U.S.-Saudi Nuclear Cooperation: Progress Is Stalled over Nonproliferation Conditions and Agency Management of Negotiations Is Unclear

U.S. policy has long sought to balance U.S. civilian nuclear exports with the nation's obligation to ensure that they are not used to proliferate nuclear weapons. The Atomic Energy Act (AEA) provides a framework for certain civilian nuclear exports and outlines the requirements for nuclear cooperation agreements, including that certain nonproliferation conditions be met; that State conduct negotiations with the technical assistance and concurrence of DOE; and that the President keep certain congressional committees fully and currently informed of negotiations or initiatives.

This report describes, among other things, (1) the status of U.S.-Saudi negotiations and any areas of disagreement and (2) what is known about U.S. agency management of the negotiations. GAO reviewed the AEA and documentation of interactions between U.S. and Saudi officials regarding nuclear cooperation. GAO received limited information from State and DOE officials during the review but interviewed over 30 other stakeholders, including former senior executive branch officials, former congressional staff, and others with knowledge of and insights into nuclear cooperation issues and the negotiations.

Since 2008, when the United States and Saudi Arabia signed a memorandum of understanding on nuclear energy cooperation, the current and prior U.S. administrations have engaged in discussions and negotiations about nuclear cooperation with the Saudi government. However, these negotiations are stalled; the two countries have not been able to resolve disagreements on several nonproliferation conditions, including Saudi Arabia agreeing to enrichment and reprocessing restrictions and signing an Additional Protocol with the International Atomic Energy Agency (IAEA), which would allow IAEA to obtain additional information about and access to Saudi nuclear activities.

U.S. agency management of the negotiations with Saudi Arabia remains unclear in two areas regarding AEA requirements—(1) that the Department of State (State) conduct negotiations, with the technical assistance and concurrence of the Department of Energy (DOE), and (2) that certain congressional committees be informed. First, it is unclear which U.S. agencies were present at or aware of various interactions where nuclear cooperation was or may have been discussed, except for the formal negotiations in 2012 and 2018 and a commercial mission coordinated with State. GAO was able to identify eight interactions where nuclear cooperation was discussed and five more interactions where nuclear cooperation may have been discussed (see figure).

Note: Interactions depicted in this figure include meetings, phone calls, and a letter, among other things.

Second, GAO was unable to determine whether the agencies kept the committees fully and currently informed. GAO identified two briefings on the negotiations—in December 2017 and January 2018—to the relevant committees, but it does not appear that these committees were briefed until more than a year after the March 2018 formal negotiations. According to congressional staff, Congress on occasion learned of developments through non-agency sources and had to apply forceful measures, including holds on nominations, to get information from the executive branch. By committing to regular briefings to Congress on nuclear cooperation negotiations and initiatives, State could better support congressional oversight on nuclear nonproliferation matters. In addition, congressional staff have said the AEA allows for broad interpretation of the “fully and currently informed” requirement. By specifying, through an amendment to the AEA, its expectations for timeliness and information provided by the agencies on nuclear cooperation negotiations and initiatives, Congress could have better assurance that it receives the information it needs for oversight of nuclear nonproliferation matters.

GAO believes that Congress should consider amending the Atomic Energy Act to require regularly scheduled briefings. GAO is also making a recommendation that the Secretary of State commit to regularly scheduled, substantive briefings to the relevant congressional committees. State concurred with our recommendation.

U.S. policy has long sought to balance encouraging U.S. exports of  civilian nuclear products, services, and technology with the nation’s  obligation to ensure they are not used to proliferate nuclear weapons.  Section 123 of the Atomic Energy Act of 1954 (AEA), as amended,  outlines the process and requirements for negotiating nuclear cooperation  agreements, which provide the framework for U.S. exports for civilian  purposes of certain nuclear material and equipment, including  components of nuclear reactors.

For more than a decade, Saudi Arabia has expressed interest in  developing a civilian nuclear energy program. Since 2008, when the  United States and Saudi Arabia signed a memorandum of understanding  on nuclear energy cooperation, the current and prior U.S. administrations  have engaged in discussions and negotiations about nuclear cooperation  with the Saudi government. In October 2017, the Saudi government  issued a solicitation to procure its first nuclear power reactor, and invited  the United States, the Republic of Korea, China, Russia, and France to  bid on the contract. Some members of Congress and nonproliferation  experts have expressed concerns that a civilian nuclear program could  enable Saudi Arabia to develop a capability to produce nuclear-weapons  material. Senior Saudi officials have stated publicly that there could be  conditions under which the country would seek to acquire nuclear  weapons or develop a nuclear weapons program.

Under Section 123, the Department of State (State) is responsible for  negotiating the agreements, with the “technical assistance and  concurrence” of the Department of Energy (DOE). Section 123 also  requires that State consult with the Nuclear Regulatory Commission  (NRC) and that the President keep certain congressional committees  “fully and currently informed of any initiative or negotiations relating to a  new or amended agreement for peaceful nuclear cooperation.” The  National Security Council (NSC) leads the interagency decision-making  process for nuclear cooperation agreements; coordinates the negotiating  process, including determining when to negotiate an agreement; and sets  nuclear cooperation policy.

You asked us to review U.S. agencies’ negotiations with Saudi Arabia  regarding potential nuclear cooperation. This report examines (1) the  potential nonproliferation benefits and concerns, if any, stakeholders have  identified with regard to U.S.-Saudi nuclear cooperation; (2) the status of  U.S.-Saudi nuclear cooperation negotiations and any areas of  disagreement; and (3) what is known about U.S. agency management of  the nuclear cooperation negotiations with Saudi Arabia.

To address all three objectives, we reviewed relevant statutes, including  the AEA, and agency procedures on conducting nuclear cooperation  negotiations. We interviewed current officials from the agencies with a  role in such negotiations, including State, DOE, the National Nuclear  Security Administration (NNSA), NRC, the Department of Commerce  (Commerce), and the Department of Defense (DOD). We also  interviewed other stakeholders, such as former government officials— including former congressional staff of both parties—and  nongovernmental and commercial entities with expertise in nuclear  cooperation. We selected these stakeholders based on a snowball- sampling technique. In this report, we summarize the information  gathered from interviewees by using “some” to refer to three interviewees,  “several” to refer to four or five interviewees, and “many” to refer to more  than five interviewees.

To describe potential nonproliferation benefits and concerns stakeholders  have identified, we also reviewed official documents and statements,  including congressional testimony, in which nonproliferation benefits and  risks of nuclear cooperation with Saudi Arabia were discussed. To  examine the status of U.S.-Saudi nuclear cooperation negotiations and  any areas of disagreement, we reviewed official documents such as  agency correspondence. To examine U.S. agency management of the  negotiations, including how the agencies have informed Congress about  the negotiations, we reviewed official documents such as agency  correspondence, certain export authorization-application packages, dates  of congressional briefings on nuclear cooperation, and agency  documentation related to U.S. government advocacy for U.S. businesses  in relation to Saudi nuclear cooperation. We also requested materials  used for briefings, if any, by the agencies to Congress.

Overall, the agencies provided us with limited information in response to  some categories we requested and did not provide information in other  categories. Specifically, beginning in May 2019, we requested from State,  DOE, and the NSC basic factual information on license applications for  the transfer of nuclear technology to Saudi Arabia; the dates of any  discussions or negotiations between U.S. and Saudi officials; the U.S.  and Saudi agencies, offices, and representatives present at such  meetings; and the types of records produced from such meetings. DOE  provided us with information on the license applications, and State and  DOE provided us with limited information on their general processes  relating to the negotiations of agreements. After reviewing a preliminary  draft of this report, State officials in January 2020 provided a list of  congressional briefings on U.S. nuclear cooperation initiatives since 2013.  However, these officials declined to discuss the details of the briefings  with us, including the participating agencies, substantive issues, and  other details that would have allowed us to establish the extent of  information provided to Congress on U.S.-Saudi nuclear cooperation  negotiations. Furthermore, neither agency nor the NSC provided  substantive information in any of the other categories we requested. In  order to complete this review within a time frame responsive to the needs  of our congressional requesters, we adjusted our audit objectives to focus  on describing the status of the negotiations and management of the  negotiations process. Because State, DOE, and NSC did not provide  information to fully address these adjusted objectives, we obtained  documentation and information from other agency officials and over 30  other stakeholders, including former U.S. government officials, current  and former congressional staff, and nuclear industry representatives and  knowledgeable nongovernmental experts who have followed the  negotiations. Appendix I contains a more detailed description of our  objectives, scope, and methodology.

