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"[Arms Control Today] has become indispensable! I think it is the combination of the critical period we are in and the quality of the product. I found myself reading the May issue from cover to cover."

– Frank von Hippel
Co-Director of Program on Science and Global Security, Princeton University
Fissile Material

U.S., Russia Reassess Reactor Conversion Agreement

Philipp C. Bleek

U.S. AND RUSSIAN officials are reassessing a joint project to convert Russia's three military plutonium-production reactors to civilian use. During a meeting in Moscow with a high-level U.S. delegation in late January, Russian officials expressed interest in halting the conversion and instead replacing the reactors with conventional power plants. They asked that the United States stop spending on the conversion effort until the alternative could be adequately studied, according to a senior administration official. In response to the request, conversion has been suspended and an independent assessment of the cost of constructing conventional power plants is being commissioned by U.S. officials.

After a February 13 Washington Post article reported that Russian officials wanted to abandon the core conversion effort, the Russian Atomic Energy Ministry press service quickly clarified the Russian position in a February 15 release: "Russia is not pulling out of the Russian-U.S. project for converting nuclear reactors producing weapons-grade plutonium to civilian needs, but will choose the option that suits Russia best."

Russian officials indicated to the U.S. delegation that replacing the reactors with conventional power plants would cost an estimated $230 million, most of which would be provided by the United States. The cost of converting the reactors, originally slated at $80 million, has expanded to approximately $300 million, making the construction of conventional plants preferable from a fiscal perspective. Although some senior U.S. officials have expressed doubt about Russia's cost estimate, one senior administration official closely involved with the negotiations says that the $230 million figure "tracks closely with current U.S. estimates."

The original agreement to halt Russian military plutonium production, a major Clinton administration non-proliferation goal, was formalized in 1994 and was originally supposed to replace Russia's three military plutonium-production reactors with conventional power plants. Although it has no use for the plutonium they produce, Russia continues to run the reactors because they generate heat and electricity for the closed "nuclear cities" in which they are located, Seversk (formerly Tomsk-7) and Zheleznogorsk (formerly Krasnoyarsk-26). But the agreement was changed to its present form in 1997, after the United States concluded that constructing conventional power plants could cost as much as $1 billion—a sum Congress was unlikely to approve. Instead, the United States and Russia agreed to keep the reactors online, but to convert their cores from natural uranium to highly enriched uranium (HEU) in order to minimize plutonium production.

The reactor conversion effort, while initially finding broad support, became increasingly controversial, and last December, Russian officials formally advised a visiting U.S. delegation led by Michael Stafford, a State Department negotiator with the Bureau of Arms Control, that Russia was considering abandoning the 1997 agreement.

Russian and American nuclear experts had raised doubts about the feasibility and safety of the core conversion project in the months prior to December's announcement. According to a report by Russian nuclear regulators provided to U.S. officials in September, the three military reactors are in such poor physical condition that conversion could result in a Chernobyl-like accident. Several prominent American nuclear experts, among them Princeton University's Frank von Hippel and Harvard University's Matthew Bunn, both former White House non-proliferation advisors, have also argued that because it is easier to construct a rudimentary nuclear weapon with HEU than with plutonium, conversion to an HEU core could actually increase proliferation risks.

The next high-level meeting to discuss the issue is currently scheduled for mid-March.

U.S., Russia Negotiate Spent Fuel Reprocessing Moratorium

Philipp C. Bleek

DESPITE DENIALS BY a high-level Russian official, the U.S. Department of Energy (DOE) says that it has reached an agreement "in principle" to suspend Russia's reprocessing of civil reactor-generated spent fuel. Energy Secretary Bill Richardson announced the "new initiative" in a February 7 statement accompanying the release of DOE's fiscal year 2001 budget, which requests an additional $100 million for non-proliferation efforts in Russia. The timing of the announcement appears to have been intended to ease congressional approval of the requested funds. However, following Richardson's speech and press reports indicating that a deal on a moratorium had already been concluded, Richardson's Russian counterpart publicly denied that any agreement existed.

News of the deal first appeared in The New York Times, which reported February 7 that Russia had "promised to stop" producing plutonium by reprocessing civil spent fuel. The following day, Richardson was quoted by The Washington Post as saying, "We have an agreement in principle. The Russian assurances are strong enough so that we put it in our budget." A reaction from Russian Minister of Atomic Energy Yevgeny Adamov quickly followed. "There are no agreements with the United States on plutonium, there have not even been any official talks to that end," he said in an interview with Interfax published February 9.

Senior DOE officials maintain that an agreement on a reprocessing moratorium had evolved in negotiations over the past several months and was reportedly confirmed during a January visit to Moscow by Undersecretary of Energy Ernest Moniz. However, as a result of the premature U.S. announcement, Adamov appears to have come under fire from other ministries in the Russian government and been forced to state publicly that no agreement had been formally negotiated.

Persuading Russia to stop reprocessing spent fuel from civilian reactors has been a stated U.S. policy goal since President Carter announced in 1977 that the United States would cease reprocessing civil spent fuel. Despite U.S. persistence, Russia has continued reprocessing spent fuel from some of its 29 civilian reactors, as well as spent fuel returned from Eastern Europe, generating almost a ton of weapons-usable plutonium every year.

Through ongoing high-level negotiations, Washington has introduced various incentives into a deal on a possible moratorium. The agreement currently under negotiation, first presented to Russian officials last summer, offers $100 million to fund bilateral threat reduction efforts in Russia (in addition to the $250 million DOE currently spends on such programs), including $45 million for spent fuel storage and material protection, control and accounting; $20 million for joint long-term research on "developing nuclear fuel cycle options that maximize technological barriers to proliferation"; $30 million for new efforts to safeguard military-origin material; and $5 million for research into long-term spent fuel storage options.

While DOE officials remain optimistic that the agreement can be formalized in the coming months, a number of key issues will need to be resolved. Portions of the funding are contingent on Russia curtailing its nuclear cooperation with Iran, but it remains to be seen whether the relatively small amount of aid the United States is offering will be sufficient to convince Russia to cut back its lucrative nuclear ties with Iran, which are potentially worth several billion dollars.

Also at issue is the length of the moratorium. DOE seems to be seeking a long-term commitment to end reprocessing of civil spent fuel. Russian officials have stated that they are considering a moratorium for a decade or two but would reserve the option to resume reprocessing once plutonium-utilizing power reactor technology has matured. It is also unclear whether the moratorium would apply only to spent fuel generated in Russia's reactors, or whether Russia would also have to cease reprocessing spent fuel returned from Eastern Europe, a practice that currently generates significant revenue for Russia's nuclear industry.

According to a senior DOE official, the United States has indicated to Russia that agreement on a moratorium and curtailed nuclear cooperation with Iran are stepping stones to increased U.S.-Russian civilian nuclear cooperation, including a possible international spent-fuel repository in Russia and development of a proliferation-resistant nuclear power reactor, initiatives currently sought by Russia.

After Stumble, 'HEU Deal' Back on Track

ON DECEMBER 1, the United States Enrichment Corporation (USEC) dropped its threat to resign as the government's executive agent for the U.S.-Russian Highly-Enriched Uranium Purchase Agreement. USEC had threatened to back out of the so-called "HEU deal" in recent months unless the federal government provided the company with additional financial support.

USEC unsuccessfully sought as much as $200 million in federal financial aid, arguing that the deal with the Russians was imposing undue financial burdens on the recently privatized company. Administration officials responded skeptically to USEC's claims of financial hardship. The company is spending $100 million this year on dividends to its shareholders and another $100 million to buy back its own stock.

Faced with USEC's possible resignation, the administration threatened to negotiate with other companies for the management rights to the deal, potentially creating a competitor to USEC. After much protest, USEC's board voted on December 1 to continue its involvement with the program until the end of 2001, when the current phase of the deal expires. Energy Secretary Bill Richardson said he was "pleased that USEC is standing by their role as our executive agent for the HEU Agreement...that is so critical to our nonproliferation goals."

Under the terms of the agreement, formalized in 1993, the U.S. government is committed to purchasing 500 metric tons of weapons-usable highly-enriched uranium (HEU) over a 20-year period from Russia, thereby securing the material and providing Russia with a ready source of capital (estimated at $12 billion) to safeguard its fissile material stockpiles and dismantled weapons systems. Russia blends the HEU down to low-enriched uranium (LEU) before shipping it to the United States, where USEC brokers its sale to utility companies for use in civilian nuclear reactors. USEC then reimburses the Russian government for both the raw uranium and for the enrichment of that material.

Under the HEU deal, USEC must pay above-market rates for Russian enrichment services. It is therefore in USEC's interest (as a profit-seeking private enterprise) to try to undermine the HEU deal in order to avoid having to fulfill its full contractual obligations. USEC has undermined the deal repeatedly. Most recently, in October 1999, the company failed to provide adequate shipping containers to Russia, slowing down Russian shipments of LEU to the United States.

U.S., Russia Sign 'Nuclear Cities' Agreement

Secretary of Energy Bill Richardson and Russian Minister of Atomic Energy Yevgeny Adamov signed an agreement September 22 to create commercial enterprises that will provide peaceful employment for displaced weapons scientists and technicians in Russia's 10 closed "nuclear cities." Unlike past efforts to provide employment opportunities for Russian weapons workers, through the International Science and Technology Center in Moscow and the Department of Energy's Initiatives for Proliferation Prevention program, the new program, called the Nuclear Cities Initiative, will focus exclusively on the closed nuclear cities. In fiscal year 1999, DOE expects to spend a total of $30 million to support activities in these cities. The agreement responds to growing U.S. concerns that former Soviet weapons scientists may be tempted to sell their expertise abroad due to deteriorating economic conditions at home.

Iraq's Reconstitution of Its Nuclear Weapons Program

October 1998

By David Albright and Khidhir Hamza

Iraq has provided few credible indications that its nearly three-decade quest for nuclear weapons has ended. Since its invasion of Kuwait in August 1990, however, Iraq has had an extremely difficult time making any progress in building nuclear weapons. The economic sanctions imposed by the UN Security Council after the invasion disrupted many vital imports, particularly for Iraq's uranium enrichment program. The allied bombing campaign destroyed many of its key nuclear facilities.

The subsequent, highly intrusive inspections mandated by the Security Council and carried out by the International Atomic Energy Agency (IAEA) Action Team in cooperation with the UN Special Commission on Iraq (UNSCOM) exposed and destroyed vast amounts of nuclear equipment and materials. In the process, the inspections uncovered a long-standing and determined clandestine nuclear weapons program, despite Iraqi denials until 1995 that such a program existed. Currently, essentially all of Iraq's pre-Gulf War nuclear facilities and equipment have been eliminated or converted to non-proscribed purposes under periodic Action Team inspections. But Iraq retains its nuclear cadres and its extensive knowledge and experience built up before the Gulf War. Moreover, some key unanswered questions remain about Iraq's effort to build the nuclear weapon itself—called "weaponization" here—and to build a gas centrifuge enrichment program to enrich uranium for weapons purposes.

