By John F. Harris and Vernon Loeb

Washington Post Staff Writers
Sunday, March 14, 1999; Page A01

The discovery by Energy Department officials poring over Chinese nuclear weapons data had the chill of a classic Cold War scandal: It appeared that Beijing, possibly working through a sympathetic scientist at Los Alamos National Laboratory, had stolen the technology needed to miniaturize nuclear warheads, making it easier, in turn, to deploy missiles that could threaten the United States.

The case evoked the specters of Julius and Ethel Rosenberg, who were executed in 1953 for delivering atom bomb plans to Soviet agents, or Theodore Alvin Hall, who also allegedly smuggled secrets to the Soviets from Los Alamos. But the latest case of possible nuclear espionage at America's premier nuclear weapons laboratory has unfolded in an entirely different political and diplomatic landscape.

U.S. investigators arriving at Los Alamos after the evidence of espionage surfaced four years ago found Chinese scientists and postdoctoral students all around the sprawling facility in New Mexico, studying under official exchange programs that are part of the Clinton administration's policy of engagement with Beijing. And some CIA analysts concluded that Chinese weapons scientists' access to open sources and exchanges with their Russian counterparts may have done more to help Beijing's weapons development than the alleged illegal actions in the late 1980s by a Taiwanese-born Los Alamos researcher.

In fact, the greatest damage caused by the latest nuclear espionage case may be to the Clinton administration's painstakingly constructed policy of engagement with China. Though the effect of the spying, if any, remains unclear, the episode has served to fuel an already growing debate between the White House and Congress over how the United States should manage its attempts to engage the world's most populous nation.

Congressional Republicans argue that the spying case demonstrates that China's attempts to steal U.S. military technology, and the potential strategic threat that poses to the United States and its allies, should move closer to the center of U.S. policy toward Beijing. The Clinton administration argues that such threats should be balanced against the potential gains of winning China's cooperation in preventing weapons proliferation and containing rogue states such as North Korea.

But since news of the spying investigation appeared, the Republicans have stepped up charges that the administration's engagement policy has been compromised by a pattern of political malfeasance and even criminal behavior by campaign contributors. By failing to respond aggressively to the Los Alamos espionage charges, these critics say, the administration has compounded what they see as earlier negligence in allowing the Chinese to acquire sensitive technology through the purchase of U.S. satellites and computers.

"The Clinton administration already has dug a very deep hole for itself on Capitol Hill with respect to China. That hole just got wider and deeper," wrote Sen. Richard G. Lugar (R-Ind.) in an article for The Washington Post op-ed page last week. Lugar called for a broad reassessment of U.S. policies of technology transfer and weapons proliferation before the visit to Washington next month of Chinese Premier Zhu Rongji.

Other administration critics have gone further, with Republican presidential candidates Malcolm S. "Steve" Forbes and Patrick J. Buchanan calling for the resignation of national security adviser Samuel R. "Sandy" Berger for his role in the Los Alamos investigation and in satellite transfers. The satellite purchases are already the subject of multiple congressional investigations, focusing in part on whether satellite sales were permitted because of campaign contributions to the Democrats by the Chinese or U.S. aerospace firms.

In an interview yesterday, Berger protested that GOP criticism that he or the Clinton administration has cast security concerns to the margins of China policy are "absolutely wrong."

"Security is at the heart of our relationship with China," he said. "We do business with China not out of sentiment, not out of affection, but out of self-interest."

Clinton administration officials say that the United States has no choice but to work with China, and that the U.S. engagement policy has moderated Chinese behavior on a variety of fronts -- from Beijing's willingness to enter into various international weapons control regimes, to its curbing of exports of anti-ship missiles and nuclear technology to Iran, and its help in containing North Korea.

"How do we deal with North Korea's missile and nuclear program?" Berger said. "If someone can tell me how we can do that without engaging China, I'd like to hear it."

Another senior administration official was left wondering whether it should really come as a surprise to anyone that the Chinese have for many years been trying to beg, borrow or steal sensitive technology and weapons information. He and other officials pointed out that the investigation at Los Alamos began after U.S. spying produced a Chinese document that included specific references to U.S. warhead design.

In reality, officials at the White House and Los Alamos said, technological exchanges with China, whether through the sale of satellites or through inviting Chinese scientists to Los Alamos, involves a delicate dance. Clearly, the Chinese seek to use such exchanges to improve their military technology. But the United States has also learned much about China's military technology, both in satellites and in nuclear weapons.

