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Testimony: The Spread of Weapons of Mass Destruction

By Gary Milhollin

Testimony of Gary Milhollin

Professor, University of Wisconsin Law School and
Director, Wisconsin Project on Nuclear Arms Control

Before the Senate Committee on Governmental Affairs
Permanent Subcommittee on Investigations

March 20, 1996

I am pleased to appear before this distinguished Subcommittee to discuss the threat posed by the spread of weapons of mass destruction. I am a member of the University of Wisconsin law faculty, and I direct a research project here in Washington that is devoted to tracking and inhibiting the proliferation of these weapons to additional countries.

The Subcommittee has asked me to describe the proliferation threat today, to describe how the proliferant countries are getting what they need, and to suggest what the United States should do to reduce or contain the threat.

“Rogue nations”

I would like to begin with the idea of “rogue nations”–now thought to include Iran, Iraq, Libya and North Korea. This is a new term that the Clinton administration has coined to define the proliferation problem, and to restrict it to these four countries. Unfortunately, it ignores a lot of proliferation.

China

China is a very serious proliferation threat. As far as we know, China is the only country that still targets American cities with nuclear warheads. It is also testing thermonuclear warheads to miniaturize them, so they will fit on new missiles capable of reaching the United States. And Chinese exports continue to fuel proliferation in both Iran and Pakistan. China is not a member of the Nuclear Suppliers Group, the Missile Technology Control Regime or the Australia Group–the agreements that seek to control the sale of the means to make nuclear weapons, chemical weapons and the missiles to deliver them. Unless China stops testing nuclear weapons and stops selling nuclear and missile technology to other countries, the proliferation problem will be impossible to solve.

China’s recent sale of ring magnets to Pakistan has been discussed extensively in the press. But it is only the latest in a long line of dangerous Chinese exports. I have attached to my testimony information from the Risk Report, a database published by my project that tracks the spread of weapons of mass destruction. The information lists China’s nuclear and missile exports to the Islamic countries from 1980 to 1994, and also lists China’s promises to stop these exports. The data show that China supplied nuclear technology to Algeria, Iran, Iraq and Syria, and missile technology to Pakistan, Saudi Arabia and Syria. Since 1994, China has supplied missile components and poison gas ingredients to Iran, and sold Pakistan missile components and magnets for producing nuclear weapon material. The data also show that China’s behavior has been essentially the same since 1980, despite its repeated promises to stop proliferating. The United States still has not found an effective strategy for getting China to keep its word. I am also attaching to my testimony a table showing the ranges and payloads of China’s main ballistic missiles.

South Asia

The magnets have refocused public attention on South Asia, where the nuclear threat is growing. Pakistan has already made around a dozen warheads and the magnets will boost its ability to make more; India possesses at least a score of warheads and recently made preparations to test one; and unnamed Pakistani officials have been quoted as saying that Pakistan will test if India does. Combined with all that is the fact that India and Pakistan are both on the verge of deploying nuclear-capable ballistic missiles–an event that could push both countries toward an open arms race and put the subcontinent on a nuclear hair trigger. South Asia is still the most likely place in the world for a nuclear war, and the risk is growing.

Both countries built their programs with outside help. India’s plutonium-producing reactors are copied from Canadian designs and operated with material from China, Norway and Russia. Pakistan’s plants for producing weapon-grade uranium are built from European designs and outfitted with equipment from Germany and Switzerland. India’s short-range missile uses rocket motors taken from a Soviet-supplied surface-to-air missile and India’s medium-range missile uses a first stage copied from a U.S. satellite launcher, a second stage based on the Soviet surface-to-air missile, and a guidance system developed with help from the German space agency. Pakistan’s missiles, of course, come from China. If you look behind the nuclear and missile programs of either India or Pakistan, you will see that practically nothing is home-grown.

And both India and Pakistan are still shopping. To my testimony I have attached data from the Risk Report showing what these countries need and are trying to buy today. Their nuclear and missile shopping lists are based on a Pentagon study and on U.S. and commercial trade data.

The idea that we only need to worry about four “rogue nations” is wrong. China, India and Pakistan are active proliferants–and their behavior is getting worse. The new strategy of confining the problem to the four “rogues” seems to be a move by the administration to boost U.S. exports. Because the United States does not trade with the rogues anyway, confining the problem to them allows American companies to sell to everybody else. Commerce Secretary Ron Brown, for example, gave a trade promotion speech in 1995 at the Indian Institute of Science in Bangalore, one of India’s main rocket research sites. It is developing rockets big enough to carry nuclear warheads throughout Asia and eventually the world. One can only wonder what Secretary Brown hoped to sell to this customer.

The Nuclear Nonproliferation Treaty is not enough

Iran, Iraq, Libya and North Korea are all members of the Nuclear Nonproliferation Treaty. Yet, they are proliferation threats. Getting countries to join the Treaty, and getting the Treaty extended, doesn’t mean much unless the Treaty has some teeth. Does it? China joined in 1992, but broke Article III and probably Article I by exporting the ring magnets to Pakistan. Article III prohibits such exports except under international inspection–which China did not require–and Article I prohibits assistance that helps a country like Pakistan make nuclear weapons. It seems clear that Pakistan bought the magnets to make nuclear weapons. But has anyone complained? We have yet to hear a peep out of the Clinton administration.

This silence has a precedent. It is the same American silence that greeted the Iraqis when they were caught trying to smuggle nuclear weapon triggers out of the United States before the Gulf War. Rather than apply sanctions, or even complain publicly about Iraq’s violation of the Treaty, the State Department chose “constructive engagement.” It would be better to maintain our influence with Saddam Hussein through trade. By selling him what he wanted, we would bring Saddam into the mainstream of nations. Sanctions would only hurt American exporters and allow the Europeans and the Japanese to get all the business. We now know what that strategy produced. We were lucky. If Saddam had not been foolish enough to invade Kuwait, we would be facing a nuclear-armed Iraq with its shadow over most of the world’s oil supply. And Iraq would have made it to the bomb while staying in the Nonproliferation Treaty.

