THE NUCLEAR CITIES INITIATIVE:

STATUS AND ISSUES January 1999

Background

The Nuclear Cities Initiative (NCI) is a new U.S.-Russian nonproliferation program designed to facilitate economic development and downsizing in the Russian nuclear weapons complex. The program was initiated because there is a serious economic strain on key facilities in the Russian nuclear complex and this situation has raised nuclear proliferation concerns, in particular the potential leakage of fissile materials and knowledgeable scientists to countries posing a proliferation risk. Also, the Russian government has determined that its nuclear complex should be re-configured to a smaller size and that this objective requires creating alternative, peaceful employment opportunities for many of the weapons scientists, technicians and engineers that would be displaced by this process. The NCI goal is to create 30,000-50,000 jobs in the Russian nuclear complex by the end of the program (estimated at 5-7 years) at a cost of approximately $550 million.1

The major installations of the Russian nuclear weapons complex are the ten "closed nuclear cities" managed by the Russian Federation Ministry for Atomic Energy (Minatom). These facilities design, maintain, and dismantle weapons and produce fissile material and weapon components. It is estimated that 732,000 people live in the closed cities, and approximately 127,000 are employed in the key nuclear enterprises.2 As part of the U.S.-Russian discussion on the structure of the NCI it was determined that the program would initially focus its efforts on three of Russia's closed cities: the nuclear weapon design laboratories Arzamas-16 (Sarov) and Chelyabinsk-70 (Snezhinsk), and the plutonium production facility Krasnoyarsk-26 (Zheleznogorsk). U.S. government managers of the program have stated that the effort could be expanded to six closed cities in two years and all ten in three years.3

The NCI was created through discussions between the Russian-American Nuclear Security Advisory Council (RANSAC), a nongovernmental organization, and the U.S. and Russian governments. These discussions began in May 1997 and culminated in a U.S.-Russian agreement on the Nuclear Cities Initiative in September 1998. However, this work built on years of laboratory-to-laboratory and government-to government contacts between U.S. and Russian officials.

The original RANSAC concept proposed that the Nuclear Cities Initiative consist of several inter-related components to help transform the Russian complex. These were: private sector development; creation of nonproliferation research and analysis centers; and expansion of U.S.-Russian cooperation on environmental clean-up activities.4 The U.S.-Russian governmental structure for the NCI has provided the flexibility for the creation of these three "legs" of the NCI program, but the early emphasis of the program is clearly on business development.

To date, the majority of work under the NCI has focused on developing the structure and legal basis for the cooperation, funding a number of specific projects at closed cities, and exchanging visits to U.S. and Russian facilities.

(Click here to see a map of Russia's Closed Nuclear Cities.)

NCI Objectives

The overarching objective of the NCI is set out in Article I of the September 1998 intergovernmental agreement. It states that the purpose is "to create a framework for cooperation in facilitating civilian production that will provide new jobs for workers displaced from enterprises of the nuclear complex in the 'nuclear cities' controlled by the Ministry of the Russian Federation for Atomic Energy."5 Other official statements make clear that the initiative is regarded as an equal partnership between both countries that will require a long-term commitment and funding provided by U.S. and Russian government programs, multinational organizations, and private firms.6

The program has set out a sequence of goals that are mutually reinforcing. The short term objective is to generate civilian employment for displaced weapons workers, while the longer term goal is to assist Russia with the downsizing of its nuclear weapons complex. In the view of Russian government officials, the orderly shrinkage of the Russian nuclear complex will be difficult, if not impossible, without the creation of alternative jobs for displaced weapons complex employees.7

Under the terms of the NCI agreement, the U.S. will seek to facilitate the creation of new jobs by engaging with Russia in the following types of activities:

• Sharing experience in the diversification of production;

• Facilitating the selection of promising projects for production diversification and creating the conditions that will enable them to be implemented;

• Developing entrepreneurial skills in employees displaced from enterprises of the nuclear complex, training them in how to write a business plan, and facilitating development of such plans; • Facilitating creation of the conditions necessary for attracting investment in the nuclear cities for purposes of implementing the projects;

• Facilitating the search for potential investors for production diversification projects, market analysis, and for marketing products and services;

• Facilitating access to existing investment mechanisms, including investment funds; and

• Identifying mechanisms for the funding of projects under the Initiative.

In the first year, the U.S. managers of the NCI have stated that they would like to create one significant business employing about 200 people in each of the three closed cities chosen as the first testing grounds for the program.8 A number of specific activities that could be implemented to reach these near-term and broader objectives are outlined in the Department of Energy's "Report to Congress on the Nuclear Cities Initiative." (See Annex III).

NCI Structure

During 1998, significant progress was made in creating a structure for the operation and implementation of the NCI. The plan calls for three levels of activity: an intergovernmental, interagency steering committee; an advisory committee composed of non-governmental experts; and informal joint working groups focused on issues specific to individual nuclear cities.

The activities of the steering group include developing joint action plans, reviewing project recommendations, and serving as a dispute resolution mechanism. The steering committee also is responsible for establishing the joint working groups. The U.S. Energy Department (DOE) and Minatom serve as steering committee co-chairs.

The U.S. steering committee, in addition to DOE, consists of representatives from the Commerce, State, and Defense Departments, as well as the Agency for International Development, the National Security Council, the Office of Science and Technology Policy, and the Office of the Vice President. Besides Minatom, the Russian members of the steering committee include the Ministries of Economics, Finance, Industry and Trade, and Foreign Affairs. The Russian Federal Security Service will also participate. At present, the Russian Ministry of Defense is not a member of the steering committee.

