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China and proliferation of weapons of mass destruction and missiles: policy issues.

January 3, 2014


Congress has long been concerned about whether U.S. policy advances the national interest in reducing the role of the People's Republic of China (PRC) in the proliferation of weapons of mass destruction (WMD) and missiles that could deliver them. Recipients of China's technology reportedly included Pakistan, North Korea, and Iran. This CRS Report, updated as warranted, discusses the security problem of China's role in weapons proliferation and issues related to the U.S. policy response since the mid-1990s. China has taken some steps to mollify U.S. and other foreign concerns about its role in weapons proliferation. Nonetheless, supplies from China have aggravated trends that result in ambiguous technical aid, more indigenous capabilities, longer-range missiles, and secondary (retransferred) proliferation. Unclassified intelligence reports told Congress that China was a "key supplier" of technology, particularly with PRC entities providing nuclear and missile-related technology to Pakistan and missile-related technology to Iran.

Policy approaches in seeking PRC cooperation have concerned summits, sanctions, and satellite exports. PRC proliferation activities have continued to raise questions about China's commitment to nonproliferation and the need for U.S. sanctions. The United States has imposed sanctions on various PRC "entities" (including state-owned entities) for troublesome transfers related to missiles and chemical weapons to Pakistan, Iran, or perhaps another country, including repeated sanctions on some "serial proliferators." Since 2009, the Obama Administration has imposed sanctions on 16 occasions on multiple entities in China for weapons proliferation.

Skeptics question whether China's roles in weapons nonproliferation warrant a closer relationship with China, even as sanctions were required on some PRC technology transfers. Some criticize the imposition of U.S. sanctions targeting PRC "entities" but not the government. Others doubt the effectiveness of any stress on sanctions over diplomacy or a comprehensive strategy. Concerns grew that China expanded nuclear cooperation with Pakistan, supported North Korea, and could undermine sanctions against Iran (including in the oil/gas energy sector). In 2002-2008, the U.S. approach relied on China's influence on North Korea to dismantle its nuclear weapons. Beijing hosted the Six-Party Talks (last held in December 2008) with limited results. Since 2006, China's balanced approach has evolved to vote for some U.N. Security Council (UNSC) sanctions against missile or nuclear proliferation in North Korea and Iran. Some called for engaging more with Beijing to use its leverage against Pyongyang and Tehran. However, North Korea's nuclear tests in 2006, 2009, and 2013 prompted greater debate about how to change China's calculus and the value of its cooperation. After negotiations, the PRC voted in June 2009 for UNSC Resolution 1874 to expand sanctions imposed under Resolution 1718 in 2006 against North Korea. The PRC voted in June 2010 for UNSC Resolution 1929 for the fourth set of sanctions against Iran. In 2013, the PRC voted for UNSC Resolutions 2087 and 2094 on North Korea for missile and nuclear tests. Still, China has continued its balanced approach that includes incremental implementation of UNSC sanctions. China's approach has not shown fundamental changes toward Pakistan, Iran, and North Korea. China again is calling for resuming the SixParty Talks, but the Administration says the goal is North Korea's credible denuclearization. On November 29, 2013, the Secretary of State again announced that China (and other countries) "significantly" reduced crude oil imports from Iran and that sanctions under the FY2012 National Defense Authorization Act (NDAA) (P.L. 112-81) would not apply. Legislation includes H.Res. 65 (Royce), H.R. 673 (Ros-Lehtinen), and S. 298 (Menendez). In December, Congress passed the NDAA for FY2014, H.R. 3304, with Section 1248 to require a report on a plan to reduce missile proliferation in Iran, North Korea, and Syria, including with the PRC's cooperation.

Purpose and Scope
PRC Proliferation Challenges
  Partial Nonproliferation Commitments
  Continuing Concerns and Intelligence Report
  Nuclear Technology Sales to Pakistan
    Nuclear Cooperation
    A. Q. Khan's Nuclear Network
  Missile Technology Sales to Pakistan
  Nuclear Technology Sales to Iran
    Overview and Policy Approaches
    Uranium Enrichment
    Dual Approach and Energy-related Oil and Gas Deals
    UNSC Resolutions and Sanctions
  Missile Technology Sales to Iran
    Obama Administration
  North Korea's Missile and Nuclear Weapons Programs
    Suspected Missile Supplies
    Secret Nuclear Programs
    PRC Border, Ports, and Airspace
    PRC-DPRK Military Relationship
    Trilateral and Six-Party Talks in Beijing
  Missile Technology Sales to Syria
Policy Issues and Options
  Issues for Policy
    The PRC Government's Role
  Foreign and Defense Policies
    Counter-Terrorism Campaign
    Missile Defense
    Proliferation Security Initiative (PSI) and 9/11 Commission
    Export Control Assistance
    Linkage to the Taiwan Question
  Economic Controls
    Satellite Exports
    Sanctions and the "Helms Amendment"
    Capital Markets
    Nuclear Cooperation and U.S. Export of Reactors
    U.S. Import Controls
    U.S. Export Controls
  Nonproliferation and Arms Control
    Nonproliferation Regimes (MTCR, NSG, etc.)
    CTBT, Fissile Materials, and Nuclear Security
    Intermediate-range Nuclear Forces (INF) Treaty


Table 1. PRC Entities Sanctioned for Weapons Proliferation


Author Contact Information

Purpose and Scope

Congress has long been concerned about whether U.S. policy advances U.S. security interests in reducing the role of the People's Republic of China (PRC) in the proliferation of weapons of mass destruction (WMD) and missiles as well as obtaining China's cooperation in weapons nonproliferation. This problem refers to the threat of nuclear, chemical, or biological weapons and missiles that could deliver them. Some have argued that certain PRC transfers violated international treaties or guidelines, and/or have contravened various U.S. laws requiring sanctions to shore up those international standards. Even if no laws or treaties are violated, many view China's transfers as threatening U.S. security interests. Using unclassified consultations and citations, this CRS Report discusses the national security problem of the PRC's role in weapons proliferation and issues related to the U.S. policy response, including legislation. Table 1, at the end of this report, summarizes the U.S. sanctions imposed or waived on PRC entities or the PRC government for weapons proliferation. For a discussion of the policy problem in the 1980s to 1996, see CRS Report 96-767, Chinese Proliferation of Weapons of Mass Destruction: Background and Analysis, and CRS Report 98-485, China: Possible Missile Technology Transfers Under U.S. Satellite Export Policy--Actions and Chronology, by Shirley A. Kan.

PRC Proliferation Challenges

Partial Nonproliferation Commitments

Since 1991, Beijing has taken steps to address U.S. and other countries' concerns by increasing its partial participation in international nonproliferation regimes and issuing export control regulations. However, questions have remained. China first promised tentatively to abide by the Missile Technology Control Regime (MTCR) in November 1991 and February 1992 and later reaffirmed that commitment in an October 4, 1994, joint statement with the United States. The MTCR, set up in 1987, is not an international agreement and has no legal authority, leaving issues about U.S. sanctions to shore up the standards unresolved. It is a set of voluntary guidelines that seeks to control the transfer of ballistic and cruise missiles that are inherently capable of delivering at least a 500 kg (1,100 lb) payload to at least 300 km (186 mi), called Category I or MTCR-class missiles. It was unclear whether China adhered to the revised MTCR guidelines of 1993 calling for the presumption to deny transfers of any missiles capable of delivering any WMD (not just nuclear weapons). A 1996 State Department fact sheet said that China unilaterally committed to controlling exports "consistent with the MTCR Guidelines and Annex," with the MTCR consisting of a common export control policy (Guidelines) applied to a common list of controlled items (Annex). However, a Senate Foreign Relations Committee report of September 11, 2000, said the State Department had argued to Congress that China agreed to the MTCR Guidelines, but not the Annex.

On November 21, 2000, Beijing said that it has no intention of assisting any other country in developing ballistic missiles that can be used to deliver nuclear weapons (missiles with payloads of at least 500 kg and ranges of at least 300 km) and promised to issue missile-related export controls "as soon as possible." After a contentious period that saw new U.S. sanctions, the PRC finally published those regulations and the control list (modeled on the MTCR) on August 25, 2002, as Washington and Beijing prepared for a Bush-Jiang summit on October 25, 2002. In 2004, China applied to join the MTCR but has not been accepted as a member.

China acceded to the Nuclear Nonproliferation Treaty (NPT) on March 9, 1992. The NPT does not ban peaceful nuclear projects. On May 11, 1996, the PRC issued a statement promising to make only safeguarded nuclear transfers. China, on July 30, 1996, began a moratorium on nuclear testing and signed the Comprehensive Test Ban Treaty (CTBT) in September 1996 but (like the United States) has not ratified it. Premier Li Peng issued nuclear export control regulations on September 10, 1997. On October 16, 1997, China joined the Zangger Committee (on nuclear trade). Also in October 1997, China promised not to start new nuclear cooperation with Iran. On June 6, 1998, the U.N. Security Council (including China) adopted Resolution 1172, asking states to prevent exports to India or Pakistan's nuclear weapon or missile programs. The PRC issued regulations on dual-use nuclear exports on June 17, 1998. In May 2004, China applied to join the Nuclear Suppliers Group (NSG), which accepted China as a member after the Bush Administration decided to support China, despite congressional concerns.

In 1995, China issued its first public defense white paper, which focused on arms control and disarmament. Also, China signed the Chemical Weapons Convention (CWC) in January 1993. On April 25, 1997, China deposited its instrument of ratification of the CWC, before it entered into force on April 29, 1997. From 1993 to 1998, the PRC issued export control regulations on chemicals. On October 14, 2002, on the eve of a Bush-Jiang summit, the PRC issued regulations for export controls over dual-use biological agents and related technology. On December 3, 2003, China issued a white paper on nonproliferation, which stated that its control lists are almost the same as those of the Zangger Committee, NSG, CWC, Australia Group, and MTCR.

Continuing Concerns and Intelligence Report

Nevertheless, China is not a member of the MTCR or the Australia Group (AG) (on chemical and biological weapons). (In June 2004, China expressed willingness to join the MTCR.) China did not join the 93 countries in signing the International Code of Conduct Against Ballistic Missile Proliferation in The Hague on November 25, 2002. China has not joined the Proliferation Security Initiative (PSI) announced by President Bush on May 31, 2003. PRC weapons proliferation has persisted, aggravating trends that result in more ambiguous technical assistance (vs. transfers of hardware), longer range missiles, more indigenous capabilities, and secondary (i.e., retransferred) proliferation.

The Director of Central Intelligence (DCI) noted that, for July-December 1996, "China was the most significant supplier of WMD-related goods and technology to foreign countries." As required by Section 721 of the FY1997 Intelligence Authorization Act (P.L. 104-293), the intelligence community's report to Congress, "Unclassified Report to Congress on the Acquisition of Technology Relating to Weapons of Mass Destruction and Advanced Conventional Munitions," named "entities" in China (plus North Korea and Russia) as key suppliers of dangerous technology that could contribute to WMD and missile programs. China's "entities," including state-owned defense industrial corporations, were reported to be "associated" with Pakistan's nuclear and missile programs and Iran's missile programs. Subsequent discussions of this required report refer to this Section 721 Report. Original legislation required a semi-annual report. The FY2004 Intelligence Authorization Act (P.L. 108-177) changed the requirement for an annual report. The Director of National Intelligence (DNI) submitted to Congress the latest unclassified Section 721 Report to cover the year of 2011. The Intelligence Authorization Act for FY2013 (P.L. 112-277) repealed this reporting requirement (Sec. 310).

Nuclear Technology Sales to Pakistan


In 1996, U.S. policymakers faced the issue of whether to impose sanctions on the PRC for technology transfers to Pakistan's nuclear program, and Beijing issued another nuclear nonproliferation pledge. Since then, the United States has maintained concerns--but at a lower level--about continued PRC nuclear cooperation with Pakistan, particularly involving the construction of nuclear power plants. The PRC government likely has known about the nuclear cooperation with Pakistan. Nonetheless, in 2004, the Bush Administration supported China's application to join the Nuclear Suppliers Group (NSG), despite congressional concerns about China's failure to apply the NSG's "full-scope safeguards" to its nuclear projects in Pakistan. (Full-scope safeguards apply IAEA inspections to all other declared nuclear facilities in addition to the facility importing supplies in order to prevent diversions to weapon programs.) The Obama Administration has not raised strong concerns about the PRC's expansion of nuclear projects.

Nuclear Cooperation

Concerns have persisted about PRC assistance to Pakistan's nuclear facilities. As reported by Pakistani and PRC news sources in 1992, China began to build a nuclear power plant at Chashma and was suspected in 1994 of helping Pakistan to build an unsafeguarded, plutonium-producing reactor at Khushab, according to Nucleonics Week (June 19, 1997, and February 26, 1998). Operational since 2001, the Chashma reactor has IAEA safeguards but not full scope safeguards (Nucleonics Week, April 26, 2001; and IAEA, Annual Report 2001).

Referring specifically to Pakistan's efforts to acquire equipment, materials, and technology for its nuclear weapons program, the DCI's June 1997 Section 721 report for the last half of 1996 (after China's May 1996 pledge) stated that China was the "principal supplier." Then, on May 11 and 13, 1998, India conducted nuclear tests, citing China's nuclear ties to Pakistan, and Pakistan followed with nuclear tests on May 28 and 30, 1998. China, as Pakistan's principal military and nuclear supplier, failed to avert the tests and did not cut off nuclear aid, but condemned the tests at the U.N. The U.S. Arms Control and Disarmament Agency's annual report on arms control for 1998 stated that "there continued to be some contacts between Chinese entities and Pakistan's unsafeguarded and nuclear weapons program."

