    Weapons of Mass Destruction: Reducing the Threat From the Former Soviet
    Union: An Update (Letter Report, 06/09/95, GAO/NSIAD-95-165).

    Pursuant to a congressional request, GAO reviewed the Cooperative Threat
    Reduction (CTR) program, focusing on the program's: (1) planning and
    funding status; and (2) recent progress in eliminating weapons of mass
    destruction in the former Soviet Union (FSU).

    GAO found that: (1) the CTR program has facilitated Ukraine's weapons
    dismantlement efforts and has significantly influenced other recipient
    states' decisions to dismantle weapons of mass destruction; (2) the
    Department of Defense (DOD) has developed its first comprehensive
    multiyear CTR plan and has doubled program obligations and tripled
    program expenditures over the past 11 months; (3) the value of CTR work
    exceeds reported expenditure levels and program managers are adjusting
    their reporting systems to reflect the value of work actually performed;
    (4) DOD has made some progress in conducting audits and examinations in
    FSU states receiving CTR funds; (5) the specific material impact of CTR
    assistance has been limited due to the lack of certain storage
    facilities and the recent delivery of some CTR aid; and (6) the program
    needs to overcome numerous challenges and problems, such as the lack of
    agreement over disposal methods, to realize its long-term objectives.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  NSIAD-95-165
         TITLE:  Weapons of Mass Destruction: Reducing the Threat From the
                 Former Soviet Union: An Update
          DATE:  06/09/95
       SUBJECT:  Nuclear weapons
                 Chemical warfare
                 Nuclear proliferation
                 Advanced weapons systems
                 Arms control agreements
                 International cooperation
                 International relations
                 Property disposal
                 Federal aid to foreign countries
                 Budget obligations
    IDENTIFIER:  DOD Cooperative Threat Reduction Program
                 Russia
                 Ukraine
                 Belarus
                 Kazakhstan
                 Strategic Arms Reduction Treaty
                 START
                 Soviet Union

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    Cover
    ================================================================ COVER

    Report to Congressional Requesters

    June 1995

    WEAPONS OF MASS DESTRUCTION -
    REDUCING THE THREAT FROM THE
    FORMER SOVIET UNION:  AN UPDATE

    GAO/NSIAD-95-165

    CTR:  An Update

    Abbreviations
    =============================================================== ABBREV

      CTR - Cooperative Threat Reduction
      DOD - Department of Defense
      FSU - former Soviet Union
      GAN - Gosatomnadzor
      IAEA - International Atomic Energy Agency
      ICBM - Inter Continental Ballistic Missile
      MINATOM - Russian Ministry of Atomic Energy
      START - Strategic Arms Reduction Treaty

    Letter
    =============================================================== LETTER

    B-260438

    June 9, 1995

    The Honorable Floyd Spence
    Chairman
    The Honorable Ronald Dellums
    Ranking Minority Member
    Committee on National Security
    House of Representatives

    The Honorable John Kasich
    Chairman
    Committee on the Budget
    House of Representatives

    As you know, Congress has had an ongoing interest in the
    effectiveness of U.S.  efforts to reduce the threat posed by weapons
    of mass destruction in the former Soviet Union (FSU).  In response to
    your requests, we have assessed the Cooperative Threat Reduction
    (CTR) program's

      planning and funding status and

      recent progress in addressing CTR objectives in the FSU, that is,
         the safe and secure elimination of nuclear, chemical, and other
         weapons of mass destruction (including missiles and other
         strategic delivery vehicles); improving controls over nuclear
         weapons and materials; and promoting demilitarization projects.

    This letter summarizes our findings, which are described in greater
    detail in appendixes I through IV.

       BACKGROUND
    ------------------------------------------------------------ Letter :1

    In 1991, Congress authorized the Department of Defense (DOD) to
    establish a CTR program to help FSU states (1) destroy weapons of
    mass destruction, (2) store and transport those weapons in connection
    with their destruction, and (3) reduce the risk of proliferation.
    Subsequently, Congress directed DOD to address these three objectives
    on a priority basis, added new objectives (e.g., promoting FSU
    defense conversion), and approved use of up to $1.25 billion in
    fiscal years 1992 through 1995 toward achieving CTR objectives.  DOD
    plans to request a total of $735 million for fiscal years 1996 and
    1997.

    To accomplish its CTR objectives, DOD has launched projects under 38
    implementing agreements with Russia, Ukraine, Belarus, and
    Kazakhstan.  Of its 1992-97 CTR funds, DOD plans to use about half to
    help dismantle and destroy strategic nuclear delivery vehicles and
    chemical weapons, roughly one quarter to improve FSU controls over
    nuclear weapons and materials, and almost one-fifth to help
    demilitarization of FSU defense activities.  DOD provides goods and
    services, rather than direct cash payments.  DOD must notify Congress
    of its intention to obligate funds for specific CTR projects 15 days
    before actually obligating the funds.

    We have issued a series of reports concerning the CTR program over
    the past 3 years.  Most recently, in October 1994, we reported that
    although the program had initiated numerous projects to address a
    wide array of threats, DOD had not estimated total requirements for
    achieving program objectives and that the prognosis for achieving the
    program's objectives varied widely.\1 We also reported that DOD had
    yet to begin auditing FSU use of CTR aid.  We recommended that the
    Secretary of Defense institute a long-term planning process to help
    DOD allocate CTR funds among competing demands and to guide
    preparation of annual budgets.  Congress subsequently required DOD to
    estimate total U.S.  expenditures required to achieve CTR objectives,
    prepare a multiyear CTR program plan, and report on how it will
    determine that CTR aid is being used for intended purposes.

    --------------------
    \1 Weapons of Mass Destruction:  Reducing the Threat From the Former
    Soviet Union (GAO/NSIAD-95-7), Oct.  6, 1994.

       RESULTS IN BRIEF
    ------------------------------------------------------------ Letter :2

    In some areas, the CTR program has made progress over the past year
    and its long-term prognosis for achieving its objectives may be
    promising.  The program has played an important role in facilitating
    Ukraine's weapons dismantlement efforts and the executive branch
    believes that the promise of CTR aid has been a significant factor in
    the political decisions of the recipient states to begin dismantling
    weapons of mass destruction.  Nevertheless, the overall specific
    material impact of CTR assistance provided to date has been limited
    and the program must overcome numerous challenges and problems to
    realize its long-term objectives.\2

    DOD has made progress over the past year in planning the CTR program
    and in obligating and expending funds for CTR projects.  DOD has
    developed its first comprehensive multiyear plan for the CTR program.
    After a slow start in preceding years, DOD has more than doubled
    program obligations and tripled program expenditures over the past 11
    months.  The value of CTR work actually performed exceeds reported
    expenditure levels and program managers are adjusting their reporting
    system to more accurately reflect the value of work performed.  Also,
    DOD has recently made some initial progress in conducting audits and
    examinations in FSU states receiving CTR funds.

    The specific material impact of actual CTR assistance provided to
    date has been limited--in part because (1) several key projects, such
    as a fissile material storage facility, are still in their early
    stages and cannot be expected to have a significant material impact
    for several years and (2) deliveries of some CTR aid did not begin
    until relatively recently.  Some CTR projects appear to have already
    had a specific material impact.  For example, CTR aid has facilitated
    the return of hundreds of nuclear warheads from Ukraine to Russia.

    The program's long-term prospects may be more promising, but problems
    and challenges remain.  For example, CTR aid should allow Ukraine to
    meet its Strategic Arms Reduction Treaty (START) obligations.  On the
    other hand, difficulties in working with the Russians in resolving
    key issues have slowed progress on several projects that could have
    major long-term significance.  For example, the United States and
    Russia have yet to agree on the applicability of a technology to be
    used in a chemical weapons destruction facility and may not do so
    until midway through fiscal year 1996.  This uncertainty raises
    questions as to the program's need for the $104 million it is
    requesting in fiscal year 1996, in part, to begin designing and
    constructing the facility.  If the United States and Russia agree on
    the applicability of a technology by March 1996, as scheduled, it
    appears that the program may be unable to obligate about $34 million
    in funds in fiscal year 1996.  Moreover, even if the facility were to
    be completed on schedule, uncertainties concerning resources,
    schedules, and costs would compromise Russia's ability to destroy its
    chemical weapons stockpile in compliance with the Chemical Weapon
    Convention's timetables if the Convention enters into force in 1996
    (see app.  II).

    --------------------
    \2 In this report, we use the term specific material impact to mean
    the actual use of this assistance to address CTR objectives.

       MATTERS FOR CONGRESSIONAL
       CONSIDERATION
    ------------------------------------------------------------ Letter :3

    Congress may wish to consider reducing the CTR program's fiscal year
    1996 request for $104 million for support to Russian chemical weapons
    destruction efforts by about $34 million because of uncertainties
    regarding the expenditure.  In addition, Congress may wish to
    consider withholding approval to obligate any remaining funds
    designated for the design or construction of elements of a chemical
    weapons destruction facility until the United States and Russia have
    agreed on the results of the joint evaluation study concerning
    applicability of a destruction technology.

       AGENCY COMMENTS AND OUR
       EVALUATION
    ------------------------------------------------------------ Letter :4

    DOD and the Department of State, in objecting to our finding that the
    material impact to date of CTR projects had been limited, stated that
    we had overlooked the CTR program's political impact and leverage in
    ensuring that FSU states undertake weapons elimination programs and
    in obtaining Ukrainian, Belarussian, and Kazakhstani agreement to
    become non-nuclear weapons states.  We do not dispute this political
    dimension to the CTR program, but we believe that DOD and State's
    comments stem from a misunderstanding of the purpose of our report.
    As requested, our report, the latest in a series of our assessments
    of the CTR program, focuses on the material impact of CTR projects
    over the past year in addressing the threats posed by FSU weapons of
    mass destruction and on the prospects for such effects in the future.

    DOD further commented that we had underestimated the role of the
    material assistance provided to date and provided several examples in
    support of this comment.  We have added some of these examples to our
    report.  However, DOD also cited benefits of deliveries of support
    equipment to Ukraine and armored protective blankets to Russia.  Our
    draft specifically cited the impact of CTR deliveries to Ukraine and
    Russian use of armored blankets in withdrawing warheads from Ukraine.
    DOD further stated that Russia is "today" using U.S.-supplied
    guillotine shears to cut up bombers.  These shears have not yet been
    used and are not expected to be used until July 1995.

    DOD stated that numerous tangible reductions in the threat to the
    United States have been achieved "through a combination of leverage
    provided by the CTR program and direct material assistance." However,
    the examples that DOD provides do not distinguish between reductions
    that may be attributed to political impacts since the Soviet Union's
    collapse in December 1991 and those that have resulted from the
    delivery of CTR aid.  For example, DOD states that missiles
    containing 2,825 warheads have been deactivated since the Soviet
    collapse but does not indicate how many of these were deactivated
    through the direct use of CTR assistance--assistance which only began
    arriving in mid-1993.  Similarly, DOD states that approximately 630
    strategic launchers and bombers have been eliminated since the Soviet
    collapse.  However, Russia had eliminated more than 400 of these by
    July 1994 before receiving CTR delivery vehicle elimination aid.

