"I actually have a pretty good collection of Arms Control Today, which I have read throughout my career. It's one of the few really serious publications on arms control issues."
– Gary Samore
Former White House Coordinator for Arms Control and WMD Terrorism

U.S., Russia Agree to Codify Nuclear Reductions

Philipp C. Bleek

U.S. and Russian officials announced in February that they have agreed to work toward a formal agreement codifying strategic nuclear cuts that will be subject to approval by their respective legislatures, and they provided more details on the possible terms of such an accord.

Speaking to the Senate Foreign Relations Committee on February 5, Secretary of State Colin Powell said that the United States and Russia are working to reach a “legally binding” agreement on strategic nuclear cuts. Indicating that the specific form of the agreement remains undecided, Powell said, “It can be an executive agreement that both houses of Congress might wish to speak on, or it might be a treaty.”

The secretary’s comments marked the first time the administration has said it would codify the nuclear reductions first announced by Presidents George W. Bush and Vladimir Putin in November. (See ACT, December 2001.) Previously, administration officials, including Bush and Secretary of Defense Donald Rumsfeld, had repeatedly voiced an aversion to what they characterized as Cold War-style arms control treaties.

Russian Ministry of Foreign Affairs spokesman Alexander Yakovenko echoed Powell’s remarks in a February 27 statement, saying that the “treaty” on strategic arms reductions would have “a legally binding character” and would be submitted “for the consideration of [both countries’] legislative bodies.”

In a Senate Armed Services Committee hearing February 28, Chairman Carl Levin (D-MI) asked Undersecretary of Defense for Policy Douglas Feith, who had just returned from Moscow, about Yakovenko’s reference to a “treaty.” Feith replied that negotiators had agreed to a “legally binding” arrangement but had yet to decide whether it would be a treaty or an “executive-legislative agreement.” The latter has the status of a treaty in international law but must be approved by a majority vote in both houses of Congress rather than by a two-thirds vote in the Senate, the approval mechanism for a treaty.

In a statement to the committee two weeks earlier, Feith had testified that U.S. officials are “perfectly open, if we can achieve an agreement that warrants it, to have it be a treaty,” but he had also said that “we see no reason to try to dictate the size and composition of Russia’s strategic forces by legal means.” Feith further indicated that because “new dangers” are likely to emerge, “we do not believe it is prudent to set in stone the level and type of U.S. nuclear capabilities.”

Feith had also reaffirmed some of Powell’s statements, saying the administration is considering “multiple agreements” with Moscow covering strategic reductions, transparency and predictability, and military cooperation, including on missile defenses.

More Details Provided

Officials from Washington and Moscow have also provided new information on an agreement’s likely composition. Yakovenko indicated in his statement that the United States and Russia had agreed to a “duration” of 10 years for the pact, that it would be “based on the verification mechanisms” of START I, and that the agreement would be “supplemented with new transparency and confidence measures with respect to nuclear warheads.”

When asked February 5 if a new agreement with Russia would include START II’s verification provisions and ban on multiple-warhead ICBMs, Powell had repeated previous statements that Moscow and Washington are considering how to “bring forward” START I verification and transparency provisions, and he indicated that the administration was also considering “how to deal with START II.”

Powell also said that Bush had told his Russian counterpart that if he wants to add multiple warheads to missiles, as Putin had threatened to do if the United States withdrew from the Anti-Ballistic Missile Treaty, he could “go ahead.” Powell noted that relations between Moscow and Washington are now under a “different framework,” whereby “you do what you have to do to defend yourself, we’ll do what we have to do to defend ourselves.”

U.S.-Russian talks on an agreement have been underway since January. John Bolton, undersecretary of state for arms control and international security, met with his Russian counterpart, Georgy Mamedov, February 19 but noted at a subsequent press conference that the two sides may not reach agreement by May, when Bush and Putin are scheduled to meet for a summit. A State Department official indicated February 20 that further talks are likely “in a couple weeks” but that no date has yet been set.

Despite apparent agreement on key issues, substantive differences have yet to be resolved. Yakovenko indicated in his February 27 statement that “a number of serious outstanding issues still remain.” Most importantly, he indicated, the two sides must agree on “real, not virtual strategic arms reductions,” a clear criticism of Washington’s plan to stockpile rather than dismantle warheads removed from operation.

Threat Reduction Funding Increase Requested

Philipp C. Bleek

After requesting cuts for threat reduction and nonproliferation programs last year, the Bush administration has asked Congress to increase funding for the efforts to downsize and secure weapons of mass destruction materials and expertise in the former Soviet Union.

U.S. nonproliferation efforts have received increased attention in the aftermath of the September 11 terrorist attacks, and the increase in requested funding was foreshadowed in late December by the release of a White House review that concluded that most threat reduction programs “work well, are focused on priority tasks, and are well managed.” (See ACT, January/February 2002.)

Submitted to Congress February 4, the administration’s fiscal year 2003 budget requests $417 million for the Defense Department’s Cooperative Threat Reduction (CTR) programs, a slight increase from the fiscal year 2002 level of $403 million but still below the $443 million allocated for fiscal year 2001 by the Clinton administration. Recent fluctuations in funding for CTR efforts have been due at least in part to budgeting technicalities and changes in program requirements.

The administration’s request calls for a more substantial increase for threat reduction programs run by the Department of Energy. For fiscal year 2003, the Bush administration budgeted approximately $1.1 billion for the department’s Defense Nuclear Nonproliferation account, about half of which is allocated for threat reduction efforts in Russia. The nonproliferation account received about $1 billion for 2002, but that sum includes $226 million of supplemental funding added by Congress in the aftermath of the terrorist attacks, making the administration’s request a substantial increase above the regular 2002 appropriation.

The budget also asks for $103 million for three State Department nonproliferation programs, approximately the same amount the programs received for 2002.

The total 2003 threat reduction budget represents the most funding requested for the initiatives in a single year. However, during a February 5 Senate Foreign Relations Committee hearing with Secretary of State Colin Powell, Chairman Joseph Biden (D-DE) called the planned increase “very, very small,” contrasting threat reduction funding with the approximately $8 billion requested for defense against ballistic missiles, which Biden noted the intelligence community considers the least likely threat against the United States.

Powell agreed that the requested increase is small but noted that the programs’ capacity to absorb additional funds is limited. Powell also said that “we’re looking at other ways of increasing the funding,” such as “debt relief.” Senators Biden and Richard Lugar (R-IN) have championed a bill that would allow Russia to write off some Soviet-era debt in exchange for nonproliferation commitments. Approved by the Senate in December, the bill must now be considered in the House.

U.S., Russian Companies Tentatively Agree on 'HEU Deal'

Philipp C. Bleek

The companies implementing a 1993 nonproliferation program under which the United States buys uranium from Russian nuclear warheads for use in power reactors reached an agreement in February that will allow shipments to resume in March.

Under the U.S.-Russian Highly Enriched Uranium Purchase Agreement, the U.S. government committed to purchasing, over a 20-year period, 500 metric tons of weapons-origin uranium blended down to low-enriched uranium for use in commercial power reactors. The agreement is implemented by the Russian government-controlled Techsnabexport (Tenex) and the private, U.S.-based USEC, Inc., formerly the government-run United States Enrichment Corporation.

