routine sanctions-busting activity, primarily through shipments of oil via Ukraine; and

    •  

  • Of particular concern is the prospect that Moscow will now serve as a safe-harbor forSerbian financial and other assets — which, thanks to the Kremlin’s insistence thatimposition of tighter U.N. sanctions be postponed until 26 April, will likely be able to be transferred to Russia and other sympathetic nations and, thus, avoid international confiscation.

 

Bottom Line: Congress must not permit itself to be put in a position whereby it seems to accept a sort of "fire-wall" between the Russian aid issue on the one hand and Russia’s complicity in the mindless slaughter of women and children in Eastern Bosnia by its Serbian ally, on the other. Accordingly, an immediate inventory must be taken of Russian activities taken on behalf of Serbia — and legislative measures devised to curtail them and to penalize their perpetrators, if new U.S. taxpayer aid is to flow to Russia.

The principle of "follow the money" — long watchwords of the Center for Security Policy in international economic and financial security matters — should be applied urgently to determine where Serbian financial deposits and other assets are now being transferred to avoid seizure. Moscow and other Russian-owned financial institutions abroad are a good place to begin the search.

ITEM: Eximbank Oil and Gas Framework Agreement

Over the past several months, the Center has carefully evaluated the merits and modalities of the U.S. Export-Import Bank oil and gas framework agreement with Russia recently initialed by the Clinton Administration.(1) In the process, a number of major strategic and financial down-side risks associated with this deal have been identified. Notably, these include the structuring of this Eximbank facility and the inadequacy of steps taken to mitigate the taxpayer risk involved in new lending to a demonstrably non-creditworthy Russia.

Eximbank loans are scheduled to be disbursed to so-called "special purpose entities" in Russia — or artificial constructs which are supposed to provide the patina of private enterprises. The Russian energy sector remains, however, substantially state-owned. It also continues to be the principal funding source for the military-industrial complex as well as a revenue stream for rampant capital flight.

The Eximbank, nonetheless, provided $82 million in a direct loan to Russia in February 1993 to finance Caterpillar tractors — at a time when Russia was not remotely creditworthy and with no pretense of "project finance" arrangements to mitigate this huge taxpayer risk. Worse yet, even proponents of this deal like former Deputy Energy Secretary Henson Moore acknowledge that revenue streams associated with secondary recovery at existing oil wells could be generated in as little as 6-24 months. The Center believes that such revenues could, in tum, potentially help to underwrite activities harmful to vital U.S. interests pursued by a revanchist Russia.

Bottom Line: Congress should demand that no U.S. government credit agency, including Eximbank, can take on new Russian exposure until such time as all arrearages to the Commodity Credit Corporation (now standing at over $715 million) are liquidated and genuinely collateralized lending arrangements are put into place. Legislation to this effect has been introduced by Rep. Jon Kyl (R-AZ), a distinguished member of the Center for Security Policy’s Board of Advisors (H.R. 1247, The Taxpayer Protection Act).

ITEM: Scandal at the European Bank for Reconstruction and Development (EBRD)

Last week, the Financial Times issued a series of damaging investigative reports concerning the appallingly wasteful spending policies of the EBRD under the direction of its French socialist president, Jacques Attali. British and other shareholders of the Bank have launched an inquiry into confirmed reports of exorbitant expenditures on marbled offices, extravagant furnishings, salaries, staff parties, a private jet for Attali, etc.

According to the FT, since the EBRD’s inception two years ago, it has spent some 200 million on overhead and start-up costs. This amount is particularly absurd when compared to the roughly 100 million the Bank has disbursed in loans to eastern Europe and the former Soviet Union. It can only be hoped that the Bank’s shareholders will demand that "heads roll" — starting with Monsieur Attali’s — when the annual shareholders meeting is held in London this coming week-end.

Bottom Line: As the EBRD is expected to play a central role in multilateral lending to Russia and other Soviet successor states and Eastern Europe, it is essential that Congress open its own inquiry and hearings into what the Center for Security Policy has long predicted would be yet another self-aggrandizing and bloated new international bureaucracy, in part funded by the U.S. taxpayer.

ITEM: Removing COCOM Restrictions

At the 3-4 April Vancouver Summit, President Clinton assured President Yeltsin that he would reexamine existing export restrictions on Russia, with a view toward sharply reducing — if not eliminating — the present regime. At this juncture, Russia has only a skeletal export control regime in place, manned by some 15 apparatchiks, many of whom undoubtedly would be ready (for a price) to make available to exporters (and re-exporters) whatever licenses are necessary to transfer sensitive technology. Fundamentally, Russia’s military remains anxious to obtain and incorporate Western technologies into its weapons systems. What is more, Russia has yet to demonstrate that it has either the capacity or the political will rigorously to restrict the export or re-export of dual-use technologies instrumental in the development of weapons of mass destruction. Only last week, Ukrainian customs officials seized a Russian cargo ship bound for Libya and carrying a multilaterally-controlled chemical used in the production of rocket fuel.

Bottom Line: Congress should resist any efforts to change the few remaining safeguards on the export of militarily-critical dual-use technologies to Russia until there is a very high degree of confidence that an effective Russian export control regime is in place and that Russia’s government has largely reformed. As it is today, U.S. export controls already fall short of covering the full range of technologies which can be used to manufacture weapons of mass destruction. In its four years in office, the Bush Administration effectively emasculated the list of controlled technologies leaving safeguards on only a limited number of highly sophisticated technologies. The fact that this issue figured so prominently on Yeltsin’s wish-list should raise eyebrows among those fully aware of the role that COCOM plays in stemming proliferation activities.

ITEM: Old Wine in New Bottles

When examined closely, Clinton’s $1.6 billion Vancouver aid package looks very much like the ineffective, if not counterproductive, aid packages promoted by his predecessor. Once again, the preponderance of U.S. aid to Russia consists of subsidized agricultural loan guarantees for the sale primarily of livestock feedgrains. Such "assistance" has primarily benefitted only a small segment of the U.S. agribusiness. It has done little to tackle the rudimentary problem in Russia’s agricultural sector — namely the absence of institutionalized ownership of land — and has likely retarded the privatization process.

A secondary emphasis has been to focus on reinvigorating Russia’s oil and gas sector through Eximbank, OPIC and multilateral project lending. This aid will undoubtedly benefit another small group of interested parties — namely the U.S. oil and gas equipment manufacturing sector — but in so doing could also provide state-owned Russian oil and gas companies with the capacity to generate hard currency revenues, monies which in the past have largely gone to enhance military-industrial activities.

Both of these efforts — loan guarantees for agricultural and oil and gas equipment sales — have little to do with impelling democratization or free market reforms. What is more, little, if any, of this sort of aid directly benefits average Russian citizens.

Bottom Line: Congress should insist that new taxpayer funds be specifically earmarked to advance the privatization of Russia’s huge agricultural sector — primarily with the use of "decommissioned" Russian military equipment, personnel and logistic support. Continued reform-retarding grain sales only frustrates the vital process of breaching the cycle of Russian dependency on Western agricultural subsidies.

– 30 –

1. See: How Not to Lend to a Bankrupt Russia: Eximbank Energy Deal Should be Iced, Reworked (11 January 1993, No. 93-D3) and Red Ink Rising: Congress Needs to Take a Hard Look at New Loans to Defaulting Moscow (21 January 1993, No. 93-D9).

‘GETTING AWAY WITH MURDER’: BUSH-BAKER ENABLE ASSAD TO GO ON SPONSORING INTERNATIONAL TERRORISM

(Washington, D.C.): A central tenet in
President Bush’s reelection campaign is
his contention that he has demonstrated
an ability to confront effectively the
foreign policy and national security
challenges facing the United States. He
repeatedly emphasizes his proven capacity
to make the hard calls and to implement
decisions that are necessary to protect
American interests — even if doing so
entails controversy at home and conflict
with foreign powers. For example, at the
Republican convention he stated: “There
will be more foreign policy challenges
like Kuwait in the next four years.
Terrorists and aggressors to stand up to;
dangerous weapons to be controlled and
destroyed….”

Unfortunately, President Bush dismally
fails what would seem to be an ideal
test case of his willingness to
“stand up to terrorists” and
those amassing “dangerous
weapons”: Syrian dictator Hafez
Assad’s continuing sponsorship of
international terrorism. In fact, his
Administration appears determined to make
the same mistake it previously made with
another Middle Eastern tyrant, Saddam
Hussein, by looking-the-other-way on
state sponsorship of terrorism and the
acquisition of weapons of mass
destruction and other arms in the blind
pursuit of “higher”
geo-political objectives.

Is Syria About to be Taken
Off the Terrorism List?

