President Obama opined on Chinese currency legislation, Pakistani double dealing, and the European debt crisis during his Thursday morning press conference, which was supposed to focus on his jobs bill. Here are the foreign policy highlights of his remarks.

On Chinese currency manipulation:

Obviously we've been seeing a remarkable transformation of China over the last two decades, and it's helped to lift millions of people out of poverty in China. We have stabilized our relationship with China in a healthy way. But what is also true is that China has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States. And I have said that publicly but I've also said it privately to Chinese leaders.

And currency manipulation is one example of it, or at least intervening in the currency markets in ways that have led their currency to be valued lower than the market would normally dictate. And that makes their exports cheaper and that makes our exports to them more expensive. So we've seen some improvement, some slight appreciation over the last year, but it's not enough.

It's not just currency, though. We've also seen, for example, you know, intellectual property, technologies that were created by U.S. companies with a lot of investment, a lot of up-front capital, taken, not protected properly, by Chinese firms. And we've pushed China on that issue as well. Ultimately, I think that you can have a win-win trading relationship with China. I'm very pleased that we're going to be able to potentially get a trade deal with South Korea. But I believe what I think most Americans believe, which is trade is great as long as everybody is playing by the same rules.

On the legislation to penalize currently manipulation currently being considered by Congress:

My main concern -- and I've expressed this to Senator Schumer -- is whatever tools we put in place, let's make sure that these are tools that can actually work, that they're consistent with our international treaties and obligations. I don't want a situation where we're just passing laws that are symbolic, knowing that they're probably not going to be upheld by the World Trade Organization for example, and then suddenly U.S. companies are subject to a whole bunch of sanctions. We've got a -- I think we've got a strong case to make, but we've just got to make sure that we do it in a way that's going to be effective.

Last point is, my administration has actually been more aggressive than any in recent years in going after some of these practices. We've brought very aggressive enforcement actions against China for violations in the tire case for example, where it's been upheld by the World Trade Organization that they were engaging in unfair trading practices, and that's given companies here in the United States a lot of relief.

So, you know, my overall goal is, I believe U.S. companies, U.S. workers, we can compete with anybody in the world. I think we -- we can make the best products. And a huge part of us winning the future, a huge part of rebuilding this economy on a firm basis -- that's not just reliant on, you know, maxed-out credit cards and a housing bubble and financial speculation, but is -- is dependent on us making things and selling things -- I am absolutely confident that we can win that competition. But in order to do it, we've got to make sure that we're aggressive in looking out for the interests of American workers and American businesses, and that everybody's playing by the same rules, and that we're not getting -- getting cheated in the process.

On Pakistan's hedging strategy:

With respect to Pakistan, I have said that my number-one goal is to make sure that al-Qaida cannot attack the U.S. homeland and cannot affect U.S. interests around the world. And we have done an outstanding job, I think, in going after directly al-Qaida in this border region between Pakistan and Afghanistan. We could not have been as successful as we have been without the cooperation of the Pakistan government. And so on a whole range of issues, they have been an effective partner with us.

What is also true is that our goal of being able to transition out of Afghanistan and leave a stable government behind -- one that is independent, one that is respectful of human rights, one that is democratic -- that Pakistan I think has been more ambivalent about some of our goals there. And you know, I think that they have hedged their bets in terms of what Afghanistan would look like, and part of hedging their bets is having interactions with some of the unsavory characters who they think might end up regaining power in Afghanistan after coalition forces have left.

What we've tried to persuade Pakistan of is that it is in their interest to have a stable Afghanistan; that they should not be feeling threatened by a stable, independent Afghanistan. We've tried to get the conversations between Afghans and Pakistans (sic) going more effectively than they have been in the past. But we've still got more work to do. And there is no doubt that there's some connections that the Pakistani military and intelligence services have with certain individuals that we find trouble (sic). And I've said that publicly and I've said it privately to Pakistani officials as well.

On the Pakistan-India relationship:

[The Pakistanis] see their security interests threatened by an independent Afghanistan, in part because they think it will ally itself to India, and Pakistan still considers India their mortal enemy. Part of what we want to do is actually get Pakistan to realize that a peaceful approach towards India would be in everybody's interests and would help Pakistan actually develop -- because one of the biggest problems we have in Pakistan right now is poverty, illiteracy, a lack of development, you know, civil institutions that aren't strong enough to deliver for the Pakistani people. And in that environment you've seen extremism grow. You've seen militancy grow that doesn't just threaten our efforts in Afghanistan but also threatens the Pakistani government and the Pakistani people as well.

So trying to get that reorientation is something that we're continuing to work on. It's -- it's not easy.

On cutting off aid to Pakistan:

You know, we will constantly evaluate our relationship with Pakistan, based on, is overall this helping to protect Americans and our interests?  We have a great desire to help the Pakistani people strengthen their own society and their own government. And so, you know, I'd be hesitant to punish, you know, aid for flood victims in Pakistan because of poor decisions by their intelligence services. But there's no doubt that, you know, we're not going to feel comfortable with a long-term strategic relationship with Pakistan if we don't think that they're mindful of our interests as well.

On the European debt crisis:

The biggest headwind the American economy is facing right now is uncertainty about Europe, because it is affecting global markets. The slow-down that we're seeing is not just happening here in the United States: It's happening everywhere. Even in some of the emerging markets like China you're seeing greater caution, less investment, deep concern.

I speak frequently with Chancellor Merkel and President Sarkozy. They are mindful of these challenges. I think they want to act to prevent a sovereign debt crisis from spinning out of control, or seeing the potential breakup of the euro. I think they're very committed to the European project. But their politics is tough because, essentially, they've got to get agreement with not only their own parliaments, they've got to get agreement with 20 parliaments, or 24 parliaments, or 27 parliaments. And engineering that kind of coordinated action is very difficult.

You know, but what I've been seeing over the last month is a recognition by European leaders of the urgency of the situation. And nobody's, obviously, going to be affected more than they will be if the situation there spins out of control. So I'm confident that they want to get this done. I think there are some technical issues that they're working on in terms of how they get a big enough -- how do they get enough fire power to let the markets know that they're going to be standing behind euro members whose -- you know, who may be in a weaker position. But they've got to act fast.

And we've got a G-20 meeting coming up in November. My strong hope is that by the time of that G-20 meeting, that they have a very clear, concrete plan of action that is sufficient to the task.

The Obama administration is taking a lot of criticism for its as yet unannounced decision to sell Taiwan a new arms package that does not include new F-16 fighter planes, and a senior administration official used some verbal gymnastics to offer a defense of the decision without actually confirming it.

