PEACEFUL NUCLEAR COOPERATION WITH CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000501210003-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 20, 2016
• Document Release Date: March 24, 2008
• Sequence Number: 3
• Publication Date: December 17, 1982
• Content Type: MEMO

Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5 ..,.,.~s,_.~,~~,
j Exrcvtivs Am~i+1`a'~
SECRET
With SECRET/NODIS Attachment
To: NSC
ACDA
December 17, 1982
- Mr. Michael O. Wheeler
- Mr. Joseph Presel
Commerce - Mrs. Helen Robbins
DOD - COL John Stanford
Energy - Mr. William Vitale
OSTP - Dr. George Keyworth
Subject: Peaceful Nuclear Cooperation with China
Attached is a final draft of the options paper on Peace-
ful Nuclear Cooperation with China. A Senior Interagency
Meeting will be held on December 21 to endorse the draft so
that it may be forwarded to the White House. The meeting
will be at 3:00 p. m. in Room 7516 of the Department of State.
Please telephone the names of your agency's representatives
to Sheila Lopez, 632-5804, by cob Monday, December 20.
L. Paul Bremer, III
Executive Secretary
NSC review completed - unredacted segments may be declassified
As stated.
DOE review completed.
SECRET
DELL: OADR
State Dept. review
completed
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
DRAFT MEMORANDUM
SECRET/NODIS/NOFORN/ORCON
ISSUE FOR DECISION
Whether to pursue peaceful nuclear cooperation now with
China and, if so, under what conditions?
ESSENTIAL FACTORS
A combination of considerations must be carefully
weighed in determining whether to cooperate with China's
peaceful nuclear program. Cooperation would provide both
political and economic benefits. It also would allow us to
work with the UK which sees its participation in China's
Guangdong reactor project as an important way of influencing
the future status of Hong Kong. But unless the difficulties
posed by China's nuclear exports practices and its assistance
to the Pak nuclear weapons program can be resolved, peaceful
nuclear cooperation would pose a major problem in light of
the requirements of the Atomic Energy and Nuclear Non-proli-
feration Acts, and your non-proliferation policy.
Background
China may purchase two power reactors for Guangdong
province with the participaton of a Hong Kong ultility.
The British have requested U.S. approval to export Westing-
house reactor technology to China for this project. The
French, as well as U.S. firms, also are interested in providing
the Guangdong reactors. China also is planning to build
a small indigenously designed (300 MWe) power reactor near
Shanghai and has sought US and other foreign assistance for
technology and equipment.
China has exported nuclear materials without inter-
nationally accepted safeguards or controls, e.g. to South
Africa and Argentina. Such exports threaten to undermine
common suppliers' policies which are essential to our non-
proliferation goals.
SECRET /NODI S /NO FORN /O RCON
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
SECRET/NODIS/NOFORN/ORCON
In April 1981, the Chinese Ambassador told Deputy
Secretary Stoessel that China would not assist other
nations to develop nuclear weapons. Because of this
summer's intelligence, General Walters traveled to
Beijing in early August to seek confirmation of that
statement. Foreign Minister Huang and Premier Zhao,
however, would only repeat that China's views on the
nuclear issue differed from those of the U.S. Although not
explicitly disavowing the Ambassador's assurance, each
avoided reiterating .that China would not assist any other
country in the development of nuclear weapons. They asserted
that China has no information that Pakistan is developing
nuclear weapons and they emphasized that China strongly
shares our interest in peace and stability on the subcon-
tinent.
Ambassador Hummel pressed the Chinese once again for
this assurance on August 30. On September 28, Vice Minister
Han Xu called in Hummel and reiterated the two points made
to Walters.
Given the recent information, we have not actively
sought to negotiate a nuclear cooperation agreement with
China. We have told the British that we cannot, under
current circumstances, approve their request to transfer
Westinghouse technology to China. We have told Westinghouse
that we may not legally license U.S. nuclear exports to
China, and we have not approved requests for the export of
U.S. nuclear technology.
Legal Constraints
Either type of Chinese assistance described above to
the Pak weapons program legally would preclude direct U.S.
export of reactors or nuclear materials or equipment, unless
the President determines that China has taken steps representing
sufficient progress toward terminating these activities.*
* /
Section 129 of the Atomic Energy Act precludes the export
of nuclear materials and equipment or sensitive nuclear
technology to any nation found by the President to have,
after March 1978, "assisted, encouraged or induced any
non-nuclear-weapon state to engage in activities involving
source or special nuclear material and having direct
significance for the manufacture or acquisition of nuclear
explosive devices, and has failed to take steps which, in
the President's judgement, represent sufficient progress,
toward terminating such assistance, encouragement or
inducement."
