Weapons of Mass Destruction: Reducing the Threat From the Former Soviet
Union: An Update (Letter Report, 06/09/95, GAO/NSIAD-95-165).

Pursuant to a congressional request, GAO reviewed the Cooperative Threat
Reduction (CTR) program, focusing on the program's: (1) planning and
funding status; and (2) recent progress in eliminating weapons of mass
destruction in the former Soviet Union (FSU).

GAO found that: (1) the CTR program has facilitated Ukraine's weapons
dismantlement efforts and has significantly influenced other recipient
states' decisions to dismantle weapons of mass destruction; (2) the
Department of Defense (DOD) has developed its first comprehensive
multiyear CTR plan and has doubled program obligations and tripled
program expenditures over the past 11 months; (3) the value of CTR work
exceeds reported expenditure levels and program managers are adjusting
their reporting systems to reflect the value of work actually performed;
(4) DOD has made some progress in conducting audits and examinations in
FSU states receiving CTR funds; (5) the specific material impact of CTR
assistance has been limited due to the lack of certain storage
facilities and the recent delivery of some CTR aid; and (6) the program
needs to overcome numerous challenges and problems, such as the lack of
agreement over disposal methods, to realize its long-term objectives.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-95-165
     TITLE:  Weapons of Mass Destruction: Reducing the Threat From the
             Former Soviet Union: An Update
      DATE:  06/09/95
   SUBJECT:  Nuclear weapons
             Chemical warfare
             Nuclear proliferation
             Advanced weapons systems
             Arms control agreements
             International cooperation
             International relations
             Property disposal
             Federal aid to foreign countries
             Budget obligations
IDENTIFIER:  DOD Cooperative Threat Reduction Program
             Russia
             Ukraine
             Belarus
             Kazakhstan
             Strategic Arms Reduction Treaty
             START
             Soviet Union

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Cover
================================================================ COVER

Report to Congressional Requesters

June 1995

WEAPONS OF MASS DESTRUCTION -
REDUCING THE THREAT FROM THE
FORMER SOVIET UNION:  AN UPDATE

GAO/NSIAD-95-165

CTR:  An Update

Abbreviations
=============================================================== ABBREV

  CTR - Cooperative Threat Reduction
  DOD - Department of Defense
  FSU - former Soviet Union
  GAN - Gosatomnadzor
  IAEA - International Atomic Energy Agency
  ICBM - Inter Continental Ballistic Missile
  MINATOM - Russian Ministry of Atomic Energy
  START - Strategic Arms Reduction Treaty

Letter
=============================================================== LETTER

B-260438

June 9, 1995

The Honorable Floyd Spence
Chairman
The Honorable Ronald Dellums
Ranking Minority Member
Committee on National Security
House of Representatives

The Honorable John Kasich
Chairman
Committee on the Budget
House of Representatives

As you know, Congress has had an ongoing interest in the
effectiveness of U.S.  efforts to reduce the threat posed by weapons
of mass destruction in the former Soviet Union (FSU).  In response to
your requests, we have assessed the Cooperative Threat Reduction
(CTR) program's

  planning and funding status and

  recent progress in addressing CTR objectives in the FSU, that is,
     the safe and secure elimination of nuclear, chemical, and other
     weapons of mass destruction (including missiles and other
     strategic delivery vehicles); improving controls over nuclear
     weapons and materials; and promoting demilitarization projects.

This letter summarizes our findings, which are described in greater
detail in appendixes I through IV.

   BACKGROUND
------------------------------------------------------------ Letter :1

In 1991, Congress authorized the Department of Defense (DOD) to
establish a CTR program to help FSU states (1) destroy weapons of
mass destruction, (2) store and transport those weapons in connection
with their destruction, and (3) reduce the risk of proliferation.
Subsequently, Congress directed DOD to address these three objectives
on a priority basis, added new objectives (e.g., promoting FSU
defense conversion), and approved use of up to $1.25 billion in
fiscal years 1992 through 1995 toward achieving CTR objectives.  DOD
plans to request a total of $735 million for fiscal years 1996 and
1997.

To accomplish its CTR objectives, DOD has launched projects under 38
implementing agreements with Russia, Ukraine, Belarus, and
Kazakhstan.  Of its 1992-97 CTR funds, DOD plans to use about half to
help dismantle and destroy strategic nuclear delivery vehicles and
chemical weapons, roughly one quarter to improve FSU controls over
nuclear weapons and materials, and almost one-fifth to help
demilitarization of FSU defense activities.  DOD provides goods and
services, rather than direct cash payments.  DOD must notify Congress
of its intention to obligate funds for specific CTR projects 15 days
before actually obligating the funds.

We have issued a series of reports concerning the CTR program over
the past 3 years.  Most recently, in October 1994, we reported that
although the program had initiated numerous projects to address a
wide array of threats, DOD had not estimated total requirements for
achieving program objectives and that the prognosis for achieving the
program's objectives varied widely.\1 We also reported that DOD had
yet to begin auditing FSU use of CTR aid.  We recommended that the
Secretary of Defense institute a long-term planning process to help
DOD allocate CTR funds among competing demands and to guide
preparation of annual budgets.  Congress subsequently required DOD to
estimate total U.S.  expenditures required to achieve CTR objectives,
prepare a multiyear CTR program plan, and report on how it will
determine that CTR aid is being used for intended purposes.

--------------------
\1 Weapons of Mass Destruction:  Reducing the Threat From the Former
Soviet Union (GAO/NSIAD-95-7), Oct.  6, 1994.

   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

In some areas, the CTR program has made progress over the past year
and its long-term prognosis for achieving its objectives may be
promising.  The program has played an important role in facilitating
Ukraine's weapons dismantlement efforts and the executive branch
believes that the promise of CTR aid has been a significant factor in
the political decisions of the recipient states to begin dismantling
weapons of mass destruction.  Nevertheless, the overall specific
material impact of CTR assistance provided to date has been limited
and the program must overcome numerous challenges and problems to
realize its long-term objectives.\2

DOD has made progress over the past year in planning the CTR program
and in obligating and expending funds for CTR projects.  DOD has
developed its first comprehensive multiyear plan for the CTR program.
After a slow start in preceding years, DOD has more than doubled
program obligations and tripled program expenditures over the past 11
months.  The value of CTR work actually performed exceeds reported
expenditure levels and program managers are adjusting their reporting
system to more accurately reflect the value of work performed.  Also,
DOD has recently made some initial progress in conducting audits and
examinations in FSU states receiving CTR funds.

The specific material impact of actual CTR assistance provided to
date has been limited--in part because (1) several key projects, such
as a fissile material storage facility, are still in their early
stages and cannot be expected to have a significant material impact
for several years and (2) deliveries of some CTR aid did not begin
until relatively recently.  Some CTR projects appear to have already
had a specific material impact.  For example, CTR aid has facilitated
the return of hundreds of nuclear warheads from Ukraine to Russia.

The program's long-term prospects may be more promising, but problems
and challenges remain.  For example, CTR aid should allow Ukraine to
meet its Strategic Arms Reduction Treaty (START) obligations.  On the
other hand, difficulties in working with the Russians in resolving
key issues have slowed progress on several projects that could have
major long-term significance.  For example, the United States and
Russia have yet to agree on the applicability of a technology to be
used in a chemical weapons destruction facility and may not do so
until midway through fiscal year 1996.  This uncertainty raises
questions as to the program's need for the $104 million it is
requesting in fiscal year 1996, in part, to begin designing and
constructing the facility.  If the United States and Russia agree on
the applicability of a technology by March 1996, as scheduled, it
appears that the program may be unable to obligate about $34 million
in funds in fiscal year 1996.  Moreover, even if the facility were to
be completed on schedule, uncertainties concerning resources,
schedules, and costs would compromise Russia's ability to destroy its
chemical weapons stockpile in compliance with the Chemical Weapon
Convention's timetables if the Convention enters into force in 1996
(see app.  II).

--------------------
\2 In this report, we use the term specific material impact to mean
the actual use of this assistance to address CTR objectives.

   MATTERS FOR CONGRESSIONAL
   CONSIDERATION
------------------------------------------------------------ Letter :3

Congress may wish to consider reducing the CTR program's fiscal year
1996 request for $104 million for support to Russian chemical weapons
destruction efforts by about $34 million because of uncertainties
regarding the expenditure.  In addition, Congress may wish to
consider withholding approval to obligate any remaining funds
designated for the design or construction of elements of a chemical
weapons destruction facility until the United States and Russia have
agreed on the results of the joint evaluation study concerning
applicability of a destruction technology.

   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :4

DOD and the Department of State, in objecting to our finding that the
material impact to date of CTR projects had been limited, stated that
we had overlooked the CTR program's political impact and leverage in
ensuring that FSU states undertake weapons elimination programs and
in obtaining Ukrainian, Belarussian, and Kazakhstani agreement to
become non-nuclear weapons states.  We do not dispute this political
dimension to the CTR program, but we believe that DOD and State's
comments stem from a misunderstanding of the purpose of our report.
As requested, our report, the latest in a series of our assessments
of the CTR program, focuses on the material impact of CTR projects
over the past year in addressing the threats posed by FSU weapons of
mass destruction and on the prospects for such effects in the future.

DOD further commented that we had underestimated the role of the
material assistance provided to date and provided several examples in
support of this comment.  We have added some of these examples to our
report.  However, DOD also cited benefits of deliveries of support
equipment to Ukraine and armored protective blankets to Russia.  Our
draft specifically cited the impact of CTR deliveries to Ukraine and
Russian use of armored blankets in withdrawing warheads from Ukraine.
DOD further stated that Russia is "today" using U.S.-supplied
guillotine shears to cut up bombers.  These shears have not yet been
used and are not expected to be used until July 1995.

DOD stated that numerous tangible reductions in the threat to the
United States have been achieved "through a combination of leverage
provided by the CTR program and direct material assistance." However,
the examples that DOD provides do not distinguish between reductions
that may be attributed to political impacts since the Soviet Union's
collapse in December 1991 and those that have resulted from the
delivery of CTR aid.  For example, DOD states that missiles
containing 2,825 warheads have been deactivated since the Soviet
collapse but does not indicate how many of these were deactivated
through the direct use of CTR assistance--assistance which only began
arriving in mid-1993.  Similarly, DOD states that approximately 630
strategic launchers and bombers have been eliminated since the Soviet
collapse.  However, Russia had eliminated more than 400 of these by
July 1994 before receiving CTR delivery vehicle elimination aid.