Under U.S. law, a nation judged to be
a state sponsor of terrorism must be
identified on the State Department’s
terrorism list. Nations appearing on that
list are statutorily prohibited from
enjoying certain trade, financial and
other benefits of a normal relationship
with the United States. href=”#N_2_”>(2)

There are strong indications that
Messrs. Bush and Baker are determined to
remove Syria from the terrorism list at
the earliest possible moment —
presumably shortly after the November
election. In the meantime, rather than
expose themselves to the torrent of
criticism that accompanied the Reagan
Administration’s March 1982 decision to
remove Iraq from the list, Bush-Baker
have apparently chosen simply to act as
though Syria were not still listed
as a state sponsor of terrorism.
This policy is evidenced in the Bush
Administration’s decisions to improve
Syria’s access to dual-use technologies,
World Bank loans, the Saudi treasury,
etc.

‘See No Evil’

The impetus behind these important
strategic concessions to Syria is the
Administration’s view that Assad has
earned U.S. help with his
“cooperation” in the anti-Iraq
coalition and his “constructive
approach” toward the Middle East
peace process. Before Bush-Baker could do
much to reward the Syrian despot,
however, they had to deal with the natty
problem that he has continued to be an
active supporter of international
terrorism and therefore is legally
ineligible for many such benefits.

The solution: Use sophistry to suggest
that — so long as Syria’s
“direct” participation in
terrorist attacks cannot be established
beyond a reasonable doubt — Syrian
behavior with respect to terrorism is
acceptable. Toward this end, Edward
Djerejian, a former U.S. Ambassador to
Damascus and the current Assistant
Secretary of State for Near East Affairs,
testified before a House Foreign Affairs
subcommittee in late 1991 that,
“Since 1986, we have no evidence
of the Syrian government’s direct
involvement in any act of
terrorism.”

This statement evokes two comments:
First, it is probably untrue.
There is almost certainly some
such evidence but — as is generally the
case in closed societies run by bad
actors determined to conceal much of
their activities — it is far less than
is needed to “prove,” for
example, Assad’s personal participation
in the planning or at least the approving
of international terrorist operations.

And, second, the Djerejian
statement seems calculated to mislead.
After all, does it not disserve the truth
to suggest that Syria’s ongoing support
in the form of housing, training,
equipping and financing terrorist
organizations and providing them with
intelligence and logistical assistance is
something other than
“direct involvement” in acts of
terrorism?

Other Administration claims also
appear less than straightforward. These
include assertions to the effect that:
Syrian-backed terrorist groups have
launched no terrorist attacks against the
United States recently; Damascus has
pledged that none would do so; and Syria
actually played an invaluable role in preventing
terrorist attacks against the United
States during the Gulf war.

Just the Facts, Ma’am

In truth, Syria is still — by any
reasonable definition — directly
involved in international terrorism. U.S.
citizens and assets continue to be
targeted by Syrian-backed terrorist
groups just as they were before, during
and subsequent to the Gulf war. Consider
the following relevant facts:

Among the terrorist organizations
headquartered in and operating from Syria
are: the Popular Front for the
Liberation of Palestine-General Command
(PFLP-GC) headed by Ahmed Jibril; the Popular
Struggle Front; Al-Sa’iga; the Popular
Front for the Liberation of Palestine
(PFLP) headed by George Habash; and the Democratic
Front for the Liberation of Palestine
(DFLP).

Syria also supports factions of the
Shi’ite Hizbullah which
routinely uses the Syrian-controlled
Bekaa valley as a staging ground for
attacks against Israel. One sign of
Assad’s relationship with this terrorist
force is the fact that Hizbullah is the
only militia in Lebanon not required to
turn over their arms to Syrian forces.

Aside from Palestinian
“liberation” groups, Syria also
supports other international terrorist
organizations. The following are
permitted to operate from the
Syrian-controlled Bekaa valley: the Japanese
Red Army; the Armenian
Secret Army for the Liberation of Armenia
(ASALA); German Red Army
Faction (RAF); and the Devrimci
Sol (Dev Sol) and the Kurdish
Workers Party (PKK) which are
active in Turkey.

Terrorist Attacks Against
Israel Continue Unabated

Even the most fatuous apologists for
Assad’s role in terrorism would be hard
pressed to deny that Syria is involved in
continuing attacks on Israel. Indeed, the
Syrian despot has brazenly contended that
“Syria does not consider resistance
against Israeli occupation as
terrorism.”

The fact that Hizbullah and PFLP
attacks against Israel have continued
throughout this summer — a reality which
the State Department has been obliged to
acknowledge — demonstrates that the
terrorist organizations enjoying Syrian
patronage are as yet unimpeded in their
operations against U.S. allies. It comes
as no surprise that Syrian-based
terrorist group are among the suspects in
the deadly bombing of the Israeli embassy
in Buenos Aires on 17 March 1992 in which
thirty people were killed and another 250
wounded.

Importantly, several Syrian-based
Palestinian groups, including the PFLP-GC
and the PFLP, were prominent participants
in the 18 October 1991
“rejectionist” conference held
in Iran. This conference issued a call
for new terrorist attacks to disrupt the
peace process. Indeed, Ahmed Jibril, head
of the PFLP-GC, directly threatened the
lives of any Palestinian delegates to a
peace conference.

Subsequently, Syrian-supported
terrorist organizations carried out a
number of violent actions. Islamic Jihad
killed an American soldier in Turkey and
wounded an Egyptian diplomat on the same
day in October 1991. In Israel, the PFLP
claimed credit for killing two Israelis
and wounding six when they fired on a
bus-load of Israeli settlers on the West
Bank on 28 October 1991. According to a
December 1991 Israeli government report, in
the four months leading up to the Madrid
Conference, there were “eighty
attacks by Syrian supported terrorist
organizations in Lebanon.”

Turkey is Another Terrorist
Target

Israel has not been the only U.S. ally
targeted by Syria. Turkey’s security
forces consider the Syrian-backed Kurdish
Workers Party to be among their main
security concerns. In 1991, the PKK was
responsible for over 900 deaths in the
predominantly Kurdish region of
southeastern Turkey. Moreover, in the
aftermath of the Gulf war — even as U.S.
officials were praising Syria’s restraint
of terrorists — the PKK “mobilized
large units against Turkish military and
police outposts.” href=”#N_3_”>(3)
In 1991, the PKK also began imitating
their Syrian-backed Shi’ite terrorist
“brothers” by taking Western
hostages.

Recent Syrian claims that they will
not destabilize Turkey notwithstanding,
the attacks have continued through to the
present day. A mid-August 1992 offensive
launched by the PKK resulted in over 100
killed and hundreds wounded while they
held siege to the southeastern Turkish
town of Sirnak. PKK officials told the
media that they fully intended to
continue on that course. There
is, moreover, no credible basis for
concluding that Syria is withholding
their support from the Kurdish terrorist
organization.

As noted above, Syria also provides
refuge and training for the Turkish
terrorist Dev Sol organization. In 1991,
Dev Sol was responsible for the murder of
about thirty police officials in
Istanbul, the death of four military
officers and approximately thirty or more
bombings. At the same moment Syria was
supposed to be “suppressing”
terrorist attacks during the Gulf war,
Dev Sol was explicitly targeting U.S.
citizens in Turkey. The result was the
murder of 2 American civilian defense
contractors in Istanbul and the wounding
of a U.S. military officer in Izmir. A
British businessman was also assassinated
by Dev Sol.

U.S. Official Complicity in
Syrian Disinformation

If the Bush Administration has not had
the nerve to try to remove Syria from the
terrorism list, it has certainly laid the
groundwork for doing so — despite
undisputed evidence of Assad’s continuing
support for international terrorist
activities — by repeatedly validating
Syrian disinformation. For example, the
State Department has accepted Damascus’
assertion that recent attacks by
Syrian-backed terrorist groups against
Israeli military targets in Southern
Lebanon does not constitute terrorism.
This reflects a view shared by Foggy
Bottom and Syria that Israel has
no business having such targets in
Lebanon and that “military”
units, as opposed to non-combatants,
cannot be considered the victims of
terrorist attack.

Interestingly, this position stands in
sharp contrast to the U.S. government’s
view of such attacks when they were
directed against American
military forces in Lebanon. For instance,
American officials properly condemned
Syria for perpetrating an act of wanton
terrorism when a group it backed killed
241 Marines in their Beirut barracks. At
the very least, the U.S. Administration
is guilty of applying a double standard
to Israeli losses to similar terrorist
actions.

Pan Am 103: There is,
however, an even more egregious example
of the Bush Administration’s complicity
in misrepresenting the true extent of
Syrian involvement in terrorism: the case
of the bombing of Pan Am flight #103.
This civilian airliner was blown up on 21
December 1988 over Lockerbie, Scotland,
with a loss of 270 — including 189
American citizens.

