By JEFF GERTH and DAVID E. SANGER
WASHINGTON -- On Oct. 9, 1995, Secretary of State Warren
Christopher ended a lengthy internal debate within the Clinton
administration by initialing a classified order, preserving the
State Department's sharp limits on China's ability to launch
American-made satellites aboard Chinese rockets.
Both American industry and state-owned Chinese companies had
been lobbying for years to get the satellites off what is known in
Washington as the "munitions list," the inventory of America's
most sensitive military and intelligence-gathering technology. But
Christopher sided with the Defense Department, the intelligence
agencies and some of his own advisers, who noted that embedded in
commercial satellites were technological secrets that could
jeopardize "significant military and intelligence interests."
There was one more reason not to ease the controls, they wrote
in a classified memorandum. Doing so would "raise suspicions that
we are trying to evade China sanctions" imposed when the country
was caught shipping weapons technology abroad -- which is exactly
what happened in 1991 and 1993 for missile sales to Pakistan.
The secretary of state's decision to keep satellites on the
munitions list, making it harder for them to be exported, did not
stand for long. Five months later, President Clinton took the
unusual step of reversing Christopher's decision.
Control of export licensing for communications satellites was
shifted to the Commerce Department, then run by Ronald Brown.
Both American satellite makers and the Chinese were delighted
because the Commerce Department has dual responsibilities:
licensing sensitive exports and promoting sales of American goods
around the world. Several have already been approved.
One of the beneficiaries of that decision, it now turns out, was
China Aerospace because its rockets could launch American
satellites. An executive of the state-owned Chinese company, Liu
Chao-ying, allegedly provided tens of thousands of dollars from
Chinese military intelligence to the Democratic Party in the summer
of 1996.
Ms. Liu's involvement was described to federal investigators
recently by Johnny Chung, a Democratic fund-raiser who says he took
$300,000 from Ms. Liu -- who is also a lieutenant colonel in the
Chinese military -- and donated almost $100,000 of it to Democratic
causes apparently keeping the rest for his businesses.
Clinton's decision was announced in March 1996, several months
before the donations. But the actual change was delayed until the
fall.
The White House said it did not know the source of Chung's
donations and denies that the decision was influenced by campaign
donations, domestic or foreign.
"This was motivated by competitiveness and streamlining
bureaucracy concerns, and nothing else," Samuel Berger, Clinton's
national security adviser, said in an interview two weeks ago.
On Friday, Berger's spokesman, Eric Rubin, said the decision was
also part of the administration's China policy, and specifically
its effort to encourage China to clamp down on military exports.
"On many occasions, this was discussed with the Chinese
government because we believe that policy on satellite licenses is
one of the tools we have to strengthen our nonproliferation
policy," Rubin said.
Clinton's decision took place after months of tension with
Beijing. And only two months after Clinton reversed the secretary
of state, the administration said China had agreed to curb its
missile and nuclear exports.
In January reports of China's export of nuclear technology to
Pakistan and missiles to Iran caused considerable concern in
Congress and the Pentagon. In early May, two months after Clinton
reversed the secretary of state, the administration said China had
agreed to curb its missile and nuclear exports. But that
announcement was greeted with considerable skepticism by Republican
critics, including Bob Dole who was well on the way to getting the
nomination for president.
During the campaign, the Republicans attacked Clinton for
failing to curb China's sales of nuclear and missile technology to
other countries. The satellite decision in March was one element of
the administration's "carrot-and-stick-approach to working with
China," said James Lilley, former American ambassador to Beijing.
But in the way business and diplomacy mix in Washington's
dealings with China, the decision also resonated in boardrooms on
both sides of the Pacific. It satisfied the commercial interests of
the American aerospace industry, which had long sought access to
China's low-cost ability to launch satellites into space, aboard
rockets called the Long March.
And it bolstered China's own commercial interests. Ms. Liu's
parent company, China Aerospace, owns a large piece of a Hong Kong
satellite operator. It also owns China Great Wall Industry Corp.,
the rocket company that launches both private satellites and tests
and provides equipment for the missiles in China's nuclear arsenal.