In 2000, news reports said that some former U.S. nonproliferation and intelligence officials suspected that China provided equipment for Pakistan's secret heavy water production plant at Khushab, where an unsafeguarded reactor reportedly started up in April 1998 and generated weapons-grade plutonium. Clinton Administration officials at the White House and State Department reportedly denied China's involvement but said that they did not know the origins of the plant. (1) The DCI reported in November 2003 that, in the first half of 2003, continued contacts between PRC entities and "entities associated with Pakistan's nuclear weapons program" cannot be ruled out, despite the PRC's 1996 promise not to assist unsafeguarded nuclear facilities. The Director of the Defense Intelligence Agency (DIA), Vice Admiral Lowell Jacoby, testified to the Senate Intelligence Committee on February 24, 2004, that PRC entities "remain involved with nuclear and missile programs in Pakistan and Iran," while "in some cases," the entities were involved without the government's knowledge, thus implying that there were cases in which the PRC government had knowledge of the relationships.

On May 5, 2004, China signed a contract to build a second nuclear power reactor (Chashma-2) in Pakistan. This contract raised questions because of continuing PRC nuclear cooperation with Pakistan and its signing right before a decision by the Nuclear Suppliers Group (NSG) on China's membership, applied with U.S. support. With a pre-existing contract, Chashma-2 was exempted from the NSG's requirement for full-scope safeguards (not just IAEA safeguards on the reactor). (2) (See "Nonproliferation Regimes (MTCR, NSG, etc.)" below for policy discussion.)

After China's grandfathering of the Chashma-2 reactor under a pre-existing contract, the United States and other countries monitored China's subsequent agreement in October 2008 to build two more nuclear reactors in Pakistan for compliance with the NSG's rules, unless there would be an exemption (like that for India in 2008). In February 2010, China tentatively agreed to finance construction of two more reactors (Chashma-3 and Chashma-4), and the next month, Pakistan's government approved the deal in which the PRC promised a loan for the projects. In June, PRC companies reportedly promised to build the reactors. (3) The PRC acknowledged the deal and contended that the reactors would be subject to IAEA safeguards. However, when President Obama met with PRC leader Hu Jintao and hosted the Nuclear Security Summit in Washington on April 12 and 13, 2010, briefings did not mention discussion of this dispute involving China and Pakistan. Later, Assistant Secretary of State for South and Central Asian Affairs Robert Blake said in Beijing on May 4 that China's deal would require it to seek an exception to the NSG's guidelines. Acting Assistant Secretary of State for International Security and Nonproliferation Vann Van Diepen testified that the Administration decided to vote against an exemption for China, at a hearing on July 22 of the House Foreign Affairs Subcommittee on Terrorism, Nonproliferation, and Trade. On September 21, the PRC Foreign Ministry claimed that the 3rd and 4th reactors were "based on" the PRC-Pakistan agreement signed in 2003 and that China requested IAEA safeguards.

Relatedly, on December 21, 2010, PPG Paints Trading Company in Shanghai pled guilty in a U.S. court to illegally exporting high-performance coatings from the United States through the PRC to the Chashma-2 reactor in Pakistan from June 2006 to March 2007. Later, on June 16, 2011, authorities in Atlanta arrested Wang Xun, a PRC national and U.S. resident. On November 16, the Commerce Department ordered sanctions against Wang. On December 3, 2012, the China Nuclear Industry Huaxing Construction Company of Nanjing pled guilty in a U.S. criminal case for illegal exports of high-performance epoxy coatings from the United States to the Chashma-2 reactor. The Section 721 Report for 2011 continued to report that PRC entities as associated with Pakistan's nuclear programs.

In another visit to Beijing on March 17-18, 2011, Assistant Secretary of State Blake reiterated the U.S. expectation for China to abide by the NSG's guidelines as committed by China when it became a member in 2004. He stated that construction of new nuclear reactors (e.g., Chashma-3 and Chashma-4) would be "inconsistent" with China's obligations to the NSG. Nonetheless, he balanced that criticism by also expressing support for Pakistan in meeting its energy needs.

However, the Carnegie Endowment argued in 2011 that two more reactors from China in six or more years would cover only 20% of Pakistan's electricity shortfall and that the design lacked modern safety standards. (4) When the Obama Administration held another Strategic and Economic Dialogue (S&ED) with the PRC on May 9-10, U.S. officials did not raise publicly this dispute. Pakistan inaugurated Chashma-2's operations on May 12, 2011. In 2013, China reportedly signed the formal agreement in February to build Chashma-3. China also expanded nuclear cooperation, reportedly promising to build two nuclear power reactors in Karachi with a loan for $6.5 billion. However, Prime Minister Nawaz Sharif still stressed Pakistan's energy shortages, in a visit to Shanghai in July, while Pakistan's nuclear power generated only 6% of electricity (in 2011). (5)

A. Q. Khan's Nuclear Network

China's past and persisting connections to Pakistan's nuclear program raised questions about whether China was involved in or had knowledge about the long-time efforts, publicly confirmed in early 2004, of Abdul Qadeer Khan, the former head of Pakistan's nuclear weapon program, in selling uranium enrichment technology to Iran, North Korea, and Libya. DCI George Tenet confirmed A.Q. Khan's network of nuclear trade in open testimony to the Senate Intelligence Committee on February 24, 2004.

China's ties to the network was a concern, particularly because China was an early recipient of the uranium enrichment technology using centrifuges that Khan had acquired in Europe. In return, in 1982, China gave Pakistan 15 tons of uranium hexafluoride gas for production of bomb-grade uranium, 50 kilograms of weapons-grade enriched uranium enough for two bombs, and a blue-print for a nuclear weapon that China already tested, according to Khan. (6)

Also, there were questions about whether China shared intelligence with the United States about Khan's nuclear technology transfers. With the troubling disclosures, China could have been more willing to cooperate on nonproliferation or could have been reluctant to confirm its involvement. A senior Pakistani diplomat was quoted as saying that, while in Beijing in 2002, PRC officials said they knew "A.Q. Khan was in China and bribing people, and they wanted him out." (7) Particularly troubling was the reported intelligence finding in early 2004 that Khan sold Libya a nuclear bomb design that he received from China in the early 1980s (in return for giving China his centrifuge technology), a design that China had already tested in 1966 and had developed as a compact nuclear bomb for delivery on a missile. (8) That finding raised the additional question of whether Khan also sold that bomb design to others, including Iran and North Korea. According to two former U.S. nuclear bomb designers, the PRC proliferated nuclear bomb technology to

Pakistan, including a test conducted in 1990 for Pakistan of its first nuclear bomb. (9) DCI Porter Goss testified in February 2005 that the Bush Administration continued to explore opportunities to learn about Khan's nuclear trade, adding that "getting to the end of that trail is extremely important for us. It is a serious proliferation question." (10) In his memoir of 2007, George Tenet wrote that Khan's broad international network included China, North Korea, and--vaguely--"the Muslim world." (11) Finally, on January 12, 2009, the State Department imposed sanctions on 13 people and three companies for involvement in A.Q. Khan's network that proliferated nuclear technology to Iran, Libya, and North Korea. But the State Department did not name China among a number of countries that cooperated to investigate and shut down that proliferation network.

Missile Technology Sales to Pakistan


From the early 1990s to 2000, the George H. W. Bush and Clinton Administrations faced the issue of whether to impose sanctions on PRC "entities" Moreover, China's own for transferring M-11 short-range ballistic missiles or related technology to Pakistan. The Clinton Administration took eight years to determine in 2000 that PRC entities had transferred complete M-11 missiles as well as technology to Pakistan, but waived sanctions in return for another missile nonproliferation pledge from Beijing. However, despite that promise of November 2000, the United States has continued concerns about PRC technology transfers that have helped Pakistan to build domestic missile programs, including development of medium-range ballistic missiles. In September 2001, the George W. Bush Administration imposed sanctions for PRC proliferation of missile technology to Pakistan, denying satellite exports to China. While China promised not to transfer missiles, it has reportedly helped Pakistan to achieve an indigenous missile capability.

Despite the PRC's November 2000 missile nonproliferation pledge, in the first several months of 2001, a PRC company reportedly delivered 12 shipments of missile components to Pakistan's Shaheen-1 SRBM and Shaheen-2 MRBM programs, according to the Washington Times (August 6, 2001). On September 1, 2001, the State Department imposed sanctions on China Metallurgical Equipment Corporation (CMEC) for proliferation of missile technology (Category II items of the MTCR) to Pakistan. In November 2004, the DCI told Congress in a Section 721 report that, in the second half of 2003, PRC entities helped Pakistan to advance toward serial production of solid-fuel SRBMs (previously identified as the Shaheen-1, Abdali, and Ghaznavi) and supported Pakistan's development of solid-fuel MRBMs (previously noted as the Shaheen-2 MRBM). The DNI's Section 721 Report for 2011 reported that PRC entities continued to supply missile-related items to Pakistan. Though that report stressed that they were "primarily" private entities, entities could include state-owned organizations. The report also stressed entities, not the regime.

Nuclear Technology Sales to Iran

Overview and Policy Approaches

In the mid-1990s, the Clinton Administration urged China to cancel ostensibly civilian nuclear projects in Iran. In negotiations leading up to the 1997 U.S.-PRC summit, China pledged to end nuclear cooperation with Iran. At the summit, President Clinton promised to implement the 1985 U.S.-PRC nuclear cooperation agreement (to sell nuclear power reactors to China). However, the United States was concerned about whether China abided by its October 1997 promise. With revelations in 2002 about Iran's uranium enrichment program, the Bush Administration in 2004 sought PRC support for sanctions imposed by the U.N. Security Council (UNSC), where the PRC has power to vote in favor, abstain, or veto. The PRC's position has evolved to support some sanctions but not use of force. The PRC voted for UNSC Resolutions 1737 (2006), 1747 (2007), 1803 (2008), and 1929 (2010) to impose sanctions on Iran. However, the PRC also has invested in and traded with Iran's oil and gas energy sector.

As complementary or alternative approaches, some have viewed China's cooperation in pressuring Iran as necessarily for a working U.S.-PRC relationship, especially through the use of summits. Others have focused attention on sanctions to target Iran's energy-related investments, industries, and imports. An alternative would be to prevent transfers of Western technology to Iran for developing its oil and gas industries. Diplomatic impasses have raised the burden on China's preferred dialogue to produce results in support of nonproliferation and stability in the Middle East. China likely fears greater instability or conflict in the Mideast, the source of about 50% of China's oil imports. China has tried to maintain a balanced position in support of Iran and U.S./European Union concerns, but also has evolved to support negotiations, the IAEA's authority in Iran, as well as some UNSC sanctions on Iran. Meanwhile, China pressed the United States to talk directly with Iran. After the United States shifted to hold direct dialogue with Iran without resulting in resolution of the dispute, the burden became greater on China to place a higher priority on nonproliferation than business as usual (including energy deals), by pressuring Iran or showing results of dialogue. Another approach has looked at options to alleviate China's dependence on Iranian oil through imports from other countries. Reportedly, in 2009, the Obama Administration discussed with Saudi Arabia and United Arab Emirates (UAE) about raising their supplies of oil to meet China's need, but China refused an explicit deal. Yet another option would increase China's access to investments in U.S. or other Western energy projects. (12) Still, others have viewed multilateral approaches as more critical in dealing with Beijing. More significant Russian nuclear cooperation with Iran has offered China maneuvering room in diplomacy. However, any closer Russian alignment with the United States and European countries would increase China's isolation at the UNSC. In addition to the three tracks supported by China (involving dialogue with Iran, the IAEA, and some UNSC sanctions), the United States, European and Asian allies, and Israel have options of sanctions separate from those imposed by the UNSC and the use of force (that would not require China's vote). Also, Congress and the Administration could urge allies and partners to suspend trade in Iran's oil and gasoline.

In the February 2001 Section 721 Report (on the first half of 2000), the DCI dropped an earlier observation that the 1997 pledge appeared to be holding. In testimony before the Senate Governmental Affairs Subcommittee on International Security, Proliferation, and Federal Services on June 6, 2002, Assistant Secretary of State John Wolf stated concerns about possible PRC-Iranian interactions "despite China's 1997 pledge to end its nuclear cooperation with Iran."

Uranium Enrichment

In 2002, an Iranian opposition group revealed that Iranian front companies procured materials from China (and other countries) for secret nuclear weapons facilities, while experts from China worked at a uranium mine at Saghand and a centrifuge facility (for uranium enrichment) near Isfahan, reported the Washington Post (December 19, 2002, and February 20, 2003). Moreover, Nucleonics Week (February 27 and March 6, 2003) reported that Iran, since 2000, was building a secret uranium enrichment plant at Natanz with technology for gas centrifuge enrichment from Pakistan (Khan Research Laboratories), a country that has received nuclear cooperation from China. Also, the IAEA found out in 2003 that, in 1991, China supplied Iran with 1.8 metric tons of natural uranium, reported Nucleonics Week (June 12, 2003). The head of the Iranian Atomic Organization reported an Iranian-PRC contract to extract uranium ore in Yazd. (13) The DCI's Section 721 Report (issued in November 2004) confirmed that the Iranian opposition group, "beginning in August of 2002, revealed several previously undisclosed Iranian nuclear facilities."

