December 26, 2004 By WILLIAM J. BROAD and DAVID E. SANGER When experts from the United States and the International Atomic Energy Agency came upon blueprints for a 10-kiloton atomic bomb in the files of the Libyan weapons program earlier this year, they found themselves caught between gravity and pettiness. The discovery gave the experts a new appreciation of the audacity of the rogue nuclear network led by A. Q. Khan, a chief architect of Pakistan's bomb. Intelligence officials had watched Dr. Khan for years and suspected that he was trafficking in machinery for enriching uranium to make fuel for warheads. But the detailed design represented a new level of danger, particularly since the Libyans said he had thrown it in as a deal-sweetener when he sold them $100 million in nuclear gear. "This was the first time we had ever seen a loose copy of a bomb design that clearly worked," said one American expert, "and the question was: Who else had it? The Iranians? The Syrians? Al Qaeda?" But that threat was quickly overshadowed by smaller questions. The experts from the United States and the I.A.E.A., the United Nations nuclear watchdog - in a reverberation of their differences over Iraq's unconventional weapons - began quarreling over control of the blueprints. The friction was palpable at Libya's Ministry of Scientific Research, said one participant, when the Americans accused international inspectors of having examined the design before they arrived. After hours of tense negotiation, agreement was reached to keep it in a vault at the Energy Department in Washington, but under I.A.E.A. seal. It was a sign of things to come. Nearly a year after Dr. Khan's arrest, secrets of his nuclear black market continue to uncoil, revealing a vast global enterprise. But the inquiry has been hampered by discord between the Bush administration and the nuclear watchdog, and by Washington's concern that if it pushes too hard for access to Dr. Khan, a national hero in Pakistan, it could destabilize an ally. As a result, much of the urgency has been sapped from the investigation, helping keep hidden the full dimensions of the activities of Dr. Khan and his associates. There is no shortage of tantalizing leads. American intelligence officials and the I.A.E.A., working separately, are still untangling Dr. Khan's travels in the years before his arrest. Investigators said he visited 18 countries, including Syria, Saudi Arabia and Egypt, on what they believed were business trips, either to buy materials like uranium ore or sell atomic goods. In Dubai, they have scoured one of the network's front companies, finding traces of radioactive material as well as phone records showing contact with Saudi Arabia. Having tracked the network operations to Malaysia, Europe and the Middle East, investigators recently uncovered an outpost in South Africa, where they seized 11 crates of equipment for enriching uranium. The breadth of the operation was particularly surprising to some American intelligence officials because they had had Dr. Khan under surveillance for nearly three decades, since he began assembling components for Pakistan's bomb, but apparently missed crucial transactions with countries like Iran and North Korea. In fact, officials were so confident they had accurately taken his measure, that twice - once in the late 1970's and again in the 1980's - the Central Intelligence Agency persuaded Dutch intelligence agents not to arrest Dr. Khan because they wanted to follow his trail, according to a senior European diplomat and a former Congressional official who had access to intelligence information. The C.I.A. declined to comment. "We knew a lot," said a nuclear intelligence official, "but we didn't realize the size of his universe." President Bush boasts that the Khan network has been dismantled. But there is evidence that parts of it live on, as do investigations in Washington and Vienna, where the I.A.E.A. is based. Cooperation between the United Nations atomic agency and the United States has trickled to a near halt, particularly as the Bush administration tries to unseat the I.A.E.A. director general, Mohamed ElBaradei, who did not support the White House's prewar intelligence assessments on Iraq. The chill from the White House has blown through Vienna. "I can't remember the last time we saw anything of a classified nature from Washington," one of the agency's senior officials said. Experts see it as a missed opportunity because the two sides have complementary strengths - the United States with spy satellites and covert capabilities to intercept or disable nuclear equipment, and the I.A.E.A. with inspectors who have access to some of the world's most secretive atomic facilities that the United States cannot legally enter. In the 11 months since Dr. Khan's partial confession, Pakistan has denied American investigators access to him. They have passed questions through the Pakistanis, but report that there is virtually no new information on critical questions like who else obtained the bomb design. Nor have American investigators been given access to Dr. Khan's chief operating officer, Buhari Sayed Abu Tahir, who is in a Malaysian jail. This disjunction has helped to keep many questions about the network unanswered, including whether the Pakistani military was involved in the black market and what other countries, or nonstate groups, beyond Libya, Iran and North Korea, received what one Bush administration official called