Weapons of Mass Destruction: Reducing the Threat From the Former Soviet Union: An Update (Letter Report, 06/09/95, GAO/NSIAD-95-165). Pursuant to a congressional request, GAO reviewed the Cooperative Threat Reduction (CTR) program, focusing on the program's: (1) planning and funding status; and (2) recent progress in eliminating weapons of mass destruction in the former Soviet Union (FSU). GAO found that: (1) the CTR program has facilitated Ukraine's weapons dismantlement efforts and has significantly influenced other recipient states' decisions to dismantle weapons of mass destruction; (2) the Department of Defense (DOD) has developed its first comprehensive multiyear CTR plan and has doubled program obligations and tripled program expenditures over the past 11 months; (3) the value of CTR work exceeds reported expenditure levels and program managers are adjusting their reporting systems to reflect the value of work actually performed; (4) DOD has made some progress in conducting audits and examinations in FSU states receiving CTR funds; (5) the specific material impact of CTR assistance has been limited due to the lack of certain storage facilities and the recent delivery of some CTR aid; and (6) the program needs to overcome numerous challenges and problems, such as the lack of agreement over disposal methods, to realize its long-term objectives. --------------------------- Indexing Terms ----------------------------- REPORTNUM: NSIAD-95-165 TITLE: Weapons of Mass Destruction: Reducing the Threat From the Former Soviet Union: An Update DATE: 06/09/95 SUBJECT: Nuclear weapons Chemical warfare Nuclear proliferation Advanced weapons systems Arms control agreements International cooperation International relations Property disposal Federal aid to foreign countries Budget obligations IDENTIFIER: DOD Cooperative Threat Reduction Program Russia Ukraine Belarus Kazakhstan Strategic Arms Reduction Treaty START Soviet Union ************************************************************************** * This file contains an ASCII representation of the text of a GAO * * report. 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We are unable to accept electronic orders * * for printed documents at this time. * ************************************************************************** Cover ================================================================ COVER Report to Congressional Requesters June 1995 WEAPONS OF MASS DESTRUCTION - REDUCING THE THREAT FROM THE FORMER SOVIET UNION: AN UPDATE GAO/NSIAD-95-165 CTR: An Update Abbreviations =============================================================== ABBREV CTR - Cooperative Threat Reduction DOD - Department of Defense FSU - former Soviet Union GAN - Gosatomnadzor IAEA - International Atomic Energy Agency ICBM - Inter Continental Ballistic Missile MINATOM - Russian Ministry of Atomic Energy START - Strategic Arms Reduction Treaty Letter =============================================================== LETTER B-260438 June 9, 1995 The Honorable Floyd Spence Chairman The Honorable Ronald Dellums Ranking Minority Member Committee on National Security House of Representatives The Honorable John Kasich Chairman Committee on the Budget House of Representatives As you know, Congress has had an ongoing interest in the effectiveness of U.S. efforts to reduce the threat posed by weapons of mass destruction in the former Soviet Union (FSU). In response to your requests, we have assessed the Cooperative Threat Reduction (CTR) program's planning and funding status and recent progress in addressing CTR objectives in the FSU, that is, the safe and secure elimination of nuclear, chemical, and other weapons of mass destruction (including missiles and other strategic delivery vehicles); improving controls over nuclear weapons and materials; and promoting demilitarization projects. This letter summarizes our findings, which are described in greater detail in appendixes I through IV. BACKGROUND ------------------------------------------------------------ Letter :1 In 1991, Congress authorized the Department of Defense (DOD) to establish a CTR program to help FSU states (1) destroy weapons of mass destruction, (2) store and transport those weapons in connection with their destruction, and (3) reduce the risk of proliferation. Subsequently, Congress directed DOD to address these three objectives on a priority basis, added new objectives (e.g., promoting FSU defense conversion), and approved use of up to $1.25 billion in fiscal years 1992 through 1995 toward achieving CTR objectives. DOD plans to request a total of $735 million for fiscal years 1996 and 1997. To accomplish its CTR objectives, DOD has launched projects under 38 implementing agreements with Russia, Ukraine, Belarus, and Kazakhstan. Of its 1992-97 CTR funds, DOD plans to use about half to help dismantle and destroy strategic nuclear delivery vehicles and chemical weapons, roughly one quarter to improve FSU controls over nuclear weapons and materials, and almost one-fifth to help demilitarization of FSU defense activities. DOD provides goods and services, rather than direct cash payments. DOD must notify Congress of its intention to obligate funds for specific CTR projects 15 days before actually obligating the funds. We have issued a series of reports concerning the CTR program over the past 3 years. Most recently, in October 1994, we reported that although the program had initiated numerous projects to address a wide array of threats, DOD had not estimated total requirements for achieving program objectives and that the prognosis for achieving the program's objectives varied widely.\1 We also reported that DOD had yet to begin auditing FSU use of CTR aid. We recommended that the Secretary of Defense institute a long-term planning process to help DOD allocate CTR funds among competing demands and to guide preparation of annual budgets. Congress subsequently required DOD to estimate total U.S. expenditures required to achieve CTR objectives, prepare a multiyear CTR program plan, and report on how it will determine that CTR aid is being used for intended purposes. -------------------- \1 Weapons of Mass Destruction: Reducing the Threat From the Former Soviet Union (GAO/NSIAD-95-7), Oct. 6, 1994. RESULTS IN BRIEF ------------------------------------------------------------ Letter :2 In some areas, the CTR program has made progress over the past year and its long-term prognosis for achieving its objectives may be promising. The program has played an important role in facilitating Ukraine's weapons dismantlement efforts and the executive branch believes that the promise of CTR aid has been a significant factor in the political decisions of the recipient states to begin dismantling weapons of mass destruction. Nevertheless, the overall specific material impact of CTR assistance provided to date has been limited and the program must overcome numerous challenges and problems to realize its long-term objectives.\2 DOD has made progress over the past year in planning the CTR program and in obligating and expending funds for CTR projects. DOD has developed its first comprehensive multiyear plan for the CTR program. After a slow start in preceding years, DOD has more than doubled program obligations and tripled program expenditures over the past 11 months. The value of CTR work actually performed exceeds reported expenditure levels and program managers are adjusting their reporting system to more accurately reflect the value of work performed. Also, DOD has recently made some initial progress in conducting audits and examinations in FSU states receiving CTR funds. The specific material impact of actual CTR assistance provided to date has been limited--in part because (1) several key projects, such as a fissile material storage facility, are still in their early stages and cannot be expected to have a significant material impact for several years and (2) deliveries of some CTR aid did not begin until relatively recently. Some CTR projects appear to have already had a specific material impact. For example, CTR aid has facilitated the return of hundreds of nuclear warheads from Ukraine to Russia. The program's long-term prospects may be more promising, but problems and challenges remain. For example, CTR aid should allow Ukraine to meet its Strategic Arms Reduction Treaty (START) obligations. On the other hand, difficulties in working with the Russians in resolving key issues have slowed progress on several projects that could have major long-term significance. For example, the United States and Russia have yet to agree on the applicability of a technology to be used in a chemical weapons destruction facility and may not do so until midway through fiscal year 1996. This uncertainty raises questions as to the program's need for the $104 million it is requesting in fiscal year 1996, in part, to begin designing and constructing the facility. If the United States and Russia agree on the applicability of a technology by March 1996, as scheduled, it appears that the program may be unable to obligate about $34 million in funds in fiscal year 1996. Moreover, even if the facility were to be completed on schedule, uncertainties concerning resources, schedules, and costs would compromise Russia's ability to destroy its chemical weapons stockpile in compliance with the Chemical Weapon Convention's timetables if the Convention enters into force in 1996 (see app. II). -------------------- \2 In this report, we use the term specific material impact to mean the actual use of this assistance to address CTR objectives. MATTERS FOR CONGRESSIONAL CONSIDERATION ------------------------------------------------------------ Letter :3 Congress may wish to consider reducing the CTR program's fiscal year 1996 request for $104 million for support to Russian chemical weapons destruction efforts by about $34 million because of uncertainties regarding the expenditure. In addition, Congress may wish to consider withholding approval to obligate any remaining funds designated for the design or construction of elements of a chemical weapons destruction facility until the United States and Russia have agreed on the results of the joint evaluation study concerning applicability of a destruction technology. AGENCY COMMENTS AND OUR EVALUATION ------------------------------------------------------------ Letter :4 DOD and the Department of State, in objecting to our finding that the material impact to date of CTR projects had been limited, stated that we had overlooked the CTR program's political impact and leverage in ensuring that FSU states undertake weapons elimination programs and in obtaining Ukrainian, Belarussian, and Kazakhstani agreement to become non-nuclear weapons states. We do not dispute this political dimension to the CTR program, but we believe that DOD and State's comments stem from a misunderstanding of the purpose of our report. As requested, our report, the latest in a series of our assessments of the CTR program, focuses on the material impact of CTR projects over the past year in addressing the threats posed by FSU weapons of mass destruction and on the prospects for such effects in the future. DOD further commented that we had underestimated the role of the material assistance provided to date and provided several examples in support of this comment. We have added some of these examples to our report. However, DOD also cited benefits of deliveries of support equipment to Ukraine and armored protective blankets to Russia. Our draft specifically cited the impact of CTR deliveries to Ukraine and Russian use of armored blankets in withdrawing warheads from Ukraine. DOD further stated that Russia is "today" using U.S.