SECRET/NODIS/NOFORN/ORCON
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
SECRET/NODIS/NOFORN/ORCON
This prohibition can be waived, subject to Congressional
review, if the President determines that not permitting
such exports would be seriously prejudicial to the achieve-
ment of U.S. non-proliferation objectives or otherwise
jeopardize the U.S. common defense and security. We
believe that at this time there is an insufficient basis
for the President to make either determination.
In addition, to export U.S. nuclear reactors and fuel to
China we would .need to negotiate an arrangement for peaceful
nuclear cooperation. There are a number of legally mandated
provisions that must be in such an agreement, such as peaceful
use assurance and retransfer consent, but IAEA safeguards
are not required in an agreement with a nuclear.-weapon
state. The President must find that the agreement promotes,
and does not constitute an unreasonable risk to, the
U.S. common defense and security. The agreement is
subject to Congressional review.
Nuclear reactor technology, in contrast to reactors or
fuel, may be exported by U.S. companies or their licensees
if the Secretary of Energy, with the concurrence of the
Department of State, finds the export will not be inimical
to U.S. interests.
Policy Considerations
Chinese readiness to export nuclear materials
without internationally accepted controls and Chinese
assistance to the Pak weapons program are serious threats to
U.S. non-proliferation goals and a major obstacle to peaceful
nuclear cooperation. We have repeatedly stressed at home
and abroad that we will not sacrifice our longstanding commit-
ment to nonproliferation in pursuit of commercial gain.
But we need to deal with the issue of peaceful nuclear coope-
ration with China in a way that can help us to change China's
damaging non-proliferation and nuclear exports practices..
Peaceful nuclear cooperation would be politically
valuable because it would show the Chinese that we are
prepared to expand our relationship in areas of mutual
benefit. The British believe that UK participation would
contribute to closer Chinese ties with the West.
Were it feasible, peaceful nuclear cooperation also
would offer substantial commercial benefits. Due to~the
depressed state of the U.S. nuclear power industry and the
decline of domestic demand, foreign sales of nuclear power
plants and associated equipment and technology have taken on
great significance. The Department of Commerce estimates
that the total potential value far foreign firms of direct
SECRET/NODIS/NOFORN/ORCON
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
SECRET/NODIS/NOFORN/ORCON
nuclear cooperation with China could be $1.7 billion, and
that the potential value of indirect cooperation could be
$410 million. (See Attachment A). Were it possible to go
forward in the nuclear area, that would also demonstrate our
ability to follow through and could lead to broader economic
cooperation in other areas.
Any cooperation arrangement will be subject to
Congressional review and scrutiny. Although not a legal
impediment, a cooperation arrangement without IAEA safeguards
would be criticized both as setting a poor non-proliferation
precedent and as potentially assisting a Communist
country's military nuclear program. It would also be
seen by many non-nuclear weapons states as discrimination in
favor of a nuclear weapons state. Finally, unless the matters
of Chinese export practices and assistance to the Pak weapons
program were resolved in a way consistent with our non-
proliferation goals there would be intense Congressional
opposition to cooperation.
Even if all the legal and political obstacles were
resolved satisfactorily, we would still need to proceed
carefully in order to minimize possible adverse regional
implications that could follow public and Congressional
debate of this issue. In particular, "if the Indians were
to conclude that the Chinese were involved in the Pakistani.
nuclear weapons design effort the intelligence community
expects a severe Indian reaction that could range from
renewed nuclear testing to direct military action against
Pakistan."*
ANALYSIS OF OPTIONS
i. Resolve outstanding non-proliferation issues before
seeking nuclear cooperation with China
We would continue our non-proliferation dialogue with
China, but would not seek to go forward now with exports
of US material, equipment or technology for the Chinese
reactors currently under consideration. If China changed
its nuclear exports practices and ceased assistance to
the PAK weapons program, we would consider such cooperation
favorably later.
SECRET/NODIS/NOFORN/ORCON
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
SECRET/NODIS/NOFORN/ORCON
-- Resolving outstanding non-proliferation issues before
seeking nuclear cooperation would clearly avoid the risk
or perception that we would sacrifice our non-proliferation
posture for commercial gain.
