5
Systems for Controlling Exports of Militarily Sensitive Items

SCOPE OF EXPORT CONTROL REQUIREMENTS

Large Repositories of Weapons-Related Items

The Soviet military-industrial complex produced an enormous variety and quantity of weapons and weapons-related items. Thus, the export potential of the successor states of the former Soviet Union (FSU)—particularly Russia, Ukraine, Belarus, and Kazakstan—is of great significance from the viewpoint of U.S. national security interests.1

For several decades the Soviet military-industrial complex was the major supplier of weapons and supporting systems for use in the Soviet Union, the other countries of the Warsaw Pact, and many countries in other regions. The enterprises provided a wide range of technologies incorporated into rocket systems, jet aircraft, tanks, automatic rifles, electronic systems, lightweight alloys, and hundreds of other types of armaments and related commodities. With the demise of the USSR, however, many manufacturing enterprises have greatly reduced their weapons-related production activities because of the absence of significant orders by the successor governments. Of course, some manufacturing lines have

1  

According to Jacques Sapir, 73 percent of the Soviet Union's defense industry was in Russia, 15 percent in Ukraine, 5 percent in Belarus, and 3 percent in Kazakstan (Jacques Sapir, "Defense Conversion and Restructuring in the Russian High-Technology Sector: Is There an Alternative to Uncontrolled Exports?" in Judith Sedaitis, ed., Commercializing High Technology: East and West, Center for International Security and Arms Control, Stanford University, Calif., January 1996, p. 111).



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--> 5 Systems for Controlling Exports of Militarily Sensitive Items SCOPE OF EXPORT CONTROL REQUIREMENTS Large Repositories of Weapons-Related Items The Soviet military-industrial complex produced an enormous variety and quantity of weapons and weapons-related items. Thus, the export potential of the successor states of the former Soviet Union (FSU)—particularly Russia, Ukraine, Belarus, and Kazakstan—is of great significance from the viewpoint of U.S. national security interests.1 For several decades the Soviet military-industrial complex was the major supplier of weapons and supporting systems for use in the Soviet Union, the other countries of the Warsaw Pact, and many countries in other regions. The enterprises provided a wide range of technologies incorporated into rocket systems, jet aircraft, tanks, automatic rifles, electronic systems, lightweight alloys, and hundreds of other types of armaments and related commodities. With the demise of the USSR, however, many manufacturing enterprises have greatly reduced their weapons-related production activities because of the absence of significant orders by the successor governments. Of course, some manufacturing lines have 1   According to Jacques Sapir, 73 percent of the Soviet Union's defense industry was in Russia, 15 percent in Ukraine, 5 percent in Belarus, and 3 percent in Kazakstan (Jacques Sapir, "Defense Conversion and Restructuring in the Russian High-Technology Sector: Is There an Alternative to Uncontrolled Exports?" in Judith Sedaitis, ed., Commercializing High Technology: East and West, Center for International Security and Arms Control, Stanford University, Calif., January 1996, p. 111).

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--> continued to produce weapons and dual-use items for the defense ministries, primarily in Russia; and many enterprises have greatly increased their efforts to sell such commodities abroad, with mixed success.2 At the same time, large stocks of weapons and other military equipment left over from Soviet times, as well as recently produced items, are now located in marshalling yards, warehouses, and other storage areas. The future disposition of many of these goods is uncertain. Dual-use items such as electronic control devices, specialty materials, advanced manufacturing equipment, and other commodities for supporting military activities are being stored in anticipation of possible future sales to recover some of their value.3 Eventual disposition of "surplus" items by governments or by enterprises through transfers to local organizations with uncertain security systems or to other countries that could use them in a provocative manner raises apprehensions in the West. At the same time, many of the goods have considerable value, both for military end users and for commercial organizations with capabilities to adapt dual-use equipment to civilian needs. The implementation of arms control agreements and related activities are adding to stockpiles large quantities of particularly sensitive material and equipment, as well as large inventories of conventional weapons. The sensitive items include direct-use nuclear material, chemical agents, and components for missiles and nuclear weapons. However, these items are usually located in separate areas that are distant from stockpiles of less sensitive items. Of special concern is the limited attention of the governments of the successor states to controlling technical data.4 Such data might describe in detail, for example, the technologies embodied in weapons of mass destruction and sophisticated conventional weapons systems. Such data are contained both in archives and in the expertise of the scientists and engineers who have been involved in developing, manufacturing, and maintaining the weapons and supporting systems. 2   See "Rosvooruzheniye Expects 1996 Arms Sales to Top $7 Billion" and "Russia Competes Again for Arms Trade," both in Moscow Times. March 28-April 3, 1996, for information on trends in Russian arms sales. 3   Discussions during the committee's visit to Russia in May 1996. In fall 1993, Gennadi Petrovich Voronin, deputy to the chairman of the Russian Federation Committee on Defense Industry, stated that Russia had a weapons stockpile ready for export worth $20 billion (G. Voronin, "How Russia's Defense Industry Responds to Military-Technical Policy," Comparative Strategy, vol. 13, no. 2, April 1994, p. 84). For additional information on this topic, see the interview with Nikolai Shumkov, head of the Main Department to Guarantee Supervision and Utilization of Armaments and Military Hardware of the State Committee for the Defense Industry, in Military Parade, Jan./Feb. 1995, pp. 94-96. 4   Discussions during the May 1996 committee visit indicated that, while materials and commodities were high export promotion and control concerns, technical data were treated as a much lower priority.

