Evidence on the Acquisition of Sensitive Western Technology
In this period of rapid political change and uncertainty in East-West relations, the role of intelligence has become increasingly critical to informed policymaking. Yet, just at the time when intelligence is urgently needed as the basis for difficult and important decisions, its availability and reliability have been affected by the political upheavals in Eastern Europe and the Soviet Union. At the same time, the changing types and sources of threat to U.S. national security require the near-term redirection of limited intelligence resources.
This chapter sets forth the results of the panel's examination of the intelligence evidence, including some at high levels of classification, on the acquisition of sensitive Western technology, principally by the Soviet Union and its (former) Warsaw Treaty Organization (WTO) allies. This analysis has two major limitations, however. First, the evidence available from the intelligence community* as of the end of 1990 still focused primarily on the traditional agents of technology acquisition—namely, the Soviet Union, the countries of Eastern Europe, and the People's Republic of China (PRC), and it provided only a limited basis on which to describe how patterns of behavior might now be changing, particularly among those countries that have turned
dramatically away from communism. Second, the evidence presented here is limited regarding the technology acquisition activities of countries of proliferation concern, in part due to its highly classified nature. As a result, the treatment of this dimension of the problem in this chapter may underrepresent its actual importance as a source of current threat to the national security of the United States.
Given the constraints just noted, this chapter first provides an update of the evidence presented in the 1987 Allen report on Soviet and WTO technology acquisition efforts prior to the beginning of 1990. It then considers probable changes in the nature and pattern of (primarily) Soviet technology acquisition since the beginning of 1990 in the wake of the profound political changes that have taken place, and it analyzes the capacity of the Soviet Union to utilize the Western technology that it has acquired or may acquire in the future. After a limited treatment of the acquisition of technologies of proliferation concern (for the reasons noted above), the chapter examines the role of the intelligence community in the export control policy process and concludes by identifying major implications and making specific recommendations.
SOVIET AND WTO TECHNOLOGY ACQUISITION EFFORTS PRIOR TO 1990
Since 1981, the collection and analysis of intelligence pertaining specifically to decision making on national security export controls has been the responsibility of the Technology Transfer Intelligence Committee (TTIC). The TTIC is an interagency committee, under the aegis of the director of central intelligence, composed of representatives of the various intelligence-gathering agencies as well as other relevant federal agencies, such as the Department of Commerce and the U.S. Customs Service. It has coordinated the collection and analysis of information on foreign efforts to acquire controlled technology and end products and integrate them into military systems. Until recently, the TTIC's work has focused predominantly on the technology acquisition efforts of the Soviet Union, the other former WTO members, and the People's Republic of China.
The TTIC is not a regulatory or decision-making body. Its function is to gather, analyze, and disseminate to appropriate government agencies the most accurate and current intelligence relevant to a particular case, export control list, or policy review decision. Such analyses can then be considered, along with other political and economic factors, in reaching a final government position.
Given the momentous political changes in Eastern Europe that were dramatized in November 1989 by the opening of the Berlin Wall, it is useful to focus on the year 1990 as a point of demarcation in evaluating the nature
and extent of Soviet and other WTO technology acquisition efforts in the West. Prior to 1990, the intelligence services of the Soviet Union and the other WTO countries acted largely in concert to target, acquire, and pass on to the Soviet military a wide range of specific high-technology products, keystone equipment,* plans, blueprints, and technical data developed and produced in the West.
The determination of specific acquisition requirements under this reportedly massive effort† was (and continues to be) directed by the Military Industrial Commission (VPK) in concert with the Soviet intelligence services, principally the Committee on State Security (KGB), the Chief Directorate of Military Intelligence (GRU), the State Committee for Science and Technology (GKNT), and the Ministry of Defense.1 Once a list of acquisition requirements was established, the next steps were to target potential sources of supply, usually in the private sector, and to identify possible channels and methods of acquisition. The latter typically involved a variety of mechanisms, including (a) espionage, (b) illegal sales, (c) diversions from the originating country and via reexport through third countries,‡ and (d) legal acquisition through purchases in third countries.
