Nuclear Nonproliferation: Status of Transparency Measures for U.S.
Purchase of Russian Highly Enriched Uranium (Letter Report, 09/22/1999,
GAO/RCED-99-194).

Pursuant to a congressional request, GAO examined the nuclear
nonproliferation status of transparency measures for U.S. purchase of
Russian highly enriched uranium (HEU), focusing on: (1) the transparency
measures that are in place; (2) whether these measures ensure that the
nonproliferation objectives of the agreement are met; and (3) the
proposals for additional transparency measures.

GAO noted that: (1) while most of the transparency measures have
gradually been implemented at four Russian nuclear material processing
facilities, several key measures have not yet been put into place; (2)
under the agreement, U.S. officials lack access to Russian nuclear
weapons dismantlement facilities and to the weapons dismantlement
process; (3) some of the low enriched uranium (LEU) delivered to the
United States--about one-third--was shipped before the transparency
measures had been implemented at each of the Russian facilities; (4)
according to the Departments of State and Energy, there was a deliberate
decision by the U.S. government that U.S. interests would be served by
allowing a portion of the HEU to be blended into LEU and to be rapidly
removed from Russia while the details of the transparency measures were
being worked out; (5) U.S. officials first visited a Russia facility in
February 1996 to implement the initial set of transparency measures; (6)
in October 1996, Russian officials agreed to strengthen the measures in
return for a $100 million advance payment to be credited against their
deliveries of LEU; (7) transparency measures provide U.S. officials with
confidence that weapons-grade HEU is being blended into LEU at the three
Russian blending facilities; (8) U.S. officials will not be highly
confident that all of the LEU purchased under the agreement is coming
from weapons-grade HEU until continuous-monitoring equipment is
operating at the Russian blending facilities; (9) according to the
Energy, U.S. officials rejected one cylinder of LEU that was shipped to
the United States in 1997 for purchase under the agreement because it
did not meet the agreement's requirement; (10) the Secretary of Energy
proposed to the Russian Minister of Atomic Energy a number of additional
transparency measures that included providing U.S. officials with
greater access to the Russian nuclear-weapons-dismantlement process; and
(11) there has been no progress in reaching an agreement with Russia's
Ministry of Atomic Energy on adopting these additional measures.

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

 REPORTNUM:  RCED-99-194
     TITLE:  Nuclear Nonproliferation: Status of Transparency Measures
	     for U.S. Purchase of Russian Highly Enriched Uranium
      DATE:  09/22/1999
   SUBJECT:  Property disposal
	     Arms control agreements
	     Nuclear proliferation
	     Nuclear facilities
	     International cooperation
	     Nuclear weapons
IDENTIFIER:  United States-Russian Federation Agreement Concerning
	     Highly Enriched Uranium Disposition

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

Report to the Honorable Richard G.  Lugar, U.S.  Senate

September 1999

NUCLEAR NONPROLIFERATION - STATUS
OF TRANSPARENCY MEASURES FOR U.S. 
PURCHASE OF RUSSIAN HIGHLY
ENRICHED URANIUM

GAO/RCED-99-194

U.S.  Purchase of Russian HEU

(141372)

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

  DOE - Department of Energy
  EIA - Energy Information Administration
  GAO - General Accounting Office
  HEU - highly enriched uranium
  LEU - low enriched uranium
  MINATOM - Ministry of the Russian Federation for Atomic Energy

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

B-283458

September 22, 1999

The Honorable Richard G.  Lugar
United States Senate

Dear Senator Lugar: 

After the breakup of the Soviet Union in the early 1990s, there was
great concern that weapons-grade material from retired Russian
nuclear weapons, such as highly enriched uranium and plutonium, could
be stolen or reused in nuclear weapons if not disposed of or properly
protected.  In the case of highly enriched uranium, one solution was
to dilute this nuclear material into low enriched uranium so that it
could be made into fuel for commercial nuclear power reactors.  In
February 1993, the United States agreed to purchase from Russia 500
metric tons of highly enriched uranium extracted from dismantled
Russian nuclear weapons over a 20-year period.\1 Russia agreed to
dilute, or blend-down, the material into low enriched uranium before
shipping it to the United States.  From June 1995 through December
31, 1998, 1,487 metric tons of low enriched uranium, derived from 51
metric tons of highly enriched uranium, was delivered to the United
States.  USEC implements the commercial contract under the agreement
and pays Russia for the deliveries of low enriched uranium.\2 Russia
is expected to receive about $12 billion from the agreement.  As of
April 1999, USEC had paid Russia almost $940 million. 

In accordance with the 1993 agreement, the United States and Russia
negotiated a series of access and monitoring measures, known as
transparency measures, at four nuclear material processing facilities
that are located in closed Russian nuclear cities.\3 These
transparency measures are designed to provide confidence that the
arms control objectives of the agreement--reducing the number of
Russian nuclear warheads--and the nonproliferation
objectives--reducing Russia's inventory of weapons-grade highly
enriched uranium--are met.  More specifically, these measures are
intended to provide confidence that the highly enriched uranium is
extracted from dismantled Russian nuclear weapons and that the highly
enriched uranium is then blended into low enriched uranium at three
Russian facilities.  U.S.  officials implement the measures through
periodic monitoring visits to Russian facilities, where they observe
the processes involved with converting highly enriched uranium into
low enriched uranium, review nuclear material inventory records, and
use equipment that measures the quality of the uranium to determine
if it is weapons grade and could be used in a nuclear weapon. 