Since the war, Iraq is suspected of having made progress on a number of bottlenecks in its weapons program, at least those which could be done with little chance of detection by inspectors. These activities include design work, laboratory efforts, subcomponent production, and the operation of test machines. If the inspection system becomes ineffective, Iraq could reconstitute major aspects of its nuclear weapons program that would likely be discovered under the current inspection regime, a combination of historical investigations and an on-going monitoring and verification (OMV) system. Even under the OMV regime, Iraq's illicit acquisition of plutonium or highly enriched uranium (HEU) from the former Soviet Union would be very difficult to detect. Because of this and other weaknesses, the OMV system needs improvement to be effective in deterring and detecting Iraq's banned activities.

There are few alternatives. A nuclear-armed Iraq would be extremely dangerous. Nuclear weapons would aid Saddam Hussein in ensuring his own survival and increasing his regional power. If he detonated a nuclear explosive underground, the international community, and in particular the United States, may not risk intervention, particularly if definitive information about the size of Iraq's nuclear arsenal is lacking.

Essential to any discussion about about Iraq or the OMV system are estimates of the time needed for Iraq to reconstitute its nuclear weapons program. Such an assessment requires a thorough understanding of Iraq's pre-war program and reasonable inferences about its activities after the war. This article attempts to summarize this discussion and outline some of the most important scenarios of how Iraq may reconstitute its nuclear weapons program. In addition, this article looks at a neglected part of the entire inspection process, namely improving methods to reduce the risk posed by the Iraqi nuclear scientists. There is wide agreement about their central importance to any Iraqi attempt to reconstitute its nuclear program. Yet, little has been done to reduce the threat they pose.

 

Acquiring a Safeguarded Fuel Cycle

Since its inception in the early 1970s, Iraq's nuclear weapons program has depended on deception and determination. Originally, the plan, which one of us (Hamza) authored, was to acquire a complete nuclear fuel cycle able to produce and separate plutonium. The plan focused on the foreign acquisition of complete nuclear facilities with training in their use conducted in the supplier country.

During the 1970s, Iraq concentrated on acquiring nuclear facilities overseas that would have been under IAEA safeguards, since Iraq had signed the nuclear Non-Proliferation Treaty (NPT) in 1968. Nonetheless, Iraq reckoned it could defeat the safeguards at these facilities or secretly build undeclared duplicate facilities.

In 1976, Iraq succeeded in buying from France a 40-megawatt materials test reactor called the Tammuz-1 reactor, or Osiraq reactor, that ran on weapons-grade uranium fuel. In 1979, Iraq established a radiochemical laboratory, equipped through a contract with the Italian company SNIA-Techint, suitable for laboratory research on reprocessing. It also acquired a fuel fabrication plant from Italy that was suitable for making natural uranium targets for secret irradiation in the Osiraq reactor.

Iraqi teams calculated that the Osiraq reactor could conservatively produce about 5 kilograms to 7 kilograms of weapons-grade plutonium per year. This value could be higher or lower depending on how the targets were arranged in the reactor; it also depended on the frequency of visits by IAEA inspectors and French personnel. The Iraqis believed that the safeguards on the reactor, which would have included periodic inspections and surveillance cameras, could have been defeated. Prior to visits by IAEA inspectors and French personnel, Iraq planned to pull out the unsafeguarded targets. Iraq had also developed plans to defeat the cameras.

Before Iraq could illicitly produce any plutonium and put the IAEA's safeguards to the test, however, Israel bombed the reactor in June 1981, shortly before the reactor was scheduled to go into operation. The radiochemical laboratory and fuel fabrication plant were not bombed. Later, the fabrication facility was used to produce unsafeguarded targets which were irradiated in a Russian-supplied research reactor to produce plutonium. The reactor also irradiated bismuth targets to make polonium-210, a material used in beryllium-polonium neutron initiators which trigger the nuclear explosion. Material from the targets was extracted in the Italian radiochemical laboratory, which was expanded in the early 1980s.

 

Iraq Goes Underground

Following the bombing of the Osiraq reactor, Iraq decided to: (1) replace the Osiraq reactor or to develop a heavy water or enriched uranium reactor and associated plutonium separation capability; and (2) develop a uranium enrichment production capacity.

Iraq tried to replace the Osiraq reactor, but by 1985, it realized that it could not buy a replacement. Before the bombing, Iraq had developed plans and purchased some minor items for a 20- to 40-megawatt heavy water natural uranium reactor. After delays in buying a replacement reactor, Iraq decided to pursue this reactor project again. In the late 1980s, however, it put its plans on hold, facing resource limitations. But Iraq continued its efforts to learn how to separate plutonium from irradiated fuel and to make heavy water. Depending on the success of the enrichment programs, Iraq may have reconstituted the nuclear reactor project.

Even before the Israeli bombing of the Osiraq reactor, Iraqi scientists had been evaluating the development of uranium enrichment technologies. However, Iraq has declared that a decision by the Iraqi leadership to pursue these options came after the June 1981 bombing. An Iraqi evaluation finished in 1981 concluded that electromagnetic isotope separation (EMIS) was the most appropriate technology for Iraq and that gaseous diffusion was the next most appropriate option. Gaseous diffusion was planned to produce low-enriched uranium (LEU) which could be used as a feedstock for EMIS, dramatically increasing overall HEU production in EMIS separators. If EMIS was unsuccessful, the plan called for expanding the gaseous diffusion facility to produce HEU directly. At the time, gas centrifuge technology was viewed as too difficult to accomplish. (See below.)

 

EMIS

The goal of the EMIS program was to build two production units, each able to achieve 15 kilograms per year of weapons-grade uranium using natural uranium feed. Iraqi estimates of the HEU output using LEU feed (enriched to 2.5 percent uranium-235) vary between roughly 25 kilograms and 50 kilograms of weapons-grade uranium per year. The variation reflects different plant designs and performance uncertainties.

After several years of research and development work of mixed success, Iraq nonetheless started in 1987 to build its first EMIS production facility at Tarmiya, north of Baghdad. Also in late 1987, Iraq decided to build a replica of Tarmiya at Al Sharqat, about 200 kilometers northwest of Baghdad. This facility, which was built by Iraqis only, was originally viewed as a second production site that would come into operation roughly at the same time as Tarmiya. In the late 1980s, this plan was modified to one where Al Sharqat would operate after Tarmiya was finished. Iraq also sought unsafeguarded LEU on the international market during the late 1980s. However, it has declared that its search was half-hearted and unsuccessful. Whether this declaration is complete is unclear. As of 1997, the Action Team had not pursued this issue further.

The EMIS program faced repeated delays and technical problems, and by the time of Iraq's invasion of Kuwait, Tarmiya was at least a year behind schedule. At that time, Tarmiya was not expected to produce its first goal quantity of weapons-grade uranium, or 15 kilograms, until at least 1992, assuming that the plant would function well and that a stock of LEU would be used. If natural uranium was used, the date for the production of the first goal quantity would have been 1993 or later.

Because of the large size of EMIS facilities, few expect Iraq to try to secretly rebuild its EMIS production facilities. In addition, it still has to overcome several technical problems, including problems in vacuum technology and ion sources, before its separators would work properly. Armed with a stock of LEU, however, Iraq could produce 15 kilograms per year of weapons-grade uranium with a facility about one-third the size of Tarmiya.

 

Enrichment Options

By 1987 or 1988, when it became apparent to the Iraqi leadership that the gaseous diffusion program was not progressing well, Iraq decided to de-emphasize this effort. It instead concentrated on chemical enrichment as a source of LEU feedstock for the EMIS program. By 1990, Iraq had made little progress in building a chemical enrichment plant. However, both programs could be reconstituted, although substantial technical challenges would need to be overcome before Iraq could operate production-scale facilities.

After the cancellation of the gaseous diffusion program, the team started to work on gas centrifuges. The team had already been transferred from the Tuwaitha Nuclear Research Center to a new site on the northern edge of Baghdad near Rashdiya, later named the Engineering Design Center (EDC). This change reflected a change of authority from the Atomic Energy Establishment to the Ministry of Industry and Military Industrialization.

This group managed to acquire extensive overseas cooperation in designing and building gas centrifuges, so much so that inspectors have characterized the assistance as key to progress in the centrifuge program.

Despite such help, at the time of the Gulf War, Iraq was still a few years from an operating plant able to produce goal quantities of weapons-grade uranium, declared by the centrifuge program as 1,000 centrifuges producing 10 kilograms of weapons-grade uranium per year. Because of the relatively small size of a gas centrifuge program and the extensive progress made before the war, Iraq is viewed as likely to reconstitute its gas centrifuge program.

 

Weaponization

Iraq's effort to produce a nuclear explosive started in the mid-1980s. Under a 1988 plan, Iraq intended to have its first weapon by the summer of 1991, based on an implosion design. Iraq had worked on developing the capability to make fissile material for many years prior to this date, and Iraq has explained that the decision at that particular time reflected the expectation that domestically produced HEU would become available within a few years. Iraq intended that its nuclear weapons would be put on ballistic missiles. Iraq faced many problems in trying to reduce and ruggedize its design to fit on top of a ballistic missile.

Questions remain about the status of Iraq's weaponization program at the time of the allied bombing campaign in January 1991, when most activities were halted. Nevertheless, the Action Team inspectors have concluded that with the accelerated effort under the crash program, Iraq could have finished a nuclear explosive design by the end of 1991, if certain technical problems were overcome. However, it would have needed longer to prove a design for the Al Hussein missile. This missile, for example, would have required a warhead with a diameter of 70 centimeters to 80 centimeters, much smaller than the diameter of the design nearing completion that had a diameter of about 120 centimeters.

Iraq was also planning to build a nuclear test site, called the Al Sahara Project. At the time of the allied bombing campaign, Iraq had picked candidate sites in southwest Iraq but it had not performed a site investigation. In addition, according to a senior Iraqi nuclear official, Iraq did not plan to conduct a test before it had accumulated a few nuclear weapons. Iraq has stated that it planned to develop confidence in its weapon designs through an extensive experimental testing program that stopped short of a full-scale nuclear test.

