In its Securities and Exchange Commission filing of May 7, 1999, the United States Enrichment Corporation (USEC) reported that its financial position has worsened since the corporation became privately owned in July 1998. As in previous filings, it grumbled that the cost of its sales is affected by its role in the importation of downblended highly enriched uranium from the Russian weapons stockpile. USEC would doubtless appreciate a subsidy from the US Congress toward purchase of the Separative Work Units (SWU, the measure of uranium enrichment services) in the imported Russian uranium. But would such a subsidy be justified and is Congress likely to grant it?

The Russian Highly Enriched Uranium (HEU) Agreement, signed in 1993 by Presidents Clinton and Yeltsin has had a trouble history. The signers intended that the US Executive Agent, USEC, would gradually purchase the low-enriched uranium resulting from the blending down of 500 metric tons of Russian HEU. However, this purpose collided with a Suspension Agreement between Russian and the United States designed to limit imports of Russian uranium. As a result, the US Congress in the USEC Privatization Act of 1996 stipulated that USEC buy from Russia only the SWU in the lightly enriched uranium and return the natural uranium in the enriched product to Russia. In the autumn of 1998 the accord was on the point of collapse, because Russia, faced with import quotas in the United States and western Europe, could not sell the returned uranium, now known as the Russian Feed.

In the fall of 1998 Congress agreed to pay for the Russian Feed for 1997 and 1998 after the signing of a commercial contract covering subsequent years. In March 1999 three companies, Cogéma, Nukem, and Cameco, with the support of the US and Russian governments, did indeed sign a contract giving them an option to purchase 72% of the Russian Feed.

Nevertheless, the Russian HEU problem lingers. The price of the SWU in the imported low-enriched uranium must be renegotiated for 2002 and subsequent years; and USEC is not happy about continuing to carry for the US government, what it views as a financial burden..

In this report we survey the history of the privatization of USEC; and then the history of the Russian HEU Agreement. We close with a discussion of the interaction between the privatization of USEC and the implementation of the Russian HEU agreement. Privatiziation, we conclude, has not made smooth the path of implementation.