Nuclear Nonproliferation: Concerns With DOE's Efforts to Reduce the Risks
Posed by Russia's Unemployed Weapons Scientists (Chapter Report,
02/19/99, GAO/RCED-99-54).
Pursuant to a congressional request, GAO reviewed the Department of
Energy's (DOE) efforts to create jobs for displaced former Soviet Union
scientists through its Initiatives for Proliferation Prevention program,
focusing on: (1) the costs to implement the program for fiscal years
1994-98, including the amount of funds received by weapons scientists
and institutes; (2) the extent to which the program's projects are
meeting their nonproliferation and commercialization objectives; and (3)
DOE's Nuclear Cities Initiative.
GAO noted that: (1) the cost to implement the Initiatives for
Proliferation Prevention program from fiscal year 1994 through June 1998
are as follows: (a) of the $63.5 million spent, $23.7 million, or 37
percent, went to scientific institutes in the Newly Independent States
(NIS); (b) the amount of money that reached the scientists at the
institutes is unknown because the institutes' overhead charges, taxes,
and other fees reduced the amount of money available to pay the
scientists; and (c) about 63 percent, or $39.8 million, of the program's
funds was spent in the United States, mostly by DOE's national
laboratories in implementing and providing oversight of the program; (2)
regarding the extent to which the program is meeting its
nonproliferation and commercialization goals, GAO found that: (a) the
program has been successful in employing weapons scientists through
research and development projects, but it has not achieved its broader
nonproliferation goal of long-term employment through the
commercialization of these projects; (b) program officials do not always
know how many scientists are receiving program funding or whether the
key scientists and institutes are being targeted; (c) some scientists
currently working on Russia's weapons of mass destruction program are
receiving program funds; (d) some dual-use projects may have
unintentionally provided defense-related information--an outcome that
could negatively affect U.S. national security interests; and (e)
chemical and biological projects may not be adequately reviewed by U.S.
officials prior to approval; and (3) the Nuclear Cities Initiative may
cost $600 million over the next 5 years: (a) the initiative is still
largely in a conceptual phase, and it is uncertain how jobs will be
created in the 10 nuclear cities because of restricted access and the
current financial crisis in Russia; and (b) the initiative is likely to
be a subsidy program for Russia for many years, given the lack of
commercial success in the Initiatives for Proliferation Prevention
Program.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-99-54
TITLE: Nuclear Nonproliferation: Concerns With DOE's Efforts to
Reduce the Risks Posed by Russia's Unemployed Weapons
Scientists
DATE: 02/19/99
SUBJECT: Nuclear weapons
Nuclear proliferation
Arms control agreements
Foreign economic assistance
Laboratories
Defense conversion
Dual-use technologies
Cost analysis
International cooperation
IDENTIFIER: DOE Initiatives for Proliferation Prevention Program
DOD Cooperative Threat Reduction Program
Defense Enterprise Fund
DOE Nuclear Cities Initiative
Russia
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Cover
================================================================ COVER
Report to the Chairman, Committee on Foreign Relations, U.S. Senate
February 1999
NUCLEAR NONPROLIFERATION -
CONCERNS WITH DOE'S EFFORTS TO
REDUCE THE RISKS POSED BY RUSSIA'S
UNEMPLOYED WEAPONS SCIENTISTS
GAO/RCED-99-54
Nuclear Nonproliferation
(141152)
Abbreviations
=============================================================== ABBREV
DOD - Department of Defense
DOE - Department of Energy
GAO - General Accounting Office
IPP - Initiatives for Proliferation Prevention
ISTC - International Science and Technology Center
KVANT -
MINATOM - Russian Ministry of Atomic Energy
NIS - Newly Independent States
USIC - U.S. Industry Coalition
VECTOR - State Research Center of Virology and Biotechnology
VNIIEF - All-Russian Scientific Research Institute of Experimental
Physics
VNIIGAZ - All-Russian Scientific Research Institute of Natural
Gases and Gas Technologies
VNIINM - All-Russian Scientific Research Institute of Inorganic
Materials
Letter
=============================================================== LETTER
B-281733
February 19, 1999
Letter
=============================================================== LETTER
The Honorable Jesse Helms
Chairman, Committee on Foreign
Relations
United States Senate
Dear Mr. Chairman:
This report responds to your request that we review DOE's
implementation of its Initiatives for Proliferation Prevention
program--an effort to develop nonmilitary applications for defense
technologies and create jobs for weapons scientists from the former
Soviet Union. The report also discusses DOE's Nuclear Cities
Initiative--a new effort to create jobs in Russia's 10 closed nuclear
cities. This report contains several recommendations to the
Secretary of Energy.
We are sending copies of this report to the Secretaries of Energy,
State, and Defense; the Director of the Office of Management and
Budget; and other interested parties. We will also make copies
available to others on request.
Please call me at (202) 512-3841 if you or your staff have any
questions. Major contributors to this report are listed in appendix
VIII.
Sincerely yours,
(Ms.) Gary L. Jones
Associate Director, Energy,
Resources, and Science
Issues
EXECUTIVE SUMMARY
============================================================ Chapter 0
PURPOSE
---------------------------------------------------------- Chapter 0:1
The risk that unemployed weapons scientists in the former Soviet
Union will sell sensitive information to countries or terrorist
groups trying to develop weapons of mass destruction poses a national
security threat to the United States. In response to this threat,
the Initiatives for Proliferation Prevention program was established
in 1994 to engage scientists in the former Soviet Union in peaceful
commercial activities. In late 1998, the administration launched a
new complementary program--the Nuclear Cities Initiative--to create
jobs for displaced weapons scientists in the 10 cities that form the
core of Russia's nuclear weapons complex.
The Chairman of the Senate Committee on Foreign Relations asked GAO
to review (1) the costs to implement the Initiatives for
Proliferation Prevention program for fiscal years 1994-98, including
the amount of funds received by weapons scientists and institutes;
(2) the extent to which the program's projects are meeting their
nonproliferation and commercialization objectives; and (3) the
Department of Energy's Nuclear Cities Initiative.
BACKGROUND
---------------------------------------------------------- Chapter 0:2
The objectives of the Initiatives for Proliferation Prevention
program are to (1) engage weapons scientists and institutes in
productive nonmilitary work in the short term and (2) create jobs for
former weapons scientists in the high-technology commercial
marketplace in the long term. It is estimated that Russia's 4,000
scientific institutes employed about 1 million scientists and
engineers. The program is limited in scope and is not designed to
address the total problem posed by unemployed weapons scientists.
Rather, it is one of several U.S. government nonproliferation
efforts focused on Russia and other countries of the former Soviet
Union, now known as the Newly Independent States. The program is
implemented through research and development projects involving the
Department of Energy's headquarters and national laboratories, U.S.
industry, and scientific institutes in the Newly Independent States.
A major purpose of the program is to identify commercial
opportunities through these projects that will attract investment by
U.S. companies. In this sense, the program functions as seed money
that could lead to self-sustaining business ventures and create
long-term employment in the Newly Independent States. As of December
1998, the program had funded over 400 projects in four countries.
More than 80 percent of the projects were in Russia, and the
remainder were in Ukraine, Belarus, and Kazakhstan.
In September 1998, the Department of Energy established, and Russia
agreed to participate in, a new nonproliferation effort--the Nuclear
Cities Initiative. This effort is not part of the Initiatives for
Proliferation Prevention program but has many related elements. It
focuses on the 10 nuclear cities that were among the most secret
facilities in the former Soviet Union. The Department of Energy and
other U.S. government agencies plan to help promote employment
opportunities in the nuclear cities, primarily for unemployed weapons
scientists, through commercial enterprises.
RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3
The cost to implement the Initiatives for Proliferation Prevention
program from fiscal year 1994 through June 1998 are as follows:
-- Of the $63.5 million spent, $23.7 million, or 37 percent, went
to scientific institutes in the Newly Independent States.
-- The amount of money that reached the scientists at the
institutes is unknown because the institutes' overhead charges,
taxes, and other fees reduced the amount of money available to
pay the scientists.
-- About 63 percent, or $39.8 million, of the program's funds was
spent in the United States, mostly by the Department of Energy's
national laboratories in implementing and providing oversight of
the program.
Regarding the extent to which the program is meeting its
nonproliferation and commercialization goals, GAO found the
following:
-- The program has been successful in employing weapons scientists
through research and development projects, but it has not
achieved its broader nonproliferation goal of long-term
employment through the commercialization of these projects.
-- Program officials do not always know how many scientists are
receiving program funding or whether the key scientists and
institutes are being targeted.
-- Some scientists currently working on Russia's weapons of mass
destruction program are receiving program funds.
-- Some "dual-use" projects may have unintentionally provided
defense-related information--an outcome that could negatively
affect U.S. national security interests.
-- Chemical and biological projects may not be adequately reviewed
by U.S. officials prior to approval.
The Nuclear Cities Initiative may cost $600 million over the next 5
years:
-- The initiative is still largely in a conceptual phase, and it is
uncertain how jobs will be created in the 10 nuclear cities
because of restricted access and the current financial crisis in
Russia.
-- The initiative is likely to be a subsidy program for Russia for
many years, given the lack of commercial success in the
Initiatives for Proliferation Prevention program.
PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4
ABOUT 37 PERCENT OF PROGRAM
FUNDS IS REACHING INSTITUTES
IN THE NEWLY INDEPENDENT
STATES
-------------------------------------------------------- Chapter 0:4.1
As shown in figure 1, only about 37 percent, or $23.7 million, of the
$63.5 million spent for the Initiatives for Proliferation Prevention
program through June 1998 went to scientific institutes. Overhead
charges, taxes, and other fees reduced the funds that the scientists
at the institutes received. The Department of Energy's national
laboratories received about 51 percent, or $32.2 million. The
remaining 12 percent, or $7.6 million, went to support U.S.
industry's participation in the program. Program officials said a
significant portion of program funds is provided to the national
laboratories because of the oversight role played by laboratory
personnel in administering the program and providing technical
oversight of the projects. However, laboratory personnel told GAO
that (1) the projects were usually not their primary responsibility
and took up only a small percentage of their time and (2) most of
their efforts were spent in the early stages of the projects
developing the paperwork necessary to get the projects started.
Figure 1: Breakout of
Expenditures for the
Initiatives for Proliferation
Prevention Program Through June
1998
(See figure in printed
edition.)
Source: Department of Energy.
IMPACT OF THE PROGRAM ON
U.S. NONPROLIFERATION GOALS
IS UNCERTAIN
-------------------------------------------------------- Chapter 0:4.2
Although, in general, the program is employing weapons scientists on
a part-time basis, it has not achieved its broader nonproliferation
goal of long-term employment through the commercialization of
projects. The lack of investment capital and markets and the
inadequate training of scientists in business skills are factors
impeding the program's commercial success. GAO reviewed 79 projects
and determined that none was a commercial success, although several
showed commercial potential, including projects dealing with solar
panels, metals recycling, and technology to eradicate insects in
lumber.
Nevertheless, Department of Energy officials believe that the program
is successful because it has at least temporarily employed thousands
of scientists at about 170 institutes and organizations throughout
Russia and other Newly Independent States. However, while over
one-half of program funds have been spent on implementation and
oversight, GAO found that program officials do not always know how
many scientists are receiving funds or whether the key scientists and
institutes are being targeted. In addition, program guidance is
unclear on whether funds should be going exclusively to former or
previously employed weapons scientists. Some scientists currently
working on Russia's weapons of mass destruction are receiving program
funds. GAO also found scientists working on nine dual-use projects
that could unintentionally yield useful defense-related information
and could, therefore, negatively affect U.S. national security
interests. Finally, GAO found that proposed chemical and biological
projects may not be adequately reviewed by U.S. officials.
