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Nuclear News - 07/12/02
RANSAC Nuclear News, July 12, 2002
Compiled by David Smigielski

A. Cooperative Threat Reduction
    1. Sam Nunn: "United States And Russia Must Take The Lead In Creating A Global Coalition Against Catastrophic Terrorism," Yaderny Kontrol, July 2, 2002
B. Spent Nuclear Fuel
    1. Zheleznogorsk Combine Received Spent Nuclear Fuel, Bellona, July 10, 2002
    2. Atomic Energy Ministry Estimates Investments For Spent Nuclear Fuel Processing, RosBusinessConsulting, July 9, 2002
C. Plutonium Disposition
    1. Plutonium Disposition Plan Narrowly Avoids Scrapping, But Still Has Many Critics, Charles Digges, Bellona, July 9, 2002
D. Russia-U.S.
    1. First Meeting Of The Russian-American Consultative Group Will Be Held In US In September, RIA Novosti, July 12, 2002
    2. Offensive Weapons Cuts Treaty Ratification To Be Priority At State Duma Autumn Session, RIA Novosti, July 12, 2002
    3. Gorbachev Warns Against New U.S. - Led Arms Race, Reuters, July 10, 2002
    4. Treaty Politics, Jon Wolfsthal, Carnegie Endowment for International Peace, July 10, 2002
    5. Senate Panel Mulls Russia Arms Pact, Barry Schweid, Associated Press, July 9, 2002
E. Russia-Iran
    1. Russia: Nuclear Fuel Will Not Stay in Iran, Natalia Yefimova, Moscow Times, July 12, 2002
    2. U.S., Russians Call For Cooperation, Deborah Seward, Associated Press, July 11, 2002
F. Russian Nuclear Forces
    1. Russian Nuclear Submarine Launches Mini-Space Shuttle, AFP, July 12, 2002
G. Russian Nuclear Power Industry
    1. Russia To Bid In Tender For Construction Of Finnish Nuclear Power Plant, Interfax, July 10, 2002
H. Nuclear Testing
    1. Russia To Improve Plesetsk Cosmodrome And Novaya Zemlya Test Site, Alexander Ovchinnikov, RIA Novosti, July 10, 2002
I. Nuclear Waste
    1. $1.8Bln In Nuclear Aid, Reuters, July 10, 2002
    2. Russian Nuclear Minister Against Repository On Novaya Zemlya, Bellona, July 10, 2002
J. Nuclear Terrorism
    1. US's Sweeping Efforts To Contain Terror, Edward Alden, Financial Times, July 11, 2002
    2. Nuclear Theft Causes Global Alert, Alexander Nicoll, Financial Times, July 8, 2002
K. Announcements
    1. More Than Money: Small Technology Spin-Offs Of The Wmd Complex, Maria Douglass and Peter Falatyn, International Science & Technology Center, July 2002
L. Links of Interest
    1. The Geopolitical Implications Of The War Against Terrorism, Center for Strategic and International Studies, July 12, 2002
    2. Nuclear Electricity Production Edging Up, International Atomic Energy Agency, July 11, 2002
    3. Senate Defense Authorization Bill Strengthens And Expands Non-Proliferation Efforts, Council for a Livable World, July 9, 2002
    4. Fact Sheet: Comparison Of U.S.-Russia Nuclear Reduction Treaties, BASIC Note, July 8, 2002

A. Cooperative Threat Reduction

Sam Nunn: "United States And Russia Must Take The Lead In Creating AGlobal Coalition Against Catastrophic Terrorism"
Yaderny Kontrol
July 2, 2002
(for personal use only)

After the ten years of cooperation in the framework of Nunn-LugarProgram, international assistance helped Russia and other CIS states tosolve many critically important problems and to finish a number ofprojects. 'The biggest success [of Nunn-Lugar Program] has been the workin persuading Ukraine, Kazakhstan, and Belarus to give up the nuclearweapons', believes Sam Nunn, Co-chairman of the Nuclear ThreatInitiative, in his interview with Yaderny Kontrol's Editor-in-ChiefVladimir Orlov.

YADERNY KONTROL: Most of the people in Russia now agree that theNunn-Lugar Program (as CTR, MPC&A, and other U.S. assistance programsare known in Russia) is in the Russian national interest. Could youplease explain why you believe it is also in U.S. national interests tomaintain and perhaps expand this Program?

SAM NUNN: The United States has an enormous national security interestin making sure that angerous weapons and materials-wherever they arelocated-are secure and do not get into the hands of the world's mostdangerous people. At a time when Russia faces serious economic andsocial challenges, the United States certainly has an interest inensuring that sufficient resources are committed to helping Russiamanage and improve security surrounding the weapons and weapons-usablematerials inherited from the Soviet Union's Cold-War arsenal. We cannotafford to lose sight of the fact that terrorists and certain states areracing to acquire weapons of mass destruction, and we ought to be racingtogether to stop them.

YADERNY KONTROL: Now, already ten years after the launch of the Program,what would you call the best success story of the Nunn-Lugar Program, asfar as nuclear nonproliferation is concerned?

SAM NUNN: I believe the biggest success has been the work in persuadingUkraine, Kazakhstan, and Belarus to give up the nuclear weapons theyinherited from the Soviet Union. This eliminated more nuclear weaponsthan those contained in the entire nuclear arsenals of China, France,and the United Kingdom combined, and kept these newly independent statesfrom adding their fingers to the nuclear trigger. Equally important,this success proves that Russia and the United States can cooperate toaffect dramatic change and improvement in the sphere of global security.It is imperative that we find new and creative ways to build upon thiscooperation in the face of catastrophic terrorism.

YADERNY KONTROL: Efforts to reduce risks of megaterrorism have beendeclared as one of the major issues in the U.S.-Russian security agenda,based on a new strategic partnership. What practical steps do youbelieve should be implemented by the United States, Russia, and by bothour countries jointly in the near future in this regard?

SAM NUNN: I agree with your assessment and would add that preventing thespread and use of nuclear, biological and chemical weapons should be thecentral organizing security principle uniting the efforts of both of ourcountries in the 21st century. I believe the United States and Russiamust take the lead in creating a global coalition against catastrophicterrorism. The greatest dangers of the 21st century are threats that allnations face together and no nation can solve on its own. Acquiringweapons and materials is the hardest step for the terrorists to take,and the easiest step for us to stop. By contrast, every subsequent stepin the process is easier for the terrorists to take, and harder for usto stop.

The coalition I envision would begin with Russia and the United States,but should quickly expand to include nations other nations in Europe,Japan, Canada, China, India, and Pakistan. This coalition should includeevery state with nuclear weapons and weapons-usable materials. We mustremember that nearly 20 tons of civilian highly enriched uranium existsat 345 civilian research facilities in 58 countries, yet there are nointernational standards for securing these nuclear materials within acountry. With U.S. and Russian leadership, we can assist every statewith nuclear materials adopt standards and cooperative programs forinventory control, safety, and security. The coalition would also workto improve border security and export controls, and train internationalteams to respond in the event of a terrorist nuclear explosion or theloss of control of nuclear weapons or materials.

YADERNY KONTROL: What do you think the NTI, a private foundation, shouldadd to the international efforts to reduce proliferation threats in theformer Soviet Union?

