Export controls make global trading difficult

 - December 15, 2006, 5:56 AM

During the Cold War, the Coordinating Committee for Multilateral Export Controls (CoCom) produced the yearly list of items that U.S., European, and Japanese firms were enjoined not to sell to the Soviet Union or any of its client states. The system worked reasonably well, and Soviet military designers were forced to develop their own sophisticated guidance systems, precision machine tools and other advanced technology. In some areas of weapons system design–for instance radars and jet engines–the West maintained an edge throughout the period.

More recently, political and technology shifts have created disagreements between former Cold War allies over the control of high-technology exports to certain countries. The U.S. has also sparred with Russia and the newly independent post-Soviet republics over the same issue. China, Iran, Pakistan, India, Vietnam and Indonesia have all been sold weapons and defense technology that they could not have developed on their own.

The debate has been complicated by the availability today, of advanced commercial-off-the-shelf (COTS) components. The Lockheed Martin F-35 Joint Strike Fighter (JSF) uses many COTS components to reduce the cost of development. The fact that so much COTS hardware and software can be used in a weapon system has truly blurred the definition of what really is a “defense-applicable” or even a “dual-use” technology.

In 2003, Silicon Graphics (SGI) settled a dispute with the U.S. Government over export sales it made seven years earlier of Challenge L computer systems, upgrades, and peripheral equipment. These were shipped to the All-Russian Institute for Technical Physics (Chelyabinsk-70) in Snezhinsk, Russia. Chelyabinsk-70 is a nuclear laboratory operated by Russia’s Ministry of Atomic Energy that does research, development, testing, and maintenance of nuclear devices. SGI did not know that the middlemen in this sale were developing a systems architecture that allowed the computers to be run as parallel processors. The result was that this Russian design center now had super-computer type capability that is usually available only to U.S. nuclear weapons researchers.

Iranian Airshow

This past January, the U.S. made known its displeasure when European firms participated in the Iran airshow on Kish Island. At the same time, AgustaWestland, EADS and Eurocopter were all campaigning to win U.S. defense orders. In cooperation with Lockheed Martin, AgustaWestland subsequently won the new Presidential helicopter contest with the US101. But the U.S. Congress has considered a resolution that would bar any company that does business with Iran from participating in the US101 program.

The potential lifting of an European Union embargo on sales of sophisticated defense technology to China is another source of transatlantic tension. But the U.S. has a dilemma, should it wish to take sanctions against such a move. The U.S. and European aerospace industries are almost inextricably linked. To sever such links would destroy (for instance) the F-35 program–and a large piece of the U.S. aerospace industrial base in the process.

For the moment, the “10-percent rule” applies. Washington will disapprove the sale of aircraft and systems to countries it deems to be unfriendly, when U.S. content exceeds 10 percent. The rule has prevented Airbus from doing new business in Iran. Even with Rolls-Royce powerplants, Airbus airliners exceed 10 percent U.S. content. “We have to respect this embargo,” Airbus vice president sales Christopher Buckley told Aviation International News. Airbus does not plan any special effort to reduce the U.S. content for future potential sales. “It would mean a radical rethink for just one customer. We’d love to work with Iran Air, but we will not change the way we design and build our aircraft.”

But in recent years, some European OEMs have developed critical technologies in house and have even joined forces with Russia for better competitiveness. Snecma and NPO Saturn have teamed on the 14,000- to 18,000-pound SaM146 turbofan for the Russian Regional Jet. “This project can open up the small commercial jet market for us,” head of Snecma commercial aircraft engines division Jean-Pierre Cojan told AIN. The French company is using technology developed during the TECH56 program to improve the CFM56 engine, which is a joint program with GE. But, noted Cojan, “In TECH56, each party keeps the ownership of its work. There is no exclusivity. Snecma can use its technology on any other engine, and we have used some on the SaM146.”

Joint Engine

For the hot section, Snecma is using materials developed for the Rafale’s M88 engine. “We have our own single-crystal alloy for turbine blades. It’s a mix of various metals that we cast in France.” Cojan added that some U.S. suppliers are on the SaM146, for commercial reasons. But, he noted, “there is nothing [in the SaM146] that cannot be done in Europe.”

Since the beginning of 1990s, Thales has been working with MiG, Kamov, Sukhoi and Antonov. “We have had cooperation on the MiG AT, MiG-29, Su-27, Su-30, Su-30MK in Malaysia and other places. Today we are working on regional jets,” Thales Aerospace division senior vice president Francois Quentin told AIN.

“We make sure that we understand what the restrictions are in terms of export controls,” Quentin said. Thales has to comply with the French laws, European export control regulations and also U.S. law if applicable, he added. But the company has a strategy to avoid being subject to U.S. export control regulations.

But even the Russians have bowed to U.S. pressure. Former Russian president Boris Yeltsin curtailed military trade with Iran after Washington imposed sanctions on a number of Russian enterprises having business with Iranian organizations. The White House made Russia cancel a number of agreements, including license production of 100 Tupolev Tu-334 airliners worth $1.2 billion and deliveries of MiG-29 fighters.

Today, Russia is increasingly subject to U.S. pressure, as more U.S.-made components find places on Russian aircraft: navigation, communications and various subsystems.

There is also another quite effective way Washington uses to prevent the Russians from dealing with what the Bush Administration defines as capitals of the Axis of Evil, namely Tehran, Pyongyang and Damascus. A general designer spoke to AIN on condition of anonymity. “I have to think twice whether to go, say, to Tehran, to seek business opportunities there. The Americans monitor visitors to U.S.-unfriendly countries and often know who went there. They then get your name on bad-guys lists together with terrorists and criminals. This limits your further movements not just to U.S., but also Europe: these lists go to European security establishments, and these do not spend much time trying to figure out why this or that name is on the list. And you may well be refused permission to visit Europe.

“Those companies that have big contracts with Iran or other such clients often chose to stay with it since they have something to loose. But for those companies not yet present there, it is difficult to start business,” he added.