Commission to Assess the Ballistic Missile Threat to the United States
Appendix III: Unclassified Working Papers
Keith Payne 1 : "The Missile Technology Control Regime--European
Involvement and Compliance Issues 2 "
The Missile Technology Control Regime (MTCR), established in 1987, is a
non-binding, self-enforcing export control agreement that seeks to limit
trade in complete missile systems and subsystems (Category I) and related
dual-use components, equipment, material, and technology (Category II). 3
For all controlled items, particular restraint is to be exercised in
considering transfers outside the regime, while, for Category I items,
there is a "strong presumption to deny" transfers. Category II items may be
exported at the discretion of the member-state, on a case-by-case basis,
for acceptable end-uses. Each member-state implements and enforces the
regime provisions according to its own legal statutes. Member-states
consult and exchange intelligence information on compliance issues. The
French government provides administrative coordination and circulates
notices of denial.
The original 1987 range/payload parameters were 300 kilometers and 500
kilograms. In July 1993, the MTCR member-states agreed to expand coverage
to all systems capable of delivering weapons of mass destruction (WMD).
Membership has grown from the original seven to 29 today. China, Israel,
and Ukraine have pledged adherence to the MTCR guidelines, but are not full
Four European countries (United Kingdom, Germany, France, Italy) were
signatories to the initial 1987 agreement, and all other NATO
Europe/European Union (EU) member-states joined by the time internal EU
trade barriers were dropped in 1992.
In the late 1980s, compliance discussions focused largely on actual or
proposed transfers by European member-states. In 1989, the United States
objected to France's intention to sell Viking rocket motor technology to
Brazil. Technology transfers from Germany, Italy, and Austria were crucial
to development of the Argentine Condor-II project, in partnership with Iraq
and Egypt. Following the Gulf War, European countries considerably
tightened their control systems. In the 1990s, most of the concern
regarding missile technology transfers focuses on Russia, China, North
Korea, and--to a lesser extent--Ukraine, Belarus, and Kazakhstan.
The following report will examine the legal structure and compliance record
of the four original European signatories of the MTCR, all of whom produce
missile systems, components, and technologies and are therefore capable of
proliferating missiles and missile technology throughout the world. In
addition, the situation of the three candidate members of NATO will be
briefly assessed, along with the European Union controls on dual-use goods.
The United Kingdom has historically been among the leading exporters of
arms and related goods and services. In recent years Britain has increased
its market share. Over the years 1992-1994, the UK ranked second in arms
exports only behind the United States, holding about 15% of the world arms
export market. 4 While Britain exports significant amounts of conventional
arms, the UK appears to have an effective system of export controls aimed
at preventing proliferation of WMD and ballistic missile technology.
British arms exports are legally controlled by the terms of the Import,
Export and Customs Powers (Defence) Act 1939, as amended by the Import and
Export Act 1990. Under these acts, the Department of Trade and Industry
(DTI) has broad powers to prohibit or regulate, or exempt from regulation,
the export from the UK of any types of goods, and issues orders which it is
free to revoke or modify. Export controls relevant to proliferation of WMD
and missile delivery systems are imposed under DTI's Export of Goods
(Control) Order 1994, as amended from time to time. 5
Schedule 1 to the Export of Goods (Control) Order 1994 lists the types of
goods, the destinations with respect to certain goods and the circumstances
under which UK export controls apply. Parts II and III of Schedule 1 relate
to nonproliferation concerns. Part II sets forth a "catch-all" destination
provision for any goods and technologies that may be used for weapons of
mass destruction and missile delivery systems, and Part III takes a
commodity-based approach to these and other controlled goods and
In addition, DTI's Export Control Division (ECO) has separately published
and updates periodically a list of sensitive destinations for which license
applications are subject to special procedures. This list reflects UK
international commitments such as the MTCR, as well as the Nuclear
Nonproliferation Treaty, Nuclear Suppliers' Group and Australia Group, and
strategic concerns and factors such as the risk of diversion or a country's
lack of effective export controls. The ECO considers license applications
to these destinations on a case-by-case basis in accordance with stringent
criteria and will not grant export licenses except after consultation with
other government agencies. 7
Oversight of the British Government's handling of arms exports is a
prerogative of Parliament, although its ability to hold government
ministries accountable has been in practice weak. 8 A lengthy investigation
completed in 1996 recommended greater openness in government export
licensing policy and a review of government powers over exports in
peacetime. 9 This study, conducted by Sir Richard Scott, a High Court
Judge, was initiated by the British Government in 1993 to investigate sales
of technology to Iraq in the 1980s. Despite the lack of strong
Parliamentary oversight, the UK government appears today to be effectively
keeping its commitments to the various nonproliferation regimes, including
MTCR, and there have been few reported violations of UK export controls in
recent years. 10 In 1992, British Aerospace was pressured by the British
government to withdraw from an Egyptian joint venture that was seeking to
develop extended-range Scud missiles. 11
Most illegal or questionable British arms sales discussed in the media over
the past ten years appear to involve machine tools (the "Matrix Churchill"
case); 12 dual-use equipment; conventional weapons such as naval guns; 13
or illegal transfers of (Iraqi) "supergun" related technology or
components, 14 rather than sales of missile components or technology. Most
of the transactions took place before the Gulf War.