We conducted this performance audit from April 2019 to April 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Uranium Enrichment and Reprocessing of Spent Nuclear Fuel

Uranium enrichment is the process of increasing the concentration of the  uranium-235 isotope relative to uranium-238 in a quantity of uranium.  Natural uranium consists of approximately 0.7 percent of the fissile  uranium-235 isotope, while uranium used in commercial nuclear power  reactors generally consists of 3 to 5 percent uranium-235 and uranium for  nuclear weapons requires a higher concentration of uranium-235. In  addition, as a nuclear reactor operates, some of the uranium in the  reactor fuel is converted to plutonium, which can also be used as a  weapons material when it is separated from other elements of the  irradiated, or spent, fuel through a process known as reprocessing.  Plutonium and enriched uranium are “special nuclear material” under the  Atomic Energy Act. The processes for obtaining such material— enrichment and reprocessing—are called sensitive nuclear technologies.

The Treaty on the Nonproliferation of Nuclear Weapons, the International Atomic Energy Agency, and Safeguards

Under the Treaty on the Nonproliferation of Nuclear Weapons, which  came into force in 1970, non-nuclear weapon state parties to the treaty  may not acquire nuclear weapons and must conclude a Comprehensive  Safeguards Agreement (CSA) with the International Atomic Energy  Agency (IAEA). IAEA is an independent international organization  affiliated with the United Nations that has the dual mission of promoting  the peaceful uses of nuclear energy and verifying, through a set of  technical measures called safeguards, that nuclear technologies and  materials are not diverted from peaceful uses to military purposes. Most  countries have also brought into force an Additional Protocol to their  CSAs, which provides IAEA with a broader range of information on the  country’s nuclear and nuclear-related activities than under a CSA alone  and gives the agency’s inspectors access to an expanded range of  locations. For example, the Additional Protocol requires states to  declare the location and status, among other things, of uranium mines  and uranium and thorium mills. Under a CSA alone, material in mining  or ore processing activities (e.g., uranium at mines and mills) is not  subject to the agency’s safeguards as it is not yet suitable for enrichment.  The United States promotes universal adoption of the Additional Protocol  as a policy, but it is not a requirement for the conclusion of a nuclear  cooperation agreement with the United States. Figure 1 shows the  safeguards arrangements of the partners with which the United States  has nuclear cooperation agreements.

The U.S. Legal Basis for Nuclear Cooperation

Section 123 of the AEA establishes a framework for civilian nuclear  cooperation agreements, which are a prerequisite for the export of certain  nuclear material and equipment, including major components of nuclear  reactors. The United States has 23 such agreements with other nations  and entities. Section 123 generally requires that nuclear cooperation  agreements include nine nonproliferation conditions, such as a guarantee  from the cooperating party that transfers will not be used for any military  purpose. The President may exempt an agreement from any of these  requirements, provided that the president determines that the inclusion of  any such requirement would be seriously prejudicial to United States  nonproliferation objectives or otherwise jeopardize the common defense  and security. See Table 1 for a list of the nine requirements.

Section 123 of the AEA also requires that State supply the President with  an unclassified Nuclear Proliferation Assessment Statement (NPAS) for  each proposed agreement, accompanied by a classified annex prepared  in consultation with the Director of National Intelligence. The NPAS  describes how the agreement meets AEA nonproliferation requirements  and usually includes an overview of the other party’s nuclear energy  program and related infrastructure, nonproliferation policies, and relations  with countries of proliferation concern.

Section 123 also lays out requirements for informing congressional  committees and obtaining congressional review. It requires that the  President submit any proposed agreement along with the NPAS to the  House Committee on Foreign Affairs and the Senate Committee on  Foreign Relations for consultation for a period of at least 30 days of  continuous session. The proposed agreement, with the NPAS, must  subsequently be submitted to Congress as a whole (and referred to the  abovementioned committees) for a period of 60 days of continuous  session, during which the committees consider it and submit  recommendations to the House and Senate, respectively, as to whether  to approve the agreement. As a general matter, the agreement may then  be brought into effect unless a joint resolution of disapproval is enacted  before the end of this period. Section 123 also requires the President to  keep the abovementioned committees “fully and currently informed” of  any initiative or negotiations relating to a new or amended agreement for  peaceful nuclear cooperation.

Figure 2 depicts the stages and time frames for negotiation and  conclusion of nuclear cooperation agreements.

Another section of the AEA, Section 57(b), governs the direct or indirect  engagement or participation in the development or production of special  nuclear material outside the United States. Under this provision, DOE  regulates exports of commercial nuclear technology and assistance. DOE  has promulgated these regulations at 10 C.F.R. Part 810; authorizations  under these regulations are accordingly referred to as “Part 810  authorizations.” Activities authorized under section 57(b) may not require  a nuclear cooperation agreement. The Secretary of Energy signed  seven “Part 810” authorizations for the export of nuclear technology to  Saudi Arabia between December 2017 and February 2019. For more  information about Part 810, see table 2.

Enrichment and Reprocessing Commitments in Nuclear Cooperation Agreements

In negotiating nuclear cooperation agreements, the United States has  sometimes pursued nonproliferation measures beyond the nine  conditions specified by the AEA. For example, the agreement that the  United States concluded with the United Arab Emirates (UAE) in 2009  includes a provision in which UAE agreed to forswear enrichment and  reprocessing capabilities. This broad restriction on any enrichment and  reprocessing, which became known as the “gold standard,” goes beyond  the enrichment and reprocessing restriction required by Section 123 of  the AEA, because it applies to all nuclear material rather than just U.S.- obligated material. U.S.-obligated material includes material transferred  by the United States or material used in, or produced through, the use of  material or facilities transferred by the United States. Following the  conclusion of the UAE agreement, the NSC deliberated requiring the so- called “gold standard” for all nuclear cooperation agreements as a policy,  but ultimately adopted a policy of pursuing it on a case-by-case basis.  The nuclear cooperation agreement that the United States concluded with  Taiwan in 2014 included a similar provision. By contrast, the agreement  concluded with Vietnam the same year includes a political commitment,  rather than a legal one, not to acquire enrichment and reprocessing  capabilities.

Role of Agencies in Nuclear Negotiations

In addition to the roles of State, DOE, and the NSC discussed previously,  additional U.S. agencies such as Commerce, DOD, and NRC are  involved in matters related to international nuclear cooperation and the  negotiation and conclusion of a nuclear cooperation agreement. Table 2  describes agency roles related to nuclear cooperation.

Stakeholders Have Identified a Range of Potential Nonproliferation Benefits and Concerns

Stakeholders we interviewed identified various potential nonproliferation  benefits and concerns related to negotiating a nuclear cooperation  agreement with Saudi Arabia. Specifically, stakeholders identified the  following benefits:  A nuclear cooperation agreement would limit production of  weapons-usable material. Several stakeholders told us that a nuclear  cooperation agreement with Saudi Arabia would give the United States  the opportunity to directly restrict Saudi Arabia’s proliferation potential.  For example, a U.S.-Saudi nuclear cooperation agreement would include  a term required by the AEA that would limit Saudi Arabia’s production of  weapons-usable material by prohibiting Saudi Arabia from separating  plutonium accumulated in any reactor supplied under the agreement  without U.S. consent. According to some stakeholders, other potential  supplier countries likely would not impose such restrictions as conditions  of supplying Saudi Arabia with nuclear materials or equipment.