 

Crash Program

By the time Iraq invaded Kuwait, Iraq still lacked an indigenous source of fissile material; its enrichment plants were still far away from producing HEU. In mid-August 1990, the Iraqi leadership ordered the diversion of its stock of safeguarded HEU fuel. Iraq's initial plan was to extract the HEU from the fuel, further enrich a portion of it, and build a nuclear weapon. The goal was to execute this plan within six months, although by the time of the allied bombing campaign in mid-January 1991 which stopped the effort, Iraq had fallen several months behind. A nuclear warhead for a ballistic missile would have taken significantly longer.

Reconstitution

Iraq has denied trying to reconstitute its nuclear weapons program after the Gulf War, although Iraqi documents suggest otherwise, at least for the period right after the war. Documents dated early June 1991 but finished several weeks earlier, called for salvaged equipment for processing safeguarded HEU fuel to be moved from the Tuwaitha Nuclear Research Center to Tarmiya. Only in late May did the first inspection team show up at Tarmiya, unknowingly halting any Iraqi effort to reconstitute these projects there.

Determining whether Iraq has conducted any proscribed nuclear activities since the Gulf War remains a thorny problem for the Action Team and UNSCOM. Little evidence has surfaced since the defection in August 1995 of General Hussein Kamel, then head of the Ministry of Industry and Military Industrialization (and Saddam Hussein's son-in-law), suggesting that Iraq has been conducting secret nuclear weapons work. Given the nature of the Iraqi regime, however, few accept that it has given up its nuclear weapons ambitions. Iraq's persistence in weakening inspections and hiding equipment, information and materials over the past seven years at great cost in lost oil revenue has only intensified suspicions about its intentions.

There is no simple answer to how much Iraq has accomplished in its nuclear weapons program since 1991 or how quickly Iraq could obtain nuclear weapons in the future. Below, we consider several important scenarios by which Iraq could build nuclear weapons. These estimates assume that the activities are carried to fruition without being discovered by the inspectors.

 

What Iraq Still Has

Iraq has demonstrated many times in the past seven years that it will make great sacrifices to preserve its basic resources for its weapons program. Nonetheless, vast amounts of equipment, materials and facilities have been destroyed by the inspectors. There are no known facilities working on nuclear weapons. The IAEA routinely says it has no evidence that banned activities are happening. However, an IAEA statement that it found "no evidence of any activity" does not mean that it has "evidence for no activity." This distinction is important.

Iraq is known to have kept its nuclear weapon teams together following the Gulf War. These teams are kept together by force and intimidation. They appear not to be significantly reduced in size or number from before the Gulf War. Many of these scientists are now in "unreal career paths," according to one Action Team inspector, and could be quickly redirected to nuclear weapons activities, if a decision were made to do so. Iraq has a relatively complete set of documents, despite its frequent protestations to the contrary. It has undoubtedly continued since the war collecting relevant data, reports and information throughout the world. Travel by Iraqis and Internet access have continued.

Following the Gulf War, Iraq established a program at its universities to train a new generation of nuclear scientists and provide more advanced instruction to members of the program. The new scientists are viewed as more loyal to the regime and may apply their expertise only in Iraq, further inhibiting defections. Many key nuclear scientists also gained experience and confidence after the war by rebuilding Iraq's civil industries. Nuclear scientists were instrumental in putting oil refineries, telephone exchanges and power stations back into operation under adverse conditions.

We believe that Iraqi scientists have been conducting theoretical design work and small-scale research and development in a wide range of proscribed areas since inspections began. Iraq may have also modified non-banned items that would be useful for small-scale research and development (R&D) and manufacturing work. Small numbers of such items may have been smuggled from abroad. Nonetheless, extensive progress by Iraqi scientists has been likely hampered by poor working conditions and the IAEA's and UNSCOM's intense scrutiny of the Iraqi program and facilities (and the difficulty in smuggling in key items, or items in sufficient quantity, from abroad).

However, these hardships should not disguise an important cultural shift in the nuclear program. In a new era of international sanctions, intense scrutiny and a lack of funds, new and more ruthless management teams are likely to emerge. The lack of accomplishments prior to the Gulf War, frequently exposed by the inspectors, will drive the new program to correct old mistakes and be more self-reliant and productive. Iraq's core asset is its seasoned and well-experienced cadre. These scientists can be expected to create more focused and productive programs at a reduced cost, size and visibility.

 

Post-War Weaponization

Prior to Iraq's invasion of Kuwait, Iraq was unable to achieve its goal of making a nuclear explosive or weapon. This weakness inhibited its ability to take advantage of the safeguarded HEU fuel before the start of the allied bombing campaign. Iraq probably has focused on making sure it would not be so limited again, if it were presented with a new supply of plutonium or HEU. It is difficult to detect small-scale weaponization work, such as high explosive lenses, uranium metallurgy and neutron initiators—even under the most intrusive inspection regimes. Based on our own assessment conducted in mid-1997, we concluded that in early January 1991 Iraq was within a few months to a year of building a nuclear explosive. Building a weapon able to be mounted to a ballistic missile would have required more time.

After the war, scientists in the weaponization program worked six days a week, eight hours per day. They had time to resolve several theoretical design issues they could not properly evaluate during the crash program. They conducted a range of theoretical activities, such as computer simulations of the atomic explosion. They also worked on more advanced explosives for the device. These activities led to a much better understanding of nuclear explosives and their behavior.

Iraq worked on small-scale experiments to improve its knowledge of particular components. It may have smuggled in subcomponents, machine tools and other items. Technicians could have continued to improve their skills in making uranium components by using surrogate materials. Iraq has worked on improving the design of high-explosive lenses and its ability to make them.

A special problem for Iraq is the neutron initiator. Its pre-war design was based on beryllium and polonium-210, a highly radioactive material with a half-life of about one year. Any polonium-210 Iraq may have successfully hidden from inspectors would have decayed away by now. Because Iraq obtained its polonium by irradiating bismuth targets in its research reactor, which is now defunct, it cannot produce more. Thus, Iraq needs a new type of neutron generator, and one likely candidate is a pulsed neutron generator based on tritium and deuterium. Iraq obtained several pulsed tritium-deuterium generators that are used in the oil exploration industry. One of the "oil well logging" devices could be suitable to trigger a nuclear explosive. Iraq also had established a program before the war to build its own pulsed neutron generator, but this program did not progress very far.

One of us (Hamza) was involved in an attempt in 1991 to create an off-shore company in Jordan to produce tritium-deuterium generators. The company would have produced these generators for the oil industry, but in secret; it would also have produced miniaturized neutron generators for use in Iraqi nuclear weapons. The company would have depended on the involvement of an East European expert with long experience in building such devices. This expert was not told the true purpose of the company, but he said that a civilian endeavor could no longer be done in Iraq because of the UN sanctions. Hamza pulled out of the project when Iraq stated that he could not take his family with him to Jordan. He believes that the company was never built in Jordan.

Assuming that Iraq has done nothing on weaponization since the Gulf War, we estimate that Iraq may need more than a year to reconstitute its program and finish a device, absent the fissile material. However, this scenario appears unlikely. The more likely scenario is that Iraq has made progress since the war, although the extent of progress is difficult to judge. Our conclusion is that Iraq could make a nuclear device within two to 12 months after deciding to do so, assuming it acquired sufficient fissile material. We also believe that the more probable time is closer to two months if HEU is obtained. The lower bound of two months includes the time needed to make components out of HEU and conduct any final testing of the device. The design would probably be an implosion system. However, Iraq was working on a gun-type device before the war, but it did not emphasize this design because of an anticipated scarcity of HEU. After the war, this design could have been perfected. If plutonium were obtained, Iraq would likely need more time, but still less than 12 months, to build a modified implosion device. Because the estimated time to complete a device is less than a year, likely considerably less than a year, the emphasis must remain on preventing Iraq from acquiring fissile material.

Our assessment appeared to be confirmed by Scott Ritter, an UNSCOM inspector who resigned in August 1998. He said that UNSCOM had intelligence information which indicates that Iraq has components necessary for three nuclear weapons, lacking only the fissile material. However, Ritter's statement has been challenged as unsubstantiated by UNSCOM, IAEA and U.S. officials. At least three of the four sources Ritter cited as the basis for his information have disputed Ritter's account, according to IAEA and U.S. officials.

 

Procurement of Fissile Material

Iraq denies ever making any attempt to procure fissile material abroad after the war. It also denies any serious attempt to do so before the war. Iraq has readily admitted, at least after Kamel's defection, that it received many offers for fissile material from abroad. One senior official said in 1996 that in the last 10 years, Iraq had received over 200 offers of everything from red mercury to fissile material to complete nuclear weapons. He insisted that Iraq had turned down every offer.

One offer, however, is being investigated by the Action Team. This offer, described in summary in a one-page document found at Kamel's farm after his defection, was purported to be by A.Q. Khan, the father of Pakistan's gas centrifuge program. An intermediary approached Iraqi intelligence in October 1990 with the following offer: Khan was prepared to give Iraq project designs for a nuclear bomb and to provide assistance in enriching uranium and building a nuclear weapon. He would also ensure any requirements of materials from Western European countries through a company Khan owns in Dubai in the United Arab Emirates. He requested a preliminary technical meeting to discuss the documents that he was willing to sell.

However, a meeting with Khan directly was not possible at that time, given the situation. An alternative of setting up a meeting with an intermediary, who had good relations with the Iraqi intelligence agents, was mentioned as a possibility. Iraqi intelligence officials believed the motive was money. Both the Pakistani government and Khan vehemently deny any such offer. Whether or nor Khan was involved, the Iraqis took this offer as genuine. Iraq's statement that it rejected this offer appears credible.

One of us (Hamza) knew of this offer at the time, and believes Iraq would not have pursued it. This type of offer would have given those involved too much knowledge and control over highly secret nuclear programs. What if they talked? Pakistan has had close relations with the United States. If the offer was a scam, large amounts of money could be at risk.

Despite these cases, we know of no evidence that Iraq has procured plutonium or HEU overseas since the war. But concern remains that Iraq may have already attempted to do so in the former Soviet Union. We cannot exclude the possibility that it has already obtained fissile material there. Nonetheless, preventing Iraq from acquiring nuclear explosive material abroad, particularly in Russia and former Soviet republics, remains a difficult but absolutely essential goal.

 

Gas Centrifuge Program

The gas centrifuge enrichment process is the most critical of the technologies Iraq pursued to make fissile material domestically. This type of activity is difficult to detect under the current OMV system. Before the war, Iraq made substantial progress in mastering the operation and construction of a variety of gas centrifuge designs. It also acquired illegally a large number of highly classified gas centrifuge design, operation and manufacturing documents from German centrifuge experts.