According to credible reports, the
investigation into the bombing originally
placed responsibility for this heinous
crime with Iran and the Syrian-backed
PFLP-GC. Teheran — seeking
vengeance for the accidental destruction
of an Iranian civilian airliner by the
USS Vincennes earlier in 1988 —
“hired” the PFLP-GC to take
“an eye for an eye” by blowing
up an American commercial jet.

The direction of the investigation
began to shift in October 1990, however,
in the midst of the Bush Administration’s
assiduous courting of Syria in connection
with the anti-Iraq coalition. At that
time, the Bush Administration announced
that two Libyans were the prime
suspects in the case. Even so,
investigators continued to maintain that
the Syrians had direct knowledge of the
plan. It was believed that, as a result
of a successful counter-terrorist
operation by Germany in October 1988, the
PFLP-GC cell there — which had been
intended to plant the bomb on an American
airliner — was broken up. The PFLP-GC
then simply “subcontracted” the
job to the Libyans.

Shortly after the Libyan connection
was announced, the Administration’s line
changed again: It claimed that the
Syrian-backed PFLP-GC was never involved.
Instead, the word was put out that Pan Am
103 was considered to have been an entirely
Libyan operation. Both Syria and
Iran were exonerated; Col. Qadhaafi
became the scapegoat.

There are several nagging problems
with this conclusion, however. Among them
is the fact that nobody denies that the
PFLP-GC was, at one point, commissioned
to blow up an American airliner or that
it would likely have tried to do so had
its operation in Germany not been
disrupted. There reportedly also were
intercepts of communications by senior
officials in Teheran indicating that they
viewed the bombing of Pan Am 103 as
revenge for the U.S. shooting down an
Iranian plane. What is more, there have
been reports that U.S. officials involved
in the investigation continue to believe
that the bombing was perpetrated by the
Libyans only after the mission had been
subcontracted out to them by the PFLP-GC
as the agent for Iran.

Reliable Administration
sources have told the Center for Security
Policy that the investigators were
ordered to concentrate only on putting
together further hard evidence to aid in
the prosecution of the Libyans. There
was to be no pursuit of any PFLP-GC
involvement, including the
possibility that this Syrian-backed group
had simply handed-off the
“contract” on an American
airliner to the Libyans. In
keeping with this whitewash of Syria’s
involvement, it is not surprising that
President Bush — in commenting on the
indictment of the Libyan suspects —
opined that “the Syrians got a bum
rap on this one.”

The Bottom Line

The truth of the matter is that Syria
remains a major supporter of
international terrorism and continues to
be actively involved in terrorist attacks
against U.S. personnel and allies.
As long as Damascus persists in such
behavior, there can be no true peace in
the Middle East and Syria will remain a
threat to American interests — not a
reliable partner in promoting them.

In the Syrian connection as in so
many other areas, President Bush’s
actions simply do not square with his
rhetoric. The Center for Security Policy
urges Congress promptly to take up this
issue in open hearings. Should it fail to
do so, the Congress is at serious
risk of becoming a party to Bush-Baker
efforts to conceal the truth about
Syria’s support for terrorism.
The effect could be to embolden the Bush
Administration after the November
election to remove Syria from the
terrorism list or otherwise to encourage
it to accelerate the ongoing effort to
treat with Assad’s Syria — much as it
once foolishly did with Saddam’s Iraq.

– 30 –

1. This
is the third in a series of Center for
Security Policy Decision Briefs
on the Bush Administration’s misbegotten
and potentially recklessly dangerous
policy toward Hafez Assad’s Syria.

2. See
in this regard the Center’s recent Brief
entitled, “Bush-Baker Open a
New Personal Diplomacy Slush Fund: World
Bank to be For Syria What C.C.C. Was For
Iraq, USSR”, ( href=”index.jsp?section=papers&code=92-D_79″>No. 92-D 79, 9
July 1992).

3. From
Patterns of Global Terrorism, 1991
published by the U.S. Department of
State, April 1992.

WHEN DEUTSCHE BANK TALKS SOVIET DEBT DEFAULT, THE BUSH ADMINISTRATION SHOULD LISTEN

(Washington, D.C.): Western creditors
have effectively been put on official
notice: The Soviet government will be
defaulting on at least some debt
repayments momentarily. That word came
this week from no less than Hilmar
Kopper, the chief executive of Deutsche
Bank, a man who ought to know; his
institution has played a central role in
organizing and underwriting Soviet
sovereign borrowing for decades.

Deutsche Bank’s Inside Dope

The Financial Times of London
reported on 11 November 1991 that Kopper
made the following points in a Munich
meeting with economic journalists:

“‘[Moscow center’s]
liquidity crisis is extremely
acute.’ Claiming an exact
knowledge of the Soviet
foreign currency figures, he said
that ‘until early Monday morning
[11 November], nothing will
happen…from Monday on, anything
is possible.’

“It [is] now probably too
late [to erect a safety net of
$4-5 billion to tide the former
Soviet Union over its immediate
balance of payments crisis.] The
Deutsche Bank chief said he
was afraid the West had ‘talked
for too long over the patient’s
bed, and now he is already
dead.'”
(Emphasis added.)

Kopper’s comments seemed as much as
anything designed to allay the concerns
of Deutsche Bank shareholders and
depositors. In stark contrast to the
fear-mongering about the adverse
consequences of a possible Soviet debt
default which have featured prominently
in German demands over the past three
months for Western infusions of new money
into the USSR, he strove to downplay the
risk to his and other banks in Germany
should Moscow center welsh on its
outstanding debt. The FT
reported that Kopper believes that
“there should be no German banking
crisis, because 1991 had been a good year
for the system in other respects, and much
Soviet bad debt had already been allowed
for.”

‘Rounding
Error’ — Acknowledged Soviet Debt Grows
Dramatically

Interestingly, on Monday November
11th, Ivan Silayev — the head of the
reconfigured Moscow center
Inter-Republican Economic Committee —
confirmed the Center for Security
Policy’s longstanding contention that
Soviet foreign debt was considerably
higher than had been previously
acknowledged. Reports from Tass
and the independent Interfax
news agency recounted in yesterday’s Wall
Street Journal revealed that the
Silayev committee now assessed Soviet foreign
debt to Western nations to stand at $81
billion at the official exchange rate.
This contrasts with official estimates of
just $65 to 68 billion issued as recently
as last week. According to Interfax,
“most of the debt had accumulated
since President Mikhail Gorbachev assumed
power in 1985.”

In addition, Silayev disclosed that
the Soviet Union owes formerly socialist
nations of Eastern Europe roughly $31
billion. While this and other foreign
debt is nominally more than
offset by some $160 billion carried on
Soviet books as hard currency owed Moscow
center by its allies for the purchase of
Soviet arms, oil and other products, in
reality that “asset” is, for
the most part, wholly uncollectible
from such bankrupt clients as Cuba,
Nicaragua, Vietnam and Iraq.

Silayev made his announcement as part
of a plea for a rescheduling of Soviet
debt payments in the run-up to a 17
November meeting in Moscow with G-7
representatives. It seems clear that the
Soviet central authorities hope not only
for such relief; they also want Western
creditors — in the words of the Journal
— to continue to demand that “the
republics deal with the debt collectively
and [to indicate] that they won’t grant
new credits if the republics insist on
acting separately.” In other words, Moscow
center is desperately trying to translate
its current financial liability into a
potent political asset by enlisting the
West in its struggle to maintain some
vestiges of central control.

For their part, the republics of the
former Soviet Union are sensibly
demanding to know exactly where this
staggering foreign debt came from — and,
even more importantly, how such
credits were used (read, squandered).
The Wall Street Journal notes
that:

“[The republics] have been
resisting turning over hard
currency to the central bank, and
have been slow to implement a
memorandum signed last month that
pledges collective responsibility
for the foreign debt. In
some republics, such as Russia
and the Ukraine, strong voices
are calling for dividing the
Soviet Union’s hard currency and
gold reserves as well as its
debt, and paying back the debt individually.”

Bush Administration Determined
to Throw Good Money After Bad?

Against this grim backdrop, the
Bush Administration is plowing ahead with
new initiatives which would significantly
expand U.S. taxpayer-underwritten credits
and investment insurance to the Soviet
Union. Yesterday, the New
York Times reported that the
Overseas Private Investment Corporation
(OPIC) was prepared to “provide
partial insurance against expropriation,
political violence and currency
convertability problems” for an
American investment fund interested in
buying shares in newly formed companies
being established by the Soviet
military-industrial complex. (One such
company continues to manufacture
precision lenses for the military while
offering microscopes and medical devices
for sale to other users.)

OPIC is allocating $100 million for
this purpose. As the Times
quaintly put it, that money would only
become a taxpayer liability in the event
“claims are filed [by the insured
fund] and OPIC cannot collect from Soviet
or republic authorities.” Chances of
such a situation arising would appear at
present to be ludicrously high.