Testifying to Congress on February 11, 2003, DCI George Tenet pointed to China's "firms" (rather than the government) and warned that they "may be backing away from Beijing's 1997 bilateral commitment to forego any new nuclear cooperation with Iran." The DCI's Section 721 Report of November 2003 reported that "some interactions of concern" between PRC and Iranian entities continued in the first half of 2003. The Director of the Defense Intelligence Agency, Vice Admiral Lowell Jacoby, testified to the Senate Intelligence Committee on February 24, 2004, that PRC entities "remain involved with nuclear and missile programs in Pakistan and Iran, while, "in some cases," the entities are involved without the PRC government's knowledge. Then, in April 2004, the Administration imposed sanctions under the Iran Nonproliferation Act. Assistant Secretary of State John Wolf testified to the House International Relations Committee on May 18, 2004, that "most" of the sanctions related to non-nuclear transfers, but there were concerns in the nuclear area as well.

In May 2006, diplomatic sources revealed that Iran had used uranium hexafluoride gas (UF6) from China to accelerate Iran's uranium enrichment program. An Iranian news agency acknowledged that hexafluoride from China was used in initial uranium enrichment, after which domestic supplies were applied. (14)

China's companies reportedly have helped Iran to procure nuclear-related hardware. In 2007, a PRC company in Dalian supplied Iran with sensitive materials for its nuclear program, including graphite, tungsten copper, tungsten powder, and high-strength aluminum alloys and maraging steel. In March 2009, the Shanghai-based Roc-Master Manufacture and Supply Company ordered 108 pressure gauges that could be used in centrifuges to enrich uranium for transfer to Iran from an agent in Taiwan (Heli-Ocean Technology Company) for Inficon Holding, the manufacturer in Switzerland. In 2010, under an IAEA investigation, China's Zhejiang Ouhai Trade Corporation, a subsidiary of Jinzhou Group, supplied to Iran sensitive valves and vacuum gauges useful for uranium enrichment and made by KD Valves-Descote in France. The reported recipient in Iran was Javedan Mehr Toos, a firm procuring nuclear-related items for Kalaye Electric Company that is part of the Atomic Energy Organization of Iran. The French firm denied selling its sensitive products to China, and the PRC company denied the story. (15) On June 16, 2010, the Department of the Treasury imposed sanctions on Javedan Mehr Toos among Iran's entities, individuals, and ships subject to U.S. sanctions under Executive Order 13382 for WMD proliferation.

Dual Approach and Energy-related Oil and Gas Deals

Since 2004, the United States has sought China's cooperation (with its veto power) at the IAEA and U.N. to achieve the U.S. and European objective of containing Iran's suspected nuclear weapon program by having the IAEA refer Iran's case to the UNSC for sanctions in response to Iran's suspected violation of the NPT. The talks are called P5+1 referring to the five permanent members of the UNSC plus Germany, or E3+3, referring to the three European Union countries of Britain, France, and Germany plus the United States, Russia, and China. While it might share U.S. concerns about nuclear nonproliferation, China has expressed reservations about sanctions and the credibility of some U.S. intelligence. Moreover, China's own "entities" have supplied sensitive technology to Iran. Beijing has interests in raising its leverage vis-a-vis Washington, including to check U.S. dominance and support for Taiwan.

Meanwhile, China has a competing priority of economic ties with Iran to fuel economic growth partly with global investments, and China generally opposes sanctions that target energy deals. There are concerns that China's economic interests and influence in Iran, including multi-billion-dollar oil and gas deals, could undermine U.S., European, and Asian pressure on and isolation of Iran, and that China could capitalize on other countries' sanctions by filling in situations where U.S., European, and Asian companies pull back from investments in or supplies to Iran. The PRC has not announced formal unilateral sanctions on Iran's energy sector or support for those of other countries. Any PRC exploitation of sanctions for gains could unravel international solidarity.

Oil. PRC companies, such as Sinopec and Zhuhai Zhenrong Corporation, reportedly have imported crude oil from Iran. In early 2012, as other countries reduced trade with Iran, China's companies like SINOPEC reportedly used their increased leverage and cut oil imports from Iran. However, the cut was due to commercial negotiations over prices and payment terms. China also increased oil imports from other countries, showing it could diversify away from Iranian oil if willing to do so. When PRC Premier Wen Jiabao visited Saudi Arabia in January 2012, its officials reportedly raised concerns about Iran and offered to expand oil supplies to China. By the end of 2011, China imported about 555,000 barrels per day (bpd) of Iranian crude oil. The PRC's import of crude oil from Iran dropped by 21% from 2011 to 2012, back to a level slightly above that in 2010. Iran was the fourth-largest foreign supplier of crude oil to China (after Saudi Arabia, Angola, and Russia). Iranian oil accounted for 8% of China's oil imports. In January-October 2013, China's import of Iranian crude oil dropped 3% from last year's same period. However, while China has cut its import of crude oil from Iran, China has increased significantly its import of fuel oil from Iran, using a loophole in sanctions and giving Iran some important revenue. (16)

Investments. PRC state-owned companies like Sinopec and China National Petroleum Corporation (CNPC) have invested significantly in Iran's oil and gas sector. China's companies reportedly promised investments totaling about $55 billion in Iran's energy industries by the end of 2009. However, committed funds would be difficult to confirm. Moreover, progress has depended on acquiring gas liquefaction technology that China has lacked. CNPC's Huanqiu Contracting and Engineering Corporation planned to build a natural gas liquefaction plant by 2016. In November 2010, China's ENN Energy Trading Company signed a deal with a U.S. company, Cheniere Energy Partners, to export U.S. liquefied natural gas (LNG) to China. Starting in 2007 or 2009, hackers based in China reportedly conducted a cyberespionage campaign, that McAfee called Night Dragon, to target major Western energy companies. (17)

The PRC's investments include the following significant projects. In October 2004, China and Iran signed a memorandum of understanding to develop Iran's Yadavaran oil field in a project initially worth $70 billion. Amid ongoing negotiations between China's Sinopec and Iran, this potential venture was valued at up to $100 billion in early 2006. In December 2007, Sinopec signed the contract to invest about $2 billion to develop the Yadavaran oil field, and the State Department responded that it was deeply disappointed and disturbed at this deal. In addition to Sinopec, the China National Offshore Oil Corporation (CNOOC) and an Iranian company signed a memorandum of understanding in December 2006 involving an investment from China worth $16 billion to produce LNG at the North Pars gas field. With a delay in further commitment, CNOOC reportedly signed the contract in May 2009. In January 2007, CNPC announced an investment of $3.6 billion to develop Phase 14 at Iran's South Pars gas field. (In 2007, Royal Dutch Shell (headquartered in the Netherlands) and Repsol (based in Spain) considered a deal to develop Phases 13 and 14 at South Pars. In June 2010, the two European companies withdrew from the project and committed to the United States not to hold further talks with Iran. At that time, the Iranian Revolutionary Guard Corps reportedly got involved in those two phases among others at South Pars.) In the presence of the PRC ambassador, CNPC also signed a contract worth $1.8 billion in January 2009 to develop Iran's North Azadegan oil field, and the PRC Foreign Ministry called the deal "normal energy cooperation." In March 2009, China's HuaFu Engineering Company signed a contract apparently to invest $3.2 billion to produce LNG at Phase 12 of the South Pars gas field. Then in June, CNPC signed a contract worth $4.7 billion to develop Phase 11 of South Pars, reportedly replacing Total of France. In August 2009, a state-owned insurance company, likely Sinosure, reportedly indicated an investment of $11.3 billion in Iran's oil refineries. China's Sinopec reportedly agreed in a memorandum of understanding in November 2009 to invest $6.5 billion in Iran's refineries to reduce its dependence on imported gasoline. Japan had concerns about China taking over an investment in the South Azadegan oilfield, with reports that China National Petroleum Corporation International (CNPCI) gained 70% share in September 2009 after Japan's Inpex company reduced its stake from 75% in 2004 to 10% in 2006. Since 2009, CNPC reportedly has considered an investment of most or all of $2.5 billion. Inpex decided in September 2010 to withdraw from South Azadegan. (18)

Gasoline. Regarding China's gasoline supplies, Zhuhai Zhenrong (and possibly others) reportedly started in 2008 to sell gasoline through intermediaries to Iran, supplying one-third of its imports by September 2009. Further, in early 2010, a PRC state-owned company, Chinaoil, sent two shipments of gasoline in the company's first direct exports to Iran since January 2009, and Sinopec also planned to sell gasoline to Iran. In August 2010, China's Zhuhai Zhenrong in partnership with Russia's LUKOIL exported gasoline to Iran. (Lukoil re-committed the next month to cease gasoline exports to Iran.) By then, PRC supplies of gasoline to Iran reached about one-half of its imports. Zhuhai Zhenrong is a state-owned trading enterprise, set up in 1994 not only by the PRC's State Council (like a Cabinet) but also the Central Military Commission (high command of the People's Liberation Army). The firm has worked with Iran's Ministries of Defense and Oil. Another PRC state-owned enterprise, ZhenHua Oil, reportedly started to supply gasoline to Iran in 2009, providing up to one-third of Iran's imports by early 2010. ZhenHua Oil was set up in 2003 as a subsidiary of China North Industries Corporation (NORINCO), a defense industrial conglomerate which has faced U.S. sanctions (see Table 1 at the end of this report). In early 2012, China's state-owned companies reportedly continued to ship gasoline to Iran. (19)

Since 2010, concerns increased about enforcement of U.S. sanctions against PRC companies, after enactment of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) of 2010 as P.L. 111-195 on July 1, 2010, following UNSC Resolution 1929 of June. China did not replace India in the original proposal for an Iran-Pakistan-India gas pipeline, when the agreement was reached in June 2010 for the Iran-Pakistan pipeline. By March 2012, the Industrial and Commercial Bank of China (ICBC) reportedly backed out of arranging finances. (20) Still, China's companies could become contractors in the project, which started in March 2013.

However, in addition to the United States, Canada, Australia, the European Union, Japan, and South Korea imposed sanctions on Iran, and they have concerns about China's exploitation of their sanctions that restrain investments in Iran. At a press conference on August 4, 2010, the State Department's Special Advisor for Nonproliferation and Arms Control Robert Einhorn acknowledged U.S. concerns that China's companies would benefit from sanctions by taking over deals abandoned by other foreign companies in support of U.S. and other sanctions against Iran's energy sector, unilateral sanctions opposed by China for "expanding" UNSC sanctions. Einhorn said that the Obama Administration urged China to act as a "responsible stakeholder." Two days later in Beijing, PRC Vice Premier Li Keqiang met with Iran's Oil Minister, but Li discussed "existing" projects, with no reported PRC commitment to new deals. In September 2010, Einhorn then went to Beijing with a "significant list" of PRC companies and banks that were suspected of violating U.N. sanctions, with or without the PRC government's approval of deals that occurred before and after June 2010. Einhorn also urged the PRC's oil companies, such as CNPC, to stop or limit investments in Iran, at least temporarily. At the end of September, the State Department issued a "fact sheet" to commend a number of foreign energy firms for stopping activities in Iran but was not able to name any PRC energy companies. (A shipping company in Hong Kong, NYK Line, stopped trading with Iran.) Also, the State Department confirmed on October 18 that it provided information to China about "specific concerns" about some PRC "companies," and that the PRC promised to investigate the cases. However, the PRC Foreign Ministry said the next day that it was following "the letter" of UNSC resolutions, with no mention of sanctions on Iran's energy sector or of any PRC investigations into PRC entities.

Still, by that month, the PRC government reportedly issued informal orders to its companies to slow down their work in Iran's energy projects. Apparently, CNPC suspended work at the South Azadegan oil field, the project that raised Japan's concern (as discussed above). Iran seemed to have concerns about the pace of implementation of PRC investments, when Iran's Minister of Economic Affairs and Finance announced in Beijing in April 2011 an Iran-China "oil and gas committee." The PRC government, in late 2010, reportedly told CNOOC to suspend the project at North Pars, and CNOOC withdrew its team. Sinopec delayed the start of the project at Yadavaran. On June 17, the National Iranian Oil Company threatened CNPC with domestic replacements if it continued to delay the development of Phase 11 of South Pars (after CNPC replaced Total), and CNPC reportedly spent just $18 million in the project by August 2011. Repeatedly in 2012, Iran's oil minister warned CNPC that it risked the contract's cancellation if it did not start work. (21)

As for the PRC's direct actions on U.S. information about PRC companies, Under Secretary of State William Burns testified to House Foreign Affairs Committee on December 1, 2010, that the Obama Administration took seriously all information about PRC companies and provided that information to the PRC. He acknowledged that "in some cases," the PRC acted on the information, but "the record is a mixed one," and the Administration continued to raise concerns. On the eve of top PRC ruler Hu Jintao's state visit in Washington, Secretary of State Hillary Clinton told ABC on January 18, 2011, that some PRC entities were still not "as in compliance" with sanctions on Iran as the United States expected, with the PRC responding that it enforced only sanctions under UNSC resolutions. She said that the United States conveyed its expectation that Beijing implement all other sanctions on Iran. Moreover, Secretary Clinton testified to the House Foreign Affairs Committee on March 1 that China did not perceive a threat from Iran. She described the U.S. challenge in a "constant, committed, and determined" daily effort to keep China's adherence even to sanctions to which it already agreed. She named five foreign firms that withdrew from energy investments in Iran (Shell, Statoil, ENI, Total, and Inpex), but she could not name any that belonged to the PRC.

