U.S. to Fund Chinese Agency Aiding Iranian and Pakistani Nukes

There is an arm of the Chinese government that has repeatedly aided the nuclear weapons programs of Pakistan and Iran. Now that arm is in line for a $5-billion loan deal from the U.S. government–for the benefit of two major U.S. corporations.

The Export-Import Bank of the United States (Ex-Im), an independent federal agency that finances exports, has granted a preliminary commitment for the largest deal in it is history: $5 billion in loans and loan guarantees to the China National Nuclear Corporation (CNNC) to build nuclear power plants.

According to U.S. government reports, CNNC has been tied to at least three instances of nuclear weapons proliferation involving Pakistan and Iran. Yet, the Chinese-government agency is still eligible for Ex-Im financing because of a Clinton-Administration decision–made at the behest of U.S. businesses–not to punish CNNC for its actions.

Westinghouse Electric, which is owned by the U.K.’s state-owned British Nuclear Fuels Ltd., has developed a cutting edge nuclear reactor, the AP-1000, a 1,000 megawatt pressurized water reactor–lauded as the safest, most powerful reactor in the world. As part of an ambitious plan to increase the country’s nuclear power supply fourfold by 2020, state-owned CNNC is building four new reactors, two in Sanmen Nuclear Power Stations southwest of Shanghai and two in Yangjiang Nuclear Power Stations southwest of Hong Kong.

Westinghouse, which builds the AP-1000 in Monroeville, Pa., is bidding for the contract against France’s Areva and Russia’s AtomStroyExport. The preliminary commitment from Ex-Im allows Westinghouse to promise China a very favorable finance package–compliments of the U.S. taxpayer. China formally accepted bids on February 28.

In February 1996, the Washington Times reported that U.S. intelligence had found that CNNC had sold 5,000 ring magnets to the A.Q. Khan Research Laboratory in Pakistan. These magnets are critical in centrifuges used to enrich–weaponize–uranium. The State Department later confirmed this story. Congressional leaders called for sanctions on China, or at least CNNC.

After the 1996 report that CNNC had sold the ring magnets to Pakistan, the Clinton Administration had suspended new Ex-Im financing to CNNC for one month, but quickly removed all sanctions. A 2002 Congressional Research Service (CRS) report states: “The Clinton Administration’s decision-making was apparently complicated by considerations of trade interests of U.S. corporations with business in China.”

The CRS report continues:

    “[Clinton] Administration officials reportedly considered imposing then waiving sanctions or focusing sanctions only on the China National Nuclear Corp., rather than large-scale sanctions affecting the entire PRC government and U.S. companies, such as Westinghouse Electric Corp. (which had deals pending with China National Nuclear Corporation) and Boeing Aircraft Co.”

Boeing is the biggest beneficiary of Export-Import Bank deals. In many recent years, a majority of the loan dollars Ex-Im issues or guarantees were for Boeing sales. China is Boeing’s biggest overseas customer.

In May 1996 the State Department announced the U.S. would not sanction China and Pakistan. The Congressional Research Service reports, “Clinton Administration officials said China ??¢â???¬ ¦ reaffirmed its commitment to nuclear nonproliferation.”

That fall, the Washington Times disclosed a CIA report that the China Nuclear Energy Industry Corp. (CNEIC), a wholly owned subsidiary of CNNC, had sold Pakistan high-temperature furnaces, which can be used in weaponizing uranium or plutonium. This deal happened in September, according to the Times, after the PRC’s “commitment” to the Clinton Administration.

Pakistan tested a nuclear weapon for the first time in May 1998.

CNNC and CNEIC reportedly have helped Iran develop nuclear weapons, as well. In April, 1995, the Washington Post reported that CNEIC was planning to sell Iran the equipment necessary to weaponize uranium. On March 13, 1998, the Post reported similar findings that had apparently leaked out of a closed meeting of the Senate Foreign Relations Committee. The Post article stated:

    “The Clinton Administration has uncovered new evidence that China tried to sell nuclear equipment with weapons applications to Iran and Pakistan within the past several weeks. The evidence was revealed during an unusual closed-door hearing of the Senate Foreign Relations Committee yesterday and undermines the administration’s announced plan to certify that China has halted all efforts to export dangerous nuclear weapons technology??¢â???¬ ¦.”

