Close-Out Sale at Commerce
Timmerman, Kenneth R.
Kenneth R. Timmerman Close-Out Sale at Commerce As Republicans move to abolish the Commerce Department, revelations emerge about how it sold highly sensitive technology to all the wrong...
...The tomography equipment was intended "to provide x-ray techniques capable of improving Chinese nuclear weapons performance...
...The Clinton administration has backed the UAE in its efforts to seek international arbitration of the issue...
...The statement went on to say that "it is inappropriate to comment or speculate on the existence of or specifics concerning any investigation conducted by other agencies or branches of the government...
...Webb also approved the sale of digital-analog computers to Iraq's Saad 16 missile design center...
...The three islands are smack in the middle of the commercial sea lanes in the Straits of Hormuz, through which 20 percent of the world's oil shipments travel daily...
...According to the Center for Iranian Trade and Development in New York, an ostensibly private organization that promotes trade with Iran, the U.S...
...Tony Grampsas John D. Ong Hon...
...military helicopter manufacturer has applied to ship laminate and honeycomb technology to China, ostensibly to make a composite tail section for a new "civilian" helicopter...
...I guarantee that this could never happen," the local Commerce rep swore...
...A Dynamic Duo Of the repeated cases in which very sensitive U.S...
...Dick Chrysler (R-Mich...
...0 The American Spectator August 1995 45...
...intelligence agencies complained that their ability to track Soviet nuclear submarines had been impaired in the Barents Sea, the principal corridor used by the Soviet Navy to get its submarines out of bases on the Kola Peninsula and into the North Atlantic...
...The GAO found in its April 1995 report on China that Commerce had "requested three pre-license checks for applications involving missile-related technology" from 1990 to 1993...
...We have since put into practice all of the recommendations made by the GAO in this area," said Undersecretary Reinsch...
...He said that most of these could be explained by a few high-profile, big-ticket investment projects, such as a natural gas liquefaction plant, and an unleaded gasoline oil refinery...
...Robert Bork Richard Brookhiser Dr...
...A survey of therect exports went through the UAE...
...According to a 1993 intelligence assessment, the end-user was "a known entity involved in militarynuclear weapons research...
...While the proposed legislation bears the signs of mere political wrangling, a very serious policy question lies beneath the maneuvering: Should the Commerce Department be making decisions that affect national security...
...But for the GAO analysts who have been examining the system over the past eighteen months, an administration which has placed top priority on exports is ill equipped to resolve the contradictions inherent to its system...
...Former licensing officers from the Department of Defense pointed to unusual cases handled by Rob Lerner, another subordinate of lain Baird...
...U nder current regulations, Commerce is supposed to refer many export license applications to the Departments of State, Defense, and Energy, as well as to the intelligence community...
...aerospace production tools are going directly to Chinese military factories, and repeated warnings from the Joint Chiefs of Staff about the growing Chinese military threat have been swept aside by Secretary of Defense Perry, Commerce, and the Clinton White House...
...Congressional critics say no, and point to a series of damaging reports in the past eighteen months—from the Government Accounting Office (GAO), the congressional Office of Technology Assessment, several congressional committees, and even the Commerce Department's own Inspector General—that detail numerous cases in which Commerce approved highly sensitive exports, over strong objections from Kenneth R. Timmerman, director of the Middle East Data Project, is the author of among other books, The Death Lobby: How the West Armed Iraq (Houghton-Mifflin...
...Provided with further details of Webb's case load, the former official said "it would be extraordinary" for an analyst to volunteer for such cases...
...radar systems...
...Potential scandals involving lax export supervision are already brewing...
...A recent war game, conducted by the Rand Corporation on behalf of the Joint Chiefs, showed the Chinese navy defeating U.S...
...government reports, and had been in unauthorized contact with the president of a supplier company, who had top secret security clearance at U.S...
...I mentioned these similarities at a recent reception in Abu Dhabi, hosted by a major U.S...
...Army Black Hawk...
...In an April 1995 report, the GAO determined that Commerce approved large numbers of licenses to export stealth technology, despite the fact that some of the equipment could be used to make ballistic and cruise missiles invisible to U.S...
