4
Improved Approaches to Facilitate Indigenization

Finishing the current task of upgrading materials protection, control, and accounting systems in ways that facilitate indigenization is critical. As noted in earlier chapters, approximately 50 Russian entities currently participate in the cooperative materials protection, control and accounting (MPC&A) program. Some participating facilities are among the most sensitive in the Russian nuclear weapons research and development complex, and others are at sensitive Russian naval installations. A number of Russian facilities are located at distant locations where once few foreign visitors ventured and where Russian specialists had limited exposure to developments outside their own country. There are also facilities, including universities and civilian research centers, in large urban areas, where nuclear safety and security are of critical importance to the nearby residents of the cities.

Based on the committee’s observations and discussions with Russian and United States experts, the improvements in MPC&A systems at sites where the U.S. Department of Energy (DOE) has been engaged have contributed greatly to the security of Russian weapon-usable material. Still, the results of the cooperative program have been inconsistent. The many successes have been offset by repeated extensions of the schedule for protecting all material, although recently the U.S. target date for completion has been changed from 2011 to 2008. Some upgrades have greatly strengthened security procedures, but others have not succeeded as planned. A few have even required replacements. The security at some facilities has dramatically increased, but at others security remains inadequate. Training programs have been very important, but improved material control and accounting have continually lagged years behind other aspects of the program.



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Strengthening Long-Term Nuclear Security: Protecting Weapon-Usable Material in Russia 4 Improved Approaches to Facilitate Indigenization Finishing the current task of upgrading materials protection, control, and accounting systems in ways that facilitate indigenization is critical. As noted in earlier chapters, approximately 50 Russian entities currently participate in the cooperative materials protection, control and accounting (MPC&A) program. Some participating facilities are among the most sensitive in the Russian nuclear weapons research and development complex, and others are at sensitive Russian naval installations. A number of Russian facilities are located at distant locations where once few foreign visitors ventured and where Russian specialists had limited exposure to developments outside their own country. There are also facilities, including universities and civilian research centers, in large urban areas, where nuclear safety and security are of critical importance to the nearby residents of the cities. Based on the committee’s observations and discussions with Russian and United States experts, the improvements in MPC&A systems at sites where the U.S. Department of Energy (DOE) has been engaged have contributed greatly to the security of Russian weapon-usable material. Still, the results of the cooperative program have been inconsistent. The many successes have been offset by repeated extensions of the schedule for protecting all material, although recently the U.S. target date for completion has been changed from 2011 to 2008. Some upgrades have greatly strengthened security procedures, but others have not succeeded as planned. A few have even required replacements. The security at some facilities has dramatically increased, but at others security remains inadequate. Training programs have been very important, but improved material control and accounting have continually lagged years behind other aspects of the program.

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Strengthening Long-Term Nuclear Security: Protecting Weapon-Usable Material in Russia Indeed, some facilities still have not fully conducted measured physical inventories of existing material. Finally, few facilities can report progress in disposing of excess weapon-usable material for which there is no current or future need. Finally, there is not a single reported example of a facility outside the navy program where dormant weapon-usable material has been transferred to a more secure location. IMPROVED APPROACHES Access to Facilities In the past, difficulties experienced by United States specialists in gaining access to sensitive Russian facilities within the Rosatom complex were frequently cited by DOE as a major impediment to MPC&A progress. Such access has been required for U.S. specialists to participate in the design of systems, monitor progress, and audit expenditures. Issues over access to Rosatom sites in both closed and open locations have clearly delayed the program. In contrast, there have been far fewer problems at facilities outside the Rosatom complex. In recent years, Russian access to U.S. laboratories for familiarization with U.S. approaches has been difficult. While the need for such familiarization visits has declined in recent years, this lack of reciprocity has not been lost on Russian officials. Nevertheless, as indicated in Box 4.1, DOE believes significant progress has been made in resolving access issues. The committee is not in a position to endorse this statement but considers it to be important and worth noting. As discussed in previous chapters, DOE cooperation with the Russian navy to secure fresh nuclear fuel rods fabricated for use in submarines has been highly BOX 4.1 Access to Sensitive Facilities Significant progress has been made in resolving the issue of access. DOE and Rosatom have established an acceleration working group that has formulated procedures to allow limited access to some of the more sensitive Rosatom facilities. These procedures have been successfully employed at a pilot facility, which led to an agreement to use the strategy at two additional facilities. Based on the success of this approach, DOE remains confident that it will have sufficient access to sensitive facilities to meet DOE’s commitment to complete the installation of rapid and comprehensive upgrades at all facilities in the joint MPC&A program by the end of 2008. SOURCE: Official statement by DOE conveyed to the committee in January 2005.