"This is with regard to Taiwan and the question of a U.S. decision one way or the other, which as you know, has not yet been formally notified to Congress with regard to the sale of F-16s," a senior administration official told reporters at the Waldolf Astoria hotel in New York on Monday evening. "Our view is that something has gotten lost in translation in the last couple of days on this issue."

The official couldn't acknowledge that reports of the sale were true, because Congress has to be notified before officials talk about foreign military sales to the press. So the official defended the decision by temporarily "assuming" the news reports were accurate.

"I will base my comments on those assuming that those leaks are true. But of course, I can't confirm them until after formal congressional notification this week," the official said.

"Assuming the reports leaked about the proposal to refurbish F-16s are true and that obviously can't be confirmed even on background until a formal congressional notification later this week -- weapons sales to Taiwan since 2009 will be greater than in the previous four years, and they will be double the sales that occurred between 2004 and 2008."

The official then defended the offer to Taiwan of upgrades for its aging fleet of F-16 A/B fighters and the rejection of Taiwan's request for 66 new F-16 C/D fighters, again without confirming that's the administration's decision.

"Assuming the decision is to upgrade F-16 A/B, they will provide essentially the same quality as new F-16 C/D aircraft at a far cheaper price. And Taiwan would stand to get 145 A/Bs versus only 66 C/Ds. And we're obviously prepared to consider further sales in the future," the official said.

The official then argued that the Obama administration has been active on strengthening relations with Taiwan.

"In addition, the administration has taken strong steps to deepen relations with Taiwan in concrete ways beyond this dossier, including Visa Waiver Program, education initiatives, trade and energy initiatives, and helping Taiwan to have more access to international fora like the World Health Organization."

The actual announcement of the Taiwan arms sales decision and its actual defense are expected later this week.

UPDATE:  Earlier today Sen. John Cornyn (R-TX)  filed his bill to require the administration to sell at least 66 new F-16 C/D multirole fighter jets to Taiwan as an amendment to the Generalized System of Preferences bill that is currently on the Senate floor, which is a vehicle for Trade Adjustment Assistance (TAA).

China's one-child policy has caused decades of sex-selective abortions and killing of baby girls that has resulted in over 30 million "unmarriageable" Chinese men, who are causing a rise in instability and sex trafficking, former ambassador and GOP presidential candidate John Huntsman wrote to Washington in a diplomatic cable newly released by WikiLeaks.

After Vice President Joe Biden said he was "not second-guessing" China's one-child policy during his trip to Beijing, all the GOP presidential candidates criticized both the policy and Biden, for seeming to endorse it. Even after Biden issued a clarification and called the policy "repugnant," House Speaker John Boehner (R-OH) said that was not enough and called on the administration to end its contributions to the U.N. Population Fund (UNFPA).

But while Boehner and some GOP candidates are new to the debate over China's one-child policy, Huntsman, who served as Obama's ambassador in Beijing and who adopted a Chinese girl years ago, warned of the policy's grave implications in a January 2010 cable.

"Abnormally high sex ratio at birth and excess female child mortality both contribute directly to the sex ratio imbalance in China," Huntsman wrote. "Social consequences of this imbalance include an estimated excess of over 30 million unmarriageable males, a potentially destabilizing force that threatens to cause unrest in the most economically marginalized areas, and could lead to increased gender violence through demand for prostitution and trafficking in girls and women."

He said there is general agreement that the "abnormally high sex ratio" is due to the selective abortion of girls and the "excess female mortality," is caused by the killing of baby girls after they are born. Both are due to the "interaction of a strong cultural preference and pressure for sons with China's strict birth limitation policy," Huntsman said.

Due to the policy, Huntsman explained that there are about 32 million Chinese men under 20 years old who will not be able to find female partners and are called "bare branches." Richer, urbanized men attract the available women, Huntsman said, meaning that the single men who can't find women are usually found in poor and rural areas, searching for sex.

"Increased demand for sex workers and shortage of women to marry could lead to more trafficking of girls and women for future brides or the sex industry," the cable said, adding that while the Chinese government has begun talking about this problem, it has yet to take basic corrective steps, such as criminalizing sex-selective abortions.

While most politicians have cringed upon seeing their name in WikiLeaks cables, the Huntsman campaign sees the cable as reinforcing their message on China and human rights. A senior advisor to Huntsman told The Cable today that the diplomatic cable is evidence that as ambassador, Huntsman championed human rights far more than the administration.

"Not only was he advocating behind the scenes, but he publicly spoke out on behalf of dissidents and human rights, even in his farewell speech," said the advisor. "Given the vice president's recent comments on the one-child policy, it's clear the Obama administration is incapable of leading on this issue -- something Ambassador Huntsman is unquestionably prepared to do,"

In that farewell speech, Huntsman said that the United States will continue to advocate on behalf of imprisoned Chinese dissidents, explicitly naming Liu Xiaobo, Chen Guangcheng and Ai Weiwei, who has since been released.

"The United States will never stop supporting human rights because we believe in the fundamental struggle for human dignity and justice wherever it may occur. We do so not because we oppose China but, on the contrary, because we value our relationship," he said.

Huntsman campaign spokesman Tim Miller said that the campaign could not discuss confidential cables, but said that as an adoptive father whose daughter was abandoned by her parents in China, Huntsman was intimately familiar with the impact of the one-child policy.

"One-child runs counter to the fundamental value of human life and has myriad other negative consequences including an increase in sex trafficking and prostitution, as well as a destabilization of the family unit," Miller said.

Secretary of State Hillary Clinton was criticized in early 2009 for seeming to back off the issue of human rights when dealing with the Chinese government. She said, "We know what they are going to say" and "Our pressing on those issues can't interfere on the global economic crisis, the global climate change crisis and the security crisis."

More recently, administration officials have been more public in their criticisms of China's human rights practices, often talking about the case of Ai Weiwei. Clinton called China's human rights record "deplorable," in a May interview with the Atlantic. "They're worried, and they are trying to stop history, which is a fool's errand. They cannot do it. But they're going to hold it off as long as possible," she said.

Vice President Joe Biden is in China to kick off a week-long Asia tour and the first thing he did after arriving at the Beijing airport was to speed over the Olympic basketball arena to take in a game between Georgetown University and the Shanxi Brave Dragons of the Chinese Basketball Association.

"Once again, sports diplomacy lives in U.S.-China relations!" Victor Cha, former National Security Council Asia official and Georgetown's director of Asian Studies, told The Cable. Cha is accompanying the team on their tour of China. He compared it to the ping-pong diplomacy between the U.S. and China that helped thaw the relationship ahead of President Richard Nixon's visit there in 1972.

