Normally it wouldn't be news if a struggling U.S. business hired a big-name Washington law firm to help it fight allegedly unfair foreign competition. But when the business is owned by the Energy Department and the accused competitors are in the former Soviet Union, nothing is normal.
The Energy Department has awarded a contract that could reach $3.34 million to Wilmer, Cutler & Pickering for help in its trade dispute with the former Soviet Union, which the Energy Department says is illegally flooding the U.S. market with cheap uranium.
The accused country has ceased to exist since the complaint was filed, but more on that later.
When Congress enacted trade laws to shield U.S. industries from "dumping" -- competing goods imported at unfairly low prices -- it did not have the Energy Department in mind. Congress was trying to protect private companies, such as textile and steel producers. But the only uranium enrichment factories in the United States -- the ones that are rapidly losing customers because of imports -- belong to the Energy Department.
The case involves two Cabinet departments, delicate issues of foreign policy, three prominent law firms, billions of dollars and the future -- if any -- of a dying U.S. industry that once dominated the world market. It also has put the Energy Department in the uncomfortable position of appearing to work against the Bush administration's policy of encouraging the newly independent republics to compete in world markets.
No wonder the Commerce Department declared in a notice in the Federal Register last week that the trade case was "extraordinarily complicated" -- an understatement if ever there was one.
"Chief among the novel issues we face in this investigation is a situation where the country identified in the petition has dissolved," department officials said, adding it would take them until May 18 -- a month longer than expected -- to sort it out.
Lawyers from the Washington firm of Hogan & Hartson who represent the Russian uranium exporting agency, including former Republican National Committee chairman Frank J. Fahrenkopf Jr., asked Commerce to dismiss the case on the grounds that it named a nonexistent defendant. But the mere fact that the old Soviet Union has been supplanted by independent republics does not mean the case should be dismissed, the Commerce Department ruled.
No one disputes that the U.S. uranium industry has fallen on hard times.
Most domestic mines have closed because raw uranium, known as "yellowcake," can be produced more cheaply in Canada and other countries. The market share of the Energy Department's uranium enrichment operation, once 100 percent of the noncommunist world's market for the enriched uranium used as fuel for power plants, now is less than 50 percent.
Uranium imports from the Soviet Union totaled less than 200,000 pounds in all of 1988. In January 1992 alone, the figure for imports from the successor republics had risen to 2.9 million pounds, according to the Commerce Department.
The dumping case began in November when U.S. uranium producers and the Oil, Chemical and Atomic Workers union filed a complaint with the U.S. International Trade Commission. Their lawyer, Valerie A. Slater of Akin, Gump, Hauer & Feld -- the firm in which U.S. Ambassador to Russia Robert Strauss was formerly a partner -- said the price of Soviet uranium would have to rise at least 132 percent to be fairly and competitively priced.
In December, the trade tribunal ruled that the domestic industry was indeed being harmed by imports. Under the law, the case then shifted to the Commerce Department to determine whether the imports are unfairly priced. If the answer is yes, the uranium from Russia and the other republics will be subject to stiff import duties, limiting the market for one of their few hard-currency exports.
If all the imported uranium were in the form of yellowcake, the Energy Department might not care about it, said lawyers familiar with the case. The uranium that goes through its enrichment plants is owned by electric utilities, which pay a fee for the enrichment services, so the origin of the material doesn't matter.
But to the extent that the utilities are buying imported uranium that is already enriched, as they are doing more and more because it is cheaper, the Energy Department's Uranium Enrichment Enterprise attracts less and less revenue.
If that enterprise were a separate corporation -- as it would be under legislation passed by the Senate and pending in the House -- it would rank near the middle of the Fortune 500 list of the biggest U.S. industrial corporations, with annual revenue of about $1.5 billion. But the technology of its factories in Ohio and Kentucky is obsolete, and it is rapidly losing market share to lower-cost operators in Europe and Russia.
Before the end of the Cold War, the Energy Department assumed that it would have to keep the enrichment plants running no matter what the cost and no matter how many commercial customers bailed out because of the need to produce highly enriched uranium for the Navy. But the Navy is no longer buying highly enriched uranium, of which it has a surplus.
As a result, the Energy Department finds itself the owner of what looks more and more like a white elephant that has no strategic mission and is losing ground to privately owned competitors.
The Energy Department's long-term plan is to keep the existing enrichment facilities operating long enough to perfect and install a new, lower-cost technology known as AVLIS, for atomic vapor laser isotope separation. The corporation to be created by the pending legislation would eventually be sold to private owners. But the longer the process takes, the less potential value the enterprise would have because its customer base is eroding.
"We certainly want to help out the former Soviet Union," said William Meyers, the Energy Department's acting general counsel. "But we know right now that we have to go forward" with the anti-dumping case in an effort to limit the damage to the Uranium Enrichment Enterprise. The Energy Department has "a statutory mandate to run this enterprise in the best interest of the taxpayers," Meyers said. "We have a stake in what it's sold for."
FROM SOVIET, SUCCESSOR REPUBLICS
---------- 1988-JANUARY 1992 ---------
Period................Volume in pounds
1988..........................189,727
1989..........................490,333
1990........................6,013,574
Jan. 1991..........................44
Feb. 1991........................... --
March 1991.......................... --
April 1991..................1,044,019
May 1991....................1,359,191
June 1991........................... --
July 1991...................1,559,296
Aug. 1991...................1,566,571
Sept. 1991.......................... --
Oct. 1991...................3,352,800
Nov. 1991........................... --
Dec. 1991...................3,383,543
Jan. 1992...................2,918,652
SOURCE: U.S. Commerce Department