Iran, Iraq, Libya and North Korea

The Iraqi threat has not gone away. Before the Gulf War, Iraq filled 166 bombs and 25 missile warheads with anthrax, botulinum and alfatoxin–all deadly germ warfare agents–and tested missile warheads filled with VX, the most lethal form of nerve gas. All of this was completely unknown to our troops, and was still unknown to the U. N. inspectors until last summer, more than four years after the War. This shows that mass destruction weapons can be built in secret, maintained in secret, and be ready to inflict deadly surprises on both troops and civilians. We don’t know what other surprises Saddam Hussein may be hiding, but the chances are that he is still hiding something.

Iraq is still much closer to the bomb than Iran. Iraq has the know-how it gained before the Gulf War and it has not disbanded its nuclear weapon teams. Because of its experience, Iraq would be able to convert smuggled material to a usable weapon much faster than Iran would. We also know that Iraq is still shopping. Late last year, missile guidance components on their way to Iraq from Russia were seized in Jordan, and similar components were pulled out of the Tigris River by U.N. inspectors. I have provided the Subcommittee with a graphic from the New York Times based on data that our project put together. The data show the astonishing amount of help Iraq got from foreign suppliers before the Gulf War, mostly from Germany and Switzerland.

I would like to emphasize that almost all of this equipment was shipped legally–in accordance with the export control laws of the time. Today, export laws are even weaker than they were before the Gulf War. The Subcommittee should realize that there is something worse than smuggling: It is deliberate, over-the-table supply, which includes training, spare parts and technical back-up. According to U.S. officials, Iran is now benefitting from the same supply network that Iraq set up in Europe before the Gulf War. I suspect that if you went into Iran today and did the same inventory that the U.N. is doing in Iraq, you would find machines supplied by many of the same companies you see on this graphic.

How far is Iran from the bomb? Iran is relying on imports, so the answer depends entirely on how much help it gets from outside. Iran has no known plants for making nuclear weapon material, but it is shopping for them. A U.S. official who has tracked Iran for more than a decade says, “there are Iranians who have been given the task to get or make fissile material for a weapon.” Last year, Iran tried to buy a centrifuge plant from Russia, which could produce bomb-grade uranium. To feed that plant, Iran has been shopping for a plant to convert uranium to hexafluoride gas and shopping for a fluorine plant in France. China has already helped with uranium mining and purification, and Iran is trying to buy 2,000 tons of uranium from Russia as part of the Bushehr reactor deal. There doesn’t seem to be any peaceful use in Iran for any of these imports.

But the greatest near-term risk is that Iran will be able to smuggle enough material to make a few warheads. The warheads would probably be delivered to their targets by the same method–smuggling. A bomb could be brought into a city in parts and assembled in a building; it could be driven into a city in a van; it could arrive in a boat entering a harbor, or in a box arriving at National Airport by airfreight. Smuggling is probably the safest way of getting a bomb to its target because, unlike a missile, it would be unclear where it came from.

If Iran does manage to smuggle enough material for one or more nuclear weapons out of Russia, what should the United States do? I think that we and the Russians should go after it. It is an old principle of the law that a thief takes no title. If Russia and the United States determine that illegally acquired nuclear weapon material is in Iran, we should follow the same policy that we are now following for Iraq: we should demand that the material be turned over, and back up the demand by the threat of force. There is a risk that Iran might defy an ultimatum, but that risk is lower than the risk to our cities of Iranian nuclear weapons.

Libya tried without success to buy an atomic bomb from China in 1970, and later tried without success to buy its way into Pakistan’s nuclear weapon program. But it has succeeded in producing poison gas. Its first chemical weapon plant, at Rabta, was supplied by German firms. A Japanese firm supplied the steel needed for munitions. Libya’s second chemical plant, which is much larger, has been built underground at a place called Tarhuna. Once this second plant begins to operate, which U.S. intelligence says may be soon, its production will greatly exceed any potential military need for chemical weapons in Libya. This raises the frightening prospect that Libya will become a poison gas exporter to countries or terrorist groups in the Middle East.

North Korea’s plutonium production is frozen for the moment by its agreement with the United States. But North Korea too is an active shopper. It has tried to recruit missile experts in Russia, and despite its agreement with the United States, all of North Korea’s missile program and parts of its nuclear program remain closed to the rest of the world. So we really don’t know what is going on. At a minimum, we can expect North Korea to continue to develop missiles for sale to Iran, Libya and Syria, and to continue research into nuclear weapon design. North Korea appears to have made enough plutonium for one or two bombs, so work on weaponization would be a high priority. And if North Korea is trying to import missile scientists from Russia, it is probably trying to import nuclear scientists and nuclear weapon material as well.

Only a global policy will work

The Clinton administration is following the same policy toward China today that the Bush administration followed toward Iraq before the Gulf War: “Hold your nose and export.” This is also the same policy that our European allies are following toward Iran–a policy that we officially deplore. But if we hold our noses and trade with China, why can’t the Europeans and the Russians hold their noses and trade with Iran?

Only a global policy will work–a policy that opposes proliferation everywhere. And it must be a policy that puts security above profits. If the United States puts profits first, so will everyone else. We have always been the world’s leader in nonproliferation. But we can’t sell everything to everybody except four “rogue” countries and expect the world to think we are serious about proliferation. One person’s rogue is another person’s valued customer.