Cha told The Cable that Biden interacted extensively with the Chinese spectators and there were good vibes all around. The loquacious vice president reportedly carried on a conversation in English with an entire section of Chinese spectators, telling jokes and receiving many high-fives. Biden was joined at the game by the new Ambassador to China Gary Locke, Assistant Secretary of State for East Asian and Pacific Affairs Kurt Campbell, NSC Senior Director for Asia Danny Russel, and China's ambassador to the United States Zhang Yesui.

On the Georgetown delegation, in addition to Cha, were Georgetown University President Jack DeGioia, as well as Chairman of the Board and former National Football League Commissioner Paul Tagliabue.

Not only that, the Hoyas beat the Dragons 98-81.

Their next game tomorrow night is against the Bayi Rockets, the Chinese People's Liberation Army team. Cha said that the upcoming game was "a great way to expand people-to-people contacts with the military, another goal of U.S. policy."

But the Hoyas are going to have to conduct that part of their diplomatic effort without Biden's help. He's off to the Southwest China city of Chengdu before returning to Beijing and then heading off to Mongolia and Japan.

The White House said Georgetown's two-week trip to China, "reflects an ongoing push to expand people-to-people exchanges between our two countries, as well as an effort to strengthen the U.S.-China relationship through sport."

The Center for a New American Security (CNAS) was entangled in a computer hacking scam that targeted international affairs experts and showed evidence of originating from China.

"On August 2, 2011 a small number of people received a phishing email referencing a recent CNAS report. The email came from an AOL email account that has no association with any CNAS network," CNAS external relations director Shannon O'Reilly said in an e-mail Friday afternoon. "We wish to assure users that the phishing email did not come from CNAS nor would CNAS ever ask for password information."

CNAS is a Washington think tank founded by Assistant Secretary of State for East Asia Kurt Campbell and Undersecretary of Defense for Policy Michele Flournoy. After Campbell and Flournoy entered the Obama administration, they handed over the reins to current CEO Nate Fick and President John Nagl.

The e-mail was sent to people "associated with political and international affairs," according to Mila Parkour, an Internet security expert who analyzed the hacking attempt on the blog Contagio. The e-mail asked the target to log into Gmail via an embedded link. If the target did so, their passwords were stored and their Gmail accounts began to be monitored from an unknown location.

The style of the attack is called "phishing," an attempt to acquire sensitive information such as usernames, passwords, and credit card details by masquerading as a trustworthy entity.

Government officials and international experts have been the targets of phishing attacks for years and the threat comes from many countries, but Defense Department officials have admitted that the great majority of cyber espionage attempts against the U.S. government come from China. Some officials believe these attacks are carried out with either the explicit or implicit permission of the Chinese government.

There's no way to be sure, but Paul Roberts at the Threat Post blog reported that there are some similarities between the CNAS-related attack and other Chinese cyber espionage attempts.

"Attackers accessed the account using TOR (The Onion Router), so it's unclear where they accessed the account from," he said. "However, other aspects of the spear phishing attack bear the telltale signatures of a China-based operation, including the source IP of the phishing e-mail, which traces back to Taiwan, and the attackers use of Foxmail to create and send the phishing e-mail -- a common trait of China-based spear phishing attacks."

Last January, several U.S. government officials received an e-mail from "dorsetttr1@state.gov," which turned out to be a fake State Department e-mail address. That email was crafted to look like an interagency communication over a U.S.-China joint statement ahead of Chinese President Hu Jintao's visit to Washington.

"This is the latest version of State's joint statement. My understanding is that State put in placeholder econ language and am happy to have us fill in but in a rush to get a cleared version from the WH they sent the attached to Mike," the fake e-mail said.

If the recipient clicked on "the attached," his system would be compromised. One U.S. official told us that a similar gambit was attempted during the Shangri-La Dialogue in Singapore last June.

The latest attack had the subject line, "CNAS Report Calls Declining Satellite Capabilities National Security Concern." That refers to a recent CNAS report that is actually quite interesting and can be found here.

Meanwhile, think tankers and officials around Washington are surely changing their Gmail passwords today and CNAS is warning that this won't be the last fishy phishing e-mail to hit the Washington foreign policy community.

"This incident is illustrative of a growing trend in which users are contacted by what appears to be trusted individuals or institutions in order to acquire sensitive information," O'Reilly said.

Vice President Joseph Biden is on his way to China, Mongolia, and Japan later this month, his office announced today.

In Beijing, Biden will meet with Vice President Xi Jinping, who is expected to replace Hu Jintao as president next year.

"He will visit China at the invitation of Vice President Xi Jinping - the first of the planned reciprocal visits between the Vice Presidents announced during President Hu Jintao's state visit to Washington earlier this year," the White House said in a release.

Biden will do the diplomatic trifecta, meeting with Hu in Beijing, as well as Chinese premier Wen Jiabao. After Beijing, Biden will go to the southwestern Chinese city of Chengdu, then to the Mongolian capitol of Ulaanbaatar, and then Tokyo. The Office of the Vice President did not release the dates or specifics of meetings for the Mongolia or Japan legs of Biden's trip.

The China visit comes only three months before President Barack Obama travels to Asia in November. Obama will lead a huge U.S. delegation as the host of the 2011 Asia-Pacific Economic Cooperation (APEC) forum, which is being held in the city of his birth, Honolulu. He will then go to Bali to lead America's first-ever delegation as an official member of the East Asia Summit (EAS). EAS is a regional security focused organization that the administration joined as part of an increased commitment to strengthen U.S. relations with Asia.

Secretary of State Hillary Clinton just got back from Bali, where she was attending the ASEAN Regional Forum (ARF), the largest grouping of Southeast Asian nations and their friends. Former Defense Secretary Robert Gates was in Singapore in June for the IISS Shangri-La Security Dialogue, which was also attended by your humble Cable guy.

In between Honolulu and Bali, Obama has a few days of down time, not enough to go back to Washington but certainly enough to visit one more country in the region. But where will he go? The Australian ambassador told a group of journalists at his annual summer BBQ this week that Australia is lobbying hard for an Obama visit. The White House has yet to make any commitments to Australia, or any other country.

The United States and North Korea will hold their first direct talks since December 2009, as the Obama administration explores ways to return to multilateral talks on the Hermit Kingdom's nuclear program.

North Korean Vice Foreign Minister Kim Kye-Gwan is already on the way to New York for the talks, which are supposed to happen either Thursday or Friday, according to State Department officials. The State Department hasn't announced its delegation to the talks, but we're told by two informed sources that Ambassador Stephen Bosworth, the State Department's special representative for North Korea, is expected to participate. Secretary of State Hillary Clinton invited the delegation.

Following the Bosworth-Kim meeting, the North Korean delegation will meet with a group of U.S. experts and academics organized under the banner of the National Committee on American Foreign Policy (NCAFP), led on this project by former diplomat Donald Zagoria. NCAFP is hosting the meetings, as they did in October 2009, when North Korean negotiator Ri Gun came to New York under similar circumstances. At that time, Zagoria was joined by former diplomat George Schwab, Korea Society president Evans Revere, and former Ambassador to China Winston Lord.