RECENT NONPROLIFERATION
INITIATIVE FOCUSES ON
RUSSIA'S NUCLEAR CITIES
-------------------------------------------------------- Chapter 0:4.3
The Nuclear Cities Initiative represents the most ambitious effort by
the United States to assist Russia in downsizing and restructuring
its vast nuclear weapons complex. According to Department of Energy
officials, the initiative may cost $600 million over the next 5
years. Because the initiative is new, no funds had been spent at the
time of GAO's review, but the Department expects to receive $15
million to $20 million in fiscal year 1999. The initiative will
start in 3 of the 10 nuclear cities--(1) Sarov, formerly Arzamas-16,
(2) Snezhinsk, formerly Chelyabinsk-70, and (3) Zheleznogorsk,
formerly Krasnoyarsk-26--and expand later.
There are many uncertainties and questions related to this
initiative. For example, it may be difficult for the Department of
Energy to create jobs in Russia's nuclear cities, which are still
considered sensitive and afford limited access to visitors.
Furthermore, as a result of the August 1998 devaluation of the
Russian currency, the Russian banking system has virtually collapsed,
and the ability of Russian banks or the willingness of foreign
investors to support job creation in the closed cities is
questionable for the foreseeable future. Given the limited
commercial success evidenced in the Initiatives for Proliferation
Prevention program and economic conditions in Russia, GAO believes
that the Nuclear Cities Initiative is likely to be a subsidy program
for Russia for many years rather than a stimulus for economic
development.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5
GAO is making several recommendations to the Secretary of Energy to
improve the implementation and oversight of the Initiatives for
Proliferation Prevention program. Specifically, GAO recommends,
among other things, that the Secretary of Energy review the role and
costs associated with the national laboratories' implementation and
oversight of the program; require that more accurate data be obtained
on the background and number of key scientists participating in the
program; and clarify program guidance to determine whether scientists
currently working in weapons of mass destruction programs are
eligible for program funding.
GAO further recommends, among other things, that the Nuclear Cities
Initiative not be expanded beyond the three nuclear cities until the
Department has demonstrated that its efforts are achieving the
intended results, including the creation of employment opportunities
for unemployed weapons scientists.
AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6
The Department of Energy, in commenting on a draft of this report,
concurred with the report's findings and recommendations and said
that GAO's evaluation will assist the Department in significantly
strengthening the program. The Department's comments are presented
in appendix VII. The Department also provided technical comments
that were incorporated into the report as appropriate. The
Department wanted to clarify three issues raised in the report,
including (1) the dual-use potential of some projects, (2) the
provision of program funding to Russian weapons scientists currently
working on their own nuclear weapons programs, and (3) the lack of
progress in commercializing program projects.
Regarding dual-use technologies, the Department noted that the
projects identified in the report date from an earlier period of the
Initiatives for Proliferation Prevention program and, at worst, might
have provided only incidental military benefits to Russia. The
Department noted that over the past 18 months, the program's
management team has intensified its reviews of projects to reinforce
understanding that they are to be directed exclusively to peaceful
purposes. Furthermore, the Department said that it has been
particularly sensitive to the dual-use potential of projects in the
Newly Independent States' chemical and biological institutes.
Nonetheless, the Department recognizes that improvements are needed
in the review process and accepts GAO's recommendation to strengthen
the process.
Regarding GAO's finding that the program is supplementing the
salaries of some Russian scientists currently working on weapons of
mass destruction, the Department stated that program policy does not
allow for payment to scientists to perform weapons work and,
therefore, the program is not subsidizing this work. However, the
Department agreed that program guidance is unclear on whether funds
should be going exclusively to former, or previously employed,
weapons scientists or whether scientists currently working in weapons
of mass destruction programs are eligible for program funding. The
Department concurred with GAO's recommendation and said it will issue
explicit program guidance on this matter within 90 days.
Finally, regarding GAO's finding that the program is not achieving
its long-term commercialization goals, the Department commented that
the commercialization of science and engineering projects is very
difficult in the United States and much more so in Russia,
particularly in the wake of the August 1998 financial crisis. The
Department noted that the Initiatives for Proliferation Prevention
program cannot by itself create commercial entities. It can only set
measures and procedures to maximize the likelihood of their creation
by U.S. industry. GAO's report recognizes the challenges faced by
the Department in commercializing projects in Russia and other Newly
Independent States. Given that commercialization is one of the
purposes of the program, GAO recommends that the Department
reevaluate the large number of projects and eliminate those that do
not have commercial potential. The Department concurred with this
recommendation.
INTRODUCTION
============================================================ Chapter 1
The collapse of the Soviet Union in 1991 heightened U.S.
policymakers' concerns about the dangers posed by the Soviet Union's
arsenal of nuclear, chemical, and biological weapons. The U.S.
government is concerned that unemployed former Soviet Union weapons
scientists pose a significant risk to nonproliferation goals because
they may provide their weapons-related expertise to countries that
are trying to develop weapons of mass destruction (known as countries
of proliferation concern), criminal elements, or terrorist groups.
It has been estimated that about 1 million scientists and engineers
were employed in Russia's 4,000 scientific institutes.
BACKGROUND
---------------------------------------------------------- Chapter 1:1
Public Law 103-87, "The Foreign Operations, Export Financing and
Related Programs Appropriations Act, 1994" made funds available for a
cooperative program between scientific and engineering institutes in
the former Soviet Union and the Department of Energy's (DOE) national
laboratories and other qualified institutions in the United States.
In response to the act, DOE undertook a program to curb the potential
for proliferation posed by weapons scientists in the Newly
Independent States (NIS) of the former Soviet Union through the
Industrial Partnering Program. The name of this program was changed
to the Initiatives for Proliferation Prevention (IPP) in 1996. The
purpose of the program is to stabilize the technology base in these
countries as they attempt to convert defense industries to civilian
applications. Immediate near-term attention was to be focused on
institutes and supporting activities that would engage NIS weapons
scientists and engineers in productive nonmilitary work. The program
was expected to be commercially beneficial to the United States and
the NIS. IPP was also expected to promote long-term nonproliferation
goals through the commercialization of NIS technologies. While
commercial benefit is a major emphasis of the program, the
nonproliferation goals of the IPP program are the foundation for all
program activities.
In 1998, DOE initiated another program that has complementary goals
and focuses on creating jobs in 10 cities (commonly referred to as
the nuclear cities) that formed Russia's nuclear weapons complex.
This program, known as the Nuclear Cities Initiative, is discussed in
more detail in chapter 4. It has been estimated that Russia's 10
closed nuclear cities contain about 1 million inhabitants. This
total includes the families of the closed cities' weapons scientists
and support personnel, such as teachers and technicians. The cities
are called "closed" because access to them is restricted and they are
geographically isolated. These cities have performed the most
sensitive aspects of nuclear weapons production. Two of the cities,
Arzamas-16 (now Sarov) and Chelyabinsk-70 (now Snezhinsk), are
primarily research institutes, responsible for weapons design. The
remaining eight were originally production facilities and are now
involved in dismantling weapons and in securing and disposing of
nuclear materials.
The director of DOE's Office of Nonproliferation and National
Security stated that the IPP program's main objectives are to (1)
identify and develop nonmilitary applications for NIS defense
technologies and (2) create long-term jobs for NIS weapons scientists
and engineers in the high-technology commercial marketplace. DOE
defines a weapons of mass destruction scientist or engineer as an
individual with direct experience in designing, developing,
producing, or testing weapons of mass destruction or the missile
systems used to deliver these weapons. While not all workers on a
project are required to satisfy the weapons of mass destruction
requirement, the majority of the scientific personnel should have
experience related to such weapons. The national laboratories, which
supervise IPP projects are responsible for ensuring that NIS
facilities and personnel were directly linked to weapons of mass
destruction. The program focuses on preventing the proliferation of
nuclear weapons but also addresses certain aspects of NIS chemical
and biological warfare systems. The program aims to use about 70
percent of its funding for nuclear-related projects and 30 percent
for chemical and biological projects.
An underlying principle of IPP is that the program is expected to
have an "exit strategy" to limit U.S. government involvement. By
serving as a catalyst to forge industrial partnerships between U.S.
industry and NIS institutes, the program anticipated "handing off"
commercial activities to the marketplace as they evolved and matured.
In this sense, IPP was expected to provide the seed money that would
lead to self-sustaining business ventures and help create a climate
that would foster long-term nonproliferation benefits.
The IPP program is one of a number of U.S. nuclear nonproliferation
programs focusing on the NIS. According to DOE officials, the
program is limited in scope and is not designed to address the total
problem posed by unemployed weapons scientists. Table 1.1 provides
information on the various U.S. nonproliferation programs focusing
on the NIS.
Table 1.1
U.S. Government Programs Focusing on
Nuclear Nonproliferation Assistance to
the NIS
(Dollars in millions)
U.S. government
agency Funds received
Program responsible for through fiscal
name Year established oversight Focus of program year 1998
-------- ---------------- ---------------- ---------------- ----------------
Initiati 1994 DOE Stabilize NIS $114
ves for defense
Prolifer institutes and
ation promote long-
Preventi term employment
on (IPP) opportunities
for weapons
scientists
Cooperat 1992 Department of Destroy and 1,346\a
ive Defense dismantle NIS
Threat weapons of mass
Reductio destruction and
n conduct certain
demilitarization
activities
Defense 1994 Defense Threat Assist defense 67
Enterpri Reduction conversion by
se Fund Agency\b financing U.S.-
NIS business
partnerships
Material 1994 DOE Through 428
s cooperative
Control, efforts, bring
Protecti NIS nuclear
on, and materials
Accounti protection,
ng (Lab control, and
to Lab) accounting
measures to
higher standards
The 1994 Department of Engage NIS 98\c
Internat State weapons
ional scientists in
Science peaceful
and research to
Technolo prevent
gy proliferation
Center
(ISTC)
Nuclear 1998 DOE Assist Russia in 0\d
Cities reducing the
Initiati size of its
ve nuclear weapons
complex by
redirecting the
work of nuclear
weapons
scientists
--------------------------------------------------------------------------------
\a Does not include activities such as certain chain-of-custody
activities, Arctic Nuclear Waste, and funds transferred to other
agencies for defense conversion activities, such as IPP and ISTC.
\b This agency is part of the Department of Defense.
\c Total from all contributors equals $215 million.
\d DOE plans to spend about $600 million on the program over the next
5 years.
Sources: Departments of Defense, Energy, and State.
According to DOE officials, IPP complements these other programs.
Department of State officials, who oversee the U.S. portion of the
International Science and Technology Center (ISTC) program, which
also provides funds to NIS weapons scientists, said the two programs
share similar objectives and can have a mutually beneficial effect.\1
The programs do have some important differences. For example, ISTC
is a multilateral program, funded by several countries and
organizations, while IPP is a bilateral program, funded solely by the
United States. Unlike ISTC, which is implemented by an
intergovernmental agreement, IPP is implemented through a series of
national laboratory contracts with NIS scientific institutes and
laboratories.
--------------------
\1 For more information on ISTC, see Weapons of Mass Destruction:
Reducing the Threat From the Former Soviet Union: An Update
(GAO/NSIAD-95-165, June 9, 1995).
IPP PROGRAM RELIES HEAVILY ON
DOE'S NATIONAL LABORATORIES AND
U.S. INDUSTRY
---------------------------------------------------------- Chapter 1:2
IPP is implemented by DOE headquarters, DOE's national
laboratories,\2 and U.S. industry partners. The program is managed
at DOE headquarters by an office director and is part of DOE's Office
of Arms Control and Nonproliferation. The director has a staff of
seven technical and support personnel. In addition, the office has
five technical and support personnel who work on the recently
established Nuclear Cities Initiative. The IPP program office is
responsible for the program's overall direction, DOE and interagency
coordination, final project approval, and budgetary matters.
