Overview
	Technical Background
	The Threat
	Securing Nuclear Warheads and Materials
	Interdicting Nuclear Smuggling
Stabilizing Employment for Nuclear Personnel   International Science & Technology Centers   Nuclear Cities Initiative   Initiatives for Proliferation Prevention   Civilian Research & Development Foundation   Impact of Other Programs
	Monitoring Stockpiles
	Ending Further Production
	Reducing Stockpiles

 

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Previous Publications
	Funding for U.S. Efforts to Improve Controls Over Nuclear Weapons, Materials, and Expertise Overseas: Recent Developments and Trends February2007 Readthe Full Report (1.5M PDF)
	Securing the Bomb 2006 The latest report in our series, from May 2006, finds that even though the gap between the threat of nuclear terrorism and the response has narrowed in recent years, there remains an unacceptable danger that terrorists might succeed in their quest to get and use a nuclear bomb, turning a modern city into a smoking ruin. Offering concrete steps to confront that danger, the report calls for world leaders to launch a fast-paced global coalition against nuclear terrorism focused on locking down all stockpiles of nuclear weapons and weapons-usable nuclear materials worldwide as rapidly as possible. Read the Executive Summary (379K PDF) or the Full Report (1.7M PDF)
	Securing the Bomb 2005: The New Global Imperatives Our May 2005 report finds that while the United States and other countries laid important foundations for an accelerated effort to prevent nuclear terrorism in the last year, sustained presidential leadership will be needed to win the race to lock down the world’s nuclear stockpiles before terrorists and thieves can get to them. Read the Executive Summary (281 K) or the Full Report (1.9M PDF)
	Securing the Bomb: An Agenda for Action Building on the previous years' reports, this 2004 NTI-commissioned report grades current efforts and recommends new actions to more effectively prevent nuclear terrorism. It finds that programs to reduce this danger are making progress, but there remains a potentially deadly gap between the urgency of the threat and the scope and pace of efforts to address it. Download the Full Report (1.2 M PDF) Выписки из доклада по-русски (423K PDF)
	Controlling Nuclear Warheads and Materials: A Report Card and Action Plan 2003 report published by Harvard and NTI measures the progress made in keeping nuclear weapons and materials out of terrorist hands, and outlines a comprehensive plan to reduce the danger. Download the Full Report (2.7M PDF)
	Securing Nuclear Weapons and Materials: Seven Steps for Immediate Action 2002 report co-published by Harvard and NTI outlines seven urgent steps to reduce the threat of stolen nuclear weapons or materials falling into the hands of terrorists or hostile states. Read the Full Report (516K PDF)

Stabilizing Employment for Nuclear Personnel

The Nuclear Cities Initiative

Status

• ensure that alternative jobs are provided for nuclear weapons scientists and workers who are no longer needed; and

• convert or shut down nuclear weapons buildings that are no longer needed.

While other U.S. programs share NCI's goal of providing alternative employment for nuclear weapons scientists, NCI is the only U.S. program focused directly on reducing the size of the Russian nuclear weapons complex and ensuring that this reduction does not lead to mass unemployment and instability. By achieving these goals, it is hoped, NCI would reduce the proliferation risks posed by desperate and under- or unemployed nuclear weapons scientists and workers, and reduce Russia's ability to mass produce additional nuclear weapons for its nuclear arsenal, should circumstances change. In principle, reducing Russia's nuclear weapons complex to a sustainable size compatible with its post-Cold War missions is as much in Russia's interest as it is in the U.S. interest. In fact, Russia has announced that with or without U.S. help, it plans to shut two of its four weapons assembly and disassembly facilities, one of two facilities for fabricating plutonium and highly enriched uranium (HEU) weapons components, and all of its remaining plutonium production reactors.[3]

Faced with modest budgets, uncertain political support, and limited high-level attention in both Washington and Moscow, NCI has struggled to make progress in addressing these daunting challenges. Given the small scale of its resources so far, the U.S. and Russian governments have agreed that it should concentrate initially on three of the ten closed cities – the nuclear weapon design cities of Sarov (formerly Arzamas-16) and Snezhinsk (formerly Chelyabinsk-70), and the plutonium production city of Zheleznogorsk (formerly Krasnoyarsk-26). Now operating under joint management with the Initiatives for Proliferation Prevention (IPP), NCI has sought to focus its efforts on key gaps that were not being filled by either IPP or the International Science and Technology Centers (ISTC) – though overlap of these programs has continued to be a problem.

Scope of the Current Nuclear Cities Problem

Russia today is not the same as the Russia of 1992, or even the Russia of the late 1990s. For much of the 1990s, the nuclear facilities in Russia's nuclear cities struggled with government funding that was far less than needed for the facilities to operate safely and securely, and which was often months late or arrived in much smaller amounts than had been budgeted. As a result, nuclear weapons workers struggled with salaries as low as $60 a month, which sometimes were not paid for months at a time. (See The Threat in Russia and the NIS.) The financial crisis of 1998 brought these problems to a head, leading thousands of workers in the nuclear cities to stage strikes and protests over lack of pay, and contributing to a number of alarming security incidents. (See Anecdotes of Insecurity.)

Since then, however, the Russian economy has stabilized, with significant economic growth in each of the last four years, and the Russian government budget has moved from yawning deficit to modest surplus. As a result, the nuclear facilities in the closed nuclear cities, and the city governments themselves, are receiving increased government support, paid on time, and salaries at these facilities (also paid on time), have increased substantially – to the equivalent of $300 per month in some cases.[4]

The key issue now is the future of the 35,000 nuclear weapons scientists and workers who the Ministry of Atomic Energy (MINATOM) expects will no longer be needed for weapons work by 2005, as the nuclear weapons complex contracts over the next few years.[5] A substantial fraction of these people are at or near retirement age, and would retire if adequate and secure pensions could be made available (see discussion below). If this is true for 10-15,000 of the total, that means that 20-25,000 new civilian jobs are needed, if large-scale unemployment for nuclear weapons experts and workers is to be avoided. Neither the U.S. government nor the Russian government has the money to keep paying nuclear workers who are no longer needed forever. In the long run, therefore, a combination of private job growth in the nuclear cities, movement of people elsewhere to work, and retirement as existing workers age is the only answer.

