Introduction

On 31 January 2004, Pakistani nuclear scientist Abdul Qadeer Khan was arrested for his central role in the black market network that had sold Pakistani nuclear weapons technology to Iran, North Korea and Libya and had offered the technology to Iraq and possibly other, as yet unknown, countries. After a televised confession on 4 February in which he claimed sole responsibility for his proliferation activities, Khan, who is revered as a national hero, was officially pardoned by President Pervez Musharraf. But he remains under house arrest in Pakistan. One week later, President George W. Bush announced that, through the work of US and UK intelligence agencies, Khan’s clandestine international network had been unravelled and his top associates put out of business. The network, which had tentacles in over 20 countries and sold Pakistan’s nuclear technology for at least 16 years, was finally exposed by the 2003 interdiction of the German-registered ship BBC China, with its cargo of uranium enrichment equipment bound for Libya’s nuclear weapons programme. In the words of then CIA Director George Tenet, A.Q. Khan was ‘at least as dangerous as Osama bin Laden’.

 

How could Khan’s nuclear proliferation have taken place? Could it happen again, through other clandestine networks? Was the Khan network unique, and to what extent does the Pakistani government bear responsibility for it? How damaging were Khan’s sales? What questions about his activities remain unanswered? Have the governments of the many countries implicated and those concerned about nuclear proliferation done all they can to prevent a reoccurrence? How effective are the preventive steps that have been taken?

 

To address these questions, this dossier begins by analysing Khan’s role in leading Pakistan’s uranium enrichment programme. It assesses the emergence of state procurement networks and their exploitation of the private sector in nuclear technology. To explain what accounted for Khan’s proliferation activity, chapter one describes Pakistan’s nuclear programmes and the procurement network on which they depended. The chapter also assesses Pakistan’s current nuclear capabilities and evaluates the likely evolution of its minimum deterrence requirements, and what is known about Pakistan’s current nuclear policy, doctrine and planning.

 

Pakistan was not the only country to evade nuclear export controls to further a covert nuclear weapons programme. Chapter two provides an overview of the extensive procurement networks operated by Iraq and now Iran, as well as the black market activity that has contributed to possible nuclear weapons development programmes in nine other countries over the past half century. The fact that several of the foreign merchants involved in supplying Pakistan’s nuclear programme also sold to Iraq, India and other nations is an illustration of the manner in which the individual nodes of proliferation networks often work independently. Several countries continue to pursue clandestine procurement programmes.

 

Khan’s evolution from an importer to an exporter of nuclear technology and materials is detailed in chapter three. This chapter analyses the role his network played in assisting the nuclear programmes of Iran, North Korea and Libya, in addition to his offer to Iraq, and considers to whom else the network might have offered nuclear technology. The chapter also analyses the attitudes and probable complicity of individual Pakistani leaders in at least some of Khan’s sales and assesses the conditions that allowed Khan to operate as he did, as well as his motives for doing so.

 

In addition to putting Khan under house arrest, Pakistan detained over two dozen of his associates for questioning. The last one was freed in May 2006, when Pakistan declared the case ‘closed’. Chapter four recounts the end of the Khan network and what happened to Khan’s associates in Pakistan and abroad, few of whom to date have received punishment commensurate with the scale of the proliferation.

Having put Khan out of business, tightened up its nuclear command and control structure, and implemented tough new export control legislation, Pakistan argues that it has taken all the necessary corrective measures, and should not be further penalised for the transgressions of a few of its citizens. Pakistan is a critical partner in Washington’s ‘global war on terror’ and, as the United States moves towards implementing an unprecedented nuclear cooperation agreement with India, Pakistan asks for non-discriminatory treatment. Chapter five assesses the organisational, legal and policy reforms Pakistan has made to prevent further onward proliferation. Because Pakistan still relies on foreign purchases for its own nuclear weapons programme, it faces mixed incentives with regard to clamping down on Khan’s associates.

 

The smuggling of nuclear material is potentially more insidious than the black marketing of the technology to produce it. Chapter six analyses the major trends observed in nuclear trafficking over the last 15 years, the materials involved, the geographical distribution of the recorded incidents and the major smuggling routes. Much of this nuclear smuggling appears to be supplier driven, initiated by individuals looking to turn a profit. By contrast, relatively little is known about the demand side of the illicit nuclear materials market.

Chapter seven addresses the efforts that nations have taken, both individually and collectively, to unravel black market networks and to preclude their replication. In particular, the chapter analyses the export control regulations of the countries with firms implicated in the activities of the Khan network. These include seven countries that have long been primary suppliers of nuclear or nuclear dual-use items, as well as six countries not traditionally considered primary suppliers. United Nations Security Council Resolution 1540, passed in 2004, requires all nations to enact and implement strict export control legislation to prevent the proliferation of weapons of mass destruction. To date, however, the implementation of that resolution has been decidedly uneven.

