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RANSAC Nuclear News, 22 June 2000

A. Highly Enriched Uranium (HEU)

    1. These Are Hard Times for Uranium Enrichment, Matthew L.Wald, New York Times (6/20/00)
    2. Decision On Piketon Plant Could Be Made Wednesday, JonathanRiskind, Columbus Dispatch (6/20/00)
    3. USEC To Cease Uranium Enrichment At The Portsmouth, OhioFacility In June 2001, USEC (6/21/00)
    4. USEC Plant Closure Lowers Costs, Improves Capacity Utilization,USEC (6/21/00)
B. Department of Energy (DOE)
    1. Richardson Says College At Fault In Loss Of Drives, JoyceHoward Price, Washington Times (6/19/00)
    2. Energy Chief Testifies FBI Has Found No Evidence Of EspionageAt Los Alamos, CNN (6/21/00)
C. Material Protection, Control, and Accounting (MPC&A)
    1. Ukrainian Experts Train On TD Software, Argonne NationalLaboratory (5/30/00)
D. U.S. – Russia General
    1. US-Russian Fund to Invest Up to $100 Million in 12 Months,Bloomberg (6/19/00)
    2. Duma To Debate Law On Spent Nuclear Fuel Imports This Year,Itar-Tass (6/19/00)
E. ABM, Missile Defense
    1. U.S. Hopes For Missile Progress With Russia, Reuters(6/19/00)
    2. CIS Summit Supports Putin On ABM Treaty, RFE/RL (6/20/00)
    3. Yakovlev Clarifies 'Assymmetric Response' To U.S. ABM Plan,RFE/RL (6/22/00)
    4. Moscow Concerned About Radar Station In Greenland, RFE/RL(6/22/00)
F. Russian Nuclear Forces
    1. Lights Out For Topol-M?, RFE/RL (6/22/00)
G. Nuclear Waste
    1. French-Russian Liability Agreement Signed, Thomas Nilsen,Bellona (6/21/00)

A. Highly Enriched Uranium (HEU)

These Are Hard Times for Uranium Enrichment
        Matthew L. Wald
        New York Times
        June 20, 2000
        (for personal use only)

BETHESDA, Md., June 19 -- Ever since Richard Nixon proposed it in 1968,policy makers have talked about having the federal government quit thebusiness of enriching uranium for nuclear power plants. It took decades,but the Clinton administration finally completed the job two years ago,with Vice President Al Gore claiming it as a victory for reinventing government.It may, however, have come at the worst possible time.

The government never ran the enterprise particularly well. But sinceprivatization, the company has done much worse.

The price of shares in the United States Enrichment Corporation, asthe new company is known, closed today at $4.6875, down from $17.50 soonafter the initial public offering in July 1998. Orders are down, costsper unit are up, and the price of USEC's only product is declining.

Now the issue is at a turning point. The corporation's board is meetinghere on Wednesday to discuss closing one of its two sprawling plants --in Portsmouth, Ohio, or Paducah, Ky. -- in an effort to prevent the companyfrom sliding into bankruptcy. This afternoon, the company released a copyof its formal notification to the Treasury that its bonds had reached junkrating, which, under the legislation that created it, allows it to closea plant.

There is intense jockeying by each plant to be the survivor, but outsidersbelieve the survivor could soon close, too, dragging down with it the otherparts in the fuel production chain from uranium mining, already at a lowebb, to the fabrication of nuclear fuel. Outside experts say that to maintainits market share, USEC has been signing contracts lately for less thanits cost of production. As a government operation, that is costly; as aprivate enterprise it is a recipe for disaster.

Even United States Enrichment's former parent, the Energy Department,acknowledges some apprehension. "We are not convinced they are drivingthemselves into bankruptcy," said T. J. Glauthier, the deputy energy secretary,"but the management challenge is great."

Several members of Congress, meanwhile, are talking about reversingthe whole process by renationalizing the company.

"I don't think there's a precedent for this," said Representative TedStrickland, Democrat of Ohio, whose district includes the Portsmouth plant.But prospects for the company are so poor that various parties are raisingthe specter that the United States could become dependent on imports tofuel the nuclear reactors that provide 20 percent of the nation's electricalpower. Whether there is enough support to bail out the company or repurchaseit remains to be seen, but the law under which the government sold thefactories calls for maintaining a "viable" domestic industry.

Uranium enrichment is an arcane business that consists of laboriouslysorting through two different types of uranium to raise the proportionof the more valuable kind, U-235, from the 0.7 percent that exists in natureto the 5 percent or so needed for power reactors or to the highly concentratedstate used in weapons.

The market price of a unit of enrichment has fallen in recent yearsfrom more than $100 to about $80 now. The United States, using technologydeveloped in World War II to make bombs, is the highest-cost producer.By contrast, the Russians, using newer technology, can make money sellingsuch enrichment units at $30 or above, experts say.

One possibility is for United States Enrichment to buy a share in aEuropean producer, Urenco, which is now owned by the governments of Britain,Germany and the Netherlands; the stakes held by the Germans and the Dutchare on the market, and Urenco has newer technology, which uses centrifuges.

The central problem facing USEC is that the international industry isset up to supply enough uranium enrichment for all the reactors that wereplanned 30 years ago, though many were never built. At the same time, theneed for weapons-grade uranium has been reversed; work done years ago tomake bomb fuel is now used for reactor fuel, reducing the need for thefactories.

