Worried About Nuclear Proliferation? Let’s Learn From Vegas

By / 4.14.2010

For the last decade, leaders from both parties have agreed that the gravest danger facing the U.S. is the threat of the use of a nuclear bomb by a terrorist group or rogue state. But while nonproliferation has long been the provenance of governments, there is a clear role for industry to play as well.

Many of the components used to build a nuclear bomb — including the technology to create a uranium enrichment program — are inherently dual-use. This means that the same technology used for innocuous industrial purposes can also be used to help build a nuclear weapon. Some of these items, such as high-quality steel and bearings for centrifuges, are now well-known to be dual-use. Others, such as “triggered spark gaps” or very high-speed switches with medical purposes, are somewhat less well-known.

The U.S. and other countries use a series of restrictions on the export of certain goods — very high-speed computers, for example — to prevent adversaries from developing better weapons. But too often, both state and industry are slow to realize the dual-use nature of some products. When Iran started its centrifuge program, it was unable to acquire the ultra-high grade maraging steel typically used to build the rotors due to export controls. Instead, it purchased the highest quality steel it could buy — and that turned out to be good enough.

Further, there is little to no sharing of information among companies about who is trying to purchase what from whom. While some individual companies have internal compliance programs, a broader approach is required to share information among companies and industries. The sharing of information would ultimately prevent those who shouldn’t have access to such items from shopping around to find a company that will sell the technology with little concern for who the final customer may be. Some claim that Iran was able to use a series of front companies to eventually purchase the maraging steel that it needed, in addition to the “good enough” stuff.

Fixing this problem will not be easy. Companies exist to generate profit, and denying potential customers never makes shareholders happy. And one could imagine that some customers would lodge discrimination complaints. Further, information about sales, both actual and potential, is naturally considered commercial proprietary information.

How can this problem be solved? Two models spring to mind. In the first, government collects and analyzes information from applications for export licenses. In the second, industry leads the effort. From my perspective, the latter is preferable.

Government leadership on this problem would probably raise more concerns than it would solve: Which government would collect the data? How would governments share data? How would government gain access to information not contained in export license applications — especially for rejected sales? And how could industry be guaranteed that commercial secrets would not be leaked?

Having industry lead this effort would solve many of these problems. For starters, companies know about sales in progress and about sales denied, so they would be able to identify problems earlier. Industry also already collects much of this data to track sales, identify future markets and stay ahead of the competition. And it’s possible to come up with schemes where the information is not shared between companies until it’s needed. This would also reduce the role and intrusiveness of government, while probably being a cheaper regulatory regime than a government-run one.

Granted, industry leadership would also raise some questions — Who would fund the effort? How would information be protected? — but an important model already exists: Las Vegas casinos. This intensely competitive industry has learned how to share information about problem gamblers and cheaters between casinos in a way that helps them all earn more. No casino wants the competition to know how much profit it is making or how much money it is losing. But if an individual or a small group has found a way to beat the casinos and win large stakes, it helps all of the casinos to identify them and keep them from winning even more. What’s more, this is completely driven and funded by the industry, which realized that it could reduce losses through cooperation. Just as casinos can keep track of problem customers collectively, so can companies that supply dual-use materials.

The challenge, of course, is to convince those companies that they would serve themselves and their legitimate customers by working together to develop such an oversight system. After all, the promise of a nuclear-free world – a collective good – isn’t quite the same incentive as preventing cheaters from winning in your casino. While an industry-run regulatory system is the best solution, it may take the specter of an intrusive government regulatory scheme to spur companies to act in our shared interest and perhaps prevent the next Iran.

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