The OPIC action is of a piece
with an initiative expected to be
announced by President Bush today at a
speech in Kansas City, Missouri — one
that will have the effect, however, of
exposing U.S. taxpayers to far larger
liabilities. Agriculture
Secretary Edward Madigan and other senior
Administration officials have been
signalling for several weeks that at
least an additional $1 billion in
Commodity Credit Corporation (CCC)
credits will shortly be extended to
Moscow. Such a transaction would
come on the heels of $2.5 billion in such
agricultural export credits granted
within the past 11 months, and an
additional $300 million from the U.S.
Export-Import Bank.

In authorizing the preponderance of
that amount ($1.5 billion) last June,
President Bush was obliged by statute to
certify that the recipient was
creditworthy. At the time, despite
overwhelming evidence to the contrary, he
blithely averred that the USSR was indeed
creditworthy and that the loans would be
repaid. Because the market believed
otherwise, none of these
credits could find commercial
underwriters until the U.S. government
agreed to up its guarantees from 98% to
100% of principal and to cover the bulk
of the interest.

Of course, no such subterfuge is
possible under present circumstances. The
Soviet Union simply cannot meet
the test required by the Agriculture Act
of 1990; “credits” extended
today must be publicly recognized for
what they are — U.S. taxpayer grants — since
no detailed mechanism yet exists between
the republics and the center for the
effective use or repayment of any new
U.S. loan guarantees.

Conclusion and
Recommendations

The Center for Security Policy
strongly believes that — if a
case can be made for supplying U.S.
agricultural exports to the former Soviet
Union on humanitarian grounds — then
such aid should be submitted to the
Congress in the form of grants
and defended accordingly. Where that is
the case, the United States must insist
on a high degree of transparency,
discipline, accountability and
monitorability sufficient to ensure, to
the maximum extent possible, that the
foodstuffs in question are properly
distributed to truly needy individuals
and communities, not diverted for less
pressing or legitimate purposes. In any
event, in making such assistance
available due consideration should be
given to the impact that exports of free
U.S. grain and other commodities will
have on food prices in the United
States and on the economies of
struggling democracies in Eastern and
Central Europe which rely on the revenues
associated with their grain exports to
the former USSR.

On the other hand, if humanitarian
considerations do not justify
making U.S. agricultural exports
available to the people of the former
USSR on a grant basis, it is
irresponsible — and probably
illegal — to offer this
assistance in the form of taxpayer credit
guarantees. It is, after all, palpably
obvious that the chances of full
repayment by the reconfigured Soviet
central authorities are virtually nil and
— in the absence of clear-cut and
reliable undertakings on the part of
alternative borrowers at the republic
level, ideally collateralized by gold,
diamonds or other commodities in U.S.
hands — any such assistance is simply
money taken from priority domestic
programs or other more deserving
recipients across the globe.

If the Bush Administration is in any
doubt on this score, it would do well to
draw the correct and larger lesson from
the evident unwillingness of Congress to
shift $1 billion from the U.S. defense
budget for such ill-defined purposes as
retraining Soviet military officers,
cleaning up Soviet environmental
disasters and retooling Soviet defense
plants. In short, the jig is up
on indiscriminate, multi-billion dollar
U.S. taxpayer-underwritten bail-outs for
Moscow center.

Rabtagate: The Inside Story Of German Collusion In The Libyan Chemical Warfare Program

Introduction

In late 1988, relations between the United States and Germany were seriously strained when a long-running, secret conflict over U.S. allegations tying a German company, Imhausen, to the then-nearly complete Libyan chemical warfare plant at Rabta broke into public view. After manfully denying any knowledge of German involvement in this affair, the government of Chancellor Helmut Kohl finally acceded to parliamentary demands for a report on what federal authorities knew and when they knew it.

This report, entitled A Report Concerning the Possible Involvement of Germans in the Establishment of a Chemical Weapon Facility in Libya, was submitted to the Bundestag on 15 February 1989. With quintessential teutonic thoroughness, it documents in the words of the preface:

 

…which and at what time agencies and members of the Federal Government were informed about the possible involvement of Germans in the production of toxic gas in Libya, what steps they took in the light of that knowledge, and what political and legal consequences they intended to draw from the available information.

 

In the aftermath of recent charges that German companies have been involved in supplying Iraq with technology associated with weapons of mass destruction and the arrest two weeks ago of seven German nationals implicated in the sale of a second chemical warfare production facility to Libya, the Center for Security Policy undertook to examine this report with care. In particular, the Center vainly sought in the detailed chronology (which spans nearly a decade and comprises the bulk of this report) evidence that confirmed the report’s central contention, namely, that:

 

…the Federal Government [in Bonn] exhausts all possibilities to prevent German firms or individuals from participating in or providing assistance for the manufacture of [chemical] weapons in other countries and to bring them to account for any such involvement in the past.

 

A Damning Chronology:

To the contrary, the official chronology contained in this report amounts to a damning indictment of the German government’s willingness to ignore indications of the involvement of its citizens in the transfer of dangerous technologies. What is more, it documents the tenacity of that government in resisting repeated demands for corrective action issued by allied capitals.

The following excerpted quotations(1) from the report’s chronology illustrate these alarming points:

 

  • 22 April 1980: The German Federal Intelligence Service (BND) reports that, with the help of unnamed East and West German experts, Libya is developing a plant for the manufacture of chemical warfare agents as well as a system for using them. The BND thinks it is also conceivable that it may be a normal chemical factory. The possibility of the conscious involvement of German companies in the construction of a warfare agents plant was excluded. Distribution [i.e., German agencies apprized of this information]: BK-Amt (Federal Chancellery); AA (Federal Foreign Office); BMVg (Federal Ministry of Defence); BMI (Federal Ministry of the Interior).

     

    •  

  • 5 July 1985: The German embassy in Moscow reports on information received from a non-Eastern source indicating that the Imhausen Company in Lahr (proprietor Dr. Hippenstiel) has concluded a contract in Hong Kong to provide supplies for a pharmaceutical project. A state-owned German company is said to be involved. The location of the project is unknown, although Libya is a suspicion.

     

    •  

  • 22 June 1987: The BND reports in its daily briefing that according to information from an allied intelligence service, a warfare agents factory is about to be completed near Rabta with a production capacity estimated at 1 to 3 tons of sarin [a highly toxic nerve agent] per day. Distribution: BK-Amt; AA; BMVg; BMWi; BMB (Federal Ministry for Intra-German Relations); BMZ (Federal Ministry for Economic Cooperation).

     

    •  

  • 26 January 1988: The German embassy in Tripoli reports…that the Rabta military research center for the production of chemical warfare agents is likely capable of operating and involves German companies.

     

    •  

  • 3 February 1988: The German embassy in Tripoli reports that after questioning representatives of German construction firms, investigations have shown that no German companies are involved in the construction of…(Rabta). The supply of equipment has mainly been organized via Switzerland, with German intermediaries and German companies. [Information] passed on to the BND.

     

    •  

  • 18 May 1988: The AA receives a routine level non-paper [i.e., an informal, albeit officially authorized, government-to-government communication] from the American embassy. It expresses concern over the participation of companies from the [FRG] in the supply of chemical facilities in Libya and the reequipping of Libyan C-130 aircraft to give them midair refueling capability:

     

    • [The U.S. non-paper of this date said in part:] We understand that several firms from the FRG have provided or facilitated Libya’s procurement of equipment — such as pumps and chemical processing reactors — for a probable chemical weapons facility. Among the firms involved in this activity are Sihi GmbH and Co., and Imhausen Chemie GmbH.

       

    •  

     

  • [N.B. The German Foreign Office does not pass this information on to the Intelligence Service or other agencies for a full week. When it does, AA requests export license check on German companies named and urges consideration of foreign trade and payments inspection.]

     

    •  

  • 8 June 1988: BMF [responds by ordering] a foreign trade and payments inspection [on only one company, Intec.] For the time being, BMF refrains from conducting [such inspections on the other firms mentioned in the non-paper [including Imhausen] because the paper contains no concrete information on the kind of goods purported to have been exported nor on their relationship to chemical weapons production.

     

    •  

  • 15 July 1988: BND receives information from an allied intelligence service concerning possible supplies from German companies for the construction of a poison gas production plant in Rabta. The firms named are IBI, Pen Tsao and Imhausen.

     

    •  

  • 2 August 1988: The ZKI and BND…conclude that the ZKI should only undertake preliminary investigations into Imhausen and refrain from ordering a foreign trade and payments investigation by inspectors from the customs authority before further information has been gathered.

     

    •  

  • 18 October 1988: The BND announces receipt of a report from an allied intelligence service [context suggests source was American] on 14 October 1988, stating that in August 1988, staff from the Imhausen Company were involved in putting the alleged warfare agents plant into operation and "possibly in the repair of damage to the production facilities, too." The BND adds that Imhausen’s involvement has also come to its attention via other channels.