Cooperation would help the United States retain influence. Several  stakeholders noted that nuclear cooperation with Saudi Arabia could help  revitalize the United States as a global nuclear supplier, which would help  the United States retain its current influence over global nonproliferation  norms and rules. For example, as a global nuclear supplier, the United  States would have greater influence in international nuclear forums such  as the Nuclear Suppliers Group, which establishes nonproliferation  guidelines. According to one stakeholder, the United States’ political  leverage to promote strong global nonproliferation norms depends upon  the United States’ retaining a leadership role in nuclear energy. Another  stakeholder said that nuclear cooperation agreements provide the United  States with influence over countries’ proliferation decisions. For instance,  this stakeholder said that nuclear cooperation agreements include legal  conditions that reinforce the legal obligations of the Treaty on the  Nonproliferation of Nuclear Weapons and create an additional  disincentive to violate those conditions or withdraw from the treaty.

Stakeholders we interviewed also identified several proliferation concerns  that U.S.-Saudi nuclear cooperation may not mitigate, and could potentially aggravate. According to these stakeholders, concerns include  the following:  Concerns about stated Saudi nuclear weapon ambitions and  commitment to obligations. Some stakeholders expressed concern  over Saudi officials’ stated interest in acquiring nuclear weapons. As  previously noted, senior Saudi officials have said publicly that there could  be conditions under which the country would seek to acquire nuclear  weapons or develop a nuclear weapons program. For example, Saudi  Crown Prince Mohammed bin Salman said publicly in 2018 that if Iran  develops or obtains a nuclear weapon, Saudi Arabia would also work to  do so. In 2009 and 2012, respectively, King Abdullah and Prince Turki al- Faisal were reported to have made similar statements. Some  stakeholders said that the intent behind such statements was to send a  message about Saudi Arabia’s posture toward Iran, but some other  stakeholders said that lower-lever Saudi officials have also indicated that  the country is open to pursuing nuclear weapons. Several stakeholders  said that such statements should be taken seriously as indicators of  Saudi nuclear weapons ambitions. One stakeholder said that such  statements raise concerns as to Saudi Arabia’s commitment to its  obligations under the Treaty on the Nonproliferation of Nuclear Weapons.  This stakeholder also said that Saudi Arabia has demonstrated  willingness to disregard the terms of transfers of U.S. conventional arms  to the country, calling into question whether the country could be trusted  to abide by the terms of the nuclear cooperation agreement.

Concerns about the extent to which a nuclear cooperation  agreement would mitigate the risks of a Saudi weapons program.  Several stakeholders questioned whether the terms of an agreement  would meaningfully restrict proliferation behavior. For example,  notwithstanding the provision of Section 123 of the AEA that prohibits a  partner country from using U.S.-obligated material or equipment for  weapons purposes, some stakeholders said that another risk of nuclear  cooperation is that it would provide Saudi Arabia with the infrastructure  and knowledge to produce nuclear material for a future weapons  program. In addition, some stakeholders said that there were questions  as to whether the United States could enforce the terms of an agreement  if it was breached—for example, whether in practice the United States  would be able to retrieve U.S.-obligated nuclear material from another  country. One stakeholder also noted that the terms of a nuclear  cooperation agreement would only be relevant in mitigating proliferation  risks if Saudi Arabia contracted with a U.S. company to build the  reactors. If Saudi Arabia purchases reactors from other suppliers, its  nuclear program will not be bound by the section 123-mandated  restrictions of a nuclear cooperation agreement with the United States,  since those restrictions only apply to U.S.-obligated material.

Concerns about the thoroughness of a U.S. assessment of Saudi  proliferation risks. Some stakeholders raised concerns about whether  the NPAS process would adequately assess Saudi proliferation risks. We  have previously identified weaknesses in the NPAS process related to  interagency consultation and a robust, transparent review process. As  described above, an NPAS for a U.S.-Saudi nuclear cooperation  agreement would be expected to include an overview of Saudi Arabia’s  nuclear energy program and related infrastructure, nonproliferation  policies, and relations with countries of proliferation concern. An NPAS  would also include an analysis of the adequacy of safeguards and other  control mechanisms to ensure that assistance provided under the U.S.- Saudi agreement is not used to further any nuclear weapons effort. Some  stakeholders said that it would be important for the NPAS for Saudi  Arabia to address the questions regarding the country’s stated intentions  to develop a nuclear weapons program. One stakeholder questioned  whether an NPAS would provide a sufficient assessment of Saudi nuclear  proliferation behavior or potential because the statutory requirement for  intelligence community input into the NPAS is narrowly worded.  Specifically, the addendum that the intelligence community is to provide  to each NPAS is required to contain a comprehensive analysis of the  country’s export control system with respect to nuclear-related matters,  including interactions with other countries of proliferation concern and the  actual or suspected nuclear, dual-use, or missile-related transfers to such  countries, but the requirement does not call for the intelligence community  to assess the country’s intent to develop nuclear weapons. State  officials declined to tell us whether they had begun drafting an NPAS in  anticipation of an agreement with Saudi Arabia. However, State officials  noted that their engagement with the intelligence community in the  development of an NPAS goes beyond the requirements of that statute,  but they also said that the legal requirement was limited.

Concerns about regional proliferation risks and undermining of  global nonproliferation norms. Several stakeholders expressed  concerns about the regional and international nonproliferation implications  of a U.S.-Saudi nuclear cooperation agreement. For example, several  stakeholders said that an agreement without restrictions on enrichment  and reprocessing could lead to the renegotiation of the agreement with  the UAE. The agreement with the UAE, which includes a commitment to  forswear enrichment and reprocessing, also contains a provision that  would allow the UAE to request renegotiation of its agreement if another  country in the region concludes a less restrictive agreement with the  United States. Several stakeholders also raised the concern that a  nuclear cooperation agreement without additional nonproliferation  conditions would undermine U.S. and global nonproliferation norms by  sending the message that such norms were negotiable. For example, in  addition to the Additional Protocol being a mechanism to prevent  diversion of nuclear material, many stakeholders said that insisting on the  Additional Protocol was critical and emphasized the importance of the  Additional Protocol as a global nonproliferation norm. Several  stakeholders also questioned the premise that supplying Saudi Arabia’s  nuclear program would allow the United States to retain influence over  international nonproliferation norms. One stakeholder said that the United  States has not been a significant nuclear exporter for decades and has  nonetheless retained its influence.

Nuclear Cooperation Negotiations with Saudi Arabia Have Stalled over Differences over Nonproliferation Conditions

The United States and Saudi Arabia have not made significant progress  toward a nuclear cooperation agreement because of persistent  differences between the parties over nonproliferation conditions, including  U.S. insistence that Saudi Arabia conclude an Additional Protocol with  IAEA and that Saudi Arabia agree to restrictions on enrichment and  reprocessing, based on our analysis of available information.

The United States and Saudi Arabia first held formal nuclear cooperation  negotiations in 2012, during which the United States provided a draft  agreement text to Saudi officials that included the nine nonproliferation  conditions required under Section 123 of the AEA, according to NNSA  officials. In that round of negotiations, Saudi officials accepted “the vast  majority” of the conditions in the draft text, according to NNSA officials;  these officials estimated that approximately three pages of the text  remained to be negotiated. NNSA officials told us that the areas of  disagreement include provisions required by the AEA. In the next formal  negotiations in 2018, there was no progress in resolving the remaining  issues, and no changes to the text of the agreement were made at the  time, according to agency officials. The areas of disagreement that were  not resolved in 2012—including those regarding provisions required by  the AEA—remained unresolved as of January 2020, according to agency  officials. These areas of disagreement include:

Additional Protocol. The United States has urged Saudi Arabia to  conclude an Additional Protocol with IAEA, according to a September  2019 letter from the Secretary of Energy to the Saudi Minister of  Energy, Industry, and Mineral Resources and based on public  statements by the Secretary of Energy and another government  official. Several former agency officials and other stakeholders said  that Saudi Arabia has expressed an unwillingness to conclude an  Additional Protocol with IAEA.

