Obama’s Lost in Space

Administration approves controversial export license allowing sensitive space technology transfer to China

July 23, 2012

The Obama administration recently notified Congress that it has agreed to license exports of sensitive U.S. space technology to China from a U.S. company that was fined in the past for illegally supplying space support that improved Chinese ballistic missiles.

The State Department’s Directorate of Defense Trade Controls, the unit that licenses exports of sensitive technology, notified House and Senate leaders on Wednesday of plans to go ahead with an export license for a deal between Space Systems/Loral and AsiaSat, a company owned in part by a Chinese state-run investment company linked to past satellite deals in the 1990s.

Additionally, U.S. government reports indicate that China’s People’s Liberation Army, which is currently engaged in a major space warfare program that involves anti-satellite missiles and lasers, used AsiaSat communications satellites in the past.

An intelligence report produced by the National Air and Space Intelligence Center stated that AsiaSat satellites were used by the People’s Liberation Army for military-related communications.

Congressional investigators who have been probing the Loral-AsiaSat deal since earlier this year are questioning whether it is legal under U.S. export laws and restrictions on transfers to China.

Documents obtained by the Free Beacon reveal that the Obama administration appeared to ignore two U.S. laws prohibiting space cooperation with China. They include sanctions against selling military goods to China imposed after the 1989 Tiananmen Square massacre by Chinese military forces, and a 1999 law requiring all space exports to China to be treated as military transfers.

The State Department justified its approval of the Loral license as permitted under the 1992 U.S.-Hong Kong Policy Act, which the department said exempts Hong Kong from other U.S. laws restricting exports of space technology and defense goods to China. The British colony reverted to Beijing control in 1997.

Investigators determined that AsiaSat is owned under a joint venture between General Electric Co. and state-owned China International Trust and Investment Corporation (CITIC). The two companies set up AsiaSat in the British Virgin Islands and named it Bowenvale Ltd.

GE’s plan to create the joint venture as a 50-50 ownership structure was opposed by State’s Office of Defense Trade Controls Compliance in 2007. Instead the ownership was structured so that GE and CITIC each owned 37.2 percent, with the remaining 25.6 percent ownership sold as stock on the Hong Kong exchange.

The State Department opposed the 50-50 ownership split over concerns it could give China a potential controlling interest.

However, congressional investigators also learned in June that AsiaSat plans to privatize the publicly held portion of the company in an apparent bid to avoid regulatory sanctions and compliance obligations of public companies.

The State Department told investigators in response that it held discussions with AsiaSat and agreed AsiaSat would not allow the privatized stock shares to be purchased by Chinese or other entities restricted from gaining access to U.S. space technology.

David S. Adams, assistant secretary of state for legislative affairs, stated in a July 18 letter to Senate Foreign Relations Committee chairman Sen. John Kerry and House Foreign Relations Committee Chairman Rep. Ileana Ros-Lehtinen and their minority counterparts that unless Congress objects, the export license will be issued for the $263.4 million deal between Loral and Asia Satellite Telecommunications Co., Ltd (AsiaSat) and its Hong Kong representative, Barry Turner, a Canadian resident of Hong Kong. Thailand’s Thaicom Public Co., Ltd. also is part of the deal.

Congress has 28 days to decide whether or not to block the sale.

A spokesman for the House Foreign Affairs Committee said the panel is reviewing the notification. A Kerry spokeswoman had no immediate comment.

Loral spokeswoman Wendy Lewis said: "Space Systems/Loral is very rigorous in our compliance with export control regulations."

According to U.S. officials, the export license will permit the transfer of what the congressional notification describes as "defense articles, including technical data, and defense services necessary for the post-preliminary design review design, manufacturing and delivery phases of AsiaSat 6 commercial communications satellite program."

The satellite will provide commercial communications for India, Philippines, Australia, New Zealand, Indonesia, and China, and the Pacific region.

According to congressional investigators, the State Department also sought to dismiss concerns about the Chinese military’s use of AsiaSat satellites. A department official stated that if the AsiaSat communications satellite is commercial in nature and had no military-hosted payload, it is not viewed as having "military-related purposes," and thus U.S. space cooperation would not be banned under U.S. laws.

Only if intelligence data showed that AsiaSat had allowed the Chinese military to put payloads on its satellites would enforcement action be taken, the State official said.

The license to AsiaSat is being carried out under the Arms Export Control Act, and is part of the Obama administration program of seeking a major loosening of export controls of sensitive technology.

Critics opposed to loosening export controls have said the new policy will help China’s large-scale military buildup, specifically its space warfare programs.

A joint State Department-Pentagon report made public in April warned that U.S. plans to loosen controls on satellite exports will boost China’s space warfare capabilities.

Because of close ties between Chinese civilian and military space development, there is a "high likelihood that space-related items and technology will be diverted from a civil use and applied to military programs," under relaxed U.S. export controls, the report said.

"As China advances in operational space capabilities, it is actively focusing on how to destroy, disrupt, or deny U.S. access to our own space assets," the report said.

The report said China is building several new classes of offensive missiles, upgrading older missile systems, and "developing space-based methods to counter ballistic missile defenses of the United States and our allies, including anti-satellite (ASAT) weapons."

Regarding space technology transfer, the report said: "Inadvertent or deliberate transfer of space-related expertise poses the most significant potential harm to U.S. national interests."

Richard Fisher, a specialist on Chinese military affairs, said he is opposed to loosening controls on space technology transfer to China.

"We do not have a required level of transparency with China’s overall space program to be relaxing rules sufficient to enable commercial cooperation," said Fisher, with the International Assessment and Strategy Center.

"We are still not able to assure that U.S. technology will somehow assist some future Chinese space weapon," he said. "China still laughs at our efforts to promote such transparency."

Congressional investigators said both CITIC and AsiaSat were involved in the strategic compromise of U.S. missile technology that grew out of satellite launch and space cooperation between U.S. companies and China in the 1990s.

For example, a representative of CITIC, Wang Jun, met at the White House on Feb. 6, 1996—the same day that then-President Clinton approved the launch of four U.S. satellites on Chinese rockets.

Records at the time also revealed that Loral chairman Bernard L. Schwartz gave large donations to the Democratic Party, including $15,000 to the Democratic Senatorial Campaign Committee on Feb. 15, 1996—just over a week after Clinton approved the satellite launches in China. On Feb. 29, 1996, Schwartz gave $50,000 to the Democratic Congressional Campaign Committee.

The satellite launches were the first step in the ill-fated technology transfer that made Chinese intercontinental ballistic missile more reliable.

Eight days after the satellite launches were approved, a Chinese launcher carrying a Loral satellite blew up on launch and destroyed a nearby Chinese village.

The launch failure investigation over the next several months led to the improper sharing of restricted U.S. missile technology.

Several officials opposed to the license say it appears to reward a U.S. company that was linked by Congress to the loss of U.S. strategic missile technology to China as a result illegal missile-related space technology sharing following a series of Chinese space launch failures in the late 1990s.

As a result of that compromise, Congress in 1999 passed legislation that forced the administration to treat U.S. satellite exports and space technology cooperation as military and defense exports.

The two companies involved in the illicit space cooperation were Loral Space and Communications Co. that owns Space Systems/Loral, and Hughes Electronics Corp. In 2002, Loral was fined $14 million for the illegal exports; Hughes was fined $32 million in 2003 for its role in the transfer. A Pentagon technology security report on the tech transfer concluded that "the significant benefits derived by China from these activities are likely to lead to improvements in the overall reliability of their launch vehicles [i.e., rockets] and ballistic missiles and in particular their guidance systems."

Published under: China , Intelligence