Negligence and nuclear nonproliferation: eliminating the current liability barrier to bilateral U.S.-Russian nonproliferation assistance programs.

• Author: Speice, Patrick F., Jr.

TABLE OF CONTENTS INTRODUCTION I. THE HISTORY OF U.S.-RUSSIAN NONPROLIFERATION AGREEMENTS AND THEIR LIABILITY PROVISIONS A. The Collapse of the Soviet Union, the Threat of "Loose Nukes, "and the Risk of "Brain Drain" B. U.S.-Russian Nonproliferation Agreements: Cooperative Threat Reduction C. The Nuclear Cities Initiative and "Brain Drain". D. U.S.-Russian Plutonium Disposition Agreements and Mixed-Oxide Fuel II. THE CURRENT LIABILITY CONTROVERSY: THE NEED FOR A NEW APPROACH A. The Problem of Establishing Liability Provisions for Bilateral Nonproliferation Agreements 1. Interested Parties 2. The Impact and Likelihood of Nuclear Incidents B. Applicable Law Absent an Agreement on Liability C. The Position of the U.S. Government D. The Position of the Russian Government III. THE PATH FORWARD: POTENTIAL SOLUTIONS TO THE LIABILITY IMPASSE A. Application of Existing Civilian Nuclear Power Liability Agreements B. The European Experience C. Damage Caps and Insurance Agreements D. Choice-of-Law, Choice-of-Forum, and Arbitration Provisions E. Equipment Specification Provisions and Warranties F. A Workable Solution: A Hybrid Approach G. Interim Solutions CONCLUSION AUTHOR'S NOTE INTRODUCTION

The September 11, 2001, terrorist attacks demonstrated in horrifying fashion the serious threat posed by international organizations that seek to cause mass destruction in the United States. Several confirmed cases of terrorist groups attempting to purchase or steal nuclear material have raised the chilling prospect of an unconventional attack on U.S. soil that would result in unparalleled destruction. (1) Because of the porous border and the wide variety of methods that terrorist groups could use to construct, deliver, and detonate a nuclear device in the United States, (2) supply-side controls aimed at preventing terrorists from acquiring nuclear material and the knowledge of how to construct nuclear weapons in the first place are likely to be the most effective means of preventing nuclear terrorism. (3)

Unfortunately, the collapse of the Soviet Union in the early 1990s has given terrorist groups new opportunities to acquire nuclear material and know-how. (4) The end of the Cold War signaled the end of the East-West confrontation that was largely defined by an extensive nuclear arms race, (5) leaving both the United States and Russia with extensive stockpiles of nuclear weapons and the nuclear material and infrastructure to support their massive military-industrial complexes. (6) In Russia, the economic difficulty that has resulted from the end of the Soviet economic system and the transition to a more liberalized economy has left the remnant nuclear infrastructure insecure and in shambles. (7) Two problems in particular are of serious concern given their potential consequences for U.S. national security. First, there is a risk that terrorist organizations could acquire assembled warheads and weapons-grade fissile material that are currently stored in facilities with inadequately funded security systems. (8) Second, the nuclear scientists that occupied the Soviet Union's secret "nuclear cities" are unemployed, increasing the possibility that these scientists will sell their knowledge to hostile nations or terrorist groups that seek nuclear capabilities. (9)

In response to the nuclear threats posed by the collapse of the Soviet Union and the subsequent economic downturn in Russia, the United States initiated a number of bilateral assistance programs to aid Russia in coping with its security shortcomings. (10) The bilateral assistance programs, broadly referred to as Cooperative Threat Reduction (CTR) projects, (11) have been generally regarded as very successful in preventing the spread of Russian nuclear material and know-how to rogue states or terrorist groups. (12) The United States has found it most effective to negotiate separate agreements that are narrowly tailored to address specific problems. (13) Although the programs generally enjoy broad support in the United States and Russia, concerns about who should be responsible, and to what extent, for damages that may arise if the projects go awry have been a primary focus in many of the bilateral negotiations to begin CTR projects. (14)