Ri was spotted at the Beijing Airport with the North Korean delegation.

In a short phone interview, Zagoria told The Cable that the experts' meeting with the North Korean delegation was scheduled for Monday, Aug. 1, as a "Track 2" discussion -- diplo-speak for unofficial talks conducted by trusted private individuals. He declined to speak about the bilateral meeting, only saying that the experts' meetings had clear boundaries and realistic expectations.

"We started these meetings in 2003. We've had a number since then when it was possible," Zagoria said. "We hope to have frank discussions on the all the relevant issues. Our goal is to help both sides clearly understand each other's positions."

Joel Wit, a former U.S. nuclear negotiator who met with the North Koreans in Germany in March, told The Cable that the talks could signal the Obama administration's willingness to move away from its policy of "strategic patience," which basically amounts to waiting for the North Koreans to make positive moves while strengthening its alliances with Japan and South Korea.

The New York meetings are the second step of a three-step process to resume multilateral talks on North Korea's nuclear program, said Wit. The first step was for the North Koreans and South Koreans to resume discussions, which has already occurred. The second step is for the United States and North Korea to meet. And the final step is to resume the Six-Party Talks, which also involve China, Russia, and Japan.

Taking that third step won't be easy. The Obama administration has made clear it won't return to the Six-Party Talks until the North agrees to abide by its previous commitments on denuclearization. The DPRK now says that denuclearization must be achieved by both sides simultaneously and has started an ambitious uranium enrichment program.

Wit said that despite the gap in positions and the aggressive North Korean behavior, the United States should act now to jumpstart negotiations rather than allow the security situation on the Korean Peninsula to deteriorate further and let the North Korean nuclear program advance unchecked.

"We're rapidly approaching a point where we're going to have to make a serious decision about what we're going to do about their [uranium program]," said Wit. "So that means seriously considering some incentives, like reactor assistance.... It's something we've got to deal with before it gets out of hand."

Victor Cha, a former NSC director for Asia, said that North Korea's bad behavior since the Six-Party Talks were abandoned in 2008 shouldn't give anyone confidence that they are negotiating in good faith.

"It has been almost three years since a full round of Six-Party Talks, and since the last round, the North has done just about every heinous act in violation of the letter and spirit of the agreements that had been negotiated," he said. "No one expects North Korea is serious about denuclearization, and Pyongyang has done nothing during Obama's tenure to demonstrate otherwise."

The Obama administration has been quietly putting pressure on the South Korean government to relax its demands for an apology from North Korea over the sinking of the Cheonan warship and its shelling of a South Korean island, Cha said. The administration believes that North Korea will be less aggressive if talks are underway, he said.

"So there are clear tactical reasons for the U.S. to re-engage. But does anyone have a strategy? Pundits will call for a bigger and better agreement this time, but after 25 years and two agreements in 1994 and 2005, I am less confident that such an agreement is attainable," he said.

State Department spokesperson Victoria Nuland set the expectations for this week's meetings low in Monday's press briefing.

"We see this as a preliminary session where we're going to lay out very clearly our expectations for what will be necessary to not only resume Six-Party Talks, but to improve direct engagement between the U.S. and the DPRK," said Nuland.

A senior State Department official, speaking to reporters during Clinton's trip to Asia, said that China was on board with a more active policy of engaging North Korea.

"I think despite the fact that China, in meetings with the United States, will rarely displays open displeasure, I think you can sense behind the scenes, there is substantial unhappiness with what's transpired with respect to Pyongyang's intransigence and provocative actions," the official said.

The State Department is engaged in an intensive effort to convince Sen. John Cornyn (R-TX) to lift his hold on the nomination of Bill Burns as deputy secretary of state, but Cornyn is demanding the administration clarify its policy on Taiwan arms sales before he'll do so.

Cornyn's hold on Burns's nomination has been in place since June 23, and it doesn't look like he will remove it any time soon. Cornyn likes Burns personally, his staff told The Cable, and he thinks Burns is right for the job, but Cornyn is using his power to hold up the nomination as leverage to force the Obama administration to do two things: release a long overdue report on Taiwan's air power capabilities to Congress, and finally acknowledge the Taiwan government's letter of request to buy 66 F-16 fighter planes from the United States.

"My primary concern is that the Obama Administration has allowed China to basically wield a veto over a U.S. arms sale that is in our national security interests, and I am troubled by the precedent this might set for the future of U.S.-China relations," Cornyn told The Cable. "It is outrageous, but not surprising that they are blocking a trade deal that supports many high-skilled jobs across the nation and would give our stalled economy a much-needed boost."

The F-16 is built by Lockheed Martin and related jobs are spread out over 44 states, but the bulk of the manufacturing and assembly takes place in Texas.

The State Department has been working hard behind the scenes to convince Cornyn to lift his hold. Secretary of State Hillary Clinton has personally engaged Cornyn twice on the issue, once in a phone call and once by approaching him in person at an unrelated event. What's more, the State Department has been calling defense firms to ask them to find projects that could deliver jobs to Texas as a way to compensate Cornyn if the F-16 production line closes due to a lack of orders, according to three sources with direct knowledge of the interactions. One of the options the administration is considering is to offer Taiwan a package of upgrades for their existing fleet of older F-16s, the A and B models, which would provide Texas with a lower amount of jobs.

But Cornyn is not about to lift his hold on Burns in exchange for some Texas defense jobs, his staffer told The Cable in an interview.

"They seem to think we can be bought off with jobs on unrelated issues, but this is not a Texas parochial issue. This is about allowing the Chinese to have a veto over U.S. arms sales to anybody," the staffer said. "That's just unacceptable to let them do that, and that's exactly what's happening."

Congress mandated that the Obama administration issue a report on Taiwan's air power capabilities in the fiscal 2010 defense authorization bill, but that report is now several months late. Cornyn's staffer said that the Pentagon completed the report months ago but that the State Department is holding it up, and the report was last seen sitting on the desk of former Deputy Secretary James Steinberg.

"The State Department refuses to sign off on it," the staffer said. "It's in final form, it's been sitting there since February at the State Department, and they don't intend to sign it any time soon."

At an event at the Heritage Foundation, Cornyn said that Clinton told him she needed three more months before releasing the report, but the secretary didn't explain why. It's possible the administration wants to wait until after Vice President Joe Biden travels to China to meet Chinese Vice President Xi Jinping, who is likely the next leader of the country, next month.

Our administration sources tell us that the State Department is not holding up the report unilaterally. Rather, they say that the administration is waiting to release parts of the report in order to have it be accompanied by a new overall approach to the issue, which they are still finalizing.

