Global Policy Forum

By Colum Lynch

The United States released more than $80 million in frozen Chinese business deals with Iraq last month as it sought China's support for a Security Council resolution that would have overhauled U.N. sanctions on Baghdad, according to diplomats and U.N. documents.

The package included a $28 million Iraqi contract to buy mobile telephone equipment from Huawei Technologies Co., a Chinese firm previously accused by the Pentagon of violating the sanctions by providing fiber-optic cable for Iraq to upgrade its antiaircraft missile batteries.

The joint U.S.-British effort to revamp the 10-year-old sanctions failed this week because Russia threatened to use its veto in the 15-member Security Council. But before Russia blocked the resolution, the United States and Britain succeeded in winning China's backing for a key element of the proposal -- a list of items that Iraq could import only with the council's approval because they have military as well as civilian uses.

The horse-trading that was involved in winning China's assent is now becoming clear.

Under the U.N.'s oil-for-food program, Iraq can sell oil and use the proceeds to buy humanitarian supplies and spare parts to keep its oil industry running. But the United States and other Security Council members can place "holds" on contracts for items they suspect are really intended for the Iraqi military. The United States has frozen about $3 billion in contracts, despite vociferous criticism from China, among other countries.

On June 28, the Bush administration informed the United Nations that it was lifting its holds on nine Chinese contracts in the telecommunications and oil sectors valued at nearly $60 million, according to diplomats. Earlier that week, the United States had unfrozen $20 million worth of Chinese deals.

On June 29, the United States and China announced that they had reached agreement with Britain and France on the list of "dual use" items as part of the broader attempt to revise the sanctions.

"The U.S. has promised to take care of some of our concerns," China's deputy ambassador to the U.N., Shen Guofang, said after the agreement was announced.

Administration officials denied that they were buying China's support, although they acknowledged that the relaxation of the holds was designed to help win broad backing for an overhaul of the sanctions.

"There wasn't a quid pro quo," a senior U.S. official said. "But we wanted to demonstrate not just to China, but to other members of the Security Council, that the new system we are proposing would involve a real change of behavior."

U.S. officials also said American technical experts had conducted a thorough "assessment of the relative risk" before approving the Huawei contract.

Early this year, when the United States bombed Iraqi radars and antiaircraft batteries, Pentagon officials said the main reason was that Huawei was upgrading those sites with fiber-optic cables. China denies the allegation.

Although the details of China's commercial dealings through the U.N. oil-for-food program are kept confidential by the United Nations, The Washington Post obtained internal U.N. records that describe the deals unfrozen by the United States last week.

They include two Iraqi contracts to buy nearly $15 million of microwave radio equipment from Cmec International Engineering Co., a Chinese firm. Another deal involved a $15.5 million sale of telecommunications equipment by China National Technical Import.

The United States also gave the go-ahead for a sale of $34,000 in "cable" by Guizhou New Era Union Import and Export Corp. When the United States originally blocked that sale, it had cited "biological weapons/chemical weapons dual-use applications," according to U.N. records.

Last week was not the first time that the Bush administration has approved contracts at critical stages in negotiations over Iraq. On June 1, for example, Moscow dropped its objection to a British resolution that extended the oil-for-food deal for one month and committed the Security Council to negotiate new "arrangements." Hours later, the United States announced that it would lift holds on $800 million in deals between Iraq and various firms, including more than $200 million for companies in Russia, China, France and Tunisia -- all key Security Council members.