Some Members in Congress raised the issue of whether the Administration would apply CISADA sanctions to PRC firms. On the eve of a PRC leader Hu Jintao's state visit, Senators Joseph Lieberman and Mark Kirk wrote a letter to President Obama on January 14, 2011, urging him to warn Hu that the United States will be forced to sanction PRC companies if they do not suspend business ties with Iran. On March 10, 10 Senators led by Senators Jon Kyl and Robert Menendez wrote to Secretary of State Clinton, stating that it appeared that PRC firms conducted significant activity in violation of U.S. law. They added that, "we cannot afford to create the impression that China will be given a free rein to conduct economic activity in Iran when more responsible nations have chosen to follow the course that we have asked of them." (22)

Among companies in the PRC, a Hong Kong shipping company, NYK Line, first announced a stop to trade with Iran, according to the State Department's statement of May 24, 2011. Concerning sanctions under the UNSC and CISADA, Under Secretary of the Treasury for Terrorism and Financial Intelligence David Cohen traveled to Hong Kong and Beijing on September 26-28, to seek cooperation to prevent Iran from using the global financial system for its nuclear and missile programs and to stress the risk of doing business with the Islamic Republic of Iran Shipping Lines (IRISL). Cohen warned four PRC banks (Bank of China, China Construction Bank, Industrial and Commercial Bank of China, and the Agricultural Bank of China) that accepting payments from an Iranian insurer (Moallem) would cut them off from the U.S. banking system, according to AFP. However, the PRC Foreign Ministry's spokesman asserted that the PRC implements UNSC resolutions and has "normal business" with Iran, without referring to CISADA, banking, energy, or shipping. Waigaoqiao Shipbuilding reportedly has built oil tankers for the National Iranian Tanker Company. In July 2013, China Shipping Container Lines (CSCL) and COSCO Container Lines reportedly stopped business with Iran.

President Obama issued Executive Order 13590 on November 21, 2011, that, inter alia, imposed sanctions on Iran's petrochemical industry and expanded sanctions against the provision of goods, services, and technology to Iran's oil and gas business. Enacted on December 31, 2011, the National Defense Authorization Act (NDAA) for FY2012, P.L. 112-81, contained Section 1245 to impose sanctions on Iran's financial sector. Secretary of the Treasury Timothy Geithner then visited Beijing on January 10-11, 2012, but apparently did not reach agreement.

Sanctions. The next day, the State Department imposed the first sanctions under CISADA against China (on Zhuhai Zhenrong for supplying gasoline), though likely with limited effects. The PRC has maintained its opposition to "unilateral" sanctions against Iran and that it has "normal" economic ties with Iran separate from the nuclear program that do not violate UNSC resolutions. However, other countries have joined the United States in cutting business with Iran's energy sector, and in June 2010, China voted for UNSC Resolution 1929 (see below) which noted the link between Iran's revenues derived from its energy sector and funding of nuclear activities. On June 28, 2012, the Secretary of State stated that China "significantly reduced" oil imports from Iran and that the sanctions under P.L. 112-81 would not apply to PRC financial institutions for a potentially renewable period of 180 days. As discussed above, China cut such oil imports for its commercial interests and energy security. At the end of July, the Treasury Department imposed sanctions under CISADA (cutting off from the U.S. financial system) on CNPC's Bank of Kunlun in the PRC for continuing to handle significant international transactions for Iran's banks. The State Department denied the action was taken against China and insisted that Washington and Beijing were "on the same page," but the PRC Foreign Ministry strongly called for revocation of what it called erroneous, unwarranted sanctions that harmed the PRC's interests. (The Bank of Kunlun reportedly held $22 billion in payments for Iran's oil by November 2013, when Iran agreed on a deal with the E3+3 on its nuclear program. (23)) On December 7, 2012, June 5, 2013, and November 29, 2013, the Secretary of State again asserted that China (and other countries) reduced crude oil imports from Iran and that sanctions under P.L. 112-81 would not apply.

Congress passed the Iran Threat Reduction and Syria Human Rights Act of 2012 (P.L. 112-158). The law authorized further sanctions against additional forms of foreign energy dealings with Iran, including shipments of crude oil. Congress passed more sanctions in Section 1241 of the NDAA for FY2013 (P.L. 112-239), covering precious metals, currencies, ports, energy, shipping, and shipbuilding. (See also CRS Report RS20871, Iran Sanctions, by Kenneth Katzman.)

UNSC Resolutions and Sanctions

Under U.S. and other foreign pressure, China has evolved to vote for some sanctions at the UNSC. On November 5, 2004, China's Foreign Minister Li Zhaoxing talked with Secretary of State Colin Powell, arguing that the dispute over Iran's nuclear program should remain under the IAEA's handling. On the next day, Li arrived in Tehran and opposed referral of Iran's case to the UNSC. (24) Then, at a meeting on the sideline of a U.N. summit in New York on September 13, 2005, President Bush tried to persuade PRC ruler Hu Jintao not to block the IAEA from referring Iran's case to the UNSC. Before the meeting, the Administration briefed China on U.S. classified intelligence about Iran's development of the Shahab-3 missile that could deliver a nuclear warhead. China (and others) abstained when the IAEA passed a resolution on September 24, 2005, declaring that Iran was not complying with the NPT, and the PRC envoy in Vienna continued to call for dealing with Iran at the IAEA. (25) In Beijing in November 2005, President Bush said that he had to repeat to Hu the need to stop Iran from developing nuclear weapons. (26)

The situation escalated on January 10, 2006, when Iran resumed work on uranium enrichment, after allowing IAEA inspectors to place seals on equipment at an enrichment plant at Natanz and starting negotiations with Britain, France, and Germany two years before. Deputy Secretary of State Robert Zoellick visited Beijing January 24-25, 2006, to stress the importance of the Iran problem, continue the "Senior Dialogue" over the PRC's role as a "responsible stakeholder," and discuss a summit on April 20 between PRC leader Hu Jintao and President Bush in Washington. At a news conference in Beijing on January 24, Zoellick acknowledged differences with China over "diplomatic tactics." At a special meeting in London on January 30, China, France, Germany, Russia, United Kingdom, and United States announced their agreement to "report" (rather than "refer") Iran's case to the UNSC at the special IAEA meeting in early February but to wait until March to decide at the Security Council on any actions to support the IAEA (without mentioning sanctions). (27) Still, on February 4, China was one of 27 countries that voted at the IAEA to support a resolution to report Iran to the UNSC, showing some progress in China's cooperation since it abstained on a resolution on Iran in September 2005.

When the IAEA sent a report on Iran to the UNSC on March 8, 2006, saying that it could not conclude that there were no undeclared nuclear materials or activities in Iran, China continued to be less critical of Iran and to favor the handling of this issue at the IAEA rather than the UNSC. On March 29, 2006, after weeks of negotiations, the Security Council issued a statement through its president, calling on Iran to suspend all nuclear enrichment and reprocessing activities to be verified by the IAEA and requesting an IAEA report in 30 days to the IAEA Board of Governors "and in parallel" to the Security Council, with no mention of sanctions. The Administration called for a UNSC resolution that invoked Chapter VII of the U.N. Charter (for sanctions or force), but the PRC argued against such action despite the IAEA's April 28 report on Iran's non-compliance.

On May 31, 2006, Secretary of State Rice announced U.S. support for a new approach to offer a package of incentives and costs for Iran's compliance, agreed by China and others on June 1. However, to U.S. displeasure, on June 16, the PRC hosted a summit of the Shanghai Cooperation Organization (SCO), at which Iran attended as an observer. PRC President Hu Jintao balanced his remarks to Iranian President Ahmadinejad by saying that Iran had a right to nuclear energy and calling for its response to the offer. But with no Iranian response, on July 12, China and the other five countries issued a statement agreeing to a two-stage approach: to seek a UNSC resolution to make it mandatory for Iran to suspend nuclear enrichment as required by the IAEA; and if Iran refused, to adopt measures under Article 41 (for sanctions, not use of force) of Chapter VII.

After Iran announced that it would respond on August 22, 2006, China voted on July 31 with other members of the UNSC (except Qatar) for Resolution 1696, demanding that Iran suspend nuclear enrichment; calling upon countries to prevent technology transfers to Iran's nuclear enrichment and missile programs; requesting an IAEA report on Iran's compliance by August 31; and warning of sanctions if Iran does not comply. After negotiations over Russian and PRC objections to the first U.S. and European draft resolution on sanctions, China voted with all other Security Council members for Resolution 1737 on December 23, 2006, which invoked Article 41 of Chapter VII to require Iran to suspend nuclear enrichment and reprocessing activities, and heavy water-related projects. On January 5, 2007, in Beijing, PRC President Hu Jintao stressed the "unanimous" adoption of Resolution 1737 to visiting Iranian nuclear official Ali Larijani. After negotiations on additional sanctions on Iran (during which China and Russia objected to a ban on Iran's arms imports and export credit guarantees for doing business in Iran), (28) China voted with all other members of the UNSC for Resolution 1747, adopted unanimously on March 24, 2007. Citing Article 41 of Chapter VII, the resolution banned Iran's arms exports.

However, the United States raised the problem with China of its violation of UNSC Resolutions 1737 and 1747. In particular, U.S. officials reportedly said in July 2007 that earlier in the year, a PRC "entity" (probably one under U.S. sanctions) tried to ship a large amount of chemicals used to make solid fuel for ballistic missiles. Cooperating with U.S. intelligence, Singapore intercepted the container from China on its way to the Shahid Bagheri Industrial Group in Iran. (29) This Iranian organization was listed in the Annex of UNSC Resolution 1737, but sanctions for entities or people in the Annex involved restricting travel and freezing financial assets. Still, Resolution 1737 decided that all States take the necessary measures to prevent transfers directly or indirectly from their territories that could contribute to Iran's development of nuclear weapon delivery systems. Resolution 1747 called for restraint in transfers related to arms and missiles to Iran.

After the IAEA reported on May 23, 2007, that Iran continued nuclear enrichment activities, the Bush Administration called for a third UNSC resolution with tougher sanctions on Iran. (30) On September 28, China joined with the United States, France, Germany, Russia, and United Kingdom in issuing a foreign ministers' statement in support of negotiations, the IAEA, as well as a third UNSC resolution with sanctions. However, on October 17, China refused to attend a meeting in Berlin on Iran's nuclear program, citing "technical" difficulties. China apparently tried to make a linkage to an unrelated matter. U.S. officials said China showed displeasure over that day's award in the U.S. Capitol of the Congressional Gold Medal to Tibet's Dalai Lama.

Even as the UNSC expected the IAEA's report and PRC Foreign Minister Yang Jiechi visited Tehran on November 13, China's Foreign Ministry spokesman criticized sanctions as being of "no help." Two days later, Under Secretary of State Nicholas Burns expressed concerns about China's increasing civilian and military trade with Iran and called on China to agree to have the next meeting on sanctions and "take a much more resolute role." (31) China again did not attend a meeting scheduled for Brussels on November 19, citing "scheduling reasons."

On December 3, 2007, the United States issued a new National Intelligence Estimate (NIE) on Iran's nuclear capabilities, finding that, in the fall of 2003, Iran had halted its nuclear weapons program but in January 2006, resumed its declared uranium enrichment activities. In response, the PRC's ambassador at the U.N. claimed that the situation for imposing more sanctions changed. (Later, in the Section 721 Report to Congress for 2009, U.S. intelligence reported an assessment that Iran kept open the option to develop nuclear weapons without knowing whether Iran eventually will decide to produce nuclear weapons. Also, Iran continued uranium enrichment.)

Nonetheless, in January 2008, China's shifted to support a third sanctions resolution at the UNSC, upon talks with Deputy Secretary of State John Negroponte who visited China for the bilateral Senior Dialogue and argued for another UNSC resolution because of Iran's violation of the previously passed resolutions. Foreign Minister Yang Jiechi attended a six-nation meeting on sanctions at Berlin on January 22, 2008. However, Yang reportedly agreed to a draft UNSC resolution only with compromise language that excluded new sanctions on freezing the assets of Iranian banks and military units, and on Iran's arms imports.

Based on the compromise in January, the U.N. Security Council passed (with Indonesia abstaining) Resolution 1803 on March 3, 2008. This third UNSC sanctions resolution called for travel restrictions and bans; bans on dual-use nuclear trade; "vigilance" in export credits and financial transactions with Iranian banks; and cargo inspections. At the same time, China stressed that the sanctions would not affect its "normal" business with Iran and called for negotiations.

While the United States and other countries sought a fourth set of UNSC sanctions on Iran, top PRC leader Hu Jintao met with Iranian President Mahmoud Ahmadinejad in Beijing on September 6, 2008, and expressed respect for Iran's right to peaceful use of nuclear energy as well as support for the nuclear non-proliferation regime. China raised another concern when it tried to link the six-nation diplomacy on Iran's nuclear program to U.S. arms sales to Taiwan. After the Bush Administration notified Congress on October 3 of proposed arms sales to Taiwan, the PRC blocked U.S. efforts to set up a conference call among the six countries to discuss Iran. (32) But later, on February 4, 2009, PRC Assistant Foreign Minister Liu Jieyi showed up at a sixnation (E3+3) meeting in Wiesbaden, Germany, to discuss Iran's nuclear program.

