Hughes, Loral, the PRC, and the Strom Thurmond Act

In December 1992 the Chinese Long March 2E rocket failed to launch the Hughes-built Australian Optus B2 telecommunications satellite due to aerody­namic buffeting of the launcher’s fairing.14 Neither party would at first admit responsibility. Hughes conducted an independent investigation, and divulged information to the PRC suggesting ways in which it should modify the fair­ing by strengthening its structure. At a subsequent successful launch in August 1994 observers from Hughes noted that the fairing had been modified simply by adding rivets. This proved to be insufficient. The next launch of a Hughes satellite, the Asian Apstar 2 in January 1995, failed for the same reason as had the launch of Optus 2. This time the Chinese members of a joint accident review committee agreed that the cause of the failure was due to weaknesses in their fairing. The marginal improvement achieved by adding rivets was not sufficient to withstand the additional stress caused by the strong upper-altitude winds that buffeted the payload when it was launched in winter. Suitable corrective mea­sures were taken along the lines first proposed by Hughes—corrective measures that, some feared, would be invaluable for improving nose cones that protected nuclear warheads on Chinese ballistic missiles.

A Loral Intelsat 708 satellite was destroyed in the Long March commercial launch failure in February 1996. This time the PRC engineers quickly admitted responsibility. They suspected that the launch failure was probably due to a fault in the inner part of the inertial measurement unit (IMU) of the Long March 3B rocket guidance system, though telemetry data did not fully confirm this. The insurance company that had agreed to cover the imminent launch of an Apstar satellite (typically for about $50 million) demanded that an independent review committee be established. The committee comprised representatives from the PRC, Hughes, Loral, and Daimler Benz, and retired experts that had worked for British Aerospace, General Dynamics, and Intelsat. It placed great weight on the telemetry data, and suggested that the follow-up frame, rather than the inner part of the IMU (the preferred explanation by Chinese engineers), was respon­sible for the accident. The PRC confirmed that, indeed, a failure in the follow-up electrical servo unit was the cause of the launch failure.

Loral faxed a preliminary report of this finding to the PRC in May 1996. The State Department learned that the firm had disclosed information that some thought would significantly improve the guidance system on Chinese missiles, without first having it reviewed for sensitive content, and without an export license.

The Strom Thurmond Act signed into law in October 1998 took steps to regulate these practices. It devoted 6 pages out of 360 (Title XV. B) to a number of measures designed to control the export of satellite technology to the PRC.15 One of its most fundamental innovations (in Section 1513) was to remove the president’s authority to change the jurisdictional status of satellites and related items even if they had civilian applications. These were, and still are (August 2012), “the only dual-use items that are required by law to be controlled as defense articles.” Thus whereas normally “the President has the authority to authorize the easing of controls on items and related technologies that transition to predominately civil uses or that become widely available,” this did not now apply to satellite-related items. The export of all “satellites and related items” were put back on the US Munitions List and subject to the ITAR, and require Congressional action to remove them.16 The Strom Thurmond Act also called for new bureaucratic procedures to ensure compliance. It stipulated that any export licenses had to be accompanied by a Technology Transfer Control Plan that had been approved by the secretary of defense and an “encryption technol­ogy transfer control plan approved by the Director of the National Security Agency.” In response to accusations that security on the launch pad in China (often in the hands of private contractors) had been dismal while the satellite was being installed, the DoD was also called upon to monitor all aspects of the launch of an American satellite in a foreign country, including analyses of launch failure, “to ensure that no unauthorized transfer of technology occurs, includ­ing technical assistance and technical data.”

In March 2003, Hughes Electronics Corporation and Boeing Satellite Systems, charged with 123 violations of export laws, admitted that they had not obtained the required licenses for their dealings with the PRC. The firms acknowledged “the nature and seriousness of the offenses charged by the Department of State, including the harm such offenses could cause to the security and foreign policy interests of the United States.”17 Their $32 million civil penalty was the largest in an arms export case.

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