Prior to the Gulf War, German companies and individuals were prime
suppliers of missile design technologies, components and subsystems, as
well as production facilities and scientific expertise, to proliferator
countries. The German company OTRAG was hired to build a missile production
facility in Libya in 1979, and the Iraqis contracted with
Messerschmidt-Bölkow-Blohm (MBB) to build a similar facility during the
Iran-Iraq War. 15 Over 65 German companies are estimated to have
participated in the Iraqi ballistic missile program. 16 German assistance
was critical for Project 1728, upgrading Scuds to Al-Hussein range. German
corporate and individual involvement in the design and development of the
ill-fated Argentine-Iraqi-Egyptian Condor II project is well-documented. 17
In the wake of embarrassing post-Gulf War revelations, the German
government introduced much stricter controls on exports of weapons and
dual-use items (including those on the MTCR List). These tighter legal
restrictions have been reinforced by more aggressive enforcement practices,
particularly with the establishment of the independent Federal Export
Office in 1992 and a three-fold expansion of its staff. Investigations of
suspected export control violations had already more than doubled between
1989 and 1991. 18
The legal basis for the German export control system comes from the Weapons
of War Control Act and the Foreign Trade and Payments Act (the latter
incorporates restrictions on dual-use commerce and was extensively amended
in 1992). 19 The control regime now includes two "catch-all" provisions
that impose licensing requirements on exports of any goods or technical
data to projects of proliferation concern. The computerized KOBRA data base
monitors all export licensing, and the government has instituted aggressive
corporate compliance procedures. Moreover, according to a government
report, "the work of German experts abroad on arms projects, particularly
missile technology projects, has been subjected to controls for all
non-OECD countries." 20
While German controls have been tightened, there is some evidence of
illicit trade in dual-use items with Iran. The Iranians have reportedly set
up an extensive clandestine procurement network within Germany and Austria.
21 The Customs criminal office is accelerating its investigation of German
companies allegedly involved in these operations. One company, Hoffman Mess
und Regeltechnik, allegedly contracted to supply Iran with tuning gyro
compasses and missile guidance components. 22 The network reportedly
operates through "front" companies in third countries, particularly Austria
France is a unique case, since the French government still retains
ownership or direction of a large segment of the national defense
industries. Arms transfers have been an important component of Gaullist
independent defense policies, as well as a major source of foreign exchange
and domestic employment. Moreover, France has the most extensive program of
ballistic and cruise missile research and development of all NATO European
countries. In addition, France maintains a significant civilian space
launch capability and has sought to develop a commerce in these
French efforts to market civilian technologies conflicted directly with
U.S. interpretations of MTCR guidelines during the 1989 controversy over
Arianespace's proposed sale of Viking rocket motors to Brazil. 23 At the
time, the Brazilian weapons industry had been supplying arms to Iraq for
the war with Iran and was developing close ties with Libya. The French
claimed that the transfer was designated for the Brazilian space launch
vehicle and that adequate safeguards would be in place to block diversion
to military purposes or to third parties. Under U.S. pressure, Arianespace
eventually withdrew its offer. 24 In May 1991, the French government
proposed expanding the MTCR to "lay down rules to promote civilian
cooperation in space, while averting the dangers of diversion of technology
for the purpose of developing a military ballistic capability." 25 More
recently, in 1997, France and Brazil began talks on joint development of a
small launch vehicle capable of carrying a 500-1,000-kilogram payload into
The French export control system bases itself on two World War II-vintage
administrative decrees, whereby the government exercises exclusive
authority over import and export of war materiel. 27 The nonproliferation
regimes have also been promulgated by administrative decree, with the MTCR
officially entering into force on November 10, 1990. Most of the
decision-making authority for export permission rests with an
interministerial commission composed of representatives of the Ministries
of Foreign Affairs, Defense, Industry, Finance, and Foreign Trade. The
Customs and Excise Department of the Ministry of Finance exercises
licensing, implementation, and enforcement authority.