DOD's comments imply that every missile and every warhead deactivated
in the former Soviet Union since December 1991 can be attributed to
the CTR program.  DOD does not provide a clear accounting as to how
and to what extent CTR hardware has been used by the FSU states to
eliminate a specific number of systems.  While such an accounting may
not be the only standard that should be used to assess the CTR
program, it should at least be one of the key criteria employed in
reviewing the program's progress.  Although we have asked it to
provide support for the material impact of CTR aid in dismantling
specific numbers of systems, DOD has not done so.  DOD officials
recently informed us that it may be impossible to determine this
impact in terms of specific numbers of systems.

DOD and the Department of State objected to our matters for
congressional consideration.  Both agencies asserted that we were
incorrect in stating that the United States and Russia had not yet
agreed upon a technology for destroying chemical weapons.  However,
as DOD indicates in its comments, Russia has selected a technology
that the United States would not have recommended--an unproven
technology that the United States is now attempting to validate.

DOD, the Department of State, and the Department of Energy also
provided technical clarifications, which we have incorporated in our
report.  The comments of DOD, State, and Energy are presented in
their entirety in appendixes VII, VIII, and IX, along with our
evaluations of them.

   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :5

To assess the CTR program's planning and recent progress, we reviewed
documents and met with officials from DOD, the Department of Energy,
and the Department of State, as well as with officials from the Arms
Control and Disarmament Agency, Defense Enterprise Fund, the Russian
government and industry, Ukrainian government and industry, and a
variety of U.S.  contractors involved in the CTR program.  We also
visited selected CTR projects in Russia and Ukraine and discussed
program implementation with assistance recipients and U.S.  officials
on site.  To determine the funding status of the program, we obtained
specific data on funding obligations, disbursements and work
performed from the Defense Nuclear Agency that implements the CTR
program.  We conducted our review between January and June 1995 in
accordance with generally accepted government auditing standards.

---------------------------------------------------------- Letter :5.1

We are planning to send copies of this report to other appropriate
congressional committees; the Secretaries of Defense, Energy, and
State; the Director of the Arms Control and Disarmament Agency; and
other interested parties.  Copies will also be made available to
others upon request.  Please contact me on (202) 512-4128 if you or
your staff have any questions concerning this report.  Major
contributors to this report are listed in appendix X.

Joseph E.  Kelley
Director-in-Charge
International Affairs Issues

IMPROVEMENTS IN PLANNING AND
FUNDING
=========================================================== Appendix I

The Department of Defense (DOD) has made progress in Cooperative
Threat Reduction (CTR) program planning, and in obligating and
disbursing CTR funds since our last review of the program.  It has
recently made progress in auditing and examining the aid that it has
provided to the former Soviet Union (FSU).

A new program office, established in May 1994 under the Under
Secretary of Defense for Acquisition and Technology to oversee
program implementation, drafted the CTR program's first multiyear
plan in response to a congressional directive.  The plan (which is
classified) is to be reviewed and revised annually and is to be used
to guide the program through its termination in 2001.\1

The CTR program has more than doubled the level of obligated
funds--increasing from the June 1994 level of $223 million cited in
our last report to almost $599 million as of May 8, 1995 (see app.
V).  The CTR office predicts that DOD will obligate over $800 million
by the end of fiscal year 1995.

The CTR program has also made progress in disbursing funds since our
last report.  Disbursements have more than tripled from the June 1994
level of $49.5 million to almost $177 million as of May 8, 1995.  The
largest disbursements were made for strategic offensive arms
elimination projects in Russia and Ukraine, the International Science
and Technology Center in Moscow, Russian rail car security
enhancements, and the design of a Russian fissile material storage
facility.

However, we have found that these disbursement figures significantly
understate the value of CTR work actually performed to date.  We
asked DOD's CTR program managers to contact contractors for 18
projects (representing 85 percent of the program's then-current
budget) and determine the cost of work actually performed but not yet
recorded by DOD as of March 1, 1995.  We found that the value of the
actual work performed on these 18 was $205.7 million--almost double
the value of the disbursements reported for them as of March 1, 1995
(see app.  VI).  The difference reflects the substantial period of
time separating the performance of the work and DOD's payment for the
work.  The CTR program is now developing a data collection system
that will include monthly reporting requirements for this kind of
data.

DOD has made arrangements with the Departments of State, Energy, and
Commerce to streamline the program by transferring nine projects,
beginning in fiscal year 1996.  The Department of State will assume
responsibility for the International Science and Technology Center
and, with the Department of Commerce, for projects aimed at improving
export controls in four FSU states.  Projects aimed at improving
nuclear materials controls and accountancy in three FSU states will
be transferred to the Department of Energy.\2

DOD has recently made some initial progress in conducting audits and
examinations of CTR aid to ensure that the aid is being used for the
purposes intended.  While CTR agreements with the FSU states provide
the United States with the right to conduct such audits and
examinations, Russia and, later, Ukraine raised concerns regarding
implementing procedures that required some months to resolve.  On May
19, 1995, DOD completed an audit and examination of rail car
conversion kits in Russia.\3 DOD has also scheduled a June 1995 audit
in Ukraine and has notified Kazakhstan of plans for a July 1995
audit.  In January 1995, DOD completed an audit and examination of a
continuous communications satellite link in Belarus.

On May 31, 1995, DOD provided Congress with its long-overdue
legislatively mandated report on U.S.  efforts to ensure that CTR aid
can be accounted for and is being used for intended purposes.  We
will provide Congress with our assessment of the DOD report, as
required by law.\4

--------------------
\1 We are currently reviewing the plan for the Committee on the
Budget, House of Representatives.

\2 In our report entitled Former Soviet Union:  U.S.  Bilateral
Program Lacks Effective Coordination (GAO/NSIAD-95-10, Feb.  7,
1995), we reported that the executive branch has had difficulty in
coordinating all of its FSU assistance programs.  We are currently
evaluating several recent executive branch actions to improve such
coordination.  According to the Department of State, an interagency
working group will coordinate former CTR projects.  The Departments
of State and Energy have prepared multiyear plans concerning CTR
projects being transferred to them.

\3 DOD also conducted a financial audit of the International Science
and Technology Center in Moscow in March 1995.

\4 Section 1203 of the National Defense Authorization Act for fiscal
year 1995 required DOD to provide the report to Congress by January
5, 1995, and calls for our assessment of the DOD report.

DESTRUCTION AND DISMANTLEMENT
PROJECTS
========================================================== Appendix II

To date, the material impact of aid actually delivered by the CTR
program's destruction and dismantlement projects has generally been
limited, although the program has succeeded in facilitating the
deactivation of strategic systems in Ukraine.  While Ukrainian
dismantlement progress appears to be dependent on CTR aid, Russia had
moved ahead of its Strategic Arms Reduction Treaty I (START)\1
schedule before it received substantial CTR aid.  CTR aid has not yet
resulted in the destruction of any Russian chemical weapons and
efforts to help plan eventual Russian chemical weapons destruction
have been hampered by numerous delays.

Executive branch agencies credit the CTR program with having had a
very significant impact on the political decisions of FSU states to
begin eliminating thousands of strategic nuclear delivery vehicles
and chemical weapons.  They state that the CTR program's impact is
therefore greater than suggested by focusing on the actual material
impact of CTR aid delivered to date.

The long-term prospects of the CTR program's destruction and
dismantlement projects may be brighter than their limited material
impact to date might indicate.  CTR aid to Russian efforts to
eliminate missile fuel could speed the pace of Russian dismantlement
efforts.  A small U.S.-funded chemical destruction facility may help
spur the Russian program, although even this facility will not be
nearly sufficient to ensure Russian compliance with the Chemical
Weapons Convention.

--------------------
\1 START I limits the FSU to 1,600 delivery vehicles (i.e.  bombers,
submarine missile launchers, and missile silos) and 6,000 warheads no
later than the year 2001.  The, as yet, unratified START II treaty
further lowers these limits and bans multiple re-entry vehicle
intercontinental ballistic missiles.  The United States and Russia
are to meet START II limits by 2003, unless the United States helps
finance Russia's dismantlement efforts.  If so, Russia would met
START II limits by the end of 2000.

      STRATEGIC OFFENSIVE ARMS
      ELIMINATION
------------------------------------------------------ Appendix II:0.1

The CTR program's efforts to destroy and dismantle strategic
offensive arms are focused on nuclear delivery systems, such as
missiles, missile silos, ballistic missile submarines, and heavy
bombers.  Russia has informed the United States that it does not need
U.S.  aid in dismantling the nuclear warheads removed from these
systems.\2

We reported last year that the impact of CTR strategic offensive arms
elimination assistance was likely to vary from one FSU republic to
another.

--------------------
\2 According to DOD, France is providing Russia with machine tools to
help dismantle warheads.  French dismantlement tool aid is valued at
$5 million.

      RUSSIA
------------------------------------------------------ Appendix II:0.2

The material impact to date of strategic delivery vehicle elimination
aid actually delivered to Russia appears to have been limited.  DOD,
in commenting on a draft of this report, stated that the CTR program
has had important political and material impacts in advancing
Russia's dismantlement effort--noting, for example, that the CTR
program had contributed to the elimination of approximately 630
strategic launchers and bombers since the Soviet Union's 1991
collapse.  However, in and of itself, the material impact of the CTR
strategic delivery vehicle elimination aid provided to date is less
than DOD's comment would suggest, since Russia had eliminated over
400 of these 630 launchers prior to initial deliveries of this aid.\3

Although Russia had succeeded in eliminating sufficient launchers to
meet its START I delivery vehicle limit by April 1995,\4 Russian
officials told us that their resources are strained by delivery
vehicle dismantlement efforts and that they lack adequate amounts of
advanced technology for some dismantlement procedures.  Russia must
transport and destroy thousands of metric tons of liquid rocket
propellant and, for the first time, dispose of large quantities of
solid rocket fuel.  Russian officials emphasized that Russia would
need the assistance even without implementation of
START II.  They told us that rocket fuel transportation and
disposition were the most crucial bottlenecks in their meeting treaty
obligations and that such difficulties had forced them to suspend
dismantlement of liquid fueled SS-18 missiles in Kazakhstan for 3
months.  The CTR program is providing equipment to safely transport
and temporarily store liquid rocket fuel from dismantled missiles.
DOD has also awarded a contract to dispose of the liquid fuel\5
(which has been delayed by a bid protest).  Russian officials told us
that more CTR assistance will be needed to dismantle solid rocket
motors and dispose of the fuel.