"You've got an industry that's very well set up for the 1970's," saidWilliam H. Timbers Jr., the president and chief executive of United StatesEnrichment. "It has to restructure."

And that is just what he insists it is prepared to do. The company,he said in an interview, has the "ability to take some tough, difficultdecisions."

Estimates vary, but world demand for nuclear fuel is around 36 millionunits a year, while the supply is 42 million units. And since uranium haslimited uses, price declines do not stimulate demand.

"It's an inelastic market," said Richard D. Miller, a consultant forthe union that represents most workers at the two plants. No matter howfar the price falls, he said, "we're not going to put it on our cereal."

But Mr. Miller and others say that USECitself has brought on some ofits own problems. Under the terms of its privatization, it was supposedto keep the two plants open until 2004. But it is allowed to close oneearlier if its bonds drop below investment grade; some critics say thecompany engineered just that, through a stock buyback that created a lessfavorable debt-to-equity ratio.

Some problems were clearly inherited.

In 1993, Mr. Gore and Boris N. Yeltsin, then president of Russia, strucka deal for the Russians to take high-enriched uranium from bombs and diluteit for use in American power reactors.

That deal has had its ups and downs, in part, critics say, because UnitedStates Enrichment, which inherited the deal when it was privatized, isnot eager to see Russian uranium displace so much of its own production.Company officials deny this, but in any case, the Russian deal representsabout 90 million enrichment units over 20 years, or enough to meet abouthalf the domestic demand. So while beating swords into plowshares may makesense as a national policy, it is tough on the companies that make plowshares.Some people think the Russian deal was USEC's undoing.

"Why does this industry and these workers have to pay the whole costof peace?," asked Daniel J. Minter, president of the union local at Portsmouth,which, after recent layoffs, represents just under 1,000 workers. "Youcouldn't have picked anything more difficult to privatize. The Pentagonwould have been easier."

Last year United States Enrichment's managers asked the Energy Departmentfor $200 million to help them over their troubles but failed to convinceofficials there that the Russian deal had caused any unexpected difficulties.Paying executives salaries commensurate with those of private industryis also a sore point.

The company began its life, meanwhile, with a huge stock of its rawmaterial, unenriched uranium hexafluoride, a kind of dowry from the government,and has been selling it, to pay dividends and other costs. Partly as aresult, the price of a pound of uranium is down sharply, forcing some minesto shut down. The nation's sole company for converting uranium ore intouranium hexafluoride, the form that USEC uses, says it is near a shutdown,too.

"The irony of this privatization," said Thomas L. Neff, a senior scientistat the Center for International Studies at M.I.T., who first conceivedthe Russian uranium deal, "is that the government set something out there,with various goodies, that did a lot of collateral damage. The governmentsubsidized an entity that's destroying everything else."
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Decision On Piketon Plant Could Be Made Wednesday
        Jonathan Riskind
        Columbus Dispatch
        June 20, 2000
        (for personal use only)

Southern Ohio uranium-enrichment workers might find out as early asWednesday that their days drawing a substantial paycheck are numbered.

And Clinton administration officials already are assessing the national-securityimpact of the bleak financial picture of USEC -- the privatized federalcorporation that runs the country's only enrichment plants in Piketon,Ohio, and Paducah, Ky.

Everyone from the 2,000 workers at the Portsmouth Gaseous DiffusionPlant to Vice President Al Gore is waiting to see what USEC does afterWednesday's board of directors meeting. Whether to close a plant -- andwhich one -- is on the agenda.

USEC sent a letter to the U.S. Treasury Department yesterday confirmingthat the company's financial condition has slid to the point that a plant-closure could be imminent.

"As a result of market and economic considerations, the board of directorsmust contemplate the termination of enrichment operations at one plant,''William Timbers, USEC president and chief operating officer, wrote.

Timbers also said USEC is "very concerned about our employees, theirfamilies and our communities in the event of a plant-closure decision.''He expressed hope that many workers could be shifted to federally fundedplant-cleanup jobs.

However, Secretary of Energy Bill Richardson sent a letter of his ownyesterday to Timbers, expressing "serious concern'' about USEC's plans.Richardson wanted to know whether USEC plans to close a plant and how itcan guarantee to protect the domestic uranium-enrichment industry.

"The domestic nuclear industry and plant employment are important issuesas is the nonproliferation benefit'' of a key Russian arms-control dealUSEC is charged with carrying out.

Gore said he's keeping tabs on the situation.

"We've been monitoring the USEC activities very closely,'' he said inan interview last week with The Dispatch.

He said he is concerned about both the workers' futures and prospectsfor the Russian arms-control deal.

Gore's effort to "reinvent'' government counted the $1.9 billion privatizationa success -- although the move began before he took office.

Gore, who shrugged off concerns about privatization two years ago, acknowledgedthat Piketon and Paducah workers already are facing 850 layoffs beginningnext month. He said the administration "has requested additional fundsfrom Congress for site cleanup and job opportunities for displaced workers.''

But Piketon workers, many of whom make more than $40,000 a year, "arejust kind of numb,'' said Herman Potter, a longtime plant employee andunion safety officer. "It's just all uncertainty.''

