Cooperative Threat Reduction: Status of Defense Conversion Efforts in the
Former Soviet Union (Letter Report, 04/11/97, GAO/NSIAD-97-101).

Pursuant to a congressional request, GAO reviewed the Department of
Defense's (DOD) program to help convert defense industries in the former
Soviet Union to commercial enterprises, focusing on: (1) the effect of
defense conversion efforts on the elimination or reduction of military
activities and production capabilities in former Soviet weapons of mass
destruction enterprises; (2) the status of defense conversion projects
and funding; and (3) conformance of the Defense Enterprise Fund's
management practices to its grant agreement and the Fund's operating
expenses.

GAO noted that: (1) given the vast size of the former Soviet Union's
weapons complex and the numerous variables involved in trying to assess
and quantify military production capacity, including unknown factors
such as possible modernization or consolidations at other locations, GAO
was unable to confirm that the defense conversion projects GAO reviewed
had any direct impact on eliminating or reducing weapons of mass
destruction or other military production capacity in the former Soviet
Union; (2) nonetheless, of the 24 projects GAO reviewed, 20 had
indigenous partners that DOD identified as firms that had been engaged
in producing weapons of mass destruction, and one project involved
converting resources that were still engaged in producing weapons of
mass destruction; (3) GAO's analysis also showed that at least 11
projects had directly used buildings formerly engaged in activities
related to weapons of mass destruction, and at least 8 projects had
employed former workers from weapons of mass destruction-related
activities at the newly established enterprises; (4) according to DOD
officials, the defense conversion projects are providing assistance to
firms that have large numbers of underutilized and often unpaid
employees; (5) DOD officials hope that the projects will become
commercially viable and that the indigenous parent firms will invest
additional resources that might have otherwise been used for producing
weapons of mass destruction or other military hardware; (6) five of the
24 defense conversion projects were no longer operating at the time of
GAO's review; (7) the remaining 19 projects have made varying degrees of
progress in setting up commercial businesses, but eight of the projects
had not begun production; (8) four of the projects that had reached
production were moving forward, and for one of these projects the U.S.
partner bought the Russian partner's share of the joint venture; (9)
three of the four housing projects are nearly complete but have not
established commercial enterprises; (10) two of the housing projects
were construction projects and were not intended to generate ongoing
businesses; (11) as of March 1997, DOD had notified Congress that it
planned to spend a total of $179.7 million on defense conversion
projects and had disbursed $143 million, including $51.7 million granted
to the Defense Enterprise Fund (DEF); and (12) the DEF has complied wit*

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

 REPORTNUM:  NSIAD-97-101
     TITLE:  Cooperative Threat Reduction: Status of Defense Conversion 
             Efforts in the Former Soviet Union
      DATE:  04/11/97
   SUBJECT:  Defense industry
             Defense conversion
             Nuclear weapons
             Funds management
             Federal aid to foreign countries
             Nuclear proliferation
             International cooperation
             International relations
IDENTIFIER:  DOD Cooperative Threat Reduction Program
             Defense Enterprise Fund
             Polish-American Enterprise Fund
             Hungarian-American Enterprise Fund
             Belarus
             Kazakhstan
             Russia
             Ukraine
             
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Cover
================================================================ COVER


Report to the Chairman, Committee on National Security, House of
Representatives

April 1997

COOPERATIVE THREAT REDUCTION -
STATUS OF DEFENSE CONVERSION
EFFORTS IN THE FORMER SOVIET UNION

GAO/NSIAD-97-101

Cooperative Threat Reduction

(711217)


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

  DEF - Defense Enterprise Fund
  DOD - Department of Defense
  DSWA - Defense Special Weapons Agency
  WMD - weapons of mass destruction

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


B-276297

April 11, 1997

The Honorable Floyd Spence
Chairman, Committee on National Security
House of Representatives

Dear Mr.  Chairman: 

In response to your request, we reviewed the Department of Defense's
(DOD) program to help convert defense industries in the former Soviet
Union to commercial enterprises.\1 At the time of our review, DOD had
undertaken 20 conversion projects, and the Defense Enterprise Fund
had completed agreements to undertake 4 projects.  Our specific
objectives were to assess (1) the effect of defense conversion
efforts on the elimination or reduction of military activities and
production capabilities in former Soviet weapons of mass destruction
enterprises, (2) the status of defense conversion projects and
funding, and (3) conformance of the Defense Enterprise Fund's
management practices to its grant agreement and the Fund's operating
expenses. 


--------------------
\1 The former Soviet Union countries that participate in this program
are Belarus, Kazakstan, Russia, and Ukraine. 


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

DOD's program to convert former Soviet Union defense industries to
commercial enterprises is part of the Cooperative Threat Reduction
program, which DOD has supported since 1992 to reduce the weapons of
mass destruction (WMD) threat.\2 The program's priority objectives
include helping to (1) destroy nuclear, biological, and chemical
weapons; (2) transport and store weapons that are to be destroyed;
and (3) prevent weapon proliferation.  In addition to these
objectives, the Cooperative Threat Reduction Act of 1993 authorized
DOD to establish a program to help demilitarize former Soviet Union
defense industries and convert military technologies and capabilities
to commercial activities.  The Soviet Union had an enormous defense
industrial complex that reportedly consisted of 2,000 to 4,000
production enterprises, research and development facilities, and
research institutes and employed between 9 million and 14 million
people.\3 Although the main objective of the Cooperative Threat
Reduction Act focused on WMD reduction, the act did not specifically
require the defense conversion program to target WMD capability. 
Nonetheless, DOD targeted WMD industries for conversion with the
goals of stimulating foreign and domestic investment in the former
Soviet Union and demonstrating that partnerships between private U.S. 
companies and former Soviet enterprises can succeed. 

The Office of the Secretary of Defense, along with several government
agencies, developed a list of 150 WMD-related enterprises in Belarus,
Kazakstan, Russia, and Ukraine to be candidates for defense
conversion projects.  According to DOD, the list consists of
enterprises that were associated with the research, development, or
production of WMD; their delivery systems; or subsystems or
components.  DOD defined WMD to include nuclear, biological, and
chemical weapons; guided missiles and aircraft that can deliver these
weapons; and weapon platforms, such as aircraft carriers, land-based
missile launchers, surface ships, submarines that carry
nuclear-equipped guided missiles, and aircraft.  Also, firms
associated with the production of command, control, and
communications equipment for military forces linked to those weapons,
as well as with the production of systems that provide strategic
defense or counter strategic bombers, were eligible for inclusion on
the list. 

The Defense Special Weapons Agency (DSWA)--formerly the Defense
Nuclear Agency--implements the defense conversion programs and
contracts under the guidance of the Deputy to the Assistant Secretary
of Defense for Cooperative Threat Reduction.  In 1994 and 1995, DSWA
established and awarded contracts for the DOD-managed projects.  For
most of these projects, DSWA contracted with U.S.  firms to assist
specified former Soviet Union firms.  Typically, the former Soviet
Union and U.S.  firms established a joint venture to provide a
civilian good or service, using U.S.  private and government funds
and former Soviet facilities and labor.  The 20 defense conversion
projects included 4 projects intended to provide housing for
demobilized Strategic Rocket Force personnel in Belarus, Russia, and
Ukraine.\4 These projects were undertaken because those countries
required that housing be provided for Strategic Rocket Force
personnel before their units could be demobilized. 

The Cooperative Threat Reduction Act of 1993 also authorized the
creation of a private, not-for-profit fund that would continue the
defense conversion efforts begun by DSWA.  The Defense Enterprise
Fund (DEF) was incorporated in June 1994 as a government-funded
enterprise to provide financial support for the demilitarization of
industries and conversion of military technologies and capabilities
into civilian activities.  DEF received its initial funding through a
$7.7 million grant from DSWA.  The grant agreement specifies the
management requirements for DEF and articulates DSWA oversight
responsibilities.  DEF is currently required to select firms for
defense conversion from DOD's list of 150 WMD-related enterprises or
notify DSWA if it selects a firm that is not on this list.  DOD
initially proposed $118 million in government-funded capitalization
for DEF; however, according to DOD officials, the U.S.  government
capitalization of DEF is currently envisioned to end at $71 million. 
The grant agreement encourages DEF to seek private capital
investment, and DEF is currently developing plans to create a private
equity fund.  In accordance with the grant agreement, DSWA is
authorized to approve DEF's plans. 

Our review did not include an evaluation of DSWA's management of the
20 individual contracts for defense conversion projects, or an
evaluation of how DOD developed the list of 150 firms that it
considered to be WMD-related enterprises. 


--------------------
\2 This report is the latest in our series of reviews of the
Cooperative Threat Reduction program.  See Related GAO products for a
list of other reports. 

\3 O'Prey, Kevin P.  A Farewell to Arms:  Russia's Struggles With
Defense Conversion.  New York:  Twentieth Century Fund Press, 1995,
page 15. 

\4 The Cooperative Threat Reduction Act of 1993 includes the
provision of housing for former military personnel of the former
Soviet Union. 