Espionage in this context was (and is) covert activity intended to obtain information about end products and technologies pertinent to military systems. Espionage has continued to be a major source of concern to the United States and the other members of the North Atlantic Treaty Organization (NATO), despite the political changes within the Warsaw Pact. There have been a series of well-publicized "spy scandals" since 1986, some of which reportedly did serious damage to U.S. and Western security. While some covert collection was directed at obtaining design plans or technical data—or, in some cases, individual or limited numbers of pieces of militarily critical hardware—the bulk of the effort was targeted directly at obtaining infor-
The term keystone equipment was developed in the 1976 report of the Defense Science Board Task Force on Export of U.S. Technology, also known as the Bucy report after its chairman, J. Fred Bucy.2 The term is used to denote critical technological equipment, such as sophisticated machine tools, necessary to manufacture other products.
The Academies' Allen panel reported that "during the Tenth Five-Year Plan (1976–1980), the Soviet acquisition program satisfied more than 3,500 specific collection requirements for hardware and documents for the 12 Soviet industrial ministries. Of the items acquired in the West, the Soviets estimated that approximately 70 percent were subject to national security export controls. This proportion was apparently much the same during the Eleventh Five-Year Plan (1980–1985). . . ."3 Evidence reviewed by this panel suggests that this collection effort continued unabated during the most recent five-year plan (1985–1990) as well.
Third countries are nonproscribed countries that are not part of CoCom.
mation regarding U.S./NATO military systems, cryptological practices, and/or military plans of operation.*
There was no definitive evidence in 1990 to indicate that the Soviet Union had changed the level of overall resources or manpower it devotes to intelligence collection by means of espionage. And there is little basis to assume that the Soviets will cease to use espionage for the foreseeable future as one means of acquiring strategic technology. But the underlying point is that export controls cannot—and are not designed to—prevent this type of acquisition effort. Rather, they are designed to restrict sales (direct or indirect) of strategic technology and equipment.
Illegal sales occur in situations in which a manufacturer, its agent, or a subsequent buyer conspires to sell—or has immediate knowledge of the sale of—a controlled item directly to a targeted country. Although there may be some instances in which an illegal sale takes place entirely without an export license, in most cases export licenses are sought but the technical parameters and capabilities of the equipment and/or the final destination are purposely misrepresented. Neither the intelligence community nor export licensing officials have precise information on the frequency of illegal sales in recent years, but it appeared that the advent of improved export licensing practices (including increased penalties) in the major CoCom (Coordinating Committee for Multilateral Export Controls) countries, together with heightened awareness on the part of manufacturers and resulting efforts to improve internal compliance procedures, limited the number of cases.
The so-called Toshiba-Kongsberg case,† the most widely publicized (and perhaps most damaging from a national security standpoint) illegal sale of the 1980s, was a sobering reminder to manufacturers of the likely consequences of being tied to an illegal sale. In fact, the case resulted in the inclusion of language in the Omnibus Trade and Competitiveness Act of 1988 directing that companies convicted of selling CoCom-proscribed items
to controlled countries without a license were to lose their export privileges to the U.S. market for a minimum of two years and a maximum of five years.
Another and probably more common channel for acquiring controlled technology was diversion of exported items, either with or without the direct knowledge of the manufacturer. In this situation, an item is exported legally to a purchaser in a nonproscribed destination (sometimes in another CoCom country) and then reexported to a proscribed destination, often through a series of intermediate nonproscribed destinations. In some cases, exporters or their brokers in CoCom and/or third countries actively participate in diversions, usually by constructing elaborate networks of ''front companies" and mail drops to obscure the export paper trail.
A more common situation. however, is the legal export of an item to a bona fide purchaser in a third country, who either immediately reexports it to a proscribed country—sometimes without ever "landing" the item in the third country—or "adds value" to the item, often by incorporating it as a component, and then reexports it to a proscribed country.