SAM NUNN: The Nuclear Threat Initiative (NTI) is a charitableorganization working to reduce the global threats from nuclear,biological and chemical weapons. NTI is currently undertaking an effortin cooperation with Russia's Ministry of Atomic Energy to assess thefeasibility of accelerating and expanding efforts to blend down highlyenriched uranium extracted from dismantled Russian nuclear weapons. NTIis undertaking similar work in Kazakhstan, which is designed toconsolidate and blend down HEU located at research reactors. NTI is alsofunding a collaborative effort-in which I am pleased to note that thePIR Center has been an active participant-between U.S., Russian andother European research institutes for the purpose of increasingEuropean participation in cooperative threat reduction activities inRussia and the former Soviet Union. Part of this effort might involvefurther exploration of the prospects of forgiving a portion of Russia'sSoviet-era debt in return for a greater commitment of Russian resourcestoward increasing security at sites that store Russia's weapons andweapons-related materials.
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B. Spent Nuclear Fuel

Zheleznogorsk Combine Received Spent Nuclear Fuel
July 10, 2002
(for personal use only)

On June 27th, Zheleznogorsk Mining and Chemical Combine receivedshipment of spent nuclear fuel from Khmelnitsk NPP in Ukraine,VolgaInform agency reported. The train consisted of six special railwaycars, 6 tonne capacity each. The shipment from the nuclear power plantto the Combine went well without any accidents. The Special Forcesguarded the train all the way and the specialists of the ZheleznogorskCombine monitored the spent nuclear fuel condition on board the train.Unloading of the fuel rods is carried out under water, then they aremoved into the sections for long-term storage.
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Atomic Energy Ministry Estimates Investments For Spent Nuclear FuelProcessing
July 9, 2002
(for personal use only)

The development of the spent nuclear fuel processing industry willrequire $3.4bn in investments through 2030, Nikolai Shingarev, head ofthe Russian Atomic Energy Ministry's department for informationpolicies, reported today. He spoke at a round-table meeting 'A yearafter the approval of the bill on importing foreign spent nuclear fuelto Russia'. According to the Ministry's official, the Russian atomicindustry will need $1.1bn in investments through 2010 for processingspent nuclear fuel. These funds will come from tariffs on electricityand profits from spent nuclear fuel imports. At present, Russia importsspent nuclear fuel only from Bulgaria and Ukraine. According toShingarev, almost no spent nuclear fuel is expected to be supplied toRussia from other countries over the next 5 to 7 years due to strongcompetition on this market. According to data from the Russian AtomicEnergy Ministry, Russia imported 64 tons of spent nuclear fuel fromBulgaria and about 100 tons from Ukraine over the past year. Domesticcompanies supply about 850 tons of spent nuclear fuel a year. Atpresent, Russin companies process from 130 to 150 tons of spent nuclearfuel a year.
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C. Plutonium Disposition

Plutonium Disposition Plan Narrowly Avoids Scrapping, But Still Has ManyCritics
Charles Digges
July 9, 2002
(for personal use only)

A-nine-year-old joint US-Russian agreement to dispose of 68 tonnes ofweapons-grade plutonium - which insiders say was nearing the scrap heap- was given a jump-start by a recent US Department of Energy (DOE) planto demonstrate the feasibility of converting warhead plutonium to oxide,allowing it to be burned as fuel.

That jump-start came from a pair of contracts forged by the DOE with theRussians, according to which a "conversion demonstration facility" willbe built at the Mayak Chemical Combine, near Chelyabinsk, to show thephysical and financial possibility of making the fuel, called MOX - amixture of plutonium and uranium oxides.

The US Los Alamos lab is the other signatory in the $3.6 millioncontract with Mayak on the demonstration project, and US technicianswill be working with their Russian counterparts to develop the highlydangerous fuel that destroys weapons-grade plutonium when burned in areactor. A prototype should be ready in about three years.

Had these contracts not been signed, said a source close to the Uralsregional arm of Gosatomnadzor (GAN), Russia's nuclear regulatory agency,the DOE plutonium disposition programme may have been scrappedaltogether - though current DOE officials would not comment on whetherthat was the case.

"This particular program has been languishing. First, it was really theobstinacy of some Russian facilities who wanted to get research anddevelopment contracts. Second - it was the leadership and direction onthe US side. [...] They were just wasting US taxpayer money," said thesource who spoke on the condition of anonymity.

"These [contracts] show that the DOE is willing to not just talk aboutwhat they are going to do, but actually do something - so [the DOEofficials] said we're going to do real work, we're going to run thenumbers, and do the design."

The source close to the GAN Urals branch further said that the DOE planwould add no radioactive waste to local facilities, something previousDOE delegations had not been able to address to the satisfaction ofUrals officials and environmentalists in prior negotiations.

"Working with this particular DOE team is the difference between nightand day," said the source.

The plutonium disposition programme, however, is not out of the woodsyet, he said, but the contracts bought the programme time andcredibility pending a major announcement by the DOE on plutoniumdisposition in mid-July. The source would not specify the nature of theannouncement, but referred to it as the "$400 million question," whichsuggests - though the source would not confirm or deny this - that thedecision may mean wide-scale reactor technology upgrades in Russia forthe burning of the MOX.

Indeed, with the last week's pledge by the world's leading industrialnations to give Russia $20 billion over the next 10 years fornon-proliferation efforts - a sort of worldwide Nunn-Lugar Act -experiments in new reactor technologies for MOX disposition may be thenext deal on the table between the DOE and the Kremlin.

But not all who heard of the MOX agreement sounded pleased as they citedextreme dangers behind the fabrication of the demonstration fuel - tosay nothing of converting vast quantities for reactor use.

"The conversion and fabrication of weapons-grade plutonium into mixedoxide fuel involves ultra-hazardous first-generation technologies withno proven history of success on an industrial scale," said RobertAlvarez, senior policy advisor to the DOE's Secretary of Energy from1993 to 1999, in an email interview with Bellona Web.

"There's a considerable amount of work that needs to be done to convertthis stuff, that is not required with fresh plutonium that hasn't beenrendered into a metal for weapons."

MOX vs. immobilization: a brief history

The origins of the agreement to create MOX fuel stem from a 1993 USNational Academy of Sciences (NAS) Report requested by the US SenateCongressional Armed Services Committee. The NAS report focused primarilyon the weapons materials coming from dismantled warheads. For plutonium,NAS suggested the options of MOX and immobilization methods as a meansto achieve non-proliferation objectives.

Presidents Bill Clinton and Boris Yeltsin, enjoying a political upsurgeon the international stage, publicly agreed to destroy some 68 tonnes -or 34 tonnes apiece - of excess weapons plutonium that the US and Russiahad declared as having at the end of the Cold War.

But immobilization was dealt a major setback in 1998 in the US due tothe technological failure to pre-treat military high-level nuclearwastes for vitrification - mixing plutonium with glass for permanentstorage - at the Savannah River Site. This process was to provide theprimary radiation barrier for the plutonium in the United States.

Red tape

Ever since then, the creation of MOX fuel - and the eventual building orretrofitting of reactors to burn it in- has been one of the hallmarkhopes of the DOE's Russian non-proliferation programme, though neitherside has made any meaningful progress until now. As one former DOEofficial, who spoke on the condition of anonymity, explained it, anedict to destroy excess weapons plutonium was handed down from the WhiteHouse - during years when Yeltsin Clinton back-slapping was at a peak -but then the support evaporated.

"The mandate [for the plutonium disposition programme] came from Clintonand Yeltsin saying 'we're going to declare 68 tonnes [of plutonium] inexcess of weapons needs," said the former DOE official in a recenttelephone interview.

"And out of the White House comes the directive - okay, DOE, dosomething. But what the White House didn't do was continue to supportthe mission of plutonium disposition at a really high level, and that'swhat it takes."

Adding to this, said the former DOE official, was tension between theDOE and its plutonium labs.

"The policy people and technical people are in different teams and theycan often be at odds with each other," the official said.

According to another government official, the DOE was prepared to signoff on a demonstration of MOX conversion as far back as three years ago,but the US State Department, which brokered that deal, never gave thego-ahead to start testing.

Because of such halting progress, the Urals source said, the programmeas a whole fell into endless cycles of research and development, wherein- in Russia especially - many of the labs weren't focused strictly onthe science of the project.