-supplied guillotine shears to cut up bombers. These shears have not yet been used and are not expected to be used until July 1995. DOD stated that numerous tangible reductions in the threat to the United States have been achieved "through a combination of leverage provided by the CTR program and direct material assistance." However, the examples that DOD provides do not distinguish between reductions that may be attributed to political impacts since the Soviet Union's collapse in December 1991 and those that have resulted from the delivery of CTR aid. For example, DOD states that missiles containing 2,825 warheads have been deactivated since the Soviet collapse but does not indicate how many of these were deactivated through the direct use of CTR assistance--assistance which only began arriving in mid-1993. Similarly, DOD states that approximately 630 strategic launchers and bombers have been eliminated since the Soviet collapse. However, Russia had eliminated more than 400 of these by July 1994 before receiving CTR delivery vehicle elimination aid. DOD's comments imply that every missile and every warhead deactivated in the former Soviet Union since December 1991 can be attributed to the CTR program. DOD does not provide a clear accounting as to how and to what extent CTR hardware has been used by the FSU states to eliminate a specific number of systems. While such an accounting may not be the only standard that should be used to assess the CTR program, it should at least be one of the key criteria employed in reviewing the program's progress. Although we have asked it to provide support for the material impact of CTR aid in dismantling specific numbers of systems, DOD has not done so. DOD officials recently informed us that it may be impossible to determine this impact in terms of specific numbers of systems. DOD and the Department of State objected to our matters for congressional consideration. Both agencies asserted that we were incorrect in stating that the United States and Russia had not yet agreed upon a technology for destroying chemical weapons. However, as DOD indicates in its comments, Russia has selected a technology that the United States would not have recommended--an unproven technology that the United States is now attempting to validate. DOD, the Department of State, and the Department of Energy also provided technical clarifications, which we have incorporated in our report. The comments of DOD, State, and Energy are presented in their entirety in appendixes VII, VIII, and IX, along with our evaluations of them. SCOPE AND METHODOLOGY ------------------------------------------------------------ Letter :5 To assess the CTR program's planning and recent progress, we reviewed documents and met with officials from DOD, the Department of Energy, and the Department of State, as well as with officials from the Arms Control and Disarmament Agency, Defense Enterprise Fund, the Russian government and industry, Ukrainian government and industry, and a variety of U.S. contractors involved in the CTR program. We also visited selected CTR projects in Russia and Ukraine and discussed program implementation with assistance recipients and U.S. officials on site. To determine the funding status of the program, we obtained specific data on funding obligations, disbursements and work performed from the Defense Nuclear Agency that implements the CTR program. We conducted our review between January and June 1995 in accordance with generally accepted government auditing standards. ---------------------------------------------------------- Letter :5.1 We are planning to send copies of this report to other appropriate congressional committees; the Secretaries of Defense, Energy, and State; the Director of the Arms Control and Disarmament Agency; and other interested parties. Copies will also be made available to others upon request. Please contact me on (202) 512-4128 if you or your staff have any questions concerning this report. Major contributors to this report are listed in appendix X. Joseph E. Kelley Director-in-Charge International Affairs Issues IMPROVEMENTS IN PLANNING AND FUNDING =========================================================== Appendix I The Department of Defense (DOD) has made progress in Cooperative Threat Reduction (CTR) program planning, and in obligating and disbursing CTR funds since our last review of the program. It has recently made progress in auditing and examining the aid that it has provided to the former Soviet Union (FSU). A new program office, established in May 1994 under the Under Secretary of Defense for Acquisition and Technology to oversee program implementation, drafted the CTR program's first multiyear plan in response to a congressional directive. The plan (which is classified) is to be reviewed and revised annually and is to be used to guide the program through its termination in 2001.\1 The CTR program has more than doubled the level of obligated funds--increasing from the June 1994 level of $223 million cited in our last report to almost $599 million as of May 8, 1995 (see app. V). The CTR office predicts that DOD will obligate over $800 million by the end of fiscal year 1995. The CTR program has also made progress in disbursing funds since our last report. Disbursements have more than tripled from the June 1994 level of $49.5 million to almost $177 million as of May 8, 1995. The largest disbursements were made for strategic offensive arms elimination projects in Russia and Ukraine, the International Science and Technology Center in Moscow, Russian rail car security enhancements, and the design of a Russian fissile material storage facility. However, we have found that these disbursement figures significantly understate the value of CTR work actually performed to date. We asked DOD's CTR program managers to contact contractors for 18 projects (representing 85 percent of the program's then-current budget) and determine the cost of work actually performed but not yet recorded by DOD as of March 1, 1995. We found that the value of the actual work performed on these 18 was $205.7 million--almost double the value of the disbursements reported for them as of March 1, 1995 (see app. VI). The difference reflects the substantial period of time separating the performance of the work and DOD's payment for the work. The CTR program is now developing a data collection system that will include monthly reporting requirements for this kind of data. DOD has made arrangements with the Departments of State, Energy, and Commerce to streamline the program by transferring nine projects, beginning in fiscal year 1996. The Department of State will assume responsibility for the International Science and Technology Center and, with the Department of Commerce, for projects aimed at improving export controls in four FSU states. Projects aimed at improving nuclear materials controls and accountancy in three FSU states will be transferred to the Department of Energy.\2 DOD has recently made some initial progress in conducting audits and examinations of CTR aid to ensure that the aid is being used for the purposes intended. While CTR agreements with the FSU states provide the United States with the right to conduct such audits and examinations, Russia and, later, Ukraine raised concerns regarding implementing procedures that required some months to resolve. On May 19, 1995, DOD completed an audit and examination of rail car conversion kits in Russia.\3 DOD has also scheduled a June 1995 audit in Ukraine and has notified Kazakhstan of plans for a July 1995 audit. In January 1995, DOD completed an audit and examination of a continuous communications satellite link in Belarus. On May 31, 1995, DOD provided Congress with its long-overdue legislatively mandated report on U.S. efforts to ensure that CTR aid can be accounted for and is being used for intended purposes. We will provide Congress with our assessment of the DOD report, as required by law.\4 -------------------- \1 We are currently reviewing the plan for the Committee on the Budget, House of Representatives. \2 In our report entitled Former Soviet Union: U.S. Bilateral Program Lacks Effective Coordination (GAO/NSIAD-95-10, Feb. 7, 1995), we reported that the executive branch has had difficulty in coordinating all of its FSU assistance programs. We are currently evaluating several recent executive branch actions to improve such coordination. According to the Department of State, an interagency working group will coordinate former CTR projects. The Departments of State and Energy have prepared multiyear plans concerning CTR projects being transferred to them. \3 DOD also conducted a financial audit of the International Science and Technology Center in Moscow in March 1995. \4 Section 1203 of the National Defense Authorization Act for fiscal year 1995 required DOD to provide the report to Congress by January 5, 1995, and calls for our assessment of the DOD report. DESTRUCTION AND DISMANTLEMENT PROJECTS ========================================================== Appendix II To date, the material impact of aid actually delivered by the CTR program's destruction and dismantlement projects has generally been limited, although the program has succeeded in facilitating the deactivation of strategic systems in Ukraine. While Ukrainian dismantlement progress appears to be dependent on CTR aid, Russia had moved ahead of its Strategic Arms Reduction Treaty I (START)\1 schedule before it received substantial CTR aid. CTR aid has not yet resulted in the destruction of any Russian chemical weapons and efforts to help plan eventual Russian chemical weapons destruction have been hampered by numerous delays. Executive branch agencies credit the CTR program with having had a very significant impact on the political decisions of FSU states to begin eliminating thousands of strategic nuclear delivery vehicles and chemical weapons. They state that the CTR program's impact is therefore greater than suggested by focusing on the actual material impact of CTR aid delivered to date. The long-term prospects of the CTR program's destruction and dismantlement projects may be brighter than their limited material impact to date might indicate. CTR aid to Russian efforts to eliminate missile fuel could speed the pace of Russian dismantlement efforts. A small U.S.-funded chemical destruction facility may help spur the Russian program, although even this facility will not be nearly sufficient to ensure Russian compliance with the Chemical Weapons Convention. -------------------- \1 START I limits the FSU to 1,600 delivery vehicles (i.e. bombers, submarine missile launchers, and missile silos) and 6,000 warheads no later than the year 2001. The, as yet, unratified START II treaty further lowers these limits and bans multiple re-entry vehicle intercontinental ballistic missiles. The United States and Russia are to meet START II limits by 2003, unless the United States helps finance Russia's dismantlement efforts. If so, Russia would met START II limits by the end of 2000. STRATEGIC OFFENSIVE ARMS ELIMINATION ------------------------------------------------------ Appendix II:0.1 The CTR program's efforts to destroy and dismantle strategic offensive arms are focused on nuclear delivery systems, such as missiles, missile silos, ballistic missile submarines, and heavy bombers. Russia has informed the United States that it does not need U.S. aid in dismantling the nuclear warheads removed from these systems.\2 We reported last year that the impact of CTR strategic offensive arms elimination assistance was likely to vary from one FSU republic to another. -------------------- \2 According to DOD, France is providing Russia with machine tools to help dismantle warheads. French dismantlement tool aid is valued at $5 million. RUSSIA ------------------------------------------------------ Appendix II:0.2 The material impact to date of strategic delivery vehicle elimination aid actually delivered to Russia appears to have been limited. DOD, in commenting on a draft of this report, stated that the CTR program has had important political and material impacts in advancing Russia's dismantlement effort--noting, for example, that the CTR program had contributed to the elimination of approximately 630 strategic launchers and bombers since the Soviet Union's 1991 collapse. However, in and of itself, the material impact of the CTR strategic delivery vehicle elimination aid provided to date is less than DOD's comment would suggest, since Russia had eliminated over 400 of these 630 launchers prior to initial deliveries of this aid.