Suspicions remain that gas centrifuge activity resumed after the war at Rashdiya. Little verified information exists for activities at Rashdiya after the war. It was not bombed at all during the war, and it was not inspected until the summer of 1991, and then only in a cursory manner. Iraq has declared that in March 1991, it started bringing evacuated equipment and materials back to Rashdiya, but had not finished reconstituting its program by the time it accepted the UN Security Council Resolution 687 (the Gulf War cease-fire resolution) in April. Iraq says that it did not resume any centrifuge work at Rashdiya or elsewhere after the war.

Nevertheless, questions remain about why Iraq decided to hide Rashdiya's existence. Although Iraq chose to tell the inspectors about many of the centrifuge program's accomplishments and the existence of other unknown centrifuge sites, it decided not to reveal Rashdiya or the extent of foreign assistance. Iraq continued to deny the importance of Rashdiya even after defectors had identified the site in 1991. Iraq came clean about Rashdiya and the extent of foreign assistance only after Kamel's defection in 1995, when exposure was certain.

Iraq also continues to maintain that all centrifuge program reports and progress reports were destroyed during the bombing or after the war. This statement is viewed by the Action Team as non-credible because documents from the rest of the Iraqi nuclear programs continue to surface. The collection of papers from Kamel's farm also included several tons of maraging steel and large quantities of carbon fiber, both key materials in making gas centrifuges. The inspectors did not know that Iraq still had this material. Whether some was used in small-scale R&D activities is unknown. In addition, Iraq may have acquired more such materials. An Iraqi official has bragged to inspectors that overseas procurement of maraging steel is no problem.

Iraq could have made progress in the following areas. It could have improved its ability to make centrifuge components to high tolerances, an absolute must for the successful operation of centrifuges and a difficult problem for Iraqi industry. Centrifuge experts could have expanded their theoretical and "hands-on" knowledge of single machines or a few hooked together by pipes into a cascade. Iraq may have also procured illicitly more machine tools to make centrifuge components. Despite this progress, Iraq would still face formidable challenges in making significant progress toward building a facility able to make kilograms of weapons-grade uranium annually. It would also need to acquire a stock of uranium hexafluoride, a demanding task.

We consider two cases, which both assume that Iraq has not started to build a centrifuge facility, whose goal capacity is taken as 10 kilograms per year of weapons-grade uranium. These cases also assume that Iraq may opt for a simpler centrifuge design that is easier to build and requires materials and equipment that are less controlled internationally.

The first case posits that Iraq needs to procure manufacturing equipment, build a manufacturing plant, conduct additional testing of the centrifuge design, produce uranium hexafluoride and manufacture 1,000 to 2,000 centrifuges. We estimate that Iraq would need about three to seven years to accomplish this set of tasks and produce its first 10 kilograms of weapons-grade uranium. The second case assumes that Iraq just needs to manufacture the centrifuges in sufficient number, having finished all necessary testing and procurement of materials and equipment. In this case, Iraq would need an estimated two to three years to bring the plant into operation and produce its first 10 kilograms of weapons-grade uranium. In brief, Iraq would need at least a few years to construct and operate a clandestine gas centrifuge enrichment plant. Because Iraq would need to procure several key items abroad, the inspection system needs to have a strong export-import focus in order to have a better chance of detecting Iraq's procurement efforts.

 

Focus on Iraqi Scientists

The Action Team realized soon after inspections started the importance of identifying and interviewing key Iraqi nuclear scientists. Most key scientists have been identified. Over a hundred are periodically interviewed by the Action Team. However, this process is inadequate in obtaining necessary information or ensuring early warning if these scientists are engaged in prohibited activities.

Most of the scientists are virtual prisoners. They live in fear of their government's punishments if they do or say anything outside the limits imposed by it. Even if they manage to leave, their families are held hostage with the possibility of terrible reprisals against them if they reveal any significant information. Currently, Iraqi scientists are interviewed in the presence of government security officials. This arrangement gives the Iraqi regime control over what the scientists can say and provides an easy way to control the information flowing to the inspectors. One of us (Hamza) was told that in case the inspectors found out his former role as head of the weaponization program, he was not to make himself available to inspectors. If he was forced to talk to them, he was instructed to claim not to remember anything about what he did.

On one inspection, the other author (Albright) was able to interview Iraqi scientists only in groups or in the presence of a "minder." One-to-one contacts usually involved pleasantries or being pulled aside to be "fed a line." In one case, the head of the gas centrifuge program tried to convince him that the first gas centrifuge facility would have taken years to finish.

Typically, the interviews are video-taped by the Iraqis. These tapes provide the Iraqis with a means to analyze in detail the information that is revealed in those sessions, any mistakes that are made, and the underlying knowledge and strategy of the inspectors. The genesis of this interviewing process dates to the beginning of inspections. One inspector said that it did not occur to the inspectors to do it any other way. "We just did not think about it," he added.

At least, the inspectors need to have the right to interview the scientists without their "minders," particularly under the OMV program. Ideally, such interviews should be conducted in another country. An alternative is to conduct the interviews in a secure room, which for example exists at the Baghdad Verification and Monitoring Center.

 

Getting the Scientists Out

A better solution is to create a method to allow Saddam's cadre of knowledgeable nuclear weapon scientists and their families to leave Iraq safely. With years of valuable experience before the war, Iraq's nuclear weapon experts are both a valuable and necessary asset to implement a decision to seek nuclear weapons. If the key scientists leave, Iraq may be unable to reconstitute a nuclear weapons program.

A practical method to implement this proposal is for the United States to link its support for lifting sanctions to Iraq agreeing to allow certain scientists and their families to leave Iraq. Such a method would avoid the need for Security Council agreement and permit the United States to name the scientists it wants out.

Would any scientists leave Iraq voluntarily? There is a growing recognition that many of the nuclear experts are not committed to remaining in this highly repressive police state. Most of the experts were arbitrarily assigned to the nuclear weapons program after returning from overseas education. After suffering years of hardships created by sanctions, many scientists and their families could be expected to leave. As mentioned earlier, the vast majority of the former nuclear weapon scientists have been identified through captured Iraqi documents and Action Team inspections. The resettlement of just a few dozen key scientists would devastate Saddam's ability to rebuild his nuclear weapons program.

Key to the success of this initiative is protecting the scientists and their families from retaliation. The United States would be a possible resettlement country, because it can provide adequate protection against Saddam's agents if he decides to violate Security Council resolutions. The Security Council would also need to assign the Action Team and UNSCOM the task of investigating any suspected retaliation against family members in Iraq. In the event of retaliation, the Security Council must be ready to punish Iraq decisively.

The scientists would need to be provided economic support until they could find adequate employment. Any costs during this resettlement process could be collected from Iraq, just as the costs of UNSCOM and Action Team inspections are taken from proceeds of Iraqi oil sales. For their part, these experts would commit not to work in any weapons of mass destruction program and agree to host government or Action Team monitoring to ensure that they are not violating their commitment or secretly helping Saddam to rebuild his military programs.

Time is running out to deprive Saddam of his most valuable remaining nuclear weapons asset. If successful, this initiative could nip an Iraqi nuclear weapons program in the bud. The alternative is letting the nuclear cadre, intimidated by Saddam, remain in Iraq, awaiting the inevitable orders to reconstitute the nuclear weapons program or train the next generation of nuclear weapons experts.

 

Conclusion

Ensuring that Iraq does not build nuclear weapons will require vigilance. The chance of Iraq building nuclear weapons in secret depends critically on the effectiveness of the OMV system. If inspections become ineffective, even if sanctions remain, Iraq's chance of success will be unacceptably high. Iraq has developed a deep understanding of the weaknesses and vulnerabilities of the entire inspection system. It appears to have a strategy to weaken inspections at will. Although a robust and constantly improving inspection system is necessary to detect and thwart Iraq's proscribed nuclear activities, Security Council enforcement of the inspections, backed up by U.S. and British willingness to use military force, will remain vital to the future effectiveness of inspections.

The OMV needs improvement, including a more system-wide approach to its design and deployment. More environmental monitoring in Iraq is needed. Improved cooperation on detecting illicit imports into Iraq is also increasingly vital, as the sanctions become less effective. International efforts to improve controls over fissile material in the former Soviet Union must receive a higher priority. With a strengthened, enforced OMV program, Iraq is far less likely to build nuclear weapons in secret. If key Iraqi scientists are brought to the West, Saddam Hussein may find it difficult to succeed in building nuclear weapons for many years.

Ultimately, the goal of the inspections in Iraq is to buy time, in hopes that the regime will either change or give up its ambitions for nuclear weapons or other weapons of mass destruction. A highly confrontational inspection system has little chance of lasting for decades in any country. It is a tribute to the Security Council, and in particular the United States, that the inspections have lasted this long. But the system of stringent inspections must remain effective at least as long as the current regime persists on its noncooperative path. The stakes are high. A nuclear-armed Iraq could haunt the world for decades, and make the accomplishment of Middle East peace a dream of the past.


Iraq's Reconstitution of Its Nuclear Weapons Program

Defense Threat Reduction Agency Created

On October 1, Secretary of Defense William Cohen announced the merger of several Pentagon agencies to form the new Defense Threat Reduction Agency (DTRA), whose mission is to combat the danger of weapons of mass destruction. "At least 25 countries are in the process of developing nuclear, biological or chemical weapons and the means to deliver them," warned Cohen at DTRA's headquarters near Dulles International Airport. "We must confront these threats in places like Baghdad before they come to our shores."

The formation of DTRA, recommended by the 1997 Defense Reform Initiative, consolidates the Defense Technology Security Agency, Defense Special Weapons Agency, and On-Site Inspection Agency. DTRA's eight directorates include Nuclear Support, On-Site Inspection, Cooperative Threat Reduction, Technology Security, Special Weapons Technology, Chem-Bio Defense, Counterproliferation, and Force Protection. DTRA Director Dr. Jay C. Davis, former associate director of the Lawrence Livermore National Laboratory, will report to the under secretary of defense for acquisition and technology. The new agency has roughly 2,100 employees and a fiscal year 1999 budget of about $1.9 billion.

Privatizing U.S. National Security: The U.S.-Russian HEU Deal At Risk

Just before their end of summit press conference on September 2, Russian President Boris Yeltsin informed President Bill Clinton that he was going to announce the end of the historic "HEU deal" signed by the two countries in 1993. Under this unprecedented government-to-government agreement, the United States agreed to purchase, over a 20 year period, 500 metric tons of highly enriched uranium (HEU) from dismantled Soviet weapons that Russia would "blend down" to low-enriched uranium (LEU) for sale to the United States as fuel for civilian nuclear reactors. The deal—worth an estimated $12 billion to Moscow—would guarantee that the Russian HEU, enough to build more than 20,000 nuclear weapons, would never again be used for weapons purposes.