Count the Clinton administration among the uncertain. Less than twoyears after the July 1998 privatization of the United States EnrichmentCorp., the administration's Enrichment Oversight Commission has concludedin a report that USEC's "weakening financial health'' has "raised importantquestions concerning security'' of the nation's future supply of enricheduranium.

Throughout the Cold War, the enrichment plants produced weapons- gradeuranium for nuclear bombs. Now, they are the country's sole domestic sourcesof low-enriched uranium used as commercial nuclear power-plant fuel.

USEC promised to run both plants until at least 2005 as a conditionof privatization. But its flagging finances and sinking credit rating meanbuilt-in escape clauses can be activated, allowing closure of a plant beforethen.

The draft report, obtained by The Dispatch from the office of Rep. TedStrickland, D-Lucasville, suggests administration officials expect USECto close a plant and perhaps ask for government assistance in developingnew enrichment technology. Among the scenarios painted by the report isthat USEC might be bought and liquidated -- leaving the United States dependenton foreign companies for enriched uranium.

Officials also are concerned about USEC's ability to maintain its roleas executive agent in charge of a $12 billion, 20-year agreement betweenRussia and the United States involving the purchase of Russian enricheduranium culled from thousands of nuclear warheads.

"USEC's performance on this nonproliferation effort is critical to nationalsecurity,'' the enrichment commission report states. "And . . . USEC'scontinued viability is crucial to maintaining a stable domestic supplierof enrichment services.''

Strickland said a plant-closure announcement would intensify effortsin Congress to renationalize USEC.

Strickland also said he will ask the Treasury Department, which oversawprivatization, to seek a federal-court injunction preventing USEC frompursuing a plant-closure option. Strickland wants a court to decide whetherUSEC has met the requirements to close a plant.

The enrichment commission report says that regardless of what USEC decideson Wednesday, the administration needs to monitor closely the company'scondition.

Meanwhile, some enrichment-industry experts, who spoke on conditionof anonymity, said USEC faces a problematic decision about which plantto shut down.

For instance, it appears USEC will not be able to complete an upgradeof the Paducah plant as quickly as it had hoped. That plant currently canenrich uranium only to about half the purity needed to provide power-plantfuel, while Piketon can perform the entire process.

But at Piketon, USEC is trying to negotiate its way out of having topay for $290 million of  environmental-compliance upgrades neededat the Ohio Valley Electric Corp., which supplies Piketon's extensive powerneeds.

One potential ray of hope for Piketon's continued survival is that itis the site of an enrichment centrifuge plant started and quickly abandonedby the federal government in the 1980s as a replacement for the higher-costgaseous diffusion technology. The centrifuge process takes less electricityto produce the enriched uranium.

The process is one of the technologies USEC is considering adopting– although perhaps with government assistance.

"We are in discussions with the government about reducing the cost ofcapital to make U.S. centrifuge more economical,'' USEC spokeswoman ElizabethStuckle said.

She did not say whether adopting the centrifuge technology would makeit more likely that the Piketon plant would survive.
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USEC To Cease Uranium Enrichment At The Portsmouth, Ohio FacilityIn June 2001
        June 21, 2000
        (for personal use only)

Portsmouth Transfer and Shipping Operations to Remain Open-Company toReturn Plant to DOE June 2002--USEC to Seek Worker Transition to GovernmentSite Environmental Restoration Jobs

USEC Inc. (NYSE: USU) announced today that it will cease uranium enrichmentoperations at the Portsmouth plant in Piketon, Ohio, beginning in June2001. The Company also announced that it will seek prompt government actionto transition as many affected employees as possible to government siteenvironmental restoration jobs.

The choice to continue to operate the Company’s Paducah, Kentucky, productionplant provides long-term financial benefits, more attractive power pricearrangements, operational flexibility for power adjustments and a historyof reliable operations.

No significant layoffs are expected at the Portsmouth plant as a resultof this decision until June 2001. After enrichment ceases in June 2001,there will be several stages of workforce reduction as USEC prepares theenrichment portion of the plant to be returned to the U.S. Department ofEnergy (DOE) in June 2002. As discussions are completed for the transitionto DOE, specific information will be provided as to the phased timing ofpost-June 2001 personnel reductions. USEC leases its two enrichment facilitiesfrom the DOE.

USEC will continue to operate its transfer and shipping activities atthe Portsmouth plant for about four or five years after enrichment hasceased, until similar facilities are available at the Paducah plant. Thetransfer and shipping facility transfers USEC’s enriched uranium productinto transportation cylinders and prepares them for shipping to fuel fabricators.

"The decision to cease enrichment at one of our facilities was necessarygiven the business challenges facing the uranium enrichment industry,"said James R. Mellor, chairman of USEC’s Board of Directors. "Choosingto close the Portsmouth plant was an extremely difficult decision becauseof the impact it will have on the lives of many of our workers, their familiesand the communities surrounding the plant.

"We deeply regret having to take this action, but we clearly could notcontinue to operate two production plants," said William H. Timbers, USECpresident and chief executive officer. "We are working hard to achievea transition of employees to government site environmental restorationjobs. This will be a major challenge, and we are asking the government,our employees, the unions and the communities to work together with usto achieve this goal."

Key business factors in the decision to reduce operations to a singleproduction plant include a global overcapacity of enrichment and lowerdemand in an increasingly competitive market. "With high production costsand production at only 25 percent capacity at both plants, we must consolidateour production," said Timbers. "By increasing capacity utilization at asingle plant, USEC will reduce production costs and strengthen the competitivenessof our core business going forward."