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

Given the vast size of the former Soviet Union's weapons complex and
the numerous variables involved in trying to assess and quantify
military production capacity--including unknown factors such as
possible modernization or consolidations at other locations--we were
unable to confirm that the defense conversion projects we reviewed
had any direct impact on eliminating or reducing weapons of mass
destruction or other military production capacity in the former
Soviet Union.  Nonetheless, of the 24 projects we reviewed, 20 had
indigenous partners that DOD identified as firms that had been
engaged in producing weapons of mass destruction, and one project
involved converting resources that were still engaged in producing
weapons of mass destruction.  Our analysis also showed that at least
11 projects had directly used buildings formerly engaged in
activities related to weapons of mass destruction, and at least
8 projects had employed former workers from weapons of mass
destruction-related activities at the newly established enterprises. 
According to DOD officials, the defense conversion projects are
providing assistance to firms that have large numbers of
underutilized and often unpaid employees.  DOD officials hope that
the projects will become commercially viable and that the indigenous
parent firms will invest additional resources that might have
otherwise been used for producing weapons of mass destruction or
other military hardware. 

Five of the 24 defense conversion projects were no longer operating
at the time of our review.  The remaining 19 projects have made
varying degrees of progress in setting up commercial businesses, but
eight of the projects had not begun production.  Four of the projects
that had reached production were moving forward, and for one of these
projects the U.S.  partner bought the Russian partner's share of the
joint venture.  Three of the four housing projects are complete but
have not established commercial enterprises.  Two of the housing
projects were construction projects and were not intended to generate
ongoing businesses.  As of March 1997, DOD had notified Congress that
it planned to spend a total of $179.7 million on defense conversion
projects and had disbursed $143 million, including $51.7 million
granted to the Defense Enterprise Fund.\5 As of December 1996, the
Fund had committed $22.6 million to eight investment projects and had
invested $16.6 million. 

The Defense Enterprise Fund has complied with many elements of the
grant agreement with the Defense Special Weapons Agency, but it has
not finalized some key grant requirements, and the Agency has not
enforced compliance.  The Defense Special Weapons Agency's oversight
of the Fund has been less rigorous than the level provided for by the
grant agreement.  The Defense Special Weapons Agency and the Defense
Enterprise Fund have not established the required evaluation
benchmarks necessary for DOD to measure the success of the Fund, and
the Fund's long-range plan for attracting private capital has yet to
be finalized.  DOD officials told us that the Defense Special Weapons
Agency was attempting to resolve these issues.  The Defense
Enterprise Fund's operating expenses have totaled $6.8 million since
its inception, which is roughly consistent with the spending of other
U.S.  government-sponsored enterprise funds in Central and Eastern
Europe and the former Soviet Union. 


--------------------
\5 DEF received $20 million of this amount in September 1996. 


   IMPACT OF DEFENSE CONVERSION
   AID ON WMD INDUSTRIES
------------------------------------------------------------ Letter :3

As previously stated, when the Soviet Union dissolved, it left behind
an enormous defense industrial complex consisting of 2,000 to 4,000
production enterprises--some of which were massive
conglomerates--that employed 9 million to 14 million workers.  To
assess whether any individual defense conversion project had an
impact on reducing this residual production capacity would have
required a complete analysis of the former Soviet Union's defense
industry.  The defense conversion projects often involved the use of
a single building that was part of a massive industrial complex, and
we would have had to account for such things as possible plant
modernization or consolidation of production lines.  This assessment
would also have required knowledge of the initial baseline production
capacity.  Such an analysis was beyond the scope of this review.  We
were unable to confirm that the defense conversion projects we
reviewed had any direct impact on eliminating or reducing WMD or
other military production in the former Soviet Union. 

Nonetheless, our review showed that 20 of the 24 conversion projects
included enterprises that DOD considers related to WMD, and according
to DOD and joint venture officials 1 of these projects involved
converting resources that were still engaged in WMD-related
production.  Defense conversion assistance establishes projects that
typically occupy abandoned buildings and create a small number of
jobs at large former Soviet Union firms where workers are often
underutilized and unpaid.  According to DOD officials, defense
conversion efforts are aimed at redirecting resources at former
Soviet Union enterprises to peaceful endeavors.  The officials
recognize that only a portion of nearly all former Soviet Union firms
that are receiving assistance will participate in a defense
conversion project.  However, DOD officials hope that the projects
will become commercially viable and additional resources will be
invested that might otherwise have been used for producing WMD or
other military hardware. 

We found that many of the projects used abandoned buildings of large
WMD-related conglomerates.  At least 11 of the 24 defense conversion
projects used former WMD-related buildings, and in 1 case active WMD
production was occurring in a building up to the time that the
defense conversion project began.  Further, at least eight projects
used former WMD-related employees.  Three housing construction
projects in Belarus and Ukraine did not include WMD-related firms. 
Table 1 shows information on DSWA's and DEF's conversion efforts. 



                                     Table 1
                     
                     Type of WMD Conversion at 20 DSWA and 4
                     DEF Projects in the Former Soviet Union

                         Number of projects              Number of projects
                  --------------------------------  ----------------------------
Projec
t
sponso                 WMD
r          Total  building           WMD    Unable                 WMD    Unable
and       number         s     buildings        to       WMD   workers        to
countr        of  converte           not  determin   workers       not  determin
y       projects         d     converted         e  employed  employed         e
------  --------  --------  ------------  --------  --------  --------  --------
DSWA
Belaru         4         2             1         1         0         1         3
 s
Kazaks         4         2             2         0         4         0         0
 tan
Russia       5\a         2             1         2         0         1         4
Ukrain         7         5             2         0         3         2         2
 e
DEF\b
Russia         4         0             2         2         1         1         2
================================================================================
Total         24        11             8         5         8         5        11
--------------------------------------------------------------------------------
Note:  This information was obtained through discussions with
officials from DSWA, DEF, U.S.  joint venture partners, and former
Soviet Union industry.  In some cases, these officials were not able
to tell us whether the workers or buildings converted from military
production had been engaged in WMD-related work. 

\a At two projects in Russia, no physical defense conversion occurred
because one project was never fully established and one housing
project was just beginning. 

\b Four additional DEF projects were not included in our review
because they were approved by DEF's board of directors after we began
our work (two in Kazakstan and two in Russia).  Two of the four were
initiated by DSWA, and DEF has made investments to the projects to
provide necessary capital. 

Information on the defense conversion projects we reviewed follows. 
Appendix I provides additional information on DSWA-managed projects
in Belarus, Kazakstan, Russia, and Ukraine.  Appendix II provides
details on DEF's conversion projects. 


      BELARUS
---------------------------------------------------------- Letter :3.1

Of the four DSWA-managed projects in Belarus, three initially
established commercial ventures at (1) a nuclear-hardened computer
circuit firm, (2) a satellite optics and reconnaissance firm, and (3)
a mainframe computer factory.  The other project funded construction
of housing for Strategic Rocket Force personnel and therefore did not
establish a defense conversion enterprise. 


      KAZAKSTAN
---------------------------------------------------------- Letter :3.2

The four DSWA-managed projects in Kazakstan are involved in
establishing commercial ventures at (1) a firm responsible for
converting an abandoned Soviet military command and control facility,
(2) the Kazakstan National Nuclear Center, (3) a production factory
for submarine-launched missiles, and (4) a biological weapons
production enterprise.  The missile factory project was able to
convert the entire firm from an active WMD missile producer to a
commercial manufacturer of cryogenic vessels. 


      RUSSIA
---------------------------------------------------------- Letter :3.3

Of the five DSWA-managed projects in Russia, three established
commercial partnerships at (1) a radar and avionics firm, (2) an
electronics firm that made gear for space and military applications,
and (3) a military avionics firm.  One project to establish a soda
bottling plant at a cruise missile enterprise was canceled.  The
housing project is just commencing, and plans are to include an
aerospace enterprise that was involved with cruise missiles and
intercontinental ballistic missile systems, an aerospace materials
organization, and a firm that specialized in solid rocket motors. 

The four DEF projects that we reviewed were all in Russia.  These
projects are to establish commercial ventures at (1) a nuclear
weapons research and development firm, (2) a manufacturer of
environmental control systems for MIG aircraft, (3) a manufacturer of
components of nuclear submarines, and (4) a firm that designed and
manufactured missile guidance systems. 


      UKRAINE
---------------------------------------------------------- Letter :3.4

Of the seven DSWA-managed projects in Ukraine, five established
commercial ventures at (1) a manufacturer of radio components,
including guidance systems; (2) a manufacturer of guidance and
control systems; (3) a firm that designed and tested radio equipment
and instrument systems for missiles and satellites; (4) a firm that
produced control systems for missiles and space systems; and (5) a
manufacturer of aerospace and military electronics equipment.  One
housing project used firms that built and designed missile silos and
military bases.  The second housing project used a firm that made
parts for the Black Sea fleet but had no relationship to WMD. 


   PROGRESS OF DEFENSE CONVERSION
   PROJECTS
------------------------------------------------------------ Letter :4

Defense conversion projects are at varying stages of development.  As
of February 1997, four projects had reached production and appeared
to be moving forward, and in one case the U.S.  partner bought the
Russian partner's share of the joint venture.  Other projects are
experiencing business difficulties.  DOD notified Congress of its
plans to spend almost $179.7 million, of which $143 million had been
disbursed as of March 1997 for all defense conversion projects. 


      DSWA AND DEF PROJECTS
---------------------------------------------------------- Letter :4.1

Two DSWA projects in Kazakstan, one DSWA project in Ukraine, and one
DEF project in Russia have reached production and appear to be moving
forward.  However, five projects in Belarus, Russia, and Ukraine are
no longer operating, and the remaining projects face obstacles.  Some
projects are still in the early stages of formation and will require
time to mature, others face legal and bureaucratic challenges that
are common in starting a commercial venture in the former Soviet
Union, and others will likely need further capital investment to be
successful.  Table 2 categorizes the status of the 24 projects that
we reviewed. 