The non-governmental experts committee is currently scheduled to be selected in early 1999. It is envisioned that the advisory committee will consist of about a dozen senior figures drawn from industry, the finance and academic communities, and non- governmental organizations.

The joint working groups have been created to address and monitor issues in the three cities initially targeted by NCI. One DOE Defense Programs laboratory and one non- defense laboratory will work with each Russian nuclear city. At present, Sandia National Laboratory (SNL) and Oak Ridge National Laboratory (ORNL) are working with Krasnoyarsk-26; Lawrence Livermore National Laboratory (LLNL) and Pacific Northwest National Laboratory (PNNL) are collaborating with Chelyabinsk-70; and Los Alamos National Laboratory (LANL) and the Savannah River Site (SRS) are coordinating with Arzamas-16.

To date, the working groups have concentrated mostly on traveling to the nuclear cities to familiarize themselves with the facilities, infrastructure, and existing activities at the locations. In November 1998, the LLNL-PNNL working group conducted a site visit at Chelyabinsk-70. There they viewed on-going conversion attempts and held a series of meetings with Russian scientists and local government officials. In early December, the Los Alamos-Savannah River team conducted a similar visit to Arzamas-16. Reciprocal visits by Russian delegations to U.S. facilities have also occurred. During the Summer and Fall of 1998, representatives from Arzamas-16, Chelyabinsk-70 and Krasnoyarsk-26 made week-long visits to PNNL to review economic conversion at the laboratory and surrounding communities. An Arzamas-16-Minatom team also toured the Oak Ridge facility to review economic development activities at that location. Other U.S. laboratories have also held NCI-related meeting with their Russian counterparts.

DOE plans to analyze the information from these lab-to-lab exchanges and distribute them to the public to facilitate a more intensive exploration of possible commercial development opportunities. The plan is to eventually expand working group membership to include major business, finance, and technology leaders from the United States, and officials from local and regional governments in Russia.

(Click here for information about U.S.-Russian Nonproliferation Programs Complementing NCI.)

NCI Status

Since the U.S.-Russian decision to create the NCI in March 1998, a number of activities have been undertaken in support of the initiative by the U.S. and Russian governments, the U.S. Congress, and non-governmental organizations.

Government Actions

The U.S. and Russian governments have focused their attention in six areas:

• Negotiation of the government-to-government agreement and creation of the NCI organization. This work included convening meetings of the joint steering committee, organizing the working groups and their meetings, and participating in numerous informal discussions on the subject. • Preparation of a report to Congress on the goals, milestones, duration, and life cycle funding for the NCI. This report was submitted to Congress in December 1998. It must now sit for 20 legislative days before any funding can be released.

• Introduction of the NCI to the public. In December 1998, DoE held an information day briefing on the NCI for interested parties in Washington, D.C. Additional activities included preparing for participation in seminars on the NCI in January 1999 in Washington, D.C. and Cambridge, Massachusetts.

• Evaluation of proposals from the nuclear cities for projects that can be initiatedunder the NCI. A particular focus is being placed on identifying a first group of diversification projects that can deliver "quick successes."

• Financing 18 projects at Russian closed cities under the U.S. Initiatives for Proliferation Prevention program, and working with the International Science and Technology Center to generate approval of 23 additional closed city projects (See Annex II).

• Determining how to fund the NCI in fiscal years 1998 and 1999.

Congressional Actions

Because the Nuclear Cities Initiative initially was agreed to by the U.S. and Russian governments in March 1998, the U.S. government did not include any funds for it in the fiscal year 1999 budget request. The U.S. government also had not budgeted for it in fiscal year 1998. This raised the threat that the new initiative would be insufficiently funded during its crucial first two years.

The short term budget problem was solved when the U.S. Department of Energy took steps to utilize funds from its IPP program to sustain the NCI in its first year. These activities were within the mandate of the program as approved by the Congress. The majority of this funding was allocated to 18 IPP projects that were approved in the Summer of 1998 and the financing of visits to Russian and American facilities. However, the longer term financing of the program presented the Clinton Administration with a more difficult problem that was solved only with the assistance of U.S. non-governmental organizations.

Since no FY99 funds for NCI had been requested by the Administration, in the Summer of 1998, members of RANSAC worked with key congressional committees to generate support for the NCI in three Senate bills. In the Energy and Water Appropriations Act and the Defense Authorization Act, the Senate initially provided $30 million for the NCI and an additional $15 [sic] for the IPP program. However, the language in these bills required that the funds be taken from the budget requested for the Department of Energy's non-proliferation and national security activities, or from unspent prior year balances in the Department's IPP budget. This meant that no new funds for the NCI were provided on top of the Administrations' original January budget request but that DoE could shift funds to NCI from other activities that were determined to be of lesser priority. In the Senate report accompanying the Foreign Operations Appropriations Act, there was language stating that the NCI is a vital undertaking and strongly recommending that sufficient funds be made available for it.

The final version of the Foreign Operations Appropriations Act, completed in the Fall of 1998, did not modify the language that was in the original Senate report, so this statement stands. However, the final Energy and Water Appropriations Act and the Defense Authorization Act, in terms of providing funding for the NCI, differed somewhat from the original Senate versions. The Energy and Water Appropriations Act allowed $15 million to be spent on NCI, while the Defense Authorization Act allowed $20 million to be spent on NCI and IPP together. In both cases the bills again required DoE to find the NCI money within existing budgets, a task that will require some difficult re-prioritizing of other non-proliferation and national security activities.