Reaching the decision on which plant to close involved evaluating manybusiness considerations. Key factors were long-term and short-term powercosts, operational performance and reliability, design and material conditionof the plants, risks associated with meeting customer orders on time, andother factors relating to assay levels, financial results and new technologyissues.

USEC Inc. is the world’s leading supplier of enriched uranium fuel forcommercial power plants. A global energy company, USEC has its headquartersin Bethesda, Md.
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USEC Plant Closure Lowers Costs, Improves Capacity Utilization
        June 21, 2000
        (for personal use only)

– Board’s Action Saves $55 Million –
– Guidance Reflects Continued Difficult Operating Environment –

The announcement today by USEC Inc. (NYSE: USU) that it will cease uraniumenrichment at its Portsmouth production plant in June 2001 is an importantstep in the Company’s ongoing efforts to align its cost of production withlower market prices.

The financial effect of the decision by USEC’s Board of Directors willbe a reduction in fixed production costs of approximately $55 million infiscal 2002 as uranium enrichment at Portsmouth ceases. Production willcontinue at both plants until June 2001, when it is expected that the Paducahplant will have been upgraded, certified and tested to produce finishedcustomer product. Electricity, the Company’s largest production cost, isexpected to increase primarily because the previous monetization of excesspower at Portsmouth will no longer be available. Depending on levels ofSWU production, these higher power costs will partially offset the improvementin fixed costs. The Company is in negotiations for a new long-term powercontract for the Paducah plant.

After the Portsmouth facility ceases enrichment operations, the Company’scapacity utilization will rise from the 25 percent expected in the comingyear to about 50 percent of the Paducah plant’s capacity in fiscal 2002.Actual capacity utilization will depend upon customer requirements.

Ceasing operations at the Portsmouth plant will result in special chargesof $125 million in fiscal 2000. The pre-tax charges include $75 millionin asset write-offs of production equipment, leasehold improvements andother fixed assets. The charges also include severance benefits based oncurrent labor contract requirements, unamortized lease turnover and otherexit costs.

The Company’s financial outlook for fiscal years 2001 and 2002 continuesto be adversely affected by market conditions for the sale of enricheduranium. As previously reported, global overcapacity for enrichment, aggressivecompetitor pricing, unfavorable currency exchange rates and liquidationof customer SWU inventories are among the factors holding down the pricefor the Company’s enrichment services. USEC’s financial projections continueto reflect a downward trend in average SWU sale prices as historicallyhigher-priced contracts are displaced with new agreements reflecting today’slower prices.

For fiscal 2001, the Company anticipates net income in the range of$30 to $35 million reflecting lower anticipated revenue and the end ofpower monetization at Portsmouth. The lower revenue forecast includes fewerspot SWU sales, resulting in anticipated sales volume of 10.5 million SWU,or about 1 million SWU less than previously projected. Natural uraniumsales are also expected to be lower than previously projected due to thecontinued decline in uranium market prices. Looking forward, the Companyanticipates net income in fiscal 2002 to be between $45 and $50 million.The fiscal 2002 outlook depends upon the timely completion of the assayupgrade project at Paducah, including approval by the Nuclear RegulatoryCommission, an agreement for market-based pricing under the Russian HEUcontract beginning in calendar 2002, and negotiation of a new, long-termpower contract for the Paducah plant.

"Faced with a changed pricing paradigm for uranium enrichment services,USEC has aggressively taken steps to lower its production costs," saidWilliam H. Timbers, president and chief executive officer of USEC. "Giventhe global overcapacity for enrichment and the volume of HEU availablefrom dismantled nuclear weapons, reducing USEC’s production capacity isa difficult but necessary action."

This news release includes certain forward-looking information (withinthe meaning of the Private Securities Litigation Reform Act of 1995) thatinvolves risks and uncertainty, including certain assumptions regardingthe future performance of the Company. Actual results and trends may differmaterially depending upon a variety of factors, including, without limitation,market demand for the Company’s services, pricing trends in the uraniumand the enrichment markets, deliveries and costs under the Russian contract,the availability and cost of electric power, the Company’s ability to successfullyexecute its internal performance plans, the refueling cycles of the Company’scustomers, and the impact of any government regulation. Additional informationregarding the foregoing factors is contained in the Company’s filings withthe Securities and Exchange Commission.

USEC Inc. is the world’s leading supplier of enriched uranium fuel forcommercial nuclear power plants. A global energy company, USEC has it headquartersin Bethesda, Md.
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B. Department of Energy (DOE)

Richardson Says College At Fault In Loss Of Drives
        Joyce Howard Price
        Washington Times
        June 19, 2000
        (for personal use only)

Energy Secretary Bill Richardson said yesterday the disappearance ofcomputer hard drives containing highly classified nuclear weapons datashould be blamed on the University of California and the "human element."

Mr. Richardson said on NBC's "Meet the Press" "it's very clear" in thecontract the University of California has with the Department of Energythat "they're in charge of security" at the Los Alamos National Laboratoryin New Mexico.

But the "human element" has prevented the implementation of an adequatesecurity system at the lab, he said.