...They also point out that the Defense Department signed off on all the exports in question, maintaining that the debate is merely the work of disgruntled bureaucrats who lost the battle in their own agencies and are seeking to fight back through the media...
...Christopher Cox Jeff Greenfield Milton Friedman Nelson L. Griswold III Suzanne Garment Hon...
...The two are neighbors on opposite sides of the narrowest neck of the Gulf...
...exports to the Peoples Republic of China are kept from sensitive end users...
...high technology goods, to better serve actual export licenses, however, did not tally with his description of the transactions...
...The letter worked, and Time caved in...
...The proposed new regulations, published on May 11 in the Federal Register, read, "No license or other authorization would be required for any transactions under BXA jurisdiction unless the regulations affirmatively state the requirement...
...And there is no legislation or executive order that is going to get around it...
...Currently, all exports from the United States are prohibited unless they are specifically allowed, either through a general license issued by BXA, or for more high-tech items, through an individually-validated export license (IVL...
...But under current regulations that is what would be needed to prevent such an export from occurring...
...By and large," Reinsch says of the GAO analysis, "the reports do not criticize BXA for deviating from the procedures as they exist, but are critical of the existing procedures...
...We are not just up against Siemens and Alcatel," he says, "but up against the German and the French governments...
...In 1993, Webb approved the sale of inertial navigation systems to a small company located on the Isle of Jersey, even though the company noted its intention to re-export the systems to Iran...
...In April, the GAO determined that Commerce approved large numbers of licenses to export stealth technology, even though some of the equipment could be used to make ballistic and cruise missiles invisible to U.S...
...technology there from countries such as Canada and the United Arab Emirates...
...Reinsch took over BXA in May 1994, and he claims the Clinton administration is attempting to resolve the turf battles once and for all...
...Normally the cases would have been assigned to analysts and licensing officers by the head of the Office of Export Licensing, kin Baird...
...In its effort to win big business over to the Democratic Party for the 1996 elections, the Clinton administration is laying the ground work for the type of export scandals the Germans underwent in the 1980s and early 1990s, when German companies built poison gas plants and missile factories in Libya, Iraq, and Iran...
...Commerce Department documents show that he handled numerous cases of sensitive exports—to the USSR, Iraq, Iran and China—that he tried to get approved without review by other agencies...
...Despite the hostility, the UAE maintains extensive commercial ties with Iran...
...indirectly" exported several hundred million dollars worth of goods to Iran in 1993, above and beyond the official U.S...
...I visited the Waldrich Siegen factory outside of Cologne in 1988, only one month after the machine was crated up and shipped to the USSR...
...Compared to 20 other countries of proliferation concern," the report stated that "China had the lowest percentage of completed pre-license checks...
...exporters that the Clinton administration would open up $100 billion in new business with China by the year 2000 is more important than national security concerns...
...goods from the UAE to Iran...
...When The American Spectator asked Reinsch to authorize interviews with the licensing officers in question, BXA General Counsel Hoyt Zia cut him off, saying, "That would be inappropriate...
...business executives, there is likely to be increasing scrutiny of U.S...
...government for the purchase of hi-tech goods for Iran...
...But earlier this year, when the GAO was conducting its investigation into shipments of stealth technology overseas, Commerce officials told the GAO they "probably could not have denied" such licenses because of the pro-export presumption of existing export regulations...
...The United Arab Emirates is a trading nation, and manufactures little for home consumption...
...Today, the UAE is literally on the front lines against Iran, locked in a dispute with Tehran over the sovereignty of three tiny but strategic islands, Greater and Lesser Tunb, and Abu Musa...
...That defense, although dated January 30 of this year, has already been dropped...
...China is not known to be planning to build a civilian helicopter of similar size anywhere in the near future...
...Embassy conducted no post-shipment verifications related to missile technology...
...The German Problem Despite its checkered record, the Commerce Department has issued new draft export control regulations that would make exporting even easier than it is today...
...O'Rourke Donald L. Stetson David Packard David Tuerck Raymond Shamie Thomas Sowell Michael Sanera Brock Yates SPECr r AT OR ® invites you u to join these readers and others...
...more than observers...
...But apparently Ron Brown's recent promise to U.S...