Known as the “HEU Deal,” the initiative is intended to make the Russian material unusable for nuclear weapons; employ Russian scientists who might otherwise be tempted to work for proliferant states or groups; and provide a much-needed revenue stream for Russia’s nuclear complex, which has struggled to pay personnel and maintain physical security. The deal also provides a significant percentage of the uranium needed to meet U.S. nuclear fuel needs.

The initiative had been effectively stalled this year because the agreement establishing prices for the HEU deal had expired at the end of 2001, and the companies could not agree on how much USEC would pay for Russian uranium under a new agreement. The terms of the previous contract allowed for its prices to be extended through 2002, but USEC had refused to place orders for this year’s shipments before a new contract had been concluded.

USEC and Tenex began negotiating new pricing terms in the spring of 1999. USEC sought to replace the existing terms, which specified a fixed uranium price that the company alleged was too high, with a more flexible pricing arrangement consisting of a three-year running average of the market price for uranium, with an additional discount. Moscow initially balked because the resulting price was significantly lower than the existing arrangement, but USEC sweetened the deal by agreeing to purchase a limited quantity of non-weapons-origin uranium fuel to provide Russia with additional revenue.

The Clinton administration approved that deal in its final week in the White House, but the incoming Bush administration withheld approval pending an internal review. (See ACT, March 2001.) The Bush administration authorized the conclusion of negotiations in November 2001, and on February 22 the State Department announced that USEC and Tenex had “concluded” a new agreement, whose terms are “subject to review and approval by the two governments.” Washington has begun that process, according to a spokesman.

The new pricing arrangement, which a source familiar with the deal said resembled USEC’s previous offer but does not include non-weapons-origin fuel, would enter into force in 2003. The two sides have agreed to an interim arrangement that maintains the previous price for 2002, the source indicated. Shipments of nuclear fuel will begin in March, according to the State Department and USEC.

Although the pricing agreement clears the way for shipments to begin, the governmental approval necessary for long-term implementation of the deal appears less than certain. Sources familiar with the issue indicated in late February that although approval by Washington and Moscow was possible within days or weeks, it could also be delayed substantially.

In an acrimonious exchange of letters with USEC head William Timbers, Energy Undersecretary Robert Card wrote January 8 that the administration “will not be able to provide approval of any long-term agreement until all other domestic issues have been resolved.”

Card was referring to the government’s concern that the United States is overly dependent on the HEU deal for nuclear fuel. To address that concern, the Department of Energy has been seeking an agreement with USEC that would require the company to maintain a domestic capacity to enrich uranium, prepare to construct a new enrichment facility, and allow the government to operate existing facilities if USEC ceases to do so.

In a January 10 response to Card, Timbers criticized the Energy Department’s demands, saying, “No U.S. corporation could subject itself to such unprecedented and unnecessary government authority and remain accountable to its shareholders or remain in business.”

Russian approval of the new contract terms appears uncertain as well, in part because the new contract will provide Moscow with considerably less revenue than the terms of the previous agreement. Russian Minister of Atomic Energy Alexander Rumyantsev wrote his U.S. counterpart January 15, calling USEC’s pricing proposals “unacceptable” and requesting government-to-government meetings “as soon as possible,” an overture that was apparently spurned by Energy Secretary Spencer Abraham.

U.S. Reinstates Funds for Russian Chemical Demilitarization

Seth Brugger

On December 28, President George W. Bush signed a major defense spending bill that reinstates U.S. funding for the design and construction of a chemical weapons destruction facility in Shchuch’ye, Russia.

The bill’s signing comes after Bush pledged to seek an “overall increase in funding” for the Shchuch’ye project during a December 11 speech in South Carolina. In a December 27 statement outlining the results of an administration threat reduction policy review, the president also said that he would seek to “accelerate” the program. (See Threat Reduction Boosted By Policy Review, Spending Bills.)

As a party to the 1997 Chemical Weapons Convention, Moscow must destroy its declared 40,000-metric-ton chemical weapons stockpile. The Shchuch’ye chemical weapons destruction facility is one of three that Russia plans to construct and therefore plays a central role in Russia’s chemical demilitarization effort.

The Russian destruction program has been reliant on international support. However, for the past two fiscal years, the House of Representatives blocked new U.S. funding for Shchuch’ye, citing questions about Moscow’s ability to finance parts of the project that it is responsible for and concerns over the amount of financial support put forth by other countries, among other matters.

A number of factors came together to help win renewed U.S. funding this year. More funding has been promised or received from other countries, and Moscow has recently increased its financing of chemical demilitarization. Domestically, the Bush administration’s support for the project, efforts by Senator Richard Lugar (R-IN) to work with his House counterparts, and leadership by Representatives Curt Weldon (R-PA) and John Spratt (D-SC) facilitated fresh project funding, according to a congressional source.

Appropriations for the Shchuch’ye facility are contained in the fiscal year 2002 defense authorization act, which permits Washington to spend up to $50 million on Russian chemical weapons destruction this fiscal year.

However, funding is conditioned upon Russia meeting six requirements. Moscow must provide a “full and accurate disclosure” of its chemical weapons stockpile, demonstrate an annual commitment to allocate at least $25 million to chemical weapons destruction, develop a “practical plan” for destroying its nerve agent stockpile, enact a law calling for the elimination of all its nerve agents at one site, and agree to destroy two particular chemical weapons destruction facilities. In addition, the international community must show a “demonstrated commitment” to fund and build the infrastructure needed to support and operate the Shchuch’ye facility. U.S. government officials say that meeting the first requirement could be difficult.

However, this December the General Accounting Office reached an agreement in principle with its Russian counterpart to conduct a joint audit of the Russian chemical weapons stockpile. In an interview, Comptroller General David Walker said that the two sides have yet to work out the deal’s details. Walker added that the audit is not specifically targeted at helping satisfy the funding conditions for Shchuch’ye but said, “It might be possible to structure the joint audit to help assure that one or more conditions have been met.”

Russian plans currently call for the Shchuch’ye facility to become operational by 2005. According to a Defense Department contractor, construction could begin as soon as the secretary of defense certifies that Russia has fulfilled the funding conditions. Certification is not likely before April, and the United States aims to finish construction in five years, missing the Russian target date for beginning operations, the contractor said.

Russia's Strategic Priorities

Celeste A. Wallander

President George W. Bush announced in December that the United States planned to withdraw from the 1972 Anti-Ballistic Missile (ABM) Treaty in six months. For years, Russia had warned that loss of the treaty would undermine the nuclear strategic stability on which the delicate balance of terror had rested during the Cold War. It had claimed that, without the ABM Treaty, other arms control agreements could not stand, including START I and II, the Intermediate-Range Nuclear Forces (INF) Treaty, and even the nuclear Nonproliferation Treaty. Russia’s leaders threatened a new arms race that would restore Cold War acrimony.

