Long march reaches Long Beach

Insight on the News, Sept 8, 1997 by Timothy W. Maier

Why Long Beach? Twenty-nine other military bases have closed in California. But the China Ocean Shipping Co., or Cosco, wants the historic U.S. naval base in Long Beach, which scores of America's great warships have called home. The Clinton administration insists this will produce an economic boom, creating 600 jobs and dumping millions into the local economy. Critics claim the deal jeopardizes national security by allowing Beijing to create an espionage operation in the heart of a military high-tech industrial zone.

The sudden interest in this base by Cosco may have to do more with its next-door neighbor -- Sea Launch, an international venture led by the Russian rocket firm RSC-Energia, which plans to use it to launch rockets carrying satellites into orbit. Insight reported earlier this year that Cosco plans to use the old Long Beach Naval Base for a joint Chinese-Russian intelligence operation as part of a spy partnership formed when the two countries signed a secret agreement in 1992 (see "Why Red China Targets the Clinton White House"" May 26). All of this, Insight revealed, has been confirmed by U.S. intelligence sources working closely with the FBI.

Insight since has learned the rocket company involved in Sea Launch is controlled by the GRU -- the infamous Russian military-intelligence service -- as are all Russian space programs, according to both U.S. and former GRU intelligence officers. The concern is that Beijing, teamed with Russia, eventually will own a West Coast rocket-launching pad and a naval base on U.S. soil from which to transfer secret high-tech equipment back to the People's Liberation Army, or PLA, in sealed containers aboard huge Cosco ships.

Besides RSC-Energia, the space venture includes Kvaerner, a Norwegian shipbuilder, and NPO-Yuzhnoye, a Ukrainian rocket maker. The facility is adjacent to the U.S. military base where Cosco plans to build a 145-acre, $200 million terminal and on-dock rail yard. The space company's plan includes converting a 31,000-ton oil rig into a launch pad and a 650-foot ship into a rocket-assembly factory and mission-control center.

The Boeing Corp., which has a 40 percent stake in the project, has been warned by top intelligence experts about Russian military intelligence playing a role in this project, but Boeing chose to ignore the advice, says an intelligence source knowledgeable about Russia's space program. Boeing spokesman Tim Dolan says Sea Launch will be a "secure site" but declined to comment further.

High-tech ventures such as Sea Launch are very attractive to Cosco, according to Red China experts and findings of the congressional Task Force for Terrorism ad Unconventional Warfare. The task force has not gone public with its conclusions, but sources close to the investigation tell Insight that Cosco is known to work closely with the Chinese navy.

"Cosco has specific roles in the PLA's contingency plan of dominating East Asia and future war with Taiwan" by stealing sophisticated military technology, says one investigator. "Their primary goal is to get stuff out of here in peacetime. Their strategic thinking is very similar to the Japanese in the 1930s. Sooner or later they are going to confront us on who is going to be the boss out in East Asia."

The 600-ship Cosco fleet has had a checkered past:

* In 1991 the Far East Economic Review reported 20 battle tanks were transported to the brutal Burmese military regime aboard a Cosco ship.

* ln 1992 Cosco was fined $400,000 by the Federal Maritime Commission, or FMC, on charges of paying kickbacks to secure customers.

* ln 1992, 200 containers of North Korean rocket fuel bound for Pakistan were seized on a Cosco ship by Hong Kong customs agents.

* In 1993, 87 pounds of heroin were seized on a Cosco ship that was docked in Canada.

* ln December 1996, a Cosco ship rammed a crowded boardwalk in New Orleans.

* In March 1996, 2,000 AK-47 assault rifles bound for U.S. street gangs were seized on a Cosco ship in Oakland by U.S. Customs agents.

* In April the FMC launched an investigation into allegations Cosco is engaging in a price war to eliminate competition in strategic areas.

* Cosco consistently maintains it has no idea what it ships. Critics say it nearly is impossible to put anything on a Cosco ship without Beijing's knowledge. And the Clinton administration refers to incidents such as those above as isolated. A source close to the congressional task force says the White House is not telling the whole story "The AK-47 [incident] is not the first time and it is not the last time they smuggled something. It continues today. They are going to steal and ship it to China. You need a place to do the paperwork and that's the port. They will have their own military base to change labels and have no accountability. They don't care about money -- this is smugglers' haven."

Cosco supporters note the firm uses 37 other U.S. ports, including six with a major U.S. military presence, without appreciable incidents. But Richard Fisher, the Heritage Foundation expert on China, says docking at a port is not the same as controlling it. It's quite another story to control a shipping facility," Fisher says. "For one thing, this whole thing [Long Beach] puts an added burden on the FBI to monitor activities.'"