The infrastructure to provide the needed number of new jobs, whether in the nuclear cities or elsewhere, has not yet been built – and the number required is far larger than the combination of MINATOM's own conversion programs and all international assistance efforts have managed to create so far. The time when employees may be most tempted to sell nuclear knowledge or steal nuclear material for sale to others is when they know they will soon lose their jobs, but for the moment still have access to nuclear secrets and materials – and for thousands in Russia's nuclear cities, that time is now. When NCI began, the U.S. Department of Energy (DOE), which oversees the program, estimated that, based on the U.S. experience with its own nuclear complex, each job created in the nuclear cities might cost $11,000 to create, suggesting that $220-$275 million would likely be needed to create the needed jobs – a figure far beyond any present or planned expenditures for NCI.[6]

The obstacles to new business development in Russia's nuclear cities are huge. While Russia's economy is now growing, foreign investors – and even startup or expansion of domestic Russian firms – still face a wide range of difficulties (from confusing taxes to ambiguous contract laws to widespread government corruption) that have severely limited foreign investment in Russia.[7] The nuclear cities themselves were intentionally built in remote locations, making it more difficult for them to produce products and transport them to market competitively. Access to the cities (particularly by foreigners) remains strictly limited, requiring 45 days advance notice, and review of the paperwork for each visitor by the Federal Security Service (FSB, successor to the KGB). Requests for access are frequently denied, often for reasons that are not clearly explained, and foreigners are closely watched (and often searched) when they visit the cities. Attempting to convince investors to put their money into a project in a city where they cannot visit the project quickly should something go wrong is extraordinarily difficult. Having been all-Soviet "company towns" of the nuclear industry for most of their existence, these towns are only beginning to gain market experience and a market mentality; experts in the cities have limited experience with working for an ever-changing competitive market, rather than filling state production orders. On the other hand, if these obstacles can be overcome, the nuclear cities offer thousands of world-class technical experts and tens of thousands of highly educated production personnel, willing to work for salaries far below those in most other developed countries – potentially an enormous economic strength, and a huge potential for profit.

NCI needs to address only a portion of this overall problem to be successful, however. MINATOM has a conversion program of its own, which it funds at roughly $50 million per year (with the revenues coming largely from the HEU Purchase Agreement), and the cities themselves have been financing a variety of efforts to create jobs and revitalize their economies. While these efforts have had both failures and successes, all told MINATOM reports that they have created several thousand of the needed jobs – and they are expected to create thousands more in the future.[8] Other countries are interested in contributing as well, and there may be an opportunity for larger-scale contributions under the new G-8 Global Partnership Against the Spread of Weapons and Materials of Mass Destruction. (See Impact of Other Programs.)

Scope and History of the Nuclear Cities Initiative

Since its inception, NCI has had quite limited resources and has led an up-and-down existence, with many critics and few high-level champions in either Washington or Moscow. The U.S. and Russian governments agreed to establish NCI in early 1998, following a proposal from the Russian-American Nuclear Security Advisory Council (RANSAC) in the fall of 1997, though a formal government-to-government agreement was not reached until September 1998.[9] The Clinton administration had made no provision for such an initiative in its budget request for fiscal year (FY) 1999, and no additional request was made to the Congress. Hence, while the Department of Energy (DOE) provided some limited FY 1998 funds for initial start-up activities from the Initiatives for Proliferation Prevention program, it fell to RANSAC and other non-government organizations to convince Congress to authorize $15 million for NCI in FY 1999.[10] By mid-1999, when the time came for Congressional decisions on the following year's budget, the U.S. government had made little progress in fleshing out a plausible strategy for reducing the security threats in Russia's nuclear cities that could be sold to Congress. As a result, Congress slashed NCI's budget to $7.5 million, and imposed a variety of legislative restrictions.

NCI was not popular in Moscow, either. From the perspective of many in Russia, NCI has meant an endless stream of Americans visiting sensitive areas to discuss potential projects, with precious little in the way of concrete job creation in return – prompting frequent Russian charges that the United States was simply engaged in "nuclear tourism." With their long Soviet experience, some in MINATOM and in the nuclear cities expected that a job creation program would mean U.S. government funding to build new factories which would produce planned products and provide jobs; NCI, by contrast, took a more American perspective that government's role was primarily in helping bridge the gap from technological invention to markets, by providing business training, help with linking up with commercial partners and investors, and the like. This fundamental difference of perspective made reaching agreements on particular projects difficult, especially in the early days of the program. Moreover, some 70% of the funding through December 2000 went to U.S. experts (paying for visits to Russian nuclear cities to help draw up plans, and the like), rather than to Russians in the nuclear cities themselves, provoking loud complaints in Russia and on Capitol Hill.[11]

Nevertheless, by the following year, FY 2001, with key Congressional threat reduction advocates such as Senator Pete Domenici (R-NM) focusing on the importance of the problem, NCI's budget was increased to almost $27 million (the program's high-water mark to date), and a new set of Congressional directions for the program's priorities was enacted – demanding both a focus on projects that could be commercially self-sustaining within three years, and pursuit of Russian agreements to shut down key weapons production facilities.[12] By then, some key NCI projects (described below) were beginning to bear fruit, more focused management approaches were being put in place on the U.S. side, and prospects for the program seemed to be improving. There were still, however, substantial complaints on the Russian side about the small proportion of money going to Russia and the meager job-creation results, and complaints on the U.S. side about difficulties in getting access to the cities to move projects forward, and other Russian barriers to building up private enterprise in the nuclear cities.

This apparently improving picture was reversed when the Bush administration came to power in January of 2001. The new team proposed to slash NCI's budget by 75%, to $6.6 million; key officials associated with the Bush administration's review of threat reduction programs made their hope to terminate the NCI program clear; and a General Accounting Office report released in March 2001 criticized NCI for spending most of its money in the United States, having no strategic plan, and focusing a significant portion of its effort on projects with little commercialization potential.[13] With Russian officials little more supportive, the program spent a good deal of 2001 fighting to survive, making the case that the issue it was addressing was critically important, and that with improved management approaches and increased Russian cooperation (as represented by a new agreement on access to the closed cities signed in mid-2001), there were good prospects for NCI being able to have a substantial positive impact.

In the wake of the September 11 attacks, that effort appeared to have succeeded: with Congress providing hundreds of millions in supplemental funding for nonproliferation efforts, the NCI program's budget for FY2002 ended up at $21 million – less than the previous year, but far more than the Bush administration had requested; the Bush administration's review accepted NCI's continuation; and in response to the GAO report, Congress and the administration agreed to put NCI under joint management with IPP, while keeping both programs as separate entities. The Bush administration proposed again to reduce funding for NCI in FY2003, but not as sharply as it had proposed to do the previous year; NCI's survival seemed assured. During 2002, however, a project that had been billed by some program officials as NCI's key flagship effort collapsed (see discussion below), and political support for NCI in both Washington and Moscow remained very weak. There is no doubt that the constant need to fight for the program's survival has substantially undermined NCI managers' ability to plan and implement a successful effort. As Senator Domenici (R-NM) has remarked, NCI is caught in a Catch-22, with constant demands to produce eye-catching results in return for resources clashing with inadequate resources to produce any eye-catching results.

NCI Projects

The projects NCI has funded fall into three principal categories: downsizing weapons infrastructure, subsidizing civilian job-creation projects, and financing infrastructure improvements (designed both to improve the business climate and to improve the quality of life).