    DOD's comments imply that every missile and every warhead deactivated
    in the former Soviet Union since December 1991 can be attributed to
    the CTR program.  DOD does not provide a clear accounting as to how
    and to what extent CTR hardware has been used by the FSU states to
    eliminate a specific number of systems.  While such an accounting may
    not be the only standard that should be used to assess the CTR
    program, it should at least be one of the key criteria employed in
    reviewing the program's progress.  Although we have asked it to
    provide support for the material impact of CTR aid in dismantling
    specific numbers of systems, DOD has not done so.  DOD officials
    recently informed us that it may be impossible to determine this
    impact in terms of specific numbers of systems.

    DOD and the Department of State objected to our matters for
    congressional consideration.  Both agencies asserted that we were
    incorrect in stating that the United States and Russia had not yet
    agreed upon a technology for destroying chemical weapons.  However,
    as DOD indicates in its comments, Russia has selected a technology
    that the United States would not have recommended--an unproven
    technology that the United States is now attempting to validate.

    DOD, the Department of State, and the Department of Energy also
    provided technical clarifications, which we have incorporated in our
    report.  The comments of DOD, State, and Energy are presented in
    their entirety in appendixes VII, VIII, and IX, along with our
    evaluations of them.

       SCOPE AND METHODOLOGY
    ------------------------------------------------------------ Letter :5

    To assess the CTR program's planning and recent progress, we reviewed
    documents and met with officials from DOD, the Department of Energy,
    and the Department of State, as well as with officials from the Arms
    Control and Disarmament Agency, Defense Enterprise Fund, the Russian
    government and industry, Ukrainian government and industry, and a
    variety of U.S.  contractors involved in the CTR program.  We also
    visited selected CTR projects in Russia and Ukraine and discussed
    program implementation with assistance recipients and U.S.  officials
    on site.  To determine the funding status of the program, we obtained
    specific data on funding obligations, disbursements and work
    performed from the Defense Nuclear Agency that implements the CTR
    program.  We conducted our review between January and June 1995 in
    accordance with generally accepted government auditing standards.

    ---------------------------------------------------------- Letter :5.1

    We are planning to send copies of this report to other appropriate
    congressional committees; the Secretaries of Defense, Energy, and
    State; the Director of the Arms Control and Disarmament Agency; and
    other interested parties.  Copies will also be made available to
    others upon request.  Please contact me on (202) 512-4128 if you or
    your staff have any questions concerning this report.  Major
    contributors to this report are listed in appendix X.

    Joseph E.  Kelley
    Director-in-Charge
    International Affairs Issues

    IMPROVEMENTS IN PLANNING AND
    FUNDING
    =========================================================== Appendix I

    The Department of Defense (DOD) has made progress in Cooperative
    Threat Reduction (CTR) program planning, and in obligating and
    disbursing CTR funds since our last review of the program.  It has
    recently made progress in auditing and examining the aid that it has
    provided to the former Soviet Union (FSU).

    A new program office, established in May 1994 under the Under
    Secretary of Defense for Acquisition and Technology to oversee
    program implementation, drafted the CTR program's first multiyear
    plan in response to a congressional directive.  The plan (which is
    classified) is to be reviewed and revised annually and is to be used
    to guide the program through its termination in 2001.\1

    The CTR program has more than doubled the level of obligated
    funds--increasing from the June 1994 level of $223 million cited in
    our last report to almost $599 million as of May 8, 1995 (see app.
    V).  The CTR office predicts that DOD will obligate over $800 million
    by the end of fiscal year 1995.

    The CTR program has also made progress in disbursing funds since our
    last report.  Disbursements have more than tripled from the June 1994
    level of $49.5 million to almost $177 million as of May 8, 1995.  The
    largest disbursements were made for strategic offensive arms
    elimination projects in Russia and Ukraine, the International Science
    and Technology Center in Moscow, Russian rail car security
    enhancements, and the design of a Russian fissile material storage
    facility.

    However, we have found that these disbursement figures significantly
    understate the value of CTR work actually performed to date.  We
    asked DOD's CTR program managers to contact contractors for 18
    projects (representing 85 percent of the program's then-current
    budget) and determine the cost of work actually performed but not yet
    recorded by DOD as of March 1, 1995.  We found that the value of the
    actual work performed on these 18 was $205.7 million--almost double
    the value of the disbursements reported for them as of March 1, 1995
    (see app.  VI).  The difference reflects the substantial period of
    time separating the performance of the work and DOD's payment for the
    work.  The CTR program is now developing a data collection system
    that will include monthly reporting requirements for this kind of
    data.

    DOD has made arrangements with the Departments of State, Energy, and
    Commerce to streamline the program by transferring nine projects,
    beginning in fiscal year 1996.  The Department of State will assume
    responsibility for the International Science and Technology Center
    and, with the Department of Commerce, for projects aimed at improving
    export controls in four FSU states.  Projects aimed at improving
    nuclear materials controls and accountancy in three FSU states will
    be transferred to the Department of Energy.\2

    DOD has recently made some initial progress in conducting audits and
    examinations of CTR aid to ensure that the aid is being used for the
    purposes intended.  While CTR agreements with the FSU states provide
    the United States with the right to conduct such audits and
    examinations, Russia and, later, Ukraine raised concerns regarding
    implementing procedures that required some months to resolve.  On May
    19, 1995, DOD completed an audit and examination of rail car
    conversion kits in Russia.\3 DOD has also scheduled a June 1995 audit
    in Ukraine and has notified Kazakhstan of plans for a July 1995
    audit.  In January 1995, DOD completed an audit and examination of a
    continuous communications satellite link in Belarus.

    On May 31, 1995, DOD provided Congress with its long-overdue
    legislatively mandated report on U.S.  efforts to ensure that CTR aid
    can be accounted for and is being used for intended purposes.  We
    will provide Congress with our assessment of the DOD report, as
    required by law.\4

    --------------------
    \1 We are currently reviewing the plan for the Committee on the
    Budget, House of Representatives.

    \2 In our report entitled Former Soviet Union:  U.S.  Bilateral
    Program Lacks Effective Coordination (GAO/NSIAD-95-10, Feb.  7,
    1995), we reported that the executive branch has had difficulty in
    coordinating all of its FSU assistance programs.  We are currently
    evaluating several recent executive branch actions to improve such
    coordination.  According to the Department of State, an interagency
    working group will coordinate former CTR projects.  The Departments
    of State and Energy have prepared multiyear plans concerning CTR
    projects being transferred to them.

    \3 DOD also conducted a financial audit of the International Science
    and Technology Center in Moscow in March 1995.

    \4 Section 1203 of the National Defense Authorization Act for fiscal
    year 1995 required DOD to provide the report to Congress by January
    5, 1995, and calls for our assessment of the DOD report.

    DESTRUCTION AND DISMANTLEMENT
    PROJECTS
    ========================================================== Appendix II

    To date, the material impact of aid actually delivered by the CTR
    program's destruction and dismantlement projects has generally been
    limited, although the program has succeeded in facilitating the
    deactivation of strategic systems in Ukraine.  While Ukrainian
    dismantlement progress appears to be dependent on CTR aid, Russia had
    moved ahead of its Strategic Arms Reduction Treaty I (START)\1
    schedule before it received substantial CTR aid.  CTR aid has not yet
    resulted in the destruction of any Russian chemical weapons and
    efforts to help plan eventual Russian chemical weapons destruction
    have been hampered by numerous delays.

    Executive branch agencies credit the CTR program with having had a
    very significant impact on the political decisions of FSU states to
    begin eliminating thousands of strategic nuclear delivery vehicles
    and chemical weapons.  They state that the CTR program's impact is
    therefore greater than suggested by focusing on the actual material
    impact of CTR aid delivered to date.

    The long-term prospects of the CTR program's destruction and
    dismantlement projects may be brighter than their limited material
    impact to date might indicate.  CTR aid to Russian efforts to
    eliminate missile fuel could speed the pace of Russian dismantlement
    efforts.  A small U.S.-funded chemical destruction facility may help
    spur the Russian program, although even this facility will not be
    nearly sufficient to ensure Russian compliance with the Chemical
    Weapons Convention.

    --------------------
    \1 START I limits the FSU to 1,600 delivery vehicles (i.e.  bombers,
    submarine missile launchers, and missile silos) and 6,000 warheads no
    later than the year 2001.  The, as yet, unratified START II treaty
    further lowers these limits and bans multiple re-entry vehicle
    intercontinental ballistic missiles.  The United States and Russia
    are to meet START II limits by 2003, unless the United States helps
    finance Russia's dismantlement efforts.  If so, Russia would met
    START II limits by the end of 2000.

          STRATEGIC OFFENSIVE ARMS
          ELIMINATION
    ------------------------------------------------------ Appendix II:0.1

    The CTR program's efforts to destroy and dismantle strategic
    offensive arms are focused on nuclear delivery systems, such as
    missiles, missile silos, ballistic missile submarines, and heavy
    bombers.  Russia has informed the United States that it does not need
    U.S.  aid in dismantling the nuclear warheads removed from these
    systems.\2

    We reported last year that the impact of CTR strategic offensive arms
    elimination assistance was likely to vary from one FSU republic to
    another.

    --------------------
    \2 According to DOD, France is providing Russia with machine tools to
    help dismantle warheads.  French dismantlement tool aid is valued at
    $5 million.

          RUSSIA
    ------------------------------------------------------ Appendix II:0.2

    The material impact to date of strategic delivery vehicle elimination
    aid actually delivered to Russia appears to have been limited.  DOD,
    in commenting on a draft of this report, stated that the CTR program
    has had important political and material impacts in advancing
    Russia's dismantlement effort--noting, for example, that the CTR
    program had contributed to the elimination of approximately 630
    strategic launchers and bombers since the Soviet Union's 1991
    collapse.  However, in and of itself, the material impact of the CTR
    strategic delivery vehicle elimination aid provided to date is less
    than DOD's comment would suggest, since Russia had eliminated over
    400 of these 630 launchers prior to initial deliveries of this aid.\3

    Although Russia had succeeded in eliminating sufficient launchers to
    meet its START I delivery vehicle limit by April 1995,\4 Russian
    officials told us that their resources are strained by delivery
    vehicle dismantlement efforts and that they lack adequate amounts of
    advanced technology for some dismantlement procedures.  Russia must
    transport and destroy thousands of metric tons of liquid rocket
    propellant and, for the first time, dispose of large quantities of
    solid rocket fuel.  Russian officials emphasized that Russia would
    need the assistance even without implementation of
    START II.  They told us that rocket fuel transportation and
    disposition were the most crucial bottlenecks in their meeting treaty
    obligations and that such difficulties had forced them to suspend
    dismantlement of liquid fueled SS-18 missiles in Kazakhstan for 3
    months.  The CTR program is providing equipment to safely transport
    and temporarily store liquid rocket fuel from dismantled missiles.
    DOD has also awarded a contract to dispose of the liquid fuel\5
    (which has been delayed by a bid protest).  Russian officials told us
    that more CTR assistance will be needed to dismantle solid rocket
    motors and dispose of the fuel.