                                     Table 2
                     
                      Status of Defense Conversion Projects

                               (Number of projects)

                  DSWA        DSWA        DSWA        DSWA         DEF
Status         Belarus   Kazakstan      Russia     Ukraine      Russia     Total
----------  ----------  ----------  ----------  ----------  ----------  ========
No longer            3           0           1           1           0         5
 operating
Not                  0           0           0           1           3         4
 reached
 productio
 n but no
 apparent
 obstacles
Not                  0           2           1           1           0         4
 reached
 productio
 n and has
 major
 obstacles
Reached              0           0           2           1           0         3
 production
 and
 has major
 obstacles
Reached              0           2           0           1           1         4
 production
 and
 moving
 forward
Housing              1           0           1           2           0         4
 projects
================================================================================
Total                4           4           5           7           4        24
--------------------------------------------------------------------------------

      BELARUS
---------------------------------------------------------- Letter :4.2

The three defense conversion projects DSWA initiated in Belarus in
mid-1994 are now dormant or no longer operating.  Two of those
projects had reached production, but the businesses eventually
failed.  According to the U.S.  partners in these projects, a poor
political and economic environment and a lack of understanding
between the U.S.  and Belarus governments led to these failures. 
U.S.  partners explained that Belarus government officials believed
they would receive monetary assistance from the U.S.  government. 
The Belarus enterprises and government did not understand that
assistance would come through U.S.  private firms in the form of
equipment and business assistance.  The housing project begun in 1995
was completed in April 1997.  This project did not have the objective
of converting a defense enterprise. 


      KAZAKSTAN
---------------------------------------------------------- Letter :4.3

Four DSWA projects began in Kazakstan, in 1995, and they are
progressing at varying rates.  One is facing bureaucratic obstacles,
and the U.S.  and Kazakstan partners are having difficulties reaching
agreements.  Two of the projects have obtained additional funding
from DEF to help move their commercial ventures forward.  One of
these projects has recently begun production, whereas the other faces
a major obstacle and needs licenses to pursue a telecommunications
business.  One project that converted a submarine missile factory
into a cryogenic vessel factory is now producing and selling its
products in Europe, and company officials expect a profit after the
first year. 

Until recently, DEF projects were solely in Russia.  However, DEF has
signed agreements for two defense conversion projects in Kazakstan. 


      RUSSIA
---------------------------------------------------------- Letter :4.4

In 1994 and 1995, five DSWA-managed projects began in Russia.  One
project has been canceled, three face major obstacles before they can
become commercially successful, and one is a housing project that is
just getting started.  The canceled project was intended to establish
a soda bottling factory, but the Russian and American partners could
not reach agreement.  As a result, DSWA spent only $195,000 of the
$5.1 million contract.  The Russian participants in this project
reported that the experience of working with an American company was
beneficial to increasing their understanding of American business,
and they subsequently negotiated business partnerships with other
American companies. 

Although three projects face major obstacles before they can become
commercially successful, DOD officials noted that these challenges
are no different from those facing other investments in Russia.  One
project was a contract awarded to a U.S.  partner to help a Russian
firm develop hardware and software for an air traffic control system. 
The future of this project mostly depends on the award of a Russian
government contract for an air traffic control system.  The second
project produced hearing aids but has had difficulty finding a market
for its products.  The third project initiated a dental chair
production line and was seeking to establish a bottling line for
disinfectant, but the project needs additional investment capital to
move forward.  The housing project is in its initial stages and will
involve the conversion of Russian defense enterprises and the
establishment of indigenous housing assembly and component
manufacturing capabilities.  Once these manufacturing lines are
established, DOD plans to construct an unspecified number of homes
for demobilized Strategic Rocket Force personnel with any remaining
funds. 

Three of the four DEF projects that we reviewed in Russia were in
their early stages of development; therefore, it was premature to
draw conclusions about their future progress.  One of the projects
has not drawn on DEF's investment because the market for the product
has not matured and investment at this point could result in a loss. 
It is not yet clear if this project will move forward, but no money
has been spent.  The fourth DEF project has reached production and is
moving forward; however, the Russian partner is no longer involved
because the U.S.  partner purchased its share of the venture. 
According to DEF officials, this project had a successful outcome. 
In addition, DEF has signed agreements for two other defense
conversion projects in Russia, bringing the total number of DEF
investments to eight, as of February 1997. 


      UKRAINE
---------------------------------------------------------- Letter :4.5

In Ukraine, DSWA initiated seven projects, five defense conversion
projects and two housing projects in 1994 and 1995.  As of March
1997, one project has not reached production but has no apparent
obstacles, two projects have major obstacles to overcome, and one has
reached production and is moving forward.  According to the U.S. 
companies involved in these joint ventures, some delays can be
attributed to Ukrainian government bureaucracy--obtaining proper
funding and permits and following designated customs procedures. 
Also, Ukrainian companies involved in the joint ventures believed
that DSWA contract funding would be paid directly to them rather than
to the joint venture or the U.S.  partner.  The fifth defense
conversion project, which had planned to establish a cellular phone
production line at an aerospace and military electronic enterprise,
is no longer operating.  To restore this project's viability, DOD is
currently attempting to identify a new American partner.  The two
housing projects for Strategic Rocket Force personnel are completed,
and the defense conversion enterprises that were created from these
projects are no longer operating. 


      DSWA AND DEF SPENDING
---------------------------------------------------------- Letter :4.6

DOD notified Congress of plans to spend nearly $179.7 million on
defense conversion projects.  It has disbursed $143 million,
including $51.7 million that was granted to DEF.  Table 3 shows
defense conversion spending as of March 1997. 



                                Table 3
                
                 DSWA Defense Conversion Spending as of
                               March 1997

                         (Dollars in millions)

                                  Notified     Obligated     Disbursed
----------------------------  ------------  ------------  ------------
Belarus                              $20.0         $19.8         $18.7
Kazakstan                             15.0          14.2          11.4
Russia                                38.0          33.0          13.5
Ukraine                               55.0          54.4          47.7
DEF grant\a                           51.7          51.7          51.7
======================================================================
Total                               $179.7        $173.1        $143.0
----------------------------------------------------------------------
Note:  Included in these figures is $66 million that had been
obligated to housing projects in Belarus, Russia, and Ukraine.  Of
the $66 million, $45 million has been disbursed. 

\a DSWA has disbursed all obligated funds to DEF, but the table does
not show the amounts DEF had committed or spent. 

As of December 1996, DEF had committed $22.6 million of its $51.7
million DSWA grant to eight defense conversion projects and had
invested $16.6 million in conversion projects.  DEF anticipates an
additional U.S.  government grant of $15 million in fiscal year 1997
from the State Department's Freedom Support Act funds.\6


--------------------
\6 A State Department official told us that the Department may
provide another $5 million later in fiscal year 1997 or in fiscal
year 1998.  The Department will allocate the funds to the U.S. 
Agency for International Development, which will transfer them to
DSWA for execution under an amendment to the existing grant
agreement. 


   DEF MANAGEMENT ISSUES AND
   EXPENDITURES
------------------------------------------------------------ Letter :5

DEF has complied with many elements of its grant agreement with DSWA,
but DEF has not finalized all requirements, and DSWA has not followed
through on compliance.  DEF's operating expenditures have totaled
$6.8 million since its inception in June 1994.  Our analysis
indicates that this is roughly equivalent to the rate of spending for
operating expenses of other U.S.  government-sponsored enterprise
funds in Central and Eastern Europe and the former Soviet Union. 


      DEF GRANT AGREEMENT ISSUES
---------------------------------------------------------- Letter :5.1

The June 1994 grant agreement between DSWA and DEF requires DSWA to
conduct semiannual progress reviews of DEF unless both entities agree
otherwise.  The agreement also stipulates that DSWA will make
approximately three visits annually to DEF's home and field
offices.\7 As of December 1996, DSWA had conducted two semiannual
progress reviews that were held in DEF's Boston office.  A program
manager also told us that he made one visit to the site of the
Kirovsky-Zavod joint venture in
St.  Petersburg, Russia.  The results of the semiannual reviews were
not documented in any systematic way and, according to a DSWA
official, were informal.  The minutes of DEF's board meetings do not
contain any discussion of the results of these reviews, and the board
members we talked to did not recall any briefings or discussions of
such reviews.  DEF officials and board members stated, however, that
DEF and DSWA were in frequent communication and thus did not need
more frequent or formalized reviews. 

In January 1997, DSWA officials told us that they would begin
conducting oversight in a more rigorous and formalized way and would
perform the semiannual reviews and the required office visits. 
Accordingly, in February 1997, the DSWA program manager conducted a
semiannual review and office visit in Richmond with DEF officials and
has planned two trips to DEF's new field offices in Moscow and St. 
Petersburg. 

In addition, DEF has not developed the performance benchmarks that
the grant agreement requires be established in consultation with
DSWA.\8 The agreement requires DEF to establish a statement of
objectives that includes benchmarks to facilitate the assessment of
DEF's expected accomplishments.  As of February 1997, DEF had
developed an objectives statement but had not established benchmarks
to assess whether and to what extent DEF's expected accomplishments
were being achieved.  The grant agreement states that DEF's success
will be evaluated by the extent to which it meets or contributes to
its objectives, such as the successful demilitarization of a defense
industry and the development of a number of key joint business
initiatives between U.S.  and former Soviet Union private firms.  The
absence of these benchmarks makes it difficult to assess DEF's
success or failure.\9 In March 1997, DOD officials drafted benchmarks
for DEF and told us that these benchmarks, once coordinated with DEF,
would be included in the requirements for the semiannual progress
reviews. 

