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Adherence to and Compliance With Arms Control, Nonproliferation, and Disarmament Agreements and Commitments

Bureau of Verification and Compliance
U.S. Department of State
Washington, DC
August 30, 2005

VII. COMPLIANCE OF OTHER NATIONS (INCLUDING SUCCESSORS TO THE SOVIET UNION) WITH THEIR INTERNATIONAL COMMITMENTS

A. MISSILE NONPROLIFERATION COMMITMENTS

Some nations that are significant proliferators of ballistic missile technology, such as North Korea and increasingly Iran, are not members of the MTCR or HCOC and have not made separate political nonproliferation commitments to the United States to halt their proliferation activities. Through our participation in multilateral regimes and in bilateral discussions with our allies and other like-minded states, the United States has attempted with little success to dissuade these states from their missile-proliferation activities. In response to continuing proliferation activities, in 2002 the United States imposed sanctions for missile-related transfers on entities in North Korea and Moldova for their missile-related transfers. In 2003, the United States imposed sanctions for missile-related transfers on entities in China, Iran, North Korea, Moldova and Macedonia. In addition, missile proliferation sanctions were waived against an Yemeni entity in August 2002 for national security reasons.

This Annex discusses the compliance of other nations with their Missile Technology Control Regime commitments and the compliance of other nations with separate political nonproliferation commitments they have made to the United States.

MISSILE TECHNOLOGY CONTROL REGIME. The Missile Technology Control Regime, created in 1987, is the centerpiece of international efforts to curb the spread of missiles capable of delivering weapons of mass destruction.

The MTCR is not a treaty, but a voluntary arrangement among member countries sharing a common interest in controlling missile proliferation. While the MTCR does not impose any legally binding obligations on participating countries, the Regime rests on adherence to common export policy guidelines (the MTCR Guidelines) applied to an integral common list of controlled items (the MTCR Equipment, Software and Technology Annex). The Guidelines and Annex are implemented according to each country's national legislation and regulations.

The Regime implements the missile controls in two categories. Category I items are complete rocket systems (including ballistic missile systems, space launch vehicles, and sounding rockets) and unmanned air vehicles (including cruise missile systems, target drones and reconnaissance drones) capable of delivering at least a 500 kg payload to a range of at least 300 km, the major subsystems that could be used on these systems, and their production facilities. Category II items are other less sensitive and dual-use missile-related components that could be used to develop a Category I system, and complete missiles and major subsystems of missiles capable of delivering a payload of any size to a range of 300 km.

Specifically, the MTCR Partners undertake the following commitments:

A. General Restraint and Case-by-Case Consideration. The MTCR Guidelines provide that "restraint will be exercised in the consideration of all transfers of items within the Annex and all such transfers will be considered on a case-by-case basis." In evaluating transfer applications for Annex items, Governments undertake to take into account the following factors: (a) concerns about the proliferation of weapons of mass destruction; (b) the capabilities and objectives of the missile and space programs of the recipient state; (c) the significance of the transfer in terms of the potential development of delivery systems (other than manned aircraft) for weapons of mass destruction; (d) the assessment of the end-use of the transfers, including the relevant assurances of the recipient states regarding end use, replication, and retransfer; (e) the applicability of relevant multilateral agreements; and, since May 15, 2003, (f) the risk of controlled items falling into the hands of terrorist groups and individuals. 

B. No Transfer of Category I Production Facilities. The MTCR Guidelines contain a commitment specifying that "the transfer of Category I production facilities will not be authorized." The MTCR defines production facilities as "equipment and specially designed 'software' therefore integrated into installations for 'development' or for one or more phases of 'production.'"

C. Category I Transfer Requests: Strong Presumption of Denial. Pursuant to the MTCR Guidelines, "particular restraint will be exercised in the consideration of Category I transfers, regardless of their purpose, and there will be a strong presumption to deny such transfers." The Guidelines further provide that the transfer of Category I items "will be authorized only on rare occasions and where the Government (a) obtains binding government-to-government undertakings embodying the assurances from the recipient government called for in paragraph 5 [regarding end-use, replication and retransfer] and (b) assumes responsibility for taking all steps necessary to ensure that the item is put only to its stated end-use."