...business...
...Joseph E. Kelley, GAO Director in charge of International Affairs Issues, wrote Glenn: "Commerce approved 87% of licenses for items going to controlled countries, and turned down only one in a hundred licenses going to such countries...
...I mentioned the high level of UAE imports from the United States that had required individually validated export licenses—over $600 million worth in the past few years...
...In June 1994, the agency wrote the editors of Time in an attempt to block publication of a story on high-tech sales to China...
...According to International Monetary Fund figures, it imports roughly $12 billion per year, and exports roughly half again as much—not all of it in oil...
...When the GAO attempted to get executive branch agencies to provide an analysis of end-users approved by Commerce to determine their involvement in weapons activities, lawyers from Commerce and other agencies refused to cooperate...
...Many of the companies receiving high performance computers from the U.S...
...These agencies have special knowledge and expertise that Commerce obviously lacks—knowledge that would bear directly on whether or not to approve a particular export...
...exports overseas, Commerce submitted the following convoluted reply to Sen...
...The technology would have allowed China to produce Gallium Arsenide chips, highly prized by makers of high-performance combat radar systems and other military end-users...
...Far from seeing a conflict of interest between Commerce's trade promotion and its trade control roles, Reinsch said there was "synergy" between the two...
...If [the Defense Department] wants to see every license, we will give them every license...
...forces in the South China Sea as early as 2010, using advanced cruise missiles developed with American technology...
...Yet those critical reports do not support this view...
...A year later, Lerner approved the sale of a tomography scanner to China...
...John Gavin Matt Downey Richard L. Thayer William F. Harvey Herbert Hoover III Jeane Kirkpatrick Jack Limpert Antonio Martino Forrest McDonald P.J...
...The UAE has proIn April 1995, Commerce Department licensing officer Steve Claggart approved the sale of the Navy aircraft carrier USS Bennington to India—and some sources say, on to China—without prior consultations with the Joint Chiefs as required by law...
...Whether or not Chrysler's legislation is passed—it is supported by the House Republican leadership, and initial hearings were scheduled to begin as this issue went to press—those reports present overwhelming evidence that would seem to disqualify the agency from the right to oversee export licensing by itself...
...The Clinton administration from its inception has been dedicated to changing those procedures...
...That level of verification is simply not going to happen...
...As one export control official in Washington said, "The UAE refused to allow a post-license verification visit, and this has made us suspicious...
...He was accompanied by an official from the Commerce Department's defense trade promotion branch in Washington and a Palestinian resident of the UAE who worked with the other two...
...machine-tool builder to its German parent company, Waldrich Sieger, with the express knowledge that the machine would be shipped onward to a Soviet military factory making the MiG-29 jet fighter...
...And today, UAE companies, which manufacture little at home, continue to serve as conduits for U.S...
...The Department of the Navy has confirmed that the Bennington had been sold for scrap to a private company called Resource Recovery International...
...has introduced legislation that would abolish the Commerce Department, shift its export licensing functions to the State Department, and abolish its trade promotion activities entirely...
...Yet, according to the reports, Commerce has not only failed to refer many appli36 The American Spectator August 1995 American Spectators...
...Westmoreland Brit Hume Donald H. Barr Philip L. Becker Mildred King Dunn Larry H. Smead Thomas W. Carroll Susan C. Loeffel Curt Huber Ben Wattenberg Richard M. Scaife Chairman, Department of Economics, George Mason University, nationally syndicated columnist, author, television and talk show personality, and all around great American...
...A s Secretary of the Department of Commerce, Ron Brown has led an unprecedented drive to sell sensitive American technology to countries that have been anything but friendly toward the United States...
...German prosecutors have virtually given up efforts to bring guilty companies to account, because the laws existing at the time did not prohibit such sales...
...In addition, the intermediary for the sale, the Oriental Scientific Import-Export Corp., was "a known Chinese entity involved in the diversion of dual-use programs to military programs," the intelligence report stated...
...adversary has been following such developments closely...
...technology, are now being shipped to Iran, Libya, Syria, Pakistan, and elsewhere...
...Undersecretary Reinsch said he was unaware of any such FBI investigation and took to the offensive: "What's going on is policy disagreements that are being disguised as the malfeasance of individuals, and this is regrettable...