And rogues can get things through re-exports. Iran now imports more goods through Dubai than it does through its own ports. There are scores of Iranian companies actively trading in Dubai. The Risk Report database has just listed 22 Iranian companies that operate in Dubai’s Jebel Ali free trade zone–the main purpose of which is to handle re-exports. I have attached the list to my testimony. These companies are legally off-limits to American exporters because of the U.S. embargo against Iran. But they are probably getting U.S. goods anyway because U.S. exporters don’t know the companies are Iranian. The U.S. Commerce Department has never published a list of Iranian companies operating in Dubai. It has never published any list of dangerous buyers anywhere. In fact, after the Commerce Department’s recent decontrol of high-speed computers, U.S. companies can now ship powerful supercomputers (operating at up to 7 billion operations per second) to buyers in Dubai without an export license. And because Dubai has no effective export control system, there is nothing to prevent these American computers from going on to Iran or anywhere else.

The Russians love to cite the U.S. reactor deal with North Korea. If America can give two big reactors to North Korea, they say, why can’t Russia sell the same kind of reactors to Iran? Is Iran less reliable than North Korea? Iran has not broken the Nonproliferation Treaty, but North Korea has. In fact, North Korea is the first country in violation of the Nonproliferation Treaty ever to get a reactor with America’s blessing. The U.S. deal with North Korea has made it impossible to stop the Russian reactor deal with Iran.

And there is the problem of “sweeteners.” These are the sensitive items that are thrown in to “sweeten” big reactor deals. They are the equivalent of nuclear candy bars. The magnets that China is giving Pakistan are probably sweeteners– greasing the skids for the reactor China is building there. And Iran has been trying very hard to get sweeteners from Russia as part of its reactor deal–that is clear. Iran failed to get a centrifuge plant, but it is still trying to get a large research reactor. The reactor would operate at about 30 to 40 megawatts, exactly the size that India and Israel used to make the plutonium for their first fission bombs. If we let China give Pakistan a sweetener, can we complain if Russia gives Iran a sweetener? And China too wants to sell Iran a reactor. What sort of sweetener will China give Iran if we ignore China’s sweetener to Pakistan?

My last point concerns a pending American export to Russia. The Convex Computer Corporation, a subsidiary of Hewlett-Packard, wants to send two supercomputers to Arzamas-16, where Moscow’s first atomic and hydrogen bombs were built, and another one to Chelyabinsk-70, the center that helped developed most of Russia’s nuclear warheads, including the world’s most powerful hydrogen bomb. The three machines operate faster than anything now available in Russia, and many of the U.S. officials familiar with the deal are convinced that the computers will be used to improve Russia’s nuclear arsenal.

Convex claims that machines would be used for “ground water and atmospheric pollution monitoring,” but to believe that is to believe in fairy tales. The Russian nuclear program is legendary in its disregard of the environment, and both of these laboratories are still developing new warheads through simulations. These simulations will become critical after the five official nuclear weapon states ban all testing, as they are scheduled to do this year. To maintain the U.S. nuclear deterrent without testing, the United States is spending $46 million to develop a new supercomputer to do our simulations.

These hearings have already proved that Russia does not have a reliable export control system, and we know from Russia’s reactor deal with Iran that Russia’s nuclear ministry does not have a responsible attitude toward proliferation. And we know from reading the newspapers that reform in Russia, and continued strategic cooperation with the United States, is far from assured. Under these conditions, the United States should not be helping Russia strengthen its nuclear arsenal.

I would like to summarize my testimony by restating four basic points:

  • We need to worry about more than four “rogue nations;”
  • We need to recognize that it will take more than the Nonproliferation Treaty to stop proliferation;
  • We must be willing to incur costs to achieve progress, even if it means losing a few export dollars and increasing tensions with some countries;
  • We need a consistent global policy, because all the countries we are worried about are interconnected, and if we are not willing to stand up to one, we won’t be able to stand up to the others.

Recommendations

The Subcommittee has asked me to make recommendations concerning Russia. They are as follows:

1. The Subcommittee should ask the representatives of the Defense, Energy and State Departments, when they testify on Friday March 22, to explain why our government is considering the export of American supercomputers to the Russian nuclear weapon laboratories at this time.

2. In view of the evidence developed at this hearing, which reveals poor control over sensitive material and equipment in Russia and other states of the former Soviet Union, Congress should exercise greater oversight on sensitive U.S. exports to such destinations. This Subcommittee should require the State and Commerce Departments to provide records of all licensed U.S. exports under their jurisdiction to such destinations during the past five years. The Subcommittee should then ask the General Accounting Office or some other expert body to determine whether these exports are consistent with U.S. national security and with U.S. nonproliferation policy. The Subcommittee should also require thirty days’ notice before any U.S.-licensed export is approved to a site or an end-user in the former Soviet Union that is associated with the production of a weapon of mass destruction.

3. Congress should require the President to begin to negotiate with Russia and other states of the former Soviet Union agreements to jointly pursue and attempt to recover any special nuclear material, nuclear weapon component, or other strategically-significant item illegally diverted to any unauthorized person or country.

Dubai Tries to Build a Modern Customs Agency

Two years ago, Dr. Obaid Saqer Busit became the youngest Director-General of the Dubai Department of Ports and Customs. At the age of thirty-four, he was suddenly responsible for tracking the flow of millions of imports and exports each year. He soon discovered, however, that Dubai had no effective law for controlling trade, including exports to Iran.

In an exclusive interview, Dr. Busit tells the Risk Report: “Two years ago we weren’t a true Customs agency. You could call us anything you want, but you couldn’t call us Customs.” Today, Dr. Busit is struggling to draft new rules that will take effect this year, but it is an uphill battle. “Change is very hard for everyone,” he says, “many people still feel they are living in the 60’s and 70’s” a time when there were virtually no regulations. “I am under a lot of pressure, and sometimes I feel that I am working alone, but I’m stubborn,” he says.

It is nearly impossible for Dubai Customs to control the trade now flowing between the U.A.E. and Iran, says Dr. Busit, because “there are no specific rules on what should or should not go.” Moreover, controlling exports to Iran, Dubai’s number one trading partner, is not a priority, notwithstanding pressure from Washington to help enforce the current U.S. embargo. “Most people in Dubai are confused by the embargo, and many Customs officials are not sure what in fact is prohibited,” Dr. Busit warns.