In reality, because the French armaments sector is so heavily controlled by
the government, the Defense Ministry--and, specifically, the Director of
International Relations at the Délégation Générale des Armements
(DGA)--have considerable power over transfers of weapons and related
technology. 28 Historically, the DGA's role has been that of promoter of
One area of contention over MTCR compliance relates to French interest in
marketing its Apache family of cruise missiles. French officials assert
that the Apache AP (designated for export) is not covered by MTCR
restrictions, since it has a 140-kilometer range and 520-kilogram
submunition package. 29 However, the Apache AP could conceivably be
launched at a sufficiently high altitude to fly at least 300 kilometers and
therefore come within the MTCR parameters. Alternatively, a buyer could
extend the range by reducing the payload. France has indicated its
intention (over U.S. objections) to sell the Apache to the United Arab
Italy's relatively lax enforcement of its export control commitments in the
1980s was tightened by new legislation following the Gulf War. Law No. 185
("New Provisions Governing the Export, Import and Transit of Armaments") of
July 9, 1990 cracked down on the weapons trade, and Law No. 222 of February
27, 1992 increased regulation of dual-use items and technologies. 31 An
interministerial committee chaired by the Prime Minister determines general
export control policy under the two laws, while a consultative commission,
chaired by a Foreign Ministry official, provides advice on specific export
license authorizations. The Defense Ministry Control List, established
under Law No. 185, incorporates the MTCR List. Only companies certified on
the National Registry of Weapons Producers, administered by the Defense
Ministry, have the right to import, export, or trans-ship items controlled
under Law No. 185.
Like Germany, the Italian government was embarrassed by revelations of arms
and technology transfers to Iraq in the wake of the Gulf War. Officials of
SNIA BPD, a Fiat subsidiary, shipped electronic components through front
companies to the Condor program, and the Banca Nazionale del Lavoro (BNL)
provided extensive loans to the Iraqi weapons project. 32 In a September
1993 interview, a former Defense Minister, Fabio Fabbri, described Italy as
"a privileged crossroads for [weapons] outlets toward the Middle East,
North Africa, and Eastern Europe," with the Mafia taking an increasingly
active role. Although the traffic in arms had lessened considerably, Fabbri
asserted, "there has been an increase in cases of illegal transfer of dual
use technology, civil and military, to Third World countries." 33
While recent drastic judicial and intelligence agency reforms may result in
improved implementation and enforcement of export controls, Italy still
remains a concern in terms of trans-shipment. 34 Nevertheless, Italian
industrialists have been lobbying the government for relief from the
restrictions of Law No. 185, described by Massimo Macchia, the Director of
the Foreign Ministry's office for arms authorizations, as "the most
restrictive of all Western laws on the subject." 35
Poland, Hungary, and the Czech Republic
Among these three incipient NATO members, only Hungary is a member of the
MTCR, having joined the regime in 1993. Poland and the Czech Republic abide
by the regime's guidelines and for several years have sought admission. The
United States currently does not favor formally admitting the Czech
Republic and Poland to the MTCR, despite their good export records, because
these states are not major developers of ballistic missiles, and Poland,
though not the Czech Republic, still possesses ballistic missiles (Scuds).
It is U.S. policy to support entry into the regime of states with important
missile industries, in order to forestall impractical efforts to tighten
the regime by member states that have no economic benefits to lose.
