French defense contractor flouting export rules

Thales Alenia Space selling sensitive technology to Chinese

February 9, 2012

The State Department is set to sanction a major French aerospace defense firm for their refusal to provide the U.S. government with data on restricted U.S. technology contained in satellites they sold to China in violation of U.S. export controls.

According to U.S. officials, the chairman of Thales Alenia Space, Reynald Seznec, was asked in a letter sent last month to turn over information on technology contained in the Spacebus4000 satellites.

Under U.S. International Traffic in Arms Regulations (ITAR), companies that sell goods containing sensitive U.S.-origin technology must first obtain a U.S. export license. Thales asserted the satellites were built without controlled U.S. technology and therefore there was no need to obtain licenses for the sale of the Spacebus 4000.

Beth McCormick, deputy assistant secretary of state for defense trade, stated in the Jan. 24 letter that for the past two years Thales has refused to cooperate with the department in its investigation of the Spacebus 4000 after it was initially offered for sale as "ITAR-free." That designation eases sales to foreign buyers, as they do not have to first obtain a U.S. export license.

Thales, which reported revenues of $17.3 billion in 2010, has declined to provide the data since 2008, claiming it was prohibited from doing so under French law.

McCormick gave the company 30 days to provide the information or face the prospect that the U.S. government would block export licenses that would limit the company’s foreign sales.

The letter did not specify what systems and programs would be sanctioned.

A State Department official declined to comment on the letter, saying only that the department "continues to look into U.S. exports to Thales Alenia Space (TAS) to determine whether or not U.S. defense articles regulated under the International Traffic in Arms Regulations (ITAR) were incorporated by TAS in its ITAR free’ variants of the Spacebus4000 series of satellites."

Spokesmen for Thales Alenia Space did not return telephone calls or emails seeking comment.

The U.S. government cut off exports of satellites to China in the 1990s after U.S. aerospace companies helped make China’s strategic nuclear missiles more reliable by improperly assisting China’s space launchers.

According to the Pentagon’s annual report on China’s military, the Chinese are developing an array of space warfare capabilities, including anti-satellite missiles and lasers. The report said China’s military has stated that it plans on "destroying, damaging, and interfering with the enemy’s reconnaissance ... and communications satellites" in a future conflict. The report also said such systems and navigation and early warning satellites are targets in an initial phase of attack that would "blind and deafen the enemy."

China’s development of space warfare capabilities is a major concern of U.S. national security officials opposed to loosening export controls on commercial space technology.

Thales built the Chinasat 6B satellite in 2007 and in 2008 began advertising Spacebus 4000 satellites for sale as "ITAR-free." It then exported several of the satellites, including some to China, a country limited from such sales by under the International Traffic in Arms (ITAR) regulations.

The U.S. government approved nearly 60 export licenses and agreements worth an estimated $42 million for Thales to buy hardware and technology for Spacebus 3000 and 4000 series satellites between 1999 and 2008, according to U.S. officials.

Some Obama officials are fighting plans to impose sanctions on Thales as they would be a major setback for the president’s effort to bolster the U.S. economy through a program of eased export controls. Mr. Obama announced the plan in August 2010 as part of an effort to increase U.S. competitiveness.

Critics of the loosened controls, however, say the program will make it easier for states like China to obtain sensitive technology that can be used for Beijing’s military buildup.

Congress was alerted to the Thales case by administration officials who said Obama administration political appointees blocked career State Department officials from imposing sanctions on Thales for the satellite sales to China.

Despite U.S. restrictions on sales of satellites technology to China, Beijing has obtained numerous systems that contain embargoed technology, according to U.S. officials. Satellite launches by or for China that contained embargoed technology since 2005 include the APSTAR 6, Chinasat 6B, Chinasat 9, Palapa D, W3C, APSTAR 7, and APSTAR 7B, according to U.S. officials.

Both the Senate Foreign Relations Committee and the House Foreign Affairs Committee are pressuring the State Department to impose sanctions on Thales and hold up their licenses for U.S. high-technology exports until State completes its investigation of the Spacebus 4000 sales to China.

On Dec. 19, three senior U.S. lawmakers wrote to Secretary of State Hillary Clinton stating that Thales satellite sales to China appear to have been illegal.

The letter was signed by Republican Reps. Ileana Ros-Lehtinen of Florida, chairwoman of the House Foreign Affairs Committee; Michael R. Turner of Ohio, chairman of the House Armed Services strategic forces subcommittee; and Frank R. Wolf of Virginia, chairman of the House Appropriations subcommittee on commerce.

"Given that this investigation has been open since 2008, and State Department personnel appear to have concluded that there is a high probability that TAS illegally exported ITAR-controlled technology to China, when does the Department expect to take a final action which, under law, may include a denial of any licenses for the export of United States Munitions List (USML) technology?" the lawmakers wrote.

"The misperception that there is an ITAR-free satellite on the market is of deep concern to U.S. industry."