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Strengthening Long-Term Nuclear Security: Protecting Weapon-Usable Material in Russia successful, a remarkable achievement given military sensitivities. While there is a difference in discipline between military and civilian organizations, some of the approaches underlying the success of the program at naval sites nevertheless should be transferable to activities at sensitive sites under the control of civilian entities. For example, limiting the number of U.S. participants involved in the program to a few specialists who have remained with the program over many years has increased understanding and respect on both sides, which is essential for productive cooperation. Also, the important role of Russian specialists from the Kurchatov Institute, who serve as expert facilitators and intermediaries, thereby reducing the requirements for repetitive U.S. visits to sensitive sites, was an important innovation that might be replicated in other aspects of the overall program. Of even greater importance has been the steadfast commitment of the Russian Navy leadership to the program. While DOE has little influence over selection of Russian program leaders, the exemplary role of the navy leadership deserves frequent mention in U.S.-Russian intergovernmental discussions. There are a few Russian facilities where significant amounts of weapon-usable material are believed to be housed that are not currently included in the cooperative program. DOE should work more intensively with Rosatom to identify such facilities and to include them in cooperative activities. For example, the Research Institute for Nuclear Technologies (NITI) in Sosnovy Bor, where material is probably located, has remained outside the program. The Krasnoye Sormovo Shipyard in Nizhny Novgorod and the Amursky Zavod Shipyard in Khaborovsk Territory also may have weapon-usable material. Since Russian activities at these sites were largely unknown to the committee, they are not addressed in this report. Nevertheless, if weapon-usable material is located at additional sites, it deserves priority consideration by DOE. If cooperation with these facilities is initiated, the goal of indigenization should be incorporated into every aspect of the program from the very beginning. At some facilities, DOE will probably have to be more flexible than in the past in: (1) allowing Russian specialists to play a more decisive role during the selection and design of upgrades; (2) modifying contractual requirements and procedures that may be considered too intrusive by Russian organizations; and (3) finding alternatives to access at facilities that for legal reasons deny entry to visitors from outside of Russia. For example, Russian managers at such sensitive facilities may design MPC&A upgrades and, after editing the designs to remove classified details, have the designs reviewed by U.S. specialists. Revised versions of the Russian designs that are satisfactory to both sides could then be used, photographed, and videotaped by Russian specialists with certifications signed by institute directors. Finally, the process, expenditures, and results of upgrades including non-sensitive information on operating experience could be discussed off-site by Russian and U.S. specialists. Such an approach using technical means for verification of MPC&A upgrade activities is not ideal, but it is better than a continued stalemate concerning important facilities.

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Strengthening Long-Term Nuclear Security: Protecting Weapon-Usable Material in Russia Streamlining the Contract Process The DOE-Rosatom cooperative MPC&A program has been well funded.1 At the same time, the leaders of every Russian facility that the committee visited2 contended that important projects were being delayed due to a reluctance by DOE to provide funding. DOE officials contended that the dormant project proposals for upgrades did not coincide with DOE priorities, even if Russian law required such upgrades and even if the upgrades would contribute to the security of weapon-usable material. Much of the Russian concern regarding proposed projects, has related to improving security along the perimeters of facilities, as mentioned in Chapter 1. Such projects are often expensive, therefore if financial resources were limited, DOE’s reluctance to fund perimeter projects would be understandable, since they are often considered by DOE experts as less effective in protecting weapon-usable material than security enhancements closer to the material. Nevertheless, the main constraints in such cases have frequently been policy disagreements and DOE’s insistence that its priorities must prevail over jointly agreed-upon priorities. However, as noted in Chapter 1, DOE is now reconsidering its policy concerning perimeter security, which may allow the initiation of new projects proposed by Russian experts. DOE’s contracting procedures are a significant cause of delays in the program. Each task order, however small, requires approval at several levels in the United States and by a special committee of the Russian government that grants tax exemptions. This process, particularly on the Russian side, may take from three to six months or more to complete. Task-by-task negotiations of hundreds of small tasks each year at Russian sites (from $5,000 to $100,000 in cost) delay activities as the contractual documents await signature in each country. Also, each task order requires U.S. visitors to verify expenditures. As an example of the potential for bottlenecks in the program, more than 420 separate tasks, valued at a total of $15.3 million, had been negotiated by DOE with the Institute for Physics and Power Engineering in Obninsk as of May 2005.3 Despite delays in the United States as well as Russia, DOE considers the problem now to be one of Russian bureaucracy (see Box 4.2). Alternative contracting procedures that compress timelines are necessary and have important implications for indigenization. Larger tasks, umbrella tasks, or both seem to be an obvious approach to be considered. Moving toward larger 1   Statement of Paul M. Longsworth, deputy administrator for defense nuclear nonproliferation, National Nuclear Security Administration, U.S. Department of Energy, before the Senate Armed Services Committee, U.S. Senate, March 10, 2004. 2   See Appendix F for a list of sites visited by the committee. 3   Information provided by Rosatom to the committee, May 2005.