In addition, the authorization bill required that a detailed report on the NCI be submitted by DOE and that it wait 20 legislative days after the report is submitted before any funds are allocated. DoE submitted this report in December 1998, but since the Congress does not reconvene until early January 1999, and the legislative calendar is riddled with recesses in its early months, in practice, the 20 legislative day requirement may not be met before February or perhaps March. This could mean that no new funds on NCI will be expended until the Spring of 1999. Informally, however, the relevant congressional committees have indicated that prior year unexpended balances from the IPP program can be used to finance NCI activities until the waiting period has expired. This prior year balance is estimated by DoE officials to be approximately $5 million.9

Despite the reporting requirements, delays, and lack of new money, the Congress seems to be willing to provide a trial period for the NCI to prove itself. This was done through the initiative of a few key members of Congress that have taken an interest in the development of the NCI, including Senators Biden and Domenici (principal authors of the first NCI funding amendment), Bingaman, Daschle, Kerrey, Leahy, Levin, Lugar, and Representatives Hastings, Spratt and Thornberry.

(Click here for information on Congressional Legislation Related to NCI.)

Non-Governmental Organization Actions

U.S. non-governmental organizations (NGOs) have been very active in helping the initiate and generate financial support for the NCI. Many NGOs have been advocating deeper U.S.-Russian cooperation on the reconfiguration of the U.S. and Russian nuclear complexes and the development of additional cooperative non-proliferation activities.

Some NGOs are still very involved in defining the NCI, but many of their ideas go beyond those currently embraced by the U.S. and Russian governments. Specifically, the most active NGOs in this area support broadening the NCI beyond its initial focus on business-related activities to include early stage cooperation in non-proliferation, environmental technology, energy research, and other areas. In their view, such a multi- pronged strategy can improve U.S. and Russian security by: reducing proliferation risks; helping to shrink the size of the workforce and production capacities available for nuclear weapons design and production in Russia; strengthening Russia's ability to control dangerous exports; and developing technology and information both sides can use.

The NGO community also helped to plan NCI related events held in the U.S. in January 1999. One was a session devoted to the NCI at the annual Carnegie Endowment for International Peace Non-Proliferation Conference. Another was a forum on the economic potential of the closed cities at the annual Harvard University "U.S.-Russia Investment Symposium".

NCI Issues

Like many U.S-Russian cooperative nonproliferation activities, the NCI has the potential to significantly further U.S. and Russian economic and security goals, but only if it is effectively implemented. However, unlike other joint programs developed since the collapse of the Soviet Union, the NCI has a much broader focus, since its goal is to address the economic instability that fuels fears about the proliferation of nuclear weapon materials and scientists from the weapons complex. The breadth of the program presents a number of serious challenges that should not be underestimated. However, the program's scope also provides it with fertile new opportunities. If properly balanced, the NCI can provide early successes that result in sustained economic development, and provide an incentive for the Russian nuclear complex to work on important non- proliferation, environmental, and other issues.

Business Development Impediments

The primary difficulties for the NCI are the desire to create economic development at a time when Russia is experiencing a wrenching economic downturn, and the need to generate this economic development in the secret world of the nuclear complex. Each of these problems will require significant work if they are to be solved. Both issues will be complicated by the political debates in the U.S. and Russia over the future relationship of the two countries and policies and actions of each that may cause disagreements between them (i.e. nuclear technology sales to foreign countries). Some of these issues will be beyond the control of the NCI program and possibly its managers, but a successful NCI can also help to solve some of them by providing alternative sources of income to Minatom and its complex. However, a significant level of success in the development of private sector businesses will be impeded unless several difficult problems are adequately addressed in the near future.

Developing Business Knowledge. After almost a decade of indigenous and U.S. sponsored attempts (through the IPP program) to facilitate the transition of Russia's closed nuclear cities from dependence on military activities to a focus on commercial ventures, it is clear that the results have fallen far short of expectations.10 This requires that new thinking and methods be applied in the implementation of the NCI if it is to surpass past disappointments and generate broad scale successes.

In Russia, the majority of the people involved in the NCI are scientists and engineers that have had little exposure to the needs and requirements of business. To a large degree this is also true of the current U.S. collaborators (government officials and laboratory scientists). Therefore, it seems that the program would benefit from engaging business professionals to assist in this effort at an early stage and that business education and training should be significant initial activities for the NCI. These activities should include: training nuclear city entrepreneurs in the basics of business management and accounting; providing assistance in developing business plans and assessing markets; demonstrating the techniques for seeking out investors and strategic partners; teaching methods of identifying funds to provide initial capital for new enterprises; establishing business centers at key cities; and employing professional analysts to review project proposals.

Facilitating Investment. The impediments to investment in Russia are well known. Many relate to the inability of the central government to make the legal changes necessary to allow for the purchase of private property, reform complicated tax laws, and tame corruption. Certainly all of these problems will affect the ability to attract investment in the closed cities. However, there are some unique aspects of the closed cities that are attractive, primarily the low levels of organized crime and highly skilled, reasonably priced workforce. Still westem business people have stated that the economic, social, and political issues in the closed cities are not well known to them, and this may further complicate their ability to invest in new commercial projects at these locations.