--------------------
\2 DOE manages the largest laboratory system of its kind in the
world. The mission of DOE's 23 laboratories has evolved over the
last 55 years. Originally created to design and build atomic bombs
under the Manhattan Project, these laboratories have since expanded
to conduct research in many disciplines--from high-energy physics to
advanced computing at facilities throughout the nation. Nine of
DOE's laboratories are multiprogram national laboratories. The
remaining laboratories are program- and mission-dedicated facilities.
DOE'S NATIONAL LABORATORIES
-------------------------------------------------------- Chapter 1:2.1
DOE's multiprogram national laboratories, plus the Kansas City
Plant,\3 play a major role in the day-to-day operations of IPP. IPP
projects are assigned to national laboratory scientists, known as
principal investigators, who (1) develop the projects with Russian
scientists, (2) provide technical oversight for the projects, and (3)
provide testing and technical confirmation of projects' results when
required by U.S. industry. Each laboratory also has an IPP program
manager who monitors the laboratory's IPP projects. An
interlaboratory board was established in 1994 to coordinate, review,
and facilitate the activities of the national laboratories and
provide recommendations to DOE headquarters on the execution of the
IPP program. Program managers from each national laboratory make up
the interlaboratory board. An interlaboratory chairman is appointed
for a 1-year period. The current chairman is from the National
Renewable Energy Laboratory.
Table 1.2 shows the distribution of IPP projects and associated
funding among the national laboratories as of December 1998.
Table 1.2
Distribution of IPP Projects and
Associated Funding Among DOE's National
Laboratories and Kansas City Plant
(Dollars in thousands)
National
laborato Number of Percentage of Program funds Percentage of
ry projects total projects allocated total funds
-------- ---------------- ---------------- ---------------- ----------------
Sandia 91 22 $14,383 18
Lawrence 56 14 14,768 18
Livermo
re
Los 51 12 12,534 15
Alamos
Oak 39 9 9,719 12
Ridge
Pacific 42 10 7,806 10
Northwe
st
Brookhav 36 9 5,222 6
en
Argonne 37 9 6,572 8
Lawrence 25 6 5,135 6
Berkeley
National 20 5 4,304 5
Renewab
le
Energy
Idaho 12 3 1,192 1
National
Environ
mental
Enginee
ring
Kansas 4 1 310 \a
City
Plant
================================================================================
Total 413 100 $81,945 100\b
--------------------------------------------------------------------------------
Note: The amount of funds allocated refers to the IPP funds
designated for projects at each national laboratory and the Kansas
City Plant, not the amount of funds spent.
\a Less than 1 percent.
\b Total does not equal 100 percent because of rounding.
Source: DOE/IPP database.
--------------------
\3 The Kansas City Plant produces and procures electronic,
electromechanical, mechanical, plastic, and nonfissionable metal
components for nuclear weapons.
U.S. INDUSTRY'S ROLE
-------------------------------------------------------- Chapter 1:2.2
A consortium of U.S. industry participants, called the United States
Industry Coalition (USIC), was established in 1994 to promote
commercialization with the NIS. USIC is a private nonprofit entity
headed by a president and board of directors and includes U.S.
companies and universities. (See app. I for a list of the USIC
members as of Sept. 30, 1998). In order to participate in the IPP
program, a company is required to become a member of USIC and pay
dues based on its size. The dues structure is as follows: Small
companies pay $1,000 for a 2-year period; consortiums and
universities pay $2,000 for a 1-year period; and large companies pay
$5,000 for a 1-year period.
IPP PROJECTS ARE THE CORE OF
THE PROGRAM
---------------------------------------------------------- Chapter 1:3
The IPP program comprises over 400 funded projects. These projects
represent collaborative activities among DOE's national laboratories,
U.S. industry partners, and NIS institutes. The purpose of the
activities is to convert NIS defense industries to commercial
civilian applications. NIS nuclear, biological, and chemical weapons
facilities are supposed to be the recipients of IPP funding. Also
eligible are facilities that were associated with the development and
production of strategic delivery systems or strategic defense
systems.
IPP projects are categorized in three phases--Thrust 1, Thrust 2, and
Thrust 3. The first phase is geared toward technology identification
and verification. Thrust 1 projects are funded by the U.S.
government and focus on "lab to lab" collaboration, or direct contact
between DOE's national laboratories and NIS institutes. The second
phase involves a U.S. industry partner that agrees to share in the
costs of the project with the U.S. government to further develop
potential technologies. The principal instrument used by DOE to
promote partnerships is the cooperative research and development
agreement.\4 The U.S. industry partner is expected to match funds
provided by DOE. Industry costs can include in-kind support, such as
employee time and equipment. Projects that do not receive any
financial support from the U.S. government, known as Thrust 3, are
expected to be self-sustaining business ventures.
According to DOE, 413 IPP projects had received funding as of
December 1998. About 170 NIS institutes and organizations have been
involved in the IPP program. The distribution of the projects among
the three phases--and the associated funding levels--is shown in
table 1.3.
Table 1.3
Distribution of Projects and Funding for
the IPP Program
(Dollars in thousands)
Percentage Amount Percentage
Number of of total allocated\ of total
Thrust level projects\a projects b funding
---------------------- ---------- ---------- ---------- ----------
Thrust 1 332 80 $41,777 51
Thrust 2 79 19 38,885 47
Thrust 3\c 2 1 1,283 2
======================================================================
Total 413 100 $81,945 100
----------------------------------------------------------------------
\a Includes projects categorized as funded, under way, and completed.
\b These amounts refer to program funds designated for specific
projects, not total funds spent.
\c Although Thrust 3 projects are intended to be self-sufficient, one
has received IPP funding.
Source: DOE/IPP database.
The IPP program is focused on four NIS countries--Russia, Ukraine,
Belarus, and Kazakhstan. The bulk of the program's effort is
concentrated on Russia. About 84 percent of the funded projects are
related to Russia, as shown in figure 1.1.
Figure 1.1: Distribution of
IPP Projects by Recipient
Country as of December 1998
(See figure in printed
edition.)
Note: Total based on 412 projects because 1 project was not
associated with a country.
Source: DOE/IPP database.
IPP projects evolve from various sources. According to DOE and
national laboratory officials, projects are proposed primarily by NIS
scientists, laboratory officials, and U.S. industry. DOE, national
laboratory, and State Department officials noted that many early IPP
projects were "off the shelf" ideas of the national laboratories that
heavily favored basic science with limited commercial potential.
IPP's former program director told us the program's first priority
was to initiate immediate projects at key NIS institutes to stabilize
personnel who were facing the threat of economic dislocation. The
idea was to get as many projects as possible under way in as short a
time as possible. He noted that a key element in selecting early
projects was to learn as much about the facilities and personnel as
possible to promote and increase transparency at the NIS weapons
institutes. In mid-1995, less than a year after IPP received its
first year's appropriation of $35 million, 175 Thrust 1 projects and
29 Thrust 2 projects had received almost $20 million.
--------------------
\4 Cooperative research and development agreements are contract
instruments that allow for joint U.S. government and industry
cost-sharing to develop technologies for commercial application.
PROCEDURES FOR REVIEWING
PROJECTS
-------------------------------------------------------- Chapter 1:3.1
Before they are approved for funding, all proposed IPP projects are
reviewed by DOE's national laboratories, DOE headquarters, and a U.S.
government interagency group comprising representatives of the
departments of State and Defense and other agencies. A project is
initially reviewed by the DOE national laboratory that proposed the
project. After passing the initial review, the project is further
analyzed by the interlaboratory board and its technical committees.
The project is then forwarded to DOE headquarters for review. DOE,
in turn, consults with the Department of State and other U.S.
government agencies for policy, nonproliferation, and coordination
considerations. DOE headquarters is responsible for making the final
decision on all projects.
THE IPP PROGRAM FACED EARLY
PROBLEMS
---------------------------------------------------------- Chapter 1:4
According to its former director, the IPP program (1) faced
continuous funding shortfalls, (2) was not adequately supported by
DOE management, (3) faced confusion about the appropriate
relationship between the national laboratories and U.S. industry
over the commercialization of NIS technology, and (4) had poor
relations with the State Department. Furthermore, the former program
director noted that DOE management did not provide adequate support
services, failed to recognize the program's successes, and was
unwilling to support budget levels consistent with DOE's original
commitments. He also noted that DOE management failed to address a
series of problems with the State Department until irreparable damage
had been done. These alleged problems ranged from broader
policy-level issues to administrative matters, such as lack of
support in processing country clearances for DOE visits to the NIS.
The Department of State's Senior Coordinator for Nonproliferation
Science Programs told us that constructive engagement between the two
agencies ceased and employees of both became embroiled in personality
conflicts. According to the former IPP program director, DOE did not
adequately address these impediments in total, indicating that DOE
did not consider the IPP program to be a high-priority
nonproliferation activity.
IMPROVEMENTS IN PROGRAM
MANAGEMENT SINCE THE
APPOINTMENT OF A NEW
DIRECTOR
-------------------------------------------------------- Chapter 1:4.1
DOE and State Department officials acknowledged that the IPP program
had difficulties in the early years but maintained that the situation
has improved markedly with the appointment of a new IPP program
director in September 1997. The new program director told us that he
has the full support of DOE management and the IPP program has
improved relations with the Department of State.
In the midst of these problems, DOE commissioned two reviews of the
program by private contractors. The first study, which cost $10,000,
was completed in August 1997, and the second, which began shortly
after the first review was completed in October 1997, cost $99,985.
The studies identified many similar programmatic weaknesses,
including flaws in program management, oversight, and failure to
commercialize projects. Recommendations to improve the program
included
-- obtaining the support of DOE management for the IPP program,
-- establishing commercialization priorities and developing a
commercialization model,
-- incorporating commercialization criteria in project approvals,
-- repairing relationships with other U.S. government entities,
-- reaching out aggressively to industrial and financial firms, and
-- restructuring the USIC model to enhance commercialization
potential.
According to the program director, since his appointment, he has
implemented almost all of the recommendations. He further noted that
program staff have been upgraded so that headquarters can assume
control of financial and program management responsibilities from
DOE's national laboratories and Albuquerque field office.
OBJECTIVES, SCOPE, AND
METHODOLOGY
---------------------------------------------------------- Chapter 1:5
The Chairman of the Senate Committee on Foreign Relations asked us to
review (1) the costs to implement the IPP program for fiscal years
1994-98, including the amount of funds actually received by NIS
scientists and institutes; (2) the extent to which IPP projects are
meeting their nonproliferation and commercialization objectives; and
(3) DOE's Nuclear Cities Initiative.
To determine the purpose and scope of the IPP program, we reviewed
DOE and State Department program files, discussed the program with
various DOE officials, and met with U.S. industry officials. We met
with the former director of the IPP program to obtain information
about its history and also had numerous discussions with the current
IPP director and members of his staff. We also met with the
directors of DOE's Office of Nonproliferation and National Security
and Office of Arms Control and Nonproliferation. We obtained
information on the IPP program from Sandia National Laboratory, Los
Alamos National Laboratory, and Argonne National Laboratory. At the
Department of State, we met with the Special Adviser to the President
and the Secretary of State on Assistance to the Newly Independent
States and his staff. We also met with State's Senior Coordinator
for Nonproliferation, Science Programs, and with various officials
from the U.S. Embassy, Moscow. In addition, we interviewed several
U.S. industry representatives who have been associated with the IPP
program, including the former presidents of the U.S. Industry
Coalition and officials from the University of New Mexico who
provided administrative support to the coalition.
