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Nuclear News - 11/19/99
RANSAC Nuclear News, 19 November 1999


A.  HEU

    1. USEC May Quit Processing Russian Uranium, Washington Post(11/19/99)
    2. Position Of U.S. Side To Uranium Deal Not So Bad - RussianMinister, Interfax (11/19/99)
B.  Russia – Iran
    1. IN BRIEF: Iranian Nuclear Talks, Associated Press(11/19/99)
C.  DOE
    1. Contractors Eyed in Leaks to China, L.A. Times (11/19/99)
D.  U.S. – Russia General
    1. Russian Arms Researcher Charged With Spying for U.S.,Washington Post (11/18/99)

A. HEU

1.
USEC May Quit Processing Russian Uranium
        Martha M. Hamilton
        Washington Post
        November 19, 1999
        (for personal use only)

USEC Inc., a formerly government-operated uranium-processing companythat was sold to investors last year, has told the Clinton administrationand members of Congress that it may quit its role as the government's executiveagent in a nuclear nonproliferation deal with Russia unless it gets assurancesof federal financial aid.

But the administration has responded to this apparent threat by negotiatingwith potential USEC competitors to take over the job if the company walks.Moreover, lawmakers from both parties are discussing whether to revokeUSEC's protection until mid-2001 from a takeover, a key part of the legislationthat privatized USEC.

"If USEC threatens to bail out on the uranium deal, we'll find otheravenues," Energy Secretary Bill Richardson said yesterday in a telephoneinterview from Turkey. "That's not a threat that will go very far withme."

According to another senior administration official, negotiations areunderway with several firms that might be interested in taking over theobligation if USEC terminates.

What amounts to a high-stakes game of poker involving the administration,Congress and the Bethesda-based company emerged out of several days ofintense behind-the-scenes bargaining as USEC sought help for its financialproblems in last-minute budget negotiations.

USEC had been seeking as much as $200 million in relief, arguing thata deal in which it buys what was formerly weapons-grade uranium from Russiais causing losses for the company and its shareholders. So far, however,the administration has offered only approximately $40 million in aid, whichwould be delivered by having the federal government assume liability foruranium waste products. Nothing was included in the budget for USEC.

USEC spokesman Charles Yulish said the company has not used the possibilityof resigning as the executive agent in the Russian deal as a threat. "Whatwe have said is that the company cannot continue to subsidize the U.S.government," he said. "I want to be clear that we have not and will notthreaten the U.S. government. We have not and would not do that."

But USEC's board will consider whether the company should resign asthe executive agent when it meets Wednesday, Yulish said.

USEC, once under the umbrella of the Department of Energy, became theexecutive agent as part of a historic agreement between the United Statesand Russia to help rid the world of nuclear weapons. USEC's role was createdin a 1993 accord designed to convert highly enriched uranium from dismantledSoviet nuclear warheads into low-enriched uranium to be used as fuel innuclear power plants. Under that accord the equivalent of more than 3,000Russian nuclear warheads have been converted into fuel.

The five-year agreement requires USEC to pay the Russians $88 per unitof processing, which the company says it now sells at the market priceof $80. Hence, USEC estimates it will lose $200 million to $300 millionunder the two years remaining in the contract. Even so, administrationofficials say, the contract may still be valuable to another company ifUSEC drops out.

Under the contract, USEC may resign as executive agent. But the contractrequires USEC to give 30 days' notice and then to continue as executiveagent for the balance of the year after that 30 days expires, plus anotheryear. It is those terms that make Dec. 1 a key date. If the company wereto give notice after that, it would need to continue until the end of 2001rather than 2000.

In addition to saying that it might resign as executive agent, USEChas also raised the possibility of laying off workers at its uranium-processingplants in Paducah, Ky., and Portsmouth, Ohio. The company has said it maylay off "several hundred" workers to help reduce its costs.

Richardson said USEC must keep both plants open and operating at currentlevels if it hopes to win federal financial backing. That position alsohas been pushed by Rep. Ted Strickland (D-Ohio), Rep. Edward Whitfield(R-Ky.) and the Paper, Allied-Industrial, Chemical & Energy WorkersInternational Union, which represents the workers at the plants.

Strickland said that he believes that USEC won't give up its executiveagent status because he believes it can't meet its long-term contractualobligations to provide fuel to utilities without at least a portion ofthe uranium from Russia.

"I don't have a lot of sympathy for USEC," Strickland said, noting thatthe company knew what it was getting into when it was privatized. He alsonoted that the company has spent about $100 million buying back its stockin order to improve per-share prices and is paying approximately $100 millionin dividends to shareholders.

In fact, USEC's lobbying appears likely to create problems for the company.House Commerce Committee Chairman Thomas J. Bliley Jr. (R-Va.) wrote NationalSecurity Adviser Samuel R. "Sandy" Berger earlier this week, raising questionsabout the manner in which the company was privatized and subsequent oversightand asking for more information. He also wrote House Speaker J. DennisHastert (R-Ill.), urging that no last-minute aid be provided, saying thathe wants to explore the circumstances surrounding USEC's current situationnext year.