Even if the rules were clear, enforcing them would be an additional challenge. Most of Dubai’s trade is made up of re-exports goods in transit through the United Arab Emirates to other countries such as Iran. Because there is little documentation for most of the ships traveling to and from Iranian ports, Dr. Busit says it is difficult to classify the types of products that may be reaching Iran. “Traditional ships can berth anywhere in Iran, so it’s difficult to account for the trade,” he explains.

U.A.E. officials have now started to focus their attention on smuggling. Dr. Busit says that illicit traders change their operations quickly to avoid the law. When Dubai started to watch its port more closely, the traders moved to Al-Khasab, a fishing village at the head of the Strait of Hormuz, only a few hours by boat from Iran’s Bandar Abbas. At Al-Khasab, says Dr. Busit, “you can now see hundreds of speedboats, filled with foodstuffs and electronics it sometimes looks like a boat race.” Most of the speedboat owners are Iranian, he adds, and they can shuttle radios, TVs, VCRs and U.S.-made appliances to Iran in a few hours. “They work like bats,” he says, “and are difficult to catch.”

In 1994, the U.A.E. Ministry of Interior issued an order to stop speedboats from transporting goods without official permission. Speedboats were limited to stays of 72 hours and are not supposed to sail from port to port without proper documentation.

Traditional ships, or dhows, can anchor in U.A.E. ports for up to 21 days, but even they are now supposed to register, obtain travel papers and document their cargo and crews. Though no penalties are mentioned in the Ministry of Interior’s 1994 directive, Dr. Busit says that Customs is willing to confiscate boats and cargo. Dr. Busit hopes computerization will help catch smugglers and facilitate legal trade. By the end of the year, he expects all Customs transactions to be processed electronically, and for the Port Rashid and the Jebel Ali Free Zone to be linked by computer. Other U.A.E. Customs and Port Authorities will be added to the communications network later. According to Dr. Busit, Dubai Customs has come a long way in a short time. “I am one of the new people to change and modernize it,” he says.

This month, trade officials from the region will gather in Dubai to hold the first Middle East conference on Electronic Data Interchange a U.S.-origin system that computerizes banking, customs clearance and cargo movement and handling. “We want to establish a club for communication on customs using EDI,” says Dr. Busit, “we are the first Middle East country to try to adopt this new system.” He says implementing new regulations “helps the Europeans trust what we are doing, and we want to keep that trust.” And looking to the future, he adds that “we want to have a model law and to follow the rules.”

Will U.S. Supercomputers Design Russian A-Bombs?

The Clinton administration may soon allow American supercomputers to be sold to Russian laboratories that design atomic and hydrogen bombs. The sales the first such exports in history are fiercely opposed by defense and nuclear weapon experts inside the U.S. government, who fear the Russians will use the machines to strengthen Russia’s nuclear arsenal.

The Convex Computer Corporation has asked the U.S. Commerce Department for permission sell powerful machines to Arzamas-16, the secret lab that developed Russia’s first A-bombs and H-bombs and is still Russia’s main nuclear weapon design site, and to Chelyabinsk-70, a second lab that claims to have developed the world’s most powerful H-bomb and to have pioneered most of the nuclear warheads now in the Russian arsenal.

Convex, acquired recently by Hewlett Packard, has informed the Commerce Department that the computers will be used only for peaceful applications such as “ground water and atmospheric pollution modelling,” but a U.S. nuclear weapon expert is skeptical: “I can’t imagine that they won’t be used for nuclear weapon work,” he tells the Risk Report.

The United States has always used the most powerful computers available to design nuclear weapons. Supercomputers are still the most powerful tool for developing both nuclear warheads and the missiles to carry them. The two Convex models for Arzamas would operate at 1,600 and 1,800 million operations per second and cost $1.5 and $2.6 million. The model for Chelyabinsk would operate at 4,500 million operations per second and cost $3.8 million. The three computers are faster and much more reliable than anything now available to the Russians, according to a U.S. official familiar with the deal. The sales will also come at a time when, according to a recent U.S. government-sponsored study, “the reform process in Russia…[has] devastated much of high-performance computing there.”

Convex’s application was filed in November 1995 and is seen by U.S. officials as motivated by a desire for prestige. According to one official, Convex believes that a sale to the Russian labs would enhance its reputation for high-end computing and allow it to compete more effectively with Cray.

Convex is also arguing that the computers are needed to carry out a set of new contracts sponsored by the U.S. Department of Energy. The contracts authorize and pay for cooperation between American and Russian nuclear weapon labs. Convex obtained copies of the contracts through Freedom of Information Act and has interpreted them as requiring supercomputers. But a U.S. official familiar with the contracts rejects this position, saying that none of the contracts requires supercomputing.

Opponents of the deal are concerned that Russia will use the machines to maintain and develop its nuclear arsenal. Itar-Tass, the Russian news agency, reported last April that Arzamas was still developing new warhead designs using simulations, even though Russia has halted nuclear testing. The simulations are done by using “steel, lead or composite materials instead of plutonium or uranium,” Itar-Tass reported. The opponents fear that the American supercomputers will greatly enhance Russia’s ability to build new types of warheads.

What is the Jebel Ali Free Zone?

For traders who sell products in the Persian Gulf and South Asia, the Jebel Ali Free Zone is a dream come true. Foreign companies can use Dubai as a distribution or manufacturing base without having to pay import duties or form partnerships with local companies in the United Arab Emirates. In Jebel Ali, a foreign-owned business essentially operates as “offshore” concern.

