Alarm bells went off at the headquarters of the supersecret National Security Agency on a cold December day in 1995. The NSA, located inside an army base at Fort Meade, Maryland, is the U.S. intelligence community’s ears around the world. It picks up millions of communications, from coded military radio transmissions to cellular-phone conversations by international weapons dealers.
This time, NSA listeners got the immediate attention of Vice Admiral J. Michael McConnell, who, as the agency’s director, was the nation’s premier electronic spymaster. The intercept that crossed his desk revealed that a year earlier, in December 1994, China completed a $70,000 deal to sell Pakistan five thousand custom-made “ring magnets” produced by an arm of the Chinese government’s China National Nuclear Corporation.
The intelligence report noted that the devices—ring-shaped, high-technology magnetic bearings—are key components in making fuel for nuclear weapons. The technology transfer remained secret until this reporter broke the story on the front page of the Washington Times in February 1996.
But the Clinton White House made sure that the State Department did not conclude China had violated the nuclear nonproliferation treaty or impose legally required economic sanctions. The administration’s policy was that sanctions against China should be avoided, that they would be bad for the international business that Commerce Secretary Ronald Brown was trying to drum up. “The lengths this administration went to to ignore great dangers to U.S. national security in the name of promoting business were unprecedented,” said a former military officer who worked in the White House and declined to be named.
On May 29, 1998—about two and a half years after U.S. intelligence flagged the China deal with Pakistan—the ground shook in a remote region of southwestern Pakistan as that nation conducted an underground nuclear test. It was the beginning of a new arms race in Southwest Asia.
Back in December 1995, NSA had sent a top-secret cable under Admiral McConnell’s title to the head of the CIA’s Non-Proliferation Center and to senior officials at the Pentagon, White House, and State Department, notifying them of China’s shipment of ring magnets to Pakistan. The intelligence report created a furor within the Clinton administration over whether China had helped Pakistan make fuel for its nuclear weapons arsenal, estimated at ten to fifteen unassembled nuclear devices. At the State Department, Robert Einhorn, deputy assistant secretary for political-military affairs, quickly recognized the problem. He had been assigned the task of looking into the application of complex laws enacted by Congress to put teeth into policies designed to halt the spread of weapons of mass destruction.
Made of a special alloy called samarium-cobalt, ring magnets must be precision manufactured to withstand the high speeds of gas centrifuges that are part of the process for making nuclear bomb fuel. China is the world leader in producing the components. The sale triggered a provision of a law on business loans that requires the secretary of state to notify the Export-Import Bank when any nation is caught helping another nation develop nuclear weapons. Mr. Einhorn called the bank and told officials the intelligence reports meant that, under the 1994 Nuclear Proliferation Prevention Act, the bank could be required to hold up all new loan guarantees for projects sought by U.S. businesses in China. But the Commerce Department, headed by Mr. Brown, former Democratic National Committee chairman, soon was leading the charge to block economic sanctions against Beijing and Islamabad. The Clinton administration ignored the violations.
The United States had imposed sanctions against China in 1993 for selling M-11 missile components but lifted them the next year at the urging of Mr. Brown and C. Michael Armstrong, chairman of Los Angeles–based satellite maker Hughes Electronics. Mr. Armstrong had written a terse letter to President Clinton on October 29, 1993, first highlighting how he had done what the president requested by supporting his economic and trade policies and calls for looser export controls. “I am respectfully requesting your involvement to resolve the China sanctions,” Mr. Armstrong wrote, noting that he had spoken to a Chinese official who informed him Beijing was “positive” about the idea.
China continues to be one of the most significant suppliers of weapons of mass destruction technologies to foreign countries.
But when then-secretary of state Warren Christopher told the Chinese that the United States needed to see “some sign of movement” by China on curbing weapons proliferation, a National Security Council memorandum reported that “the Chinese were not forthcoming.” The memo said Mr. Armstrong and Hughes Electronics “lobbied aggressively” to be allowed to sell satellites to China.
In 1995, the president named Mr. Armstrong to the influential Export Council, where he fought trade controls designed to protect national security. The council produced a lengthy paper arguing against imposing sanctions on foreign trading partners that engaged in illicit weapons sales. Bernard Schwartz, chairman of Loral Space & Communications, also lobbied hard to ease restrictions on satellite sales to China. Mr. Schwartz denied that his large donations to the Democratic National Committee (DNC) were meant to influence Mr. Clinton’s policies on satellite exports.
A Senate investigation into illegal foreign political payments could not make a direct connection between them and Mr. Clinton’s conciliatory policies toward China. Both the White House and the Chinese government deny that Chinese cash influenced policies. But a Senate Governmental Affairs Committee report in 1998 concluded: “It is clear that illegal foreign contributions were made to the DNC and that these contributions were facilitated by individuals with extensive ties to the PRC [People’s Republic of China]. It is also clear that well before the 1996 elections, officials at the highest levels of the Chinese government approved of efforts to increase the PRC’s involvement in the U.S. political process.”
Two years before the ring magnets deal, in March 1992, China signed the nuclear nonproliferation treaty. The 1970 agreement recognized five nations—the United States, the Soviet Union, Britain, France, and China—as the only nuclear powers and sought to prevent others from becoming nuclear powers. The treaty was extended indefinitely in 1995 in what the Clinton administration hailed as a major arms-control victory. The treaty forbids signatories from providing components of nuclear weapons to nonnuclear states.
