PREPARED STATEMENT OF JAMES R. LILLEY DIRECTOR, INSTITUTE FOR GLOBAL CHINESE AFFAIRS, UNIVERSITY OF MARYLAND PROLIFERATION: CHINESE CASE STUDIES SUBCOMMITTEE ON INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL SERVICES of the COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE APRIL 10, 1997 ``The United States and China's neighbors would welcome greater transparency in China's defense programs, strategy and doctrine.'' \1\ ``When capable, feign incapacity; when active, inactivity.'' \2\ Former Secretary of State Warren Christopher apparently says and believes in a strategy of ``integration through engagement, and that China should take its place as a world leader as a secure, open and successful nation.'' \3\ Sun-tau, the ancient as well as the greatest Chinese philosopher of the art of war, saw it differently. There is some evidence he still has considerable influence over Chinese strategic thinking. He certainly did over the late Chairman Mao, another architect of Chinese strategy. There is, in short, a perception gap of some size. In addition, in dealing with proliferation and China, there are two basic problems. The first is the flow of hardware, technology, and personnel into China, principally from Russia, and the second problem is the flow outward of hardware and technology from China, principally to the nations of South Asia and the Middle East. In the case of inflows from Russia, we have some hard data on conventional hardware flown but much less on Weapons of Mass Destruction (WMD). The latter would have to be the subject of a classified briefing. There was some evidence when I was at DOD in 1992 but that was almost five years ago. This must be the highest priority target, in my view, for our intelligence community, and I presume that it is. Dr. Stephen J. Blank of the Army War College has written an important essay on this based on open data. He concludes that China's hunger for weapons imports matches Russia's needs and creates a perfect fit between both sides. The Russian arms industry, he points out, is ``out of control and is not animated by any sense of strategic imperatives other than making money for defense producers. . . . We see only the tip of the iceberg when we look at these arms sales to China.'' \4\ Russia has concluded that the starved Russian defense industry--GNP has fallen 40 percent since 1991--needs arms sales to take the road to revival of Russian power and prestige--that production lines must be kept hot. A heavy veil of secrecy, however, falls on the area of WMD. The rationale is: Chinese and Russian strategic interests coalesce to resist U.S. hegemony, but greed, corruption and desire for monopolizing exports drive the sales making them vulnerable to penetration. What we know has been sold to China by Russia are SU-27, state-of- the-art aircraft, plus the technology to build them in China. The total number could be over 200. Modern Kilo class submarines using the most advanced muffling technology and 2 Sovremenny class destroyers along with SS-N-22 Sunburn anti-ship missiles. The Sunburn is designed to counter U.S. Aegis equipped ships. Overall sales may have been as high as $5.2 billion in 1995. More ominous are unconfirmed reports than Russia may be selling SS-18 technology to China; this is an intermediate range ballistic missile. The sale in 1995 of upper stage rocket engines to China, Russian military technicians recruited for long-term service including the best Russian man on MIRVs, and Russian close cooperation in development of new more powerful and better targeted cruise missiles are all issues that require more information. Also, there is some information on Chinese acquisition of Russian 4000 km range Backfire bombers. Russian strategists talk of dealing with the eastern expansion of NATO by strengthening ties to China and therefore supporting China's outward push towards the sea where it faces its greatest challenge, the U.S. Chinese strategists say much the same thing: solidify and stabilize our land borders so we can look ease and south--Taiwan, the Diao Yu islands off Japan, Hong Kong and the South China Sea. Chinese purchases from Russia reflect this orientation--building projection of sea and naval power. These purchases will also enable China to develop an integrated land/sea/air defense system. As for China's exports, ``since 1988, the United States has repeatedly claimed that Chinese exports of missiles and missile components posed a challenge to MTCR provisions'' \5\ whose parameters China has said it will adhere to since 1991. China has been identified as involved in the nuclear weapons program in Pakistan with the latest sale of 5000 ring magnets in the fall of 1995, even though it signed the NPT in 1992. Perhaps the most disturbing sale for the U.S. is the C-802 cruise missiles, the Eagle strike, to Iran for installation in the 10 Hudong class missile boats delivered earlier. This violates our legislation-- the Gore-McCain Act, sections 1604 and 1605, which prohibits companies and foreign governments from transferring advanced conventional weapons to Iran or Iraq. This law specifically refers to cruise missiles. Admiral Redd, former commander of the 5th Fleet, held three news conferences in 1996 to complain about these sales which endangered his men and ships by the Iranian Revolutionary Guard Navy. Former CIA Director John Deutch also complained about these sales. The Administration, however, has concluded that the known transfers are not of a destabilizing number and type. Tell that to our sailors and airmen in the Persian Gulf who are aware the Iranians now have facing our ships launch vehicles for mobility and numerous caves for shelter and concealment along the coast. This points up the central dilemma in dealing with China on these specific issues without any workable strategic understanding on common objectives. Although the Chinese have in fact formally supported the nuclear non-proliferation treaty, are a signatory of the Chemical Weapons Convention, and an adherent to the Missile Technology Control Regime, they do not support The Australia Group, the Wassenar Agreement or the Nuclear Supplies Group. China has asserted three basic principles in its arms transfer policy: 1. Transfers should be conducive to the strengthening of the legitimate defense capabilities of the receiving countries. 