-- If continuing non-proliferation discussions resulted in
satisfactory assurances and no evidence to the contrary
emerged, we would seek to cooperate on.future projects.
-- This approach entails considerably fewer political costs
or opposition in Congress, and' it would avoid a public
debate over the extent of Chinese aid to the Pak nuclear
weapons program which would hurt broader US interests in
China and in Pakistan.
-- By not making clear our desire at least in principle
to engage in peaceful nuclear cooperation, we do not provide
any additional incentive for China to change its non-prolifera-
tion and nuclear export policies.
-- We lose the opportunity which would be afforded by US
nuclear cooperation to improve the overall climate
of cooperation between countries, and to contribute to
political and economic ties.
-- Refusal to permit UK firms to use licensed US technology.
is a matter of concern to PM Thatcher.
-- There is a high likelihood that if the US does not sell
the reactors, France alone, or perhaps with UK partici-
pation, will, despite our efforts to dissuade them.
2. Pursue nuclear cooperation with China on the basis. of
adequate non-proliferation assurances and other conditions.
We would make clear to the Chinese our desire to cooperate
in this field and conclude a peaceful nuclear cooperation
agreement allowing transfer of nuclear technology, reactors,
and fuel if we (1) get convincing assurances from the highest
levels that China would not assist any country to obtain
nuclear weapons, and there is no evidence leading to a contrary
conclusion; (2) obtain Chinese agreement to adequate"bilateral
procedures which assure that our exports are not used for
any military purpose and obtain the other provisions needed
in an agreement for peaceful nuclear cooperation; and (3)
obtain a Chinese commitment to adhere to international
norms in its own nuclear exports, including IAEA safeguards.
SECRET/NODIS/NOFORN/ORCON
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
SECRET/NODIS/NOFORN/ORCON
We would need to consider carefully how best to approach
the Chinese in order to achieve these three objectives.
Before concluding an agreement or licensing exports, the
President would need to be in a position to determine that
China had "taken steps which represent sufficient progress
toward terminating" assistance to Pakistan's "activities
involving source or special nuclear material and having
direct significance for the manufacture or acquisition of
nuclear explosive devices." Thus, we would also need to
assess carefully the validity of Chinese assurances, and the
impact of a Presidential determination on our relations
with Pakistan.
-- Making clear our readiness to cooperate if certain con-
ditions are met could foster our non-proliferation objectives,
while providing a legally sound and more politically acceptable
basis for realizing the political and economic benefits of
peaceful nuclear cooperation with China.
-- Not approving exports unless the outstanding non-
proliferation problems are resolved would lessen criticism
at home and abroad that we have sacrified our longstanding
non-proliferation goals in pursuit of commercial advantage.
-- It would show the UK that we are willing to continue trying
to pursue a positive approach to its request for cooperation.
-- Even cooperation on these terms would face Congressional
opposition as well as skepticism about the basis of the Presi-
dential determination.
-- The public debate could harm broader US interests in China
and South Asia.
-- Having accepted Chinese assurances and pursued cooperation,
if we were to receive further reports of activities contrary to
those assurances, US-China relations and US credibility in the
nuclear field could be damaged.
-- Once engaged in discussions, there would be pressures to
settle for less than adequate assurances, or to dismiss evi-
dence suggesting that the Chinese were not living up to
their assurances, in order to meet the commercial time-table.
SECRET/NODIS/NOFORN/ORCON
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
SECRET/NODIS/NOFORN/ORCON
3. Allow only the transfer of US nuclear technology to China
by U.S. firms or their licensees while continuing to seek
Chinese non-proliferation assurances to permit later reactor
and fuel exports.
We would not pursue any direct exports of significant
nuclear material or equipment. But we would not oppose
technology exports by U.S. firms or their foreign licensees,
e.g., in the UK and France, even though not receiving prior
assurance from China concerning assistance to weapons pro-
grams in non-nuclear-weapon states or its nuclear export
practices. The export of nuclear reactor technology would
require a finding by the Secretary of Energy, with concurrence.
of the Department of State, that they "will not be inimical
to the interests of the United States." It would not require
approval of Congress. We would continue the nuclear dialogue
in an attempt to provide a basis for more extensive cooperation
later.
