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. Last Updated: 07/27/2016

Adamov's Dual Role in U.S. Uranium Pact

WASHINGTON -- Two years ago, a small Pennsylvania consulting firm was quietly hired by a U.S. company responsible for a sensitive nuclear security pact between the United States and Russia.

As it turns out, one of the firm's owners was Yevgeny Adamov -- then Russia's nuclear power minister. At the time, Adamov's ministry was overseeing multimillion-dollar negotiations between Russia and USEC Inc., the same company that hired his consulting firm.

USEC buys bomb-grade uranium stripped from Russian warheads as exclusive agent for the U.S. government under a 1993 pact known as Megatons to Megawatts. The uranium is shipped to the United States, where it is reprocessed into fuel for nuclear power plants.

USEC executives say they did not know who owned the consulting firm, and did not learn of Adamov's involvement until he was dismissed last year by President Vladimir Putin amid allegations of corruption.

They said the firm, Omeka Ltd., was hired for legitimate consulting work to identify prospective ventures between USEC and the commercial arm of the Nuclear Power Ministry -- Tenex. No projects were launched before the contract expired and a USEC spokesman said the company did not violate the law.

Interviews and records show that USEC paid Omeka $123,880 for consulting fees and expenses incurred between Jan. 1, 2000, and March 31, 2001. At the same time -- under terms specified in its contract with USEC -- Omeka also received payments totaling $90,000 or more from Tenex.

The contract ended around the time Adamov lost his post in March 2001. Earlier that year, a report circulated by the State Duma's anti-corruption commission alleged that Adamov had mixed his private business dealings and public responsibilities. Adamov has denied any wrongdoing. The report noted Adamov's ownership in Omeka, but did not refer to its contract with USEC.

MT editor's note: The Duma report, released early in 2001, accused Adamov of illegally engaging in business activities worth millions of dollars while he was minister and of appointing business associates to key posts in the ministry. The allegations have not been independently confirmed. A spokeswoman for the Prosecutor General's Office said Monday that her agency had conducted a probe but found no basis for a criminal case.

Adamov declined to respond to requests for an interview or to answer written questions. An Omeka executive said he did not believe Adamov received revenue from Omeka while he was a government minister.

"We more or less put [Adamov's ownership] in a blind trust,'' said Mark Kaushansky, who co-founded Omeka in 1994 with Adamov.

USEC was once a government-owned corporation that processed the nation's uranium for use in nuclear power plants. As such, it had responsibility for carrying out the Megatons to Megawatts pact, which calls for 500 metric tons of weapon-grade uranium to be stripped from Russian warheads, blended to a lower level of radioactivity and sold to the United States.

When the federal government sold USEC for $1.9 billion in 1998, the privatized entity retained responsibility for the national security agreement. It is up to USEC to negotiate prices for the uranium, which it resells to U.S. utilities.

Analysts estimate that Russia, over a 20-year period ending in 2013, would be paid approximately $12 billion under the accord. The exact price of the uranium, however, has been subject to intense, recurrent negotiations: Even a slight shift in price can be worth huge sums. Negotiations on new prices got under way in early 2000 -- around the same time that USEC retained Omeka.

USEC executives and an Omeka representative said the talks leading to their contract, which began in late 1999, had no connection with negotiations regarding the U.S.-Russian agreement.

A USEC senior vice president, Philip Sewell, said Omeka was retained to provide "a speculative assessment'' of opportunities with Tenex. The contract specified that services were to be performed by "no one other than'' Kaushansky, Adamov's Pittsburgh-based partner, whose title at Omeka is general manager. Kaushansky declined to quantify Adamov's ownership, other than to say, "Yes, he had an equity stake in the company. ... He is one of the owners.''

Kaushansky said his partner ceased any operational role in Omeka upon becoming minister in 1998.

USEC executives said that until the Duma report began circulating they had no idea of Adamov's involvement with Omeka. Upon learning of his role, they had an in-house auditor review the contract and Kaushansky's performance. The audit, they said, upheld the propriety of the arrangements.

The hiring of Omeka was handled by Sewell, USEC's chief negotiator with Adamov's ministry. He said Tenex officials were the first to recommend Kaushansky, and that he relied on their word that Omeka was a bona fide entity. Kaushansky said Tenex hired Omeka at some point before the company's contract with USEC.

Yet the former minister's involvement with Omeka was less than a secret: In 1999, at least two English-language publications wrote that Adamov, his wife and Kaushansky had founded Omeka in a Pittsburgh suburb.

This much is not in dispute: Adamov and his subordinates were positioned to influence the outcome of Russian negotiations with USEC regarding the Megatons to Megawatts accord.

And, in May 2000 -- less than five months after hiring Omeka -- representatives of USEC say the Russians tentatively agreed to new financial terms that were advantageous to USEC. However, the terms were not ratified by both governments before Adamov left his ministry post. They remain unresolved to this day, although USEC and Tenex recently submitted new pricing terms -- also considered beneficial to USEC.