    While Russia has already met its START I delivery vehicle limit, it
    has not yet met its START I warhead limit and its START II limits.
    According to DOD, CTR assistance will help Russia meet its START I
    and II obligations by 2001,
    2 years ahead of schedule.  DOD has agreed to provide Russia with
    $150 million for delivery vehicle dismantlement, including $20
    million for solid rocket motor and fuel disposition.  As of May 8,
    1995, CTR program officials had obligated $112 million and disbursed
    almost $20 million for dismantlement projects in Russia.  As of March
    1995, the value of work performed totaled $56 million.  About 40
    percent of the CTR-provided equipment has been delivered.

    The CTR budget estimate includes $95 million over the next 2 years to
    further accelerate Russian dismantlement efforts and encourage
    Russian ratification of the START II agreement.  DOD is also
    considering providing about $145 million in dismantlement assistance.
    Of the proposed $145 million, roughly half would be used to help
    dispose of solid rocket motors and fuel.  The remaining assistance
    would be used to dispose of liquid fuel and support destruction of
    delivery vehicles and launchers.

    --------------------
    \3 Our prior CTR work reveals that, according to Russian officials,
    Russia eliminated over 400 launchers by July 1994.  CTR dismantlement
    assistance deliveries to Russia did not begin until September 1994.
    Moreover, not all delivered CTR assistance has yet been put into
    operation.  For example, U.S.-supplied guillotine shears have not yet
    cut up any Russian bombers, although Russia has used lighter U.S.
    equipment to strip such aircraft.

    \4 We reported in October 1994 that Russia had the means to eliminate
    its delivery vehicles in compliance with START I obligations.

    \5 Russia rejected the U.S.  incineration method for disposing of
    such fuel.

          UKRAINE
    ------------------------------------------------------ Appendix II:0.3

    Ukraine lacks Russia's resources and capabilities to dismantle its
    176 delivery vehicles and silos.  The CTR program has obligated $90
    million for strategic nuclear arms dismantlement in Ukraine.  As of
    March 1995, the value of work performed exceeded $52 million.  The
    CTR budget estimate submission calls for an additional $30 million
    over the next
    2 fiscal years to further assist Ukraine with its dismantlement
    efforts.

    As we reported last year, Ukraine lacks the necessary capabilities
    and infrastructure to dismantle delivery systems, especially silos,
    in accordance with START I.  During our visit to Ukraine, Ukrainian
    political and military officials stressed the importance of continued
    CTR dismantlement assistance, citing that without it, Ukraine could
    not continue its dismantlement efforts.

    CTR aid is intended to help eliminate SS-19 and SS-24\6 missiles and
    silos and dispose of liquid rocket propellant.  Initial CTR
    assistance deliveries--mobile cranes, all-terrain vehicles, fuel,
    tires, and batteries--appear to have facilitated the removal of
    warheads from missiles and the return of warheads to Russia.  As of
    January 1995, 40 SS-19 missiles had been removed from their silos and
    all 46 SS-24 missiles had their warheads removed.  According to
    Ukraine, as of April 1995, 40 percent of its nuclear warheads--about
    700--had been returned to Russia.  Per agreement, all nuclear weapons
    are to be removed from Ukraine by mid-1996.

    The CTR program will use over $30 million to design, construct, and
    equip an SS-19 missile neutralization facility at which liquid fuel
    will be removed from the missiles as they are dismantled.  Ukraine
    has no such facility.  An integrating contractor\7 will oversee the
    neutralization facility and train the Ukrainians in its operation.

    Dismantlement efforts could also be affected by the need to house
    demobilized Strategic Rocket Forces officers.  Ukrainian law dictates
    that demobilized officers must be provided housing.  Ukrainian
    officials told us that they cannot afford to construct the total
    amount needed and that future dismantlement progress could be slowed
    without prospects for adequate officer housing.  The CTR program
    plans to provide about
    428 housing units through defense conversion projects.

    --------------------
    \6 It is uncertain what Ukraine plans to do with the SS-24 missiles
    once the launchers have been eliminated.  Under START, it is not
    required to eliminate these missiles.

    \7 An integrating contractor manages all phases of a particular
    project and interfaces with other contractors performing specific
    tasks.

          KAZAKHSTAN
    ------------------------------------------------------ Appendix II:0.4

    CTR officials have authorized $70 million in assistance to Kazakhstan
    and plan to spend another $20 million over the next 2 fiscal years.
    As of May 8, 1995, less than $50,000 in dismantlement assistance had
    been provided to Kazakhstan because--according to DOD--CTR efforts to
    help Kazakhstan eliminate over 100 SS-18 missile silos had been
    delayed for several months due to Russian security concerns.  These
    concerns have since been resolved, according to DOD.

    CTR assistance will fund an integrating contractor to help eliminate
    the silos after Russia removes the missiles.\8 The silo work is not
    expected to begin until later this year when DOD hires an integrating
    contractor.\9 Until then, the actual cost of the project is unknown.

    --------------------
    \8 As of April 1995, the Russians had removed all warheads from
    Kazakhstan.

    \9 In the interim, DOD has hired two contractors to help Kazakhstan
    salvage metal and equipment from the silos.

          BELARUS
    ------------------------------------------------------ Appendix II:0.5

    In Belarus, CTR program officials plan to provide $11 million in aid
    to help remove SS-25 missiles, related structures, and, possibly,
    residual liquid fuel.  No CTR dismantlement aid has been provided to
    date.  CTR aid will help Belarus meet its START I obligation to
    eliminate the missile launch pads.  Russia is removing the SS-25
    missiles from Belarus and has already withdrawn more than 45 of them.

          CHEMICAL WEAPONS DESTRUCTION
    ------------------------------------------------------ Appendix II:0.6

    The CTR program's progress in addressing Russian chemical weapons
    destruction has been frustrating, and its outlook, though improving,
    remains unclear.  Russian delays hampered several significant CTR
    efforts in the past year.  Although the program may increase CTR
    chemical weapons aid almost ten-fold, many issues need to be resolved
    before future CTR funds can be used--including the prospects for
    using an unproven Russian technology.  Despite several recent
    promising developments, it seems unlikely that Russia will be able to
    destroy its total chemical weapons stockpile in accordance with time
    frames stated in the Chemical Weapons Convention.

    CTR assistance is directed at developing technology and procedures to
    destroy Russian nerve agents, which constitute about 80 percent of
    the declared Russian stockpile of 40,000 metric tons, at five of
    seven chemical weapons sites.  The United States, in prior years,
    committed to provide $55 million in CTR funds to (1) prepare a
    comprehensive implementation plan for destroying chemical weapons;
    (2) establish a centrally located analytical chemical weapons
    destruction laboratory; and (3) conduct a joint evaluation of a
    Russian chemical weapons destruction technology, for determining what
    additional U.S.  assistance could be provided in the design and
    development of a chemical weapons destruction facility.  As of May
    1995, the CTR program has obligated $22.2 million of the $55 million
    available for chemical weapons destruction efforts and disbursed
    about $7.3 million.  The value of work performed totaled about $7.7
    million.

    However, delays have plagued efforts to spend the current $55
    million.  For example, the overall completion date for the program's
    major U.S.  contract, worth almost $8 million, likely will slip 1
    year, from mid-December 1995 to the end of 1996.  Current project
    delays occurred for several reasons, including (1) disagreements
    between the United States and Russia over the priority of destroying
    air-delivered versus artillery-delivered chemical munitions; (2)
    differences over the type of chemical weapons destruction technology
    to be used, whether a proven U.S.-favored direct incineration
    process, or a Russian-favored two-step neutralization process; and
    (3) Russian delays in providing information and access to chemical
    weapons storage sites.  Also, Russian indecision for over a year on
    selecting the central analytical destruction laboratory's location
    delayed use of $30 million committed for that purpose.

    The CTR program envisions dramatic increases from the $55 million
    level of assistance.  The DOD budget estimate submission for fiscal
    years 1996-97 includes $234 million for the next 2 fiscal years to
    help in design and construction of a chemical weapons destruction
    facility that would be capable of destroying about 500 metric tons
    per year of the roughly
    5,600 metric tons of chemical weapons agent located at this
    facility.\10 It also notes that constructing a chemical weapons
    destruction facility would cost more than $500 million and require
    multi-year funding through 2001.

    However, even dramatic increases will address only a portion of
    Russian chemical weapon destruction costs.  Russian estimates
    indicate that destroying Russia's total chemical weapons stockpile
    might cost
    $5 billion-$10 billion.  Some Russians estimate that Russia will need
    between 35-50 percent of the estimated cost of total chemical weapons
    destruction in donor assistance.\11 DOD intends for the U.S.  funding
    to address less than 10 percent of Russian funding requirements and
    to act as a catalyst for broader financial support to achieve full
    chemical weapons destruction goals.  Although the chemical weapons
    destruction facility is intended to eliminate a "significant portion"
    of the threat, according to the DOD budget estimate submission, the
    site where it will be built contains only 14 percent of the Russian
    chemical weapons stockpile.  Facilities at all seven sites are
    anticipated.

    Uncertainties of cost and schedule associated with Russia's unproved
    technology could be severe.  The United States experienced years of
    delays and unanticipated cost increases during the design and
    construction of a U.S.  chemical weapons destruction facility using a
    proven technology.\12

    In addition, many issues need to be resolved before large-scale
    funding can be undertaken.  Requirements for fiscal year 1996 funding
    appear to be contingent on completion of several tasks--most
    importantly, the joint evaluation of chemical weapons destruction
    technology.  The final report on the joint evaluation's results is to
    contain specific proposals on the applicability of the two-step
    process for designing a chemical weapons destruction facility.  DOD's
    budget estimate submission for fiscal years 1996 and 1997 assumes
    that the results of the joint evaluation will be favorable and
    completed on schedule by March 1996.  Development of an
    implementation plan and conceptual designs for a pilot demonstration
    facility is to accord with the results of the joint evaluation.
    Further delays during fiscal year 1995 and early into 1996 could
    reduce the need and impact the justification for the budget requests.