-- Cooperation with China on nuclear reactor technology
could help demonstrate our ability to work with China, while
having at least some economic benefits.
-- Actual cooperation, even if limited, could provide an
entree to influence Chinese nuclear exports practices and
non-proliferation policy.
-- Authorizing use of U.S, technology by UK firms would
enhance the chances for UK participation in the Guangdong
project, improving the atmosphere for resolution of Hong
Kong's future status.
-- US opposition to the transfer to China of US technology
by foreign licensees might further antagonize our European
allies in the wake of the Soviet pipeline issue.
Cons:
-- The Administration would be seen domestically and abroad
as not serious in its commitment to non-proliferation when
it permits technology exports even though reactors and fuel
exports are inconsistent with US law.
-- Unless the outstanding non-proliferation issues are satis-
factorily resolved, Congressional and public reaction to
even technology exports would be hostile, and likely to
engender substantial debate about the China/Pak connection
to the detriment of our overall Asian and non-proliferation
policies.
SECRET/NODIS/NOFORN/ORCON
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
SECRET/NODIS/NOFO RN/ORCON
-- Even limited exports without credible assurances would
greatly increase pressures for passage of pending legislation
restricting nuclear exports.
-- There would be continuing pressure if a joint U.S.-U.K.
project were established to allow US export of components
for this project, with even greater political costs.
-- Since this option would not meet China's preference for
direct reactor or major component exports, and another
country would be the supplier, we would lose the non-
proliferation and economic benefits of more extensive
exports.
4. Seek to establish nuclear cooperation with China
despite legal and political obstacles without any
non-proliferation conditions..
We would continue our non-proliferation dialogue with
the Chinese, including seeking to dissuade China from assisting
the Pak weapons program, but we would not require assurances
from China on this point or assurances about Chinese nuclear
exports as conditions for cooperation. However, we would
require adequate bilateral procedures to ensure our exports
are not used for any military purpose, and other provisions
needed in an agreement for peaceful nuclear cooperation.
This option would require either (a) a Presidential deter-
mination that China has taken sufficient steps to terminate
assistance to the Pak weapons program or (b) a Presidential
waiver under Section 129 .of the Atomic Energy Act (subject -
to Congressional review) on grounds that not permitting
nuclear exports to China would be seriously prejudicial to
the achievement of U.S. non-proliferation objectives or
otherwise jeopardize U.S. common defense and security.
-- If upheld by Congress, we would realize the political and
economic benefits of nuclear cooperation.
-- Actual cooperation could provide leverage to move the
Chinese on non-proliferation issues.
-- At this time there is insufficient basis for either a
Presidential determination or waiver.
SECRET/NODI S/NO FO RN /O RCON
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
SECRET/NODIS/NOFORN/0 RCON
-- Seeking cooperation without non-proliferation assurances
would guarantee very strong public and Congressional
criticism, including debate over the China-Pak connection,
which would damage our relations with China and our strategic
interests in Southwest Asia.
-- The credibility of this Administration's commitment to
non-proliferation would be destroyed.
S EGRET /NO DI S/NO FORK /O RCON
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
Options for U.S. Nuclear Exports to China
Maximum Estimated Value of U.S. Exports ($M) fpr Guangdong
(2x10p0) Nuclear Power Plant
Engineering
and Consulting
Fuel
Technology
Nuclear Steam
Supply Systems
Technology
Turbine
Generators
Other Equipment
Total
A
Current Legal
Provision:
0
0
0
0?
0
0
B
Technology Transfe
to China: ~
r:
$300m
$lOm
$60m
$30m
$
Om
m
i"?U.S Licensees;
0
10
60m
0
O
$70m
C
Maintain
Cooperation
D
Export
Technology &
Equipment:
Directly
Same as D if cooperation is achieved within reasonable time frame
300 500 900 300 200 $1.7b
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
 Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5
EXECUTIVE SECRETARIAT
Routing Slip
ACTION
INFO
DATE
INITIAL
1
Dcl
2
DD
_
3
EXDIR
4
D/ICS
5
DDI
6
DDA
~
DDO
8
DDS&T
9
Chm/NIC
10
GC
11
IG
12
Compt
13
D/EEO
14
D/Pers
15
D/OEA
19
C/IPD/OIS
20
/;; tom..
21
22
Executive Sec/r(etary
Approved For Release 2008/03/24 :CIA-RDP84B00049R000501210003-5