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--> In some cases, controlling the international flow of sensitive technical information is more important, even though it is far more difficult, than controlling the commodities themselves. Some countries of proliferation concern may be capable of building their own weapons systems if they have access to the technologies set forth in technical documentation or to guidance provided by experienced specialists. Also, they may be interested in adapting existing designs of weapons systems and supporting equipment to their special needs, drawing on foreign experiences embodied in technical data. Growing Interests in Producing Dual-Use Items As military orders declined, almost all defense enterprises in the four successor countries began searching for new products they could manufacture for civilian markets.5 Much of the civilian production of the former Soviet military plants has long been directed to simple consumer goods that do not require a high level of technology (e.g., food products, trucks, refrigerators, television sets).6 However, many enterprises and research and development institutes, with their sights on both international and domestic civilian markets, are now seeking to use more advanced capabilities to produce high-technology items. As they attempt to convert sophisticated military technologies to civilian applications, they inevitably become involved with many items that are included on international dual-use export control lists.7 Materials and equipment associated with the production of biological and chemical warfare agents present particularly difficult control problems because some of the same technologies have applications in pharmaceutical, agricultural, and other civilian areas.8 As in the case of commodities produced solely for weapons purposes, much of the technology underlying dual-use goods is reflected in design documents and operating manuals. Since access to such documentation could, in many cases, save considerable time and resources of commercial competitors attempting to 5   See Kevin O'Prey, A Farewell to Arms? Russia's Struggle with Defense Conversion (New York: Twentieth Century Fund Press, 1995), pp. 44-47, and Tarja Cronberg. "Civil Reconstruction of Military Technology: The U.S. and Russia," Journal of Peace Research, vol. 31. no. 2. May 1994. pp. 213-217. 6   Before the process of large-scale conversion was begun in the late 1980s. 40 percent of production by volume in military plants was for civilian goods. By 1993 it was up to 75 percent (Albert Trifonov, "Russian Defense Industry Policy," Comparative Strategy, vol. 13. no. 1. January 1994, p. 87). 7   For further discussion of these problems, see Glenn E. Schweitzer, Moscow DMZ: The Story of the International Effort to Convert Russian Weapons Science to Peaceful Purposes (Armonk. N.Y.: M. E. Sharpe, 1996) pp. 121-138. 8   U.S. Congress, Office of Technology Assessment, Proliferation of Weapons of Mass Destruction: Assessing the Risks (Washington. D.C.: U.S. Government Printing Office, 1993). p. 6.

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--> produce and market comparable items, the technical specifications and related data frequently are considered valuable intellectual property and are protected accordingly. However, only in Russia are the ground rules for such protection reasonably well developed, but even there effective implementation and enforcement seem to be problematic. In any event, a party seeking technical data for use in designing new types of weapons systems probably would not be deterred by violations of patent and copyright laws. Challenge for Export Control Authorities Export control authorities are thus faced with the reality that many technologies in the aerospace, nuclear, chemical, and biological fields are inherently dual-use, requiring only modest adaptations for different end uses. Hundreds of facilities in the four countries—particularly Russian enterprises and institutes from the former Soviet military-industrial complex—are attempting to market items embodying sensitive technologies.9 Most of the manufacturing enterprises and research institutes involved in design and production of weapons and dual-use items are owned or controlled directly by governments, with only a limited number of smaller private firms and individual entrepreneurs gradually obtaining the capability to manufacture some dual-use items.10 Despite controls that the governments can exert over state enterprises, few firms appear to give sufficient attention to export control. The principal concern of almost all firms is increasing their sources of income—a completely understandable response at a time when they are having difficulties meeting payrolls and paying utility bills. Although export control procedures exist, some exporters may know little about regulatory policies and practices. Others may assume that, if they are to receive substantial cash payments for their goods, they will be able to work out any problems with the government ministries.11 The ministries themselves are under considerable pressure to assist the enterprises and institutes in obtaining foreign contracts and thereby maintain their industrial and scientific capabilities. Such an orientation may mean open advo- 9   Discussions during the committee's visit to Russia in May 1996. For a listing of many of these enterprises, see Bureau of Export Administration, Russian Defense Business Directory (Washington, D.C.: U.S. Department of Commerce, 1995), and Investment Opportunities in Ukrainian Defense, (Washington, D.C.: U.S. Department of Commerce, 1996). 10   Even for weapons-related firms that are partly or entirely in private hands, the government has a number of ways to influence the enterprise management. See Clifford Gaddy, "Market Reform and Defense Industry in Russia: Who's Adjusting to Whom'?" The Brookings Review, vol. 14. no. 3, Summer 1996, p. 32. 11   These attitudes were reflected in discussions by the committee in Russia with both government officials and enterprise managers, although specific examples were not cited and there was no indication of how widespread these views are.

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--> cacy for expanded sales or simply staying out of the way of the enterprise directors. For example, in Russia the Ministry for the Defense Industries and the Ministry for Atomic Energy (MINATOM) are vocal advocates for exports of high-technology products. While these ministries are active participants in the evolving export control systems, at the same time they push hard to enable the enterprises for which they have responsibility to follow up every lead for possible sales that technically comply with international requirements.12 Important overseas targets for sales of both military and dual-use items are the long-standing consumers of Soviet products, particularly governments and organizations in Asia and the Middle East. In 1995, 80 percent of Russia's military sales were to China and India.13 For dual-use technologies, additional countries in Asia, such as South Korea, and nations throughout Europe also are considered as high-priority marketing arenas by enterprise directors. Both Russia and Ukraine are having some success in reaching western markets with aerospace technologies,14 and a number of Russian enterprises are developing western markets for dual-use items that are on control lists. Meanwhile, research institutes are seeking links with many foreign institutions that can lead to new commercial products in high-technology areas. Industrial organizations in the United States, Europe, Asia, and the Middle East, in turn, are not hesitant to search out advanced technologies throughout the FSU; and firms from dozens of countries outside the region are now engaged in joint ventures and other arrangements with advanced-technology enterprises and institutes. Countries of proliferation concern, including Libya, Iran, North Korea, and Iraq, are among the many nations that actively explore trade opportunities in 12   U.S. Department of State response, reflecting government-wide views, to committee questions, February 1996. See also Andrei Shoumikhen, "The Weapons Stockpiles," Comparative Strategy, vol. 14, no. 2, April 1995, p. 214. 13   Richard Grimmett, Conventional Arms Transfers to Developing Nations, 1988-1995 (Washington, D.C.: Congressional Research Service, August 1996). U.S. Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers, 1995 (Washington, D.C.: U.S. Government Printing Office, April 1996) also cites Russian arm sales in the period 1992-1994 to such countries of western concern as Iran, North Korea, and Syria. Overall Russian arms sales, which have been increasing recently, are approximately one-third of total U.S. arms sales in 1995. However, U.S. sales are more widely distributed among many countries. 14   Voronin, op. cit., p. 84. See also the cases of the Saratov Aviation Plant and the Central Aerohydrodynamic Research Institute in David Bernstein, ed., Defense Industry Restructuring in Russia: Case Studies and Analysis, (Stanford, Calif.: Center for International Security and Arms Control, Stanford University, December 1994); Victor Zaborski, "Ukraine's Niche in the U.S. Launch Market: Will Kiev's Hopes Come True?," World Affairs, vol. 159, no. 2, Fall 1996, pp. 55-63; Victor Zaborski, "Ukraine's Missile Industry and National Space Program: MTCR Compliance or Proliferation Threat," The Monitor: Nonproliferation, Demilitarization, and Arms Control, vol. 1, no. 3, Summer 1995, pp. 5-8.

