FR Current Events Project: Keeping Tabs on the Media's Attacks on Bush and the Republican Party

May 31, 2002, 8:45 a.m.
Bank Scam
The House of Representatives keeps Enron on welfare.

By Timothy P. Carney

While Congress, like a pack of hunting dogs, has been looking under every rock in Texas and Washington for guilty parties in the Enron debacle, Congress has just given a gold star and a pat on the back to Ken Lay's chief accomplice.

The Export-Import Bank, a federal agency whose function is to loan money to foreign companies, won a four-year reauthorization on a voice vote in the House earlier this month, and the conference report will be passed directly after recess. All has been happening with little fuss, despite new evidence of its complicity in Enron's shady dealings.

Congress created the Export-Import Bank during the Great Depression as a way of encouraging exports. Ex-Im loans money to foreign governments or companies so that they will buy American goods. It also guarantees private bank loans to foreign buyers.

While the "bank," with hundreds of millions of dollars to hand out every year, has many well-heeled and well-connected supporters, the opposition sports some powerful lawmakers as well as powerful arguments. Majority Leader Dick Armey (Tex.), Majority Tom DeLay (Tex.), GOP Conference Chairman J. C. Watts (Okla.), and former Democratic Whip David Bonior (Mich.) have all voted to kill the bank in recent years.

Conservative lawmakers oppose Ex-Im — a federal agency redistributing wealth from taxpayers to foreign and U.S. corporations — on principle. A few stories about Ex-Im's recent loans and loan guarantees shows clearly the lesson we all know: Any time something really screwed up happens, the government is probably behind it.

As Americans move in and out of energy crises and price spikes, the Jiangnan shipyard in Communist China will have all the juice it needs, thanks to U.S. tax dollars. In 1996, the Clinton administration skirted its way around a law preventing loans to Marxist regimes, and signed off on a $120 million low-interest loan to the China National Nuclear Power Corporation (CNNP).

For this loan to go through, President Clinton had to sign a letter saying the loan was in our national interest. His signature on that letter was interesting in the light of his administration's finding weeks before that CNNP had transferred to Pakistan nuclear-weapons materials.

This loan from taxpayers helped Americans, Ex-Im contended, because the CNNP was building the plant using the goods and services of the Bechtel Corporation, an American-based company. Bechtel, and the family that runs it, have given over $1.5 million in campaign contributions over the last six cycles, giving slightly more to Republicans than Democrats.

Just as generous in Washington — and frankly getting a better return on its investment — is Boeing. In terms of dollar amounts, Boeing has benefited from at least 42 percent of the loans and long-term guarantees from Ex-Im in each of the last three fiscal years.

It may, at first glance, seem unbelievable that a federal agency could exist for the primary purpose of subsidizing one company's exports. But after a quick look at some Federal Elections Commission filings, it all makes sense. Boeing, like Bechtel, has given over $1.5 million to both parties over the last six election cycles.

The Ex-Im argument is that the loans help not only Boeing, but the subcontractors and their workers. That argument is difficult to swallow in Wichita, Kansas, where the tail sections of Boeing 737s used to made. The Red Chinese demanded that Boeing build those sections in Xian, China using Chinese labor. Ex-Im made the sales possible, and so the move to Xian necessary.

But nobody has used Ex-Im as craftily as Enron. The failed energy trader went down with hundreds of millions of dollars in taxpayer liability — money it borrowed so that it could by goods and services from, well, Enron.

Enron owned 50 percent of a Turkish electric company, Trakya Elektrik, which got a $250 million loan from U.S. taxpayers via Ex-Im in 1995-96 so that it could buy from Enron. Similarly, Ex-Im extended in 2000 a $135 million in loans to a Venezuelan natural gas plant owned 49.26 percent by Enron. The U.S. exporter, again, was Enron.

In other words, U.S. taxpayers leant money to Enron so that Enron could buy things from Enron.

But Enron's overseas ventures also got Ex-Im loans to buy from other companies, such as Bechtel and GE. One such deal — at the Dabhol power plant in India — has made news lately because the plant had to close down after its only client, a local utility, couldn't pay its bills.

These deals — where taxpayers' money was put at risk as Enron shifted money from its left hand to its right — were part of Enron's hocus-pocus accounting. If every time it sold something to itself, Enron got a low-interest loan from Uncle Sam, it never had to make a real sale and could keep driving its claimed profits skyward.

Out of $650 million in Ex-Im loans and loan guarantees to Enron during the Clinton years, over $500 is still outstanding, and the taxpayers could end up footing the bill.

Everyone knows about Enron's generosity to both parties, but they had ties that ran deeper. Rebecca McDonald, chairman and CEO of Enron Global Assets, sat on Ex-Im's advisory committee. The Los Angeles Times reported Tuesday that Eduardo Aguirre, now Ex-Im's vice-chairman, wrote an e-mail to Ken Lay in November when times were getting rough, promising him, "I'm only as close as the phone if there is anything I can do for you."

The liberals who oppose Ex-Im hope to reform it. But in its essence, it is a bad agency. Taking money from would-be consumers in the U.S. cannot make jobs. The frustrating thing is that many Republican lawmakers and business interests know this fact, but either forget it or ignore it when the wealth is being transferred to their friends.

Perhaps more distorting of the market is the loan guarantees Ex-Im issues. The General Accounting Office has found that for every dollar Ex-Im underwrites, it crowds out probably just as much lending capital, if not more. That means a loan that, on an even playing field, looks better investment to a bank, gets spiked for an Ex-Im-guaranteed loan to a company in the favor of Washington's power elite. This can only hurt market efficiency.

Just before the Memorial Day recess, the House passed an extension for Ex-Im until June 14. Before then, Congress must pass the conference report on the agency's four-year extension, or Ex-Im folds.

Republicans have a chance to live up to their free-market rhetoric, but it would take standing up to their big-business patrons. Liberals have a chance to win one for the little guy, but it would involve spurning their rich friends. If anyone forces a floor vote on the final reauthorization of Ex-Im in early June, pay attention. You'll see who really believes in freedom.

— Timothy P. Carney is a reporter for the Evans-Novak Political Report.

August 1998 Pakistan

Special Weapons News

Clinton Will ask Congress to Repeal Sanctions on Pakistan ASSOCIATED PRESS OF PAKISTAN NEWS SUMMARY (20-08-1998) ): President Clinton is going to ask the Congress to repeal all such laws, including Symington and Pressler Amendments, that impose sanctions on Pakistan.

Pakistan in dire need of 'concessions' from US on CTBT, Kashmir issues By Nayyar Zaidi The News International Pakistan 17 August 1998 - A variety of serious political developments in both Pakistan and India have cast a long shadow on the forthcoming Pakistan-US-India talks. "Any optimism that might have prevailed about the positive outcome of these talks has evaporated with the most recent violent events and political developments in Karachi and the Vajpayee's severe health problems," an observer added.

Shamshad-Talbott meeting: US to take 'some hard decisions' after talks By Shaheen Sehbai Dawn 16 August 1998 -- The United States believes that the next round of Pakistan-US talks between Strobe Talbott and Secretary Shamshad Ahmed, to be held in London, would be final and decisive and Washington would then take "some very hard decisions."

This was stated by a senior White House official at a rare briefing for Pakistani community leaders and Pakistani journalists at the National Security Council headquarters in the White House on Aug 13.

Pakistan has no aggressive designs, nuclear capability guarantee for national defence ASSOCIATED PRESS OF PAKISTAN NEWS SUMMARY (15-08-1998)

Pakistan-India talks prospects dim, says envoy By Shaheen Sehbai Dawn 14 August 1998 The prospects of bilateral talks between India and Pakistan are "very very dim", Pakistan Ambassador to Washington, Riaz Khokhar said on Wednesday.

PRESIDENT CLINTON TELLS LAWMAKERS OF EFFORTS TO RESOLVE F-16 ISSUE Embassy of Pakistan News 14 August 1998 -- President Clinton has assured his administration's efforts to reimburse Pakistan for the 28 F-16 aircraft Pakistan paid for but has never received.

No bail-out without deal on CTBT By Shaheen Sehbai Dawn 13 August 1998 -- The United States has clearly indicated to Islamabad that any package to bail out Pakistan, either by the IMF, Islamic Bank or the Paris Club, was linked to progress in the on-going talks on Comprehensive Test Ban Treaty.

India sees positive change in Pakistani attitude The Times of India 12 August 1998 - India has ``perceived a positive change'' in the Pakistani attitude towards the normalisation of bilateral relations. ``In fact, in the last few days, there have been hints from Pakistan that the two countries could even go for fixing the date of the next round of foreign secretary-level talks before Prime Minister Atal Behari Vajpayee and Prime Minister Nawaz Sharif meet on the sidelines of the forthcoming non-aligned summit at Durban later this month.''

Pakistan's last gamble Prem Shankar Jha The Hindustan Times 11 August 1998 -- Contrary to what Mr Vajpayee said in Parliament, Pakistan did not overplay the Kashmir card in Colombo, and get its knuckles rapped. Colombo was only the first stage of a last, desperate, gamble to wrest Kashmir from India, by literally blackmailing the world into imposing a solution to the Kashmir dispute on India. Both the Prime Minister and Foreign Minister of Pakistan have now issued the threat of war, and what is more, nuclear war, to India.

Shaheen missile can be test-fired any time The News International Pakistan 09 August 1998 - Pakistan can test-fire 750-km range Shaheen missile any time, according to top Pakistani nuclear scientist Dr Samar Mubarakmand, Director (Technical) of Pakistan Atomic Energy Commission (PAEC). Pakistan was about to test-fire Shaheen -- which has a range of 750 km with a payload of 1,000 kg -- in May this year, but the test was postponed because of political reasons. Work on long range Shaheen-II is at advanced stage, though sources have avoided to disclose the range and payload of this missile.

