1997 Congressional Hearings
Special Weapons
Nuclear, Chemical, Biological and Missile

                         PREPARED STATEMENT OF 
                             JAMES R. LILLEY

                                 of the
                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE
                            APRIL 10, 1997

    ``The United States and China's neighbors would welcome greater 
transparency in China's defense programs, strategy and doctrine.'' \1\

    ``When capable, feign incapacity; when active, inactivity.'' \2\

    Former Secretary of State Warren Christopher apparently says and 
believes in a strategy of ``integration through engagement, and that 
China should take its place as a world leader as a secure, open and 
successful nation.'' \3\ Sun-tau, the ancient as well as the greatest 
Chinese philosopher of the art of war, saw it differently. There is 
some evidence he still has considerable influence over Chinese 
strategic thinking. He certainly did over the late Chairman Mao, 
another architect of Chinese strategy. There is, in short, a perception 
gap of some size.
    In addition, in dealing with proliferation and China, there are two 
basic problems. The first is the flow of hardware, technology, and 
personnel into China, principally from Russia, and the second problem 
is the flow outward of hardware and technology from China, principally 
to the nations of South Asia and the Middle East.
    In the case of inflows from Russia, we have some hard data on 
conventional hardware flown but much less on Weapons of Mass 
Destruction (WMD). The latter would have to be the subject of a 
classified briefing. There was some evidence when I was at DOD in 1992 
but that was almost five years ago. This must be the highest priority 
target, in my view, for our intelligence community, and I presume that 
it is. Dr. Stephen J. Blank of the Army War College has written an 
important essay on this based on open data. He concludes that China's 
hunger for weapons imports matches Russia's needs and creates a perfect 
fit between both sides. The Russian arms industry, he points out, is 
``out of control and is not animated by any sense of strategic 
imperatives other than making money for defense producers. . . . We see 
only the tip of the iceberg when we look at these arms sales to 
China.'' \4\
    Russia has concluded that the starved Russian defense industry--GNP 
has fallen 40 percent since 1991--needs arms sales to take the road to 
revival of Russian power and prestige--that production lines must be 
kept hot. A heavy veil of secrecy, however, falls on the area of WMD. 
The rationale is: Chinese and Russian strategic interests coalesce to 
resist U.S. hegemony, but greed, corruption and desire for monopolizing 
exports drive the sales making them vulnerable to penetration.
    What we know has been sold to China by Russia are SU-27, state-of-
the-art aircraft, plus the technology to build them in China. The total 
number could be over 200. Modern Kilo class submarines using the most 
advanced muffling technology and 2 Sovremenny class destroyers along 
with SS-N-22 Sunburn anti-ship missiles. The Sunburn is designed to 
counter U.S. Aegis equipped ships. Overall sales may have been as high 
as $5.2 billion in 1995. More ominous are unconfirmed reports than 
Russia may be selling SS-18 technology to China; this is an 
intermediate range ballistic missile. The sale in 1995 of upper stage 
rocket engines to China, Russian military technicians recruited for 
long-term service including the best Russian man on MIRVs, and Russian 
close cooperation in development of new more powerful and better 
targeted cruise missiles are all issues that require more information. 
Also, there is some information on Chinese acquisition of Russian 4000 
km range Backfire bombers.
    Russian strategists talk of dealing with the eastern expansion of 
NATO by strengthening ties to China and therefore supporting China's 
outward push towards the sea where it faces its greatest challenge, the 
U.S. Chinese strategists say much the same thing: solidify and 
stabilize our land borders so we can look ease and south--Taiwan, the 
Diao Yu islands off Japan, Hong Kong and the South China Sea. Chinese 
purchases from Russia reflect this orientation--building projection of 
sea and naval power. These purchases will also enable China to develop 
an integrated land/sea/air defense system.
    As for China's exports, ``since 1988, the United States has 
repeatedly claimed that Chinese exports of missiles and missile 
components posed a challenge to MTCR provisions'' \5\ whose parameters 
China has said it will adhere to since 1991. China has been identified 
as involved in the nuclear weapons program in Pakistan with the latest 
sale of 5000 ring magnets in the fall of 1995, even though it signed 
the NPT in 1992.
    Perhaps the most disturbing sale for the U.S. is the C-802 cruise 
missiles, the Eagle strike, to Iran for installation in the 10 Hudong 
class missile boats delivered earlier. This violates our legislation--
the Gore-McCain Act, sections 1604 and 1605, which prohibits companies 
and foreign governments from transferring advanced conventional weapons 
to Iran or Iraq. This law specifically refers to cruise missiles. 
Admiral Redd, former commander of the 5th Fleet, held three news 
conferences in 1996 to complain about these sales which endangered his 
men and ships by the Iranian Revolutionary Guard Navy. Former CIA 
Director John Deutch also complained about these sales. The 
Administration, however, has concluded that the known transfers are not 
of a destabilizing number and type. Tell that to our sailors and airmen 
in the Persian Gulf who are aware the Iranians now have facing our 
ships launch vehicles for mobility and numerous caves for shelter and 
concealment along the coast.
    This points up the central dilemma in dealing with China on these 
specific issues without any workable strategic understanding on common 
objectives. Although the Chinese have in fact formally supported the 
nuclear non-proliferation treaty, are a signatory of the Chemical 
Weapons Convention, and an adherent to the Missile Technology Control 
Regime, they do not support The Australia Group, the Wassenar Agreement 
or the Nuclear Supplies Group. China has asserted three basic 
principles in its arms transfer policy:

        1. Transfers should be conducive to the strengthening of the 
        legitimate defense capabilities of the receiving countries.
        2. Transfers should be without harm to regional peace and 
        3. Transfers should not be used to interfere in the internal 
        affairs of sovereign states.