     

    •  

  • 20 October 1988: The Federal Chancellor [Helmut Kohl] is briefed for the first time on the information gathered by the intelligence services in relation to Libyan efforts to establish a [chemical] warfare agents factory.

     

    •  

  • 11 November 1988: [The German Foreign Ministry proposes that its minister, Hans Dietrich Genscher make the following points in the course of a trip to Washington:]

     

    • U.S. evidence provided in October 1988 has been looked into, but so far nothing has been found on Germans or German firms violating the Foreign Trade and Payments Act.

      •  

    • There is no verified information on the activity of Germans in the Libyan chemical weapons plant. Even if this were the case, the Federal Government would have no effective lever to prevent the mere participation of Germans in such projects.

    •  

  • 11 November 1988: [A letter to Foreign Minister Genscher from then-U.S. Secretary of State George Shultz] praises the Federal Government’s efforts to prevent German firms from exporting chemical weapons materials while recognizing the legal obstacles to stronger measures.

     

    •  

  • 24 November 1988: BND reports to the Chancellor in response to the evidence presented by the U.S. Administration:…until the summer of 1988, the BND had no knowledge of the participation of German companies neither (sic) from its own nor from foreign intelligence sources.

     

    •  

  • 5 December 1988: …U.S. Ambassador to Bonn [Richard Burt] hands over a paper concerning the technology center and the "Pharma 150" chemical factory in Rabta. The paper contains references to the production of mustard gas and sarin as well as to the participation of the Imhausen and IBI companies.

     

    •  

  • 19 December 1988: The ZKI informs the BMF…that the information available is still not sufficient to warrant the institution of formal investigations [vice prosecutions] as yet.

     

    •  

  • 12 January 1989: In Washington, a German delegation [hears reports from U.S. officials] on the storage of precursor [chemicals] in Rabta and link[ing] the supply of these products to the Imhausen Company….Apart from mentioning the names of individual Imhausen staff members, the U.S. side also names other German firms [as well as contractors and suppliers from other Western companies and East European nations].

     

    •  

  • 13 January 1989: The public prosecutor’s office institutes formal investigative proceedings [against Imhausen].

     

Hard Questions for German Excuse-Mongers

The Center for Security Policy believes that the blatant contradictions and misrepresentations riddling this chronology beg a number of serious questions about German technology security policies past, present and future. The following is but a partial sampling:

  • How can the BND’s categorical statement of 5 May 1988, to the effect that no German companies were involved at Rabta, be squared with intelligence to the contrary in its possession as of at least 3 February 1988?

    •  

  • Why did Bonn consistently refuse until July 1988 to act on evidence available to it as early as July 1985 that warranted at least a preliminary investigation of charges of a German connection to the Rabta plant?

    •  

  • What is the United States to make of the fact that talking points supplied to Foreign Minister Genscher for his November 1988 visit to Washington were patently false?

    •  

  • How could the German Intelligence Service have told Chancellor Kohl on 24 November 1988 that "until the summer of 1988, the BND had no knowledge of the participation of German companies neither from its own nor from foreign intelligence sources," when it had been supplied with precisely such information since at least January 1986 and especially since January 1988?

    •  

  • Was not the practical effect of German official conduct that the government in Bonn "ran interference" for domestic companies bent on exporting dangerous technologies to renegade nations like Libya?

    •  

  • How, if at all, has Bonn changed its procedures in the aftermath of the Imhausen fiasco for examining and urgently acting upon allegations of wrongful technology transfers?

    •  

  • The German government contends that recently revealed illegal transfers from German companies to Iraq were able to occur as a result of "insufficient staff" resources in its technology security apparatus. What does it say about Germany’s determination to protect dangerous dual-use technologies that this problem — which was clearly identified as a factor contributing to Bonn’s failures in the Rabta case — remains uncorrected to this day?

    •  

  • On 22 June 1987, U.S. intelligence concerning Rabta was shared with the Federal Ministry for Inter-German Relations, the interface between Bonn and the German Democratic Republic. To what extent has Bonn made other information about sensitive technology transfers available to East German authorities? To what extent will West Germany be able to monitor — to say nothing of control — the flow of Western technology at East German borders? How does the German government propose to deal with the continuing threat posed to the West’s technical secrets by the apparently still entrenched East German security service (the Stasi)?

 

Conclusion and Recommendation

These questions — and the serious problems they illuminate about Germany’s technology security policies — require urgent consideration by the United States government. This is especially so at the present juncture when Washington faces insistent German demands for the relaxation or outright elimination of existing controls on militarily relevant technologies.

The Center for Security Policy believes that the record compiled by the West German government itself does not inspire great confidence in Bonn’s assurances about the responsible conduct of its exporters or the integrity of its export control regime. To the contrary, that record suggests that there exists at the highest levels of German industry and officialdom a cynical willingness to subordinate common security interests to narrow parochialism and greed. Worse yet, there is abundant evidence that the German behavior which has produced Libya’s chemical warfare plant at Rabta has been the norm — not the exception; as a result, an appalling array of potent, dual-use technologies have been supplied by Germany’s enterprises to such end-users as the Soviet military, the hard-line communist regimes formerly in absolute control of Eastern Europe and Saddam Hussein.

In light of this evidence, the Center renews its call for President Bush to utilize authority available to him under existing U.S. law to impose import sanctions against German companies judged to have violated regulations controlling exports. It also urges Congress to hold urgent hearings into German export practices and to examine with care the real risks they pose to American and Western security interests — and the additional costs imposed on U.S. defense expenditures.

Under no circumstances should the United States assent to German demands for further liberalization of the multilateral export control regime unless and until Bonn can demonstrate the adoption of a far more conscientious technology security policy and effective enforcement of existing arrangements. Such an approach should, in particular, govern the U.S. Senate’s imminent action on legislation reauthorizing the Export Administration Act (due to expire on 30 September 1990).

1. Emphasis added throughout excerpts.

Robinson To Congress: Use Oil Reserves To Protect The Taxpayer From Price Gouging

Roger W. Robinson, Jr., former chief economist on the National Security Council and member of the Center for Security Policy’s Board of Advisors, told Congress today that the United States and its allies have an alternative to crippling price hikes and speculation in oil prices.

In testimony before the House Energy and Commerce Committee’s Subcommittee on Energy and Power, Robinson reminded legislators of a Reagan Administration initiative developed in the winter of 1983-84 when the Iran-Iraq conflict entered into its "tanker war" phase and oil facilities were coming under periodic attack. In order to head off a round of sharply higher energy prices — spurred by anticipation of future supply disruptions and the activities of speculators — the United States obtained the agreement of its allies to release Western oil stocks at the first sign of significant price hikes.

Robinson testified, "I believe that this proven alliance policy of early stock releases calculated to help keep oil price increases manageable should have been publicly reaffirmed by the Bush Administration at the outset of this crisis. Such an action could already have contributed importantly to avoiding the 10-15 cent per gallon increase in gasoline prices which has occurred over the past six days — to say nothing of the sharp upward spiral of world oil prices now underway."

Robinson also urged Congress to reject the Bush Administration’s willingness to seize on the Middle East energy crisis as its latest pretext for providing extremely ill-considered assistance to the Soviet Union’s energy sector. He observed:

…The Soviet Union has amply demonstrated just this year, its willingness to withhold oil and natural gas deliveries as an instrument of repression against Lithuania. It is also in the midst of cutting back desperately needed oil supplies to countries in Eastern Europe such as Czechoslovakia, Hungary, Poland, and Bulgaria by some 20-30 percent.

Accordingly, I would urge [the Energy and Commerce] and other congressional committees to place this policy option — which can only enhance Moscow’s future ability to exploit for political, strategic or economic purposes resulting dependencies on Soviet energy supplies — near the bottom of the list of numerous, more sound proposals to reduce U.S. and Western exposure to cut-offs of Middle East oil supplies.

The Center’s proposal that the Reagan approach to oil stock sales be adopted at once was favorably reviewed in the prestigious trade publication Energy Daily which carried an article entitled "U.S., Allies Should Plan to Avoid Oil Price Run Up Fed by Speculation." Copies of this article and Robinson’s testimony are attached.

Energy Leverage: Moscow’s Ace in the Hole

The Emerging Instrument of
Choice for Soviet Coercion

As Soviet troops begin to withdraw
from Eastern Europe, their value as
instruments of Soviet leverage over the
Warsaw Pact nations will begin to
decline. The Soviet Union, however, still
retains an immense capability to extort
cooperation from these countries through
another means.

Moscow enjoys enormous control over
oil and gas supplies to the region thanks
to the virtually complete dependency of
the countries of Eastern Europe on Soviet
exports of these energy resources. This
source of leverage is documented by data
compiled by the Center for Security
Policy and displayed in the three tables
in this analysis.