Restriction on enrichment and reprocessing. According to public  statements by agency officials, the United States supports a  permanent restriction on enrichment and reprocessing. According to  the Secretary’s September 2019 letter and to former officials we  interviewed, however, the United States may be willing to accept a  temporary restriction on enrichment and reprocessing in its  negotiations with Saudi Arabia. According to these former officials,  such a temporary restriction would allow the United States and other  countries more time to work with Saudi Arabia to reach agreement on  mutually acceptable terms. However, one stakeholder said that this  option would not be attractive to Saudi Arabia and would not be useful  to the United States as a nonproliferation measure because an  existing nuclear cooperation agreement and any nuclear infrastructure  that it would have enabled would reduce U.S. leverage to influence  Saudi enrichment and reprocessing decisions in the future.

Despite the lingering disagreement on certain provisions between both  countries, NNSA officials told us in November 2019 they believed the  negotiations had made progress since 2012 because the continued  interactions with Saudi officials over this time were useful in advancing  Saudi understanding of the United States’ position on the nonproliferation  conditions of a potential agreement.

We are unable to characterize Saudi views on the status of the  negotiations or on other aspects of our review, because State did not  respond to our repeated requests for assistance in facilitating travel to  Saudi Arabia and interviews with relevant Saudi officials. We also did not  receive a response to our written request to the Saudi ambassador to the  United States for an opportunity to interview relevant Saudi officials about  the negotiations.

Agency Management of Negotiations, Including Agency Roles and Informing Congress, Remains Unclear

Agency management of U.S.-Saudi nuclear cooperation negotiations  remains unclear with regard to agency roles and informing Congress. We  were unable to confirm U.S. agency roles at a range of U.S.-Saudi  interactions where nuclear cooperation was or may have been discussed.  We were also unable to determine whether the agencies kept the relevant  congressional committees fully and currently informed of the negotiations.

Agency Roles in U.S.- Saudi Nuclear Cooperation Negotiations Remain Unclear

The roles various U.S. agencies have played in U.S.-Saudi nuclear  negotiations remain unclear because DOE and State did not provide us  with information to clarify or corroborate such roles. According to a State  official and DOE officials, State would have “by definition” led any  negotiations and without State present, any interactions between U.S.  and Saudi officials on nuclear cooperation did not constitute negotiations.  The AEA stipulates that State conduct any nuclear cooperation  negotiations but does not define “negotiations.” According to one  stakeholder, during an NSC meeting in late 2017, during which nuclear  cooperation with Saudi Arabia was discussed, the NSC made a decision  to reinforce established agency roles, including specifying that State  would lead any negotiations. We were unable to confirm whether NSC  made such a decision because NSC did not respond to our requests for  interviews or documentation. However, through our interviews with State,  DOE, and NRC officials, we determined that representatives of each  agency participated in the 2012 and March 2018 formal nuclear  cooperation negotiations with Saudi Arabia.

State and DOE officials did not provide information that we requested  about interactions between the United States and Saudi Arabia, such as  the dates and agency participants. However, despite the limited  cooperation from State and DOE, we were able to identify through our  analysis of documentation and interviews with other stakeholders, a  range of interactions between the United States and Saudi Arabia where  nuclear cooperation was or may have been discussed. The interactions  we were able to identify during which potential nuclear cooperation was  discussed are as follows:  five bilateral meetings, including a September 2018 meeting in  Washington, D.C., a December 2018 meeting in Saudi Arabia, and an  August 2019 meeting in Washington, D.C.; a Civil Nuclear Energy Roundtable in Saudi Arabia in December 2017, a commercial nuclear mission to Saudi Arabia in April 2018, in  partnership with DOE; and  the letter from the Secretary of Energy to his Saudi counterpart in  September 2019 conveying U.S. positions on nonproliferation  conditions for U.S.-Saudi nuclear cooperation.

We also identified five interactions where the U.S. Secretary of Energy  and Saudi officials may have discussed nuclear cooperation, including a  phone call in November 2017 and meetings on the sidelines of four  events:  the IAEA General Conference in Austria in September 2017,  the Bilateral Energy Dialogue in Saudi Arabia in December 2017,  the World Economic Forum in Switzerland in January 2018, and  the Future Investment Initiative in Saudi Arabia in October 2019.

Figure 3 illustrates U.S.-Saudi negotiations and other interactions, and  appendix II includes a detailed list of the interactions we were able to  identify.

Because State and DOE did not cooperate with our information requests,  we cannot confirm that the interactions we identified constitute all of the  interactions between the United States and Saudi Arabia on potential  nuclear cooperation since 2012. Furthermore, we were unable to  determine whether the agencies followed the established roles in the  other interactions with Saudi Arabia where nuclear cooperation was or  may have been discussed because NSC, State, and DOE did not  respond to our requests for information to clarify these matters.  Specifically, with the exception of the April 2018 commercial nuclear  mission to Saudi Arabia, we were unable to determine whether State or  other agency officials authorized, were present for, or were aware of a  number of DOE–led interactions with Saudi Arabia described above. In  addition, State and DOE officials declined to confirm whether State  authorized the September 2019 letter from the Secretary of Energy to his  Saudi counterpart regarding U.S. positions on the nonproliferation  conditions for nuclear cooperation.

The Level of Information U.S. Agencies Have Provided to Congress about U.S.-Saudi Nuclear Cooperation Negotiations Remains Unclear

It is unclear whether the agencies kept the relevant committees fully and  currently informed of U.S.-Saudi negotiations. State officials stated that  they consistently provide information to Congress, but the limited  information they provided to us does not support this position. As  previously stated, section 123 of the AEA requires that the President keep  certain congressional committees “fully and currently informed of any  initiative or negotiations relating to a new or amended agreement for  peaceful nuclear cooperation.”

State officials told us during our May 2019 interview that they consistently  provided information to Congress on the nuclear cooperation negotiations  and other interactions with Saudi Arabia. However, neither State nor DOE  provided documentation within the time frame of our review to support  these statements. DOE did not respond to our request for information on  any dates or related details of any congressional briefings related to U.S.- Saudi nuclear cooperation negotiations. State did not respond to our  initial request in May 2019 for information on dates and related details of  any congressional briefings it held on U.S.-Saudi nuclear cooperation  negotiations. However, in January 2020, after reviewing a preliminary  draft of this report, State officials provided a list of congressional briefings  on U.S. nuclear cooperation initiatives since 2013.

We reviewed this list and identified two briefings specifically focused on  nuclear cooperation negotiations with Saudi Arabia: one held in January  2018 for House Committee on Foreign Affairs staff and another held in  May 2019 for House Committee on Oversight and Reform staff. State  officials also noted that U.S.-Saudi nuclear cooperation may have been  discussed in other State briefings that focused on nuclear cooperation in  general or with other countries, such as briefings to the House Committee  on Foreign Affairs and Senate Committee on Foreign Relations in July  2019 and November 2019. State officials declined to discuss the details  of any congressional briefings with us, including the participating  agencies, substantive issues, and other details. Consequently, we could  not establish the extent and substance of information the agencies  provided to Congress on U.S.-Saudi nuclear cooperation negotiations.

After State did not provide us with the information we requested, we  reached out to a number of current and former staff of the House  Committee on Foreign Affairs and Senate Committee on Foreign  Relations, representing both parties. Through our interviews with eight of  these staff, we were able to identify one congressional briefing by the  agencies in December 2017 on the status of U.S.-Saudi nuclear  cooperation negotiations. However, based on our interviews with  congressional staff, we were unable to identify the dates of any other  briefings by the agencies on the U.S.-Saudi nuclear cooperation  negotiations. Notably, based on our review of the documentation and  interviews with congressional staff, it does not appear that the agencies  provided a briefing to the House Committee on Foreign Affairs or Senate Committee on Foreign Relations until more than a year after the last  formal U.S.-Saudi nuclear cooperation negotiations in March 2018.