PM calls for unity on nuclear issue The News International Pakistan 07 August 1998 - Offering an olive branch to his political foes, Prime Minister Nawaz Sharif called upon politicians of all shades to foster unity to frustrate attempts being made to punish Pakistan for demonstrating its nuclear capability.

Sartaj replaces Gohar as foreign minister The News International Pakistan 07 August 1998 - In the first phase of cabinet reshuffle, Senator Sartaj Aziz has replaced Gohar Ayub Khan as Foreign Minister, while Dr Hafiz Pasha has been appointed Adviser to the Prime Minister for Finance.

N-tests corrected power imbalance The News International Pakistan 06 August 1998 - The Chairman Joint Chiefs of Staff Committee and Chief of Army Staff (CoAS), General Jehangir Karamat, has said that "had we not reacted to correct the nuclear imbalance our security would have been jeopardised."

Solarz lobbying for Indian N-programme The News International Pakistan 05 August 1998 - Former US Congressman Stephen Solarz has become an Indian lobbyist, urging the American administration to recognise India as the newest member of the world's nuclear club instead of punishing it with sanctions.

How objective are U.S. lobbyists? By Sridhar Krishnaswami The Hindu 05-08-1998 :: Pg: 14 :: The spotlight is on the former Congressman, Mr. Stephen Solarz, and his lobbying firm, APCO Associates, which has since been retained by the Indian Embassy here and on the kind of advice the former law maker had to give the Senate Foreign Relations Committee on May 13, 1998, after the Indian nuclear tests.
Pak. should sign CTBT, says ex-Foreign Minister By Amit Baruah The Hindu: 05-08-1998 :: Pg: 14 :: Sardar Assef Ahmed Ali, former Pakistan Foreign Minister, has said that Islamabad should sign the Comprehensive Nuclear Test Ban Treaty (CTBT) if sanctions were lifted. He was addressing a seminar organised by the Coalition for Nuclear Non-Proliferation in Pakistan (CNNP), a newly-formed group.
U-S / KASHMIR Voice of America 03 August 1998 THE UNITED STATES IS OFFERING TO MEDIATE TALKS BETWEEN INDIA AND PAKISTAN ON THE DISPUTED REGION OF KASHMIR.

U.S. Department of State Daily Briefing , AUGUST 3, 1998 QUESTION: Our sources are speculating to us that Pakistan is being driven to irrational actions because of its economy suffering from our sanctions. Congress is considering a 12-month waiver on our sanctions. Do you foresee any way that that process could be speeded up in order to take some of the pressure off?

Pakistan may not quit SAARC The Hindustan Times 02 August 1998 - A striking feature of the just concluded 10th SAARC summit in Colombo was Pakistan's determined bid to get the assembled heads of government to formally and collectively discuss the pressing question of South Asian security.

Indian fighter planes intrude into AJK The News 02 August 1998 - PAF fighters come into action; 13 more killed by Indian firing across LoC; emergency declared in hospitals; death toll touches 46 in two days; Azad Kashmir to observe protest day on 3rd; GOC visits forward areas
Pak proposals on Kashmir 'neurotic': Indian official The News 02 August 1998 - India rejected Pakistani proposals to solve their long-running Kashmir dispute because they were "neurotic" and "based on fantasies", a top Indian bureaucrat was quoted as saying Saturday.

INDIA / PAK / FIRING Voice of America 02 August 1998 -- INDIA AND PAKISTAN TRADED ARTILLERY FIRE ACROSS THE DISPUTED KASHMIR BORDER FOR THE FOURTH STRAIGHT DAY, SUNDAY.

PAK INDIA KASHMIR Voice of America 01 August 1998 -- PAKISTAN HAS ACCUSED INDIA OF SABOTAGING EFFORTS TO RESTART A DIALOGUE BETWEEN THE TWO COUNTRIES, BY INTENSIFYING MILITARY EXCHANGES ON THE DISPUTED KASHMIR BORDER. TENSIONS ARE HIGH AFTER FOUR DAYS OF FIGHTING WHICH LEFT AS MANY AS 65 PEOPLE DEAD AND DOZENS MORE INJURED.

India follows pattern of sabotaging talks The News 01 August 1998 - The Indian army's unprovoked firing across the Line of Control strengthens fears that the Hindu nationalist BJP government has started unfolding its agenda on Kashmir. The intensity and volume of LoC violations speak of unprecedented new element of "rules of engagement."

India-Pakistan negotiations fail By Hasan Akhtar Dawn 01 August 1998 -- Talks between India and Pakistan aimed at easing bilateral tensions have failed to break the ice. Spokesman Tariq Altaf briefing newsmen here on Friday said their attempt to resume the stalled talks had failed as India continued to maintain its hardline stand on Kashmir.

Indian shelling death toll rises to 34 By Tariq Naqash Dawn 01 August 1998 -- The Indian aggression on the border areas of Azad Kashmir has left at least 34 civilians dead and more than 71, including 13 Pakistani soldiers, injured. The shelling continued the whole day long, causing at least 13 deaths and 25 casualties.

ASSOCIATED PRESS OF PAKISTAN NEWS SUMMARY (01-08-1998) Nawaz terms outcome of his talks with Indian counterpart as "Zero" - Indian rigidity blamed for stalemate in resumption of Indo-Pak talks

RADIO PAKISTAN HOME BROADCASTS 01-08-1998 -- In occupied Kashmir, Indian troops in their continued reign of repression brutally tortured forty people in Thanamandi area of Rajouri district. According to reports the occupation forces destroyed a number of houses and harassed women folk in the area. The troops attacked a caravan of shepherds in Kishtwar area killing three of them. Dozens of cattle were also killed. A Pakistan Foreign Ministry spokesman has said that no progress could be achieved despite two rounds of talks between Foreign Secretaries of Pakistan and India in Colombo.

English News Headlines PAKISTAN TELEVISION CORPORATION 01-08-1998 -- THERE HAS BEEN NO PROGRESS AT THE SECRETARY-LEVEL TALKS BETWEEN INDIA AND PAKISTAN, IN COLOMBO. INDIA UNDERMINED THE LITTLE CHANCE OF SUCCESS THE TWO PRIME MINISTERS HOPE TO ACHIEVE IN COLOMBO BY RESORTING TO UNPROVOKED FIRING ALONG THE LINE OF CONTROL KILLING 26 INNOCENT CIVILIANS.

CHINESE NUCLEAR EXPORTS TO PAKISTAN (Senate - February 07, 1996)

[Page: S1070]
Mr. PRESSLER. Mr. President, I want to bring to the attention of my colleagues some very disturbing developments in weapons proliferation in south Asia. Last year may go down in history as one of the worst years for the cause of nuclear nonproliferation. New evidence released this week merely reinforces this grave conclusion.

On February 5 the Washington Times reported that, in 1995, Chinese defense industrial trading companies exported 5,000 ring magnets to Pakistan. Under the terms of an international agreement with the International Atomic Energy Agency, the export of ring magnets is strictly controlled because of the magnets' critical use in the production of nuclear weapons. Specifically, ring magnets are used in gas centrifuges, which are used to extract enriched, weapons-grade uranium from uranium gas.

Just this morning, Mr. President, the Washington Post reported a similar story, finding that American intelligence officials believe there is no doubt that the transfers occurred. Chapter 10, section 101, of the Arms Export Control Act contains very severe penalties that are to be imposed on both the exporting country and the importing country for illicit nuclear transfers of this type. Specifically, the law states that no Federal assistance--economic or military--may be made available to either country. In the case of the receiving country, Pakistan, this would mean the suspension of economic and military assistance, including military training or the transfer of defense articles. In the case of the delivering country, the People's Republic of China, the operations of the United States Export-Import Bank would be blocked.

These shocking revelations raise three fundamental issues:

First, numerous officials in the Government of Pakistan have been quoted, as recently as 1995, that it was no longer enriching uranium for nuclear weapons production. In other words, Pakistan claimed it had frozen its bomb program. We could never verify those statements, but that was what we were led to believe. We now know differently.

Second, the People's Republic of China has made a series of pledges to the United States with regards to the proliferation of weapons of mass destruction. Again, we now know differently.

Finally, during most of 1995--when the transfer of nuclear technology from the People's Republic of China to Pakistan was taking place--representatives of the Government of Pakistan and the Clinton administration were actively lobbying the Congress to weaken United States non-proliferation law to allow for a one time transfer of military equipment valued in excess of $370 million, as well as the resumption of nonmilitary aid. As we all know, last year the Senate passed the so-called Brown amendment, which authorized the transfer of this military equipment to Pakistan. It also repealed portions of the so-called Pressler amendment, a law which prohibited any United States assistance to the Government of Pakistan because of its possession of nuclear explosive devices.

This last point--the passage of the Brown amendment--is particularly disturbing. I opposed the Brown amendment. I opposed it in part because it called for the transfer of military equipment without obtaining one single concession from Pakistan on the issue of nuclear proliferation. Frankly, if Members of Congress were aware of the ring sale--this violation of U.S. law --I do not believe the Brown amendment would have passed.

It is unfortunate enough that our Nation would transfer to Pakistan, United States-made military equipment without any non-proliferation concession. Now we face the real and embarrassing prospect of having weakened United States non-proliferation law for Pakistan's benefit at the same time Pakistan was expanding its nuclear weapons capability in violation of United States law. This irony would be humorous if the issue wasn't so serious.

Accordingly, in view of the confirmations of these transfers, I have written today to President Clinton urging that he enforce the law. Specifically, any contemplated transfer of military equipment to Pakistan, as called for in the Brown amendment, should cease immediately. Further, sanctions called for under the law also should be applied to Chinese exporting companies.

Finally, Mr. President, it may be worth exploring if officials within the Clinton administration knew of this blatant violation of U.S. nonproliferation law while the administration was lobbying to pass the Brown amendment. And if they did, in fact, know it would be important to determine if they informed Members of Congress of this development. I intend to raise this matter with the chairman of the Intelligence Committee in the very near future.