Still, some experts outside the administration wonder if Clinton's credibility with Congress and the public in managing such a delicate traffic may have been critically weakened by the scandals that have plagued his administration, including allegations that China may have tried to channel funds to the Democratic Party to influence decisions on satellite sales.

"Making that argument [for engagement] is essentially a way of saying 'trust me,' " said Richard Brody, a Stanford University political scientist. "This is a potential case in which the fact that Clinton has lost a lot of trust with the public may have some [policy] consequences."

At its heart, the Los Alamos case remains a mystery. The prime suspect, Chinese American scientist Wen Ho Lee, was fired Monday by Energy Secretary Bill Richardson after failing an FBI polygraph test last month. But government sources acknowledge that he may never be charged, noting that FBI agents secretly investigated him while he performed his duties from June 1996 almost up until the point when he was polygraphed last month. They never had enough evidence to obtain a wiretap to monitor his calls or a warrant to search his home.

Further complicating the case is the fact that no one knows precisely what may have been leaked or mentioned to the Chinese and what effect, if any, that information had in terms of accelerating the ability of Chinese physicists to build miniature warheads.

But Republican critics argue that, whatever the damage, the administration's handling of the allegations once again reflected a willingness to play down serious security threats posed by China rather than reexamine its engagement policy.

The investigation at Los Alamos, spearheaded by Notra Trulock, a Los Alamos analyst serving on temporary assignment as the Energy Department's chief of intelligence, began in the summer of 1995 and became an official department "administrative inquiry" in November.

By June 1996, the FBI opened a formal criminal investigation into Wen Ho Lee that produced little results. By April 1997, according to Los Alamos lab director John C. Browne, Lee was stripped of his classified computer code under the guise of a change in assignment so as not to tip him that he was being watched by FBI agents.

"It was getting high-level attention back here," said one FBI official, referring to the bureau's Washington headquarters, "and high-level attention at Energy."

Trulock briefed Berger on the seriousness of the case in July 1997, and Berger then set in motion an interagency process that led to Clinton signing Presidential Decision Directive 61 in February 1998. Two months later, Edward Curran, an FBI counterintelligence official who led the 1996 investigation of CIA spy Harold Nicholson, took over all of the Energy Department's counterintelligence operations.

The department's counterintelligence budget by then had tripled to $7.2 million. It has since doubled again this fiscal year to $15.6 million and will double again, to $31 million, next year under Clinton's decision directive, which recommends periodic polygraph examinations for all employees in classified weapons programs and background investigations into all foreign visitors from so-called sensitive countries such as China, none of whom are allowed into any of the national laboratories' highly classified weapons design facilities.

Finally, by the end of last year, officials said, Lee was removed from his office in a classified section of Los Alamos and transferred to an unclassified area, pending dismissal.

Senior administration officials contend that they have created an extremely rigorous new counterintelligence program at the department's national laboratories, and they insist that the House and Senate intelligence committees have received repeated briefings on the case; Clinton himself said there have been 16 over the past two years.

Rep. Porter J. Goss (R-Fla.), chairman of the House intelligence panel, said those briefings were hardly expansive until Trulock appeared before a select committee probing the issues of technology transfers to China.

"It definitely could have been better," said Goss, a former CIA agent who champions large funding increases in U.S. intelligence and counterintelligence. He sees a silver lining to the dark cloud hanging over Los Alamos.

"People in this country now realize that there are other countries, all the time, day and night, trying to steal our secrets," he said. "China is still an authoritarian government, they still have intercontinental ballistic missiles pointed our way. These folks are a serious potential enemy. They are also a potential friend. So I think it's important that we engage them with our eyes open."

Berger argued that the Los Alamos episode had to be viewed in context. "We have a lot of countries that are trying to obtain our technological secrets, probably most countries in the world," he said. "Some of them are in the 'friends' category."

There is deep concern at the White House, meanwhile, that this latest controversy could undermine the political consensus for engagement at a particularly sensitive time in U.S.-China relations, with tensions mounting over security matters, human rights and trade as Premier Zhu prepares to visit the United States next month.

"When [members of Congress] peel this onion back, they won't find much," one senior White House official said. "They'll find there was sloppy security in the labs. Will this overheated rhetoric have on impact on the United States' ability to engage China? The jury is still out on that."