The HEU deal, initiated by President George Bush and signed by President Clinton in February 1993, arose from a proposal to U.S. and Russian officials in October 1991 (only weeks before the dissolution of the Soviet Union)< 1 > and subsequently became the centerpiece of U.S. efforts to address what is arguably the most extreme proliferation threat since the beginning of the nuclear age: the possibility that nuclear weapons, the fissile material from them, or the technical skills necessary to make them would be diverted from the rapidly decaying Soviet military industrial complex to rogue states, terrorist groups or countries with nuclear ambitions. To date, Russia has shipped LEU made from about 50 tons of HEU (10 percent of the total)—the equivalent of about 2,000 nuclear weapons.

Because Russia's closed "nuclear cities" that are responsible for making nuclear weapons are unavoidably involved in the destruction of these weapons and the purification and blending down of HEU, the U.S.-Russian deal ensures that money flows to precisely those places and people that present the largest proliferation threat to the world. The need to verify that the LEU that Russia sells under the deal truly comes from HEU has given the United States the opportunity not just to monitor the destruction of Russian weapons-usable fissile material, the so called transparency process, but also to assist Moscow in improving fissile material protection, control and accounting systems that further protect inventories of these materials. In addition, U.S. national laboratories have developed active relationships with an increasing number of Russian "nuclear cities," an engagement that builds peaceful relationships with the most capable of Cold War adversaries and the most dangerous potential contributors to global nuclear weapons proliferation. These otherwise intrusive measures—and new initiatives on plutonium and closed cities—are possible largely because of the more than one half billion dollars per year Russia gains from the HEU deal.

In short, the HEU deal benefits Russia, the United States and international security. Why then did Yeltsin threaten to end the deal? The answer lies in recurrent failures on the part of both governments to implement the deal. While this failure is due in part to Russian bumbling and commercial incompetence, it is the United States that has created the real impediments to success. Despite warnings and opportunities to intervene, Washington has consistently put domestic commercial and financial interests, most notably those involved in the recent privatization of the U.S. Enrichment Corporation (USEC), ahead of U.S. national security interests. If the deal is to be repaired, the United States must reassume the responsibility it has abdicated. If decisive action is not taken, shipments will end, perhaps permanently.

 

An Unusual Deal

The basic terms of the HEU deal are outlined in an agreement signed by the United States and Russia on February 18, 1993. However, the HEU deal is unusual in that it calls for the parties to carry out their obligations through commercial mechanisms. Under the agreement, each government was to appoint an "executive agent" that would carry out commercial implementation of the deal through contracts for the purchase and sale of the Russian LEU.

Russia assigned implementation to its Ministry of Atomic Energy (MINATOM), which would utilize its experienced government trade organization AO Techsnabexport (TENEX). In a fateful move, the United States, which initially made the Department of Energy (DOE) its executive agent, committed to make USEC—a newly created, government-owned corporation—its ultimate executive agent. Created by the Energy Policy Act of 1992 and slated for eventual sale to private investors, USEC was the result of a 20 year effort to make the government's uranium enrichment operations more "business-like."

Unfortunately, actions taken by U.S. government officials—some of whom later joined USEC—to assure the corporation profitability and increase its value at privatization have systematically worked against the HEU deal. National security officials, skilled in negotiating agreements and wielding U.S. power in conventional ways, have either failed in their oversight of the commercial implementation at home, been misled, or simply been outvoted in the administration.

While some administration officials now take the position that the United States has no financial responsibility for the HEU deal, and that Russia must simply take what it can get, the 1993 agreement is quite clear that the ultimate responsibility belongs to the governments. The agreement specifies that the "[commercial] terms (including price), shall be subject to approval by the Parties." The United States committed to "use the LEU converted from HEU in such a manner as to minimize disruptions in the market and maximize the overall economic benefit for both Parties." Such provisions show the responsibility of both governments to manage carefully the commercial implementation of the HEU deal. From the Russian perspective, the United States has failed to do so.

The Uranium Problem

While the United States is committed under the government to government agreement to purchase LEU from Russian HEU and the initial contract was for the purchase of LEU, that is not how things have turned out. The Russian LEU contains two inputs of value: the natural uranium (as uranium hexafluoride, or UF6) and the "enrichment" services (measured in separative work units, or SWUs). (See sidebar.)

The current problem is that Russia is not being paid for the uranium component, which is a state asset of the Russian government, like gold. The enrichment component is being purchased by USEC, with that money going to MINATOM. Because it is not possible to ship a SWU (except as an input of enriched uranium) and because Russian law prohibits export of state assets without a contract for sale and payment within 180 days, LEU derived from HEU cannot be exported from Russia without a uranium sales agreement. Thus, the whole HEU deal rests on finding a workable solution to the uranium problem.

The uranium problem has been present from the beginning of the deal. Following the intergovernmental agreement, an implementing contract for the HEU deal was negotiated with MINATOM and TENEX by DOE Deputy Assistant Secretary Philip Sewell in May 1993. That contract called for DOE to purchase Russian LEU but to pay immediately only for the enrichment component. The uranium component (actually, an equivalent amount of feedstock material that USEC customers had previously delivered for enrichment) was to be paid for when USEC "used or sold" the uranium equivalent or at the conclusion of the deal, which might be as late as 2013. At the time the contract was negotiated, it was expected that USEC would be assigned the contract after the company came into existence in July 1993. Indeed, Sewell left government for USEC several months later and the final contract was signed by USEC and TENEX at the January 1994 Moscow summit.

This defective LEU purchase contract, which Russia contends did not carry out the intent of the 1993 agreement, was designed more to benefit the commercial interests of USEC than to implement the intergovernmental agreement. USEC would get control of the uranium component of Russia's LEU without having to pay for it until the company wanted to. Of course, USEC would not be able to resell the accumulating inventory of displaced feedstock for some years because of trade restrictions on the sale in the United States of Russian uranium. USEC could have used the uranium for a process called "overfeeding," that is, using more uranium in the enrichment process to reduce consumption of electricity. DOE had been overfeeding the two gaseous diffusion plants it owned for years, a practice that was assumed to continue when the HEU deal was proposed. However, subsidies provided to USEC (in particular, DOE's below-market-value electricity contracts) eliminated incentives to overfeed and it soon became apparent that Russia would not get paid for its uranium anytime soon.

Thus, even from the beginning, the United States did not act to ensure payment to Russia for the uranium component of the LEU, which was estimated to be worth up to $4 billion over the course of the agreement. But USEC supporters were too clever by half: the corporation would, two decades hence, have to pay for the Russian uranium it held title to under the contract, a major liability that would interfere with the ultimate privatization of the corporation.

The uranium problem was addressed, but not fully solved, by the USEC Privatization Act, which Congress passed and President Clinton signed into law on April 26, 1996.< 2 > The legislation called for the United States to purchase the uranium component of the Russian LEU delivered in 1995 and 1996 and, overriding the defective LEU purchase contract, returned title to the uranium content (rather, the displaced uranium set aside by USEC) to Russia for it to sell on its own beginning January 1, 1997. To facilitate Russian uranium sales, the legislation overrode trade restrictions imposed on Russia in 1992 (as a result of an anti dumping action against uranium exporters from the former Soviet Union) by creating a new and gradually expanding quota for Russian sales of uranium to the United States.

By returning title of the displaced uranium to Russia, USEC was relieved of a $4 billion liability on its books, but Russia was left with a substantial amount of uranium to sell. When annual Russian LEU shipments to the United States are scheduled to reach 30 metric tons HEU equivalent in 1999, the uranium component will reach 9,000 metric tons (23.4 million pounds U3O8) annually. By comparison, the United States consumes about 17,000 tons of uranium each year, while other Western nations together consume about 36,000 tons.

Moscow will face serious obstacles to selling such large amounts of uranium in the current market. Both the United States and the European Community impose restrictions on the amount of Russian uranium that can be sold, and Japan is reluctant to buy Russian uranium because of ongoing territorial disputes with Moscow. In addition, because most utilities purchase uranium under long term contracts that cover requirements for several years forward, there is little near term market for new sales of any kind of uranium. Thus, Russia will not be able to sell its uranium directly to utility end users, but only to companies that are willing to purchase the uranium and hold it for future sales when market demand and trade restrictions allow.

On June 2, 1998, Russia reached a preliminary agreement with a consortium of three Western uranium companies (CAMECO of Canada, COGEMA of France and NUKEM of Germany) to purchase its uranium at USEC for a 10 year period, including the 11,000 tons remaining from LEU deliveries to USEC in 1997 and 1998. Under the preliminary agreement, Russia would receive payment promptly when the uranium contained in the LEU delivered to the United States was returned to Russian control at USEC. The companies offered to pay the going market price, less a profit margin when prices rose above $29 per kilogram of uranium (as UF6).

For this deal to make commercial sense, the price of uranium would have to be expected to increase at a rate at least as great as the interest rate used to finance the purchase and holding of the uranium. Based on their own market analyses, the companies clearly believed that uranium prices would rise, particularly if the sale of the Russian uranium was handled responsibly, and that they would not have to hold the Russian uranium for more than a few years. After an extensive review, the Russian government approved the draft agreement by issuing a formal decree. In its own effort to be clever and put pressure on the companies to pay a minimum price in a final contract, MINATOM asked that the decree establish $29 per kilogram of uranium as the minimal acceptable price.

 

USEC Privatization

Unfortunately, just as Russia was approving its agreement with the uranium companies, the United States was completing its plans for USEC's privatization. Unbeknownst to all but those directly involved, USEC had convinced mid-level DOE and Office of Management and Budget (OMB) officials to transfer large amounts of DOE inventories of uranium to USEC to increase the company's value. The existence of this uranium was not generally known until May, when merger and acquisition bidders involved in USEC's privatization tried to find buyers for the uranium as part of their plans to finance the company's acquisition.

On May 20, the author alerted national security officials at the State Department and the National Security Council to the uranium transfers, and the potential negative implications for the HEU deal of USEC sales of uranium in competition with Russia. National security officials subsequently met with DOE and Treasury Department officials to discuss the implications of possible USEC uranium sales for the HEU deal. However, Treasury and White House officials pushing USEC privatization overruled any actions. The reasons given ranged from the parochial to the absurd: nothing could be done that might threaten the privatization, and government officials were forbidden to discuss any matters concerning USEC (even among themselves) during the "quiet period" mandated by the Securities and Exchange Commission (SEC). The latter turned out to be a fabrication—SEC rules apply only to company management's public disclosures and only after a securities offering is filed with the SEC. Neither was the case.