(Hungary, which also has no major missile industry, was admitted before
this policy was developed). It is also U.S. policy to admit only
"missile-free" states to the MTCR. The United States is working with Warsaw
on eliminating the Polish Scud force; the Czechs have eliminated all their
surface-to-surface missiles. Membership in the MTCR is not a prerequisite
for admission of these countries to NATO. All three have good records with
regard to both exports and transshipment of missile-related items. 36
With the entry into force of the Maastricht Treaty eliminating controls in
trade among EU member states (including controls on dual-use goods and
technologies), the European Commission promulgated a set of regulations for
a Community regime restricting dual-use exports outside the EU. 37 However,
Article 223 of the Treaty of Rome still makes the weapons trade a national
prerogative; according to Article 223, "each Member State may take measures
which it deems necessary for the protection of interests which are vital to
its security and which concern the production of or trade in weapons,
ammunitions or war materials." 38 While the EU Regulation provides a common
list of controlled dual-use items and technologies, a common list of
destinations, common criteria for issuing export licenses outside the EU, a
forum for coordination of export control procedures, and a process for
administrative cooperation, it still leaves implementation and enforcement
of controls in the hands of the national authorities. 39
Annex 1 of the EU Regulation contains the MTCR List, as well as other
multilateral export control regime lists. The Regulation also contains a
"catch-all' clause, requiring authorization if an exporter has been
informed by authorities that the items in question are destined to a WMD
program or to "the development, production, maintenance or storage of
missiles capable of delivering such weapons, as covered by the
corresponding non-proliferation arrangements." 40
There is presently discussion among member-states as to whether the EU
Regulation precludes more restrictive national controls (such as those
implemented by the UK and Germany) or whether a member-state may veto an
export authorization issued by another member-state. 41 On the other hand,
German industrialists have sought relief from their more restrictive
national controls (as well as a "level playing field" among EU
There has been some concern regarding smaller EU member-states (especially
Austria) being used as trans-shipment points by proliferators. In addition,
the Netherlands domestic security service reported in 1996 that Libya and
Syria were trying to buy Dutch missile equipment and technology. 43 The
Belgian company, Poudreries Réunies, was implicated in the scandal over the
Iraqi "supergun," whose inventor, Gerald Bull, had his corporate
headquarters in Brussels. 44 But these instances appear to be isolated
While there was considerable concern regarding European breaches of the
MTCR before the Gulf War, European governments have made a significant
effort to crack down on this illicit trade in the 1990s. However, the
increasingly precarious state of the European defense sector, coupled with
proliferator-state efforts to establish covert procurement networks, does
create cause for renewed vigilance. These networks target dual-use items
and technologies largely through front companies operating in third
countries. Promulgation of the EU Regulation could result in the Germans
adopting a "lowest common denominator" approach and lifting some of their
stricter controls. However, compared to the scandals of the late 1980s and
early 1990s, the European MTCR compliance record today is generally
1. Keith Payne is the President and founding Research Director, National
Institute of Public Policy. Specializes in U.S., European, and Russian
defense policies, deterrence theory and policy, military history,
proliferation, international security affairs, geopolitics and arms
control. Has been a consultant on international security issues to the
White House and the Arms Control and Disarmament Agency, and currently
serves the U.S. State Department as a member of the Defense Trade Advisory
Group. Adjunct professor at Georgetown University and Southwest Missouri
State University, Editor-in-Chief of Comparative Strategy; an International
2. National Institute for Public Policy, 3031 Javier Road, Suite 300 ·
Fairfax, VA 22031 · (703) 698-0563Prepared Under Prime Contract No.
98-M398300-000, Subcontract No. SPC-NIPP-AB22
3. U.S. Arms Control and Disarmament Agency, "The Missile Technology
Control Regime," Fact Sheet, September 15, 1997, p. 1.
4. United States, Arms Control and Disarmament Agency, World Military
Expenditures and Arms Transfers 1995 (Washington: U.S. Government Printing
Office, 1996), p. 16.
5. American Bar Association (ABA), Task Force on Nonproliferation of
Weapons of Mass Destruction, Beyond COCOM--A Comprehensive Study of Export
Controls; Germany, United Kingdom, France, Italy and Japan and the European
Union Export Control Regulation (Washington: American Bar Association,
September 1994), p. 33.
6. ABA, pp. 37-38.
7. ABA, pp. 38-39.
8. See "Ask me no questions, I'll tell you no lies," The Economist, Feb.
12, 1994 pp. 57-58.
9. Stephanie Strom, "British Report on Iraq Arms Deal Declares Parliament
Was Misled, New York Times, February 16, 1996, pp. 1, 6; Charles Miller and
Michael J. Witt, "Report May Spawn U.K. Export openness," Defense News,
February 19-25, 1996, p. 6.
10. See David Owen et al, "Saudi Arms Deal Bypasses Export Regulations,"
London Financial Times, January 28, 1994, pp. 1, 18.
11. "Increase in Egypt's "Scuds" Leads to BAE Pull-Out," Jane's Defence
Weekly, September 5, 1992, p. 31.
12. John Plender and Tim Laxton, "Matrix Churchill Helped Iraq With Nuclear
Capability," Financial Times, February 13, 1996, pp. 1, 16; Sean O'Neill,
"Minister Admits Error on Iraq Arms," Daily Telegraph, October 13, 1993,
from Monterey Institute database, accessed via internet,
(http://cns.miis.edu/cgi-bin/getdoc.cgi), April 11, 1998.
