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China seeks Czech military technology through Europe's backdoor
Jiri Kominek, The Jamestown Foundation, China Brief
12/17/2005

Despite U.S. and EU embargos on the transfer of sensitive military technology to Beijing that followed the Tiananmen Square crackdown in 1989, China continues to seek such technology through the “backdoor” from EU member-states. Government officials and various segments of business communities in certain EU member-states maintain ties to regimes that are at least ambivalent, if not outright hostile, toward the United States, including Iran, North Korea, and China. Accordingly, a number of EU countries, particularly from the former East bloc, disagree with embargos on the export of military technology to China. Moreover, no EU member-state perceives a direct military threat from China as does the U.S., which could potentially be embroiled in a full-scale war with China over Taiwan.

Two trends have served to raise pressures for closer defense cooperation between European firms and China. Following the end of the Cold War, the global market for defense equipment shrunk and many European defense manufacturers began looking to export to non-traditional customers. Most regard China as an excellent opportunity to boost profits. Beijing, for its part, realizes that Europe wants to do business and has expressed a willingness to open the door on the condition that it is given access to the latest Western defense technology, especially in the areas of high electronics and others in which China’s indigenous defense industry lags behind those of the West.

Another impetus for expanded defense trade is ideological. Many political parties, particularly those in former Warsaw Pact states, make no effort to disguise their affinity with the Chinese Communist Party (CCP), as well as their displeasure with the United States and its current foreign policy.

Beginning in late 2003, the Chinese government started negotiations with a Czech electronics firm, ERA Pardubice, about the possibility of acquiring the VERA-E Passive surveillance system (PSS), an advanced electronic intelligence (ELINT) platform. VERA-E would provide the People’s Liberation Army (PLA) with a quantum leap in its command, control, communications, computers and intelligence (C4I) capabilities. The Chinese government and ERA were involved in the final stages of the transfer process during the first half of 2004, and were seeking permission to export six systems worth approximately USD 60 million from the Czech government (Czech News Agency [CTK], March 16, 2004).

Yet following massive intervention by then U.S. Secretary of State Colin Powell to Cyril Svoboda, Czech Minister of Foreign Affairs, the Czech government finally decided to block the sale in autumn of the same year by refusing to issue ERA an export license (Jane’s Defence Weekly, October 20, 2004). The official reason given for the blockage of the sale by the Czech government was that the technology could potentially harm the security of a fellow NATO ally.

The Czech-made VERA-E is a highly advanced sensor that is able to detect aircraft, ships, and ground vehicles from signals emitted by their radar, communications, and other onboard electronic systems. VERA-E itself emits no signals, and therefore cannot be detected by sensor platforms of opposing forces. The U.S. government had grave concerns that the Chinese could use the VERA-E PSS to monitor the movements of U.S. Navy ships and aircraft in the Straits of Taiwan. Another concern was that China could reverse engineer the technology for re-export to “rogue” states such as Iran or North Korea, or to other potentially hostile state and non-state actors including international terrorist organizations.

Despite the official cancellation of VERA-E to China, however, concerns have arisen that Beijing continues its efforts to discreetly secure the technology from the Czech Republic by incrementally acquiring components and know-how through the “backdoor” (Euro, June 2005). This can be done under the guise of civilian technology transfer whereby components of the VERA-E could be masked as elements of a passive air traffic management system for use at China’s rapidly expanding civilian airports, thus bypassing EU export controls. ERA manufactures several non-military passive radar systems for use at civilian airports whose parts and technology are similar to those of VERA-E. The most crucial components for VERA-E consist of software in the form of logorhythmic source codes that could be easily and surreptitiously transferred (Euro).

Czech Prime Minister Jiri Paroubek reportedly discussed transfer of the VERA-E during his visit official visit to China in May (Euro.). Moreover, Czech industry continues in its efforts to export non-military technologies in the form of turbines for hydroelectric power plants, machine tools and automobiles to China, and it is feared that Beijing could use this as leverage to acquire the VERA-E system as part of ongoing efforts to boost its military capabilities.

A large number of Czech politicians, especially members of the ruling Social Democratic Party (CSSD) and Communist Party (KSCM), continue to maintain close ties to the CCP (Mlada Fronta Dnes April 18). Many of these politicians enjoy a broad-base of growing support among their Czech constituencies and have publicly called for the lifting of the EU embargo on China. The Social Democrats are more comfortable in cooperating with the Communists than they are with more rightist political parties. Many Social Democrats are in fact former communists themselves, and are alleged to secretly maintain strong ties to their former party as well as to members of the international communist party.

Furthermore, a number within the Social Democratic government have expressed their anger that the U.S. offered little compensation for scuttling the VERA-E deal. After the Czech government bowed to Washington’s wishes, the U.S. Department of Defense agreed to purchase only one VERA-E system for testing purposes (Jane’s Defence Weekly, July 6). A second system was sold to Estonia in September, apparently with some funding from the U.S. DoD (Ibid.).

Many in the Czech Republic thus hold the view that cooperating with the U.S. in upholding the arms embargo is bad for business. Their calls appear to be part of a growing consensus within the EU, with politicians from the broader political spectrum issuing calls to lift the embargo—especially those from member-states whose domestic defense industries are lobbying for arms sales to China.

China is fully aware of this domestic political pressure and is taking steps to exploit the situation to its fullest extent. China offers incentives such as the possibility of allowing Western European companies from the non-defense sector greater access to its growing domestic market. A number of European and North American companies that design and manufacture both civilian and defense sector technology continue to export to China, and are involved in a number of highly sensitive, top-secret military programs for the PLA, PLA Air Force (PLAAF), and PLA Navy (PLAN).

One such example is the highly secretive Z-10 attack helicopter, which could not have been developed without the direct participation and assistance of a number of high-level European and North American aerospace companies. Photos of the Z-10 were released on the Internet by Chinese journalists, not only confirming the existence of the program but also proving that Western companies played a direct role in its development. August Westland, the Anglo-Italian helicopter manufacturing consortium, for example, helped develop the main rotor for the Z-10. EADS and Eurocopter assisted in the development other Chinese helicopter programs with military applications, and it is suspected that technology from these programs was transferred to the Z-10. Pratt & Whitney Canada has supplied turbo shaft power plants for the program, while the Lord Corporation in Cary, North Carolina has supplied bearings and other technologies critical in the Z-10’s rotor design. These companies have been able to bypass international embargoes on supplying military technology by officially aiding China in developing civilian programs (Jane’s Defence Weekly, April 13).

Conclusion

The Chinese government has increased defense spending to modernize its armed forces and upgrade capabilities. New acquisitions include air-to-air refueling aircraft, advanced ballistic missile technology, and new naval vessels armed with advanced supersonic anti-ship cruise missiles. Apart from Taiwan, future flashpoints could include oil and trade routes in the South China Sea and the Straits of Malacca.

In order to increase military capabilities, China will require the assistance of Western companies from various aerospace and electronics industries, among others. Western companies, especially those from EU member-states, provide China with valuable and sophisticated technology. Even more worrisome from the perspective of Western security analysts is the possibility that China could reverse engineer much of the technology that it is procuring from the West for re-export to potentially hostile state and non-state actors.

The EU should carefully consider the consequences of allowing its defense firms to export sensitive military technology to China. Defending corporate profit can be at the expense of national security, and this short-sided position can have long-term international repercussions.

Jiri Kominek is a Prague-based independent journalist and consultant who regularly contributes to the Jane's Information Group and Royal United Services Institute (RUSI). He is a specialist in defense, security, and economic issues in Central and Eastern Europe and the former Soviet Republics.

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