In May 1995, DSWA amended the grant agreement to require DEF to
submit a long-range plan by September 1995 that, at a minimum, would
address how DEF intends to become self-sufficient by 1998.  DEF has
not yet presented a specific plan to DSWA for approval; however, DOD
officials stated that DEF will do so on March 31, 1997.  DEF plans
for self-sufficiency include attracting private capital, and,
according to a DEF official, DEF expects to be investing private
funds by 1998.  DEF management presented a plan to its board of
directors in December 1996 and provided preliminary briefings to DOD
officials on the plan's essential elements in December 1996 and
January 1997.  The proposed plan involves establishing a private
equity fund with $15 million of DEF capital and shared management, an
arrangement similar to that used by the Polish-American Enterprise
Fund in establishing its private equity fund.  The private equity
fund will focus on enterprises undergoing industrial and
technological conversion, but will not be strictly limited to defense
conversion projects.\10 However, consistent with the legislation
establishing DEF, investments by DEF in this fund must support
programs for demilitarization of industries and defense conversion. 

It has been difficult for U.S.  government-sponsored enterprise funds
to attract private capital; only the first 2 funds--the
Polish-American Fund and the Hungarian-American Fund--of the 11 that
the government has sponsored in Central and Eastern Europe and the
former Soviet Union have been able to do so.  To attract private
capital, enterprise funds must have a successful record of
investments.  The Hungarian-American Fund began to look for private
capital in 1991 and was finally successful in 1996.  The investment
of private capital can provide fund management with an opportunity to
earn incentive compensation based on earnings over and above the
grant ceiling of $150,000 for fund managers.\11


--------------------
\7 Until April 1996, DEF had home offices in Richmond, Virginia, and
Boston, Massachusetts.  In April, DEF closed the Boston office.  DEF
has recently opened field offices in St.  Petersburg and Moscow,
Russia. 

\8 DEF has established portfolio indicators to evaluate its
investments, such as rates of return achieved, milestones for
equipment and licenses procured, and exit mechanisms.  DEF calls
these indicators benchmarks, but they differ from the benchmarks
required by the grant agreement, which require measuring progress
toward the objectives of demilitarization and defense conversion. 

\9 In the future, DOD will have to consider the Government
Performance and Results Act of 1993, which requires all federal
agencies to establish systems for measuring whether agency programs
are meeting their intended objectives. 

\10 A DEF official stated that the private fund will not make any
nondefense-related investments until DEF funds are fully invested in
defense conversion projects. 

\11 DEF's grant agreement states that employees may earn no more than
$150,000 per year from grant funds, and any compensation in excess of
the ceiling may be paid from sources other than grant funds. 


      DEF OPERATING EXPENSES
---------------------------------------------------------- Letter :5.2

The aggregate level of DEF's operating expenses is consistent with
that of other U.S.  government-sponsored enterprise funds in Central
and Eastern Europe and the former Soviet Union.  DEF expended $6.8
million between June 1994 and December 1996 for operating
expenses.\12 Table 4 shows that DEF's expenditure rate falls within
the range experienced for all enterprise funds and for those of
similar size.\13 Table 5 shows DEF's expenses by category for the
last 2 fiscal years.  Consistent with most U.S.  government-sponsored
international enterprise funds, project expenses (legal, accounting,
and consulting) and personnel compensation constitute the largest
share of DEF's operating expenses. 



                                Table 4
                
                  Operating Expenses Among Enterprise
                       Funds as of September 1996

                         (Dollars in millions)

                                                            Annualized
                                                             operating
                                                         expenses as a
                                                         percentage of
Fund                                Grant commitment  grant commitment
----------------------------------  ----------------  ----------------
Polish-American Fund                            $264              1.09
Albanian-American Fund                            30              1.78
U.S.-Russia Fund                                 440              1.90
Western Newly Independent States                 150              3.13
 Fund
Baltic-American Fund                              50              3.14
Bulgarian-American Fund                           55              3.33
Central Asian Fund                               150              3.38
Defense Enterprise Fund                           71              3.77
Czech and Slovak American Fund                    65              4.20
Hungarian-American Fund                           70              4.38
Romanian-American Fund                            50              4.53
----------------------------------------------------------------------
Note:  We calculated the percentage of operating expenses by
annualizing each fund's expenses since inception and compared that
amount to the grant commitment for each fund. 



                                Table 5
                
                 DEF Operating Expenses by Category for
                       Fiscal Years 1995 and 1996

                         (Dollars in thousands)

                                           FY 1995         FY 1996
                                        --------------  --------------
                                                Percen          Percen
Operating expenses                      Amount       t  Amount       t
--------------------------------------  ------  ------  ------  ------
Project expenses                          $406      20  $1,556      34
Employee compensation and benefits         700      34   1,033      22
Bad debt provision                           0       0     600      13
Travel and related expenses                222      11     293       6
Legal and accounting                       214      11     240       5
Occupancy                                   71       4     193       4
Consulting                                  96       5     141       3
Raising private capital                     10       0     118       3
Insurance                                   49       2      42       1
Communications                              38       2      56       1
Taxes and licenses                          37       2      44       1
Office supplies                             32       2      53       1
Depreciation and amortization               27       1     108       2
Miscellaneous                              121       6     170       4
======================================================================
Total                                   $2,023     100  $4,647     100
----------------------------------------------------------------------

--------------------
\12 This amount includes $113,000 in operating expenses incurred for
the period June through September 1994. 

\13 There are several ways to evaluate administrative expenses,
including comparisons to average performing assets, investment
income, and grant amount.  Because of DEF's relatively early stage of
development and the availability of consistent data, we used
operating expenses to grant amount to make this comparison. 


   RECOMMENDATION
------------------------------------------------------------ Letter :6

In addition to the recent efforts DOD has initiated to strengthen its
oversight of DEF, we recommend that the Secretary of Defense direct
that performance benchmarks be established, as required by DOD's
grant agreement with DEF; a long-range plan for attracting private
capital be prepared by DEF and approved by DOD; and semiannual
progress reviews and the required office and field visits be
performed. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

DOD and DEF provided written comments on a draft of this report.  DOD
concurred with our report and recommendation and noted its plans to
implement our recommendation.  DEF did not expressly disagree with
our report or recommendation but stated that Congress did not intend
for its oversight to be carried out in the same manner as oversight
of a typical U.S.  Agency for International Development or DOD
grantee.  We generally agree with DEF on this matter; therefore, our
recommendation is limited to compliance with the oversight
requirements of the grant agreement itself.  DEF also stated that it
has controlled its expenses better than our report suggests.  To
evaluate DEF operating expenses, we used the most consistent and
readily available data for all 11 U.S.  government-sponsored
enterprise funds.  DOD's and DEF's comments are presented in
appendixes III and IV, respectively. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

To determine the status of ongoing defense conversion projects and
better understand their potential WMD impact, we reviewed 20 DSWA and
4 DEF defense conversion projects that had been approved at the time
we began our review in early July 1996.  We did not review the four
DEF projects that were approved after we began our review.  In
reviewing these conversion projects, we examined records and
interviewed officials at DSWA, DOD, DEF, and U.S.  private firms
involved in the defense conversion projects.  We also visited several
locations in Russia and Kazakstan and we interviewed U.S., Russian,
and Kazakstan government and private officials and toured sites of 12
projects to observe first-hand the (1) buildings, (2) condition of
the projects and equipment being used, and (3) current stage of
development.  During these visits, we attempted to confirm the prior
uses of buildings being employed for these projects and the previous
roles of employees.  In Belarus and Ukraine, we relied on statements
and documents provided by DSWA and U.S.  contractors.  For all
projects, we relied on the views of officials associated with the
projects regarding how each project plans to overcome obstacles,
achieve production, and sell products. 

In assessing the WMD attributes and the ability of each project to
convert WMD capability, we did not review the DSWA and DEF processes
for selecting defense conversion projects.  For the purposes of this
review, we accepted DOD's judgment that the list of 150 firms
included WMD-related enterprises.  We were not able to independently
verify the WMD relationships of conversion projects and we relied on
DSWA, DEF, U.S.  contractor, and joint venture officials to provide
accurate information.  In Kazakstan and Russia, we spoke with joint
venture officials who are former employees of WMD enterprises because
the facilities that we saw no longer produced WMD components.  In
Belarus and Ukraine, we relied on information from DSWA project
managers and industry officials to understand former capabilities of
former Soviet Union enterprises.  In all cases, we used multiple
independent sources to draw our conclusions. 

In reviewing DEF management practices and operating expenses, we
interviewed and obtained documents from DEF and DOD officials on
DEF's policies, procedures, and practices.  We reviewed DEF's grant
agreement, bylaws, corporate policies, and procedures.  These
documents established criteria for assessing DEF's management
practices.  We analyzed various DEF project and expense files.  We
also spoke with selected DEF investment partners.  We obtained
documents from the U.S.  Agency for International Development on
policies and expenditures of other enterprise funds.  We used data
from these funds to establish a basis for determining the consistency
of DEF expenses with other funds. 

We conducted our review between July 1996 and March 1997 in
accordance with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :8.1

We are sending copies of this report to the Secretaries of Defense
and State, the President of the Defense Enterprise Fund, and other
appropriate congressional committees.  We will also make copies
available to others on 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 V. 