Yet, sometime between the first serious Russian warnings in 1999 and the December 2001 decision, something changed. Russian President Vladimir Putin responded to the decision by calling it merely a “mistake” and said that it would not harm improving U.S.-Russian relations. Russia has not withdrawn from any arms control agreements; in fact, Russia and the United States are moving forward with discussions for a new offensive arms limitation agreement, perhaps in time for a Bush-Putin summit in early summer 2002.

What has happened to make Russia sanguine about a world without the ABM Treaty? Russia’s priorities have changed, as well as its assessment of what U.S. testing portends for the strategic relationship in the next 10 to 15 years. The political relationship has improved, and the Putin leadership cannot reverse course without closing off vital opportunities for integration and chances to secure resources to solve the terrible problems that plague Russia. In short, what has happened is that the Russian government has bet it will not lose as much from a world without the treaty as it will gain from a United States willing to cooperate. Most of all, Russia’s leaders have realized that U.S. missile defenses will not be a reality for some time and that they can preserve options for responding to potential defenses over the next few years.

The Stakes

The ABM Treaty provided Russia with status, partnership, and security. Status came from locking the United States into a bilateral relationship that no other country shared. The ABM Treaty preserved an aspect of superpower status that Russia could claim even as its conventional forces shrunk to nearly one-fourth their former size and its strategic nuclear arsenal dropped to nearly half of its Cold War high. By the same token, the treaty created a claim for partnership in negotiating strategic stability in the new security environment. Although the Bush administration tried to relegate Russia to a lower priority in U.S. foreign policy in the early months of its term, it found it needed to take Russia seriously to try to find a compromise on the ABM Treaty, if only to reassure European allies that the United States remained a reliable partner.

At the same time, the ABM Treaty provided security benefits. Nuclear deterrence policy is not merely about mutual assured destruction and the threat of being able to launch a few missiles at vulnerable cities. It remains based on counterforce calculations: we hold at risk not merely (or primarily) cities and citizens to deter leaders in other states, but military, defense, and industrial infrastructure.1 By preventing the United States from deploying defenses, the ABM Treaty limited U.S. counterforce capability.

The decision to forego these advantages without vehement objection is due in part to a new leadership style (Putin’s pragmatism vs. Boris Yeltsin’s high drama), but it is more importantly rooted in a shift in priorities. Putin’s foreign policy serves his domestic economic goals: to stabilize, regularize, and restructure the economy to support a 21st century Russian society and cultivate a newly confident Russian state. The Putin leadership wants Russian businesses to produce and invest, not merely strip assets and hide them abroad. It seeks good business relations with export markets and potential foreign investors.

The opportunity for substantially improved relations with the United States is key to Putin’s priority for economic growth and integration. Economic and business relations with Europe are strong, but they are not enough. Russia needs U.S. support for accession to the World Trade Organization (WTO), which should expand Russia’s export markets and provide leverage for cleaning up Russia’s business practices. If that happens, Russian businesses would become more competitive, and international investors might become willing to invest substantial amounts of capital into new and reformed Russian enterprises.

On the security front, the biggest problems facing Russia this decade are NATO and instability and terrorism in Eurasia. Russia and the United States now agree that counterterrorism is their central security priority. It does not make sense for Russia to undermine its partnership in a vital security issue by worsening relations over the less immediate concern about missile defenses. NATO’s future as a military alliance in Europe is much more important than future missile defenses because it affects how Russia will reform its conventional military forces. Putin has invested considerable diplomatic effort in reassuring European partners that Russia is a responsible neighbor. One element of Putin’s campaign has even been to propose joint development of European missile defense systems, possibly in the context of NATO. For such a cooperative security posture toward Europe to remain credible, Putin can hardly break off relations with the United States and embark upon a nuclear arms race.

However, these economic and political priorities alone would not matter if the Russian security leadership had not come to the conclusion that the U.S. decision poses no threat to Russia in the short term and does not rule out long-term options to preserve Russia’s nuclear capability. Russian government statements since the decision have repeatedly asserted that U.S. testing is unlikely to result in a successful comprehensive national missile defense system. Therefore, although Russia loses the ABM Treaty, it retains assured retaliation capability for the short and medium terms. Both Putin and Defense Minister Sergei Ivanov have stated explicitly that Russia can afford to wait and watch as the United States tests and develops missile defense because it is not expected that even a limited U.S. system—let alone one big enough to negate Russia’s deterrent capability—will be ready for 10, 15, or maybe 20 years.2

Russia’s Strategic Future

Earlier Russian threats to withdraw from a broad array of international and bilateral arms control treaties have largely disappeared. Such actions would be clearly counter to Russia’s own interests. Russia will concentrate on specific measures and capabilities to preserve its assured retaliation capability, not on destroying international treaties simply to make a point about U.S. unilateralism.

Russia’s immediate focus will be the new offensive arms control talks and a potential agreement linking offensive and defensive systems. Numbers for the new agreement are not in dispute. Russia can accept the 2,200-warhead ceiling the United States has proposed, although Russia envisions reductions to 1,500 warheads. Russia prefers a treaty, although Putin might accept a formal executive agreement if that is as far as the United States will go, especially if it includes transparency measures in defensive systems.3

The most important problem is likely to be the meaning of “operationally deployed warheads” in a new treaty. As proposed by the Bush administration, the term would not apply to warheads removed from delivery vehicles that had been removed from launch platforms. Such a definition would mean that the United States would preserve the ability to reconstitute American strategic forces well beyond the 1,700-2,200 warheads being discussed if the new agreement does not mandate destruction of the delivery vehicles and launch platforms. The Russians well understand this, and they are very much opposed.4

If the United States insists on the treaty limiting only operationally deployed warheads and preserving delivery vehicles and launch platforms for a reconstitution capability, Russia will insist on maintaining the same option (if not same capability). This could mean that Russia might preserve warheads in excess of 1,500, as well as delivery vehicles and launch platforms. This would make little economic sense because Russia simply cannot afford to preserve the Cold War Soviet arsenal, even in storage, on a military budget (projected for 2002) of only $9 billion. However, arms control is political, so if the United States is granted the right to preserve a hedge force, any bilateral agreement will have to grant Russia the same rights. Russia may not exercise the right, but such a hedge force would provide Russia with additional options for countering a significant U.S. missile defense system, should such a system be successfully developed and deployed.

The resulting negative nonproliferation implications are clear: if Russia did exercise the right to preserve a hedge force, large numbers of warheads and delivery vehicles would have to be stored, maintained, and secured. A renewed threat reduction effort might be joined to the treaty to provide for safe and secure storage of nondeployed Russian warheads and delivery vehicles. However, having the U.S. taxpayer preserve Russia’s ability to reconstitute its nuclear forces (against the United States) might be a complicated political issue. Even if Washington were willing to pay, Moscow might be unwilling to allow U.S. involvement in creating and maintaining systems to secure a nuclear arsenal meant to be reconstituted against a reconstituted U.S. force. Without some system to secure non-operationally deployed Russian warheads, further arms reductions risk creating a greater proliferation danger.