As you requested, this report examines (1) the transparency measures
that are in place, (2) whether these measures ensure that the
nonproliferation objectives of the agreement are met, and (3) the
proposals for additional transparency measures.  This report is the
unclassified version of a classified report that we issued to you on
July 8, 1999.  In addition to information on these three objectives,
the classified report included information on whether the
transparency measures ensure that the arms control objectives of the
agreement--that the highly enriched uranium that is purchased by the
United States is extracted from dismantled Russian nuclear
weapons--are met. 

--------------------
\1 Formally known as The Agreement Between the Government of the
United States of America and the Government of the Russian Federation
Concerning the Disposition of Highly Enriched Uranium Extracted From
Nuclear Weapons (Feb.  18, 1993). 

\2 Formerly a government-owned corporation, the United States
Enrichment Corporation was privatized in July 1998 and is now known
as USEC Inc., or USEC. 

\3 Russia's 10 closed nuclear cities performed the most sensitive
aspects of Russia's nuclear weapons production.  Access to the closed
cities is restricted, and they are geographically isolated. 

   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

While most of the transparency measures have gradually been
implemented at four Russian nuclear material processing facilities,
several key measures have not yet been put into place.  Moreover,
under the agreement, U.S.  officials lack access to Russian nuclear
weapons dismantlement facilities and to the weapons dismantlement
process.  Some of the low enriched uranium delivered to the United
States--about one-third--was shipped before the transparency measures
had been implemented at each of the Russian facilities.  According to
the Departments of State and Energy, there was a deliberate decision
by the U.S.  government that U.S.  interests would be served by
allowing a portion of the highly enriched uranium to be blended into
low enriched uranium and to be rapidly removed from Russia while the
details of the transparency measures were being worked out.  U.S. 
officials first visited a Russian facility in February 1996 to
implement the initial set of transparency measures.  In October 1996,
Russian officials agreed to strengthen the measures in return for a
$100 million advance payment to be credited against their future
deliveries of low enriched uranium.  The most significant
strengthened measures involve the (1) use of portable
U.S.-manufactured equipment at various stages to confirm the presence
or absence of weapons-grade highly enriched uranium and (2)
installation of U.S.  equipment that can continuously monitor whether
the highly enriched uranium is blended into low enriched uranium. 
However, continuous-monitoring equipment has been installed at only
one of the three Russian blending facilities after a 2-year delay and
has not yet gone into routine operation.  Russian officials have not
agreed to a schedule for installing the equipment at the two other
blending facilities. 

Transparency measures provide U.S.  officials with confidence that
weapons-grade highly enriched uranium is being blended into low
enriched uranium at the three Russian blending facilities. 
Nevertheless, U.S.  officials will not be highly confident that all
of the low enriched uranium purchased under the agreement is coming
from weapons-grade highly enriched uranium until
continuous-monitoring equipment is operating at the Russian blending
facilities.  Furthermore, according to the Department of Energy, U.S. 
officials rejected one cylinder of low enriched uranium that was
shipped to the United States in 1997 for purchase under the agreement
because it did not meet the agreement's requirements. 

In March 1998, the Secretary of Energy proposed to the Russian
Minister of Atomic Energy a number of additional transparency
measures that included providing U.S.  officials with greater access
to the Russian nuclear-weapons-dismantlement process.  However,
Department of Energy officials told us that although one Russian
facility has recently expressed an interest in a demonstration
project, there has been no progress in reaching an agreement with
Russia's Ministry of Atomic Energy on adopting these additional
measures. 

   BACKGROUND
------------------------------------------------------------ Letter :2

Little official information is available on the sources, uses, and
inventories of highly enriched uranium (HEU) in Russia, according to
a May 1998 report by the Energy Information Administration (EIA).\4
EIA estimates, however, that Russia produced about 1,400 metric tons
of weapons-grade HEU from 1950 through 1988, after which, Russia is
believed to have stopped producing HEU for defense purposes.\5 The
inventory of HEU remaining in Russia was estimated to be 1,270 metric
tons at the end of 1994.  EIA reported that not all HEU in Russia was
used in nuclear weapons.  For example, some HEU has been used as fuel
for plutonium-production, research, and naval propulsion reactors.\6
EIA noted that most of the uranium used to produce HEU in the former
Soviet Union reportedly came from fuel that was used in
plutonium-production reactors. 

In January 1994, USEC signed a commercial contract with
Techsnabexport to implement the February 1993
government-to-government agreement.  Techsnabexport is a commercial
arm of the Ministry of the Russian Federation for Atomic Energy
(MINATOM) and is the Russian executive agent for the agreement.  In
November 1996, USEC and Techsnabexport signed an amendment to the
commercial contract that established an agreement on the quantities
and prices of low enriched uranium (LEU) for 5 years.  The agreement
provided for USEC to purchase LEU derived from 18 metric tons of HEU
in 1997, 24 metric tons in 1998, and 30 metric tons annually from
1999 through 2001.  According to USEC, from June 1995 through
December 1998, USEC received 1,487 metric tons of LEU, as shown in
figure 1.\7 From August 1998 through March 1999, Techsnabexport
suspended the contracted deliveries of LEU to USEC, in part, because
of Russia's dissatisfaction with progress in reaching an agreement on
the price it would receive for the natural uranium that makes up a
portion of the LEU.  As a result, USEC received only 60 percent of
the 1998 LEU shipments it had contracted for delivery.  An agreement
on the natural uranium was reached in March 1999, and a USEC
representative stated that Techsnabexport delivered the last of the
1998 LEU shipments in June 1999. 

