In the aftermath of the Cold War, global economic competition has come to play an increasingly important role in defining national security and the shape of the future world order. As international conflict shifts from military to economic competitiveness, many nations are now hoping to extract economic advantage from their investments in defense research and production. This volume brings together papers on several key aspects of defense commercialization and attempts to bridge the divide between research on conversion efforts in the United States and studies of transition in post-Communist economies.

This report is the result of a CISAC-sponsored workshop in which several American companies doing business with military research and production enterprises could have more detailed interchanges with other American companies in a systematic way, and the results could be analyzed and reported.  The primary objective was to find successful approaches that could be applied to other ventures.  A secondary objective was to illuminate critical points for further collaboration and study.

The economic, political, and social changes underway in the former Soviet Union are of unprecedented scale and importance. Figures published in March 1993 cite that 839 defense enterprises, employing a total of four million workers, were undergoing conversion; 600 conversion programs were in effect to guide the process, and conversion of 400 of those enterprises was expected to be complete by the end of the year. In this process, 410,000 people, 210,000 of them engineers and technicians, have left the employ of the military industrial complex. These changes will affect all spheres of post-Soviet society, including the economy, social integrity, science, and culture, for decades to come. The complete restructuring of Russia's economic and social life will mandate in turn significant changes in the scientific establishment and its place in post-Soviet society.

This report is an expanded version of the executive summary of a much larger report, "Defense Industry Restructuring in Russia: Case Studies and Analysis." Many people contributed to that report, and to the underlying research. In writing that report, we did not attempt to reach consensus among the authors on the interpretations to be drawn from the data.

In this study we have looked at some of the most important elements of restructuring involved in the attempt to generate a viable civilian industrial sector from the assets of the military-industrial complex. Many other reform activities must be implemented at the national level to create the environment and infrastructure necessary for the functioning of a restructured industrial sector. Although not addressed here, they are important and difficult to implement. Another issue that we have not addressed is the pandemic presence of organized crime, which is a huge financial "tax" on economic activity as well as a disincentive to entrepreneurship and investment. I join those who believe that this is the largest single problem threatening the economic stability of Russia today.

Because of the Soviet Union's heavy emphasis on military prowess and capability, the military-industrial sector in the Soviet Union (and Russia) was larger than its counterparts in other industrialized societies. In addition to military equipment, it produced almost all civilian products with technology content such as appliances, electronic equipment, and aircraft.

With the ending of the Cold War, support for the military production from this sector was radically deemphasized. The necessary adjustment of the military enterprises to this demand shock has been embedded in far more comprehensive economic reforms. As the country has moved to a market economy and privatized much of its economic potential, the managers of the enterprises have found it necessary to convert most of their output to nonmilitary products and services as well as to restructure the enterprises.

The three major areas of restructuring are (1) the relationships of the enterprises with their owners, (2) the internal organization and operational procedures of the enterprises, and (3) the relations between the enterprises and the employees. The degree of success of the national economic reform program and the health of the economy will depend substantially on the degree of success of the defense enterprises in utilizing their residual assets (human, technological, and physical) to generate profitable economic activity.

This report deals with this economic transition, primarily at the enterprise level. We have met the directors of more than forty defense enterprises and worked with approximately ten of them in considerable detail and six in more detail, having spent between one quarter and one person year with managers from each of the six. The report contains case studies of these six enterprises as well as cross-cutting chapters on four critical aspects of enterprise restructuring--privatization, organization, accounting, and social services. These have emerged as the key factors governing the strategies of the enterprises, and they will be some of the primary determinants of the success or failure of an enterprise.

The Soviet Union's economy was overindustrialized and highly militarized, with a disproportionate share of the military industry located in the Russian Republic. It is therefore not surprising that industrial production, including military production, has dropped sharply in the economic environment of the last few years. Many enterprises are shrinking, but few are failing completely or going into bankruptcy, and there is little disaggregation of large enterprises into smaller legal entities. Thus, with the exception of privatization, the general profile of Russian industry has not changed greatly.