\3 Although Russia had succeeded in eliminating sufficient launchers to meet its START I delivery vehicle limit by April 1995,\4 Russian officials told us that their resources are strained by delivery vehicle dismantlement efforts and that they lack adequate amounts of advanced technology for some dismantlement procedures. Russia must transport and destroy thousands of metric tons of liquid rocket propellant and, for the first time, dispose of large quantities of solid rocket fuel. Russian officials emphasized that Russia would need the assistance even without implementation of START II. They told us that rocket fuel transportation and disposition were the most crucial bottlenecks in their meeting treaty obligations and that such difficulties had forced them to suspend dismantlement of liquid fueled SS-18 missiles in Kazakhstan for 3 months. The CTR program is providing equipment to safely transport and temporarily store liquid rocket fuel from dismantled missiles. DOD has also awarded a contract to dispose of the liquid fuel\5 (which has been delayed by a bid protest). Russian officials told us that more CTR assistance will be needed to dismantle solid rocket motors and dispose of the fuel. While Russia has already met its START I delivery vehicle limit, it has not yet met its START I warhead limit and its START II limits. According to DOD, CTR assistance will help Russia meet its START I and II obligations by 2001, 2 years ahead of schedule. DOD has agreed to provide Russia with $150 million for delivery vehicle dismantlement, including $20 million for solid rocket motor and fuel disposition. As of May 8, 1995, CTR program officials had obligated $112 million and disbursed almost $20 million for dismantlement projects in Russia. As of March 1995, the value of work performed totaled $56 million. About 40 percent of the CTR-provided equipment has been delivered. The CTR budget estimate includes $95 million over the next 2 years to further accelerate Russian dismantlement efforts and encourage Russian ratification of the START II agreement. DOD is also considering providing about $145 million in dismantlement assistance. Of the proposed $145 million, roughly half would be used to help dispose of solid rocket motors and fuel. The remaining assistance would be used to dispose of liquid fuel and support destruction of delivery vehicles and launchers. -------------------- \3 Our prior CTR work reveals that, according to Russian officials, Russia eliminated over 400 launchers by July 1994. CTR dismantlement assistance deliveries to Russia did not begin until September 1994. Moreover, not all delivered CTR assistance has yet been put into operation. For example, U.S.-supplied guillotine shears have not yet cut up any Russian bombers, although Russia has used lighter U.S. equipment to strip such aircraft. \4 We reported in October 1994 that Russia had the means to eliminate its delivery vehicles in compliance with START I obligations. \5 Russia rejected the U.S. incineration method for disposing of such fuel. UKRAINE ------------------------------------------------------ Appendix II:0.3 Ukraine lacks Russia's resources and capabilities to dismantle its 176 delivery vehicles and silos. The CTR program has obligated $90 million for strategic nuclear arms dismantlement in Ukraine. As of March 1995, the value of work performed exceeded $52 million. The CTR budget estimate submission calls for an additional $30 million over the next 2 fiscal years to further assist Ukraine with its dismantlement efforts. As we reported last year, Ukraine lacks the necessary capabilities and infrastructure to dismantle delivery systems, especially silos, in accordance with START I. During our visit to Ukraine, Ukrainian political and military officials stressed the importance of continued CTR dismantlement assistance, citing that without it, Ukraine could not continue its dismantlement efforts. CTR aid is intended to help eliminate SS-19 and SS-24\6 missiles and silos and dispose of liquid rocket propellant. Initial CTR assistance deliveries--mobile cranes, all-terrain vehicles, fuel, tires, and batteries--appear to have facilitated the removal of warheads from missiles and the return of warheads to Russia. As of January 1995, 40 SS-19 missiles had been removed from their silos and all 46 SS-24 missiles had their warheads removed. According to Ukraine, as of April 1995, 40 percent of its nuclear warheads--about 700--had been returned to Russia. Per agreement, all nuclear weapons are to be removed from Ukraine by mid-1996. The CTR program will use over $30 million to design, construct, and equip an SS-19 missile neutralization facility at which liquid fuel will be removed from the missiles as they are dismantled. Ukraine has no such facility. An integrating contractor\7 will oversee the neutralization facility and train the Ukrainians in its operation. Dismantlement efforts could also be affected by the need to house demobilized Strategic Rocket Forces officers. Ukrainian law dictates that demobilized officers must be provided housing. Ukrainian officials told us that they cannot afford to construct the total amount needed and that future dismantlement progress could be slowed without prospects for adequate officer housing. The CTR program plans to provide about 428 housing units through defense conversion projects. -------------------- \6 It is uncertain what Ukraine plans to do with the SS-24 missiles once the launchers have been eliminated. Under START, it is not required to eliminate these missiles. \7 An integrating contractor manages all phases of a particular project and interfaces with other contractors performing specific tasks. KAZAKHSTAN ------------------------------------------------------ Appendix II:0.4 CTR officials have authorized $70 million in assistance to Kazakhstan and plan to spend another $20 million over the next 2 fiscal years. As of May 8, 1995, less than $50,000 in dismantlement assistance had been provided to Kazakhstan because--according to DOD--CTR efforts to help Kazakhstan eliminate over 100 SS-18 missile silos had been delayed for several months due to Russian security concerns. These concerns have since been resolved, according to DOD. CTR assistance will fund an integrating contractor to help eliminate the silos after Russia removes the missiles.\8 The silo work is not expected to begin until later this year when DOD hires an integrating contractor.\9 Until then, the actual cost of the project is unknown. -------------------- \8 As of April 1995, the Russians had removed all warheads from Kazakhstan. \9 In the interim, DOD has hired two contractors to help Kazakhstan salvage metal and equipment from the silos. BELARUS ------------------------------------------------------ Appendix II:0.5 In Belarus, CTR program officials plan to provide $11 million in aid to help remove SS-25 missiles, related structures, and, possibly, residual liquid fuel. No CTR dismantlement aid has been provided to date. CTR aid will help Belarus meet its START I obligation to eliminate the missile launch pads. Russia is removing the SS-25 missiles from Belarus and has already withdrawn more than 45 of them. CHEMICAL WEAPONS DESTRUCTION ------------------------------------------------------ Appendix II:0.6 The CTR program's progress in addressing Russian chemical weapons destruction has been frustrating, and its outlook, though improving, remains unclear. Russian delays hampered several significant CTR efforts in the past year. Although the program may increase CTR chemical weapons aid almost ten-fold, many issues need to be resolved before future CTR funds can be used--including the prospects for using an unproven Russian technology. Despite several recent promising developments, it seems unlikely that Russia will be able to destroy its total chemical weapons stockpile in accordance with time frames stated in the Chemical Weapons Convention. CTR assistance is directed at developing technology and procedures to destroy Russian nerve agents, which constitute about 80 percent of the declared Russian stockpile of 40,000 metric tons, at five of seven chemical weapons sites. The United States, in prior years, committed to provide $55 million in CTR funds to (1) prepare a comprehensive implementation plan for destroying chemical weapons; (2) establish a centrally located analytical chemical weapons destruction laboratory; and (3) conduct a joint evaluation of a Russian chemical weapons destruction technology, for determining what additional U.S. assistance could be provided in the design and development of a chemical weapons destruction facility. As of May 1995, the CTR program has obligated $22.2 million of the $55 million available for chemical weapons destruction efforts and disbursed about $7.3 million. The value of work performed totaled about $7.7 million. However, delays have plagued efforts to spend the current $55 million. For example, the overall completion date for the program's major U.S. contract, worth almost $8 million, likely will slip 1 year, from mid-December 1995 to the end of 1996. Current project delays occurred for several reasons, including (1) disagreements between the United States and Russia over the priority of destroying air-delivered versus artillery-delivered chemical munitions; (2) differences over the type of chemical weapons destruction technology to be used, whether a proven U.S.-favored direct incineration process, or a Russian-favored two-step neutralization process; and (3) Russian delays in providing information and access to chemical weapons storage sites. Also, Russian indecision for over a year on selecting the central analytical destruction laboratory's location delayed use of $30 million committed for that purpose. The CTR program envisions dramatic increases from the $55 million level of assistance. The DOD budget estimate submission for fiscal years 1996-97 includes $234 million for the next 2 fiscal years to help in design and construction of a chemical weapons destruction facility that would be capable of destroying about 500 metric tons per year of the roughly 5,600 metric tons of chemical weapons agent located at this facility.\10 It also notes that constructing a chemical weapons destruction facility would cost more than $500 million and require multi-year funding through 2001. However, even dramatic increases will address only a portion of Russian chemical weapon destruction costs. Russian estimates indicate that destroying Russia's total chemical weapons stockpile might cost $5 billion-$10 billion. Some Russians estimate that Russia will need between 35-50 percent of the estimated cost of total chemical weapons destruction in donor assistance.\11 DOD intends for the U.S. funding to address less than 10 percent of Russian funding requirements and to act as a catalyst for broader financial support to achieve full chemical weapons destruction goals. Although the chemical weapons destruction facility is intended to eliminate a "significant portion" of the threat, according to the DOD budget estimate submission, the site where it will be built contains only 14 percent of the Russian chemical weapons stockpile. Facilities at all seven sites are anticipated. Uncertainties of cost and schedule associated with Russia's unproved technology could be severe. The United States experienced years of delays and unanticipated cost increases during the design and construction of a U.S. chemical weapons destruction facility using a proven technology.