   Figure 1:  Annual Amounts of
   LEU Delivered to the United
   States From 1995 Through 1998

   (See figure in printed
   edition.)

Source:  USEC. 

Several U.S.  and Russian government agencies are involved in the
negotiation and implementation of the transparency measures.  A
Department of State official is designated as the Chief HEU
Transparency Negotiator for the United States, and a Department of
Energy (DOE) official is the Deputy Chief Negotiator.  DOE's Office
of Nonproliferation and National Security, contracting with most of
DOE's national laboratories and several of its operations offices,
implements U.S.  transparency activities, such as staffing and
organizing U.S.  monitoring visits to the Russian facilities.  DOE
spent about $44 million on HEU transparency activities from fiscal
year 1994 through fiscal year 1998.\8 Lawrence Livermore National
Laboratory spent about $20 million, or about 45 percent of the total
funds that DOE has provided, during this period.  For the Russian
Federation, MINATOM is responsible for negotiating and implementing
the transparency measures. 

The March 1994 Protocol on HEU Transparency Arrangements established
the Transparency Review Committee as the formal bilateral mechanism
for U.S.  (DOE and State Department) and Russian (MINATOM) officials
to negotiate specific transparency measures at Russian and U.S. 
facilities and to discuss and resolve issues arising from the
implementation of the measures.  From 1994 through 1997, U.S.  and
Russian officials held six meetings of the Transparency Review
Committee.  An additional meeting of the executive members of the
committee was held in February 1998.\9

--------------------
\4 Commercial Nuclear Fuel From U.S.  and Russian Surplus Defense
Inventories:  Materials, Policies, and Market Effects, EIA (May
1998). 

\5 Uranium, in its natural form, comprises a mixture of several
isotopes (forms of the same element with different atomic weights). 
Less than 1 percent of natural uranium is the isotope uranium 235
(U-235), the fissionable isotope used in nuclear weapons and
reactors.  Uranium that is enriched to a concentration of over 90
percent U-235 is highly enriched and is weapons-grade material. 
Uranium that is enriched to a concentration of from 3 to 5 percent
U-235 is low enriched uranium and is commercial-reactor-grade
material. 

\6 Not all HEU is considered to be weapons-grade material.  Any
uranium enriched to 20 percent of U-235 or greater is considered to
be highly enriched.  Under the 1994 Transparency Protocol, the United
States has the right to monitor only the concentration of U-235 in
the uranium being processed. 

\7 According to USEC, this quantity of LEU is derived from 51 metric
tons of HEU, which the Department of Energy estimates is equivalent
to the amount of HEU found in about 2,040 nuclear warheads. 

\8 DOE plans to spend an additional $45 million for HEU transparency
activities for fiscal year 1999 through fiscal year 2001. 

\9 In 1996, the United States also established a U.S.  interagency
committee, chaired by the National Security Council, to oversee the
implementation of the U.S.  national security and commercial
objectives of the HEU purchase agreement.  In May 1998, the committee
was formalized by an executive order of the President as the
Enrichment Oversight Committee and includes representatives from the
Departments of State, Defense, and Energy; the intelligence
community; and other federal agencies. 

   TRANSPARENCY MEASURES HAVE BEEN
   GRADUALLY IMPLEMENTED AT
   RUSSIAN FACILITIES
------------------------------------------------------------ Letter :3

From February 1996 through May 1999, transparency measures were
gradually implemented at four Russian nuclear material processing
facilities.  However, under the agreement, U.S.  officials lack
access to Russian nuclear weapons dismantlement facilities and to the
process whereby nuclear weapons are dismantled.  In October 1996,
Russian officials agreed to strengthen the measures at the Russian
facilities in return for a $100 million advance payment to be
credited against their future deliveries of LEU.  Although Russian
officials have allowed DOE to implement many of the transparency
measures that were agreed to in 1996, there have been some delays and
impediments in implementing them. 

      RUSSIAN AND U.S.  FACILITIES
      THAT PROCESS HEU AND LEU
---------------------------------------------------------- Letter :3.1

Currently, four Russian facilities process the HEU and six U.S. 
facilities process the LEU purchased under the agreement, as shown in
figure 2.  Under the agreement, the United States does not have
access to the Russian weapons dismantlement facilities or to the
weapons dismantlement process.\10 The Russian facilities are
administered by MINATOM.  Of the four Russian facilities, only three
blend HEU into LEU.  The Seversk facility is currently the only one
that performs all of the processes related to the conversion and
blending of HEU into LEU.  (For a discussion of the fourth
facilityMayak--see pp.  10-11.) USEC operates one of the six U.S. 
facilities, the Portsmouth uranium enrichment facility, in Piketon,
Ohio.  USEC sends the LEU from the Portsmouth facility to five U.S. 
nuclear fuel fabricators that make nuclear reactor fuel for
commercial nuclear power reactors.  (See app.  I for a description of
the processes for converting and blending HEU into LEU at the Russian
and U.S.  facilities.)

   Figure 2:  Russian Federation
   and U.S.  Facilities That
   Process HEU and LEU, as of June
   1999

   (See figure in printed
   edition.)

   Source:  DOE.

   (See figure in printed
   edition.)

--------------------
\10 According to DOE, there are four Russian nuclear weapons
dismantlement facilities:  Sverdlovsk-45, Zlatoust-36, Avangard, and
Penza-19. 