While Russia has already met its START I delivery vehicle limit, it
has not yet met its START I warhead limit and its START II limits.
According to DOD, CTR assistance will help Russia meet its START I
and II obligations by 2001,
2 years ahead of schedule.  DOD has agreed to provide Russia with
$150 million for delivery vehicle dismantlement, including $20
million for solid rocket motor and fuel disposition.  As of May 8,
1995, CTR program officials had obligated $112 million and disbursed
almost $20 million for dismantlement projects in Russia.  As of March
1995, the value of work performed totaled $56 million.  About 40
percent of the CTR-provided equipment has been delivered.

The CTR budget estimate includes $95 million over the next 2 years to
further accelerate Russian dismantlement efforts and encourage
Russian ratification of the START II agreement.  DOD is also
considering providing about $145 million in dismantlement assistance.
Of the proposed $145 million, roughly half would be used to help
dispose of solid rocket motors and fuel.  The remaining assistance
would be used to dispose of liquid fuel and support destruction of
delivery vehicles and launchers.

--------------------
\3 Our prior CTR work reveals that, according to Russian officials,
Russia eliminated over 400 launchers by July 1994.  CTR dismantlement
assistance deliveries to Russia did not begin until September 1994.
Moreover, not all delivered CTR assistance has yet been put into
operation.  For example, U.S.-supplied guillotine shears have not yet
cut up any Russian bombers, although Russia has used lighter U.S.
equipment to strip such aircraft.

\4 We reported in October 1994 that Russia had the means to eliminate
its delivery vehicles in compliance with START I obligations.

\5 Russia rejected the U.S.  incineration method for disposing of
such fuel.

      UKRAINE
------------------------------------------------------ Appendix II:0.3

Ukraine lacks Russia's resources and capabilities to dismantle its
176 delivery vehicles and silos.  The CTR program has obligated $90
million for strategic nuclear arms dismantlement in Ukraine.  As of
March 1995, the value of work performed exceeded $52 million.  The
CTR budget estimate submission calls for an additional $30 million
over the next
2 fiscal years to further assist Ukraine with its dismantlement
efforts.

As we reported last year, Ukraine lacks the necessary capabilities
and infrastructure to dismantle delivery systems, especially silos,
in accordance with START I.  During our visit to Ukraine, Ukrainian
political and military officials stressed the importance of continued
CTR dismantlement assistance, citing that without it, Ukraine could
not continue its dismantlement efforts.

CTR aid is intended to help eliminate SS-19 and SS-24\6 missiles and
silos and dispose of liquid rocket propellant.  Initial CTR
assistance deliveries--mobile cranes, all-terrain vehicles, fuel,
tires, and batteries--appear to have facilitated the removal of
warheads from missiles and the return of warheads to Russia.  As of
January 1995, 40 SS-19 missiles had been removed from their silos and
all 46 SS-24 missiles had their warheads removed.  According to
Ukraine, as of April 1995, 40 percent of its nuclear warheads--about
700--had been returned to Russia.  Per agreement, all nuclear weapons
are to be removed from Ukraine by mid-1996.

The CTR program will use over $30 million to design, construct, and
equip an SS-19 missile neutralization facility at which liquid fuel
will be removed from the missiles as they are dismantled.  Ukraine
has no such facility.  An integrating contractor\7 will oversee the
neutralization facility and train the Ukrainians in its operation.

Dismantlement efforts could also be affected by the need to house
demobilized Strategic Rocket Forces officers.  Ukrainian law dictates
that demobilized officers must be provided housing.  Ukrainian
officials told us that they cannot afford to construct the total
amount needed and that future dismantlement progress could be slowed
without prospects for adequate officer housing.  The CTR program
plans to provide about
428 housing units through defense conversion projects.

--------------------
\6 It is uncertain what Ukraine plans to do with the SS-24 missiles
once the launchers have been eliminated.  Under START, it is not
required to eliminate these missiles.

\7 An integrating contractor manages all phases of a particular
project and interfaces with other contractors performing specific
tasks.

      KAZAKHSTAN
------------------------------------------------------ Appendix II:0.4

CTR officials have authorized $70 million in assistance to Kazakhstan
and plan to spend another $20 million over the next 2 fiscal years.
As of May 8, 1995, less than $50,000 in dismantlement assistance had
been provided to Kazakhstan because--according to DOD--CTR efforts to
help Kazakhstan eliminate over 100 SS-18 missile silos had been
delayed for several months due to Russian security concerns.  These
concerns have since been resolved, according to DOD.

CTR assistance will fund an integrating contractor to help eliminate
the silos after Russia removes the missiles.\8 The silo work is not
expected to begin until later this year when DOD hires an integrating
contractor.\9 Until then, the actual cost of the project is unknown.

--------------------
\8 As of April 1995, the Russians had removed all warheads from
Kazakhstan.

\9 In the interim, DOD has hired two contractors to help Kazakhstan
salvage metal and equipment from the silos.

      BELARUS
------------------------------------------------------ Appendix II:0.5

In Belarus, CTR program officials plan to provide $11 million in aid
to help remove SS-25 missiles, related structures, and, possibly,
residual liquid fuel.  No CTR dismantlement aid has been provided to
date.  CTR aid will help Belarus meet its START I obligation to
eliminate the missile launch pads.  Russia is removing the SS-25
missiles from Belarus and has already withdrawn more than 45 of them.

      CHEMICAL WEAPONS DESTRUCTION
------------------------------------------------------ Appendix II:0.6

The CTR program's progress in addressing Russian chemical weapons
destruction has been frustrating, and its outlook, though improving,
remains unclear.  Russian delays hampered several significant CTR
efforts in the past year.  Although the program may increase CTR
chemical weapons aid almost ten-fold, many issues need to be resolved
before future CTR funds can be used--including the prospects for
using an unproven Russian technology.  Despite several recent
promising developments, it seems unlikely that Russia will be able to
destroy its total chemical weapons stockpile in accordance with time
frames stated in the Chemical Weapons Convention.

CTR assistance is directed at developing technology and procedures to
destroy Russian nerve agents, which constitute about 80 percent of
the declared Russian stockpile of 40,000 metric tons, at five of
seven chemical weapons sites.  The United States, in prior years,
committed to provide $55 million in CTR funds to (1) prepare a
comprehensive implementation plan for destroying chemical weapons;
(2) establish a centrally located analytical chemical weapons
destruction laboratory; and (3) conduct a joint evaluation of a
Russian chemical weapons destruction technology, for determining what
additional U.S.  assistance could be provided in the design and
development of a chemical weapons destruction facility.  As of May
1995, the CTR program has obligated $22.2 million of the $55 million
available for chemical weapons destruction efforts and disbursed
about $7.3 million.  The value of work performed totaled about $7.7
million.

However, delays have plagued efforts to spend the current $55
million.  For example, the overall completion date for the program's
major U.S.  contract, worth almost $8 million, likely will slip 1
year, from mid-December 1995 to the end of 1996.  Current project
delays occurred for several reasons, including (1) disagreements
between the United States and Russia over the priority of destroying
air-delivered versus artillery-delivered chemical munitions; (2)
differences over the type of chemical weapons destruction technology
to be used, whether a proven U.S.-favored direct incineration
process, or a Russian-favored two-step neutralization process; and
(3) Russian delays in providing information and access to chemical
weapons storage sites.  Also, Russian indecision for over a year on
selecting the central analytical destruction laboratory's location
delayed use of $30 million committed for that purpose.

The CTR program envisions dramatic increases from the $55 million
level of assistance.  The DOD budget estimate submission for fiscal
years 1996-97 includes $234 million for the next 2 fiscal years to
help in design and construction of a chemical weapons destruction
facility that would be capable of destroying about 500 metric tons
per year of the roughly
5,600 metric tons of chemical weapons agent located at this
facility.\10 It also notes that constructing a chemical weapons
destruction facility would cost more than $500 million and require
multi-year funding through 2001.

However, even dramatic increases will address only a portion of
Russian chemical weapon destruction costs.  Russian estimates
indicate that destroying Russia's total chemical weapons stockpile
might cost
$5 billion-$10 billion.  Some Russians estimate that Russia will need
between 35-50 percent of the estimated cost of total chemical weapons
destruction in donor assistance.\11 DOD intends for the U.S.  funding
to address less than 10 percent of Russian funding requirements and
to act as a catalyst for broader financial support to achieve full
chemical weapons destruction goals.  Although the chemical weapons
destruction facility is intended to eliminate a "significant portion"
of the threat, according to the DOD budget estimate submission, the
site where it will be built contains only 14 percent of the Russian
chemical weapons stockpile.  Facilities at all seven sites are
anticipated.

Uncertainties of cost and schedule associated with Russia's unproved
technology could be severe.  The United States experienced years of
delays and unanticipated cost increases during the design and
construction of a U.S.  chemical weapons destruction facility using a
proven technology.\12

In addition, many issues need to be resolved before large-scale
funding can be undertaken.  Requirements for fiscal year 1996 funding
appear to be contingent on completion of several tasks--most
importantly, the joint evaluation of chemical weapons destruction
technology.  The final report on the joint evaluation's results is to
contain specific proposals on the applicability of the two-step
process for designing a chemical weapons destruction facility.  DOD's
budget estimate submission for fiscal years 1996 and 1997 assumes
that the results of the joint evaluation will be favorable and
completed on schedule by March 1996.  Development of an
implementation plan and conceptual designs for a pilot demonstration
facility is to accord with the results of the joint evaluation.
Further delays during fiscal year 1995 and early into 1996 could
reduce the need and impact the justification for the budget requests.