...No one is ever going to fmd out that equipment the Chinese say will be used to make cellular phones is really being used for command and control by the Chinese military...
...Following these cases, sources said the FBI began investigating Lerner for potential conflict of interest...
...When confronted with these cases, a former Assistant Secretary of Commerce who knew Webb in the 1980s commented that it was "highly unusual for a person of his technical focus, which'was primarily avionics and propulsion systems, to have volunteered to take cases that appear to be out of his area of expertise...
...This turns exporting from a privilege to a right, making it virtually impossible for Commerce (or any other agency, for that matter) to block an export for any reason...
...Walter Williams, Hon...
...I will not respond to allegations and innuendo made off the record," says William Reinsch, Undersecretary of Commerce for Export Administration (BXA...
...They warn that high-technology sales to China feed a military machine that could be turned against us...
...John Sununu Stuart Krane Albert Wohlstetter Gen...
...Reception in Abu Dhabi Potentially even more damaging to the administration, given its current hard-line policy toward Iran, are re-exports of sensitive U.S...
...radar...
...In one such landing this past March, 18 Revolutionary Guardsmen engaged in a firefight with Dubai police...
...communications cables and listening devices at depths of up to 6,000 meters beneath the ocean's surface...
...To subscribe, call us at 1-800-524-3469 Charlton Heston (8:30 am to 11:30 pm, Eastern time), Gary L. Bauer and we will send you twelve Frank J. Fahrenkopf, Jr...
...William Schulz Hon...
...In a written reply issued by the Public Affairs office, Baird stated, "BXA is precluded by law from discussing the specifics of individual license applications...
...The report concluded: "In general, export licensing process and monitoring controls for missile technology and dual-use export license applications cannot ensure that such U.S...
...The two Commerce Department employees were embarrassed when our conversation turned toward the subject of possible diversion of U.S...
...nuclear weapons labs...
...An examination of Department of Commerce export licensing records reveals dramatic similarities between the purchasing patterns of UAE companies and those of Iraq in the 1980s, when it was building up its military industries...
...In late 1992, Lerner approved the sale of extremely advanced computer chip manufacturing technology to China, which meant it did not require specific approval from the Commerce Department to be exported...
...In 1992, Webb was the licensing officer who determined that Garrett Engine Co...
...could export advanced gas turbine engines to China, for use in a military jet trainer, without an export license...
...Critics argue that Commerce's main preoccupation has become to ship as much high technology out the door of Factory America as quickly as it can, with no questions asked...
...we do not consider them qualified or authorized to conduct enforcement activities...
...export figure of $362 million in direct exports...
...But many in the national security community, including the Joint Chiefs of Staff, see China as the emerging military threat in South Asia over the next two decades...
...It is simply a McCarthyite tactic to discredit individuals and the department when what you have is a policy dispute," Reinsch said...
...the national security community, to countries of proliferation concern...
...Brown has worked so hard and so well at pushing American business abroad that some Republicans in Congress fear Bill Clinton's re-election campaign coffers will swell from the donations of grateful exporters...
...In subsequent answers to written questions submitted by Sen...
...Clearly, the Commerce Department is under fire, and not just because of faults committed under previous administrations...
...technology was shipped to known military end-users in the SOyiet Union, China, Iraq, and Iran, despite clear prohibitions against such sales...
...Licensing officer lain Baird, who our sources say supervised most of the above-mentioned cases, refused to answer specific questions from The American Spectator concerning his role—no doubt under instructions from Zia...
...Since the reports were released, he claims, Commerce has stopped using foreign nationals to carry out these checks...
...Hundreds of small sailing vessels, called dhows, ply daily between Dubai and the Iranian military and container port of Bandar Abbas...
...Instead of joining this debate, however, the Commerce Department has consistently attempted to stifle it or to bulldoze those who disagree with its point of view...
...Della Newman James Grant Cathy Hines Midge Decter John E. Carlson Fred C. lkle Hon...
...The UAE was the principal commercial pipeline for Iran throughout the eight years of Iran's vicious war with Iraq...
...Mitchell Pearlstein Malcolm S. Forbes, Jr...