    To date, the chemical weapons destruction program remains uncertain
    about specific requirements for fiscal year 1996 funding and how much
    of the funding the program will be able to obligate during the fiscal
    year.  A DOD official said, as of mid-May, that he realistically
    could expect to obligate between $50 million-$70 million of the
    fiscal year 1996 request of $104 million.  In addition, the chemical
    weapons destruction program in mid-May had identified about $34.3
    million of the fiscal year 1996 budget request for technology
    development requirements, including additional Russian equipment
    testing to be determined.  In commenting on a draft of this report,
    DOD said that it had scheduled $34.3 million to be obligated in late
    1996 as the first installment for the integrating contractor that
    would provide U.S.  assistance for the design and construction of the
    Russian chemical weapons destruction facility.  However, DOD has
    mistaken the $34.3 million, which it associated at the time of our
    review with undefined additional technology development activities
    with a nearly identical amount that recently revised funding
    breakouts allocated to the integrating contractor.  DOD reduced an
    amount for the integrating contractor from $35.7 million to $34.3
    million.  DOD provided insufficient documentation to justify changes
    in these funding amounts.  Given the lack of clarity associated with
    the purpose for the $34.3 million and history of delays in this
    program, it appears uncertain that DOD needs or could realistically
    expect to obligate this amount of funding in fiscal year 1996.

    Uncertainty still exists about Russia's specific commitments to
    destroy its chemical weapons under its international obligations.  In
    the past, Russia made no specific commitments to the United States to
    carry out the conditions of a bilateral chemical weapons destruction
    agreement and the Chemical Weapons Convention.  DOD told Russian
    representatives in May that an implementing agreement would need to
    link U.S.  assistance to specific Russian actions that address U.S.
    concerns.

    Because of these uncertainties--and without significant additional
    financial assistance--Russia appears unable to destroy its stockpile
    in compliance with the Chemical Weapons Convention's time frames, if
    the Convention enters into force in or about 1996 as estimated.  The
    Convention requires that all stocks of chemical weapons be destroyed
    in 10 years, with an extension of 5 years, if needed.  Although
    estimates for meeting the Convention's time frames depend on several
    variables and events that have not yet occurred--such as the entry
    into force of the Convention and Russian ratification of it,
    successful completion of the chemical weapons destruction technology
    joint evaluation, and design and construction of chemical weapons
    destruction facilities--it is doubtful that all seven chemical
    weapons destruction site facilities could be completed to meet the
    time frames.

    However, several key events in March 1995 could provide new impetus
    to chemical weapons destruction projects.  These include Russia's (1)
    finalizing and approving a work plan for 1995, which set tasks and
    milestones for the year; (2) identifying locations for the chemical
    weapons destruction facility and the central analytical laboratory;
    (3) issuing a presidential decree on chemical weapons disarmament,
    which established a legal framework for chemical weapons destruction
    and stated that a plan for speeding up Russia's preparation for
    destroying chemical weapons be completed by May 1995; and (4)
    establishing a separate line item of about $21 million for chemical
    weapons destruction in the Russian federal budget.

    --------------------
    \10 An additional $10 million for the chemical weapons destruction
    facility for fiscal year 1995 actually will be reprogrammed for other
    uses, according to a DOD official.

    \11 Germany has provided assistance of about $6.5 million through
    fiscal year 1994 and expects to approve an additional $4.5 million
    for fiscal year 1995 during May, according to a German official.

    \12 We reported in December 1994 that the U.S.  chemical weapons
    stockpile program had been delayed by design, equipment, and
    construction problems at the new disposal facility at Johnston Atoll.
    As a result of these and other factors, the estimated cost of the
    stockpile disposal program increased and the Army's destruction
    schedule slipped.  Chemical Weapons Disposal:  Plans for Nonstockpile
    Chemical Warfare Material Can Be Improved (GAO/NSIAD-95-55, Dec.  20,
    1994).

    CONTROL OVER NUCLEAR WEAPONS AND
    MATERIALS
    ========================================================= Appendix III

    CTR projects for providing Russia with the means to safely store
    components from dismantled nuclear weapons have been delayed for
    several months, although they now appear to be moving forward again.
    However, long-standing Russian plans to acquire two storage
    facilities and 100,000 storage containers exceed the scope of these
    projects.  While CTR projects have had little direct impact in
    improving material protection, control and accounting over
    weapons-useable civilian material at FSU nuclear facilities, the
    prognosis for doing so is improving as a result of recent agreements
    with Russia to upgrade controls at some facilities.  However, several
    issues need to be resolved before a long-range plan now being
    developed by the United States to improve controls at 80 to 100 such
    facilities can be implemented successfully.

          FISSILE MATERIAL STORAGE
    ----------------------------------------------------- Appendix III:0.1

    Russian officials have stated that Russia lacks suitable storage for
    components from thousands of nuclear weapons and have asserted that
    the process of dismantling these weapons could be slowed by this
    storage shortfall.\1 They plan to build two storage facilities--each
    capable of holding 50,000 containers\2 and each built in two,
    25,000-container phases.  Russian officials maintain that acquiring
    storage space and containers are their highest CTR priorities.\3

    The United States has agreed to provide Russia's Ministry of Atomic
    Energy with $15 million in design assistance and $75 million in
    equipment, training, and services to help build and outfit one of the
    facilities, at Mayak.  The Army Corps of Engineers has performed
    design-related work valued at $13.8 million to help Russia with
    numerous studies, analyses, and plans.\4 DOD has obligated $27.4
    million in equipment funds and performed equipment-related work
    valued at $4.7 million.

    The CTR program has included another $6 million in design funds and
    $75 million in construction funds for the Mayak facility in its
    1996-97 budget estimate submission.  If approved, these funds would
    raise total CTR funds for the Mayak facility to $171 million.

    During the past year the storage facility project was delayed by
    several months, due to difficulties with the Russians.  In September
    1994, after learning that the Russians had unilaterally made a major
    change in the facility's design--eliminating the relevance of roughly
    30 percent of the U.S.  design effort--the United States froze
    deliveries of construction equipment until Russia addressed U.S.
    questions about the new change.  Deliveries were also held up by
    Russia's initial reluctance to allow the United States to perform a
    radiation survey of the Mayak site.\5 In March 1995, DOD, satisfied
    with the progress of the design\6 and having convinced Russia to
    schedule the survey, authorized the shipment of the construction
    equipment.  Russia has begun preparing the site for construction,
    which is scheduled to begin in June.

    The CTR program has cited the storage facility project as evidence
    that the risk of proliferation has been reduced.  Although the
    project is now moving forward again, the facility's first 25,000
    container phase will not be ready until December 1998--assuming no
    further difficulties.  Moreover, before the United States can support
    construction at the Mayak site the United States and Russia must
    first amend existing agreements or conclude new ones to allow for
    additional design and construction funds and work out arrangements
    for the use of a U.S.-hired integrating contractor.  DOD officials
    informed us that they are developing a detailed plan for using
    construction funds and that the project could probably absorb the $23
    million requested for facility construction in fiscal year 1996--if
    agreements or amendments can be completed and an integrating
    contractor is hired by the end of 1995.  Russia must also provide (1)
    detailed construction schedules and (2) more detailed design
    information to allow the United States to define equipment, training,
    and services requirements and obligate another $47.6 million of the
    $75 million in CTR equipment funds.

    The total cost of the Mayak facility will likely exceed the $171
    million allocated by the CTR program.  The latest Russian study
    reviewed by the Army Corps of Engineers estimates that the entire
    Mayak facility will cost about $677 million to build and equip--a
    substantial increase over past estimates.\7 In the past, Russian
    officials have suggested that the two countries divide the costs
    evenly, which could result in a U.S.  share of about $338 million for
    the Mayak facility--if the current Russian estimate is accurate.

    CTR efforts to provide containers for the facility have also been
    delayed--although in this case the delays are due to U.S.  technical
    difficulties and coordination problems.  Russia plans to equip both
    storage facilities with a total of 100,000 containers.  The United
    States plans to develop and deliver as many containers as possible
    within a $50 million budget.\8 Originally this amount was estimated
    to be about 33,000 containers.  The United States has not agreed to
    provide additional containers.

    The project had planned to produce and deliver the first 10,000
    containers to Russia by December 1995, beginning with monthly
    shipments of 1,000 in March 1995.  However, one container failed
    during tests in December 1994--necessitating design changes.  An
    independent analysis cited technical and managerial deficiencies.

    Although project participants appear to have taken corrective action,
    the container project will warrant close attention through its
    completion, due to its complexity, cost, and high Russian interest
    level.  Although the redesigned prototype has been successfully
    tested, manufactured units will require more testing and CTR
    officials will not decide before July 1995 whether to begin
    full-scale production.  As a result, fewer containers--possibly
    26,000 to 28,000--will be provided later than had been planned.  The
    United States anticipates producing 850 a month by the end of this
    year.  The Russians have been pressing for delivery and expressed
    great unhappiness with the delay when we met with them in Moscow.

    --------------------
    \1 In the past U.S.  agencies have been unable to confirm a storage
    shortfall.  Some have noted that Ministry of Defense storage space
    for intact weapons could be used.  The Ministry of Atomic Energy has
    argued against doing so.

    \2 Estimates that 2 to 5 containers could be needed to hold
    components from a single warhead indicate that one 50,000 container
    facility could hold materials from 10,000 to 25,000 weapons.  Russia
    may dismantle as many as 24,000 weapons.

    \3 The Russians have stated that the facility will be transparent to
    the United States.  Facility transparency is part of an overall U.S.
    effort to prevent a resumption of the U.S.-Soviet nuclear arms
    competition.

    \4 The Department of Energy contributed $1 million of its own funds
    to the design effort.

    \5 The Mayak site is located at the scene of a 1957 nuclear accident
    that contaminated much of the area.

    \6 Russia plans to have completed 35 percent of the design by October
    1995.

    \7 The November 1993 estimate of $315 million cited in our last
    report placed the cost of building and equipping the facility's first
    phase at $300 million.  The current Russian estimate includes $454
    million to build and equip the facility's first phase--an increase of
    more than 50 percent.  According to DOD, the current Russian estimate
    is within the range of the Army Corps of Engineers' most recent
    estimates.

    \8 DOD has obligated $45 million and disbursed $10 million as of May
    8, 1995.  As of March 1, the value of work performed was estimated at
    $14.2 million.

          MATERIAL PROTECTION,
          CONTROL, AND ACCOUNTING
    ----------------------------------------------------- Appendix III:0.2

    To date, the CTR program has had little direct impact in protecting,
    controlling, and accounting for civilian nuclear material that
    presents a high proliferation risk.\9 The program's prospects are
    improving as a result of recent agreements with the Russians to
    upgrade nuclear material controls at civilian facilities using
    direct-use material (highly enriched uranium and plutonium).  The
    United States is also developing a long-range plan to help upgrade
    controls at 80 to 100 civilian, naval nuclear, and nuclear
    weapons-related facilities handling direct-use material by 2002.
    However, several issues need to be addressed for the U.S.  program to
    succeed.