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2.
Position Of U.S. Side To Uranium Deal Not So Bad - Russian Minister
        Interfax
        November 19, 1999
        (for personal use only)

MOSCOW.  Nov 19 (Interfax) - The financial position of  the U.S. Enrichment Corp. selling Russian low enriched uranium to Americanpower plants  under  a  $12 billion contract is not as bad as  it  has  been reported lately, Russian Atomic EnergyMinister Yevgeny Adamov  told  a Thursday news conference inMoscow.
 
He said the claims that the company is on the verge of bankruptcy arenot quite true.

Experts  link the future of the Russian-American uranium contractwith the performance of Enrichment.

The  company appealed to the U.S. government for $200 million in subsidies  to cover losses. Meanwhile, Adamov called it an attempt  to feign poverty.

He  said he met the company leadership two weeks ago. He said thecurrent  fall  in  uranium  prices caused among other  things  by  the implementation of the Russian-U.S.contract is worsening the  financial indicators of Enrichment andthe company is not collecting the receipts it had counted on.

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B. Russia – Iran

1.
IN BRIEF: Iranian Nuclear Talks
        Associated Press
        November 19, 1999
        (for personal use only)

MOSCOW -- Iranian and Russian officials met for talks on selling fuelrods to Iran for a nuclear power plant starting in 2004, Interfax reported.

The United States has sternly objected to the Russian-designed Bushehrnuclear power plant project, saying Russia is transferring know-how andmaterials necessary for building an atomic bomb to a state suspected ofsponsoring terrorism.

Russia has said the $800 million deal is strictly business, and thatthe country has no interest in providing weapons technology to Tehran.

Iranian vice president for atomic energy, Qolam Reza Aqazadeh-Khoi,met Wednesday with the president of TVEL, a Russian company that dealsin fuel rods for use in Russian-made nuclear reactors.

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C. DOE

1.
Contractors Eyed in Leaks to China
        L.A. Times
        November 19, 1999
        (for personal use only)

WASHINGTON--New evidence widens the FBI's investigation into spyingallegations and suggests China may have stolen information about America'smost advanced nuclear warhead from one of the weapon's contractors or fromthe Navy, The Washington Post reported today.
 
The probe had focused almost entirely on the Los Alamos National Laboratoryin New Mexico and Wen Ho Lee, a staff scientist there.
 
But errors found in a Chinese intelligence document describing theW/88 warhead have been traced to a defense installation and contractorsthat assemble nuclear weapons, sources told the Post.
 
An FBI analysis now supports the position of Energy Department officialsand Los Alamos scientists that China could have obtained the nuclear secretsat any of dozens of locations, the sources said.
 
The information most likely came from one of the weapon's assemblypoints, an unidentified source told the Post. These sites include SandiaNational Laboratories, which builds warhead prototypes; Lockheed MartinCorp., which mounts the warheads on missiles, and the Navy, which supervisesthe process.
 
A Lockheed Martin spokesman told the newspaper his company "is cooperatingwith the government in its investigation and is not under investigationnor implicated in any wrongdoing."
 
Mark Holscher, Lee's attorney, told the Post the new evidence "is furtherproof that the focus of the investigation on Dr. Lee was inappropriateand that to continue to prosecute him for lesser charges is unfair."

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D. U.S. – Russia General

1.
Russian Arms Researcher Charged With Spying for U.S.
        David Hoffman
        Washington Post
        November 18, 1999
        (for personal use only)

MOSCOW, Nov. 17—Russian security services have charged an arms controlresearcher with spying for the United States, sources said today.

Igor Sutyagin, chief of the section on military technological researchat the Institute for the Study of the United States and Canada, was detainedOct. 27 by the Federal Security Service in Kaluga, south of Moscow, wherehe lives.

At the time, sources said the investigation was looking into leaks ofclassified information. But on Nov. 5, Sutyagin was formally accused ofespionage, the sources said. Details of the charges are not known.

Paul Podvig, editor of a book on Russia's nuclear forces to which Sutyagincontributed a chapter, said, "I am 100 percent certain that Igor didn'tdo anything wrong."

According to the sources, the security services searched Podvig's officefor a second time recently and seized between 500 and 600 copies of thebook, "Russian Strategic Nuclear Forces," which was published last year.

Sergei Rogov, director of the USA-Canada Institute said there was noaccess to secret information at the institute.

"This is a very unpleasant situation," Rogov said. "Unfortunately, previouslyour institute was a couple of times in the same situation, and a coupleof employees of the institute admitted that they were sending informationback to the CIA, and they are in the United States now, with a formal statusas someone who suffered because of cooperation with the CIA.

"It's very unfortunate that this institute, against our will, was involvedagain in this kind of game. Naturally, only the court can decide whetherthe accusations against our researcher are true or not. Only at the trialcan they find out if he is guilty or not.

"Right now he is under investigation and it doesn't make our work easier,because dealing with controversial subjects like arms control, it's easyto be accused of selling out, especially when you think about an agreementwhen both sides have to make concessions, which originally may be perceivedas impossible," Rogov said.

Joshua Handler, a Princeton University PhD student who was a guest atthe USA-Canada Institute, was questioned in the case, but no accusationshave been made against him. He recently left Russia.

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