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. Last Updated: 07/27/2016

Fund Rides Missiles to Modems

John Nowell made his first official visit to Russia in 1992 on a charity mission to re-route Gulf War rations to starving Russian provinces.


Flying military rations to the needy was a sharp contrast to his objectives years before when, as a U.S. paratrooper during the Cold War, he was trained to drop behind Russian enemy lines.


But if there are such things as converted cold warriors, Nowell counts himself among them.


Now, he serves as the new president and chief executive officer of the Defense Enterprise Fund, established by the U.S. Pentagon to help Russian arms makers with defense conversion projects.


DEF's latest project, "missiles-to-modems," is a 20th century take on swords-to-plowshares that will see a nuclear missile factory in Kazakhstan launch a modem adapter, marketed through the upscale U.S. catalog Sharper Image, at a retail price of $49.95.


"It's the kind of thing I can push across the table to a U.S. congressman and say, 'This could have been a bullet,'" Nowell said in an interview.


The fund is part of the Pentagon's $1.5 billion cooperative threat reduction program. Originally started with a $7.7 million grant from the U.S. Defense Department in 1994, the fund now is responsible for $70 million in government money invested in a dozen military conversion projects in three former Soviet republics. These projects employ 5,000 scientists and have converted 55,000 square meters of defense plants for civilian use.


But if gadgets like the Kazakh-made modem are pleasing to a congressman, the DEF has its critics. The General Accounting Office, a U.S. congressional watchdog agency, investigated whether the cooperative threat reduction program, including the DEF, succeeded in promoting nonproliferation. The investigation proved inconclusive.


The fund has been sued twice, unsuccessfully, by U.S.-based R&G International and Svetlana Electron Devices in St. Petersburg. The firms, part of a joint venture, claim that they applied for a DEF investment but received only a bill for legal and accounting expenses they alleged were paid to firms employing fund board members.


Despite the minor hang-ups, Nowell said he hopes to expand the scope of his work, launching by Oct. 1 a parallel $100 million venture capital fund looking at similar conversion projects. So far, he says he has commitments of about $35 million from major corporations.


"The plan is to take the same management of DEF and create a new company called Global Partners," he said.


And Nowell remains convinced that, in the broad expanse of his former Cold War opponent, there lie invaluable commercial gems waiting to be harvested -- enough to earn his two funds $175 million.


"Somewhere, in some institute, you find a chemical weapons lab making a solvent that makes pen ink flow 12 times faster, or that makes a better herbicide for Monsanto or better sticky pad for 3M," he said.