...No One Is Ever Going to Find Out" One area of potential scandal has already been hinted at by the GAO: the almost total lack of reliable means to verify that overseas purchasers will indeed use sensitive dual-use technology for the civilian purposes they claim--and not reexport them to countries such as Iran, or use them in their own weapons programs...
...In 1983, Webb approved the sale to Iraq of military transport helicopters, using a little-known proviso that helicopters weighing under 10,000 pounds do not require special munitions licenses...
...Iran has occupied the islands militarily since 1992...
...Jack Kemp Arthur Cinader John Naisbitt Clinton I. Smullyan, Jr...
...The exports in question were subsequently blocked after State and Defense got wind of the pending shipments...
...exports to military plants in China and Iran in the coming months...
...Glenn: 40 The American Spectator August 1995 Although [officials of the Foreign Commercial Service] are not recruited on the basis of criteria specifically related to the conduct of export control enforcement activities, they are generally well-qualified to make the commercial inquiries and visits required...
...The UAE, for example, is not only a good friend to the United States and a good market for U.S...
...Should the new regulations go into effect, this would get worse by several orders of magnitude...
...Commerce still requires adult supervision," the official quipped...
...We found that the majority of applications to Commerce for the export categories related to stealth are not sent to DoD or State for review," the GAO reported...
...Customs, alleged that Lemer had received specifications from the manufacturer that should have prompted him to require a license for the sale...
...He claimed that Iraqi documents provided in support of the license showed that Saad 16 was merely a university research center dedicated to aerospace and ballistics...
...This reporter photographed some of those "civilian" helicopters in Iraq in 1989, painted in full combat regalia at a military display...
...Last year the administration began working on an executive order that would compel Commerce to share license applications with any agency that requests them...
...The company specifications were subsequently removed from the Commerce Department file...
...As we detailed in these pages recently ("China Shops," TAS, March 1995), the Clinton administration is pumping more than two billion dollars per year of inherently dual-use technology into China, much of which is going to build military capabilities—all in the name of "defense conversion...
...Said one intelligence analyst who has been tracking Chinese procurement habits in the United States: "Once they figure out the types of end-uses Commerce is willing to approve, then that is what they put on their license applications...
...Once that order has been issued, Reinsch argues, a new era will begin...
...The Palestinian who worked for Commerce volunteered that he had been given the task of conducting the post-license checks—and, of course, had found nothing wrong...
...During Desert Storm, its fledgling air force battled against Iraqi jets...
...This meant the Chinese could also purchase the manufacturing technology for the engines, which various intelligence reports—today disputed by Commerce—claimed could be used by the Chinese to build an advanced cruise missile...
...The Iranian government has established a large number of front companies in the UAE whose sole purpose is to provide fake end-user documentation to the U.S...
...Among those cases was the shipment of a 26-axis composites tape-laying machine, sold by a U.S...
...exporters will be as free to sell as many high-tech goodies to hostile countries astheir German counterparts were before the German government passed tough new laws three years ago...
...Soon, U.S...
...for resale only within the UAE," do not in fact exist—at least not according to UAE commercial directories and other corporate records obtained from the Ministry of Foreign Affairs...
...In addition to the tremendous potential for kickbacks that has been generated by Ron Brown's high-profile foreign sales extravaganzas in the company of high-powered U.S...
...Moreover, the activities performed by the Foreign Commercial Service . . . are strictly administrative and commercial...
...Brown has also promised to open up India, another potentially huge untapped market for U.S...
...Export licensing decisions are not made by a single officer but are reviewed and approved by senior managers who sign-off on every license application approval...
...When Congress learned of the sale, it protested vigorously to President Reagan but did not succeed in blocking delivery...
...capital goods...
...But an enforcement officer from a rival agency balks at Reinsch's explanation...
...Most of those indiIran's extensive military industries...
...The anticipated military applications and the potential impact on Chinese nuclear weapons capabilities far outweigh any civilian application," the report concluded...
...The end-user, AVIC, is controlled by China's Ministry of Defense—and also happens to be building China's next generation attack helicopter, a derivative of the U.S...
...government...