 

Taking into account how the Khan network and other black market merchants were able to avoid international controls, chapter eight discusses policy options, including diplomatic measures, export control improvements and other actions that governments may wish to consider in order to prevent future clandestine nuclear transfers.

 

When nuclear proliferators have succeeded, it partly has been because economic and political trends have trumped the collective efforts of concerned governments to erect barriers to the spread of sensitive technology. To understand this, it is necessary to recount the basic history and elements of the global non-proliferation regime.

 

Almost all of the countries that have pursued nuclear weapons programmes obtained at least some of the necessary technologies, tools and materials from suppliers in other countries. Even the United States (which detonated the first nuclear weapon in 1945) utilised refugees and other European scientists for the Manhattan Project and the subsequent development of its nascent nuclear arsenal. The Soviet Union (which first tested an atomic bomb in 1949) acquired its technological foundations through espionage. The United Kingdom (1952) received a technological boost through its involvement in the Manhattan Project. France (1960) discovered the secret solvent for plutonium reprocessing by combing through open-source US literature. China (1964) received extensive technical assistance from the USSR.

 

In 1953, US President Dwight D. Eisenhower proposed the creation of an International Atomic Energy Agency (IAEA) that would both control and develop the use of nuclear energy. The UN established the autonomous IAEA in 1957. In addition to promoting the peaceful application of nuclear energy, the IAEA was assigned the function of applying safeguards (including reporting requirements, audits and on-site inspections) to verify that existing nuclear facilities were used exclusively for peaceful purposes. It did so initially through bilateral agreements which were specific to certain named facilities.

 

Meanwhile, the United States promoted nuclear energy through the subsidised sale of US nuclear technology and material – the result of Eisenhower’s ‘Atoms for Peace’ programme. Other countries then joined the nuclear export business. Among the early sales, Canada and France sold research reactors to India and Israel respectively, both of which went on to unilaterally apply them to weapons-development purposes.

After France and China joined the nuclear club, many countries began to examine ways to halt the spread of nuclear weapons, an effort that culminated in the signing of the Treaty on the Non-Proliferation of Nuclear Weapons in 1968. The Nuclear Non-Proliferation Treaty (NPT), as it is commonly called, imposed various obligations on its signatories when it came into force in March 1970. The five nuclear weapons states (NWS) pledged not to transfer nuclear weapons nor ‘in any way to assist, encourage, or induce any non-nuclear weapons state to manufacture or otherwise acquire … or control’ such devices (Article I). In turn, each non-nuclear weapon state party undertook not to receive any such transfer, nor ‘to manufacture or otherwise acquire’ or ‘to seek or receive any assistance in the manufacture of’ these items (Article II). In addition, these states also agreed to accept IAEA safeguards on all ‘source or special fissionable material’ within the territory of the state or under its control (Article III.1). The nationwide, full-scope safeguards required by the NPT greatly expanded upon the agency’s bilateral, facilities-specific safeguards. In Article III.2 of the NPT, all states party also forgo the provision of: ‘(a) source or special fissionable material, and (b) equipment or material especially designed or prepared for the processing, use or production of special fissionable material, to any non-nuclear weapons state for peaceful purposes, unless subject to IAEA nationwide safeguards’. The burden of controlling proliferation thus falls on safeguards, not export controls.

 

As of the beginning of 2007, 168 of the nearly 188 states party to the NPT have signed or approved safeguards agreements with the IAEA, with 157 having acceded to or put these agreements into force. The five NWS comply with voluntary safeguards agreements covering some facilities, but these are largely symbolic and the nuclear material therein is not safeguarded in perpetuity. All 67 NPT non-NWS that are known to possess significant nuclear capabilities (nuclear power plants, research reactors, fuel-cycle research and development facilities or other nuclear fuel subject to safeguards) have full-scope safeguards agreements in force, as does Taiwan. Non-signatories of the NPT India, Israel and Pakistan have facility-specific safeguards agreements, as does North Korea, whose 2003 withdrawal from the NPT remains in contention. If official commitment to the NPT and its associated safeguards programmes alone could prevent the proliferation of nuclear weapons, then transnational proliferation networks would have little room for manoeuvre. Unfortunately, an official commitment to nuclear non-proliferation does not always translate into effective measures to curb the problem.

Concerned about the vagueness of some terms of the NPT, in 1971 15 exporting countries took it upon themselves to interpret what equipment actually fell under the treaty’s control. The Zangger Committee, named after its first chairman, Claude Zangger of Switzerland, agreed to a ‘trigger list’ of items whose export would activate IAEA safeguards. The list, tied directly to the NPT, has been updated over the years, but remains non-binding.