"I have to keep a balance between science and security. Security isa priority, but at the same time a lot of important scientific researchhas to take place and, you know, right now, I don't seem to win," he toldABC's "This Week."

Sen. Jon Kyl, Arizona Republican, said Mr. Richardson should resignbecause he alone bears the blame since he fought the creation of a newagency to oversee nuclear security.

"He chose to assume the full responsibility, to reject putting someoneelse in charge, to fight the creation of this new semiautonomous agency,and he said, 'Until we have a new undersecretary, I am the one in charge,and I accept full responsibility.'

"Having done that, accepting full responsibility is not blaming others,as you heard him do today. It is understanding that he was the one, byhis own choice, who chose to accept it, and therefore he has to bear theconsequences, and I believe he ought to step down," Mr. Kyl said on NBC.

Mr. Richardson said on ABC's "This Week" that the contract with theUniversity of California will be "re-evaluated" to determine if it is "providingadequate security at the labs." Asked if the contract might be in jeopardy,Mr. Richardson said, "You know, they're vulnerable. . . ."

Reminded that he assured Americans more than a year ago that "theirnuclear secrets are now safe at the labs," following reports of Chineseespionage, Mr. Richardson said on NBC, "I have put more security than anysecretary, I have devoted an enormous amount of time. We have massivelyupgraded security."

Mr. Richardson said what he "didn't take into account" when he madethat pledge was "that the lab culture needs more time to be changed. Ididn't take into account the human element."

The secretary said he didn't foresee the degree of resistance to extrasecurity he has encountered from scientists at the lab.

Mr. Richardson said he found it "incomprehensible" that there were noprocedures for logging people into and out of the vault where two highlyclassified hard drives disappeared.

The drives mysteriously reappeared Friday behind a copying machine inthe X division, which is the name given to the lab's most sensitive area. "What I think has happened here is that the FBI is focusing on a few individualsin the X division that made contradictory statements about where the driveswere. There's a criminal investigation going on, and what entirely couldbe the case is that one of these individuals misplaced the drives, andwhat we now have is a potential cover-up or some other factors that haveto be determined and that explains the whereabouts of these disks," Mr.Richardson told NBC.

"I believe there's been no espionage. It doesn't appear [the drives]left the X division," he said.

But others aren't so sure. Rep. Porter J. Goss, Florida Republican andchairman of the House Intelligence Committee, told NBC, "There is no evidencethat there is not espionage, and that's what concerns us very greatly."

Key senators such as Richard C. Shelby, Alabama Republican and chairmanof the Select Committee on Intelligence, and Mr. Kyl of Arizona, a memberof that panel, said Mr. Richardson's efforts to strengthen security atthe nuclear weapons labs obviously have not been enough.

Mr. Shelby told "Fox News Sunday" that security breaches at federalagencies have grown into a "big malignancy that has spread anywhere inthis administration."

"It's not just the labs. Look at the CIA: John Deutsch, the former director,thousands of pages [of secret information] put on an unclassified computer[at his home]. The State Department breached, not once, not twice. I thinkit's a culture. The American people deserve better," Mr. Shelby said.

Senate Majority Leader Trent Lott echoed that sentiment on ABC.

"It's bigger than Bill Richardson. There's a laxity in this administrationabout security," said the Mississippi Republican.

Mr. Kyl and Mr. Shelby both said they believe Mr. Richardson shouldstep down. But the energy secretary said he does not plan to walk awayfrom the current turmoil. He said President Clinton has offered him hisfull support both publicly and privately

In appearances on two talk shows yesterday, Edward Curran, directorof counterintelligence for the Department of Energy, confirmed Mr. Richardson'sclaim that many scientists have resisted his efforts to bolster security.On CNN's "Late Edition," Mr. Curran said he recommended that workers inthe lab's X division — "our most critical program" — be polygraphed.

"But over half the people in the X division signed petitions opposedto the polygraph," he said.

Mr. Shelby said he expects Mr. Richardson to be at a closed-door meetingof the Senate Intelligence Committee meeting scheduled tomorrow to discussthe Los Alamos security situation.

Mr. Richardson failed to appear for such a meeting last week. He saidyesterday he was not prepared at that time. "I now have the information.. . . I'm willing to testify before any Senate or House committee," hesaid on NBC.

He stressed that he has "an obligation" to appear at a Senate ArmedServices Committee hearing this week. That takes priority, he said, becausethat committee has jurisdiction over the  Department of Energy.
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Energy Chief Testifies FBI Has Found No Evidence Of Espionage AtLos Alamos
        June 21, 2000
        (for personal use only)

Devices contained classified nuclear data

Energy Secretary Bill Richardson, appearing before a congressional committeefor the first time since two computer drives that held nuclear secretstemporarily disappeared from the Los Alamos National Laboratory, said onWednesday that the FBI has confirmed the drives are authentic and thatthe agency has found no evidence of espionage.

"We do not know everything, but we know more about the case this morning,"Richardson told the Senate Armed Services Committee. He said a grand juryhas been convened to examine the incident.

"I will not rest till I know what happened," he said.

Richardson said the FBI is continuing its investigation and repeatedone theory that the loss and recovery of the hard drives may have simplybeen the mistake of one employee who was afraid to come forward.

The two hard drives, each smaller than a deck of playing cards, heldnuclear weapons secrets and were stored in a vault at the New Mexico lab.

