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.

This report examines the cost and benefits, both national security and economic, of export controls on certain high-technology, dual-use items including computers, microprocessors, commercial aircraft, and methodsfor data security. We also consider the nature and implications of U.S. unilateral export controls and sanctions, emphasizing the U.S. unilateral embargoes to certain proscribed states, the Enhanced Proliferation Control Initiative (EPCI), and u.s. mandatory sanctions policy under the Missile Technology Control Regime (MTCR). We analyze a few cases in detail rather than offer a generic, and inherently less thorough, review of all dualuse items. Assessments of the utility of high-technology controls cannot be made independently of a detailed analysis of the specific items and destinations subject to controls.

This report comprises a description, summary, and analysis of an entrepreneurial training workshop for Russian nuclear scientists held at the Lawrence Livermore National Laboratory (LLNL), May 9-20, 1994. This is the third in a series of such workshops. The first workshop was held in Boston, July, 1992. The second was held in Moscow, June, 1993. The workshop was cosponsored by the U.s. Arms Control and Disarmament Agency (ACDA), the U.S. Department of Energy (DOE), and the Ministry of the Russian Federation for Atomic Energy (Minatom).

The goals of the workshop were to provide the Russian scientists with academic and practical background in several basic business areas, and then to assist them, in conjunction with American industry representatives, in the preparation of business plans for possible cooperative projects.

Using major new documentary sources, this book tells the story of why and how China built its nuclear submarine flotilla and the impact of that development on the nation's politics, technology, industry and strategy.

Based on interviews with participants and research in newly opened archives, the book reveals how the American atomic monopoly affected Stalin's foreign policy, the role of espionage in the evolution of the Soviet bomb, and the relationship between Soviet nuclear scientists and the country's political leaders.

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.

This paper describes the technologies needed for producing nuclear weapons, giving particular attention to those used in electromagnetic separation and laser uranium-235 enrichment.  The complexity of the technologies makes it clear that developing countries, to various degrees, need assistance from the developed world in order to build nuclear weapons.  Complete restriction of assistance could prevent the spread of these weapons.  Unfortunately, knowledge of the technology is already so widespread that preventing further spread is virtually impossible in the long run.  In practice, imposing rigorous control over the availability of key components of all of the possible technologies may delay access to nuclear weapons by the less-developed world for many years.  All of the recommendations in this discussion may be overtaken by the chaotic situation in the former Soviet Union--rumors abound that its nuclear engineers, technology, weapons material, and the weapons themselves are potentially for sale.  A better method of preventing proliferation is needed, and some of the proposals for achieving improvements are discussed in this paper.

The papers in this volume are revised versions of presentations made by the authors at a conference on economic reform in Russia, which was held at Stanford University on November 22 and 23, 1993. Professor Kenneth Arrow from Stanford chaired the confer­ence, which was sponsored by the university's Center for International Security and Arms Control ( CISAC), under the auspices of its project on Russian defense conversion, and by the Moscow-based Institute for the Economy in Transition. Speakers included all the authors in this volume, as well as other representatives of the Institute for the Economy in Transition, the World Bank, and the European Bank for Reconstruction and Development ( EBRD).