On June 26, Senator Pete Domenici (R-NM), who co authored the USEC Privatization Act, wrote to national security advisor Samuel Berger (with a copy to Secretary of the Treasury Robert Rubin) stating his concern that "sale of [the USEC uranium inventory] would negatively impact the sale of HEU Agreement derived natural uranium and could significantly reduce the Russian Federation's incentive to continue the [HEU] Agreement." Domenici concluded: "I have worked for over a decade to privatize the USEC. But if circumstances are different than what we have assumed, you need to take those new circumstances into account before a decision to privatize is made." Three days later, the Treasury Department proceeded to file the prospectus for the sale of USEC with the SEC, starting the countdown to the sale of USEC shares to private investors.< 3 > Domenici never received an answer to his letter.

If the president's highest national security advisor could, or would, do nothing, Secretary Rubin should have been in a position to weigh the foreign policy implications of USEC privatization against the domestic forces promoting privatization. But on June 24, Rubin delegated to the undersecretary for domestic finance the necessary authority for all matters relating to the privatization of USEC.< 4 > Whatever Rubin's reasons, he delegated the decision-making authority to the government's leading cheerleader for USEC privatization, a move that had the full support of more than 60 Wall Street investment firms set to profit from the sale of USEC.

The June 29 SEC filing confirmed not only the huge size of USEC's uranium stockpile, but also the fact that USEC was stockpiling additional uranium at one of the plants it was leasing from DOE by a process called "underfeeding."< 5 > To make matters worse, the SEC filing committed USEC to sell more than 60 million pounds of uranium on an accelerated schedule, before July 2005. A subsequent leak of an internal USEC planning document revealed plans to sell nearly 90 million pounds in this period, reaching a peak level of more than 22 million pounds in 2002.< 6 > If USEC and its administration supporters had intended to sabotage Russia's pending agreement with the three uranium companies, they could not have done more. USEC's planned sales totally changed the economics of any commercial deal to buy and hold Russian uranium. Not only would the holding time, and thus holding costs, increase, but the ultimate price received would be lower because of the additional supply to the market.

Perhaps coincidentally, DOE, under pressure from OMB (which strongly supported USEC privatization and DOE uranium transfers to the company), advanced a proposal in May to sell about 30 million pounds of its uranium inventories (in addition to that already transferred to USEC) between 1998 and 2003. New projections of uranium prices by industry analysts and the independent Energy Information Administration soon showed reductions of up to 40 percent in future uranium prices.< 7 > Not surprisingly, in the face of USEC plans and DOE uncertainties, the three Western companies re evaluated the draft agreement and informed Russian authorities it would have to be revised.

As USEC's privatization moved forward, Russia also made clear its serious reservations about the future of the HEU deal. On July 17, Russian Minister of Atomic Energy Yevgeniy Adamov wrote a letter to Domenici, who had visited Moscow in early July and discussed the deal with Russian officials. Adamov wrote:

 

We are not sure that after actual privatization USEC as a private company will be able to fulfill its commitments of the U.S. executive agent under this Agreement and ensure further acceptance and full payment for the low enriched uranium supplied…. We think that this constitutes deviation of the U.S. Party from the implementation of agreed provisions of the Agreement and affect its fulfillment. In such situation Russia will bear significant financial losses and this will result in strengthening the negative reaction of the Russian legislators both with respect to the implementation of this Agreement and other arrangements with the USA on the issues of nuclear arms control.

Adamov was undoubtedly referring to the opposition in the Russia Duma (the lower house of parliament) to the ratification of START II, to intrusive transparency and security measures, and pending legislation to end the HEU deal itself. Adamov's warning, which foreshadowed Yeltsin's threat to end the deal at the upcoming Moscow summit, should have made the dangers clear to the United States.

Additional interagency meetings on the HEU deal broke down because OMB officials insisted that President Clinton had approved a go ahead on privatization on July 25, 1997, and had not altered this order. In fact, Clinton reportedly had read a press article questioning privatization and forwarded it to his advisors, asking: "Are we sure we are doing the right thing?" Despite U.S. officials' prior knowledge of the impending problem and sober warnings from responsible Russian officials, the privatization juggernaut plowed on, raising questions about the source of the pressure to proceed at any cost, including U.S. national security interests. On July 28, USEC became a private company.

 

The Current Situation

At the Moscow summit, Clinton managed to dissuade Yeltsin from withdrawing from the HEU deal by assuring him that the United States would find a solution to the problems. Adamov and Energy Secretary Bill Richardson were appointed to coordinate the effort. However, Richardson was soon handicapped by differences within the administration about how to deal with the uranium feed issue. For a long time, White House officials steadfastly refused to consider a U.S. purchase of any part of the uranium feed component, arguing that Moscow must recognize that market circumstances had changed (even if the United States changed them) and therefore must settle for much less money from commercial buyers. In effect, these officials contended that the United States had no responsibility under the government-to-government agreement, and that Russia was on its own in the commercial implementation of the HEU deal.

This position arises from a fundamentally flawed assumption about the HEU deal. When it was first proposed, it was thought that the HEU deal would be "budget-neutral." At that time, it was the U.S. government, through DOE, that was to purchase the Russian LEU. DOE would then resell the LEU without requiring an appropriation by a Congress that was trying to balance the U.S. federal budget. It was thus politically and budgetarily necessary to assert that DOE would incur no costs when it entered into the contract. In fact, under government accounting rules for the enrichment enterprise, the HEU deal would not only be budget-neutral, but "profitable." The price the United States would pay for the uranium content of the Russian LEU would be recovered by reduced costs (according to government accounting rules at least) from overfeeding the enrichment plants, and the price paid for the SWUs would be far below the full-cost recovery values attributed to operation of the enrichment plants.

In privatizing the U.S. enrichment enterprise and transferring large amounts of uranium, administration officials themselves destroyed the budget neutrality of the HEU deal. The transfer of below-market-value electricity supplies to the new government corporation and the failure to charge a capital cost per SWU for use of the enrichment plants not only destroyed any incentive to overfeed and thus buy the uranium, but also subsidized USEC production costs for SWUs so that they were below what was promised Russia. The privatization of USEC compounded this problem, since the private corporation—unlike the government corporation—must make a profit in reselling the Russian SWUs. As discussed below, it is now impossible to pay Russia a fair market value for its enrichment services. Transfer of amounts of uranium greater than was statutorily authorized and aggressive USEC uranium sales plans made it impossible for Russia to sell the uranium from HEU at prices even close to those originally agreed.< 8

If U.S. actions taken in connection with USEC privatization have altered not just the economic factors, but also the fundamental assumptions of the deal, it is important to ask what responsibilities the United States retains under the original government-to-government agreement. In the world of commercial agreements, the answer would be clear: the United States would be obligated to compensate Russia for any lost income. Of course, Russia lost the Cold War and is desperate for money. Perhaps U.S. officials believe Russia will just have to accept the dictates of the victors.

For its part, Russia holds the United States responsible for purchasing the LEU and will not continue to ship without payment. Russia is undoubtedly counting on the importance of the HEU deal to the United States to force a resolution. However, this is a dangerous game of brinkmanship: Washington may push Moscow so far that it is impossible to revive the deal. The inability of policy makers to perceive the consequences of their actions, or inaction, or to act to fix things, does not give confidence. Nor is it easy to identify anyone in Russia who would champion a resumption of the deal once it ended.

 

Domenici's Proposal

In a September 8 letter to Clinton, Domenici wrestled with this dilemma and came down on the side of prudence. Commenting that he did not think Russia could bend further on terms and that changed political circumstances in Russia would make it difficult for ministries involved to accept much lower prices, Domenici suggested that the United States take partial responsibility for the situation and intervene in a limited way.

Under Domenici's proposal, the United States would, in effect, purchase about 28 million pounds of uranium from Russia's 1997 and 1998 LEU shipments—at a cost of about $300 million—conditional on Moscow reaching a long term commercial agreement for the uranium component of its future deliveries. The United States would hold the Russian uranium and remaining DOE stocks of uranium off the market for 10 years. The hope was that removing an estimated 58 million pounds of uranium from the market (28 million pounds of Russian uranium and 30 million pounds of DOE inventory) would partly reverse the negative market impact of uranium transfers to USEC. Domenici also called for the United States to define terms for returning the uranium component of the LEU to Russia for use in the blending down of HEU or as fuel in Soviet design reactors in Russia and elsewhere.

Essentially, Domenici invited Clinton to join in a bipartisan effort to strengthen the HEU deal and signaled congressional receptiveness to a budget request under the president's emergency appropriation powers. Such a presidential request would not be unusual; Congress finally settled on more than $20 billion of such emergency requests. On September 22, Richardson and Adamov, meeting in Vienna, issued a joint report on the status of implementation of the HEU deal.< 9 The framework proposed in the report was intended to facilitate a purchase agreement between Russia and the Western companies. The framework included most of the Domenici proposal, but no commitment to purchase the uranium from 1997 and 1998 deliveries. Subsequently, after a great debate at high levels, the administration agreed to accept a congressional appropriation of $325 million for the 1997 and 1998 deliveries, which was passed into law on October 21.

The resolution of the uranium problem is still uncertain. Russia continues to insist on prices for its uranium that are now significantly above market and refuses to recognize that commercial buyers will have to pay even lower amounts due to the high costs of holding the uranium until market and trade conditions allow it to be resold. Some in the administration still resist spending the funds authorized by Congress and seem unwilling to accept limits on DOE sales of uranium. Between Russian inflexibility, administration equivocation, and worsening uranium market conditions, it will be hard to reach a commercial deal that relieves the United States of all future responsibility for the HEU deal.

 

The Future of the Deal

If the uranium problem can be solved, the next challenge to the HEU deal will come from USEC's obligation to pay Russia for the enrichment component of its LEU deliveries. As a government owned corporation, USEC was—at least in principle—under the control of the U.S. government. The United States could ask USEC to pay for Russian enrichment services even if the cost was greater than the company's own cost of production and the corporation made no profit on the Russian SWUs. With privatization, USEC has no strong incentives to continue its role in the HEU deal. In fact, according to revelations in its SEC filing, USEC has a strong incentive to quit its role and even to seek to end the HEU deal.

Moreover, even when it was a government-owned corporation, USEC put its business interests ahead of the HEU deal. In 1996, Russia asked USEC to increase its 1997 purchases of LEU from 10 tons HEU equivalent to 18 tons. According to a protocol, or summary, of discussions in Moscow in July (in which no non-USEC U.S. government official participated), "USEC responded that because of power and labor commitments and level of demand for SWUs, this could not be done in 1997," offering instead to purchase the HEU equivalent of 12 tons.< 10 USEC officials asked U.S. government officials to approve the 12 ton level, but failed to inform them of the Russian offer to deliver more. Russian officials naturally assumed that USEC was speaking on behalf of the U.S. government. Without outside intervention, Washington might never have detected this subversion of the HEU deal.