They were discovered missing May 7 when two scientists wanted to makesure the drives were protected from a wildfire that threatened the lab.The lab was evacuated the next day because of the fire threat, but no onereported the drives missing until May 31, triggering the investigation.

The drives mysteriously reappeared last Friday in a room at the labthat already had been searched several times.

"The local tool rental place has a much  better idea of where theirtools are ... than  they had in the lab at Los Alamos. It  defiesyour imagination," Sen. Richard  Shelby, R-Alabama, told CNN on Tuesday.

 Shelby, who chairs the Senate Intelligence  Committee, hascalled for Richardson's  resignation.

 Unaccounted for since January?

The security issues facing Richardson include questions about the EnergyDepartment's inventory procedures.

Although the hard drives contained highly classified nuclear secrets,they left virtually no paper trail while they were missing.

After interviewing dozens of people and conducting a string of polygraphtests, investigators are stymied in trying to determine -- even in generalterms – when the two devices vanished from the highly secured vault.

It may have been as long as six months ago, government officials fear.

"My understanding is that the last, absolute inventory that was taken– that surely established where these hard drives were -- was part of theY2K survey, which would be at the beginning of the year," Rep. Porter Goss,R-Florida, told CNN on Tuesday.

Goss, chairman of the House Intelligence Committee, is a former CIAofficer who has kept in close touch with the FBI and Energy Departmentinvestigation into the disappearance -- and then reappearance -- of thetwo hard drives, which contain information about how to dismantle nuclearwarheads.

FBI analysis continues

The failure of the laboratory to require basic logout and login proceduresfor the devices is expected to bring Richardson under sharp questioning.

But Energy Department and lab officials have said no such tracking wasrequired under a relaxed policy instituted in the early 1990s for materialclassified as "secret" -- as opposed to "top secret."

The FBI was still electronically examining the two drives, which suddenlyreappeared behind a copying machine last Friday not far from the vaultwhere they were supposed to be kept. The area, where access was limitedto people with high security clearances, had been searched several times,raising the possibility someone might have misplaced and then returnedthem.

But when were they last taken from the vault and by whom?

'Conflicting statements'

Initially, Air Force Gen. Eugene Habiger, the Energy Department's newtop security officer, and Los Alamos Lab Director John Browne said in congressionaltestimony that a scientist had reported seeing the two devices in the vaulton April 7, a month before they were found missing and seven weeks beforesenior lab officials were notified.

But sources familiar with the investigation told CNN on Tuesday thatthis account has come under suspicion because of "conflicting statements"made during interviews and polygraph tests.

Another individual has told investigators he went into the vault onApril 27 and would have noticed if they had been missing then, but doesnot recall actually seeing them.

What's clear, said Goss, is that there was inadequate tracking on paperof the use of the two drives, which belonged to an emergency nuclear responseteam. Members of the team, known as NEST, have been the focus of the FBIcriminal investigation. The team is trained to be ready to find and disarma nuclear device on short notice.

The disks, or drives, are designed for use in a laptop computer andare part of an emergency response "kit" available to team members.

All 26 individuals who had unescorted access to the vault have beengiven polygraph tests, according to Richardson.

Browne, the lab's director, has testified that security rules for thetracking of items classified as secret were eased government-wide in 1992to reduce the cost of handling the large amount of documents carrying thisdesignation.

In early 1993 it was extended by then-President Bush to government contractorssuch as the University of California, which runs the Los Alamos lab. Thepolicy was continued by the Clinton administration.

The President's Foreign Intelligence Advisory Board a year ago citedinadequate tracking of secret nuclear materials in a stinging rebuke ofsecurity at the Energy Department and its weapons labs.

While the current Los Alamos security break likely did not involve espionage,"in some ways it's worse," former Sen. Warren Rudman, chairman of the advisoryboard, said in an interview. "Espionage is very hard to guard against.You win some and lose some. Here you've got a situation where there justsloppy accountability and record keeping."
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C. Material Protection, Control, and Accounting (MPC&A)

Ukrainian Experts Train On TD Software
        Argonne National Laboratory
        May 30, 2000
        (for personal use only)
During the week of May 15th, Nuclear Material Control and Accounting(MC&A) experts from all over Ukraine met at the George Kuzmycz TrainingCenter (GKTC) in Kiev to train on a software system developed by Argonne’sTD division. The software (Automated  Inventory/Material AccountingSystem, or AIMAS) is designed to assist facilities in Ukraine with trackingnuclear material and reporting inventory changes to the International AtomicEnergy Agency (IAEA). This work is part of a nonproliferation program withUkraine sponsored under the Nunn-Lugar Congressional Act. Tom Ewing, whoheads the AIMAS project, and Roy Lindley were on hand from TD to participatein the training and discussions. The week-long training sessions are sponsoredabout four times a year and are attended by 20-25 nuclear facility usersand representatives from regulatory agencies in Ukraine.
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D. U.S. – Russia General

US-Russian Fund to Invest Up to $100 Million in 12 Months
        June 19, 2000
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The U.S.-Russian Investment Fund, a U.S. Congress-financed fund activein Russia since 1995, said it will invest between $75 million and $100million in Russia in the next 12 months.

One-third of the new investment will go to buy shares, while the restwill be used for making loans to small and mid-size businesses, especiallythose in Internet development and high technology, and its home mortgagelending program.