Sincerely yours,

Harold J.  Johnson, Associate Director
International Relations and Trade Issues


DSWA-MANAGED CONVERSION PROJECTS
=========================================================== Appendix I

The Defense Special Weapons Agency (DSWA) managed 20 defense
conversion projects in Belarus, Kazakstan, Ukraine, and Russia. 
Typically, DSWA contracted with private U.S.  firms to initiate
projects at former weapons of mass destruction (WMD) industries in
the former Soviet Union.  These private firms often used their own
capital as investments in these projects. 


   BELARUS DEFENSE CONVERSION
   PROJECTS
--------------------------------------------------------- Appendix I:1

DSWA planned to spend $20 million on four defense conversion projects
in Belarus.  Three of the projects involved U.S.  firms and Belarus
defense-related entities--Belomo Optics and Mechanical Manufacturing
Association, Integral Research and Production Amalgamation, and Minsk
Computer.  One project is to provide housing to demobilized Strategic
Rocket Force personnel. 


      BELOMO
------------------------------------------------------- Appendix I:1.1

  -- Contract amount and date:  $960,000 awarded in April 1994. 

  -- Former defense capability:  Producer of satellite and aerial
     reconnaissance optics, night vision optics, lasers, simulators,
     and tank and armored vehicle optics. 

  -- Former employment level:  40,000 at height of production; 20,000
     in 1993. 

  -- Purpose of joint venture:  To manufacture and sell laser pointer
     devices. 

  -- Defense building conversion:  Refurbished a 12,900-square foot
     production area.  The site may have manufactured parts for a
     missile homing device. 

  -- Joint venture production:  Produced 19,023 laser pointers, which
     are used by speakers in presentations. 

  -- Joint venture employment:  88 former defense workers.  We could
     not confirm if these employees worked on WMD-related projects. 

  -- Obstacles:  Not applicable. 

  -- Status of project:  Ceased operations in 1996.  Falling retail
     prices for the laser pointers and increased competition from
     suppliers in Asia created a situation in which the venture could
     no longer compete. 


      INTEGRAL
------------------------------------------------------- Appendix I:1.2

  -- Contract amount and date:  $5.8 million awarded in April 1994. 

  -- Former defense capability:  Producer of nuclear-hardened chips
     for the Soviet military.  According to the U.S.  partner of the
     project, Integral produced 40 percent of the chips on the Soviet
     Union's missile guidance systems.  Integral also produced
     integrated circuits, transistors, electronic watches, and
     microwave and pulse diodes. 

  -- Former employment level:  33,000 in September 1993. 

  -- Purpose of joint venture:  To produce low end integrated
     circuits. 

  -- Defense building conversion:  Converted a 26,400-square foot
     facility, located in the center of Integral's complex, that had
     been used for military production.  The facility made
     microprocessors that could be used in guidance systems. 

  -- Joint venture production:  Began production and delivery of
     integrated circuits in May 1995. 

  -- Joint venture employment:  250 former defense workers. 

  -- Obstacles:  Not applicable. 

  -- Status of project:  No longer operational.  Because of a poor
     business environment, the American partner withdrew from the
     joint venture. 


      MINSK COMPUTER
------------------------------------------------------- Appendix I:1.3

  -- Contract amount and date:  $2.5 million awarded in September
     1994. 

  -- Former defense capability:  Manufacturer of mainframe computers
     for the Soviet military.  Before the breakup of the former
     Soviet Union, over 85 percent of Minsk Computer's work was for
     the military.  DSWA reported in 1993 that Minsk Computer had no
     defense work and had laid off 40 percent of its employees. 

  -- Former employment level:  10,000 at the height of production. 

  -- Purpose of joint venture:  To produce solid-state battery
     chargers, power supplies, transformers, and wireless
     communications modems for computer network systems. 

  -- Defense building conversion:  Converted a 17,200-square foot
     facility that was used for military production.  We were not
     able to determine if this facility had been used for WMD-related
     activities. 

  -- Joint venture production:  Produced solid-state battery
     chargers, power supplies, and transformers.  Developed 25
     prototype wireless communications modems. 

  -- Joint venture employment:  168 former defense workers employed. 

  -- Obstacles:  Not applicable. 

  -- Status of project:  No longer operational. 


      HOUSING
------------------------------------------------------- Appendix I:1.4

  -- Contract amount and date:  $9.9 million awarded in May 1995. 

  -- Former defense capability:  No commercial venture is being
     established as part of this project. 

  -- Former employment level:  Not applicable. 

  -- Purpose of joint venture:  To build 171 apartments for
     demobilized Strategic Rocket Force personnel and their families. 

  -- Defense building conversion:  Not applicable. 

  -- Joint venture production:  Not applicable. 

  -- Joint venture employment:  Not applicable. 

  -- Obstacles:  None. 

  -- Status of project:  Completed in April 1997. 


   KAZAKSTAN DEFENSE CONVERSION
   PROJECTS
--------------------------------------------------------- Appendix I:2

DSWA notified Congress of its intent to spend $15 million on four
defense conversion projects in Kazakstan.  These projects are between
U.S.  firms and Kazakstan defense-related entities--Biomedpreparat,
Gidromash, the National Nuclear Center, and Kazinformtelecom. 


      BIOMEDPREPARAT
------------------------------------------------------- Appendix I:2.1

  -- Contract amount and date:  $2.7 million awarded in March 1995. 

  -- Former defense capability:  Biological weapons research and
     production.  According to joint venture officials,
     Biomedpreparat produced organisms such as Ebola and Anthrax. 

  -- Former employment level:  700 at its peak in the mid-1980s; 200
     in October 1996. 

  -- Purpose of joint venture:  To manufacture and distribute
     vitamins, pharmaceuticals, and antibiotics. 

  -- Defense building conversion:  Renovations have begun on
     Biomedpreparat's infirmary (see fig.  I.1), which was used as
     the facilities' decontamination unit and will house initial
     pharmaceutical production.  Joint venture officials also hope to
     use a waste treatment building for future production. 

  -- Joint venture production:  The joint venture has bottled
     vitamins that were manufactured in the United States to use for
     its initial marketing efforts.  The initial production line is
     not yet complete. 

  -- Joint venture employment:  In October 1996, 14 former
     Biomedpreparat workers were employed, and 80 to 100 former
     workers may be employed once full production is ready. 

  -- Obstacles:  This project faces major challenges because
     government obstacles remain and the U.S.  and Kazakstan partners
     are having difficulties reaching agreements.  Also, facility
     renovations are not complete, and necessary equipment is not in
     place. 

  -- Status of project:  Renovations on the infirmary are being
     completed, and pharmaceutical manufacturing equipment is being
     shipped to Kazakstan to set up a production line. 

   Figure I.1:  Abandoned
   Infirmary at a Biological
   Weapons Factory Where
   Construction of a
   Pharmaceutical Production Line
   Has Begun

   (See figure in printed
   edition.)


      GIDROMASH
------------------------------------------------------- Appendix I:2.2

  -- Contract amount and date:  $3 million awarded in March 1995. 

  -- Former defense capability:  Built components of missile delivery
     systems and manufactured engine casings.  Approximately 85 to 90
     percent of production had been devoted to defense, and 10
     percent was related to WMD.  The WMD production was focused on
     the manufacture of submarine-launched missiles and various
     prototypes.  The plant manufactured the entire missile device,
     except for the nuclear component.  When defense conversion
     efforts were commencing in Kazakstan in 1994, 40 percent of the
     plant was being utilized for the production of antisubmarine
     rockets and missiles. 

  -- Former employment level:  2,200 in 1988; 1,400 in 1994. 

  -- Purpose of joint venture:  To manufacture a wide array of
     standard and specialty pressure vessels, including cryogenic
     pressure vessels, valves, and other products for the oil, gas,
     and petrochemical industry. 

  -- Defense building conversion:  Converted 699,700-square feet of
     Gidromash's production space (see fig.  I.2).  Some equipment
     from Gidromash's former production lines was utilized, whereas
     other equipment was junked.  Joint venture officials pointed out
     that one large lathe used for missile production was outside
     rusting. 

  -- Joint venture production:  The cryogenic vessel production line
     opened in July 1996.  The project has firm orders for 150
     cryogenic vessels and produces them at a rate of 3 to 4 a week. 

  -- Joint venture employment:  374 former Gidromash workers. 

  -- Obstacles:  None. 

  -- Status of project:  Production has begun, and the joint venture
     is growing.  Anticipated sales are $5 million to $6 million in
     1996, $12 million to $15 million in 1997, and $20 million to $40
     million by 2000. 

   Figure I.2:  Cryogenic Pressure
   Vessel Production at a Former
   Missile Production Facility

   (See figure in printed
   edition.)


      NATIONAL NUCLEAR CENTER
------------------------------------------------------- Appendix I:2.3

  -- Contract amount and date:  $4 million awarded in March 1995. 

  -- Former defense capability:  The National Nuclear Center is a
     Kazakstan government organization that was established after the
     fall of the Soviet Union to carry out basic research in the
     field of nuclear energy.  The center is responsible for sites
     that conducted nuclear weapons testing and research while the
     Soviet Union was intact.  It also manages several research
     reactors. 

  -- Former employment level:  2,000 employees in 1995. 

  -- Purpose of joint venture:  To establish a printed circuit board
     production and marketing business. 

  -- Defense building conversion:  The project's main facility is
     located in Kurchatov, Kazakstan, which is just outside the
     Semipalatansk nuclear test site and is located on the grounds of
     the National Nuclear Center (see
     fig.  I.3).  This facility was constructed as a Soviet Union
     defense conversion project in the late 1980s.  The second
     facility occupies an administrative office building just outside
     the grounds of the National Nuclear Center near Almaty,
     Kazakstan.  These buildings were not used for any WMD-related
     activities. 