\12 In addition, many issues need to be resolved before large-scale funding can be undertaken. Requirements for fiscal year 1996 funding appear to be contingent on completion of several tasks--most importantly, the joint evaluation of chemical weapons destruction technology. The final report on the joint evaluation's results is to contain specific proposals on the applicability of the two-step process for designing a chemical weapons destruction facility. DOD's budget estimate submission for fiscal years 1996 and 1997 assumes that the results of the joint evaluation will be favorable and completed on schedule by March 1996. Development of an implementation plan and conceptual designs for a pilot demonstration facility is to accord with the results of the joint evaluation. Further delays during fiscal year 1995 and early into 1996 could reduce the need and impact the justification for the budget requests. To date, the chemical weapons destruction program remains uncertain about specific requirements for fiscal year 1996 funding and how much of the funding the program will be able to obligate during the fiscal year. A DOD official said, as of mid-May, that he realistically could expect to obligate between $50 million-$70 million of the fiscal year 1996 request of $104 million. In addition, the chemical weapons destruction program in mid-May had identified about $34.3 million of the fiscal year 1996 budget request for technology development requirements, including additional Russian equipment testing to be determined. In commenting on a draft of this report, DOD said that it had scheduled $34.3 million to be obligated in late 1996 as the first installment for the integrating contractor that would provide U.S. assistance for the design and construction of the Russian chemical weapons destruction facility. However, DOD has mistaken the $34.3 million, which it associated at the time of our review with undefined additional technology development activities with a nearly identical amount that recently revised funding breakouts allocated to the integrating contractor. DOD reduced an amount for the integrating contractor from $35.7 million to $34.3 million. DOD provided insufficient documentation to justify changes in these funding amounts. Given the lack of clarity associated with the purpose for the $34.3 million and history of delays in this program, it appears uncertain that DOD needs or could realistically expect to obligate this amount of funding in fiscal year 1996. Uncertainty still exists about Russia's specific commitments to destroy its chemical weapons under its international obligations. In the past, Russia made no specific commitments to the United States to carry out the conditions of a bilateral chemical weapons destruction agreement and the Chemical Weapons Convention. DOD told Russian representatives in May that an implementing agreement would need to link U.S. assistance to specific Russian actions that address U.S. concerns. Because of these uncertainties--and without significant additional financial assistance--Russia appears unable to destroy its stockpile in compliance with the Chemical Weapons Convention's time frames, if the Convention enters into force in or about 1996 as estimated. The Convention requires that all stocks of chemical weapons be destroyed in 10 years, with an extension of 5 years, if needed. Although estimates for meeting the Convention's time frames depend on several variables and events that have not yet occurred--such as the entry into force of the Convention and Russian ratification of it, successful completion of the chemical weapons destruction technology joint evaluation, and design and construction of chemical weapons destruction facilities--it is doubtful that all seven chemical weapons destruction site facilities could be completed to meet the time frames. However, several key events in March 1995 could provide new impetus to chemical weapons destruction projects. These include Russia's (1) finalizing and approving a work plan for 1995, which set tasks and milestones for the year; (2) identifying locations for the chemical weapons destruction facility and the central analytical laboratory; (3) issuing a presidential decree on chemical weapons disarmament, which established a legal framework for chemical weapons destruction and stated that a plan for speeding up Russia's preparation for destroying chemical weapons be completed by May 1995; and (4) establishing a separate line item of about $21 million for chemical weapons destruction in the Russian federal budget. -------------------- \10 An additional $10 million for the chemical weapons destruction facility for fiscal year 1995 actually will be reprogrammed for other uses, according to a DOD official. \11 Germany has provided assistance of about $6.5 million through fiscal year 1994 and expects to approve an additional $4.5 million for fiscal year 1995 during May, according to a German official. \12 We reported in December 1994 that the U.S. chemical weapons stockpile program had been delayed by design, equipment, and construction problems at the new disposal facility at Johnston Atoll. As a result of these and other factors, the estimated cost of the stockpile disposal program increased and the Army's destruction schedule slipped. Chemical Weapons Disposal: Plans for Nonstockpile Chemical Warfare Material Can Be Improved (GAO/NSIAD-95-55, Dec. 20, 1994). CONTROL OVER NUCLEAR WEAPONS AND MATERIALS ========================================================= Appendix III CTR projects for providing Russia with the means to safely store components from dismantled nuclear weapons have been delayed for several months, although they now appear to be moving forward again. However, long-standing Russian plans to acquire two storage facilities and 100,000 storage containers exceed the scope of these projects. While CTR projects have had little direct impact in improving material protection, control and accounting over weapons-useable civilian material at FSU nuclear facilities, the prognosis for doing so is improving as a result of recent agreements with Russia to upgrade controls at some facilities. However, several issues need to be resolved before a long-range plan now being developed by the United States to improve controls at 80 to 100 such facilities can be implemented successfully. FISSILE MATERIAL STORAGE ----------------------------------------------------- Appendix III:0.1 Russian officials have stated that Russia lacks suitable storage for components from thousands of nuclear weapons and have asserted that the process of dismantling these weapons could be slowed by this storage shortfall.\1 They plan to build two storage facilities--each capable of holding 50,000 containers\2 and each built in two, 25,000-container phases. Russian officials maintain that acquiring storage space and containers are their highest CTR priorities.\3 The United States has agreed to provide Russia's Ministry of Atomic Energy with $15 million in design assistance and $75 million in equipment, training, and services to help build and outfit one of the facilities, at Mayak. The Army Corps of Engineers has performed design-related work valued at $13.8 million to help Russia with numerous studies, analyses, and plans.\4 DOD has obligated $27.4 million in equipment funds and performed equipment-related work valued at $4.7 million. The CTR program has included another $6 million in design funds and $75 million in construction funds for the Mayak facility in its 1996-97 budget estimate submission. If approved, these funds would raise total CTR funds for the Mayak facility to $171 million. During the past year the storage facility project was delayed by several months, due to difficulties with the Russians. In September 1994, after learning that the Russians had unilaterally made a major change in the facility's design--eliminating the relevance of roughly 30 percent of the U.S. design effort--the United States froze deliveries of construction equipment until Russia addressed U.S. questions about the new change. Deliveries were also held up by Russia's initial reluctance to allow the United States to perform a radiation survey of the Mayak site.\5 In March 1995, DOD, satisfied with the progress of the design\6 and having convinced Russia to schedule the survey, authorized the shipment of the construction equipment. Russia has begun preparing the site for construction, which is scheduled to begin in June. The CTR program has cited the storage facility project as evidence that the risk of proliferation has been reduced. Although the project is now moving forward again, the facility's first 25,000 container phase will not be ready until December 1998--assuming no further difficulties. Moreover, before the United States can support construction at the Mayak site the United States and Russia must first amend existing agreements or conclude new ones to allow for additional design and construction funds and work out arrangements for the use of a U.S.-hired integrating contractor. DOD officials informed us that they are developing a detailed plan for using construction funds and that the project could probably absorb the $23 million requested for facility construction in fiscal year 1996--if agreements or amendments can be completed and an integrating contractor is hired by the end of 1995. Russia must also provide (1) detailed construction schedules and (2) more detailed design information to allow the United States to define equipment, training, and services requirements and obligate another $47.6 million of the $75 million in CTR equipment funds. The total cost of the Mayak facility will likely exceed the $171 million allocated by the CTR program. The latest Russian study reviewed by the Army Corps of Engineers estimates that the entire Mayak facility will cost about $677 million to build and equip--a substantial increase over past estimates.\7 In the past, Russian officials have suggested that the two countries divide the costs evenly, which could result in a U.S. share of about $338 million for the Mayak facility--if the current Russian estimate is accurate. CTR efforts to provide containers for the facility have also been delayed--although in this case the delays are due to U.S. technical difficulties and coordination problems. Russia plans to equip both storage facilities with a total of 100,000 containers. The United States plans to develop and deliver as many containers as possible within a $50 million budget.\8 Originally this amount was estimated to be about 33,000 containers. The United States has not agreed to provide additional containers. The project had planned to produce and deliver the first 10,000 containers to Russia by December 1995, beginning with monthly shipments of 1,000 in March 1995. However, one container failed during tests in December 1994--necessitating design changes. An independent analysis cited technical and managerial deficiencies. Although project participants appear to have taken corrective action, the container project will warrant close attention through its completion, due to its complexity, cost, and high Russian interest level. Although the redesigned prototype has been successfully tested, manufactured units will require more testing and CTR officials will not decide before July 1995 whether to begin full-scale production. As a result, fewer containers--possibly 26,000 to 28,000--will be provided later than had been planned. The United States anticipates producing 850 a month by the end of this year. The Russians have been pressing for delivery and expressed great unhappiness with the delay when we met with them in Moscow. -------------------- \1 In the past U.S. agencies have been unable to confirm a storage shortfall. Some have noted that Ministry of Defense storage space for intact weapons could be used. The Ministry of Atomic Energy has argued against doing so. \2 Estimates that 2 to 5 containers could be needed to hold components from a single warhead indicate that one 50,000 container facility could hold materials from 10,000 to 25,000 weapons. Russia may dismantle as many as 24,000 weapons. \3 The Russians have stated that the facility will be transparent to the United States. Facility transparency is part of an overall U.S. effort to prevent a resumption of the U.S.-Soviet nuclear arms competition. \4 The Department of Energy contributed $1 million of its own funds to the design effort. \5 The Mayak site is located at the scene of a 1957 nuclear accident that contaminated much of the area. \6 Russia plans to have completed 35 percent of the design by October 1995. \7 The November 1993 estimate of $315 million cited in our last report placed the cost of building and equipping the facility's first phase at $300 million. The current Russian estimate includes $454 million to build and equip the facility's first phase--an increase of more than 50 percent. According to DOD, the current Russian estimate is within the range of the Army Corps of Engineers' most recent estimates. \8 DOD has obligated $45 million and disbursed $10 million as of May 8, 1995. As of March 1, the value of work performed was estimated at $14.2 million. MATERIAL PROTECTION, CONTROL, AND ACCOUNTING ----------------------------------------------------- Appendix III:0.2 To date, the CTR program has had little direct impact in protecting, controlling, and accounting for civilian nuclear material that presents a high proliferation risk.