Outside the Jebel Ali Free Zone, commercial law in the United Arab Emirates requires foreigners to go into business with local U.A.E. firms or sponsors who are entitled to own at least 51 percent of the business and its profits. But inside Jebel Ali, there is no need to bother with these rules. Foreign companies are free to manufacture, trade and form joint ventures as they please.

To register, a person need only fill out a two-page questionnaire and fax it to the authorities in Dubai. An initial response takes about a week, and then a handful of forms need to be processed and notarized, including the applicant’s articles of incorporation. By keeping down the bureaucracy, Jebel Ali can deliver office keys to new clients in less than two months.

The Free Zone is located 35 kilometers southwest of Dubai city and is built around the world’s largest man-made port. It covers 100 square kilometers, of which about 30 percent has been leased. An array of investment incentives has attracted more than 850 companies, including almost 100 American firms. Most companies are set up to re-export goods through Dubai to other markets, the largest being Iran and India. Here are some of the main benefits:

  • 100% foreign ownership
  • 100% repatriation of capital and profits
  • No minimum capital investment
  • A shareholder’s liability is limited to the amount of its paid-up share capital
  • No currency restrictions
  • No corporate taxes
  • No personal income taxes
  • Ready-made factories and warehouses
  • Excellent infrastructure, support services and communications
  • Access to a consumer market of 1.4 billion people.

Who uses Jebel Ali?

Japan’s Sony Corporation operates a 23,000-square meter warehouse in the Jebel Ali Free Zone. It is the largest storage space in the world for a single product type electronics. Other multinationals such as Black & Decker, Daewoo, General Motors, Grundig, H.J. Heinz, Hyundai, IBM, McDermott, Mitsui, Samsung and York International also have taken advantage of Jebel Ali. But the majority of Free Zone business is done by smaller traders whose names are not well known. In fact, some clients use less than 35 square meters of office space, but such clients “must be very active,” Chairman Sultan Ahmed Bin Sulayem tells the Risk Report.

Business at Jebel Ali includes manufacturing, trade, services and distribution. In 1994, the companies in the Free Zone sold $1.6 billion worth of goods around the world, and Dubai officials expect rapid growth in the coming years.

When Jebel Ali opened in 1985, Indian and Gulf state companies were first in the door. Sixteen registered in the first year. Now an average of 16 new companies register each month. About 40 percent of the companies are from industrialized countries in Europe, the United States and the Far East. There are 200 European companies and about 100 from North America. The U.A.E. accounts for close to 200, India 154 and Pakistan 34. The are about a dozen companies from the former Soviet Union and a dozen from China and Hong Kong.

Director of Jebel Ali Says U.S. Embargo Will Not Affect Iran

 Sultan Ahmed Bin Sulayem, the Chairman and Managing Director of Dubai Ports and the Jebel Ali Free Zone, does not believe that U.S. prohibitions against trade with Iran will affect business in the Persian Gulf. In an exclusive interview with the Risk Report, the 41-year-old, American-educated Chairman says that as far as he is concerned, companies in Dubai are “free to trade with anyone.”

“Politics is politics and business is business,” Bin Sulayem explains, “and I’m a supporter of business.” Dubai only prohibits trade in two cases: Arab league goods to Israel because of the Arab boycott, and goods to Iraq because of the U.N. embargo. “We only abide by an embargo if the U.N. has instructed us to do so,” he says.

Today, there are no restrictions on U.A.E. trade with Iran. “The U.S. embargo against Iran doesn’t affect business here; we deal with countries from all over and Iran is still our number one trading partner,” says Bin Sulayem. He believes the U.S. embargo cannot prevent American goods from reaching Iran. Consumer goods are especially hard to stop, he says, pointing out that American products still get to Cuba and Iraq despite U.S. and U.N. embargoes. “The boycott on Iraq is not working. Iraq gets what it needs because people will sell to Saddam.”

The Chairman also wonders how the United States can expect to control its technology after it leaves America’s shores. “If IBM sells large volumes of computers abroad and they end up in Iran, how can you stop it or punish IBM?” he asks. He points out that American high-tech military exports to Israel have been diverted to China. “Whom can you trust? Even selling to your ally carries a risk of diversion,” he argues. Unless the whole world agrees to stop trading with Iran, the U.S. embargo will never work, he says. “At the end of the day, American companies will be the ones hurt most by the boycott….”

Trade relations between the United Arab Emirates and Iran remain strong despite the territorial dispute over Abu Musa and the Greater and Lesser Tunb Islands in the Persian Gulf. In 1992, the U.A.E. accused Iran of annexing Abu Musa, and Tehran refuses to discuss the status of the other islands. The U.A.E. is “actively pursuing peaceful means to address its differences with Iran,” Sulayem says. Meanwhile, trade continues to grow. “It’s easy for Americans to say from 7,000 kilometers away what we should do with Iran, but it’s not easy for us only 12 hours of sailing away we must coexist with Iran because we cannot change our geography.”

Bin Sulayem encourages companies from around the world to set up shop in Jebel Ali and to enjoy the tax shelter and trade privileges. He expects rapid growth and the need for expansion within two years. “What we desire is more high-tech trade, and that’s one reason why we are opening an office in Los Angeles for the Dubai Commerce and Tourism Promotion Board. We realize that there is a perception problem in the United States.”

 

Dubai: The Commercial Gateway to Iran

Dubai, called the “Hong Kong of the Middle East,” has been known for centuries as a trading port. It was once famous for its market in pearls and gold. Today, Dubai is emerging as the premier distribution center for high-tech exports to the Mideast and South Asia. U.S. officials worry that in the same way Hong Kong became a conduit for secret sales to Communist China, Dubai will become the favorite diversion point for hot cargoes to Iran.