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--> Russia and other successor states.15 That said, however, detailed information about the quantities and types of sensitive commodities leaving Russia and the other successor states—as legal trade or as contraband—is not readily available. Even the publicly available Russian custom reports are presented at a level of generality that provides few insights beyond those gleaned from anecdotal reports. Nevertheless, it must be assumed that transfers of sensitive items will be a very real possibility on a sizable scale in the years ahead. The international export control regimes provide important guidance as to the design and operation of national mechanisms for regulating exports of many items. However, the international agreements reached in the frameworks of these regimes call for prohibitions or restrictions on transfers of only the most critical items. These agreements generally emphasize transparency of international transfers rather than proscribed limitations on exports of most weapons-related items, particularly dual-use commodities, and allow each country to decide for itself whether to authorize an export. Thus, if diffusion of sensitive items to countries of proliferation concern and to terrorist groups is to be contained on a broad basis, the international community must agree increasingly not only on the critical elements of national export control systems but also on responsible export control decision making. In summary, U.S. policies and programs must address the dual challenges of supporting the establishment in the successor states of legal, regulatory. and enforcement systems that help ensure that international transfers of items on the control lists of the international regimes are subjected to governmental reviews and licensing procedures and that approvals of exports are consistent with the requirements of the regimes, and encouraging the successor states to ensure that the decision-making process on whether to approve exports of controlled items gives adequate weight to the international security implications of such exports. The foregoing challenges must be met at a time when all the governments and enterprises of the region are desperate for international markets and thus frequently seek such markets in countries that may not be considered fully responsible by western governments. In such economic circumstances none of the successor states want to have regulatory systems that delay foreign sales because of excessive bureaucratic requirements. Also, Russia and, to a lesser extent, the 15   Gary Bertsch and Igor Khripunov, "Restraining the Spread of the Soviet Arsenal: Export Controls as a Long-Term Nonproliferation Tool," in U.S. Congress, Global Proliferation of Weapons of Mass Destruction, Hearings before the Permanent Subcommittee on Investigations of the Senate Governmental Affairs Committee, Part II, (Washington, D.C.: U.S. Government Printing Office, 1996), pp. 665-701.

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--> other countries will have political difficulties curtailing some trade opportunities that fully conform with the requirements of the regimes but nevertheless could, in the view of the United States, contribute to the proliferation of weapons of mass destruction or otherwise threaten international security. EFFORTS OF RUSSIA, UKRAINE, BELARUS, AND KAZAKSTAN TO ESTABLISH AND UPGRADE EXPORT CONTROL SYSTEMS Inheritance from the USSR Russia inherited many of the components of the export control system of the FSU. Also, the Soviet system was the only approach that was familiar in 1992 to officials of the other newly independent countries of the region. The Soviet system was quite effective in containing sensitive commodities and information, motivated by the challenge of staying ahead of the West and the attendant need for protection of state secrets. Indeed, many items were classified as secret and simply not considered for export. Other sensitive items were firmly under the control of well-disciplined state organizations, with little possibility of leakage from the system. All decisions on exports of militarily sensitive items were made centrally. Thus, all exports, including exports viewed with alarm by other governments, could be attributed, with a high degree of confidence, to well-considered actions by the government. Changing Times As Russia and the other successor states increasingly embrace industrial partnerships with many countries, even in sensitive technological areas, the former security barriers for containing items of military significance are now giving way to western-style export control systems. Such systems are intended to prevent uncontrolled diffusion of military technologies while still permitting responsible trade involving sensitive items, often at the initiative of individual enterprises, with approval by the government.16 The possibility of leakage of sensitive goods into international markets outside normal trade channels has become a great concern in the West. Irrespective of export controls, enterprise managers in the four successor countries are aware of the increased temptations in the region for theft; but managers who are determined to protect sensitive items have difficulty finding financial support from the government or elsewhere for industrial security upgrades. Also, there are many 16   For some examples of sensitive exports, see Sergei Kortunov, "National Export Control System in Russia," Comparative Strategy, vol. 13, no. 2, April 1994, pp. 231-238.