The creation of new entrants (new business entities), to the extent that it is occurring, is one of the more promising aspects of the economic transition. However, the managers of many of the large enterprises resist divesting themselves of segments of their business. They fear that subsequent capitalization will result in a major reduction of value of the parent because the parent's contribution to the capitalized spin-off will not command much equity. Directors recognize the need for decentralization of management and financial responsibility, but many of them prefer to create divisions rather than subsidiaries. They also try to bring outside investment into the entire large enterprise rather than into a subsidiary. It is difficult for small groups of employees to simply leave and form a new (start-up) corporation because of the lack of commercial and social services infrastructure, especially capital markets, and the lack of rights to use state facilities.

The end of the Cold War creates both new challenges and new opportunities for improving nuclear weapons safety. Several post Cold War developments are likely to have negative effects on the safety of existing nuclear weapons arsenals. These potentially dangerous trends include an apparent decline of morale in the laboratories and military organizations responsible for weapons safety, the potential proliferation of nuclear weapons to new states, the likely discontinuation of nuclear testing for safety related purposes, and the introduction of new nuclear weapons operations, including large-scale warhead dismantlement and the relocation and long-term storage of large numbers of nuclear weapons.

In an effort to explore such challenges and opportunities, a NATO Advanced Research Workshop was held in Oxford, England from August 25^th through 27^th, 1994. The workshop produced seven specific proposals for consideration to increase nuclear weapons safety and security. The proposals represent a summary of the points discussed at the workshop and are not intended to imply complete consensus of all participants.

When a state develops a nuclear arsenal, these destructive weapons must be initially integrated into existing military forces and initially managed through existing civil and military institutions. The subsequent relationship between nuclear weapons and civil-military relations in possessor states is complex, however, and presents an important two-way puzzle. First, it is important to ask how existing patterns of civil-military relations in nuclear states have influenced the likelihood of nuclear-weapons use. Some scholars believe that military officers are less war-prone and hawkish than civilian leaders; others believe the opposite, that the military tends to be bellicose and biased in favor of aggressive military postures. Which view is right, especially when nuclear weapons are involved, is a question that has not been fully addressed in the literature. Second, it is important to flip the question around and also ask how nuclear weapons have influenced civil-military relations in the states that have acquired the ultimate weapon. Again, the answer is not clear. One might expect that the massive destructive power of these weapons would encourage much greater civilian involvement in military affairs. Yet, at the same time, one might predict that military organizations would maintain significant control over nuclear policy as they want to protect their operational autonomy, and because the perceived need for a prompt response would mitigate against tight civilian control.

With the ending of the Cold War, regional conflicts have come increasingly to the fore.  U.S. foreign policy goals in such areas continue to involve a mix of U.S. self-interest (as perceived by governing elites, Congress, and sometimes the electorate directly) and a desire to see conflicts in the world resolved more peacefully.  Both of these factors have led and will probably continue to lead to U.S. military interventions in some of these conflicts.

This paper addresses the issue of what role--if any--U.S. nuclear weapons should play in these interventions.  We focus on the following questions: given a military regional confrontation between the United States and a regional power, under what circumstances if any should nuclear weapons be used?  What arguments militate for and against their use? Can one come to an overall policy recommendation in this regard?

We are well aware that the best way to deal with military confrontations is to prevent them. To some degree, military confrontations represent a failure of policy.  Nevertheless, these confrontations do occur, and on occasion, the use of nuclear weapons has been and may again be contemplated.  The paper reviews some such possible occasions.

For more than half a century, we viewed one another through our gunsights.  Our ships passed each other on the tranquil watersof the world's largest ocean without so much as a sailor's traditional greeting.  Wary and suspicious, it was best to keep fingers on the trigger when warships passed in the night.

Now the Cold War is over.  Greater cooperation is evident not only in Europe, but also among the disparate nations of the Pacific Rim.  Despite widely divergent interests and agendas in this, the home of 60 percent of the world's people, trends are already becoming evident that point toward closer collaboration in a number of political, economic, and cultural endeavors.  The intersection of security interests, particularly at sea, suggests that the timing may be right to examine new forms of military cooperation as well.  While different threat perceptions have long militated against multilateralism in Asia, modest yet concrete steps toward naval cooperation inconceivable before the Cold War's thaw are now possible.