Prof.

Jeffrey Langholz Dario Eubank, Georg Grosse-Hohl,

IP FA08 501H Sergey Moudriak, Nikita Perfilyev

To: Barak Obama; President of the United States of America

From: Dario Eubank, Georg Grosse-Hohl, Sergey Moudriak, Nikita Perfilyev; National Security Advisors

Date: January 21, 2009

Subject: Resubmitting the 123 Agreement for congressional approval will establish a framework for the

U.S.-Russian civil nuclear energy cooperation and improve the U.S.-Russia relations

Executive Summary

Following the Russian-Georgian military conflict, U.S.-Russia relations reached their lowest point

since the end of the Cold War. Withdrawing the 123 Agreement from Congress and phrasing it in terms

of punishment for Russia’s actions in the Caucasus further disrupts the U.S.-Russia political relations and

harms the U.S.-Russia cooperation in the field of nonproliferation. It also prevents long-term civil nuclear

energy cooperation and thereby deprives the U.S. of economic opportunities. The alternative courses of

action on this issue include (1) maintaining the status quo; (2) toning down the rhetoric; (3) setting

additional conditions for the 123 Agreement; and (4) resubmitting the Agreement as is. The fourth

alternative will establish a framework for the U.S.-Russian civil nuclear energy cooperation and help

generally to improve the U.S.-Russia relations. We therefore advise the Administration to resubmit the

Agreement for congressional approval as soon as the U.S.-Russia relations stabilize.

Statement of the Problem and Context

To enable long-term nuclear energy cooperation with any country, the U.S. has to conclude the so-

called “123 Agreement,” named after Section 123 of the U.S. Atomic Energy Act. This section requires

Congress’ approval for deals transferring U.S. nuclear technology or materials to other nations.

The U.S. has 123 Agreements with 46 nations. Russia, however, is not on the list. The Agreement

with Russia is important, because Russia possesses one of the world’s most technologically advanced

nuclear industries and thus has a lot to offer to the U.S. in terms of economic opportunities, as well as

technical and political support in preventing nuclear proliferation and terrorism. Specifically, the

Agreement could assist U.S. researchers in such areas as fast neutron reactors and advanced fuel-cycle
technologies by giving them access to Russia's advanced facilities and experience. The Agreement would

also allow U.S. firms to sell nuclear materials, equipment, and technologies to Russia. It would facilitate

joint ventures with Russian companies to develop and market nuclear reactors and other products to third

countries. This Agreement could help the U.S. and Russia develop new types of proliferation-resistant

nuclear reactors, fuel management technologies, and improve technology for detection of illicit nuclear

materials. It would also allow the U.S. to work with the International Uranium Enrichment Center at the

Russian city of Angarsk to establish an international fuel bank and thereby reduce incentives for countries

embarking on nuclear power programs to acquire their own enrichment plants.

After years of negotiations, the U.S. and Russia signed the 123 Agreement in May 2008. President

Bush then submitted the agreement to both houses of Congress for review. Following Russia's military

confrontation with the U.S. ally Georgia in August 2008, President Bush withdrew the Agreement. He

phrased his decision as a sanction for Russia’s aggression against Georgia. The Bush administration also

recognized that, given the increased tension between the U.S. and Russia, Congress would likely pass a

resolution explicitly rejecting the deal. Withdrawing the 123 Agreement from congressional consideration

before rejection saved the deal for the current Administration to re-consider. This Administration now

faces the questions of how to improve the U.S.-Russia relations and whether to resubmit the 123

Agreement for congressional approval.

Evaluation Criteria

The course of action we recommend should mitigate the negative aspects of the current approach.

We list the criteria according to their importance:

• Improving the U.S.-Russian relations. Russia is an important player so far as international

security is concerned. The recommended course of action should reverse the downward trend in the

U.S.-Russia relations and preserve the possibility for future cooperation.

• Supporting the nuclear nonproliferation regime. The U.S. should adhere to its obligations under

the Nonproliferation Treaty (NPT). The U.S. should also seek worldwide partnerships to halt the

spread of fissile materials and technology to countries seeking to obtain nuclear arms.
 • Economic benefits. The suggested option should help revive the U.S. nuclear industry and open

opportunities for cooperation between the U.S. and Russian civil nuclear industries.

We use these criteria to evaluate each of four available alternatives. We rely on our professional judgment

to predict how alternatives might be viewed by the major stakeholders, namely the U.S. government, the

Russian government, the U.S. nuclear industry, and the international community.