These sources also say there is some worry inside the administration that Cornyn will not be satisfied until or unless the administration actually agrees to sell Taiwan the planes.

As for Taiwan's letter of request to buy F-16s, the administration has been playing a game with the Taiwanese -- telling them privately not to submit the letter so the administration wouldn't have to formally reject it and can continue to claim that no official request has been made.

But senators and lobbyists working on the F-16 issue have been pressing the Taiwanese to just go ahead and make the request public in order to place pressure on the administration and force them to declare their position on the arms sales, one way or the other.

"We've been encouraging the Taiwanese to tape it to the front door and walk away, like getting served a subpoena," said a Washington lobbyist who works on the F-16 issue. He said the Taiwanese have been trying to get the United States to accept the letter since 2006.

Cornyn also wants the administration to acknowledge publicly that the Taiwanese want to buy the F-16s, and then make clear either that the United States is willing or unwilling to fulfill that request.

"If you think that selling Taiwan new F-16s is not in our interest, then say it. Stop hiding behind this ‘we haven't received an LOR from Taiwan' argument. We know they have just intimidated them out of submitting it. It's just a farce," the staffer said. "Come clean and stop playing this game."

There's very little chance the Obama administration would move forward with selling F-16s to Taiwan in the first place. The White House delayed the delivery of a $6.2 billion arms package to Taiwan that was left over from the Bush administration until after President Obama visited Beijing in November 2009. But when the delivery finally went through in January 2010, the Chinese went ballistic and cut off military-to-military relations with Washington.

The U.S. government is required by law to provide for the defense of Taiwan under the Taiwan Relations Act, but for years the United States has failed to provide Taiwan with the types of high-end systems that would allow the country to maintain parity with China. Meanwhile, the Chinese continue to stockpile missiles and other weapons on the coast opposite Taiwan.

"We have de facto ceased abiding by the TRA," said Bush administration Pentagon China official Dan Blumenthal. "We are supposed to sell arms to Taiwan based on their objective defense needs. Does Taiwan not need an air force? This started under Bush and has continued under Obama."

Heading into the 2012 presidential election season, Taiwan's friends in Washington, both on the Hill and on K Street, are preparing a new push to elevate the F-16 debate from an insider's policy discussion into a political issue. Their argument will be as much about jobs as U.S. national security: They plan to make the case that if Taiwan doesn't get to buy the F-16, the production line will close and thousands of U.S. workers will be out of a job.

"In the absence of the Taiwan order for 66 F-16s, the coming closing of the F-16 line in Fort Worth, Texas heralds a double hit for the interests of the United States that encompasses the strategic tool that the line represents for US national security interests as well as the essential job skills and manufacturing prowess that the F-16 supply chain and production facility represent for the US economy," said Rupert J. Hammond-Chambers, the president of the U.S. Taiwan Business Council.

The advocates say that without new orders, the F-16 production line will close in October 2013, and new orders for parts will start to peter out as early as the end of this year. They point to a report produced by Lockheed Martin, which makes the F-16, showing a state-by-state breakdown of the thousands of jobs that would be lost if the jet fighter's production line is closed.

"Particularly hard hit are states such as Texas, Florida and Ohio with in excess of 1,000 high paying aerospace jobs per state lost. This will be devastating for communities in these states indeed for all of the 40 plus states in the country whose communities contribute to the production of F-16s," Hammond-Chambers said.

Meanwhile, the Burns nomination remains stalled and the path to a compromise between Cornyn and Clinton remains unclear.

"They want the issue to go away, but we're not going to let it go away," the Cornyn staffer said.

What's more, if Cornyn does lift his hold, that doesn't mean it will be smooth sailing for Burns's nomination. We have confirmed that there is at least one more GOP Senate hold on the Burns nomination due to a separate issue.

Deputy Secretary of State Jim Steinberg leaves office next month after more than two years as the No. 2 official at the State Department and an influential voice inside the administration on Asia policy.

Last week at the Shangri-La Security Dialogue in Singapore, he sat down with The Cable to look back at the successes and failures of the administration's policy in the region, his unique experience inside Hillaryland, and his plans for the future.

Here are some excerpts:

Josh Rogin: Today (June 6) you had a meeting with Chinese Defense Minister Gen. Liang Guanglie. How did it go, what was the takeaway from that meeting?

Jim Steinberg: I think the most important takeaway is the intensification of the dialogue. As you know it's been a priority for us to try to get the military-to-military dimension to be equal to and balanced with what is obviously a very intensive engagement on the political side. And what we've seen over the last six months in particular is sort of a greater willingness on the part of our Chinese counterparts to engage on both the classic mil-to-mil... but also, in these kind of mixed fora, like the [Strategic and Security Dialogue], where we have both Foreign Ministry and military types. And then the fact that General Liang is willing to meet me here is I think a very good sign, because it means we have a variety of ways of engaging with influential important voices on the security side.

JR: Let's take more of a 30,000-foot view here: two years of U.S.-China relations, some successes, some challenges. Overall, looking back, what do we point to as the top accomplishments of the last two-plus years of the Obama administration's China policy?

JS: What we point to is that, on most of the big issues of our time, that we've come to understand that we have a lot of common interests, and that we are going to be more successful in pursuing them if we do it together, beginning with the earliest engagement, which was on the economic issues, that China and the United States have a critical role to play in dealing with the world financial crisis of 2008 and long-term, sustained economic growth. And while I wouldn't pretend that we've resolved all the bilateral economic differences between us, we have worked well in the G-20 and in a global setting, and we have made some progress on the trade and financial issues.

I think that both on North Korea and Iran, it's important to recognize how much positive convergence we've had. If one would have asked two years ago, for example, on dealing with Iran, how much we would be in sync with China I think they would be amazed how well this has worked, both in terms of the formal stuff in the Security Council, but also in the P5+1. The Chinese have been fully on board, they haven't undercut it, they've been very clear and consistent with the need for Iran to meet their obligations (and they've worked as a partner with us on that), and they've been very restrained in their political and economic engagement with Iran.

JR: Early on, you put forward publicly and very forthrightly strategic reassurance with China. We don't really hear that much anymore and there was some confusion in the community about what it meant. What happened there?

JS: I think the current formulation is strategic mutual trust, which I see as responding to the same set of issues that I raised -- that the way you get strategic mutual trust is by reassuring each other on issues of concern. So I feel from my own perspective -- in terms of what I believe was needed -- that the formula that the two presidents have agreed on, which is building strategic mutual trust, is exactly what I was trying to get at: which is how do you look at the sources of mistrust and address them. I believe that concept has been really built in.