\9 The program's prospects are improving as a result of recent agreements with the Russians to upgrade nuclear material controls at civilian facilities using direct-use material (highly enriched uranium and plutonium). The United States is also developing a long-range plan to help upgrade controls at 80 to 100 civilian, naval nuclear, and nuclear weapons-related facilities handling direct-use material by 2002. However, several issues need to be addressed for the U.S. program to succeed. The FSU possesses hundreds of tons of direct-use nuclear material located at 80 to 100 civilian, naval nuclear, and nuclear weapons-related facilities, mostly in Russia. Much of this material is considered to be highly attractive for theft. Current nuclear controls in use at FSU nuclear facilities make it difficult to deter or detect such theft. The facilities rely on manual, paper-based tracking systems that cannot quickly locate and assess material losses. In addition these facilities lack modern physical protection systems, such as monitors, that can detect unauthorized attempts to remove nuclear material from a facility. The CTR program provides assistance to Russia, Ukraine, and Kazakhstan for upgrading civilian nuclear material controls at selected model facilities and developing regulations, enforcement procedures and national material tracking systems. Through the program, the United States has provided technical working group meetings, site surveys, physical protection equipment, computers, and training in support of CTR projects. To date, none of the projects have been completed. DOD has obligated $36.8 million of $62.5 million budgeted, and the value of work is $2.7 million.\10 DOD is currently defining work valued at $28 million for future obligations. So far, CTR efforts have had little direct impact in improving control over direct-use material at civilian facilities. This is due mainly to delays in negotiating agreements with the FSU states; Russian Ministry of Atomic Energy (MINATOM) restricting work to low-proliferation risk materials in Russia; and the preliminary nature of the work at other FSU facilities where direct-use material is present. Problems in procuring equipment have also caused some delays. CTR work on developing a national regulatory system in Russia has been hampered by MINATOM's resistance to expanding the role of GAN, Russia's nuclear regulatory agency, and GAN's lack of statutory authority for oversight and enforcement. The prospects for accelerating obligations in Russia may be improving. Recently, Russia and the United States agreed to add five high-priority sites handling large amounts of direct-use material to the program. The Department of Energy also signed a letter of intent with GAN to cooperate in implementing a national material control and accounting system. The Department of Energy is preparing a long-range plan to enhance nuclear material protection control and accounting at the 80 to 100 facilities handling direct-use material by the year 2002. Responsibility for funding and supporting CTR nuclear material protection control and accounting efforts will be transferred from DOD to the Energy Department in fiscal year 1996. The Energy Department plan would include Energy's lab-to-lab program, initiated by Energy in 1994, which works directly with personnel at Russian civilian and nuclear-weapon related nuclear facilities to improve nuclear material control, accounting, and physical protection. The plan's estimated cost is about $0.5 billion. Several issues would need to be addressed for such a program to succeed. Currently, there is no agreement with the Russians for work at most of the 80 to 100 facilities. In the past, MINATOM has taken a go-slow approach and only recently opened up direct-use facilities to the CTR program. However, the Energy Department has had some early success in upgrading controls at a direct-use facility under its lab-to-lab program. In addition, the U.S. and Russian Steering Groups for Energy's lab-to-lab program have agreed to develop a unified plan for cooperation with the principal MINATOM nuclear weapons-related facilities, and Energy is negotiating agreements for work at many of the other 80 to 100 facilities.\11 The Department of Energy has not yet determined the appropriate number of personnel and amount of resources needed to manage the planned expansion of the program. In fiscal year 1995, Energy manages a lab-to-lab budget of $15 million. Starting in fiscal year 1996, Energy will be responsible for implementing the proposed long-range plan, which calls for a budget increase in material protection control and accounting assistance to about $70 million per year. This budget level will continue until fiscal year 1999. The United States has yet to determine the degree of oversight needed to ensure program success. The Russians have already told Energy officials that the United States may not be allowed direct access to a small number of highly sensitive facilities. It is unclear to what extent currently negotiated audit and examination provisions under CTR will apply to the new projects in the proposed long-range plan. According to a State Department official, given the extremely important priority of preventing diversion of nuclear material, the executive branch has agreed in principle on the need for flexibility in pursuing adequate arrangements for ensuring that U.S. assistance is used as intended. The official also noted that most of the equipment provided is highly specialized, permanently installed, and not easily used for other purposes. Even with a successful Energy-led program, the United States would not be able to control the extent to which Russian facilities meet international standards. According to a U.S. national laboratory official, Russia will be provided with all the elements to develop a nuclear material control system that is consistent with international standards, but responsibility for meeting the standards rests with the Russians. As a nuclear weapons state under the Nuclear Nonproliferation Treaty, Russia is under no treaty obligation to meet international safeguard standards.\12 In contrast, as non-nuclear weapons states under the treaty, Ukraine and Kazakhstan are required to meet IAEA safeguard standards. -------------------- \9 Although it was not a CTR project, DOD used some CTR funds to finance their portion of Project Sapphire. In 1994, Project Sapphire transferred from Kazakhstan to the United States 600 kilograms of highly enriched uranium that presented a proliferation risk. According to a DOD official, CTR funds used for Project Sapphire were in addition to the $5 million available for obligation for material protection control and accounting assistance to Kazakhstan. \10 In Russia, DOD has obligated $20.3 million of $45 million budgeted, and the total value of work performed is $1.2 million. In Ukraine, DOD has obligated $11.5 million of a planned $12.5 million, although the total value of work performed is less than $660,000. In Kazakhstan, DOD has obligated $4.9 million of a planned $5 million program, and the total value of work performed is $850,000. \11 In addition, the Russian government issued a decree in January that commits it to improving material protection control and accounting at Russian nuclear facilities. \12 Russia has entered a voluntary agreement with the International Atomic Energy Agency (IAEA) to meet international safeguards requirements at some of its civilian nuclear power facilities and research reactors. Russia also is a signatory to the Convention on the Physical Protection of Nuclear Materials, and as such is obligated to meet defined standards of physical protection for nuclear material. Ukraine is also a signatory to the Convention. WEAPONS SECURITY ----------------------------------------------------- Appendix III:0.3 Two CTR projects to enhance nuclear weapons security--armored protective blankets and kits to upgrade railcars--are being completed. The United States and Russia are exploring new areas of cooperation on weapons security. The CTR program provided 4,000 armored blankets to Russia between July 1992 and June 1993. In October 1994 the program completed shipping 115 kits to upgrade rail cars for transporting warheads. Russian officials told us in March 1995 that most of the kits were being installed and that the process had been delayed by a Russian funding shortfall that had been recently remedied. Russian officials told us that Russia has used blankets to protect 600 strategic warheads being withdrawn from Ukraine. DOD, in commenting on a draft of this report, informed us that the blankets and rail cars have been used to move warheads within Russia and to Russia from Ukraine and Kazakhstan. DOD also noted that CTR assistance had helped secure and transport strategic warheads that had been deployed in Russia.\13 We reported last year that--despite the rail car kits and the blankets--the FSU rail transportation system would still not be safe by Western standards. Russian officials told us that they were concerned about threats posed by criminals and poor rail conditions. U.S. and Russian officials are now exploring additional weapons security measures, including new types of rail cars and supercontainers for warheads in transit. The two countries are also considering computerized accounting systems for warheads and personnel security measures. While DOD has recently agreed to provide $20 million in such aid, its budget estimate includes far more for weapons security--a total of about $120 million in fiscal year 1995-97 funds for such purposes, including $42.5 million in fiscal year 1996 alone. -------------------- \13 DOD noted that there are over 1,000 such warheads. DOD officials do not know how many of these 1,000 have been transported with CTR aid. DEMILITARIZATION ========================================================== Appendix IV The International Science and Technology Center in Moscow appears to have had a good first year in addressing its nonproliferation objectives, although it does not preclude the possibility that scientists receiving Center funds may also work on Russian institutes' weapons activity with non-Center funds.\1 Most of DOD's defense conversion projects are not converting active production lines but are instead using previously dormant facilities that once produced items related to weapons of mass destruction. -------------------- \1 DOD categorizes U.S. support for the Center as CTR demilitarization activity, prompting our decision to discuss the Center here. The Department of State, which currently manages the Center project for DOD and which will assume complete responsibility for U.S. support for the Center in fiscal year 1996, commented on a draft of this report that it has always considered the Center to be a non-proliferation effort, not a demilitarization project. INTERNATIONAL SCIENCE AND TECHNOLOGY CENTER ------------------------------------------------------ Appendix IV:0.1 During its first year, the International Science and Technology Center in Moscow appears to have made a good beginning in achieving its nonproliferation objectives by supporting work on peaceful projects for scientists engaged in weapons of mass destruction and missile delivery system activities. However, although CTR program materials have often described the recipients of Center funds as "former" weapons scientists, we found that scientists receiving Center funds may also continue to be employed by institutes engaged in weapons work. According to the State Department, the Center's objective is to intentionally fund weapons scientists in the FSU and redirect their efforts to peaceful activities. The Center prohibits use of its funds for weapons work. With the collapse of the Soviet Union, the United States became concerned that FSU experts in weapons of mass destruction and related technologies might flee to other countries of proliferation concern to employ their specialized knowledge and maintain their livelihoods. According to State Department officials, many such experts are not being paid on a regular basis by their institutes. Continued economic deterioration could exacerbate this problem, particularly in light of decreased demand for this expertise and the inability of the governments to pay these experts on a regular basis. Estimates of the numbers of experts who potentially might engage in proliferation activities range from 10 thousand to several 10s of thousands of individuals. Center officials estimate that there are 3,000 core weapons of mass destruction and missile delivery system experts. As a result, the United States, European Community, Japan, and Russia agreed to establish the Moscow Center to provide peaceful opportunities to weapons scientists and engineers, particularly to experts on weapons of mass destruction and delivery vehicles. The Center selects projects from those submitted on a competitive basis, using a detailed review process. Center projects are carried out at various facilities and institutes throughout the FSU. To limit the potential diversion of funds, scientists and experts are paid directly on a quarterly basis rather than through their institutes and direct procurements of necessary equipment are made for the projects. An overhead payment up to 10 percent is made to the scientists' institutes upon successful completion of the project. The United States has committed $46 million to the Center in Moscow.