It was Great Wall that the State Department sanctioned in 1991 and
1993 for selling missiles to Pakistan.
Other powerful Chinese state enterprises also had
multibillion-dollar stakes in getting access to American
satellites. Among them was China International Trade and Investment
Corp., whose chairman, Wang Jun, gained unwanted fame in the United
States last year when it was revealed that he attended one of
Clinton's campaign coffee meetings in the White House. The day of
Wang's visit, Clinton, in what Rubin said was a coincidence, signed
waivers allowing the Chinese to launch four American satellites --
though they were unrelated to the business interests of China
International Trade.
"Any suggestions that these decisions were influenced by Wang
Jun's presence in the U.S. is completely unfounded," Rubin said.
But there is no doubt that American companies -- partners and
suppliers of China International Trade and China Aerospace -- put
enormous pressure on the White House. They were also important
campaign contributors. For example, the chief executive of Loral
gave $275,000 between November 1995 and June 1996 to the Democrats.
How Clinton came to change the export control rules for
satellites to China is a tale of Washington turf wars between the
State and Commerce Departments, of arguments over how to balance
America's security concerns and commercial competition in the
hottest of all the emerging markets.
But it is also a story of how the interests of both large
American donors and surreptitious foreign donors to the 1996
campaign intersected.
The Precursor:
A Strong Push Under Bush
hina's drive to obtain a steady stream of satellite technology
from the United States preceded the Clinton administration's
arrival in Washington.
In 1990, just a year after the killings at Tiananmen Square,
officials from China Aerospace and the Chinese government
approached Lilley, the American ambassador, pressing for President
Bush to waive restrictions enacted in the aftermath of Tiananmen
that barred China from launching American satellites.
"They hit me very hard," Lilley recalled recently. "It was a
prestige national program. It was putting China on the map as the
big space country of the 21st century."
Bush, America's first permanent representative in China, granted
a waiver that allowed a launch on one of China's Long March
rockets. In 1992, a number of senators -- including Al Gore, then
still a senator from Tennessee -- wrote to the Bush administration
warning that China was using the launches to "gain foreign
aerospace technology that would be otherwise unavailable to it."
During the last days of the 1992 presidential campaign, Gore
made the waivers an issue, contending that Bush "has permitted
five additional American-built satellites to be launched by the
Chinese."
"President Bush really is an incurable patsy for those
dictators he sets out to coddle," Gore said during a speech at the
Goddard Space Flight Center in Greenbelt, Md.
The Argument:
Business Leaders Pressure Clinton
lmost as soon as Clinton took office, business leaders began
their campaign to drastically change his views about China.
Both Chinese and American companies were working to get
satellites off the State Department's munitions list. The rules for
exporting goods that are on the list are particularly tough.
Congress must be notified 30 days in advance. Moreover, the State
Department considers only nonproliferation issues and defers to the
Pentagon's judgments. In contrast, the Commerce Department's
export-control administration solicits a host of views and must
weigh the effects of its decisions on America's competitive
position.
Christopher's aides also noted in their 1995 classified memo
that "U.S. firms remain concerned there could be additional
sanctions imposed on China precluding future munitions licenses,"
exactly the kind of sanctions that had been only recently lifted
for China Aerospace's subsidiaries.
And there was a lot at stake: an estimated 14 commercial
communications satellite launches a year worldwide, costing several
hundred million dollars apiece.
"The business community regarded the inclusion of civilian
satellites on the munitions list as an insult," said William
Reinsch, the under secretary of Commerce for export control, who
fought Christopher's decision. "We're the only country that treats
them that way."
The Chinese also understood that they had a huge stake in the
outcome of the decision. Zuoyi Huang, president of the California
subsidiary of China Great Wall, a part of the China Aerospace
empire, said in an interview that his company was eager for any
changes that would insure easier access to American technology.
"The license takes time," he said. "You have to get a waiver
from the president. The customers can't wait. It's just pure
commercial use. It's not a military threat to the United States."