Current and former congressional staff we interviewed also described  their frustration in trying to obtain information, beyond briefings, from the  agencies on the status of the negotiations. Several current and former  congressional committee staff we interviewed told us that they learned of  developments in the U.S.-Saudi negotiations through the press or from  representatives of the nuclear industry, rather than directly from the  agencies, despite having asked the executive branch to keep them  informed of any developments. For example, one former staff member of  a relevant committee told us that they learned of the March 2018 formal  negotiations just days before the meeting through a press article. Another  former congressional committee staff member said that since late 2017,  the agencies have only provided information to Congress about the  negotiations in response to forceful measures, such as holds on  nominations or legislation. According to many of the current and former  congressional staff we interviewed, this stands in contrast to past practice  in which agencies regularly briefed the committees on nuclear  cooperation negotiations without coercion, and sometimes even initiated  the meetings.

State and DOE provided Congress with contradictory justifications for not  providing such information to Congress, according to our review of  documents and interviews with congressional staff. For example, one  congressional committee staff member told us that agency officials said  they were not obligated to keep the committee currently and fully  informed of negotiations because the United States was not in  negotiations with Saudi Arabia. On another occasion, when pressed by  members of Congress in congressional hearings, an agency official said  he could not discuss nuclear cooperation negotiations with Saudi Arabia  because negotiations were ongoing. Specifically, in September 2019, the  Assistant Secretary of State for International Security and  Nonproliferation stated in a hearing that he could not get into details of  nuclear cooperation negotiations with Saudi Arabia because the  negotiations were ongoing. These contradictory justifications may have  led to inconsistency in the agencies providing information to Congress on  nuclear cooperation negotiations. By committing to regularly scheduled,  substantive briefings to Congress on nuclear cooperation initiatives and  negotiations, State and DOE could enhance transparency and build  confidence with Congress on nuclear cooperation, preemptively address  congressional concerns about cooperation with certain countries, and  support congressional oversight on nonproliferation matters.

Former congressional staff, including those involved in drafting Section  123(e) in 2008—the “fully and currently informed” provision—said the  intent of the provision was to promote transparency on the status of any  nuclear cooperation negotiations to the congressional committees of  jurisdiction to lay the groundwork for congressional consideration of any  agreement. However, some former congressional staff said that the  provision allows for broad interpretation and that it may be up to  Congress to more clearly define the “fully and currently informed”  requirement. By specifying, through an amendment to the AEA, its  expectations for timeliness and information provided by the agencies on  nuclear cooperation negotiations and initiatives, Congress could have  better assurance that it will get the information it needs for its oversight of  nuclear nonproliferation matters.

State officials told us that they consistently provided information to  Congress on the nuclear cooperation negotiations and other interactions  with Saudi Arabia. They later provided a list of congressional briefings on  U.S. nuclear cooperation initiatives since 2013 but did not specify what  was discussed. Based on this limited information, it is unclear whether the  briefings by State kept Congress fully and currently informed of  developments in the negotiations with Saudi Arabia, and congressional  staff provided us with examples of having to find information on the  negotiations from other sources, such as press articles.

NNSA is a separately  organized agency within the Department of Energy, with responsibility for its nuclear  weapons and nonproliferation programs, among other things. transparency and build confidence with Congress on nuclear cooperation,  preemptively address concerns about cooperation with certain countries,  and support congressional oversight on nuclear nonproliferation matters.

Former congressional staff involved in drafting the “fully and currently  informed” provision said that its intent was to promote transparency and  lay the groundwork for congressional consideration of any agreement.  However, some said that this provision allows for broad interpretation of  the “fully and currently informed” requirement. By specifying, through an  amendment to the AEA, its expectations for timeliness and information  provided by the agencies regarding nuclear cooperation negotiations and  initiatives, Congress could have better assurance that it will get the  information it needs for its oversight of nuclear nonproliferation matters.

Congress should consider amending the Atomic Energy Act to require  regularly scheduled briefings, for instance, on a quarterly basis, and  specify expectations for the content of such briefings, such as potential  difficulties in negotiating nonproliferation conditions with partner countries.

The Secretary of State, in coordination with the Secretary of Energy,  should commit to regularly scheduled, substantive briefings for the House  Committee on Foreign Affairs and the Senate Committee on Foreign  Relations on all initiatives and negotiations related to nuclear cooperation  in order to enhance transparency and establish greater confidence with  Congress on nuclear cooperation matters. (Recommendation 1)

We provided a draft of this report to the Secretaries of State, Energy,  Defense, and Commerce, and to the Chairman of the NRC for review and  comment. In its written comments, reproduced in appendix III, State  neither agreed nor disagreed with our findings, and concurred with our  recommendation. State also noted in its response that it is already  implementing the recommendation; specifically, that it conducted briefings  on nuclear cooperation in 2018 and 2019 to Congress. However, as we  noted in our report, because State officials declined to discuss the details  of these briefings, we could not establish the extent and substance of  information the agencies provided to Congress on U.S.-Saudi nuclear  cooperation negotiations. Furthermore, as we reported, staff of the  relevant congressional committees we interviewed were able to identify  only one briefing on U.S.-Saudi nuclear negotiations and several staff  expressed frustration in trying to get information about the negotiations,  including learning of developments through the press. NRC also provided  written comments, which are reproduced in appendix IV; NRC neither  agreed nor disagreed with our recommendation. DOE provided technical  comments, which we incorporated as appropriate. DOD and Commerce  did not have any comments.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of State, the  Secretary of Energy, the Secretary of Defense, the Secretary of  Commerce, the Chairman of the Nuclear Regulatory Commission, and  other interested parties. In addition, this report will be available at no  charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

Saudi nuclear cooperation negotiations and any areas of disagreement,  we also reviewed official documentation such as agency correspondence  to Saudi officials and transcripts of congressional hearings. In addition,  we submitted to the Saudi Ambassador to the United States a written  request for an opportunity to interview relevant Saudi officials about the  negotiations, but did not receive a response. To examine U.S. agency  management of the negotiations, including how the agencies have  informed Congress about the negotiations, we reviewed official  documentation such as agency correspondence to Saudi officials, certain  export authorization application packages, dates of congressional  briefings on nuclear cooperation, and agency documentation related to  U.S. government advocacy for U.S. businesses related to nuclear  cooperation with Saudi Arabia. We also requested a list of dates and  participants of U.S.-Saudi interactions pertaining to nuclear cooperation,  as well as materials used for briefings, if any, by the agencies to  Congress.

The agencies provided us with limited information in response to some  categories we requested and did not provide information in other  categories. Specifically, beginning in May 2019, we requested from the  Departments of State and Energy and the National Security Council  (NSC) basic factual information on license applications for the transfer of  nuclear technology to Saudi Arabia; the dates of any discussions or  negotiations between U.S. and Saudi officials; the U.S. and Saudi  agencies, offices, and representatives present at such meetings; and the  types of records produced from such meetings. DOE provided us with  information on the license applications, and State and DOE provided us  with limited information on their general processes relating to the  negotiation of agreements. State officials also provided a list of  congressional briefings on U.S. nuclear cooperation initiatives since 2013  in January 2020, after reviewing a preliminary draft of this report, but  declined to discuss the details of the briefings with us, including the  participating agencies, substantive issues, and other details that would  have allowed us to establish the extent of information provided to  Congress on U.S.-Saudi nuclear cooperation negotiations. Furthermore,  neither agency nor NSC provided substantive information in any of the  other categories we requested; in order to complete this review within a  time frame responsive to the needs of our congressional requesters, we  adjusted our audit objectives to focus on examining the status of the  negotiations and management of the negotiations process. Because  State, NSC, and DOE did not provide information to fully address these  adjusted objectives, we obtained documentation and information from  other agency officials and over 30 other stakeholders, including, as  previously noted, former senior U.S. government officials, current and  former congressional staff, and nuclear industry representatives and  knowledgeable nongovernmental experts who have followed the  negotiations.