The issues businesses have raised include:

• Lack of knowledge about life in the closed cities;

• The degree of access that will be permitted to the closed cities, and potential friction with the Russian security services;

• Uncertainties about existing infrastructure in the cities, and the willingness of the local and central governments to provide resources and funding to facilitate commercial development projects;

• A restrictive communication infrastructure that limits nuclear city contact with rest of the world;

• Questions about the specific capabilities of the workforce; and

• Restrictions on technologies that can be shipped to nuclear weapons facilities, such as advanced computers.

Some of the nuclear cities have sought to address these problems and shift to a more business-friendly focus, For example, Arzamas-16 has established a reduced-tax investment zone to draw in businesses, and created an investment fund to provide initial start-up funding for new enterprises. In particular, this investment fund, financed through payments from all the businesses registered in the investment zone, seems to have been consciously set up to ensure that decisions are made on good business grounds, that the management of the fund is fully auditable and transparent, and that no funding is diverted to the nuclear weapons institute. Other closed cities are less advanced in their thinking in this area than Arzamas but many are working with local and central government institutions to take additional steps to encourage investment.

However, not all of the problems are on the Russian side. One area with significant economic potential is collaboration between western computer software companies and Russian closed cities, particularly the weapon design laboratories. Some contracts for unclassified software products have already been signed and the western partner claims to be very satisfied with the results. But, expansion of this contract and work with other companies is being stymied by U.S. laws that limit the ability to ship high powered computers to Russian nuclear weapon related institutes. This is an issue that can only be addressed by the executive branch and Congress in the United States.

Under-explored Opportunities

The intensive focus on business development and attracting investment in the closed cities has consumed most of the officials working on the NCI. However, there are other activities that could be undertaken through the program that could generate significant employment, provide early successes, contribute to missions that the Russian nuclear complex must ultimately embrace, and benefit U.S. non-proliferation and environmental clean-up goals. Unfortunately, to date, these activities have been under-explored, though not ruled out, as part of the NCI.

Development of Nonproliferation Research and Analysis Centers. Shifting former nuclear weapon scientists to focus on nonproliferation and arms control research and analysis is a fertile opportunity. A relatively small amount of funding could facilitate the start-up and basic operation of a few nonproliferation centers which could provide tangible deliverables within a year. U.S. nuclear weapons laboratories have already made this transition very successfully. For example, at LLNL, a U.S. nuclear weapon design lab, the Proliferation Prevention and Arms Control Program grew from $30 million to $160 million per year during the period of 1990-1997, and many former weapons scientists have made the transition to this line of work.11 Similar shifts have occurred at most other U.S. national laboratories.

The proposal for the development of nonproliferation centers at Russian nuclear research centers was raised at a May 1997 RANSAC meeting in Moscow. The original idea was to establish non-proliferation centers that are similar to those that exist at U.S. laboratories at four Russian institutes: Arzamas-16; Chelyabinsk-70; the Institute of Physics and Power Engineering (IPPE) at Obninsk; and the Russian Research Center Kurchatov Institute (RRC-KI) in Moscow (IPPE and RRC-KI are not in closed nuclear cities). Areas where additional, worthwhile nonproliferation work could occur at Russian labs include: verification of past fissile material production ("nuclear archeology"); verification of a fissile material cutoff treaty; identification and analysis of the declassification of information in Russia; assessments of foreign nuclear programs; non- proliferation technology detection/verification; methods and options for warhead dismantlement transparency and verification; improvement of export controls; and training of a new generation of non-proliferation specialists. Collaboration with the U.S. could be expanded to many of these areas, and others, through U.S. government, laboratory, and private grant-making foundation funding.

The Kurchatov Institute took the first step in this direction and has received funding from a U.S. philanthropic foundation for the establishment of the Kurchatov Analytical Center for Non-Proliferation and Control (KACNAC). In its first year, KACNAC will focus on producing four analyses: a study of Russian-Iranian nuclear relations; conversion of Russian icebreaker fuel from highly-enriched to lowenriched uranium; methods for verifying a fissile material production cutoff; and means for improving the Russian export control system. Proposals for the creation of non-proliferation centers have also been submitted by IPPE and Chelyabinsk-70. At the time of this writing, it is anticipated that the U.S. Energy Department will designate a portion of the NCI's 1999 funds to support some of the projects at the Chelyabinsk-70 non-proliferation center.

Cleanup Technology Development and Testing. Both the United States and Russia face an enormous challenge in cleaning up their nuclear weapons complexes. This will require development of many new technologies. A portion of the NCI funds could be used to facilitate cooperation in this area.

The United States spends roughly $300 million per year developing new technologies for nuclear cleanup but the results have been disappointing. In fact, according to a 1997 report by the U.S. Congressional Research Service, since 1991 DOE has spent $2 billion funding 1,370 cleanup R&D projects. Fifty of these technologies have been deployed at a projected lifetime cost savings of $309 million.12By comparison, a small U.S.-Russian cooperative program in this area has been financed at $10 million since 1992 and 30 Russian-developed technologies have been identified as being potentially applicable to the U.S. cleanup problem. Five of these technologies are now available for use in the U.S. and the most expensive of them cost $800,000 to produce.