      TRANSPARENCY MEASURES AT THE
      RUSSIAN FACILITIES
---------------------------------------------------------- Letter :3.2

Specific transparency measures, applicable to both Russian and U.S. 
facilities, are identified in 16 technical annexes to the March 1994
Protocol on HEU Transparency Arrangements that were signed from 1995
through 1998 as a result of six meetings of the Transparency Review
Committee and one meeting of its executive members.\11 The date when
each technical annex was signed generally determined when U.S. 
monitors could begin implementing the transparency measures at the
Russian facilities.\12 As a result, about one-third of the shipments
of LEU that were sent to USEC under the commercial contract, from
1995 through 1998, were not subject to transparency measures.  (App. 
II provides a list of the 16 technical annexes that grant specific
monitoring and access rights at the Russian and U.S.  facilities.  It
also provides more information on the LEU shipments that were not
subject to the transparency measures.)

Originally, two Russian facilities processed HEU--the Seversk and
Ural facilities.  In 1996, the Krasnoyarsk plant began to process
HEU.  According to DOE, starting in 1996, U.S.  monitors were allowed
to perform the following activities at these facilities: 

  -- Observe the chemical processes whereby the HEU is transformed
     from metal chips--fragments of nuclear weapons components--into
     a gaseous form of HEU for blending purposes.\13

  -- Visit the areas where HEU is blended into LEU. 

  -- Apply tamper-indicating devices--U.S.  tags and seals--to HEU
     and LEU containers to help monitors identify and track the
     movement of the material through the different processes or from
     one facility to another. 

  -- Review and obtain copies of Russian nuclear material control and
     accounting documents to track the amount of HEU and LEU that is
     being processed.\14

  -- At the Ural facility, from February 1996 through October 1998,
     U.S.  monitors were able to take random samples of uranium, up
     to four times a year at the point where the uranium is blended
     (blendpoint), to measure the enrichment levels of the uranium
     that was being processed to determine whether HEU was being
     blended into LEU. 

In October 1996, MINATOM agreed to a list of additional measures
designed to strengthen transparency at the Russian facilities.  In
December 1996, MINATOM received an advance payment from USEC of $100
million in exchange for agreeing to implement these additional
measures.  Some of these measures include the following: 

  -- Use of U.S.-manufactured portable equipment that measures the
     enrichment of the uranium and confirms the presence or absence
     of weapons-grade HEU at various stages of the conversion and
     blending processes.  Since U.S.  monitors are not certified to
     work in Russian facilities, Russian technicians, witnessed by
     U.S.  monitors, operate the portable uranium detection equipment
     and record the results. 

  -- Access to areas where HEU weapons components are received from
     the Russian dismantlement facilities and are stored in sealed
     containers. 

  -- Ability to observe the process in which the weapons components
     are cut into metal chips. 

  -- Access to the areas where the HEU oxide is chemically treated to
     remove certain impurities.\15

  -- Installation of U.S.  equipment that can continuously monitor
     the enrichment levels and material flow rate at the points where
     HEU is blended into LEU.\16 This equipment is shown in figure 3. 

   Figure 3:  U.S.  Equipment That
   Continuously Monitors the
   Blending of HEU Into LEU

   (See figure in printed
   edition.)

   Source:  DOE.

   (See figure in printed
   edition.)

DOE started to implement most of the strengthened measures during
monitoring trips to three of the Russian facilities beginning in
1997.  In a February 1998 memo, DOE reported that Russian officials
had implemented 95 percent of the strengthened transparency measures
that were linked to USEC's December 1996 advance payment of $100
million.  The fourth facility, Mayak, started to process HEU under
the agreement in 1997, but the transparency measures were not
implemented there until after the technical annex had been signed for
the facility in February 1998. 

U.S.  monitoring visits can occur up to six times each year at the
Russian facilities, and each visit can last up to 5 days.  U.S. 
monitors are required to notify MINATOM 30 working days in advance of
their visits to the Russian facilities.  Currently, DOE selects its
monitors from a list of 100 persons from DOE, DOE's national
laboratories and its contractors, and other U.S.  agencies.  The
first monitoring trip took place in February 1996 at the Ural
facility.  According to DOE, from February 1996 through March 1999,
U.S.  monitors made 50 visits to the four Russian facilities, as
shown in table 1.\17 In order to gain daily access to the
HEU-blending process, in August 1996, DOE established a permanent
monitoring office at the Ural facility in Novouralsk, Russia.  Two to
four U.S.  monitors, who are rotated every 2 months, usually staff
the permanent office and can visit the facility daily.\18 Because DOE
now staffs a permanent monitoring office at the Ural facility, there
has not been a need for periodic monitoring visits there since August
1996. 

                                Table 1
                
                 U.S. Visits to Russian HEU-Processing
                 Facilities From February 1996 Through
                               March 1999

                        Familiariz
                             ation  Monitoring   Technical
Facility                  visits\a      visits    visits\b       Total
----------------------  ----------  ----------  ----------  ----------
Ural Electrochemical             3           3           4          10
 Integrated Plant
Siberian Chemical                2          15           0          17
 Enterprise
Krasnoyarsk                      1          11           3          15
 Electrochemical Plant
Mayak Production                 2           6           0           8
 Association
======================================================================
Total                            8          35           7          50
----------------------------------------------------------------------
\a U.S.  monitors visited the Russian facilities before transparency
measures were in place to familiarize themselves with the facilities'
operations. 

\b U.S.  monitors can visit the Russian blending facilities to assist
in the installation of U.S.  continuous-monitoring equipment. 

Source:  DOE. 