In April 2009, the Obama Administration shifted policy to participate regularly in E3+3 talks with Iran. At the same time, some observers in the EU reported that "because of a lack of any real leverage over China on the issue [of Iran's nuclear program], other than pointing to the threat of U.S. or Israeli attack on Iranian nuclear sites, the EU has been unable to persuade China to back tougher sanctions." They also pointed out that China actually shielded Iran from tougher sanctions and reinforced its economic influence in Iran. (33)

The Obama Administration also sought to "reset" the relationship with Russia for closer cooperation, which seemed to increase the isolation of China on the issue of whether to apply greater multilateral pressure on Iran. After Iran disclosed to the IAEA in September 2009 what was a second, secret uranium enrichment plant at Qom, Russia proposed that Iran send enriched uranium to Russia for processing for use in a research reactor. Russian President Dmitry Medvedev also discussed possible sanctions. (In 1995, Russia and Iran signed a contract for a Russian-built nuclear reactor at Bushehr in Iran. In 2005, Russia proposed that Iran transfer nuclear material from the Russian-built nuclear plant to Russia and to conduct nuclear enrichment at a facility in Russia. On November 16, 2009, Russia's Energy Minister indicated that the reactor would not start operations in 2009 due to "technical" reasons, but the announcement came one day after Presidents Barack Obama and Medvedev expressed concerns in a meeting in Singapore about Iran's uranium enrichment program.) (34) In February 2010, Russia joined France and the United States in criticizing Iran when it announced a plan to enrich uranium to 20% U-235, developments that further increased pressure on the PRC to sanction Iran.

A week after President Obama's summit in Beijing on November 17, 2009, at which he pressed China to cooperate in dealing with Iran, PRC Foreign Minister Yang Jiechi called Secretary of State Hillary Clinton. Prior to the summit, Administration officials had traveled to Beijing to warn that Israel regarded Iran's nuclear program an "existential" threat and could bomb Iran. The PRC told Clinton of its support for an IAEA resolution critical of Iran. The IAEA passed a resolution on November 27, censuring Iran's nuclear enrichment facility at Qom. Further, in February, April, and October 2010, Israel sent officials to China to urge its cooperation to sanction Iran. As discussed above, the Administration urged Saudi Arabia and the UAE to increase oil supplies to China to reduce its dependence on Iran's oil. Moreover, visiting the two countries

in March 2010 for talks that included sanctions against Iran, Defense Secretary Robert Gates confirmed that all the Persian Gulf states were worried about Iran's nuclear program and missile proliferation, and he asked the Saudi king to urge China to support UNSC sanctions against Iran. (35)

Thus, China faced increased international pressures to act on additional sanctions against Iran. Still, in diplomatic negotiations on another UNSC Resolution for a fourth set of sanctions, China reportedly opposed sanctions to target Iran's oil and gas industry. President Obama made some progress with PRC leader Hu Jintao when he attended the Nuclear Security Summit in Washington on April 12, 2010, and Hu used the word "sanctions" for work at the UNSC. (36)

On June 9, 2010, China voted for UNSC Resolution 1929 to impose sanctions against Iran. The resolution simply noted the potential connection between Iran's revenues derived from its energy sector and funding of Iran's nuclear activities. Among the sanctions, the resolution called on all countries to prevent the direct or indirect supply to Iran of certain major weapons. Later, in testimony to the House Foreign Affairs Committee on March 1, 2011, Secretary of State Clinton confirmed to Congress that China "went along" with the UNSC sanctions on Iran only "after much diplomatic effort and arm twisting."

As the United States and other nations imposed unilateral sanctions including ones that targeted Iran's energy sector, concerns increased that China could fill in gaps and exploit such sanctions (as discussed above). Days before Hu Jintao's state visit in Washington on January 19, 2011, the United States and EU discouraged China from joining Iran's invited tour of its nuclear sites, rather than IAEA inspections, and China implied that it declined to visit. Days later, on January 22, China was said to stay in solidarity with others in P5+1 talks with Iran. (37) The U.S.-PRC Joint Statement issued at that summit called for full implementation of UNSC Resolutions on Iran, but it did not refer to the other sanctions or oppose Iran's nuclear activities. Indeed, the statement noted positively Iran's right to peaceful uses of nuclear energy under the NPT. Moreover, State Department official Robert Einhorn in March criticized China for its mixed implementation of UNSC sanctions on Iran and said that Iran was suspected of getting nuclear-related items in China. Earlier the same month, Malaysia seized suspected cargo on a ship from China bound for Iran. Meanwhile, the U.N. also investigated Iran's attempt to acquire phosphor bronze from a company in China, though China cooperated in the seizure of the banned material in South Korea. Further, from October 2008 to January 2011, the manager of a company in China helped a citizen of Iran to procure U.S. materials that could be used in gas centrifuges to enrich uranium. (38)

On November 8, 2011, the IAEA reported in GOV/2011/65 about "possible military dimensions" to Iran's nuclear program and development of a "nuclear explosive device." The IAEA warned that, since 2002, it "has become increasingly concerned about the possible existence in Iran of undisclosed nuclear related activities involving military related organizations, including activities related to the development of a nuclear payload for a missile." With Russian resistance as cover, China urged the IAEA not to report the agency's evidence. Upon the release of the report, China responded that the IAEA should be "objective and just" and Iran should be flexible and sincere in "serious" cooperation with the IAEA. Though China voted on November 18 at the IAEA Board of Governors for a resolution of concern, it stopped short of reporting the matter to the UNSC.

Missile Technology Sales to Iran


During the Clinton Administration, PRC entities reportedly transferred equipment and technology to Iran's missile programs, including development of medium-range ballistic missiles. In November 2000, the Administration determined that PRC missile technology transfers took place but waived sanctions, citing a new PRC promise on missile nonproliferation. However, PRC entities reportedly continued missile-related proliferation activities in Iran. In contrast to the previous administration, the Bush Administration stressed the use of sanctions against PRC entities, including "serial proliferators."

Obama Administration

The Obama Administration has continued to impose sanctions. This record raised questions about the effectiveness of sanctions as well as the PRC's commitment and capability to control exports to Iran. (See Table 1 on sanctions.) In February and April 2009 and July 2010, the United States imposed sanctions on PRC entities and Li Fangwei for missile proliferation in Iran. The United States subsequently imposed repeated sanctions on such entities or individuals. Also, in July 2009, the State Department reportedly had concerns that Q.C. Chen (a PRC person previously sanctioned for weapons proliferation) arranged for the sale of a test chamber to Iran's Defense Industries Organization that could be useful for testing missile parts. The test chamber was made by Voetsch China (a PRC subsidiary of a German firm) and was not controlled by the MTCR. (39) In February 2011, the Section 721 Report for 2011 told Congress that PRC "entities" continued to supply missile-related items to Iran. The report also said that entities in the PRC (and Russia and North Korea) likely supplied key components for Iran's production of ballistic missiles.

North Korea's Missile and Nuclear Weapons Programs

Suspected Missile Supplies

Since 1998, there have been public reports about and U.S. government confirmation of PRC assistance to North Korea's missile program. There were questions about whether the PRC had interests in North Korea's missile advances. Lieutenant General Xiong Guangkai, a Deputy Chief of General Staff of the People's Liberation Army (PLA), visited North Korea in early August 1998, before the surprising launch of a medium-range Taepo Dong-1 missile on August 31, 1998. However, increased worries about North Korea's missile program spurred U.S. and Japanese support for missile defenses opposed by China. Some said PRC entities acted on their own.

The National Security Agency (NSA) reportedly suspected in late 1998 that the China Academy of Launch Vehicle Technology (CALT) was working with North Korea on its space program (closely related to missiles) to develop satellites, but that cooperation was not confirmed to be linked to the Taepo Dong-1 MRBM program, the Washington Times reported (February 23, 1999). An NSA report dated March 8, 1999, suggested that China sold specialty steel for use in North Korea's missile program, reported the Washington Times (April 15, 1999). In June 1999, U.S. intelligence reportedly found that PRC entities transferred accelerometers, gyroscopes, and precision grinding machinery to North Korea, according to the Washington Times (July 20, 1999). An October 20, 1999, classified report said that China's Changda Corp. sought to buy Russian gyroscopes that were more of the same that China supplied to the North Korean missile program earlier that year, reported the Washington Times (November 19, 1999). In December 1999, the NSA discovered an alleged PRC deal to supply unspecified PRC-made missile-related items to North Korea through a Hong Kong company, said the Washington Times (January 1, 2000).

The DCI first publicly confirmed PRC supplies to North Korea, or Democratic People's Republic of Korea (DPRK), in July 1999. The DCI's April 2003 Section 721 Report said that, in the first half of 2002, North Korea continued to procure missile-related raw materials and components from foreign sources, but it dropped a previous reference about those foreign supplies as especially going through DPRK firms in China. There were direct implications for U.S. national security, because of North Korea's nuclear weapons and nuclear programs as well as delivery systems. PRC technology transfers have further implications for secondary, or retransferred, proliferation, since North Korea reportedly supplied technology to Iran, Syria, Pakistan, Egypt, Libya, and Yemen. The DNI's Section 721 Report of May 2007 told Congress that PRC "entities" continued in 2005 to assist North Korea's ballistic missile program.

There were indications that some sensitive exports from China continued to North Korea. Taiwan raided in July 2010 Ho Li Enterprises that received orders since March 2007 from Dandong Fang Lian Trading Company in Dandong, PRC, with an alleged association with the DPRK's military, for two dual-use, high-technology machine tools that ended up in North Korea earlier in 2010. (40) By early 2011, the DPRK reportedly built a new facility to launch long-range ballistic missiles, located close to China. (41) Further, the Section 721 Report for 2011 noted that the DPRK continued to procure missile-related materials and components from foreign sources. This ability still raised questions about China's control of trade at the PRC-DPRK border and compliance with UNSC resolutions that imposed sanctions on North Korea's missile and nuclear programs.

After the DPRK's failed launch of a Taepo Dong-2 missile on April 13, 2012, a military parade two days later in Pyongyang showed an apparent KN-08 ICBM on a 16-wheel transporter-erector-launcher (TEL) that reportedly originated from the PRC. The suspected PRC TEL raised concerns that included implications for threats to U.S. security, violations of UNSC sanctions, China's credibility as a UNSC Member that committed to and then undermined UNSC resolutions, U.S.-PRC cooperation, and whether U.S. sanctions would apply. Representative Michael Turner sent a letter on April 17 to Secretary of State Hillary Clinton and DNI James Clapper, asking about the suspected transfer of the TEL. At a hearing of the House Armed Services Committee two days later, Representative Turner asked Defense Secretary Leon Panetta, who testified that the DPRK's missile and nuclear capabilities posed threats and that the PRC provided help for the DPRK's missile program, though he did not specify the assistance. On April 19, the Foreign Ministry claimed that the PRC has implemented UNSC resolutions and PRC nonproliferation policies and export controls, and the State Department said at a news conference it took China at its word on the allegations. Still, in diplomatic channels, the State Department raised the alleged transfer with the PRC as a weapons proliferation concern. Meanwhile, an unnamed official of the Obama White House downplayed the PRC's help for the DPRK's missile program as "poor performance" in implementing sanctions (not "willful proliferation") and not a clear violation of UNSC sanctions, because the transfer supposedly entailed the chassis (not a complete TEL) and that could have been sold for "civilian" use by a DPRK front company. (42) The Obama Administration did not impose sanctions for the PRC transfer.

Nonetheless, the suspected WS51200 TEL in the DPRK was produced as a 122-ton vehicle by the Hubei Sanjiang Space Wanshan Special Vehicle Company, which is a part of the China Space Sanjiang Group under the China Aerospace Science and Industry Corporation (CASIC). They belong to the PRC's state-owned aerospace defense industry, producing products for the PLA. The Wuhan Sanjiang Import and Export Company shipped (on the Harmony Wish) four WS51200 vehicles from Shanghai to North Korea in August 2011, marking them on a shipping document as "off-road trucks." (43) Moreover, the PRC has controls at its border with the DPRK. Further, UNSC Resolution 1695 of 2006 required all States to prevent transfers of missile and missile-related items, materials, goods, and technology to the DPRK's missile or WMD programs. Also adopted in 2006, UNSC Resolution 1718, inter alia, required all States to prevent the direct or indirect transfer to the DPRK of missiles, missile systems, or related materiel, determined by the UNSC or a special committee. UNSC Resolution 1874 of 2009 expanded that ban to cover all arms (except for small arms) and related materiel as well as financial transactions, technical training, advice, services, or assistance related to the provision, manufacture, maintenance, or use of such arms. Visiting Beijing on May 22, Special Representative for North Korea Policy Glyn Davies acknowledged to reporters that he raised the issue of how to reinforce UNSC-approved sanctions and take them seriously, though he insisted that the United States and China share interests of peace, stability, and denuclearization. Further, at the press briefing on June 13, the State Department confirmed concerns that PRC entities assisted the DPRK's missile program and the U.S. expectation that China enforce the U.N.'s sanctions. A U.N. panel found that many of the violations of sanctions involved China's entities, and China resisted releasing the report. Also, South Korea suspected that, in December 2012, China exported bauxite (aluminum ore), a material that could be used to manufacture missiles, to a weapons plant in North Korea. (44)

Secret Nuclear Programs

A serious case of secondary weapons proliferation involves North Korea's secret program to enrich uranium to develop nuclear weapons, a program that U.S. officials said was surprisingly acknowledged by North Korea to visiting Assistant Secretary of State James Kelly during talks in Pyongyang on October 4, 2002. This acknowledgment was not publicly disclosed by the Bush Administration until October 16, 2002, at a time when President Bush sought congressional authorization for the war against Iraq. By early 2007, however, U.S. officials restated the assessment of the highly enriched uranium (HEU) program.