D. Category II Transfer Requests. Category II transfers are subject to "restraint" and "case-by-case" consideration, taking into account the required factors, as described in A above. In addition, "particular restraint will also be exercised in the consideration of transfers of any items in the Annex, or of any missiles (whether or not in the Annex), if the Government judges, on the basis of all available, persuasive information, evaluated according to factors including those in paragraph 3 [see A above], that they are intended to be used for the delivery of weapons of mass destruction, and there will be a strong presumption to deny such transfers."

E. Transfers of Design and Production Technology. The Guidelines provide that "the transfer of design and production technology directly associated with any items in the Annex will be subject to as great a degree of scrutiny and control as will the equipment itself, to the extent permitted by national legislation."

These MTCR export controls are not bans, but regulatory efforts by individual Partners to prevent transfers of items that could contribute to delivery systems for WMD. Controlling such exports through licensing is consistent with the MTCR's objective of curbing the flow of missile equipment and technology worldwide. It also helps suppliers have confidence that they can provide access to sensitive items without fear of these items being diverted to programs of concern.

The MTCR Partners do not make export licensing decisions as a group. Rather, each individual Partner implements the MTCR Guidelines and Annex in accordance with national legislation and practice and the Guidelines specify that "the decision to transfer remains the sole and sovereign judgment of the Government." In addition, there are no provisions in the Regime to review the individual licensing decisions by Partner nations for conformity with the Guidelines, and there are no inherent penalties if some members believe another member has made a "wrong" decision. Instead, Partners regularly exchange information on relevant licensing matters in order to ensure consistency with the Regime's overall nonproliferation objectives, and when questions arise, concerned Partners consult bilaterally to promote a common understanding of the issue and a consistent approach to the Regime's overarching nonproliferation objectives.

Over the course of the MTCR's history, the Regime has made some important strides in slowing missile proliferation worldwide. The MTCR Partners' efforts have: induced most major suppliers to control their missile-related exports responsibly, reduced the number of countries with MTCR-class missile programs, and added countries with significant economic and political potential to the MTCR to increase its influence and capabilities. The MTCR Partners also have cooperated to halt numerous shipments of proliferation concern and have established the MTCR Guidelines and Annex as the international standard for responsible missile-related export behavior. In addition, they have established a broad outreach program to non-members, in order to increase awareness of the global missile proliferation threat and to urge countries that have engaged in missile proliferation to desist. In recent years, the MTCR Partners also have focused increasingly on new ideas for addressing ongoing global missile proliferation challenges and the demand-side issues posed by non-MTCR members.

Membership in the MTCR has grown steadily since the Regime's creation in 1987. In 2001, the Republic of Korea joined the Regime, bringing the total number of MTCR Partners by the end of the reporting period to 33: Argentina, Australia, Austria, Belgium, Brazil, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, the Republic of Korea, Luxembourg, the Netherlands, New Zealand, Norway, Poland, Portugal, Russia, South Africa, Spain, Sweden, Switzerland, Turkey, Ukraine, the United Kingdom, and the United States.

The MTCR Guidelines and Annex are open to all nations to implement unilaterally, and the United States and its MTCR partners encourage all governments to do so. Several countries have declared unilateral adherence to the MTCR Guidelines and have implemented export controls consistent with the MTCR Guidelines and Annex. These states include Bulgaria, Israel, Romania, and the Slovak Republic. China has committed to the original 1987 Guidelines of the MTCR but not the Annex. The United States and several other MTCR Partner countries maintain an active nonproliferation dialogue with these countries. However, these countries do not participate as Partners in the Regime, e.g., they do not participate in the decision-making process regarding the activities and future orientation of the MTCR.

HAGUE CODE OF CONDUCT AGAINST BALLISTIC MISSILE PROLIFERATION. On November 25, 2002, the International Code of Conduct (ICOC) was launched in The Hague, Netherlands. Now known as the Hague Code of Conduct (HCOC), it is intended to create a widely subscribed international predisposition against ballistic missile proliferation. It consists of a set of broad principles, general commitments, and modest confidence-building measures. It is a voluntary political commitment, not a treaty, and is open for subscription by all countries. The Code is intended to supplement, not supplant, the Missile Technology Control Regime.