To identify the IPP program's costs for fiscal years 1994-98, we
obtained data from DOE's IPP program office and national
laboratories. We discussed these data with budget and program
analysts from DOE's Office of Nonproliferation and National Security.
To assess the extent to which the IPP program was meeting its
nonproliferation and commercialization objectives, we judgmentally
selected 79 IPP projects valued at $23 million. Of the 79 projects,
70 were with Russia, 7 were with Ukraine, and 2 were with Belarus.
Of the projects reviewed, 46 were Thrust 1, 30 were Thrust 2, and 2
were Thrust 3. One project was described as program directed and did
not have an associated thrust level. The projects were managed by
five DOE laboratories--Argonne National Laboratory, Los Alamos
National Laboratory, the National Renewable Energy Laboratory, Oak
Ridge National Laboratory, and Sandia National Laboratory. (See app.
II for a list of the projects.)
We based our selection of projects on a number of factors. For
example, we chose our projects from five DOE national laboratories
that accounted for 57 percent of all funded IPP projects. The dollar
size of projects was also a consideration. We chose projects whose
allocations ranged from $30,000 to $1.4 million. In addition, we
included the number of NIS scientists employed on the projects among
our selection criteria. Furthermore, we asked DOE to provide us with
a list of IPP projects that would be useful to review. DOE queried
several national laboratories and provided that list to us. Whenever
possible, we included these projects in our sample. We also provided
DOE with a list of proposed projects that identified the Russian
institutes we planned to visit. DOE officials said that the projects
we chose represented a fair sample of IPP projects.
We used the IPP information system to identify IPP projects. The
database was developed and maintained by Los Alamos National
Laboratory. The system holds data on all funded IPP projects as well
as draft proposals. Members from the national laboratories and the
Kansas City Plant, DOE headquarters, the Department of State, and
many U.S. companies that are members of USIC have access to the
system. For the projects we selected for our sample, we did find
some inconsistencies, inaccuracies, and incomplete data. However, we
did, whenever possible, obtain corrected data through follow-up
discussions with the principal investigators at each U.S. laboratory
and with Russian officials.
To assess the impact on U.S. nonproliferation goals of the IPP
program, we met or spoke with the principal investigator for each IPP
project. We used information contained in DOE's IPP information
system to determine the extent to which each project focused on
critical nonproliferation objectives, such as the number of weapons
scientists engaged in the project and its potential commercialization
benefits. We discussed with the principal investigator how the
project was meeting these objectives and what role the investigator
played in monitoring the project. We met or spoke with principal
investigators from Los Alamos National Laboratory, Sandia National
Laboratory, Argonne National Laboratory, Oak Ridge National
Laboratory, the National Renewable Energy Laboratory, and the Kansas
City Plant.
In several instances, we contacted U.S. industry officials to follow
up on the status of commercialization activities. For example, we
discussed selected projects and related commercial activities with
U.S. industry officials from RUSTEC, Inc. (Camden, New Jersey);
Energy Conversion Devices, Inc. (Troy, Michigan); Bio-Nucleonics
(Miami, Florida); TCI, Inc. (Albuquerque, New Mexico); and Raton
Technology Research, Inc. (Raton, New Mexico).
We visited Moscow and St. Petersburg, Russia, in September 1998 to
meet with government and institute officials about the program and
selected IPP projects. We focused our visit on Russia because over
80 percent of all funded IPP projects are there. We met or
communicated with representatives from the Russian Ministry of Atomic
Energy and 18 institutes and organizations that receive IPP funds.
We met with the following organizations in the Moscow area: Entek
(Research and Development Institute of Power Engineering), the
Kurchatov Institute, the Research Institute of Pulse Technique,
KVANT/Sovlux, the All-Russian Scientific Research Institute of
Natural Gases and Gas Technologies (VNIIGAZ), the Gamaleya Institute
of Epidemiology and Microbiology, the Institute of Nuclear Research,
the All-Russian Scientific Research Institute of Inorganic Materials
(VNIINM), the Engelhardt Institute of Molecular Biology, and the
Institute of Biochemistry and Physiology of Microorganisms. In St.
Petersburg, we met with the following organizations: the St.
Petersburg State Electro Technical Institute, the V.G. Khlopin
Radium Institute, the Ioffe Physico Technical Institute, and the
Association of Centers for Engineering and Automation (St.
Petersburg State Technical University). We also met with officials
from the All-Russian Scientific Research Institute of Experimental
Physics (Sarov). In addition, we met in the United States with
officials visiting from two other Russian institutes--the N.N.
Andreyev Acoustics Institute and the Landau Institute of Theoretical
Physics. We also had discussions with the director general of the
State Research Center of Virology and Biotechnology (VECTOR). See
appendix III for more information about each institute we visited.
One problem we encountered in doing our work was that we were denied
access to Sarov, a closed nuclear city in Russia. We had planned to
visit the city to learn more about its economic conditions and review
several IPP projects. We had been granted access to visit the city,
including obtaining the required entry and visa documents.
Furthermore, IPP contracts with NIS institutes have a provision that
allows for audits by GAO. After we had arrived in Russia, however,
we were informed that the visit had not been cleared by Russia's
Federal Security Bureau (formerly known as the KGB) and we would not
be permitted to enter Sarov. Representatives from Sarov, however,
traveled to Moscow to meet with us. They told us that they wanted us
to visit their city but did not have the final approval authority.
We performed our work from February 1998 through February 1999 in
accordance with generally accepted government auditing standards.
ABOUT 37 PERCENT OF THE IPP
PROGRAM'S FUNDS REACH INSTITUTES
IN THE NEWLY INDEPENDENT STATES
============================================================ Chapter 2
As of June 1998, institutes in the Newly Independent States (NIS) had
received about 37 percent of all IPP funding. About 51 percent of
the program's funds have gone to DOE's national laboratories, and 12
percent have supported U.S. industry's participation in the program.
The portion allocated to DOE's laboratories goes for the salaries of
scientists engaged in the IPP projects, as well as for laboratory
overhead charges. In Russia, scientists and others working on IPP
projects received less than 37 percent of IPP funds because of
various Russian taxes and administrative overhead charges on IPP
funds at their institutes. DOE officials told us that they view the
Russian taxes as costs over which they have no control and consider
administrative charges an acceptable program cost.
For the IPP program to achieve its goals, DOE officials told us it
should be funded at about $50 million per year. At that level, they
believe the program could be phased out by 2007. However, the
program has never received that much funding in any one year. For
example, in fiscal year 1994, the IPP program received its largest
amount--$35 million. DOE is developing a strategic plan to establish
goals for the IPP program and a means of measuring its
accomplishments.
MOST IPP PROGRAM FUNDS GO TO
DOE'S NATIONAL LABORATORIES
---------------------------------------------------------- Chapter 2:1
Most IPP funds have gone to DOE's national laboratories to cover (1)
the costs of scientific research related to IPP projects (2) the
costs of developing or monitoring the projects, and (3) various kinds
of administrative and overhead charges. As indicated in figure 2.1,
an analysis of the program's expenditures from fiscal year 1994
through June 1998 shows that 51 percent, or $32.2 million, of the
$63.5 million spent on the IPP program has gone to reimburse DOE
laboratories.\1
Figure 2.1: Percentage of IPP
Expenditures for DOE
Laboratories, Industry
Coalition, and Newly
Independent States, From Fiscal
Year 1994 Through June 1998.
(See figure in printed
edition.)
$23.7 million = NIS expenditures.
$10.8 million = DOE laboratories' direct project cost.
$21.4 million = DOE laboratories' administrative and overhead cost.
$7.6 million = U.S. Industry Coalitiion's administrative cost.
Source: DOE.
The direct costs of DOE laboratories for projects ($10.8 million, or
17 percent of all program expenditures) include funds used for the
salaries and travel costs of DOE laboratory researchers during the
time they worked on specific IPP projects. Principal investigators
at the DOE laboratories told us they and their staff spent time
conducting research related to the projects or monitoring the NIS
contracts. IPP projects were usually not the main responsibility of
the principal investigators. In several cases, they told us they
spent about 5 to 10 percent of their time monitoring an IPP project.
Furthermore, they said they spent most of this time during the early
stages of the project, developing the paperwork necessary to get the
project started.
Besides the funds attributable to the principal investigators and
their research staff at DOE laboratories, a small portion of IPP
funds was allocated for equipment and materials. However, the bulk
of the expenditures for DOE laboratories went for administrative
support fees. Totaling $21.4 million, these expenditures represented
33.7 percent of total program expenditures. The support fees include
-- a portion of laboratory overhead, including the salaries and
travel expenses of the IPP program managers, who coordinate the
program among scientists at each laboratory;
-- various standard administrative and support costs, paid to the
contractor that operates the laboratory;
-- another administrative charge, specifically for this program,
taken from the funds earmarked for institutes in the Newly
Independent States; and
-- materials and subcontracts purchased in the United States and
valued at $2 million.
The director of the IPP program told us he was concerned about the
laboratories' costs for operating the program and the length of time
to receive financial information from some of the labs. The director
of the Office of Nonproliferation and National Security and other DOE
officials told us that they believe laboratory overhead should be
reduced to maximize the amount of money received by NIS weapons
institutes. The director also told us that although her office
supported funding the principal investigators, IPP should not be a
jobs program for DOE's national laboratories. The Department of
State's special adviser on assistance to the NIS told us that while
he supported the goal of IPP, he questioned how valuable the
laboratories are in promoting the goals and objectives of the program
and said that questions should be raised about the extent and
duration of the laboratories' involvement.
--------------------
\1 The administrative costs for DOE headquarters staff and the
contractors who assist those who manage the program are not included
in any of these amounts.
INDUSTRY SUPPORT SERVICES
ACCOUNTED FOR EXPENDITURES OF
OVER $7 MILLION
---------------------------------------------------------- Chapter 2:2
Until the end of fiscal year 1998, the University of New Mexico
provided administrative services to the U.S. Industry Coalition
(USIC), the consortium of industry partners interested in cooperating
with DOE on IPP projects with the Newly Independent States. DOE's
costs for the University of New Mexico's participation totaled about
$7.6 million through June 1998. DOE anticipated that the consortium
would become self-sustaining after 5 years, following strategic
investments in successful IPP projects. According to DOE officials,
the university never fulfilled the role envisioned for it, and its
staff generally did not possess the required expertise. DOE decided
to terminate funding for the university as of September 30, 1998.
DOE and the University of New Mexico agreed that the university's
resources were not well suited to support IPP's increased emphasis on
commercializing projects. The university may, however, provide some
support services to IPP in the future.
IPP program officials and industry members of USIC, the chartered
corporation, told us that USIC should still play a role in promoting
the commercialization of NIS technologies. On October 1, 1998, DOE
entered into an agreement with USIC to pursue commercial efforts with
the NIS. USIC is currently organizing an office in Washington, D.C.,
to carry out its responsibilities. DOE has agreed to support USIC's
operations through September 30, 1999, at a cost of $1.6 million.
NIS INSTITUTES RECEIVE ABOUT 37
PERCENT OF IPP FUNDS
---------------------------------------------------------- Chapter 2:3
As of June 1998, about 37 percent, or $23.7 million, of the program's
expenditures had been used to pay for work at NIS institutes;
however, not all of these funds are reaching weapons scientists,
engineers, and technicians who work on IPP projects. After a DOE
laboratory wires a payment of funds to a bank designated by a Russian
institute\2 --a step DOE takes when a principal investigator is
satisfied that a segment of work on a project is complete--the bank
may charge a fee, some taxes may be paid, and the institute may take
some of the funds for general overhead expenses. When a Russian
scientist finally receives a payment, the individual may have to pay
additional taxes on that income. Although DOE has sometimes tried to
help the institutes avoid or postpone tax payments, it is unclear how
successful such efforts have been.