START I may survive loss of the ABM Treaty with or without new agreements on reductions and defense transparency. Russia has some interest in the treaty as a way to limit U.S. nuclear forces to some degree and (more importantly) to keep the verification regime and attendant Russian claims on U.S. transparency. Russian sources claim that withdrawal remains a possible response if things go badly in the security relationship, especially given substantial discontent with the treaty in the Russian military.5 U.S. sources are skeptical that Russia would give up an international treaty that gives Russia a claim on how the United States shapes its nuclear forces. If a new offensive arms agreement succeeds in creating new limits and a verification regime, START I might not be needed. If the negotiations fail, START I becomes more valuable for the existing transparency and verification system, but also more difficult to preserve if Russia views the failure as due to American bad faith.

Even if START I remains in force, Russia is considering options to enhance its retaliatory capability in the event the United States does successfully test and deploy missile defenses. It is virtually certain that START II will never come into force. The Russian Duma ratified the treaty on the condition the ABM Treaty remain in force. Without START II, Russia can maintain existing MIRVed ICBMs permitted under START I, including SS-18s and SS-24s, considered important by Russian analysts to increase the invulnerability of Russia’s retaliatory capability against an enhanced counterforce capability that would accompany a missile defense shield. Whether Russia would in fact keep these missiles is questionable because they are aging beyond their service life and need to be retired regardless of arms control treaties, but preserving them is one way for Russia to keep its options open.

Russian officials talk most about the option to put up to three warheads on the new SS-27 (Topol-M). Designed in response to the U.S. Strategic Defense Initiative in the 1980s, the SS-27 incorporates features meant to make it more difficult for a missile defense system to track and destroy. Russia may resume production of 10 SS-27s per year—up from the six per year that production had fallen to in 2000 and 2001 due to budget constraints—although this level would remain well below the 30-40 SS-27s Russia had originally planned to deploy each year.6

In the weeks since the U.S. decision, however, President Putin and Defense Minister Ivanov have both stated that Russia has no immediate plans to MIRV its SS-27s. Although deploying multiple warheads per missile would be cheaper than maintaining more missiles, it would not be costless to deploy fully operational MIRV systems for the SS-27. Clearly, the Russian government plans to maintain the option of MIRVing SS-27s, as well as maintaining existing MIRVed ICBMs permitted by START I in the event the United States does successfully deploy missile defenses. Putin has also said that Russia’s decision on MIRVing will depend on the “quality” of the U.S.-Russia relationship. His criteria are most likely a new arms agreement, U.S. support for Russian WTO membership, and the NATO-Russia relationship.

Russia’s other option is to develop countermeasures, such as decoys and technology to maneuver warheads in flight.7 Countermeasures would be expensive, and a decision to develop them would depend on how threatened Russia believed its retaliatory capability to be by new U.S. defense systems. Russia can live with a U.S. capability to shoot down 20-30 incoming warheads. Beyond that, Russia would begin to explore countermeasure options. The problem of expense for such research and development could well be mitigated by Russian-Chinese cooperation in countermeasures development, which is one reason their joint opposition to U.S. missile defense played such an important role in the 2001 Russia-China Friendship and Cooperation Treaty.8

The Long Term

Putin’s popularity and effectiveness as president remain high. His public opinion support numbers are around 80 percent, and his legislation breezes through the Duma and Federation Council. He continues to move supporters and associates into key positions and has achieved greater control over Russia’s regional leaders. Putin’s decision to support the U.S. war on terrorism and accept the U.S. decision to withdraw from the ABM Treaty have not been enthusiastically supported, but they have not caused visible opposition. As long as the Russian economy remains strong, Russian public support for Putin will hold.

The greater risk is that Putin will face opposition within defense, security, and foreign policy circles if he has nothing to show for pragmatic cooperation with the United States. Russian analysts warn that Putin risks being as alone, and vulnerable, as Mikhail Gorbachev was in 1991.9 Putin probably would not be toppled from office, but that does not mean that his problems in Russian defense and security circles would not affect U.S. interests. U.S.-Russian security cooperation, particularly for securing and disposing of Russia’s numerous weapons of mass destruction, requires active support from Russia’s defense interests, not just lack of active opposition.

For example, initiatives to support alternative employment for Russian scientists that used to work on weapons of mass destruction have been sometimes hindered when Russian security officials block access to facilities in which the scientists are working in new commercial enterprises because defense-related work also continues there. Security officials are also sensitive about Western access to information about Russia’s submarine force (nuclear-weapons capable boats as well as those simply powered by nuclear reactors), the dismantling and securing of which is a major U.S. nonproliferation concern. The sensitivity of the issue and influential role of the FSB in limiting transparency is evidenced in the conviction in December 2001 of Grigory Pasko, a journalist who revealed dumping of nuclear waste in the Pacific by the Russian navy, and in the prosecution of Igor Sutyagin, a researcher who relied upon unclassified information to write analyses of Russia’s navy under a Western contract.

In these and other cases, cooperation and transparency are sensitive because American intentions in dismantling Russia’s weapons of mass destruction are questioned. In many instances, concerns have been allayed and cooperation achieved, as evidenced in the impressive achievements of the Cooperative Threat Reduction program and related projects for nonproliferation cooperation. But success requires willingness and goodwill on the part of Russian officials at all levels, not merely those at the top.10 As the counterterrorism campaign takes on the threat of weapons of mass destruction, the stakes in how the United States and Russia manage their post-ABM relationship will grow.

1. For an excellent and succinct explanation of war-fighting, counterforce, and deterrence, see Bill Keller, “Missile Defense: the Untold Story,” The New York Times, December 29, 2001.
2. “Putin hits at US decision to pull out of ABM Treaty,” The Financial Times, December 14, 2001; “Russian Defense Minister Says Proposed U.S. Missile Defense May Never Happen,” Associated Press, December 18, 2001.
3. Discussion with Russian officials in Washington, December 2001; Fred Weir, “Russia Remains Skeptical of Paperless Disarmament,” The Christian Science Monitor, January 4, 2002.
4. For a Russian analysis of U.S. “downloading” and the implications of warheads that are not “operationally deployed,” see Pavel Podvig, “The End of Strategic Arms Control?” PONARS Policy Memo Series #217 (Washington, D.C.: Center for Strategic and International Studies, 2001).
5. Nikolai Sokov, “Void Left by the ABM Treaty in Danger of Widening,” Jane’s Defense Weekly, January 2, 2002.
6. For numbers, design characteristics, and capabilities of Russian nuclear forces, see Pavel Podvig, ed., Russian Strategic Nuclear Forces (Cambridge, MA: MIT Press, 2001).
7. Mikhail Khodarenko, “Na povestke dnya-gonka vooruzheniy,” Nezavisimoye voyennoye obozreniye, December 21, 2001.
8. Nikolai Sokov, “What Is at Stake for the United States in the Sino-Russian Friendship Treaty?” PONARS Policy Memo Series #200 (Washington, D.C.: Center for Strategic and International Studies, 2001).
9. Aleksei Arbatov, “Dogovor po PRO i terrorizm,” Nezavisimaya gazeta, December 26, 2001.
10. Oleg Bukharin, Matthew Bunn, and Kenneth Luongo, “Renewing the Partnership: Recommendations for Accelerated Action to Secure Nuclear Material in the Former Soviet Union,” report of the Russian-American Nuclear Security Advisory Council, August 2000; “Russia ‘Nuclear Regionalism’ and U.S. Policy,” proceedings of a conference held by the Center for Nonproliferation Studies, Monterey Institute for International Studies, March 19, 2000.