Dr. Khan's "nuclear starter kit" - everything from centrifuge designs to raw uranium fuel to the blueprints for the bomb. Privately, investigators say that with so many mysteries unsolved, they have little confidence that the illicit atomic marketplace has actually been shut down. "It may be more like Al Qaeda," said one I.A.E.A. official, "where you cut off the leadership but new elements emerge." A Potential Danger A. Q. Khan may have been unknown to most Americans when he was revealed about a year ago as the mastermind of the largest illicit nuclear proliferation network in history. But for three decades Dr. Khan, a metallurgist, has been well known to British and American intelligence officials. Even so, the United States and its allies passed up opportunities to stop him - and apparently failed to detect that he had begun selling nuclear technology to Iran in the late 1980's. It was the opening transaction for an enterprise that eventually spread to North Korea, Libya and beyond. Dr. Khan studied in Pakistan and Europe. After he secured a job in the Netherlands in the early 1970's at a plant making centrifuges - the devices that purify uranium - Dutch intelligence officials began watching him. By late 1975, they grew so wary, after he was observed at a nuclear trade show in Switzerland asking suspicious questions, that they moved him to a different area of the company to keep him away from uranium enrichment work. "There was an awareness," said Frank Slijper of the Dutch Campaign against Arms Trade, who recently wrote a report on Dr. Khan's early days, "that he was a potential danger." Dr. Khan suddenly left the country that December, called home by his government for its atomic project. Years later, investigators discovered that he had taken blueprints for the centrifuges with him. In Pakistan, Dr. Khan was working to develop a bomb to counter India's, and Washington was intent on stopping the project. It later proved to be the first of several occasions when the United States failed to fully understand what Dr. Khan was up to. Joseph Nye, a Harvard professor who has served in several administrations, said American intelligence agencies thought Pakistan would try to make its bomb by producing plutonium - an alternative bomb fuel. Mr. Nye was sent to France to halt the shipment of technology that would have enabled Pakistan to complete a reprocessing plant for the plutonium fuel. "We returned to Washington to celebrate our victory, only to discover that Khan had already stolen the technology for another path to the bomb," Mr. Nye recalled. To gather more atomic gear and skill, Dr. Khan returned to the Netherlands repeatedly. But the United States wanted to watch him, and a European diplomat with wide knowledge of nuclear intelligence cited the two occasions when the C.I.A. persuaded the Dutch authorities not to arrest him. Intelligence officials apparently felt Dr. Khan was more valuable as an unwitting guide to the nuclear underworld. "The Dutch wanted to arrest him," the diplomat said. "But they were told by the American C.I.A., 'Leave him so we can follow his trail.' " A Chinese Connection Dr. Khan quickly led the agents to Beijing. It was there in the early 1980's that Dr. Khan pulled off a coup: obtaining the blueprints for a weapon that China had detonated in its fourth nuclear test, in 1966. The design was notable because it was compact and the first one China had developed that could easily fit atop a missile. American intelligence agencies only learned the full details of the transactions earlier this year when the Libyans handed over two large plastic bags with the names of an Islamabad tailor on one side and a dry-cleaner on other - one of several clues that it had come from the Khan Laboratories. The design inside included drawings of more than 100 parts, all fitting in a sphere about 34 inches in diameter, just the right size for a rocket. Equally remarkable were the handwritten notations in the margins. "They made reference to Chinese ministers, presumably involved in the deal," one official who reviewed it disclosed. And there was also a reference to "Munir," apparently Munir Khan, Dr. Khan's rival who ran the Pakistan Atomic Energy Commission and was in a contest with Dr. Khan to put together a Pakistani weapon that would match India's. In that race, size was critical, because only a small weapon could be put atop Pakistani missiles. One note in the margin of the design, the official said, was that "Munir's bomb would be bigger." Intelligence experts believe that Dr. Khan traded his centrifuge technology to the Chinese for their bomb design. A certain familiarity developed between Dr. Khan and those watching him. "I remember I was once in Beijing on a nonproliferation mission," said Robert J. Einhorn, a longtime proliferation official in the State Department, "and we knew that Khan was in Beijing, too, and where he was. I had this fantasy of going over to his hotel, calling up to his room, and inviting him down for a cup of coffee." Of course, he never did. But if he had, Dr. Khan might not have been surprised. Simon Henderson, a London-based author who has written about Dr. Khan for more than two decades, said the Pakistani scientist long suspected he was under close surveillance. "Khan once told me, indignantly, 'The British try to recruit members of my team as spies,' " Mr. Henderson recalled. "As far as I'm aware, he was penetrated for a long, long time." Still, for