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--> reports of illegal practices by enterprise managers in the region who arrange for sales abroad of natural resources and other valuable exports,17 and the involvement of management personnel of defense-oriented firms in diversions of sensitive items cannot be ruled out. While data are not available on the extent of such activities, anecdotal evidence suggests that the likelihood of illicit diversions needs to be continuously addressed. At the same time, the governments of the four countries have become increasingly sensitive to heightened western concerns over the possibilities of smuggling and diversions that could contribute to the proliferation of weapons of mass destruction. Government leaders have publicly espoused nonproliferation goals, and the key ministries repeatedly claim that their commitments to controlling exports are consistent with international nonproliferation norms. However, another consideration is probably the most important factor stimulating the interest of government officials in upgrading export control systems unilaterally and through bilateral cooperative efforts. They consistently link trade and export control issues, reflecting their desires to gain recognition as responsible trading partners—an important step toward greater access to western markets and technologies.18 Of special significance, Russia wants to be perceived as a world leader in the development and deployment of nuclear and aerospace technologies for peaceful purposes; and Ukraine seeks wide recognition for its achievements in developing technologies for applications in space programs.19 Also, cooperative ventures offer opportunities for additional financial resources for staff salaries and international travel and for equipment purchases. Adopting Internationally Acceptable Export Control Systems Many of the countries of the FSU, particularly the four countries of principal interest for this study, have started down the path of adopting export control systems that conform to the approaches developed in the West. Table 1.5 in the Executive Summary sets forth the key elements of such systems that had been identified by the members of the former Consultative Group and Coordinating Committee for Multilateral Export Controls (COCOM). These were incorporated into a "Common Standard" that was intended to be applicable to all types of sensitive exports. The Common Standard still commands broad international acceptance. Russia has the most highly developed export control system in the region.20 A 17   Discussions during the committee's visit to Russia in May 1996. 18   U.S. Department of State response to committee questions, February 1996. 19   Discussions with Ukrainian officials during the committee's visit in April 1996. Also. Zaborski, op. cit. 20   See Suzette Grillot and Cassady Craft, "How and Why We Evaluate Systems of Export Control," The Monitor, vol. 2, no. 4, Fall 1996, pp. 11-15, for a quantitative approach showing this.

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--> small number of officials who formerly worked in the Soviet export control system have led the Russian effort. They have recast the old regulations to better fit western patterns and are reorienting the cadres of specialists involved in the effort. The other countries began their programs nearly from scratch, relying primarily on new personnel with very little experience in the field. On occasion, their efforts have been plagued by turf disputes, inadequate budgets, inertia, and technical problems—the impediments to change that exist in many bureaucracies. In all countries, limitations also can be traced to a lack of experience and equipment. Studies by U.S. government agencies and nongovernmental groups confirm the committee's overall impression that the four countries have made significant progress since the beginning of 1995 in upgrading their export control systems to meet the requirements of the Common Standard.21 However, even after rapid progress in 1995 and 1996, in almost every aspect of the Common Standard, the four countries have a long road ahead until adequate export control machinery is in place and is operating effectively and efficiently. While Russia has the most developed system, it also faces the largest challenge.22 An essential element of an effective national export control system is a sound legal framework. All countries of the region are in the process of upgrading the legal bases for their activities. Russia has not yet enacted comprehensive export control legislation, although many decrees and regulations have been promulgated that provide a basis for an active program.23 As of June 1996, Kazakstan was the only country of the four with a free-standing export control law. Belarus and Ukraine were still preparing draft legislation. Implementing regulations in these three countries were in various stages of development. At the same time, all four countries are attempting to promulgate lists of controlled items consistent with the lists of the international regimes. In summary, each of the four countries has established or is establishing an interagency regulatory mechanism for reviewing and approving export licenses, and they are installing computerized systems for tracking applications for and action on licenses. Enforcement: The Weak Link The four countries have many difficulties in the enforcement area. While 21   At the outset the committee decided not to construct a detailed baseline for each country against which to measure their progress. This assessment of progress being made in the region is based primarily on the committee's discussions of activities under the bilateral programs. 22   U.S. Department of State's response to committee questions, February 1996. Discussions during committee's visit to Russia in May 1996 and to Kazakstan, Ukraine, and Belarus in April 1996. Information provided to the committee by U.S. Department of Commerce specialists concerning their rating system. 23   Gary Bertsch and Igor Khripunov, eds., Russia's Nonproliferation and Conventional Weapons Export Controls: 1995 Annual Report (Athens: University of Georgia, 1996).

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--> enforcement of export control laws can never be the only line of defense against nonproliferation, the probability of detection and the consequences of detection must be sufficiently high so as to be a credible deterrent. Much of the attention in the successor states is directed to strengthening the customs services, initially through an explosive growth of personnel and expanded training programs. In Russia, for example, customs personnel have increased from 7,000 to 54,000 in 4 years; in Ukraine from 2,000 to 17,000; in Belarus from 400 to 6,000; and in Kazakstan from 1,000 to 7,000.24 This growth reflects the fact that the customs services are being called on to play a more extensive role in the new approaches to security as well as in collection of export and import fees. Also, the countries are faced with many international borders that previously did not exist. On the other hand, customs personnel have much less enforcement authority than counterparts in the United States. The problem of controlling the outflow of commodities is immense. Customs facilities simply do not exist along many stretches of the tens of thousands of kilometers of frontiers, and inspection equipment, laboratory support, and automation equipment are in short supply. The training requirements are enormous. (Even in the United States, with its well-developed customs training capabilities, training opportunities are limited to 1,500 persons per year.) Customs officials are confronted with many export and import issues. In Russia, export and import customs fees—which include taxes on exports of natural resources and imports of industrial goods—represent 20 to 25 percent of the national budget, and customs officials understandably give priority to the collection of sorely needed revenues.25 In Kazakstan, all exports are subject to taxes, with sensitive exports being a very small part of the broader export control agenda.26 Exports of militarily sensitive items may at times appear so complex that such matters are pushed aside in favor of more familiar activities. Another difficulty that will not be easily overcome is susceptibility of enforcement personnel to corruption throughout the region. Salaries are very low and often delayed for several months. Thus, employees of the customs services and border guards are attractive targets for bribes by smugglers. Recent actions of interest by the four countries include the following: In Russia several new decrees were issued in the spring of 1996 that clarified the procedures for addressing dual-use items and the control lists for such items. The customs service promptly strengthened its organizational structure to address different categories of controlled dual-use items, including nuclear-related, missile-related, and other items.27 24   U.S. Department of State response to committee questions, February 1996. 25   Discussions during the committee's visit to Russia in May 1996. 26   Discussions during the committee's visit to Kazakstan in April 1996. 27   Discussions during the committee's visit to Russia in May 1996.