Celeste A. Wallander is director and senior fellow of the Russia and Eurasia Program at the Center for Strategic and International Studies.


President George W. Bush announces that the United States will withdraw from the 1972 Anti-Ballistic Missile (ABM) Treaty.

U.S., Russia Complete START I Reductions

Philipp C. Bleek

The United States and Russia completed nuclear weapons reductions required by the first Strategic Arms Reduction Treaty (START I) on December 5, seven years after the accord entered into force.

Under the treaty, the two countries have reduced their strategic nuclear arsenals by more than 40 percent over the past decade, decommissioning more than 4,000 strategic warheads since exchanging baseline stockpile information in September 1990. Reductions were implemented under a comprehensive monitoring and verification regime that included periodic information exchanges and intrusive monitoring and inspection provisions.

The accord requires Washington and Moscow to deploy no more than 1,600 long-range missiles and strategic bombers and caps deployed strategic warheads at 6,000, using rules that slightly undercount the number of warheads actually deployed. In addition, the countries must meet sublimits on ICBMs and submarine-launched ballistic missiles.

Signed by Presidents George H. W. Bush and Mikhail Gorbachev in July 1991, START I was the first treaty to substantially reduce the number of strategic nuclear weapons deployed by the United States and Soviet Union. The accord built on the first strategic arms pact between the two superpowers, an interim agreement that emerged from the Strategic Arms Limitation Talks in the early 1970s and capped—but did not reduce—the countries’ arsenals.

Shortly before leaving office, Bush also signed a START II agreement with Russian President Boris Yeltsin in January 1993. That agreement would have reduced U.S. and Russian arsenals to 3,500 deployed strategic warheads by 2007, but it has not entered into force, largely due to disagreements over U.S. national missile defense efforts.

In 1997 the United States and Russia also agreed to a framework for START III negotiations, which would have reduced the two sides’ strategic arsenals to 2,500 warheads by 2007. Under the framework, the two parties also agreed to consider measures to destroy their downloaded warheads and to increase the transparency of their strategic nuclear warhead inventories.

START I does not require the destruction of nuclear warheads removed from delivery vehicles; the United States and Russia have stockpiled substantial numbers of warheads as a result. Washington’s strategic and tactical warhead “hedge” is currently estimated at more than 5,000 warheads, while Moscow is estimated to have stockpiled more than 13,000 warheads.

The accord also does not cover nonstrategic nuclear weapons. The United States currently deploys an estimated 200-400 nuclear gravity bombs in Europe and stores, in operational condition, more than 1,000 additional tactical nuclear weapons. Experts estimate that Russia deploys about 3,500 tactical nuclear weapons.

The other three START I parties—Ukraine, Belarus, and Kazakhstan—all met their treaty obligations well in advance of the implementation deadline. These three states inherited nuclear weapons when the Soviet Union dissolved, only five months after START I had been signed. Under a May 1992 agreement, these states agreed to become parties to START I and to transfer all their nuclear warheads to Russia, a process completed by 1996. However, the three states retained most of the warheads’ strategic delivery vehicles—including both bombers and ICBMs—which the United States has helped them to destroy.

START I will remain in effect until December 5, 2009, during which time the treaty parties can request challenge inspections of suspect activity. The treaty parties also have the option to extend the accord for successive five-year periods if the treaty has not been superceded by another arms reduction agreement.

China Purchases More Russian Destroyers

On January 3, China signed a contract, estimated to be worth more than $1 billion, to purchase two advanced warships from Russia. Delivery of the ships, expected within about four years, will double the number of Sovremennyy-class destroyers that China possesses.

China’s first purchase of two Sovremennyy-class destroyers several years ago received a lot of attention because the warships are equipped to fire the SS-N-22 “Sunburn” anti-ship missile. The Sunburn is a supersonic, sea-skimming missile that can be armed with a nuclear warhead, although China’s Sunburns are thought to carry conventional warheads. The Pentagon viewed delivery of the ships, which has taken place over the past two years, as a qualitative improvement for the Chinese navy but not as a significant change to the military balance in the Taiwan Strait.

Although discussions on China’s possible purchase of the first two destroyers began in 1994, according to an October 2000 report by the Congressional Research Service, China negotiated the deal after an incident in March 1996, when the United States responded to Chinese military exercises opposite Taiwan by sending two U.S. carrier battle groups to the region.

Last spring, the Bush administration agreed to supply Taiwan with four Kidd-class guided-missile destroyers even though long-time Taiwan supporters in Congress were calling for the United States to provide more advanced Arleigh Burke-class destroyers equipped with the Aegis combat system. The new deal between Russia and China could increase congressional pressure on President George W. Bush to authorize transfers of Arleigh Burke-class destroyers to Taipei in the future.

Debt for Nonproliferation: The Next Step in Threat Reduction

James Fuller

Debt restructuring and reduction, whereby the terms of a loan are changed or part of a loan is forgiven, are common tools used by creditors for a variety of purposes. Wealthier creditor nations, such as the United States, often restructure and reduce debt owed by developing nations in order to bring about positive economic change in a debtor country. Similarly, the private financial sector restructures private debt owed by nations when it makes financial sense to do so. International nongovernmental organizations (NGOs) and others have also worked with government and private creditors to use debt reduction to accomplish more philanthropic goals that can benefit both public and private creditors in less tangible ways.

Indeed, “debt swaps”—a term used loosely here to denote a creditor forgiving monetary debt in exchange for specific actions by a debtor—have been an effective tool for improving global conditions in a number of ways.1 The international environmental community, in particular, has been very effective in encouraging and leveraging debt conversion to help meet global environmental objectives since 1984, when the World Wildlife Fund conceived of “debt-for-nature” swaps.2 In these exchanges, a portion of a country’s restructured debt—either commercial debt or official debt owed another country—is forgiven in return for the debtor dedicating an agreed-upon amount of local currency to an environmental project.3 Over the last two decades, nearly $1 billion in debt-for-nature swaps have been implemented.4

Another important area that would benefit from this relatively new and innovative funding mechanism is nuclear, chemical, and biological weapons proliferation prevention. Since 1992, the United States has directly underwritten about $10 billion in threat reduction activities in Russia and the former Soviet Union, but the situation demands even greater investment. Russia’s financial problems and security needs, which demand the formation of a sustainable Russian infrastructure to prevent the proliferation of weapons of mass destruction after direct U.S. assistance stops, both argue for increased involvement by other industrialized nations and the private sector. “Debt-for-nonproliferation” swaps are potentially powerful tools that could leverage current conditions to reduce further the security threat from Russia’s weapons infrastructure.