The dominance of USEC's commercial interests has been amplified by privatization, enrichment market developments and continued ineffective oversight by government officials. According to the company's SEC filing: "Unit costs of SWU purchased under the Russian HEU Contract are substantially higher than the Company's marginal cost of production." Increasingly large volumes of Russian SWUs result in USEC having to operate its two enrichment plants at inefficient levels, raising unit costs on the SWUs that USEC does produce. The plants are most efficient at a production level of about 13 million SWUs per year. USEC sells 11 million to 13 million SWUs per year, but, by next year, Russian LEU deliveries will reach 5.5 million SWUs, meaning that USEC will have to operate its plants far below their optimum production levels.

Meanwhile, USEC's portfolio of old high priced SWU contracts, inherited from DOE, are ending and market prices for new contracts are declining. Under its present contract with Russia, USEC must, in 1999, pay about $88.90 per SWU (including transportation)—more than the current price for new SWU contracts, implying that USEC must market Russian SWUs on which it can make no profit. When USEC was owned by the U.S. government, the United States could simply tell USEC to buy and resell the SWUs even if it did not make a profit. Obviously, privatization has changed this; private shareholders demand a profit.

Thus, the best outcome, by far, for USEC is for the HEU deal to fail entirely; that is, for the Duma or the Russian government, in nationalistic frustration, to stop exporting its sensitive national treasure. Based on the above SWU-cost factors and the higher prices expected for uranium if Russian uranium were kept from the market, USEC's profits would be approximately three times as high as at present if the HEU deal ended completely.< 11 USEC's private investors and the Wall Street firms that still hold stock could see an increase in their return on investment from about 7 percent to 22 percent, or, equivalently, a trebling of share price.

The transfer of large amounts of uranium to USEC by its administration supporters, together with USEC leaks of aggressive sales plans, nearly caused an end to the HEU deal on September 2. Failure of the United States to ensure payment for Russia's uranium may yet guarantee that result. Given declining SWU prices and increased deliveries, it is inevitable that USEC will seek a deferral of Russian SWU purchases and a substantial reduction in the price paid to Russia to ensure the company's profitability. The U.S. government would either have to explain to Russia why it has to sell at a price well below the market price—so a private American company can make a profit—or subsidize that profit from taxpayer funds. Of course, it may not come to such a clear conclusion: there are many ways to frustrate performance of a contract to the point that Russia finds continuing the HEU deal unacceptable.

 

Solutions

The United States must recognize that its own actions have severely undermined the HEU deal and that the assumption that the deal can be accomplished at no net cost to the United States is a serious mistake. In subsidizing and otherwise biasing USEC financial incentives against the SWU part of the deal and by transferring large amounts of uranium to the corporation without limits on sales, Washington may have increased the value received by the Treasury Department for USEC's sale but created a threat to national security that will most likely require continued expenditure of funds to alleviate. But even if the United States cannot shift the entire cost of the deal to the private sector, the HEU deal is a good buy, perhaps the most cost effective national security initiative in history. Trillions of dollars were spent in the Cold War to counter the threat of tens of thousands of Soviet nuclear weapons. If the United States can forever remove large numbers of such weapons from the world for less than the cost of one B-1 bomber, it will be money well spent.

There are several immediate tasks for the administration. The first is to use the uranium-funding "carrot" provided by Congress to secure the best possible long-term commercial agreement for the sale of Russian uranium beginning in 1999, and to formalize such an agreement in a way that ensures that it will continue in the future. To do so, the United States needs to convince Russian officials to be realistic about market conditions and the low salability of its large volumes of uranium, recognizing the Russian complaint that U.S. actions—from USEC transfers to trade restrictions—have significantly worsened the market situation for Moscow.

The second is to improve U.S. oversight over the HEU deal to a level commensurate with its national importance and U.S. commitments under the intergovernmental agreement. The president appointed an interagency oversight committee, but it has failed to recognize problems and take timely action. This failure is due partly to inadequate staffing and lack of information, partly to the inattention by national security officials preoccupied with other crises, and partly to the lack of influence of national security advisors in the White House policy process.

An immediate need is better information about what is happening in the HEU deal. The memorandum of agreement between the U.S. government and USEC defers excessively to USEC commercial interests.< 12 The United States should not depend on limited self reporting by the corporation about what is happening in the HEU deal. USEC's position, endorsed by the agreement, is that all information connected with the HEU deal is proprietary, preventing public as well as government scrutiny of developments—including those initiated by USEC—that involve profound public and national security interests. In short, privatizing USEC appears to have resulted in the privatization of an important aspect of U.S. national security. At the very least, a U.S. government observer should participate in all negotiations and meetings relating to the HEU deal and all documents should routinely be provided to a more knowledgeable and attentive oversight process.

With regard to the impending SWU problem, the United States could take several actions to alter USEC's economic incentives so that it was more willing to continue the HEU deal. After all, the United States owns the enrichment plants that USEC leases for only a few million dollars a year, and DOE holds the below market-value electricity contracts that benefit the company. One measure would be to increase power costs; another would be to impose an increasing fee per SWU for use of the enrichment plants above a certain level of production, so that USEC would have to pay more to produce SWUs that would otherwise replace Russian SWUs. Such a fee would also correct the artificial incentives that lead USEC to underfeed its enrichment plants and thus accumulate more uranium. If this cannot be done, the United States should itself (through DOE, for instance) replace USEC as executive agent for the HEU deal, taking over direct relations with Russia and reselling Russian SWUs to the highest bidders. If politically necessary, USEC might be given a right of first refusal to purchase the Russian SWUs.

Alternatively, while one must always be wary of institutional invention, creating a government owned corporation that could take on nuclear security tasks on a multi year basis, without the constraints of annual budget cycles and with a certain amount of commercial intelligence and flexibility, offers a number of advantages. Indeed, USEC was not a bad idea in principle; it was largely the pursuit of privatization and inadequate supervision that led to problems. The creation of a USEC II, for example, would provide the United States with a vehicle with which to bargain with both Russia and commercial parties to achieve the most efficient implementation of the HEU deal, including the ability to enter into long term commercial agreements that are impossible for government agencies. Such a government-owned corporation could also take on other post-Cold War tasks, including those relating to plutonium disposition, securing (including by direct purchase) smaller quantities of HEU and plutonium at diverse sites across the former Soviet Union, and other nuclear security matters that require sustained attention and funding.


NOTES

1. Author's meeting with Soviet Minister of Atomic Energy Viktor Mikhailov, October 18, 1991; Thomas L. Neff, "A Grand Uranium Bargain," The New York Times, October 24, 1991, and author's subsequent meetings in Washington and Moscow in 1991 and 1992.

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2. The USEC Privatization Act (Public Law 104-134) treatment of uranium reflected a delicate compromise between the interests of USEC, the domestic uranium mining industry, and the HEU deal. The legislation imposes a 4-million-pound annual limit on the sale of uranium transferred under the act to USEC. However, Congress was not aware of other transfers made by DOE to USEC, sales of which USEC contends are not limited by the act. U.S. uranium producers have brought legal action against DOE, contending that the other transfers were illegal.

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3. The SEC "S-1" filing is available at http://www.sec.gov or from Morgan Stanley Dean Witter at (212)761-4000.

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4. Treasury Order Number 103-04, Federal Register, June 30, 1998, pp. 35644-35645.

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5. By using additional electric power, USEC can produce LEU using less uranium than its utility customers actually deliver, keeping the remainder. Underfeeding is commercially feasible for USEC because DOE resells its below-market-value electric power supplies to USEC at cost.

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6.Nuclear Fuel, Vol. 23, No. 14, July 13, 1998, p. 1.

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7. "The Uranium Market Outlook," Quarterly Market Report, Uranium Exchange Company, July 1998; and U.S. Energy Information Administration, unpublished analyses, July to September 1998.

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8. The original contract negotiated by DOE listed prices of $28.50 per kilogram of uranium and $82.10 per SWU, or $780 per kilogram LEU (enriched to 4.4 percent U-235). The current market price for uranium is about $25 per kilogram, while the value if purchased and held for later resale is about $15 per kilogram due to substantial holding costs.

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9. The text of the report was obtained unofficially and published in Nuclear Fuel, Vol. 23, No. 20, October 5, 1998, p. 6.

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10. "Protocol of Meetings Between MINATOM, Techsnabexport and USEC in Moscow," July 8-11, 1996.

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11. Thomas L. Neff, "The U.S.-Russia HEU Deal: Strategic Realities," presentation to the Nuclear Energy Institute Forum, July 29, 1998.

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12. Under the April 28, 1997 memorandum of agreement between the U.S. government and USEC, the United States would only be able to detect actions, like those taken in 1996 by USEC to limit purchases of HEU, if USEC chose to report them.

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Thomas L. Neff is a senior member of the Center for International Studies at the Massachusetts Institute of Technology in Cambridge.

Just before their end of summit press conference on September 2, Russian President Boris Yeltsin informed President Bill Clinton that he was going to announce the end of the historic "HEU deal" signed by the two countries in 1993.

Putting National Security First

August/September 1998

By Spurgeon M. Keeny, Jr.

The U.S. agreement to purchase 500 tons of highly enriched uranium (HEU) from dismantled Russian nuclear weapons over 20 years stands out as one of the most important and innovative initiatives of the post-Cold War world. The deal, initiated by President Bush and signed by President Clinton in 1993, appeared to be the paragon of a mutually advantageous arrangement to reduce nuclear dangers. Yet, after five years of troubled implementation, the deal remains on shaky ground. And with the July privatization of the U.S. Enrichment Corporation (USEC), the future of the agreement is in serious jeopardy.

On its face, the HEU deal appears almost too good to be true—a clear win-win proposition for both parties and the international community. The U.S. purchase would permanently eliminate enough fissile material to make more than 20,000 nuclear weapons. The estimated price tag of $12 billion would provide Russia with desperately needed cash in return for material it does not need; and the United States would receive $12 billion worth of fuel for nuclear power reactors. Moreover, the money would go directly to the Russian nuclear establishment, thereby helping prevent the deterioration of the institution responsible for the security and safety of Russian nuclear assets and requiring increased transparency in its operations. To make certain that the HEU can never again be used for weapons, Russia mixes HEU with natural uranium to produce low-enriched uranium (LEU) suitable for use in nuclear power reactors but not weapons. Transparency procedures verify that the LEU shipped to the United States actually comes from HEU.