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--> Kazakstani officials are particularly concerned about smuggling in the Caspian Sea area and are gradually increasing their capabilities to monitor activities along the coast of the country.28 Belarusan and Ukrainian officials believe they have identified the principal smuggling routes in their countries and are focusing their efforts accordingly.29 Of course, intelligence agencies play an important role in the enforcement area. Officials in Kazakstan and Russia underscored the importance of intelligence information in anticipating and uncovering illegal operations. However, an assessment of the role of intelligence services was beyond the scope of this report.30 End-Use Verification Another problem area is the limited capability of all four countries to screen the proposed end users who are identified in applications for licenses for exports of controlled items. Western governments rely heavily on data banks concerning appropriate end users and call on their embassies to assist in clarifying questionable destinations for controlled goods. They maintain a variety of black lists, gray lists, and terrorist lists. Developing accurate and up-to-date records is an expensive undertaking, and devoting resources to such activities is not of priority concern in the four countries. Russia has the strongest capability to check on the appropriateness of proposed end users, but officials acknowledged limitations in confirming end users. They added that improving the databases for end-user verification is an important need.31 Measuring Progress in Containing Sensitive Items An important step in the development of an export control system is adherence to the requirements of one or more of the international control regimes. For example, Russia has agreed to internationally adopted limitations and reporting requirements on transfers of nuclear materials, nuclear dual-use items, and missile technology-related commodities. Russia has declared that its export control procedures are consistent with the policies of the Australia Group.32 While such arrangements are certainly not a direct measure of the degree to which transfers of items of 28   U.S. Department of State's response to committee questions. February 1996. 29   Discussions during the committee's visits to Ukraine and Belarus in April and May 1996. 30   A discussion of the importance of the intelligence services is included in The Nuclear Black Market. Center for Strategic and International Studies, Washington, D.C., 1996. 31   Discussions during the committee's visit to Russia in May 1996. 32   Discussions during the committee's visit to Russia in May 1996. 33   For a Russian perspective on this issue, specifically as it relates to the Missile Technology Control Regime, see A. V. Ustinov, "Export of Missile Technologies: Will Russia Enter the World Market?," Comparative Strategy, vol. 13, no. 3, July 1994, pp. 283-286.

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--> Adapting Approaches to the Local Environment The four governments are attempting to put in place all elements of export control systems. The details of such systems need not be identical to the American approach; they should take into account the capabilities and needs of each country. For example, a very simple licensing system may be appropriate in a country where all manufacturing facilities of concern are government owned and the number of organizations authorized to export controlled items may be as small as three or four, as in the case of Kazakstan. On the other hand, special measures may be needed in some of the countries to compensate for corruption among enforcement personnel, such as multiple paths for checking on compliance. The ultimate test of an export control system is its effectiveness in carrying out the requirements of the international control regimes and not necessarily its consistency with the American approach. An important aspect of the cooperation strategy should be the continuing emphasis on rapid "indigenization" of the programs, particularly in Ukraine, Belarus, and Kazakstan: the emphasis on programs that "train the trainers" and increasing reliance on vehicles, computers, boats, and other equipment produced locally or that at least can be serviced and maintained locally. Rapid indigenization is essential to ensure that the countries are ready in the near future to assume full responsibility for upgrading and maintaining systems that are internationally acceptable. While the political outlook, economic conditions, industrial assets, and civil service personnel capabilities vary considerably among the four countries, the positive attitude toward working with American specialists to improve export control systems was consistent in many agencies in each country. Thus, U.S. specialists have an unusual opportunity to adapt familiar organizational and technical approaches to realities in the region and to set priorities for establishing those aspects of export control systems that are most likely to have near-term impact in containing sensitive items. Layers of Control Layers of control are helpful in deterring and detecting illegal exports—controls at the enterprise or institute level, checks at the customs certification and border stations, surveillance along the borders, and programs for interdiction of contraband between the foregoing control layers. At present, the primary reliance on the customs services in the enforcement area is a necessary point of departure for this approach since customs officials are involved in most of the layers. However, many other agencies also have a role to play and should be involved in cooperative efforts, including the intelligence agencies and the military and paramilitary agencies responsible for border surveillance in the four countries. Also, innovative approaches are needed for control at the source. Once an item leaves an enterprise through unauthorized channels, the difficulties of detecting it en route to a foreign destination are very severe.

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--> Financial Viability of Key Enterprises and Institutes A serious threat to the efforts of the United States to strengthen the capabilities of institutions in the FSU in order to curb proliferation is the continuing decline in the financial viability of the concerned enterprises and institutes. It is not reasonable to rely on unpaid or underemployed work forces to implement important aspects of export control systems, such as internal compliance programs. The need for high levels of integrity in resisting economic pressures for personal financial gain should not be placed in competition with personal survival. There is no easy solution to the massive economic shortfalls throughout the former Soviet military-industrial complex, and programs to protect sensitive items should take into account the unstable situation in these institutions. U.S. Legislative and Organizational Framework for Cooperative Programs Finally, the legislative and organizational approaches in Washington to developing, supporting, and implementing cooperative programs deserve greater attention. Specifically, the Defense Against Weapons of Mass Destruction Act of 1996 did not address several important aspects of export control, particularly the responsibilities of the Commerce Department, while concentrating on the role of the U.S. Customs Service. Moreover, budgetary support for export control cooperation is in constant jeopardy in the unpredictable and small budget of the State Department. Areas for Future Emphasis Against the foregoing background of developments in the four countries and the experience of cooperative programs to date, several areas deserve special emphasis during the next several years: Joint efforts should reflect the need for the four countries to complete the infrastructure that provides an adequate legal, organizational, and manpower base to support export control. The importance of the governments continuing to strengthen implementation and enforcement is very clear. Since not all aspects of export control can receive immediate attention, priorities should focus on urgent problems, including (a) the need to control the most sensitive items, (b) the opportunities for controlling items at the enterprise level, and (c) the importance of participation by adjacent states of the FSU in regional approaches to combat the smuggling of sensitive items. The protection of sensitive technical data that are subject to export control has not received sufficient attention. Preventing the diffusion of such information in some instances can be more important than containing commodities, and higher priority should be given to efforts to control sensitive technical information.