Weapons complex downsizing. The principal project here is at the Russian nuclear weapons assembly and disassembly plant "Avangard," in the closed city of Sarov. NCI has financed a major project to move the fence at Avangard so that 6 buildings totaling 550,000 square feet, on 10 acres of land – about 40% of the Avangard facility – are now outside the fence and opened to civilian work in the new "Sarov Technopark."[14] The last nuclear weapons work will be phased out at Avangard in 2003. This was an historic event – the first ever opening of part of the Soviet nuclear weapons complex – but the total reduction in Russia's capacity to produce nuclear weapons was small, as Avangard was the smallest of four nuclear weapons assembly and disassembly facilities. In addition to the Avangard project, as part of the negotiations toward establishing the "Open Computing Centers" in Sarov and Snezhinsk (see below), computers that had been transferred from U.S. firms to the Russian weapons labs were moved out of the weapons areas to the OCCs, eliminating concerns over their possible use for weapons work. A Zheleznogrosk Technopark has been established as well, but this was not carved out of former weapons production space in a similar way.

Job creation. As of early 2002, NCI had provided support for some 10 job creation projects in Sarov, 11 in Snezhinsk, and 7 in Zheleznogorsk.[15] A few of the most important include:

• Fresenius: Kidney Dialysis Equipment. Fresenius, a leading producer of kidney dialysis equipment, had reached agreement with NCI to make a substantial investment in a project that would produce components for such equipment at the Sarov Technopark at Avangard. This was to have been the Technopark's flagship project, and was frequently touted by DOE officials as a key NCI success, with other commercial firms coming right behind Fresenius to make investments in projects in Sarov.[16] Ultimately, however, Fresenius pulled out of the project when MINATOM could not provide satisfactory commitments on the ability to Fresenius personnel to get timely access to the project. This was a serious substantive and political blow to the NCI effort.

• Open Computing Centers. Russia has developed a thriving software industry, in many cases doing "outsourced" software development on contract to foreign companies.[17] Russian weapons experts have strong expertise in software, particularly since the Soviet Union's less impressive computer hardware forced them to develop efficient algorithms for their weapons work. Intel has for some time employed a group of former weapons workers in Sarov to work on Intel software design. NCI therefore sponsored the establishment of "Open Computing Centers" – open in the sense that they are outside the fence of the nuclear facility, though still within the closed city – in Sarov and Snezhinsk.[18] A third center in Zheleznogorsk is planned to open shortly. These centers have been the largest job-creation efforts funded by NCI, supporting hundreds of jobs in total. To date, however, these centers have subsisted primarily on subsidized work provided by the U.S. national laboratories, with only a modest fraction of their effort being competitively won commercial work. Efforts to get the thriving Russian software industry to invest in these centers, or Western firms to provide large-scale contracts to them, have borne only modest fruit to date. The Sarov center has been placed under new, more entrepreneurial management, and has merged with the "Open Science Center," also supported by NCI, to form "Sarov Labs," a joint stock company to be run as a commercial business.[19] The Zheleznogorsk center will have a major investment from Novosoft, a leading Russian software developer operating on the international market, and hence will start from the beginning operating primarily as a commercial business.[20]

• Nuclear Waste Processing, Zheleznogorsk. Russian experts at the plutonium production facility at Zheleznogorsk have developed a technology for cleaning intensely radioactive sludge from the bottom of high-level waste tanks, a multi-billion-dollar problem at facilities such as Hanford and Savannah River in the United States (as well as Russian facilities). With help from NCI, they have established a firm that hopes to provide technological consulting services for high-level waste tank cleanout projects. The effort already employs dozens of people, and could potentially employ hundreds of people if the firm successfully penetrates this cleanup market.

• Identification Technologies Company. The deputy director of security at the nuclear weapons design laboratory in Snezhinsk resigned to found this company, which distributes equipment for upgrading nuclear security at sites in Russia. The company is making money commercially, providing jobs for Russian nuclear security experts, while simultaneously contributing to the parallel U.S. goal of improving protecting against theft of nuclear material at Russian nuclear facilities.

• European Bank for Reconstruction and Development (EBRD) Small Business Loans. The EBRD has a half-billion-dollar fund for providing loans to small and medium-sized enterprises in Russia. NCI provided $1.5 million to allow the EBRD to set up loan offices in each of NCI's three target cities; the EBRD itself also set up an office in Seversk (formerly Tomsk-7), home of a large plutonium production, uranium enrichment, and weapon component fabrication facility. Although the interest rates on the EBRD loans are at commercial rates – a fact which provoked considerable Russian complaint – demand for these loans in the nuclear cities has been high. By the end of 2001, the EBRD had made 982 loans in the four cities, totaling $3.9 million;[21] $5-$6 million.[22] Each such loan goes to some one with a reviewed proposal for starting or expanding a small or medium-sized business. The default rate on these loans has been close to zero. While EBRD does not collect data on the number of jobs created as a result of these loans, it seems very likely that the average number of jobs created per loan is at least 2-3, which suggests that this project may have created several thousand new jobs in Russia's closed nuclear cities – by far the biggest job creation success NCI has had, though an uncertain one.

• Nonproliferation Analysis Centers. Working in cooperation with RANSAC and with U.S. foundations, NCI has supported the establishment of nonproliferation and arms control analysis centers in both Sarov and Snezhinsk, Russia's two principal nuclear weapons design cities. (Experts from U.S. nuclear weapons labs play key roles in U.S. nonproliferation policy, advising on matters ranging from what technologies should be controlled to constrain proliferators' nuclear weapons programs to how best to secure nuclear warheads and materials.) These centers have provided detailed analyses of a range of subjects. The Sarov center, in particular, in addition to analyses of specific nonproliferation topics, has provided quarterly assessments of economic and political developments in Sarov, which have been useful to both the U.S. and Russian governments in assessing next steps for promoting economic development in the city. These centers, however, employ only a couple of dozen people. A much larger number of Russian weapons experts work on other U.S.-Russian nonproliferation cooperation programs (see Impact of Other Programs). The job-creation potential of the nonproliferation centers could expand substantially if their role was expanded to include nonproliferation technology research and development, on contract to the U.S. and other governments (see discussion below).

NCI has pursued a wide range of other projects designed to create jobs for workers and scientists in the nuclear cities as well, from expanding production of high-voltage switches for the Russian electric power industry to technical services to the Russian oil and gas industry. Some of these have been successful in providing modest number of jobs, and are either self-sustaining or seem to be on a path toward achieving that goal; others have been failures. All told, NCI argued that as of mid-2001, it had succeeded in moving 370 weapons experts out of Russia's nuclear weapons complex and providing them alternative employment (in addition to the uncounted jobs created by the EBRD loans);[23] that number has increased only modestly since then.