\2 As of May 8, 1995, DOD had obligated $22.8 million and disbursed $20.9 million to the Center. The Center, which has been in operation for about 1 year, has disbursed $2.8 million for salaries and related project costs. Its Governing Board has approved 130 projects--valued at $60 million--of nearly 400 proposals received.\3 Grants include approximately $25 million in U.S. funds and involve 8,200 scientists and engineers, including, according to Center officials, at least 1,000 core weapons of mass destruction scientists. Recipients of seven Center grants at three different institutes told us that they had been involved in nuclear weapons development or nerve agent research--suggesting that they are among the Center's target group. They noted that the grants were important in redirecting their research and helping them survive the current economic conditions. State Department officials indicate that the target population appears to be staying in Russia, although the Center's role in encouraging them to do so is difficult to assess. We found that Center-supported scientists are not necessarily employed full time on Center projects and that they may spend part of their non-Center funded time working on Russian weapons of mass destruction. They may remain employed by FSU laboratories and work less than 100 percent of their time on Center projects--some as little as 10 percent. This situation raises the prospect that the scientists could spend the remainder of their time on their institutes' work on weapons of mass destruction. According to the State Department, Center and U.S. officials track the time the scientists spend on Center projects only and are not in a position to monitor their non-Center activities. Nevertheless, Center officials told us that they doubt that most scientists are actually working on other than Center projects. Center and State officials told us that the scientists maintain their connection to the institutes to retain important social benefits that the Center does not provide. U.S. officials stated that the Center is intended to help prevent proliferation and encourage commercial efforts, rather than to preclude scientists from working on Russian weapons of mass destruction, and that the Center prohibits the use of its funds for weapons-related work. We also learned that the United States and the Center are taking some steps to guard against the risk that scientists participating in Center projects could create dual-use items--civilian goods with weapons applications--with Center funds. U.S. officials explained that the United States policy is not to fund a project if it advances the state of Russian weapons technology, but could consider doing so if it utilizes existing weapons technologies for civilian applications and would provide meaningful employment for the target group of scientists. For example, the United States is supporting, through the Center, development of a commercial streak camera. Streak camera technology can be relevant to nuclear testing, and the final product could be subject to export licensing if produced for export, depending on its technical capabilities. The Center project was reviewed for dual-use potential during a detailed U.S. review process for all Center proposals based on scientific merit and U.S. policy. The State Department will assume responsibility for U.S. support for the Center in fiscal year 1996 and has prepared a multiyear plan to 2003. It estimates the project level will reach 225 projects, employing an estimated 12,000 individuals. State plans to budget approximately $90 million over the next 7 years for Center activities, $18 million annually through 1998 with a gradual decline to almost zero in fiscal year 2003. From the year 2003, State Department projects that nearly all funds will come from other U.S. agencies and non-governmental sources such as commercial partnerships. State officials hope to increase promotion of commercial partnerships where limited activities have occurred. State officials could not provide detailed analysis to support these planning figures, which, they stated, were largely developed by DOD through fiscal year 1998. However, they informed us that they have initiated a process for reviewing and revising these figures. They added that the funding levels were based on first-year spending rates, an unexpectedly large number of proposals, hopes of achieving a more targeted outreach to scientists, and overall political considerations. Project monitoring is already an area of concern for Center officials, who said that, because of the limited number of staff, they can monitor projects only intermittently, instead of quarterly as desired. Additionally, State Department officials explained that project monitoring is a tool in reviewing dual-use concerns and that the United States has proposed that the Center hire six to eight new project staff to help free senior staff for monitoring activities. -------------------- \2 This amount includes $5 million for projects in Belarus and $6 million for projects in Kazakhstan. \3 DOD conducted a full financial audit of the Center in March 1995 and concluded that the Center's financial statement fairly presented its financial position as of December 31, 1994. DEFENSE CONVERSION ------------------------------------------------------ Appendix IV:0.2 According to DOD officials, U.S. defense conversion aid is not intended to be sufficient to convert the FSU's defense industry. The program is planning to promote defense conversion by providing leverage to U.S. investment in the FSU. Although DOD claims their conversion efforts reduce the threat of weapons of mass destruction, we found that most of these efforts are converting dormant facilities that once produced items related to weapons of mass destruction. In commenting on a draft of this report, DOD informed us that most of its efforts are aimed at converting production capability because it considers much of Russia's weapons production capability to be inactive. DOD stated that converting inactive capability will alleviate pressure on Russia to rearm or sell high-tech weapons abroad and also aid the Russian economy. We also found that, initially, DOD efforts did not give priority to privatization of defense enterprises, and some of these companies remain state owned . The task of converting the FSU's defense industry to peaceful enterprises is enormous. One DOD official says that Russian officials claim that defense conversion will cost $150 billion and take 12 to 15 years. About 1,800 Russian defense plants are already undergoing conversion. The DOD defense conversion efforts primarily consist of industrial partnerships between U.S. enterprises and FSU weapons producers and in many cases these partnerships are creating private spin-off enterprises. Most of these efforts have been initiated in the past year and are in the early stages of development. Until now, DOD has managed nearly all of the defense conversion projects, but after fiscal year 1995 all new projects are to be managed by the Defense Enterprise Fund--a DOD-funded non-profit venture capital fund. DOD has $152.7 million available for obligation for defense conversion from fiscal year 1994 and 1995 funding. Currently, it plans to allocate an additional $70 million in fiscal year 1996-97 funds to the Fund. Up to $60 million of the $152.7 million is being obligated to convert former defense facilities to housing construction to help support the demobilization of Strategic Rocket Force officers. DOD is using the remaining $92.7 million primarily for industrial partnerships that will create joint ventures. The Fund will receive $27.7 million of this $92.7 million. As of May 8, the CTR program had obligated $97.6 million for defense conversion and the Fund.\4 As of March, according to DOD, the value of defense conversion work performed was about $24.7 million, and as of May defense conversion projects had created 93 jobs for Americans and 1,475 jobs for FSU defense employees. DOD estimates expect U.S. companies to have exported more than $27 million, and projected sales of the 15 joint ventures are expected to exceed $53 million this fiscal year. -------------------- \4 As of May 30, 1995, the CTR program had obligated nearly $118 million for defense conversion and the Defense Enterprise Fund. DOD-MANAGED PROJECTS ------------------------------------------------------ Appendix IV:0.3 DOD justifies the program by claiming that defense conversion efforts reduce the threat of weapons of mass destruction at their origin by converting enterprises to civilian sector endeavors. According to a DOD official, DOD focused on initiating projects at FSU firms and facilities that once produced weapons of mass destruction, but there is only one facility where an active production line is being converted to civilian use. The Defense Nuclear Agency initiated the defense conversion program by matching U.S. businesses with DOD-selected FSU defense enterprises. We also found that defense conversion took priority over privatization as criteria for selection. Although encouraging privatization is a U.S. policy, Defense Nuclear Agency officials said that it was not an initial concern of CTR defense conversion.\5 According to DOD officials, implementing agreements with the FSU republics do not make privatization a requirement for defense conversion projects, but DOD officials are working with the FSU governments to privatize CTR projects. DOD-managed projects are at varying stages of implementation. In Russia, one project links GosNIIAS--a state-owned aviation enterprise on Russia's list of firms not to be privatized--to a U.S. firm with which it had previously been involved. DOD is providing $4.1 million to the U.S. firm, which has subcontracted $938,000 to GosNIIAS to begin to develop an air traffic control system in the Russian Far East. Unlike another Russian project we reviewed, the GosNIIAS project is not a joint venture and profits made could go back to GosNIIAS. In Ukraine, a U.S. commercial partner has teamed up with a Ukrainian enterprise, Hartron, which formerly made ballistic missile guidance systems for the SS-18 and SS-19. These firms will work together to develop nuclear power plant instrumentation and control systems, which are designed to improve nuclear safety. The United States provided a $5 million grant to the U.S. firm, which has contributed $14 million for this joint venture. As of July 1994, Hartron has about 10,000 employees and has several other on-going conversion efforts, including a Chinese-Ukrainian venture assembling televisions, an association with a U.S. computer firm to produce components, and a planned project linking banks with satellite communications. In Kazakhstan, a U.S. firm has teamed up with KazInformtelecom to build a national and international telecommunications system, which is projected to be operational in 11 cities in 12 months. The U.S. government is providing $5 million of the $16.1 million for this partnership. KazInformtelecom is a new company that was established in 1994. It is the executive contractor to convert part of the Saryshaghan testing site to civilian use. Saryshaghan tested surface to air and anti-ballistic missiles. Defense conversion funds are also being used to help provide housing to further Inter Continental Ballistic Missile (ICBM) demobilization. According to DOD, the shortage of housing is one of the most serious obstacles to eliminating strategic nuclear missile arsenals and closing missile bases. In Belarus, Russia, and Ukraine, provisions for housing are a statutory prerequisite for officer demobilization. In Ukraine, DOD plans to provide