National security for sale.

• Author: Aizenman, Nurith
• Position: Government privatization and nuclear terrorism

In November of 1991, Thomas Neff had a stroke of genius. A year earlier, the once-fearsome Soviet empire had abruptly collapsed into a heap of disordered republics; and while this epic event was greeted with sighs of relief by most Americans, nuclear proliferation experts like Neff, a professor at M.I.T., knew better than to pop open the champagne just yet. True, the prospects of a nuclear armageddon with Russia had never been more remote -- particularly since, as a result of the START I and II treaties, Russia was already in the process of dismantling 80 percent of its nuclear arsenal. But this good news also had a dark side: once the nuclear warheads were taken apart, the bomb-grade uranium inside would be more vulnerable to theft. Meanwhile, hundreds of tons of bomb-grade uranium in Russia's existing stockpile lay scattered across the country in insecure storage sites -- guarded, if at all, by demoralized soldiers and nuclear workers who in many instances had not been paid, or even fed, by the cash-strapped Russian government in months. Given the small quantity of enriched uranium required to build a nuclear bomb, the possibilities for disaster seemed limitless: a terrorist group might break into one of the many nuclear warehouses that lacked even rudimentary electronic detection systems and make off with enough uranium to blow up Manhattan. A starving soldier might sneak home a few handfuls of the stuff to sell on the black market -- where it could be snapped up by eager buyers from Iraq, Iran or North Korea. A highly trained, but unemployed nuclear worker might be forced to make ends meet by going to work for one of those rogue nations. And most disturbing of all, in a quest for hard currency, the Russian government might itself be moved to sell wholesale quantities of nuclear material to the highest bidder. (In fact, in 1995 evidence surfaced that the head of Russia's Ministry of Atomic Energy, Victor Mikhailov, was trying to reach just such an arrangement with Iran).

Which brings us to Neff's ingenious proposal. Although of high, bomb-grade quality, the uranium from Russia's dismantled warheads could potentially be diluted into the lower grade kind used to fuel nuclear power reactors. And the U.S. government was already in the business of producing and selling such fuel to nearly all of the commercial nuclear power plants in the U.S. as well as one-third of those abroad. So instead of producing all of that nuclear fuel in our own facilities, Neff reasoned, why not buy a portion of it from the Russians. From the American point of view, the arrangement would cost nothing because we could still get the Russian material at a lower price than we'd be re-selling it to the power plants. Meanwhile, the Russians would receive a desperately needed infusion of cold cash -- a good chunk of which could be used to improve the security of their remaining nuclear stockpile. In addition, thousands of Russia's dangerously idle nuclear workers would once more be gainfully employed, this time in re-processing the bomb-grade uranium. Best of all, huge quantities of deadly Russian nuclear material would be moved beyond the reach of would-be bomb-makers.

It took some prodding, but the U.S. government, first under President Bush and then under Clinton, eventually took up Neff's plan. By August of 1992, the United States and Russia had reached a tentative agreement: Over the next 20 years, the United States would pay Russia about $12 billion for the reprocessed uranium derived from 500 metric tons of nuclear material from its warheads -- 40 percent of Russia's total supply of bomb-grade uranium and enough to destroy Hiroshima 25,000 times over.

The Russian uranium deal was, as its advocates have noted, a classic conversion of swords into plowshares. It ought to have been a crowning achievement of America's post-cold war foreign policy. But this is Washington, where even the brightest ideas can be clouded by muddy thinking. And unfortunately for the deal, at the same time that the United States and Russia were hammering out its specifics, proponents of privatizing government were gaining bipartisan support for a plan to sell off Uncle Sam's uranium production business. Thus the privatization scheme and the swords-into-plowshares deal evolved in tandem -- intertwined from the very start. And the unhappy impact of the former on the latter provides an instructive -- and depressing -- example of how a knee-jerk commitment to privatizing government can seriously compromise America's national interests.

A Private Matter

The notion that the private sector can run just about anything more efficiently and effectively than the federal government was well on its way to becoming international gospel by the early 1990s. In Western Europe, hundreds of billions of dollars worth of government enterprises ranging from telephone companies to steel mills were put on the auction block. The privatization wave attracted a strong following in the United States as well. However, in contrast to Europe, most major services in the U.S. were already handled by private industry. Undaunted, the privatization advocates found themselves a juicy target. "They were trying to think of something that no one else had thought of," Clinton's former chairman of the Council of Economic Advisers Joseph Stiglitz explains only half-jokingly, "and then someone had a brilliant idea: Why not privatize the making of atomic bombs -- or at least the processing of the uranium that...