NCI has succeeded in drawing in a significant amount of capital from other sources, leveraging NCI's own investments. As just noted, the $1.5 million investment in setting up EBRD loan offices has already resulted in $5-$6 million in loans in the nuclear cities from the EBRD, and the very modest investment in the IDCs has helped experts in Zheleznogorsk win some $17 million from MINATOM headquarters.[24] MINATOM has invested several million dollars from its conversion program in NCI projects, a new European Nuclear Cities Initiative (ENCI) has been established to complement NCI, the British government has announced its intention to launch a small program in the nuclear cities, and – perhaps most important – private firms have provided millions of dollars in contracts or investments to entities supported by NCI. The list of private firms that have entered into or considered investments in or contracts with NCI projects includes firms such as Motorola, General Electric, and General Motors.[25] Every single one of the projects NCI was supporting in FY 2001 had some Russian contribution, and two-thirds of them had Russian monetary contributions complementing the U.S. government support.[26] As of mid-2001, NCI estimated that $37.5 million in NCI spending (as of that time) had leveraged $24.7 million in investment from other sources.[27]

Community development and infrastructure. Particularly in its early years, NCI supported a broad range of projects designed to create a more favorable business infrastructure, or a more livable society, in the nuclear cities – ranging from helping to install improved telecommunications capabilities (including high-speed internet connections that would help experts in the nuclear cities win research and development (R&D) outsourcing contracts for companies abroad), to helping to improve medical care in the cities. NCI has also arranged the establishment of "sister city" municipal exchanges between Russia's closed cities and the cities near comparable nuclear facilities in the United States, in which city leaders (and high-school students) exchanged visits and compared their approaches to common problems. NCI has also financed a variety of training programs, from business management to protecting intellectual property rights.

Perhaps the most important and successful of NCI's infrastructure investments has been its investment in the "International Development Centers" (IDCs) in Zheleznogorsk and Snezhinsk.[28] These centers, each led by a Russian with substantial experience in Russian commercial industry, provide a wide range of services to those attempting to start or expand businesses in the cities – from business training, to space for meetings with foreign partners, to help with developing business and market plans. In addition, they have worked with the city governments to help prepare economic development plans for these cities. Like the nonproliferation centers, the IDCs themselves employ only a few people – but have the potential to have a substantial indirect impact on job creation. For example, experts from Zheleznogorsk won $17 million in competitive grants from MINATOM's own conversion program in 2001, more than any other nuclear city, and attributed that success in significant part to the assistance their IDC provided in project development and analysis.[29] Responding to congressional direction to focus on projects that can be rapidly commercialized, NCI has now phased out most of its support for community development and infrastructure projects, except for the IDCs.

In short, NCI has had some success in downsizing infrastructure and creating jobs, in the very difficult political and economic environment in Russia's closed nuclear cities. NCI has also given the United States a window into what is happening in Russia's nuclear cities, and channel by which to discuss the changes there with Russia and seek to influence them. These intangible benefits are important, and should not be ignored. But what has been achieved to date is extremely modest by comparison to what is needed. Four years since its inception, with $67 million appropriated through FY 2002, NCI has contributed to the shutdown of only a very small fraction – perhaps 5-10% – of Russia's nuclear warhead assembly capability, and a still smaller proportion of its total nuclear weapons complex. It is unlikely that NCI has created as many as 4,000 jobs even if the uncounted number resulting from the EBRD loans is included. That is perhaps 10-20% of what is needed, and if 4,000 were the right number, the cost to date would be almost $17,000 per job created.[30] Some of the projects NCI has supported may grow and thereby create additional jobs in the future; others, however, may prove not to be sustainable when no longer subsidized by NCI, ending jobs currently counted as "created."

NCI officials argue, with some merit, that direct job creation is not the best metric for measuring their success, and that they will be successful if they help create a better business climate in the nuclear cities that leads to economic revitalization and job creation there. Developing metrics to assess how well the program is meeting that objective, however – and how much of the economic changes occurring in these cities has anything to do with NCI's efforts – is a difficult challenge; the program has not developed such metrics to date. Moreover, political support for NCI among Russian and U.S. officials will be severely undercut if the program does not succeed in achieving the visible metric of job creation. In short, the challenge is huge, the effort to date has had only modest success, and the resources provided to date have been woefully inadequate to the task.

Budget

See budget table

NCI has received $67 million in appropriations through FY 2002, with $21 million of that coming in FY 2002 itself. The up-and-down course of these budgets is described above. The Bush administration requested $16.748 million for NCI in FY 2003. While Energy and Water appropriators in both the House and Senate approved the Bush administration's request, this appropriation was not completed, so as of late 2002, the Department of Energy was running on a continuing resolution, along with much of the rest of the government. Program officials expect to receive approximately $16 million in FY 2003.[31]

By contrast, in 1998 DOE officially estimated that $550 million over 5 years – more than six times the annual rate planned for FY 2003 – would be needed to foster sustainable employment for 50,000 people in Russia's nuclear cities.[32] Even if only half that number of jobs is required, and even if funds can successfully be used to leverage private investment, the fact remains that NCI's current resources are simply not on a scale that can have any very large impact on the future of ten entire cities – or even of the three cities where it has focused so far.

Key Issues and Recommendations

While criticizing NCI's progress, the GAO report concluded that making an effort to help Russia shrink its nuclear complex and provide alternative employment for the nuclear scientists and workers who are no longer needed is "clearly in our national security interest." NCI has the potential to make a critically important contribution to U.S. and international security – in effect addressing the root causes of nuclear insecurity, rather than the symptoms. But to achieve that potential, a broad agenda of reform of the effort is needed, including:

• A broader approach to fostering private sector job growth in the nuclear cities;

• A more comprehensive set of job-creation tools than relying only on quick technology commercialization, including contracting a portion of U.S. nonproliferation, nuclear cleanup, and energy R&D to nuclear city experts (a win-win-win approach that would get this work done for less and provide access to unique Russian concepts and technologies, while creating sustainable jobs for Russian nuclear city experts);

• Support for secure retirement for Russian nuclear scientists and workers;

• A more focused approach to working with Russia to reduce its nuclear weapons infrastructure to a sustainable size; and

• Substantially increased resources – both of money and of sustained high-level attention.

A broader approach to economic redevelopment.[33] Currently, NCI focuses primarily on subsidizing the startup or expansion of particular business projects, usually involving attempts to commercialize technology from the Russian weapons institutes. These projects are typically proposed by Russian weapons experts, reviewed by DOE and national laboratory experts, and then an attempt is made to "sell" them to Western private firms, to convince them to invest in and partner with these potential enterprises. This approach has multiple flaws. First, DOE and its national laboratories have been notably unsuccessful in commercializing laboratory technology in the thriving U.S. economy; why they are expected to be successful in the far more difficult circumstances of Russia's nuclear cities is not clear. Second, while considerable effort is made to identify projects with commercial potential, nonetheless the initial suggestion of projects tends to be more "technology push" than "market pull" – more trying to sell a technology developed by the Russian labs than trying to adapt these labs' expertise to pursue market opportunities as they develop. Third, while lack of initial start-up capital is a substantial constraint on establishing or expanding businesses, government subsidies for a portion of the initial start-up capital are no guarantee of commercial success, particularly in the extremely difficult environment for private business found in these most Soviet of Russian cities.

