- The Washington Times - Wednesday, October 16, 2002

A Chinese state-run company is talking with Iraq about selling a chemical used in making missile fuel, although no transfer has been spotted, according to U.S. intelligence officials.
The covert procurement effort by Iraq was uncovered in August and is seen as a sign that Baghdad continues to work on building missiles and that Chinese companies remain key suppliers of missile goods.
Disclosure of the China-Iraq talks on a missile-related chemical comes as Chinese President Jiang Zemin prepares to visit the United States for talks with President Bush in Texas. Mr. Jiang will visit the United States from Oct. 22 to 25 before traveling to Mexico for an economic summit.
China's sales of products with both military and civilian uses to rogue states and unstable regions continues to be a problem, according to Bush administration officials.
The intelligence report on the talks was sent to senior administration policy-makers in mid-August around the time that China announced new export controls on its state-run companies to stem dangerous arms proliferation.
On Aug. 22, China issued new export regulations aimed at limiting sales of missiles and missile-related items. A Chinese Foreign Ministry statement said that details of the controls would be issued "in the near future."
The controls were issued under pressure from the U.S. government, which has criticized China for two decades for not stopping sales of missile-related goods.
The intelligence on the talks shows that arms-related transfers by China have continued despite the announced new controls, U.S. officials said.
"Chinese arms proliferation activities to the Mideast have continued unabated," one official said.
Another official said that intelligence agencies have not confirmed any transfer of a dual-use chemical but are continuing to monitor the region.
A semiannual CIA report to Congress on global arms proliferation is overdue. The report is being held up by the Bush administration until after Mr. Jiang's visit.
The last CIA report made public in January identified China as a key arms seller. The report stated that China provided "dual-use missile-related items, raw materials, and/or assistance to several other countries of proliferation concern such as Iran, North Korea and Libya."
Chinese Foreign Ministry spokeswoman Zhang Qiyue said that Mr. Jiang's visit to the United States "is of great significance" and will focus on "major international issues of common concern," such as trade and anti-terrorism efforts.
The Bush administration has imposed economic sanctions against Chinese companies for missile-related sales to Pakistan and Iran.
China also assisted Iraq with a fiber-optic communications system that was used for both civilian and military communications, including Iraq's air-defense system, which continues to threaten U.S. and allied aircraft patrolling Iraqi skies.
The fiber-optic network was bombed last year during U.S. military strikes. China, however, was never hit with economic sanctions for the system, despite U.N. prohibitions on arms-related sales to Iraq.
The identity of the dual-use chemical involved in the Iraq-China talks could not be confirmed. However, one official said that it was a component used to make nitric acid, a key element for missile fuel.
U.S. and British intelligence agencies recently disclosed that Iraq has rebuilt a chemical facility destroyed during the 1991 Persian Gulf war.
Defense Intelligence Agency official John Yurechko told reporters during a briefing on Oct. 8 that the Iraqi chemical complex is known as Project Baiji, and was part of efforts by Baghdad to hide its weapons programs by using dual-use facilities.
"We have to be honest all components and supplies used in [weapons of mass destruction] and missile programs are dual-use," Mr. Yurechko said, noting that the U.S. military is watching the plant because of its ability to make missile fuel.
A British report on Iraq's weapons programs said that the country has been building Baiji since 1992 and that "intelligence reports indicate that it will produce nitric acid which can be used in explosives, missile fuel and in the purification of uranium."

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