all the surveillance, American officials always seemed a step or two behind. In the 1990's, noted Mr. Einhorn, the assumption was that Iran was getting most of its help from Russia, which was providing the country with reactors and laser-isotope technology. Virtually no attention was paid to its contacts with Dr. Khan. "It was a classic case of being focused in the wrong place," Mr. Einhorn said. "And if Iran gets the bomb in the next few years, it won't be because of the Russians. It will be because of the help they got from A. Q. Khan." Triumph and Mystery As soon as Mr. Bush came to office, his director of central intelligence, George J. Tenet, began tutoring him on the dangers of Dr. Khan and disclosing how deeply the agency believed it had penetrated his life and network. "We were inside his residence, inside his facilities, inside his rooms," Mr. Tenet said in a recent speech. "We were everywhere these people were." But acting on the Khan problem meant navigating the sensitivities of a fragile ally important in the effort against terrorism. That has impeded the inquiry ever since. Washington had little leverage to force Pakistan's president, Gen. Pervez Musharraf, to clamp down on a national hero, especially since Dr. Khan may have had evidence implicating the Pakistani government in some of the transactions. And in interviews, officials said they feared that moving on Dr. Khan too early would hurt their chances to roll up the network. Stephen J. Hadley, the deputy national security adviser, went to Pakistan soon after the Sept. 11 attacks and raised concerns about Dr. Khan, some of whose scientists were said to have met with Osama bin Laden, Al Qaeda's leader. But Mr. Hadley did not ask General Musharraf to take action, according to a senior administration official. He returned to Washington complaining that it was unclear whether the Khan Laboratories were operating with the complicity of the Pakistani military, or were controlled by freelancers, motivated by visions of profit or of spreading the bomb to Islamic nations. The Pakistanis insisted they had no evidence of any proliferation at all, a claim American officials said they found laughable. As evidence grew in 2003, Mr. Bush sent Mr. Tenet to New York to meet with General Musharraf. "We were afraid Khan's operation was entering a new, more dangerous phase," said one top official. Still there was little action. But in late October 2003, the United States and its allies seized the BBC China, a freighter bearing centrifuge parts made in Malaysia, along with other products of Dr. Khan's network, all bound for Libya. Confronted with the evidence, Libya finally agreed to surrender all of its nuclear program. Within weeks, tons of equipment was being dismantled and flown to the Energy Department's nuclear weapons lab at Oak Ridge, Tenn. Pressures mounted on General Musharraf. "I said to him, 'We know so much about this that we're going to go public with it,' " Secretary of State Colin L. Powell told journalists last week. " 'And you need to deal with this before you have to deal with it publicly.' " On television, Dr. Khan was forced to confess but he gave no specifics, and General Musharraf pardoned the scientist. American officials pressed to interview him and his chief lieutenant, Mr. Tahir, a Sri Lankan businessman living in Dubai and Malaysia, who was eventually arrested by Malaysian authorities. But the Pakistanis balked, insisting that they would pass questions to Dr. Khan and report back. Little information has been conveyed. "Some questions simply were never answered," said one senior intelligence official. "In other cases, you don't know if you were getting Khan's answer, or the answer the government wanted you to hear." Dr. Khan's silence has extended to the question of what countries, other than Libya, received the bomb design. Intelligence experts say they have no evidence any other nation received the design, although they suspect Iran and perhaps North Korea. But that search has been hampered by lack of hard intelligence. "We strongly believe Iran did," said one American official. "But we need the proof." Dr. Khan has also never discussed his ties with North Korea, a critical issue because the United States has alleged - but cannot prove - that North Korea has two nuclear arms programs, one using Khan technology. "It is an unbelievable story, how this administration has given Pakistan a pass on the single worst case of proliferation in the past half century," said Jack Pritchard, who worked for President Clinton and served as the State Department's special envoy to North Korea until he quit last year, partly in protest over Mr. Bush's Korea policy. "We've given them a pass because of Musharraf's agreement to fight terrorism, and now there is some suggestion that the hunt for Osama is waning. And what have we learned from Khan? Nothing." Some Missing Pieces In March, American investigators invited reporters to the giant nuclear complex in Oak Ridge to display the equipment disgorged by the Libyans. They surrounded the site with guards bearing automatic weapons, and Energy Secretary Spencer Abraham joined the officials in showing off some of the 4,000 centrifuges. "We've had a huge success," he said. But it turned out that the centrifuges were missing their rotors - the high-speed internal device that makes them work. To this day, it is not clear where those parts were coming from. While some officials believe the Libyans