More broadly, there appears to be no example anywhere in the world where very modest subsidies for high-technology startup firms were themselves sufficient to revitalize the economy of a city or region where the main previous industry had gone into decline. Revitalizing such a region is not an uncommon problem (though some of the specific circumstances in Russia and its closed nuclear cities are unique), and the evidence from both successful and unsuccessful experiences in the United States and around the world makes clear that a broader set of tools – ranging from investments in infrastructure and education to tax breaks and other incentives for businesses to locate in the targeted area – are essential to success. To overcome the huge obstacles to business development in Russia's closed nuclear cities in particular – and seize the opportunities there – the traditional approach of most past U.S. efforts related to defense conversion, focused on funding high-tech R&D and providing some business training, will be helpful but will not be enough. The full spectrum of tools that have been used to promote private-sector growth in other areas (in Russia and elsewhere) – business centers, loan guarantees, political risk insurance, start-up capital for new enterprises, tax incentives, and the like – are likely to be necessary.

Neither DOE nor MINATOM is well-suited to imaginatively deploying such a broad set of economic development tools. Indeed, to date, NCI (and other U.S. programs) have been notably unsuccessful in working with the complete set of agencies of the U.S. and Russian governments that would be needed to put a broadened economic development strategy for these cities into place. Since NCI began, for example, the Russian government itself has granted and then taken away "tax haven" status for these cities, to attempt to convince businesses to locate there, has drastically increased the level of federal support for both the nuclear facilities and the city governments at these sites, and has ratcheted up the security services' intrusive monitoring and control of foreigners visiting these cities, while publicly suggesting that their gates will be opened in the future. These steps almost certainly had far more influence (both positive and negative) on the economic futures of the nuclear cities than anything NCI has managed to accomplish to date, yet all were done with essentially no discussion between the United States and Russia concerning how such policies could be shaped to maximize the chances for success in the common goal of providing needed alternative employment as Russia's nuclear weapons complex contracts. Similarly, in the 1990s, the United States launched a "Regional Investment Initiative" designed to use all of the tools available to the U.S. government to encourage foreign investment in certain selected regions in Russia that were leading the way in reform; no similar effort to bring a wide range of the U.S. government's tools to bear has been taken for the nuclear cities.

• Recommendation: NCI should establish an advisory group that includes individuals with substantial experience in several areas, including revitalizing the economies of regions where the main industry has declined; high-technology commercialization; commercial firms' approaches to performing contract R&D; and Russian market conditions. Working with this advisory group, NCI and its Russian counterparts should develop a broadened program plan, drawing together a wide range of tools that could be applied by the U.S. and Russian governments to promote job growth in the nuclear cities. This plan should be based on adapting the lessons of other efforts to revitalize the economies of regions where the main industry has declined to the unique circumstances of Russia's closed nuclear cities.

• Recommendation: The U.S. and Russian governments should establish a broader and higher-level dialogue about steps that could be taken to ensure a stable transition for Russia's nuclear cities (and, more broadly, for all the closed cities in Russia). This should include joint development of a package of incentives the two governments could offer to businesses to employ former nuclear weapons experts and workers – whether those jobs are in the nuclear cities themselves or elsewhere. Examples could include:

• Tax breaks to businesses for each former nuclear weapons expert or worker they employ (whether the job is located in a closed city or elsewhere)

• Subsidized equity and loan capital for starting or expanding businesses in the closed nuclear cities

• Russian government investments in infrastructure and training needed for business development in the nuclear cities

• Recommendation: As part of the broader dialogue just recommended, the U.S. and Russian governments, in consultation with the private sector, should develop and implement an approach to allowing rapid access to these cities by pre-cleared individuals associated with firms that have made investments or written contracts for work in these cities. An approach to access that is workable for the private sector is crucial to creating private-sector jobs in these cities; this issue, more than any other, killed the Fresenius project, and other firms will have observed what took place in that episode.

• Recommendation: As part of this ongoing dialogue, NCI and MINATOM's own $50 million/year conversion fund should be much more fully coordinated (and integrated, where possible), to maximize the leverage of the combined funding in promoting economic revitalization in Russia's nuclear cities. (Currently, while MINATOM's fund has made some investments in NCI-supported projects, it generally supports its own efforts with little consultation or coordination with NCI.)

• Recommendation: As part of this broader dialogue, the U.S. and Russian governments should also discuss recent Russian statements suggesting that the nuclear cities are to be opened. The two sides should identify the different ways and degrees to which this might be done, the implications of different possible approaches for security and for economic development in these towns, and the schedule on which the options identified as most promising might be accomplished.

• Recommendation: NCI should be as open to low-tech small and medium-sized enterprises – generally selling to local and Russian markets – as it is to high-tech enterprises that make use of specific technologies from the Russian weapons facilities. Such small and medium-sized businesses are the principal engine of new job creation in most economies.

Opportunities to get U.S. government R&D done for less, while leveraging the creation of commercial R&D consulting firms in Russia. Commercial manufacturing enterprises churning out widgets in Russia are not likely to employ substantial numbers of scientists. Scientists are needed mainly for long-range R&D, and in an economy still suffering more than 10% inflation each year, it does not make economic sense for firms to invest R&D money now in the hope of returns ten years down the road unless those returns are expected to be astronomical. Moreover, manufacturing products competitively in the nuclear cities is likely to be difficult, given the problems of transportation of goods from these isolated facilities, lack of production infrastructure outside of the nuclear facilities themselves, limited access to secret production lines within the facilities, and the like.

For these reasons, approaches in which Western firms (or governments) hire nuclear-city experts as contracted knowledge workers (mathematicians, computer programmers, engineers, and the like) are likely to be particularly promising: they would employ scientists and engineers, make use of the vast pool of low-cost technical talent in the nuclear cities, provide jobs without requiring major capital investments in these cities, and sidestep the various problems with establishing large-scale civilian manufacturing there. With the shortage of software experts and other engineers in the United States and around the world, firms are increasingly putting together teams including engineers around the globe, in which experts from the nuclear cities would be prime candidates for participation.[34] Experience in the past suggests that if experts in the nuclear cities simply work on a contract that then expires, they are left with no continuing enterprise afterward; what is needed, therefore, is to pull together ongoing enterprises in the business of conducting R&D on contract, capable of marketing their own R&D services – as "Sarov Labs" plans to be.