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Strengthening Long-Term Nuclear Security: Protecting Weapon-Usable Material in Russia BOX 4.2 MPC&A Contracting Delays At one site of the Rosatom weapons complex, the U.S. project team was told by its principal Russian contact that a contract that had been awaiting approval for many months had finally been signed and that it took fifty separate signatures, both within and outside the site, to have it approved. Also, to receive the Russian tax exemption as agreed, the program needs a tax exemption certificate for each transfer of funds or delivery of equipment. After receiving the task order, Rosatom submits a request for a tax exemption certificate to a special committee of the Russian government for approval. The process may take three to six months. However, the process to request an exemption certificate can begin shortly after a contract or task order is signed and does not generally cause delays in executing the contract. SOURCE: Official communication to the committee by DOE, January 2005. task orders reduces U.S. micromanagement practices, which are often reflected in small task orders and do not facilitate progress toward indigenization. Another problem attributable at least in part to the emphasis on small task orders has been a decline in the MPC&A experience of the DOE teams traveling to Russia. Many of the most experienced U.S. MPC&A specialists have grown tired of repetitive trips to Russia to address the details of small task orders. According to managers at one Russian institute, eleven visits by U.S. specialists were required to complete the details of one task order of less than $100,000. While the committee could not verify this statement, there clearly is frustration among Russian experts over the never-ending negotiation and renegotiation of even the smallest contract details. Russian counterparts are well aware of the many changes in the composition of U.S. teams, and at times they refer to DOE team members as administrative personnel rather than technical specialists. Also, they sarcastically talk about nuclear tourism on the U.S. side. DOE could further improve its use of advanced communications, such as video conferences, to reduce travel demands. Additionally, there may be opportunities for Russian experts to incorporate more effective business practices into their regular contracting negotiations with DOE as a means of reducing costs and increasing the efficiency of cooperative MPC&A efforts. Practical Steps Toward Indigenization The committee considered a large number of possible modifications to the current program that would contribute to more rapid progress in completing MPC&A upgrades at Russian facilities and that would enhance the prospects for