Mr. President, I ask unanimous consent that articles in the Washington Times of February 5 and the Washington Post of February 7 as well as my letter to the President of this date be printed in the Record.

There being no objection, the articles were ordered to be printed in the Record, as follows:

[Page: S1071]

From the Washington Times, Feb. 5, 1996

[FROM THE WASHINGTON TIMES, FEB. 5, 1996]

China Nuclear Transfer Exposed

HILL EXPECTED TO URGE SANCTIONS

(BY BILL GERTZ)
The CIA has uncovered new evidence China has violated U.S. antiproliferation laws by exporting nuclear weapons technology to Pakistan.

Evidence that China has transferred ring magnets--used in gas centrifuges that enrich uranium for weapons--is likely to intensify congressional pressure on the Clinton administration to impose sanctions as required by law.

Last week, several senators asked the president in a letter if China's sale of advanced cruise missiles to Iran, disclosed Tuesday by Vice Adm. Scott Redd, commander of U.S. naval forces in the Persian Gulf, also violates counterproliferation laws.

State Department officials are expected to confront Chinese Vice Foreign Minister Li Zhaoxing, who arrives in Washington today, over the nuclear technology and other weapons-proliferation exports.

The administration in the past has sought to minimize Chinese nuclear and missile-proliferation activities. But senior State Department officials are said to be very worried that China's proliferation activities can no longer be ignored without undermining the credibility of U.S. efforts to halt the spread of nuclear arms technology and missiles.

`The Chinese are their own worst enemy,' a White House official said when asked about the new proliferation activities by Beijing.

The CIA in 1992 obtained intelligence indicating China had transferred M-11 missiles to Pakistan, including photographs of missile canisters. But the State Department ruled there was no proof missiles were inside, thereby avoiding having to invoke tough sanctions.

Instead, the department in 1993 applied much milder sanctions for transferring what is said was M-11 technology, and then lifted the sanctions after a year.

According to intelligence sources, the CIA recently notified the State Department that China sold 5,000 ring magnets to the A.Q. Khan Research Laboratory in Kahuta, Pakistan, last year.

Officials did not further identify the originating firm in China, but one congressional source said the magnets were probably produced by the China National Nuclear Co., a government-owned firm that makes nuclear-related products.

CIA spokesman Mark Mansfield declined to comment when asked about the Chinese transfer of nuclear technology. Spokesmen for the Chinese and Pakistani embassies could not be reached for comment.

According to congressional sources, State Department officials believe China's export of ring magnets violates the Arms Export Control Act. Under an amendment to that law, the 1994 Nuclear Proliferation Prevention Act, the president is required to impose sanctions on any country that `transfers to a non-nuclear weapon state any design information or component' used in building nuclear arms.

Gas centrifuges are used to extract enriched uranium from uranium gas. Intelligence officials believe the magnets sent to Pakistan will be used in special suspension bearings at the top of a spinning chamber in the centrifuges.

`This is another example of the ruthless way the Chinese are violating every nonproliferation pledge they've made to us,' said William C. Triplett, former chief counsel of the Senate Foreign Relations Committee.

On Wednesday, Sens. Larry Pressler of South Dakota, Alfonse M. D'Amato of New York, Connie Mack of Florida and Arlen Specter of Pennsylvania wrote to President Clinton about Iran's test-firing a Chinese C-802 advanced anti-ship cruise missile.

`Clearly, Adm. Redd's acknowledgment of the C-802 test-firing would appear to be an official recognition of an illegal transfer to Iran to advanced conventional weapons by Chinese defenses industrial trading companies,' Mr. Pressler said in a statement. `This is a vital national security matter and demands immediate attention.'

In their letter, the four senators asked the president either to `enforce the sanctions pursuant to federal law or to seek a waiver.'

Under an amendment to the fiscal 1993 defense authorization law, the president is required to impose sanctions on any nation that transfers advanced conventional weapons to either Iran or Iraq. The measure was sponsored by Sen. John McCain, Arizona Republican, and Sen. Al Gore, Tennessee Democrat and now vice president.

Mr. McCain, in a separate letter to Undersecretary of State Lynn Davis, the department's top arms-control policy-maker, asked whether the Chinese cruise missile transfer to Iran violates federal law and contributes to Iran's efforts to acquire destabilizing advanced conventional arms.

In the House, Rep. Nancy Pelosi, California Democrat and a member of the House Intelligence Committee, asked the committee last week to hold hearings on China's proliferation activities.

It also was a key topic when several members of the House International Relations Committee met last week with Peter Tarnoff, undersecretary of state for political affairs.

The disclosures about export of missile and nuclear weapons components come at a time of increased tensions between Washington and Beijing.

The State Department announced last week that it has granted a visa to Taiwan's vice president, Li Yuan Zu. China protested the action and has been threatening to use force to recapture Taiwan, which it regards as a renegade province, not an independent country.

Other Chinese activities that have severely eroded support in Congress for a waiver of sanctions:

The expulsion last week of three Chinese nationals from Ukraine for trying to obtain secret technology on SS-18 ICBM boosters from a missile-production facility in Dnipropetrovsk.

Ongoing copyright violations involving U.S. goods.

Continued nuclear weapons testing.

Dispatching missile technicians to Pakistan in 1994, indicating the transfer of M-11 technology was still under way at a time when China was denying such activities.

--

[Page: S1072]

From the Washington Post, Feb. 7, 1996

[FROM THE WASHINGTON POST, FEB. 7, 1996]

China Aids Pakistan Nuclear Program

PARTS SHIPMENT REPORTED BY CIA COULD JEOPARDIZE U.S. TRADE DEALS

(BY R. JEFFREY SMITH)
U.S. intelligence officials have concluded that China sold sensitive nuclear weapons-related equipment to Pakistan last year, an act that could lead the Clinton administration to halt U.S. government financing for nearly $10 billion worth of American business deals in China.

President Clinton's advisers are studying the intelligence report to determine how they should respond, according to several officials. Legislation approved by Congress in 1994 requires that he either approve the sanctions, which would block loan guarantees by the U.S. Export-Import Bank, or formally waive the penalties, once such an intelligence report is received.

In a previous arms transfer case, involving the alleged sale of Chinese missiles to Pakistan, the State Department ducked imposing sanctions by concluding that the evidence was not strong enough. A senior official commenting yesterday at the State Department about the new report of nuclear aid to Pakistan, said that `as of now' the United States has not determined that China has `done anything that would trigger sanctions under U.S. legislation.'

But several other U.S. officials privy to the new intelligence report said there is no doubt about its conclusions, a circumstance that could put the administration in a bind because it prefers to avoid damaging extensive U.S. trade ties with China.

The aim of the sanctions would be to punish China for assisting Partisan's production of highly enriched uranium, a key ingredient of nuclear weapons. But U.S. officials say the nuclear transfer is only one of several recent actions by China that may wind up disrupting its commercial and diplomatic relations with the United States.

China's export to Iran late last year of anti-ship cruise missiles--confirmed last week by a senior U.S. Navy official--may also qualify as a sanctionable offense, according to some U.S. officials and lawmakers. Another U.S. law requires broad economic penalties against any nation that gives `destabilizing numbers and types of advanced conventional weapons' to Iran, which Washington has branded a terrorist nation.

U.S. officials said that the number of missiles sold by China may not be large enough to force the drastic cutoff of development bank assistance, technical assistance, military exchanges and sensitive exports mandated by the law. But four senators recently wrote to Clinton to say that either sanctions or a waiver are required in this case.

In yet another sign of increasingly rocky U.S. relations with China, some administration officials have raised the prospect of imposing tariffs later this year on billions of dollars in trade to protest China's refusal to halt illicit copying of U.S. trademark goods.

Washington is also trying to persuade China to adopt a less threatening posture toward Taiwan. Beijing views the island as a renegade province, but Taiwan receives U.S. arms and is supported by many U.S. lawmakers because of its considerable prosperity and political openness relative to China.

`There's a recognition that this is going to be a very difficult year in U.S.-China relations,' a senior State Department official said. He explained that with China in the midst of a difficult transition to new political leadership, and `our own domestic environment' affected by an upcoming presidential election, the two nations may find themselves being pulled toward opposing positions on matters they previously sidestepped or settled through compromise.

Washington has long had concerns about Chinese military assistance to Pakistan, which Beijing regards as an erstwhile political ally and military counter-weight to India. U.S. intelligence officials have long alleged that Pakistan's nuclear arsenal is largely derived from design information supplied by China, a charge that Beijing denies.

U.S. intelligence reports have also pinpointed the apparent location in Pakistan of crated, Chinese-made, medium-range missiles, which if confirmed would force a cutoff of billions of dollars worth of U.S.-China trade. But the administration has decided that no sanctions need be invoked until the missiles are sighted outside their crates.

The latest Chinese nuclear-related transfer to Pakistan was recently detected by the CIA and first reported publicly in Monday's editions of the Washington Times. It involves a shipment of 5,000 specialized magnets to the Abdul Qadeer Khan Research Laboratory in Kahuta, named for the father of the Pakistani nuclear bomb program.

According to two knowledgeable officials, the magnets are clearly meant to be installed in high-speed centrifuges at the plant that enrich uranium for nuclear weapons.

Several congressional sources said that the shipment thus triggers provisions of the 1994 Nuclear Proliferation Prevention Act, which forces `a cutoff of Export-Import Bank assistance' involving trade with China.

Among the large U.S. companies that would be affected by a loan guarantee cutoff are Boeing Co., AT&T, and Westinghouse Electric Corp.

`We do have genuine concerns about any possible nuclear-related transfers between China and Pakistan and we have raised these concerns . . . at very senior levels,' the senior official said at the State Department.