We conducted our work from April 2019 through April 2020 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.

Appendix II: Identified Developments in U.S.- Saudi Nuclear Cooperation

Since the United States and Saudi Arabia signed a memorandum of  understanding on nuclear energy cooperation in 2008, there have been a  variety of interactions between the United Sates and Saudi Arabia  regarding potential nuclear cooperation between both countries, as well  as other developments related to such cooperation. The Atomic Energy  Act (AEA) does not define “negotiations.” In this report, we use “formal  nuclear cooperation negotiations” and “formal negotiations” to signify  sessions where parties aim to agree on specific terms and conditions in  the text of an agreement. We use the term “interactions” for all U.S.-Saudi  encounters on potential nuclear cooperation other than the two formal  negotiations explicitly identified by agency officials. Table 3 provides  information on dates we identified of formal U.S.-Saudi negotiations; other  U.S.-Saudi interactions; National Security Council meetings to discuss  policy and related matters on U.S.-Saudi negotiations; agency briefings to  Congress on the negotiations; and other related developments, including  developments in Saudi Arabia related to its planned nuclear power  program.

Appendix III: Comments from the Department of State

Appendix IV: Comments from the Nuclear Regulatory Commission

Appendix V: GAO Contact and Staff Acknowledgments

In addition to the individual named above, other key contributors to this  report were William Hoehn, Assistant Director; Alisa Beyninson, Analyst  in Charge; Antoinette Capaccio; Tara Congdon; Camille Pease; Steven  Putansu; Dan Royer; Sara Sullivan; and Madeline Welter.

Nuclear cooperation agreements outline conditions—such as physical security and peaceful use—for partner countries that may import civilian nuclear material and equipment from the U.S.

It is unclear whether the Departments of State and Energy kept Congress “fully and currently informed” of nuclear cooperation negotiations with Saudi Arabia, as required by the Atomic Energy Act. These negotiations are stalled over nonproliferation conditions.

We recommended that the agencies commit to regular, substantive briefings to Congress and that Congress consider amending the Atomic Energy Act to specify the timeliness and substance of briefings.


Maritime Security: DOT Is Still Finalizing Strategy to Address Challenges to Sustaining U.S.-Flag Fleet

The U.S. government relies on U.S.-flag vessels to transport cargo and provide a pool of U.S.-citizen mariners who could be called upon to support defense needs in times of war or crisis. Through financial support and by requiring government agencies to ship certain cargo on U.S. flag vessels, the United States has supported the viability of the U.S.-flag fleet. However, concern has grown about the fleet's future sustainability. In 2014, Congress mandated that DOT develop national strategies to address this issue.

This statement summarizes GAO's August 2018 report on challenges in sustaining the U.S. flag fleet for defense purposes and DOT's efforts to draft a national maritime strategy that addresses these challenges. Specifically, it discusses: (1) the status of the mandated national strategies and (2) challenges that stakeholders identified related to sustaining the U.S.-flag fleet and options DOT has considered for addressing them.

For the August 2018 report, GAO reviewed relevant laws, regulations, reports, and studies. GAO also analyzed data on international government cargo and interviewed officials from DOT and DOD, vessel operators, and other stakeholders. For this statement, GAO spoke to DOT officials for an update on the status of the strategy.

The Department of Transportation (DOT) is still finalizing the national maritime strategies that were called for in two separate mandates by Congress in 2014. According to DOT officials, DOT has been working on a single draft maritime strategy to meet both mandates. This strategy is intended to address how to make vessels registered to the United States (U.S.-flag vessels) more competitive in the international cargo market. It is also intended to address how to ensure the long-term viability of U.S.-flag vessels and U.S.-citizen mariners. The Department of Defense (DOD) counts on U.S.-citizen mariners that work on U.S.-flag vessels to crew the government-owned reserve fleet during a crisis. In an August 2018 report, GAO concluded that by not completing the strategy or establishing a timeline for completing it, DOT had delayed providing decision-makers the information they needed to address challenges facing the U.S. flag fleet. Subsequently, with the passage of the John S. McCain National Defense Authorization Act for Fiscal Year 2019, Congress extended the deadline for the strategy to February 2020. According to DOT officials, DOT will issue the strategy by the new deadline.

Stakeholders GAO spoke with for its August 2018 report identified two primary challenges to ensuring that the U.S.-flag fleet would continue to meet DOD's national defense needs: (1) maintaining the financial viability of the U.S.-flag fleet, which is threatened by the increasingly higher costs of operating U.S. vessels compared to foreign flag vessels and a decrease in government cargo being shipped internationally; and (2) a potential shortage of U.S. citizen mariners available to support defense needs, in part due to the declining numbers of U.S.-flag vessels that employ these mariners. For example, the number of U.S. flag vessels involved in international trade declined from 199 vessels at the end of 1990 to just 82 vessels by the end of 2017. DOT officials have identified some options to make U.S.-flag vessels more competitive, increase the amount of commercial cargo on U.S. flag vessels, and address a potential shortage of U.S.-citizen mariners, although they are not ready to assess their feasibility or formally propose these options.

To address the challenge of maintaining the financial viability of U.S.-flag vessels, DOT has identified options such as changing regulations to decrease the costs of bringing a ship under the U.S. flag and requiring that certain energy export commodities, such as oil or liquefied natural gas, be carried on U.S.-flag vessels.

To address the potential shortage of U.S.-citizen mariners, DOT convened a working group to determine how many mariners would be needed to meet defense needs. The working group estimated a shortage of over 1,800 U.S.-citizen mariners in the event of a sustained military activation, although it also recommended data improvements to increase the accuracy of the count of available mariners. In addition, the working group identified two actions that could help increase the number of U.S.-citizen mariners: (1) developing a reserve program to identify and support qualified mariners willing to sail to support defense needs during an emergency and (2) expanding programs and requirements that support U.S.-citizen mariners, such as requirements that government agencies must ship certain cargo on U.S. flag vessels.

In the August 2018 report, GAO recommended that DOT complete the national maritime strategy and establish time frames for its issuance. DOT concurred with the recommendation.

Thank you for the opportunity to discuss our work on efforts by the  Departments of Transportation (DOT) and Defense (DOD) to draft a  national maritime strategy that addresses challenges the government  faces in supporting the fleet of U.S.-flag vessels. DOD largely relies on  internationally-trading U.S.-flag vessels (vessels registered in the United  States that must be mainly crewed by U.S. citizens) for sealift—the  process of transporting government equipment and supplies by sea for  military purposes. However, it has long been recognized that the  operating costs of U.S.-flag vessels are higher than the operating costs of  foreign-flag vessels, and that government support is therefore necessary  to maintain a fleet of internationally trading U.S.-flag vessels. To help  ensure an adequately-sized U.S.-flag fleet for defense needs, the  government supports internationally-trading U.S.-flag vessels in the  following ways: (1) through the Maritime Security Program (MSP), which  provides the operators of selected U.S.-flag vessels a stipend in  exchange for their agreeing to provide sealift support in times of war or  crisis, and (2) through “cargo preference” requirements that specify that  federal agencies must transport certain percentages of international  government cargo on U.S.-flag vessels.

Despite the MSP and cargo preference requirements that have helped  support the U.S.-flag fleet, concerns have been raised about the fleet’s  future sustainability The U.S.-flag fleet has been in decline for many years  and increasingly faces difficulties in competing for international cargo due  to the higher costs of operating under the U.S. flag. Notably, the number  of U.S.-flagged vessels has continued to decline—from 199 vessels at the  end of 1990 to just 82 vessels by the end of 2017, creating a potential  shortage of U.S. citizen mariners to crew government-owned reserve  vessels in times of need. Recognizing these and other challenges,  Congress statutorily mandated in 2014 that DOT develop national  strategies related to the sustainability of the U.S.-flag fleet, including  recommendations for the future. In the John S. McCain National Defense  Authorization Act for Fiscal Year 2019, the statutory deadline for the  national maritime strategy was extended from February 2015 to February  2020.