...Iran's leaders and largest trading conglomerates do business through the Dubai banking system, which is beyond a doubt the most efficient and most cosmopolitan of any country in the Gulf...
...Now Commerce officials challenge journalists who criticize them to identify their sources—something no credible reporter will do...
...Undersecretary Reinsch argued there was "no change in the bottom line of what is controlled and what is not controlled...
...Once equipment actually reached Chinese factories, "the U.S...
...Chrysler, who introduced the legislation to abolish the Commerce Department, is ready and waiting...
...For example, a 1992 shipment of some 160 third generation night-vision devices, licensed by Commerce, appears to have gone "missing...
...The American Spectator August 1995 41 posed taking the issue to the World Court in The Hague, but Iran has refused...
...products: it has proved to be a faithful ally...
...To put pressure on the UAE, Iranian Revolutionary Guards have staged a series of probing attacks over the past few months, landing at night along the Dubai coast in small motor boats...
...Several were killed or wounded, and the rest jailed...
...Glenn's staff, the GAO stated flatly: "We believe that the [licensing] agencies do not monitor compliance...
...Following the sale, U.S...
...Even congressional Democrats, who have never before considered getting rid of Commerce, are now beginning to believe that this may be the only solution to averting the potentially disastrous flow of sensitive technology to our enemies...
...A major U.S...
...U.S...
...Sources in several agencies said the order is in the final stages of legal review as we go to press, and should be published by early July...
...Sources who subsequently reviewed the case, once it was blocked by U.S...
...Amb...
...defense contractor, where I met the local representative of the Commerce Department's Foreign Commercial Service...
...But now the Republicans are fighting back...
...In its defense of how the pre-license and post-shipment checks were administered by officers working for or reporting to the Foreign Commercial Service (FCS), whose primary duty is to promote U.S...
...Normally this sale would have been denied, but Commerce determined that the ultimate end-user was the United Kingdom, and that therefore no license was required for the sale...
...According to the GAO, Commerce scrutiny of exports to Indian entities involved in ballistic missile and nuclear weapons programs has also been spotty...
...Company officials showed me documents and insisted they had all the proper approvals from the U.S...
...The Clinton administration in general, and Ron Brown in particular, sees China as a huge potential market for U.S...
...Chinese missiles, perhaps incorporating U.S...
...Alan Abelson Dr...
...44 The American Spectator August 1995 In the mid 1980s, Webb also allowed a U.S...
...Webb, a former Department of Defense employee and a captain in the Naval reserve, retired earlier this year...
...Furthermore, Reinsch maintained, most of the licenses cited above were approved through the inter-agency review process—a contention hotly disputed by officials from other agencies...
...In particular, the sources said, the FBI was investigating allegations that Lerner had falsified official U.S...
...GAO highlighted two exports of a radar-absorbent material to a German firm for use in a cruise missile project that could subsequently be forwarded to the Middle East...
...virtually every one was processed by one of two Commerce analysts, Bruce Webb and Rob Lerner...
...One potential U.S...
...My interlocutor in Abu Dhabi admitted that the fear of diversion to Iran had prompted the visit of a Commerce Department investigator to the UAE in November 1994...
...Kenneth R. Timmerman Close-Out Sale at Commerce As Republicans move to abolish the Commerce Department, revelations emerge about how it sold highly sensitive technology to all the wrong people— and kept Defense and State out of the loop...
...THE AMERICAN Spectator, the Commerce Department said the carrier "was a WWII era vessel which had been disarmed and mothballed for 25 years...
...Commerce and the administration reply that, as we approach the twenty-first century, national security will be conditioned increasingly by America's economic strength, and that competing effectively in international markets has become critical to the high-technology companies that will conceive, design, and build the weapons systems of tomorrow...
...issues for only $35...
...They would have to actually go to China, get full cooperation from the Chinese government, and see the equipment being used by uniformed Chinese soldiers...
...The changes are designed to reduce the likelihood of mistakes by exporters or opportunities for confusion, all of which will result in more effective enforcement...
...Commerce and State Department officials acknowledged this point...
...company to sell a side-scan sonar array to the Soviet Union, which gave their navy the capability, which it did not have before, to detect U.S...
Vol. 28 • August 1995 • No. 8