--------------------
\11 Russia also has the reciprocal right to implement transparency
measures in the United States to determine whether the Russian LEU is
fabricated into fuel for commercial nuclear power reactors and is not
refabricated into HEU that could be used in U.S.  nuclear weapons. 
From 1996 through 1998, MINATOM officials visited U.S.  facilities
seven times to implement these measures.  In October 1998,
representatives of the Portsmouth uranium enrichment facility told us
that they would not produce weapons-grade HEU from the Russian LEU
because they are prohibited by federal nuclear-licensing requirements
from this activity.  Moreover, the United States no longer requires
new HEU for weapons production. 

\12 In the case of the Ural facility, U.S.  monitoring visits began
after the technical annex for the facility had been initialed by the
parties but before it was signed. 

\13 During these chemical processes--oxidation and fluorination--the
HEU metal chips are heated to convert them into an HEU oxide, and the
HEU oxide is then converted into HEU hexaflouride, or UF6. 

\14 When reviewing and obtaining documentation at the Russian
facilities, U.S.  monitors have access to some sensitive commercial
information but do not have access to classified national security
information. 

\15 This chemical process is called purification. 

\16 Oak Ridge and Los Alamos National Laboratories developed the
continuous-monitoring equipment for installation at Russian blending
facilities.  According to equipment specifications, the equipment is
designed to measure the flow rates of the uranium, tracking the
amount of uranium that is being blended to within plus or minus 20
percent.  The LEU blendstock that is used to blend HEU into LEU is
uranium that has been enriched up to 1.5 percent U-235 by using
depleted uranium containing less than 0.7 percent U-235. 

\17 From fiscal year 1994 through fiscal year 1998, about 35 percent
of the total $44 million that DOE funded for implementing the
transparency activities was spent on U.S.  monitoring visits and on
the establishment and maintenance of a permanent presence office in
the Russian Federation. 

\18 According to DOE, 55 U.S.  monitors rotated through the permanent
office at the Ural facility from August 1996 through March 1999. 

      DELAYS AND IMPEDIMENTS TO
      IMPLEMENTING SOME MEASURES
      AT THE RUSSIAN FACILITIES
---------------------------------------------------------- Letter :3.3

Although Russian officials have allowed DOE to implement most of the
strengthened transparency measures that were agreed to in 1996, there
have been delays and impediments to implementing some of them. 
Despite these difficulties, State Department and DOE officials
believe that the measures have given them unprecedented access to
facilities in Russian closed cities.  Since 1996, DOE has continued
to negotiate for access to the process whereby HEU weapons components
are cut into metal chips.  Both Russian and U.S.  officials consider
information about the design of their weapons to be classified,
including the shapes of their weapons components.  Accordingly, DOE
has suggested that weapons components could be shrouded during the
metal-chipping process when U.S.  monitors are present to allow them
to witness the process without revealing classified information.  DOE
officials told us that the Mayak facility has recently expressed an
interest in conducting a demonstration of shrouding weapons
components during the metal-chipping process but that MINATOM has not
yet approved this proposal. 

Moreover, the installation of U.S.  continuous-monitoring equipment
at the Russian Ural facility was delayed for 2 years.  The delay was
due to a number of factors, including requirements by the Russian
government to license and certify the equipment before it was
installed and concerns by Russian officials about how data generated
by the equipment would be used by the United States.  In January and
February 1999, DOE officials and national laboratory staff installed
and tested the monitoring equipment at the Ural facility.  During
this test, U.S.  officials found that the equipment could accurately
detect the enrichment levels of the uranium but that the equipment
needed some adjustments to properly measure the amount of LEU that
was being processed.  Before the equipment can go into routine
operation at the facility, these technical problems must be fixed,
and a revised technical annex and other agreements for the facility
must also be approved and signed by the United States and the Russian
Federation.  According to a February 1999 cable from the U.S. 
Embassy in Moscow, DOE and MINATOM had not resolved their differences
over how the United States will remove or use the data generated by
the monitoring equipment and what steps both parties will take to
resolve any discrepancies that may occur between the data generated
by the equipment and the Russian facility's own documentation of its
nuclear material. 

DOE and Lawrence Livermore officials told us that they plan to
install continuous-monitoring equipment at the second Russian
blending facility at Krasnoyarsk by the end of September 1999. 
However, DOE is waiting to ship the equipment to Krasnoyarsk until
the Department receives final approval from MINATOM to install and
operate the equipment.  According to DOE, an agreement has not yet
been reached with MINATOM on the details for installing the equipment
at Seversk, the third Russian blending facility.  A DOE official told
us that before the equipment can be installed at these two blending
facilities, MINATOM would likely require that the technical annexes
related to the transparency procedures for these facilities be
revised and renegotiated.  A MINATOM official told us in September
1998 that he considered the installation of the equipment at the Ural
facility to be a pilot test and that there were no specific plans for
installing the equipment at the other two facilities.  DOE officials
disagreed with MINATOM's statement because, in October 1996, Russian
officials had granted the United States the right to install this
equipment at the Ural, Krasnoyarsk, and any future Russian blending
facilities.  At the time of our review, this matter had not yet been
resolved. 

   CONFIDENCE EXISTS THAT
   WEAPONS-GRADE HEU IS BLENDED
   INTO LEU
------------------------------------------------------------ Letter :4

Transparency measures provide U.S.  officials with confidence that
weapons-grade HEU is being blended into LEU at the Russian blending
facilities.  Nevertheless, U.S.  officials have stated that until
continuous-monitoring equipment is installed at the three Russian
blending facilities, they will not be highly confident that all of
the LEU that the United States is purchasing is coming from blended
HEU.  Furthermore, in response to the concerns we raised, DOE
improved its procedures for collecting information on the LEU
cylinders shipped under the agreement through its arrangements with
USEC. 