Labs at the Russian research and development body Bochvar, for instance,have nixed several MOX proposals over the past years, mainly, accordingto the Urals source, because the pursuit of MOX is not profitable.Bochvar, he said, makes a royalty on each nuclear fuel rod - with itsbuilt-in potential for reprocessing - sold in Russia.

The MOX programme, which is geared toward the ultimate destruction ofweapons-grade plutonium, rather than its re-harvesting -threatens tobreak a lucrative Bochvar rice bowl, the source said. Bochvar officialsdeclined to comment.

Minatom's cult of plutonium

For decades - and arguably even still - anything having to do with thedestruction of weapons plutonium has been a taboo for Russia's NuclearPower Ministry, Minatom. Therefore, according to Minatom sources, quietcelebrations at the ministry accompanied the announcement of theSavannah River vitrification failure in 1998.

The Russians, said the Urals source, would only consider MOX for thepurpose of putting the excess plutonium to some power producing use -like it is done in France, where reactor-grade MOX fuel has been burnedfor more than a decade, although not entirely successful.

"[...]Throughout the Clinton Administration, Minatom would not evenconsider discussion of immobilization, because of the belief thatplutonium has great value based on the Soviet rationale of 'sunkcosts,'" Alvarez wrote.

"Minatom's plutonium policy mirrors that of the US in the 1960's.Powerful elements of secrecy, isolation and privilege have fostered arigid theological view by Minatom about the benefits of plutonium."

According to Minatom sources, the MOX option as spelled out in the newagreement is grudgingly acceptable because it allows for the dispositionof plutonium in an energy producing way.

"The contract provides [....] for that demonstration [of conversion] tofinally show [...] that disarmament is not just talk, and that we aretaking the warheads, turning them into powder, turning that into fueland giving light and heat to [...] Russian people," said the sourceclose to the Urals GAN.


But a plan with that ambition would presumably require that MOX,incorporating weapons-grade plutonium, be fabricated for and burnedthroughout Russia in already existing civilian reactors. Currently, theonly hope of burning weapons MOX on the Russian side is at the Beloyarskfast neutron reactor, and even that is questionable.

Valery Kuznetsov, a former GAN inspector, who now works for theMoscow-based environmental group Green Cross, told Bellona Web thatcurrent reactor technology in Russia simply doesn't supportweapons-grade MOX fuel.

Another option - using Russia's seven VVER-1000 reactors, which havebeen considered candidates for upgrades by the DOE and Minatom - could,he said, "lead to second Chernobyl - maybe worse."

He added that any upgrade to a VVER-1000 that would bring it anywherenear a safe range for operation with MOX fuel would require $100 million- a dangerous experiment that would presumably be financed by the DOE.

Storage until destruction

If other reactors are not developed and funded, that leaves, accordingto Vladimir Slivyak, co chairman of Moscow-based Ecodefence!environmental group, Beloyarsk's beleaguered breeder reactor, which,with 34 tonnes of plutonium oxide gathered in one place waiting to beburned, would "create a terrorist's paradise."

Alexey Yablokov, who was a senior advisor on environmental safety issuesto former President Boris Yeltsin in the mid-1990s, agreed with Slivyak.

"The materials that make up the warhead have to be mixed with glass orconcrete and stored in a safe facility, or they must be processed inbreeder reactors," Yablokov told Bellona Web.

"Unfortunately, Russia does not have the means to do either of thesethings."

There are 52 military storage depots for the enriched uranium andplutonium from which nuclear warheads are made, but Yablokov and otherswho have studied security at the sites say security is lax andaccounting systems for weapons-grade materials non-existent.

"The basic problem is that the current US-Russian MOX agreement puts thecart before the horse," former DOE senior policy advisor Alvarez said.

According to him, though, weapons-grade plutonium is still more securethan the huge amounts of poorly protected separated plutonium, not usedin warheads, that Minatom is storing at its nuclear material and otherproduction sites.

"The a priori assumption behind the MOX agreement is that the safe andsecure storage of nuclear materials is of secondary importance. Nothingcould be further from the truth, in the US and in Russia," Alvarez said.

"We now need to address these realities. The Nunn-Lugar program served agood purpose during the early years of the post Cold War, particularlyfor the dismantlement of delivery systems," he added.

"Now it's time for the US, Russia, and nations formerly part of theSoviet Union, to enter into a nuclear material framework agreement withthe goal of achieving the safe and secure storage of excess nuclearmaterials."
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D. Russia-U.S.

First Meeting Of The Russian-American Consultative Group Will Be Held InUS In September
RIA Novosti
July 12, 2002
(for personal use only)

The first meeting of the Russian-American Consultative Group will takeplace in September in the United States, said official spokesman for theRussian Foreign Ministry Alexander Yakovenko on Friday, answering thequestions of the Russian mass media.

He pointed out that the agenda of the session was now being worked out.In Moscow's opinion, "the priority themes for discussion at it could benon-proliferation, the implementation of the Treaty on StrategicOffensive Reductions, transparency and cooperation in the sphere ofmissile defence," pointed out the Russian diplomat.

According to Alexander Yakovenko, this dialogue will make it possiblefor Moscow and Washington "to form the programme for joint actions inthe sphere of strategic security for a foreseeable future." said he.

The Russian diplomat reminded the reporters that the Consultative Group"has been instituted in accordance with the Joint Declaration of thePresidents of Russia and the United States, signed by Vladimir Putin andGeorge W. Bush at their meeting in Moscow on May 24, 2002." It "iscalled upon to become a main mechanism with the help of which Russia andthe United States will strengthen mutual confidence, expandtransparency, exchange information and plans and will discuss strategicproblems of mutual interest," emphasised Alexander Yakovenko.
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Offensive Weapons Cuts Treaty Ratification To Be Priority At State DumaAutumn Session
RIA Novosti
July 12, 2002
(for personal use only)

The Russian Foreign Ministry believes the issue of Offensive WeaponsCuts Treaty ratification to be "one of the priorities for the Parliamentwhen the parliamentary session resumes in autumn", said an officialrepresentative for the Russian Foreign Ministry Alexander Yakovenko at apress conference.

The Ministry hopes the final decision will be positive, he stated.

"The Parliaments of the two countries are aware that it is vitallyimportant to ratify the Offensive Weapons Cuts Treaty", said Yakovenkoin the context of the fact that the document had been put intoconsideration in the US Senate. "Yet the documents preparationprocedures, the work of the legislative bodies and the process ofratification itself in Russia and the USA are different, thus the datesof ratification will hardly coincide," the diplomat pointed. Moreover,the Russian Foreign Ministry doesn't consider it necessary.

In compliance with the Russian legislation, the Treaty and its detailedanalysis were passed to the Russian Federal Assembly (the upper chamberof the Russian Parliament) for consideration early in June, Yakovenkorecalled. The corresponding Russian departments are currently finishingpreparation of the main set of ratification documents, the diplomatpointed and recalled that the work of the Federal Assembly had beenadjourned.
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Gorbachev Warns Against New U.S. - Led Arms Race
July 10, 2002
(for personal use only)

Former Soviet leader Mikhail Gorbachev warned the West Wednesday toguard against a new arms race fueled by United States' determination todefend itself after the September 11 attacks.

"We should understand that...the President of the United States isresponsible for the security of the nation," Gorbachev, still a leadingfigure on the international stage, said in a lecture held in aparliament committee room.

"But at the same time we, as the friends, allies and partners of theUnited States, should be in a position to say to them that while doingthat, don't re-launch a new arms race," he said, speaking through atranslator.

Two months ago, President Bush and his Russian counterpart, VladimirPutin, signed a pact to cut their arsenal of deployed nuclear warheads.

But Putin has faced criticism at home for giving in to Washington'sinsistence that decommissioned warheads may be kept in storage insteadof being destroyed.