2. Transfers should be without harm to regional peace and stability. 3. Transfers should not be used to interfere in the internal affairs of sovereign states. When dealing with the Chinese rhetoric and reality on proliferation, keep in mind that Chinese policy for decades, even centuries, has been based first on high sanctimonious rhetoric, at a second level on Realpolitik, and a third, on victimization. When China sells controversial weapons to what we, though they do not, consider rogue states like Iran, this has multiple advantages for China. First, it makes money for a military establishment on the go which needs all the money it can get; secondly, it appeals to a Moslem state on a governmental basis and this state might then be less inclined to support troublesome Moslem radicals in China's northwest; third it reminds the U.S. that China is a player in the international scene and that it can make the U.S. uncomfortable by claiming it is only retaliating for U.S. arms sales to Taiwan, which China considers part of China. China also says any action by us based on Gore-McCain would be unilateral, it has no international support--China did not participate in any way in a piece of U.S. domestic legislation which impacts severely on China. China reminds us of the fallout from Helms- Burton on Cuba and also of our legislation on nuclear proliferation trying to use export/import loans as leverage on nuclear-related weapons sales. This is unrealistic, i.e., $50,000 of ring magnets causing the withdrawal of $10-20 billion in EX/IM loans. Given the current economic growth in China and American business desire to be involved and competitive, the proposition is unworkable. What then can be done? The most important problem is to engage other key countries when there is an infraction of international standards of organizations to which China belongs, or to which it adheres. China has been excluded from the rulemaking process and tends at times to view international organizations and their universal norms as fronts for other powers. They often participate to avoid losing face and influence. China see complaints about China's violations of international norms to be part of an integrated Western strategy, led by Washington, to prevent it from becoming a great power, to contain China. This often causes us to vociferously deny we are containing China--so China says we should demonstrate our denial by weakening the U.S.-Japan security alliance which the Chinese say is aimed at them, by cutting arms sales to Taiwan, which they say is their sovereign territory, and by refusing to deploy theater missile defense which the Chinese consider an anathema, an instrument of first strike. Perhaps Chinese concerns in these three area telegraph their vulnerabilities. The U.S. needs to have consistency and cohesion with our close allies and friends on enforcement of export control measures, especially when there is solid evidence of an infraction. The U.S. failure to discover chemical precursors on the Chinese ship Milky Way in 1993, when we claimed there were, discredited our proliferation efforts world-wide. This error cannot be repeated. We need to reach some common conclusions with China on the real down-side for both of us in selling modern weapons to certain states in the Middle East and South Asia. This would involve reviewing our respective positions on Pakistan, Iran, Syria, Iraq, Libya, and the Sudan, to name just a few, and to establish some joint objectives. We were able to reach solid consensus with China during the Afghan war and the result was the defeat of the Soviet Union, a benefit to both of us. In addition, we have to establish some discipline and control over our intelligence and export control apparati. One now reads secret intelligence reports in the Washington media describing in some detail intelligence findings on Chinese proliferation attempts. This undercuts our leverage, undermines our policy, and dilutes our effectiveness. We cannot afford posturing and domestically-motivated legislation. Our ineffectiveness on human rights was clearly demonstrated when after much bluster and showmanship in 1993, the Administration reversed course one year later and delinked MFN from human rights. This phenomenon was repeated when the Chinese out-maneuvered the U.S. on the Gore-McCain bill and sold cruise missiles to Iran without retaliation. This compounds the Chinese view that we are not serious. We must determine through skillful handling and operational probing the extent of Chinese proliferation activities--the most important being the full measure of Chinese acquisitions from Russia. We should have some leverage with Russia on this, and it would give a clearer indication of Chinese intentions. By careful probing we were able to establish Chinese vulnerabilities in 1991-92 on proliferation of missiles to Pakistan and could thus tailor specific retaliation to the infractions. This did achieve temporary results. This success could not be repeated because the Chinese acquired other sources for commodities previously supplied by the U.S. Our negotiators are faced by an increasing sense of nationalism in China, and by a more confrontational approach. This should not obscure the leverage we have. We also need to engage the Chinese military more closely because it is a powerful force in proliferation policy in China. Harvard University is bringing Chinese military officers to the U.S. to understand better our system and our strategy. This is a modest beginning. Officially we can also do more with China. We need to gain greater reciprocity and to try to establish some common goals, starting with North Korea, a dangerous WMD problem for both of us. --------------------------------------------------------------------------- \1\ United States Security Strategy for the East-Asia Pacific Region. DOD/ISA, February, 1995. \2\ Sun-tau, The Art of War. Translated by Samuel Griffith. \3\ Preparing for China's Future After Deng. Testimony by Robert Kagan before the Senate Foreign Relations Subcommittee on East Asian Affairs, 18 March 1997. \4\ Stephen J. Blank The Dynamics of Russian Arms Sales to China. U.S. Army War College. March 1997. \5\ Engaging China in the International Export Control Process. RAND 1997. Prepared for DOD.