JR: Turning to North Korea for a second, there were a lot of signs in 2010 that the State Department was actively looking at a new North Korea formulation and a new policy. There were some meetings, some real discussions that were pretty well reported on, but ultimately we didn't really see a new North Korea policy. What happened there, how far did those discussions get, and was that a misperception in the community?

JS: I think it was a misperception. One of the things that I've learned over the years, especially from when I was in policy planning, is that you have to keep engaging with people outside of government. You shouldn't just kind of assume that once you've developed a policy that it's the right policy, and the right policy forever. You owe it to yourself to have people come in and challenge you, saying you're doing it wrong, you're doing it differently, and I think it's to the credit of Secretary [Clinton] and others that she regularly brings in people on almost every major policy issue to have a chance to hear different viewpoints and different perspectives. But I think that the basic conviction that we've had is a preparedness to engage in negotiations but a desire to avoid the mistakes past is something that's been very consistent.

JR: A lot of Asia expertise is leaving the administration lately. I'm wondering how you see the shift of responsibility in the Asia portfolio.

JS: Ultimately, policy comes from the president and the secretary. What we do is support them and advise them and I hope to continue to be able to do that from the outside. But I think we have two very experienced leaders who've been dealing with these issues for 2.5 years in their current jobs. That's what gives the continuity, what you'll see even with the changes at the Pentagon. You have somebody who's been involved in policy from the beginning so I don't anticipate this is classic inside-baseball and I don't think it's the individuals [that are most important]. The leadership is what makes the difference, that's where policy comes from.

JR: What's often said about you is that you had a unique role as deputy secretary because you were often at the White House, you had a seat at the principal's meetings, and you came from the Obama camp in a Clinton world. Is that an accurate portrayal?

JS: Not really. I have to say that what's been gratified me is that I felt very close ties everywhere. I've worked in three administrations. The level of general cooperation in the interagency is unprecedentedly good in this administration -- not that we agree on everything but there's that it's a common enterprise. I know there's a lot of speculation about different camps but I haven't felt that at all in 2.5 years -- and I haven't felt like you have to sign up for one or the other. I've been enormously appreciative of the relationship I have with Secretary Clinton; she's an amazingly good boss, it's been an honor to be her deputy, and I felt fully part of her team. But I also felt very engaged and appreciated by the White House.

JR: It's also been said that you came in and were very clear that you wanted to stay two years -- no more, no less. What was the thinking there?

JS: Two children, nine and seven. You should do an interview with them and see how they feel. It's a privilege to serve your country but you also have a responsibility to your family. My wife's in the administration too. The kids have been great about it, but I both owe it to them and frankly it's the most rewarding thing in the world, that opportunity. So I have to say that I'm excited about [becoming the dean of Syracuse University's] Maxwell School and the professional side [of my relocation] but the part I'm most excited about is spending more time with the kids.

JR: So your whole family's going to move?

JS: Yes, my wife will be a vice president at Syracuse University. We will be living in a small town about 20 miles outside of Syracuse and living a very good family life.

JR: Any chance at all we might see Jim Steinberg return in the second term of Obama 2.0? Are you going to rule it out?

JS: I have no plans. This is very much family-driven, and from my perspective, it was a very important commitment to now go back and let the kids grow up with two parents at home a lot of the time. I'm looking forward to it.

SINGAPORE - Rarely does a top Chinese government official take questions from foreign reporters in an open setting. But today, Chinese Defense Minister Gen. Liang Guanglie addressed the 10^th annual IISS Shangri-La Security Dialogue and took several questions, including one set from your humble Cable guy.

We asked him to react to yesterday's announcement by Defense Secretary Robert Gates that the U.S. would increase its military presence and involvement in Southeast Asia, which is widely seen as a response to Chinese assertiveness in the region and China's recent aggressive actions in the heavily disputed South China Sea. We also asked him what the Chinese response would be and whether China's development of anti-access and area denial weaponry was contributing to an arms race in Southeast Asia.

Liang spent most of his answer praising recent improvements in the U.S.-China military to military relationship, as Gates had done all weekend as part of the joint effort to portray a warming of ties. But Liang ended his remarks by claiming that in the South China Sea, "the freedom of navigation has never been impeded, has never been a problem, and the situation in the South China Sea remains stable."

The Chinese officers in the room next door were clearly not happy with the Cable's questions, one conference delegate told us after the session, and they were asking other conference goers for details about this "rude American reporter."

Watch the entire exchange here:

SINGAPORE — U.S. Defense Secretary Robert Gates and Chinese Defense Minister Gen. Liang Guanglie held a 55-minute meeting Friday behind closed doors on the sidelines of the IISS Shangri-La Security Dialogue. Both sides claimed progress in U.S.-China military relations, while largely avoiding contentious issues such as U.S. arms sales to Taiwan and growing competition in Southeast Asia.

Your humble Cable guy was in the room for the first 5 minutes before being ushered out by security, and heard both leaders praise the resumption of military-to-military ties, which began again last May following the People Liberation Army's early 2010 decision to sever ties in response to the United States' $6.4 billion arms sale to Taiwan.

"President Hu and President Obama both believe that our military to military ties are an underdeveloped part of our relationship between the United States and China. In recent months our two countries have made some progress in toward rectifying this imbalance by jointly identifying areas of cooperation," Gates said at the start of the meeting.  "As I leave office at the end of this month, I do so believing that our military relationship is on a more positive trajectory."

"It is critically important to maintain a dialogue in areas where we disagree, so we can have greater clarity about each other's intentions," Gates continued.  "Together we can show the world the benefits that arise when great nations collaborate on matters of shared interest."

Liang struck a similarly positive note, saying that, "since the beginning of this year... the mil-to-mil relations and technical cooperation between the two militaries have made some positive progress."

According to three senior U.S. defense officials who briefed reporters on the rest of the meeting, both military leaders spent the bulk of the time reviewing points of agreement and pledging cooperation on areas of shared strategic interest -- piracy, disaster response, and North Korea -- while avoiding areas of conflict.

"Of course, there were areas of disagreement raised, but they were acknowledged and moved on from," one of the officials who was in the room reported.

For example, when Liang raised the issue of future U.S. arms sales to Taiwan, as Chinese leaders do in every meeting, Gates gave a clear but curt one line response.

"We know each other's points on Taiwan well," Gates told Liang, according to the officials.

And when Liang criticized what he referred to as voices in the United States that China believes are hyping the Chinese military threat, Gates responded that there are anti-U.S. voices in China as well, but that on neither side do the negative voices represent the views of each country's leadership.

"The reality is that some will always oppose this relationship moving forward, but it is our responsibility to keep it moving forward," Gates said.

Gates also stressed that incoming Defense Secretary Leon Panetta will continue the effort to advance U.S.-China military ties. But Gates won't leave the issue totally behind.