He has also been forced to accept Bush's determination to scrap the30-year-old Anti-Ballistic Missile (ABM) treaty -- long seen in Russiaas a cornerstone of nuclear stability.

Gorbachev, whose reforms in the late 1980s helped pave the way for anend to the Cold War, is lobbying for funds to help tackle theenvironmental consequences of chemical, nuclear and biological weaponsleft by the Soviet empire.

He said there were some 200 submarines, now out of use, that still heldnuclear reactors that had to be disposed of.

"We are still dealing with the consequences of the old arms race,without starting a new one," he said.
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Treaty Politics
Jon Wolfsthal
Carnegie Endowment for International Peace
July 10, 2002
(for personal use only)

Any Democratic president who had dared to present the Treaty of Moscowto the Senate would have been ripped apart by Republican critics. ButDemocrats are taking a pass on confronting the fundemental flaws inPresident Bush's agreement. In part, it is to avoid a national securitydebate with the president in an election year; in part, it isrecognition that a Republican president can implement arms controlreductions that a Democratic president cannot. The Republican Senate,after all, blocked President Bill Clinton from negotiating precisely thereductions that President Bush has now agreed to. The Democrats may bemaking the right political move, but that should not excuse the criticalflaws in this treaty. Our analysis piece originally posted on May 24still sounds right to us.

President Bush has hailed the just signed agreement as a critical stepin "liquidating the legacy of the cold war." Doing nothing of the kind,the agreement - which is all of 493 words long - fails to require theelimination of a single warhead, missile, submarine, bomber or anynuclear material. In addition to lacking any binding constraints oneither country, the "treaty" does not define what is being controlled,contains no terms for monitoring compliance or verification, andestablishes no process for dispute resolution. Even the centralprovision of the document - that each country will reduce its arsenal tobetween 1700 and 2200 nuclear weapons - raises gaping questions sinceits fails to define how these weapons will be counted. Are these toinclude tactical, short range weapons? Will non-deployed or storedweapons be counted? Since nothing is defined, the parties are free tointerpret the agreement however they wish. With no firm terms, it isimpossible to violate the agreement.

Even these flaws, which make a mockery of international legalagreements, are not the most dangerous thing about this so-calledtreaty. By far the most worrying aspect is that it does nothing toaddress the threat stemming from the insecure storage of Russianwarheads and nuclear materials. By failing to include any terms formonitoring nuclear reductions, requiring secure storage of removedwarheads or furthering the elimination of nuclear materials, thisagreement could easily make the nuclear security situation in Russia -already a cause for alarm-even worse. By encouraging unmonitored anduncontrolled reductions, Russia's nuclear complex will be furtheroverwhelmed with additional stocks of dismantled nuclear weapons andcomponents, and the essential building blocks for terrorist nuclearweapons. Although the two countries will continue to cooperate in thevital area of securing nuclear materials and weapons, this agreementmakes that job harder to achieve, and increases the vulnerabilities inthe Russian nuclear complex.

President Bush and his administration opposed negotiating a binding armscontrol agreement to limit nuclear force. President Putin wanted alegally binding document. Each side got what they wanted with thislegally binding document that fails to control or reduce anything.
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Senate Panel Mulls Russia Arms Pact
Barry Schweid
Associated Press
July 9, 2002
(for personal use only)

Senior senators found fault Tuesday with President Bush's nuclear armsreduction agreement with Russia but did not challenge its ratification.

"It could turn out to be a great treaty," Chairman Joseph R. Biden ofthe Foreign Relations Committee declared.

The complaints ranged from not requiring the destruction of the warheadsto be taken out of U.S. and Russian arsenals over the next 10 years toexempting battlefield nuclear weapons from the cutbacks.

But in the first round of the Senate's review of the agreement Bushreached with Russian President Vladimir Putin in May, only one of thefour critics, Sen. Russ Feingold, D-Wis., appeared on the verge ofopposing the pact.

With Secretary of State Colin Powell in the witness chair, defending thetreaty as a milestone in a new relationship with Russia, Feingold hotlyquestioned a provision that permits either side to abandon the accordwith three-months notice and without explanation.

Arguing the Senate should be consulted first - and should have beenbefore Bush scrapped a 1972 treaty that banned national anti-missiledefenses - Feingold told Powell, "The administration is not taking theSenate's role seriously."

Challenging the administration from another direction, Sen. John F.Kerry, D-Mass., said the cutbacks should have been much deeper than theplanned reduction from about 6,000 warheads on each side to 1,700 to2,200.

Kerry said "the most glaring hole in this treaty" was that the warheadswould not be destroyed but could be kept in storage - and easily putback on the launchers, bombers and submarines from which they wereremoved.

Kerry also said that keeping a stockpile of at least 1,700 warheads wasin excess of the needs of the United States and Russia in their newrelationship - and too many to have around with terrorists on the prowl.

But Powell told the Committee he believed the two sides would destroymany of the warheads they set aside. "There is no incentive to keepweapons we do not need," he said.

And yet, Powell disclosed the Bush administration was aiming for anarsenal of 4,600 long-range nuclear warheads, including some 2,000warheads that are being held in reserve.

"This tells us the Bush administration wants to maintain flexibility andbe able to double the size of the strategic arsenal under the treaty,"Daryl Kimball, executive director of the private Arms ControlAssociation, said.

He said the treaty was likely to pass but the Senate may be interestedin adding "constructive conditions that fill in many gaps in this verysparse and incomplete treaty."

These, Kimball said, could require tougher provisions to ensure theterms are carried out and for the destruction of warheads.

Chairman Biden and a senior Republican, Sen. Dick Lugar of Indiana,called the treaty a good first step.

"I think this is a good treaty," Biden said. "It could turn out to be agreat treaty or it could turn out to be marginal one."

Among the flaws Biden found in the pact was that it permits Russia toretain SS-18 multiple warhead missiles that had been outlawed in theSTART II treaty that Bush's father, President George H.W. Bush, signedin January 1993.

Lugar called the treaty "a tremendous step in the right direction," buthe said he also was concerned about not requiring the destruction ofwarheads and said "we must work with Russia to make sure they do notfall into the wrong hands."

Lugar, who has sponsored legislation to help Russia eliminate part ofits nuclear arsenal, urged Congress to help cut delays in dismantlingnuclear weapons by dropping a requirement that the White Housedemonstrate that Russia is committed to the goals of arms control.

Powell endorsed the idea.
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E. Russia-Iran

Russia: Nuclear Fuel Will Not Stay in Iran
Natalia Yefimova
Moscow Times
July 12, 2002
(for personal use only)

Russia will take back spent nuclear fuel from the atomic power stationit is building in Iran, even though language to that effect was omittedfrom the 1992 agreement to construct the plant, Nuclear Power Ministryofficials said Thursday.

The officials, who spoke on condition of anonymity, said work is underway on a supplementary agreement that will ensure in writing Iran'scommitment to return spent fuel from the Bushehr civilian nuclear powerplant. They added that Teheran has consented to these terms.

Such fuel has been a major concern for both Washington andnonproliferation experts because it could be converted intoweapons-grade radioactive material and could thereby accelerate Iran'sefforts to develop its own nuclear weapons. The ministry officialsexplained that the original contract did not include such a clausebecause it was signed at about the same time as environment-friendlylegislation banning the import of nuclear waste. In July of last year,however, President Vladimir Putin signed into law a hotly debated billallowing imports of spent nuclear fuel, opening the way for changes tothe Iran deal.