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--> An important related area is the evolution of a cadre of export control officials who give adequate weight to proliferation concerns in decision making. Indeed, a regulatory system that operates in conformity with the procedural requirements of the international regimes but that fails to achieve outcomes that reflect a commitment to nonproliferation goals cannot be considered acceptable. RECOMMENDATIONS TO THE U.S. GOVERNMENT CONCERNING FUTURE COOPERATION IN EXPORT CONTROL 1. Support Completion of the Legal, Organizational, and Manpower Infrastructure Specific Finding: A starting point for controlling exports of sensitive items is a legal and organizational framework that provides the capability for policy and regulatory development, licensing activities, and enforcement. Each of the four countries is in the process of broadening and codifying the legal basis for its programs and of providing an operational system staffed with well-trained specialists. This long-term effort requires continued attention over a number of years. The United States has the most fully developed export control infrastructure of any country and is in a strong position to contribute in many ways. Over the long term, however, the four countries must assume responsibility for ensuring that improvements are sustained. Budgetary support in the United States for bilateral export control programs needs more stability. The budget level of $10 million for FY 1996, supplemented with funds from earlier years already in the pipeline, has sustained an appropriate level of activity. Funding for FY 1997 has become quite fragmented. The Nonproliferation and Disarmament Fund of the Department of State, which was to be the central funding source for several agencies, has only $5 million for export control programs on a worldwide basis. Meanwhile, Congress has earmarked $15 million of its FY 1997 appropriation to DOD for the Cooperative Threat Reduction program for the activities of the U.S. Customs Services in the FSU. DOE has set aside funds to continue its activities. On the other hand, the Department of Commerce. which should play a critical role, has no budget line for its participation. Recommendation: Continue to fund export control efforts in the FSU at least at the level of FY 1996 for several more years and be prepared to increase funding should particularly important high-impact opportunities arise. U.S. agencies finally have in place the international arrangements, the receptivity of key foreign counterparts, and a base of initial experience to facilitate program efforts in a number of important areas. Against this background, program activities can be broadened at little additional cost in ways that will enable American specialists to continue past activities while introducing new concepts and approaches. If Russia, in particular, unexpectedly seeks a much

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--> higher level of cooperation, increased funding would be a very good investment, especially with regard to enforcement activities.45 Recommendation: Ensure that adequate resources are available to the Department of Commerce, as well as to the Departments of State, Defense, and Energy and the U.S. Customs Service, so that specialists with unique expertise can continue to participate in the programs. The future funding available to the agencies is very uncertain and should be put on a firmer basis. Several approaches should be considered: (a) each of the concerned agencies could seek its own appropriation for participation in the program; (b) funds could be made available to the agencies through the Freedom Support Act; and (c) if the budget of the State Department continues to be a vehicle for financing activities of other agencies, Congress should protect—through earmarking—the amount to be directed to export control activities in the FSU, and the State Department should strengthen its staff so that more serious planning and evaluation efforts associated with the funds can be carried out. Recommendation: Emphasize in bilateral discussions at all levels the importance of developing capabilities to meet international requirements for export control and to ensure adherence to all relevant aspects of the international control regimes. Unfortunately, the topic of export control is too often considered complicated and remote from immediate problems and therefore is left off the agendas of important policy discussions. At the same time, advocates for export control in the FSU are still few in number, and they need all the political support they can obtain, particularly from their own governments. To help buffer the technical cooperation efforts from political problems, the United States should not hesitate to initiate confidential discussions through diplomatic channels to resolve misunderstandings concerning international export control issues. Recommendation: Negotiate an intergovernmental agreement with Russia to help ensure the long-term stability of bilateral cooperation in the field of export control. Given the large stores of sensitive commodities and technical data in Russia, sustained cooperation that addresses a broad range of issues is clearly warranted. An important step in this regard is the completion of a bilateral agreement. Recommendation: Support the strengthening of institutions in the FSU that provide training and advisory services for government agencies and enterprises involved in export control. The number of new specialists who 45   The committee notes that multiyear funding for the bilateral programs would increase the stability and continuity of the cooperative efforts but acknowledges that U.S. congressional procedures make multiyear funding unlikely.

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--> could benefit from training in both the general area of export control and in specialized fields is very large. Also, the technical issues involved in determining whether certain items are subject to licensing, in going through the licensing process, and then in actually shipping items abroad can be complicated for even experienced manufacturers and shippers. Of particular interest is support for the enterprises in their determinations of commodity classifications. In Russia, where many enterprises and shippers are involved, an independent Center for Export Control has been established and deserves support from both internal and external sources. Also deserving support are the specialized training and advisory units in ministries and enterprises that are expanding their export control activities. Recommendation: Involve interested American universities and nongovernmental organizations, when appropriate, in promoting training and research related to export control that involves specialists from the FSU. Several American universities and nongovernmental organizations have been effective in promoting greater awareness of the importance and details of export control activities throughout the FSU. Funded primarily by private foundations, these organizations have provided training opportunities in the United States for individuals from each of the four countries who subsequently assumed leadership roles in their governments. The U.S. Government should draw on the resources of these organizations to help strengthen local capabilities in the successor states. They can be particularly helpful in tracking progress in implementing and enforcing laws and regulations. 2. Strengthen Implementation and Enforcement Capabilities Specific Finding: In each of the four countries there is a considerable gap between the requirements and plans for export control activities and the implementation of effective programs for fulfilling those requirements, particularly in the area of enforcement. The role of the United States in this area has been very limited relative to the size of the problem, and activities should be significantly increased. While U.S. efforts have been quite successful in assisting with the preparation of laws and regulatory documents, only recently have the documentation requirements for prosecution of violations become a topic for cooperation. One of the most effective deterrents to violations of export controls, at least in the United States, has been the successful prosecution of violators; and it seems likely that penalties would have an impact in the FSU. However, there are few reports of successful prosecutions in this region. Recommendation: Continue to cooperate with counterpart agencies that have received computers and related equipment to ensure that automated

