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Disarmament Diplomacy

Issue No. 25, April 1998

US Companies Reported Assisting Chinese Missile Development

Two reports in the New York Times in April have alleged the significant involvement in China's ballistic missile programme by two US companies, Loral Space and Communications (based in New York) and the Los Angeles-based Hughes Electronics division of General Motors.

According to the first Times report (4 April), the involvement of both companies was being investigated by a Federal Grand Jury. The core of the allegation is that the companies provided information on rocket guidance-systems, partly in an attempt to improve the reliability and performance of Chinese rockets carrying the companies' space technology. On 16 February 1996, a Chinese rocket carrying a Loral satellite (reportedly worth $200 million) exploded. According to the report, in February 1997 President Clinton gave permission - apparently during the course of a US Government investigation into the 1996 accident, and against the advice of the Justice Department - for another Loral satellite to be launched by the Chinese. The Times added that Loral's Chief Executive, Bernard Schwartz, was the main individual contributor to Democratic Party funds in 1997.

On 13 April, the Times reported that a classified May 1997 Department of Defense (DoD) report into the 1996 accident had concluded that Loral and Hughes had acted improperly in providing China with expertise and information related to the improvement of guidance-systems. According to the Times, the DoD report concluded: "United States national security has been harmed."

Reacting to the reports, State Department spokesperson James Rubin told the press on 15 April that the matter was still being investigated: "One of the issues that is germane is the extent to which anything might or might not have harmed...national security. And so we would not want to say anything publicly that could interfere with the ongoing investigation..."

Also on 15 April, speaking in Tokyo, Loral President and Chief Operating Officer, Gregory Clark, insisted: "We feel [our] people involved in that [February 1996 incident] behaved correctly. They did not divulge any information that was inappropriate. We feel that very strongly..." Clark added: "We're collaborating very openly with government facilities investigating this."

According to reports, in March this year, Loral concluded a contract with China's Great Wall Industry Corporation for five satellite launches between March 1998 and March 2002; all five satellites will be carried on China's Long March 3B rocket.

Reports: Report - cos eyes of China missiles, Associated Press, 4 April; Two companies probed for China missiles, Reuters, 4 April; US firms helped China on missiles, Times says, Reuters, 13 April; Loral space chief denies wrongdoing in China case, Reuters, 15 April.

© 1998 The Acronym Institute.

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