- The Washington Times - Thursday, January 2, 2003

WASHINGTON, Jan. 2 (UPI) — The State Department Thursday criticized a close U.S. ally and two American companies for harming Washington's security interests in trade with China.

Israel faced flak for its defense sales to China while Boeing Satellite Systems and Hughes Electronics companies received a damning letter, accusing them of 123 violations.

"The United States has made very clear the strategic implications for U.S. security interests, of Israel's defense trade and transfer of U.S.-made equipment and advanced defense technologies to China," State Department spokesman Richard Boucher told a briefing in Washington.

He said this was an "an ongoing subject of discussion" with the government of Israel, based entirely on U.S. strategic concerns. "Any allegations that it's based on commercial considerations are unfounded," he added.

Boucher said the United States and Israel shared many strategic interests, "and just as we are sensitive to Israel's strategic interests, we believe that Israel should be is sensitive to ours."

He said one of the issues the United Sates had discussed with Israel was the sale of Falcon planes to China, a dispute that goes back to the Clinton administration.

Boucher said that the introduction of advanced defense technologies to China might have far-reaching repercussions on the regional situation, particularly the dispute involving Taiwan.

He said the United States wants "any suppliers of weaponry to be considerate and concerned about this strategic situation and region that's of great sensitivity and importance to us."

Boucher also said that the State Department has handed over a detailed letter, containing 123 charges, to Boeing and Hughes.

They have 30 days to respond to charges they illegally shared sensitive space technology with China in the 1990s that may have helped Beijing fine-tune its missiles.

"The number and the substance of the charges reflect the seriousness of the violations," State Boucher told the briefing. "Any assistance to improve the launch vehicle is clearly prohibited by the U.S.-China bilateral agreement on technology safeguards."

The State Department, which sent the letter on Dec. 26, could request an oral hearing.

The department says that the companies have committed 123 violations of the Arms Export Control Act and the International Traffic in Arms Regulations.

Boeing and Hughes face fines of up to $500,000 per charge and possible bars to getting U.S. export licenses if found guilty of the charges.

The State Department letter says Hughes officials gave China detailed information about rocketry to help them figure out why their rockets were failing soon after launch.

State Department has held several rounds of talks with Hughes and Boeing to settle the dispute. Last January, the department settled a similar dispute with Loral Space & Communications for helping China build its rockets after a Chinese rocket carrying a Loral satellite blew up in 1996.

The company agreed to pay $16 million to the State Department.

Boeing, however, says that the violations the State Department is talking about go back to the 1990s when Hughes Space and Communications was under different management. Boeing acquired the Hughes satellite business in 2000.

Boucher acknowledged Boeing took over the Hughes unit after the events, but said it was still the "responsible party to respond to these claims about the unit and what it did."

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