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China-Iran Trade Surge Vexes U.S.

By Neil King Jr.
Source: The Wall Street Journal
WASHINGTON — The U.S. government says a handful of Chinese companies have ramped up shipments of sensitive military technologies to Iran, part of a surge in China-Iran trade that is complicating efforts to apply pressure on Tehran to rein in its nuclear program.

The State Department and its embassy in Beijing have lodged "numerous" formal protests with the Chinese government since the start of the year over the shipments, U.S. officials said. They said the goods have included a range of specialty metals and other dual-use items that could aid Tehran’s missile and nuclear programs, with some cargoes going to Iran’s main ballistic-missile producer. The U.S. argues that such trade is barred under a December United Nations sanctions resolution on Iran.

The Chinese government declined to respond to questions about the U.S. allegations. It has previously accused the U.S. of placing sanctions on Chinese companies based on scant evidence.

The growing dispute over China’s burgeoning trade with Iran — its exports to Iran in the first six months of this year surged 70% from 2006, to $3.2 billion — comes at a sensitive time. The U.N. Security Council, which includes China as one of its five veto-wielding permanent members, is weighing whether to push ahead on a third resolution to impose tougher trade and financial sanctions on Iran over its uranium-enrichment work.

The U.S., Britain and some other European countries allege that Iran is pursuing nuclear weapons under the guise of a civilian power program, a charge Tehran denies. The U.N. has already imposed two sets of sanctions on Iran to get it to halt its nuclear program. These measures have ordered a freeze of the international assets of a major Iranian bank and 10 entities connected to the country’s nuclear and missile programs, and imposed an embargo on Iranian arms exports, among other steps. Far from backing off, Iran has pressed ahead with its nuclear program.

The debate over how to proceed with Iran is likely to take center stage when world leaders meet in September for the annual U.N. General Assembly. China and Russia, another permanent Security Council member, appear increasingly leery of supporting sanctions that would strike at companies more central to Iran’s economy or banking system.

China’s controversial shipments to Iran, which coincide with a furor over defective Chinese exports to the U.S., also raise questions about Beijing’s ability to control the transfer of potential weapons materials to countries under international scrutiny.

The U.S. has long accused China of supplying nuclear technology to countries such as North Korea, Pakistan, Iran and Libya. In recent years, though, Beijing has joined international nonproliferation agreements and imposed tougher rules on exports.

"This is no longer a government policy problem," said Joseph Cirincione, an arms-control expert at the liberal Center for American Progress. "It is a matter of China actually implementing the export controls it now has in place. It is a problem that many countries have."

In a classified incident this year, U.S. intelligence agencies tipped off authorities in Singapore about a container that was transiting through its port from China en route to Iran. Inside the container, Singaporean customs agents found large quantities of a chemical compound used to make solid fuel for ballistic missiles, U.S. and other international officials said.

More disturbing, U.S. officials said, was the intended recipient: the Shahid Bagheri Industrial Group, which is responsible for Iran’s efforts to develop long-range missiles. The company was among the 10 entities targeted in the set of U.N. sanctions levied on Iran in December.

U.S. officials declined to name the Chinese company that was allegedly behind that shipment or the other companies allegedly behind other recent shipments. The officials said most of the questionable Chinese exports to Iran have come from five or six Chinese firms, all of which are under unilateral U.S. sanctions for allegedly shipping missile components and other restricted military equipment to Iran. Since 2005, the U.S. has imposed unilateral sanctions on nine Chinese companies believed to be engaged in such trade. The sanctions bar U.S. companies from doing business with any of these companies.

Companies the Bush administration considers "serial proliferators" to Iran include Beijing Alite Technologies Co., China Great Wall Industry Corp. and China National Precision Machinery Import/Export Corp. An official from Beijing Alite said the company’s products "have nothing to do with military weapons" and that it stopped trading with Iran in 2003. A China Great Wall spokeswoman said the company "never had any business relationship with Iran." An officer at China National Precision declined to comment.

When the U.S. renewed sanctions on these companies last year for allegedly continuing shipments of sensitive materials to Iran, a Chinese Foreign Ministry spokesman said the U.S. had provided no clear evidence of wrongdoing and criticized the move as "groundless and extremely irresponsible."

For the White House, China’s growing economic ties with Iran pose the biggest impediment to its strategy of combining incentives and economic pressure to get Tehran to back off its nuclear work. While many European companies and banks have begun to cut back their dealings with Iran, Chinese companies are surging ahead. A branch of China North Industries Group, or Norinco, China’s huge state-owned defense-industrial manufacturer, just signed a deal valued at nearly $590 million to supply subway trains for Tehran’s metro system.

U.S. officials said that in discussions with Beijing, Chinese officials have denied specific shipments violated U.N. resolutions or other international treaties. In other cases, they promised to investigate, but with no apparent follow-through. U.S. officials said China has clamped down in some instances. Don Mahley, a senior State Department official, told a congressional panel this month the U.S. was unable "to ascertain the level of control or awareness that Chinese officials have over increasingly freewheeling Chinese companies that trade in materials related to [weapons of mass destruction] and their delivery systems."

Bush administration officials said the U.S. is also monitoring shipments to Iran from companies in other countries, including Germany and Italy. They said Washington could move to impose U.S. sanctions on some of the companies in coming months.