assistance that will result in 428 housing units at a cost of $30 million. The Ukraine housing requirement for demobilization is 6,000 units. In Russia, the DOD-funded housing project is expected to provide 500 units of the potentially 30,000 housing units needed at a cost of up to $20 million. In Belarus DOD plans to provide up to 207 of the 802 housing units needed at a cost of $10 million. All but one of these projects are aimed at creating new housing industries and infrastructure that can be used to create additional housing. As a result, housing project start-up costs appear high. -------------------- \5 In Belarus, privatization is not permitted. DEFENSE ENTERPRISE FUND-MANAGED PROJECTS ------------------------------------------------------ Appendix IV:0.4 New defense conversion projects are being developed by the Defense Enterprise Fund, a venture capital fund capitalized by DOD to finance joint ventures and promote FSU defense conversion. According to one Fund official, the Fund will take more risk than the average venture capital firms to fill a perceived void and will require that its projects are privatized. The Fund has recently begun operating. Its Board of Directors first met in September 1994. DOD has obligated $27.7 million available to the Fund. To date, the Fund has provided one $1.8 million loan. The Board has approved several other projects whose final terms and conditions are being negotiated. DOD has proposed that about $118 million be provided to the Defense Enterprise Fund from fiscal years 1994 through 1997. In fiscal year 1995, $20 million was rescinded from the $40 million budget. DOD officials believe that the proposed funding is the minimum necessary to capitalize the Defense Enterprise Fund so it will have enough money to sustain itself after funding is completed. These officials believe that if funding is cut again the Fund will not have an opportunity to become self-sustaining and will just be an expensive mechanism to support joint defense conversion business initiatives. DOD justifies this funding based on other venture capital fund experiences and computer modeling of the $118 million, which shows the fund can be self-sustaining in certain scenarios. According to DOD officials, DOD took a conservative approach and modeled scenarios that predicted between 30 percent and 70 percent of the projects will default. These high default rates were based on pessimistic forecasts by other fund managers who predict problems trying to convert former Soviet weapons of mass destruction industries. Using the higher default rates, the Fund would have great difficulty sustaining itself. DOD has requested the Defense Enterprise Fund provide its own analysis based on DOD's funding profile. FUNDING FOR THE CTR PROGRAM (FISCAL YEARS 1992-95) =========================================================== Appendix V (Dollars in millions) Notification s to Disbursement Projects Congress Obligations s ------------------ ------------ ------------ ------------ Destruction and dismantlement ------------------------------------------------------------ Chemical weapons $55.000 $22.182 $7.336 destruction/lab- -Russia Communications link Belarus 2.300 .974 .457 Kazakhstan 2.300 .614 .134 Ukraine 2.400 .650 .131 Environmental 25.000 14.772 1.831 restoration- Project Peace Nuclear infrastructure elimination ------------------------------------------------------------ Belarus 5.000 .000 .000 Kazakhstan 17.000 .000 .000 Ukraine 10.000 .000 .000 Strategic offensive arms elimination ------------------------------------------------------------ Belarus 6.000 .000 .000 Kazakhstan 70.000 .324 .049 Russia 150.000 112.083 19.639 Ukraine 205.000 89.536 19.279 ============================================================ Subtotal 550.000 241.135 48.856 Chain of custody/nonproliferation ------------------------------------------------------------ Armored blankets- 5.000 3.244 2.905 -Russia Emergency response ------------------------------------------------------------ Belarus 5.000 4.288 3.604 Kazakhstan 5.000 2.045 .302 Russia 15.000 12.857 11.182 Ukraine 5.000 2.002 .179 Export controls ------------------------------------------------------------ Belarus 16.260 3.073 1.237 Kazakhstan 2.260 1.117 .137 Russia 2.260 .044 .011 Ukraine 7.260 3.337 .254 Fissile material 50.000 44.944 10.086 containers-- Russia Material control and accountability ------------------------------------------------------------ Kazakhstan 5.000 4.923 .364 Russia 45.000 20.333 .568 Ukraine 12.500 11.504 .129 Nuclear reactor 11.000 11.000 .046 safety--Ukraine Rail car security 21.500 21.500 17.649 upgrades--Russia Storage facility 15.000 15.000 12.866 design Storage facility 75.000 27.356 2.511 equipment Weapons security- 20.000 .000 .000 -Russia ============================================================ Subtotal 318.040 188.567 64.030 Demilitarization ------------------------------------------------------------ Defense conversion/Industrial Partnerships ------------------------------------------------------------ Belarus 20.000 19.607 8.098 Kazakhstan 15.000 14.860 .105 Russia 40.000 17.218 3.681 Ukraine 50.000 38.286 4.280 Defense Enterprise 27.670 7.670 7.670 Fund Research and 10.000 .000 .000 development foundation-- Russia Science and technology center ------------------------------------------------------------ Belarus 5.000 .000 .000 Kazakhstan 6.000 .000 .000 Russia 35.000 22.853 20.889 Ukraine 15.000 .414 .307 ============================================================ Subtotal 223.670 120.908 45.030 Other authorized programs/program support ------------------------------------------------------------ Arctic nuclear 30.000 19.520 5.270 waste--Russia Military-to-military contacts ------------------------------------------------------------ Belarus 7.524 .301 .098 Kazakhstan .900 .074 .014 Russia 11.548 7.761 3.844 Ukraine 5.900 .869 .321 Other assessment 24.400 19.720 9.221 costs ============================================================ Subtotal 80.272 48.245 18.768 ============================================================ Total $1,171.982 $598.855 $176.684 ------------------------------------------------------------ Note: These figures were current as of May 8, 1995. WORK PERFORMED ON SELECTED CTR PROJECTS (FISCAL YEARS 1992-95) ========================================================== Appendix VI (Dollars in millions) Value of work Projects performed Disbursements ------------------------------ ------------- ------------- Destruction and dismantlement ------------------------------------------------------------ Chemical weapons destruction/ $7.649 $5.120 lab--Russia Environmental restoration- 4.958 .802 Project Peace--Belarus Strategic offensive arms elimination ------------------------------------------------------------ Russia 55.925 28.186 Ukraine 52.530 8.753 Kazakhstan .045 .045 Chain of custody ------------------------------------------------------------ Emergency response--Belarus 4.125 3.340 Fissile material containers-- 14.254 6.501 Russia Material control and accountability ------------------------------------------------------------ Kazakhstan .850 .016 Russia 1.189 .368 Ukraine .660 .117 Storage facility design-- 13.764 12.441 Russia Storage facility equipment-- 4.744 .345 Russia Demilitarization ------------------------------------------------------------ Defense conversion-industrial partnership ------------------------------------------------------------ Belarus 7.785 6.844 Kazakhstan .113 .099 Russia 3.059 2.524 Ukraine 6.043 1.966 Defense Enterprise Fund 7.670 7.670 Science and technology center- 20.313 20.313 -Russia ============================================================ Total $205.676 $105.450 ------------------------------------------------------------ Note: These figures were current as of March 1, 1995. (See figure in printed edition.)Appendix VII COMMENTS FROM THE DEPARTMENT OF DEFENSE ========================================================== Appendix VI (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) The following are GAO's comments on DOD's letter dated June 2, 1995. GAO COMMENTS 1. The draft report states that without CTR assistance Ukraine could not dismantle its nuclear weapons. 2. DOD's statements that CTR-provided equipment is being used to cut up heavy bombers and nuclear submarines are inaccurate. While some CTR-provided equipment is in use at Engels Air Base, the guillotine shears have not been used to cut up any aircraft to date. In addition, while heavy equipment being provided through the CTR program to cut up nuclear submarines is not yet operational, some CTR-supplied equipment is being used to cut launcher tubes out of submarines. 3. We question DOD's emphasis on the tangible impact of the program with regard to dismantlement efforts. In various documents, DOD officials attribute the deactivation of thousands of nuclear warheads and the dismantlement of hundreds of strategic launchers to CTR assistance. When asked to document their claims, DOD officials could not provide the data needed to substantiate the direct impact of CTR dismantlement assistance. 4. According to a DOD official, the phrase "these warheads" refers to the class of warheads rather than to a specific number of warheads moved. 5. As of May 18, 1995, the date of the draft report, our information on CTR audits and examinations was accurate. We have modified the report to reflect the most recent developments. 6. We have added language to clarify our meaning. The United States and Russia have not agreed on the applicability of the Russian destruction technology for a chemical weapons destruction facility because the necessary data will not be available until the ongoing joint evaluation is concluded. Unlike the U.S.-preferred incineration process, the Russian technology has no record of performance outside the laboratory, and the Russians have not provided sufficient data to allay U.S. concerns about the technology's technical and cost uncertainties. Without the joint evaluation results, a U.S. commitment to support an uncertain technology would be premature. 7. It is precisely because of the difficult history of chemical weapons destruction in the United States with what is now a proven technology, that we questioned the basis for DOD's assumption that the Russian technology inevitably will be "validated" to be feasible and affordable for use in a large-scale facility. 8. While the chemical weapons destruction project management may have been persistent in its efforts to overcome U.S. and Russian differences, we also must note that in many significant differences--such as selection of a chemical weapons destruction technology and selection of the type of chemical weapons (artillery- or air-delivered munitions) to be destroyed first, among others--the Russian position has prevailed. We believe that this reinforces DOD's point on the difficulties the chemical weapons destruction project faces. 9. We believe that it is necessary to link obligation rates to the final reporting data for the critical joint evaluation study because the nature and scope of future U.S. support for several efforts--the preliminary implementation plan, the pilot demonstration system, and the Russian chemical weapons destruction facility--are related directly to the results of the testing. 10. In response to our questions, DOD provided us with several revised "preliminary" funding breakouts and schedules, just prior to, during, and after the time it received our draft report for comment. In the latter revisions, the $34.3 million for additional technology development activities to be determined--that we recommended be reduced--had changed to show about $23 million for testing specific types of equipment, and the remainder of the $34.3 million was reallocated to other parts of the project. 11. Our understanding of such timelines was illustrated in our October 1994 CTR report. (See page 1, footnote 1 of this report.) We stated that the ". . . program was initially slowed by the time needed to complete agreements between the United States and former Soviet republics, fully develop projects, and comply with legislated requirements . . . ." 12. In our October 1994 CTR report, we also stated that the Russians do not want U.S. assistance in dismantling their nuclear warheads. At that time, DOD had no comment on our assessment. 