The clarification came in response to reports that Russia had failed tosecure guarantees from Iran that the latter would return spent fuel fromthe Bushehr plant, an $800 million project due to be completed in 2003or 2004. Last month, documents identified as a draft report for internaluse by the Russian government were posted on the web site of the localGreenpeace office. The documents, which a Greenpeace official said hadcome from a state agency other than the Nuclear Power Ministry and aredated February 2002, say that the contract with Iran does not cover theissue of re-importing spent nuclear fuel from Bushehr to Russia but thatnegotiations on the problem are under way. Senior U.S. diplomats havesaid that Iran is emerging as the biggest problem on the U.S.-Russianagenda, and talks on the issue have been progressing more slowly thanWashington would like.

In addition to the spent fuel, points of contention have includedtraining and fuel-cycle technology that Russian experts could provide toIran's nuclear program, as well as the transfer of missile technologyand conventional weapons sales.

Asked about Iran during his post-summit press conference with U.S.President George Bush, Putin reiterated the Kremlin's position thatBushehr was a civilian project and did not increase Iran's chances ofdeveloping weapons of mass destruction.

Two prominent U.S. experts on nonproliferation were in Moscow onThursday to present a new framework for improving U.S.-Russiancooperation and helping end the two nations' deadlock over Iran. RobertEinhorn, a senior adviser at the Center for Strategic and InternationalStudies, said Russia should limit its nuclear cooperation with Iran toproviding power reactors and should commit to supply all fuel for thereactors and then take it back. Moscow should also pressure Iran toallow more intrusive inspections and to give up all nuclear fuel cycleactivities, such as uranium enrichment and fuel fabrication.

Washington, according to Einhorn and his colleague Gary Samore of theInternational Institute for Strategic Studies, must mitigate itsobjections to the Bushehr project, which, in the past, has been rejectedoutright. "The problem with this zero-tolerance approach is that itwon't work," Einhorn told a conference organized by Moscow's PIR Center."Russia is too committed to complete the Bushehr project and has astrong economic and political stake in carrying the project tofruition." Einhorn also said the United States would be well served toimprove intelligence-sharing with Russia and expand bilateral nuclearcooperation in such areas as advanced reactor types and spent nuclearstorage.

Some 90 percent of the world's spent nuclear fuel is controlled by theUnited States, which provides it to other countries but retains theright to approve any transfer of such material. By exercising thisright, Washington could significantly reduce the amount of fuelavailable for storage in Russia and, consequently, deliver a blow toMoscow's stated aim of earning billions of dollars through the storageproject. Last year, the U.S. State Department explicitly linked U.S.approval to a written pledge by Moscow to terminate nuclear cooperationwith "third parties;" presumably, these would include the "axis of evil"-- Iran, Iraq and North Korea.
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U.S., Russians Call For Cooperation
Deborah Seward
Associated Press
July 11, 2002
(for personal use only)

Russia and the United States must improve cooperation and increaseintelligence sharing to prevent Iran from developing nuclear weapons,U.S. and Russian experts said Thursday.

U.S. experts also said Russia needs more resources and betterenforcement of export controls to prevent the proliferation of nucleartechnology that could help Iran develop weapons of mass destruction.

Russia's nuclear cooperation with Iran has been a major subject ofcontention between President Bush and Russian President Vladimir Putinat their most recent summits. The United States opposes Moscow's role incompleting a civilian nuclear power plant at Bushehr in southwesternIran.

Senior U.S. and Russian experts met in Moscow on Thursday to discussways to improve cooperation between the two countries regarding Iran.Russians at the meeting agreed better cooperation was needed, but manydefended the Bushehr project.

Russia is the only major nuclear power now assisting Iran in developingatomic energy, said Gary Samore, a senior fellow at the London-basedInternational Institute for Strategic Studies and a former official onproliferation issues in the Clinton administration.

The United States believes Russia's $800 million deal to build the1,000-megawatt pressurized water reactor in Bushehr could help Irandevelop nuclear weapons.

Samore said the U.S. approach to pressuring the Russians to restrict itsnuclear cooperation with Iran has had "mixed" results. He saidintelligence sharing remains difficult, and hostility leftover from theCold War still hindered closer cooperation between intelligenceservices.

Robert Einhorn, a senior adviser at the CSIS International SecurityProgram who also served in the Clinton administration, said there was a"standoff" over the Iran issue, with both sides unwilling to shareinformation.

He said Putin needed to make a "strong and unequivocal" commitment tobetter enforcement to prevent the illegal seepage of nuclear technologyto Iran.

Einhorn said Russia must agree to limit its cooperation with Iran tocompleting the Bushehr project and to ensure that it had a secureagreement on controlling the fuel that would be used to run the plant.

Russian participants in the forum expressed appreciation for theAmerican point of view, but some argued Russia was only fulfilling itsagreement for supplying civilian nuclear technology.

And, the Russians argued, they are doing no more than the United States,which has an agreement to supply North Korea with civilian nucleartechnology.

Vladimir Orlov, a specialist at the PIR think tank that organized theconference, called for a joint evaluation of the threat from Iran beforeany new measures are adopted to restrict alleged proliferation.
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F. Russian Nuclear Forces

Russian Nuclear Submarine Launches Mini-Space Shuttle
July 12, 2002
(for personal use only)

A Russian nuclear submarine on Friday successfully launched a uniquemini-space shuttle capable of delivering cargo to the InternationalSpace Station (ISS) and safely returning to earth, officials said.

The Russian navy said the shuttle has a special breaking device whichallows it to cleanly attach itself to the ISS or softly land otherplanets.

The launch was made from the Barents Sea by the Ryazan nuclearsubmarine, with the shuttle attached to an intercontinental ballisticrocket called Volna (Wave) which is based on an earlier RSM-50 model(NATO designation SS-N-18).

The device may also be used in the future to help astronauts return fromthe ISS. The the model tested Friday is not reusable, although officialshope that future mini-shuttles can have an indeffinite lifespan.

"This is a unique device because it is only 0.8 meters (2.6 feet) indiameter when folded," said Lidiya Avdeyeva, a spokeswoman for theBabakin science research center that developed the device.

"But it expands in space, allowing it slow down and land safely,"Avdeyeva told AFP.

Navy officials said Friday's successful test will be used for devisingfuture re-usable models.

The test came only days after the Russian space agency invited its USand European colleagues to launch a manned flight to Mars by 2014.

Officials said the mini-shuttle tested Friday was first developed aspart of the "Mars 96" project that was later scrapped by Moscow becauseof chronic underfunding.
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G. Russian Nuclear Power Industry

Russia To Bid In Tender For Construction Of Finnish Nuclear Power Plant
July 10, 2002
(for personal use only)

Yevgeny Yakovlev, head of the Power Machines company, confirmed thatfirm is prepared to bid in a tender to supply equipment for a Finnishnuclear power plant.

On Tuesday, the company quoted Yakovlev as saying that it hascontributed to the construction of nuclear power plants in China, Iranand India, and has good chances for winning the tender.

On May 24, the Finnish parliament voted in favor of the construction ofa new nuclear power plant in the country. The Finnish companyTeollisuuden Voima Oy, whose chief owners are Fortum and the Voima Oygroup, the country's largest energy companies, will be in charge of theconstruction. A tender for the construction is expected to be held inthe fall. The project is estimated at 1.7 billion euros, with equipmentaccounting for nearly one half of that amount.

Viktor Kozlov, director general of Atomstroi, one of the world's leadingcompanies in nuclear power plant construction, is quoted by the PowerMachines report as saying that Russia stands a good chance of winningthe bid, in particular because Russia would build a power unit with awater-cooled reactor, similar to that of the plant in China, which isnearing completion.

Furthermore, Finland operates a Loviza nuclear power plant built byRussian contractors based on a Russian design. Loviza, one of Finland'stwo nuclear power plants, is regarded as one of the safest and mostecologically friendly plants in Europe.

Germany, France, Sweden and the United States also plan to bid in thetender.
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H. Nuclear Testing

Russia To Improve Plesetsk Cosmodrome And Novaya Zemlya Test Site
Alexander Ovchinnikov
Ria Novosti
July 10, 2002
(for personal use only)

The Russian Defense Ministry sees the updating of the Plesetskcosmodrome and Novaya Zemlya test site as top-priority special projects.