  -- Joint venture production:  Production began recently. 

  -- Joint venture employment:  28 National Nuclear Center workers
     were employed as of October 1996.  Additional center workers are
     to be hired as production demands warrant. 

  -- Obstacles:  None. 

  -- Status of project:  Project officials plan to sell printed
     circuit boards on the world market.  The U.S.  partner, an
     established firm in the electronics industry, will use its
     marketing resources to sell initial products.  The project has
     brought in the Defense Enterprise Fund (DEF) as an investor to
     have enough capital to initiate production.  DEF has committed a
     total of $2.5 million to this project and invested $500,000. 

   Figure I.3:  Building
   Originally Constructed for a
   Soviet Defense Conversion
   Project That Now Houses a
   U.S.-Kazakstan Printed Circuit
   Board Production Line

   (See figure in printed
   edition.)


      KAZINFORMTELECOM
------------------------------------------------------- Appendix I:2.4

  -- Contract amount and date:  $5 million awarded in January 1995. 

  -- Former defense capability:  Kazinformtelecom is responsible for
     maintaining the Saryshagan missile testing site.  The site
     controlled satellites, monitored intercontinental ballistic
     missiles, regulated early detection and tracking systems, and
     tested surface-to-air and antiballistic missiles. 
     Kazinformtelecom officials explained that this site, which was
     abandoned by the Russian military in 1994, was one of three
     central Soviet command and control sites and that it controlled
     satellite communications for the Soviet military. 

  -- Former employment level:  3,000 military and 2,000 civilian
     workers were employed at the Saryshagan site. 

  -- Purpose of joint venture:  To establish an international and
     domestic wireless telecommunications service in Kazakstan and
     have wireless communications in 11 Kazakstan cities. 

  -- Defense building conversion:  The Saryshagan site is 1 of 11
     sites operated by the joint venture but is the only site with a
     defense conversion application.  The building at the abandoned
     Saryshagan base was unoccupied, and the project was using a
     former Soviet satellite dish that had been abandoned (see fig. 
     I.4). 

  -- Joint venture production:  Telecommunications service has not
     yet begun.  The establishment of service depends on the
     equipment being in place and the granting of necessary
     government licenses. 

  -- Joint venture employment:  52 local national employees. 
     Kazinformtelecom officials explained that about 25 of these
     people, 20 of whom are engineers, worked at the Saryshagan site
     before conversion.  The joint venture will hire up to 250
     additional people once obstacles are overcome. 

  -- Obstacles:  As of February 1997, three significant obstacles
     needed to be overcome before the project could become fully
     functional.  First, no resolution had been reached on an
     interconnect agreement with Kazaktelecom.  Second, the Kazakstan
     government had granted a license to the venture for data
     communications, but it had not granted a license for voice
     communications.  Until a voice communications license is
     obtained, it will not be possible to operate a profitable
     business.  Third, one subcontractor had not delivered necessary
     equipment. 

  -- Status of project:  Much of the equipment is in place, and the
     project officials are trying to overcome the obstacles.  DEF has
     become an investor in this project. 

   Figure I.4:  Abandoned Soviet
   Command and Control Base Where
   One Project Occupies a Building

   (See figure in printed
   edition.)


   RUSSIA DEFENSE CONVERSION
   PROJECTS
--------------------------------------------------------- Appendix I:3

DSWA notified Congress of its intent to spend $38 million on five
defense conversion projects in Russia.  Four of these projects are
between U.S.  firms and Russian defense-related entities--GOSNIIAS,
Istok, Leninets, and Mashinostroyenia.  One project is to provide
housing to demobilized Strategic Rocket Force personnel and establish
joint ventures with three defense-related entities--Kompozit,
Mashinostroyenia, and Soyuz. 


      GOSNIIAS
------------------------------------------------------- Appendix I:3.1

  -- Contract amount and date:  $4.1 million in July 1994. 

  -- Former defense capability:  GOSNIIAS is a state-controlled
     enterprise that designs and tests military avionics and carries
     out avionics and weapons integration. 

  -- Former employment level:  8,000 employees in 1992. 

  -- Purpose of joint venture:  While no joint venture was
     established, the project was intended to build prototypes for
     air traffic control hardware and software based on the Global
     Positioning System and GLONASS, the Russian counterpart. 

  -- Defense building conversion:  Occupied a 8,600-square foot
     military design facility that had previously been used for
     conducting mathematical analyses concerning weapons. 

  -- Joint venture production:  Developed a business plan and built
     prototypes for air traffic control hardware and software. 

  -- Joint venture employment:  This project began with a staff of 10
     defense workers and employed as many as 60 defense workers at
     one time. 

  -- Obstacles:  While the partnership has developed a business plan
     and built prototype hardware and software, a market has yet to
     develop.  GOSNIIAS and the U.S.  contractor tell us that they
     plan to work together in competing for a future Russian
     government contract for an air traffic control system.  However,
     the contract has yet to be tendered.  This contract could result
     in 200 jobs for GOSNIIAS and be worth $80 million to $100
     million. 

  -- Status of project:  Work on the DSWA contract is nearly
     complete, and closeout on the contract is pending.  Rockwell
     intends to create a long-term relationship with GOSNIIAS and is
     planning on awarding subcontracts to GOSNIIAS for a variety of
     efforts. 


      ISTOK
------------------------------------------------------- Appendix I:3.2

  -- Contract amount and date:  $5.7 million awarded in July 1994. 

  -- Former defense capability:  Producer of magnetrons, klystrons,
     high-powered vacuum tubes, carbon dioxide lasers,
     electro-optical devices, batteries, microwave devices, and
     solid-state electronic components. 

  -- Former employment level:  8,000 in 1994. 

  -- Purpose of joint venture:  To manufacture and distribute hearing
     aids. 

  -- Defense building conversion:  The project converted a
     15,100-square foot facility that produced highly integrated
     circuits.  According to joint venture officials, this defense
     facility was associated with WMD. 

  -- Joint venture production:  By early summer 1995, production had
     begun on a hearing aid (see fig I.5) that was useful for the
     moderately hearing impaired--about 50 to 60 percent of the
     hearing impaired population in Russia.  The joint venture is
     capable of producing 250,000 hearing aids annually and initially
     produced about 25,000 hearing aids.  The venture purchased parts
     for 40,000 hearing aids, but some of the components were in poor
     condition. 

  -- Joint venture employment:  160 former defense workers. 
     According to Istok officials, 80 percent of the staff are
     engineers, but we did not determine if they had worked on
     WMD-related projects. 

  -- Obstacles:  The joint venture suffered a major setback in
     distributing its hearing aids.  It had planned to sell the
     hearing aids via the Russian government's medical technology
     supply agency, which would have distributed them to more than
     200 hearing clinics around Russia.  However, the lack of
     government funds prompted the supply agency to only purchase
     hearing aids for the severely hearing impaired--a small
     population for which Istok's hearing aid was not well suited. 
     At that time, the venture had no other products.  The joint
     venture needs additional financing to establish new production
     lines. 

  -- Status of project:  Istok is now planning to produce another
     hearing aid and focus attention on selling it on the export
     market (mostly in third world countries) as well as on the
     Russian market.  Istok also hopes to begin production on a
     hearing aid aimed at severely hearing impaired individuals.  The
     joint venture has asked DSWA to provide additional funding to
     help move the venture forward. 

   Figure I.5:  Hearing Aid
   Production at a Former
   Integrated Circuit Production
   Building

   (See figure in printed
   edition.)


      LENINETS
------------------------------------------------------- Appendix I:3.3

  -- Contract amount and date:  $2 million in June 1994. 

  -- Former defense capability:  Manufacturer of airborne radars and
     other radio electronic equipment.  Leninets officials claimed
     that they also made specialized equipment, such as chips for
     high-frequency radars used in MIG and Sukoi aircraft.  Leninets
     consists of 16 factories, 10 research organizations, and 50
     small enterprises. 

  -- Former employment level:  Unknown. 

  -- Purpose of joint venture:  To remanufacture dental chairs,
     distribute new dental equipment, and bottle solutions for oral
     infection control. 

  -- Defense building conversion:  The project is occupying a
     4,600-square foot building that formerly operated, in part, as a
     toy factory, but Leninets officials stated that 55 percent of
     the building was devoted to manufacturing portable naval
     radiation decontaminators, which were intended for use on naval
     vessels after a nuclear attack.  Production stopped in 1993. 

  -- Joint venture production:  As of October 1996, the project had
     sold 187 remanufactured dental chairs, earning the venture about
     $35,000 a month (see fig.  I.6).  The distribution of new dental
     equipment earns the project about $80,000 a month. 

  -- Joint venture employment:  About 22 people, some of which have
     manufacturing skills associated with computers and other
     equipment and others are being used in accounting and marketing
     roles. 

  -- Obstacles:  The project has had considerable difficulty in
     setting up its bottling operation, which it sees as more
     lucrative than the other ventures.  The bottling operation has
     been delayed for over 1 year due to setbacks at the U.S. 
     manufacturer of the bottling equipment and problems with Russian
     customs.  Project officials also underestimated the cost of
     purchasing the equipment and refurbishing the space that they
     are to occupy.  As a result, the project had run out of funds at
     the end of 1996. 

  -- Status of project:  The project is seeking at least $250,000 to
     $500,000 in new capital to start up the bottling line. 

   Figure I.6:  Dental Chair
   Production Line at a Former
   Manufacturer of Portable Naval
   Radiation Decontaminators

   (See figure in printed
   edition.)