One very promising way for the U.S. government to kill two birds with one stone would be to contract a few percent of the hundreds of millions of dollars a year in counterterrorism, nonproliferation, nuclear cleanup, and energy R&D it sponsors every year to be done by Russian experts in the nuclear cities, rather than by American experts. This would be a win-win approach, getting R&D done for the U.S. government at lower cost, while providing high-technology jobs making use of the technical expertise in the nuclear cities. It would also take advantage of unique Russian ideas and technologies, and provide technologies that could be implemented in both Russia and the United States to address similar problems – such as the cleanup of nuclear waste from weapons production. This is already happening at a very limited scale – DOE's Environmental Management program, for example, has sponsored a number of Russian studies of nuclear waste issues, and in the wake of September 11, U.S. and Russian labs are collaborating on development of a range of counter-terrorism technologies – but there are much larger opportunities available. Over time, it can be hoped that if initial U.S. funding helps establish centers of excellence on nonproliferation, cleanup, or energy technologies in Russia's closed cities (while providing tangible deliverables to justify the U.S. spending), as the Russian government budget improves and the centers establish the importance and value of the work they do, the Russian government itself will ultimately pick up the tab for their continued operation.

• Recommendation: The Secretary of Energy should direct all the DOE assistant secretaries who sponsor substantial R&D programs to identify a few percent of the projects in their research portfolios that could be done cost-effectively by experts in Russia's nuclear cities.[35] The Secretary should consult with his cabinet colleagues to determine whether other departments, such as the Defense Department, may also be able to take part in such an initiative. By this means, tens of millions of dollars in near-term funding for real high-technology jobs in the Russian nuclear cities could be arranged in a manner that would contribute to, rather than detracting from, the other priorities of the U.S. government – and would be additional to the funds provided within NCI's budget. This few percent set-aside should last only a few years, however. During that time, as part of the initiative, NCI should work to help the Russian experts working on these contracts to form ongoing R&D contract enterprises; within a few years, the goal would be for these enterprises to be able to continue to win contracts competitively, on the basis of the quality and cost of the services they can provide, without any set-aside.[36]

• Recommendation: NCI should focus a substantial portion of its effort on helping to kick-start the formation of such contract R&D enterprises, and helping to broker deals between such enterprises and Western firms.

• Recommendation: As part of the broader U.S.-Russian dialogue on the future of Russia's nuclear cities recommended above, the United States should work with Russia to identify means by which Russia itself could support a strong continuing R&D effort in areas of mutual interest, such as nuclear waste cleanup and nonproliferation. (Revenue from spent fuel imports or expanded uranium and enrichment exports, for example, might be possible sources for such financing, and areas where U.S. policymakers have the power to increase Russia's opportunities.)[37]

Western vs. Russian markets and investors. [38] To date, NCI, as a U.S.-funded program, has focused mainly on attempting to convince U.S. or Western firms to invest in Russia's nuclear cities. Given the security constraints in the cities, and the difficulties constraining foreign direct investment in Russia more generally, this has been a tough sell – as the collapse of the Fresenius deal symbolizes. Experts in Russia's nuclear cities, however, have had some success in getting Russian investment in enterprises geared toward Russian markets – from products for the oil and gas industry to high-power switches for Russia's power sector. Russian investors have a significantly easier time gaining regular access to the closed cities, compared to foreign personnel.

• Recommendation: Since the goal is to reduce Russia's nuclear weapons complex and provide jobs for the personnel who are no longer needed, rather than to provide subsidies to U.S. business, NCI should pursue whatever projects offer the best potential for job creation – and in many cases, this will mean Russian firms as investors and partners in the cities, and projects intended for Russian markets.

Excessive commercialization expectations. Congress has directed NCI to focus on projects that can be commercially self-sustaining within three years. This reflected legitimate concern over supporting projects that seemed to have little hope of standing on their own feet in the near term, but it is an over-ambitious requirement: very few firms attempting to commercialize a new technology break even within three years even within the thriving U.S. economy. Moreover, given the conditions in Russia's nuclear cities, it is unrealistic to expect that relying solely on jump-starting commercialization of technologies from the Russian nuclear facilities will provide the thousands of jobs needed on the timescale required. Indeed, in the case of the U.S. nuclear weapons complex, re-employment has in effect meant billions of dollars a year in U.S. government spending to employ workforces of nearly the same size as before on cleaning up the radioactive contamination from past weapons production. While neither Russia nor the United States can afford to subsidize taking the same approach in Russia's nuclear cities, this does make clear that a broader set of tools for creating jobs is likely to be needed.

• Recommendation: Congress should modify its direction to NCI, allowing expenditures on a broader set of economic development tools than only rapid commercialization of new enterprises.

Need for support for secure retirement. Thousands of nuclear experts and workers in Russia's nuclear weapons complex are at or near retirement age, and this number increases year by year. Shifting these older experts and workers to new jobs is particularly difficult. Until recently, pensions available upon retirement were far too low to live on – so people stayed on at the facilities rather than retiring.[39] Many thousands would likely retire, reducing the scale of job creation needed, if arrangements were put in place to provide these people with secure and adequate pensions. On a per-person basis, this would likely be much the cheapest approach to addressing the problem of excess nuclear scientists and workers: the director of the nuclear weapons design laboratory at Sarov, for example, has estimated that 2,000 of his employees could be convinced to retire with additional pension supplements of just $500 per year per person.[40] Over ten years, retiring 10,000 people from Russia's nuclear complex might thus cost only $50 million. The impact of retirement as part of the solution could be even greater if "buyouts" for early retirement were offered, as has been widely done in the United States and elsewhere. In particular, personnel have generally been reluctant to leave a secure job at a nuclear facility for the uncertainties of the private market – but if they had the security of a year or two's "cushion" as part of a buy-out, substantial numbers might be willing to take the plunge and leave the nuclear facilities behind. Any such strategy would have to include provisions to ensure that the retired personnel were not returning to work at the nuclear facilities, and that the total nuclear facility workforce was being reduced by at least the number of people retired (rather than the retired personnel simply being replaced with younger people).[41]

• Recommendation: The U.S. and Russian governments, along with their partners in the G-8 Global Partnership Against the Spread of Weapons and Materials of Mass Destruction, should agree on agree on an approach, primarily financed by Russia itself, to ensuring that secure and adequate pensions are provided for excess nuclear weapons scientists and workers. Resources should also be made available for an early retirement "buyout" program to encourage nuclear facility personnel to leave the nuclear facilities and either retire or find other work.

Actual weapons complex downsizing. As noted above, Russia has announced plans to close two of its four nuclear weapons assembly facilities, one of its two facilities for fabricating plutonium and HEU warhead components, and all of its plutonium production reactors, as well as cutting back at other facilities that will remain open. Helping with the reduction of Russia's nuclear weapons complex is a particularly crucial NCI goal. Russia will likely remain a nuclear power and require a significant nuclear weapons complex to maintain its arsenal for as long as the United States does. But Russia simply cannot afford the level of upkeep required to ameliorate all of the proliferation risks of its complex if the complex remains its current size. And many in the U.S. Congress are more willing to provide funds to reduce Russia's weapons infrastructure than to subsidize jobs programs for Russians. Currently, however, NCI is not able to assist in this reduction beyond the one weapons assembly facility at Avangard, because Russia has rejected NCI involvement at Zarechny (home of the other, larger weapons assembly facility slated for shut-down) and Seversk (home of the weapons component fabrication facility and two of the three plutonium production reactors scheduled for shut-down) until it demonstrates results in its initial three target cities.

