[IWAR] CRYPTO, CHINA satellite, espionage

From: 7Pillars Partners (partnersat_private)
Date: Tue Jun 23 1998 - 21:17:34 PDT

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    U.S. suspects Chinese after encoded circuit board disappeared from rocket
       New York Times
       WASHINGTON -- A secret encoded circuit board containing sensitive
       American technology was missing from a Chijese rocket that exploded in
       1996 and American officials said Tuesday they suspect that Chinese
       authorities took it.
       American military monitors had watched the launch of a Chinese rocket
       from southern China as it streaked toward space carrying a $200 million
       American communications satellite.
       But 22 seconds after liftoff on Feb. 15, 1996, the Long March rocket
       exploded, showering fiery debris, burning fuel, and chaos on a nearby
       Chinese village, where, by American accounts, as many as 200 civilians
       were killed.
       For five hours, American officials said, Chinese authorities barred them
       from rushing to the crash site, saying it was for their own safety. When
       the Americans finally reached the area and opened the satellite's
       battered but intact control box, a secret encoded circuit board was
       Now congressional investigators are asking whether there could be any
       explanation for the missing technology other than that the Chinese took
       ``The box is recovered, but the card is gone,'' Rep. Curt Weldon,
       R-Penn., said on Tuesday. ``We better call the Chinese on this issue.
       That is a very serious concern.''
       Weldon quoted a statement he said was given to him by the National
       Security Agency, which warned that: ``If the encryption board were
       reverse-engineered, the knowledge gained cowld be used to strengthen
       adversaries' knowledge'' of the devices the United States uses to
       safeguard its communications systems.
       A senior Defense Department official said on Tuesday night that he was
       not aware that the government had demanded that the Chinese account for
       the missing encoded card. ``We're not 100 percent sure they filched this
       encryption card,'' the official said. ``It may have just fallen out, but
       we have to assume they do have it.''
       At the hearing, Congress also disclosed that the Justice Department has
       begun an investigation of a second failed China missile launch that also
       involved an American satellite. This second inquiry is centered on the
       possible sharing of sensitive information with the Chinese without
       American government supervision.
       The disclosure of the missing encryption board was made at an unusual
       joint hearing of the House National Security and International Relations
       committees, opening a new front in Congress' inquiry into whether
       sensitive American space technology was transferred to the China and
       assisted Beijing's military.
       The new evidence promised to be a main focus of a special select
       committee the House created last weeks to investigate the wide-ranging
       China accusations, Weldon said.
       The new revelation also adds a new dynamic to an ongoing Justice
       Department inquiry into the matter. Federal investigators are trying to
       determine if the two satellite-makers, Loral Space & Communications and
       Hughes Electronics, divulged sensitive technology to Chinese rocket
       scientists during an analysis of the failed launch.
       The encoded circuit board, a 64-bit card, tells an orbiting satellite
       which way to point to receive and transmit signals to and from Earth.
       The State Department oversees exports of the encoded boards as
       militarily sensitive technology. But when the same components are
       embedded in a satellite, the whole unit falls under the export controls
       of the Commerce Department. A government auditor told a Senate inquiry
       earlier this month that the Commerce rules are looser than the State
       Government officials insist that American satellites launched on Chinese
       rockets are protected with armed, 24-hour American guards. But the
       Commerce rules provide little protection against sensitive technology
       being released in accidents like the February 1996 explosion.
       William Reinsch, an undersecretary of commerce for export
       administration, told a House hearing last Thursday that there ``there
       would not have been any effect on national security'' if Chinese
       engineers illegally obtained the encoded device.
       But the Defense Department said in a statement it provided to Weldon
       that the ``loss of the chips'' would actually have a ``minimal impact''
       -- not no impact at all -- on national security.
       In addition, according to Weldon, the National Security Agency, the
       government's code makers and code breakers, said that it had changed the
       encoded algorithms in satellite circuit boards after the failed
       February, 1996, launch.
       ``If there was only 'minimal impact' to national security, why did the
       NSA change the algorithms?'' Weldon asked today's witnesses from the
       State, Defense and Commerce departments, which included Reinsch.
       The administration officials did not have a ready answer.
       Tuesday's hearing also provided new details into the Justice
       Department's investigation of the role of American satellite makers in
       helping China's troubled rocket program.
       One year before the 1996 accident, a Chinese rocket containing a Hughes
       satellite failed, and Hughes did a study of that failure. The Commerce
       Department permitted Hughes to provide the study to the Chinese after
       the company assured the department that its review was done
       ``independently'' of the Chinese and the department determined that the
       review compliee with the license, according to testimony by Reinsch.
       Reinsch said the Justice Department had recently requested all its
       documents on the 1995 accident. Bert Brandenburg, a Justice Department
       spokesman, said the department's review of the 1995 study was part of
       their investigation into the 1996 study by Loral and Hughes.
       Marcy J.K. Tiffany, general counsel for Hughes, said company employees
       had held meetings with the Chinese to obtain data for the 1995 study and
       that the Commerce Department had reviewed the scope of those meetings to
       assure they would be in compliance with the license.
       Reinsch told the panel that the Hughes study would not help China's
       missile program because it only involved the integration of the Hughes
       satellite with the Chinese rocket.
       But Rep. Benjamin Gilman, R-N.Y. and chairman of the House International
       Relations Committee, questioned why the Commerce Department didn't seek
       advice from other agencies before allowing Hughes to share the report
       with China.
       ``You quietly authorized a United States company to share information
       regarding a Chinese launch failure in 1995 without sharing that decision
       with any other agency,'' he said.
       Reinsch replied, ``This was a judgment we made on our own.''
       Rep. Tillie K. Fowler, R-Fla., questioned why a Pentagon agency didn't
       seek additional expertise on another technology sale to China, which
       congressional and industry officials said involved Hughes.
       Ms. Fowler asked Pentagon officials about why they approved the 1996
       sale of encrypted ground station terminals to a Chinese military
       company, China Electronics Systems Engineering Corp.
       The terminals, called Vsats, are the heart of a clgsed telecommunication
       network in which the users, typically businesses, transmit data via
       satellite. The communications can be coded through separate equipment.
       Ms. Fowler wondered why officials from the Defense Intelligence Agency,
       who are supposed to be consulted on such technology transfers, were
       apparently not consulted.
       David Tarbel, the head of the Defense Technology Security
       Administration, the Pentagon agency responsible for reviewing technology
       transfers, said he would reply later to the inquiry. Tarbel did not
       return a reporter's phone call.
       Ms. Tiffany, the Hughes lawyer, said ``we comply with all American laws
       and restrictions in our overseas sales and those laws do not prohibit
       the sale of Vsats to the Chinese military.''

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