What is more, the Center has discerned
important evidence that the USSR is
prepared to use this leverage to
secure continued cooperation by East
European governments with select Soviet
objectives. As described below, Moscow
has threatened — and, in some cases,
acted — to restrict the availability of
energy supplies to wayward allied
regimes. It has also demanded hard
currency payments for its energy exports
to these countries, a development that
has the potential to siphon off a
substantial portion of the Western
economic assistance now beginning to flow
to Eastern Europe.

If the West is serious about assisting
the newly emerging democracies of Eastern
Europe in their efforts to shed the yoke
of Soviet imperialism, it must help
mitigate their present exposure to this
form of coercive leverage. This will
require policy actions designed to reduce
significantly East European dependence on
Soviet energy supplies and to preclude
steps now in the offing that might further
enhance Soviet energy-related
leverage over these countries.

East European Dependence on
Soviet Energy Supplies

Today, one of the most strategically
significant — yet least understood —
risks to East European political
independence and economic recovery
emanates from the inordinate reliance of
these countries on Soviet energy
supplies. Out of a total regional energy
consumption of approximately 9.0 million
barrels per day (b/d) oil equivalent,
only 6.7 – 6.8 million b/d oil equivalent
comes from indigenous sources.

Importantly, the bulk of the latter —
5.0 million b/d oil equivalent — is the
supplied regional coal production. The
remainder is met by hydroelectric,
nuclear and modest indigenous oil and gas
sources.

Consequently, oil and gas imports are
essential to satisfying roughly 25
percent of East European energy
needs. The Soviet Union is today for all
intents and purposes the sole supplier of
such imports. Moreover, as is starkly
illustrated by Table I,
these Soviet energy resources constitute
essentially all the oil needs of the
region (with the exception of Romania).
For example, in 1987, Soviet oil
deliveries constituted the following
estimated percentages of total oil
consumption in these countries: Bulgaria
– 88%, Czechoslovakia – 99%, East Germany
– 123%(1),
Hungary – 99%, and Poland 93%.

Overall, Eastern Europe consumes about
1.9 – 2.0 million barrels of oil per day
(b/d), produces about 315 thousand b/d
and exports roughly 400 thousand b/d. It
also imports small amounts of oil from
countries other than the Soviet Union.
The total daily volume of Soviet oil
deliveries to Eastern Europe for 1988 —
the last year for which complete data are
available — was in excess of 1.5 million
b/d.

Eastern Europe is even more dependent
upon the Soviet Union for imports of
natural gas. While several of the USSR’s
allies in the region are somewhat less
reliant on imported gas to meet
indigenous needs, as Table
II indicates, they tend to
obtain what gas they get from
non-national sources entirely from the
Soviet Union.

Does Such Dependency on
Soviet Energy Matter?

Unfortunately for the would-be
independent democracies of Eastern
Europe, their need for Soviet oil and gas
puts them at a particular disadvantage.
For one thing, with the growing awareness
of the devastating impact coal
consumption has on the European
environment, the countries of Eastern
Europe are going to come under growing
domestic and international pressure to
reduce that consumption. Oil and gas
will, consequently, become even more
important to the economic viability, not
to say growth, of the region.

Moreover, the sizeable investment in
fixed infrastructure already in place to
support Soviet natural gas imports means
that a cut-off from that source and
adaptation to other sources would entail
considerable dislocation and expense.

It is worth noting in this regard that
the Arab oil embargo of 1973-74 only
affected approximately five
percent of Western oil
requirements. And yet, the economic
impact of that cut-off was massive and
adverse — even on economies far more
robust than any in Eastern Europe today.

The Soviet Energy Situation

Worse yet for the East Europeans, even
if the Soviet Union were not disposed to
exploit energy leverage for political
reasons, Moscow may have no choice but to
cut back on its exports of oil and gas to
the region.

Signs of serious problems in the
Soviet energy sector are increasingly
evident.(2)
About seventy-four percent of total
Soviet energy production and seventy
percent of consumption are based on oil
and gas. (Coal constitutes an
additional twenty percent of both
production and consumption. Hydroelectric
and nuclear electric power provide the
remaining six percent of total energy
production.)

Soviet oil production has declined
from 12.6 million barrels per day at the
beginning of 1989 to 12.1 million barrels
per day by the end of the year. Causes of
the oil production decline include the
depletion of existing oil fields,
escalating costs, serious environmental
problems, and a chaotic administrative
situation, (e.g., wholesale dismissals
and disciplinary actions along with the
merger of the oil and gas ministries last
summer).

Production of natural gas has
similarly encountered spiraling costs as
well as environmental conditions that
present huge risks (e.g., pipeline
construction over permafrost in the Yamal
Peninsula). For its part, the coal
industry suffers from chronic and
exploitative neglect. This is
particularly true of its workforce.
Despite promises made by Mr. Gorbachev to
Soviet miners last summer, improvements
have not been forthcoming. As the winter
subsides, many experts expect that the
coal miners will again go on strike, in
defiance of new and more restrictive
legislation enacted following last fall’s
work stoppages.

Evidence of Soviet Use of
Energy for Political Leverage

While Moscow may thus have some
legitimate grounds for reducing energy
exports to Eastern Europe, there is
mounting evidence that it is prepared to
make a virtue of necessity by exploiting
its leverage for political ends in allied
capitals.

The Baltic states have already had a
strong signal that increased energy costs
would be the price of independence.
Soviet spokesman Gennadi Gerasimov said
as much when asked on NBC’s “Meet
the Press” on 31 December 1989, how
the Soviet Union could make the Baltics
remain part of the Soviet Union. He
replied:

    By persuasion and by proving that
    it’s better to stay in the Soviet
    Union — the new union, the new
    federation — than to go it
    alone…[The Baltics] cannot
    really be on their own in
    economic terms. If you take
    figures, you can see that these
    Baltic republics are getting our
    oil at very cheap prices, which
    they cannot get from the West, if
    they go it independently. href=”#N_3_”>(3)

Other indications of increased Soviet
willingness to exploit East European
vulnerabilities in the energy sector
include:

  • Last fall, Moscow signalled to
    representatives of one of Hungary‘s
    opposition party, Democratic
    Forum, that a steady energy
    supply from the Soviet Union
    could be jeopardized if
    cooperation on other fronts was
    less than satisfactory. In
    January, Hungary was forced to
    buy oil from Iraq for hard
    currency     because of
    reductions in Soviet oil
    deliveries.

  • In January, the Soviet Union
    showed that it could also use
    energy resources as a
    “carrot,” by promptly
    bolstering Romania‘s
    energy supplies (390,000 tons of
    oil for January and 22 million
    cubic meters of natural gas
    daily) when Ion Iliescu, an old
    Gorbachev colleague from
    university days, emerged as
    Ceaucescu’s successor. Follow-on
    shipments of aid in unspecified
    amounts were also promised.

  • The Soviet Union has recently
    told Czechoslovakia
    that it would only deliver 18
    percent of this year’s contracted
    total of crude oil in the first
    three months of 1990 due to
    “the political situation in
    the Soviet Union.” href=”#N_4_”>(4)

  • Production from the Polish
    refinery in Plock has been
    reduced by one-third due to
    interrupted Soviet oil
    deliveries.

Some of these interruptions are no
doubt caused by serious Soviet production
and transportation problems, but some
were distinctly political. Two recent
events further signal likely Soviet
intentions concerning future use of the
energy “stick”:

    First, at the recent COMECON meetings,
    the Soviet Union indicated that if the
    East European countries intend to break
    away from COMECON arrangements
    prematurely and without Soviet
    concurrence, payments for energy supplies
    from the Soviet Union would be
    immediately due in hard currency. This
    statement had an immediate impact on
    representatives from Czechoslovakia,
    Hungary and Poland, producing a dramatic
    softening of positions about promptly
    dismantling COMECON and pleas for a
    “phase in” period for hard
    currency energy payments to Moscow.

    Second, in February, West Germany
    reportedly agreed to support payment by
    East Berlin to the Soviet Union in
    deutsche marks for East Germany’s energy
    imports from the USSR effective
    immediately     after monetary union.
    This means that overnight a major market
    for Soviet energy exports would be
    transformed from a barter relationship to
    one denominated in hard currency.

Implications for U.S.
Policy

In the months ahead, pressure will
likely intensify to offer large-scale
assistance to the Soviet Union to help it
overcome its energy production
bottlenecks. Soviet authorities have
launched an all-out campaign to sign up
Western oil companies for joint
exploration and production ventures. For
example, U.S. firms such as Chevron,
Combustion Engineering and Dresser
Industries are actively exploring joint
venture operations with a view to
expanding Soviet energy production
capabilities.