13. Fred Barbash, "Iran Arms Scandal Roils London Politics," Washington
Post, June 20, 1995, p. A16.
14. Kenneth R. Timmerman, The Death Lobby: How the West Armed Iraq (Boston:
Houghton Mifflin, 1991) pp. 299, 321, 322.
15. Center for International Security and Arms Control, Assessing Ballistic
Missile Proliferation and Its Control, Stanford University, June 1991, p.
16. National Security Research, Inc., "Iraq Inspections--Lessons Learned,"
Defense Nuclear Agency Technical Report TR-92-115 (January 1993), p. 108.
17. See Nathaniel C. Nash, "Argentina's President Battles His Own Air Force
on Missile," New York Times, May 13, 1991, p. A1.
18. Federal Ministry of Economics, "Report by the Government of the Federal
Republic of Germany on the tightening of export controls for goods with
civilian and military applications (dual-use goods)," Bonn: March 11, 1992
(English translation provided by German Embassy), p. 6
19. ABA, p. 16.
20. Federal Ministry of Economics, p. 5.
21. See article by Rudolf Lambrecht et al in Stern, April 17, 1997,
reprinted in FBIS-WEU-97-108, April 18, 1997.
22. Article in Stern, September 11, 1997, pp. 182-184, reprinted in
FBIS-TAC-97-254, September 11, 1997.
23. David Silverberg, "French Proposal May Violate Pact on Proliferation,"
Defense News, July 17, 1989, p. 4.
24. See Arms Control Reporter, October 14, 1991, Sec. 706.B.68.
25. See French text in Le Monde: Sélection hebdomaire, May 30-June 5, 1991,
p. 2. See also Arms Control Reporter (May 31, 1991) Sec. 706.B.60.
26. Peter B. deSelding, "Brazil, France Discuss Small Launcher," Space
News, July 7-13, 1997, p. 3.
27. ABA, p. 55.
28. See Edward A. Kolodziej, Making and Marketing Arms: The French
Experience and Its Implications for the International System (Princeton:
Princeton University Press, 1987) pp. 266ff.
29. See Dennis M. Gormley and K. Scott McMahon, "Proliferation of
Land-Attack Cruise Missiles: Prospects and Policy Implications," in Henry
Sokolski (ed.), Fighting Proliferation: New Concerns for the Nineties
(Maxwell AFB, AL: Air University Press, 1996) pp. 154-155.
30. Paul Beaver, "USA angry over French decision to export Apache," Jane's
Defense Weekly, April 8, 1998, p. 4.
31. ABA, p. 68.
32. On SNIA BPD, see article by Antonio Cipriani in L'Unita, July 30, 1989,
p. 6, reprinted in FBIS-WEU-89-151, August 8, 1989, p. 6. On BNL, see Yann
Tessier, "Italian bank sent cash to Iraq, commission says," Washington
Times, January 27, 1994, p. A13.
33. Fabbri interview with Corrado Incerti, Panorama, September 19, 1993, p.
56, reprinted in FBIS-WEU-93-186, September 28, 1993, p. 33.
34. Guido Azzolini article in Il Giornale, August 23, 1993, p. 8, reprinted
in FBIS-WEU-93-172), September 8, 1993, p. 32.
35. Quoted in article by Niccolo D'Aquino and Alberto Sisto in Il Mondo,
August 2-9, 1993, pp. 68-70, reprinted in FBIS-WEU-93-162-A, August 24,
1993, p. 12.
36. Telephone conversation with an ACDA official, April 13, 1998.
37. "Council Regulation (EC) No. 3381/94 of 19 December 1994 setting up a
Community regime for the control of exports of dual-use goods," Official
Journal of the European Communities, L 367, Vol.37, December 31, 1994, pp.
38. Quoted in Jan Hoekema, "The European Perspective of Proliferation
Export Controls," in Kathleen Bailey and Robert Rudney (eds.) Proliferation
and Export Controls (Lanham, MD: University Press of America, 1993) p. 80.
39. ABA, pp. 94-95.
40. "Council Regulation," p. 3.
41. Ibid, pp. 100-101.
42. See unattributed Frankfurter Allgemeine article, September 5, 1994, p.
15, reprinted in FBIS-WEU-94-175, September 9, 1994, pp. 23-24.
43. Article in Algemeen Dagblad (Rotterdam), June 7, 1996, p. 7, reprinted
in FBIS-TOT-96-018-L, June 7, 1996.
44. Kevin Toolis, "The Man Behind Iraq's Supergun," New York Times
Magazine, August 26, 1990, p. 77.