Dubai’s strategic position on the Persian Gulf puts it at the crossroads of Asia, Africa and Europe. It is the commercial capital of the United Arab Emirates and the second largest of the seven emirates, which consist of Abu Dhabi, Dubai, Sharjah, Umm Al Quwain, Ajman, Ras Al Khaimah and Fujairah. With its liberal trade policy and efficient ports, Dubai is an ideal base for companies trading in the Middle East. And for those that register in the Jebel Ali Free Zone, life is even better: No corporate taxes, no personal income taxes, 100-percent foreign ownership allowed, no currency restrictions and no bureaucracy.

In this issue, the Risk Report probes the possibility that sensitive technology may be diverted through Dubai to U.S.-embargoed countries such as Iran, Iraq and Libya, and to other countries of proliferation concern like India, Pakistan and China. This month’s Risk Report reveals:

  • How Iran continues to import American goods through Dubai despite the trade embargo imposed by Washington in May 1995;
  • There are virtually no export controls in the United Arab Emirates on equipment useful for building weapons of mass destruction;
  • Why the Director of Dubai Customs and the Chairman of the Jebel Ali Free Zone believe the U.S. embargo against Iran will never work;
  • The names of more than 20 Iranian companies operating in the Jebel Ali Free Zone.

Dubai: A Booming Entrepot and Growing Diversion Risk

“I have checked to see if there are any export control laws in the U.A.E. and to the best of my knowledge none exists.” This was the verdict of the American Embassy in Abu Dhabi in 1992, when an official faxed a memo to a Washington law firm that had asked about export controls in the United Arab Emirates.

U.S. officials now tell the Risk Report that the Emirates do have some export controls, but not on what matters most to Washington. “Their controls are meant to prevent such things as stolen cars, drugs, or precious art from being smuggled out of their country,” says one senior U.S. official, “we aren’t talking about weapons of mass destruction.” When it comes to controlling nuclear, chemical or missile-related transfers, the U.A.E. lags far behind the West. Last year, for example, the Emirates finally joined the Nuclear Nonproliferation Treaty (NPT), but “so far no regulations have been issued they haven’t even developed an agenda to follow through,” says the official.

In 1995, U.S. companies sold over $2 billion dollars worth of goods to the United Arab Emirates one tenth of the country’s total imports. As trade grows, so do U.S. concerns that American products are being diverted to Iran through Dubai, the U.A.E.’s commercial capital and premier trading port. Dubai now serves as the main entrepot of the Persian Gulf. It is what Singapore is to Southeast Asia and Hong Kong is to East Asia. “The concern over Dubai is fairly new,” says a U.S. government official, “other conduits such as Singapore, Hong Kong, Cyprus and Malta are more established and were more active during the Cold War.”

Dubai buys far more than it keeps. Up to seventy percent of Dubai’s imports are re-exported, and almost half of the re-exports go to Iran. “The Iranians have a strong official and commercial presence in Dubai — it is their playground, the most accessible window to the rest of the world, particularly to high technology,” says a U.S. official. Of Dubai’s population of 600,000, about 70,000 are Iranian passport holders and another 70,000 citizens are of Iranian origin.

Of the roughly $1 billion in U.S. goods exported to Dubai in 1994, trade officials estimate that more than a quarter were reexported to Iran. And though the current embargo makes most U.S. trade with Iran illegal, American products continue to reach Iranian shores by the boatload. Dubai’s wooden dhows have been carrying cargoes across the Persian Gulf for centuries. But instead of pearls, spices and gold, the products today are computers, electronics and home appliances. Iran imports more through Dubai than through any of its own ports, according to a U.S. official who tracks Iranian trade, and Dubai’s 700-kilometer coastline makes smuggling fairly easy. Vessels depart daily to Bandar Abbas, Bushehr and other Iranian destinations.

These realities leave U.S. officials pessimistic. How can the U.S. embargo against Iran be enforced in Dubai, when “ninety-nine percent of the trade is legal from Dubai’s standpoint?” says an official in Washington. “It’s an impossible enforcement situation to stop small cargoes of highly valuable goods.”

Another U.S. official who analyzes diversion networks says that Dubai is “the new kid on the block, but we have not seen established patterns yet.” At this point, he is more concerned about Iran’s primary suppliers than about diversions through the U.A.E. “We now have a bunch of suppliers that are very adept at getting around export control laws. Iraq taught a lot of Europeans in the 1980s how to set up dummy companies to make sales and take advantage of local laws that help a country acquire chemical weapons.” The bigger problem now, he says, is that some U.S. allies are willing to sell sensitive materials and equipment directly to Iran. Recently, dual-use items such as growth media and fermenters for biological weapons have gone straight to Iran from Europe, he complains. “Our allies obviously don’t share our view of Iran,” he adds.

Sultan Bin Sulayem, the Chairman of Dubai’s Jebel Ali Free Zone, points out that when it comes to high technology, “the French and the Germans are very active in Iran…and so is the former Soviet Union.” He also says that Iran’s high-tech suppliers are more likely to use airplanes to make deliveries whereas boats are used to deliver consumer goods. A U.S. enforcement official makes the same observation: “If you’re looking at the types of high-value items that Iran would like to get, air traffic is a better bet for transit.”

Dubai handles cargo with great efficiency. It is now the world’s second largest sea-air hub, outranked only by Seattle. It takes only four hours for cargo brought in by sea to be cleared through the Jebel Ali Free Zone, transported to the airport and loaded on a cargo plane, according to official records. And Dubai Cargo Village boasts that it can unload and reload a Boeing 747 cargo plane in 90 minutes. Other international air cargo centers can take more than two hours.

Dubai has figured in a number of well-known nuclear diversion cases. In the mid-1980s, a series of shipments of heavy water were routed through Dubai to Bombay by an unscrupulous German broker. The water wound up in unsafeguarded Indian nuclear reactors that make plutonium free for atomic bombs. In October 1995, seven persons were indicted in the United States for conspiring to export sensitive U.S. electronics through the Emirates to Iran. From 1991 to 1994, about $500,000 in electronics, communication equipment, computers and other items were exported without a license, the indictment charged. Named in the indictment was Jimsheed Khodagholipour of Hanofeel General Trading Est., a United Arab Emirates company. Through Hanofeel and an Iranian company, Tak Neda Co. Ltd., the defendants allegedly shipped the controlled goods to the Emirates, and from there to Iran.

