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Rummy's North Korea Connection
http://www.fortune.com/fortune/articles/0,15114,447429-1,00.html
FORTUNE April 28, 2003
Rummy's North Korea Connection
What did Donald Rumsfeld know about ABB's deal to build nuclear reactors
there? And why won't he talk about it?
By Richard Behar
Defense Secretary Donald Rumsfeld rarely keeps his opinions to himself. He
tends not to compromise with his enemies. And he clearly disdains the
communist regime in North Korea. So it's surprising that there is no clear
public record of his views on the controversial 1994 deal in which the
U.S.
agreed to provide North Korea with two light-water nuclear reactors in
exchange for Pyongyang ending its nuclear weapons program. What's even
more
surprising about Rumsfeld's silence is that he sat on the board of the
company that won a $200 million contract to provide the design and key
components for the reactors.
The company is Zurich-based engineering giant ABB, which signed the
contract
in early 2000, well before Rumsfeld gave up his board seat and joined the
Bush administration. Rumsfeld, the only American director on the ABB board
from 1990 to early 2001, has never acknowledged that he knew the company
was
competing for the nuclear contract. Nor could FORTUNE find any public
reference to what he thought about the project. In response to questions
about his role in the reactor deal, the Defense Secretary's spokeswoman
Victoria Clarke told Newsweek in February that "there was no vote on
this"
and that her boss "does not recall it being brought before the board
at
any
time."
Rumsfeld declined requests by FORTUNE to elaborate on his role. But ABB
spokesman Bjoern Edlund has told FORTUNE that "board members were
informed
about this project." And other ABB officials say there is no way such
a
large and high-stakes project, involving complex questions of liability,
would not have come to the attention of the board. "A written summary
would
probably have gone to the board before the deal was signed," says
Robert
Newman, a former president of ABB's U.S. nuclear division who spearheaded
the project. "I'm sure they were aware."
FORTUNE contacted 15 ABB board members who served at the time the company
was bidding for the Pyongyang contract, and all but one declined to
comment.
That director, who asked not to be identified, says he's convinced that
ABB's chairman at the time, Percy Barnevik, told the board about the
reactor
project in the mid-1990s. "This was a major thing for ABB," the
former
director says, "and extensive political lobbying was done."
The director recalls being told that Rumsfeld was asked "to lobby in
Washington" on ABB's behalf in the mid-1990s because a rival American
company had complained about a foreign-owned firm getting the work.
Although
he couldn't provide details, Goran Lundberg, who ran ABB's
power-generation
business until 1995, says he's "pretty sure that at some point Don
was
involved," since it was not unusual to seek help from board members
"when
we
needed contacts with the U.S. government." Other former top
executives
don't
recall Rumsfeld's involvement.
Today Rumsfeld, riding high after the Iraq war, is reportedly discussing a
plan for "regime change" in North Korea. But his silence about
the nuclear
reactors raises questions about what he did--or didn't do--as an ABB
director. There is no evidence that Rumsfeld, who took a keen interest in
the company's nuclear business and attended most board meetings, made his
views about the project known to other ABB officials. He certainly never
made them public, even though the deal was criticized by many people close
to Rumsfeld, who said weapons-grade nuclear material could be extracted
from
light-water reactors. Paul Wolfowitz, James Lilley, and Richard Armitage,
all Rumsfeld allies, are on record opposing the deal. So is former
presidential candidate Bob Dole, for whom Rumsfeld served as campaign
manager and chief defense advisor. And Henry Sokolski, whose think tank
received funding from a foundation on whose board Rumsfeld sat, has been
one
of the most vocal opponents of the 1994 agreement.
One clue to Rumsfeld's views: a Heritage Foundation speech in March 1998.
Although he did not mention the light-water reactors, Rumsfeld said the
1994
Agreed Framework with North Korea "does not end its nuclear menace;
it
merely postpones the reckoning, with no assurance that we will know how
much
bomb-capable material North Korea has." A search of numerous
databases
found
no press references at the time, or throughout the 1990s, noting Rumsfeld
was a director of the company building the reactors. And Rumsfeld didn't
bring it up either.
ABB, which was already building eight nuclear reactors in South Korea, had
an inside track on the $4 billion U.S.-sponsored North Korea project. The
firm was told "our participation is essential," recalls Frank
Murray,
project manager for the reactors. (He plays the same role now at
Westinghouse, which was acquired by Britain's BNFL in 1999, a year before
it
also bought ABB's nuclear power business.) The North Korean reactors are
being primarily funded by South Korean and Japanese export-import banks
and
supervised by KEDO, a consortium based in New York. "It was not a
matter
of
favoritism," says Desaix Anderson, who ran KEDO from 1997 to 2001.
"It was
just a practical matter."
Even so, ABB tried to keep its involvement hush-hush. In a 1995 letter
from
ABB to the Department of Energy obtained by FORTUNE, the firm requested
authorization to release technology to the North Koreans, then asked that
the seemingly innocuous one-page letter be withheld from public
disclosure.