As the result of diplomatic pressure from the United States, the CoCom countries have made continuing efforts under the Third Country Cooperation initiative, modeled on U.S. bilateral agreements, to convince third countries to cooperate with CoCom export control policies by preventing reexports of CoCom-controlled items. However, evidence reviewed by the panel, which was corroborated by information, collected during the panel's fact-finding missions in Asia and Europe,* indicated that such diversion practices continued through 1990. There are many reasons for this, among the most important of which have been that (1) the bureaucratic machinery of many third-country governments has been technically ill-prepared and insufficiently financed to undertake adequate enforcement, (2) there has been a notable absence in these countries of monetarily significant penalties for violation, (3) many of these countries have been nonaligned and some have not shared the threat perceptions of the CoCom countries, and (4) illegal reexport trade can be highly lucrative. Thus, despite continuing efforts by the United States, other countries—both in and outside CoCom—have countenanced, if not actively facilitated, the diversion of technology.
See Appendix D.
With the growing diffusion of technology and technical and manufacturing know-how beyond the advanced industrialized countries, it was no longer necessary in some cases for a proscribed country to resort to any of the mechanisms and channels described above to acquire certain types of strategic technology. For example, even prior to the 1990 CoCom decision to decontrol most personal computers, it was readily possible to make legal purchases of personal computers manufactured entirely in countries such as Taiwan or South Korea (unless the machine contained controlled U.S. components). Evidence from a wide variety of sources indicates that the Soviet Union and other proscribed countries are fully aware of and have exploited these opportunities.
There are obvious limits to what the United States or the CoCom countries together can do to constrain third countries from exporting indigenously manufactured, and in some cases indigenously designed, products. Moral and economic pressure has been successful with some third countries—particularly, for example, the industrialized neutral countries of Europe—but less so with others.
Based on the sum of the evidence that it reviewed, both from classified and published sources, the panel was unable to identify any overall change in the late 1980s in the efforts by the Soviet Union and its WTO allies to acquire technology in the West for incorporation into military systems.
CHANGES IN THE NATURE AND PATTERNS OF SOVIET AND WTO TECHNOLOGY ACQUISITION SINCE THE BEGINNING OF 1990
Despite the urgent need on the part of the Soviet Union for advanced technology to speed the process of economic modernization, and in some cases the transformation to a market economy, it is too soon to assess the characteristics of the post-Cold War technology acquisition "problem." Nevertheless, some clear indications can be identified.
Because so much of the modern technology and equipment needed by the Soviets is now dual use, by 1990 diversions and legal sales in third countries had become the predominant acquisition methods and accounted for the majority of successful acquisition efforts. The role of diversions and legal sales is likely to increase, relative to espionage, in the future.
One factor may be a net loss to the Soviets of a significant amount of the cooperation they previously received from the intelligence services of some of their former allies, principally Czechoslovakia, Hungary, and Poland. A
second factor may be that. specifically with regard to the acquisition of dual use items, as opposed to military information and/or hardware, other channels and methods of acquisition simply may have become easier and cheaper, given the diffusion of technology and sources of supply.
Among the most significant changes associated with the end of the Cold War and the dissolution of the WTO as a military alliance is the partial disbandment of the state security apparatus in Poland, Hungary, and Czechoslovakia, as well as the total dissolution of the Stasi in the former German Democratic Republic. In fact, the newly democratic governments in those countries have indicated a willingness to establish barriers against the reexport (i.e., diversion) to the Soviet Union of technology that is needed for East European economic modernization and development. The disbandment of these intelligence-gathering organizations removes much of the non-Soviet Warsaw Pact (NSWP) government-sponsored capability to acquire strategic technology, either through espionage or diversion. Thus, as noted above, even though the Soviet Union is continuing active collection efforts, it is apparently no longer able to call upon the active, official cooperation of its former allies.