    The FSU possesses hundreds of tons of direct-use nuclear material
    located at 80 to 100 civilian, naval nuclear, and nuclear
    weapons-related facilities, mostly in Russia.  Much of this material
    is considered to be highly attractive for theft.  Current nuclear
    controls in use at FSU nuclear facilities make it difficult to deter
    or detect such theft.  The facilities rely on manual, paper-based
    tracking systems that cannot quickly locate and assess material
    losses.  In addition these facilities lack modern physical protection
    systems, such as monitors, that can detect unauthorized attempts to
    remove nuclear material from a facility.

    The CTR program provides assistance to Russia, Ukraine, and
    Kazakhstan for upgrading civilian nuclear material controls at
    selected model facilities and developing regulations, enforcement
    procedures and national material tracking systems.  Through the
    program, the United States has provided technical working group
    meetings, site surveys, physical protection equipment, computers, and
    training in support of CTR projects.  To date, none of the projects
    have been completed.  DOD has obligated $36.8 million of $62.5
    million budgeted, and the value of work is $2.7 million.\10 DOD is
    currently defining work valued at $28 million for future obligations.

    So far, CTR efforts have had little direct impact in improving
    control over direct-use material at civilian facilities.  This is due
    mainly to delays in negotiating agreements with the FSU states;
    Russian Ministry of Atomic Energy (MINATOM) restricting work to
    low-proliferation risk materials in Russia; and the preliminary
    nature of the work at other FSU facilities where direct-use material
    is present.  Problems in procuring equipment have also caused some
    delays.  CTR work on developing a national regulatory system in
    Russia has been hampered by MINATOM's resistance to expanding the
    role of GAN, Russia's nuclear regulatory agency, and GAN's lack of
    statutory authority for oversight and enforcement.

    The prospects for accelerating obligations in Russia may be
    improving.  Recently, Russia and the United States agreed to add five
    high-priority sites handling large amounts of direct-use material to
    the program.  The Department of Energy also signed a letter of intent
    with GAN to cooperate in implementing a national material control and
    accounting system.  The Department of Energy is preparing a
    long-range plan to enhance nuclear material protection control and
    accounting at the 80 to 100 facilities handling direct-use material
    by the year 2002.  Responsibility for funding and supporting CTR
    nuclear material protection control and accounting efforts will be
    transferred from DOD to the Energy Department in fiscal year 1996.
    The Energy Department plan would include Energy's lab-to-lab program,
    initiated by Energy in 1994, which works directly with personnel at
    Russian civilian and nuclear-weapon related nuclear facilities to
    improve nuclear material control, accounting, and physical
    protection.  The plan's estimated cost is about $0.5 billion.

    Several issues would need to be addressed for such a program to
    succeed.

      Currently, there is no agreement with the Russians for work at most
         of the 80 to 100 facilities.  In the past, MINATOM has taken a
         go-slow approach and only recently opened up direct-use
         facilities to the CTR program.  However, the Energy Department
         has had some early success in upgrading controls at a direct-use
         facility under its lab-to-lab program.  In addition, the U.S.
         and Russian Steering Groups for Energy's lab-to-lab program have
         agreed to develop a unified plan for cooperation with the
         principal MINATOM nuclear weapons-related facilities, and Energy
         is negotiating agreements for work at many of the other 80 to
         100 facilities.\11

      The Department of Energy has not yet determined the appropriate
         number of personnel and amount of resources needed to manage the
         planned expansion of the program.  In fiscal year 1995, Energy
         manages a lab-to-lab budget of $15 million.  Starting in fiscal
         year 1996, Energy will be responsible for implementing the
         proposed long-range plan, which calls for a budget increase in
         material protection control and accounting assistance to about
         $70 million per year.  This budget level will continue until
         fiscal year 1999.

      The United States has yet to determine the degree of oversight
         needed to ensure program success.  The Russians have already
         told Energy officials that the United States may not be allowed
         direct access to a small number of highly sensitive facilities.
         It is unclear to what extent currently negotiated audit and
         examination provisions under CTR will apply to the new projects
         in the proposed long-range plan.  According to a State
         Department official, given the extremely important priority of
         preventing diversion of nuclear material, the executive branch
         has agreed in principle on the need for flexibility in pursuing
         adequate arrangements for ensuring that U.S.  assistance is used
         as intended.  The official also noted that most of the equipment
         provided is highly specialized, permanently installed, and not
         easily used for other purposes.

    Even with a successful Energy-led program, the United States would
    not be able to control the extent to which Russian facilities meet
    international standards.  According to a U.S.  national laboratory
    official, Russia will be provided with all the elements to develop a
    nuclear material control system that is consistent with international
    standards, but responsibility for meeting the standards rests with
    the Russians.  As a nuclear weapons state under the Nuclear
    Nonproliferation Treaty, Russia is under no treaty obligation to meet
    international safeguard standards.\12 In contrast, as non-nuclear
    weapons states under the treaty, Ukraine and Kazakhstan are required
    to meet IAEA safeguard standards.

    --------------------
    \9 Although it was not a CTR project, DOD used some CTR funds to
    finance their portion of Project Sapphire.  In 1994, Project Sapphire
    transferred from Kazakhstan to the United States 600 kilograms of
    highly enriched uranium that presented a proliferation risk.
    According to a DOD official, CTR funds used for Project Sapphire were
    in addition to the $5 million available for obligation for material
    protection control and accounting assistance to Kazakhstan.

    \10 In Russia, DOD has obligated $20.3 million of $45 million
    budgeted, and the total value of work performed is $1.2 million.  In
    Ukraine, DOD has obligated $11.5 million of a planned $12.5 million,
    although the total value of work performed is less than $660,000.  In
    Kazakhstan, DOD has obligated $4.9 million of a planned $5 million
    program, and the total value of work performed is $850,000.

    \11 In addition, the Russian government issued a decree in January
    that commits it to improving material protection control and
    accounting at Russian nuclear facilities.

    \12 Russia has entered a voluntary agreement with the International
    Atomic Energy Agency (IAEA) to meet international safeguards
    requirements at some of its civilian nuclear power facilities and
    research reactors.  Russia also is a signatory to the Convention on
    the Physical Protection of Nuclear Materials, and as such is
    obligated to meet defined standards of physical protection for
    nuclear material.  Ukraine is also a signatory to the Convention.

          WEAPONS SECURITY
    ----------------------------------------------------- Appendix III:0.3

    Two CTR projects to enhance nuclear weapons security--armored
    protective blankets and kits to upgrade railcars--are being
    completed.  The United States and Russia are exploring new areas of
    cooperation on weapons security.

    The CTR program provided 4,000 armored blankets to Russia between
    July 1992 and June 1993.  In October 1994 the program completed
    shipping
    115 kits to upgrade rail cars for transporting warheads.  Russian
    officials told us in March 1995 that most of the kits were being
    installed and that the process had been delayed by a Russian funding
    shortfall that had been recently remedied.

    Russian officials told us that Russia has used blankets to protect
    600 strategic warheads being withdrawn from Ukraine.  DOD, in
    commenting on a draft of this report, informed us that the blankets
    and rail cars have been used to move warheads within Russia and to
    Russia from Ukraine and Kazakhstan.  DOD also noted that CTR
    assistance had helped secure and transport strategic warheads that
    had been deployed in Russia.\13

    We reported last year that--despite the rail car kits and the
    blankets--the FSU rail transportation system would still not be safe
    by Western standards.  Russian officials told us that they were
    concerned about threats posed by criminals and poor rail conditions.
    U.S.  and Russian officials are now exploring additional weapons
    security measures, including new types of rail cars and
    supercontainers for warheads in transit.  The two countries are also
    considering computerized accounting systems for warheads and
    personnel security measures.  While DOD has recently agreed to
    provide $20 million in such aid, its budget estimate includes far
    more for weapons security--a total of about $120 million in fiscal
    year 1995-97 funds for such purposes, including $42.5 million in
    fiscal year 1996 alone.

    --------------------
    \13 DOD noted that there are over 1,000 such warheads.  DOD officials
    do not know how many of these 1,000 have been transported with CTR
    aid.

    DEMILITARIZATION
    ========================================================== Appendix IV

    The International Science and Technology Center in Moscow appears to
    have had a good first year in addressing its nonproliferation
    objectives, although it does not preclude the possibility that
    scientists receiving Center funds may also work on Russian
    institutes' weapons activity with non-Center funds.\1 Most of DOD's
    defense conversion projects are not converting active production
    lines but are instead using previously dormant facilities that once
    produced items related to weapons of mass destruction.

    --------------------
    \1 DOD categorizes U.S.  support for the Center as CTR
    demilitarization activity, prompting our decision to discuss the
    Center here.  The Department of State, which currently manages the
    Center project for DOD and which will assume complete responsibility
    for U.S.  support for the Center in fiscal year 1996, commented on a
    draft of this report that it has always considered the Center to be a
    non-proliferation effort, not a demilitarization project.

          INTERNATIONAL SCIENCE AND
          TECHNOLOGY CENTER
    ------------------------------------------------------ Appendix IV:0.1

    During its first year, the International Science and Technology
    Center in Moscow appears to have made a good beginning in achieving
    its nonproliferation objectives by supporting work on peaceful
    projects for scientists engaged in weapons of mass destruction and
    missile delivery system activities.  However, although CTR program
    materials have often described the recipients of Center funds as
    "former" weapons scientists, we found that scientists receiving
    Center funds may also continue to be employed by institutes engaged
    in weapons work.  According to the State Department, the Center's
    objective is to intentionally fund weapons scientists in the FSU and
    redirect their efforts to peaceful activities.  The Center prohibits
    use of its funds for weapons work.

    With the collapse of the Soviet Union, the United States became
    concerned that FSU experts in weapons of mass destruction and related
    technologies might flee to other countries of proliferation concern
    to employ their specialized knowledge and maintain their livelihoods.
    According to State Department officials, many such experts are not
    being paid on a regular basis by their institutes.  Continued
    economic deterioration could exacerbate this problem, particularly in
    light of decreased demand for this expertise and the inability of the
    governments to pay these experts on a regular basis.  Estimates of
    the numbers of experts who potentially might engage in proliferation
    activities range from 10 thousand to several 10s of thousands of
    individuals.  Center officials estimate that there are 3,000 core
    weapons of mass destruction and missile delivery system experts.

    As a result, the United States, European Community, Japan, and Russia
    agreed to establish the Moscow Center to provide peaceful
    opportunities to weapons scientists and engineers, particularly to
    experts on weapons of mass destruction and delivery vehicles.  The
    Center selects projects from those submitted on a competitive basis,
    using a detailed review process.  Center projects are carried out at
    various facilities and institutes throughout the FSU.  To limit the
    potential diversion of funds, scientists and experts are paid
    directly on a quarterly basis rather than through their institutes
    and direct procurements of necessary equipment are made for the
    projects.  An overhead payment up to 10 percent is made to the
    scientists' institutes upon successful completion of the project.