Contracting a small portion of future U.S. environmental clean-up research and development activities to Russian rather than U.S. experts could provide multiple benefits: the United States would get technology developed more cheaply than developing its own; contaminated Russian facilities that could serve as demonstration sites for new technologies; nuclear weapons experts would be redirected to peaceful tasks; and Russia could utilize these technologies at its numerous contaminated nuclear sites. However, at present, the U.S. NCI managers do not plan to expand the NCI to environmental activities until Fiscal Year 2000. In order to prepare for successful work in this area, one issue that could be addressed in 1999 is developing a quality assurance program for Russian environmental technologies. Regardless of the effectiveness or decreased cost, Russian technologies may be disqualified from use in the United States if they cannot meet U.S. quality assurance requirements and strict environmental standards. A first step could include developing a program to teach the Russian institutes about the standards that environmental technologies must meet to be considered for use in the United States.

Other Proposals. In addition to the non-proliferation and environmental areas, other ideas for NCI activities have also been put forth. These include contracting with closed city experts on energy, nuclear safety, emissions-trading related activities, and radioactive waste management issues. There have also been suggestions that new nuclear projects, such as those that may be required for plutonium disposition, be pursued and that there be a better dialogue on the social implications of downsizing the Russian nuclear complex.13

Conclusion

The Nuclear Cities Initiative is a major new undertaking for both the U.S. and Russian governments. The problem it seeks to address is very serious and lack of success would have security and political consequences in both countries. To date significant progress has been made in creating the foundation and operating structures for the NCI, but the most difficult and important work remains in the future.

In the United States, the program faces the challenge of convincing a skeptical Congress that an undertaking of this size and scope can be successful. If key members of the Congress are not persuaded early on that the NCI will work, future funding could be in jeopardy. In Russia, there are significant impediments to investment and the location and culture of the closed cities further complicates this already difficult challenge. These circumstances place an enormous burden on both governments. But it also provides them with an unique opportunity to forge coalitions with new allies including savvy industries, non-governmental organizations, and the investment community.

In order to address the challenges posed by this initiative, both countries may need to temper their intense emphasis on private sector development in the early stages of the program while the foundation for investment is built inside the closed cities and rebuilt in Russia as a whole. In addition, more attention should be focused on other potential aspects of the NCI, such as creating and expanding non-proliferation centers and developing environmental clean-up technologies. These activities can produce jobs, income, and benefits for both countries. Employing a multi-pronged strategy also may be the best way to ensure that early progress under the NCI is concretely demonstrated and that the transformation of the Russian weapon complex begins in earnest and is stable and sustainable over the long term.

Endnotes 1. U.S. Department of Energy, Report to Congress on the Nucleat Cities Initiative, p.9. Washington, D.C., December 1998. Also, presentation by William Desmond, Nuclear Cities Initiative Director, at the "Nuclear Cities Initiative: Information Day," U.S. Department of Energy, Washington, D.C., December 2,1998.

2. Cetina, Jill, Oleg Bukharin, and Frank von Hippel, Defense Conversion and Small Business Development: A Proposal for Two IFC Projects in Three of Russia's Closed Nuclear Cities, Report 306, Princeton University Center for Energy and Environmental Studies, March 1998. See also, Bukharin, Oleg, Minatom's Adjustment to New Realities, Report 301, PU/CEES, September 1997. Also, private conversations with Russian officials.

3. Desmond, ibid.

4. Russian-American Nuclear Security Advisory Council (RANSAC), "The Nuclear Weapons Complexes: Meeting the Conversion Challenge A Proposal for Expanded Action," September 1997.

5. Agreement Between the Government of the United States of America and the Government of the Russian Federation on the Nuclear Cities Initiative, September 22, 1998.

6. Joint Statement Regarding the Initiative for Cooperation by the United States Department of Energy and the Ministry of Atomic Energy for the Russian Federation for the Development and Conversion of the "Atomic Cities," March 1998.

7. Private conversations of the author with Russian officials.

8. Desmond, ibid.

9. Desmond, ibid.

10. Several Russian facilities have been successful in initiating a few commercial projects in recent years. Some of the projects have been financed by Russian businesses, such as the gas company Gazprom. Others are foreign financed, including: production of video and audio tapes for BASF, a German-based multinational corporation, in Krasnoyarsk-45; investment by a Korean firm in a diamond-cutting capability at Arzamas-16; and a contract between Intel, a U.S. computer firm, and scientists at Arzamas-16 to work on software.

11. Presentation by William Dunlop, Lawrence Livermore national Laboratory at a RANSAC workshop, Moscow, Russia, April 7, 1998.

12. Holt, Mark and Jeff Day, Environmental Technology Development at DOE, Congressional Research Service, Washington, D.C., March 1997. 13. For an overview of other activities that should be undertaken by the Nuclear Cities Initiative, see Bunn, Matthew, Oleg Bukharin, Kenneth Luongo, and Frank von Hippel, "Retooling Russia's Nuclear Cities," Bulletin of Atomic Scientists, September/October 1998, pp. 44-50.