At the meeting, Clinton Administration officials reportedly revealed:

    “??¢â???¬ ¦[E]fforts by Chinese manufacturers to sell nuclear components to the Iranian government program in charge of nuclear weapons and to facilities in Pakistan that are involved in nuclear weapons activities.”

The article named CNEIC as the likely Chinese entity involved.

In July of 1996 and January of 1997, the Ex-Im board of directors approved two loans to help CNNC build nuclear power plants at the Qinshan nuclear facility near Shanghai. HUMAN EVENTS reported this in May 2001. That deal primarily benefited Bechtel, another beneficiary from the deal given preliminary approval by Ex-Im last month.

This $5-billion deal to aid CNNC seems to undercut two current efforts by the Bush Administration. First, President Bush has exhorted Congress to tighten its belt on spending. Approving Ex-Im’s largest deal ever could undermine his credibility on that issue, because whether the $5-billion is made as a direct loan (which would come directly out of the U.S. Treasury) or a loan guarantee (for which a certain amount of cash would have to be set aside by the Treasury) or a combination of the two, it will take U.S. taxpayer dollars for the benefit of the Chinese regime. Whether the $5 billion ends up being a loan or a loan guarantee, the deal will put the U.S. taxpayer on the hook for the entire $5 billion in the case of a Chinese default.

It would also seem to give the U.S. government a vested interest in the solvency and survival of the Communist regime in Beijing–making it harder for us to apply pressure on that regime.

Especially in the light of the left’s class-warfare-based attacks against the administration, such as Paul Krugman’s recent charge that Bush “takes food from the mouths of babes and gives the proceeds to his millionaire friends,” a record corporate-welfare deal could provide additional ammunition to Bush’s left-wing opponents.

Bush has also been trying to pressure other nations to do more to stop nuclear proliferation. While visiting Russia, Bush unsuccessfully tried to convince Russian President Vladimir Putin not to help Iran’s nuclear power program, arguing that it would aid Iran’s efforts to develop nuclear weapons.

Similarly, the administration is scolding North Korea for aiding the nuclear weapons programs of “rogue nations.”

Director of Central Intelligence Porter Goss said in mid-February that the U.S. was pressing harder to find details about the proliferation of Pakistani scientist A.Q. Khan. Pakistan arrested Khan in early 2004 for shipping centrifuge materials to Libya.

The CNNC sale to Pakistan first reported in 1996 was of centrifuge materials, and the buyer was the A.Q. Khan laboratory.

The U.S. government has been working on aiding Westinghouse’s bid for CNNC’s contract for months. In a visit to China in October, then-Energy Secretary Spencer Abraham lobbied the Chinese to go with Westinghouse for the deal, according to the Pittsburgh Post-Gazette. The Post-Gazette said the $5-billion deal could bring 5000 jobs to the area, because the reactors would presumably be built in Monroeville, Pa.

Ex-Im finances U.S. exports both by loaning money to foreign governments or companies and also by underwriting private loans. For the Westinghouse deal, no specifics have been given as to what portion of the $5 billion would be direct loans, and what portion would be loan guarantees.

In addition to inviting charges of hypocrisy by dealing with known proliferators, the Ex-Im deal could have other negative effects. By engaging in a bidding war, with taxpayer money, against France and Russia, the U.S. government is ensuring a very good deal for CNNC. This enriches CNNC, which is in charge of both nuclear weapons and nuclear power for the communist nation.

Ex-Im is an independent agency, meaning it does not answer to the President. Its board members, while all appointed by Bush, serve fixed terms, unlike Cabinet-agency political appointees, who serve at the pleasure of the President. Still, a phone call from the President could likely quash any pending deal.


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