thebigp

IN 1993, Vice President Gore boarded Air Force Two and flew to Moscow for meetings with Russian Prime Minister Victor Chernomyrdin about the vitally important task of protecting nuclear weapons and nuclear material in the newly decentralized former Soviet Union. It was a natural mission for Gore; during his tenure in the Senate, he had become something of an expert in arms control agreements and, thanks to the patronage from Hammer, had already met with Anatoly Dobrynin, Moscow’s longtime ambassador to Washington.
Many defense experts consider Russia’s nuclear arsenal to pose the greatest immediate threat to U.S. security, of even greater concern than China’s alleged acquisition of U.S. nuclear secrets. The Chinese will no doubt develop sophisticated warheads and the missiles to launch them over the next decade or two; the Russians already have them. The fear of loose nukes grew as economic conditions in the old Soviet republics deteriorated in the early 1990s. Gore’s mission was to reach an agreement with Russia on a way to manage all those weapons in a post-Cold War world.
Gore and Chernomyrdin signed a 20-year, $12 billion deal under which Russia would ship its weapons-grade uranium to the United States. The U.S. Enrichment Corp. (then government-owned) would buy the highly enriched uranium, process it into lower grade, reactor-friendly uranium and sell it to nuclear power plants in the United States. The cash-starved Russian government would get much-needed dollars to pay its nuclear scientists, those scientists would not be tempted to offer their services around the world, and nuclear material would be under the protection of the United States.
IT LOOKED GOOD ON PAPER, but it didn’t work out that way. In 1996, Congress passed a bill to privatize the U.S. Enrichment Corp., a move that threatened the Gore-Chernomyrdin agreement, though one that in fact would ultimately benefit Gore.
Foreign policy experts including Thomas Neff, a senior researcher for the Center for International Studies at the Massachusetts Institute for Technology, who conceived of the uranium agreement warned that privatization threatened the deal. A privatized, profit-seeking U.S. Enrichment Corp., would pay Russia far less cash for its uranium than the amount Gore and Chernomyrdin had originally agreed on. Gore, as the broker of the deal, was in a perfect position to lobby against the privatization scheme. He didn’t. Instead, the Clinton-Gore administration wholeheartedly supported privatization of USEC as part of its efforts to “reinvent government.”
USEC’s board of directors, led by William Rainer, a large donor to the P**********l Inaugural Committee in 1993, had decided to consider two options: Sell the company to a behemoth like Lockheed Martin Corp., or go it alone with an initial public offering. Rainer and the board chose the latter course. In 1998, the U.S. government got $1.9 billion from the sale of USEC to private investors. Clinton rewarded Rainer for presiding over USEC’s privatization by nominating him to serve as the chairman of the Commodities Futures Trading Commission. At his Senate confirmation hearings, Rainer said, “I thought it was the right decision, and one year later, I look at the decision and I still think it was the right decision.”
The decision was certainly right for some of Gore’s biggest benefactors, which quickly cashed in on what turned out to be a $75 million bonanza. Wall Street firms such as Morgan Stanley, Dean Witter & Company; Merrill Lynch & Co., Inc.; and Goldman Sachs & Co., Gore’s No. 3 career patron, collectively raked in at least $42 million in underwriting fees. Well-connected law firms, among them Skadden, Arps, Slate, Meagher & Flom and Patton, Boggs earned nearly $11 million for their part in taking the company private. USEC retained J.P. Morgan & Company, Inc., as its adviser in the deal; J.P. Morgan, in turn, , hired Greg Simon, Gore’s domestic policy adviser, for a fee of $10,000 a month to help it select the new, privatized company’s directors.
AS NEFF AND OTHER EXPERTS had predicted, however, the deal soon began to unravel. Later in 1998 USEC announced that it had received shipments of uranium from the U.S. Department of Energy. The sudden glut caused the worldwide price of uranium to plummet, and the Russians suddenly stood to receive less money than they had been promised. Yeltsin’s government cried foul and threatened to sell its nuclear material to other countries, including Iran. The White House scrambled to come up with the money the Russians demanded, and managed to quietly slip an extra $325 million for the Russians a taxpayer-financed bailout into an omnibus appropriations bill before Congress.
Neff, the architect of the plan to ship Russia’s weapons-grade uranium to USEC for reprocessing, estimates that it will cost taxpayers $140 million a year for 15 years to continue purchasing the Russian nuclear material, for a total cost of $2.1 billion or $200 million more than the sale of USEC brought in. Gore’s “reinvention” of USEC made a lot of money for some of his most reliable political patrons. It also endangered nuclear arms control and left in private hands the management of facilities that are contaminated with deadly substances.
SecThe Center for Public IntegrityJanuary 10, 2000