Guns or butter?


You would be hard-pressed to find common ground between Iran and the United States, but as Robert Kelley writes, both Markazi Province and South Carolina continue to grapple with the construction of government mandated, over budget and overdue fuel reactors:

Iran is facing increasing difficulties completing its IR-40 pressurized heavy water reactor (PHWR) near the town of Arak. Fortunately, Iran has agreed to suspend most construction work as part of a plan arranged with the EU3+3 negotiators. On the one hand, this means welcome cost savings for the Iranian Government
. On the other hand, it could be an emergency for the local population.

Until this suspension Iran was beating a dead horse, completing a 1990s reactor project that had little use and was poorly suited to its stated purpose—namely, to produce medical isotopes for the Iranian health industry. The reactor is large for this intent, not ideal for the extraction of medical isotopes and located far from customers. It is likely that when the reactor was originally conceived and designed in the 1990s it was envisioned to support a weapons programme, but construction delays, technical difficulties and its changingpurpose turned it into a white elephant. This may even have been acknowledged in Tehran where cost savings are needed to offset sanctions; this project lends itself to such action.

Assessing the benefits for the local economy

What does the Arak PHWR project mean for Markazi Province—of which Arak is the capital—in terms of jobs and the economy? A quick review of Google Earth imagery shows that the attendant-heavy water plant in Arak was at an advanced state of construction in 2003, with most buildings finished externally and large amounts of piping and technical infrastructure complete. This did not happen overnight. It is possible that as many as ten years elapsed while getting the heavy water production plant from concept through the design stage to the state it was in by 2003. Ten years of increasing construction budgets, employment and equipment purchases going to the residents of Arak. If it was truly commissioned in 2006, it was a cash cow for the local economy and still employs an operating force.

In the Google Earth imagery the future reactor was barely a graded field in 2003. Iran floated plans to start up the reactor in 2009 or 2011, but as of 2014 it was still not finished. There are many reasons for the delays but one of the clearest is lack of fuel. Iran has wasted years not producing fuel for the reactor. This is not surprising given that the fuel form they have displayed on television is poorly suited to this class of reactor. There are additional reports that they were only recently pursuing criticality spacing studies in a zero-power configuration, surprisingly late in the design process.

Part of the difficulty may lie in the cladding for the IR-40 fuel. According to reports by the Board of the International Atomic Energy Agency (IAEA), Iran has produced only 10 fuel assemblies after several years of work, and none in the later part of 2013. Clearly, Iran can make fuel pellets, and that is what the IAEA verifies. But the cladding plant is probably still not functioning properly, resulting in a reactor with no fuel and little purpose. The IAEA would not normally inspect a zirconium cladding plant because it is not a legally defined as a ‘nuclear facility’. In a case like this, the IAEA would need to make a request to visit under the temporary agreements it has concluded with Iran. Note that for the zero-power experiments, the cladding does not have to be perfect or able to take the heat load, but in the real reactor it needs to be of high quality.

Who are the beneficiaries of IR-40 construction spending? Obviously, the local construction and operating forces benefit but there is also a huge advantage for the Iranian Revolutionary Guard—the people who make crucial decisions and control big business. With big money and big contracts come big benefits. Stopping work on the IR-40 prior to the EU3+3 agreement puts all of that at risk. Therefore, the project has dragged on for years past its first start-up date specifically so that the largesse might continue.

Parallels with other nuclear programmes

Is this a new situation? Not really. In Libya, millions of dollars were appropriated for the putative nuclear programme. However, very little of that percolated down to the nuclear cadre. The majority was spent on gold watches and Swiss bank accounts.

Now that IR-40 construction has stopped in deference to the EU3+3 agreement, the Governor of Arak must be desperate to find replacement jobs and income for the local economy

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. If he needs an ally he need look no further than to the Governor of South Carolina, Nikki Haley, who faces an almost identical situation with the MOX Fuel Plant being built at the Savannah River site—a project that is at least $3 billion over budget and only 60 per cent complete. The project’s overseer, the United States Government, frustrated with lack of progress and ballooning costs, is reassessing and has proposed either cancelling the project or going into ‘cold standby’. This pleases many nonproliferation experts who are having second thoughts about the plant and wondering whether it reduces or increases proliferation risks.

The logic in South Carolina is simple. Cost overruns or not, the area stands to lose 1800 jobs. Looking at the IR-40 construction site in imagery shows that the problems in Iran are of comparable magnitude; hundreds of jobs are at stake.

This is not an unfamiliar phenomenon. Just before the 2003 US invasion of Iraq, the director of an Iraqi electronics plant stated that he had ‘400 gardeners’ on his staff. He explained that, in a centrally planned economy, he was forced to employ a certain number of locals no matter what his electronics quota was, so gardening was the job chosen for the underemployed. In fact, the site really was well-landscaped and maintained!

‘Guns or butter’

In a recent foreign policy pronouncement—which is rare for a US state government—South Carolina specifically pointed out that shutting down the plant will cause the USA to renege on its international nuclear non-proliferation agreement with Russia to reduce plutonium stockpiles. Ironically, despite current differences, this is one area where Russia and the USA should continue to cooperate.

Observers have noted that Iran has been pursuing a questionable project for many years—particularly given that it was suggested that interest in nuclear weapons was officially stopped in 2004. Looking at timelines for construction, appropriations of design and construction funds and commitments to the local community can shed light on the real motivation for project continuation in both Iran and South Carolina.

The US Government is not going to keep funding a project that is out of control in terms of budget. Governor Haley is apprehensive that her constituents will end up the victims of that decision. It would be interesting to interview the Governor of Arak to see what objectives and constraints he operates under.

The phrase ‘guns or butter’ refers to a well-known model that seeks to explain the relationship between two goods that are important for a nation’s economic growth
. In the case of the Arak project, the nuclear weapon programme could be regarded as the guns, while the production of medical isotopes would be the butter. Therefore, the question becomes: what does more to fan an international crisis—politicized guns or butter?

Robert Kelley (United States) is an Associated Senior Research Fellow with SIPRI’s Arms Control and Non-proliferation Programme, and a veteran of over 35 years in the US Department of Energy nuclear weapons complex, most recently at Los Alamos.

Originally published by SIPRI.