    When dealing with the Chinese rhetoric and reality on 
proliferation, keep in mind that Chinese policy for decades, even 
centuries, has been based first on high sanctimonious rhetoric, at a 
second level on Realpolitik, and a third, on victimization. When China 
sells controversial weapons to what we, though they do not, consider 
rogue states like Iran, this has multiple advantages for China. First, 
it makes money for a military establishment on the go which needs all 
the money it can get; secondly, it appeals to a Moslem state on a 
governmental basis and this state might then be less inclined to 
support troublesome Moslem radicals in China's northwest; third it 
reminds the U.S. that China is a player in the international scene and 
that it can make the U.S. uncomfortable by claiming it is only 
retaliating for U.S. arms sales to Taiwan, which China considers part 
of China. China also says any action by us based on Gore-McCain would 
be unilateral, it has no international support--China did not 
participate in any way in a piece of U.S. domestic legislation which 
impacts severely on China. China reminds us of the fallout from Helms-
Burton on Cuba and also of our legislation on nuclear proliferation 
trying to use export/import loans as leverage on nuclear-related 
weapons sales. This is unrealistic, i.e., $50,000 of ring magnets 
causing the withdrawal of $10-20 billion in EX/IM loans. Given the 
current economic growth in China and American business desire to be 
involved and competitive, the proposition is unworkable.
    What then can be done?
    The most important problem is to engage other key countries when 
there is an infraction of international standards of organizations to 
which China belongs, or to which it adheres. China has been excluded 
from the rulemaking process and tends at times to view international 
organizations and their universal norms as fronts for other powers. 
They often participate to avoid losing face and influence. China see 
complaints about China's violations of international norms to be part 
of an integrated Western strategy, led by Washington, to prevent it 
from becoming a great power, to contain China. This often causes us to 
vociferously deny we are containing China--so China says we should 
demonstrate our denial by weakening the U.S.-Japan security alliance 
which the Chinese say is aimed at them, by cutting arms sales to 
Taiwan, which they say is their sovereign territory, and by refusing to 
deploy theater missile defense which the Chinese consider an anathema, 
an instrument of first strike. Perhaps Chinese concerns in these three 
area telegraph their vulnerabilities.
    The U.S. needs to have consistency and cohesion with our close 
allies and friends on enforcement of export control measures, 
especially when there is solid evidence of an infraction. The U.S. 
failure to discover chemical precursors on the Chinese ship Milky Way 
in 1993, when we claimed there were, discredited our proliferation 
efforts world-wide. This error cannot be repeated.
    We need to reach some common conclusions with China on the real 
down-side for both of us in selling modern weapons to certain states in 
the Middle East and South Asia. This would involve reviewing our 
respective positions on Pakistan, Iran, Syria, Iraq, Libya, and the 
Sudan, to name just a few, and to establish some joint objectives. We 
were able to reach solid consensus with China during the Afghan war and 
the result was the defeat of the Soviet Union, a benefit to both of us.
    In addition, we have to establish some discipline and control over 
our intelligence and export control apparati. One now reads secret 
intelligence reports in the Washington media describing in some detail 
intelligence findings on Chinese proliferation attempts. This undercuts 
our leverage, undermines our policy, and dilutes our effectiveness.
    We cannot afford posturing and domestically-motivated legislation. 
Our ineffectiveness on human rights was clearly demonstrated when after 
much bluster and showmanship in 1993, the Administration reversed 
course one year later and delinked MFN from human rights. This 
phenomenon was repeated when the Chinese out-maneuvered the U.S. on the 
Gore-McCain bill and sold cruise missiles to Iran without retaliation. 
This compounds the Chinese view that we are not serious.
    We must determine through skillful handling and operational probing 
the extent of Chinese proliferation activities--the most important 
being the full measure of Chinese acquisitions from Russia. We should 
have some leverage with Russia on this, and it would give a clearer 
indication of Chinese intentions. By careful probing we were able to 
establish Chinese vulnerabilities in 1991-92 on proliferation of 
missiles to Pakistan and could thus tailor specific retaliation to the 
infractions. This did achieve temporary results. This success could not 
be repeated because the Chinese acquired other sources for commodities 
previously supplied by the U.S.
    Our negotiators are faced by an increasing sense of nationalism in 
China, and by a more confrontational approach. This should not obscure 
the leverage we have.
    We also need to engage the Chinese military more closely because it 
is a powerful force in proliferation policy in China. Harvard 
University is bringing Chinese military officers to the U.S. to 
understand better our system and our strategy. This is a modest 
beginning. Officially we can also do more with China. We need to gain 
greater reciprocity and to try to establish some common goals, starting 
with North Korea, a dangerous WMD problem for both of us.


    \1\ United States Security Strategy for the East-Asia Pacific 
Region. DOD/ISA, February, 1995.

    \2\ Sun-tau, The Art of War. Translated by Samuel Griffith.

    \3\ Preparing for China's Future After Deng. Testimony by Robert 
Kagan before the Senate Foreign Relations Subcommittee on East Asian 
Affairs, 18 March 1997.

    \4\ Stephen J. Blank The Dynamics of Russian Arms Sales to China. 
U.S. Army War College. March 1997.

    \5\ Engaging China in the International Export Control Process. RAND 
1997. Prepared for DOD.