To date, the chemical weapons destruction program remains uncertain
about specific requirements for fiscal year 1996 funding and how much
of the funding the program will be able to obligate during the fiscal
year.  A DOD official said, as of mid-May, that he realistically
could expect to obligate between $50 million-$70 million of the
fiscal year 1996 request of $104 million.  In addition, the chemical
weapons destruction program in mid-May had identified about $34.3
million of the fiscal year 1996 budget request for technology
development requirements, including additional Russian equipment
testing to be determined.  In commenting on a draft of this report,
DOD said that it had scheduled $34.3 million to be obligated in late
1996 as the first installment for the integrating contractor that
would provide U.S.  assistance for the design and construction of the
Russian chemical weapons destruction facility.  However, DOD has
mistaken the $34.3 million, which it associated at the time of our
review with undefined additional technology development activities
with a nearly identical amount that recently revised funding
breakouts allocated to the integrating contractor.  DOD reduced an
amount for the integrating contractor from $35.7 million to $34.3
million.  DOD provided insufficient documentation to justify changes
in these funding amounts.  Given the lack of clarity associated with
the purpose for the $34.3 million and history of delays in this
program, it appears uncertain that DOD needs or could realistically
expect to obligate this amount of funding in fiscal year 1996.

Uncertainty still exists about Russia's specific commitments to
destroy its chemical weapons under its international obligations.  In
the past, Russia made no specific commitments to the United States to
carry out the conditions of a bilateral chemical weapons destruction
agreement and the Chemical Weapons Convention.  DOD told Russian
representatives in May that an implementing agreement would need to
link U.S.  assistance to specific Russian actions that address U.S.
concerns.

Because of these uncertainties--and without significant additional
financial assistance--Russia appears unable to destroy its stockpile
in compliance with the Chemical Weapons Convention's time frames, if
the Convention enters into force in or about 1996 as estimated.  The
Convention requires that all stocks of chemical weapons be destroyed
in 10 years, with an extension of 5 years, if needed.  Although
estimates for meeting the Convention's time frames depend on several
variables and events that have not yet occurred--such as the entry
into force of the Convention and Russian ratification of it,
successful completion of the chemical weapons destruction technology
joint evaluation, and design and construction of chemical weapons
destruction facilities--it is doubtful that all seven chemical
weapons destruction site facilities could be completed to meet the
time frames.

However, several key events in March 1995 could provide new impetus
to chemical weapons destruction projects.  These include Russia's (1)
finalizing and approving a work plan for 1995, which set tasks and
milestones for the year; (2) identifying locations for the chemical
weapons destruction facility and the central analytical laboratory;
(3) issuing a presidential decree on chemical weapons disarmament,
which established a legal framework for chemical weapons destruction
and stated that a plan for speeding up Russia's preparation for
destroying chemical weapons be completed by May 1995; and (4)
establishing a separate line item of about $21 million for chemical
weapons destruction in the Russian federal budget.

--------------------
\10 An additional $10 million for the chemical weapons destruction
facility for fiscal year 1995 actually will be reprogrammed for other
uses, according to a DOD official.

\11 Germany has provided assistance of about $6.5 million through
fiscal year 1994 and expects to approve an additional $4.5 million
for fiscal year 1995 during May, according to a German official.

\12 We reported in December 1994 that the U.S.  chemical weapons
stockpile program had been delayed by design, equipment, and
construction problems at the new disposal facility at Johnston Atoll.
As a result of these and other factors, the estimated cost of the
stockpile disposal program increased and the Army's destruction
schedule slipped.  Chemical Weapons Disposal:  Plans for Nonstockpile
Chemical Warfare Material Can Be Improved (GAO/NSIAD-95-55, Dec.  20,
1994).

CONTROL OVER NUCLEAR WEAPONS AND
MATERIALS
========================================================= Appendix III

CTR projects for providing Russia with the means to safely store
components from dismantled nuclear weapons have been delayed for
several months, although they now appear to be moving forward again.
However, long-standing Russian plans to acquire two storage
facilities and 100,000 storage containers exceed the scope of these
projects.  While CTR projects have had little direct impact in
improving material protection, control and accounting over
weapons-useable civilian material at FSU nuclear facilities, the
prognosis for doing so is improving as a result of recent agreements
with Russia to upgrade controls at some facilities.  However, several
issues need to be resolved before a long-range plan now being
developed by the United States to improve controls at 80 to 100 such
facilities can be implemented successfully.

      FISSILE MATERIAL STORAGE
----------------------------------------------------- Appendix III:0.1

Russian officials have stated that Russia lacks suitable storage for
components from thousands of nuclear weapons and have asserted that
the process of dismantling these weapons could be slowed by this
storage shortfall.\1 They plan to build two storage facilities--each
capable of holding 50,000 containers\2 and each built in two,
25,000-container phases.  Russian officials maintain that acquiring
storage space and containers are their highest CTR priorities.\3

The United States has agreed to provide Russia's Ministry of Atomic
Energy with $15 million in design assistance and $75 million in
equipment, training, and services to help build and outfit one of the
facilities, at Mayak.  The Army Corps of Engineers has performed
design-related work valued at $13.8 million to help Russia with
numerous studies, analyses, and plans.\4 DOD has obligated $27.4
million in equipment funds and performed equipment-related work
valued at $4.7 million.

The CTR program has included another $6 million in design funds and
$75 million in construction funds for the Mayak facility in its
1996-97 budget estimate submission.  If approved, these funds would
raise total CTR funds for the Mayak facility to $171 million.

During the past year the storage facility project was delayed by
several months, due to difficulties with the Russians.  In September
1994, after learning that the Russians had unilaterally made a major
change in the facility's design--eliminating the relevance of roughly
30 percent of the U.S.  design effort--the United States froze
deliveries of construction equipment until Russia addressed U.S.
questions about the new change.  Deliveries were also held up by
Russia's initial reluctance to allow the United States to perform a
radiation survey of the Mayak site.\5 In March 1995, DOD, satisfied
with the progress of the design\6 and having convinced Russia to
schedule the survey, authorized the shipment of the construction
equipment.  Russia has begun preparing the site for construction,
which is scheduled to begin in June.

The CTR program has cited the storage facility project as evidence
that the risk of proliferation has been reduced.  Although the
project is now moving forward again, the facility's first 25,000
container phase will not be ready until December 1998--assuming no
further difficulties.  Moreover, before the United States can support
construction at the Mayak site the United States and Russia must
first amend existing agreements or conclude new ones to allow for
additional design and construction funds and work out arrangements
for the use of a U.S.-hired integrating contractor.  DOD officials
informed us that they are developing a detailed plan for using
construction funds and that the project could probably absorb the $23
million requested for facility construction in fiscal year 1996--if
agreements or amendments can be completed and an integrating
contractor is hired by the end of 1995.  Russia must also provide (1)
detailed construction schedules and (2) more detailed design
information to allow the United States to define equipment, training,
and services requirements and obligate another $47.6 million of the
$75 million in CTR equipment funds.

The total cost of the Mayak facility will likely exceed the $171
million allocated by the CTR program.  The latest Russian study
reviewed by the Army Corps of Engineers estimates that the entire
Mayak facility will cost about $677 million to build and equip--a
substantial increase over past estimates.\7 In the past, Russian
officials have suggested that the two countries divide the costs
evenly, which could result in a U.S.  share of about $338 million for
the Mayak facility--if the current Russian estimate is accurate.

CTR efforts to provide containers for the facility have also been
delayed--although in this case the delays are due to U.S.  technical
difficulties and coordination problems.  Russia plans to equip both
storage facilities with a total of 100,000 containers.  The United
States plans to develop and deliver as many containers as possible
within a $50 million budget.\8 Originally this amount was estimated
to be about 33,000 containers.  The United States has not agreed to
provide additional containers.

The project had planned to produce and deliver the first 10,000
containers to Russia by December 1995, beginning with monthly
shipments of 1,000 in March 1995.  However, one container failed
during tests in December 1994--necessitating design changes.  An
independent analysis cited technical and managerial deficiencies.

Although project participants appear to have taken corrective action,
the container project will warrant close attention through its
completion, due to its complexity, cost, and high Russian interest
level.  Although the redesigned prototype has been successfully
tested, manufactured units will require more testing and CTR
officials will not decide before July 1995 whether to begin
full-scale production.  As a result, fewer containers--possibly
26,000 to 28,000--will be provided later than had been planned.  The
United States anticipates producing 850 a month by the end of this
year.  The Russians have been pressing for delivery and expressed
great unhappiness with the delay when we met with them in Moscow.

--------------------
\1 In the past U.S.  agencies have been unable to confirm a storage
shortfall.  Some have noted that Ministry of Defense storage space
for intact weapons could be used.  The Ministry of Atomic Energy has
argued against doing so.

\2 Estimates that 2 to 5 containers could be needed to hold
components from a single warhead indicate that one 50,000 container
facility could hold materials from 10,000 to 25,000 weapons.  Russia
may dismantle as many as 24,000 weapons.

\3 The Russians have stated that the facility will be transparent to
the United States.  Facility transparency is part of an overall U.S.
effort to prevent a resumption of the U.S.-Soviet nuclear arms
competition.

\4 The Department of Energy contributed $1 million of its own funds
to the design effort.

\5 The Mayak site is located at the scene of a 1957 nuclear accident
that contaminated much of the area.

\6 Russia plans to have completed 35 percent of the design by October
1995.

\7 The November 1993 estimate of $315 million cited in our last
report placed the cost of building and equipping the facility's first
phase at $300 million.  The current Russian estimate includes $454
million to build and equip the facility's first phase--an increase of
more than 50 percent.  According to DOD, the current Russian estimate
is within the range of the Army Corps of Engineers' most recent
estimates.

\8 DOD has obligated $45 million and disbursed $10 million as of May
8, 1995.  As of March 1, the value of work performed was estimated at
$14.2 million.

      MATERIAL PROTECTION,
      CONTROL, AND ACCOUNTING
----------------------------------------------------- Appendix III:0.2

To date, the CTR program has had little direct impact in protecting,
controlling, and accounting for civilian nuclear material that
presents a high proliferation risk.\9 The program's prospects are
improving as a result of recent agreements with the Russians to
upgrade nuclear material controls at civilian facilities using
direct-use material (highly enriched uranium and plutonium).  The
United States is also developing a long-range plan to help upgrade
controls at 80 to 100 civilian, naval nuclear, and nuclear
weapons-related facilities handling direct-use material by 2002.
However, several issues need to be addressed for the U.S.  program to
succeed.