Despite these smuggling incidents, a U.S. official tells the Risk Report that Dubai Customs does not want negative attention and is ready to cooperate in global enforcement efforts. “They clearly don’t want to be seen as a smuggling port, but rather as a law-abiding, efficient, reliable trading center,” says the U.S. official. Dubai Customs agents are “very willing to cooperate on hot tips and they work as professionals,” he says, adding that “there is an ethic of being efficient and honest.”

Dr. Obaid Busit, the head of Dubai Customs, says that his office has very good relations with Australian, European and U.S. Customs. He tells the Risk Report that he has recently cooperated on “two big operations regarding sensitive chemical transfers that involved India in one case and, I think, Germany and China in another.” Last year, Dr. Busit agreed with U.S. and European officials to start investigating the end-use of all sensitive chemical shipments. “We work silently, case by case; we are trying to build a database ourselves to profile companies and middlemen,” he says.

Statistics

Capital: Abu Dhabi
Political System: Federation
President: Zayid bin Sultan al Nuhayan
Prime Minister: Sheikh Maktum bin Rashid al Maktum
Population: 2.3 million (Dubai: 605,000)
Gross Domestic Product: $38.8 billion (1995 est.)
Armed Forces: 61,500
Nuclear Nonproliferation Treaty (NPT): Signed in 1995
Nuclear Suppliers Group (NSG): Not a member
Missile Technology Control Regime (MTCR): Not a member
Chemical Weapons Convention (CWC): Signed but not ratified

India Wants to Deploy and Possibly Export the Prithvi

India declared in January that it would mass-produce and deploy the 250-kilometer range Prithvi missile, despite U.S. pressure on India not to do so.

The announcement was accompanied by news stories reporting that the missile would also be for sale. In a catalogue entitled Indian Defence Products, the reports said, the Prithvi was listed among Indian “defense products available for export.” Developed by the Indian Defence Research and Development Organization (Defense Research and Development Organization) (DRDO) and produced by the state-run Bharat Dynamics, Ltd., the Prithvi can carry a nuclear, chemical or high-explosive warhead far enough to reach the major Pakistani cities of Islamabad and Karachi, as well as Pakistan’s secret nuclear weapon plant at Kahuta.

These missile developments come on the heels of a December report in the New York Times quoting the Wisconsin Project that India appeared to be preparing for a nuclear weapon test. As the Risk Report went to press, however, no further test preparations by India had been observed.

India has also carried out preliminary test firings of the longer-range Agni missile, but has apparently suspended testing of the Agni for the time being.

Exporting an Arms Race

By Gary Milhollin

The New York Times
February 20, 1996, p. A19

The White House is about to take one of the greatest national security gambles since the end of the cold war. To please the computer industry, the Clinton Administration is preparing to send powerful American supercomputers to Russian nuclear weapons laboratories.

The Convex Computer Corporation, a subsidiary of Hewlett-Packard, wants to send two computers to Arzamas-16, where Moscow’s first atomic and hydrogen bombs were built, and another one to Chelyabinsk-70, the center that developed most of Russia’s nuclear warheads, including the world’s most powerful hydrogen bomb. The three machines, together worth almost $8 million, operate faster than anything now in Russia.

Many experts are convinced that the computers would improve Russia’s nuclear arsenal. “These are the worst places in Russia to send a supercomputer,” a senior American official familiar with the deal told me last week. The economic expediency of the transaction rankles Senator John McCain, Republican of Arizona, who said, “A decision of this magnitude should not be made based solely on commercial interests, but on national security interests as well.”

The United States has always used the most powerful computers available to simulate and design nuclear weapons. Yet Convex has assured the Commerce Department that the computers would be used only for peaceful applications such as “ground water and atmospheric pollution modeling.” A company spokesman assured me that there would be an inspection plan to prevent cheating.

But a senior American nuclear weapons expert, who spoke on condition of anonymity, questioned the security arrangement, citing Russia’s legendary disregard for the environment and the lack of central control over its labs. “I can’t imagine that they won’t be used for nuclear weapons work,” he said of the computers. Last year, the Russian news agency Itar-Tass reported that scientists at Arzamas were still using simulations to develop new warheads.

Such simulations will become critical after the five official nuclear powers ban all testing, as they are scheduled to do this year. The United States is spending $46 million to develop the world’s fastest supercomputer, which Energy Secretary Hazel O’Leary said will create “a safe, secure and reliable nuclear deterrent without underground testing.” Obviously the Russians want to do the same thing — using the Convex supercomputers. But if both sides are pursuing the same strategy, supercomputers are not a deterrent: they are part of an arms race.

Convex contends that its deal supports a program begun in 1994 in which the Energy Department pays Russian labs to keep better track of their nuclear materials. But an official familiar with the contracts told me there are no provisions in them involving supercomputers. In fact, the Energy Department initially opposed the Convex deal but was outmaneuvered by the Commerce Department.

The Defense Department could still block the transaction, but it rarely interferes with export agreements. If the Pentagon gives in, Russia will get a strategic boost, even as our nuclear talks with Moscow deteriorate into an extortion game. “We are almost down to paying them off for one clause at a time,” said one United States official.

The Convex agreement could make it impossible to keep other American companies from making similar sales to Russia and other countries. “This Russian deal is part of a disturbing pattern, where we are taking bigger security risks to make money on exports,” said James R. Lilley, Assistant Secretary of Defense for International Security Affairs in the Bush Administration.

With the Communists resurgent in Moscow and extreme nationalists trying to reawaken the Soviet bear, we should not be sharpening Russia’s nuclear claws. The Clinton Administration should kill the Convex deal.