`We will do whatever is required under U.S. law, but . . . we have to have a very high degree of confidence in our evidence,' the official added. `As of now we have not determined that China . . . has done anything that would trigger sanctions under U.S. legislation. But this is obviously under continual review.'

--
U.S. Senate,
Washington, DC, February 7, 1996.

The President,
The White House,
Washington, DC.

Dear Mr. President: The United States Intelligence Community is confirming on background that the People's Republic of China (PRC) has violated U.S. non-proliferation laws by exporting nuclear weapons technology to Pakistan. According to today's Washington Post, our intelligence officials believe `there is no doubt' that an illicit transfer has taken place.

Specifically, the Washington Times first reported on February 5 that, in 1995, Chinese defense industrial trading companies sold 5,000 ring magnets to the Abdul Qadeer Khan Research Laboratory in Kahuta, Pakistan. Under an international agreement sponsored by the International Atomic Energy Agency, the export of ring magnets is severely restricted because of their critical use in nuclear weapons production.

This reported sale of nuclear technology raises two key concerns many in Congress have held for some time: Contrary to the most solemn declaration of the Government of Pakistan, Pakistan is attempting to expand its supply of weapons-grade enriched uranium, and Chinese companies are actively fueling and profiting from a dangerous nuclear arms race in South Asia.

Chapter 10 of the Arms Export Control Act contains a set of specific prohibitions governing illicit nuclear transfers. If the President determines that a country has delivered or received `nuclear enrichment equipment, materials or technology,' no funds may be made available to that country under the Foreign Assistance Act of 1961. This would include all civilian and military equipment, including that provided by the Brown Amendment to the Fiscal Year 1996 Foreign Operations Appropriations Act. The prohibitions also extend to military education and training.

I ask that you make the determination called for by Chapter 10. Unquestionably, this sale of nuclear technology represents a serious violation of federal law, as well as international nuclear non-proliferation agreements.

No issue is more important to the security of all people than nuclear non-proliferation. For that reason, I urge your Administration to take immediate and certain action to enforce the law with respect to this sale of nuclear technology and freeze all assistance, civilian or military, to Pakistan. The sanctions called for under the law should be applied to Chinese exporting companies.

Sincerely,

Larry Pressler,
U.S. Senator.

Syria Circumvents U.S. Attempts to Restrict Spread of Weapons Technology

Syria is believed to be acquiring Chinese missile technology through a circuitous route.

By Sue Lackey
Special to ABCNEWS.com

W A S H I N G T O N, Aug. 23 — Syria is circumventing U.S. restrictions to obtain missile technology that could make it a much wider threat throughout the Middle East, according to high-placed government and intelligence sources.
The missiles Syria is trying to build could strike targets throughout Israel and as far away as Ankara, Turkey, with chemical — and perhaps even nuclear — warheads.
Syria’s efforts could prove especially sensitive now, as Israel — under the new leadership of Prime Minister Ehud Barak — makes overtures to Syrian leader Hafez Assad toward restarting long-stalled peace talks.
From North Korea to Pakistan to …
Over the last decade, the Syrian government has attempted to upgrade its strategic defense system by acquiring the advanced M-9 medium-range ballistic missile directly from China. But under pressure from the Pentagon, the Chinese two years ago backed out of a deal to sell them the technology.
Now, say U.S. and Israeli intelligence sources, Syria is obtaining Chinese medium-range, mobile-launch missile technology through a circuitous route that involves Iran, Pakistan and North Korea.
“Some of the transfers have gone through Hong Kong, have gone through third-party ports like Kuala Lumpur, other places where the stuff can be moved, but not directly traced,” says Rep. Curt Weldon, R-Pa., a member of the House Armed Services Committee. Weldon participated in the Cox committee, which issued a report earlier this year that accused China of stealing U.S. nuclear and other secrets.
“Anyone who monitors our intelligence intercepts can see the daily reports of items that are about to be transferred to rogue states, and many of those transfers involve Syria. That means they now have tremendous leverage in any negotiation with Israel,” he adds.
The trail starts with Pakistan. China in 1992 sold 34 M-11 short-range ballistic missiles to Pakistan.
The Clinton administration imposed sanctions on China in August 1993, and lifted them in October 1994 after the State Department received assurances from China that it would no longer sell missiles.

China Keeps at it
But in December of 1994, intelligence intercepts from the National Security Agency — the main U.S. international monitoring arm — indicated a division of the government-owned China National Nuclear Corp. had completed a deal to provide 5,000 custom-made ring magnets, a key component in producing nuclear fuel, to Pakistan in violation of the Nuclear Proliferation Prevention Act.
“We didn’t actually sanction [the Chinese] in that case,” says a proliferation expert with President Clinton’s National Security Council, “although we did suspend the activities of the Export-Import Bank in China, a much broader sanction than one particular Chinese entity. (The Export-Import Bank deferred loan approvals for American businessmen operating in China for 30 days in 1996).
“We decided that the activity that took place, which involved providing ring magnets to Pakistan, was something the company did but the Chinese government had not approved,” the expert said. “The Chinese have made certain commitments about what their policies are with respect to missile transfers, and we remain concerned that the Chinese export control system is not adequate to fulfill those commitments.”
Pakistan continued to acquire sophisticated M-9 missile components from China and the Nodong missile from North Korea, which utilizes Chinese-based technology, say U.S. and Israeli sources.
Iran, facing potential nuclear and chemical threats from both Iraq and Israel, also acquired Nodong missile technology from North Korea and M-9 technology from Pakistan, using it to develop its indigenous Shahab-class missiles, the most sophisticated of which may be able to reach Europe within a decade.

Final Link in Chain
Pakistan, which tested its first nuclear device in 1998, is capable of buying the missiles needed for delivery of nuclear payloads, but lacks the ability to produce them. With China under close watch since the U.S. espionage scandal broke, Pakistan turned to a loose alliance with Iran, and continued to purchase Chinese and North Korean technology supplied through third-party transfers, say senior U.S. intelligence sources.
“Pakistan has essentially no indigenous production capability;” says John Pike of the Federation of American Scientists. “North Korea has developed the [missile] program, Iran is attempting to finish it, and Pakistan is helping them pay for it.”
The Syrians, say the sources, then turned to Iran, which supplied its with assistance in developing its medium-range strategic missile system in an effort to contain Israel and its neighbor Turkey.
Syrian officials in Washington did not return repeated requests for comment.

Copyright ©1999 ABC News Internet Ventures.

HOOVER DIGEST
1999 No. 4

Bill Gertz

Missile Deception

U.S. intelligence learned as long ago as 1995 that China was selling nuclear technology to Pakistan—yet Washington did nothing. Bill Gertz explains how corporate interests waylaid the national interest.

Alarm bells went off at the headquarters of the supersecret National Security Agency on a cold December day in 1995. The NSA, located inside an army base at Fort Meade, Maryland, is the U.S. intelligence community’s ears around the world. It picks up millions of communications, from coded military radio transmissions to cellular-phone conversations by international weapons dealers.

This time, NSA listeners got the immediate attention of Vice Admiral J. Michael McConnell, who, as the agency’s director, was the nation’s premier electronic spymaster. The intercept that crossed his desk revealed that a year earlier, in December 1994, China completed a $70,000 deal to sell Pakistan five thousand custom-made “ring magnets” produced by an arm of the Chinese government’s China National Nuclear Corporation.

The intelligence report noted that the devices—ring-shaped, high-technology magnetic bearings—are key components in making fuel for nuclear weapons. The technology transfer remained secret until this reporter broke the story on the front page of the Washington Times in February 1996.

But the Clinton White House made sure that the State Department did not conclude China had violated the nuclear nonproliferation treaty or impose legally required economic sanctions. The administration’s policy was that sanctions against China should be avoided, that they would be bad for the international business that Commerce Secretary Ronald Brown was trying to drum up. “The lengths this administration went to to ignore great dangers to U.S. national security in the name of promoting business were unprecedented,” said a former military officer who worked in the White House and declined to be named.

On May 29, 1998—about two and a half years after U.S. intelligence flagged the China deal with Pakistan—the ground shook in a remote region of southwestern Pakistan as that nation conducted an underground nuclear test. It was the beginning of a new arms race in Southwest Asia.

Back in December 1995, NSA had sent a top-secret cable under Admiral McConnell’s title to the head of the CIA’s Non-Proliferation Center and to senior officials at the Pentagon, White House, and State Department, notifying them of China’s shipment of ring magnets to Pakistan. The intelligence report created a furor within the Clinton administration over whether China had helped Pakistan make fuel for its nuclear weapons arsenal, estimated at ten to fifteen unassembled nuclear devices. At the State Department, Robert Einhorn, deputy assistant secretary for political-military affairs, quickly recognized the problem. He had been assigned the task of looking into the application of complex laws enacted by Congress to put teeth into policies designed to halt the spread of weapons of mass destruction.

Made of a special alloy called samarium-cobalt, ring magnets must be precision manufactured to withstand the high speeds of gas centrifuges that are part of the process for making nuclear bomb fuel. China is the world leader in producing the components. The sale triggered a provision of a law on business loans that requires the secretary of state to notify the Export-Import Bank when any nation is caught helping another nation develop nuclear weapons. Mr. Einhorn called the bank and told officials the intelligence reports meant that, under the 1994 Nuclear Proliferation Prevention Act, the bank could be required to hold up all new loan guarantees for projects sought by U.S. businesses in China. But the Commerce Department, headed by Mr. Brown, former Democratic National Committee chairman, soon was leading the charge to block economic sanctions against Beijing and Islamabad. The Clinton administration ignored the violations.

The United States had imposed sanctions against China in 1993 for selling M-11 missile components but lifted them the next year at the urging of Mr. Brown and C. Michael Armstrong, chairman of Los Angeles–based satellite maker Hughes Electronics. Mr. Armstrong had written a terse letter to President Clinton on October 29, 1993, first highlighting how he had done what the president requested by supporting his economic and trade policies and calls for looser export controls. “I am respectfully requesting your involvement to resolve the China sanctions,” Mr. Armstrong wrote, noting that he had spoken to a Chinese official who informed him Beijing was “positive” about the idea.