The State Department’s Bureau of Political-Military Affairs was in a quandary. China had failed its first test as a signatory. Selling ring magnets to Pakistan undermined years of work to keep such states from building nuclear bombs. In January 1996, the State Department quietly approached the China National Nuclear Corporation about the sale it learned of in December. The Chinese said there was “no information” about it. They lied. And the State Department and the White House’s National Security Council knew it. The intelligence was solid: NSA had the intercept detailing the transfer.
To this day, the Chinese and Pakistani governments deny the sale. But for $70,000, China gave a major boost to Pakistan’s nuclear weapons program. “The United States does have concerns about possible nuclear-related transfers between China and Pakistan,” State Department spokesman Glyn Davies said the day the Washington Times broke the story, refusing to comment directly on the transaction. He said the matter had been raised at senior levels of the Chinese and Pakistani governments. But the exact “concerns” and how they were raised did not become public. They were secret, and the Clinton administration was not pressured to explain, either by Congress or the news media.
Ten days later, Chinese Foreign Ministry spokesman Shen Guofang denied the sale took place. “China, a responsible state, has never transferred equipment or technology for producing nuclear weapons to any other country, nor will China do so in the future,” he told reporters in Beijing. He warned that U.S. economic sanctions against China would cause “serious harm” to relations. “China hopes the U.S. side will not use rumors as the basis for making decisions,” he said.
Rumors? The rumors were hard intelligence reports, most classified at the top-secret level and above. The CIA, however, did produce an unclassified report to Congress covering the period from July to December 1996. “During the last half of 1996, China was the most significant supplier of weapons of mass-destruction goods and technology to foreign countries,” the report said. “The Chinese provided a tremendous variety of assistance to both Iran’s and Pakistan’s ballistic-missile programs. China also was the primary source of nuclear-related equipment and technology to Pakistan and a key supplier to Iran during this reporting period.”
In a move aimed at keeping the ring magnets dispute quiet, Mr. Christopher wrote to the Export-Import Bank in February 1996, asking it to defer loan approvals for American businessmen operating in China. The cutoff would have been worth about $10 billion in new loans if it had been kept in place. But the measure lasted only thirty days and did not affect already approved loans. The bank began considering new loans after the thirty days lapsed, without waiting for an official go-ahead from State. The president considered waiving the thirty-day sanctions but backed off after Congress protested.
Several U.S. corporations, including Boeing and Honeywell, lobbied against sanctions. To many in the business community, nuclear weapons transfers should not be allowed to disrupt the flow of trade. National security interests, Mr. Brown asserted, should not be a higher priority than trade. “I happen to think the best chance for us to have an impact in those other areas is through being engaged with China,” he said. Mr. Christopher broached the ring magnets sale in his April 19 meeting with Chinese foreign minister Qian Qichen, a hard-line Communist and vehement critic of the United States. Mr. Qian lied: China had not violated the treaty and therefore had no reason to commit itself to refraining from such exports.
The Christopher-Qian meeting revealed the administration’s plan: If China would just pledge not to transfer more nuclear weapons technology, the United States would agree not to impose the sanctions required by law. After months of secret U.S.-Chinese talks, State Department spokesman Nicholas Burns issued a carefully worded statement May 10, 1996, saying the secretary of state had cleared China of any culpability. “Of particular significance, the Chinese assured us that China will not provide assistance to unsafeguarded nuclear facilities, and the Chinese will now confirm this in a public statement,” Mr. Burns said.
Unsafeguarded facilities are nuclear plants and support facilities that are not subject to inspection by the International Atomic Energy Agency, which monitors nuclear facilities around the world under the treaty. “In addition,” Mr. Burns declared, “senior Chinese officials have informed us that the government of China was unaware of any transfers of ring magnets by a Chinese entity, and they have confirmed our understanding that China’s policy of not assisting unsafeguarded nuclear programs will preclude future transfers of ring magnets to unsafeguarded facilities.” There was “not a sufficient basis” to impose sanctions as required by the Nuclear Proliferation Prevention Act of 1994.
China’s public announcement of the accord said only that “China will not provide assistance to unsafeguarded nuclear facilities.” The Clinton administration claimed this was a “significant public commitment.” The Chinese response was reported by the Xinhua News Agency, the communist government’s official organ. “As a state party to the treaty on the Non-Proliferation of Nuclear Weapons, China strictly observes its obligations under the treaty, and is against the proliferation of nuclear weapons,” Xinhua quoted an unnamed Foreign Ministry spokesman as saying. “China pursues the policy of not endorsing, encouraging, or engaging in the proliferation of nuclear weapons or assisting other countries in developing such weapons.” No mention was made of ring magnets, and no promises were offered on future sales. The Chinese “assurance” fell short of the written guarantee sought by U.S. officials.
The limitations of the U.S.-China understanding were highlighted by the fact that the U.S. statement was issued not in Warren Christopher’s name but in that of his spokesman. The failure to sanction Beijing undermined the nuclear nonproliferation treaty and encouraged China and other nations to disregard their obligations under it, said Representative Floyd Spence, South Carolina Republican and chairman of the House National Security Committee. “It is a further example of the administration looking the other way when the Chinese openly violated international law,” Representative Spence said. But it was a lawmaker from Mr. Clinton’s own party who had some of the strongest words. “It is outrageous that the administration has now freed the Export-Import Bank to use taxpayer funds for loans to assist the China National Nuclear Corporation—the very company that sold the ring magnets to Pakistan,” said Representative Nancy Pelosi, California Democrat. “When all is said and done,” she added, “the Chinese proliferated nuclear weapons technology and got away with it, and Pakistan received essential nuclear weapons technology and was rewarded.”