Iran Replies to the Risk Report; Denies It Wants the Bomb

Dr. Mohamed Sadegh Ayatollahi, Representative of the Islamic Republic of Iran to the International Atomic Energy Agency (IAEA) in Vienna, has written a detailed response to the September issue of the Risk Report, which published allegations that Teheran was pursuing a nuclear weapon capability. Excerpts from Ambassador Ayatollahi’s statement have been edited for publication here.

Nuclear Activities of the Islamic Republic of Iran
by Dr. Mohamed Sadegh Ayatollahi
Nuclear activities of the Islamic Republic of Iran have been given considerable coverage by the international media. Such coverage is based entirely on circumstantial evidence, unfounded allegations by unnamed sources and pure innuendo. Any attempt by the Islamic Republic of Iran for peaceful application of nuclear energy, which in any other state would not even merit news coverage and would be considered an inalienable right, is immediately singled out as part of a plot to acquire nuclear weapons.

On Iran’s nonproliferation record

Iran is a proponent of the peaceful application of nuclear energy and has a record which can be matched by very few states. Iran signed the Nuclear Nonproliferation Treaty (NPT) at an early date and has placed all its nuclear activities under full-scope IAEA safeguards. Iran played an active and constructive role in negotiations toward the indefinite extension of the NPT and supports efforts to negotiate a comprehensive test ban treaty. As a victim of chemical warfare during its war with Iraq, the Islamic Republic of Iran abhors the manufacture, stockpiling and deployment of all types of weapons of mass destruction. In 1974, Iran was the first state in the Middle East to propose the establishment of a nuclear-weapon-free- zone in the region.

On conventional arms buildup

Iran advocates peaceful relations with the outside world and emphasizes the need to promote “security-building” measures with neighboring states, including Iraq. The painful history of Iran’s 8-year war with Iraq has never prompted Iran to expand even her conventional arsenals, as compared to arms expenditure and imports by other Persian Gulf States with smaller populations and less GNP.

On cooperation with the IAEA

Iran has always supported initiatives aimed at strengthening IAEA safeguards so that the unfortunate lapses which occurred in Iraq and North Korea would not be repeated elsewhere. The records of the IAEA attest to this support. On numerous occasions we have invited the IAEA to visit our nuclear establishment in line with our stated policy of transparency. Visits by IAEA inspectors have never resulted in the slightest hint of any nuclear activity which may remotely be construed as “non-peaceful.” This position has never been challenged by any documented allegation.

On Israel

Israel has a track record in the nuclear field which is diametrically opposed to that of Iran but unfortunately receives less exposure by the same news media which tirelessly perpetrate allegations against Iran. Let us consider the following facts: Israel has never joined the NPT. Israel has never placed its nuclear activities under effective IAEA safeguards. Israel’s activities in applying nuclear technology for military purposes are so well-known and well-documented that they need not be elaborated upon here. Israel’s nuclear threat continues to be the major obstacle to the establishment of a nuclear-weapon-free-zone in the Middle East. Israel has a remarkable record of attacking peaceful nuclear installations of the Middle East States. The Israeli attack on the IAEA-safeguarded Iraqi research reactor was a clear violation of international law and may have encouraged the subsequent Iraqi digressions.

On the decision to complete Bushehr

One of the main focuses of the western, mostly American, propaganda has been the decision to complete Bushehr Nuclear Power Plant (BNPP) and the intention of the Russian Government to assist Iran. The Government of the Islamic Republic of Iran has decided to complete BNPP and further develop its nuclear power industry for several reasons: Billions of dollars have already been invested in this project, whose construction was suspended in 1978. Nuclear power is the inalienable right of all parties to the NPT that have forfeited military nuclear applications in return for the benefits from peaceful applications. Total dependence on fossil fuels for power may not be viable in the future in view of environmental considerations and insecurity of sources of supply. By the year 2010, the domestic demand for oil in Iran will make total internal consumption of this product, and consequently suspension of its export, inevitable.

It is often claimed that the completion of the Bushehr reactor will lead to production of nuclear weapons. This is entirely an over-simplistic and inaccurate statement. Any nuclear expert can attest to the complex and costly facilities required before weapon-grade fissionable material can be extracted from irradiated fuel assemblies of a nuclear power plant facilities and expenses far beyond the capacity of all but a few industrialized states. The Russian and Chinese Governments have stated on many occasions that they will never export to Iran any item which may be considered contrary to its obligations under the terms of the NPT.

On the Atomic Energy Organization of Iran (AEOI)

The Atomic Energy Organization of Iran is the only organization in Iran responsible for the promotion of nuclear activities and the implementation of national policies in the nuclear field. To achieve its objectives, Iran will undertake the following:

  • The construction of Esteghlal Nuclear Power Plant in Bushehr with the cooperation of People’s Republic of China and completion of unit No. 1 of Bushehr nuclear power plant by Russia;
  • Installation of a zero-power research reactor and a training reactor;
  • Completion of the existing radio-isotope laboratories and installation of a cyclotron accelerator for producing industrial, medical and research isotopes;
  • Production of various types of lasers;
  • Expansion of capacity of the existing Gamma-Irradiation Center and establishment of centers for food irradiation in other producing regions of the country;
  • Expansion of dosimetry, film-badge and thermo-luminescence reserves;
  • Performance of exploration activities in the country to identify new sources and establishing their definite reserves;
  • Establishment of a pilot plant for production of fuel and nuclear material;
  • Training of about 300 personnel at Ph.D., M.Sc. and B.Sc. levels, and nearly 300 additional technicians in the field of nuclear science and technology.

The Islamic Republic of Iran has suggested to the International Atomic Energy Agency to organize regional training courses and joint projects with other countries in the Middle East and Central Asia, making use of the facilities of the Atomic Energy Organization of Iran.