 

The Zangger Committee, now totalling 36 members, remains active, but has largely been superseded by the Nuclear Suppliers Group (NSG) another informal, consensus-based mechanism which from the beginning included France (at the time outside the NPT). The NSG, originally known as the London Club, was formed in 1975 in response to India’s 1974 detonation of a ‘peaceful nuclear device’. India had acquired much of its nuclear infrastructure from abroad through official assistance programmes, including those of Canada, France and the United States. The seven original NSG members created a set of guidelines restricting the export of items and technology specially designed for nuclear use (also called ‘trigger list’ items, published by the IAEA in 1978 in what became Part 1 of INFCIRC/254). The group did not reach a consensus to establish controls on dual-use items (those goods that have both nuclear and non-nuclear applications). In other ways, however, the guidelines went beyond the NPT, controlling the technology to develop or make any of the items it covers, and items that can be used to manufacture nuclear weapons themselves.

 

While the international reaction to India’s 1974 nuclear test and concerns over Pakistan’s intentions ensured that exporting states would no longer sell sensitive nuclear facilities to states of proliferation concern, several proliferators – particularly Pakistan and Iraq – found alternative sources. Exploiting legal loopholes, setting up front companies and falsifying end users, they did not need to rely on the nuclear programmes of other states to provide entire facilities, nor to smuggle nuclear components; they simply ordered dual-use items from otherwise legitimate manufacturers and used them to construct the equipment themselves. As explained in chapter one, many of Khan’s transactions apparently followed the letter, if not the spirit, of national non-proliferation laws, while in other instances the distinction between illicit and legitimate transactions proved difficult for exporters or government regulators to discern. Coupled with cooperation from China, which was not a party to the NPT until 1992, this approach allowed Pakistan to acquire sufficient technology and material to cross the nuclear weapons threshold perhaps as early as 1985. That same decade, Iraq brought its nuclear programme to within a few years of being able to produce nuclear weapons, before its invasion of Kuwait and the subsequent Gulf War effectively halted any progress it had made.

 

After the 1990–91 Gulf War, when it was realised how Iraq had been able to further its nuclear weapons programme including through the acquisition of dual-use items not covered by the NSG guidelines, the primary supplier countries sought to make significant improvements to their export controls on specialised nuclear and dual-use items. In particular, in 1992 NSG members finally adopted guidelines to control the export of dual-use items (Part 2 of INFCIRC/254, which includes 67 categories of items). The NSG also decided in 1992 to make IAEA full-scope safeguards a condition of the supply of trigger-list items. The NSG began to meet regularly again to exchange information to modify its guidelines and lists of controlled items, and it even initiated a real-time electronic denial notification database. In 1994, the NSG further strengthened its requirement for the original supplier’s consent for the re-transfer of trigger-list items from any state which did not require full-scope safeguards as a condition of supply. At the same time, the NSG also adopted the so-called ‘non-proliferation principle’, whereby a supplier, notwithstanding other provisions in the guidelines, should authorise a transfer only when satisfied that the transfer would not contribute to the proliferation of nuclear weapons. There is no standard interpretation of this clause, however. It should also be noted that the NSG is an entirely voluntary export control regime. Some developing countries see the dual-use controls as discriminatory, because they are not rooted in the NPT, and as a reinforcement of the separation between nuclear ‘haves’ and ‘have-nots’.

The lessons learned from the discovery of Iraq’s clandestine nuclear weapons development programme also led to steps to strengthen the IAEA safeguards system in order to increase the likelihood of detecting undeclared activities. In Iraq, North Korea and other countries where full-scope safeguards were in force, IAEA inspectors only had the right to visit declared sites and to verify the non-diversion of declared nuclear material. In 1995 the IAEA Board of Governors approved a new voluntary legal authority called the Additional Protocol to a state’s safeguards agreement. A state that accepts the Additional Protocol is required to provide the IAEA with a wide range of information covering all aspects of its nuclear fuel cycle-related activities, to grant the agency broader access rights and to enable it to use the most advanced verification tools. The reporting requirements include information on the manufacture and export of sensitive nuclear-related goods. Despite hopes that this strengthening of the safeguards system would become a universal norm, as of early 2007, only 111 states and Taiwan had signed an Additional Protocol, and only 78 of these had ratified it. Thirteen states with significant nuclear activities (including Brazil, Argentina and Egypt) had yet to sign.

 

The lessons that exporting countries learned were based on the fundamental premise that states orchestrated the production and procurement of dual-use items to enhance their nuclear weapons capabilities. In the 1960s, when states negotiated the original NPT, governments exercised close control over non-state actors, such as private companies, which were involved in civil or military nuclear programmes. The acquisition of nuclear weapons seemed beyond the capacity of non-state actors not involved in these state programmes. However, several fundamental economic trends during the 1980s and 1990s created new opportunities for proliferators to obtain nuclear dual-use items.