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Strengthening Long-Term Nuclear Security: Protecting Weapon-Usable Material in Russia meaningful and lasting indigenization. Some of the relevant conclusions are set forth in previous chapters. Umbrella task orders of up to $1 million or even more should become more frequent, with subtasks detailed as necessary; funding should be transferred upon completion of each subtask as is currently done. Indeed there have been efforts by DOE to use this approach. Greater responsibility should be placed on the Russian organization concerned to prepare the detailed plan for the overall task order and subtasks. DOE specialists should review and modify the proposed approaches when necessary. Verification of fiscal accountability should therefore be possible through less frequent visits than are required to verify a number of small contracts. DOE and Rosatom should give priority to improving accounting systems at the facility level and should more actively support the development and operation of the national accounting system. Initial physical inventories of material at the institute level—based on measured values—are of particular importance. This will improve the accuracy of data incorporated into the internal accounting systems, and subsequently, the data transmitted to the national system. In some institutes, two-track systems may be necessary at the outset, involving: (1) rapid but crude inventories of all materials; and (2) more detailed inventories of the materials that pose the greatest risks. While it is important that accounting systems exist, it is equally important that there be timely and accurate data transmitted to the national system. A strong regulatory basis is essential to ensuring the integrity of the data and the system as a whole. DOE, in cooperation with Rosatom and other appropriate Russian governmental agencies such as Rostekhnadzor, should continue to support the development and adoption of necessary laws, decrees, and regulations that will expand and clarify the legal infrastructure for MPC&A. However, working with Russian counterparts, DOE should give greater attention to establishing priorities among the many dozens of documents in preparation and fostering rapid adoption of sound modern approaches. In addition, it is important that DOE and its Russian partners work to ensure that those regulations are enforced. These documents address, for example, regulatory requirements, inspection infrastructure, information systems, measurement procedures, instrumentation requirements, and instrument calibration. Important criteria in prioritizing the documents should include: new documents of priority to the Russian government; the anticipated effect of the documents on the near-term protection of materials against both insider and external threats; and, the long-term indigenization significance of the documents. DOE and Rosatom should jointly review the many interactions among Russian organizations involved in protecting material at the facility level to identify areas in which coordination can be improved. For example, procedures concerning the transportation of materials between sites, overlapping responsibilities of Rosatom and Rostekhnadzor at Rosatom facilities, and interactions between guard

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Strengthening Long-Term Nuclear Security: Protecting Weapon-Usable Material in Russia forces and facility management are areas that could result in security vulnerabilities if neglected. Responsibility for guard forces at some facilities has been transferred from the Ministry of Internal Affairs to Rosatom. DOE should continue to work with Rosatom to help ensure an orderly transition of guard forces to the new Rosatom enterprise system, keeping in mind that Russia has extensive experience in organizing guard forces. While some facilities will continue to rely on the Ministry of Internal Affairs and other guards will remain at their current positions, there will be a number of new guards. As more guards enter the system, screening and training programs will be particularly important. DOE should continue its emphasis on the development of local capabilities, particularly private sector capabilities, to design, produce, and service system components. In many cases, system components that are used in cooperative projects should be manufactured in Russia. When only foreign equipment is available, preference should usually be given to equipment that can be easily serviced by Russian firms. DOE should recognize the important role of the equipment certification process as part of the overall regulatory system in Russia. At the same time, that certification process should support the overall MPC&A mission. MPC&A upgrades should emphasize the use of sturdy equipment that is relatively inexpensive to operate and maintain, minimizes electric power consumption, and has proven reliable in the Russian environment. Reducing the costs associated with maintenance is an important aspect of indigenization. DOE should rely on the Russian facilities to serve as prime contractors for Russian subcontractors that provide and install upgrade equipment at facilities. Currently, some DOE contracts are signed directly with Russian equipment providers to install upgrades at the facilities. This approach significantly reduces the capability of the facilities to control the equipment installation and may result in equipment that does not conform to technical and operating requirements of the facility. Even though the facilities formally endorse the plans for installing equipment, unanticipated problems often arise and occasionally cause managers to resist, rather than embrace, the installed upgrades. While placing subcontract management responsibility on the Russian facility may in some cases delay installation, in the long term it will contribute to indigenization by allowing the facilities to have direct control over the equipment providers during and after installation and by requiring the facilities to develop the capability to deal with subcontractors. DOE should ensure that ownership titles of equipment provided to Russian facilities are legally transferred to the facilities, with due attention to avoidance of value-added and other taxes from which U.S. assistance is exempt. There has been some uncertainty among facility managers about this issue. DOE should carefully review the ratio of its expenditures between funds managed and expended directly by DOE laboratories and funds transferred to and

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Strengthening Long-Term Nuclear Security: Protecting Weapon-Usable Material in Russia managed by Russian facilities. The percentage provided to Russian facilities should increase as rapidly as possible to reflect the importance of indigenization. This approach could allow savings on the U.S. side by reducing the number of U.S. visits required to manage activities that Russian experts could supervise. Some of the foregoing steps have been taken by DOE on a modest scale. Indeed, since this study was initiated in 2003, the DOE management team has demonstrated much greater sensitivity to the importance of indigenization and has reflected this sensitivity in a number of program activities. Still, a more concerted effort in these areas would expedite the upgrade process and also foster indigenization.