Colonel-General Alexander Kosovan, deputy defense minister forconstruction and quartering, told a press conference that a finaldecision has been taken to invest 1.5 billion roubles in updating thePlesetsk infrastructure. "Launches of other than manned space objectsfrom Baikonur have become economically unprofitable for Russia", saidKosovan.

To him, the annual lease to Kazakhstan is 120 million dollars, while theconstruction of new launch pads in Plesetsk will cost 100 milliondollars.

The general also said that, after the defense minister's visit to NovayaZemlya, it was decided to okay it.

With the end of nuclear tests in Novaya Zemlya financing has virtuallyended and the test site is "falling apart", Kosovan said.

"Financing the Novaya Zemlya test site does not mean that the DefenseMinistry is preparing to resume nuclear tests there", stressed GeneralAlexander Kosovan.
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I. Nuclear Waste

$1.8Bln In Nuclear Aid
July 10, 2002
(for personal use only)

International donors agreed Tuesday to launch a 1.8 billion euro ($1.78billion) program to help clean up the environment in and around northernRussia, which faces a big threat from nuclear waste.

A one-day conference chaired by the European Union and Russia announcedinitial funds totalling 110 million euros for the most urgent projectsneeded to reduce water and air pollution in the Baltic and Barents Searegions. The European Commission, the EU's executive body, pledged 50million euros. Six countries -- Russia, Denmark, Finland, theNetherlands, Norway and Sweden -- offered 10 million euros each. "Anumber of other countries indicated that they may soon be able to comeforward with additional contributions," the organizers said in astatement.

The startup funds are to co-finance 1.8 billion euros' worth of loansfrom international financial institutions such as the European Bank forReconstruction and Development for more than a dozen cleanup projectsalready identified.

EU External Relations Commissioner Chris Patten said about 500 millioneuros is to be spent on tackling dangerous nuclear waste in northwesternRussia, which is mainly the legacy of the Cold War, when the SovietUnion built hundreds of nuclear submarines.
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Russian Nuclear Minister Against Repository On Novaya Zemlya
July 10, 2002
(for personal use only)

The Russian nuclear minister Alexander Rumyantsev visited Novaya Zemlyaarchipelago and then stated that it would not be efficient to build theradioactive and nuclear waste repository there, ITAR-TASS reported. Hebelieves it would be more efficient to construct the repository on themainland. Alexander Rumyantsev also said that there were three possiblesites for the repository: in Arkhangelsk region, near Murmansk, and inthe centre of the Kola Peninsula. Rumyantsev promised to take the finaldecision on the repository location later. He claimed that thepermanent frost on Novaya Zemlya would turn into a marshland in 100years. The Russian atomic minister referred to the practice of Finlandand Sweden where such repositories are located inside granite rockswithout cracks and on the south. Besides, the construction would be 4times cheaper on the mainland, the minister claimed.
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J. Nuclear Terrorism

US's Sweeping Efforts To Contain Terror
Edward Alden
Financial Times
July 11 2002
(for personal use only)

Sam Nunn, the former US senator, who has led the effort to keep Russiannuclear weapons out of terrorist hands, warned recently that the US wasin the midst of a new kind of arms race "between those seeking toacquire weapons of mass destruction and those trying to stop them".

Since September 11 the machinery of the US government has been mobilizedas never before to prevent terrorists from using nuclear, chemical orbiological weapons for what is now termed "a catastrophic attack".

Much as with the outbreak of the cold war, both the structure of the USgovernment and its ideology of warfare are being transformed. PresidentGeorge W. Bush has declared that his highest priority is to preventterrorists from striking the US with a nuclear or other deadly weapon.

Last month, he proposed the creation of a new Department of HomelandSecurity. The initiative promises the most significant restructuring ofUS government since the 1947 National Security Act, which created theDefence Department. It will bring together virtually every governmentagency that is in some way concerned with detecting attacks in the US,defending its borders, or responding if the unthinkable happens.

But in spite of the frenzied scramble of the past 10 months, experts saythe US is little closer to a doctrine - a vision and operational planthat coherently directs government action to head off the most pressingthreats against the US.

Instead, there has been a series of warnings from intelligence and lawenforcement agencies of some sort of terrorist attack somewhere in thecountry. The possible targets have included everything from the Statueof Liberty to nuclear power plants and gas pipelines. Most recently, theFBI even warned that al-Qaeda might have developed an "offensive scubadiving capability".

All this has underscored an uncomfortable truth: the US's adaptation tothis new breed of terror must be huge because US authorities have littleor no idea how, or when, terrorists might strike again. As the authorsof a recent Brookings Institution study put it, there are "a nearlyinfinite number of feasible targets" thatterrorists could strike in theUS.

The approach so far has been scattershot. Mr Bush has asked Congress tospend at least $38bn in 2003 for initiatives including:

* Inspecting import shipments. While a nuclear or biological weaponcould perhaps be put together by a terrorist group operating inside theUS, at least some of the key components would almost certainly have tobe smuggled into the country. To prevent that from happening, US Customsis establishing global tracking systems to protect the roughly 16m cargocontainers that enter the country each year.

* Tightening visas. Funding has also been increased more than 20-fold tomore than $380m to improve background checks before visas are issued andto help immigration officials prevent visitors from overstaying theirvisas. The immigration service is also busy cracking down on foreignstudents studying in the US.

* Securing airports. Funding for airport security has more than tripledto finance the federal government's takeover of airport inspections.Personal inspections at airports are already more intrusive, andWashington has asked that by the end of the year all airports installx-ray technology.

* Preventing biological attacks. Congress in May passed a $4.6bnbioterrorism bill that - among other measures - will allow thegovernment to hire hundreds of new inspectors to check for contaminationof the food supply. It also seeks to protect drinking water, and providestricter oversight of research involving deadly biological agents. Thisweek the US said it would vaccinate 500,000 emergency response workersagainst a potential smallpox attack.

While all these effort have enjoyed broad congressional support, somecritics, including former Senator Nunn, worry that the US is building awall around itself that, like the Maginot Line, is destined to fail.Instead, he argues, the US should be concentrating on keeping suchweapons out of terrorist hands in the first place.

"Acquiring weapons and weapons material is the hardest step for theterrorists to take and the easiest step for us to stop," he said.

"By contrast, every subsequent step in the process is easier for theterrorists to take, and harder for us to stop."
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Nuclear Theft Causes Global Alert
Alexander Nicoll
Financial Times
July 8 2002
(for personal use only)

"See that baseball over there?" asks Robert Gallucci of GeorgetownUniversity in Washington. "That's how much plutonium it takes to build abomb of the size we dropped on Nagasaki."

Mr Gallucci, a long-time US official dealing with policy on weapons ofmass destruction, is highlighting why, 57 years after they were firstand last used, they remain a threat to the world's future.

Nuclear arms are the only weapons ever to have achieved massdestruction: the two bombs dropped in August 1945 by US aircraft onHiroshima and Nagasaki in Japan killed 200,000 people directly andcaused untold numbers of subsequent casualties.

While such devastation takes only a baseball's-worth of plutonium, thereis an awful lot of plutonium in the world. As a result of civil andmilitary activity over the past 50 years, the world has an estimated3,000 tonnes of weapons-grade uranium and plutonium - enough to makethousands of bombs - and it is not all in secure storage.

The theft of even a few kilograms could be catastrophic. "The best wayto short circuit the difficulties of nuclear bomb development is toobtain fissile material," says Joseph Cirincione, director of thenon-proliferation project at the Carnegie Endowment.