The DCI's April 2003 Section 721 Report stated that the United States was suspicious of an uranium enrichment program in North Korea for "several years" but did not obtain "clear evidence indicating that North Korea had begun constructing a centrifuge facility until recently." While the DCI previously reported that North Korea has another program using plutonium that produced one or two nuclear weapons, the Washington Post reported on April 28, 2004, that U.S. intelligence newly estimated that North Korea had at least eight nuclear weapons.

DCI George Tenet testified to the Senate Intelligence Committee on February 24, 2004, that U.S. intelligence judged in the mid-1990s that North Korea had produced "one, possibly two, nuclear weapons" and the 8,000 fuel rods that North Korea claimed to have reprocessed into plutonium metal would provide enough plutonium for "several more." On February 16, 2005, the Director of the Defense Intelligence Agency, Vice Admiral Lowell Jacoby, testified that North Korea's Taepo Dong 2 intercontinental ballistic missile, which could have been ready for testing, "could deliver a nuclear warhead to parts of the United States in a two-stage variant and target all of North America with a three-stage variant." However, a test of that missile failed in July 2006.

This case raised a question about whether China's nuclear technology indirectly contributed to North Korea's nuclear weapons program through Pakistan, since China was the "principal supplier" to Pakistan's nuclear weapons program. There also were questions about whether China shared useful intelligence about its knowledge of any Pakistani-North Korean cooperation.

The New York Times and Washington Post reported on October 18, 2002, that U.S. officials believed Pakistan provided equipment, including gas centrifuges, for the North Korean uranium enrichment program, in return for North Korea's supply of Nodong MRBMs to Pakistan by 1998. The Washington Post added on November 13, 2002, that the Bush Administration had knowledge that Pakistan continued to provide nuclear technology to North Korea through the summer of 2002. Henry Sokolski of the Nonproliferation Policy Education Center wrote in National Review Online (November 19, 2002) that "one might call on Pakistan, Russia, and China to detail what nuclear technology and hardware they allowed North Korea to import."

The New York Times reported on January 4, 2004, about a history of nuclear technology proliferating from Pakistan's Khan Research Laboratories headed by Abdul Qadeer Khan and disclosed that he had transferred designs for uranium-enrichment centrifuges to China first. DCI George Tenet confirmed to the Senate Intelligence Committee on February 24, that North Korea pursued a "production-scale uranium enrichment program based on technology provided by A.Q. Khan." Particularly troubling was the reported intelligence finding in early 2004 that Khan sold Libya a nuclear bomb design that he received from China in the early 1980s (in return for giving China centrifuge technology), a design that China already tested in 1966 and developed as a compact nuclear bomb for delivery on a missile. (45) That finding raised an additional question of whether Khan also sold that bomb design to others, including Iran and North Korea.

Moreover, PRC firms could have been involved directly or indirectly in North Korea's nuclear weapons programs or weapons proliferation to other countries. In June 1999, authorities in India inspected the North Korean freighter Kuwolsan and found an assembly line for Scud ballistic missiles intended for Libya, including many parts and machines from China or Japan, according to the Washington Post (August 14, 2003). The Washington Times reported on December 9 and 17, 2002, that a PRC company in the northeastern coastal city of Dalian sold to North Korea 20 tons of tributyl phosphate (TBP), a dual-use chemical that U.S. intelligence reportedly believed would be used in the North Korean nuclear weapons program.

PRC Border, Ports, and Airspace

Questions have arisen about China's compliance with or enforcement of UNSC resolutions and even enabling of the DPRK's activities in allowing cross-border trade and transactions to and from North Korea as well as Pakistani, North Korean, and Iranian ships and planes to use PRC ports and airspace (and perhaps military airfields). China's possible cooperation in interdiction, restrictions in the use of its ports and airfields, law-enforcement, and intelligence-sharing has become a salient question in light of the Bush Administration's PSI announced in May 2003 (which China did not join). As part of the military trade between Pakistan and North Korea, in July 2002, Pakistan flew a C-130 transport aircraft to pick up missile parts in North Korea, reported the New York Times (November 24, 2002). In December 2002, the Spanish and U.S. navies interdicted a North Korean ship (So San) with Scud missiles bound for Yemen, and the Spanish Defense Minister reported that the ship's last port of call was in China. In addition, an Iranian ship stopped at the Tianjin port in China and picked up missile components before sailing on to North Korea to take delivery of missiles and rocket fuel in February and November 2002, reported the South Korean newspaper, Joong Ang Ilbo (December 19, 2002). From April to July 2003, China reportedly gave overflight rights to Iranian Il-76 cargo planes that flew to North Korea at least six times to pick up wooden crates suspected of containing cruise missiles, and the Bush Administration lodged a diplomatic protest with Beijing, reported Time (Asian edition) on July 14, 2003. At a hearing held by the Senate Foreign Relations Committee on September 11, 2003, on U.S.-China ties, Assistant Secretary of State James Kelly confirmed to Senator Russell Feingold that the State Department raised with China the problem of North Korean planes flying through PRC airspace or making refueling stops in China.

Then, in June 2005, China (and a Central Asian country) agreed to deny over-flight rights to an Iranian cargo plane that had landed in North Korea allegedly to pick up missile components. In November 2007, the Bush Administration reportedly raised concerns with China that an Iran Air plane was flying from North Korea via Beijing's airport to Iran with a shipment of missile jet vanes for Iran's missile program. In August 2008, India denied use of its airspace to a North Korean plane that stopped in Burma (Myanmar) and was scheduled to fly on to Iran with suspected cargo related to weapons proliferation. (46) Such incidents raised the question of whether China allowed overflight by planes from North Korea, had knowledge of their cargo, or shared intelligence with the U.N., United States, or other countries.

After North Korea's second nuclear test in May 2009 and the UNSC applied sanctions under Resolution 1874, the United Arab Emirates, in August 2009, seized a ship (ANL Australia) transporting North Korean weapons to Iran. However, after originating in North Korea, the cargo was first transferred in June to a PRC ship that docked at China's port cities of Dalian and Shanghai, where the cargo was then moved to the ANL Australia. (47) Then, in December 2009, a plane carrying weapons in contravention of U.N. sanctions headed from North Korea for Sri Lanka and other countries, with the North Korean weapons bound for Iran. Thailand's air force seized the Il-76 plane, when it landed in Bangkok to refuel. In November 2009, South Africa seized North Korea's weapons cargo bound for Congo, in violation of UNSC Resolution 1874, and the shipment was first loaded onto a ship docked in Dalian. China's port of Dalian, close to North Korea's port of Nampo, has been one of the critical transshipment points in China for North Korea's cargo. (48) China apparently has not seized such arms shipments.

On April 12, 2011, Senator Lugar introduced S.Con.Res. 12, which called for a presidential report on North Korean ships and planes that visited Burma via China. A report by a U.N. Panel of Experts, blocked at the UNSC by China in May 2011, found that Iran and the DPRK traded illicit missile technology using Air Koryo and Iran Air, involving transshipment through China. In May 2011, a monitored DPRK ship sailed near Shanghai to the South China Sea, possibly bound for Burma or Bangladesh with missiles and related parts, and turned around. In May 2012, South Korea seized sensitive graphite cylinders useable in a missile program that North Korea shipped on a PRC ship en route to Syria. In August, Japan seized five aluminum alloy rods (which could be used in nuclear centrifuges) from North Korea bound for Burma, among cargo on a Taiwan-owned ship that departed from Dalian, China. In late 2012, North Korea reportedly agreed to supply Scud missile parts to Egypt by air cargo through China, and missile technicians from the China Precision Machinery Import-Export Corporation (CPMIEC) reportedly went to Egypt to work with North Korean technicians. (49)

PRC-DPRK Military Relationship

Questions have arisen about the PRC's military relationship with the DPRK, including any PLA contingency planning in the event of a crisis or collapse in North Korea and support for the DPRK regime (even as it attacked South Korea's naval ship and island in 2010). A related issue concerns the challenge in talking with the PLA about contingencies that also could involve the U.S. military and allies. Other key questions are about the PLA's knowledge of the DPRK's missile and nuclear programs, plans to secure weapons and nuclear material, willingness to share information with the United States and U.S. allies, and aim to exert control that could complicate U.S. and Republic of Korea (ROK) operations. The PLA has called the DPRK a "buffer," keeping U.S. and ROK forces below the 38th parallel. Concerning operations at sea, PLA General Ma Xiaotian, in July 2010, expressed "opposition" to even U.S.-ROK exercises in the Yellow Sea.

As discussed in this report, the PRC and DPRK militaries had high-level contact just before the missile tests of August 1998 and July 2006. Moreover, this relationship has raised questions about China's effectiveness in using leverage with the power-holders in Pyongyang. When asked on October 14, 2009, whether the United States and China discussed contingencies in North Korea, Assistant Secretary of State Kurt Campbell acknowledged talks about "every" aspect. However, in February 2010, a professor at Peking University and a close observer of PRC policies warned that Beijing would not accept an implosion in Pyongyang or watch passively if other countries gain political and military control in North Korea. The professor later wrote in March 2012 that while Beijing seeks denuclearization, some PRC leaders actually hold the United States, rather than the DPRK, more responsible for tensions on the Korean peninsula. (50)

Indeed, China seemed to have shifted from pressuring North Korea with the military relationship to propping up the DPRK regime's security and survival. In August 2003, Wen Wei Po (a PRC-owned newspaper in Hong Kong) printed an article questioning whether the PRC-North Korean alliance under the 1961 Treaty of Friendship, Cooperation, and Mutual Assistance continued to serve China's interest. China took steps that appeared to pressure North Korea, including using the PLA. In September 2003, China replaced paramilitary People's Armed Police (PAP) troops with PLA soldiers along its border with North Korea, as confirmed by the PRC Foreign Ministry and the official People's Daily (September 16, 2003), apparently to warn North Korea against provocations. Reports appeared in 2006 to confirm the PLA's construction of fences along the border, although that construction reportedly had started in 2003. The Defense Department reported to Congress in 2004 with a skeptical critique that China "avoided taking real steps to pressure North Korea." Nonetheless, the report confirmed that "as a potential hedge against uncertainty, the PLA assumed responsibility for border security along the northeast frontier in fall 2003, increasing security along the porous border with North Korea and strengthening China's ability to stem refugee flows or respond to a breakdown of the North Korean regime." (51)

At the same time, China pursued military contacts with the United States (including Secretary of Defense Donald Rumsfeld's visit to Beijing in October 2005), even while China's traditional military friendship with North Korea showed greater candor. When PRC ruler Hu Jintao visited Pyongyang in October 2005 and Kim Jong Il visited China in January 2006, PRC media downplayed Hu's third position as Chairman of the Central Military Commission (CMC) (in addition to other positions as Communist Party General-Secretary and PRC President). On March 9, 2006, General B.B. Bell, Commander of U.S. Forces Korea, testified to the House Armed Services Committee that PRC-North Korean military engagement was "quite low" and that despite the friendship treaty, "the amount of military support that the PRC provides to the North is minimal." The PLA hosted the visit in May 2006 of Admiral William Fallon, Commander of the Pacific Command, to the Shenyang Military Region (close to the border with North Korea).

PRC Defense Minister and CMC Vice Chairman Cao Gangchuan visited North Korea in April 2006 for three days. But he did not get an audience with Kim Jong Il, raised the controversy of the DPRK's nuclear program, and then visited South Korea for five days in the same month. Just months after General Cao's visit, Pyongyang tested a Taepo Dong-2 missile in July 2006 and a nuclear device in October 2006. When the top PLA officer and another CMC Vice Chairman, General Guo Boxiong, visited Washington in July 2006, he criticized North Korea's July 4 missile test, even citing the UNSC's Resolution that condemned the test. Further indicating strains, on the day after the DPRK's nuclear test on October 9, 2006, the PRC Foreign Ministry publicly said that the test had a "negative impact" on PRC-DPRK ties and denied that China was North Korea's "ally." A PRC-owned newspaper in Hong Kong reported that PLA and PAP troops were on high alert at the PRC-DPRK border. (52) On October 16, the PLA commemorated the death of a soldier who was killed by North Korean soldiers a year earlier. (53)

However, following Pyongyang's second nuclear test in May 2009, PRC Defense Minister Liang Guanglie visited North Korea for five days on November 22-27. General Liang reportedly recalled that he was a veteran of the Korean War in which PRC-DPRK friendship was "sealed in blood." He met with Kim Jong Il but did not mention North Korea's nuclear program or denuclearization, in contrast to reporting of Defense Minister Cao's visit in 2006.