The Need for Increased Investment

Currently, there are more than 30 U.S.-Russian threat reduction programs administrated by three different U.S. departments, with a budget totaling $750 million for fiscal year 2001. But the September 11 terrorist attacks on the United States, the ensuing revelations as the war on terrorism progresses, and the use of anthrax in the U.S. mail system have called into question the pace with which threat reduction work in Russia is being completed. The human losses endured and the costs to the U.S. economy as a result of the September 11 terrorist attacks would likely pale in comparison to a successful attack using a weapon of mass destruction.

In January 2001, a bipartisan task force co-chaired by Howard Baker and Lloyd Cutler strongly recommended that investments in U.S. Energy Department nonproliferation activities be increased to roughly 1 percent of the annual U.S. defense budget over the next 10 years. Energy Department nonproliferation programs help Russia dispose of weapons plutonium; protect, control, and account for nuclear weapons material; stabilize the economic situation in Russia’s “nuclear cities”; and promote nuclear warhead safety and security. The importance of these programs cannot be overstated, and the Baker-Cutler report indicated that its 1 percent recommendation would total about $3 billion per year, or $30 billion over the ensuing decade.

However, neither the departing Clinton administration, nor the incoming Bush administration, nor the Congress has supported appropriations anywhere close to this level. Clearly, another funding mechanism is needed that will provide a substantial and immediate infusion of cash into Russia’s nonproliferation efforts. But the funding needs to minimize the characteristics of an international welfare program in order to promote a long-term, sustainable Russian proliferation prevention enterprise that will last after direct aid stops. A process is needed to ensure that, once the acute proliferation issues are successfully addressed, the people whose livelihood depended on the production of nuclear, chemical, or biological weapons have an alternative future. Further funding should be aimed at spurring Russian private-sector interest in the business of preventing proliferation.

A well-implemented debt-for-nonproliferation swap would have all these advantages. The processes that may be used to effect a debt swap can be grouped into four categories.

  • Buy-Back. A debtor nation purchases debt directly from a creditor at less than face value and at the same time endows a fund in local currency to conduct work in the debtor country that is of value to both the creditor and the debtor.
  • Write-Off. A creditor agrees to forgive some portion or all of an outstanding debt in exchange for the establishment by the debtor of the endowment as described above.
  • Rescheduling. Creditors agree to reschedule the servicing of old debt by exchanging a large amount of paper for a smaller amount. In the case of official bilateral debt rescheduling, some portion, such as the interest payments, are re-directed into an endowment. In the case of commercial debt, principal and interest are often separated into derivatives, which can also be used separately.
  • Tri-Party Arrangements. A third party such as an international nongovernmental organization receives a donation or purchases debt from a creditor and negotiates a write-off with the debtor nation.

By promoting self-investment, debt-for-nonproliferation swaps would encourage infrastructure building and therefore help to generate a sustainable Russian effort to prevent proliferation. A swap could also involve industrialized countries besides the United States, providing broader international participation in preventing proliferation from Russia than currently exists. The establishment of a fund would also probably be the most effective way to involve private and NGO stakeholders in forging public-private partnerships for nonproliferation. Such partnerships would have multiple benefits, such as promoting confidence in the accountability of funds and helping to establish a private-sector component in a long-term nonproliferation effort. Last but certainly not least, a swap would reduce Russian external debt without forcing Moscow to spend hard currency and draw down its Central Bank foreign reserves, thus serving the long-term goal of promoting economic stability in Russia.

In addition to process-related advantages, it makes extremely good political sense for the West to help Russia while it struggles in its quest for a market-based economy because Moscow has offered strong support for the U.S. war on terrorism and has held the Organization of the Petroleum Exporting Countries at arm’s length in its quest to control worldwide oil prices more strongly.

A wide variety of programs could benefit from a viable debt-for-nonproliferation program. Cleaning up Cold War nuclear waste could provide an extensive jobs program for former weapons specialists and would make Russian nuclear cities more attractive for outside investment. The long-term sustainability of the U.S. effort in Russian nuclear material protection, control, and accounting is another effort that would benefit from additional funding and greater commitment by Russia’s private sector. The evolving European Nuclear Cities Initiative is in need of the innovative financing that a successful debt-for-nonproliferation enterprise would offer. The decontamination of Russian nuclear-powered multi-purpose submarines is another activity that has yet to be underwritten by the West or the Russians.5

Russia’s External Debt

Of course, despite these benefits the idea of a swap would be less tenable if there were no financial basis for debt forgiveness. But Russia’s economic situation offers some genuine opportunities for constructive debt reduction. The collapse of the ruble in 1998, coupled with the size of Russian federal debt, has severely hampered Russia’s transition to a viable free-market economy, its capacity for making social-service and infrastructure improvements, and its ability to fund proliferation prevention and other security endeavors. Russian external debt totals $147 billion, nearly $71 billion of which is from the Soviet era. (See Figure 1. PDF file, requires Adobe Acrobat Reader.) Approximately $2.7 billion of this Soviet-era debt is owed to the United States.6 The debt amounts to almost 140 percent of projected revenue from exports and is roughly 42 percent of projected 2002 gross domestic product.7

Sizable amounts of Russian external debt are held by the Paris Club and the London Club, two separate ad hoc groups of creditors that meet with representatives of nations about to default on their debt. The Paris Club is currently comprised of 18 creditor nations (including all members of the G-8) and deals with official, bilateral debt instruments. The London Club is comprised of commercial banks. Both organizations meet with debtor nations in order to agree on the best terms for any debt restructuring. Although the United States could theoretically effect a debt swap itself, in reality a swap would involve these forums because unilateral U.S. action could harm the economic interest of other creditors left holding Russian debt.

There is some precedent for Russian debt forgiveness among these creditors, which have provided some debt relief to Russia. In August 1999, the Paris Club provided a framework agreement that postponed payment of debt principal under their auspices until after the 2001 Russian presidential election but continued interest obligations. In February 2000, the London Club agreed to forgive some of the Russian debt to commercial lenders. In this agreement, $31.8 billion in claims held by commercial creditors were exchanged for $21 billion in new Eurobonds. When combined with an eight-year grace period on payment of principal, plus a lower interest rate, total debt forgiveness amounted to 52 percent in present-value terms.8

The economic straits brought on by the collapse of the ruble have, until recently, been somewhat offset by the strong price of oil, which has bolstered Russian revenues. This improvement has somewhat weakened the financial case for debt relief because Russia is better able to service its debt obligations.Although Russia is maintaining a strong posture, saying that it will meet its $14 billion debt service obligations this year—a figure that amounts to about 37 percent of its foreign reserves—the economic forecast for Russia in 2002 is considerably less optimistic because of the significant drop in oil prices.9 It remains to be seen if Russia can maintain its current rate of positive economic growth and relative vitality or whether action by the Paris Club will be warranted. In 2003, substantially greater debt servicing will be required, and with a prolonged soft oil market, Russia could find itself in economic trouble.