      MASHINOSTROYENIA
------------------------------------------------------- Appendix I:3.4

  -- Contract amount and date:  $5.1 million awarded in June 1994. 

  -- Former defense capability:  Producer of cruise missiles,
     intercontinental ballistic missiles, and maneuverable
     satellites. 

  -- Former employment level:  9,000 in 1992. 

  -- Purpose of joint venture:  To establish a cola bottling
     facility. 

  -- Defense building conversion:  Plans called for the conversion of
     Mashinostroyenia's nitrogen building, which was needed to
     produce missiles. 

  -- Joint venture production:  The joint venture was never
     established, so it never reached production. 

  -- Joint venture employment:  None. 

  -- Obstacles:  According to Mashinostroyenia officials, DOD
     selected the project without their input, and they were not
     happy to have a low-skilled project at their high-technology
     firm. 

  -- Status of project:  The American partner and Mashinostroyenia
     were not able to work out differences, and the U.S.  partner
     asked to be released from the contract.  DSWA agreed in April
     1996 to cancel the contract and disbursed $195,000 of the $5.1
     million contract. 


      HOUSING
------------------------------------------------------- Appendix I:3.5

  -- Contract amount and date:  $20 million awarded in June 1995. 

  -- Former defense capability:  The Russian partners for this
     project include Soyuz, a firm that built turbofans for cruise
     missiles; Kompozit, a producer of heat shields for missiles and
     space systems; and Mashinostroyenia. 

  -- Former employment level:  Kompozit employed 10,000 in 1992,
     Mashinostroyenia employed 9,000 in 1992, and Soyuz employment
     was unknown. 

  -- Purpose of joint venture:  To construct a housing industry in
     Russia and build homes for Strategic Rocket Force personnel. 

  -- Defense building conversion:  No buildings have been selected
     for this project. 

  -- Joint venture production:  Unknown at this time because the
     joint venture has not been established. 

  -- Joint venture employment:  Unknown at this time because the
     joint venture has not been established. 

  -- Obstacles:  Until January 1997, DOD and the Russian government
     were not able to reach agreement on the scope of this project. 

  -- Status of project:  In January 1997, the Russian government and
     DOD officials agreed that Russian WMD enterprises would work
     with an American partner to establish five production lines. 
     These production lines are a modular housing assembly facility,
     a window and door manufacturing facility, a low-pressure brass
     casting production line, an asphalt shingle production line, and
     a lumber mill capable of supplying the lumber suitable for
     housing construction.  Remaining funds will be used to provide
     housing to demobilized Strategic Rocket Force personnel. 


   UKRAINE DEFENSE CONVERSION
   PROJECTS
--------------------------------------------------------- Appendix I:4

Between 1994 and 1995, DSWA signed contracts totaling $53.5 million
to initiate seven defense conversion projects.  These projects were
between U.S.  firms and Ukraine defense-related entities--Central
Design Institute and Montazhnik K, Fregat, Hartron, Kommunar,
Meridian, Monolit, and Orizon. 


      CENTRAL DESIGN INSTITUTE AND
      MONTAZHNIK K
------------------------------------------------------- Appendix I:4.1

  -- Contract amount and date:  $16 million awarded in September 1994
     to construct 135 apartment units.  Contract options were
     exercised to construct an additional 60 units for a total cost
     $18.7 million. 

  -- Former defense capability:  Design and construction of
     defense-related structures for the Ukrainian Ministry of
     Defense. 

  -- Former employment level:  Unknown, but current employment is
     22,000. 

  -- Purpose of joint venture:  To design and construct apartment
     units for demobilized Strategic Rocket Force personnel and
     transfer modern housing construction and production technologies
     to Ukraine. 

  -- Defense building conversion:  There was no defense conversion
     requirement as the Ukrainian Ministry of Defense was the
     customer, joint venture partner, and subcontractor for this
     housing project.  Furthermore, in 1991 the Ministry had
     established its own housing construction complex.  It is now
     pursuing more commercial construction activities. 

  -- Joint venture production:  Designed and constructed 195
     apartment units. 

  -- Joint venture employment:  440 workers. 

  -- Obstacles:  None. 

  -- Status of project:  As of May 1996, all of the 195 apartment
     units had been constructed and transferred to the Ministry of
     Defense.  The joint venture was hoping to continue with other
     construction projects. 


      FREGAT
------------------------------------------------------- Appendix I:4.2

  -- Contract amount and date:  $10 million awarded in June 1994 and
     later increased to $15 million. 

  -- Former defense capability:  Producer of ship parts and equipment
     for the Black Sea Fleet.  No ties to producing or supporting
     WMD. 

  -- Former employment level:  3,200 in 1993. 

  -- Purpose of joint venture:  To produce and construct up to 261
     prefabricated housing units for demobilized Strategic Rocket
     Force personnel at Pervomaysk, Ukraine. 

  -- Defense building conversion:  The joint venture occupied about
     150,700 square feet of one building.  Former production in this
     building was not related to WMD. 

  -- Joint venture production:  Produced 261 prefabricated housing
     units. 

  -- Joint venture employment:  Nearly 300 workers were involved in
     fabricating, erecting, and finishing the housing modules. 

  -- Obstacles:  None. 

  -- Status of project:  The last of the 261 housing units were
     turned over to the Ukrainian Ministry of Defense in August 1996. 
     The joint venture had hoped to secure domestic and foreign
     customers for the prefabricated housing units, but there was no
     market for the product.  The equipment used to produce the units
     remains at the Fregat factory in Pervomaysk. 



      HARTRON
------------------------------------------------------- Appendix I:4.3

  -- Grant amount and date:  $5 million grant awarded in May 1994. 

  -- Former defense capability:  Hartron, the largest manufacturer of
     control systems in Ukraine, developed, produced, and installed
     control systems for missiles and space systems. 

  -- Former employment level:  Unknown, but current employment is
     10,000. 

  -- Purpose of joint venture:  To produce instrumentation and
     control systems to improve the safety and reliability of
     Ukrainian nuclear power plants. 

  -- Defense building conversion:  The joint venture occupies about
     10,800 square feet of space in one building.  The Hartron
     facility, however, was not a production facility.  Instead, it
     was used for designing and testing purposes.  Manufacturing of
     the systems was done at other facilities. 

  -- Joint venture production:  The joint venture delivered its first
     instrumentation and control system in May 1996 to the South
     Ukraine nuclear plant. 

  -- Joint venture employment:  The joint venture hired 65 employees,
     but this number could increase with production volume. 

  -- Obstacles:  The joint venture must contend with untimely
     customer payments.  Its customers, the Ukrainian nuclear power
     plants, are suffering financial difficulties and often delay
     payment.  The American partner requested an extension of the
     grant until September 1997 and an increase of the rate of
     disbursement, not the grant amount, to lower the cost of the
     equipment sold to the nuclear power plants.  No decision has
     been made on this proposal. 

  -- Status of project:  As of October 1996, the joint venture had a
     backlog of orders worth over $10 million. 


      KOMMUNAR
------------------------------------------------------- Appendix I:4.4

  -- Contract amount and date:  $3.3 million awarded in January 1995. 

  -- Former defense capability:  Manufacturer of aerospace and
     military electronics equipment, including missile and space
     guidance systems and relays for satellites. 

  -- Former employment level:  Unknown, but current employment is
     18,000. 

  -- Purpose of joint venture:  To design, manufacture, and
     distribute cellular telephones in Asia and Ukraine. 

  -- Defense building conversion:  The joint venture was to convert
     nearly 40,000 square feet of factory space. 

  -- Joint venture production:  None, as the contract is being closed
     out.  The joint venture has not been registered in Ukraine. 
     However, Kommunar officials still hope to pursue cellular
     telephone production through other opportunities.  They believe
     that the market for cellular telephones is growing worldwide. 

  -- Joint venture employment:  Had employed 55 workers. 

  -- Obstacles:  The project is not operational.  The U.S.  partner
     lacks the capital to proceed with the project, and Kommunar
     would like to form a venture with a different firm.  DOD is
     attempting to attract a new U.S.  partner to this project. 

  -- Status of project:  DSWA is closing out the contract with the
     American partner. 


      MERIDIAN
------------------------------------------------------- Appendix I:4.5

  -- Contract amount and date:  $4.1 million awarded in October 1995. 

  -- Former defense capability:  Involved in designing and testing
     radio equipment and instrument systems for missiles and
     satellites. 

  -- Former employment level:  Unknown, but current employment is
     4,800. 

  -- Purpose of joint venture:  To manufacture high-quality die cast
     products for the housing, appliance, and automotive markets. 

  -- Defense building conversion:  The joint venture will eventually
     occupy over 95,000 square feet of factory space in about four
     buildings.  One building is presently being refurbished to
     accommodate die casting equipment. 

  -- Joint venture production:  The joint venture hopes to begin
     production in July 1997. 

  -- Joint venture employment:  Once production begins, the venture
     will employ about 250 workers. 

  -- Obstacles:  None. 

  -- Status of project:  As part of its business plan, the American
     partner wants to fully capitalize the joint venture and is
     seeking over $11 million from such entities as DEF, the Overseas
     Private Investment Corporation, and the European Bank for
     Reconstruction and Development.  According to the joint venture
     partner, DEF has expressed interest in funding the joint venture
     and is considering making an investment. 


      MONOLIT
------------------------------------------------------- Appendix I:4.6

  -- Contract amount and date:  $4.8 million awarded in October 1995. 

  -- Former defense capability:  Manufacturer of electronics for
     rocket control and guidance systems. 