• Recommendation: The United States and Russia should work out a deal under which NCI could participate in downsizing in the other key cities where it will take place, including putting in place measures (such as the movement of the fence at Avangard) to confirm that the downsizing has in fact taken place and cannot be readily reversed – in return for the United States committing to substantially higher levels of downsizing assistance. In effect, this would make it possible to argue to congressional skeptics that "for this much money, we can shut down this much weapons production capability," providing a readily quantifiable performance metric similar to number of missiles dismantled.

• Recommendation: The United States and Russia should also enter into a broader dialogue concerning the future of their respective nuclear complexes and stockpiles. The maintenance of a huge U.S. reserve of warheads and warhead components is justified in large part by pointing to Russian maintenance of a huge warhead and component production capability – which in part is justified by pointing to the huge U.S. reserve. Given the post-September 11 spirit of partnership between Russia and the United States, both nuclear stockpiles and the nuclear complexes on both sides are larger than needed. Over time, the two sides should work out a mutually acceptable plan specifying what stockpiles and production capability each side will maintain, and what will be eliminated.

Need for additional resources. Very few of the initiatives identified above could be pursued successfully with $20 million per year. If the United States is going to play a significant role in resolving the security threats Russia's nuclear cities pose to its security, it will have to make a larger investment. Given the meager results to date, however, a larger investment simply cannot be sold to the U.S. Congress without a substantial reform of the effort, as outlined above – the two have to go hand in hand.

• Recommendation: If substantial reforms of the NCI effort are initiated, Congress should substantially increase the funding available for the program, to $50-$100 million per year.

• Recommendation: Support for initiatives in the nuclear cities – including support for secure pensions, and for cleanup work, neither of which the U.S. Congress is likely to be enthusiastic about paying for – should be a key priority for expenditure from the $20 billion over 10 years pledged by the participants in the G-8 Global Partnership Against the Spread of Weapons and Materials of Mass Destruction.

Need for increased sustained high-level attention. To date, high-level attention to NCI and its goals has been sporadic, in both Washington and Moscow. As a result, key problems have been allowed to fester, and key opportunities have not been seized. To build a reformed effort that can succeed, and can win support for substantially increased resources, will require sustained political heavy lifting at the highest levels.

• Recommendation: Increased sustained, high-level attention should be devoted to resolving the security risks posed by Russia's nuclear cities.

Need for clear definition of goals and metrics for measuring progress toward them. If NCI is to earn sustained political support in Washington and Moscow, it will have to be able to demonstrate that it is making measurable, demonstrable progress toward its goals – which will require a clear definition of those goals, and metrics to assess progress toward them. Such measures are equally crucial for NCI managers to assess which parts of their effort are working efficiently and which are not – and to change course accordingly. Is NCI about creating jobs? If so, for who? Nuclear weapons scientists? Also engineers? Also production workers? What about residents of the nuclear cities who are not former employees of the weapons complex? Is NCI about reducing the Russian nuclear weapons complex? If so, how is progress toward that objective to be measured? Is the purpose of NCI to improve the business climate in the nuclear cities, so enabling later growth to be driven by the private sector? If so, how does one measure NCI's contribution toward that goal?

• Recommendation: NCI should develop a clearly articulated set of goals for the program, and measures to assess progress toward those goals.

Need for an integrated strategy for NCI and related programs. As with many other parts of the U.S. government's overall effort to improve controls over nuclear weapons, materials, and expertise, there is no overall integrated strategy for NCI and related programs such as the International Science and Technology Centers and the Initiatives for Proliferation Prevention, specifying the overall goal to be addressed, the role of each program in contributing to that goal, what the final end-state to be achieved is, when that end-state is supposed to be reached, and how much that will cost. Such an integrated plan is needed to focus these efforts, maximize synergies among them, and minimize overlaps and duplication of effort.

• Recommendation: The Bush administration should prepare an integrated strategy for all the U.S. programs focused on stabilizing nuclear personnel, specifying what is to be accomplished by when, with what resources, and which programs are to do each part of the job.

Stabilizing facilities while avoiding subsidizing ongoing weapons work. A central issue for the Nuclear Cities Initiative, as with programs such as IPP and ISTC, is to ensure that it is really providing a permanent transition away from nuclear weapons work, and not merely subsidizing the salaries of individuals (and the budgets of facilities) that will remain primarily focused on weapons work. This problem is somewhat limited for NCI because NCI's government-to-government agreement specifies that NCI's projects will be within the nuclear cities, but not within the nuclear facilities themselves. At the same time, however, it is critical to ensure that these facilities do not become desperate themselves (a large portion of the known nuclear-related technology flow out from the former Soviet Union not having come from individuals, but from conscious decisions by facility management to provide dual-use technologies). And the scientists still involved in weapons work are likely to be those whose knowledge is of especially high proliferation concern. This tangle of issues raises a host of difficult policy questions: Should U.S. programs support the creation of new civilian jobs within nuclear facilities themselves, or only new jobs outside the nuclear facilities? Should personnel who continue to work part-time on nuclear weapons work be eligible (as they now are) for part-time participation in ISTC, IPP, and NCI? If not, would the most critical nuclear scientists still be willing to participate in such programs, or, if they had to choose between one and the other, would they stay with weapons work? Is it a problem if a new commercial enterprise established with U.S. support is a spin-off from a nuclear weapons facility, with a portion of its profits going back to that facility? Should programs such as NCI focus on providing jobs within the nuclear facilities, within the nuclear cities but outside the facilities, beyond the nuclear cities, or all three?

• Recommendation: Scientists who continue to work part-time on nuclear weapons programs should continue to be eligible for participation in ISTC, IPP, and NCI – but every effort should be made to convince increasing numbers of participants to move permanently away from weapons work.

• Recommendation: The U.S. government should develop a clear policy on how much, and under what circumstances, it is willing to support projects that provide some revenue to Russia's nuclear weapons facilities.

• Recommendation: NCI should continue to focus primarily on providing jobs outside the nuclear facilities themselves. The focus should be on providing jobs for former nuclear weapons scientists and workers that are outside the nuclear weapons complex – which could include both jobs inside the nuclear cities and jobs outside these cities that would attract these former nuclear weapons personnel.