Russia's Closed Nuclear Cities

1 Arzamas-16, Sarov: Nuclear Weapon Design, Nuclear Weapon Assembly/Disassembly

2 Chelyabinsk-70, Snezhinsk: Nuclear Weapon Design

3 Chelyabinsk-65, Ozersk, Mayak: Plutonium Production, Tritium Production, Weapon Component Fabrication

4 Krasnoyarsk-26, Zheleznogorsk: Plutonium Production

5 Krasnoyarsk-45, Zelenogorsk: Uranium Enrichment

6 Penza-19, Zarechnyy: Nuclear Weapon Assembly/Disassembly

7 Sverdlovsk-44, Novoural'sk: Uranium Enrichment

8 Sverdlovsk-45, Lesnoy: Nuclear Weapon Assembly/Disassembly, Weapon Component Fabrication

9 Tomsk-7, Seversk: Plutonium Production, Uranium Enrichment

10 Zlatoust-36, Trekhgornyy Nuclear Weapon Assembly/Disassembly

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U.S.-Russian Nonproliferation Programs Complementing NCI

Before the Nuclear Cities Initiative was developed, the U.S. and Russia were engaged in a variety of other cooperative nuclear security programs. Many of these programs have provided funding to the Russian nuclear complex for work on peaceful, nonproliferation- related activities. These programs and projects will continue to function in tandem with the Nuclear Cities Initiative in the future. Several important programs are:

• Highly-Enriched Uranium (HEU) Purchase Agreement. Under this 1993 agreement the United States will purchase 500 metric tons of HEU from retired Russian weapons. The HEU will be down-blended to a non-weapon usable enrichment level. When completed, the program will have provided Russia with $12 billion over a 20 year period. A portion of the annual income from the deal is used to pay some Minatom closed cities for their work in the down- blending process.

• Material Protection, Control, and Accounting (MPC&A) Program. In this effort, U.S. and Russian experts cooperate to install advanced security systems at Russian nuclear facilities containing plutonium and highly-enriched uranium. This program allocates several million of dollars annually to Russian nuclear facilities for MPC&A equipment, training, and labor. Most of the closed nuclear cities are involved in this effort.

• Fissile Material Storage Facility. Through the Cooperative Threat Reduction (CTR) program (also known as the Nunn-Lugar program) administered by the U.S. Department of Defense, the U.S. is funding construction of a fissile material storage facility at Mayak (Chelyabinsk-65). A portion of the money spent on thisproject is used for materials and labor procured in that city.

• Plutonium Production Reactor Conversion. This is a DoE-CTR program under which the U.S. is helping facilitate the conversion of the last three Russian plutonium production reactors at Tomsk-7 and Krasnoyarsk-26 so that the reactors can continue to generate heat and power without producing fissile material. As this program is implemented, U.S. assistance will help support hundreds of Russian nuclear workers.

• Plutonium Disposition. This U.S.-Russian and international effort is focused on eliminating plutonium that has been declared excess to national security needs. Significant work has been completed in evaluating options. Construction of disposition facilities can commence once a U.S.-Russian agreement is completed. This process will require between a billion and several billion dollars to complete, but only about $200 million is currently committed to the effort.

• Initiatives for Proliferation Prevention (IPP). This program was established in 1994 to facilitate commercial joint ventures between U.S. businesses and Russian chemical, biological and nuclear weapon institutes. To date, cumulative funding for this program is about $114 million, with only a small fraction having been spent in the ten closed nuclear cities (principally Arzamas-16 and Chelyabinsk- 70). This is changing, as IPP has been re-oriented to focus much of its effort on the needs of the Russian nuclear complex. About 400 projects have been funded and developed through IPP, employing about 4,400 workers.

International Science and Technology Center (ISTC). This is an international initiative that focuses on funding non-military research projects for Russian scientists. The Center, located in Moscow, is funded through the U.S. State Department, in concert with Japan, Canada, and the European Union (a sister center is located in Kiev). To date, over 17,000 scientists in Russia and Ukraine have been employed through this program. (Back)

Congressional Legislation Related to NCI Energy and Water Appropriations Act for FY99, HR 4060, Conference Report to Accompany HR 4060 Title III Department of Energy, Nonproliferation and National Security (p. 108): The conferees have deleted the bill language included by the Senate for the Initiatives for Proliferation Prevention (IPP) program and the nuclear cities initiative. However, from within available funds and prior year balances, the conference agreement includes $25,000,000 for IPP and $15,000,000 for the nuclear cities initiative. National Defense Authorization Act for FY99, HR3616, Conference Report to Accompany HR 3616 Title XXXI DOE National Security Programs, Subtitle C-- Program Authorizations, Restrictions, and Limitations, Sec. 3133. Nonproliferation Activities. (p. 331) a) Initiatives for Proliferation Prevention.--Of the amount authorized to be appropriated by section 3103(a)(1)(A)(ii), up to $20,000,000 may be used for the Initiatives for Proliferation Prevention program. b) Nuclear Cities Initiative. 1) Funds authorized under this title may not be obligated or expended for the purpose of implementing the Nuclear Cities Initiative until A) the Secretary of Energy submits to the congressional defense committees the report described in paragraph (2); and B) a period of 20 legislative days has expired following the date on which the report is submitted to Congress. 2) The Secretary of Energy shall prepare a report on the Nuclear Cities Initiative. The report shall describe A) The objectives of the initiative; B) methods and processes for the implementation of the initiative; C) a program timeline for the initiative with milestones; and D) the funding requirements for the initiative through its completion. 3) For purposes of this section, the term " Nuclear Cities Initiative" means the initiative arising pursuant to the March 1998 discussion between the Vice President of the United States and the Prime Minister of the Russian Federation and between the Secretary of Energy of the United States and the Minister of Atomic Energy of the Russian Federation. 4) For purposes of paragraph (1)(B), a legislative day is a day on which both Houses of Congress are in session. Foreign Operations, Export Financing, and Related Programs Appropriation Act for FY999 Senate Report 105-255, accompanying S. 2334 (p. 34) NUCLEAR CITIES The Committee is aware that in March 1998 the United States-Russian Commission on Economic and Technical Cooperation created the nuclear cities initiative, to focus attention on the economic problems facing Russian nuclear weapons complexes. The initiative has the potential to significantly reduce the danger of nuclear proliferation from the brain drain of knowledgeable scientists, the potential theft of fissile material created by economic desperation, and sales of nuclear technology to countries of proliferation concern. The Committee is concerned that since the nuclear cities initiative was not created until after the President submitted his fiscal year 1999 budget request, this vital undertaking may not be adequately funded. The Committee, therefore, strongly recommends that sufficient funds be made available from the NIS account to support the implementation of the nuclear cities initiative, including the promotion of economic development and private sector investment in Russia's closed nuclear weapons complexes.

