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Viewing cable 07BEIJING5360, BILATERAL NONPROLIFERATION DIALOGUE: SMALL GROUP

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Reference ID Created Released Classification Origin
07BEIJING5360 2007-08-15 09:29 2011-08-30 01:44 SECRET Embassy Beijing
O 150929Z AUG 07
FM AMEMBASSY BEIJING
TO SECSTATE WASHDC IMMEDIATE 0808
S E C R E T BEIJING 005360 
 
 
E.O. 12958: DECL: 08/15/2027 
TAGS: PARM PREL ETTC MTCR CH
 
SUBJECT: BILATERAL NONPROLIFERATION DIALOGUE: SMALL GROUP 
DISCUSSION OF A WAY FORWARD ON NONPROLIFERATION SANCTIONS 
 
Classified By: Political Minister Counselor Aubrey Carlson. 
Reasons 1.4 (B) and (D). 
 
1. (S) Summary:  In a small group meeting concluding 
bilateral nonproliferation talks August 13, ISN PDAS McNerney 
outlined a U.S. proposal to work cooperatively to end 
proliferation by specific sanctioned Chinese companies with a 
view toward eventually removing sanctions on companies that 
demonstrate a sustained commitment to nonproliferation.  To 
this end, McNerney conveyed the U.S. desire to begin a 
dialogue with China North Industries Corporation (NORINCO) to 
establish whether it can serve as a model company for other 
Chinese companies to follow.  MFA Arms Control and 
Disarmament Department Director General Zhang Yan responded 
positively to the U.S. proposal and encouraged the United 
States to also begin a dialogue with China Great Wall 
Industries Corporation (CGWIC), which McNerney agreed would 
be productive.  Zhang pledged to press NORINCO and CGWIC to 
work constructively with the USG.  End Summary. 
 
2. (S) Principal Deputy Assistant Secretary of State for 
International Security and Nonproliferation Patricia McNerney 
met August 13 with MFA Arms Control and Disarmament Director 
General Zhang Yan in a small group at the conclusion of 
bilateral U.S.-China Nonproliferation meetings (septels) to 
discuss developing a cooperative mechanism for enhancing 
U.S.-China nonproliferation engagement.  Drawing from the 
interagency-approved strategy on ending Chinese 
proliferation, McNerney expressed U.S. desire to create an 
incentive structure for Chinese companies currently under 
U.S. sanctions to work with the USG with a view toward ending 
their proliferation activities and ultimately removing 
existing sanctions.  She highlighted that sanctioned Chinese 
companies can choose to take the "good path" of ending 
proliferation and establishing an internal compliance program 
(ICP) to prevent future proliferation.  The benefits of 
taking this path, she explained, could be public recognition 
by the USG of the company's efforts, waiving of U.S. 
sanctions as appropriate, and enhanced international 
recognition leading to normalized business relations with the 
United States and globally.  On the other hand, the McNerney 
continued, Chinese companies can also continue on a "bad 
path" that would lead to continued U.S. sanctions and public 
stigma. 
 
3. (S) As part of this proposal, McNerney indicated that the 
USG would like to use the China North Industries Corporation 
(NORINCO) as a test case.  She stated that the USG would like 
to invite senior NORINCO officials to Washington to start a 
dialogue that would address NORINCO's business model and 
strategic plan, its ICP process, the nature of existing 
business with Iran and other countries of concern, and 
efforts taken in relation to UN Security Council resolutions. 
 The invitation would be extended exclusively to NORINCO's 
senior corporate officials, who would be asked to be 
unaccompanied by advisors from the University of Georgia or 
the China Arms Control and Disarmament Agency.  The ultimate 
goal of this engagement, she explained, would be to ensure 
strong nonproliferation credentials by large Chinese 
companies currently under nonproliferation sanctions, and to 
remove current sanctions on such companies.  This effort, she 
said, would meet common U.S. and PRC nonproliferation 
objectives. 
 
4. (S) In parallel, PDAS McNerney suggested that the U.S. and 
Chinese governments develop a framework for enhanced 
cooperation and transparency.  She indicated that the USG 
would prepare for China a nonpaper outlining such 
cooperation, including enhanced transparency of enforcement 
measures by China and strengthened EXBS and other 
government-to-government cooperation aimed at enhancing 
enforcement actions.  That nonpaper could serve as the basis 
for reaching agreement on a framework for enhanced 
cooperation between the two governments. 
 
5. (S) DG Zhang responded enthusiastically to the U.S. 
proposal, characterizing it as encouraging, constructive and 
innovative.  He stated that the PRC has been working with 
large Chinese companies under U.S. sanctions, such as NORINCO 
and China Great Wall Industries Corporation (CGWIC), to 
improve their performance and to put in place internal 
mechanisms to prevent proliferation.  According to Zhang, 
these companies have made tremendous efforts in this area, 
have learned important lessons from past proliferation 
activities, and would not engage in problematic transactions 
in the future.  As such, he urged the USG to begin engaging 
with both companies, which McNerney agreed would be a good 
approach.  Zhang further believed that USG engagement with 
these companies, the possibility of the removal of sanctions, 
and the prospect of U.S. business opportunities would create 
incentives for the companies to terminate business with Iran 
and/or North Korea.  This would create positive results for 
other companies to follow, Zhang said.  He also proposed that 
the United States could attach conditions in the event that 
these companies re-engage in proliferation activities.  He 
pledged to press the companies to engage constructively with 
the USG and to be transparent and forthcoming.  Lastly, Zhang 
expressed his belief that positive engagement between the USG 
and NORINCO and CGWIC, and possibly additional entities, 
would strengthen the hand of the MFA in nonproliferation 
vis-a-vis other PRC agencies on the issue of stopping arms 
trade with Iran and North Korea. 
 
6. (U) PDAS McNerney cleared this cable. 
RANDT 
 
 
NNNN 
 



End Cable Text