Concomitant with the negotiation of the Soviet Nuclear Threat Reduction Act of 1991, (15) the United States and Russia successfully negotiated an agreement (Umbrella Agreement) that held Russia solely and unconditionally liable for any damages arising from CTR activities. (16) More recently, however, Russia has rejected liability provisions that mirror those of the CTR Umbrella Agreement when negotiating specific nonproliferation assistance agreements that do not fall under the Agreement. (17) Because the United States has continued to insist that liability for all CTR activities be covered under the Umbrella Agreement, no new CTR programs have been initiated to continue the important work of securing Russia's nuclear infrastructure, and numerous existing programs have expired. (18)

The United States and Russia established two Department of Energy (DOE) CTR assistance programs during the 1990s to address specific problems plaguing Russia's nuclear industry, but the countries deferred their concerns over liability. (19) First, the Nuclear Cities Initiative (NCI) is designed to address the issue of "brain drain" by converting Russia's former nuclear cities into successful civilian enterprises. (20) Second, the plutonium disposition program is intended to assist Russia in constructing a Mixed-Oxide Fuel (MOX) reactor that will consume thirty-four tons of excess weapons-grade plutonium. (21) The United States and Russia opted to begin implementing these initiatives, agreeing to work out specific liability provisions during the first few years of their existence. (22) By the middle of 2003, however, they had failed to negotiate a mutually acceptable liability agreement for either program, and consequently, the unfinished programs have expired and cannot be continued. (23)

This Note will analyze the liability impasse that is hindering the progress of present and future bilateral nonproliferation assistance agreements between the United States and Russia, ultimately recommending a solution that will prove acceptable to both parties. Part I will survey existing Russian nonproliferation agreements with the United States, focusing on the specific liability provisions that govern each one. Part II will investigate the current controversy between the United States and Russia concerning liability provisions that govern CTR activities, explaining the difficulty of negotiating liability provisions for CTR nonproliferation assistance programs given the various interests of both countries. Part III will analyze the feasibility and desirability of a number of approaches to resolving the liability dispute between the United States and Russia, providing recommendations that best accommodate the interests of both sides.

1. THE HISTORY OF U.S.-RUSSIAN NONPROLIFERATION AGREEMENTS AND THEIR LIABILITY PROVISIONS

   1. The Collapse of the Soviet Union, the Threat of "Loose Nukes," and the Risk of "Brain Drain"

      Although a major armed conflict never occurred between the United States and the Soviet Union during the Cold War, both states devoted significant economic and human resources to preparing for a full-scale nuclear conflict. (24) Accordingly, the Soviet Union developed an extensive military-industrial complex, which was intended to mirror and surpass the United States' efforts to amass and develop nuclear weapons, allowing the Soviet Union to acquire a vast arsenal of strategic and tactical nuclear weapons for waging war. (25) Entire cities were constructed to serve this goal, and thousands of nuclear physicists and other scientists that were employed by the Soviet government for the sole purpose of developing a nuclear arsenal occupied these "nuclear cities." (26) Vast sums of money were invested in development of nuclear weapons, resulting in the production and stockpiling of 40,000 assembled warheads and more than 1150 metric tons of weapons-grade fissile material. (27)

      With the end of the Cold War in 1991, the states of the former Soviet Union were thrown into economic and political disarray. (28) Perhaps the greatest risk that accompanied this collapse was the threat of "loose nuclear weapons. (29) The end of the Cold War largely eliminated the risk of global nuclear conflict between states, but the threat of terrorist attacks became the primary challenge to the United States' national security, as demonstrated by a number of incidents during the last decade. (30) Although no terrorist acts directed against the population or interests of the United States or other states have been launched with nuclear weapons yet, this failure "must be assumed to be due to lack of means rather than lack of motivation." (31) Attempts by al-Qaeda to acquire nuclear material are well documented. (32) and several other attempted thefts of nuclear material indicates that there is a demand for nuclear material among terrorist groups, many of which are hostile to the United States. (33)

      The collapse of the Soviet Union dramatically increased the risk that terrorist organizations will succeed in acquiring fissile material from Russia for several reasons. First, the end of the Soviet state marked the end of state control over every aspect of life in the Soviet Union. (34) One by-product of stringent centralized control was heavy regulation and intense security measures for military facilities and nuclear installations. (35) Second, the economic decline that accompanied the transition to a market economy (36) exacerbated the problem, as the fiscal situation in the former Soviet states, most notably Russia, made security programs impossible to fund. (37) Graham Allison summarizes the implications of post-Soviet disorder in Russia:

       The dramatic changes ... have produced

      ...