My statement today provides information on (1) the status of the  mandated national strategies and (2) challenges that stakeholders  identified related to sustaining the U.S.-flag fleet for defense needs and  options DOT has considered for addressing them. This statement is  based on our August 2018 report on challenges to sustaining U.S.-flag  vessels for military needs.

For the 2018 report, we reviewed relevant laws, regulations, guidance,  prior GAO reports, and studies related to MSP and maritime economics.  We also analyzed data for fiscal year 2012 through 2017 on international  cargo shipped by government agencies. In addition, we spoke with  officials from DOT, DOD, and selected agencies subject to cargo  preference requirements, as well as MSP vessel operators, academics  knowledgeable about maritime issues, and other stakeholders. Detailed  information on our scope and methodology can be found in our issued  report. For this statement, to update the status of DOT’s efforts on the  national maritime strategy, we reviewed the John S. McCain National  Defense Authorization Act for Fiscal Year 2019 and spoke to DOT  officials. We conducted the work on which this statement is based in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

DOT Has Not Finalized a National Maritime Strategy but Plans to Do So by New February 2020 Deadline

In 2014, Congress issued two separate mandates to DOT to develop  strategies related to challenges facing the U.S.-flag fleet, specifically:

The Secretary of Transportation was directed to develop a national  maritime strategy with recommendations to, among other things, help  U.S.-flag vessels remain competitive.

The Secretary of Transportation and the Maritime Administration  (MARAD) within DOT were directed to develop, in collaboration with  DOD, a national sealift strategy to ensure the long-term viability of  U.S.-flag vessels and U.S.-citizen mariners.

As we reported in August 2018, according to MARAD and DOD officials,  MARAD has been working on a single draft maritime strategy to meet  both mandates because the broader national maritime strategy would  need to encompass the national sealift strategy, as well.

While there is no statutory deadline for the completion of the national  sealift strategy, in the John S. McCain National Defense Authorization Act  for Fiscal Year 2019, the statutory deadline for the national maritime  strategy was extended from February 2015 to February 2020. In our  August 2018 report, we noted that MARAD officials had completed a draft  strategy in 2016, but they told us that the strategy was subject to the new  administration’s review. At that time, MARAD and DOT officials told us  that they viewed the existing draft strategy as pre-decisional and could  provide no timeline for when they planned to move the strategy forward.  In our report, we concluded that the delay in submitting the strategy to  Congress had resulted in decision-makers not having the information they  needed and recommendations from the agency to inform policy-making in  this area. We recommended that DOT complete the national maritime  strategy and establish time frames for its issuance. DOT concurred with  our recommendation. In our recent discussions with DOT officials after  passage of the John S. McCain National Defense Authorization Act for  Fiscal Year 2019, they told us that DOT now plans to meet the new  statutory deadline and issue the strategy by February 2020.

Stakeholders Identified Two Primary Challenges to Supporting the U.S.-Flag Fleet for Defense Needs, and DOT Has Identified Various Options to Address Them

Stakeholders we spoke with for our August 2018 report identified two  primary challenges to ensuring that the U.S.-flag fleet would continue to  meet DOD’s national defense needs. First, they described maintaining  the financial viability of U.S.-flag vessels participating in MSP as a  challenge. Second, stakeholders identified a potential shortage of U.S.  citizen mariners available to crew the government-owned reserve fleet  during a military activation as a challenge, in part due to the declining  numbers of U.S.-flag vessels that employ these mariners. In our August  report, we noted that MARAD had identified some options to address the  competitiveness of U.S.-flag vessels and the long-term viability of the  U.S.-citizen mariners—issues that are very similar to the key challenges  identified by stakeholders. However, DOT and MARAD officials had  stated that they were not yet ready to address the feasibility of these  options, or formally propose them.

Maintaining Financial Viability of the U.S.-Flag Fleet

According to MARAD officials, the relative cost of operating a U.S.-flag  vessel compared to a foreign-flag vessel has increased in recent years,  making it more challenging for vessel operators to remain economically  viable under the U.S. flag. In our August report we found that financial  support to U.S.-flag vessels through both the MSP stipend and the  government cargo preference requirements has helped ensure a  sufficient number of internationally trading U.S.-flag vessels are available  to meet DOD’s most recently stated cargo capacity needs from such  vessels. On the other hand, according to MARAD officials, the additional  cost of operating a U.S. flag vessel compared to a foreign-flag vessel has  increased—from about $4.9 million annually in 2009 and 2010 to about  $6.2 to $6.5 million currently—making it harder for such vessels to remain  financially viable. This cost differential results primarily from the rising  relative costs of employing U.S. versus foreign mariners as crew.  Compounding the increasing costs of operating U.S. flag vessels, the  volume of government cargo—a key source of revenue for many U.S.- flagged vessels—has fallen in recent years as the international military  presence of the United States and funding for food aid overseas have  both declined. In response to these challenges, Congress increased the  MSP stipend from $3.5 million to $4.99 million per vessel from fiscal year  2016 to 2017. MARAD officials said this increase has temporarily  stabilized the financial situation of MSP vessel operators. However, they  added that trends in operating costs and government cargo suggest that  the ability to retain an adequate number of financially-viable U.S.-flagged  vessels will remain an ongoing challenge.

MARAD officials identified the following options as having potential to  reduce the costs of operating a U.S.-flag vessel—which would in turn  make U.S.-flag vessels more competitive in the international cargo  market:

MARAD is part of a U.S. Registry Working Group looking at a range  of actions to decrease the time and cost of bringing vessels under the  U.S. flag, including the cost of meeting Coast Guard requirements.  For example, the group is looking at a recommendation for the  broader application of internationally recognized vessel standards to  U.S.-flag vessels to meet Coast Guard requirements.

In the current strategic plan for 2017 through 2021, MARAD identified  two areas of reform—mariner income-tax relief and liability insurance  reform—that could reduce the crew costs of operating under a U.S.  flag.

According to MARAD officials, some stakeholders have  recommended that MARAD consider requesting the elimination of a  tax on U.S.-flag vessels receiving maintenance overseas to reduce  maintenance costs for U.S.-flag vessels. In general, maintenance and  repairs on U.S.-flag vessels not conducted at U.S. shipyards are  subject to a statutory 50 percent ad valorem tax on the cost of  maintenance performed in a foreign country. According to 12 of the 14  MSP vessel operators we spoke with for our August report, U.S.  shipyards are typically more expensive than foreign shipyards or may  not be close to the vessel’s location or route, so they typically choose  to pay the tax and have the maintenance performed overseas. Four  MSP vessel operators we spoke to stated that they send U.S.-flag  vessels to U.S. shipyards for maintenance when it makes sense from  a logistical and financial perspective. MARAD officials we spoke to  said they are considering the effect of eliminating the tax, a step that  would reduce costs for vessel operators but would potentially  negatively affect the financial viability of U.S. shipyards, which the law  was designed to assist. However, MARAD officials stated that they  have not yet evaluated these trade-offs.

MARAD and DOD’s Transportation Command (Transportation Command)  officials have also identified—but not officially proposed—several options  to address the decline in government cargo carried on U.S.-flag vessels,  which would also make U.S.-flag vessels more competitive by providing  more revenues. In our August 2018 report, Transportation Command  officials and ship operators to whom we spoke told us that they consider  access to U.S. government cargo to be a critical means of sustaining  U.S.-flag vessels.