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--> licensing and customs tracking systems are installed and used as planned. There is a clear need for American specialists to provide hands-on guidance in Ukraine, Belarus, and Kazakstan concerning systems and programs that have proved to be effective in the United States. Adaptations may be necessary in the countries, and the rapid transfer of American experience both in using and in adapting the equipment and software that have been provided can be very helpful in the immediate future. Recommendation: Expand bilateral cooperation among customs officials, emphasizing training and demonstration programs that can have multiplier effects in view of the vast responsibilities of the customs services . Despite the enormity of the task facing customs officers in the FSU, cooperation in training, advice, and demonstration equipment can help impart momentum into the much larger efforts that are needed but that are far beyond the capabilities of the United States to support directly. Recommendation: Share with enforcement counterparts information on procedures used in the United States to collect evidence and prosecute parties found to be violating export control laws. As the criminal justice systems in the four countries continue to evolve, American specialists can be very helpful in relating their experiences concerning the detailed aspects of preparation for and carrying out of prosecutions of violators of export controls. While the legal systems in the countries of interest vary significantly from the American legal system, many techniques that have been successful in the United States should be of relevance to other countries as well. Recommendation: Encourage high-visibility prosecutions of export control violators in the four countries so that local exporters become aware of the consequences of violations of export control laws and regulations. Attracting the attention of exporters of sensitive items through high-visibility prosecutions of violations should be particularly important in countries where in the past crimes were often overlooked if the perpetrators had strong political connections. 3. Focus on Critical Commodities, Stewardship at the Enterprise Level, and Regional Approaches Specific Finding: In addition to supporting the development of comprehensive approaches to export control, U.S. specialists should advocate short-term strategies that focus on immediate solutions to reducing the likelihood of uncontrolled diffusion of sensitive items. In a territory as vast as the FSU, once a diverted item of concern leaves a production or storage facility undetected, its discovery becomes very difficult. Therefore, of particular importance is greater

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--> attention to controlling the most sensitive items at the enterprises and institutes while continuing efforts to intercept controlled items en route to their final destinations, including transit through neighboring countries. American business is often far more effective than U.S. government officials in obtaining the attention of Russian enterprise officials, and the involvement of such business people in discussions of enterprise activities can be very productive. Also, regional approaches are critical if smuggling and inappropriate transshipments of controlled items are to be checked. Recommendation: Emphasize control of the most sensitive items by targeting educational and enforcement efforts on the organizations most likely to handle such items. Concentrating on the most sensitive items as defined in the international control lists could be an important interim step before comprehensive control systems are operating effectively. This approach would counter smuggling and diversions inspired by parties intent on obtaining weapons technologies, which presumably would include some of the most critical items. Recommendation: Encourage the strengthening of surveillance at the enterprise level through enhanced capabilities of on-site customs officials. Customs officials are resident at many of the most important manufacturing facilities in the FSU, and officials from regional offices visit other facilities regularly. In addition to their responsibility for providing necessary documentation for shipments of authorized goods, they should play a very active role in helping to prevent unauthorized shipments from the facilities. Recommendation: Expand interactions between officials of American companies and foreign enterprises responsible for internal export compliance programs and for industrial security and demonstrate to foreign counterparts how the U.S. private sector participates in the development of new export control regulations. The internal compliance programs of U.S. firms have already triggered considerable interest among enterprise managers in Russia. More industrial leaders from the countries should have the opportunity to appreciate the value that U.S. businessmen attach to such programs. U.S. experiences in industrial security should also be helpful to counterparts. Finally, the U.S. experience in bringing companies into export control activities from the very beginning indicates that, when business concerns are considered from the outset, misunderstandings can be avoided as to export requirements during implementation activities. Recommendation: Encourage local officials involved in the Customs Union in the FSU to strengthen approaches for monitoring transshipments of controlled items. The impact of the Customs Union, if any, on transshipments

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--> of controlled items is still evolving. With or without the union, the countries of the region should be alert to the reliability of end users throughout the region, particularly as transshipment agents. Recommendation: Participate in cooperative programs with countries of Central Asia that emphasize the importance of countering smuggling and inappropriate transshipments of sensitive items. Controlling the flow of goods across the lengthy borders of the successor states is very difficult. An important step in limiting contraband, which could include sensitive items, is a commitment by all successor states to establish programs to intercept smuggled goods as quickly as is feasible. The regional training programs supported by the United States should emphasize the threats from smuggling while giving less attention to the development of elaborate export control systems in countries that produce few controlled items. 4. Increase Attention to Control of Technical Data Specific Finding: Some nations and subnational groups of proliferation concern could benefit significantly from access to technical data about the design, manufacture, or integration of weapons system components. Yet this topic is receiving relatively little attention in the FSU. Russia, in particular, still protects military-classified documents. Also, the country is concerned about intellectual property. But controls over intellectual property are uncertain and are not designed to keep documents out of the hands of irresponsible parties. Recommendation: Encourage counterparts in the four countries to strengthen national regulatory and organizational frameworks for regulating flows of technical data subject to export controls. None of the countries has established an adequate framework for addressing technical data. This complicated topic, involving many ministries and institutions from both the military and the civilian sectors, will require many adjustments of current approaches that concentrate on commodities, for both specialists from the region and American collaborators. Recommendation: Develop and disseminate "model" technical data provisions that could be used by institutions in the FSU in contracts with domestic or foreign organizations involving controlled items. As a first step, such model provisions could be developed for and included in those contracts between American institutions supported with U.S. Government funds and Russian facilities that involve the transfer of data that are subject to export controls. While technical data concerns will vary depending on the transaction, contracts should have provisions to ensure that the requirements of the international regimes will be respected.

