Will Washington Penalize Cairo for Missile Trade with Pyongyang?

U.S. agencies are now debating whether there is enough evidence of missile trade between Egypt and North Korea to impose penalties against the two countries under U.S. law. “This is an active issue,” a U.S. State Department official tells the Risk Report.

Under the 1990 U.S. Missile Control Act, the President can impose sanctions when he determines that a country has sold missiles or missile-related equipment or technology to a country that does not adhere to the Missile Technology Control Regime. Neither Egypt nor North Korea is an MTCR member, nor do they adhere to its guidelines. U.S. sanctions apply to a foreign exporter or importer acting wholly outside the United States and are triggered by a Presidential finding, the responsibility for which has been delegated to the Under Secretary of State for Arms Control and International Security Affairs. If a company knowingly contributes to missile development in a non-MTCR country, the United States may:

— Ban the company’s sales to the United States for at least two years if the contribution was substantial.

— Ban the company from buying items on the U.S. Munitions List, which includes conventional arms and most missile-related components, for two years or more.

— Ban U.S. missile-related exports to the company for two years if the company sold less sensitive items.

By definition, U.S. penalties apply to all subunits of a penalized entity.

Egyptian-North Korean missile trade

Missile cooperation between Cairo and Pyongyang has been going on for 15 years. “This missile partnership is not new,” says a State Department official, “but the question is what exactly is sanctionable activity?” According to the Missile Control Act, the transfer must happen after November 1990, when the law first took effect, and the equipment transferred must be listed on the Missile Technology Control Regime Annex. In addition, the transfer must make a “contribution” to Egypt’s Scud program and this contribution must be knowing. “If the items that have been shipped are MTCR items, then it probably won’t be too hard to prove that a knowing contribution was made,” says a U.S. official, “but the challenge is to know exactly what was shipped to Egypt this year.”

Sanctions against the Egyptian Ministry of Defense, which runs Cairo’s missile development program, could be costly. Each year, Cairo receives more than $1 billion in U.S. military aid and buys U.S. munitions. U.S. Department of Commerce records show that in 1992 alone, the United States sold Egypt an estimated $400 million in armaments and military-related construction. Egypt is currently co-producing with the United States almost 500 M1A1 Abrams battle tanks at a site outside Cairo known as ‘Factory 200’. General Dynamics Land Systems (GDLS) received about $1 billion in Pentagon contracts to help build the plant, train the workers and conduct the co-production effort. Egypt and the United States are now negotiating another contract for producing additional tanks after the current production run is complete by the end of next year. If Washington decides to impose penalties against Cairo, U.S. exporters would not be allowed to sell additional munitions-related products to Egypt’s Defense Ministry or any other Egyptian organization involved in the missile trade with North Korea. This could affect millions of dollars in business.

Sanctions against Pyongyang would be minimal because the United States does not conduct arms trade with North Korea. In 1992, Washington did impose penalties against two North Korean missile makers for their sales to Syria: LYONGAKSAN MACHINERIES AND EQUIPMENT EXPORT CORPORATION and CHANGGWANG CREDIT CORPORATION. Both companies would probably be sanctioned again if Washington should decide that the recent missile-related shipments to Egypt violate U.S. law.