(Back)

ANNEX I: NCI Chronology

1997

• April: RANSAC meeting on "The Nuclear Weapons Complexes: Meeting the Conversion Challenge", convened in Moscow.

• September: Release of RANSAC document on "The Nuclear Weapons Complexes: Meeting the Conversion Challenge: A Proposal for Expanded Action".

• September: Vice President Albert Gore and then-Prime Minister Victor Chernomyrdin make first reference to "promoting the conversion of the Russian nuclear complex" at the ninth meeting of the joint Commission on Economic and Technological Cooperation (also known informally as the "Gore-Chernomyrdin Commission").

1998

• March: Vice President Albert Gore and then-Prime Minister Victor Chernomyrdin agree to cooperate on nuclear cities issues at the tenth meeting of the "Gore-Chernomyrdin Commission".

• March: U.S. Energy Secretary Federico Pena and Russian Atomic Energy Minister Yevgeny Adamov issue a joint statement agreeing to actively promote conversion and nonproliferation activities in the Russian weapon complex.

• May: Undersecretary Ernie Moniz of the U.S. Energy Department and Deputy Atomic Energy Minister Lev Ryabev hold a preliminary planning meeting in Moscow to develop the structure and framework for the Nuclear Cities Initiative.

• June: A delegation from Sarov consisting of scientists and officials from the city and regional governments attend a DOE-sponsored "Economic Diversification Workshop" at Pacific Northwest National Laboratory in Richland, Washington.

• July: NCI Steering Committee convenes its first meeting in Washington D.C., and members of the Russian delegation visit DOE's Oak Ridge lab in Tennessee to learn about U.S. experience in reducing the size of and converting parts of its weapons complex.

• July: At the Eleventh meeting of the joint Commission on Economic and Technological Cooperation Vice President Gore and then Prime Minister Kiriyenko pledge to provide mutual assistance and resources to the Nuclear Cities Initiative.

• September: Energy Secretary Richardson and Atomic Energy Minister Adamov sign the NCI government-to-government agreement.

• September, November, December: Joint Working Group visits commence.

• December: DOE submits the "Report to Congress on the Nuclear Cities Initiative."

ANNEX II: 1998 IPP and ISTC Projects Approved in the Closed Cites

Recent International Science and Technology Center Approved Projects Involving the "Nuclear Cities"

Approved at the 17th Governing Board held November 8-9, 1998

Nuclear Institute Description Duration Funding Parties VNIITF (Snezhinsk Development of the Instruments for Optical 3D-Intrascopy- 24 months EU, USA, Norway (Chelyabinsk-70)) Medical Optical Tomography VNIITF (Snezhinsk Development of On-line System Based on a Long-lived 18 months (Chelyabinsk-70)) Sensor for Measuring Concentrations of Toxic Elements in EU River Water VNIITF (Snezhinsk Investigation of Opportunities for Increasing Explosives 24 months (Chelyabinsk-70)) Work Safety in Collieries with Dangerous Levels of Gas and USA Dust VNIITF (Snezhinsk Feasibility Study of Technology for Computer-Aided Design 30 months EU, USA (Chelyabinsk-70)) of New Drugs VNIITF (Snezhinsk RIKEN/Budker INP Low Energy Positron Source 12 months Japan (Chelyabinsk-70)) VNIIEF (Sarov Study of Stability and Perturbation Evolution of Diverging 36 months USA (Arzamas- 16)) and Converging Shock Waves VNIIEF (Sarov Development of a Method of Phase-Conjugated Remote 36 months EU (Arzamas- 16)) Sensing of Turbulent Atmosphere Based on Stimulated Scattering VNIITF (Snezhinsk Theoretical and Experimental Study of Physical Effects 24 months (Chelyabinsk-70)) Concerned with Interaction Between Polarization and EU, USA Propagation of Light VNIIEF (Sarov Development of Procedures and Devices for Passive 24 months (Arzarnas- 16)) Sampling to Monitor Tritium and Its Oxides in the USA Environmental Objects VNIIEF (Sarov Mathematical Simulation of Atmospheric Pollutants 30 months (Arzamas- 16)) Mesoscale Transport and Transformation: Kinetics of USA, Korea Aerosol Formation in Clouds VNIIEF (Sarov Study of the Character of Crystal Implants and Interaction of 24 months USA (Arzamas- 16)) Biologically Active Media Siberian Physical Gallium Arsenide System for Low-Dose X-ray Imaging 36 months Technical Institute EU, Sweden (Tomsk)

Nuclear Institute Description Duration Funding Parties

VNIIEF (Sarov An Automatic Tunable CO2 Laser 24 months EU (Arzamas- 16))

VNIITF (Snezhinsk Development of the Model of Substance for Description of 30 months EU, Korea (Chelyabinsk-70)) Processes with motion of Brittle Low-Strength Media