After South Korea announced on May 20, 2010, an international finding that North Korea attacked South Korea's naval ship, Cheonan, on March 26, killing 46 sailors, CMC Vice Chairman Guo Boxiong visited the Shenyang Military Region apparently in early June, including its troops at the border with North Korea. In July, the PLA also "opposed" U.S.-ROK maritime exercises in the whole Yellow Sea, seemingly supporting the DPRK which was the target of the exercises to enhance deterrence and defense. In August, the PRC Executive Vice Minister of Public Security Liu Jing visited North Korea to hold talks and donate equipment to the Ministry of People's Security which was identified as under the National Defense Commission. At a higher level, PRC Minister of Public Security Meng Jianzhu visited Pyongyang on February 13-14, 2011, arriving two days after protestors in Egypt ousted President Hosni Mubarak. Minister Meng signed an agreement to cooperate with the DPRK, before he got a meeting with Kim Jong Il. In April, the DPRK allegedly launched a cyberattack that was staged from China against South Korea, in the first public report of a cyberattack by one country against another's bank. In July, the PRC gave or sold 3,000-4,000 military trucks and jeeps to North Korea. The next month, PRC Defense Minister, General Liang Guanglie, met with a DPRK military officer on logistics. (54)

In November 2011, Kim Jong Il and Kim Jong Un received PLA General Li Jinai, a CMC Member who conveyed greetings from Hu Jintao as Party leader but not CMC Chairman. Just after the PLA's visit, the DPRK announced on November 30 that it made progress in uranium enrichment. However, after Kim Jong Il died, Hu Jintao on December 20 expressed condolences also as the CMC Chairman, in a rare invocation of this military title in dealing with North Korea. Hu promptly expressed support for Kim Jong Un, even before he was named as Supreme Leader. In mid-2012, the PLA and civilian forces held exercises at the Yalu River and elsewhere near the DPRK (including in a counter-terrorism scenario), but with no reported DPRK participation. During PRC Defense Minister Chang Wanquan's visit to Washington in August 2013, the PLA's Director of Foreign Affairs spoke to selected reporters and called for the U.S. side to be "flexible" toward North Korea and spoke against sanctions to deal with its nuclear weapons program. The next month, however, Under Secretary of Defense for Policy James Miller called on the PRC to maintain and increase pressure on North Korea to achieve denuclearization.

Trilateral and Six-Party Talks in Beijing

Overview and PRC Policy

After the Bush Administration's October 2002 disclosure about North Korea's ongoing nuclear weapons programs, it sought a multilateral effort (not just bilateral negotiations) to achieve the complete, verifiable, and irreversible dismantlement (CVID) (not just a freeze) of North Korea's nuclear weapons programs (uranium and plutonium programs) as well as nuclear weapons. The Administration's strategy relied on securing China's cooperation and central role. At the October 25, 2002, summit in Crawford, TX, top PRC ruler Jiang Zemin agreed with President Bush on the goal of a nuclear-free Korean peninsula achieved through a peaceful resolution, although Jiang claimed to be "completely in the dark" about North Korea's nuclear weapons.

However, some have raised issues of whether China has been helpful in fully using its leverage with North Korea, whether it seeks North Korea's denuclearization with as much urgency as the United States and its allies, whether China's role warrants a closer U.S.-PRC relationship that risks other U.S. interests, and whether China actually undermines regional stability, given its support for the status quo that includes a provocative, belligerent DPRK. China has balanced its own various concerns that include (1) sustainment of a "friendly" U.S. approach toward China; (2) U.S. security policies (suspected of provoking instability and collapse of a fellow Communist regime, with loss of a perceived "buffer" between PLA and U.S. forces); (3) diminished global standing in any appearances of isolated PRC influence; (4) Beijing's losses and wins with Washington, including any limits to U.S. arms sales to Taiwan; (5) U.S. alliances with Japan and South Korea; (6) a stronger Japan (with missile defense and even possibly nuclear weapons); (7) stability and PRC influence on a weak North Korea; (8) a strong, unified Korea; and (9) sustaining a fellow Communist regime and legacies of past leaders to preserve power.

China commonly has cited a concern about "stability" (e.g., jeopardized by DPRK refugees). However, China's view appears different from that of the United States and others. In response to Kim Jong Il's death in December 2011, PRC Foreign Minister Yang Jiechi called for "peace and stability," but Secretary of State Clinton's statement did not use "stability." Some have suspected the PRC's preference for the status quo, even though that involves the DPRK's provocations of instability and repression. Beijing's citied concern was belied by the continuation into 2012 of smuggling of drugs and people plus other illicit activity across the PRC-DPRK border and more relaxed military patrols and other controls on China's side of the border. Also, the PRC acknowledged in February that it repeatedly repatriated certain DPRK citizens over 10 times. (55)

Initially, China did not respond to multilateral cooperation with the urgency and to the extent sought by the United States. Then, North Korea further escalated the situation by expelling IAEA inspectors and reactivating its nuclear reactor at Yongbyon in December 2002, and by withdrawing from the NPT in January 2003. On February 7, 2003, Bush said he had to "remind" Jiang of "joint responsibilities" in achieving "common" objectives concerning North Korea. Two days later, Secretary of State Colin Powell said in an interview on Fox News Sunday that China had "considerable influence with North Korea." Powell reported that North Korea depended on China for 80% of its energy and economic activity, and urged China to play an active role in the dispute. Later, in November, Powell said that after he had pressed the need for China to "rise to its responsibilities in dealing with this regional problem," PRC Vice Premier Qian Qichen made an "important contribution" in March 2003 by delivering the message in North Korea that "there would be no alternative to multilateral talks" that involved China and other countries. (56)

Starting in 2003, as North Korea further exacerbated the security situation, China's stance shifted to sponsor multilateral talks to denuclearize the Korean peninsula, to be openly critical of North Korea, and to support tough UNSC resolutions that condemned the July 2006 missile firings and that imposed sanctions for the October 2006 nuclear test by the DPRK. However, the PRC also urged the United States to provide aid to North Korea, to lift sanctions, to hold bilateral U.S.-DPRK talks by 2007 (even outside of Beijing), and to show flexibility for a final settlement. While skeptics pointed to progress as limited to the process of the Beijing-sponsored talks, there appeared some initial progress in results by the summer of 2007, with the shutdown of North Korea's Yongbyon nuclear reactor. Nonetheless, in spite of the PRC's role in sponsoring negotiations with and supporting North Korea, its "isolated" position in multilateral negotiations, and the seeming fragility of the health of the North Korean ruler and economy, the North Korean regime retained time to stall denuclearization, diplomatic leverage, economic gains, repression of its people, ways for weapons proliferation, and a capability for additional nuclear tests.

Trilateral Talks (April 2003)

After the PRC's pressure on North Korea in March 2003, China hosted Trilateral Talks among China, the DPRK, and the United States on April 23-25, 2003. Secretary Powell noted positively that "China has stepped up." However, the DCI's Section 721 Report (of November 2004) confirmed that, at the meeting, North Korea threatened to "transfer" or "demonstrate" its nuclear weapons. On June 9, 2003, in Tokyo, Deputy Secretary of State Richard Armitage "saluted" China's cooperation on North Korea and declared "a new phase of our relationship with China."

1st Round of Six-Party Talks (August 2003)

Responding to U.S. insistence on expanded multilateral talks, China hosted the first round of the Six-Party Talks (also including South Korea, Japan, and Russia) on August 27-29, 2003. However, North Korea again threatened to transfer or test a nuclear weapon, as confirmed by the DCI's Section 721 Report of November 2004. Then, China seized a shipment of tributyl phosphate (TBP), a material used for nuclear weapons, suspected by the CIA on a train bound for North Korea in the summer of 2003, reported Asahi Shimbun (February 22, 2004). The DCI's Section 721 Report confirmed that, in September 2003, at the border with North Korea, China stopped a shipment of chemicals that could have been used in the DPRK's nuclear program.

2nd Round (February 2004)

The Bush Administration sought another round of multilateral talks before the end of 2003, with a tentative date set by November for around December 17, (57) but the talks were not held then. When PRC Premier Wen Jiabao visited President Bush at the White House on December 9, 2003, the Taiwan question eclipsed the issue of North Korea. The Washington Post disclosed on January 7, 2004, that at a meeting in Seoul the week before, a PRC diplomat, Fu Ying, questioned the credibility of U.S. intelligence that Pyongyang had a highly enriched uranium program.

China then hosted the second round of Six-Party Talks on February 25-28, 2004, for which Assistant Secretary of State James Kelly expressed appreciation. However, North Korea denied the suspected uranium enrichment program. The State Department's statement after the talks did not report any progress in either freezing or dismantling North Korea's nuclear weapons programs, but pointed to "progress on a regularized process" for peacefully resolving this issue.

3rd Round (June 2004)

Before China hosted another round of Six-Party Talks, PRC Deputy Foreign Minister Zhou Wenzhong publicly questioned the credibility of U.S. intelligence about North Korea's uranium enrichment and expressed support for North Korea's arguments (in an interview with the New York Times, June 9, 2004). China hosted the third round of talks on June 23-26, 2004. The DPRK again threatened to test a nuclear weapon. Afterward, National Security Adviser Condoleezza Rice traveled to Beijing and told CMC Chairman Jiang Zemin and President Hu Jintao that "A.Q. Khan was not engaged in academic research" and that "North Korea has a highly enriched uranium program," reported the Washington Times on July 14, 2004.

Despite the lack of any breakthrough in the Trilateral Talks and three rounds of Six-Party Talks held since April 2003, Assistant Secretary of State James Kelly contended at a hearing of the Senate Foreign Relations Committee in July 2004 that multilateral diplomacy was useful and that the talks held in Beijing yielded progress in dealing with the threat of North Korean nuclear weapons. (58) In answer to Senator Chuck Hagel, Kelly acknowledged that "there could be and probably should be a role for the United Nations Security Council (UNSC)," but reported that China likely will not be interested in dealing with the threat at the UNSC. In answer to Senator Lincoln Chaffee, Kelly denied that China linked cooperation on North Korea to U.S. concessions on Taiwan (including arms sales), by saying that China did not pose Taiwan "as a tactical issue" in discussions about North Korea. Kelly acknowledged to Senator Bill Nelson that it remained unclear as to whether China's preference for positive incentives (over pressure) will work.

In early February 2005, President Bush sent Michael Green, the National Security Council's Senior Director for Asian Affairs to Beijing, Tokyo, and Seoul to intensify diplomatic pressure on Pyongyang. In Beijing, Green met with President Hu Jintao and reportedly presented urgent U.S. intelligence findings that North Korea had processed several tons of uranium hexafluoride (which could be enriched to make nuclear bombs) and sold some to Libya perhaps in early 2003. (59) Other reports, however, pointed to intelligence findings that the material originated in North Korea but that Pakistan bought the uranium hexafluoride and supplied it to Libya. (60)

Suspension of Six-Party Talks

On February 10, 2005, North Korea again escalated tensions by announcing that it would indefinitely suspend its participation in the Six-Party Talks and that it had manufactured nuclear weapons. North Korea's announcement further called into question China's preference for positive inducements and raised the issue of using sanctions to pressure Pyongyang, including consideration of action by the UNSC. Instead of using China's economic and other leverage on North Korea, the Foreign Ministry contended at a news conference on February 17 that sanctions would only complicate the situation (a position that Foreign Minister Li Zhaoxing argued to Secretary of State Rice on February 12). China instead urged U.S.-North Korean bilateral talks.

The Bush Administration then stepped up pressure on the PRC to use its leverage to bring North Korea back to the talks. On March 21, 2005, Secretary of State Rice met with top PRC officials including President Hu in Beijing, after visiting other Asian capitals. She urged China in particular to help restart the Six-Party Talks, publicly saying that "China has the closest relationship with North Korea," that "it is not a U.S.-North Korean issue," and that "there are other options in the international system." (61) In Beijing on April 26, 2005, Assistant Secretary of State Chris Hill reportedly raised the idea of an interruption of oil flows from China to North Korea, but China refused. (62) On April 28, President Bush reminded China about his agreement with Jiang Zemin and mentioned Secretary Rice's option of going to the U.N. Security Council (where China has veto power). A PRC Foreign Ministry official publicly blamed Washington for a "lack of cooperation" and Bush for calling Kim Jong Il a "tyrant" at a news conference. (63) At a congressional hearing on May 26, Hill said that China had "enough influence" to convince North Korea to return to the talks but had not done it. He also made China accountable for any failure of the Six-Party Talks if it failed to get its "very close friend" back to the talks. (64)

Meanwhile, Secretary Rice also offered a strengthened U.S.-PRC relationship and agreed that Deputy Secretary of State Robert Zoellick would hold the first "Senior Dialogue" with his PRC counterpart, a meeting which was scheduled for early August 2005. PRC ruler Hu Jintao had requested what China called "strategic talks" when he met with President Bush in November 2004. (65) One day after North Korea announced on July 9 that it would return to the talks, Secretary Rice visited China, but this time before visiting U.S. allies (Thailand, Japan, and South Korea). (66)

4th Round and Joint Statement (July-September 2005)

After a period of 13 months without talks, China announced the start of the fourth round of the Six-Party Talks in Beijing on July 26, 2005, and described China's role as both a "host" to "facilitate" the talks and a "participant." The inconclusive first phase of this round ended on August 7, when the countries agreed to recess and resume talks on August 29. Pakistani President Pervez Musharraf provided support for U.S. reports of North Korea's uranium enrichment program, when he said that A.Q. Khan supplied North Korea with centrifuges and their designs. (67) North Korea did not return to the talks as agreed but returned later on September 13. Meanwhile, President Bush agreed to meet at the White House with Hu Jintao in early September but had to postpone because of Hurricane Katrina. Bush then met with Hu in New York on September 13.