The FSU possesses hundreds of tons of direct-use nuclear material
located at 80 to 100 civilian, naval nuclear, and nuclear
weapons-related facilities, mostly in Russia.  Much of this material
is considered to be highly attractive for theft.  Current nuclear
controls in use at FSU nuclear facilities make it difficult to deter
or detect such theft.  The facilities rely on manual, paper-based
tracking systems that cannot quickly locate and assess material
losses.  In addition these facilities lack modern physical protection
systems, such as monitors, that can detect unauthorized attempts to
remove nuclear material from a facility.

The CTR program provides assistance to Russia, Ukraine, and
Kazakhstan for upgrading civilian nuclear material controls at
selected model facilities and developing regulations, enforcement
procedures and national material tracking systems.  Through the
program, the United States has provided technical working group
meetings, site surveys, physical protection equipment, computers, and
training in support of CTR projects.  To date, none of the projects
have been completed.  DOD has obligated $36.8 million of $62.5
million budgeted, and the value of work is $2.7 million.\10 DOD is
currently defining work valued at $28 million for future obligations.

So far, CTR efforts have had little direct impact in improving
control over direct-use material at civilian facilities.  This is due
mainly to delays in negotiating agreements with the FSU states;
Russian Ministry of Atomic Energy (MINATOM) restricting work to
low-proliferation risk materials in Russia; and the preliminary
nature of the work at other FSU facilities where direct-use material
is present.  Problems in procuring equipment have also caused some
delays.  CTR work on developing a national regulatory system in
Russia has been hampered by MINATOM's resistance to expanding the
role of GAN, Russia's nuclear regulatory agency, and GAN's lack of
statutory authority for oversight and enforcement.

The prospects for accelerating obligations in Russia may be
improving.  Recently, Russia and the United States agreed to add five
high-priority sites handling large amounts of direct-use material to
the program.  The Department of Energy also signed a letter of intent
with GAN to cooperate in implementing a national material control and
accounting system.  The Department of Energy is preparing a
long-range plan to enhance nuclear material protection control and
accounting at the 80 to 100 facilities handling direct-use material
by the year 2002.  Responsibility for funding and supporting CTR
nuclear material protection control and accounting efforts will be
transferred from DOD to the Energy Department in fiscal year 1996.
The Energy Department plan would include Energy's lab-to-lab program,
initiated by Energy in 1994, which works directly with personnel at
Russian civilian and nuclear-weapon related nuclear facilities to
improve nuclear material control, accounting, and physical
protection.  The plan's estimated cost is about $0.5 billion.

Several issues would need to be addressed for such a program to
succeed.

  Currently, there is no agreement with the Russians for work at most
     of the 80 to 100 facilities.  In the past, MINATOM has taken a
     go-slow approach and only recently opened up direct-use
     facilities to the CTR program.  However, the Energy Department
     has had some early success in upgrading controls at a direct-use
     facility under its lab-to-lab program.  In addition, the U.S.
     and Russian Steering Groups for Energy's lab-to-lab program have
     agreed to develop a unified plan for cooperation with the
     principal MINATOM nuclear weapons-related facilities, and Energy
     is negotiating agreements for work at many of the other 80 to
     100 facilities.\11

  The Department of Energy has not yet determined the appropriate
     number of personnel and amount of resources needed to manage the
     planned expansion of the program.  In fiscal year 1995, Energy
     manages a lab-to-lab budget of $15 million.  Starting in fiscal
     year 1996, Energy will be responsible for implementing the
     proposed long-range plan, which calls for a budget increase in
     material protection control and accounting assistance to about
     $70 million per year.  This budget level will continue until
     fiscal year 1999.

  The United States has yet to determine the degree of oversight
     needed to ensure program success.  The Russians have already
     told Energy officials that the United States may not be allowed
     direct access to a small number of highly sensitive facilities.
     It is unclear to what extent currently negotiated audit and
     examination provisions under CTR will apply to the new projects
     in the proposed long-range plan.  According to a State
     Department official, given the extremely important priority of
     preventing diversion of nuclear material, the executive branch
     has agreed in principle on the need for flexibility in pursuing
     adequate arrangements for ensuring that U.S.  assistance is used
     as intended.  The official also noted that most of the equipment
     provided is highly specialized, permanently installed, and not
     easily used for other purposes.

Even with a successful Energy-led program, the United States would
not be able to control the extent to which Russian facilities meet
international standards.  According to a U.S.  national laboratory
official, Russia will be provided with all the elements to develop a
nuclear material control system that is consistent with international
standards, but responsibility for meeting the standards rests with
the Russians.  As a nuclear weapons state under the Nuclear
Nonproliferation Treaty, Russia is under no treaty obligation to meet
international safeguard standards.\12 In contrast, as non-nuclear
weapons states under the treaty, Ukraine and Kazakhstan are required
to meet IAEA safeguard standards.

--------------------
\9 Although it was not a CTR project, DOD used some CTR funds to
finance their portion of Project Sapphire.  In 1994, Project Sapphire
transferred from Kazakhstan to the United States 600 kilograms of
highly enriched uranium that presented a proliferation risk.
According to a DOD official, CTR funds used for Project Sapphire were
in addition to the $5 million available for obligation for material
protection control and accounting assistance to Kazakhstan.

\10 In Russia, DOD has obligated $20.3 million of $45 million
budgeted, and the total value of work performed is $1.2 million.  In
Ukraine, DOD has obligated $11.5 million of a planned $12.5 million,
although the total value of work performed is less than $660,000.  In
Kazakhstan, DOD has obligated $4.9 million of a planned $5 million
program, and the total value of work performed is $850,000.

\11 In addition, the Russian government issued a decree in January
that commits it to improving material protection control and
accounting at Russian nuclear facilities.

\12 Russia has entered a voluntary agreement with the International
Atomic Energy Agency (IAEA) to meet international safeguards
requirements at some of its civilian nuclear power facilities and
research reactors.  Russia also is a signatory to the Convention on
the Physical Protection of Nuclear Materials, and as such is
obligated to meet defined standards of physical protection for
nuclear material.  Ukraine is also a signatory to the Convention.

      WEAPONS SECURITY
----------------------------------------------------- Appendix III:0.3

Two CTR projects to enhance nuclear weapons security--armored
protective blankets and kits to upgrade railcars--are being
completed.  The United States and Russia are exploring new areas of
cooperation on weapons security.

The CTR program provided 4,000 armored blankets to Russia between
July 1992 and June 1993.  In October 1994 the program completed
shipping
115 kits to upgrade rail cars for transporting warheads.  Russian
officials told us in March 1995 that most of the kits were being
installed and that the process had been delayed by a Russian funding
shortfall that had been recently remedied.

Russian officials told us that Russia has used blankets to protect
600 strategic warheads being withdrawn from Ukraine.  DOD, in
commenting on a draft of this report, informed us that the blankets
and rail cars have been used to move warheads within Russia and to
Russia from Ukraine and Kazakhstan.  DOD also noted that CTR
assistance had helped secure and transport strategic warheads that
had been deployed in Russia.\13

We reported last year that--despite the rail car kits and the
blankets--the FSU rail transportation system would still not be safe
by Western standards.  Russian officials told us that they were
concerned about threats posed by criminals and poor rail conditions.
U.S.  and Russian officials are now exploring additional weapons
security measures, including new types of rail cars and
supercontainers for warheads in transit.  The two countries are also
considering computerized accounting systems for warheads and
personnel security measures.  While DOD has recently agreed to
provide $20 million in such aid, its budget estimate includes far
more for weapons security--a total of about $120 million in fiscal
year 1995-97 funds for such purposes, including $42.5 million in
fiscal year 1996 alone.

--------------------
\13 DOD noted that there are over 1,000 such warheads.  DOD officials
do not know how many of these 1,000 have been transported with CTR
aid.

DEMILITARIZATION
========================================================== Appendix IV

The International Science and Technology Center in Moscow appears to
have had a good first year in addressing its nonproliferation
objectives, although it does not preclude the possibility that
scientists receiving Center funds may also work on Russian
institutes' weapons activity with non-Center funds.\1 Most of DOD's
defense conversion projects are not converting active production
lines but are instead using previously dormant facilities that once
produced items related to weapons of mass destruction.

--------------------
\1 DOD categorizes U.S.  support for the Center as CTR
demilitarization activity, prompting our decision to discuss the
Center here.  The Department of State, which currently manages the
Center project for DOD and which will assume complete responsibility
for U.S.  support for the Center in fiscal year 1996, commented on a
draft of this report that it has always considered the Center to be a
non-proliferation effort, not a demilitarization project.

      INTERNATIONAL SCIENCE AND
      TECHNOLOGY CENTER
------------------------------------------------------ Appendix IV:0.1

During its first year, the International Science and Technology
Center in Moscow appears to have made a good beginning in achieving
its nonproliferation objectives by supporting work on peaceful
projects for scientists engaged in weapons of mass destruction and
missile delivery system activities.  However, although CTR program
materials have often described the recipients of Center funds as
"former" weapons scientists, we found that scientists receiving
Center funds may also continue to be employed by institutes engaged
in weapons work.  According to the State Department, the Center's
objective is to intentionally fund weapons scientists in the FSU and
redirect their efforts to peaceful activities.  The Center prohibits
use of its funds for weapons work.

With the collapse of the Soviet Union, the United States became
concerned that FSU experts in weapons of mass destruction and related
technologies might flee to other countries of proliferation concern
to employ their specialized knowledge and maintain their livelihoods.
According to State Department officials, many such experts are not
being paid on a regular basis by their institutes.  Continued
economic deterioration could exacerbate this problem, particularly in
light of decreased demand for this expertise and the inability of the
governments to pay these experts on a regular basis.  Estimates of
the numbers of experts who potentially might engage in proliferation
activities range from 10 thousand to several 10s of thousands of
individuals.  Center officials estimate that there are 3,000 core
weapons of mass destruction and missile delivery system experts.

As a result, the United States, European Community, Japan, and Russia
agreed to establish the Moscow Center to provide peaceful
opportunities to weapons scientists and engineers, particularly to
experts on weapons of mass destruction and delivery vehicles.  The
Center selects projects from those submitted on a competitive basis,
using a detailed review process.  Center projects are carried out at
various facilities and institutes throughout the FSU.  To limit the
potential diversion of funds, scientists and experts are paid
directly on a quarterly basis rather than through their institutes
and direct procurements of necessary equipment are made for the
projects.  An overhead payment up to 10 percent is made to the
scientists' institutes upon successful completion of the project.