It is easy to understate the problem of Russian sustainability of debt obligations. Russia has had both cash flow (liquidity) and budgetary (solvency) problems in the servicing of its external debt. Currently, the latter is the more serious problem. High oil prices resolved the liquidity problem with the buildup of dollar reserves in the Central Bank. Falling oil prices will especially affect the budgetary problem because the Ministry of Finance will need to buy dollars with rubles from the Central Bank to service the debt. The ruble appropriations required for servicing the debt will likely squeeze budgets for reform: revenues from oil and gas sales account for about one-half of the federal budget and gas and oil prices tend to go together.10

Despite this uncertain economic future, securing Paris Club participation in a debt swap would likely be a challenge. Germany, with most of the estimated Russian Paris Club Soviet-era debt, will chair any upcoming Paris Club meeting and therefore have substantial influence on the outcome. And the initial German position on debt forgiveness, formally announced by the German Paris Club representative after the 2000 London Club agreement, was that no previous debt settlement, especially the London Club agreement, established a precedent for Paris Club negotiations. Germany has publicly stated that it believes that Russia should be able to service its debt with improved economic performance, a better use of natural resources, and a return of capital that has left the country. The current German position does not acknowledge the benefits of a more liberal debt-relief agreement that might accrue to arms agreements, foreign policy cooperation, and other noneconomic issues.

U.S. Precedent and Current Legislation

Because of potential Paris Club reticence in writing off Russian debt, it is critical that the United States take a lead role in implementing a debt-for-nonproliferation swap—a role that makes particular sense because of extant U.S. involvement in Russian threat reduction efforts. The precedent for the United States using its financial leverage to effect positive change in other countries is well established, though traditionally the goals of such actions have been developmental rather than security-oriented.

From 1990 to 1999, the U.S. government engaged in almost $15 billion worth of bilateral debt-reduction activities with 39 countries, Russia not included. U.S. debt reduction programs are an important component of Washington’s international economic policy and have been used to help stabilize the finances of debtor countries and put them on a path of sustainable economic growth. The United States has accepted and supported the notion that debt reduction initiatives can “unlock resources for poverty alleviation, basic human needs, child survival, and environmental protection.”11 Special provisions have been associated with specific debt-reduction agreements that help to assure these objectives.

In three exceptional cases, the United States has reduced the debt of severely indebted lower-middle-income countries to promote not only economic reform but also U.S. national security interests. In 1991 the United States reduced Poland’s debt by 70 percent ($2.5 billion) in recognition of its strategic importance in stabilizing Eastern Europe and transforming Eastern European countries into market-oriented democracies and in recognition of the role Polish armed forces played in the Allied victory in World War II. Also in 1991, Congress supported the forgiveness of $7 billion for Egypt, its total military debt to the United States, in recognition of its key role in solidifying the Persian Gulf War coalition. Finally, in 1994, Congress enacted special legislation that forgave Jordan’s $700 million debt to the United States in recognition of the positive role it plays in stabilizing the Middle East.12

Each of these three special debt reduction cases required special legislation, and although in Russia’s case existing U.S. legislation does, technically speaking, contain authority for debt swaps for various purposes, the chances of a debt swap succeeding would be enhanced by obtaining the positive congressional endorsement that would be represented by new legislation targeted specifically at swapping Russian debt-for-nonproliferation commitments.

Fortunately, Congress has expressed considerable interest toward debt for nonproliferation in recent months. On December 20, the Senate passed by unanimous consent the Security Assistance Act, which contained the Debt Reduction for Nonproliferation Act of 2001 (DRNA). The DRNA was sponsored by Senators Joseph Biden (D-DE) and Richard Lugar (R-IN) and co-sponsored by Senator Jesse Helms (R-NC). It sets forth U.S. security interests in preventing proliferation and reducing weapon stockpiles, especially in Russia, and it recognizes that existing nonproliferation programs have made substantial progress but that the threat remains urgent.

More specifically, the DNRA states that new nonproliferation funding streams—such as debt reductions and exchanges—are needed and that the burden will have to be shared by Russia, the United States, and other debt-holding governments. It further states that Russia’s substantial Soviet-era debt burden severely stresses its budget, will do so even more in 2003 and thereafter, and is among the factors that have led Russian officials to recognize that its future lies with the West.

If enacted in its current form, the DRNA would authorize the president to establish an office at the Treasury Department to administer the debt reduction and authorize $300 million in appropriations in fiscal years 2002 and 2003 to offset the cost of the debt reduction to the U.S. Treasury. It would authorize the president to reduce the Lend Lease and agricultural portions of the Soviet-era debt and replace those obligations with new obligations defined in a “Russian Nonproliferation Investment Agreement” that would be negotiated with the Russians and potentially result in a ruble-based Nonproliferation Fund. It would allow the president to sell the debt to an eligible third-party or the Russian government, provided the required nonproliferation plans, commitments, and transparency measures were in place.

The DRNA would require that consequent nonproliferation programs and projects be approved by the U.S. government directly or via its representation on any governing board established to manage the funds, incorporate best practices from established threat reduction and nonproliferation assistance programs, be subject to U.S. audits, be free of Russian taxes, and that 75 percent of such funds be spent in Russia. Finally, the DRNA would instruct the president (or his designees) to seek the appropriate agreements and arrangements in the Paris Club and establish an interagency committee to ensure that U.S. public and private efforts are not in conflict and that public and private spending on these purposes is maximized, efficient, and furthers U.S. national security interests.

A Way Forward

The future of the DRNA now rests with the Republican-controlled House of Representatives, which will likely take its cue from the White House. The act is likely to be taken up soon after Congress returns early in 2002 in a Senate-House conference.

Because the United States funds Russian threat reduction programs already, it is logical for it to participate in a swap, but the importance of international participation must be stressed. That could be a challenge even if the United States takes the lead because, as explained, the strong oil market, until recently, stabilized the Russian economic situation. Certain creditors, particularly Germany, will likely therefore believe their debt can be serviced on schedule without any restructuring or forgiveness.

Indeed, for the immediate future it would appear that the financial arguments for Paris Club and London Club actions relative to Russia are not nearly as viable as they once were. But there is one special class of debt owed to Germany that could swing the door on debt-for-nonproliferation wide open: the money the Soviet Union once owed East Germany that Russia now owes the unified Federal Republic of Germany.

What is interesting about this debt— the exact amount of this debt is the subject of focused negotiation between the two countries—is that it is not included in the German federal budget, and it is highly improbable that this debt will be serviced through actual cash payments by Russia to Germany. In other words, if Germany were to swap this debt, it would be of minimal financial impact. The Germans have set the level of this debt at almost $7 billion; the Russians have set the level much lower. Informal settlement proposals have included debt for equity (Germany) and debt for investment (Russia), with neither proposal evidently striking the fancy of both parties. Debt for nonproliferation should be considered in this context, allowing Germany an attractive way of participating in any U.S. proposal to forgive debt in exchange for nonproliferation obligations.