During our review, we found that principal investigators at DOE
laboratories often did not know how much IPP funding their Russian
counterparts received. Neither DOE nor its laboratories require any
receipts or other explanation from the Russian institutes to show how
the funds sent to Russia are allocated. Financial officials and
others at the DOE laboratories are satisfied if they have
documentation that the funds went to the designated bank account for
the NIS institute. Principal investigators told us that their role
in monitoring the contracts was mainly to establish the contracts or
monitor the technical work products of the NIS researchers.
--------------------
\2 We focused on Russia because it received 84 percent of the IPP
projects.
AMOUNT OF IPP FUNDING
RECEIVED BY RUSSIAN
SCIENTISTS AND ENGINEERS
VARIES
-------------------------------------------------------- Chapter 2:3.1
DOE does not have detailed records of the amounts of IPP funding
received by individual scientists, engineers, and technicians in the
NIS, and therefore it is uncertain how much of the funding
supplements their salaries. However, at Russian institutes,
according to a March 1998 DOE report to the Congress, the average IPP
recipient receives about 47 percent of the funds provided to the
institute. The remainder typically goes for various payroll
taxes--pensions, medical insurance, and the equivalent of Social
Security--along with 7 to 18 percent for the institute's overhead
costs.\3 In addition, the IPP recipient's salary may be subject to an
income tax of 12 to 35 percent. The director of the IPP program said
that overhead payments to the institutes were justified as long as
they were reasonable because they helped to stabilize the institutes.
Even if all of the funds destined for the Newly Independent States
are not allotted for salaries, DOE officials said the funds are being
used mostly to achieve the goal of stabilizing the institutes.
At several of the 15 institutes we visited in Russia, we attempted to
determine how much IPP funding each institute received and how the
funding was allocated at each institute. Although we were not
usually provided with documentation to review, in general, Russian
officials told us that the funds received by the institutes went for
taxes, administrative and overhead costs, and salaries. An analysis
of the information provided to us indicated that the amount of IPP
funding reaching weapons scientists and technicians at the institutes
varied. For example, we were told at one institute that none of the
IPP funds went for salaries; instead, the funds were used for
overhead, travel, computers, and Internet access. (See app. IV for
additional information on how funding was allocated at Russian
scientific institutes).
We also met with the director of a Russian institute who was visiting
the United States and participated in the IPP program. He told us
that he did not receive the amount of funding that DOE's information
showed going to his institute. Our review of the project found that
(1) DOE's information was inaccurate, (2) laboratory officials
responsible for the project did not know how much went to the
institute, and (3) half of the funds allocated to the Russian
institute went to a U.S. company instead. We discussed this project
with DOE officials. They told us that they investigated the case,
with the assistance of their General Counsel, because of the concerns
we raised. DOE found that a number of actions occurred during the
course of the project that were contrary to IPP policies and
practices and said that they will not be allowed to recur. A
discussion of this IPP project follows:
DOE's IPP database showed that the N.N. Andreyev Acoustics
Institute, in Moscow, received $68,200 of the $99,700 spent for the
demonstration of an acoustic nozzle developed at the institute.\4
However, the director of the institute told us that the institute
actually received $27,000. According to the director, about 40
percent of the $27,000 was allocated for the salaries of scientists
and others participating in the project. For example, the Russian
inventor of the nozzle received $5,000 (equal to about 50 months'
salary), or about 5 percent of all IPP funds spent on the project.
The remainder of the $27,000 went for taxes in Russia and the
institute's overhead.
Records supplied by Argonne National Laboratory show that it paid out
$60,000 rather than $68,200 in February 1998. The IPP program
director at Argonne said that the IPP database showed $68,200 was
spent for the NIS institute, but $8,200 of that amount was part of a
$39,700 payment to Argonne, not to the Russian institute. According
to the DOE laboratory's records, about $60,000 went to a bank account
designated by the Russian institute. However, the manager of
Argonne's IPP program said he suspected that the Russians received
less than half of the $60,000. This is because Argonne transferred
the $60,000 to a U.S. company that represented the Russian
institute. Argonne officials, including the internal audit manager
who reviewed the laboratory's records on our behalf, told us it was
unclear how much of the $60,000 went to the Russian institute or its
personnel.
The U.S. company became the institute's exclusive agent for acoustic
activities in North America the same week in February that the
agreement with the DOE lab was finalized. The company provided us
with documents stating that the Russian institute would receive
$30,000 and the U.S. company would receive the remaining $30,000.
According to a letter the company sent the Russian institute on April
20, 1998, the Russian share included (1) $4,368 for equipment and
travel costs for two institute officials visiting the United States,
(2) $2,500 for the institute's share of program and demonstration
set-up costs, and (3) $23,131 for the Russian institute's costs.
--------------------
\3 The DOE report is entitled Taxation of the DOE Initiatives for
Proliferation Prevention Activities in the Russian Federation (Mar.
1998). The report is based on information that Sandia National
Laboratory officials gathered from their Russian counterparts on 28
IPP projects.
\4 The nozzle, which uses sound vibrations to break up water
molecules and create a fine mist, might have several commercial
applications. For example, it might be used as a fire suppressant.
SOME IPP FUNDS ARE USED FOR
RUSSIAN TAXES
-------------------------------------------------------- Chapter 2:3.2
In general, representatives of the Russian institutes we visited said
it was typical for a portion of the IPP funds to be used for taxes.
The March 1998 DOE report to the Congress on Russian taxation of the
IPP program described the tax situation for IPP as a problem, but not
as debilitating.\5 According to the report, there was no
comprehensive mechanism that guaranteed tax exemption for U.S.
nonproliferation programs, but a temporary agreement between the
United States and Russia, known as the Panskov-Pickering Agreement,
provided for deferring taxes.\6 In many instances, however, Russians
involved with the IPP program were not aware of the temporary
agreement on income tax deferment and therefore did not contact the
U.S. embassy to obtain it. In other cases, local authorities
ignored the agreement, according to the DOE report. By July 1998,
according to a DOE official, the Russian State Tax Service said that
the agreement was no longer valid and all postponed taxes were due;
however, the agreement was reinstituted in November 1998. A DOE
official said that if the Russian Duma ratifies and the Russian
President approves a bilateral agreement, signed by the United States
and Russia in 1992 and providing exemptions from some Russian taxes
for U.S. aid, then the tax deferments under the Panskov-Pickering
Agreement may become permanent.
Unlike the IPP program, some aid programs to Russia, such as the ISTC
program, provide assistance that is exempt from Russian taxes because
of an intergovernmental agreement. DOE officials said that while the
ISTC program does not pay taxes because of an intergovernmental
agreement, all projects, including those of the ISTC, may still
involve some customs duties, bank fees, and taxes at the local if not
at the national level.
--------------------
\5 The DOE report is called Taxation of the DOE Initiatives for
Proliferation Prevention Activities in the Russian Federation (Mar.
1998).
\6 In 1996, the Panskov-Pickering Agreement or "Agreement on the
Implementation of Tax Postponements under Gratuitous Assistance
Rendered to the Russian Federation by the United States of America"
was signed, providing temporary tax deferment of some taxes,
including income taxes, value-added tax, excise tax, customs duties,
and property tax.
DOE OFFICIALS SEE NEED FOR
CONSISTENT PROGRAM FUNDING AND
STRATEGIC PLAN
---------------------------------------------------------- Chapter 2:4
As shown in table 2.1, funding levels for the IPP program have
varied. In fiscal year 1994, the program's initial year, IPP
received its highest annual level of funding, $35 million. In the
following year, it was not funded.\7 DOE officials believe the
program needs more consistent funding and say they see a need for a
program plan with adequate performance measures.
Table 2.1
Annual Funding for the IPP Program
(Dollars in millions)
Fiscal year Funding
---------------------------------------- ----------------------------
1994 $35
1995 0
1996 20\a
1997 29.6
1998 29.6
1999 22.5
======================================================================
Total $136.7
----------------------------------------------------------------------
\a The fiscal year 1996 funds include $10 million in no-year funding
that the Department of Defense transferred to IPP from the
Cooperative Threat Reduction Program, with the understanding that
$2.5 million would be spent at chemical and biological institutes.
Source: DOE.
DOE officials hold a variety of views on when to end the IPP program.
In part, their views depend on the program's receiving adequate
funding and accomplishing its mission. The former director of the
program told us he believed the program could have ended after 5
years if it had received adequate funding. Originally, he
anticipated that it would receive $50 million per year and become
self-sustaining after 5 years.
The current director of the program also told us in February 1998
that the program could end by 2006 if it was adequately funded at
about $50 million per year. However, in June 1998 he said that
funding the program and then terminating it after 5 years was
artificial. He said the program should be continued as long as it is
useful and meets a need.
The director of DOE's Office of National Security and
Nonproliferation said that she would like to see the IPP budget
increased to $50 million per year. She believes that amount would be
sufficient for DOE to make a significant impact on nonproliferation
and commercialization and to end the program. She believes that
adequate funding could lead to a phaseout by 2007. She noted that as
DOE closes in on the 2000 time frame, it will be time to take a hard
look at IPP, just as DOE will take a look at its other
nonproliferation programs.
The successful completion of the program depends on identifying the
goals of the program and determining when they have been achieved.
The director of the program is developing program goals and a
strategic plan. In February 1998, the director said the program was
changing how it planned to measure performance. He noted that the
program has to be results oriented if it is to succeed. In the past,
the most commonly used measures of the program's success included the
number of projects, the amount of funds a project provided to the
NIS, and the number of institutes engaged. These measures would
continue to have some use, according to the director, but IPP must
employ more meaningful measures that show results. Consequently, he
was looking at measures such as the number of patents issued for
projects or the number of companies created. The director said the
strategic plan will include about a dozen ways to measure
performance. As of January 1999, the IPP program had developed a
draft strategic plan, which includes some performance measures.
Possible program measures include, among other things, (1) the amount
of funds spent, (2) the number of NIS employees engaged in the IPP
program, and (3) the number of job opportunities created. Possible
commercialization measures include (1) the number of Thrust 3
projects, (2) the amount of private-sector funding for Thrust 2 and
Thrust 3 projects, and (3) the number of commercial patent
applications.
--------------------
\7 According to DOE, not only federal funds are involved in assisting
the NIS under the IPP. IPP tries to leverage $1 or $2 of private
support for every $1 provided in federal funds. For some projects we
reviewed, the private support was not in dollars sent to institutes
of the former Soviet Union; instead it was more likely to be in-kind
support that was used by the U.S.commercial partner to pay its U.S.
staff to evaluate the work of researchers in the former Soviet Union.
IMPACT OF THE IPP PROGRAM ON U.S.
NONPROLIFERATION GOALS IS
UNCERTAIN
============================================================ Chapter 3
Russian officials participating in the IPP program told us that IPP
program funds are helping to prevent some institutes from closing and
are supplementing the salaries of some scientists. However, numerous
obstacles, such as a lack of capital and markets, are preventing the
program from achieving its long-term goal of successfully
commercializing IPP projects.
DOE's implementation and oversight of the IPP program raises
concerns. For example, program officials are using inconsistent and
imprecise methods to identify the number and background of NIS
scientists and institutes receiving IPP funding. As a result, some
institutes receive IPP funds, even though they are not associated
with weapons research and development programs. In addition, IPP
projects are not just directed to former weapons scientists. In some
cases, scientists currently working on Russia's weapons of mass
destruction program are receiving IPP program funds to supplement
their salaries. Some of the projects we reviewed also had "dual-use"
implications that could yield unintended, yet useful, defense-related
information. Furthermore, some U.S. officials responsible for
reviewing proposed IPP projects related to chemical and biological
research told us that they did not always receive enough information
from DOE to adequately review the projects.