States subscribing to the HCOC "resolve to implement" the following General Measures: (a) ratify, accede or otherwise abide by three space-related international agreements - the Outer Space Treaty; the Convention on International Liability for Damage Caused by Space Objects; and the Convention on Registration of Objects Launched into Outer Space; (b) "curb and prevent the proliferation" of WMD-capable ballistic missiles; (c) "exercise maximum possible restraint" in the development, testing, and deployment of WMD-capable ballistic missiles; (d) "exercise the necessary vigilance in the consideration of assistance to space launch vehicle programs in any other country" so as to prevent contributing to WMD-capable delivery systems and (e) "not to contribute to, support or assist any Ballistic Missile program in countries which might be developing or acquiring weapons of mass destruction in contravention of norms established by, and of those countries' obligations under, international disarmament and nonproliferation treaties."

In addition, the HCOC subscribing states "resolve to implement" the following transparency measures: (1) annual declarations outlining the nation's ballistic missile policies and information on the numbers and generic class of ballistic missiles launched during the preceding year as declared under the HCOC's pre-launch notification mechanism; (2) annual declarations outlining the nation's space launch vehicle policies and information on the number and generic class of space launch vehicles launched during the preceding year as declared under the HCOC's pre-launch notification mechanism; and (3) exchanges of pre-launch notifications on their ballistic missile and space launch vehicle launches and test flights.

As of December 2003, 111 states had subscribed to the ICOC including Russia and Libya. Other states, including China, North Korea, India, Pakistan, Yemen and Iran have not subscribed. Iraq was not originally invited to subscribe, but would be able to subscribe if it chose to do so.

CHINESE NONPROLIFERATION COMMITMENTS. Intensive bilateral dialogue and high-level political efforts augmented by trade sanctions imposed in 1991-92, 1993-94, and since September 2001 have resulted in a variety of Chinese missile nonproliferation commitments.

China is not an MTCR partner. However, as described below, it has committed over the course of a number of years to abide by various missile nonproliferation commitments.

Noncompliance concerns emerged soon after China issued its first missile nonproliferation commitment in March 1992. Previously in June 1991, the United States imposed sanctions on two Chinese entities-- China Great Wall Industry Corporation (CGWIC) and the China Precision Machinery Import/Export Corporation (CPMIEC)-- in connection with the sale of M-11 missile-related equipment to Pakistan. In return for ending sanctions on these two entities, China provided a written commitment in March 1992 to then Secretary of State James Baker that it would abide by the original "guidelines and parameters" of the MTCR, which the United States publicly stated were applicable to both the M-9 (CSS-6) and M-11 (CSS-7) missiles. After issuing this commitment, Chinese entities transferred M-11 missiles to Pakistan. In response to U.S. complaints, China indicated that the M-11 missile was not covered by the MTCR and that it was fully complying with its 1992 pledge. In 1993, the United States imposed Category II sanctions on the Chinese Ministry of Aerospace Industry and the Pakistani Ministry of Defense for their roles in the transfer. Some of the divisions of the Ministry of Aerospace Industry that were affected by the sanctions included: the China Precision Machinery Import-Export Corporation (CPMIEC), China Great Wall Industrial Corporation (CGWIC), China Aerospace Corporation (CASC), and the Chinese Academy of Space Technology (CAST).

In return for the lifting of the sanctions imposed in 1993, China pledged in October 1994 in a Joint Statement with the United States that it would not transfer ground-to-ground missiles "inherently capable of reaching a range of at least 300 km with a payload of at least 500 kilograms." In the years following this commitment, Chinese entities continued to provide missile-related items and assistance to countries, including Iran and Pakistan. China declared in October 1996 that its previous commitments did not cover items contained on the MTCR Annex. However, following additional negotiations, in June 1998, China in a Joint Statement reaffirmed that its policy was "to prevent the export of equipment, materials, or technology that could in any way assist programs in India or Pakistan, for nuclear weapons or for ballistic missiles capable of delivering such weapons." Nevertheless, despite these Chinese assurances, the United States continued to detect evidence of Chinese missile-related transfers.

In return for the waiving of sanctions on several companies, China in November 2000 issued a stronger commitment to missile nonproliferation, stating it would not assist "in any way, any country in the development of ballistic missiles that can be used to deliver nuclear weapons (i.e., missiles capable of delivering a payload of at least 500 kilograms to a distance of at least 300 kilometers)." The Chinese, however, continued to make no mention of preventing or restricting the proliferation of Category II missiles in their commitment. In addition, China agreed to enact and publish comprehensive missile-related export controls "at an early date." China's unilateral political commitment and the related discussions with the United States have been referred to as "the November 2000 Arrangement."