China proposed a joint statement that recognized North Korea's insistence on a light water reactor and had no explicit mention of a uranium program. On September 17, PRC Vice Foreign Minister Dai Bingguo presented China's draft as the "most realistic" and put pressure on the United States to agree to it. (68) Along with other countries, the United States agreed to sign the Joint Statement of Principles (not an agreement) on September 19, 2005, in which North Korea committed to abandon "all nuclear weapons" and "existing nuclear programs" and to return to the NPT and IAEA safeguards; and the other countries agreed "to discuss, at an appropriate time, the subject of the provision of a light water reactor." However, the United States had to clarify separately that dismantlement of nuclear weapons must be verifiable; that nuclear programs included plutonium and uranium; and that an "appropriate time" for "discussion" of a light water reactor would be when North Korea has verifiably eliminated all nuclear weapons and all nuclear programs. (69)

At a hearing of the House International Relations Committee on October 6, 2005, Representative Ileana Ros-Lehtinen asked about PRC pressure to accept the deal. Assistant Secretary of State Chris Hill did not deny that Beijing exerted pressure and noted that there were earlier PRC drafts that were "absolutely unacceptable," while the mention of a light water reactor was "not welcomed." He testified, nonetheless, that the United States benefitted from China's strong desire to reach a deal and that "we can work well with the Chinese." He also described China's role as that of a "secretariat" (producing drafts), seemingly a neutral role.

5th Round (November 2005)

After the joint statement of September 2005 was signed, PRC Vice Premier Wu Yi traveled to North Korea on October 8-11, 2005, promising new economic aid. Top PRC leader Hu Jintao then followed with a visit on October 28-30 and attended a ceremony to sign economic agreements. On November 1, China announced that the next round would start on November 9. While there was progress in the process, when the meeting for the 5th round of the Six-Party Talks ended on November 11, no progress in results was announced for the implementation of the joint statement to dismantle North Korea's nuclear weapons. Moreover, there continued to be differences between the U.S. and PRC approaches in continuing the Six-Party Talks. While President Bush called for "firm resolve" in a speech given in Kyoto, Japan, on November 16, 2005, the PRC's Hu Jintao called for "greater flexibility" in a speech in Seoul the next day.

PRC Communist Party General-Secretary Hu Jintao hosted North Korean ruler Kim Jong Il in China on January 10-18, 2006, and Hu expressed support for the Six-Party Talks. The PRC proposed a meeting on January 18 in Beijing between Assistant Secretary of State Chris Hill and North Korean negotiator Kim Kye-gwan. China's media said that PRC diplomat Wu Dawei "also joined" the implied U.S.-DPRK bilateral meeting (vs. the U.S. view of a three-nation meeting).

On February 3, 2006, Senators Harry Reid (Democratic Leader), Carl Levin (Ranking Democrat of the Armed Services Committee), Joseph Biden (Ranking Democrat of the Foreign Relations Committee), and John Rockefeller (Vice Chairman of the Intelligence Committee) wrote a letter to President Bush, saying that U.S. policy "still has not resulted in an elimination, freeze, or even a slowing of North Korea's nuclear and ballistic missile activities." At a hearing of the House International Relations Subcommittee on Asia and the Pacific on March 8, 2006, Chairman James Leach critiqued President Bush's "reactive" approach to the Six-Party Talks that "appear moribund," calling for U.S. leadership, "initiative" for more dialogue, "greater flexibility" for diplomacy, sending Assistant Secretary of State Chris Hill (the witness) to Pyongyang, negotiation of a permanent peace on the peninsula at a separate forum, direct contacts with North Korean officials, and liaison offices to solve a "problem of communication." Leach argued against continuing to "transfer the initiative to others, indebting us to the diplomacy of countries that may have different interests or simply ensconcing the status quo."

Indeed, despite its considerable influence, China's balanced role placed its stance as more neutral than supportive of the United States and its allies. Moreover, while Beijing pursued the "process" of the talks, results remained elusive. The burden increased on China's preferred diplomacy to achieve the DPRK's nuclear disarmament. The impasse also threatened to strain U.S.-PRC ties.

Missile Tests (July 2006)

The impasse continued into the summer of 2006, when China failed to prevent North Korea from test-firing seven ballistic missiles, including the first test of a Taepo Dong-2 ICBM under development with a range (perhaps 3,700 miles) that could reach Alaska. (70) After the DPRK began preparations in May, Congress expressed concerns, including in a letter from Senators Carl Levin and Hillary Clinton to President Bush on June 15. At a hearing of the House Armed Services Committee on June 22, some Members asked about China's role. Brigadier General John Allen, the Pentagon's Principal Director for Asian and Pacific Affairs, testified that the PRC tried to dissuade North Korea from steps that would be destabilizing and undermine the Six-Party Talks. However, the PRC's use of leverage, including the PLA's opposition or acquiescence to the DPRK's missile program, was unclear. Indeed, there was high-level military contact between the PRC and DPRK shortly before the July 2006 missile tests, similar to that before the August 1998 missile firing. On June 21, 2006, the PLA Chief of General Staff, General Liang Guanglie, told a DPRK military visitor that the PLA will "expand cooperation" with the Korean People's Army.

On July 4, 2006 (Washington time), North Korea provocatively fired a Taepo Dong-2 ICBM that failed in less than 40 seconds after launch and several short-range Scuds and medium-range Nodongs. On July 5, Senator John McCain stated that China and Russia have the most leverage over North Korea and warned that their postures would have a heavy impact on our relations.

In a phone call with President Bush on July 6, PRC ruler Hu Jintao expressed "deep concerns" about the "situation" but also warned against actions that might "aggravate the situation." (71) On July 7, with U.S. support, Japan sponsored a UNSC resolution that invoked Chapter VII of the U.N. Charter (language for sanctions and/or force), but China countered with a non-binding statement by the UNSC president with no mention of Chapter VII. China's draft statement of July 10 called for resuming the Six-Party Talks, preventing technology and financial transfers to North Korea's missile and WMD programs, and other voluntary measures. Tokyo and Washington agreed on July 10 to postpone a vote on their resolution to give time for Beijing's diplomacy.

China sent a scheduled delegation led by Vice Premier Hui Liangyu to Pyongyang on July 10-15 to commemorate the 45th anniversary of the bilateral friendship treaty, and Hui reportedly signed a new agreement on economic aid. But Kim Jong Il snubbed the PRC visitor. Although China was given time for this mission, Beijing intensified its criticism of Tokyo on July 11, calling its resolution an "overreaction." Assistant Secretary of State Chris Hill reported from Beijing on July 12 that China's delegation failed to achieve progress in getting Pyongyang back to the talks.

On July 12, China (and Russia) reportedly dropped their pursuit of a draft statement to sponsor a draft UNSC resolution that countered Japan's resolution primarily by withholding authority under Chapter VII (for sanctions or use of force). Still, China's resolution called for nations to resume the Six-Party Talks and refrain from supplying technology or funds to the DPRK's missile program. Despite similar goals, Beijing's envoy threatened to veto Tokyo's resolution.

Ultimately, negotiations led to UNSC Resolution 1695 that was adopted unanimously on July 15, 2006, condemning the DPRK's missile launches, demanding that it suspend its missile program, requiring all countries to prevent technology transfers to its missile or WMD programs, requiring countries to prevent missile proliferation from the DPRK and financial transfers to its missile or WMD programs, as well as urging the DPRK in particular to show restraint and return to the Six-Party Talks (with implementation of the September 2005 Joint Statement and abandonment of all nuclear weapons and nuclear programs). While in St. Petersburg, Russia, for the Group of Eight summit, President Bush thanked Hu Jintao for his "leadership" on the resolution. Also, on July 26, 2006, the White House confirmed reports that in late 2005, China had frozen North Korean assets at the Bank of China for counterfeiting the PRC currency. (72)

Nonetheless, at a hearing of the Senate Foreign Relations Committee on July 20, 2006, Chairman Richard Lugar pointed out that China facilitated talks on the DPRK while continuing to supply key energy and lifelines into North Korea. He warned that although China wanted to avoid regional instability, the missiles tests were destabilizing; China's ability to secure global benefits for its high economic growth rates depended on continued cooperation with the West; and "Beijing must reassess its regional priorities." It remained unclear whether China supported use of Chapter VII, although Assistant Secretary Hill testified that the resolution's language on "international peace and security" was a reference to Chapter VII. Despite the UNSC resolution, China criticized Japan's sanctions on September 19 and refused to attend a meeting of eight countries to discuss the DPRK at the U.N. two days later.

In September 2006, the House and Senate passed the conference report for the FY2007 NDAA (P.L. 109-364), which required the President to appoint a North Korea Policy Coordinator to review policy and report to Congress. The Administration did not comply with an appointment. Congress later repealed the requirement in the FY2008 NDAA (P.L. 110-181).

First Nuclear Test (October 2006)

On October 3, 2006, North Korea warned that it would conduct a nuclear test, and China reacted the next day by singling out North Korea to use restraint. On October 9, North Korea conducted a nuclear test. On the same day, even as President Bush reacted with no confirmation of the test, China confidently expressed its "opposition" to North Korea for "flagrantly" conducting a nuclear test. The next day, a PRC-owned newspaper in Hong Kong specifically reported that North Korea conducted a nuclear test 300 meters underground with an explosion of 800 tons. (73) China's strongly negative reaction to this nuclear test reflected a heighten fear of instability on its periphery and frustration at North Korea's defiance of China's leaders. (On October 16, 2006, the Director of National Intelligence publicly confirmed this nuclear test of "less than a kiloton." President Bush issued a formal determination on December 7, 2006, declaring that North Korea detonated a nuclear explosive device on October 9, 2006.)

The PRC Foreign Ministry urged resuming the Six-Party Talks. China also agreed to UNSC sanctions but opposed using force or the PSI, which China did not join. (74) The United States and Japan compromised with China and Russia, which urged "balance" (targeted arms embargo, no ban on ships and aircraft, restrictive language for "measures under Article 41" (sanctions) of Chapter VII, and "cooperative" action including cargo "inspections" to prevent proliferation).

On October 14, 2006, China voted with all other members of the UNSC for Resolution 1718, imposing sanctions to prevent the supply of major weapons as well as items that could contribute to the DPRK's nuclear, missile, or other WMD programs; luxury goods; transfers of funds for those programs; travel by people responsible for those programs; and inspection of cargo to prevent WMD proliferation. Secretary Rice praised China for its "remarkable evolution." On October 17, Rice left for Japan and South Korea (allies first), China, and Russia, saying she expected every country to "fully implement all aspects" of Resolution 1718. She defended the Administration's approach, saying "what the President has done in putting together this coalition, with China at the center of it willing to go along with Chapter 7, is quite remarkable." (75) In remarks in Beijing on October 20, Rice asserted that China was now committed to the DPRK's denuclearization, rather than Washington dealing bilaterally with Pyongyang.

However, China's enforcement of the resolution was questionable, as it called for "cooperative action" in "inspection" (and not interception or interdiction) of cargo. Also, while any PRC sanctions under its strict interpretation of Resolution 1718 might seek to counter the DPRK's weapons-related activities, they might not be sufficiently broad or effective in achieving the ultimate, unrealized goal of the dismantlement of North Korea's nuclear weapons and programs. China's agreement to ban luxury goods could have indicated its disapproval of the defiance of Kim's regime. However, "luxury goods" were not defined, and North Korean elites reportedly continued to enjoy shopping sprees across the border in Dandong, China. (76) Indeed, China increased the export of banned luxury goods to North Korea from 2006 to 2007. (77)

Immediately after voting for the resolution, the PRC ambassador stated his reservations that "China does not approve of the practice of inspecting cargo" to and from the DPRK. After imposition of sanctions, China's customs agents reportedly carried out more stringent inspections of cross-border traffic, perhaps to prevent dangerous transfers. (78) China seemed to have tightened "inspections" (to the letter of the resolution), without participation in military inspection or interdiction at sea. Also, after the nuclear test, China's major state-owned banks suspended financial transactions with North Korea and then relaxed restrictions around mid-November. (79)

Other than these initial and limited actions, PRC and foreign reports portrayed business as usual in PRC trade with North Korea. (80) The PRC Foreign Ministry also declared on October 17 that the "China-DPRK border is normal." China had numerous other options, including limiting its exports to and imports from North Korea, valued at $1.6 billion in 2005. (81) Limiting investments there and cracking down on smuggling were other PRC options. On October 22, PRC media reported the arrest of two people for smuggling uranium, possibly from North Korea, but that arrest took place in September 2006, before the nuclear test. (82) China also could have cut crude oil supplies (up to 90% of the DPRK's supplies). Some stoppage of supplies (in February 2005, February 2006, and September 2006) was reported, but that took place before the DPRK's nuclear test and not as sanctions. Also, PRC provision of diesel fuel as aid to North Korea continued. The amount of crude oil that the PRC exported to the DPRK remained the same in 2005 to 2007. (83)
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Title Annotation:Purpose and Scope-First Nuclear Test (October 2006)
Author:Kan, Shirley A.
Publication:Congressional Research Service (CRS) Reports and Issue Briefs
Article Type:Report
Geographic Code:9CHIN
Date:Jan 1, 2014
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