IPP PROGRAM FUNDS ARE HELPING
SOME INSTITUTES AND SCIENTISTS
---------------------------------------------------------- Chapter 3:1
In general, officials at the 15 Russian institutes we visited were
supportive of the program. Officials from three institutes told us
that the IPP program had prevented their laboratory or institute from
shutting down and reduced the likelihood that scientists would be
forced to seek other employment. A representative from Sarov told us
that without the IPP program, the situation at the institute would be
a disaster. An official from the Research Institute of Pulse
Technique said the IPP funding added $200 per month in salary and
benefits for each employee assigned to the project, a significant
amount for a Russian scientist. Some institute officials told us
that the benefits of the IPP program went beyond financial support.
For example, the general director of the St. Petersburg State
Technical University said the IPP project on metal recycling has
helped teach the university how to do business with the United
States.
Given the dire financial and physical conditions at some of these
locations, it is not surprising that institute officials were
grateful for IPP funds. At several institutes we saw poorly lit,
unheated work space and laboratories, aging equipment, crumbling
floors, and peeling paint. Furthermore, some institute officials
told us that their workers had not been paid in several months and
salaries had been eroded by the recent devaluation of the ruble, the
Russian currency. For example, officials from the city of Sarov,
which contains a major Russian nuclear weapons design facility, told
us that the average monthly salary was about $200. The recent
devaluation of the ruble, however, has reduced the actual value of
the salary by about half.
LONG-TERM COMMERCIALIZATION
OBJECTIVE HAS MET WITH LIMITED
SUCCESS AND WILL BE DIFFICULT
TO ACHIEVE
---------------------------------------------------------- Chapter 3:2
To date, no IPP projects can be classified as long-term commercial
successes, and only a few have met with limited success. Overall, of
the over 400 funded projects, only two have achieved Thrust 3 status
(as potential self-sustaining business ventures) and 79 are
categorized as Thrust 2 (an intermediate step toward
commercialization). Even the Thrust 3 projects that we reviewed have
not achieved the type of commercial success envisioned by DOE. In
fact, one of these projects, which is designed to help one of
Russia's closed nuclear cities develop material used in the
production of silicon chips, does not have a U.S. industrial partner
and faces an uncertain future.
DOE and national laboratory officials told us that when the program
was started, there was a general expectation that most projects would
not graduate from Thrust 1 to Thrust 2 to Thrust 3. According to DOE
data, 31 Thrust 1 projects have evolved to Thrust 2, and 1 project
has evolved from Thrust 2 to Thrust 3. Plans for the IPP program
envisioned, however, that projects would move from Thrust 2 to Thrust
3 in 3 years.
The IPP program director told us he was disappointed that more
projects have not evolved more quickly. He indicated that there were
too many ongoing Thrust 1 projects with little or no commercial
potential. He said, however, that the limited commercial success of
the IPP projects is not surprising in view of the difficulties
involved in commercialization.\1 According to the director,
commercializing science and engineering projects is very difficult in
the United States and much more difficult in Russia. He noted that
commercializing a new specialty chemical or polymer can take from 6
to 8 years in the United States. IPP projects do not have to start
at the Thrust 1 phase. DOE officials are now stressing the
commercialization of projects and told us that projects should have a
U.S. industry partner identified at the conceptual stage. The
director of DOE's Office of Arms Control and Nonproliferation told us
that if a project does not have a clear commercial objective, he will
not approve it unless there is an overriding national security
consideration.
We found that many factors affected commercialization, including a
lack of capital, the lack of a clearly defined goal for achieving
commercial success, the inadequate training of NIS scientists in
business-related skills, limited markets, and concerns about
intellectual property rights. The difficulties of commercializing
IPP projects have increased with the recent economic crisis in
Russia. We found some IPP projects with limited commercial
success--that is, a product has been developed and appears
marketable, but customer demand for the products has generally not
been established. A few projects we reviewed showed commercial
potential and had interested U.S. industry partners. These included
(1) a metals recycling partnership between U.S. industry and a
Russian entity, (2) a photovoltaic cell renewable energy production
project, and (3) a technology to eliminate insects from Russian
lumber. For the first two projects, the U.S. industry-NIS
partnerships were established before the partners began to
participate in the IPP program. (See app. V for more information on
these and other IPP projects.)
Several institute officials told us that current economic conditions
in Russia discourage commercialization and investment. Some
institute officials told us that Russian banks had frozen their
assets and they were unable to be paid for work being done under IPP
projects. Worsening economic conditions compound the difficulties
associated with investing in Russia. According to the director
general of the Khlopin Institute, it is unrealistic to expect that
nuclear scientists trained under the Soviet system can easily make
the transition to a market-based economy. He also believed that
DOE's national laboratories were not well equipped to promote
commercialization in Russia.
A couple of DOE national laboratory officials told us that they did
not have the background and skills needed to fully implement
commercialization programs in the NIS. The IPP program director at
Sandia National Laboratory told us that the laboratories have done a
good job of identifying potential projects and U.S. industrial
partners. However, a laboratory is not the place to raise venture
capital and develop markets for products because a laboratory does
not have that kind of expertise. The actual commercial development
must come from U.S. industry. According to the general director of
the St. Petersburg State Technical Institute, Russia needs an
infrastructure in place before it can undertake significant
commercialization activities. He said that, in the long-term, Russia
needs to develop a cadre of managers who know how to deal in a market
economy. Without such managers, commercialization will not take
place on a broad scale in Russia.
Despite the limited success in commercializing IPP projects, DOE
officials told us that the program has been successful because it has
at least temporarily employed thousands of weapons scientists at
about 170 institutes and organizations throughout Russia and other
Newly Independent States.
--------------------
\1 In 1994, we reported that DOE's national laboratories faced
challenges in commercializing products. Although the potential for
commercial product development exists, the actual outcomes will not
be known for several years. Over half of the national laboratory
managers of programs with commercial product potential expected clear
evidence of that potential to emerge within 5 years. For more
information, see National Laboratories: Are Their R&D Activities
Related to Commercial Product Development? (GAO/PEMD-95-2, Nov. 25,
1994).
DOE'S IMPLEMENTATION AND
OVERSIGHT OF THE IPP PROGRAM
RAISE CONCERNS
---------------------------------------------------------- Chapter 3:3
Our review raised several concerns about DOE's implementation and
oversight of the IPP program including
-- the adequacy of DOE's efforts to obtain information on the
background and number of NIS scientists and institutes engaged
in IPP projects;
-- the appropriateness of DOE's supplementing the salaries of
scientists currently working in Russia's weapons of mass
destruction program;
-- the advisability of DOE's funding projects that could
unintentionally provide defense-related information to Russian
and other NIS scientists; and
-- the adequacy of DOE's reviews of IPP projects dealing with
chemical and biological research.
BACKGROUND INFORMATION OF
NIS SCIENTISTS AND
INSTITUTES WAS NOT
CONSISTENTLY OBTAINED
-------------------------------------------------------- Chapter 3:3.1
DOE's program guidance specifies that each project proposal should
include a discussion of the background and experience of the key NIS
scientists and institutes to determine that they possess the
appropriate weapons of mass destruction background. The guidance
also specifies that the principal investigator at the DOE laboratory
is responsible for providing this information for each project. Some
principal investigators told us that information on the backgrounds
of the NIS scientists and engineers was not relevant to the project's
success. In two instances, they said it was "none of their business"
to ask for such information, claiming that doing so would have been
too intrusive or would have resulted in a breach of Russia's national
security laws. One principal investigator told us that he does not
want to know the roles of the scientists because this information
could jeopardize relationships and put the NIS scientists at risk for
revealing such information. At one national laboratory, the IPP
program director said the laboratory does not generally ask about
scientists' background because of concerns about undermining the
potential success of a project.
During our visit to Russia, we asked for and received background
information on scientists from officials at some institutes.
Representatives from Sarov told us that it was not a violation of
Russia's laws to provide background information, provided that a
request was limited to general information about the scientists'
nuclear weapons-related activities.
DOE's IPP program director told us that the principal investigators
monitor the projects very closely, helping to ensure accountability.
However, we found that the degree of oversight varied among the U.S.
laboratories. In general, the principal investigators told us that
they monitor the projects through contract deliverables (end
products) received from the institutes, such as technical reports. A
principal investigator is satisfied that an institute has complied
with the terms of the contract between the national laboratory and
the NIS institute upon (1) receiving the required deliverable(s) and
(2) ensuring that the institute has met other technical expectations.
Generally, the principal investigators did not believe their role
included verifying the number of scientists working on a project or
trying to determine if the scientists were performing weapons-related
work while receiving IPP funding. A Sandia National Laboratory
principal investigator told us that he was not concerned about the
number of NIS scientists who were involved in the project as long as
the institute met the technical requirements of the contract.
From the projects we reviewed, it was not always clear how NIS
institutes and scientists were selected for IPP funding. DOE and
laboratory officials told us that at the beginning of the program, it
was important to get as many projects as possible under way in as
short a time as possible. They noted that part of the initial phase
of the program was focused on learning about the NIS institutes. A
State Department official told us that IPP has not focused
consistently on the most critical weapons institutes. This official
told us she is uncertain that IPP program officials always ask the
right questions about reaching the highest-priority NIS scientists
when screening projects for funding. The president of the Kurchatov
Institute, in Moscow, told us that, in general, IPP projects have not
targeted the most critical nuclear scientists. He noted that two IPP
projects that DOE identified as being highly successful have not
focused on important weapons scientists and that nonproliferation
efforts to date have been ad hoc, with no real strategy in mind.
The IPP program director initially told us that there is no
U.S.-government-wide comprehensive, consolidated list of critical
institutes and scientists that the program seeks to engage.
According to the director, a list of institutes of nonproliferation
interest for Kazakhstan, Ukraine, and Belarus has been developed. An
interim list of Russian institutes has also been issued and continues
to be refined. The director said that DOE works primarily with the
national laboratories, the State Department, and other agencies to
try to ensure that it is focusing on the most important nuclear
institutes. However, in some cases the principal investigators were
uncertain about the institutes' roles in weapons activities. The Los
Alamos National Laboratory's IPP program director told us that
sometimes the definition of a weapons of mass destruction scientist
is stretched to maximize the participation of NIS scientists and
institutes in the IPP program.
For more than half of the projects we reviewed, we were able to
determine that the institutes that performed the work had a clear
affiliation to weapons of mass destruction or other defense-related
activities. These institutes either had a direct connection to
weapons research, design, or production or were affiliated with
materials production or uranium enrichment. However, we found that
in about 20 cases, the institutes that received IPP funding did not
appear to have a direct association with weapons of mass destruction
or defense-related activities. We were unable to determine the
institutes' backgrounds for the remaining projects we reviewed. Some
projects that were not focused on weapons-related institutes included
the following:
-- At the Institute of Nuclear Research, which has participated in
three IPP projects, the work has always been academic in nature,
according to institute officials. They said the institute never
directly performed military work. According to DOE, although
the institute is not a primary weapons institute, it has
conducted considerable work on the effects of radiation on
electrical systems. Currently, the institute has no significant
military role and has probably not had one since the early
1990s.
-- Russia's natural gas enterprise, VNIIGAZ, which participated in
one IPP project, has performed no defense-related activities,
according to officials.
-- A national laboratory principal investigator told us that a
project that focused on studying the effects of radiation
contamination in Ukraine was not related to weapons of mass
destruction.