Given the strategic importance of the
energy sector and the Soviet Union’s
capacity — and willingness — to apply
leverage in this area on the emerging
democracies of Eastern Europe, it
is clearly not in the interest of
the West or the governments of Eastern
Europe to enhance that capability.

Instead, immediate attention should be
given to developing and implementing the
following policy approach:

  • On a coordinated, multilateral
    basis the West should assist
    Eastern Europe in diversifying
    its energy supplies. The Soviet
    shares of total oil and gas
    consumption respectively should
    be limited to about 30%,
    mirroring the intent of the
    International Energy Agency
    Agreement of May 1983 pertaining
    to West European dependency on
    Soviet gas supplies.

  • At the same time, East European
    governments might approach Arab
    energy suppliers with the
    suggestion that, in exchange for
    receiving below-market prices on
    oil (and perhaps gas) deliveries
    for a period of time, the
    producer-countries can gain
    important new energy markets. The
    East European nations could
    pledge to pay full market prices
    for such energy supplies as soon
    as their respective economic
    revivals permit.

  • During the vulnerable period of
    supply diversification, a hedge
    against potential energy supply
    short-falls could be created
    through the creation of an
    alliance-wide Contingency
    Energy Fund     for the
    countries of Eastern Europe and
    the Baltic states. Middle East
    producers could help lead this
    important Western assistance
    effort and absorb some of the
    costs which may be levied should
    Soviet supply shortfalls occur
    for either economic or political
    reasons.

  • In addition, the USSR should be
    obligated to make purchases from
    Eastern Europe in hard currency
    commensurate with its demand for
    hard currency payment for energy
    deliveries.

  • There should be no waiver of the
    Stevenson amendment which
    effectively caps U.S. subsidized
    credits to the Soviet Union for
    oil and gas exploration and
    development.

  • Large-scale Western joint
    ventures in the energy sector
    should be deferred, at least
    until East European dependency on
    the Soviet Union has been
    successfully reduced.

The Center believes that the
strategic, political and economic
implications of Soviet energy leverage
are of sufficient importance as to
warrant a full-scale interagency review
by the U.S. government including
senior-level discussions with allied
nations. At the very least a National
Security Council meeting should be
convened at the earliest possible time to
consider the foregoing recommendations
and other policy options.

The address on March 14th by Deputy
Secretary of Energy Henson Moore before
the American Committee on U.S.-Soviet
Relations entitled, “Soviet Energy
in the 1990s” offers an excellent
opportunity to illuminate for the public
the results of such cabinet-level
deliberations as well as U.S. objectives
for the forging of
“risk-sensitive” alliance
policies. The Center urges Secretary
Moore to demonstrate in his remarks that
the Bush Administration is cognizant of
the substantial risks for Eastern Europe
involved in Moscow’s energy leverage and
that it will be following a prudent and
comprehensive approach toward minimizing
the exposure of both new and older
democracies to Soviet exploitation
of this leverage.


Table I

Eastern Europe Oil Dependence on the Soviet Union

(1987)

(thousand b/d)
Production Imports* Exports Apparent
Consumption**
Bulgaria 6 290 (259) 1 295
Czechoslovakia 3 371 (347) 25 349
East Germany 1 420 (399) 96 325
Hungary 40 201 (178) 62 179
Poland 3 352 (321) 10 345
Romania 215 290 (94) 176 329
Total 268 1,924(1,598) 370 1,822
* Parenthetical numbers under imports represent oil imports from the Soviet Union.
** Production + Imports – Exports = Apparent Consumption
Net Imports

As % of
Consumption

 Soviet Imports
% of Gross
Imports		 % of
Consumption
Bulgaria 98% 89% 88%
Czechoslovakia 99% 94% 99%
East Germany 100% 95% 123%
Hungary 78% 88% 99%
Poland 99% 91% 93%
Romania 35% 32% 28%
Source: Center for Security Policy, Washington, D.C., 1 March 1990.



Table II

Eastern Europe Gas Dependence on the Soviet Union

(1987)

(Billion cubic meters)
Production Imports* Exports Apparent
Consumption**
Bulgaria negl 6.0 (6.0) 0 6.0
Czechoslovakia 0.8 12.1 (10.6) 0.6 12.3
East Germany 7.3 7.0 (7.0) 0 14.3
Hungary 7.2 4.8 (4.8) 0 12.0
Poland 5.8 7.5 (7.5) 0 13.3
Romania 32.7 3.2 (3.2) 0 35.9
Total 53.8 40.6 (39.1) 0.6 93.8
* Parenthetical numbers under imports represent gas imports from the Soviet Union.
** Production + Imports – Exports = Apparent Consumption
Net Imports

As % of
Consumption

 Soviet Imports
% of Gross
Imports		 % of
Consumption
Bulgaria 100% 100% 100%
Czechoslovakia 93% 88% 86%
East Germany 49% 100% 49%
Hungary 40% 100% 40%
Poland 56% 100% 56%
Romania 9% 100% 9%
Source: Center for Security Policy, Washington, D.C., 1 March 1990.


Table III

Estimated Market Value of

Soviet Oil and Gas Supplies to Eastern Europe

($US Billions)
Oil* Gas** Total
Bulgaria 1.6 0.7 2.3
Czechoslovakia 2.1 1.3 3.4
East Germany 2.5 0.9 3.4
Hungary 1.1 0.6 1.7
Poland 2.0 0.9 2.9
Romania 0.5 0.4 0.9
Total Eastern
Europe		 $ 9.8 $ 4.8 $ 14.6
* Based on 1989 oil export data valued at $17.38 per barrel.
** Based on 1987 gas export data valued at $3.50 per mm BTU.
Source: Center for Security Policy, Washington, D.C., 1 March 1990.

Fire Sale On National Security: Commerce’s Latest Technology Decontrol Fiasco

The Decision to Decontrol Wire-Bonders

Today, the Commerce Department is informing the member nations of the Coordinating Committee on Multilateral Export Controls (COCOM) that the United States will decontrol the sale of wire-bonding technology to "proscribed destinations," i.e. the Warsaw Pact. Wire-bonders are devices essential to the efficient manufacture of high quality computer chips and other microelectronic devices. Such devices have been rigorously controlled by COCOM until now because of the obvious utility they would have to Soviet military applications.

Contending that wire-bonding machines were available to the Soviet Union from non COCOM-controlled foreign sources, Commerce Secretary Robert Mosbacher decided — despite vigorous objections from the Defense Department and a contrary finding from the U.S. intelligence community — to utilize his authority under the Export Administration Act to decontrol this technology. The result will enable the USSR for the first time legally to establish state-of-the-art production lines for microelectronic components; the principal — if not exclusive — beneficiary of this action will be the Soviet military.

The Emerging Pattern of Dangerous Decisions

Over the past six months, the Center has documented a series of actions by the Bush Administration that share a common characteristic: The fact that serious national security risks will arise from the decontrol of certain advanced technologies is not deemed by the Commerce Department to be sufficient reason to justify retaining the relevant controls.

  • In July 1989, Commerce acted to remove controls on a vast array of sophisticated "personal" computers notwithstanding the reality that many of those that could be obtained by the Soviet Union as a result are more advanced than even the U.S. Defense Department envisions using in its next procurement of such computers.

    •  

  • Throughout much of the fall of 1989, Commerce — with the support of the State Department — has strongly supported West German efforts to relax current COCOM constraints on extremely precise machine tools. The Germans and other allies wish to sell the Soviet Union and other Warsaw Pact nations machine tools with the capability of producing, for example, advanced aviation components with an accuracy of plus-or-minus five microns (two ten-thousandths of an inch) or better. This level exceeds that utilized by 95 percent of the American defense industrial base and is vastly in excess of what is currently available to the Soviet Union.

    •  

  • In December 1989, Secretary Mosbacher made public statements indicating considerable support for a proposal along the lines of one being advanced by a consortium led by US West to install a fiber optic communications network in the Soviet Union. Such a system would revolutionize the USSR’s military command, control and communications (C3) system. It would, for example, decisively enhance the security, effectiveness and robustness of the Soviet C3 network.

 

While Secretary Mosbacher has subsequently sought to make a distinction between a state-of-the-art fiber optic capability (which he says he would oppose selling the Soviet Union on national security grounds) and an older version (which he evidently believes would not cause similar problems), in fact this is a distinction without a difference. Even a fiber optic communications system that is relatively obsolete by Western standards will have an extremely deleterious effect on U.S. security. What is more, it is only prudent to expect that, in the present environment, more rather than less sophisticated fiber optic and switching technology will be actually be utilized in any deal that goes forward.

It is also noteworthy in this vein that the Commerce and State Departments have been championing a plan to grant blanket exemptions to existing multilateral controls for certain countries of Eastern Europe. The theory is that assurances will be given by those to whom such exemptions are granted sufficient to ensure that militarily relevant (dual-use) technology provided to Eastern Europe does not hemorrhage through to the USSR. In fact, however, as long as these nations remain members of the Warsaw Pact and retain the various military, intelligence and technology sharing arrangements with Moscow it is ludicrous to place much stock in such assurances and associated safeguards (e.g., periodic visits to sites where advanced Western technology is located).