      U.S.  OFFICIALS HAVE
      CONFIDENCE THAT LEU IS
      COMING FROM WEAPONS-GRADE
      HEU
---------------------------------------------------------- Letter :4.1

DOE and Lawrence Livermore officials told us that they have
confidence that weapons-grade HEU is being blended into LEU at the
Russian blending facilities.\19 DOE and Lawrence Livermore officials
told us that until continuous-monitoring equipment is installed at
the three Russian blending facilities, they will not be highly
confident that blending is occurring and that all of the LEU that the
United States is purchasing is coming from blended HEU.  For example,
although the continuous-monitoring equipment has been installed at
the Ural facility, this facility is scheduled to blend only 12 metric
tons of the total 30 metric tons of HEU to be delivered as LEU for
1999. 

There are several ways in which U.S.  monitors can gain confidence
that weapons-grade HEU is being converted and blended into LEU at the
Russian facilities.  U.S.  monitors are allowed to use U.S.  portable
equipment, apply identifying U.S.  tags and seals to containers and
equipment that indicate tampering, and obtain Russian nuclear
material inventory documentation on the HEU and LEU in containers at
each step of the conversion and blending processes.  According to
Lawrence Livermore officials, the equipment allows U.S.  monitors to
determine, with high confidence, that the HEU that is being processed
when the U.S.  monitors are present is weapons-grade material.  Since
1997, six times a year, U.S.  monitors have been able to visit areas
at the Mayak and Seversk facilities where sealed containers that were
used to ship HEU weapons components are stored.  They can also
observe the HEU after it has been cut into metal chips.  At two
blending facilities--Seversk and Krasnoyarsk--U.S.  monitors can
observe and measure the enrichment of the HEU in containers six times
a year as they are fed into the blendpoint. 

At the Ural facility, permanent monitors have daily access to the
blending area, where they can apply U.S.  tags and seals to HEU in
containers and to some equipment, and can obtain Russian
documentation that shows the amounts of HEU and LEU that are being
blended.  From February 1996 through October 1998, U.S.  monitors
were able to randomly request that Russian technicians take samples
of the HEU and LEU at the blendpoint.  An analysis of the samples,
which were limited to being taken four times a year, provided a
snapshot of the enrichment levels of the HEU and LEU in the pipes at
the time of sampling.  As of October 1998, DOE reported that a total
of 11 samples had been taken and analyzed by Russian technicians
under observation by U.S.  monitors.  The analysis showed that
weapons-grade HEU was being blended.\20 When put into routine
operation, the continuous-monitoring equipment that was recently
installed at the Ural facility will provide U.S.  monitors with a
continuous record of whether blending is occurring.  As a result,
random samples will no longer be taken there. 

DOE and Lawrence Livermore officials have stated that because the
access granted to U.S.  monitors is limited at each of the Russian
facilities, they are unable to track the HEU through the entire
process as it is converted and blended into LEU.  Additionally, State
Department and Lawrence Livermore officials told us that the
continuous-monitoring equipment does not provide U.S.  monitors with
information on whether the HEU that is being blended is of weapons
origin. 

--------------------
\19 Our July 8, 1999, classified report discusses U.S.  officials'
confidence that the HEU that has been purchased under the agreement
is coming from Russian dismantled nuclear weapons. 

\20 DOE paid the Russian Ural facility $124,391 to perform all 11 of
these analyses. 

      ONE CYLINDER OF LEU WAS
      REJECTED UNDER THE AGREEMENT
---------------------------------------------------------- Letter :4.2

In 1997, U.S.  monitors discovered that one cylinder of LEU that was
shipped to the United States did not meet the requirements of the
agreement.  In an October 27, 1997, letter, the Department of State
informed MINATOM that it would not accept the cylinder under the HEU
purchase agreement.  According to an April 1998 unverified press
account, U.S.  officials were uncertain of whether the cylinder
contained LEU that came from HEU from nuclear warheads.  However,
according to USEC officials, on February 1, 1999, USEC paid Russia's
Techsnabexport for the cylinder under a separate commercial
agreement.  Figure 4 shows the disputed cylinder. 

   Figure 4:  Disputed Cylinder of
   LEU Rejected Under HEU Purchase
   Agreement

   (See figure in printed
   edition.)

   Source:  Portsmouth Uranium
   Enrichment Facility.

   (See figure in printed
   edition.)

      USEC DOCUMENTATION AND
      REPORTING
---------------------------------------------------------- Letter :4.3

Until recently, U.S.  monitors did not always obtain documentation on
the contents of all of the LEU cylinders shipped under the agreement
in a timely manner.  A USEC representative told us that USEC had not
been required to regularly share cylinder documentation data with DOE
but, as a matter of practice, had shared this information with DOE
upon request.  During our review, we raised concerns with DOE
officials about whether they should formalize their data-sharing
arrangement with USEC and receive USEC documentation more routinely. 
In response to our concerns, in March 1999, DOE officials formally
requested that USEC send them the results of USEC's and the Russian
facilities' documentation on the contents of the LEU cylinders on a
monthly basis.  DOE officials stated that by regularly receiving this
information from USEC, they could be more confident that the LEU
obtained under the agreement is consistent with the process of
blending HEU.  USEC provided DOE with the first of these monthly
reports on May 7, 1999. 