"He said he hopes to continue to monitor the forward progress in retirement, with a fishing line in hand," one defense official reported.

Gates also noted in the meeting that Joint Chiefs Chairman Adm. Mike Mullen will travel to China in July, a reciprocal visit following PLA Chief of General Staff Chen Bingde's visit to Washington last month.

The cordial U.S.-China exchanges could turn more adversarial as the conference goes on. Gates speaks Saturday and is expected to lay out a range of new ideas for how the United States plans to increase its military involvement in Southeast Asia. The moves are widely seen as a response to growing Chinese assertiveness in the region. Liang speaks Sunday.

The discussion was only one of four bilateral meetings Gates held Friday. He also met with Japanese Defense Minister Toshimi Kitazawa, Singaporean Permanent Secretary for Defense Chiang Chie Foo, and Malaysian Prime Minister Najib bin Tun Hj Abdul Razak.

The Cable asked the senior defense officials what Kitazawa had to say about Japanese Prime Minister Naoto Kan's bombshell announcement this week that he would resign his post.

"That was not discussed," one official said.

SHANGRI-LA HOTEL, Singapore - The U.S. and China are both striving to portray a warm bilateral relationship as they headline a huge international security conference in Singapore this weekend. Meanwhile, the U.S. side is preparing to unveil parts of its new approach to Southeast Asia, which will include more U.S. military ties to the region as a means of countering growing Chinese influence.

Here at the 10^th annual Shangri-La Dialogue in Singapore, the U.S. charm offensive is in full swing, with Defense Secretary Robert Gates previewing his keynote speech by saying that U.S.-China relations are improving and the U.S. welcomes China's rise.

"We are not trying to hold China down. China has been a great power for thousands of years. It is a global power and will be a global power," Gates told reporters on the plane ride to the conference, which begins today and goes through Sunday, with 35 nations participating. The conference is being hosted by the International Institute for Strategic Studies.

"We're very satisfied with the progress of the relationship," Gates claimed. "My first visit to China in this job was in the fall of 2007. I laid out a fairly ambitious agenda for developing our military-to-military relationship. We've obviously hit snags and obstacles along the way, but I think we're in a pretty good place now, pretty realistic."

This is Gates' fifth appearance at Shangri-La and his final appearance as defense secretary. He steps down July 1 and CIA Director Leon Panetta has been nominated to replace him. Last year he made news by criticizing China's People's Liberation Army and defending U.S. arms sales to Taiwan, but this year he is striking a conciliatory tone and striving to avoid any controversy that could be portrayed as a negative ripple in U.S.-China relations.

For example, Gates was asked on the plane what he thinks about the prospect of selling F-16 fighter jets to Taiwan, an idea supported heavily by at least 45 U.S. senators.

"I don't have a view on that at this point," Gates said.

But lying just underneath the veneer of warm words, there are large strategic issues in play and Gates is planning to unveil some, but not all, of the U.S. plans to increase its military relationships and involvement in Southeast Asia, despite growing budget problems back in Washington.

The Obama administration is quietly shifting its strategic focus toward more emphasis on Southeast Asia, due to the recognition that the region's importance is growing in the military, diplomatic, and trade arenas. China made a play for increased power in the region in 2009 and 2010, but was rebuked by skiddish countries wary of China's intentions. The U.S. is responding by assuring these countries that America is in the region for the long haul.

"[T]here has been really extraordinary progress made, particularly in the last couple of years or so with a number of countries in strengthening our military-to-military relationships and our overall relationship -- Singapore, Indonesia, Vietnam, Philippines, Malaysia, Australia certainly, as well as our traditional allies in Thailand, Japan, and Korea," Gates said. "And I think the general recognition on the part of all the countries over the past several years that their own security environment is evolving and their desire to adjust their own positions accordingly and the need for us to be flexible as we develop our relationships with these countries and the nature of the activities that we have with others, whether it's exercises or training programs or equipment or whatever."

"What I will largely talk about at the conference is the evolution and the changes in these positions and kind of where we are and moving to the future," Gates said, declining to give details of his Saturday keynote address.

Looming over the promise of increased U.S. commitment to Southeast Asia is the fact that the U.S. fiscal situation is horrid and the Pentagon's mammoth budget is under the microscope like never before. But Gates said that was being taken into consideration when making plans to increase U.S. military involvement in the region.

"[I]n a way many of the things that we're doing in Asia in building these relationships are actually pretty cost effective -- training, exercises, rotations of forces and so on are -- and the use of our Navy, our air assets moving from place to place. I think these are all cost effective ways of enhancing our influence, but also letting these countries know that we're a reliable partner and that we can be counted on," he said.

"Everything will be on the table, but I believe that our approach to enhancing our relationships, our presence and our influence in Asia is a very cost effective approach."

Gates is trying to be kind to the Chinese, but when questioned directly he gave a sober assessment of what he sees as their intentions.

"They are clearly working on capabilities that are of concern to us in terms of denial of access, particularly with respect to our aircraft carriers, the development of long-range accurate cruise and ballistic anti-ship missile... my sense of it is that they are -- and in their efforts frankly to build a blue water navy," he said. "I think they are intending to build capabilities that give them considerable freedom of action in Asia and the opportunity to extend their influence."

As the conference begins, all eyes are on Gates and the Chinese delegation, which will be headed for the first time by Defense Minister Gen. Liang Guanglie. Gates and Liang will hold a bilateral meeting today. A joint press statement may be in the works.

The heat is on here at the beautiful Shangri-La luxury hotel. Your humble Cable guy arrived at 1 AM to find a member of the local security service passed out on the curb in front of the lobby, being treated by emergency medical personnel. Hotel staff told us he had suffered cardiac arrest due to heat exhaustion. We are pleased to report he is recovering now at a local hospital.

Follow us here on The Cable for constant updates on the conference throughout the weekend and find more information at IISS's blog Shangri-La Voices. Politico's Mike Allen also scored an interview with Gates on the plane, which can be found here.

For the third time in two years, hundreds of Chinese officials are meeting with hundreds of their U.S. counterparts to discuss dozens of bilateral topics in dozens of meetings. After the first day of the two-day event, there aren't any new bilateral agreements to announce, and officials say there aren't any expected soon.

"Now more than ever, with two years of dialogues behind us, success depends on our ability to translate good words into concrete actions on the issues that matter most to our people. So as we begin this third round, we will keep that goal in clear focus," Secretary of State Hillary Clinton said in her Monday morning remarks at the opening of the U.S.-China Strategic and Economic Dialogue, which is being held at various locations in downtown Washington.

She praised the new high level participation of senior officials from China's People's Liberation Army and rattled off a long list of issues that would be discussed, including: military-to-military relations, the situation in the Middle East, the need to rebalance the global economy, Iran sanctions, the North Korean nuclear crisis, and human rights.

