The Multinational Monitor



Nuclear Enrichment's Proliferation

The U.S. government, which will ultimately spend an estimated $3.9 trillion for a 50-year nuclear weapons program, now may allow penny pinching to dash a fleeting opportunity to sweep a huge arsenal of nuclear weapons from the world's streets.

Then-President George Bush proposed a rare win-win deal for the United States, Russia and the world in 1992. Under this proposal, the United States would buy 500 tons of weapons-grade highly enriched uranium (HEU) from Russia over 20 years, decapitating a huge surplus of dangerous warheads. The U.S. Enrichment Corp. (USEC), a company owned by the U.S. government, would blend this Russian HEU with low-enriched uranium to produce fuel that can be sold to nuclear utilities, recouping most or even all of the transaction costs.

After half a century of disaster-inviting nuclear policies - a battery of indefensible human radiation experiments, the destruction of two Japanese cities, a budget-busting and terror-inducing arms race, the subsidization of an unsafe and unaffordable nuclear power industry and the myopic accumulation of highly radioactive waste that poses a threat for millions of years - the United States embraced a decent idea.

Although President Clinton formalized the HEU deal with the Russians in January 1994, the United States just placed its initial, modest HEU order with Moscow this year. Complications have arisen, in part, because of a 1991 U.S.-Soviet anti-dumping trade dispute over uranium which led to a U.S. suspension agreement that effectively bans the sale of Russian uranium - including the natural uranium found in Russian HEU - in the U.S. market. But the U.S. Commerce Department has the authority to alter this uranium suspension agreement to accommodate vital U.S. security interests, such as those that the HEU deal would further.

A greater problem is that this first HEU order is being held hostage to price haggling between the United States and Russia, haggling that could jettison the whole HEU deal. USEC, which has been given complete control over HEU purchasing from Russia, is largely responsible for the bottleneck. The company is in the process of being privatized and its executives are acting more like profit maximizers (trying to acquire Russian HEU on the cheap) than minimizers of nuclear proliferation risk, who would be willing to invest more money in an opportunity to remove this volatile fuel from the world weapons market.

"For understandable commercial reasons, USEC has gone to great lengths to retain control over the HEU deal, but the problem with the HEU deal will become more acute in 1996, when the current [bilateral] price agreement expires and USEC has been fully privatized," observes Richard Falkenrath of Harvard University's Center for Science and International Affairs in a July 1995 working paper. "Unless there is a change in the current U.S. procedure for buying Russian HEU before then, the HEU deal is likely to collapse in 1996 when USEC and the Russian government are unable to agree on the price to be paid for further shipments of Russian HEU."

USEC has a clear profit motive in playing nuclear brinkmanship with Russia. Its game is to try to pay as little as possible for the HEU in order to maximize the profit it receives from reselling the reprocessed fuel to nuclear utilities. As it moves toward privatization, USEC has been jockeying to enure that competing uranium enrichment companies continue to be barred from bidding for Russian weapons fuel.

With USEC in transition from a government to a private corporation, the HEU deal is structured to guarantee the worst of both worlds. On the one hand, USEC executives already resemble politically unaccountable private executives who would submit the broad public interest in nonproliferation to their own bottom line. On the other hand, the federal government foolishly set up USEC as a Russian HEU monopsony - no other firm is permitted to bid up the price of this dangerous commodity.

With the privatization hysteria that is sweeping Washington and much of the world, it is important to consider the many social and economic costs of privatization before one government asset and service after another gets shoved onto the auction block. But HEU is potentially many more times more powerful and dangerous than the fertilizer that destroyed a federal building in Oklahoma in April 1995. There is an overriding public interest in seeing that the supply and proliferation of this weapons-grade material is minimized. The porous proliferation of conventional weapons produced by government-regulated corporations [see "Exporting Repression," Multinational Monitor, January/February 1995], combined with USEC's recent price haggling with the Russians, does not suggest that a privatized USEC will enhance global security, which should be the overriding concern with HEU. The USEC privatization should not go forward.

Moreover, even if USEC was aggressively pursuing its Russian HEU commitments, these commitments are inadequate. As Falkenrath concludes, the U.S. government should "resolve to purchase as much Russian HEU as possible, as quickly as possible."

# END #