``We are committed to supporting Russia on its course to a market economy,though the transition is truly a hard one,'' said fund President DavidJones, who is also chief executive.

International investors are once again looking for opportunities inRussia, after the economy grew 7 percent in the past year and almost twoyears after the Russian government defaulted on Treasury debt and allowedthe ruble to plummet.

The fund already has invested about $200 million in equity and loans.Its largest projects include a $31.5 million investment in TV- 3 Russia,and a $7 million investment in Nevsky 49, a St. Petersburg hotel that isa joint venture with the European Bank for Reconstruction and Development.

The fund won a court battle last winter against the Russian government,which took over the Lomonosov Porcelain Factory in October after the fundbought a 19.95 percent stake for $4.25 million in 1998.

Kohlberg Kravis Roberts & Co., the world's largest leveraged buyoutcompany, paid the same amount for a similar stake, held by offshore companies.Other international investors own about 24 percent. The government cededcontrol back to investors after a series of appeals.

``The investment is underway but it is too early to judge the results,''said Douglas Boyce, the porcelain factory's general director. ``The mostimportant thing is that shareholders are satisfied that their rights asowners have been upheld.''

About $2.7 million will be invested by the fund in the factory to modernizeit, and to improve working conditions, Boyce said.
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Duma To Debate Law On Spent Nuclear Fuel Imports This Year
        June 19, 2000
        (for personal use only)

The State Duma will debate draft laws regulating the import of irradiatednuclear fuel from other countries byRussia by the end of this year.

The draft laws were prepared by the Atomic Energy Ministry and may beconsidered by the lower house of parliament either before it adjourns forsummer vacations or at its autumn session, Deputy Atomic Energy MinisterVladimir Vinogradov said.

He spoke at a conference of Russia's Nuclear Society in St. Petersburgon Monday.

Chairman of the State Duma sub-committee on atomic energy Vladimir Klimovsaid Russia's capacities for processing uranium fuel from other countriesinto fuel for nuclear power plants are loaded by only 10-15 percent. However,more imports are prohibited by the law on environmental protection.

If the Duma adopts the proposed amendments, Russia may control one-tenthof the world's irradiated nuclear fuel processing market which is estimatedat 200 billion U.S. dollars.

Deductions from these revenues will help solve the problem of scrappingold nuclear submarine and other nuclear weapons.
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E. ABM, Missile Defense

U.S. Hopes For Missile Progress With Russia
        June 20, 2000
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OSLO, Jun 20, 2000 -- (Reuters) Deputy U.S. Secretary of State StrobeTalbott said on Monday he saw prospects for compromise and cooperationwith Russia on missile defenses.

Talbott told reporters that he expected to have "good, serious and productiveconversations" in Oslo on Monday night and Tuesday with Russian DeputyForeign Minister Georgy Mamedov.

Russia opposes a U.S. plan for a National Missile Defense (NMD) to shootdown rockets if they threaten U.S. territory.

Russia has proposed a system whereby rockets could be brought down closeto their launch point, and says its scheme would benefit all nations.

"I think there is plenty of room for additional cooperation on the questionof missile defense," Talbott, the most senior U.S. official negotiatingon arms control with Russia, told reporters when asked about Moscow's proposals.

"This is not an 'either-or' proposition," he said. "The ballistic missileproblem is multi-faceted and therefore the response has to be multi-faceted,certainly including ways that will very closely involve our European allies."

Talbott said there was room for extra cooperation between Russia andthe United States and between Russia and NATO.

Talbott, who saw Norwegian Foreign Minister Thorbjoern Jagland shortlybefore meeting Mamedov, said the talks would build on a summit betweenRussian President Vladimir Putin and U.S. President Bill Clinton earlythis month in Moscow.


"President Putin and President Clinton agreed on a work plan to broadencooperation on a variety of strategic issues including arms control issues.That's what we will be discussing," he said. Clinton and Putin would nextmeet at a G-8 summit in Japan in late July.

Talbott gave no hint that any breakthrough could be reached in Oslo.Jagland said after meeting Mamedov and Talbott: "My impression is thatthey mean business. They are trying to see things in a pragmatic way."

Unlike Talbott, Mamedov did not talk to reporters after seeing Jagland.Talbott and Mamedov would meet in the U.S. ambassador's residence in centralOslo, where Clinton hosted an Israeli-Palestinian summit in late 1999.

"I think it's appropriate...that Oslo is once again providing facilitationfor international diplomacy," Talbott said.

Russia says it opposes the U.S. NMD plan because it violates a 1972Anti-Ballistic Missile Treaty, a cornerstone of arms control.

The Clinton administration wants the treaty changed to address threatsfrom what it views as "rogue nations" like North Korea. Washington projectsthat North Korea could fire a missile into U.S. territory by 2005.

"The U.S. believes strongly that the way the world has changed since1972...requires all responsible governments to address strategic security,"Talbott said.

"It is well known that (Russia has) serious questions about whetherthe ABM treaty should be changed and specifically they have questions aboutthe American National Missile Defense system. We will pursue those," hesaid.

Talbott and Jagland said they had no plans to scrap a controversialradar station in Arctic Norway, despite Russian objections that it is partof a U.S. early warning system for missiles. Washington says the installationis for tracking debris in space.