    The United States has committed $46 million to the Center in
    Moscow.\2 As of May 8, 1995, DOD had obligated $22.8 million and
    disbursed $20.9 million to the Center.  The Center, which has been in
    operation for about 1 year, has disbursed $2.8 million for salaries
    and related project costs.  Its Governing Board has approved 130
    projects--valued at $60 million--of nearly 400 proposals received.\3
    Grants include approximately $25 million in U.S.  funds and involve
    8,200 scientists and engineers, including, according to Center
    officials, at least 1,000 core weapons of mass destruction
    scientists.

    Recipients of seven Center grants at three different institutes told
    us that they had been involved in nuclear weapons development or
    nerve agent research--suggesting that they are among the Center's
    target group.  They noted that the grants were important in
    redirecting their research and helping them survive the current
    economic conditions.  State Department officials indicate that the
    target population appears to be staying in Russia, although the
    Center's role in encouraging them to do so is difficult to assess.

    We found that Center-supported scientists are not necessarily
    employed full time on Center projects and that they may spend part of
    their non-Center funded time working on Russian weapons of mass
    destruction.  They may remain employed by FSU laboratories and work
    less than 100 percent of their time on Center projects--some as
    little as 10 percent.  This situation raises the prospect that the
    scientists could spend the remainder of their time on their
    institutes' work on weapons of mass destruction.

    According to the State Department, Center and U.S.  officials track
    the time the scientists spend on Center projects only and are not in
    a position to monitor their non-Center activities.  Nevertheless,
    Center officials told us that they doubt that most scientists are
    actually working on other than Center projects.  Center and State
    officials told us that the scientists maintain their connection to
    the institutes to retain important social benefits that the Center
    does not provide.  U.S.  officials stated that the Center is intended
    to help prevent proliferation and encourage commercial efforts,
    rather than to preclude scientists from working on Russian weapons of
    mass destruction, and that the Center prohibits the use of its funds
    for weapons-related work.

    We also learned that the United States and the Center are taking some
    steps to guard against the risk that scientists participating in
    Center projects could create dual-use items--civilian goods with
    weapons applications--with Center funds.  U.S.  officials explained
    that the United States policy is not to fund a project if it advances
    the state of Russian weapons technology, but could consider doing so
    if it utilizes existing weapons technologies for civilian
    applications and would provide meaningful employment for the target
    group of scientists.  For example, the United States is supporting,
    through the Center, development of a commercial streak camera.
    Streak camera technology can be relevant to nuclear testing, and the
    final product could be subject to export licensing if produced for
    export, depending on its technical capabilities.  The Center project
    was reviewed for dual-use potential during a detailed U.S.  review
    process for all Center proposals based on scientific merit and U.S.
    policy.

    The State Department will assume responsibility for U.S.  support for
    the Center in fiscal year 1996 and has prepared a multiyear plan to
    2003.  It estimates the project level will reach 225 projects,
    employing an estimated 12,000 individuals.  State plans to budget
    approximately $90 million over the next 7 years for Center
    activities, $18 million annually through 1998 with a gradual decline
    to almost zero in fiscal year 2003.  From the year 2003, State
    Department projects that nearly all funds will come from other U.S.
    agencies and non-governmental sources such as commercial
    partnerships.  State officials hope to increase promotion of
    commercial partnerships where limited activities have occurred.

    State officials could not provide detailed analysis to support these
    planning figures, which, they stated, were largely developed by DOD
    through fiscal year 1998.  However, they informed us that they have
    initiated a process for reviewing and revising these figures.  They
    added that the funding levels were based on first-year spending
    rates, an unexpectedly large number of proposals, hopes of achieving
    a more targeted outreach to scientists, and overall political
    considerations.

    Project monitoring is already an area of concern for Center
    officials, who said that, because of the limited number of staff,
    they can monitor projects only intermittently, instead of quarterly
    as desired.  Additionally, State Department officials explained that
    project monitoring is a tool in reviewing dual-use concerns and that
    the United States has proposed that the Center hire six to eight new
    project staff to help free senior staff for monitoring activities.

    --------------------
    \2 This amount includes $5 million for projects in Belarus and $6
    million for projects in Kazakhstan.

    \3 DOD conducted a full financial audit of the Center in March 1995
    and concluded that the Center's financial statement fairly presented
    its financial position as of December 31, 1994.

          DEFENSE CONVERSION
    ------------------------------------------------------ Appendix IV:0.2

    According to DOD officials, U.S.  defense conversion aid is not
    intended to be sufficient to convert the FSU's defense industry.  The
    program is planning to promote defense conversion by providing
    leverage to U.S.  investment in the FSU.  Although DOD claims their
    conversion efforts reduce the threat of weapons of mass destruction,
    we found that most of these efforts are converting dormant facilities
    that once produced items related to weapons of mass destruction.  In
    commenting on a draft of this report, DOD informed us that most of
    its efforts are aimed at converting production capability because it
    considers much of Russia's weapons production capability to be
    inactive.  DOD stated that converting inactive capability will
    alleviate pressure on Russia to rearm or sell high-tech weapons
    abroad and also aid the Russian economy.  We also found that,
    initially, DOD efforts did not give priority to privatization of
    defense enterprises, and some of these companies remain state owned .

    The task of converting the FSU's defense industry to peaceful
    enterprises is enormous.  One DOD official says that Russian
    officials claim that defense conversion will cost $150 billion and
    take 12 to 15 years.  About 1,800 Russian defense plants are already
    undergoing conversion.

    The DOD defense conversion efforts primarily consist of industrial
    partnerships between U.S.  enterprises and FSU weapons producers and
    in many cases these partnerships are creating private spin-off
    enterprises.  Most of these efforts have been initiated in the past
    year and are in the early stages of development.  Until now, DOD has
    managed nearly all of the defense conversion projects, but after
    fiscal year 1995 all new projects are to be managed by the Defense
    Enterprise Fund--a DOD-funded non-profit venture capital fund.

    DOD has $152.7 million available for obligation for defense
    conversion from fiscal year 1994 and 1995 funding.  Currently, it
    plans to allocate an additional $70 million in fiscal year 1996-97
    funds to the Fund.  Up to $60 million of the $152.7 million is being
    obligated to convert former defense facilities to housing
    construction to help support the demobilization of Strategic Rocket
    Force officers.  DOD is using the remaining $92.7 million primarily
    for industrial partnerships that will create joint ventures.  The
    Fund will receive $27.7 million of this $92.7 million.

    As of May 8, the CTR program had obligated $97.6 million for defense
    conversion and the Fund.\4 As of March, according to DOD, the value
    of defense conversion work performed was about $24.7 million, and as
    of May defense conversion projects had created 93 jobs for Americans
    and 1,475 jobs for FSU defense employees.  DOD estimates expect U.S.
    companies to have exported more than $27 million, and projected sales
    of the 15 joint ventures are expected to exceed $53 million this
    fiscal year.

    --------------------
    \4 As of May 30, 1995, the CTR program had obligated nearly $118
    million for defense conversion and the Defense Enterprise Fund.

          DOD-MANAGED PROJECTS
    ------------------------------------------------------ Appendix IV:0.3

    DOD justifies the program by claiming that defense conversion efforts
    reduce the threat of weapons of mass destruction at their origin by
    converting enterprises to civilian sector endeavors.  According to a
    DOD official, DOD focused on initiating projects at FSU firms and
    facilities that once produced weapons of mass destruction, but there
    is only one facility where an active production line is being
    converted to civilian use.  The Defense Nuclear Agency initiated the
    defense conversion program by matching U.S.  businesses with
    DOD-selected FSU defense enterprises.  We also found that defense
    conversion took priority over privatization as criteria for
    selection.  Although encouraging privatization is a U.S.  policy,
    Defense Nuclear Agency officials said that it was not an initial
    concern of CTR defense conversion.\5 According to DOD officials,
    implementing agreements with the FSU republics do not make
    privatization a requirement for defense conversion projects, but DOD
    officials are working with the FSU governments to privatize CTR
    projects.

    DOD-managed projects are at varying stages of implementation.

      In Russia, one project links GosNIIAS--a state-owned aviation
         enterprise on Russia's list of firms not to be privatized--to a
         U.S.  firm with which it had previously been involved.  DOD is
         providing $4.1 million to the U.S.  firm, which has
         subcontracted $938,000 to GosNIIAS to begin to develop an air
         traffic control system in the Russian Far East.  Unlike another
         Russian project we reviewed, the GosNIIAS project is not a joint
         venture and profits made could go back to GosNIIAS.

      In Ukraine, a U.S.  commercial partner has teamed up with a
         Ukrainian enterprise, Hartron, which formerly made ballistic
         missile guidance systems for the SS-18 and SS-19.  These firms
         will work together to develop nuclear power plant
         instrumentation and control systems, which are designed to
         improve nuclear safety.  The United States provided a $5 million
         grant to the U.S.  firm, which has contributed $14 million for
         this joint venture.  As of July 1994, Hartron has about 10,000
         employees and has several other on-going conversion efforts,
         including a Chinese-Ukrainian venture assembling televisions, an
         association with a U.S.  computer firm to produce components,
         and a planned project linking banks with satellite
         communications.

      In Kazakhstan, a U.S.  firm has teamed up with KazInformtelecom to
         build a national and international telecommunications system,
         which is projected to be operational in 11 cities in 12 months.
         The U.S.  government is providing $5 million of the $16.1
         million for this partnership.  KazInformtelecom is a new company
         that was established in 1994.  It is the executive contractor to
         convert part of the Saryshaghan testing site to civilian use.
         Saryshaghan tested surface to air and anti-ballistic missiles.

      Defense conversion funds are also being used to help provide
         housing to further Inter Continental Ballistic Missile (ICBM)
         demobilization.  According to DOD, the shortage of housing is
         one of the most serious obstacles to eliminating strategic
         nuclear missile arsenals and closing missile bases.  In Belarus,
         Russia, and Ukraine, provisions for housing are a statutory
         prerequisite for officer demobilization.  In Ukraine, DOD plans
         to provide assistance that will result in 428 housing units at a
         cost of $30 million.  The Ukraine housing requirement for
         demobilization is 6,000 units.  In Russia, the DOD-funded
         housing project is expected to provide 500 units of the
         potentially 30,000 housing units needed at a cost of up to $20
         million.  In Belarus DOD plans to provide up to 207 of the 802
         housing units needed at a cost of $10 million.  All but one of
         these projects are aimed at creating new housing industries and
         infrastructure that can be used to create additional housing.
         As a result, housing project start-up costs appear high.

    --------------------
    \5 In Belarus, privatization is not permitted.

          DEFENSE ENTERPRISE
          FUND-MANAGED PROJECTS
    ------------------------------------------------------ Appendix IV:0.4

    New defense conversion projects are being developed by the Defense
    Enterprise Fund, a venture capital fund capitalized by DOD to finance
    joint ventures and promote FSU defense conversion.  According to one
    Fund official, the Fund will take more risk than the average venture
    capital firms to fill a perceived void and will require that its
    projects are privatized.  The Fund has recently begun operating.  Its
    Board of Directors first met in September 1994.  DOD has obligated
    $27.7 million available to the Fund.  To date, the Fund has provided
    one $1.8 million loan.  The Board has approved several other projects
    whose final terms and conditions are being negotiated.

