Taiwan Communiqué No. 82, August 1998

Loral and other leaks

China's Long March

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In our previous Communiqué, we presented a brief report on the Loral satellite launch scandal, and the leakage of U.S. technology to China (Taiwan Communiqué, no. 81, pp. 8-11). In the third week of May 1998, the House of Representatives passed several amendments to the 1999 Defense Authorization Bill, one outright banning satellite exports to China, one banning exports of sensitive technology embedded in satellites, and yet another one transferring the authority to issue export licenses for satellites back to the State Department from the Commerce Department.

During the subsequent weeks, there have been a number of additional reports from within the U.S. government, think tanks and in the press, detailing the way in which U.S. high-technology found its way to China, and in particular into the Chinese military. Below we attempt to give an overview.

A detailed overview is also given in a Heritage Foundation Backgrounder, titled "Commercial Space Cooperation should not harm national security", dated 26 June 1998, by Richard D. Fisher Jr. The backgrounder can be accessed on the Internet at http://www.heritage.org

Taiwan Communiqué comment: We wonder why the Clinton Administration found it necessary to allow launches by the Chinese in the first place. Isn't the United States the world's premier space-faring nation? Where are companies like Lockheed Martin and McDonnell Douglas with their Thor-Delta and Atlas Centaur ? Can't they increase their production rate and build more and better rockets?

Don't we have our European friends with the highly reliable Ariane-4 rocket? Don't the Russians have great capabilities in their space system with the Proton rocket?

The answer is reportedly that the Chinese were "cheaper." Well, they were cheaper, because they don't abide by the rules of the commercial market: the Chinese military is not only subsidizing the Long March rocket industry — it actually owns it. American payments to the Chinese thus go directly into the pockets of the generals, who are threatening Taiwan — and occasionally Los Angeles — with their missiles.

This support of the Chinese rocket industry by the United States takes place at the expense of the American space industry, at the expense of American jobs, at the expense of a strategic American asset.

Selling Spy Satellites

In the third week of June 1998, the New York Times published a report that the Hughes/Loral-built Chinasat8 satellite, for which Mr. Clinton granted an export waiver in February 1998, in spite of the ongoing Department of Justice investigation, would allow the Chinese to eavesdrop on mobile telephone conversations at home and abroad ("Selling Spy Satellites to China", New York Times, 19 June 1998).

Chinese military using Global Positioning

On 20 June 1998, a Washington Post report by veteran reporter Walter Pincus revealed that a 1997 Defense Department report had concluded that the Chinese military were using the American Global Positioning System (GPS) to "improve the accuracy of its weapons and the situational awareness of its operating forces" ("U.S. Navigation Satellites help China, Pentagon Says", Washington Post, 20 June 1998).

The report indicated that the Chinese airforce is "...pursuing the integration of GPS into its new fighter aircraft" and that "GPS updates will enable China to make significant improvements in its missiles capabilities."

How Hughes got what it wanted

In another major exposé, on 25 June 1998, the Washington Post published a report by its staff writer John Mintz, it which he detailed the lobbying activities of Hughes Electronics Corp. CEO C. Michael Armstrong ("How Hughes got what it wanted", Washington Post, 25 June 1998).

The report described How Mr. Armstrong in 1992/93 had voiced support for Mr. Clinton's economic package, and in return wanted Mr. Clinton to exempt Hughes from trade sanctions against China, so the firm could launch satellites there. At the end of a letter he threatened that "thousands of Californians could lose their jobs" if the sales ban remained, and stated "This will be public and political shortly." Within weeks, Mr. Armstrong was able to meet Mr. Clinton, and "eventually got what he wanted."

According to the report, Mr. Armstrong was also instrumental in getting the Clinton Administration to shift responsibility for export licensing from the State Department to the Commerce Department: he hired Loretta Dunn, then aide to Commerce Secretary Ron Brown, as Hughes' vice president for trade. She lobbied numerous former colleagues, and was credited in the March 1996 shift to Commerce.

DOD Report: damage to National Security

On 27 June 1998, the New York Times reported that a Defense Technology Security Administration 9DTSA) at the Pentagon had concluded in a report that the Loral / Hughes leakage of information to China after the February 1996 Long March launch failure committed three major security breaches that harmed U.S. national security.

The confidential 1997 DTSA report had identified the information which had been given to the Chinese after the launch failure, and concluded that it helped China improve its military rocket technology, in particular in the electronic flight control system, and the guidance system.

The report also concluded that Loral and Hughes had provided the Chinese with the information, without going through required U.S. government approval procedures, thus violating American technology export controls. The findings of the DTSA report triggered the Justice Department to initiate a criminal inquiry into the two aerospace companies ("Report outlines damage to national security in companies' China dealings", New York Times, 27 June 1998).

A subsequent Wall Street Journal article focused on a Chinese-born Loral physicist by the name of Wah Lim as the center of the controversy. Dr. Lim reportedly headed the review of the launch failure, but was appointed to that function only after the person who was originally to direct the inquiry, Mr. James Reynolds, was abruptly fired from his position to make way for Mr. Lim.

It was Mr. Lim, who after the inquiry was completed, released the data to the Chinese without going through the required approval procedure by the State Department. The Wall Street Journal article details some of the ties Mr. Lim had with government officials and business executives in China ("China-satellite inquiry focuses on Lim, Ex-Loral aide who reviewed explosion", Wall Street Journal, 6 July 1998).

The New York Times, in article dated 24 June 1998, also reported that a secret encoded circuit board onboard the Loral satellite which went down in the failed launch, was missing from the wreckage. According to the report, the control box containing the encryption circuit board was found, but the board itself was gone.

When American military monitors at the site wanted to go to the crash site, they were barred by Chinese authorities for five hours ("House hears about encoded circuit board missing from Chinese rocket", New York Times, 24 June 1998).

Iridium could help Chinese deploy multiple warheads

In mid-July 1998, the Washington Times revealed that a classified U.S. Air Force report had concluded that the technical cooperation between the Motorola company and the Chinese in the case of the Iridium mission had provided the Chinese with a "technology bridge" for multiple warhead missiles ("U.S. technology builds `bridge' for China missile", by Bill Gertz, Washington Times, 14 July 1998).

The Iridium system is the 66-satellite low earth orbit satellite communication system for hand-held telephones. Motorola typically launches two to seven satellites per launch, and has used both U.S. Russian, and Chinese boosters to get the system on orbit. The Russian Proton carries seven of the 700 kg satellites per launch, the American Thor-Delta II five satellites, and the Chinese Long March two satellites per launch into the 420-mile high orbit.

With Motorola assistance, the Chinese built a "smart dispenser" for the injection of the Iridium satellites into the correct orbit. The Air Force report concludes that the Chinese can easily adapt the technology to fit on their CSS-4 intercontinental ballistic missile, or develop an improved version for the new solid-fuel DF-31 and DF-41 ballistic missiles now under development. These have ranges of over 4,500 and 7,000 miles respectively.

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