In the course of our review, we also tried to determine if the 15
institutes we visited, plus the key biological warfare institute in
Russia, are training or have had contacts with representatives from
countries of proliferation concern. We received responses from 12 of
the institutes and found some evidence that contacts with countries
of proliferation concern had occurred at four institutes. In one
case, a researcher from an NIS biological institute, which had
received IPP funds, told us that he had gone to Iran on a teaching
contract. He said he did not provide any sensitive information to
Iran. Another institute told us that it had provided training to
Libya in 1994 on light water reactors but said that the training had
taken place before the IPP project was awarded in 1996. On January
12, 1999, the Clinton administration imposed economic penalties on
this institute after determining that it had provided sensitive
missile or nuclear assistance to Iran. According to DOE officials,
the IPP program had been withholding approval on additional projects
for this institute for several months in anticipation of this recent
U.S. government action.
We were also told that one institute trained students from India,
Pakistan, and Iran about 10 years ago. Also in 1994, the institute
provided a special training course in radiochemistry for a group of
about 20 students from China. An institute official said that no
sensitive information had ever been included in the training courses.
Finally, officials from a technical university that received IPP
funds told us they are currently training students from China, India,
Libya, Pakistan, Sudan, and Syria.
Officials from several institutes we visited told us that they were
not aware of any scientists emigrating to countries of concern to
provide weapons-related services. Some institute officials told us
that their employees are patriotic and would not jeopardize their own
country's national security by providing information to a rogue
state. Nevertheless, Russian institute officials did note that
"brain drain" is a problem. For example, Russian scientists are
leaving the institutes but are emigrating to countries like the
United States, Israel, and Germany for better opportunities. In
addition, scientists and technicians are seeking employment in
Russia's banking and technology industries. One institute official
said he is most concerned about scientists who leave the scientific
field because their skills are lost forever. He said that when a
scientist emigrates to another country, however, these skills are
maintained.
THE NUMBER OF NIS SCIENTISTS
ENGAGED IN IPP PROJECTS IS
UNCERTAIN
-------------------------------------------------------- Chapter 3:3.2
IPP program guidance specifies that the number of people employed in
the NIS on IPP projects is a primary measure of the program's
success. According to program officials, the guidance clearly
requires that accurate figures on the number of scientists and
engineers be maintained. The national laboratories we visited--Los
Alamos, Sandia and Argonne--had different methods for determining the
number of NIS scientists and engineers working on IPP projects. One
of the laboratories relied primarily on estimating the number of
scientists by applying a formula under which the total value of the
contract was divided by the scientists' average monthly salary to
arrive at the number of full-time equivalents. The other
laboratories used a combination of formulas plus some form of
verification, but no approach was applied systematically. In many
cases, however, laboratory principal investigators knew the names of
some key NIS participants as a result of prior meetings,
correspondence, or reports submitted to the laboratories.
According to a Sandia official, accurately tracking the number of
scientists employed on projects was not considered very important at
the start of the program. As a result, efforts to develop these
figures were not a priority. A former Sandia principal investigator
who helped implement the IPP program told us that it was never the
intent of the program to identify exactly how many NIS scientists
were working on a project. In some instances, principal
investigators provided us with resumes and/or lists of NIS scientists
engaged in the projects. Argonne officials said that they tried to
get this type of information for many earlier projects because the
former Argonne administrator of the program viewed it as necessary to
qualify an institute for IPP funding. In one case we reviewed,
national laboratory information indicated that no scientists were
employed on a project. However, according to officials from the
Russian institute, about 50 people were involved in the project. In
several instances, information provided by the U.S. national
laboratories did not indicate how many scientists were employed on a
project. According to program officials, as a result of our review,
principal investigators at the national laboratories are becoming
reacquainted with program guidance on the need to maintain accurate
information on the number of scientists receiving IPP funds.
SOME NIS SCIENTISTS WORK ON
WEAPONS OF MASS DESTRUCTION
RESEARCH AND DEVELOPMENT
PROGRAMS WHILE RECEIVING IPP
FUNDING
-------------------------------------------------------- Chapter 3:3.3
The September 1993 Report of the Senate Committee on Appropriations
provides guidance on the types of NIS institutes the Congress
expected would be included in the IPP program. The Committee
recognized that the Russian institutes were "principally devoted to
military activities" and that a loss of employment had affected
"weapons scientists and engineers previously involved in the design
and production of weapons of mass destruction." DOE's program
guidance is unclear on whether funds should be going exclusively to
former, or previously employed, weapons scientists or if scientists
currently working on weapons of mass destruction programs are
eligible to receive funding. The director of the IPP program told us
that although program guidance is unclear on this point, he believes
that both current and previously employed weapons scientists are
eligible for program funding.
We found that IPP projects are not directed solely to former weapons
scientists. For example, scientists from Sarov who were
participating in the IPP program and receiving salaries supplemented
by IPP funds told us that they are working on weapons of mass
destruction projects. Sarov's deputy director for international
relations told us that about half of the institute's scientists and
engineers who are involved in international collaboration, including
the IPP program, spend part of their time working on nuclear weapons
research activities.
For many of the projects we reviewed, the principal investigators did
not know whether the NIS scientists and engineers were working on
other projects while receiving IPP funds, but several speculated that
they were quite possibly doing so. IPP program directors from
Sandia, Los Alamos, and Argonne said their laboratories do not know
how the NIS scientists are splitting their time among various
institute activities. Laboratory officials speculated that it is
very likely that the scientists could be working on various other
projects, including their institute's weapons of mass destruction
programs. Russian institute officials told us that in most cases,
the scientists are working on the IPP projects part-time. They may
also be involved in other collaborative projects with other countries
and/or spending part of their time working on other projects at their
institute. An official from Los Alamos National Laboratory told us
that it would be unrealistic to think that Russian scientists
receiving IPP funding were not also working on their own country's
weapons program.
SOME PROJECTS HAVE DUAL-USE
IMPLICATIONS
-------------------------------------------------------- Chapter 3:3.4
According to DOE's program guidance, IPP projects must not, among
other things, (1) include weapons and delivery system design activity
and (2) provide assistance in the maintenance or improvement of
military technology. Program officials said that since Russia's
technology base has been developed in the weapons program and since
the goal of the IPP program is the commercial development of these
technologies, there is an inherently dual-use aspect of the program.
Moreover, they said, many of the projects involve materials science
and any improvement in materials have inherent dual-use potential.
According to program officials, no projects were undertaken that
provided significant enhancements to Russia's or other NIS' weapons
of mass destruction capability.
Discussions with principal investigators and other information
indicated to us that nine of the nuclear-related projects we reviewed
could have dual-use implications--that is, information learned during
the course of the project could unintentionally provide useful
defense-related benefits to Russian and other NIS scientists. These
projects, all of which were approved from 1994 through 1996, include
the following:
-- One project involved ways to improve a protective coating
material. The national laboratory principal investigator told
us that Los Alamos is developing the coating and is paying a
Russian institute to do some of the testing. The coating has
both military and civilian applications and could be used to
make aircraft bodies more resistant to corrosion. He noted that
the Russians could obtain information to develop a similar
material by analyzing the samples that Los Alamos has provided
for testing. According to DOE headquarters officials, the
Russian Federation already has aircraft utilizing this
technology and therefore this project does not increase that
country's defense capabilities.
-- According to a DOE laboratory official, two IPP projects have
focused on Russian electromagnetic absorbing materials
technologies. According to DOE's information, this dual-use
technology presents a proliferation risk. Among other things,
this technology could reduce electromagnetic noise in airports,
thereby improving flight safety. In addition to potential
commercial applications, these projects were designed to assess
the state of the technology to determine its validity for
possible application to U.S. defense systems. The projects
have not gone beyond the Thrust 1 stage and were recently
canceled for lack of commercial potential.
-- IPP project funds have been used to enhance communications
capabilities through high data rate electronic links among some
of Russia's closed nuclear cities and DOE's national
laboratories. While the project promotes better communications
among the Russian nuclear institutions, it is possible that it
could also indirectly support the collaboration of Russian
weapons laboratories. Additional communications links are
planned for other nuclear and biological facilities in Russia.
DOE officials told us that the benefits of the project clearly
outweigh any negative implications of dual-use.
-- Los Alamos National Laboratory is funding two projects in
Chelyabinsk, a closed nuclear city, to improve the durability
and performance of metal. The principal investigator said the
technology could be used, for example, to enhance the
performance of both military and civilian aircraft engines. He
noted that he had not given the possibility much thought but
believed that the United States could benefit from the
technological improvements as much as Russia. According to DOE
headquarters officials, the development of aircraft engine
components clearly has dual-use implications. They point out
that this work is highly developmental and represents one of the
true nonproliferation success stories. Furthermore, they added,
any Newly Independent State wanting to obtain this
state-of-the-art engine technology could easily buy it.
The Los Alamos IPP program director told us that nothing in the IPP
program threatens U.S. national security interests because the
United States and Russia are basically equal in terms of nuclear
weapons development. Therefore, there are no advantages that Russia
could gain from the technology of U.S. origin used in the IPP
program. DOE's director of Arms Control and Nonproliferation
disagreed and told us the policy concerning U.S. technology related
to the IPP program is clear. First and foremost, IPP projects are
reviewed to ensure that they will "do no harm" to U.S. national
security interests. He said that since he assumed his position in
November 1997, all projects are being reviewed for any potential
military applications.
IPP CHEMICAL AND BIOLOGICAL
PROJECTS MAY NOT BE
ADEQUATELY REVIEWED
-------------------------------------------------------- Chapter 3:3.5
According to IPP program guidance, cooperative research in biological
and chemical activities could be redirected to support a biological
and/or chemical weapons program. The program's guidelines call for
coordination with the departments of State and Defense to ensure that
IPP projects will not support another nation's biological or chemical
weapons knowledge base and that IPP funds are not provided to any NIS
institute currently engaged in work on offensive biological or
chemical weapons.
Our review of 19 approved IPP chemical and biological projects (7 of
which were part of our overall sample of projects), indicated that
DOE's review process may be inadequate. According to DOE officials,
all chemical and biological IPP projects are subject to reviews by
several agencies, including the Department of State, the Department
of Defense's Office of Cooperative Threat Reduction, the Department
of the Army's Soldiers and Biological Chemical Command (Aberdeen,
Maryland), and the U.S. Army Medical Research Institute of
Infectious Diseases (Fort Detrick, Maryland). However, for 19
projects that had been approved as of July 31, 1998, there was not
always sufficient evidence in IPP project files to determine whether
the proposed projects had been reviewed by all of the agencies.
Furthermore, the criteria for reviewing the projects are vague.
We found no evidence in the IPP program files to indicate that 7 of
the 19 projects had been reviewed by DOE program offices. External
project reviews also appeared to be inconsistent and/or were not well
documented. For example, we found that, of the 19 project files,
-- 13 contained evidence of the State Department's review,
-- none showed evidence of review by DOD's Office of Cooperative
Threat Reduction, and
-- 15 showed no evidence of review by other agencies.
DOE does not provide specific criteria for reviewing the proposed
chemical and biological projects. Rather, DOE forwards the projects
with a cover letter asking reviewers to indicate whether the project
(1) raises no concerns, (2) raises some concerns that can be dealt
with through close oversight by the national laboratory's principal
investigator, or (3) should not be done in its present form. Agency
officials provided varying views on what criteria should be applied.
Two officials said that projects should constitute "good science" but
also noted that all proposed projects must be consistent with U.S.
national security interests. The former special coordinator of DOD's
Office of Cooperative Threat Reduction told us that her office
reviews projects to identify areas of research that could be of
interest to DOD.