were going to make their own, others fear the equipment had been shipped from an unknown location - and that the network, while headless, is still alive. John R. Bolton, the under secretary of state for arms control and international security, echoed those suspicions, saying the network still had a number of undisclosed customers. "There's more out there than we can discuss publicly," he said in April. Federal and private experts said the suspected list of customers included Syria, Egypt, Saudi Arabia, Sudan, Malaysia, Indonesia, Algeria, Kuwait, Myanmar and Abu Dhabi. Given the urgency of the Libyan and Khan disclosures, many private and governmental experts expected that the Bush administration and the I.A.E.A. would work together. But European diplomats said the administration never turned over valuable information to back up its wider suspicions about other countries. "It doesn't like to share," a senior European diplomat involved in nuclear intelligence said of the United States. "That makes life more difficult. So we're on the learning curve." Federal officials said they were reluctant to give the I.A.E.A. classified information because the agency is too prone to leaks. The agency has 137 member states, and American officials believe some of them may be using the agency to hunt for nuclear secrets. One senior administration official put it this way: "The cops and the crooks all serve on the agency's board together." The result is that two separate, disjointed searches are on for other nuclear rogue states - one by Washington, the other by the I.A.E.A. And there is scant communication between the feuding bureaucracies. That lack of communication with the United Nations agency extends to the Nuclear Suppliers Group, a loose organization of countries that produce nuclear equipment. It can stop the export of restricted atomic technology to a suspect customer, but it does not report its actions to the I.A.E.A. Moreover, there is no communication between the I.A.E.A. and the Bush administration's Proliferation Security Initiative, which seeks to intercept illicit nuclear trade at sea or in the air. "It's a legitimate question whether we need a very different kind of super-agency that can deal with the new world of A. Q. Khans," said a senior administration official. "Because we sure don't have the system we need now." Dr. ElBaradei, the head of the United Nations agency, says he is plunging ahead, pursuing his own investigation even as the Bush administration attempts to have him replaced when his term expires late next year. In an interview in Vienna, he defended his record, citing the information he has wrung out of Iran, and his agency's discovery of tendrils of Dr. Khan's network in more than 30 countries around the globe. "We're getting an idea of how it works," he said of the Khan network. "And we're still looking" for other suppliers and customers. One method is to investigate the countries Dr. Khan visited before his arrest. Nuclear experts disclosed that the countries were Afghanistan, Egypt, Iran, Ivory Coast, Kazakhstan, Kenya, Mali, Mauritania, Morocco, Niger, Nigeria, North Korea, Saudi Arabia, Senegal, Sudan, Syria, Tunisia and the United Arab Emirates. Many of them are Islamic, and several of the African countries are rich in uranium ore. In one of its biggest operations, the agency is hunting for clues in a half dozen of the network's buildings and warehouses in Dubai, which for years were used for assembling and repacking centrifuges. Both in Washington and in Vienna, the most delicate investigations involve important American allies - including Egypt and Saudi Arabia. So far, said European intelligence officials familiar with the agency's inner workings, no hard evidence of clandestine nuclear arms programs has surfaced. Suspicious signs have emerged, however. For instance, experts disclosed that SMB Computers, Mr. Tahir's front company in Dubai for the Khan network, made telephone calls to Saudi Arabia. But the company also engaged in legitimate computer sales, giving it plausible cover. Experts also disclosed that Saudi scientists traveled to Pakistan for some of Dr. Khan's scientific conferences. But the meetings were not secret, or illegal. There is also worry in both Washington and Vienna about Egypt, which has two research reactors near Cairo and a long history of internal debate about whether to pursue nuclear arms. But European intelligence officials said I.A.E.A. inspectors who recently went there found no signs of clandestine nuclear arms and some evidence of shoddy workmanship that bespeaks low atomic expectations. As for Syria, the Bush administration had repeatedly charged that it has secretly tried to acquire nuclear arms. But the I.A.E.A. has so far found no signs of a relationship with Dr. Khan or a clandestine nuclear weapons program. Worried about what is still unknown, the I.A.E.A. is quietly setting up what it calls the Covert Nuclear Trade Analysis Unit, agency officials disclosed. It has about a half dozen specialists looking for evidence of deals by the Khan network or its imitators. "I would not be surprised to discover that some countries pocketed some centrifuges," Dr. ElBaradei said. "They may have considered it a chance of a lifetime to get some equipment and thought, 'Well, maybe it will be good for a rainy day.' " William J. Broad reported from New York for this article, and David E. Sanger from Washington. Copyright 2004 The New York Times Company