Clinton Protects Russian 'HEU Deal' Assets

July/August 2000

Amid the continuing financial problems of the United States Enrichment Corporation (USEC), President Bill Clinton issued an executive order June 22 that protects Russian government assets related to the Highly Enriched Uranium (HEU) agreement from garnishment by outside entities. Russia had halted shipments of low-enriched uranium (LEU) under the so-called HEU deal after a Swiss company filed suit in a Kentucky court to seize agreement-related assets as compensation for funds the company claims it is owed by the Russian government.

Under the HEU deal, formalized in 1993, the U.S. government has committed to purchasing 500 metric tons of HEU over a 20-year period, securing the material and providing Russia with an estimated $12 billion in capital to safeguard its fissile material stockpiles and dismantled weapons systems. Russia blends the HEU down to LEU before it is shipped to the United States, where USEC, the U.S. government's executive agent, brokers its sale to utility companies for use in civilian nuclear reactors. USEC then reimburses the Russian government for both the cost of the uranium and the enrichment of that material.

Noga, a Geneva-based trading company, claims the Russian government owes it $800 million for goods delivered in the early 1990s and has filed lawsuits in several countries to recoup the debt. A Swedish arbitration court agreed in January that the company is owed money, but the Russian government is contesting the claim. In response to an announcement that Noga had filed a claim in the Paducah, Kentucky, U.S. District Court on January 27, Russia halted shipments of LEU under the bilateral agreement in mid-May.

Following the release of Clinton's executive order June 22, Russian Deputy Atomic Energy Minister Vladimir Vinogradov informed the Russian news agency Interfax on June 23 that Russia was prepared to resume uranium deliveries the following week. "The cargo is in the St. Petersburg port waiting for a U.S. freighter to pick it up," Vinogradov said.

USEC to Close Plant

USEC announced June 21 that it will close one of its two uranium-enrichment plants in June 2001 in what is apparently an effort to lower costs and avert impending bankruptcy. USEC claims that its financial woes are due at least in part to its commitments under the HEU deal, under which it must pay above-market rates for Russian enrichment services. USEC has recently been seeking to renegotiate its contractual commitments with Russia to allow Moscow to sell some commercial nuclear fuel alongside downgraded HEU from the Russian nuclear weapons stockpile, in exchange for market-based pricing under the HEU deal.

USEC had apparently negotiated such an arrangement with Tenex, Russia's executive agent for the HEU deal, and was prepared to sign an agreement May 4, but Energy Department officials declined to approve the deal at that time, stating concern about the potential impact on national security and the U.S. enrichment industry.

Energy Secretary Bill Richardson and USEC President and Chief Executive Officer William Timbers exchanged a series of heated letters in June. Richardson expressed his "serious concern" regarding the "national security and energy security" implications of USEC's recent actions in a June 19 letter, and Timbers responded in a June 20 letter defending the company's actions.

Richardson's June 21 response to Timber's letter, the most recent in the ongoing exchange, appears to raise serious questions about USEC's future as a private entity. Richardson criticized USEC's "lack of follow through" on the "very commitments that engendered broad support for USEC privatization in the first place." USEC was privatized in 1998, but subsequent problems, including USEC's repeated requests for financial assistance from the federal government, have led some to speculate that the enterprise may be "renationalized."