The United States has committed $46 million to the Center in
Moscow.\2 As of May 8, 1995, DOD had obligated $22.8 million and
disbursed $20.9 million to the Center.  The Center, which has been in
operation for about 1 year, has disbursed $2.8 million for salaries
and related project costs.  Its Governing Board has approved 130
projects--valued at $60 million--of nearly 400 proposals received.\3
Grants include approximately $25 million in U.S.  funds and involve
8,200 scientists and engineers, including, according to Center
officials, at least 1,000 core weapons of mass destruction
scientists.

Recipients of seven Center grants at three different institutes told
us that they had been involved in nuclear weapons development or
nerve agent research--suggesting that they are among the Center's
target group.  They noted that the grants were important in
redirecting their research and helping them survive the current
economic conditions.  State Department officials indicate that the
target population appears to be staying in Russia, although the
Center's role in encouraging them to do so is difficult to assess.

We found that Center-supported scientists are not necessarily
employed full time on Center projects and that they may spend part of
their non-Center funded time working on Russian weapons of mass
destruction.  They may remain employed by FSU laboratories and work
less than 100 percent of their time on Center projects--some as
little as 10 percent.  This situation raises the prospect that the
scientists could spend the remainder of their time on their
institutes' work on weapons of mass destruction.

According to the State Department, Center and U.S.  officials track
the time the scientists spend on Center projects only and are not in
a position to monitor their non-Center activities.  Nevertheless,
Center officials told us that they doubt that most scientists are
actually working on other than Center projects.  Center and State
officials told us that the scientists maintain their connection to
the institutes to retain important social benefits that the Center
does not provide.  U.S.  officials stated that the Center is intended
to help prevent proliferation and encourage commercial efforts,
rather than to preclude scientists from working on Russian weapons of
mass destruction, and that the Center prohibits the use of its funds
for weapons-related work.

We also learned that the United States and the Center are taking some
steps to guard against the risk that scientists participating in
Center projects could create dual-use items--civilian goods with
weapons applications--with Center funds.  U.S.  officials explained
that the United States policy is not to fund a project if it advances
the state of Russian weapons technology, but could consider doing so
if it utilizes existing weapons technologies for civilian
applications and would provide meaningful employment for the target
group of scientists.  For example, the United States is supporting,
through the Center, development of a commercial streak camera.
Streak camera technology can be relevant to nuclear testing, and the
final product could be subject to export licensing if produced for
export, depending on its technical capabilities.  The Center project
was reviewed for dual-use potential during a detailed U.S.  review
process for all Center proposals based on scientific merit and U.S.
policy.

The State Department will assume responsibility for U.S.  support for
the Center in fiscal year 1996 and has prepared a multiyear plan to
2003.  It estimates the project level will reach 225 projects,
employing an estimated 12,000 individuals.  State plans to budget
approximately $90 million over the next 7 years for Center
activities, $18 million annually through 1998 with a gradual decline
to almost zero in fiscal year 2003.  From the year 2003, State
Department projects that nearly all funds will come from other U.S.
agencies and non-governmental sources such as commercial
partnerships.  State officials hope to increase promotion of
commercial partnerships where limited activities have occurred.

State officials could not provide detailed analysis to support these
planning figures, which, they stated, were largely developed by DOD
through fiscal year 1998.  However, they informed us that they have
initiated a process for reviewing and revising these figures.  They
added that the funding levels were based on first-year spending
rates, an unexpectedly large number of proposals, hopes of achieving
a more targeted outreach to scientists, and overall political
considerations.

Project monitoring is already an area of concern for Center
officials, who said that, because of the limited number of staff,
they can monitor projects only intermittently, instead of quarterly
as desired.  Additionally, State Department officials explained that
project monitoring is a tool in reviewing dual-use concerns and that
the United States has proposed that the Center hire six to eight new
project staff to help free senior staff for monitoring activities.

--------------------
\2 This amount includes $5 million for projects in Belarus and $6
million for projects in Kazakhstan.

\3 DOD conducted a full financial audit of the Center in March 1995
and concluded that the Center's financial statement fairly presented
its financial position as of December 31, 1994.

      DEFENSE CONVERSION
------------------------------------------------------ Appendix IV:0.2

According to DOD officials, U.S.  defense conversion aid is not
intended to be sufficient to convert the FSU's defense industry.  The
program is planning to promote defense conversion by providing
leverage to U.S.  investment in the FSU.  Although DOD claims their
conversion efforts reduce the threat of weapons of mass destruction,
we found that most of these efforts are converting dormant facilities
that once produced items related to weapons of mass destruction.  In
commenting on a draft of this report, DOD informed us that most of
its efforts are aimed at converting production capability because it
considers much of Russia's weapons production capability to be
inactive.  DOD stated that converting inactive capability will
alleviate pressure on Russia to rearm or sell high-tech weapons
abroad and also aid the Russian economy.  We also found that,
initially, DOD efforts did not give priority to privatization of
defense enterprises, and some of these companies remain state owned .

The task of converting the FSU's defense industry to peaceful
enterprises is enormous.  One DOD official says that Russian
officials claim that defense conversion will cost $150 billion and
take 12 to 15 years.  About 1,800 Russian defense plants are already
undergoing conversion.

The DOD defense conversion efforts primarily consist of industrial
partnerships between U.S.  enterprises and FSU weapons producers and
in many cases these partnerships are creating private spin-off
enterprises.  Most of these efforts have been initiated in the past
year and are in the early stages of development.  Until now, DOD has
managed nearly all of the defense conversion projects, but after
fiscal year 1995 all new projects are to be managed by the Defense
Enterprise Fund--a DOD-funded non-profit venture capital fund.

DOD has $152.7 million available for obligation for defense
conversion from fiscal year 1994 and 1995 funding.  Currently, it
plans to allocate an additional $70 million in fiscal year 1996-97
funds to the Fund.  Up to $60 million of the $152.7 million is being
obligated to convert former defense facilities to housing
construction to help support the demobilization of Strategic Rocket
Force officers.  DOD is using the remaining $92.7 million primarily
for industrial partnerships that will create joint ventures.  The
Fund will receive $27.7 million of this $92.7 million.

As of May 8, the CTR program had obligated $97.6 million for defense
conversion and the Fund.\4 As of March, according to DOD, the value
of defense conversion work performed was about $24.7 million, and as
of May defense conversion projects had created 93 jobs for Americans
and 1,475 jobs for FSU defense employees.  DOD estimates expect U.S.
companies to have exported more than $27 million, and projected sales
of the 15 joint ventures are expected to exceed $53 million this
fiscal year.

--------------------
\4 As of May 30, 1995, the CTR program had obligated nearly $118
million for defense conversion and the Defense Enterprise Fund.

      DOD-MANAGED PROJECTS
------------------------------------------------------ Appendix IV:0.3

DOD justifies the program by claiming that defense conversion efforts
reduce the threat of weapons of mass destruction at their origin by
converting enterprises to civilian sector endeavors.  According to a
DOD official, DOD focused on initiating projects at FSU firms and
facilities that once produced weapons of mass destruction, but there
is only one facility where an active production line is being
converted to civilian use.  The Defense Nuclear Agency initiated the
defense conversion program by matching U.S.  businesses with
DOD-selected FSU defense enterprises.  We also found that defense
conversion took priority over privatization as criteria for
selection.  Although encouraging privatization is a U.S.  policy,
Defense Nuclear Agency officials said that it was not an initial
concern of CTR defense conversion.\5 According to DOD officials,
implementing agreements with the FSU republics do not make
privatization a requirement for defense conversion projects, but DOD
officials are working with the FSU governments to privatize CTR
projects.

DOD-managed projects are at varying stages of implementation.

  In Russia, one project links GosNIIAS--a state-owned aviation
     enterprise on Russia's list of firms not to be privatized--to a
     U.S.  firm with which it had previously been involved.  DOD is
     providing $4.1 million to the U.S.  firm, which has
     subcontracted $938,000 to GosNIIAS to begin to develop an air
     traffic control system in the Russian Far East.  Unlike another
     Russian project we reviewed, the GosNIIAS project is not a joint
     venture and profits made could go back to GosNIIAS.

  In Ukraine, a U.S.  commercial partner has teamed up with a
     Ukrainian enterprise, Hartron, which formerly made ballistic
     missile guidance systems for the SS-18 and SS-19.  These firms
     will work together to develop nuclear power plant
     instrumentation and control systems, which are designed to
     improve nuclear safety.  The United States provided a $5 million
     grant to the U.S.  firm, which has contributed $14 million for
     this joint venture.  As of July 1994, Hartron has about 10,000
     employees and has several other on-going conversion efforts,
     including a Chinese-Ukrainian venture assembling televisions, an
     association with a U.S.  computer firm to produce components,
     and a planned project linking banks with satellite
     communications.

  In Kazakhstan, a U.S.  firm has teamed up with KazInformtelecom to
     build a national and international telecommunications system,
     which is projected to be operational in 11 cities in 12 months.
     The U.S.  government is providing $5 million of the $16.1
     million for this partnership.  KazInformtelecom is a new company
     that was established in 1994.  It is the executive contractor to
     convert part of the Saryshaghan testing site to civilian use.
     Saryshaghan tested surface to air and anti-ballistic missiles.

  Defense conversion funds are also being used to help provide
     housing to further Inter Continental Ballistic Missile (ICBM)
     demobilization.  According to DOD, the shortage of housing is
     one of the most serious obstacles to eliminating strategic
     nuclear missile arsenals and closing missile bases.  In Belarus,
     Russia, and Ukraine, provisions for housing are a statutory
     prerequisite for officer demobilization.  In Ukraine, DOD plans
     to provide assistance that will result in 428 housing units at a
     cost of $30 million.  The Ukraine housing requirement for
     demobilization is 6,000 units.  In Russia, the DOD-funded
     housing project is expected to provide 500 units of the
     potentially 30,000 housing units needed at a cost of up to $20
     million.  In Belarus DOD plans to provide up to 207 of the 802
     housing units needed at a cost of $10 million.  All but one of
     these projects are aimed at creating new housing industries and
     infrastructure that can be used to create additional housing.
     As a result, housing project start-up costs appear high.