13. Our draft report described how the CTR program is providing assistance to help the Russians safely store components from dismantled nuclear weapons and stated that the U.S. and Russia are discussing the provision of supercontainers. 14. As of May 18, 1995, the date of our draft report, the information on dismantlement efforts in Kazakhstan was accurate. We have modified the report to more accurately reflect the current status of these efforts. 15. The "Statement of Work for a Comprehensive Plan to Support the Russian Chemical Weapons Destruction Program," dated January 1994, stated that a U.S. contractor would prepare a comprehensive plan to "include all the key milestones for the destruction of the entire Russian CW [chemical weapons] stockpile and the estimated associated costs." The preliminary implementation plan for the first site only is a significant decrease in scope. 16. DOD is incorrect in stating that the draft report was "out-of-date." We noted in the draft report that the Russians--after a year-long delay--had selected the site for the Central Analytical Laboratory in March 1995 and we characterized this event as one of several recent positive developments. 17. The draft report clearly distinguishes between nuclear material protection, control, and accounting, and nuclear weapons security. Our finding that the CTR program has made little progress in protecting nuclear material that presents a proliferation risk refers to nuclear material protection, control, and accounting projects not only at specific facilities, but also to the establishment of national material control and accounting systems in Russia. We also disagree with DOD's comments that we narrowly focused on one aspect of the program. Our assessment in this area relates to all known sites where nuclear material directly usable in nuclear weapons is located. 18. While we agree with DOD that Project Sapphire was a critical step in protecting nuclear material that presented a proliferation risk, Project Sapphire was not a CTR project. Project Sapphire was funded by State, DOD, and Energy. We have added a footnote that explains that some CTR funds were used to pay for DOD's portion of Project Sapphire and that DOD's portion of Project Sapphire was not funded out of the material protection, control, and accounting program for Kazahkstan. In addition, we believe that Project Sapphire represents a unique response to a specific proliferation threat and does not represent an ongoing strategy of the CTR program to improve nuclear material protection, control, and accounting in the FSU. We note that the administration is currently developing a strategy to improve material protection, control, and accounting systems at all known facilities using direct use material in the former Soviet Union. 19. Although some progress has been made in other CTR projects that are involved in improving protection of nuclear material, the projects involve either (1) facilities using nuclear material that presents a low proliferation risk (such as low enriched uranium and irradiated plutonium) or (2) projects in their initial stages involving facilities using material presenting a high proliferation risk (such as highly enriched uranium and unirradiated plutonium). We have made changes to the draft that more accurately show that the CTR program has made little direct impact in protecting nuclear material that presents a high proliferation risk. 20. DOD's comment on progress made with Russia under the laboratory-to-laboratory program overstates the impact of fiscal year 1995 CTR funds on the program. The Department of Energy's lab-to-lab program has successfully completed a project to upgrade physical protection of approximately 100 kilograms of highly enriched uranium at the Kurchatov Institute in Moscow. However, the project was completed in February 1995 using Energy's funds. Fiscal year 1995 CTR funds for Energy's lab-to-lab program were not transferred to Energy until April 20, 1995. 21. We have revised the text of the report to acknowledge that most defense conversion projects are focused on converting inactive defense factories that still have production capability. We also acknowledge in the report that DOD believes converting excess production capability will alleviate pressure on Moscow to rearm or sell high-tech weapons abroad and will also aid the Russian economy. 22. Although DOD has accelerated the start-up of 15 projects in a little more than a year, we believe that it is too early to judge the success of these projects. One of the projects that DOD gives high marks to in its comments was considered by officials responsible for managing the program as stalled from its inception. After receipt of our draft report, DOD officials informed us of progress on this project. 23. The report already notes the primary purpose of the program is to prevent proliferation. 24. This concept is not disputed anywhere in the report. 25. DOD's assertion that it generally describes the recipients of Center grants as "former Soviet" weapons scientists is incorrect. DOD often--in testimony, budget submissions, and briefing documents--used the terminology, "former" weapons scientists or scientists "formerly" involved in a weapons program. The Assistant Secretary of Defense, while testifying before the House Appropriations Committee, Subcommittee on Defense, on March 9, 1994, described the recipients as "former weapons scientists," and the 1996 Budget Submission describes the recipients as "scientists and engineers formerly involved with weapons of mass destruction." 26. The $27.67 million totals the amount notified to Congress for all the republics. (See figure in printed edition.)Appendix VIII COMMENTS FROM THE DEPARTMENT OF STATE ========================================================== Appendix VI (See figure in printed edition.) (See figure in printed edition.) See comment 3. (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) The following are GAO's comments on the Department of State's letter dated June 1, 1995. GAO COMMENTS 1. Classified enclosure concerning chemical weapons destruction issues has been detached from the letter. 2. We have added language to clarify our meaning. The United States and Russia have not agreed on the applicability of the Russian destruction technology for a chemical weapons destruction facility because the necessary data will not be available until the ongoing joint evaluation is concluded. Unlike the U.S. preferred incineration process, the Russian technology has no record of performance outside the laboratory, and the Russians have not provided sufficient data to allay U.S. concerns about the technology's technical and cost uncertainties. Without the joint evaluation results, a U.S. commitment to support an uncertain technology would be premature. 3. State Department officials notified us that their written comments on our draft report contained some out-of-date and incorrect information concerning the Chemical Weapons Destruction project. As a result, State officials stated in our exit meeting that State deferred to DOD concerning program-specific comments. Consequently, we responded only to DOD's comments on program details. 4. Our information on CTR audits and examinations was accurate as of May 18, 1995, the date of the draft report. We have modified the report to reflect the recent progress in conducting such examinations. 5. Russia was dismantling its nuclear warheads and launchers before any CTR dismantlement assistance arrived in September 1994. While Russia appears to maintain a robust dismantlement rate, we could not determine to what extent CTR assistance would accelerate the Russian dismantlement rate. 6. While we do not take issue with State's assertions about the political impact of offering Belarus CTR assistance, the United States and Belarus have yet to sign an implementing agreement detailing the requirements for CTR dismantlement assistance. 7. DOD has often--in testimony, budget submissions, and briefing documents--used the terminology, "former" weapons scientists or scientists "formerly" involved in a weapons program. The Assistant Secretary of Defense, while testifying before the House Appropriations Committee, Subcommittee on Defense on March 9, 1994, described the recipients as "former weapons scientists," and the 1996 Budget Submission described the recipients as "scientist and engineers formerly involved with weapons of mass destruction." The report notes that there is no connection between Center-funded projects and weapons projects beyond the fact that the same scientists could be working on both projects. 8. We cannot comment on the impact of anecdotal evidence. 9. We did not perform a statistical analysis of all Center projects. Rather, based on the review of approximately 10 percent of the existing projects, we point out that scientists working on Center projects could also be working on current weapons programs. U.S. and Center officials, as well as recipients, confirmed that no restrictions exist to prohibit this from occurring. The text was changed to reflect the receipt of social benefits as a reason for part-time employment at the institutes. 10. The example cited in the report does not display a basic misunderstanding on our part. The report uses streak cameras as an example of an item, funded by the Center, that is dual-use in nature. Streak cameras are relevant in nuclear testing, the project was subject to the dual-use review by the U.S. officials, and the final product could be subject to export licensing. 11. We have revised the text of the report to acknowledge that most defense conversion projects are focused on converting inactive defense factories that still have production capability. Our report now points out that DOD believes converting production capability will aid the Russian economy and alleviate pressure on Moscow to rearm or sell high-tech weapons abroad. Neither DOD or the Department of State have provided any information showing how the industrial partnership program would largely eliminate the capability to produce weapons of mass destruction. 12. This paragraph focuses on overall defense conversion and not just weapons of mass destruction. Although the DOD defense conversion program emphasizes converting weapons of mass destruction facilities, not all conversion projects are converting these types of facilities. In one case, a firm in Ukraine was formerly producing engines and parts for naval vessels. (See figure in printed edition.)Appendix IX COMMENTS FROM THE DEPARTMENT OF ENERGY ========================================================== Appendix VI (See figure in printed edition.) (See figure in printed edition.) The following are our comments on the Department of Energy's letter dated May 26, 1995 and memorandum dated May 17, 1995. GAO COMMENTS 1. We have changed the report to reflect wording changes suggested by the Department of Energy. 2. The statement that currently there is no agreement with the Russians for work at the 80 to 100 facilities is accurate. However, we have made changes to the report to reflect the agreement in principle reached by the U.S. and Russian lab-to-lab steering groups for work at MINATOM nuclear weapons related facilities and Energy's current efforts to negotiate agreements for work at many of the other 80 to 100 facilities. 3. Energy's assertion is incorrect. However, to more accurately reflect Russia's international obligations, we have added a footnote that Russia has entered into a voluntary arrangement to meet international safeguards at some of its civilian nuclear power facilities and research reactors. However, this falls short of having to meet international standards for all of its nuclear facilities as in the case of Ukraine and Kazakhstan. We also added that Russia is a party to the Convention on the Physical Protection of Nuclear Materials that obligates it to meet defined standards of physical protection of nuclear materials. MAJOR CONTRIBUTORS TO THIS REPORT =========================================================== Appendix X NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION, WASHINGTON, D.C. F. James Shafer Pierre R. Toureille Blake L. Ainsworth Charles T. Bolton Muriel J. Forster Jo Ann T. Geoghan Julie M. Hirshen Beth A. Hoffman Leon Jeffrey D. Phillips Raymond A. Plunkett RESOURCES COMMUNITY AND ECONOMIC DEVELOPMENT DIVISION, WASHINGTON, D.C. Mary Alice A. Hayward EUROPEAN OFFICE Patrick A. Dickriede