The Foreign Availability Scam

While the foregoing litany illustrates the mindset of many in the Bush Administration on the irrelevance of a rigorous technology security policy in the so-called post-Cold War world, the specific device being used to force reckless decontrol actions through the U.S. government warrants special mention.

Under the Export Administration Act, goods and technology must be decontrolled if an item is found to be available to a controlled country (e.g., the USSR) "in sufficient quantity and of comparable quality sufficient to meet the military needs of proscribed destinations" such that export controls are essentially ineffective in safeguarding militarily critical technologies.(1)

In other words, if the Commerce Department can demonstrate that the item in question is either produced indigenously in the controlled country, or available from a third country which does not maintain stringent export controls, the law stipulates that U.S. manufacturers of such items should not be disadvantaged by having to operate under an unfair control regime. In practice, however — as first the computer decontrol and most recently the wire bonder decisions have amply illustrated — the Commerce Department apparently believes it is not obliged to be either truthful or rigorous in assessments it makes about foreign availability, or to refute documented evidence from the national security community which contradicts its assessments.

In both of these episodes, the data presented by Commerce to support its findings of foreign availability were flimsy and suspect. In both instances — and especially the latter one — strong rebuttals were offered to the Commerce Department’s analyses by the Department of Defense and the U.S. intelligence community. Overwhelming evidence substantiates the position that the Soviet Union does not now possess an indigenous capability to produce wire bonders or to obtain them from foreign sources in sufficient quantity or quality to render U.S. export controls irrelevant.

Because the Secretary of Commerce is not required to seek the concurrence of any other Cabinet officer in making the final determination about foreign availability, however, and because there is no statutory mechanism established for resolving disputes over associated findings, Secretary Mosbacher has the authority to make decontrol decisions — no matter how ill-advised and irrespective of the serious deficiencies in the supporting analyses.

This latitude for reckless decision-making is the more worrisome for the fact that a vast array of other technology decontrol proposals are now the subject of foreign availability assessments. A partial list includes the following, highly sensitive dual-use technologies:

  • polysilicon — materials used in advanced chips for a wide variety of electronic systems;

    •  

  • anti-friction bearings — precision bearings used in numerous weapon systems (e.g., sophisticated inertial guidance systems for ballistic missiles);

    •  

  • gallium-arsenide chip technology — chips whose inherent resistance to the non-blast effects of nuclear weapons make them very attractive for use in a wide variety of military systems;

    •  

  • 32-bit personal computers — high speed computers with direct applicability to design and manufacturing techniques necessary for modern weapons.

 

Dennis Kloske’s Broken Promises

Some hopes were raised that a more orderly and rigorous process could be utilized for decisions affecting these and other foreign availability assessments when Dennis Kloske in August 1989 pledged to Senator Malcolm Wallop (R-WY) to ensure that Defense Department and intelligence community judgments were given appropriate weight. In the aftermath of the computer decontrol fiasco, Mr. Kloske (who was then awaiting Senate confirmation for his present position as Under Secretary of Commerce for Export Administration) promised to develop an interagency mechanism for eliciting and incorporating the views of technical and intelligence experts throughout the U.S. government with a view to avoiding the sort of problems that arose in the earlier case.

Unfortunately, the wire bonder episode reveals that these pledges amounted to little more than empty lip-service paid to appease momentarily the legitimate concerns of an important United States Senator in order to facilitate confirmation. In the event, information that Secretary Kloske should have ensured was rigorously factored into the Commerce Department decision was suppressed or ignored. Even though the absence of any foreign availability for wire bonding equipment outside of COCOM(2)

had been authoritatively established, for want of the sort of mechanism Mr. Kloske promised the Senate, it was evidently possible for yet another decision to decontrol sensitive dual-use technology to be taken, unencumbered by the facts.

More worrisome still, there continues to be no mechanism for appealing such decisions to the National Security Council before they are made. Indeed, the NSC has shown irresponsible disinterest in the whole matter of technology security, enormously compounding the risks of capricious decontrol actions — and increasing the likelihood that they will occur.

Time out on Tech Transfer

As Ambassador Alan Wendt, the State Department’s senior official for technology transfer matters, prepares to depart for a series of consultations next week with key COCOM partners, the pressure is on to show an American willingness to be "flexible" on further decontrol proposals. If past practice is any guide, what passes for a decision-making process in the executive branch on such issues will authorize the enunciation by Ambassador Wendt of a general commitment to such flexibility.

It is all the more ironic — and portentous — that this commitment is going to be made against the backdrop of an increasingly aggressive effort on the part of the Soviets and their proxies to acquire Western dual-use technology, legally or illegally. Moreover, as the future course of the Soviet Union becomes more and more uncertain, the advisability of providing militarily relevant technology to the USSR and its Warsaw Pact allies becomes ever more dubious.

In light of this backdrop, however, it is imperative that urgent action be taken to prevent further damage to U.S. security from a seriously flawed technology decontrol process. Fortunately, numerous congressional hearings are scheduled in coming weeks on the reauthorization of the Export Administration Act. The Congress should insist that, until the opportunity afforded by such hearings for a systematic review of that process and the direction of decision-making it is producing, a moratorium should be imposed on further decontrol actions.

At a minimum, Commerce should defer further decontrol action pending the outcome of a report required by law last year on the foreign availability process due to be submitted to the Congress on 15 April.

For his part, President Bush should embrace such a request. He should also become personally engaged in a review of the technology decontrol process. Among other means of doing so, he should direct that contested technology transfer issues get formally considered by an interagency committee chaired by his Deputy National Security Advisor. Should the President refrain from taking such steps, the consequences are likely to be severe and adverse.

At the very least, the course currently being pursued by the Commerce and State Departments will utterly undo President Bush’s efforts to argue against the pernicious notion that a "peace dividend" can be realized at once. Much of the impetus for such a notion arises from the sense conveyed by the Administration’s technology transfer policies, namely that this country’s principal adversary has been suddenly transformed into an utterly benign and cooperative nation.

1. P.L. 96-72, as amended by P.L. 100-418, the Omnibus Trade Act of 1988, Section 5(f).

2. The Commerce Department wrongly contended that, in addition to COCOM nations, a Swiss company could supply wire bonders when, in fact, no such capability currently exists.

The Dirty Dozen #7: Technip Coflexip

 

Technip Coflexip, one of France’s largest engineering and construction companies, is extensively involved in Iran’s energy sectors.  The company’s projects in the country could total as much as $400 million, and possibly more, depending on the status of contracts and letters of intent negotiated with Iranian companies. 1

Technip’s ties to Iran include multiple contracts for the construction of large petrochemical plants in Iran.  For at least one of these contracts, the company is reported to be providing a variety of equipment and technology.  That project is being built in partnership with Iran’s state-owned National Petrochemical Company.  Technip also owns 20% of the Iranian engineering firm Nagran, which is also involved in Technip’s engineering contracts in Iran. 2

Most significantly, however, Technip’s business ties to Iran have been investigated by the U.S. government due to allegations that specialty pumps provided to Iran by Technip may have contributed to that country’s covert nuclear weapons programs.  According to published reports, the company may have transferred "cryogenic fluid transfer pumps" designed to be "submersible and used to transfer extremely cold fluids" — pumps that may have ended up in the cooling system of one Iran’s nuclear reactors rather than a petrochemical complex. 3

Technip’s activities place it on the "Dirty Dozen" list for the following reasons:

  • Advanced Technology: As a leading engineering firm, Technip is undertaking technologically-advanced projects in at least two terrorist-sponsoring states.  As evidenced by an ongoing U.S. government investigation, these types of projects can introduce technology that can have military purposes.  The likelihood that dual-use technology is diverted to nefarious purposes is increased when a company, as is the case with Technip, contracts with state-owned companies. 
  • Revenues: Technip is involved in energy projects in terrorist sponsoring states that amount to at least $100 million and possibly $400 million or more, depending on the status of certain contracts.  Not only does this create revenues for the governments involved, but it also serves an engine for broader economic growth.
  • Moral and Political Cover :  When leading global companies such as Technip partner with terrorist-sponsoring states, it sends a clear message to these governments: Sponsoring terrorism is not a concern as long as there are corporate profits to be made.  This message undermines U.S. sanctions and international diplomatic efforts.

1. Hydrocarbon Processing, 12/1/02; and WWP-Business Opportunities in Africa & the Middle East, 4/1/02.

2. Oil & Gas Journal, 11/4/02; and Chemical News & Intelligence, 9/18/02.

3. The Washington Times, 9/5/03.