"Everything was held close to the vest for some reason," says
Ronald
Kurtz,
ABB's U.S. spokesman. "It wasn't as public as contracts of this
magnitude
typically are."
However discreet ABB tried to be about the project, Kurtz and other
company
insiders say the board had to have known about it. Newman, the former ABB
executive, says a written summary of the risk review would probably have
gone to Barnevik. Barnevik didn't return FORTUNE's phone calls, but
Newman's
Zurich-based boss, Howard Pierce, says Rumsfeld "was on the board--so
I
can
only assume he was aware of it."
By all accounts Rumsfeld was a hands-on director. Dick Slember, who once
ran
ABB's global nuclear business, says Rumsfeld often called to talk about
issues involving nuclear proliferation, and that it was difficult to
"get
him pointed in the right direction." Pierce, who recalls Rumsfeld
visiting
China to help ABB get nuclear contracts, says, "Once he got an idea,
it
was
tough to change his mind. You really had to work your ass off to turn him
around." Shelby Brewer, a former head of ABB's nuclear business in
the
U.S.,
recalls meetings with Rumsfeld at the division's headquarters in
Connecticut. "I found him enchanting and brilliant," he says.
"He would
cut
through Europeans' bullshit like a hot knife through butter."
None of them could recall Rumsfeld talking about the North Korea project.
But if he was keeping his opinions to himself, others were not. The
Republicans attacked the deal from the start, particularly after gaining
control of Congress in 1994. "The Agreed Framework was a political
orphan
within two weeks after its signature," says Stephen Bosworth, KEDO's
first
executive director and a former U.S. ambassador to South Korea. It's not
hard to understand why it was controversial. North Korea is on the list of
state sponsors of terrorism and has repeatedly violated the terms of the
Non-Proliferation Treaty. Robert Gallucci, the assistant secretary of
state
who spearheaded the 1994 agreement, doesn't disagree, but says, "If
we
didn't do a deal, either we would have gone to war or they'd have over 100
nuclear weapons."
The problem, say a number of nuclear energy experts, is that it's
possible,
though difficult, to extract weapons-grade material from light-water
reactors. "Reprocessing the stuff is not a big deal," says
Victor
Gilinsky,
who has held senior posts at the Atomic Energy Commission and the Nuclear
Regulatory Commission. "You don't even need special equipment. The
KEDO
people ignore this. And we're still building the damn things."
Given the Republican outcry over the reactor deal, Rumsfeld's public
silence
is nearly deafening. "Almost any Republican was complaining about
it,"
says
Winston Lord, President Clinton's assistant secretary of state for East
Asian/Pacific Affairs. Lord can't remember Rumsfeld speaking out. Nor can
Frank Gaffney Jr., whose fervently anti-KEDO Center for Security Policy
had
ties to Rumsfeld. Gaffney speculates that Rumsfeld might have recused
himself from the controversy because of his ABB position.
By 1998 a debate was raging in Washington about the initiative, and the
delays were infuriating Pyongyang. Inspectors could no longer verify North
Korea's nuclear material inventory. Still, at some point in 1998, ABB
received its formal "invitation to bid," says Murray. Where was
Rumsfeld?
That year he chaired a blue-ribbon panel commissioned by Congress to
examine
classified data on ballistic missile threats. The commission concluded
that
North Korea could strike the U.S. within five years. (Weeks after the
report
was released, it fired a three-stage rocket over Japan.) The Rumsfeld
Commission also concluded that North Korea was maintaining a nuclear
weapons
program--a subtle swipe at the reactor deal, which was supposed to prevent
such a program. Rumsfeld's resume in the report did not mention that he
was
an ABB director.
In his final days in office, Clinton had been preparing a bold deal in
which
North Korea would give up its missile and nuclear programs in return for
aid
and normalized relations. But President Bush was skeptical of Pyongyang's
intentions and called for a policy review in March 2001. Two months later
the DOE, after consulting with Rumsfeld's Pentagon, renewed the
authorization to send nuclear technology to North Korea. Groundbreaking
ceremonies attended by Westinghouse and North Korean officials were held
Sept. 14, 2001--three days after the worst terror attack on U.S. soil.
The Bush administration still hasn't abandoned the project. Representative
Edward Markey and other Congressmen have been sending letters to Bush and
Rumsfeld, asking them to pull the plug on the reactors, which Markey calls
"nuclear bomb factories." Nevertheless, a concrete-pouring
ceremony was
held
last August, and Westinghouse sponsored a training course for the North
Koreans that concluded in October--shortly before Pyongyang confessed to
having a secret uranium program, kicked inspectors out, and said it would
start making plutonium. The Bush administration has suspended further
transfers of nuclear technology, but in January it authorized $3.5 million
to keep the project going.
Sooner or later, the outspoken Secretary of Defense will have to explain
his
silence.
Feedback: rbehar@fortunemail.com
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