[Page: H4763]
From the New York Times, June 18, 1998
U.S. Rethinking a Satellite Deal Over Links to Chinese Military
Washington, June 17: Faced with growing criticism of its satellite exports to China, the Clinton Administration is rethinking whether to allow one of the biggest sales to date, a $650 million deal President Clinton quietly approved two years ago.
Government officials said the Pentagon and State Department were raising new questions about whether a Chinese-controlled company with close ties to China's military should be allowed to buy the satellites, which contain some of the United States' most sophisticated communications equipment.
The satellites are the cornerstone of a commercial mobile phone network planned for China and 21 other Asian nations. American officials said their design included a powerful antenna that could eavesdrop on mobile phone calls in China or other countries in the region. It could also be used by the Chinese military to transmit messages through hand-held phones to remote parts of China.
Antennas of these dimensions are a mainstay of the United States' and Russia's eavesdropping satellites and have not previously been exported to China, though a sale to the United Arab Emirates is pending. They also can be used to extend the range of mobile phones.
Mr. Clinton leaves next week for China, and the Administration had hoped to use the trip to showcase a variety of business deals and agreements, including cooperation on civilian satellite and rocket projects. Meanwhile, the House continued investigating the export of space technology today.
Administration officials said concerns about the pending satellite sale had been deepened by American intelligence reports about Shen Rongjun, the Chinese Army general who oversees his country's military satellite programs. The reports quote the general as saying he planned to emphasize the role of satellites in gathering information.
In an unusual arrangement, Hughes Space and Communications hired General Shen's son, a dual citizen of Canada and China, to work on the project as a manager. The company said it was aware of his familial ties; it is not clear whether the Clinton Administration knew.
Father and son were both directly involved in the project, and American officials said the intelligence reports said the general was pressing his son to move it forward.
The New York Times reported last week that the Chinese military was sending many of its coded messages through American-made commercial satellites sold to Asian companies. China's military satellite network collapsed in 1996, when its first satellites wore out and the replacements failed to work as planned.
President Clinton approved the Hughes project on June 23, 1996, after advisers assured him the communications satellite technology was readily available from European suppliers and would not contribute to Chinese military capabilities.
China already has a burgeoning
cellular telephone system, which relies on ground-based transmitters. There are almost 1.5 million cellular phones in Beijing and Shanghai, but the system is less developed in the country's more remote areas, industry officials say.
Donald O'Neal, a spokesman for Hughes, said the satellites were `inherently dual use,' meaning that they have both civilian and military potential. `The satellite is not designed for military application,' Mr. O'Neal said. `But I don't know how you can prevent it.'
The Federal Government could still stop the deal. Mr. O'Neal said Hughes, which is part of Hughes Electronics, a subsidiary of the General Motors Corporation, was waiting for the Commerce Department to review its application to sell the satellite to the Asian consortium, A.P.M.T. or Asia-Pacific Mobile Telecommunications.
Liu Tsun Kie, a spokesman for the consortium, said in a telephone interview from Singapore that the satellite network would be marketed to civilians by regional telecommunications operators. It would be up to Chinese Government regulators, Mr. Liu said, to decide if China's military could use the satellites.
Mr. Liu predicted that the Clinton Administration would eventually approve the deal. `In view of the improving Sino-American relationship, as well as the close rapport established between the U.S. satellite industry and major industry leaders in China and the Asia Pacific,' he said, `we are confident that A.P.M.T. will obtain all the necessary approval and export license to insure no delay in satellite launch.'
Mr. Liu said the project would attract more than 200,000 mobile phone customers in China within its first two years.
THE TWO CRUCIAL STEPS IN A SATELLITE SALE
Making a satellite sale to China involves two crucial steps that occur simultaneously. Aerospace manufacturers must persuade the President to sign a waiver of the sanctions imposed on Beijing after the Tiananmen Square killings in 1989. Each project requires a separate waiver.
At the same time, companies apply to Federal Government agencies for permission to export specific technologies used in the satellites. Satellite exports to the Chinese military are banned, but sales to Chinese companies are generally allowed, unless they would advance military development in areas like intelligence gathering and nuclear weapons.
Mr. Clinton granted the waiver for the Hughes project two years ago and the company obtained the necessary export licenses. Since then, however, Hughes has changed the design to enhance the satellite's capabilities, requiring it to return to the Government for a new license.
That decision is now before a Government Department and including officials from the Pentagon, State Department, the Arms Control and Disarmament Agency and the Department of Energy. Each department casts a single vote, with the decision made by majority rule. A dissenting agency can appeal to the President, but that has never happened.
A Commerce Department spokesman declined to discuss the case, saying it involved confidential business information.
Privately, Commerce Department officials are arguing that the deal should go forward because the design approved in 1996 is substantially the same as the current configuration, Administration and Congressional officials said.
But some Pentagon and State Department officials believe the license should face more scrutiny in light of the new information about General Shen and the capabilities of the satellite. Administration officials also said that the increased scrutiny by Congress of the Chinese military and American satellites has prompted officials to pay closer attention to exports to China.
Several Congressional committees are investigating whether the policies on technology exports hurt the national security.
TECHNICAL QUESTIONS DETERMINE FATE OF DEAL
The issue turns on highly technical questions. An Administration official who disagrees with the Commerce Department's analysis said the Hughes design is substantially different from what was approved two years ago.
`The antenna sent up the flags,' the official said. `It is more powerful than what we have licensed before.'