Vice President Joseph Biden delivered the strongest message on Chinese human rights practices in his Monday morning remarks, when he said, "We have vigorous disagreement in the area of human rights."

"We've noted our concerns about the recent crackdown in China, including attacks, arrests and the disappearance of journalists, lawyers, bloggers and artists," Biden said. "I recognize that some in China see our advocacy [on] human rights as an intrusion and Lord only knows what else.  But President Obama and I believe strongly, as does the secretary, that protecting fundamental rights and freedoms such as those enshrined in China's international commitments, as well as in China's own constitution, is the best way to promote long-term stability and prosperity of any society."

Jeffrey Bader, the recently departed senior director for Asia at the National Security Council, wrote in a Brookings Institution policy brief that the dialogue "was not conceived as a mechanism to deal with bilateral crises or to produce specific ‘deliverables,' but to develop a richer, more intensive dialogue between senior officials on the two sides than would be possible in the usual quick in-and-out visits, and to break down bureaucratic stovepipes among agencies, particularly on the Chinese side, not accustomed to coordinating effectively with each other."

On Sunday, Clinton awarded Bader the Secretary's Distinguished Service Award, standing alongside Chinese State Councilor Dai Bingguo.

Critics of the Obama administration's China policy see the event as yet another example of the administration placing style over substance, and raising expectations of progress in the U.S.-China relationship without delivering results.

"By far the most important economic issue for America and China is the related imbalances in our economies," wrote the Heritage Foundation's Derek Scissors. "The U.S. recognized this several years ago and has repeatedly raised the matter. Result: Both economies are now more imbalanced than when the dialogue began. The main reason is simple: Neither country wants to bear the pain of rebalancing. Instead, they take to telling the other side why it should rebalance."

A senior administration official, speaking to reporters after the conclusion of the first day's meetings, said that the primary discussion of tough economic issues will be held on Tuesday.

"Tomorrow the focus is on how the U.S. and China can rebalance our economies so we can strengthen our recoveries. Monetary and exchange rate policies are certainly be a focus of those discussions," the official said. But he warned not expect any major announcements. "[The Chinese currency] is not moving enough and no one's satisfied, but it's appreciated more than 5 percent against the dollar [over the last year]," he noted.

Undersecretary of State for Economic, Energy, and Agricultural Affairs Robert Hormats took the Chinese to task for their policy of giving regulatory, financial, and legislative support to state-owned enterprises.

"The biggest challenge in addressing these issues effectively is forging a common understanding that state-controlled competition is not competition, and that competitiveness cannot be bestowed by decree. The trade distortions created by the ‘China Model' are disadvantageous to our U.S. companies trying to compete for opportunities around the world, and a direct threat to U.S. jobs and competitiveness," Hormats said.

And Deputy Secretary of State James Steinberg told an audience at the Center for Strategic and International Studies on Monday afternoon that climate change, specifically short-term climate change forces, was a major topic of discussion between Energy Secretary Stephen Chu and his Chinese counterparts.

As for the military component of the talks, Assistant Secretary of State Kurt Campbell told reporters last week that the United States intends to engage "not just traditional players in the Foreign Ministry but also other players in the Chinese government, including the military."

Dan Blumenthal, a former China desk officer at the Pentagon and now a senior fellow at the American Enterprise Institute, said that while increased military dialogue and the building of relationships is good, the administration must not depend on such dialogue to halt the growing tension in the bilateral security relationship.

"The Chinese are moving very cautiously, the political leadership in China is very adverse to making any bold decisions, and the PLA has very little interest in talking to us about anything of substance," he said. "The summits matter less than what we are doing on the ground in response to what China is doing."

The wide-ranging sanctions law passed by Congress and signed into law by President Barack Obama last July calls for the administration to punish companies from third-party countries that are still doing business in Iran. However, U.S. senators still aren't sure whether the administration will follow through with this punishment, especially when it comes to companies in China.

A bipartisan group of 10 U.S. senators, led by Sens. Jon Kyl (R-KY) and Robert Menendez (D-NJ), wrote to Secretary of State Hillary Clinton on Thursday to demand an update on the State Department's investigation into these companies' ongoing business with the Iranian regime. Their letter was subsequently obtained by The Cable. Deputy Secretary of State James Steinberg announced that State's investigation began on Sept. 29, which means that law requires the results to arrive by March 29, the senators wrote.

"It appears that Chinese firms in the energy and banking sectors have conducted significant activity in violation of U.S. law," the senators stated. "We cannot afford to create the impression that China will be given free rein to conduct economic activity in Iran when more responsible nations have chosen to follow the course we have asked of them. We are sure you agree."

The State Department's Bob Einhorn is briefing senators on Capitol Hill on this very issue on Friday, a senior GOP Senate aide told The Cable.

In remarks at the Carnegie Endowment for International Peace on Wednesday, Einhorn addressed the issue directly, saying that "we continue to have concerns about the transfer of proliferation-sensitive equipment and materials to Iran by Chinese companies, there is substantial evidence that Beijing has taken a cautious, go-slow approach toward its energy cooperation with Iran."

That explanation won't be enough to satisfy the senators' demands for more active confrontation if Chinese companies are indeed flouting sanctions.

One of the main concerns on Capitol Hill is that as countries pull out from Iran, other countries will take over contracts, thereby nullifying the effect of the sanctions -- a practice known as "backfilling."

For example, the administration and Congress worked hard to convince Japan and South Korea to impose unilateral measures against Iran. However, there's particular concern that China firms will simply come in and take over those contracts.

Kyl and Sen. Chuck Schumer (D-NY) sent a letter to Clinton last October on this very issue, noting reports that China National Petroleum Company (CNPC) replaced the Japanese firm Inpex and agreed to invest around $2 billion to develop Iran's South Azadegan oil fields last year.

One week later, the Government Accountability Office (GAO) released a report that identified 16 companies that sold petroleum products to Iran between Jan. 1, 2009, and June 30, 2010. Of those 16, the GAO reported that five have shown no signs of curtailing business with Iran. Three of those companies are based in China, one in Singapore, and one in the UAE.

Other lawmakers who have pressed the administration to enforce Iran sanctions against China include Sens. Joe Lieberman (I-CT), Susan Collins (R-ME), Mark Kirk (R-IL), and Rep. Howard Berman (D-CA).

"Clearly, Congress -- on both sides of the aisle -- is losing patience and expects the administration to act," said Josh Block, a senior fellow at the Progressive Policy Institute and former spokesman for AIPAC. "If not, what kind of message are we sending to these companies in China and Venezuela and Turkey and elsewhere -- and their governments -- that are helping Iran break international isolation?"