On the other hand, there are countertendencies even within the NSWP countries. First, there is what the panel considers may be a short-term phenomenon: the potential for continued collection efforts by former employees of disbanded intelligence services, either on a free-lance basis or under the sponsorship and direction of the Soviet intelligence services. It will take some time to dismantle fully a system—and indeed, a means of livelihood for thousands of people—that has been in place for more than 40 years. For the time being, these "free-lance" collection efforts, which could operate largely detached from national political processes, are a continuing source of concern. A second countertendency is that growing business pressures, as the NSWP countries attempt to integrate themselves into the global market, may create incentives to permit (if not condone) active programs of industrial espionage.
Soviet intentions and practices in the post-Cold War era are far more difficult to determine, again in part because it is simply too soon for new patterns to have emerged. In fact, on the basis of the quantity and quality of the evidence it reviewed, the panel found it impossible to draw any valid conclusions about either positive or negative changes. The available evidence is anecdotal in nature and must be interpreted in light of the possibility that there has been some (perhaps temporary) loss of human intelligence sources as a result of the dissolution of the formerly Communist regimes in Eastern Europe. On the other hand, some of the disruption in human intelligence channels, to the extent that any has occurred, may be offset by the increase in and ready availability of information provided by emigres from the Soviet Union and the East European countries.
SOVIET UTILIZATION OF ACQUIRED WESTERN TECHNOLOGY
As noted previously in the Allen report, the intelligence community continues to find it difficult to determine the nature and extent of the impact of technology obtained in the West on the development of Soviet military systems. Unfortunately, no further sources of information have become available on an unclassified basis that are comparable to the "Farewell papers,"* which provided a unique inside look at the fulfillment of the individual needs of Soviet defense manufacturing ministries.
In some respects, it appears that the chaos and disruptions associated with perestroika in the Soviet Union have exacerbated the difficulties the Soviets have long had in overcoming internal barriers to effective diffusion and application of technology obtained in the West. Yet, the Soviets have continued to be successful at obtaining one or more copies of a particular item, which in some cases may have removed key manufacturing bottlenecks in their military industry (e.g., access to the Toshiba-Kongsberg numerically controlled, multiaxis machine tools) or may have given them confidence that a specific design approach had been successful in the West. It is also likely that the opening of the Soviet economy to Western investment may facilitate more transfers of technology to Soviet military industries.
In general, however, the Soviet effort to acquire Western technology has not succeeded in reducing the West's technology lead, according to Defense Department and intelligence community estimates. As suggested by the data in Tables 4-1 and 4-2, the United States held a superior position in 15 of 20 militarily related technology areas in 1990, compared with 13 of 20 areas in 1986 (as reported by the Allen panel). Although the more recent data indicate that the Soviets have for the first time attained superiority in two technology areas, an analysis of net change by sector indicates an overall increase in the U.S. technological advantage. On average, the Soviet Union continues to remain at least 5 to 10 years behind in most key technology areas. The situation remains different, however, for fielded military systems, regarding which the strong Soviet emphasis on the development and production of military hardware has resulted in many effective weapons systems.
In all likelihood, the Soviet Union will continue to maintain—and more important, to modernize—its strategic forces, albeit at a somewhat reduced size, despite recent and prospective arms control agreements. The situation
TABLE 4-1 Relative U.S. Versus USSR Standing in 20 Militarily Related Technology Areas, 1986
with respect to the modernization of conventional forces is somewhat harder to predict, given the current economic and political disruptions within the Soviet Union and the external pressures that now exist as a result of the successful completion of the Treaty on Conventional Forces in Europe. In modernizing either strategic or conventional forces, however, the Soviet Union will for the foreseeable future continue to remain dependent on certain Western technology that it cannot produce itself or could produce only at inordinate expense.
TABLE 4-2 Relative U.S. Versus USSR Standing in 20 Militarily Related Technology Areas, 1990
ACQUISITION OF TECHNOLOGIES OF PROLIFERATION CONCERN
Within recent years, the intelligence community has begun to devote increased attention to monitoring and analyzing the acquisition of proliferation technologies—namely, advanced conventional weapons, missile delivery systems, and technologies associated with nuclear, chemical, and biological weapons—by countries considered to represent potential national security threats to the United States and to international security. In some respects, the development of such data is even more difficult than in the case of Soviet acquisition efforts due to (a) the multiplicity of areas and actors that potentially require attention, (b) the difficulty of developing reliable sources of human intelligence, and (c) the ease with which the acquisition and use of some of these technologies are justified for commercial purposes or can be misrepresented or hidden entirely.