   U.S.  OFFICIALS ARE SEEKING
   ADDITIONAL TRANSPARENCY
   MEASURES
------------------------------------------------------------ Letter :5

In March 1998, the Secretary of Energy proposed a number of
additional transparency measures to the Russian Minister of Atomic
Energy.  In September 1998, we asked MINATOM officials if they
planned to grant any broader access to U.S.  transparency monitors. 
MINATOM officials responded that broader access for U.S.  monitors,
such as access to the Russian weapons dismantlement process, would
have to be negotiated in the context of other arms control
agreements.\21 DOE officials also acknowledged that it could be
difficult to achieve broader access for U.S.  monitors in the absence
of an arms control agreement whereby both the United States and
Russia could verify reductions in nuclear weapons and classified
information about nuclear weapons could be exchanged. 

--------------------
\21 In our report entitled Weapons of Mass Destruction:  Effort to
Reduce Russian Arsenals May Cost More, Achieve Less Than Planned
(GAO/NSIAD-99-76, Apr.  13, 1999), we discuss the status of a
facility that is being constructed with U.S.  funds at the Mayak
nuclear complex to store plutonium removed from dismantled Russian
nuclear weapons.  The report found that Russian negotiators had not
yet agreed to U.S.  proposals aimed at confirming that the plutonium
to be stored at Mayak would originate solely from dismantled nuclear
weapons and would support Russia's dismantlement of nuclear weapons. 

   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

We met with officials from the Departments of State and Energy to
receive the Departments' comments on a draft of this report. 
Specifically, we obtained comments from the Director, Office of
Policy and Regional Affairs for Russia and the New Independent
States, Department of State, and the Deputy Director, Office of Arms
Control and Nonproliferation, Department of Energy.  The Departments
of State and Energy stated that the report's findings were fair and
balanced. 

The Departments of State and Energy also provided technical comments
that were incorporated into the report as appropriate. 

   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7

To examine the status of the implementation of the transparency
measures, we reviewed the February 1993 government-to-government HEU
purchase agreement, the September 1993 Memorandum of Understanding
Relating to Transparency and Additional Arrangements, the March 1994
Protocol on HEU Transparency Arrangements, and 16 technical annexes
to the 1994 Protocol, signed from 1995 through 1998, that grant
specific monitoring and access rights at the U.S.  and Russian
facilities.  We also reviewed the records of five of the six meetings
of the bilateral Transparency Review Committee, which occurred from
September 1994 through November 1997.  According to DOE officials, no
records were issued for the fifth meeting of the committee in
December 1996 and the meeting of the executive members of the
committee in February 1998 because the signed transparency annexes
served as the records of these meetings.  We obtained and reviewed
unclassified and classified reporting cables from the U.S. 
Department of State and the U.S.  Embassy in Moscow, Russia, covering
the period from 1992 through 1999.  DOE provided us with trip reports
covering the period from 1994 through 1999, which documented U.S. 
monitors' visits to the Russian facilities to implement the
transparency measures.  To identify DOE's funding of transparency
activities from fiscal year 1994 through fiscal year 2001, we also
obtained budgetary and expenditure data from DOE.  We reviewed
relevant technical and energy trade publications covering the period
from 1991 through June 1999. 

In Washington, D.C., we met with officials from the Department of
State's Office of Policy and Regional Affairs for Russia and the New
Independent States; DOE's Offices of the Undersecretary, Nuclear
Energy, Science and Technology, Arms Control and Nonproliferation,
and International Nuclear Safety and Cooperation; DOE contractors
from Lawrence Livermore National Laboratory; and EIA.  Several U.S. 
officials whom we met with had served as U.S.  monitors who staffed
DOE's permanent office at the Russian Ural facility or regularly
participated in the monitoring visits to the Russian facilities.  We
also met with officials from the Department of Defense and several
agencies that represent the U.S.  intelligence community. 

We visited Moscow, Russia, in September 1998 to meet with various
U.S.  officials from the U.S.  Embassy and with Russian officials
from MINATOM and one of its commercial subsidiaries--Techsnabexport. 

To discuss the commercial aspects of the purchase agreement that had
an impact on transparency measures, we also met with and gathered
information from representatives of USEC--the U.S.  executor of the
agreement--in Bethesda, Maryland.  We met with the President of Edlow
International Company, in Washington, D.C., who was responsible for
managing all of the shipments of the LEU from St.  Petersburg,
Russia, to the United States.  We visited the two uranium enrichment
facilities operated by USEC--the Portsmouth facility in Piketon,
Ohio, and the Paducah, Kentucky, facility.  We also met with
representatives of one of the five U.S.  fuel fabricators--GE Nuclear
Fuel, in Wilmington, North Carolina. 

We conducted our review from August 1998 through June 1999 in
accordance with generally accepted government auditing standards. 

---------------------------------------------------------- Letter :7.1

We are sending copies of this report to Senator Jesse A.  Helms,
Chairman, and Senator Joseph R.  Biden, Ranking Minority Member,
Senate Committee on Foreign Relations; Representative Benjamin A. 
Gilman, Chairman, and Representative Sam Gejdenson, Ranking Minority
Member, House Committee on International Relations; and other
appropriate committees. 