And the most promising sources of such material for any prospectivenuclear bomb-maker are in the former Soviet Union. According to a reportby Matthew Bunn, John P. Holdren and Anthony Wier of Harvard University,"there are hundreds of thousands of kilograms of military plutonium andhighly enriched uranium spread across the former Soviet Union, much ofit dangerously insecure, and smaller but still immense amounts in theother seven nuclear weapon states."

Moscow may not accurately account for its nuclear materials, makingpossible losses difficult to document.

The Carnegie Endowment for International Peace, in its publicationDeadly Arsenals, quotes estimates of 150 tonnes of plutonium and 1,500tonnes of highly enriched uranium in Russia. "Of this material,approximately 700 tonnes are thought to be in nuclear weapons," it says."Non weaponised materials are scattered throughout Russia at more than53 sites in hundreds of buildings under varying levels of security andphysical protection."

The soldiers guarding nuclear facilities are often drawn from amongweaker military recruits. There are frequent reports in the Russianmedia of theft, suicide, violence and demoralisation among the guards,who are poorly paid and lack good housing. Surveys by US organisationshave reported missing and unlocked doors.

Many incidents of losses of small amounts of fissile material have beenreported. Among the most serious was in 1998, when an attempted theft of18.5kg of material, reported to be highly enriched uranium, was foiledat a Chelyabinsk facility. According to the report by Mr Bunn and hisHarvard colleagues - called Securing Nuclear Weapons and Materials:Seven Steps for Immediate Action - this is the only known case involvingenough to make a weapon.

Indeed, though reports of smuggling are frequent, few are verified. Whatis initially labelled "weapons grade" often turns out to be lower-gradematerial that could have come from any one of thousands of Russiansites. Such material is not usable for a nuclear weapon, but it couldmake a "dirty bomb", in which a conventional explosion would disperseradioactive material.

Sergei Ivanov, the Russian defence minister, has told senior foreignofficials that he has no evidence of weapons materials or equipmentfalling into foreign hands but that some people and expertise may have.

A UK intelligence official says he has no evidence of any case ofinterception of a real transfer of fissile material, though he saysthere have been "hundreds" of sting operations set up by intelligenceagencies, customs services or fraudsters.

Yet this is small comfort. "The significance of the most minimal failureof the system of containment is so large. Just one baseball," says MrGallucci.

The US has spent billions of dollars on reducing the threat from Russianfacilities under the programme, named after its two founding senators,Sam Nunn and Richard Lugar. Nunn-Lugar money has funded the accelerateddestruction of Russian missiles, bombers and submarines, thedeactivation of 5,500 nuclear warheads and the improved storage fornuclear materials.

This is sensitive, painstaking work, carried out in partnership with theRussian government, which naturally wants to maintain sovereignty overits own defence and has difficulty obtaining domestic funding. Someaspects, such as the decommissioning of nuclear submarines, poseparticular difficulties.

The problem with nuclear materials is the long period for which theywill have to be stored before they can be destroyed. "Plutonium is atough nut to crack," says Tom Kuenning, director of co-operative threatreduction at the Pentagon's Defense Threat Reduction Agency. "We need todispose of these materials and make them so they are not usable."

Last month, the other members of the Group of Eight, the world's sevenrichest nations plus Russia, agreed to match the $10bn the US plans toput into the Nunn-Lugar programme over the next 10 years. Though thismoney is the subject of political squabbles in Washington, the war onterrorism will focus US officials even more closely on whether Russiannuclear material is safe.
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K. Announcements

More Than Money: Small Technology Spin-Offs Of The Wmd Complex
Maria Douglass and Peter Falatyn
International Science & Technology Center
July 2002

ABOUT THE AUTHORS: The authors are US staff members at the ISTC inMoscow. Maria Douglass is Senior Technology Implementation Manager andPeter Falatyn is Senior Advisor. The present article does not engage theISTC or its member States. The authors acknowledge the contribution tothis data collection project of the Center for Science Research andStatistics (Moscow).

The positive economic impact of small business and small technology is adocumented fact. This study looks at high-tech small business formationand development aided by R & D funding from a leading nonproliferationorganization, the International Science & Technology Center (ISTC -- see

The "word on the street" is that the ISTC excels in providing newoccupations for weapons of mass destruction (WMD) scientists andengineers but has not assisted real commercial development inscience-based institutions in its target area of the Former SovietUnion. Some attribute the lack of successful high-tech entrepreneurshipamong former WMD specialists to the lack of liquid financial marketsthat could provide an outlet for venture capital.

These assumptions do not accord with our own experience aspractitioners. We have found a modest abundance of high-tech ventures ofvarious kinds, and the key challenge facing them is not money. Likewise,the people with money, the would-be venture capitalists, complain of ashortage not of good technology but of real investment opportunities.What is missing?

** The International Science & Technology Center **

Between 1994 and 2001, the ISTC funded 1,500 scientific researchprojects in the amount of $400 million to engage over 40,000 weaponsexperts from the former Soviet military complex and direct their worktoward peaceful research, thereby promoting nonproliferation. ISTCfunding provides grant payments, equipment for project research,scientists' travel and other support.

** Data Collection Project **

In autumn 2001, the ISTC commissioned a study to assess progress made byISTC-supported scientific research teams in creating and commercializingnew technologies and in acquiring new entrepreneurial skills that willassist the teams after ISTC funding ends. The questionnaire developmentand polling of ISTC Project Managers was conducted by the Center forScience Research and Statistics ( Results from thestudy were received by the ISTC in April 2002.

The study was based on a questionnaire consisting of 36 questions on:

-- aspects of ISTC funding and forms of cooperation and maintenance ofbusiness contacts

-- productivity of R&D projects and their value for continuing researchon the same subject

-- sources of financing for new research

-- forms of commercialization sustaining research activities

-- participation in programs focused on development of small andmiddle-sized business

The survey sample included all managers of ISTC projects eithercompleted or near completion -- 534 people in all, located in 55 citiesand towns in Russia, Armenia, Belarus, Georgia, Kazakhstan, and theKyrgyz Republic. A total of 417 questionnaires were received from eitherISTC project managers or their designees, a response rate of 78 percent.

Nearly a third of all respondents indicated that they were engaged insome form of the commercialization of the results of the ISTC project.Respondents broke down as follows according to the organizational formof their commercial activities:

Contract science and technology projects 65
Small enterprise 22
Joint venture 4
Contract for joint activities
(strategic partnership)
Other / No Answer 308

We investigated the answers of the 22 "small enterprise" respondents infurther detail. This included looking at patterns in the projectmanagers' area of technological expertise, age, abilities in English,and access to the Internet. Eleven of the 22 were interviewed at greaterlength about their enterprises, the challenges facing them, and criticalsuccess indicators or factors.

** Observations **

Contrary to common notions concerning Russian business, we found thatall respondents were happy to share information about their businessactivities. In fact, no interviewees declined to provide even annualsales figures when requested.

We were surprised to find that most of the small businesses wereexisting enterprises engaged in commercializing ISTC project results. Wehad expected promising results to precede business formation. Oneinterviewee noted, that all of the laboratories in his institute thathad survived the brain drain and funding crises of the early 1990s nowhad small businesses associated with them. They were born out ofeconomic necessity, and were established in order to ensure theviability of scientific research in the laboratories.

We compared the distribution of small enterprises by technology areawith the corresponding distribution of ISTC funding. Adisproportionately large number of small business had been formed in thefields of Environment and Biotechnology. Conversely, adisproportionately small number were in expected fields such astelecommunications enabling technologies and information technologies.Given the fast pace of innovation in the latter areas, low barriers toentry, and low start-up costs, entrepreneurial developers of IT may havealready been able to engage in commercial activity even without the helpof the ISTC.

