Obama Girds for USEC Bankruptcy

by Geoffrey Sea

(With UPDATE* including repaired links)

One week ago, President Obama quietly signed a somewhat convoluted executive order, extending a state of “national emergency” in regard to risks posed by weapons-grade uranium of the Russian Federation. OMG, that sounds serious! Indeed, some sloppy media reports* suggested that the move relates to an ongoing nuclear proliferation risk, or to continuing Russian transgressions.

In reality, the measure, posted in the Federal Register last Monday in a notice reproduced below, has been undertaken at the insistence of the Russians, in order to protect Russian assets from unlawful attachment in the increasingly-likely case of a bankruptcy declaration by USEC Inc., or seizure by USEC's creditors.

Under the Megatons to Megawatts program, which is set to expire in 2013, highly-enriched uranium (HEU) from old Soviet nuclear warheads has been down-blended to reactor grade by the Russians, then sold on the international market by USEC. The concession results from a sweetheart contract given to USEC by the U.S. government as one form of federal subsidy for the fleetingly-private company. In administration of that program, from which USEC has derived substantial profit as a middle-man, reactor-grade uranium still under Russian title – i.e. not yet paid for by USEC – may wind up in USEC's possession, either in storage or in transportation.

Given the precipitous decline in USEC's financial fortunes and the jolting trade of its stock (most recently reflected in the transfer of 12% of USEC stock within a couple hours last Friday), the Russians are concerned that their assets could find themselves stuck in a bankruptcy proceeding, or abducted by USEC's creditors, who are now sharpening the talons of collateral attachment.

Lady Liberty awash in a sea of Red Ink. Indeed.

The situation is made more dire by the draconian terms of USEC's credit facility with risk-queen J.P. Morgan Chase, which subjects all of USEC's assets to “full cash dominion” – meaning that the bank can seize all of USEC's assets if USEC defaults on its credit terms. The only assets not subject to such seizure are those protected by the U.S. government under “national security” provisions.

Hence the need to protect Russian uranium in USEC's possession from being seized by the J.P. Morgan repo men. “Sensitive” dysfunctional U.S. technology encased in uranium centrifuges was similarly protected as “national-security”-related “intellectual property” (it ought to be called “ineffectual property”) as the overlooked key part of an agreement signed by USEC and the Department of Energy two weeks ago.

In other words, the USEC carcass is already being divvied up among the governmental and banking predators, but discreetly, in such a way that doesn't frighten away the watering prey of common shareholders, whose fresh blood is still required.

The "national nuclear emergency" in this case is that the rogue state of J.P. Morgan might acquire tons of stuff that used to be encased in Russian nuclear weapons.  Duck and cover!

The true import of Obama's executive order is clear only by reference to the original order  of President Clinton that has now been extended:

Government of the Russian Federation assets directly related to the implementation of the HEU Agreements currently may be subject to attachment, judgment, decree, lien, execution, garnishment, or other judicial process, thereby jeopardizing the full implementation of the HEU Agreements to the detriment of U.S. foreign policy.

Misunderstanding of the relation of the new order to USEC's bankruptcy risk may be fostered by the fact that President Obama has only extended the order of a previous president, originally issued twelve years ago, in June of 2000.

But the reason that this situation still qualifies as a subject for the president's “emergency powers” is that USEC operates on a twelve-year breakdown cycle. Privatized USEC first posed a bankruptcy risk after its stock crashed in 1999, following revelations that the company had failed to develop Atomic Vapor Laser Isotope Separation (AVLIS) technology, as promised. (“We'll see Elvis before we see AVLIS" became the standard joke.)

Now, as a closing bookend to the mad USEC privatization experiment, the company has been found to have pulled the identical scam a second time, without a viable technology to show for its claimed eleven years of centrifuge development.

Hence the panic of those darned post-Bolsheviks that their capital assets will wind up impounded at some locked USEC liquidation lot. Clinton's order carried no expiration date. There was no need for renewal if the Russians had no new concern, and details of the Obama order may add some legal protection to the Russian assets.

I'm no red-baiter, but protecting Russian state property against seizure by J.P. Morgan under the guise of a Unites States “national emergency” may be the most genuinely socialist thing that Barack Obama has ever done.

Welcome to the New World Order.

*UPDATE: It has been pointed out that prior annual extensions of the 2000 Clinton order have been issued by G.W. Bush and by Obama, however, none of those was done with the White House publicity and faked urgency attached to this extension. Obama issued a separate letter to Congress on June 25 dramatizing the otherwise mundane action, obviously intended to bolster the bogus "national security" argument for USEC federal funding, intended to confuse.

And confuse it did. Witness this pseudo-journalism from the Finance Examiner, which precisely inverts the facts of the story. According to Kenneth Schortgen, Jr.:

"Under this National Emergency and Executive Order, the United States is seizing assets and property owned or managed by the Russian Federation relating to nuclear items and programs tied to Highly Enriched Uranium (HEU)"

Um, no. The United States is NOT seizing Russian assets, it is PROTECTING Russian assets from seizure. But Schortgen's confusion emanates directly from the pomp and prose of Obama's "national emergency" grandstanding, which itself reflects a line of disinformation that comes straight from USEC Inc., as the company continues to try to Rangel federal funds through a supposedly-banned earmark. No misspelling.

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From the White House:

For Immediate Release: June 18, 2012

Notice: Continuation of the National Emergency with Respect to the Risk of Nuclear Proliferation Created by the Accumulation of Weapons-Usable Fissile Material in the Territory of the Russian Federation

"On June 21, 2000, the President issued Executive Order 13159 (the "order") blocking property and interests in property of the Government of the Russian Federation that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of United States persons that are directly related to the implementation of the Agreement Between the Government of the United States of America and the Government of the Russian Federation Concerning the Disposition of Highly Enriched Uranium Extracted from Nuclear Weapons, dated February 18, 1993, and related contracts and agreements (collectively, the "HEU Agreements"). The HEU Agreements allow for the downblending of highly enriched uranium derived from nuclear weapons to low enriched uranium for peaceful commercial purposes. The order invoked the authority, inter alia, of the International Emergency Economic Powers Act (50 U.S.C. 1701-1706) and declared a national emergency to deal with the unusual and extraordinary threat to the national security and foreign policy of the United States posed by the risk of nuclear proliferation created by the accumulation of a large volume of weapons-usable fissile material in the territory of the Russian Federation.

The national emergency declared on June 21, 2000, must continue beyond June 21, 2012, to provide continued protection from attachment, judgment, decree, lien, execution, garnishment, or other judicial process for the property and interests in property of the Government of the Russian Federation that are directly related to the implementation of the HEU Agreements and subject to U.S. jurisdiction. Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. l622(d)), I am continuing for 1 year the national emergency with respect to the risk of nuclear proliferation created by the accumulation of weapons-usable fissile material in the territory of the Russian Federation.

This notice shall be published in the Federal Register and transmitted to the Congress.

BARACK OBAMA"