Transportation Command and MARAD officials stated that one way to  increase the amount of commercial cargo on U.S.-flag vessels would  be to require that certain energy export commodities, such as oil or  liquefied natural gas, be carried on U.S.-flag vessels. While this option  has been considered in the past, it would require new legislation and  would potentially have a negative impact on the export market for  liquefied natural gas. In 2015, we analyzed the potential effects of a  requirement that U.S. liquefied natural gas exports be carried on U.S.- built and -flagged vessels. We found that such a requirement could  potentially increase the number of U.S.-flag vessels by 100 over the  course of many years; however, due to their higher operating costs,  this would increase the cost of transporting liquefied natural gas from  the United States, decrease the competitiveness of U.S. liquefied  natural gas in the world market, and in turn, reduce demand for U.S.  liquefied natural gas. MARAD officials stated that another option  would be increasing the percentage of other cargo, such as food aid,  that civilian agencies are required to transport on U.S.-flag vessels.  This would also require an amendment to existing legislation and  would also have trade-offs, since cargo requirements such as these  can result in higher shipping costs that can negatively affect the  missions of civilian agencies, in particular food aid agencies.

Another option identified by MARAD officials to address declining  government cargo volumes would be to increase the MSP stipend to  replace some of the government support previously provided through  cargo preference requirements, as was done for fiscal year 2017.

Potential Shortage of U.S.- Citizen Mariners

The second challenge identified by stakeholders related to maintaining  adequate sealift for defense needs is the potential shortage of U.S.- citizen mariners available to crew the government-owned reserve fleet  during a crisis. The government’s reserve fleet vessels are held in  reduced operating status with minimal crew in peacetime. When put into  full operating status—such as for a surge related to a wartime effort— these vessels need additional crew, and DOD counts on mariners  working on oceangoing U.S.-flag vessels to meet this need. MARAD and  DOD have raised concerns about the sufficiency of U.S.-citizen mariners  to meet this need. For example, in January 2018, in a statutorily  mandated report, MARAD’s Maritime Workforce Working Group  estimated a shortage of over 1,800 mariners in the case of a drawn-out  military effort, although it also recommended data improvements to  increase the accuracy of the count of available mariners.

Specifically, in this report, the working group estimated approximately  11,768 qualified and available U.S.-citizen mariners as of June 2017— 1,839 less than the 13,607 mariners the working group estimates would  be needed for sustained operation of the reserve and commercial fleet.  The working group based its identification of 11,768 existing qualified  U.S.-citizen mariners on the number of U.S.-citizen mariners actively  sailing on U.S.-flag commercial and government-owned oceangoing  vessels. For the vessels in full operating status, the working group  accounted for 2 mariners employed for each crew position. The double  crew, which according to MARAD officials is typical for a commercial  U.S.-flag vessel operating in international trade, allows each mariner,  over the course of a year, to work for 6 months on the vessel and take 6  months of earned leave. The working group assumed that during a  military activation, commercial operations would continue at the same  level as during peacetime—but that some U.S-citizen mariners currently  working on commercial vessels would be willing to reduce the amount of  earned leave they took in order to work on government-owned reserve  vessels. The working group analyzed this scenario by changing the ratio  of crew positions to crew from 2 to 1.75. As illustrated in figure 1, under  this scenario, with an average of 26 crew positions per vessel, between 6  and 7 mariners per existing commercial oceangoing U.S.-flag vessel are  made available to crew the reserve fleet.

According to the working group’s methodology, given the size of the  current U.S.-flag oceangoing fleet and the number of currently employed  mariners on this fleet, there are enough U.S.-citizen mariners to crew the  reserve fleet during an initial surge, but not for a sustained activation,  during which the working group estimated that the reserve vessels  themselves would need a double crew to allow for crew rotations. This  need for crew rotations on the reserve vessels led the working group to  estimate a shortage of 1,839 U.S.-citizen mariners. Moreover, the working  group’s report found that the shortage of mariners may be understated if  some of the estimated available mariners are unable or unwilling to  continue sailing during times of national emergency, as available  mariners are not required to crew the reserve fleet.

Although the working group concluded that there is a shortage of  mariners for sustained operations, its report also details data limitations  that cause some uncertainty regarding the actual number of existing  qualified mariners and, thus, the extent of this shortage. The working  group’s approach—driven, in part, by limitations of the U.S. Coast  Guard’s database that tracks mariner credentials—did not count any  qualified mariners who are no longer employed on U.S.-flag oceangoing  vessels or who are employed on other types of vessels but may have the  required credentials. In fact, according to the working group’s analysis,  over 15,000 mariners listed in the U.S. Coast Guard’s database have  unlimited credentials but are unaccounted for, as they are neither  currently employed on large, oceangoing vessels nor serving as civil- service mariners committed to government-owned vessels. The working  group stated that the availability and continuing proficiency of these  mariners remains unknown. MARAD officials emphasized to us, however,  that mariners who have not worked on the right types of vessels for more  than 18 months are likely to need additional training before they would be  qualified to crew the reserve fleet during a military activation.

The working group’s report contains several recommendations related to  improving information on the number of available and willing mariners.  These recommendations include replacing the Coast Guard database  with one that would enable a more accurate account of available  mariners, and establishing a periodic survey of the U.S.-citizen mariner  pool to allow MARAD to determine, with reasonable certainty, how many  qualified mariners would be available and willing to sail on U.S.- government reserve vessels if called upon to do so. The report concluded  that until these agencies improve the tracking of licensed mariners who  may be available to crew the government-owned reserve vessels when  activated into full operating status, the extent to which there is a shortage  of mariners for defense needs will remain unclear. The lack of  information on the extent to which there is a shortage of mariners limits  the U.S. government’s ability to effectively plan for such needs. In  January 2018, MARAD’s administrator testified that MARAD is working  with the Coast Guard and the maritime industry to better track licensed  mariners who may no longer be sailing but could serve in a time of crisis,  and in March 2018, MARAD officials told us they are taking steps to  initiate a new survey of mariners, as recommended in the working group’s  report.

In its report, the working group also identified options to address the  challenge of ensuring a sufficient number of U.S.-citizen mariners for  defense needs. It identified two actions that could help increase the  number of U.S.-citizen mariners—one focused specifically on mariners  and the other focused more broadly on the merchant marine, which  encompasses U.S.-flag vessels and U.S.-citizen mariners. However, the  working group’s report did not discuss specific costs or trade-offs related  to either action or elaborate any further on them. The report identified the  following actions:

MARAD should develop a broad-based reserve program that would  identify and support qualified mariners willing to sail in commercial  and government-owned vessels during an emergency. MARAD would  provide limited financial assistance in training mariners and  maintaining credentials, in turn for which mariners who participate  would be obligated to sail in the event of a defense need.

MARAD and other U.S. government agencies should support a  healthy merchant marine (which encompasses U.S.-flag vessels and  U.S.-citizen mariners). The government should fully support programs  including MSP, requiring the government to ship certain cargo on U.S  flag vessels, the Jones Act, and government chartering of privately  owned vessels. If DOD determines that national needs require more  mariners and vessels than can be provided through current programs,  those programs should be expanded to meet such needs.

In conclusion, the U.S.-flag fleet is increasingly facing challenges that  threaten its ability to meet future defense needs. In response to  congressional mandates, MARAD has been working on a national  maritime strategy and plans to issue one by February 2020. However,  until such a strategy is in place, decision-makers will have limited  information to make important policy choices that consider all the relevant  tradeoffs associated with this complex issue.

Chairman Mast, Ranking Member Garamendi, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions.

If you or your staff have any questions about this testimony, please  contact Andrew Von Ah, Director, Physical Infrastructure, at (202) 512- 2834 or vonaha@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Alwynne Wilbur (Assistant Director), Stephanie Purcell, (Analyst in  Charge), Bonnie Ho, Christopher Jones, and Amy Rosewarne. Other staff  who made key contributions to the report cited in the testimony are  identified in the source product.

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In a crisis, the government relies on oceangoing U.S.-flag ships and U.S.-citizen crews to help the military. To ensure their availability, the government provides stipends and requires certain government cargoes to be shipped on U.S.-flag ships.

U.S.-flag ships have become more expensive to run and the government has shipped less cargo—making it harder for carriers to stay in business.

There may not be enough U.S.-citizen sailors to meet defense needs.

In 2014, Congress required the Department of Transportation to develop a U.S. maritime strategy. We’ve recommended completing this strategy in the related report.