China continues to be one of the most significant suppliers of weapons of mass destruction technologies to foreign countries.

But when then-secretary of state Warren Christopher told the Chinese that the United States needed to see “some sign of movement” by China on curbing weapons proliferation, a National Security Council memorandum reported that “the Chinese were not forthcoming.” The memo said Mr. Armstrong and Hughes Electronics “lobbied aggressively” to be allowed to sell satellites to China.

In 1995, the president named Mr. Armstrong to the influential Export Council, where he fought trade controls designed to protect national security. The council produced a lengthy paper arguing against imposing sanctions on foreign trading partners that engaged in illicit weapons sales. Bernard Schwartz, chairman of Loral Space & Communications, also lobbied hard to ease restrictions on satellite sales to China. Mr. Schwartz denied that his large donations to the Democratic National Committee (DNC) were meant to influence Mr. Clinton’s policies on satellite exports.

A Senate investigation into illegal foreign political payments could not make a direct connection between them and Mr. Clinton’s conciliatory policies toward China. Both the White House and the Chinese government deny that Chinese cash influenced policies. But a Senate Governmental Affairs Committee report in 1998 concluded: “It is clear that illegal foreign contributions were made to the DNC and that these contributions were facilitated by individuals with extensive ties to the PRC [People’s Republic of China]. It is also clear that well before the 1996 elections, officials at the highest levels of the Chinese government approved of efforts to increase the PRC’s involvement in the U.S. political process.”

Two years before the ring magnets deal, in March 1992, China signed the nuclear nonproliferation treaty. The 1970 agreement recognized five nations—the United States, the Soviet Union, Britain, France, and China—as the only nuclear powers and sought to prevent others from becoming nuclear powers. The treaty was extended indefinitely in 1995 in what the Clinton administration hailed as a major arms-control victory. The treaty forbids signatories from providing components of nuclear weapons to nonnuclear states.

The State Department’s Bureau of Political-Military Affairs was in a quandary. China had failed its first test as a signatory. Selling ring magnets to Pakistan undermined years of work to keep such states from building nuclear bombs. In January 1996, the State Department quietly approached the China National Nuclear Corporation about the sale it learned of in December. The Chinese said there was “no information” about it. They lied. And the State Department and the White House’s National Security Council knew it. The intelligence was solid: NSA had the intercept detailing the transfer.

To this day, the Chinese and Pakistani governments deny the sale. But for $70,000, China gave a major boost to Pakistan’s nuclear weapons program. “The United States does have concerns about possible nuclear-related transfers between China and Pakistan,” State Department spokesman Glyn Davies said the day the Washington Times broke the story, refusing to comment directly on the transaction. He said the matter had been raised at senior levels of the Chinese and Pakistani governments. But the exact “concerns” and how they were raised did not become public. They were secret, and the Clinton administration was not pressured to explain, either by Congress or the news media.

Ten days later, Chinese Foreign Ministry spokesman Shen Guofang denied the sale took place. “China, a responsible state, has never transferred equipment or technology for producing nuclear weapons to any other country, nor will China do so in the future,” he told reporters in Beijing. He warned that U.S. economic sanctions against China would cause “serious harm” to relations. “China hopes the U.S. side will not use rumors as the basis for making decisions,” he said.

Rumors? The rumors were hard intelligence reports, most classified at the top-secret level and above. The CIA, however, did produce an unclassified report to Congress covering the period from July to December 1996. “During the last half of 1996, China was the most significant supplier of weapons of mass-destruction goods and technology to foreign countries,” the report said. “The Chinese provided a tremendous variety of assistance to both Iran’s and Pakistan’s ballistic-missile programs. China also was the primary source of nuclear-related equipment and technology to Pakistan and a key supplier to Iran during this reporting period.”

In a move aimed at keeping the ring magnets dispute quiet, Mr. Christopher wrote to the Export-Import Bank in February 1996, asking it to defer loan approvals for American businessmen operating in China. The cutoff would have been worth about $10 billion in new loans if it had been kept in place. But the measure lasted only thirty days and did not affect already approved loans. The bank began considering new loans after the thirty days lapsed, without waiting for an official go-ahead from State. The president considered waiving the thirty-day sanctions but backed off after Congress protested.

Several U.S. corporations, including Boeing and Honeywell, lobbied against sanctions. To many in the business community, nuclear weapons transfers should not be allowed to disrupt the flow of trade. National security interests, Mr. Brown asserted, should not be a higher priority than trade. “I happen to think the best chance for us to have an impact in those other areas is through being engaged with China,” he said. Mr. Christopher broached the ring magnets sale in his April 19 meeting with Chinese foreign minister Qian Qichen, a hard-line Communist and vehement critic of the United States. Mr. Qian lied: China had not violated the treaty and therefore had no reason to commit itself to refraining from such exports.

The Christopher-Qian meeting revealed the administration’s plan: If China would just pledge not to transfer more nuclear weapons technology, the United States would agree not to impose the sanctions required by law. After months of secret U.S.-Chinese talks, State Department spokesman Nicholas Burns issued a carefully worded statement May 10, 1996, saying the secretary of state had cleared China of any culpability. “Of particular significance, the Chinese assured us that China will not provide assistance to unsafeguarded nuclear facilities, and the Chinese will now confirm this in a public statement,” Mr. Burns said.

Unsafeguarded facilities are nuclear plants and support facilities that are not subject to inspection by the International Atomic Energy Agency, which monitors nuclear facilities around the world under the treaty. “In addition,” Mr. Burns declared, “senior Chinese officials have informed us that the government of China was unaware of any transfers of ring magnets by a Chinese entity, and they have confirmed our understanding that China’s policy of not assisting unsafeguarded nuclear programs will preclude future transfers of ring magnets to unsafeguarded facilities.” There was “not a sufficient basis” to impose sanctions as required by the Nuclear Proliferation Prevention Act of 1994.

China’s public announcement of the accord said only that “China will not provide assistance to unsafeguarded nuclear facilities.” The Clinton administration claimed this was a “significant public commitment.” The Chinese response was reported by the Xinhua News Agency, the communist government’s official organ. “As a state party to the treaty on the Non-Proliferation of Nuclear Weapons, China strictly observes its obligations under the treaty, and is against the proliferation of nuclear weapons,” Xinhua quoted an unnamed Foreign Ministry spokesman as saying. “China pursues the policy of not endorsing, encouraging, or engaging in the proliferation of nuclear weapons or assisting other countries in developing such weapons.” No mention was made of ring magnets, and no promises were offered on future sales. The Chinese “assurance” fell short of the written guarantee sought by U.S. officials.

The limitations of the U.S.-China understanding were highlighted by the fact that the U.S. statement was issued not in Warren Christopher’s name but in that of his spokesman. The failure to sanction Beijing undermined the nuclear nonproliferation treaty and encouraged China and other nations to disregard their obligations under it, said Representative Floyd Spence, South Carolina Republican and chairman of the House National Security Committee. “It is a further example of the administration looking the other way when the Chinese openly violated international law,” Representative Spence said. But it was a lawmaker from Mr. Clinton’s own party who had some of the strongest words. “It is outrageous that the administration has now freed the Export-Import Bank to use taxpayer funds for loans to assist the China National Nuclear Corporation—the very company that sold the ring magnets to Pakistan,” said Representative Nancy Pelosi, California Democrat. “When all is said and done,” she added, “the Chinese proliferated nuclear weapons technology and got away with it, and Pakistan received essential nuclear weapons technology and was rewarded.”

The Power of the PLA

China's military has used its formidable resources to threaten Taiwan, buy nuclear weaponry, and expand a commercial empire.

In July 1998, China became the world's tenth-largest trading nation, a meteoric rise from insignificance two decades before. Since 1996, the People's Republic of China (PRC) has supplanted Japan as the source of America's largest trade deficit; China also sells more to the European Union and most of its Asian neighbors, including Japan, than it buys.
Since 1989, this rising economic prosperity has been accompanied by double-digit increases in the size of the PRC's defense budget. What this means is a matter of debate. Beijing defends its military budgets by saying that they have barely kept pace with the country's inflation rate. This would be more plausible if the actual defense budget were the same as the official defense budget.

How large is the military budget

No foreign analysts of the People's Liberation Army (PI) believe this to be so; they differ only on the size of the discrepancy between actual and published budgets. Some estimate the variance as tenfold; most say the real figures are three to four times greater. In any case, this would not account for the 1998 defense budget, a 12.8 percent increase that was announced as the Chinese economy was in deflation. Even a massive stimulus package was not expected to yield an inflation rate above 3 percent.
An increasingly assertive international attitude became noticeable as well. In 1992, for example, the PRC's National People's Congress unilaterally declared China's sovereignty over

territories-including Taiwan and the islands of the Diaoyu/ Senkaku, Penghu, Dongsha, Xisha (Paracel), and Nansha (Spratly) groups-it disputed with at least a half dozen neighbors. The law furthermore claimed that the Chinese military (PLA) had the right to "take all necessary measures to prevent and stop the harmful passage of vessels through its territorial waters."
Since the waters surrounding these islands are busy shipping lanes, these actions aroused considerable international apprehension. After quiet pressure from one of its major investors, Japan, with whom the PRC disputes sovereignty over the Diaoyu/Senkaku Islands, Beijing softened its public stand. But the law has never been rescinded.
In the early 1990s, China began to procure advanced weaponry from the former Soviet Union. Its purchase of such high profile weapons as Sukhoi-27 fighter planes, Ilyushin 76 transport planes, Kilo-class submarines with advanced radar systems, and Sovremenny-class guided missile destroyers equipped with Sunburn SS-N-22 cruise missiles received press attention around the world. Less publicized but also important is the help China has received from Israel in its weapons development. According to statistics compiled by the Stockholm International Peace Research Institute, the PRC was the world's third largest arms importer in 1997.

