Monday, 27 August, 2007

by John Garnaut
Sydney Morning Herald

Last week a gang of white-haired, radiation-riddled peasants gave a demonstration of how the international nuclear safeguard regime applies to their small corner of China's uranium market.

International safeguards, of course, underpin the Australia-China nuclear transfer agreements that were ratified four months ago. The agreements mean Australia will soon join Russia, Kazakhstan and Namibia as primary members of China's nuclear suppliers' club. With any luck, Australia will be supplying $250 million of uranium to China each year, equivalent to about a half its current total uranium exports.

The nuclear transfer agreement is Australia's guarantee that its uranium will never find its way from China to North Korea, Iran, Pakistan or al-Qaeda, let alone China's own nuclear weapons arsenal.

Meanwhile, three sorry peasants and a mine worker spent last Tuesday in a Guangzhou courtroom charged with uranium trafficking.

According to Chinese journalists, who relayed to the Herald what they could not publish, all four appeared pale and lethargic and had ghost-white hair. Unfortunately, two other accused uranium traffickers could not attend court because they were suffering from a variety of diseases.

So, how do you establish a uranium smuggling racket in China? First, according to the defendants' courtroom testimony, you become friendly with someone high up in a "military-controlled" mine in the mountainous southern province of Yunnan. That person - Old Zhou as he was known in court - gives you eight kilograms of uranium-235 and uranium-238 on a "no-money-down" basis.

Zhou was to receive 200,000 yuan ($32,000) a kilogram and the defendants would keep any additional profit. Zhou is apparently being tried separately.

Second, according to one of the defendants, Yang Guoliang, you carefully pack the uranium in plastic bags, wrap the bags in an old cloth and then package it all in carbon duplicate paper. Apparently, the carbon paper is meant to be a nuclear-proof safety feature, as recommended by one of Old Zhou's former professors.

You then have your uranium sampled at the Chenzhou uranium mine in central China's Hunan province. And if you are not happy with the 46.7 per cent purity reading, you can purify it yourself. "I loaded the samples and Zhang and I used a sieve, a sieve screen," explained one of the smugglers, Yang Guoliang.

His collaborator, Zhang Sangang, now has tuberculosis. It seems the smugglers were dealing with yellowcake, or uranium oxide, rather than the refined product. The uranium sample, now 56.7 per cent pure, according to a colleague in Hunan, is packed into a small plastic bottle and the bottle is carefully placed in a shirt pocket. One of the smugglers, Li Zi'an, catches an overnight bus from Hunan to meet a middleman at, of all places, Guangzhou's Golden Goose Hotel. The middleman, Peng Shuangjin, agrees to buy the uranium at 260,000 yuan per kilo. But he gets cold feet, phones the police, and undercover cops confiscate the sample and arrest the trafficker in the foyer of the Golden Goose.

The middleman, Peng, says Li Zi'an told him he had stashed the uranium in a cave in Hunan province which no one else could ever find. But Li Zi'an told the court he had only been "blowing bull" to make a quick sale. In fact, he told the court, he had sent so many samples to so many different potential buyers that they now had no idea where all the uranium had gone.

According to one version of events, eight kilograms of uranium is sitting in a cave somewhere in Hunan. In the other version, it has been split into countless samples in countless briefcases and could now be anywhere in or out of the country. While some of the above is in dispute, it seems clear China has a nuclear safeguards problem. Western intelligence agencies have long been concerned with top-level nuclear technology transfers between China and North Korea, Pakistan and, more recently, Iran.

Abdul Qadeer Khan, the disgraced "father" of Pakistan's nuclear bomb, spent much of his time in Beijing, although it was not clear whether his interlocutors were representing the People's Liberation Army, Chinese intelligence or just themselves. A Chinese nuclear warhead design was once found in Khan's luggage. Later, the same design was found in another suitcase in Libya. But these days, the greater proliferation concern is further down the food chain.
In May 2005, nine months after a senior Chinese official first told Alexander Downer he wanted to discuss a "sensitive" issue, China's Commission of Science, Technology and Industry for National Defence circulated a national warning about unauthorised uranium mining, smelting and trafficking throughout southern China.

In July last year, after Australia and China had signed a draft nuclear transfer treaty, the defence commission was forced to issue another similar warning, this time targeted at Hunan province and co-signed by police, environmental and mining authorities.

Further, in Mongolia a fortnight ago, I heard unconfirmed reports that a North Korean delegation had just been in town asking about uranium exploration rights with joint venture Chinese companies.

Australia's Department of Foreign Affairs assures us China has committed to meet the requirements of the Convention on the Physical Protection of Nuclear Material.

A Carnegie Institute paper, Deadly Arsenals, says the China National Nuclear Corporation "produces, stores and controls all fissile material for civilian as well as military use".

But as is so often (and so paradoxically) the case in China, it is the authoritarian regime's lack of control in the nation's lower rungs that creates the greatest problems.

Chinese authorities know the country is home to a raging underground uranium production system. In all probability, only the dopiest smugglers with the most obviously radioactive hair have so far been caught.