Since China's first commitment in March 1992 and until these negotiations stopped in November 2000, these successive cycles of bilateral compliance diplomacy have fallen into a common pattern. When U.S. intelligence detects evidence of missile-related transfers by Chinese entities to proliferant countries, China first either denies such transfers occurred or asserts that the transfers in question did not violate its commitments to the United States. Then, after protracted bilateral consultations, China issues another nonproliferation pledge and the United States waives sanctions, only to begin the cycle again.

Despite the November 2000 Arrangement, the United States continues to have similar concerns about Chinese compliance with and implementation of its missile nonproliferation commitments. Transfers that assist in the development of Category I missile programs in Iran and Pakistan continue. The continued proliferation of missile-related technology led the United States to impose sanctions in September 2001 on the China Metallurgical Equipment Corporation (CMEC/MECC). Since then, and as detailed in this report, numerous Chinese entities have continued to provide missile-related technology to nuclear-capable Category I ballistic missile programs.

In addition, China has interpreted and implemented its November 2000 political commitments in ways that have fallen short of establishing an effective missile nonproliferation system.

OTHER NONPROLIFERATION COMMITMENTS. As part of its bilateral diplomatic consultations, the United States has sought nonproliferation commitments from both missile technology supplier states and recipient nations that are not members of the MTCR or the HCOC. Some countries have agreed to support common nonproliferation objectives by making a commitment to the United States not to acquire WMD-capable delivery systems for their military.

COUNTRY ASSESSMENTS

CHINA

ISSUE. Proliferation of missile-related technology by Chinese entities continues and calls into question China's stated commitment to controlling missile proliferation.

HISTORY OF ADHERENCE EVALUATION. Chinese compliance with its missile nonproliferation commitments was first assessed in the June 2003 (CY2001) NCR. In that Report, the United States concluded that:

[China's] actions call into serious question China's stated commitment to controlling missile proliferation. Chinese state-owned corporations have engaged in transfer activities with Pakistan, Iran, North Korea, and Libya that are clearly contrary to China's commitments to the United States.

COMMITMENTS UNDERTAKEN. In return for the waiving of a number of sanctions required by U.S. law for past serious transfers by Chinese entities to the Iranian and Pakistani missile programs, including the transfer of a missile production facility to Pakistan, China in November 2000 issued a stronger commitment to missile nonproliferation stating it would not assist "in any way, any country in the development of ballistic missiles that can be used to deliver nuclear weapons (i.e., missiles capable of delivering a payload of at least 500 kilograms to a distance of at least 300 kilometers)." In addition, China agreed to enact and publish comprehensive missile-related export controls "at an early date." China's unilateral political commitment and the related discussions with the United States have been referred to as "the November 2000 Arrangement."

ACTIONS. Despite China's November 2000 Arrangement and the promulgation of export control regulations, China's proliferation of missile-related technology continues and calls into question China's stated commitment to controlling missile proliferation. These missile-related transfers continued in 2002 and 2003 to ballistic missile programs in Iran, Iraq, Libya, Pakistan, and North Korea. The United States has sanctioned several of the companies transferring these technologies.

Chinese entities continued to transfer missile-related goods and technical knowledge to countries such as Pakistan, Iran, Libya, and North Korea. These transfers continue to contribute the development of MTCR Category I ballistic missiles in these countries. In addition, Chinese entities provided dual-use missile-related items, raw materials, and assistance to Iran, Libya, and North Korea.

China's implementation and enforcement of the missile export control regulations remain problematic. The Chinese Government has not established a system of end-use verification checks to ensure that items approved for transfer are not diverted. China must also ensure that "catch-all" controls are effectively implemented within China. Finally, China needs clearly to signal to all Chinese entities that it intends vigorously to enforce its export controls. Beijing has also not taken adequate steps under these new regulations to prevent sensitive transfers or prosecute violations, and China needs to publicize its efforts to enforce its export control regulations.

COMPLIANCE-RELATED DIALOGUE AND ANALYSIS. Despite its November 2000 pledge, Chinese companies in 2002 and 2003 continued to supply technology and assistance to missile programs in various countries; this technology and assistance was of direct use to these programs. The United States has gone to considerable lengths to inform the Chinese Government about the proliferation activities of these entities. However, despite these efforts, the Chinese Government almost invariably denies that such activities are occurring, and Chinese entities and persons continue to proliferate missile technology.