    DOD has proposed that about $118 million be provided to the Defense
    Enterprise Fund from fiscal years 1994 through 1997.  In fiscal year
    1995, $20 million was rescinded from the $40 million budget.  DOD
    officials believe that the proposed funding is the minimum necessary
    to capitalize the Defense Enterprise Fund so it will have enough
    money to sustain itself after funding is completed.  These officials
    believe that if funding is cut again the Fund will not have an
    opportunity to become self-sustaining and will just be an expensive
    mechanism to support joint defense conversion business initiatives.
    DOD justifies this funding based on other venture capital fund
    experiences and computer modeling of the $118 million, which shows
    the fund can be self-sustaining in certain scenarios.  According to
    DOD officials, DOD took a conservative approach and modeled scenarios
    that predicted between 30 percent and 70 percent of the projects will
    default.  These high default rates were based on pessimistic
    forecasts by other fund managers who predict problems trying to
    convert former Soviet weapons of mass destruction industries.  Using
    the higher default rates, the Fund would have great difficulty
    sustaining itself.  DOD has requested the Defense Enterprise Fund
    provide its own analysis based on DOD's funding profile.

    FUNDING FOR THE CTR PROGRAM
    (FISCAL YEARS 1992-95)
    =========================================================== Appendix V

                        (Dollars in millions)

                        Notification
                                s to                Disbursement
    Projects                Congress   Obligations             s
    ------------------  ------------  ------------  ------------
    Destruction and dismantlement
    ------------------------------------------------------------
    Chemical weapons         $55.000       $22.182        $7.336
     destruction/lab-
     -Russia
    Communications
     link
    Belarus                    2.300          .974          .457
    Kazakhstan                 2.300          .614          .134
    Ukraine                    2.400          .650          .131
    Environmental             25.000        14.772         1.831
     restoration-
     Project Peace

    Nuclear infrastructure elimination
    ------------------------------------------------------------
    Belarus                    5.000          .000          .000
    Kazakhstan                17.000          .000          .000
    Ukraine                   10.000          .000          .000

    Strategic offensive arms elimination
    ------------------------------------------------------------
    Belarus                    6.000          .000          .000
    Kazakhstan                70.000          .324          .049
    Russia                   150.000       112.083        19.639
    Ukraine                  205.000        89.536        19.279
    ============================================================
    Subtotal                 550.000       241.135        48.856

    Chain of custody/nonproliferation
    ------------------------------------------------------------
    Armored blankets-          5.000         3.244         2.905
     -Russia

    Emergency response
    ------------------------------------------------------------
    Belarus                    5.000         4.288         3.604
    Kazakhstan                 5.000         2.045          .302
    Russia                    15.000        12.857        11.182
    Ukraine                    5.000         2.002          .179

    Export controls
    ------------------------------------------------------------
    Belarus                   16.260         3.073         1.237
    Kazakhstan                 2.260         1.117          .137
    Russia                     2.260          .044          .011
    Ukraine                    7.260         3.337          .254
    Fissile material          50.000        44.944        10.086
     containers--
     Russia

    Material control and accountability
    ------------------------------------------------------------
    Kazakhstan                 5.000         4.923          .364
    Russia                    45.000        20.333          .568
    Ukraine                   12.500        11.504          .129
    Nuclear reactor           11.000        11.000          .046
     safety--Ukraine
    Rail car security         21.500        21.500        17.649
     upgrades--Russia
    Storage facility          15.000        15.000        12.866
     design
    Storage facility          75.000        27.356         2.511
     equipment
    Weapons security-         20.000          .000          .000
     -Russia
    ============================================================
    Subtotal                 318.040       188.567        64.030

    Demilitarization
    ------------------------------------------------------------

    Defense conversion/Industrial Partnerships
    ------------------------------------------------------------
    Belarus                   20.000        19.607         8.098
    Kazakhstan                15.000        14.860          .105
    Russia                    40.000        17.218         3.681
    Ukraine                   50.000        38.286         4.280
    Defense Enterprise        27.670         7.670         7.670
     Fund
    Research and              10.000          .000          .000
     development
     foundation--
     Russia

    Science and technology center
    ------------------------------------------------------------
    Belarus                    5.000          .000          .000
    Kazakhstan                 6.000          .000          .000
    Russia                    35.000        22.853        20.889
    Ukraine                   15.000          .414          .307
    ============================================================
    Subtotal                 223.670       120.908        45.030

    Other authorized programs/program support
    ------------------------------------------------------------
    Arctic nuclear            30.000        19.520         5.270
     waste--Russia

    Military-to-military contacts
    ------------------------------------------------------------
    Belarus                    7.524          .301          .098
    Kazakhstan                  .900          .074          .014
    Russia                    11.548         7.761         3.844
    Ukraine                    5.900          .869          .321
    Other assessment          24.400        19.720         9.221
     costs
    ============================================================
    Subtotal                  80.272        48.245        18.768
    ============================================================
    Total                 $1,171.982      $598.855      $176.684
    ------------------------------------------------------------
    Note: These figures were current as of May 8, 1995.

    WORK PERFORMED ON SELECTED CTR
    PROJECTS (FISCAL YEARS 1992-95)
    ========================================================== Appendix VI

                        (Dollars in millions)

                                    Value of work
    Projects                            performed  Disbursements
    ------------------------------  -------------  -------------
    Destruction and dismantlement
    ------------------------------------------------------------
    Chemical weapons destruction/          $7.649         $5.120
     lab--Russia
    Environmental restoration-              4.958           .802
     Project Peace--Belarus

    Strategic offensive arms elimination
    ------------------------------------------------------------
    Russia                                 55.925         28.186
    Ukraine                                52.530          8.753
    Kazakhstan                               .045           .045

    Chain of custody
    ------------------------------------------------------------
    Emergency response--Belarus             4.125          3.340
    Fissile material containers--          14.254          6.501
     Russia

    Material control and accountability
    ------------------------------------------------------------
    Kazakhstan                               .850           .016
    Russia                                  1.189           .368
    Ukraine                                  .660           .117
    Storage facility design--              13.764         12.441
     Russia
    Storage facility equipment--            4.744           .345
     Russia

    Demilitarization
    ------------------------------------------------------------

    Defense conversion-industrial partnership
    ------------------------------------------------------------
    Belarus                                 7.785          6.844
    Kazakhstan                               .113           .099
    Russia                                  3.059          2.524
    Ukraine                                 6.043          1.966
    Defense Enterprise Fund                 7.670          7.670
    Science and technology center-         20.313         20.313
     -Russia
    ============================================================
    Total                                $205.676       $105.450
    ------------------------------------------------------------
    Note: These figures were current as of March 1, 1995.

    (See figure in printed edition.)Appendix VII
    COMMENTS FROM THE DEPARTMENT OF
    DEFENSE
    ========================================================== Appendix VI

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    The following are GAO's comments on DOD's letter dated June 2, 1995.

    GAO COMMENTS

    1.  The draft report states that without CTR assistance Ukraine could
    not dismantle its nuclear weapons.

    2.  DOD's statements that CTR-provided equipment is being used to cut
    up heavy bombers and nuclear submarines are inaccurate.  While some
    CTR-provided equipment is in use at Engels Air Base, the guillotine
    shears have not been used to cut up any aircraft to date.  In
    addition, while heavy equipment being provided through the CTR
    program to cut up nuclear submarines is not yet operational, some
    CTR-supplied equipment is being used to cut launcher tubes out of
    submarines.

    3.  We question DOD's emphasis on the tangible impact of the program
    with regard to dismantlement efforts.  In various documents, DOD
    officials attribute the deactivation of thousands of nuclear warheads
    and the dismantlement of hundreds of strategic launchers to CTR
    assistance.  When asked to document their claims, DOD officials could
    not provide the data needed to substantiate the direct impact of CTR
    dismantlement assistance.

    4.  According to a DOD official, the phrase "these warheads" refers
    to the class of warheads rather than to a specific number of warheads
    moved.

    5.  As of May 18, 1995, the date of the draft report, our information
    on CTR audits and examinations was accurate.  We have modified the
    report to reflect the most recent developments.

    6.  We have added language to clarify our meaning.  The United States
    and Russia have not agreed on the applicability of the Russian
    destruction technology for a chemical weapons destruction facility
    because the necessary data will not be available until the ongoing
    joint evaluation is concluded.  Unlike the U.S.-preferred
    incineration process, the Russian technology has no record of
    performance outside the laboratory, and the Russians have not
    provided sufficient data to allay U.S.  concerns about the
    technology's technical and cost uncertainties.  Without the joint
    evaluation results, a U.S.  commitment to support an uncertain
    technology would be premature.

    7.  It is precisely because of the difficult history of chemical
    weapons destruction in the United States with what is now a proven
    technology, that we questioned the basis for DOD's assumption that
    the Russian technology inevitably will be "validated" to be feasible
    and affordable for use in a large-scale facility.

    8.  While the chemical weapons destruction project management may
    have been persistent in its efforts to overcome U.S.  and Russian
    differences, we also must note that in many significant
    differences--such as selection of a chemical weapons destruction
    technology and selection of the type of chemical weapons (artillery-
    or air-delivered munitions) to be destroyed first, among others--the
    Russian position has prevailed.  We believe that this reinforces
    DOD's point on the difficulties the chemical weapons destruction
    project faces.

    9.  We believe that it is necessary to link obligation rates to the
    final reporting data for the critical joint evaluation study because
    the nature and scope of future U.S.  support for several efforts--the
    preliminary implementation plan, the pilot demonstration system, and
    the Russian chemical weapons destruction facility--are related
    directly to the results of the testing.

    10.  In response to our questions, DOD provided us with several
    revised "preliminary" funding breakouts and schedules, just prior to,
    during, and after the time it received our draft report for comment.
    In the latter revisions, the $34.3 million for additional technology
    development activities to be determined--that we recommended be
    reduced--had changed to show about $23 million for testing specific
    types of equipment, and the remainder of the $34.3 million was
    reallocated to other parts of the project.

    11.  Our understanding of such timelines was illustrated in our
    October 1994 CTR report.  (See page 1, footnote 1 of this report.) We
    stated that the ".  .  .  program was initially slowed by the time
    needed to complete agreements between the United States and former
    Soviet republics, fully develop projects, and comply with legislated
    requirements .  .  .  ."

    12.  In our October 1994 CTR report, we also stated that the Russians
    do not want U.S.  assistance in dismantling their nuclear warheads.
    At that time, DOD had no comment on our assessment.

