Demilitarization programs are meant to shift sections of the former Soviet defense complex to the civilian sector.
[Department of Defense "CTR Program Implementation: Forecast to Industry," 2/96, p. 13.]

DEFENSE CONVERSION
The Soviet Union's infrastructure to support its vast nuclear weapons program included between 2,000 and 4,000 laboratories, production, and maintenance facilities, and over 9 million personnel.[1]  When the Cold War ended and the Soviet Union broke up, much of the nuclear industry in Russia became unnecessary and was therefore to be converted to perform civilian activities. The United States recognized the benefits in facilitating this conversion.  By helping to provide former Russian weaponmakers new employment and by helping to convert military production facilities to civilian facilities, the US could actively help dismantle the very threat that it had feared for the last fifty years. Additionally, by providing other means of employment for many of the former Soviet engineers, technicians, and production-line workers, the US could increase stability in Russia and promote the building of a new capitalist economy. To these ends, the US Department of Defense (DOD) was directed by the Nunn-Lugar legislation to identify sites in the former Soviet Union (FSU) in which the United States could aid in defense conversion.  Although the Cooperative Threat Reduction Act of 1993 did not specifically require DOD to focus its defense conversion activities on weapons of mass destruction (WMD) facilities, DOD compiled a list of 150 WMD-related enterprises in the four nuclear successor states of the FSU (Belarus, Kazakhstan, Russia, and Ukraine) that could be targeted for defense conversion. The DOD's Defense Special Weapons Agency (DSWA) was then authorized to implement the defense conversion program for the DOD.[1] The DOD also established a private venture capital fund called the Defense Enterprise Fund to financially assist other defense conversion joint ventures. This project is described in detail below.  Formal provisions for extending US defense conversion assistance to Russia were worked out through the Gore Chernomyrdin Commission (GCC).

In 1994 and 1995 DSWA awarded contracts to US firms that would engage in defense conversion in the FSU.  Typically, the US firm would establish a joint venture with a FSU defense firm to provide a civilian good or service. The joint venture would be run using US funds and former Soviet facilities and labor.  These defense conversion projects in Russia consisted of the so-called "fast four" projects and a project to build housing for decommissioned Russian military officers. The "fast four" projects were with the Russian defense-related entities, GosNIIAS (the State Scientific Research Institute of Aviation Systems), Istok Scientific Industrial Association, Leninets, and Mashinostroyeniya.[1] Among the goods to be produced at these facilities were dental chairs, hearing aids, bottled soft drinks, and air traffic management technology.[2] The projects have had varying degrees of success. According to an April 1997 General Accounting Office (GAO) report to Congress, one of the projects is no longer operating, one of the projects has not reached production capability and has major obstacles to overcome, and the other two projects have reached production capability, but still have major obstacles to overcome.[1]  CTR assistance for the Istok Audio International hearing aid venture is planned to draw to a close in the first quarter of FY 2002 with ISO 9000 registration and procurement of additional equipment.  Planned support for NPO Mashinostroyeniya activities in the first quarter of FY 2002 included the launch of the International Executive Service Corp (IESC) Reutov Business Assistance Center.[7]

The purpose of the housing project is twofold. First, in order for Russian Strategic Rocket forces to be demobilized, Russian law requires that adequate housing for retired officers be provided. However, there is currently a major shortage of housing in certain parts of the former Soviet Union and thus, the military officers that are in charge of Russia's nuclear weapons cannot be retired. The decommissioning of these forces has been deemed desirable by both the United States and Russia, hence the Cooperative Threat Reduction Act of 1993 included the provision of housing for FSU military personnel.[1]  Secondly, several defense-related firms are being converted to manufacture the prefabricated housing systems and related projects.  This project was to proceed through a joint venture between American Housing Technologies Inc. (a consortium of eight US firms) and the three Russian firms Soyuz Federal Center for Dual-Use Technologies, Kompozit Scientific Industrial Association, and Mashinostroyeniya Scientific Industrial Association.[1, 2, 3] However, as of March 1997 the joint venture had not been formed and it was not until January 1997 that the DOD and the Russian government finally agreed on the scope of the project. According to the aforementioned GAO report, in January 1997 it was agreed that the Russian enterprises would work with their western partners to develop five production lines for specific housing components. Remaining funds were to be used to provide housing for the demobilized Strategic Rocket Forces.[1] During FY 2001 American Housing Technologies completed the installation of the faucet and roof shingle lines at Kompozit. The purchase of a prefabricated housing production line for Kompozit was planned for the first quarter of FY 2001.[7]

The housing programs, funded by CTR monies, turned into a hotly debated political issue in Congress in early 1995. There was considerable concern among certain members of Congress that the United States was providing money to build houses for the Russian military, when many thought that the funds could be better spent on the US military. Amid this controversy, US Secretary of Defense William Perry vigorously supported the defense conversion programs and the housing projects in particular. He often called the programs "defense by other means."  Among other things, Perry noted that President Clinton had promised Russian President Yeltsin housing construction aid to draw the Russians out of the Baltic States.[4] After several months of threatening to cut the defense conversion funding, Congress passed a supplemental appropriations bill that cut off $20 million intended for defense conversion projects, including military officer housing.[5]

Click here for more detailed information on the "fast four" and housing projects administered by the DSWA as described in the GAO's April 1997 report to Congress on defense conversion.

