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U.S.-Russia Uranium Pact Stalls

Energy: A price dispute could lead to a nuclear power fuel shortage and hurt national security.


WASHINGTON — A landmark 1993 agreement to sell tons of uranium stripped from Russian warheads to fuel American power plants is in jeopardy because of a dispute over price between the Russians and a U.S. company.

The standoff between the Russians and the U.S. company responsible for carrying out the deal already has stalled shipment of uranium to the United States. And arms control specialists are concerned that a collapse of the deal could increase the chance of terrorists or rogue nations obtaining the nuclear material.

A senior Bush administration official, Energy Undersecretary Robert G. Card, told the American company in a letter last week that "U.S. strategic interests may be at risk if the [firm] cannot ensure continuity of shipments of Russian down-blended [uranium] to the United States."

Card said the disagreement could also lead to "a nuclear power fuel shortage" here; the U.S. company relies heavily on the uranium purchased from Russia for sales that it makes to American nuclear power plants. The company supplies about 70% of the uranium fuel used in American nuclear plants, which generate about one-fifth of all electricity used in the U.S.

The high stakes illuminate an anomaly in how the United States has handled a crucial national security function: Since mid-1998, the government has ceded to the private company, USEC Inc. of Bethesda, Md., far-reaching responsibility for implementing the agreement with the Russians to purchase 500 metric tons of military uranium.

Because USEC and the Russians remain at odds over pricing, no shipments have been authorized for 2002. Ordinarily, the year's first load of uranium--three metric tons, or enough for about 120 nuclear warheads--would have been ordered by October and would begin flowing to the United States in March.

In a written response to Card on Thursday, USEC President William H. Timbers Jr. said that the energy official's letter "undermines and could significantly affect the ability of [USEC] to reach prompt and successful agreement" with the Russians regarding the 1993 uranium deal. Timbers also termed Card's concerns about a possible shortage of nuclear-power fuel "unwarranted and disingenuous."

Copies of the letters were obtained by The Times.

A USEC spokesman said Tuesday that the company expects to resolve its differences with the Russians without any serious consequences.

A Bush administration official familiar with the current talks said that USEC and the Russians "seem to be at loggerheads. . . . I think [the uranium agreement] is in jeopardy. I would not characterize this as normal negotiations." The official spoke on condition of anonymity.

1993 Agreement Is Seen as a Watershed

From the standpoint of those concerned about the potential spread of nuclear weaponry in the aftermath of the Cold War, the 1993 U.S.-Russian accord, known as "Megatons to Megawatts," was a watershed.

During a 20-year period, the U.S. government would purchase about 500 metric tons (about 1.1 million pounds) of highly enriched uranium stripped from former Soviet warheads. The purchase proceeds would employ thousands of Russian scientists and technicians, who would blend down, or dilute, the material for use as fuel in commercial nuclear power plants.

The deal appeared to have several attractive features.

The securing of the weapon-grade uranium--at a price of approximately $12 billion--would keep it from well-capitalized terrorists such as Osama bin Laden. And by employing Russians to blend down the material to commercial-grade fuel, the deal would help dissuade them from selling their services to others who covet nuclear materials and expertise, such as Iraq or Iran.

The purchases of Russian uranium began in 1995, under the purview of the U.S. Department of Energy and the government-held United States Enrichment Corp., a precursor of USEC Inc. Then-President Clinton, with bipartisan congressional backing, approved privatizing the corporation in 1997. And in 1998, investors bought the entity from the government in a deal worth nearly $1.9 billion. Its shares trade on the New York Stock Exchange.

The newly privatized USEC Inc. remained the exclusive U.S. agent for the Russian uranium deal. In the last seven years, USEC has paid $2.2 billion for fuel derived from 141 metric tons of weapon-grade enriched uranium from the Russians, the equivalent of about 5,600 warheads.

More than half of the uranium fuel that USEC sells to utility companies comes from Russia; the company also produces it at a single plant in Paducah, Ky.

For the Russians, the value of the uranium deal is huge--as much as $700 million a year. The sale proceeds provide a significant revenue source for Russia's Ministry of Atomic Energy, which is responsible for safeguarding nuclear material at production and research facilities.

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