This remarkable deal nearly collapsed at the September summit when President Yeltsin threatened Russian withdrawal, charging U.S. non-performance of its obligations. How could this deal possibly end so ignominiously? The answer lies in the inability of the U.S. and Russian bureaucracies to focus on true national priorities. While insisting on a "budget neutral" purchase formula, the United States has combined very generous subsidies to USEC with protectionist "anti-dumping" laws, which result in a complex artificial pricing policy (separating the cost of enrichment from the cost of the contained uranium). Together, these provisions make the sale of LEU on equitable terms extremely difficult. Russia complicated the process by placing a value on the uranium component of its LEU out of line with world prices, which continue to fall due to abundant supplies, lack of demand and U.S. manipulation of the market.

The United States unwisely assigned the negotiation and implementation of the deal to the government-owned, but highly independent, U.S. Enrichment Corporation, which was finally privatized in July, putting it completely outside the control of the U.S. government. While part of the government, USEC arranged ridiculously low rent for government-built enrichment facilities powered by highly subsidized electricity and acquired at no cost large stocks of uranium, which allow it to undersell the already depressed uranium market. After privatization USEC retained its subsidies, but its sole objective is to maximize the return to its new stockholders. In this economic environment, USEC has a strong incentive to see the HEU deal fail since honoring the agreement will substantially reduce its profit margin.

In a last minute effort to save the deal, $325 million was included in the 1999 Omnibus Appropriations Bill at Senator Pete Domenici's initiative to pay Russia for the uranium content of LEU delivered to USEC during the past two years. But release of these funds is conditioned on the success of an extremely complex arrangement whereby Russia must negotiate long-term purchase contracts with companies for uranium Russia holds title to at USEC (equivalent to the uranium content of the Russian LEU). Russia will find it difficult, if not impossible, to obtain what it considers fair prices since buyers know USEC can undersell Russia from its large stockpile of uranium. Nevertheless, Russia may settle for whatever it can get in order to obtain the desperately needed $325 million immediately and to continue the overall deal, which in enrichment charges alone will be worth some $500 million annually. This action will at best kick the problem down the road a few years since USEC, which by virtue of its lavish U.S. government subsidies can enrich customers' uranium for much less than the agreed price for Russian enrichment services, will undoubtedly try to cut payments to Russia for the enrichment component of the LEU price.

The time has come for President Clinton to cut this economic Gordian knot and direct his administration to find a solution that puts U.S. security ahead of corporate profits in making good on this unprecedented deal. We cannot afford to miss this opportunity to eliminate forever enough fissile material to make as many nuclear weapons as are today deployed in the entire world.

Putting National Security First

Moscow Summit Brings Two Minor Arms Control Agreements

IN A SUMMIT dominated by other issues, including the Russian financial crisis and regional security issues such as Kosovo and Iraq, Presidents Bill Clinton and Boris Yeltsin signed two minor arms control-related agreements during their September 1–2 meeting in Moscow. The agreements concerned the sharing of early-warning information and the disposition of plutonium no longer required for military purposes. Other arms control and non-proliferation issues, such as Russian ratification of START II, were discussed, but without major breakthroughs.

The "Joint Statement on the Exchange of Information on Missile Launches and Early Warning" has two main components. First, the United States and Russia will share, on a "continuous" basis, early-warning information on the launches of ballistic missiles and space-launch vehicles by any nation, a measure that goes beyond previous information-sharing agreements. (North Korea's August 31 test of the Taepo Dong-1 "is exactly the kind of information that we would have passed on to the Russians" had this agreement been in effect, explained Robert Bell, special assistant to the president for national security affairs, in a September 1 White House briefing.) Each side will be responsible for processing its own early-warning data, retrieved from launch-detection satellites and ground-based radars, at its national center before providing it to the other party. In addition, Yeltsin announced in his September 2 press conference with Clinton that a joint early-warning center, the first of its kind, will be established on Russian territory. Many details of the agreement must be worked out in the months ahead, however, especially with respect to the scope of the data to be shared.

Second, the United States and Russia agreed to establish a multilateral pre-launch notification regime for ballistic missiles and space-launch vehicles. In this way, any state that chooses to participate could provide advance notification of a missile launch.

The joint statement aims to bolster the reliability of Russia's early-warning system. In his September 1 briefing, Bell said the joint statement "is especially relevant at a time when Russia's early-warning system is under stress from budget difficulties, systems failures and the closure of early-warning radars on the soil of nations outside Russia." Despite these concerns, however, the U.S. government remains confident that there is little chance of an accidental Russian nuclear launch. Ted Warner, assistant secretary of defense for strategy and threat reduction, said at the September 1 briefing that there are not "significant dangers" of an accidental launch today and that the joint statement will reduce this small risk even further.

Washington and Moscow have been sharing information on missile launches and early warning for nearly three decades. Under the 1971 "Accidents Measures" agreement, the United States and Soviet Union agreed to provide each other with advance notification of any planned missile launches that "will extend beyond its national territory in the direction of the other Party." In addition, both sides were required to notify each other immediately if their early-warning systems detected "unidentified objects," though this provision was implemented only on a case-by-case basis. The 1971 agreement was expanded in 1988, when the United States and Soviet Union agreed to provide advance notification of any launch of an ICBM or submarine-launched ballistic missile (SLBM) by either side. At their 1995 and 1997 summit meetings, Clinton and Yeltsin also agreed to share early-warning information related to theater missile defense systems.

Under the "Joint Statement of Principles for Management and Disposition of Plutonium Designated as No Longer Required for Defense Purposes," the latest of several plutonium-management agreements between the two countries, the United States and Russia declared their intention to remove approximately 50 metric tons of plutonium each from their nuclear weapons programs so that the materials can never again be used to fabricate nuclear devices. According to Gary Samore, senior director for non-proliferation at the National Security Council, this amount represents approximately 25 percent of Russia's total plutonium stockpile and as much as 50 percent of the U.S. stockpile. The joint statement specifies that the plutonium must either be consumed as fuel in nuclear power reactors, or immobilized in glass or ceramic together with high-level radioactive waste.

Details of the plutonium agreement, such as transparency and verification measures, must be finalized. Also, the financial arrangements to implement the agreement remain to be made. In a September 1 White House briefing, Samore estimated that the agreement, which is expected to take at least five years to implement, is likely to cost hundreds of millions of dollars in the United States and Russia—a price tag that Moscow can ill afford at this time. (Financial issues have plagued a related agreement on the disposition of highly enriched uranium removed from dismantled Russian nuclear weapons. See story.) Nevertheless, the two governments hope to complete negotiations on the agreement by the end of the year.

CD Convenes Committee to Work on Fissile Cutoff

THE UN CONFERENCE on Disarmament (CD) agreed on August 11 to start talks on banning the production of fissile material for nuclear weapons purposes. Israel, the last holdout among the 61 member-states, made clear that although it did not object to beginning negotiations, it did have "fundamental problems" with a cutoff treaty. Other members, led by Pakistan and Egypt, called for inclusion of fissile stockpiles under the treaty, a view not shared by the five nuclear-weapon states, India and Israel.

Conference members agreed to base the talks on the March 1995 "Shannon" mandate and its accompanying report, which permitted states to raise the issue of past fissile material production. Despite reaching consensus on the Shannon mandate in 1995, the CD had proved unable to start cutoff talks because members of the non-aligned movement, led by India, linked work on a cutoff treaty to negotiations on a timebound framework for nuclear disarmament, a condition unacceptable to the nuclear-weapon states. India dropped the linkage in May following its nuclear tests and Pakistan, another principal obstacle, signed on to the talks in July. Israel was not a conference member in 1995 and thus had not consented to the Shannon mandate.

In remarks to the Israeli cabinet on August 11, Prime Minister Benjamin Netanyahu said President Clinton had asked Israel not to block establishment of the ad hoc committee. Netanyahu told the cabinet that convening the committee does not "indicate that we [Israel] are taking a position on the treaty and its contents" and that Jerusalem would voice its concerns to Washington. Israel is concerned that a cutoff treaty with an intrusive inspection regime of its Dimona reactor could remove the ambiguity surrounding the Israeli nuclear program.

India, voicing a view shared by the nuclear-weapon states, emphasized on August 11 that the purpose of the treaty is to ban future production. Washington, for its part, envisions a treaty limited to banning future production, verification measures focusing on newly produced fissile material and uranium enrichment and plutonium reprocessing facilities, routine inspections and some type of challenge or non-routine inspections.

However, Pakistani CD Ambassador Munir Akram, speaking on August 11, said a "vast majority" of conference members want a treaty that also addresses stockpiles. Akram said that Pakistan could not "agree to freeze inequality" vis-a-vis India by endorsing a treaty that only halted future production. New Delhi is estimated to possess enough fissile material to make two to three times as many nuclear weapons as Pakistan.

Syria claimed that a treaty not accounting for past production would be "discriminatory," while Iran expressed concern that leaving out stockpiles would legitimize their possession. In general, most non-aligned states agree with Egypt that a treaty would only be effective if it included stockpiles. Otherwise, they claim, the treaty would merely be another non-proliferation mechanism that has no "real disarmament value" since the five declared nuclear-weapon states have already reportedly stopped production of fissile material for weapons purposes.

Members could not agree on a chairman for the committee until August 20, thereby limiting the committee to two meetings before the negotiating mandate expired on September 9, the close of the 1998 negotiating session. In order to reopen negotiations next year, the conference will need to reach consensus again on forming the committee and appointing a chairman.

 

Other CD Business

Despite earlier promising signs, Australian Ambassador John Campbell, the special coordinator on anti-personnel landmines (APLs), reported to the CD on August 27 that the non-aligned states could not reach consensus to negotiate an APL transfer ban. He recommended a special rapporteur be appointed next year to win the necessary consensus to start talks.

Ambassador Li Changhe of China pressed the conference on August 13 to establish an ad hoc committee for the prevention of an arms race in outer space. Calling it an "urgent issue," he charged that the Anti-Ballistic Missile (ABM) Treaty has been "seriously weakened through…re-interpretation" and cited U.S. programs, including theater missile defense systems and the Mid-Infrared Advanced Chemical Laser (MIRACL), as evidence that weapon systems could appear in space in the near future. The United States does not support establishing an ad hoc committee, claiming that there is no arms race in outer space.

At the last plenary meeting of the 1998 session on September 8, the application of Ireland, Malaysia, Kazakhstan, Tunisia and Ecuador for CD membership was blocked. According to Rebecca Johnson of the Acronym Institute, Iran vetoed the admission of these states in order to punish Ireland for its criticisms of Iranian human rights policies. Members expect the conference to revisit the issue of new members at the start of next year's session, which will be divided into three parts: January 18–March 26; May 10–June 25 and July 26–September 8.

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