"It raises no issues whatsoever with compliance" with the 1972 Anti-BallisticMissile Treaty," Talbott said.
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CIS Summit Supports Putin On ABM Treaty
        June 20, 2000
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The 12 CIS presidents issued a statement at their 21 June summit stressing"the historic  importance of the Anti-Ballistic Missile Treaty of26 May 1972 as the cornerstone of international peace, security and strategicstability," ITAR- TASS and Reuters reported. They implicitly condemnedU.S. plans for its own limited missile defense system as undermining theeffectiveness of the ABM Treaty and, by extension, global strategic stability.They also hailed the ratification by the Russian State Duma of the START-IITreaty. Addressing a meeting in Moscow of CIS Defense Ministers on 19 June,Russian Foreign Minister Ivanov had called on them to back President Putin'srecent proposal for a European anti-missile defense system, which Ivanovtermed "the only efficient way to counteract the peril of nuclear missileproliferation without destroying the whole system of disarmament accords."
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Yakovlev Clarifies 'Assymmetric Response' To U.S. ABM Plan
        June 22, 2000
        (for personal use only)

Speaking during a graduation ceremony at the Peter the Great RocketTroops Academy on 21 June, Strategic Rocket Forces Commander-in-Chief VladimirYakovlev said he does not exclude Russia's pulling out of the 1988 treatyon the destruction of intermediate and short-range missiles if the U.S.sets up its own limited national defense system, Interfax and "Segodnya"reported. "This step is possible as part of any asymmetric steps by Moscowin response to Washington's pulling out of the 1972 Anti Ballistic MissileTreaty," he said. Yakovlev also noted that the number of warheads on ICBMswould be increased in response to such a U.S. move.
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Moscow Concerned About Radar Station In Greenland
        June 22, 2000
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Speaking to his Danish counterpart, Niels Helveg Petersen, in Bergen,Norway, on 21 June, Russian Foreign Minister Igor Ivanov expressed concernover the construction of a radar station in Greenland, Interfax reported.The news agency quoted Ivanov as saying that "Moscow regards the radarstation as part of the would-be national anti-missile defense system theU.S. plans to create." He warned that if the U.S. system involves Danishradar, "Copenhagen will be responsible" for the collapse of the 1972 Anti-BallisticMissile Treaty. Earlier the same day in Bergen, Ivanov similarly expressedconcern over the U.S. radar station being built in Norway close to theRussian border. Russia fears the site will be used to track ballistic missiles,while the U.S. has said its purpose is to monitor debris from space.
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F. Russian Nuclear Forces

Lights Out For Topol-M?
        June 22, 2000
        (for personal use only)

"Trud-7" reported on 22 June that Strategic Rocket Force troops havetaken over four power plants in Altai Krai after the Altaienergo companythreatened to cut off electricity supplies to the local unit of the force.That unit, which is equipped with Topol-M missile systems, owes some 4.9million ($174,000) for energy deliveries. Unit commanders cited nationalstrategic security for the decision to take over the power plants. Accordingto the newspaper, this is the third such incident over the past year.
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G. Nuclear Waste

French-Russian Liability Agreement Signed
        Thomas Nilsen
        June 21, 2000
        (for personal use only)

France and Russia signed the long-awaited liability accord on Tuesday.The agreement will remove most barriers for the work on decommissioningof the nuclear waste storage vessel Lepse in Murmansk.

The liability agreement covers the supply of French equipment for theRussian nuclear industry, including the robotics to remove the damagedspent nuclear fuel stored onboard the run-down storage vessel, Lepse, inthe Russian port of Murmansk. Lack of the agreement has postponed the Lepseproject that was considered to be one of the major steps in nuclear cleanupwork with international assistance.

The Bellona Foundation and Murmansk Shipping Company initiated the Lepseproject back in 1994. In October 1994, the EU-Commissioner on Environmentvisited Lepse in Murmansk together with Bellona and promised on the spotthat EU would provide financial help to deal with the highly radioactivespent fuel onboard the vessel. Later both Norway and France agreed to givefinancial aid to the project. The unloading of the spent fuel and placingit into casks for onshore storage at the nuclear powered icebreaker baseAtomflot in Murmansk is estimated to cost around $10 million.

French nuclear engineering company SGN was the one that won the EU tenderto develop the robotics for removing the spent fuel from Lepse, but untiltoday there has been little progress in the actual work due to the lackof a liability agreement between France and Russia. The agreement was signedin Paris by Russia's Minister of Nuclear Energy, Yevgeny Adamov, and FrenchIndustry Minister, Christian Pierret.

The agreement is said to clarify all questions related to which partiesare to be held responsible for malfunctions of equipment supplied to Russiannuclear objects by French companies.

Lepse holds around 640 spent fuel assemblies transferred from the reactorson the nuclear powered icebreaker Lenin that suffered an accident in 1966.Due to the lack of cooling in the Lenin reactors, some of the fuel assembliesenlarged and therefor did not fit into the storage channels onboard Lepse.The workers used sledgehammers to push the fuel assemblies into the channelsand as a result, they where partly destroyed. The radiation from the storagesection on Lepse is today far beyond acceptable norms. The estimated amountof radioactivity in the fuel assemblies is 28.000 TBq (750.000 Curies).

The robotics to be developed by SGN will make it possible to removethe spent fuel without exposing the workers to high doses of radioactivity.
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