June 27, 1998
Report Outlines Damage to National
Security in Companies' China Dealings
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By ERIC SCHMITT
WASHINGTON -- When two American satellite makers shared
technical information with Chinese rocket scientists, they committed
three major security breaches, according to a confidential assessment by the
Pentagon.
The Pentagon had already determined that the two companies, Loral Space
& Communications and Hughes Electronics, did some harm to the national
security of the United States when they helped China find the cause of a
failed rocket launch in February 1996. The Chinese rocket, which was
carrying a Loral satellite, exploded 22 seconds after lift-off.
But in newly revealed portions of a report, authorities described with more
precision the degree of damage and the nature of the violations by the
companies. The report is significant because its findings triggered a Justice
Department criminal inquiry into the two aerospace companies, which in turn
became a central focus of a multi-pronged congressional investigation into
whether China illicitly obtained sensitive American technology.
Portions of the 20-page report by the Defense Technology Security
Administration, a Pentagon agency responsible for safeguarding American
technology exports, were read to The New York Times. The report
categorized the violations in three degrees of seriousness, a person familiar
with the report said.
According to the May 16, 1997, report, there were three "major" breaches
that "undeniably" would have been deleted by the Pentagon had military
authorities been given the opportunity to screen the material before it was
given to the Chinese. In any case, officials say they believe the companies
gave China data that required a State Department license.
A senior administration official said on Friday that the breaches involved the
companies' volunteering alternative causes for the accident that could help
China improve its rocket technology.
In addition, there were three "medium" violations, which "most likely" would
have been deleted by the State Department, and 12 "minor" infractions that
"probably" would have been denied to the Chinese, said the person who has
read the document.
All of the infractions involved assistance the American technical experts gave
the Chinese to help solve problems with their rockets' guidance and control
systems, an area of weakness in China's missile programs.
Administration officials have refused to discuss the report's findings at the
insistence of the Justice Department, which is conducting a criminal inquiry
into Loral and Hughes. Justice officials fear that revealing the conclusions
could undermine their investigation.
On one level, the investigation focuses on whether the American companies,
which were part of an industry commission established for insurance
purposes to investigate the explosion, gave China data that required a State
Department license. On a broader level, though, the issue is whether the
American experts conveyed technical information that the Chinese could also
apply to their military ballistic missiles.
The rockets the Chinese use to launch satellites are very similar to the
Chinese missiles that carry nuclear warheads. American policymakers are
concerned that any information that improves the reliability of the commercial
launches could do the same for military missiles.
The Times had previously reported that the American experts determined
that the February 1996 accident was caused by a flaw in the electronic flight
control system. One of the "major" breaches of information, the Pentagon
report found, was that the companies volunteered alternative causes for the
failed unit that the Chinese had not concluded on their own.
Administration officials, including those from the Central Intelligence Agency,
have played down this violation, arguing that the failed component, while
integral to commercial rockets' guidance systems, is not used in any ballistic
missile that the Chinese have now or plan to field in the future.
A more troubling "major" violation, a senior administration official said, was
the companies' suggestion that the Chinese use diagnostic techniques that
would allow Beijing's engineers to detect flaws in guidance systems for any
kind of missile, including those carrying nuclear weapons.
"The significant benefits derived by China from these activities are likely to
lead to improvements in the overall reliability of their space-launched vehicles
and ballistic missiles, and, in particular, their guidance systems," the report
says, according to the person who has read it.
The larger issue centers on what happened after the Chinese Long March
missile blew up on Feb. 15, 1996, destroying a $200 million Loral
communications satellite.
International insurers insisted that China have an outside review panel
examine the cause of the accident. Loral headed the industry team, which
included experts from Hughes.
The industry commission then gave its findings to the Chinese without prior
approval from the United States government. Loral executives acknowledge
this happened, but insist no sensitive information was divulged.
When the State Department learned of the information shared with the
Chinese, it asked four federal agencies with expertise in rocket technology or
missile proliferation to review the industry commission's report.
The State Department's own intelligence arm and the Air Force's National
Air Intelligence Center shared the Pentagon technology office's conclusions
that national security had been harmed. The CIA, which only considered the
impact on the spread of missiles around the world, found that the crash did
not raise concerns in that area.
But in the past week, the director of central intelligence, George Tenet,
ordered his agency to assess the incident for national-security damages just
as the other agencies had. The new CIA report is expected to be completed
in the next few weeks, an administration official said on Friday.
The Pentagon report has attracted wide attention on Capitol Hill, mainly
because the Defense Technology Security Administration, which prepared
the report, draws on the expertise of the nation's top rocket scientists.
"The DTSA report is very serious, and one we'll have to look at very
carefully," said Rep. Norm Dicks, D-Wash., the senior Democrat on the
House Select Committee looking into the China accusations.
The chairman of the Select Committee, Rep. Christopher Cox, R-Calif., has
said the satellite makers' information-sharing will be the panel's first order of
business this summer.
"I want to make sure that we remain focused, so that we can answer at least
this threshold question before us," Cox said this week.
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