Importing and exporting arms

China is not only a major importer of arms but a major exporter as well. Many exports have been to "rogue states," countries that are either politically and culturally unstable or possess considerable potential to disrupt the stability of their regions. Chided by the United States, Beijing points out that America is the world's leading arms exporter and that, as a sovereign state, the PRC has the right to sell arms wherever it deems appropriate.
China has been reluctant to participate in arms forums, feeling that its voice will be overwhelmed by a clique of wealthy industrialized states that believe they can arrogantly dictate to developing areas. It has also objected to being asked to abide by rules, such as those governing the sale of missiles, which China had no part in formulating.
A leading cause of concern is the PRC's nuclear exports to Pakistan and Iran. The tension escalated in May 1998, when India detonated a series of nuclear j, explosions. In response to inter' national criticism, New Delhi explained that it has acted to counter China's help to Pakistan's nuclear development program. Pakistan, India's regional arch-enemy, then retaliated with its own series of detonations.
Hopes that the number of nuclear powers could be capped suffered a severe setback. According to U.S. intelligence agency reports, the PRC sold approximately 5,000 ring magnets to Pakistan between 1994 and 1996. The magnets were used to make enriched, weapons-grade uranium in a Pakistani installation, Kahuta, that is not subject to inspection or normal international safeguards.
The 1994 Nuclear Proliferation Prevention Act requires the United States to cut off all U.S. Export-Import Bank financing to any country that "has willfully abetted any non-nuclear-weapons state" to acquire unsafeguarded enriched uranium or plutonium. President Clinton, arguing that imposing the sanctions would hurt American businesses, declined to levy sanctions in return for a promise that Beijing would cease such shipments.

PLA helping Iran

The PRC continued, at least until 1997, to help Iran to construct a plant near Esfahan to produce uranium hexafluoride which is fed into gas centrifuges for enrichment. More recent reports indicate that Chinese technicians are aiding Iran in uranium mining and processing and, in fuel fabrication. These activities, however, seem to have been carried out in compliance with the Non-Proliferation Treaty
China's level of involvement with Iran's nuclear program has lessened, though apparently because of competition from Russia rather than international pressure to desist. In summer 1996, the PRC supplied Iran with 400 metric tons of chemicals, some of which can be used in producing nerve gas. There have also been reports that Chinese companies have sold Iran equipment that could be used to produce biological weapons. The PRC has supplied anti-ship cruise missiles including Silkworms, C-8Ols and C-802s, to Iran.
Beijing has helped Syria with its ballistic missile and sold Silkworms to Iraq. It is assisting Algeria in the construction of a nuclear research facility that is to be placed under international safeguards, but there are concerns about a "hot-cell" facility to which the reactor is connected.
China's attitude toward arms control leaves room for various interpretations. Optimists point out that Beijing did sign the Comprehensive Test Ban Treaty (CTBT) in 1996, after much international pressure. Pessimists argue that, since the treaty does not enter into force until signed by all powers, and since India strongly resisted signing, the PRC's decision to accede to the agreement was prompted by a desire to score points against an old antagonist rather than by real commitment to the goals of the treaty.

Test-ban treaty problems

Most recently, India has hinted that it would sign the CTBT if it were granted the status of a nuclear-weapons state and a permanent seat in the UN Security Council. Should India's demands be met, the PRC would be obliged to abide by the CTBT Primary remaining proliferation problems involving China include

The absence of a clear commitment to carefully monitor end-use assurances on its nuclear and nuclear-related exports.

No clear statement that it will eschew nuclear or nuclear related help or exports to states that, while they might meet formal international safeguard criteria, nonetheless have a suspect nonproliferation record.

Beijing's unwillingness to accept full-scope safeguards as an export requirement, as shown by its refusal to join the Nuclear Suppliers Group, which carries that obligation.

Skeptics also point out that, while Beijing has agreed to various regulations before, it is not always assiduous about enforcing them. If caught, the government can either deny that the level of proof it is presented with is sufficiently convincing, or explain that it had no knowledge that the actions were taking place.
The PLA's business empire has also aroused much interest in foreign countries. The Chinese military has been involved in production since its inception, though not to make profits. The idea was to avoid having the army become a burden on society; soldiers could weave their own sandals, build their own barracks, and raise their own food rather than tax an already impoverished peasantry. Some production was actually for the benefit of the peasantry: In the early days of the Communist Party, soldiers helped to build schools and dig irrigation ditches.

Attending to defense and production

Deng Xiaoping came to power in the late 1970s with an ambitious agenda to modernize China. Arguing that one could not graft a strong military onto a weak economy, he called upon the PLA to help the country's efforts at rapid industrialization. A few voices raised misgivings: Would this not dull the fighting edge of the military?
They were assured that it would not: The PLA could attend to defense and production at the same time. Soldiers took up the charge with alacrity, producing refrigerators, motorbikes, pharmaceuticals, and toys. They also run financial institutions, hotels, and karaoke parlors.
The PLA's General Logistics Department alone has at least 20,000 firms. No one, including the department's personnel, is sure of the exact number, because companies do not always provide notification when they change names or spin off affiliates. These involve an estimated 3 percent of the PRC's total GDP.
Some of these activities are legal, some not. Hotels and karaoke parlors can be thinly disguised brothels. Some of the financial institutions are engaged in dubious practices, to the detriment of customers. In July 1998, a scandal broke involving the army-backed J&A Securities firm. Several executives thereof had allegedly amassed huge personal fortunes through shady practices and then placed the money in personal accounts in Hong Kong banks.
Even where transactions are legal, civilian entrepreneurs complain that they cannot compete fairly with military-owned businesses, which are exempt from inspection. Military vehicles do not have to pay tolls on roads and the military can commandeer space on the PRC's overcrowded railway system when it wishes to ship goods to market. By 1993, the military's business activities were sufficiently worrisome that the PRC's defense minister warned that "the Steel Great Wall [a metaphor for the PLA) may self-destruct."

International concern

Internationally, the products of the PLA's business enterprise have caused some concern as well. Chinese-made assault rifles began turning up at American crime scenes in unusual numbers. In 1996, within days of President Clinton's decision not to apply sanctions despite the sale of ring magnets to Pakistan, an FBI sting operation seized $4 million of AK 47 automatic rifles that had been smuggled into California.
The rifles were supplied by two PLA-affiliated companies, Norinco and Poly, with ties to high-ranking Chinese officials. The head of Poly, Wang Jun, is the son of a retired military leader and hero of the revolution. He was later revealed to have been a visitor to the White House and a contributor to Clinton's reelection campaign.
Due to a mysterious leak, assumed to be from the U.S. side, agents had to move in on their suspects earlier than they would have preferred. They had been discussing the purchase of handheld antiaircraft missiles, explosives, and other agents of mass destruction and had believed they were on the verge of luring important Chinese officials who were involved to U.S. soil, where they could be arrested.
In July 1998, Chinese President Jiang Zemin, as part of a massive anticorruption campaign, made the startling announcement that the PLA was to abandon its business connections. What effect this will have is unclear: party and government have tried to rein in the problems in the military's commercial undertakings before, without noticeable effect.
Given the size of the military enterprises, it is unthinkable that they could be closed down. This would put hundreds of thousands out of work and stop production of needed goods and services.
Possibly the military will be told to sell the enterprises, but this raises questions of who would buy them-certainly not the state, given its lack of financial resources and the spotty profit record of state-owned enterprises. A "shell game" may take place, in which enterprises change names but ultimate control is maintained by military institutions. The consensus is that too many important people would be hurt were this directive to succeed. . . and that therefore it will not succeed.
This leaves the task of defining the relationships between China's civilian leadership and the PLA. Jiang Zemin is the first PRC leader never to have had military experience, a fact that seemed to concern the high command when Jiang assumed office. Jiang moved slowly, replacing people who reached retirement age with persons who owed their loyalty to him. It is believed that he would not have dared order the PLA to divest itself of its business empire had he not been confident that the army is loyal to him.
Ensuring that the army is firmly under the control of the Communist Party with Jiang as its head has been a major focus of propaganda for the past several years; in general these efforts seem to have succeeded. Previous reforms have concentrated on separating the army from the party and government-for example, there is now no serving member of the military on the Standing Committee of the Politburo.
This separation makes it possible for the military to develop corporate interests of its own that may not coincide with those of party and government. It cannot be assumed that the army's loyalty is eternal or unconditional. What will the military ask in return for giving up its lucrative commercial empire? There is some feeling that the high command has been urging a harder international line on Jiang as he deals with such contentious issues as relations with the United States, Japan, and Taiwan. The next few months will be interesting for China watchers.·

June Teufel Dreyer, a specialist in the Chinese military, teaches in the School of Business at the University of Miami.

"Bill Clinton was the best president Enron ever had!"

Clinton Enron Nexus

-August 1993. New President Bill Clinton takes his first vacation, a ski weekend to Vail, Colorado. Who shows up to visit with Clinton? Ken Lay, Enron CEO.

"A tired-looking Clinton, off on his first real vacation since becoming president, seemed reluctant Saturday morning to admit to reporters that he was having a good time. He kept mumbling stuff about health care being the next big ticket item on his domestic agenda. But by evening, he'd had such a good time on the local links with Ford, golf legend Jack Nicklaus and Houston's own Ken Lay, chairman of the Enron Corp..." (Source: The Houston Chronicle, August 16, 1993, Monday, 2 STAR Edition SECTION: A; Pg. 5; "Clinton Takes Real Vacation")

-1994/1995 Clinton Administration "makes a sale" for Enron. Enron and the administration work together to win Enron the contract for a power plant in India. Clinton uses resources from the CIA to assess risk and analyze the strategy of Enron's British competitor. The administration is instrumental in procuring $400 million in financing from the Export-Import Bank of the United States and the Overseas Private Investment Corporation.