--------------------
\5 In Belarus, privatization is not permitted.

      DEFENSE ENTERPRISE
      FUND-MANAGED PROJECTS
------------------------------------------------------ Appendix IV:0.4

New defense conversion projects are being developed by the Defense
Enterprise Fund, a venture capital fund capitalized by DOD to finance
joint ventures and promote FSU defense conversion.  According to one
Fund official, the Fund will take more risk than the average venture
capital firms to fill a perceived void and will require that its
projects are privatized.  The Fund has recently begun operating.  Its
Board of Directors first met in September 1994.  DOD has obligated
$27.7 million available to the Fund.  To date, the Fund has provided
one $1.8 million loan.  The Board has approved several other projects
whose final terms and conditions are being negotiated.

DOD has proposed that about $118 million be provided to the Defense
Enterprise Fund from fiscal years 1994 through 1997.  In fiscal year
1995, $20 million was rescinded from the $40 million budget.  DOD
officials believe that the proposed funding is the minimum necessary
to capitalize the Defense Enterprise Fund so it will have enough
money to sustain itself after funding is completed.  These officials
believe that if funding is cut again the Fund will not have an
opportunity to become self-sustaining and will just be an expensive
mechanism to support joint defense conversion business initiatives.
DOD justifies this funding based on other venture capital fund
experiences and computer modeling of the $118 million, which shows
the fund can be self-sustaining in certain scenarios.  According to
DOD officials, DOD took a conservative approach and modeled scenarios
that predicted between 30 percent and 70 percent of the projects will
default.  These high default rates were based on pessimistic
forecasts by other fund managers who predict problems trying to
convert former Soviet weapons of mass destruction industries.  Using
the higher default rates, the Fund would have great difficulty
sustaining itself.  DOD has requested the Defense Enterprise Fund
provide its own analysis based on DOD's funding profile.

FUNDING FOR THE CTR PROGRAM
(FISCAL YEARS 1992-95)
=========================================================== Appendix V

                    (Dollars in millions)

                    Notification
                            s to                Disbursement
Projects                Congress   Obligations             s
------------------  ------------  ------------  ------------
Destruction and dismantlement
------------------------------------------------------------
Chemical weapons         $55.000       $22.182        $7.336
 destruction/lab-
 -Russia
Communications
 link
Belarus                    2.300          .974          .457
Kazakhstan                 2.300          .614          .134
Ukraine                    2.400          .650          .131
Environmental             25.000        14.772         1.831
 restoration-
 Project Peace

Nuclear infrastructure elimination
------------------------------------------------------------
Belarus                    5.000          .000          .000
Kazakhstan                17.000          .000          .000
Ukraine                   10.000          .000          .000

Strategic offensive arms elimination
------------------------------------------------------------
Belarus                    6.000          .000          .000
Kazakhstan                70.000          .324          .049
Russia                   150.000       112.083        19.639
Ukraine                  205.000        89.536        19.279
============================================================
Subtotal                 550.000       241.135        48.856

Chain of custody/nonproliferation
------------------------------------------------------------
Armored blankets-          5.000         3.244         2.905
 -Russia

Emergency response
------------------------------------------------------------
Belarus                    5.000         4.288         3.604
Kazakhstan                 5.000         2.045          .302
Russia                    15.000        12.857        11.182
Ukraine                    5.000         2.002          .179

Export controls
------------------------------------------------------------
Belarus                   16.260         3.073         1.237
Kazakhstan                 2.260         1.117          .137
Russia                     2.260          .044          .011
Ukraine                    7.260         3.337          .254
Fissile material          50.000        44.944        10.086
 containers--
 Russia

Material control and accountability
------------------------------------------------------------
Kazakhstan                 5.000         4.923          .364
Russia                    45.000        20.333          .568
Ukraine                   12.500        11.504          .129
Nuclear reactor           11.000        11.000          .046
 safety--Ukraine
Rail car security         21.500        21.500        17.649
 upgrades--Russia
Storage facility          15.000        15.000        12.866
 design
Storage facility          75.000        27.356         2.511
 equipment
Weapons security-         20.000          .000          .000
 -Russia
============================================================
Subtotal                 318.040       188.567        64.030

Demilitarization
------------------------------------------------------------

Defense conversion/Industrial Partnerships
------------------------------------------------------------
Belarus                   20.000        19.607         8.098
Kazakhstan                15.000        14.860          .105
Russia                    40.000        17.218         3.681
Ukraine                   50.000        38.286         4.280
Defense Enterprise        27.670         7.670         7.670
 Fund
Research and              10.000          .000          .000
 development
 foundation--
 Russia

Science and technology center
------------------------------------------------------------
Belarus                    5.000          .000          .000
Kazakhstan                 6.000          .000          .000
Russia                    35.000        22.853        20.889
Ukraine                   15.000          .414          .307
============================================================
Subtotal                 223.670       120.908        45.030

Other authorized programs/program support
------------------------------------------------------------
Arctic nuclear            30.000        19.520         5.270
 waste--Russia

Military-to-military contacts
------------------------------------------------------------
Belarus                    7.524          .301          .098
Kazakhstan                  .900          .074          .014
Russia                    11.548         7.761         3.844
Ukraine                    5.900          .869          .321
Other assessment          24.400        19.720         9.221
 costs
============================================================
Subtotal                  80.272        48.245        18.768
============================================================
Total                 $1,171.982      $598.855      $176.684
------------------------------------------------------------
Note: These figures were current as of May 8, 1995.

WORK PERFORMED ON SELECTED CTR
PROJECTS (FISCAL YEARS 1992-95)
========================================================== Appendix VI

                    (Dollars in millions)

                                Value of work
Projects                            performed  Disbursements
------------------------------  -------------  -------------
Destruction and dismantlement
------------------------------------------------------------
Chemical weapons destruction/          $7.649         $5.120
 lab--Russia
Environmental restoration-              4.958           .802
 Project Peace--Belarus

Strategic offensive arms elimination
------------------------------------------------------------
Russia                                 55.925         28.186
Ukraine                                52.530          8.753
Kazakhstan                               .045           .045

Chain of custody
------------------------------------------------------------
Emergency response--Belarus             4.125          3.340
Fissile material containers--          14.254          6.501
 Russia

Material control and accountability
------------------------------------------------------------
Kazakhstan                               .850           .016
Russia                                  1.189           .368
Ukraine                                  .660           .117
Storage facility design--              13.764         12.441
 Russia
Storage facility equipment--            4.744           .345
 Russia

Demilitarization
------------------------------------------------------------

Defense conversion-industrial partnership
------------------------------------------------------------
Belarus                                 7.785          6.844
Kazakhstan                               .113           .099
Russia                                  3.059          2.524
Ukraine                                 6.043          1.966
Defense Enterprise Fund                 7.670          7.670
Science and technology center-         20.313         20.313
 -Russia
============================================================
Total                                $205.676       $105.450
------------------------------------------------------------
Note: These figures were current as of March 1, 1995.

(See figure in printed edition.)Appendix VII
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix VI

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The following are GAO's comments on DOD's letter dated June 2, 1995.

GAO COMMENTS

1.  The draft report states that without CTR assistance Ukraine could
not dismantle its nuclear weapons.

2.  DOD's statements that CTR-provided equipment is being used to cut
up heavy bombers and nuclear submarines are inaccurate.  While some
CTR-provided equipment is in use at Engels Air Base, the guillotine
shears have not been used to cut up any aircraft to date.  In
addition, while heavy equipment being provided through the CTR
program to cut up nuclear submarines is not yet operational, some
CTR-supplied equipment is being used to cut launcher tubes out of
submarines.

3.  We question DOD's emphasis on the tangible impact of the program
with regard to dismantlement efforts.  In various documents, DOD
officials attribute the deactivation of thousands of nuclear warheads
and the dismantlement of hundreds of strategic launchers to CTR
assistance.  When asked to document their claims, DOD officials could
not provide the data needed to substantiate the direct impact of CTR
dismantlement assistance.

4.  According to a DOD official, the phrase "these warheads" refers
to the class of warheads rather than to a specific number of warheads
moved.

5.  As of May 18, 1995, the date of the draft report, our information
on CTR audits and examinations was accurate.  We have modified the
report to reflect the most recent developments.

6.  We have added language to clarify our meaning.  The United States
and Russia have not agreed on the applicability of the Russian
destruction technology for a chemical weapons destruction facility
because the necessary data will not be available until the ongoing
joint evaluation is concluded.  Unlike the U.S.-preferred
incineration process, the Russian technology has no record of
performance outside the laboratory, and the Russians have not
provided sufficient data to allay U.S.  concerns about the
technology's technical and cost uncertainties.  Without the joint
evaluation results, a U.S.  commitment to support an uncertain
technology would be premature.

7.  It is precisely because of the difficult history of chemical
weapons destruction in the United States with what is now a proven
technology, that we questioned the basis for DOD's assumption that
the Russian technology inevitably will be "validated" to be feasible
and affordable for use in a large-scale facility.

8.  While the chemical weapons destruction project management may
have been persistent in its efforts to overcome U.S.  and Russian
differences, we also must note that in many significant
differences--such as selection of a chemical weapons destruction
technology and selection of the type of chemical weapons (artillery-
or air-delivered munitions) to be destroyed first, among others--the
Russian position has prevailed.  We believe that this reinforces
DOD's point on the difficulties the chemical weapons destruction
project faces.

9.  We believe that it is necessary to link obligation rates to the
final reporting data for the critical joint evaluation study because
the nature and scope of future U.S.  support for several efforts--the
preliminary implementation plan, the pilot demonstration system, and
the Russian chemical weapons destruction facility--are related
directly to the results of the testing.

10.  In response to our questions, DOD provided us with several
revised "preliminary" funding breakouts and schedules, just prior to,
during, and after the time it received our draft report for comment.
In the latter revisions, the $34.3 million for additional technology
development activities to be determined--that we recommended be
reduced--had changed to show about $23 million for testing specific
types of equipment, and the remainder of the $34.3 million was
reallocated to other parts of the project.

11.  Our understanding of such timelines was illustrated in our
October 1994 CTR report.  (See page 1, footnote 1 of this report.) We
stated that the ".  .  .  program was initially slowed by the time
needed to complete agreements between the United States and former
Soviet republics, fully develop projects, and comply with legislated
requirements .  .  .  ."