Analysis and learning. Currently NCI's modest staff at DOE headquarters has all it can do to keep the program on track and manage existing and proposed projects. Little effort is being devoted to in-depth analysis of the evolving economic situation in Russia's closed nuclear cities, lessons learned from NCI projects and related efforts to date, or what could be learned from other efforts around the world that have focused on revitalizing depressed economic areas. In short, limited resources are preventing the program from supporting the kinds of analysis that might more effective use of resources possible.

• Recommendation: NCI should sponsor small efforts to collect and analyze data on economic trends in Russia's closed nuclear cities (such as the quarterly economic data on Sarov provided by the Sarov Analytical Center for Nonproliferation, under NCI sponsorship). To the extent possible, these efforts should include all of Russia's closed nuclear cities, not just the three currently targeted by NCI. Such data is crucial for understanding such matters as which cities need what kinds of help, what kinds of economic enterprises are doing well or badly in these cities, where demographic trends suggest that retirement incentives would make the most difference, and the like.

• Recommendation: NCI should sponsor a study of the lessons learned from successful (and unsuccessful) enterprises in Russia's nuclear cities. Years before NCI was established, for example, the nuclear facility in Zelenogorsk worked with the German firm BASF to clean out a huge uranium enrichment building and install equipment to make video and audio tape instead. This facility now profitably churns out tens of millions of video and audio tapes every year, under BASF license. Intel, Motorola, Mobil, Microsoft, Sun, and others have either entered into or considered investments or contracts in Russia's nuclear cities. There are now also a substantial body of successful and unsuccessful cases that NCI itself has supported, or that have been supported by IPP or ISTC. It would be extremely worthwhilel to examine these cases, consult with the firms involved and other firms, and determine what forms of government support or policy change would be needed to leverage larger private commitments in Russia's nuclear cities. Companies such as these should be asked the question: “what would have to happen for you to conclude that it would be in your business interest to put significant quantities of your money into projects in these cities?”[42]

• Recommendation: Information from these analytical studies and data collection efforts should be regularly provided to the NCI advisory group recommended above, which should make recommendations on what further analysis and data collection would be most useful for the program.

Focus on the cities most requiring assistance. As noted earlier, the U.S. and Russian governments have long agreed to keep NCI focused on three of the ten Russian closed cities – Sarov, Snezhinsk, and Zheleznogorsk. MINATOM has argued for a principal focus on Sarov, in an effort to demonstrate at that site that success is possible. In fact, most NCI activities in Snezhinsk, other than the IDC and the Open Computing Center, are likely to be phased out, as under current Russian plans, Snezhinsk will remain a defense-focused city with nuclear workforce reductions that can be achieved without mass layoffs.[43]

These three cities may not be cities most in need of assistance, however. Sarov, for example, is doing well: unemployment is low and expected to remain so, the economic output of the town increased by 47% in 2001 compared to 2000, and wages at the nuclear facility increased by some 60 percent over the same period (though the increased average for 2001 was still only about $210 per month).[44] Other nuclear cities, such as Ozersk and Trekhgorny, are reportedly experiencing a much greater degree of desperation.[45] In general, the weapons design cities (Sarov and Snezhinsk) have substantial continuing weapons work and significant international cooperation, and the uranium enrichment cities (Novouralsk, Zelenogorsk, Seversk) have substantial commercial income from uranium enrichment and blending activities under the HEU Purchase Agreement. The plutonium production cities (Ozersk, Zheleznogorsk, and Seversk again) face substantial reductions in jobs as a result of the planned closure of the plutonium production reactors in Seversk and Zheleznogorsk (as well as the shut-down of weapon component manufacture at Seversk), and the poor prospects for commercial contracts for the reprocessing plant at Ozersk. The warhead assembly and disassembly cities (Zarechny, Trekhgorny, and Lesnoy) face either closure of their nuclear facility (Zarechny) or reductions in funding for its work, and have little prospect for large-scale international cooperation.[46] MINATOM has so far not been willing to allow NCI to begin operations in these cities, because of their sensitivity, though MINATOM officials have indicated that if NCI could demonstrate success in Sarov, and had sufficient resources available to expand, NCI cooperation in Zarechny would be possible.

• Recommendation: As part of the broader U.S.-Russian dialogue recommended above, the United States should seek Russian agreement that as the resources available for NCI are increased, the program will be allowed to operate in the cities where it is most needed.

Jobs going to the people of most concern. NCI projects are designed to help Russia reduce its nuclear weapons complex, in part by providing alternative employment for people who are no longer needed for weapons work. These projects are also designed to be commercial businesses, however, and as such they hire the best people available for the jobs they have. As a result, a substantial number of the jobs created may often go to people who are not high proliferation concerns – sometimes people who have never worked in the nuclear weapons complex, but happen to live in the closed nuclear city. (The same is true of other programs, such as IPP.) At the Open Computing Center in Sarov, for example, many of the programmers are young people who never worked at the nuclear weapons design facility;[47] the EBRD, in making its loans, imposes no requirements on the background of the people receiving them. Thus, in reviewing the number of jobs created in a particular program, one has to keep in mind that not all of these are likely to be held by former nuclear weapons scientists or workers.

• Recommendation: NCI should collect data on how many of the jobs created as part of the program are held by former employees in the nuclear weapons complex, and whether these are scientists, engineers, or workers. NCI should seek arrangements to maximize the proportion of jobs in enterprises it helps to support that go to workers from the nuclear weapons complex.

Reliance on the national laboratories. Like most other DOE programs in Russia, NCI is heavily dependent on experts from the U.S. national laboratories. The technical expertise and personal relationships with counterparts at Russian nuclear facilities that the U.S. laboratories bring to bear are undoubtedly essential. But U.S. national laboratory personnel are not generally experts in economic redevelopment, in high-technology commercialization, or in operating in the vagaries of the Russian commercial marketplace (though they have learned a great deal by doing in programs such as NCI over the years). A program with NCI's goals that was managed by any institution other than DOE would likely have placed much less emphasis on making use of U.S. national laboratory experts, and much more on bringing to bear the talents of private firms and non-government organizations. There are now, for example, a significant number of business consulting firms operating in Russia, in the business of helping Russian firms start up, expand, or forge partnerships with Western firms; the U.S. Agency for International Development makes extensive use of such firms. While such private firms are expensive, so are the national laboratories: with overhead, a single expert from the U.S. national laboratories typically costs the government $250,000-$300,000 per year.

• Recommendation: Working with the advisory group recommended above, NCI should reconsider how much of its effort should be implemented through U.S. national laboratories, and how much by private firms, taking into account the strengths and expertise that each bring to bear.

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Written by Matthew Bunn. Last updated by Matthew Bunn on November 27, 2002.

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The Securing the Bomb section of the NTI website is produced by the Project on Managing the Atom (MTA) for NTI, and does not necessarily reflect the opinions of and has not been independently verified by NTI or its directors, officers, employees, agents. MTA welcomes comments and suggestions at atom@harvard.edu. Copyright 2007 by the President and Fellows of Harvard College.

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