A good generic example of such covert development is chemical weapons. It is often difficult to determine with certainty that commercially available chemicals used in agriculture are instead being diverted as precursors to the manufacture of chemical weapons. Similarly, a commercially justifiable interest in space launch technology can mask the development of a ballistic missile delivery capability. Despite such difficulties, much is known about the evolving nature of the threat in each proliferation area.
THE ROLE OF THE INTELLIGENCE COMMUNITY IN THE EXPORT CONTROL POLICY PROCESS
Intelligence has played an important continuing role in the export control policy process since the early days of the effort after World War II, and particularly since the 1981 founding of the Technology Transfer Intelligence Committee. In this regard, one of the most valuable contributions of the intelligence community has been to develop "red side" methodological approaches that have made it possible to examine Soviet technology acquisition efforts from the standpoint of Soviet, rather than Western, military needs and capabilities. Such "red side" thinking is not yet sufficiently institutionalized in the intelligence community's support for U.S. export control policy, however. As a result, policy analysis for export controls has tended to continue to use "mirror image'' assumptions regarding Soviet requirements for Western technology, based on Western, instead of Soviet, military systems and capabilities.
In this period of rapid change and uncertainty within the Soviet Union and Eastern Europe, of conflicting desires in the West to advance these countries technologically in order to help them economically (while not increasing the military risk to the West), and of growing proliferation threats from other sources, the quality, accuracy, and timeliness of intelligence information are ever more critical. The obstacles to the collection of such information by overt and covert means are not insignificant. The panel took note of the continuing paucity of reliable data on changes in the nature and pattern of Soviet technology acquisition efforts since 1989. It also found an even more serious lack of reliable data on the scope and extent of technology acquisition in the West by countries that are the focus of proliferation concern.
THE IMPLICATIONS OF THE INTELLIGENCE EVIDENCE
The end of the Cold War and the opening of both sides to access by nationals of the other, together with new interest in market economics and industrial modernization on the part of many former WTO countries, create
the opportunity for an increase of military and industrial espionage. Under these circumstances, the application of appropriate analytic resources is required in order to obtain an accurate assessment of Soviet technology needs and thus be in a position to undertake a responsive calibration of the U.S. export control program that blends the twin goals of strategic technology protection and economic cooperation.
In the past, Soviet and other WTO technology acquisition efforts in the West were driven almost exclusively by military needs and requirements that were unattainable (or attainable only at great expense) within the bloc. Today, however, because the Soviets may seek to acquire technology for commercial as well as military reasons, there is a need for more thorough assessments of Soviet requirements so that the West can differentiate between various motivations for technology acquisition and can apply more appropriate policy responses.
The demands on the intelligence community in the "new era" regarding acquisition of Western technology by traditional and new potential adversaries have increased and are likely to continue to do so for the foreseeable future. Some of these new responsibilities likely will require either the reallocation of existing human and financial resources or supplemental resources. It is also likely, however, that insofar as the Soviet and former WTO countries are concerned, the intelligence community can take advantage of the increased ease of access to develop a better understanding of the planning dynamics that condition their efforts to acquire and apply Western technology.
The intelligence community should expand its efforts to develop reliable assessments of changes in the nature and pattern of current Soviet technology acquisition efforts—and current patterns of Soviet utilization of the technology it acquires—and should make this information available to the relevant agencies of the U.S. government and to the countries participating in CoCom.
The intelligence community should continue and expand its recent efforts to develop an analytic capability to examine Soviet technology acquisition and utilization from the standpoint of the actual state of Soviet technology progress, both civilian and military, and the internal dynamics of technology diffusion within the Soviet Union and East European countries.
The executive branch should give serious consideration to reallocating resources—and/or identifying additional resources—to develop better information about the acquisition and utilization of
sensitive Western technology by countries of proliferation concern. *