"For 18 months, the Indian power-plant deal has floated near the top of the list of 100 or so big infrastructure projects around the world that the United States Government desperately wants American firms to win. It is the first of eight big power generation projects in India, and if the American consortium could close this one, it would create a precedent likely to give other American companies an advantage in billions of dollars of follow-on deals. In years past, American officials would have offered some modest help, but only as a sideshow to bigger foreign policy concerns, from containing Communist influence in South Asia to keeping India and Pakistan from accelerating their nuclear arms race. But that was another era in American foreign policy, before the Commerce Department built what Jeffrey E. Garten, the undersecretary of commerce for international trade, calls "our economic war room."

From that Washington war room, the negotiators for the Enron Corporation, the lead bidder in the American consortium, have been shadowed and assisted by a startling array of Government agencies. In a carefully-planned assault, the State and Energy Departments pressed the firms' case. The American ambassador to India, Frank G. Wisner, constantly cajoled Indian officials. The Secretary of Energy, Hazel O'Leary, brought in delegations of other executives -- including some last week -- to make the point that more American investment is in the wings if the conditions are right.

To sweeten the pot, the Export-Import Bank of the United States and the Overseas Private Investment Corporation put together $400 million in financing. And working just behind the scenes, as it often does these days, was the Central Intelligence Agency, assessing the risks of the project and scoping out the the competitive strategies of Britain and other countries that want a big chunk of the Indian market.

The big push by Washington Inc. paid off last month when the Indian government awarded the power plant project to the American consortium." (Source: The New York Times, February 19, 1995, Sunday, Late Edition - Final SECTION: Section 3; Page 1; Column 2; Business/Financial Desk; "How Washington Inc. Makes a Sale")

-October 1995. Bill Clinton recruits Ken Lay to act as a point man for Clinton in drumming up support for Fast Track legislation. Lay just happens to be an old friend of Mack McClarty.

"Two distinguished political doctors have been brought in to try to revive a nearly dead bill allowing President Clinton to secure new trade agreements with other nations.

Bill Frenzel, a former Republican member of the House Ways and Means Committee, and Ken Lay, chief executive of natural-gas giant Enron Corp., have been called in to break a year-long impasse that has blocked meaningful progress on trade pacts with Chile, the rest of Latin America, and the Pacific im.

Both men are well known to one player in that dispute - Ways and Means Chairman Bill Archer, R-Texas, whose district includes Enron's headquarters in Houston. The two also have connections to the Clinton administration. Mr. Frenzel served as a special adviser to Mr. Clinton to lobby his former colleagues on the North American Free Trade Agreement. Mr Lay has been a friend of Clinton adviser Thomas "Mac" McLarty since Mr. McLarty's time as head of Arkansas' largest natural-gas utility." (Source: Journal of Commerce, October 10, 1995, Tuesday SECTION: FOREIGN TRADE, Pg. 3A; "Outsiders Called in to End Logjam on Trade Authority")

-August 1997 Clinton hosts Ken Lay at White House to discuss upcoming meeting in Kyoto, Japan concerning greenhouse gas.

"The Clinton administration, when calling business leaders to the White House to discuss what the United States' bargaining position on global warming should be at upcoming negotiations in Kyoto, Japan, chose John Browne of British Petroleum to represent the oil industry. But Browne is British, head of a London-based company. And Britain's new Labor government has blasted the United States for failing to go far enough to reduce greenhouse gases. So why was a Brit asked to participate? Browne has broken ranks with other oil executives to concede a buildup of carbon dioxide gases may be changing the Earth's climate. BP also happens to be the United States' largest crude oil producer with 13,000 employees in this country, company officials pointed out. Enron Corp.Chief Executive Ken Lay, who also was at the Monday meeting, said Clinton sounded Browne out on his opinions of the policies being pushed by the Europeans. Nobody seemed to worry the United States was tipping its hand. ""This is kind of early in the process,'' Lay said." (Source: The Houston Chronicle, August 6, 1997, Wednesday, 3 STAR Edition SECTION: BUSINESS; Business Digest; Pg. 1; "White House warms to BP exec")

-September 1997 Clinton helps Enron get a 3 billion dollar power-plant project in India.

"On Nov. 22, 1995, for example, Clinton scrawled an FYI note to McLarty, enclosing a newspaper article on Enron Corp. and the vicissitudes of its $3 billion power-plant project in India. McLarty then reached out to Enron's chairman, KEN LAY, and over the next nine months closely monitored the project with the U.S. ambassador to New Delhi, keeping Lay informed of the Administration's efforts, according to White House documents reviewed by TIME. In June 1996, four days before India granted final approval to Enron's project, Lay's company gave $100,000 to the President's party." (Source: Time Magazine, SEPTEMBER 1, 1997 VOL. 150 NO. 9; "THAT INVISIBLE MACK SURE CAN LEAVE HIS MARK")

-October 2000 Near end of Clinton's Presidency, but prior to the November election, a Clinton Assistant Treasury Secretary takes a position at Enron as vice president for federal government affairs. Observers call it a slap in the face to George Bush.

"Enron announced yesterday that Linda Robertson, assistant Treasury secretary for legislative affairs and public liaison, will join the Houston energy company in early November as vice president for federal government affairs. She will replace Joe Hillings, who earlier announced his retirement.

Ken Lay, chairman and chief executive of Enron, has given more than $ 290,000 of his own money to the Republican Party this year to help elect Bush, his longtime friend, president. But that didn't insulate Enron from criticism in some Republican quarters on Capitol Hill. "Enron has just slapped George W. Bush across the face. It just makes little sense," a GOP leadership aide said yesterday." (Source: The Washington Post, October 12, 2000, Thursday, Final Edition SECTION: A SECTION; Pg. A23; SPECIAL INTERESTS; "Enron Hire Faces Some Partisan Fire")

Clinton to Enron: Over One Billion Tax Dollars!

The Clinton administration provided more than $1 billion in subsidized loans to Enron Corp. projects overseas at a time when Enron was contributing nearly $2 million to Democratic causes.

Clinton officials refused to finance only one out of 20 projects proposed by the energy company between 1993 and 2000 to build power plants, natural-gas pipelines and other big-ticket energy facilities around the world, according to the Export-Import Bank and the Overseas Private Investment Corp., the agencies that provided the subsidies.

In addition, the administration, which lauded Chairman Kenneth L. Lay as an exemplary "corporate citizen," granted about $200 million worth of insurance against political risks for nine Enron projects in such politically volatile areas as Argentina, Venezuela and the Gaza Strip, according to documents the agencies provided to the Senate Finance Committee.

"These projects obviously were a tremendous benefit to Enron's operations," said Sen. Charles E. Grassley, Iowa Republican and ranking minority member of the committee. He noted that the Reagan and Bush administrations approved no loans for Enron between 1985 and 1992 and provided insurance for only one Enron power project in Guatemala in 1992.

The Clinton administration provided three loans between 1994 and 1998 to the now-defunct Dabhol power project in India. Mr. Clinton's commerce secretary, Ron Brown, trumpeted the approval of the Dabhol loans on a trade mission to India in 1995, with Mr. Lay by his side.

The trip was one of 11 Clinton trade missions provided at taxpayer expense for corporate executives from Enron and other companies. The U.S. Trade and Development Agency, which sponsored the trips, also provided $1 million in funding to study Enron energy projects in Russia, Eastern Europe and former Soviet states. (Source: The Washington Times, February, 21, 2002; Section: Business "Clinton helped Enron finance projects abroad")

"Enron did surprisingly well during the Clinton years," declared NBC News reporter Lisa Myers on the February 25 NBC Nightly News. She explained: "Lay played golf with the President, and Enron received $1.2 billion in government-backed loans for projects around the world. Documents obtained by NBC News show the Clinton administration billed three Enron projects in India and Turkey as success stories, personally pushed by the late Commerce Secretary Ron Brown. About that time, Enron made its first $100,000 contribution to the Democrats." (Source: NBC Nightly News, February 25, 2002)

Under the Clinton administration, the Overseas Private Investment Corp. "gave hundreds of millions of dollars" in loans and other government support to risky Enron-related projects overseas, according to a Senate Finance Committee audit released today.
As WorldNetDaily first reported Jan. 22, Enron became one of OPIC's biggest customers during the Clinton years.

From fiscal year 1993 to fiscal 2000, OPIC gave at least $544 million in loans to Enron-related projects, the agency reported in a letter to the Senate panel. It provided another $204 million in political-risk insurance. OPIC listed only currently supported projects.

The Export-Import Bank, another federal overseas economic-development agency, gave more than $650 million in loans to Enron-related projects over the same period, confirming WorldNetDaily's earlier reporting.

Between 1993 and 1995 alone, Ex-Im Bank supported Enron deals in India, Turkey, the Philippines and China worth nearly $4 billion, making the Houston-based company one of the biggest beneficiaries of the Clinton administrations export policy. The head of the federal bank at the time, Kenneth Brody, is a close friend of former Treasury Secretary Robert Rubin, having worked with Rubin at Goldman Sachs. In his financial disclosure report, Rubin listed Enron among firms with which he had significant contact at his Wall Street firm. Former Enron CEO Ken Lay offered Rubin a seat on Enrons board in 1999, as he was resigning from the Clinton administration.

The Senate panel asked for data back to 1985. "It appears the agency made no loans to Enron-related businesses from 1985 to 1992," during previous Republican administrations, said Sen. Chuck Grassley, R-Iowa, ranking committee member.

Current outstanding balance on all the Clinton-era federal loans to Enron-related projects is $965 million, according to documents. With the insurance liability, the federal agencies' indirect exposure to Enron-related projects approved by the Clinton administration totals nearly $1.2 billion.