  -- Former employment level:  20,000 in the 1980s according to the
     joint venture partner.  Employed 13,000 workers as of June 1996. 

  -- Purpose of joint venture:  To manufacture advanced
     instrumentation and control systems for nuclear and conventional
     commercial power stations in Ukraine and other former Soviet
     states. 

  -- Defense building conversion:  The production lines that occupied
     the 18,300-square foot facility were used to manufacture
     electronics for rocket control and guidance systems.  The
     facility, however, was not active when the joint venture was
     formed. 

  -- Joint venture production:  Production has yet to begin.  Once
     equipment is installed, the venture could reach production in 6
     to 8 weeks. 

  -- Joint venture employment:  The joint venture employs 25 workers. 
     Once production begins, the number could increase. 

  -- Obstacles:  Even though the conversion of the facility is nearly
     complete, the Ukrainian State Customs Committee is not
     permitting joint venture equipment to enter Ukraine despite,
     according to DOD officials, an agreement between the U.S.  and
     Ukrainian governments.  Repeated attempts to resolve this issue
     have proven unsuccessful.  Such delays will further impact the
     project schedule. 

  -- Status of project:  The scope of the work had to be modified
     because Monolit could not afford the labor and design work
     associated with refurbishing the factory space to accommodate
     the needed equipment. 


      ORIZON
------------------------------------------------------- Appendix I:4.7

  -- Contract amount and date:  $2.7 million awarded in October 1995. 

  -- Former defense capability:  Manufacturer of precision guidance
     and control systems for military satellites. 

  -- Former employment level:  Once employed about 18,000 workers. 
     9,000 current employees. 

  -- Purpose of joint venture:  To produce and assemble polyvinyl
     chloride windows and doors for sale in the former Soviet Union,
     especially Ukraine. 

  -- Defense building conversion:  The joint venture is converting
     53,800 square feet of space and will have an additional 10,800
     square feet for storage.  In the building that the joint venture
     occupies, satellite guidance and control systems were installed
     and tested.  High bay areas, required for the assembly and
     testing of large military satellite systems, were idle before
     the establishment of the joint venture. 

  -- Joint venture production:  Production was to have begun in
     October 1996.  Although the project schedule slipped about 5
     months, the joint venture began production in March 1997. 

  -- Joint venture employment:  15 workers; employment is expected to
     increase with the commencement of production. 

  -- Obstacles:  Orizon was to have provided the labor and materials
     for modifying the building and installing the required
     utilities, but it did not receive its appropriated funding from
     the Ukrainian government to finance these efforts.  To avoid
     further delays, DSWA modified the contract so that the American
     joint venture partner could complete the necessary renovations
     and begin production. 

  -- Status of project:  Production began in March 1997. 


DEF CONVERSION PROJECTS
========================================================== Appendix II

As of July 1996, DEF had approved four investments in Russia for up
to $8.8 million.  In one case, the investment was in the form of a
loan and, in three cases, in the form of an equity position.  These
projects are between U.S.  firms and Russian defense-related
entities--Kirovsky-Zavod, Nauka, Khlopin Radium Institute, and
Mashinostroyenia. 


   KIROVSKY-ZAVOD
-------------------------------------------------------- Appendix II:1

  -- Investment amount and date:  $3 million in loans approved in
     April 1995. 

  -- Former defense capability:  Manufacturer of propulsion systems
     for nuclear submarines. 

  -- Former employment level:  50,000 in 1991. 

  -- Purpose of joint venture:  To produce excavator frames for
     export to a plant in Belgium. 

  -- Defense building conversion:  Converted 60,300 square feet of
     floor space in a building that was previously used to
     manufacture pumping turbines and was not related to WMD. 

  -- Joint venture production:  Producer of excavator frames. 

  -- Joint venture employment:  Initially employed about 80 workers,
     but the number has risen to 100 and could peak at 200 by the end
     of 1997.  It is likely these workers were in the defense
     industry, but it is uncertain whether they worked on WMD-related
     activities. 

  -- Obstacles:  None. 

  -- Status of project:  The plant is currently working at capacity,
     and the project is expected to break even in 1997.  The project
     is expected to pay off its DEF loan.  The U.S.  partner
     expressed interest in expanding the operation, but the Russian
     partner was not willing to do so.  As a result, the U.S. 
     partner purchased the Russian partner's share of the joint
     venture. 


   NAUKA
-------------------------------------------------------- Appendix II:2

  -- Investment amount and date:  $2.8 million equity investment
     approved in September 1995.  The project has not yet used DEF
     funding. 

  -- Former defense capability:  Designer of environmental control
     systems for MIG aircraft. 

  -- Former employment level:  5,000 employees. 

  -- Purpose of joint venture:  To produce and market environmental
     control systems for private commercial aircraft manufacturers. 

  -- Defense building conversion:  Converted 53,800 square feet of
     factory space.  We were not able to confirm if this space had
     been used for WMD-related activities. 

  -- Joint venture production:  Has a limited 3-year contract to make
     heat exchangers (environmental control system components) for a
     British firm. 

  -- Joint venture employment:  About 40 employees that were younger
     hires and did not work on previous WMD projects. 

  -- Obstacles:  There is no market in Russia for domestic aircraft
     engines and no aircraft are being sold; thus, no market exists
     for aircraft environmental control systems. 

  -- Status of project:  The American partner has not yet drawn on
     the DEF investment. 


   KHLOPIN RADIUM INSTITUTE
-------------------------------------------------------- Appendix II:3

  -- Investment amount and date:  $1 million equity investment
     approved in September 1995. 

  -- Former defense capability:  Research and development associated
     with nuclear weapons, and plutonium and isotope production,
     among others. 

  -- Former employment level:  1,600 in 1995. 

  -- Purpose of joint venture:  To convert Russian WMD expertise into
     a commercial venture that builds and operates log sterilization
     and debarking centers in Russia, which will export treated logs
     to the United States. 

  -- Defense building conversion:  Unknown. 

  -- Joint venture production:  To irradiate timber of bugs and fungi
     so they will be suitable for export and processing in U.S. 
     sawmills. 

  -- Joint venture employment:  Approximately 10 scientists are
     working on this project, and more Khlopin employees will be used
     as this project develops. 

  -- Obstacles:  The project needs cash to get a log yard in Russia
     operational, and it needs to obtain a Western timber products
     firm as a partner. 

  -- Status of project:  DEF has invested $500,000 of the $1 million
     approved.  Although the technology is not at issue, the project
     has not yet demonstrated it can deliver logs.  The DEF Chief
     Financial Officer has temporarily become Chief Executive Officer
     of the joint venture. 


   MASHINOSTROYENIA
-------------------------------------------------------- Appendix II:4

  -- Investment amount and date:  $2 million equity investment
     approved in February 1996. 

  -- Former defense capability:  Manufacturer of intercontinental
     ballistic missiles, nuclear cruise missiles, and reconnaissance
     satellites. 

  -- Former employment level:  9,000 in 1992. 

  -- Purpose of joint venture:  To convert skilled Russian military
     programmers who were working in the areas of guidance and
     control systems for cruise missiles and rocket launchers to
     commercial programmers for software development. 

  -- Defense building conversion:  The project will occupy space
     outside of Mashinostroyenia's security enclosure. 

  -- Joint venture production:  Expected to develop commercial
     software programs for mainframe computers. 

  -- Joint venture employment:  300 former WMD-related workers within
     3 to 5 years (projected). 

  -- Obstacles:  The original Western partner withdrew from the
     investment. 

  -- Status of project:  DEF is seeking another Western partner. 




(See figure in printed edition.)APPENDIX III
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix II



(See figure in printed edition.)




(See figure in printed edition.)APPENDIX IV
COMMENTS FROM THE DEFENSE
ENTERPRISE FUND
========================================================== Appendix II



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

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

Blake Ainsworth
Muriel J.  Forster
Venecia R.  Kenah
Beth Hoffman Leï¿½n
Pierre R.  Toureille
F.  James Shafer

OFFICE OF THE GENERAL COUNSEL

Richard Seldin

RELATED GAO PRODUCTS

Weapons of Mass Destruction:  DOD Reporting on Cooperative Threat
Reduction Assistance Has Improved (GAO/NSIAD-97-84, Feb.  27, 1997). 

Weapons of Mass Destruction:  Status of the Cooperative Threat
Reduction Program (GAO/NSIAD-96-222, Sept.  27, 1996). 

Nuclear Nonproliferation:  Status of U.S.  Efforts to Improve Nuclear
Material Controls in Newly Independent States (GAO/NSIAD/RCED-96-89,
Mar.  8, 1996). 

Weapons of Mass Destruction:  DOD Reporting on Cooperative Threat
Reduction Assistance Can Be Improved (GAO/NSIAD-95-191, Sept.  29,
1995). 

Weapons of Mass Destruction:  Reducing the Threat From the Former
Soviet Union:  An Update (GAO/NSIAD-95-165, June 9, 1995). 

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

Soviet Nuclear Weapons:  U.S.  Efforts to Help Former Soviet
Republics Secure and Destroy Weapons (GAO/T-NSIAD-93-5, Mar.  9,
1993). 

Soviet Nuclear Weapons:  Priorities and Costs Associated With U.S. 
Dismantlement Assistance (GAO/NSIAD-93-154, Mar.  8, 1993). 

Russian Nuclear Weapons:  U.S.  Implementation of the Soviet Nuclear
Threat Reduction Act of 1991 (GAO/T-NSIAD-92-47, July 27, 1992). 


*** End of document. ***