The Review: A Decision Against and a Quick Appeal
he arguments came to a head in 1995. C. Michael Armstrong, then
the chief executive of Hughes Electronics and newly chosen as the
head of Clinton's export council, asked to meet Christopher. He
urged that satellites, which his company produces, no longer be
treated as military goods.
The secretary of state promised that he would conduct a detailed
review in consultation with the Department of Defense, the CIA and
National Security Agency, and the Department of Commerce.
But the majority of the interagency group quickly found itself
at odds with the aerospace industry. A key issue was how to protect
encryption equipment, which is built into a satellite and
interprets instructions from ground controllers who manipulate the
satellite once it is in orbit. Similar devices are used to
communicate with American spy satellites, and the Pentagon and
intelligence agencies worried that anyone who could crack the code
could take control of the satellites themselves.
An Aug. 17, 1995, a memorandum prepared for the interagency
group noted that the chief executive of a satellite company told
Christopher that "once it is embedded in the satellite, the
encryption device has no military significance." Thus, the
industry argued, there was little risk that the Chinese would get
their hands on the encryption devices -- especially because American
military officials are supposed to watch the satellites with care
when they are in Chinese hands.
But, the memo went on, "the national security position" is
that "the nature of the device itself," not its location,
"should be used to determine whether it must be controlled as a
military item."
The encryption issue was one of the main reasons the interagency
group -- over the objections of the Commerce Department --
recommended that satellites remain on the munitions list.
Christopher concurred.
Soon after Christopher put his initials on the decision
memorandum, Commerce Secretary Ronald Brown appealed the decision
to the president.
The Turnaround:
The Commerce Dept. Wins a Turf Battle
he debate surrounding the appeal did not heat up for four
months. The nature of the arguments that went to the White House
are still unclear: Many of the documents remain classified. But
those that have been reviewed by The New York Times show that the
White House and the Commerce Department began communicating again
about the issue on Feb. 8, 1996, two days after Clinton broke a
backlog of applications for launches by China, by approving four of
them that day.
Clinton signed those waivers the same day that Wang Jun, the man
who was often referred to during the campaign finance
investigations as a "Chinese arms dealer," visited Washington.
His company, China International Trade and Investment Corp., has a
multibillion-dollar stake in one of Hong Kong's largest satellite
companies.
That same day, Wang met with Brown, at his expansive office in
the Commerce Department. And that evening, Wang attended a coffee
at the White House, an event Clinton later called "clearly
inappropriate." Others at the coffee said Wang never spoke during
the session.
By mid-February, for reasons that are still murky, there seemed
to be some urgency at the White House to decide whether to reverse
Christopher's decision, shifting satellite export licensing to the
Commerce Department.
A Feb. 15 State Department memo talks about speeding up the
process because "the administration wanted to wrap this up."
In the end, the State Department relented. Participants in the
final debate said that the president concluded that the technology
could be adequately protected through the Commerce Department, just
as the department protects supercomputers and other sensitive
technologies.
The president's decision was announced on March 14. Commerce
officials, who had just won one of Washington's nastiest turf wars,
were jubilant.
"Good news," officials were told by e-mail. The electronic
message went on to recommend a "low key" spin on the news that
would "not draw attention to the decision."
Internal Commerce Department documents show that officials were
anticipating questions from reporters and Congress about whether
the decision represented an effort to ease technology transfers to
China and remove items from sanctions -- some of the same concerns
that figured in Christopher's decision.
In the days preceding the announcement, China had raised
tensions with its Asian neighbors and the United States to new
heights, firing M-9 ballistic missiles, which carried dummy
warheads, into target zones 30 miles off the shore of Taiwan.
The March 14 announcement said that regulations implementing the
president's decision would be issued within 30 days. But the
bureaucratic infighting continued.
Finally, the State Department issued the regulations shifting
most satellite licensing to the Commerce Department.
They were published on Nov. 5, 1996, the day Clinton was
re-elected.