The United States and Russia recently signed the Agreement for
Cooperation in the Field of Peaceful Uses of Nuclear Energy. This
deal would provide a framework to govern peaceful nuclear commerce
between Russia and the United States. The U.S. has entered into
similar deals with most of the world's major commercial nuclear
countries and organizations, including China, Brazil, Euratom, and
Japan. Known as 123 Agreements, they are required
by Section 123 of the 1954 Atomic Energy Act before the U.S. can
engage foreign nations in commercial nuclear activities. The
agreements help open markets to U.S. industry, provide access to
peaceful nuclear technology, and influence nonproliferation policy.
If implemented under the right conditions, such an agreement with
Russia would advance U.S. commercial and energy interests. While
this is an important agreement, Congress should object unless the
Bush Administration addresses the following outstanding issues:
- Russia is not cooperating with the U.S. on disclosure of
nuclear cooperation with Tehran and cessation of arms sales to
protect the Iranian nuclear program.
- Russia lacks a comprehensive liability regime for commercial
nuclear activities, thus creating a major obstacle to U.S.
companies conducting commercial nuclear business in Russia.
- Russia has made no commitment to open its nuclear market to
Resolution of these issues, however, does not solve the long
list of outstanding grievances that the U.S. still has with Russia,
and implementation of the 123 Agreement must not be viewed as a
concession on any of them. The fact is that Russia's aggressive
rhetoric and behavior toward some of America's friends and allies
such as Georgia and Ukraine, its attempts to dictate NATO policy,
its lackluster support for Iranian sanctions, and its ongoing sales
of conventional arms to Iran pose significant risks to larger U.S.
foreign policy interests.
123 Agreement for the United States: The Balance
Under the right conditions, the U.S.-Russia nuclear deal should
advance U.S. commercial and energy interests.
First, it should advance U.S. energy interests. As the
nation seeks to decrease carbon dioxide (CO2) emissions without
causing undue economic harm, it is becoming clear that the U.S.
must expand its access to nuclear power. A recent analysis by the
Energy Information Agency on the economic impact of the
Lieberman-Warner climate change bill (S. 2191) considered seven
scenarios for meeting the bill's strict CO2 reduction mandates.
While every scenario led to negative economic consequences, the
economic impact could be best controlled by building hundreds of
new nuclear reactors. Other countries are reaching similar
If the current trend of enacting policies to limit CO2 emissions
continues, there will need to be a substantial buildup of nuclear
power in the coming decades. Unfortunately, the U.S. does not have
the industrial base to support such a buildup. It must look abroad
to meet its demand until domestic capacity is developed. Russia is
one of only a handful of countries that have both the industrial
capacity and the technical know-how to help the U.S. meet that
Second, it should advance U.S. industrial interests.
The U.S. is no longer a leader in commercial nuclear technology.
Its three decades-long hiatus has caused it to drop behind industry
leaders like France, Russia and Japan. Worse, there is no guarantee
that U.S. industry will ever revive-even as the world embarks on a
One reason for this is the structure of the global commercial
nuclear marketplace. Most markets are closed or tightly controlled
by national governments. And many of the international suppliers of
nuclear goods are either state-owned or subsidized. The one
exception to this is the U.S., which is very open to foreign
competition. That is not to say that the U.S. market is as free as
it should be, especially for uranium enrichment services, but it is
much freer than most markets.
This creates a situation in which privately owned U.S. firms are
forced to compete with state-subsidized firms in the U.S. and often
denied access to markets abroad. The best way to rectify this
situation is not to close the U.S. market to foreign competition
but to open foreign markets to U.S. suppliers. The inefficiencies
of state ownership will eventually allow privately owned U.S.
companies to emerge as industry leaders once again if they are
allowed to compete. The U.S.-Russian 123 agreement could help to
open the potentially vast Russian market to U.S. suppliers.
Necessary Next Steps for the U.S.
Despite its potential advantages, the Russian 123 Agreement
would not advance U.S. interests unless certain conditions are met
and outstanding issues resolved. The 1954 Atomic Energy Act allows
Congress to halt the agreement as well as provide oversight of the
pact. It will be imperative that Congress exercise that authority
moving forward. To that end, Congress must assure that the
agreement includes provisions that:
- Compel Russia to discontinue support of Iran's military
nuclear energy program and provide its full disclosure.
Russia's interactions with Iran could prove positive if they were
managed properly. Indeed, it is Russia's provision of nuclear fuel
that undermines Iran's justification for the necessity of uranium
enrichment capability. However, Russia must discontinue any efforts
that advance Iran's heavy water reactor program, enrichment
activities, or spent fuel reprocessing programs. Russia must
disclose its past activities in support of the Iranian program, as
well as what it knows about third parties' assistance to it. Russia
should work with the United States and other nations to compel Iran
to discontinue any fuel enrichment or spent fuel reprocessing
activities, which will give Iran access to bomb-grade material. The
problem with the current path is that the U.S. has very little
leverage to compel either Russia or Iran to do anything
differently. The U.S. should use the prospect of the 123 Agreement
as an incentive to halt Russia's interactions with Iran on nuclear
- Provide adequate liability protection for U.S.
companies doing business in Russia. Even with a 123
Agreement in place, U.S. companies would likely forgo engaging in
commercial activities in Russia due to a lack of liability
protection. This has been one of the primary obstacles preventing
U.S. companies from engaging in international nuclear commerce.
Indeed, many countries use the lack of liability protection for
U.S. companies as a means to protect their domestic nuclear
industry from U.S. competition. There is a solution, however. The
United States is part of the Convention for Supplementary
Compensation for Nuclear Damages, which creates a liability
framework to manage international liability issues. Parties to the
convention operate under common liability rules for nuclear
activities. This allows U.S. companies to compete abroad. Russia
should join the convention as a condition of moving forward with
the 123 Agreement.
- Provide two-way market access. This agreement
should not be simply an avenue to bring Russian goods and services
to the U.S. market. While that is critical, it is also important
that U.S. companies are allowed to compete for business in Russia.
Like the U.S., Russia is planning a significant expansion of
nuclear power. And while Russian nuclear technology is second to
none, foreign competition will assure that the highest quality
standards are maintained throughout the country.
The 1954 Atomic Energy Act gives Congress oversight over 123
Agreements and it should oppose signature of the agreement in this
case unless the above conditions are met. While this agreement may
have the potential to help open markets to U.S. industry, provide
access to some peaceful nuclear technology, and influence
nonproliferation policy, currently it is not ready for
implementation. In fact, it could set these interests back
significantly. However, a good agreement could help the U.S. reach
its objectives in Iran, meet its growing energy and environmental
requirements and set America's commercial nuclear industry back on
a path to leadership. For these reasons, Congress should ensure
that the U.S. accepts the U.S.-Russia 123 Agreement only if and
when the outstanding issues are resolved.
Spencer is Research Fellow in Nuclear Energy in the Thomas A.
Roe Institute for Economic Policy Studies at The Heritage
Euratom consists of 27 European nations.
U.S. Department of Energy, Energy Information Administration,
Energy Market and Economic Impacts of S. 2191, the
Lieberman-Warner Climate Security Act of 2007, April 2008.