"These loans obviously were a tremendous benefit to Enron's operation," Grassley said, particularly since commercial banks rarely finance such long-term projects in unstable foreign markets.

A committee investigator told WorldNetDaily that the panel is reviewing confidential memos written or received by OPIC and Ex-Im Bank officials regarding the Enron transactions.

Former OPIC head Ruth Harkin was appointed by Clinton after her husband, Sen. Tom Harkin, D-Iowa, campaigned vigorously for Clinton in '92 and '96. The senator was one of the ex-president's biggest boosters during his impeachment trial.

Prior to joining the Clinton administration, Ruth Harkin was a top corporate lawyer at Akin Gump Strauss Hauer & Feld, a Washington firm that includes Clinton pal Vernon Jordan and Democratic power broker Robert Strauss. Akin Gump has listed Enron among its clients.

Ex-Im Bank board members during the Clinton years include Jackie Clegg, wife of Sen. Chris Dodd, D-Conn., and Maria Haley, a former aide to Clinton in Little Rock and ex-wife of John Haley, who was convicted in the Whitewater investigation.

Dodd served as co-chairman of the Democratic National Committee during the '96 Clinton-Gore campaign. Clinton appointed Clegg vice chair of the Ex-Im Bank board in June 1997.

Haley has ties to the crooked Riady family who operate the Lippo Group out of Jakarta, Indonesia. The Riadys ran afoul of federal bank regulators after they took control of the Worthen Bank in Little Rock in the 1980s. Haley's long-time law partner, Mark Grobmyer, a Clinton golfing buddy, is a Lippo lobbyist.

While at Ex-Im Bank, documents show Haley OK'd federal loans for Indonesian projects worth more than $40 billion, including many involving Lippo and its subsidiaries.

Clinton replaced her on the board with Vanessa Weaver, who was forced by the Senate Banking Committee to recuse herself from Lippo transactions after a 1999 Investor's Business Daily story exposed her close ties to Lippo executive John Huang.

Both Huang and James Riady have since been convicted of fraud relating to Clinton-Gore fund-raising.

Two Enron executives -- Joseph Sutton and Rebecca McDonald -- have served on the Ex-Im Bank's advisory committee.

Enron, which usually backs Republicans, gave more than $150,000 to Clinton's party during the 1996 election cycle.

Yet another federal agency, the Trade and Development Agency kicked in more than $1.1 million from 1992 to 2001 for foreign projects involving Enron or its subsidiaries. It also sponsored 11 visits to the U.S. by foreign officials who participated in Enron-related projects. (Source: World Net Daily, January, 22, 2002; "Senate probes Clinton loans for Enron deals")

Enron and the Clinton Administration: Ties That Bind

(CNSNews.com) - While Capitol Hill Democrats have been trying with limited success to tie the Bush administration to the energy conglomerate Enron Corporation, the now-bankrupt firm actively cultivated a long-term relationship with the Clinton administration, according to documents obtained by CNSNews.com and authenticated by the company.

The seeds of the relationship were planted even before Bill Clinton was sworn in as president, and lasted until the final months of his administration. The documents also show the company and the Clinton administration sought to use each other to promote their respective agendas, both in Congress and abroad.

While the documentation gives no indication of any illegal activities, it does paint a picture of an American corporate giant seeking to influence an administration and exploit its policies, while entertaining the prospect of using its corporate clout to advance Clinton administration initiatives.

The Seeds of a Relationship Sown

Enron Corporation saw the opportunity to exploit the newly minted Clinton administration even before Clinton was sworn into office, and saw 1992 campaign issues including investment tax credits and restrictions on carbon dioxide (CO2) as beneficial to the company.

According to the November 1992 edition of the Enron corporate newsletter, 'To The Point,' the company looked forward to dealing with the upcoming Clinton administration.

The newsletter noted, "Senator [Al] Gore has been an avid proponent of a strong global warming policy" that would lower greenhouse gas emissions, and the Enron communique noted that Clinton and Gore's support of restrictions on CO2 emissions "should provide a real opportunity for natural gas."

Enron stood to benefit from any government restrictions on greenhouse gas emissions because the company had ownership or financial stake in numerous natural gas and wind power technologies, which produce little or no greenhouse gas emissions.

The company often described itself as "a major supplier of solar and wind renewable energy worldwide," and Enron also praised the newly elected Democrats for their "plans to aggressively convert government and other vehicles to alternate fuels, mainly natural gas."

The November 1992 newsletter also praised the Clinton campaign's economic policies, including its proposed investment tax credit, which the newsletter stated "would be beneficial to Enron and the natural gas industry," by facilitating lower costs for future Enron projects.

Enron even praised Clinton for his proposed health care plan, which ultimately died in the Democratic-controlled Congress in 1994. "Anything the new administration can do to control health costs will be of tremendous value to Enron and the nation," the newsletter noted.

Enron Feeds at Government Trough

Enron's ability to harness feelings of goodwill with Clinton's new team bore fruit in short order.

By 1995, Enron was able to successfully secure financing for the Dabhol Power plant in India with loans from the U.S. Export-Import Bank totaling $298 million dollars to cover about 32 percent of the costs. Enron's ownership stake was 80 percent in the Indian power plant.

Enron was able to secure another $100 million in investment money from the U.S. federal agency, Overseas Private Investment Corporation (OPIC).

In 1996, the investment corporation provided another $200 million dollars in "political risk insurance" for the India project, according to OPIC documents.

But Enron's relationship with the Clinton administration was not a one-way street, and top corporate officials lent their aide to the president.

Former Enron Chairman and CEO Kenneth Lay wrote a personal letter to Clinton in 1995, supporting the president's budget proposal in Congress.

The letter, dated June 27th and blind copied to Clinton senior advisor Mack McLarty, Enron Vice President Joe Hillings and Enron Senior Vice President of Environmental & Government Relations Terry Thorn, was sent at the height of the budget battle with the newly elected Republican-controlled 104th Congress.

"I applaud your political courage and leadership in supporting a balanced federal budget," Lay wrote. "The debate should be about budget priorities and timing, not whether a commitment should be made to fiscal responsibility."

After offering his opinions on how to limit federal spending, Lay ended by writing, "I believe the American public will look kindly upon your leadership to bring closure on this vital issue."

Later that year, Clinton administration officials helped Enron during the company's negotiations over a natural gas project in Mozambique.

The top negotiator on the gas project for Mozambique was Minister of Mineral Resources John Kachamila, who complained of "outright threats to withhold development funds if we didn't sign," with Enron.

Kachamila said U.S. diplomats, "especially [U.S. Embassy Deputy Chief of Mission] Mike McKinley, pressured me to sign a deal that was not good for Mozambique. He was not a neutral diplomat," according to the Houston Chronicle.

The Clinton administration's U.S. Agency for International Development (USAID) was also reportedly involved in the pressuring of Mozambique to sign the deal with Enron.

USAID is especially powerful because of the volume of money it pumps into the developing world. Mozambique was receiving over $40 million dollars during this time from USAID.

Enron Entertains Favors for Clinton Administration

In an Oct. 15, 1996 memo from John Palmisano, senior director for environmental policy and compliance at Enron, it was noted that the Clinton administration sought the company's help in gaining support from China and India for proposed climate change regulations.

Palmisano's memo, which was sent to Thorn, Hillings and a variety of other Enron corporate officials and lobbyists, noted, "the Administration is concerned about getting China and India into the family of nations committed to both carbon emissions trading concepts.

"We have been asked how we can help in this regard and how natural gas might be part of [joint implementation] activities in China," Palmisano wrote in the memo. Joint implementation involves a wealthier "donor" country that invests in pollution reduction measures in a "host" country in exchange for "credits," which the donor nation may use to meet its own pollution reduction targets. The Palmisano memo was written following meetings in Washington, D.C. with Clinton administration officials.

Palmisano's memorandum indicated he had met with several representatives of Clinton's Environmental Protection Agency, the Department of Energy, the State Department and the Office of Management and Budget.

The memo continued, "there seems to be an opportunity to get Administration support, and maybe money, to identify natural gas related activities in China that link to climate change in general and joint implementation in particular. I was approached twice during last week on this issue."

Palmisano bluntly sought guidance from his colleagues at Enron when he asked, "Does anyone have a notion as to how I should follow up?"

Enron also entertained requests on helping the Clinton administration move its climate change agenda on the domestic front.

A Feb. 7, 2000 memo from Jeffrey Keeler, Enron's Director of Environmental Strategies, to various Enron executives recalled another attempt to secure the company's help.

"I spoke with Jeff Seabright of the White House Climate Change Task Force today, who asked if Enron might become involved in supporting an initiative in the FY 2000 budget request on the subject of 'international energy collaboration.'"

Keeler noted how the proposal could benefit Enron because it "provides $100 million, spread across various agencies [Dept. of Energy], USAID, Commerce Dept. [Export, Import Bank], [U.S. Trade and Development Agency] for collaboration on energy technologies ..."

Climate change in general and the Kyoto Protocol on climate change specifically were the target of criticism in some quarters of Congress, and Keeler's memo explained one way in which some of the objections to Kyoto could be decreased or eliminated.

"The White House would be interested in our assistance in building support for such 'international' support," wrote Keeler, while also cautioning against the use of word "Kyoto" when referring to climate change initiatives.

"This proposal avoids direct mention of 'Kyoto' - in fact is more in line with the [Alaska Republican Sen. Frank] Murkowski, [Idaho Republican Senator Larry] Craig, [Nebraska Republican Sen. Chuck] hagel (sic) approach to climate change - supporting R&D for energy technologies," the Keeler memo stated.

Conversely, Keeler, a strong proponent of climate change initiatives, was not happy with President Bush's decision in 2001 to oppose any new laws that set mandatory reductions on carbon dioxide emission from electric power plants.

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