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--> 5. Encourage Full Consideration of Proliferation Issues in Export Control Decisions Specific Finding: While the bilateral programs have concentrated on establishing the machinery for reaching and enforcing export control decisions, they have given less attention to the policy considerations that should underpin decisions, other than consistency with the limited requirements of the international regimes. Given economic realities, the governments of the successor states will inevitably give greater weight than would the United States to promoting trade with nations that pose proliferation risks. Until there are strong nonproliferation advocates involved directly or indirectly in the interagency deliberations, the principal inhibition on controversial exports of sensitive materials will often be external pressure from the United States or other interested countries. Recommendation: Ensure that continuing consultations on the importance of export control activities in meeting nonproliferation objectives become an integral component of U.S. bilateral relations with the successor states in both the short and the long terms, as has been the case with relations between the United States and its traditional allies. When special program funding for cooperative activities comes to an end, the leverage of the U.S. Government on the export control activities in the successor states will diminish greatly, even though such activities will continue to have very significant national security implications. To help prevent the loss of interest in the U.S. Government in these programs, the State Department should ensure that the significance of export control is fully recognized in its future policies with regard to the successor states. Recommendation: Promote bilateral discussions of the relationships between exports of sensitive items and proliferation concerns in many forums, at the governmental and nongovernmental levels. American specialists should repeatedly point out that, while the establishment of governmental machinery for export control is very important, the goal is prevention of diffusion of sensitive items that could cause international security problems. Therefore, each sensitive export must be considered not only from the point of view of the international "legality" of the transaction but also from the viewpoint of the national security "desirability" of the transaction. Recommendation: Support the development of cadres of nonproliferation specialists in the FSU who have strong linkages with both policy officials in their countries and colleagues abroad. The professional capabilities and commitments of cadres of specialists are at the heart of the effectiveness of export control systems. The professional culture of such specialists should reflect a high degree of sensitivity and commitment to nonproliferation objectives.

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--> AREAS FOR ADDITIONAL STUDY Export control activities touch on many related areas of international security importance. Areas that deserve more detailed analysis include the following: Smuggling of controlled items. As previously suggested, greater attention needs to be devoted to interdiction of contraband material and equipment after it leaves the source undetected by responsible parties. The known histories of smuggling of controlled items and of other items such as drugs and small arms may give some insights into the problems. The interests and capabilities of organized crime to penetrate the nuclear establishments of the countries of the region needs special attention, even though the bilateral materials protection, control, and accountability programs discussed in the previous chapter should address some aspects of this issue. Also, the intelligence services and law enforcement agencies have not participated fully in the discussions of export control either in the United States or the FSU; they undoubtedly could provide important additional perspectives on the problem. Controlling the borders. Better understanding of the responsibilities, capabilities, and activities of the various units responsible for border security in the FSU should provide insight into how U.S. cooperative efforts could be most supportive in this area. Controlling the export of conventional weapons. Russia continues to sell significant quantities of fighter aircraft and other conventional weapons abroad, and several other countries of the FSU also sell limited quantities of conventional weapons abroad. A review of the inventories of armaments in the FSU available for transfers abroad and the export control aspects of sales and other transfers should help clarify the magnitude of this issue during the next several years. Controlling items related to biological warfare. While the international regime for biological agents and related equipment identifies critical items to be controlled (Australia Group control lists), development and enforcement of effective export control systems is very difficult, given the relative simplicity of the technologies involved. In this area control of technical data incorporated into documents or retained by former defense scientists is an important objective, and effective approaches to this end are needed. U.S. support at key facilities. Many enterprises and institutes that have control over sensitive items in the four countries of concern have been in very difficult financial situations for several years. At the same time, a number of American programs are supporting projects at a large number of those institutions. Greater attention should be given to how U.S. programs targeted to these institutions through many channels can be used to assist in upgrading commitments to export control, thereby counteracting to some extent the pressures to sell equipment and information that would enable the institutions to meet their payrolls. Perhaps U.S. programs that provide some financial relief to the institutions

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--> should require certain steps at the institutions to upgrade export control compliance as a condition of receiving U.S. funds. Tracking the evolution and effectiveness of export control systems. Documentation of the evolution of the export control systems in the region and, to the extent possible, correlating development of the systems with assessment of leakages of sensitive items from the region would be helpful in both assessing the impact of export control and providing guidance for future U.S. programs in this field. Anticipating the activities of organized crime. While there currently are no known links between the activities of organized crime syndicates and the smuggling of militarily sensitive commodities or information, the possibility of such links should be of considerable concern. Studies of organized crime activities in regions of the FSU where sensitive items are concentrated (e.g., Moscow region, St. Petersburg region, Urals) could be helpful in identifying emerging pathways for circumventing export control requirements. Reducing the vulnerability of surplus sensitive items. Given the vast quantities of surplus weapons-related items being stored in Russia (in addition to direct-use nuclear material), attention should be given to steps for reducing the number of storage sites, the security arrangements at these sites, the procedures being used for disposing of surplus items, and the ultimate disposition of selected items that have no possibility for conversion to civilian uses. Clarifying the regulatory basis for controlling technical data. For many years, balancing the need for national security restrictions on technical data exchanges with the scientific benefits from international technical cooperation has been a difficult issue. Now the situation is even more complex as electronic communications can result in rapid distribution of all types of data throughout the world. At the same time, the export control restrictions remain. A special effort to clarify the types of data that are and should remain controlled in the framework of the international regimes would be very helpful.