Two examples of successful small enterprises in the field ofenvironmental technologies were studied in depth. These two firms focuson the Russian and "near-abroad" markets, where they are familiar withthe regulatory environment and market requirements and well positionedto compete on cost. Five interviewees were key players in biotechspin-offs. In this field output was sold on both export and domesticmarkets and a wide range of commercialization strategies was used.

** Success Stories **

Three of the five small enterprises in biotechnology (OOO "Imtek"; ZAO "National Biotechnology"; and a spin-off fromthe Institute of Immunological Engineering, Lyubchany, Moscow Region)envision completing the development of drugs taken through thepre-clinical trials stage of drug discovery under ISTC projects. Two ofthe five ("Imtek" and a spin-off from the Institute of Highly PureBiopreparations, St. Petersburg) are involved in supplying live cellcultures and microbiological strains for research and diagnostic assays.While Imtek is exclusively oriented toward the export market (chieflyEurope and North America), the Highly-Pure spin-off sells on thedomestic market.

The sixth firm, Immunoscreen, one of five small enterprises coming outof the State Research Center for Biological Instrument-Making (Moscow)develops and manufactures test kits for screening newborn babies forcongenital disorders. It supplies these test kits only to the Ministryof Health of the Russian Federation, although it is considering otherpotential markets in the former Soviet Union.

The enterprises studied did not emerge as an outcome of new technologydeveloped with ISTC support. Rather, the project managers were able touse ISTC funding to expand or improve an existing product or productline that had already found a limited market niche. This enabled many ofthe small enterprise teams to conserve their very limited capital whilestill maintaining and expanding the scientific capabilities that hadgotten them this far in their nascent enterprises. This was at a timewhen investor and government sources of R & D funding were eithernon-existent or rapidly drying up.

OOO "GlobalTest" -- a small enterprise based in the closed nuclear cityof Sarov -- develops and manufactures specialized vibration sensorssuitable for high-temperature, high-radiation applications in thenuclear power industry. Founded in 1991, GlobalTest received its first R& D funds from ISTC in late 1994. Now GlobalTest is offering over 50products for use by power plants, automakers, and even Moscow'sinternational airport Sheremetyevo.

The Executive Director of NTM-Protection, a designer and manufacturer ofecological control equipment, notes that the main competitors in hisbusiness area have completely different profiles. Yet due to timelyfeedback, NTM-Protection is practically a monopolist in its marketsegments. His business began in 1995, and received its first ISTCfunding in 1997. In a short period of time, NTM-Protection was able todevelop 6 different types of equipment using ISTC funding, all of whichfound success on the Russian market. Foreign competitors have beenpushed out, unable to compete on price and service. Further, the ISTCframework of science research projects allowed weapons scientists toparticipate in NTM-Protection's commercial product development --scientists who otherwise would have had no opportunity to work incommercial development.

A similar dynamic was discovered in the case of National Biotechnology,envisaged as the manufacturing and sales entity for drugs developed withISTC support by the Institute of Applied Microbiology (Obolensk, Moscowregion), and also in the case of another start-up from the Institute ofHighly Pure Biopreparations. This appears to be a universal phenomenon.In an interview with one of the biotech entrepreneurs, it was noted thatmost research institutes establish such structures because they cannotaccrue more than a certain portion of their revenue from manufacturingand sales and at the same time preserve their tax privileges.Conversely, a reduced tax burden is placed upon small enterprises, andthis encourages their formation.

Pharmaceutical products and test kits are sold primarily on the domesticand near-abroad markets. There are several reasons for this:

-- regulatory barriers to entry in Western markets

-- the familiarity of the domestic market (a product of the strongintegration during Soviet times of research institutes, the HealthMinistry, and research hospitals and the wide availability ofepidemiological data)

-- the high cost (relative to median incomes) of Western pharmaceuticalproducts in domestic markets

Many ISTC project managers now involved in small enterprises had theiroriginal business ideas and even some customers before their involvementwith ISTC. The ISTC projects enabled them to continue research anddevelopment, honing their specific products for market niches known tothe project teams. At a time when funding for research in Russia wasscarcest, the ISTC project teams were able to hold together and evenadvance commercial applications of science for the Russian market.

** More than Money **

As already noted, many of the Project Managers interviewed indicatedthat their small business formation was a means for funding additionalscientific research to ensure the viability of their laboratories orinstitutes. Except for two striking cases, the majority of intervieweesconsider themselves scientists first and businessmen a distant second.

Representatives of the science-enabling businesses universally viewedthe need for funding in terms of money for research. The majorchallenges facing their businesses were related to the absence of neededexpertise. One Laboratory Head noted that his biggest need was for aninternational-caliber CEO: "We are not good organizers or traders. Thebusiness could really take off if we had someone to lead us." Theabsence of specialized skill sets appears in other ways too. All but oneinterviewee indicated that marketing -- knowledge of the needs andidentities of potential buyers of their products -- was the significantissue, and not access to investment money.

Immunoscreen is a high-tech spin-off from the Institute of BiologicalInstrument-Making in Moscow. Immunoscreen had been tasked by theMinistry of Heath to develop test kits for use in Finnish diagnosticequipment acquired in the 1980s. The ISTC project included developmentof documentation for certification of the kits, originally designed withsupport from the Ministry of Health. Their sales are growing at 100percent or more annually, but the potential market is inherently limitedby the number of live births in Russia. The founders are interested inexpanding their sales to other former Soviet republics that utilize thesame Finnish equipment. However, the market does not exist until thesecountries reinstate the regulatory mandate to perform newborn screening.Immunoscreen would like to commercialize other results of the ISTCproject involving new diagnostic equipment design, but they lack themarket intelligence to effectively "pitch" the idea to an investor.

** The Exceptions **

Neurok LLC and GlobalTest are the exceptions to the tendency to keepsmall enterprises "on the side." Serge Shumsky, one of the founders ofNeurok -- a start-up established after the completion of the founders'ISTC project -- aims to commercialize its proprietary artificial neuralnetwork technology. Shumsky was born and raised in the closed city ofSnezhinsk (formerlyChelyabinsk-70) and formerly was on the faculty of FIAN Lebedev(Moscow). The remainder of the development team was from the closed-cityinstitute from which Shumsky came, VNIITF (the All-Russian NuclearResearch Center for Technical Physics, the Russian equivalent of SandiaNational Laboratories).

The team left their old positions to form Neurok LLC. When they receivedangel capital, they hired an outside CEO and set themselves up in theMoscow State University incubator technopark. Neurok's CEO had extensivemanagement experience in industry as former CFO of TransNeft tradinghouse, the leading Russian oil-pipeline company and as CEO of aninternational trade and brokerage house, with a Western MBA educationalbackground. Neurok has a VP of Marketing and distinct marketingdepartments, albeit modest, for each of its business units.

** Conclusion **

So the emerging theme in this first look at small enterprises emergingfrom the FSU research sector is that business skills are in shortersupply than money. The ISTC Project Managers, now involved in growingtheir small enterprises, themselves recognize this hurdle. Since theystill identity themselves as scientists rather than as businessheavyweights, they are not committed to or even particularly interestedin expanding their enterprises into big businesses. Their firms areproduct-oriented as opposed to promoting a novel business model orvision that would make them attractive to potential investors. Venturecapital is invested in people, not technologies. However, the absence ofovert signs of financial success should not be misread: they aregenerally satisfied with their professions, and all are making economiccontributions and creating jobs through their small enterprises.
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L. Links of Interest

The Geopolitical Implications Of The War Against Terrorism
Center for Strategic and International Studies
July 12, 2002

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Nuclear Electricity Production Edging Up
International Atomic Energy Agency
July 11, 2002

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Senate Defense Authorization Bill Strengthens And Expands
Non-Proliferation Efforts
Council for a Livable World
July 9, 2002

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Fact Sheet: Comparison Of U.S.-Russia Nuclear Reduction Treaties
July 8, 2002

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