Officials from one or more of the agencies that provide or coordinate
technical reviews of the chemical and biological projects told us
that they (1) do not always have sufficient information about the
projects, (2) are uncertain whether they receive all of the proposed
projects, (3) do not always thoroughly review the projects they
receive, and (4) do not know the overall outcomes of the project
reviews. Reviewers from some agencies told us that many of the
proposals they review contain limited information, making adequate
evaluation difficult. The official from the U.S. Army's Medical
Research Institute of Infectious Diseases, who is responsible for
reviewing biological projects, said his review is informal and
superficial. The review is intended primarily to (1) determine that
the projects are not being duplicated by other U.S. government
agencies and to (2) identify promising projects that might be more
appropriately funded by other agencies. He assumed that the
proposals received a more rigorous review at the IPP program office.
An official from the Army's Soldiers and Biological Chemical Command
noted that IPP projects are also reviewed informally. The Command
began reviewing IPP proposals in late 1997 and focuses on whether a
project is based on good science. The official also said (1) it is
uncertain whether the Command is seeing all of the projects, since it
evaluates only project proposals forwarded by DOE, and (2) there is
no well established mechanism to find out which projects are approved
or rejected. The Command expected, however, that DOE would reject
any proposals to which serious objections were raised. Officials
from DOD's Office of Cooperative Threat Reduction told us that the
IPP review process is ad hoc and it is unclear how DOD's review fits
in with other U.S. government reviews. These officials were
uncertain how many projects they had reviewed but thought it was only
a few.
We found that some reviewers had raised objections to projects. For
example, the Soldiers and Biological Chemical Command raised concerns
about two projects, one of which focused on the destruction of toxic
material by means of ballistic missile rocket engines. DOD also
objected to this project. Ultimately, the project was not approved,
primarily because it lacked technical merit and commercial potential.
National security considerations also entered into the disapproval.
Additionally, the Command raised concerns about another project that
dealt with cholesterol esterase activators. According to the
Command's evaluation, the proposed work could be approved, but there
were concerns because it had the potential to provide information
that could be applied to enhance the effects of nerve agents on the
nervous system. According to an IPP program official, the project
was further scrutinized and found to have only peaceful applications.
The Command researcher who raised objections to the project was never
informed of its final disposition.
IPP program officials told us that despite what the documentation in
the project files showed, project proposals were routinely being sent
to the relevant federal agencies for review. IPP officials
responsible for coordinating the reviews of the chemical and
biological projects said they give reviewers a chance to provide
input before decisions are made, but all agencies are not involved on
a consistent basis. For example, IPP program officials were
uncertain about the process for distributing project proposals and
obtaining comments from DOD's Office of Cooperative Threat Reduction.
An IPP official told us that the State Department was responsible for
disseminating the proposals to DOD through an interagency mechanism.
A State Department official said this information was not correct.
DOE does, however, rely on the State Department to facilitate other
U.S. government agencies' reviews of proposed IPP chemical and
biological projects through the interagency mechanism. A State
Department official said that this process, which has been in place
for about a year, works well and that the results of the reviews are
provided to DOE. According to program officials, as a result of our
review, project proposals are now being sent directly to the
Cooperative Threat Reduction office for review.
DOE'S NEW INITIATIVE WILL FOCUS
MORE AID ON RUSSIA'S NUCLEAR
CITIES
============================================================ Chapter 4
In September 1998, the United States and Russia embarked on an
ambitious effort, known as the Nuclear Cities Initiative, to expand
commercial cooperation in Russia's 10 nuclear cities. The two
governments signed an agreement to facilitate the provision of new
civilian jobs for workers in those locations. The Nuclear Cities
Initiative will complement the IPP program in that its purpose is
also to create jobs in the civilian sector for displaced weapons
scientists. Whereas IPP is focused on four countries, the initiative
will focus only on Russia's 10 nuclear cities. Some IPP projects
will furnish the initial assistance under the initiative, but the
initiative is envisioned as a more ambitious commercialization effort
for such cities than the IPP program or any other assistance program.
DOE estimates that the Nuclear Cities Initiative may cost $600
million during the next 5 years, with the initial funding set at $15
to $20 million for fiscal year 1999. On December 10, 1998, DOE
submitted a report to the Congress describing the objectives of the
Nuclear Cities Initiative.
U.S. embassy officials in Moscow have questioned large funding
commitments to the nuclear cities at this time. According to these
officials, promoting investment in nuclear cities has poor short-term
prospects because of Russia's current economic situation and the
difficulties it poses to achieving commercial success in these
isolated locations.
ROLE OF RUSSIA'S 10 NUCLEAR
CITIES
---------------------------------------------------------- Chapter 4:1
The former Soviet Union concentrated most of its nuclear weapons
program at 10 cities, shown in figure 4.1, that were so secret they
did not appear on any publicly available maps until 1992.
Figure 4.1: Russia's Nuclear
Cities
(See figure in printed
edition.)
Source: GAO's presentation of information from DOE and MINATOM.
The 10 nuclear cities were among the most secret facilities in the
former Soviet Union. Behind their walls, thousands of scientists and
engineers labored on the design, assembly, and production of the
Soviet nuclear arsenal. Today, the cities remain high-security
areas, and access to them is limited. The 10 cities and their roles
in developing nuclear weapons are shown in table 4.1.
Table 4.1
Role of Russia's Nuclear Cities in
Weapons Design and Development
New name Old name Nuclear role
------------------------------ ------------------ ------------------
Sarov Arzamas-16 Nuclear weapons
design and
assembly;
plutonium storage
Zarechnyy Penza-19 Nuclear weapons
assembly and
disassembly;
plutonium and
highly enriched
uranium
storage
Novouralsk Sverdlovsk-44 Uranium
enrichment, highly
enriched uranium
storage and
blending
Lesnoy Sverdlovsk-45 Nuclear weapons
assembly and
disassembly;
plutonium storage
Ozersk Chelyabinsk-65 Mayak Fuel Storage
Site, fuel
fabrication, mixed
oxide fuel,
plutonium
production
reactors,
reprocessing,
waste management
Snezhinsk Chelyabinsk-70 Nuclear weapons
design; plutonium
and highly
enriched uranium
storage
Trekhgornyy Zlatoust-36 Nuclear weapons
assembly and
disassembly;
plutonium and
highly enriched
uranium storage
Seversk Tomsk-7 Uranium enrichment
and reprocessing,
plutonium
production
reactors, waste
management
Zheleznogorsk Krasnoyarsk-26 Reprocessing,
plutonium
production
reactors, waste
management
Zelenogorsk Krasnoyarsk-45 Fuel fabrication
(military),
uranium enrichment
----------------------------------------------------------------------
Source: DOE.
FOCUS OF THE NUCLEAR CITIES
INITIATIVE WILL DIFFER FROM
THAT OF THE IPP PROGRAM
---------------------------------------------------------- Chapter 4:2
The IPP program has provided funds to various kinds of institutes
with nuclear and other disciplines throughout Russia, including many
in Moscow, St. Petersburg, and the nuclear cities. However, the
Nuclear Cities Initiative will provide assistance only to Russia's 10
nuclear cities. In addition, unlike the IPP program, the Nuclear
Cities Initiative is based on a government- to-government agreement
rather than on agreements between U.S. and Russian laboratories and
institutes. The program is an outgrowth of a meeting between the
Vice President of the United States and the Prime Minister of Russia
at the Tenth Session of the United States-Russian Federation
Commission for Economic and Technical Cooperation in March 1998.
After additional meetings between high-ranking officials, the U.S.
Secretary of Energy and Russia's Minister of Atomic Energy signed an
agreement on September 22, 1998. The purpose of the agreement is to
facilitate the provision of new civilian jobs for Russian workers in
the nuclear complex, which is controlled by the Ministry of the
Russian Federation for Atomic Energy (MINATOM). Russian officials
have identified a need to create 30,000 to 50,000 new jobs in these
cities.
According to DOE, the Nuclear Cities Initiative will create jobs
faster than the IPP program. It will include the redirection of
skills not only in the high-technology arena, as is being done in the
IPP program, but also in the service, information, education, and
small business sectors. Unlike the IPP program, the Nuclear Cities
Initiative has a social component involving other federal agencies,
such as the Agency for International Development and the Department
of Commerce, to build good will in the scientific and general
communities within these cities. The initiative will provide among
other things, support systems for depression, women's rights,
language training, and job retraining. Furthermore, unlike the IPP
program, which is driven by DOE's national laboratories, DOE expects
that the initiative will have working groups comprising not only
scientists but also business and community leaders. DOE expects that
the role of DOE's national laboratories will be reduced as the
initiative evolves.
According to DOE, the Nuclear Cities Initiative will draw on the
experience of the United States in restructuring the former nuclear
weapons laboratories and production complexes. DOE will share the
experience in restructuring that has occurred at U.S. nuclear sites
such as Hanford, Washington and Oak Ridge, Tennessee, and will
provide business training and support for development at nuclear
cities and institutes in Russia affected by downsizing. The U.S.
technical assistance will include training in business planning,
methods to attract business to the area, and ways to get new
businesses started.
OBJECTIVES OF THE NUCLEAR
CITIES INITIATIVE
-------------------------------------------------------- Chapter 4:2.1
According to DOE's report to the Congress on the program, the goals
of the initiative are to
-- assist the Russian Federation in reducing the size of its
nuclear weapons establishment to correspond with its post-Cold
War budget realities and smaller nuclear arsenal and
-- promote nonproliferation goals by redirecting the work of
nuclear weapons scientists, engineers, and technicians in the 10
Russian nuclear cities to alternative scientific or commercial
activities.
In its report to the Congress, DOE said the program serves U.S.
national security objectives by
-- assisting the Russian Federation in reducing its nuclear weapons
establishment, which is still significantly larger than that of
the United States;
-- facilitating the transition of Russian scientists, engineers,
technicians, and other specialists from weapons development or
production to civilian work, thereby deterring the transmission
of weapons knowledge to criminal elements, rogue states, or
other undesirable customers;
-- extending into the 10 nuclear cities U.S. efforts to assist
Russian science in moving from weapons development to civilian
uses; and
-- helping to promote stability in Russia at a time when that
country is undergoing extreme financial and political crisis.
The program has other benefits, too, according to the DOE report,
such as
-- making the benefits of Russian science available to U.S.
commercial enterprises,
-- leveraging and developing existing success in bilateral and
multilateral "brain drain" programs to advance Russia's new goal
of downsizing its nuclear weapons complex, and
-- providing new understanding of the conditions in the nuclear
cities.
The agreement lists several cooperative activities. One such
activity is developing entrepreneurial skills in employees displaced
from enterprises of the nuclear complex, training them to write
business plans, and facilitating the development of such plans.
Other possible activities include facilitating
-- the creation of conditions necessary for attracting investment
in the nuclear cities to implement the projects within the
framework of the agreement;
-- the search for investors for production diversification
projects, market analysis, and the marketing of products and
services resulting from the implementation of those projects;
and
-- access to existing investment mechanisms, including investment
funds.
As a first step, DOE sent two working group missions, including
members of the scientific, business, and financial communities, to
Russia. DOE plans to send a third mission later this year. The
initiative will start in three cities--(1) Sarov, formerly
Arzamas-16, (2) Snezhinsk, formerly Chelyabinsk-70, and (3)
Zheleznogorsk, formerly Krasnoyarsk-26,--and expand later. DOE's
report to the Congress said it is critical that projects be selected,
reviewed, and launched expeditiously because of the financial crisis
in Russia. The report also outlines the objectives of the Nuclear
Cities Initiatives and provides milestones or goals for fiscal years
1999 and 2000. Program milestones for fiscal year 1999 include
d