We are also sending copies of this report to the Honorable Madeleine
K.  Albright, the Secretary of State; the Honorable Bill Richardson,
the Secretary of Energy; the Honorable William S.  Cohen, the
Secretary of Defense; and other interested parties.  If you have any
questions or need additional information, please contact me or Gene
Aloise, Assistant Director, on (202) 512-3841.  Other major
contributors to this report were Sarah Veale, Victor Sgobba, and
Duane Fitzgerald, Ph.D. 

Sincerely yours,

(Ms.) Gary L.  Jones
Associate Director, Energy,
 Resources, and Science Issues

PROCESSES FOR CONVERTING AND
BLENDING HIGHLY ENRICHED URANIUM
INTO LOW ENRICHED URANIUM AT
RUSSIAN AND U.S.  FACILITIES
=========================================================== Appendix I

Four Russian facilities convert and blend highly enriched uranium
(HEU) into low enriched uranium (LEU) through the following
processes: 

  -- Seversk and Mayak receive HEU weapons components from the
     Russian weapons dismantlement facilities, cut the components
     into metal chips, and heat the HEU metal chips to convert them
     into oxide. 

  -- Seversk and Mayak chemically treat the HEU oxide to remove
     certain impurities.\22 Seversk and Krasnoyarsk combine the
     purified HEU oxide with fluorine to produce HEU hexafluoride,
     also known as UF6. 

  -- Seversk, Krasnoyarsk, and Ural blend the HEU into LEU.  During
     the blending process, the HEU is blended with uranium that is
     enriched up to a level of 1.5-percent U-235--called
     blendstock--to produce LEU. 

  -- Seversk, Krasnoyarsk, and Ural load the LEU into cylinders that
     contain about 1.5 metric tons of LEU each.  The cylinders are
     transported by rail to St.  Petersburg, Russia, and from there,
     they are shipped to the United States. 

Once the LEU arrives in the United States, six U.S.  facilities
perform the following processes: 

  -- The Portsmouth uranium enrichment facility may further change
     the enrichment of the LEU to meet USEC customers' commercial
     specifications or the cylinders may be sent as received to the
     five U.S.  nuclear fuel fabricators. 

  -- The five U.S.  nuclear fuel fabricators convert the LEU into
     reactor fuel and sell it to electric utilities in the United
     States and other countries. 

--------------------
\22 Some of the initial shipments of LEU under the agreement
contained traces of plutonium and other impurities.  In order to meet
the U.S.  uranium industry's standards for product purity, Russia
began to process the HEU to remove any impurities starting in 1996 at
the Seversk facility. 

TECHNICAL ANNEXES ESTABLISH
IMPLEMENTATION OF TRANSPARENCY
MEASURES
========================================================== Appendix II

Sixteen technical annexes to the 1994 Transparency Protocol implement
access and monitoring procedures at the U.S.  and Russian facilities
subject to the 1993 government-to-government HEU purchase agreement. 
From 1995 through 1998, the United States and the Russian Federation
signed these annexes, some of which were revised as new Russian
facilities or as new processes were added.  As a result, some of the
shipments sent to the United States under the commercial agreement
from the Russian facilities were not subject to the transparency
measures.  The technical annexes governing the U.S.  monitoring of
Russian facilities will continue to be revised if the HEU conversion
and blending activities of the Russian facilities change or when new
transparency activities are implemented, such as installing equipment
that continuously monitors whether HEU is being blended into LEU at
the three Russian blending facilities. 

   TECHNICAL ANNEXES IMPLEMENT
   TRANSPARENCY MEASURES
-------------------------------------------------------- Appendix II:1

From 1995 through 1998, U.S.  and Russian negotiators signed 16
technical annexes to the 1994 Transparency Protocol that established
specific access and monitoring rights at U.S.  and Russian
facilities.  When two additional Russian facilities started to
process HEU under the agreement and some of the facilities added new
processes, technical annexes had to be negotiated for each of these
facilities, and some annexes had to be revised and renegotiated to
accommodate the new processes, as demonstrated by figure II.1. 

   Figure II.1:  Titles of
   Transparency Annexes to 1994
   HEU Transparency Protocol, by
   Major Category

   (See figure in printed
   edition.)

Source:  Department of Energy. 

   SOME SHIPMENTS WERE NOT SUBJECT
   TO TRANSPARENCY
-------------------------------------------------------- Appendix II:2

Some LEU shipments were sent to the United States under the 1994
commercial contract between USEC and Techsnabexport before the
transparency measures had been implemented at each of the Russian
blending facilities.  According to the Departments of State and
Energy, there was a deliberate U.S.  government decision that U.S. 
interests would be served by allowing a portion of the HEU to be
blended into LEU and to be rapidly removed from Russia while the
details of the transparency measures were being worked out.  In
addition, by allowing the shipments to begin before the transparency
measures were in place, Russia could begin receiving much needed
financial revenue from the HEU agreement. 

From 1995, when the first LEU deliveries started, through 1998, about
one-third--496 metric tons of the total 1,487 metric tons--of the LEU
sent to the United States was not subject to transparency measures,
as shown in figure II.2.  The amount of LEU that was not subject to
transparency measures was equivalent to about 17 metric tons of HEU. 
For example, officials from Lawrence Livermore National Laboratory
told us that because the technical annex was not signed for the Ural
facility until 1996, the United States was not permitted to monitor
any of the 1995 LEU shipments sent to the United States under the
agreement.  All of the 1995 LEU shipments came from that facility. 

   Figure II.2:  Some LEU
   Shipments Were Not Subject To
   Transparency Measures

   (See figure in printed
   edition.)

Source:  Department of Energy. 

*** End of document. ***