Available Alternatives

Alternative 1: Maintain status quo. The withdrawal of the Agreement, characterized as a sanction,

harms the U.S.-Russia political relations and further antagonizes the Russian leaders. It politicizes and

endangers prospects for the nuclear energy cooperation which could serve as a framework for the

cooperation on projects to inhibit the spread of nuclear weapons and which so far have received Russian

support. The absence of the Agreement deprives the U.S. of Russia’s civil nuclear expertise and

technology. It precludes the possibility of joint U.S.-Russian commercial ventures that could generate

hundreds of millions of dollars in revenue for our civil nuclear sector. Moreover, this approach will likely

increase the tension between the two countries and inhibit future bilateral collaboration on

nonproliferation issues.

Alternative 2: Reduce the rhetoric, but do not resubmit the Agreement. This alternative requires

the U.S. Administration to keep the Russian-Georgian conflict and the 123 Agreement as separate issues

and refrain from using the Agreement as leverage against Russia. Toning down the rhetoric could help

stabilize relations. However, without the Agreement in operation there will be no legal framework for

long-term nuclear energy cooperation. This alternative also limits the two countries’ means to advance

nonproliferation objectives.

Alternative 3: Reintroduce the 123 Agreement bound to additional conditions. The

Administration may resubmit the 123 Agreement to Congress, but at the same time impose further

conditions to make the Agreement more beneficial to the U.S. and thus more likely to get Congress'

approval. It can be argued that the combination of the original 123 Agreement and the additional

conditions would not only facilitate the objectives set forth in the NPT, but also benefit the U.S.
economically and politically.

Yet, binding the reintroduction of the 123 Agreement to any additional conditions, after years of

talks with Russia, would cause Russia to see the U.S. as an unreliable partner. Russia might then decide to

walk away from the Agreement altogether. The result would be further deterioration of the U.S.-Russia

relations.

Alternative 4: Reintroduce the Agreement with no additional conditions. Similar to Alternative 3,

this would result in economic benefits and the facilitation of the objectives set forth in the NPT. In

addition, it would have a positive short-term effect on the U.S.-Russia bilateral relations and help reduce

the fallout from recent confrontations, such as Kosovo’s independence, U.S. plans for a missile defense

system in Europe, Iran's nuclear program, and the Russian-Georgian conflict. The Agreement could have

a positive “spillover” effect on other security related and nonproliferation objectives that call for

cooperation between the two countries.

Of course, the 123 Agreement will not by itself eliminate differences of opinion between U.S. and

Russia on key security issues. But this Agreement “could help promote better communication and

enhanced personal relationships between key officials and possibly lead to improved policy coordination

on a variety of nuclear-related issues, including those involving nuclear exports and nonproliferation.”

(Einhorn et al., 2008, 42).

Table 1. Comparison of Alternatives

Alternatives/ Improving U.S.-Russia Supporting nuclear

Criterion Economic benefits
political relations nonproliferation regime
Status Quo Poor Poor Poor
Tone down
Fair Fair Poor
the rhetoric
Set additional
Poor Fair/Good Good
conditions
Resubmit the
Good/Excellent Good Good
Agreement as is

Recommendation
 Based on our analysis we recommend Alternative 4, namely to reintroduce the Agreement as is.

We believe that the 123 Agreement is not only beneficial to the U.S., but also can contribute to our

nonproliferation efforts and promote relations with Russia. Keeping the rhetoric down would produce

favorable short-term influence on U.S.-Russia relations. The absence of nuclear cooperation agreement,

however, will not only cost us many opportunities domestically and internationally, but will also preclude

the establishment of fundamental framework for long-term cooperation between the two countries.

To some extent it is tempting to proceed with the Alternative 3 and condition the Agreement on

Russia’s cooperation in areas of key-interest to the US policy, including Iran. However, such approach

would undermine our credibility as a reliable partner and might inhibit future cooperation between the

U.S. and Russia on nonproliferation objectives.

Adopting Alternative 4 does pose additional challenges. The Administration should allow some

time for the situation in the Caucasus to calm down. This option also requires substantial work with

congressmen to guarantee the approval of the Agreement. If successful, however, this course of action

will aid our efforts to strengthen the nonproliferation regime, promote U.S.-Russian political relations and

provide economic benefits to the U.S. nuclear industry.

Implementation Plan

• Refrain from describing the withdrawal of the Agreement as a sanction

• Approach Russian officials and reiterate U.S. support for the Agreement

• Emphasize the importance of Russia’s constructive behavior prior and post ratification of the

Agreement by the U.S. Congress

• Work with Congress to secure approval of the Agreement

• Continue to monitor the U.S.-Russian relations, and resubmit the Agreement as soon as its

approval by Congress seems probable

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