For its part, the United States should begin by using authority provided by the DRNA to write off the remaining $480 million in Lend-Lease debt that Russia owes the United States from World War II—debt from a time when the United States and Russia were allies—in exchange for a ruble debt-for-nonproliferation fund. (See Figure 2. PDF file, requires Adobe Acrobat Reader.) The United States should join forces with Germany, which should dedicate a major portion or all of the East German debt owed by Russia to the same objective. In order for the United States to become a more equitable partner with Germany in this arrangement, the United States should strongly consider swapping all $2.7 billion of Russia’s Soviet-era debt to the United States and encourage other Paris Club members, such as Italy and France, to do the same. Agreement by these principals should be followed by the unsolicited offer of a debt swap to Russian President Vladimir Putin, subject to conditions on the construct and use of the proposed Nonproliferation Fund. In this manner, Russia’s investment potential is not questioned; new funds in the order of $20 billion become available to further enhance security around Russia’s nuclear, biological, and chemical materials and expertise; and Germany, which holds a disproportionate amount of Russian Paris Club debt, is not disproportionately affected by the actions of other G-8 members.

A debt-for-nonproliferation swap must be supported by the chiefs of state of the nations involved and must include proper surveillance and conditionality to assure operational costs and risks are relatively small and benefits are large and certain. By taking advantage of the lessons learned from highly successful debt conversion programs in bio-diversity and their extension to European economic restoration efforts, the U.S. government and the rest of the developed world have a tool to reduce further the Russian nuclear threat in a positive and constructive manner. Debt for nonproliferation could greatly enhance the funds available for proliferation prevention through broader multilateral participation and public-private partnerships, assist Russia in reducing its external debt without hard-currency transfers, and help expedite weapons-complex downsizing in Russia to the benefit of all parties.


The author would like to acknowledge the assistance of John Hardt of the Congressional Research Service; the PNNL research team of K. Mark Leek, Jana Fankhauser, and Patricia Godoy-Kain; and Ron Bartek of Mehl, Griffin and Bartek, Inc.
1. There seem to be two conventions for use of the term “debt swap.” This article uses the more general terminology associated with the establishment of the Polish EcoFund in 1992. The more restricted definition is primarily associated with the tri-party agreement process. The more general term in this context is “debt conversion.”
2. T. E. Lovejoy, “Aid Debtor Nations’ Ecology,” The New York Times, October 4, 1984.
3. Commercial debt becomes available for debt swap when banks sell at a discount debt instruments of low market value. Banks may also donate such debt, typically in order to generate good will and take advantage of federal tax codes that allow banks to write off debt when donated to a not-for-profit corporation. M. L. Dionne, “Treasury Agrees to Construe Revenue Ruling on Debt-for-Nature Swaps Liberally,” Tax Notes, April 18, 1988. J. E. Gibson and R. K. Curtis, “A Debt for Nature Blueprint,” Columbia Journal of Transnational Law, 1990.
4. Ruth Norris, ed., The IPG Handbook on Environmental Funds. (Pact Publications: New York, 1999).
5. James Fuller and K. Mark Leek, “Debt for Ecology: A Concept to Help Stabilize Russian Nuclear Cities,” Pacific Northwest National Laboratory (PNNL-34546), presented at the International Forum on Energy and Environmental Opportunities in the Russian State Research Centres and Nuclear Cities in Como, Italy, April 2001; James Fuller, “Debt for Nonproliferation,” Pacific Northwest National Laboratory (PNNL-35638), presented at the Carnegie Endowment for International Peace Dialogue in Moscow, December 2001.
6. Official debt data from the Russian Ministry of Finance via Troika Dialog, Moscow, November 2001. Commercial debt data courtesy of Frank Russell Company, Tacoma, WA, October 2001.
7. “Russia: External Accounts on Good Footing,” Emerging Europe Monitor: Russia, CIS & Baltics, December 2001.
8. John P. Hardt, Russia’s Paris Club Debt and U.S. Interests, Congressional Research Service Report to Congress, Washington, D.C., June 6, 2001; author conversations with John P. Hardt.
9. “Russia: External Accounts on Good Footing,” Emerging Europe Monitor, December 2001; “Russia to pay $14.05 billion in foreign debt in 2002,” Tri-City Herald, December 12, 2001.
10. Hardt, Russia’s Paris Club Debt and U.S. Interests.
11. U.S. Department of Treasury, U.S. Debt Reduction Activities FY 1990 Through FY 1999, public report to Congress, February 2000.
12. Ibid.

James Fuller is director of the Pacific Northwest Center for Global Security at the Pacific Northwest National Laboratory in Richland, Washington.


U.S., Russia to Discuss Strategic Reductions

In Moscow on December 10, Secretary of State Colin Powell said that the United States and Russia would seek to “formalize” an agreement to lower strategic nuclear weapons levels.

At a briefing in Brussels a week later, Russian Defense Minister Sergei Ivanov added that the two sides had agreed to begin discussing “radical reductions of strategic offensive weapons” at the “expert level” in January.

According to Ivanov, the discussions will cover the depth of the reductions, their time frame, and the issues of verification and transparency. Undersecretary of State for Arms Control and International Security John Bolton and Russian Deputy Foreign Minister Georgy Mamedov will initially lead the talks, which will reportedly begin January 26 in Washington.

President George W. Bush pledged November 13 to reduce deployed U.S. strategic nuclear forces to between 1,700 and 2,200 warheads over the next 10 years. Russian President Vladimir Putin promised to try to “respond in kind,” and one month later, he indicated he had a range of 1,500-2,200 in mind.

Putin has repeatedly called for the negotiation of a formal arms control pact to codify the reductions. Bush initially appeared averse to formal negotiations, but recent statements by key Washington officials indicate that some sort of binding compact is possible. And senior U.S. officials have recently indicated that an agreement to extend START I and START II verification provisions to cover the planned reductions is under discussion with Moscow.

It remains unclear whether the Bolton-Mamedov talks will aim to negotiate an arms control treaty or whether they will try to agree on an informal arrangement. When asked about the possibility of a formal treaty, U.S. officials have continued to emphasize that all options remain under consideration. A Moscow summit between Bush and Putin is planned for late spring or early summer and could serve as the target date for the signing of an agreement.

Defense Act Repeals Restriction on Nuclear Cuts

President George W. Bush signed the fiscal year 2002 defense authorization bill December 28, clearing a major impediment to promised strategic nuclear reductions.

The bill repeals a restriction, first included in the fiscal year 1998 defense authorization act, that barred reducing the number of deployed U.S. strategic nuclear weapons below START I levels. This limit could be broken if START II, which mandated deeper reductions, entered into force, although only to the extent necessary to implement that treaty. The restriction also banned early deactivation of strategic nuclear weapons systems absent an “understanding or agreement” between the United States and Russia on such actions.

Established in part to encourage Russia to ratify START II, the restriction was maintained by Republican lawmakers intent on preventing President Bill Clinton from unilaterally reducing U.S. nuclear forces. But Congress relented after the Bush administration formally requested relief from the provision, which would have blocked the deep strategic reductions the president announced November 13. (See ACT, December 2001.)

The defense bill also contains language prohibiting expenditures on retiring, dismantling, or transferring B-1B Lancer bombers until a detailed report on Air Force bomber structure is submitted to Congress. Over the summer, the administration announced that it intended to reduce the B-1 fleet from 93 to 60 aircraft and the number of B-1 bases from five to two. (See ACT, July/August 2001.) But lawmakers from states due to lose their bomber contingents have resisted that move.


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