As of March 1997 DOD notified Congress that it planned to spend a total of $179.7 million on defense conversion in the former Soviet Union. Of this amount it had disbursed $143 million, including $51.7 million to the Defense Enterprise Fund.[1] Total funding appropriated for defense conversion/housing projects in the Russian federation is $43.7 through FY 2000. No additional appropriations are planned.[7] Overall, the GAO claims that US defense conversion programs have had a negligible impact on the military-industrial complex of the former Soviet Union.[1] A DOD official defends the program by saying, "While the US government role in FSU defense conversion is ultimately limited, it is a critical catalyst for the private sector involvement that must be the engine of this conversion."[6]
Sources:
[1] "Cooperative Threat Reduction: Status of Defense Conversion Efforts in the Former Soviet Union" United States General Accounting Office, April 1997, GAO/NSIAD-97-101.
[2] "Cooperative Threat Reduction Assistance to Russia," Stimson Center Website: http://www.stimson.org/rd-table/ctr-russ.htm, 16 January 1997.
[3] "US Assists Russia with Defense Conversion," Defense Link News Overview, 28 June 1995, http://www.dtic.dla.mil/defenselink/news/Jun95.
[4] "Perry 'Vigourously' Defends Conversion," Post-Soviet Nuclear & Defense Monitor,  vol. 2, no. 13., 17 February 1995, p 3.
[5] "Congress Agrees on Cuts to Defense Conversion, Military Housing," Post-Soviet Nuclear & Defense Monitor, vol. 2, no. 16., 25 April 1995, p 4.
[6] Statement of Franklin C. Miller, Assistant Secretary of Defense, before the Senate Armed Services Committee, 26 March 1994.
[7] Cooperative Threat Reduction Annual Report to Congress, Fiscal Year 2002. {Entered 1/22/98 PBI}  {Updated 8/29/2002 MJ}

DEFENSE & MILITARY CONTACTS
The Cooperative Threat Reduction (CTR) program supports United States defense and military contacts with the defense ministries of the states of the former Soviet Union. Through the defense and military contacts program a network of professional exchanges is established that gives recipient state defense and military establishments a stake in continued good relations with the US. Goals of this program include encouraging nonproliferation efforts, enhancing stability by regular exchanges on defense strategy, greater transparency in budgets and programs, and assisting in the restructuring and downsizing of former Soviet defense establishments. The United States defense and military contacts program also addresses as much as possible the concerns of the militaries and encourages their support for democratic reforms. It helps militaries to better understand democratic societies, especially civil-military relationships and develop long-term institutional interfaces for substantive professional dialogue on defense and military topics. Finally, the defense and military contacts program encourages participation in bilateral events such as high-level exchanges, unit exchanges, ship visits, bilateral exercises in such areas as  disaster relief, search and rescue, and exchanges of delegations on a wide range of defense and military issues.  The US will be establishing contact programs with most of the newly certified states.  Additionally, the Defense Military Contacts programs increase US understanding of the defense establishments of the former Soviet Union.[1] This program seeks to promote better understanding between US and recipient country military establishments through events such as disaster relief and emergency aid.[2] While in the initial years of the program some 200 events took place under the program each year, by the late 1990s this number increased to approximately 350 annual events (for example, 338 events in FY 2000).  Plans call for a further increase to 500 annual events FY 2002-2007. Cumulative funding for defense and military contacts, through fiscal year 1997, amounted to nearly $10 million in obligated CTR funds. Of this amount, nearly $5.5 million has been disbursed.[3] As a result of the increase in pace of activities, the estimated total cost of the project has increased from $123.9 million to $176.4 million. In contrast to other CTR projects, the Defense and Military Contacts project budget is not broken down by countries, in order to facilitate responsiveness to future requirements and to maintain flexibility.[4]
Sources:
[1] Statement of Franklin C. Miller, Assistant Secretary of Defense for International Security Policy (Acting) before the Subcommittee on Strategic Forces of the US Senate Armed Services Committee, 5 March 1997, p. 18.
[2] Department of Defense, "CTR Update: Russia," 19 September 1996.
[3] Figures provided by CTR Program Office, US Department of Defense, 10 February 1997.
[4] Cooperative Threat Reduction Annual Report to Congress, Fiscal Year 2002. {updated 1/20/98 PBI, 8/29/2002 MJ}

Comments or questions? Contact Cristina Chuen at MIIS CNS: Cristina.ChuenATmiis.edu

This material is produced independently for NTI by the Center for Nonproliferation Studies at the Monterey Institute of International Studies and does not necessarily reflect the opinions of and has not been independently verified by NTI or its directors, officers, employees, agents. Copyright © 2003 by MIIS.

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