 

Firstly, the national economies of many less-developed countries became more open to foreign investment and export-oriented growth. Low labour costs and liberal government regulations, among other factors, made these countries attractive for foreign direct investment and the creation of new manufacturing capabilities. As most of the foreign companies that entered these markets had home offices in countries with relatively tight controls on the export of nuclear goods and technologies, this process alone did not create an immediate proliferation threat. However, many of the countries hosting foreign investment had policy requirements for partnering with local enterprises and other similar methods aimed at enhancing the economic capabilities of their domestic companies, policies that led to the diffusion of technologies. Consequently, by the late 1990s, more states than ever before could produce dual-use items.

 

Secondly, these global patterns of production had a symbiotic relationship with the emergence of new trade flows in which goods increasingly passed through giant ports specialising in transit, transshipment and re-export services. While Japan, the United States and other developed countries expanded their existing port facilities, much more spectacular growth occurred in ports in the less-developed world, particularly in Asia. Throughout the 1980s and 1990s, most governments advertised the efficiency and security of their ports, and often associated these ports with free trade or similar types of special economic zones. Under these conditions, the Khan network could camouflage its logistical operations and specific transactions more easily.

Thirdly, officials in several of the emerging economies had reasons not to control the production of or the trade in dual-use items. Some officials believed (and may still believe) that introducing controls on production or exports violated the tenets of successful export-oriented growth. Other officials viewed such controls as discriminatory attempts to stifle their legitimate development aspirations. Still others felt that, in any case, nuclear proliferation posed a greater threat for others than for them. This meant that the Khan network could find some countries where governments might overlook, ignore, or even encourage their local activities.

Fourthly, globalisation and rapid advances in information technology brought new intangible methods of transferring sensitive information, particularly via the internet. Such transfers, along with the application of IT to industrial processes, allowed for complex manufacturing operations to be performed in states which may otherwise have lacked indigenous technological expertise. Technical innovations – such as the biennial doubling in processing speed resulting from the increased compression efficiency of integrated circuits – also complicated those efforts to regulate dual-use trade which defined thresholds for the goods and technologies requiring export licences. Exporters in many states often dispute the effectiveness of controls, especially when the goods or technologies in question are widely available in other countries. The vast majority of the growing volume of globalised trade in dual-use technology is innocuous, which further complicates any monitoring of illicit trade.

 

In sum, the governments and international bodies that seek to control the trade in nuclear technology and related goods face a daunting task. By analysing both the historical and current activities of nuclear procurement networks, this dossier seeks to assist those engaged in this laudable effort.

 

A core mission of the International Institute for Strategic Studies is the presentation to a wide public of the best available information on military capabilities worldwide. For nearly half a century, the IISS has sought to provide facts upon which intelligent policy analyses can be based. Given the greater saliency of nuclear proliferation and other transnational threats, there is a demand for more information on non-state actors and on their possible links with state actors. Our task is to gather all the information available on these challenges and to put it in the public domain, making the best possible efforts to analyse dispassionately the proliferation challenges that confront the international community. By so doing, we can explain the bases on which governments and other actors should be developing policy.

 

The IISS Strategic Dossier series emerged as an important aspect of this work. In September 2002 the IISS published Iraq’s Weapons of Mass Destruction: A Net Assessment, followed in January 2004 by North Korea’s Weapons Programmes: A Net Assessment and in September 2005 by Iran’s Strategic Weapons Programmes: A Net Assessment. This report retains the proliferation focus, analytical rigour and methodology of those dossiers, but differs in important ways. Firstly, the subject of this study is not a single country, but the global problem of proliferation networks and nuclear black markets. Secondly, although Pakistan was the centre of the most harmful of those proliferation networks, it is certainly not in the same ‘rogue state’ category as the above trio. To the contrary, it is a long-time partner of NATO countries and a critical ally in the struggle against al-Qaeda. The world has come to know, however, that the proliferation threat does not come only from hostile states. Finally, the report focuses only on nuclear trafficking, not the trade involving chemical or biological weapons (for which there is little open-source data), nor conventional weapons or missiles (except in the context of Pakistan’s nuclear weapons).

 

The production of this publication relied on the same process followed for the previous strategic dossiers. Recognised subject experts were invited to draft chapters on each of the relevant topics, and these were then subjected to review and comment by a range of experts in the field. Private comments were sought from current and retired government and international officials, and non-governmental experts. The editor, aided by a research assistant, then produced new drafts, incorporating these comments and additional information, and the original authors were given a final opportunity to respond to the penultimate drafts. The IISS would like to thank the various individuals who have contributed their knowledge and experience to the compilation of this dossier. The responsibility for the information and judgements that we present is, unambiguously, ours alone.