Open For Business

They call it the "Berlin Wall." It's a plain, six-foot-high concrete barrier that bisects an unnamed village outside the Iranian city of Bushehr. On one side, about 1,500 Iranians live under Sharia--they lead quiet, spartan lives of work and prayer at the local mosque, with men and women strictly segregated. A few feet away on the other side of the wall, a rollicking population of 800 or so Russians and Ukrainians swill homemade moonshine and carouse late into the night. Yet every morning, the two sides--Iranians and Russians--meet on a vast construction site, where for the past seven years they've been building what may soon be Iran's first nuclear power plant. "We're at the top of our field," says 44-year-old Andrei Malyshev, formerly deputy minister in Russia's Ministry for Atomic Energy and now head of Russia's nuclear inspectorate. "We have an excellent product and we're proud of it."

To Russia, the Bushehr project is the symbol of its ambition as an exporter of nuclear technology. To Western intelligence officials and diplomats, it's the beginning of a nightmare of proliferating nukes. Although Iran claims it's only building an innocent electrical-power plant, Western officials worry that Russia's nuclear know-how and materials could easily be diverted to weapons. Last week the United Nations' International Atomic Energy Agency gave them more cause for worry. Inspectors examining equipment at a nearby nuclear facility discovered traces of highly enriched uranium--the stuff of bombs. The evidence, though circumstantial, raises the possibility that Iran may already be well on its way toward joining the nuclear club.

Russia is adamant in its refusal to pull out of Bushehr. Just last week U.S. State Department officials left Moscow after failing to persuade the Russians to abandon the project. They were disappointed, but not surprised; Russia has resisted similar entreaties for years. The Atomic Energy ministry, known as Minatom, is in fact hoping that Bushehr will serve as a harbinger of business to come. Out of the crumbling Russian nuclear industry, Minatom is engaged in an aggressive campaign to market Russian nuclear know-how to developing countries--several of which may be eager to acquire dual-use technology to secretly build nuclear weapons on the cheap.

Russian atomic scientists are already helping China and India build nuclear plants. They're bidding on a reactor in Finland. They're considering building a research reactor in Burma and have already trained 300 Burmese scientists. They're also in talks with Bulgaria, Cuba, Indonesia, Egypt and Syria. Several African countries are interested in a controversial new technology for nuclear plants that float in the ocean--a prospect that keeps proliferation experts awake at night. "Minatom does not seem to worry much about the possibility that someone might break into these reactors and take the fuel," says Cristina Chuen, a researcher at the Center for Nonproliferation Studies in Monterey, California.

Russia's nuclear ambitions grew out of the collapse of the Soviet economy. Even though Minatom retained responsibility for a large and deteriorating network of nuclear power plants in the early 1990s, its budget shrank to a fraction of its Soviet-era peak. To obtain much-needed currency, the ministry, which employs tens of thousands of nuclear scientists, started exporting nuclear technology to former Soviet satellite nations. At first, the United States seemed to be making headway in limiting the spread of Russia's nuclear know-how. The Kremlin put a stop to all Russian nuclear cooperation with North Korea partly to assuage U.S. concerns over Kim Jong Il's rising nuclear ambitions. A year later the United States undid that diplomacy when it struck a deal of its own with Pyongyang to build a light-water reactor, in return for a promise to halt its homegrown nuclear program. "Minatom went clean and then the U.S. turns around and delivers a light-water reactor to a country with a dubious stature," says Aleksandr Pikayev of the Carnegie Center in Moscow. That, he says, goes a long way toward explaining Minatom's current "hardened attitude."

The Russian government also has a lot riding on Minatom's success. Russia's burgeoning nuclear industry is one of the economy's few bright spots. Last year Minatom took in $2.6 billion in nuclear export revenues and expects $3 billion this year. Bushehr alone will account for $800 million and about 20,000 Russian jobs. Last year Minatom deputy Bulat Nigmatulin told reporters that Russia may build 10 nuclear reactors in foreign countries over the next 10 years. In addition to five reactors already under construction in China, Iran and India, the other five could be finished by 2010 at $800 million to $900 million apiece. Says Malyshev: "It's absolutely normal when a country creates a high-class product to sell it to other countries."

But what if that product can be used for nefarious purposes? CIA analysts in a January report put Russia at the top of the list of suppliers of the technology of weapons of mass destruction and advanced conventional munitions, followed by North Korea, China and, to a limited degree, some suppliers in Western countries. Last week's revelation in Iran is sure to turn up the heat. The U.N. team found the traces of highly enriched, bomb-grade uranium at a remote installation outside Deh-Zire, a village near Natanz, where the Iranian government has launched a uranium-enrichment program of its own. (It claims the fuel is for the Bushehr plant.) Iranian officials argue that traces of highly enriched uranium had been deposited on the equipment when it was imported. But Western experts aren't buying it. A Tehran-based Western diplomat told NEWSWEEK that the enrichment site has underground facilities that could house tens of thousands of centrifuges--enough to make fuel for the eight reactors Iran says it wants to build, or a whole lot of bombs. And much of them are hardened against bombing strikes, which "obviously gives us cause for concern," says the diplomat.

Russian experts insist that Bushehr's light-water reactor would be useless for producing weapons-grade material. But U.S. officials and scientists at Lawrence Livermore Laboratory disagree. Over several years, they insist, Bushehr could produce "80 to 100 plutonium-based nuclear weapons." Will Israel or the United States take out the plant with a pre-emptive air or missile strike--just as Israeli bombers leveled Iraq's Osirak reactor in 1981? Such a move would have to come before the plant goes online in early 2004 to avoid turning the region into a radioactive mess. If Russia doesn't curb its nuclear ambitions, a confrontation in Iran could be the first of many.