    13.  Our draft report described how the CTR program is providing
    assistance to help the Russians safely store components from
    dismantled nuclear weapons and stated that the U.S.  and Russia are
    discussing the provision of supercontainers.

    14.  As of May 18, 1995, the date of our draft report, the
    information on dismantlement efforts in Kazakhstan was accurate.  We
    have modified the report to more accurately reflect the current
    status of these efforts.

    15.  The "Statement of Work for a Comprehensive Plan to Support the
    Russian Chemical Weapons Destruction Program," dated January 1994,
    stated that a U.S.  contractor would prepare a comprehensive plan to
    "include all the key milestones for the destruction of the entire
    Russian CW [chemical weapons] stockpile and the estimated associated
    costs." The preliminary implementation plan for the first site only
    is a significant decrease in scope.

    16.  DOD is incorrect in stating that the draft report was
    "out-of-date." We noted in the draft report that the Russians--after
    a year-long delay--had selected the site for the Central Analytical
    Laboratory in March 1995 and we characterized this event as one of
    several recent positive developments.

    17.  The draft report clearly distinguishes between nuclear material
    protection, control, and accounting, and nuclear weapons security.
    Our finding that the CTR program has made little progress in
    protecting nuclear material that presents a proliferation risk refers
    to nuclear material protection, control, and accounting projects not
    only at specific facilities, but also to the establishment of
    national material control and accounting systems in Russia.  We also
    disagree with DOD's comments that we narrowly focused on one aspect
    of the program.  Our assessment in this area relates to all known
    sites where nuclear material directly usable in nuclear weapons is
    located.

    18.  While we agree with DOD that Project Sapphire was a critical
    step in protecting nuclear material that presented a proliferation
    risk, Project Sapphire was not a CTR project.  Project Sapphire was
    funded by State, DOD, and Energy.  We have added a footnote that
    explains that some CTR funds were used to pay for DOD's portion of
    Project Sapphire and that DOD's portion of Project Sapphire was not
    funded out of the material protection, control, and accounting
    program for Kazahkstan.  In addition, we believe that Project
    Sapphire represents a unique response to a specific proliferation
    threat and does not represent an ongoing strategy of the CTR program
    to improve nuclear material protection, control, and accounting in
    the FSU.  We note that the administration is currently developing a
    strategy to improve material protection, control, and accounting
    systems at all known facilities using direct use material in the
    former Soviet Union.

    19.  Although some progress has been made in other CTR projects that
    are involved in improving protection of nuclear material, the
    projects involve either (1) facilities using nuclear material that
    presents a low proliferation risk (such as low enriched uranium and
    irradiated plutonium) or (2) projects in their initial stages
    involving facilities using material presenting a high proliferation
    risk (such as highly enriched uranium and unirradiated plutonium).
    We have made changes to the draft that more accurately show that the
    CTR program has made little direct impact in protecting nuclear
    material that presents a high proliferation risk.

    20.  DOD's comment on progress made with Russia under the
    laboratory-to-laboratory program overstates the impact of fiscal year
    1995 CTR funds on the program.  The Department of Energy's lab-to-lab
    program has successfully completed a project to upgrade physical
    protection of approximately 100 kilograms of highly enriched uranium
    at the Kurchatov Institute in Moscow.  However, the project was
    completed in February 1995 using Energy's funds.  Fiscal year 1995
    CTR funds for Energy's lab-to-lab program were not transferred to
    Energy until April 20, 1995.

    21.  We have revised the text of the report to acknowledge that most
    defense conversion projects are focused on converting inactive
    defense factories that still have production capability.  We also
    acknowledge in the report that DOD believes converting excess
    production capability will alleviate pressure on Moscow to rearm or
    sell high-tech weapons abroad and will also aid the Russian economy.

    22.  Although DOD has accelerated the start-up of 15 projects in a
    little more than a year, we believe that it is too early to judge the
    success of these projects.  One of the projects that DOD gives high
    marks to in its comments was considered by officials responsible for
    managing the program as stalled from its inception.  After receipt of
    our draft report, DOD officials informed us of progress on this
    project.

    23.  The report already notes the primary purpose of the program is
    to prevent proliferation.

    24.  This concept is not disputed anywhere in the report.

    25.  DOD's assertion that it generally describes the recipients of
    Center grants as "former Soviet" weapons scientists is incorrect.
    DOD often--in testimony, budget submissions, and briefing
    documents--used the terminology, "former" weapons scientists or
    scientists "formerly" involved in a weapons program.  The Assistant
    Secretary of Defense, while testifying before the House
    Appropriations Committee, Subcommittee on Defense, on March 9, 1994,
    described the recipients as "former weapons scientists," and the 1996
    Budget Submission describes the recipients as "scientists and
    engineers formerly involved with weapons of mass destruction."

    26.  The $27.67 million totals the amount notified to Congress for
    all the republics.

    (See figure in printed edition.)Appendix VIII
    COMMENTS FROM THE DEPARTMENT OF
    STATE
    ========================================================== Appendix VI

    (See figure in printed edition.)

    (See figure in printed edition.)

    See comment 3.

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

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    The following are GAO's comments on the Department of State's letter
    dated June 1, 1995.

    GAO COMMENTS

    1.  Classified enclosure concerning chemical weapons destruction
    issues has been detached from the letter.

    2.  We have added language to clarify our meaning.  The United States
    and Russia have not agreed on the applicability of the Russian
    destruction technology for a chemical weapons destruction facility
    because the necessary data will not be available until the ongoing
    joint evaluation is concluded.  Unlike the U.S.  preferred
    incineration process, the Russian technology has no record of
    performance outside the laboratory, and the Russians have not
    provided sufficient data to allay U.S.  concerns about the
    technology's technical and cost uncertainties.  Without the joint
    evaluation results, a U.S.  commitment to support an uncertain
    technology would be premature.

    3.  State Department officials notified us that their written
    comments on our draft report contained some out-of-date and incorrect
    information concerning the Chemical Weapons Destruction project.  As
    a result, State officials stated in our exit meeting that State
    deferred to DOD concerning program-specific comments.  Consequently,
    we responded only to DOD's comments on program details.

    4.  Our information on CTR audits and examinations was accurate as of
    May 18, 1995, the date of the draft report.  We have modified the
    report to reflect the recent progress in conducting such
    examinations.

    5.  Russia was dismantling its nuclear warheads and launchers before
    any CTR dismantlement assistance arrived in September 1994.  While
    Russia appears to maintain a robust dismantlement rate, we could not
    determine to what extent CTR assistance would accelerate the Russian
    dismantlement rate.

    6.  While we do not take issue with State's assertions about the
    political impact of offering Belarus CTR assistance, the United
    States and Belarus have yet to sign an implementing agreement
    detailing the requirements for CTR dismantlement assistance.

    7.  DOD has often--in testimony, budget submissions, and briefing
    documents--used the terminology, "former" weapons scientists or
    scientists "formerly" involved in a weapons program.  The Assistant
    Secretary of Defense, while testifying before the House
    Appropriations Committee, Subcommittee on Defense on March 9, 1994,
    described the recipients as "former weapons scientists," and the 1996
    Budget Submission described the recipients as "scientist and
    engineers formerly involved with weapons of mass destruction." The
    report notes that there is no connection between Center-funded
    projects and weapons projects beyond the fact that the same
    scientists could be working on both projects.

    8.  We cannot comment on the impact of anecdotal evidence.

    9.  We did not perform a statistical analysis of all Center projects.
    Rather, based on the review of approximately 10 percent of the
    existing projects, we point out that scientists working on Center
    projects could also be working on current weapons programs.  U.S.
    and Center officials, as well as recipients, confirmed that no
    restrictions exist to prohibit this from occurring.  The text was
    changed to reflect the receipt of social benefits as a reason for
    part-time employment at the institutes.

    10.  The example cited in the report does not display a basic
    misunderstanding on our part.  The report uses streak cameras as an
    example of an item, funded by the Center, that is dual-use in nature.
    Streak cameras are relevant in nuclear testing, the project was
    subject to the dual-use review by the U.S.  officials, and the final
    product could be subject to export licensing.

    11.  We have revised the text of the report to acknowledge that most
    defense conversion projects are focused on converting inactive
    defense factories that still have production capability.  Our report
    now points out that DOD believes converting production capability
    will aid the Russian economy and alleviate pressure on Moscow to
    rearm or sell high-tech weapons abroad.  Neither DOD or the
    Department of State have provided any information showing how the
    industrial partnership program would largely eliminate the capability
    to produce weapons of mass destruction.

    12.  This paragraph focuses on overall defense conversion and not
    just weapons of mass destruction.  Although the DOD defense
    conversion program emphasizes converting weapons of mass destruction
    facilities, not all conversion projects are converting these types of
    facilities.  In one case, a firm in Ukraine was formerly producing
    engines and parts for naval vessels.

    (See figure in printed edition.)Appendix IX
    COMMENTS FROM THE DEPARTMENT OF
    ENERGY
    ========================================================== Appendix VI

    (See figure in printed edition.)

    (See figure in printed edition.)

    The following are our comments on the Department of Energy's letter
    dated May 26, 1995 and memorandum dated May 17, 1995.

    GAO COMMENTS

    1.  We have changed the report to reflect wording changes suggested
    by the Department of Energy.

    2.  The statement that currently there is no agreement with the
    Russians for work at the 80 to 100 facilities is accurate.  However,
    we have made changes to the report to reflect the agreement in
    principle reached by the U.S.  and Russian lab-to-lab steering groups
    for work at MINATOM nuclear weapons related facilities and Energy's
    current efforts to negotiate agreements for work at many of the other
    80 to 100 facilities.

    3.  Energy's assertion is incorrect.  However, to more accurately
    reflect Russia's international obligations, we have added a footnote
    that Russia has entered into a voluntary arrangement to meet
    international safeguards at some of its civilian nuclear power
    facilities and research reactors.  However, this falls short of
    having to meet international standards for all of its nuclear
    facilities as in the case of Ukraine and Kazakhstan.  We also added
    that Russia is a party to the Convention on the Physical Protection
    of Nuclear Materials that obligates it to meet defined standards of
    physical protection of nuclear materials.

    MAJOR CONTRIBUTORS TO THIS REPORT
    =========================================================== Appendix X

    NATIONAL SECURITY AND
    INTERNATIONAL AFFAIRS DIVISION,
    WASHINGTON, D.C.

    F.  James Shafer
    Pierre R.  Toureille
    Blake L.  Ainsworth
    Charles T.  Bolton
    Muriel J.  Forster
    Jo Ann T.  Geoghan
    Julie M.  Hirshen
    Beth A.  Hoffman Leon
    Jeffrey D.  Phillips
    Raymond A.  Plunkett

    RESOURCES COMMUNITY AND ECONOMIC
    DEVELOPMENT DIVISION, WASHINGTON,
    D.C.

    Mary Alice A.  Hayward

    EUROPEAN OFFICE

    Patrick A.  Dickriede