VNIITF (Snezhinsk Research on Development of a Method of Surface 18 months USA (Chelyabinsk-70)) Micromechanical Tests of Metal Oxide Thin-Film Heat- Resistant Coatings on Metal-Ceramic Substrates for High- Temperature Fuel Cells

VNIIEF (Sarov Research on a Powerful Heavy Ion Fusion Facility Based 24 months EU, Germany (Arzarnas- 16)) on Accelerator Developments in Europe and Russia

VNIIEF (Sarov Nuclear-Physics Investigations Aimed at the Solution of 24 months Japan (Arzamas- 16)) Weapon Plutonium Conversion and Long-Lived Radioactive Wastes Transmutation Problems

VNIIEF (Sarov Nanodiamond Materials for Cold Emission Cathodes 24 months EU, USA (Arzamas- 16))

VNIITF (Snezhinsk Molecular Modeling of Anti-Tumor Preparations 24 months EU, USA (Chelyabinsk-70))

VNIIEF (Sarov Study of Low-Molecular Weight Extracellular DNA as a 36 months EU, USA, Korea (Arzamas- 16)) Factor in Programmed Death due to the Action of the Surrounding Medium

VNIITF (Snezhinsk Telecommunications Support of ISTC Projects in 24 months EU (Chelyabinsk-70)) Kyrgyzstan Republic VNIIEF (Sarov Integrated Generic Health Prediction for People Exposed to None USA (Arzamas- 16)) Hazardous Environments: A Method Based on Genotype Specified and Radiosensitive Analysis

VNIIEF (Sarov Ecological Monitoring at Sites of Chemical Weapons None USA (Arzamas- 16)) Destruction and Near Highly Dangerous Industries Using a Specified Multifrequency Infrared Laser

Initiatives for Proliferation Prevention Approved Projects Involving the "Nuclear Cities"

Projects Approved May 15, 1998

Tomsk-7 There is a need to have tougher coatings for materials to prevent their deterioration. $100,000 Using a plasma system, a diamond-like coating will be prepared improving the output of this type of coating material.

Krasnoyarsk-26 A team approach of US and NIS experts will formulate and design a pathway on how $150,000 Chelyabinsk-65 best to handle and treat tank wastes containing High Level Radioactive Wastes. The initial effort twill involve training the NIS team on how the US has designed the efforts at the Hanford Site.

Project Approved May 29, 1998

Arzamas-16 Economic diversification workshop for Arzamas-16 hosted at PNNL. $75,000

Projects Approved July 6, 1998

Chelyabinsk-65 Project focuses on pulsed neutron source from an active core using plutonium dioxide $150,000 fuel. Today, pulsed neutron sources are considered as one of the most promising directions for neutron production for studying condensed matter and for performing nuclear physics research.

Chelyabinsk-70 The goal is to develop a new generation of efficient x-ray tubes with a molten metal $335,000 heat carrier in the anode. The market for this product will be in medical diagnostics and non-destructive evaluations.

Chelyabinsk-70 This project focuses on the improvement of materials used in making the cathode- $320,000 anode of x-ray tubes. Improvements in this area will increase the efficiency of the product.

Arzarnas-16 Better well casting perforator is the objective of this project, providing better $260,000 reliability and extending the length of casing perforation. Application will be in oil and gas production.

Arzamas-16 A highly specific sized pulsed pressure generator for placement in down hole $220,000 operation for the purpose of cracking the outermost layer of facing material. This generator will be employed in the oil and gas producing fields to achieve better recovery of crude product.

Arzamas-16 The mining and oil exploration industries require safer devices for detonation of $260,000 explosives. This new type of detonator will not prematurely fall in the presence of stray electrical or electromagnetic currents. Projects Approved July 21, 1998

Arzamas- 16 Using electron beam technology a new survey detector will be developed which will $140,00 assist mining operations in assessing the precious mineral content of rubblized ore.

Chelyzbinsk-70 The establishment of a center in Russia that focuses on good quality and standardization $1,200, practices to aid that country in developing products more efficiently and with better acceptance in world markets. A US based company is willing to assist in this endeavor and will partner with this new Russian entity to achieve a problem solving approach to engineering and manufacturing.

Arzamas-16 The design, fabrication and testing of a new high energy output magnetron will be the $950,00 delivered product of this project. The application will be used in food sterilization and processing.

Arzamas-16 The ceramic industry that produces construction products experiences a lot of losses due $143,00 to flaws developed during the manufacturing process. A new sensor that will detect these flaws using advanced acoustical measurements is the goal of this project.

Krasnoyarsk-26, Economic diversification workshops for Krasnoyarsk-26 and Chelyabinsk-70 will be $200,00 Chelyabinsk-70 hosted at PNNL.

Arzamas- 16 Business and project planning for identification of obstacles to economic growth and $135,00 economic opportunities for applications and demonstrations for nuclear waste management techniques and technologies.

Arzamas- 16 Planning workshop for the development of a center at an institute for the benefit of $100,00 preserving the Russian infrastructure.

Arzamas- 16 Workshop to bring experts together for the purpose of providing information to the $100,00 Russians on decontamination and decommissioning of nuclear production facilities.

Chelybinsk-70 Develop designs and specifications for a flexible, explosive, and possibly multi-stage $200,00 system for effectively cutting steel reinforced concrete structural sections using special explosive devices including mechanical and explosive energy and temperature stimuli. This specialized explosive driven cutting technology will be applied to decontamination and decommissioning of DOE & DOD structures.

18 projects approved since May 15 for a total value of $5,038,