Friday, May 23, 2003

The Bush administration has imposed stiff economic sanctions on one of China’s largest state-run manufacturers for selling missile-related goods to Iran.

The two-year sanctions will, for the first time, bar any exports to the United States from a Chinese firm, in this case North China Industries Corp., known as Norinco, which manufactures an array of military and civilian products.

Bush administration officials said conservative official estimates are that the sanctions will cost Beijing “hundreds of millions” of dollars annually in lost sales in the United States.

Sanctions also were imposed on an Iranian government missile producer, the Shehid Hemmat Industrial Group, which has been involved in Iran’s short- and medium-range missile program since the mid-1990s.

Documents made public by the Federal Register state that the sanctions were imposed May 9 under two presidential executive orders aimed at curbing arms transfers.

Norinco was caught providing Iran with specialty steel used in all its missile programs in October 2002 — two months after Beijing announced new export regulations aimed at curbing missile-technology sales.

China’s government was informed about the sanctions and denied that the company transferred the specialty steel involved.

In the past, sanctions on arms-proliferating countries have been limited to a ban on contracts with the U.S. government, although little defense-related trade occurs between the United States and such countries.

The latest sanctions require the Treasury Department to “prohibit the importation into the United States of any goods, technology, or services produced or provided by these entities.”

“This is the first time in the last 15 years that sanctions on China will have teeth,” one U.S. official said.

Norinco is China’s third-largest manufacturer, and the sanctions could cost the company up to $100 million in lost business in the United States, through such retailers as Wal-Mart and Kmart.

Norinco makes some 4,000 products ranging from toys to short-range ballistic missiles, according to U.S. officials. Since it was formed in 1980, Norinco has had about $25 billion of import and export business.

As for businesses that will complain of the inconvenience of not being able to purchase inexpensive Norinco products, the official said, “It’s also inconvenient to have an Iranian missile come down on you.”

No details of the activities by the Chinese and Iranian companies were made public in State Department documents. An announcement of the sanctions will appear today in the Federal Register, the U.S. government’s official publication for regulations.

A congressional official close to the issue said the sanctions were imposed after a huge political battle in the Bush administration between pro-Chinese officials opposed to the sanctions and national security officials.

The official said the sanctions on Norinco were overdue and described the company as a “serial proliferator” of missiles and goods related to weapons of mass destruction.

Gary Milhollin, director of the private Wisconsin Project on Nuclear Arms Control, which tracks arms sales, said the State Department action shows that “missile exports to Iran continue.”

The two-year ban on all Norinco imports is a significant departure from past actions. “It may be that these sanctions will have an impact,” Mr. Milhollin said in an interview.

The Iranian company has been sanctioned in the past. In 2000, Shehid was sanctioned, along with a North Korean company, for missile-related purchases from North Korea.

Several Norinco employees were indicted in 1996 for being part of a covert effort uncovered by the U.S. Customs Service to smuggle 2,000 AK-47 assault rifles into Oakland, Calif., to arm urban street gangs.

A Norinco subsidiary, Hong Kong-based Rex International, also was involved in brokering the sale of high-grade seamless steel pipes to an Iranian chemical-weapons facility.

Among Norinco’s military products are armored fighting vehicles, various kinds of artillery, antitank missile systems, small arms, ammunition, radars, sighting and aiming systems, and high-performance engines, according to Mr. Milhollin.

Norinco has several subsidiaries in the United States, including, in California, Beta Chemical, Beta First, Beta Lighting, Beta Unitex and China Sports; and in New Jersey, Forte Lighting, Larin, and NIC International, Mr. Milhollin stated in congressional testimony.

China has been a major supplier of missiles to Iran for more than a decade. According to a 1999 congressional report on Chinese military and espionage activities, Beijing has provided Iran with CSS-8 ballistic missiles and support equipment and various missile-guidance components.

China also sold Iran solid-missile-fuel technology and C-802 antiship cruise missiles.

The U.S. government has criticized and sanctioned China repeatedly for its missile and weapons sales to Iran, North Korea and Pakistan. Sanctions were also imposed in July on eight Chinese companies that sold arms and germ-weapons goods to Iran.

The State Department also imposed sanctions on various Chinese companies for selling weapons-related goods to Iran in May 2002 and January 2002.

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