12.  In our October 1994 CTR report, we also stated that the Russians
do not want U.S.  assistance in dismantling their nuclear warheads.
At that time, DOD had no comment on our assessment.

13.  Our draft report described how the CTR program is providing
assistance to help the Russians safely store components from
dismantled nuclear weapons and stated that the U.S.  and Russia are
discussing the provision of supercontainers.

14.  As of May 18, 1995, the date of our draft report, the
information on dismantlement efforts in Kazakhstan was accurate.  We
have modified the report to more accurately reflect the current
status of these efforts.

15.  The "Statement of Work for a Comprehensive Plan to Support the
Russian Chemical Weapons Destruction Program," dated January 1994,
stated that a U.S.  contractor would prepare a comprehensive plan to
"include all the key milestones for the destruction of the entire
Russian CW [chemical weapons] stockpile and the estimated associated
costs." The preliminary implementation plan for the first site only
is a significant decrease in scope.

16.  DOD is incorrect in stating that the draft report was
"out-of-date." We noted in the draft report that the Russians--after
a year-long delay--had selected the site for the Central Analytical
Laboratory in March 1995 and we characterized this event as one of
several recent positive developments.

17.  The draft report clearly distinguishes between nuclear material
protection, control, and accounting, and nuclear weapons security.
Our finding that the CTR program has made little progress in
protecting nuclear material that presents a proliferation risk refers
to nuclear material protection, control, and accounting projects not
only at specific facilities, but also to the establishment of
national material control and accounting systems in Russia.  We also
disagree with DOD's comments that we narrowly focused on one aspect
of the program.  Our assessment in this area relates to all known
sites where nuclear material directly usable in nuclear weapons is
located.

18.  While we agree with DOD that Project Sapphire was a critical
step in protecting nuclear material that presented a proliferation
risk, Project Sapphire was not a CTR project.  Project Sapphire was
funded by State, DOD, and Energy.  We have added a footnote that
explains that some CTR funds were used to pay for DOD's portion of
Project Sapphire and that DOD's portion of Project Sapphire was not
funded out of the material protection, control, and accounting
program for Kazahkstan.  In addition, we believe that Project
Sapphire represents a unique response to a specific proliferation
threat and does not represent an ongoing strategy of the CTR program
to improve nuclear material protection, control, and accounting in
the FSU.  We note that the administration is currently developing a
strategy to improve material protection, control, and accounting
systems at all known facilities using direct use material in the
former Soviet Union.

19.  Although some progress has been made in other CTR projects that
are involved in improving protection of nuclear material, the
projects involve either (1) facilities using nuclear material that
presents a low proliferation risk (such as low enriched uranium and
irradiated plutonium) or (2) projects in their initial stages
involving facilities using material presenting a high proliferation
risk (such as highly enriched uranium and unirradiated plutonium).
We have made changes to the draft that more accurately show that the
CTR program has made little direct impact in protecting nuclear
material that presents a high proliferation risk.

20.  DOD's comment on progress made with Russia under the
laboratory-to-laboratory program overstates the impact of fiscal year
1995 CTR funds on the program.  The Department of Energy's lab-to-lab
program has successfully completed a project to upgrade physical
protection of approximately 100 kilograms of highly enriched uranium
at the Kurchatov Institute in Moscow.  However, the project was
completed in February 1995 using Energy's funds.  Fiscal year 1995
CTR funds for Energy's lab-to-lab program were not transferred to
Energy until April 20, 1995.

21.  We have revised the text of the report to acknowledge that most
defense conversion projects are focused on converting inactive
defense factories that still have production capability.  We also
acknowledge in the report that DOD believes converting excess
production capability will alleviate pressure on Moscow to rearm or
sell high-tech weapons abroad and will also aid the Russian economy.

22.  Although DOD has accelerated the start-up of 15 projects in a
little more than a year, we believe that it is too early to judge the
success of these projects.  One of the projects that DOD gives high
marks to in its comments was considered by officials responsible for
managing the program as stalled from its inception.  After receipt of
our draft report, DOD officials informed us of progress on this
project.

23.  The report already notes the primary purpose of the program is
to prevent proliferation.

24.  This concept is not disputed anywhere in the report.

25.  DOD's assertion that it generally describes the recipients of
Center grants as "former Soviet" weapons scientists is incorrect.
DOD often--in testimony, budget submissions, and briefing
documents--used the terminology, "former" weapons scientists or
scientists "formerly" involved in a weapons program.  The Assistant
Secretary of Defense, while testifying before the House
Appropriations Committee, Subcommittee on Defense, on March 9, 1994,
described the recipients as "former weapons scientists," and the 1996
Budget Submission describes the recipients as "scientists and
engineers formerly involved with weapons of mass destruction."

26.  The $27.67 million totals the amount notified to Congress for
all the republics.

(See figure in printed edition.)Appendix VIII
COMMENTS FROM THE DEPARTMENT OF
STATE
========================================================== Appendix VI

(See figure in printed edition.)

(See figure in printed edition.)

See comment 3.

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

The following are GAO's comments on the Department of State's letter
dated June 1, 1995.

GAO COMMENTS

1.  Classified enclosure concerning chemical weapons destruction
issues has been detached from the letter.

2.  We have added language to clarify our meaning.  The United States
and Russia have not agreed on the applicability of the Russian
destruction technology for a chemical weapons destruction facility
because the necessary data will not be available until the ongoing
joint evaluation is concluded.  Unlike the U.S.  preferred
incineration process, the Russian technology has no record of
performance outside the laboratory, and the Russians have not
provided sufficient data to allay U.S.  concerns about the
technology's technical and cost uncertainties.  Without the joint
evaluation results, a U.S.  commitment to support an uncertain
technology would be premature.

3.  State Department officials notified us that their written
comments on our draft report contained some out-of-date and incorrect
information concerning the Chemical Weapons Destruction project.  As
a result, State officials stated in our exit meeting that State
deferred to DOD concerning program-specific comments.  Consequently,
we responded only to DOD's comments on program details.

4.  Our information on CTR audits and examinations was accurate as of
May 18, 1995, the date of the draft report.  We have modified the
report to reflect the recent progress in conducting such
examinations.

5.  Russia was dismantling its nuclear warheads and launchers before
any CTR dismantlement assistance arrived in September 1994.  While
Russia appears to maintain a robust dismantlement rate, we could not
determine to what extent CTR assistance would accelerate the Russian
dismantlement rate.

6.  While we do not take issue with State's assertions about the
political impact of offering Belarus CTR assistance, the United
States and Belarus have yet to sign an implementing agreement
detailing the requirements for CTR dismantlement assistance.

7.  DOD has often--in testimony, budget submissions, and briefing
documents--used the terminology, "former" weapons scientists or
scientists "formerly" involved in a weapons program.  The Assistant
Secretary of Defense, while testifying before the House
Appropriations Committee, Subcommittee on Defense on March 9, 1994,
described the recipients as "former weapons scientists," and the 1996
Budget Submission described the recipients as "scientist and
engineers formerly involved with weapons of mass destruction." The
report notes that there is no connection between Center-funded
projects and weapons projects beyond the fact that the same
scientists could be working on both projects.

8.  We cannot comment on the impact of anecdotal evidence.

9.  We did not perform a statistical analysis of all Center projects.
Rather, based on the review of approximately 10 percent of the
existing projects, we point out that scientists working on Center
projects could also be working on current weapons programs.  U.S.
and Center officials, as well as recipients, confirmed that no
restrictions exist to prohibit this from occurring.  The text was
changed to reflect the receipt of social benefits as a reason for
part-time employment at the institutes.

10.  The example cited in the report does not display a basic
misunderstanding on our part.  The report uses streak cameras as an
example of an item, funded by the Center, that is dual-use in nature.
Streak cameras are relevant in nuclear testing, the project was
subject to the dual-use review by the U.S.  officials, and the final
product could be subject to export licensing.

11.  We have revised the text of the report to acknowledge that most
defense conversion projects are focused on converting inactive
defense factories that still have production capability.  Our report
now points out that DOD believes converting production capability
will aid the Russian economy and alleviate pressure on Moscow to
rearm or sell high-tech weapons abroad.  Neither DOD or the
Department of State have provided any information showing how the
industrial partnership program would largely eliminate the capability
to produce weapons of mass destruction.

12.  This paragraph focuses on overall defense conversion and not
just weapons of mass destruction.  Although the DOD defense
conversion program emphasizes converting weapons of mass destruction
facilities, not all conversion projects are converting these types of
facilities.  In one case, a firm in Ukraine was formerly producing
engines and parts for naval vessels.

(See figure in printed edition.)Appendix IX
COMMENTS FROM THE DEPARTMENT OF
ENERGY
========================================================== Appendix VI

(See figure in printed edition.)

(See figure in printed edition.)

The following are our comments on the Department of Energy's letter
dated May 26, 1995 and memorandum dated May 17, 1995.

GAO COMMENTS

1.  We have changed the report to reflect wording changes suggested
by the Department of Energy.

2.  The statement that currently there is no agreement with the
Russians for work at the 80 to 100 facilities is accurate.  However,
we have made changes to the report to reflect the agreement in
principle reached by the U.S.  and Russian lab-to-lab steering groups
for work at MINATOM nuclear weapons related facilities and Energy's
current efforts to negotiate agreements for work at many of the other
80 to 100 facilities.

3.  Energy's assertion is incorrect.  However, to more accurately
reflect Russia's international obligations, we have added a footnote
that Russia has entered into a voluntary arrangement to meet
international safeguards at some of its civilian nuclear power
facilities and research reactors.  However, this falls short of
having to meet international standards for all of its nuclear
facilities as in the case of Ukraine and Kazakhstan.  We also added
that Russia is a party to the Convention on the Physical Protection
of Nuclear Materials that obligates it to meet defined standards of
physical protection of nuclear materials.

MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix X

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C.

F.  James Shafer
Pierre R.  Toureille
Blake L.  Ainsworth
Charles T.  Bolton
Muriel J.  Forster
Jo Ann T.  Geoghan
Julie M.  Hirshen
Beth A.  Hoffman Leon
Jeffrey D.  Phillips
Raymond A.  Plunkett

RESOURCES COMMUNITY AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C.

Mary Alice A.  Hayward

EUROPEAN OFFICE

Patrick A.  Dickriede