FINDING. The United States finds that items transferred by Chinese entities contributed to Category I missile programs contrary to the Chinese Government's November 2000 missile nonproliferation commitments. The United States remains concerned and will continue to monitor this situation closely.

RUSSIA

ISSUE. During the period of this Report, Russian entities continued to supply missile-applicable technologies to missile programs of proliferation concern in China, India, Iran, and other countries.

HISTORY OF COMPLIANCE EVALUATION. Russian compliance with its MTCR commitments was first assessed in the June 2003 (CY2001) NCR. In that Report the United States concluded that:

Russian commercial and governmental entities have engaged in transfers that are contrary to the nonproliferation criteria outlined in the MTCR Guidelines. To date, Russia's efforts to prevent further transfers have been inadequate.

COMMITMENTS UNDERTAKEN. Russia became an MTCR Partner on August 8, 1995. Since then, the Russian Government has enacted a number of laws and presidential decrees that implement controls on missile technology. The current Russian law governing the export of complete missile systems is the September 6, 1999, edict by President Yeltsin, "On Measures to Increase the Efficiency of Russian Federal Military-Technical Cooperation with Foreign States." This edict makes the Ministry of Trade responsible for processing general licenses that allow enterprises to export arms independently and for granting individual equipment or technology export license for specific contracts. The Ministry is also responsible for determining the legal competence of a foreign partner to receive Russian military equipment, including verifying the end-user certificate. This edict was replaced by Edict No. 1953, December 1, 2000, "Issues Concerning the Russian Federation's Military - Technical cooperation with Foreign States."

The current law governing the export of dual-use exports is the Federal Law on Export Control, which the Russian Government enacted on July 18, 1999. Article 20 of this law also includes "catch all" provisions. Government Resolution No. 296 "Governing Foreign Trade Control over Equipment, Materials and Technologies Which Can be Used to Make Missile Weapons," enacted on April 16, 2001 and subsequently updated in October 2001 and October 2002, creates the procedures by which the trade of missile technology in the Russian Federation is to occur. The Federal Law created the Department of Export Control (DEK) which was responsible for conducting license determinations at the request of exporters, for processing and issuing export licenses, for developing and maintaining commodity classification lists, and for drafting regulations designed to ensure continued implementation of nonproliferation export controls.

The March 2003 government reshuffling transferred export control oversight to the Ministry of Defense (MOD). As a result, the Federal Service for Technical and Export Controls under the MOD assumed responsibilities for export controls from Ministry of Economic Development and Trade (MEDT) DEK.

The current limitations of Russia's export control system are hindering the Russian Government's ability to implement its MTCR commitment to review all Annex item transfers on a case-by-case basis, which in turn undermines its ability to "exercise restraint" in considering such transfers and effectively halt them.

ACTIONS. While some progress has been made, Russian entities continued during the reporting period to supply sensitive missile-applicable items, technology, and expertise to missile programs in India, Iran, and China, indicating that in many cases Russia's export control system has been ineffective in assuring case-by-case review of Annex item transfers that would halt problematic missile-related transfers. Based on all available information, the continuing pattern of missile-related transfers by Russian entities calls into serious question Russia's ability to control missile proliferation

COMPLIANCE-RELATED DIALOGUE AND ANALYSIS. Transfers by entities under Russia's jurisdiction still call into question the Russian Government's ability to conduct case-by-case review or its willingness to exercise restraint with respect to MTCR-controlled technologies to ballistic missile programs of concern. Although such transfers are not directly barred by the MTCR, Russia's actions do not accord with the MTCR implementation policies of the United States and other MTCR members.

The United States has raised its concerns about these transfers at all levels of the Russian Government. If this assistance is authorized by the Russian Government, this assistance is not directly precluded by Russia's commitments under the MTCR Guidelines. To the extent these transfers are not authorized by the Russian Government, they raise concerns regarding its ability to implement controls on missile-related technologies.

FINDING. Russian entities have engaged in transfers that, although not directly precluded by Russia's commitments under the MTCR Guidelines, raise serious missile proliferation concerns and call into question Russia's ability to implement controls on missile-related technologies. To date, Russia's efforts to prevent further transfers have been inadequate.