The antenna allows the satellite to receive incoming signals. But a sophisticated antenna, like the one currently under review, can become a listening device that is very effective against ground-based interception efforts, Government reports show.
Before 1996, the Pentagon could easily have stopped the license, because satellites were treated as military items and subject to State Department authority. That year President Clinton shifted jurisdiction to the Commerce Department, easing the controls and lessening the influence
of the Pentagon, a senior Government auditor told Congress earlier this month.
A.P.M.T. was organized in the early 1990's. Most of its stock was held by five Chinese state-owned entities: China Satellite Launch and Tracking Control, a unit of Costind, and scientific and research arm of the Chinese military, the China Aerospace Corporation, part of the defense-industrial complex, China Resource Holdings, a trading company that owns a bank in Hong Kong with the Riady family of Indonesia, and subsidiaries of Chinese electronics and telecommunications ministries. A small stake was held by a Singapore company.
In February 1996, the consortium authorized Hughes to proceed with the design and construction of a sweeping mobile satellite telecommunications network that would span 22 countries in Asia and the Pacific, from Pakistan to Indonesia.
China's own space program--both rockets and satellites--was then under severe strain.
A Chinese rocket exploded shortly after liftoff in February. Two months later, engineers from Hughes and Loral Space Communications were brought in by insurers and China Aerospace to help figure out what went wrong.
The conversations that ensured between the companies and Chinese technicians are now the subject of a criminal investigation, which is seeking to determine whether American export laws were violated. Both companies deny wrongdoing.
While China is trying to repair its rocket program, its satellites began to fail. The first domestically produced satellites, launched by the Chinese military in the early 1990's were wearing out, and the first replacement, built in cooperation with the German company Daimler-Benz, had failed to achieve proper orbit after its 1994 launch.
In early 1996, all this led China's most senior military official, Gen Liu Huaqing, to discuss his concern with General Shen, who until a recent reorganization was a senior Costind official and oversees China's satellite and rocket launching programs, American officials said.
General Shen and General Liu have publicly promoted satellite technology as crucial to the future development of China's military capabilities. General Shen has privately assured his colleagues about his ability to fix China's satellite problems and improve the military's surveillance and intelligence-gathering capabilities, American officials said.
At about the same time, there were concerns within Hughes and
A.P.M.T. over how long it was taking President Clinton to make a decision about the deal, Mr. O'Neal and American officials said.
Commercial satellite exports to China have been banned since the killings in Tiananmen Square in 1989, but the President can waive the prohibition, which Presidents George Bush and Clinton have done 20 times.
[Page: H4764]
`EXPEDITED HANDLING' OF WAIVER WAS SOUGHT
Hughes officials wanted `an expedited handling' of the waiver in order to meet a contractual deadline, Mr. O'Neal said. And recently released White House documents show that the company hoped to have the President sign off on the deal before Hughes' chairman left China on June 19, 1996.
The staff memorandum that the President relied on to approve the deal made no mention of the Loral-Hughes help for China's rocket program. Three weeks before the memorandum to the President, the State Department had alleged, in a letter to Hughes, that there had been a violation of the arms export control law during the rocket accident review.
The President granted the waiver on June 23.
Soon after the Presidential action, Hughes received a license to export a satellite. Later that summer, Hughes applied for another export license that would allow Shen Jun, the son of General Shen, to work on projects subject to United States export controls, including the A.P.M.T. project, Mr. O'Neal said.
`We applied for and received an export license that allowed him to participate as a translator in the A.P.M.T. preliminary design review,' Mr. O'Neal said.
Mr. Shen was hired in 1994 by Hughes for his computer expertise, though the company was also aware of his family ties before he joined the company, Mr. O'Neal said.
General Shan has been involved in the A.P.M.T. project as the overseer of the Chinese launch and tracking company and his son has given Hughes marketing advice about China and technical advice about mobile telephone networks, Mr. Liu and a Hughes executive said.
Mr. O'Neal said he had no comment on the Shen family discussions because `anything he said to his dad is personal.'
Despite all the flurry of activity in mid-1996 between Hughes and A.P.M.T., the deal bogged down amid internal squabbles. But by this year the pace had picked up again and last month the consortium reorganized itself and signed another deal with Hughes for an upgraded satellite.
The new satellite will have greater power to transmit and receive signals. Its payload includes a large scale antenna reflector and a digital on board processor, Mr. Liu and Mr. O'Neal said.
The antenna and processor enabled the consortium's network to pinpoint low-power hand-held phones and simultaneously handle 16,000 phone conversations. Mr. Liu said that the regional affiliates `will be able to intercept calls if required by local authorities' but the consortium will not be able to intercept.
As a result of the recent reorganization, the consortium is now two thirds owned by its Chinese affiliates China A.P.M.T., said Mr. Liu, the consortium's deputy president. China A.P.M.T., in turn, is owned by the same five Chinese entities, including the Costind unit, and it will be the local A.P.M.T. franchise in China.
The president of A.P.M.T. and China A.P.M.T. is Li Baoming and A.P.M.T.'s chief engineer is Feng Ruming. Mr. Liu said both men have senior posts with the China Satellite Launch and Tracking Control Corporation, the unit of Costind overseer by General Shen. American intelligence reports say Mr. Feng and Mr. Li are top military officers, according to Administration officials.
Mr. O'Neal said that Hughes was `not aware' of A.P.M.T.'s military ties and while `there could be' some, it was up to the Federal Government to vet those connections. That is precisely what is now happening.
|
NEWSLETTER
|
| Join the GlobalSecurity.org mailing list |
|
|
|
