The latest instance of "what-aboutism" is the House Republican decision to open an investigation of the Uranium One transaction—the allegation that Hillary Clinton transferred control of 20% of America's uranium mining output to a Russian company, in exchange for substantial contributions to the Clinton Foundation from the executives of that same Russian company. Perhaps fearing future revelations of Trump's closeness to Russia, the evident purpose of the investigation is to establish a "Hillary too" counterpoint. Based on what is currently in the public record, little, if anything about the allegation is plausible. In this post, I want to summarize the legal context and known facts regarding the transfer and put the allegations of impropriety in context. (I focus exclusively on the transfer and the U.S. government's approval of it. I am not, in this post, considering the evidence—such as it is—of donations to the Clinton Foundation. My reasoning is simple: if there is no "quo" to be given, the question of a "quid" is moot.)

Legal Background—the CFIUS Process

The allegations arise in the context of an intergovernmental process managed by the Department of Treasury involving an inter-agency committee known as the Committee on Foreign Investments in the United States (CFIUS). Since the 1950s, U.S. law has given the president the authority to block transactions that he deems a national security risk to the United States. Begining in 1975, under President Gerald Ford, an interagency committee, CFIUS, was chartered to advise the president on how to exercise that authority. Further significant amendments to the process were made in 2007. Today, CFIUS operates pursuant to section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (FINSA) and as implemented by Executive Order 11858, as amended, and regulations at 31 C.F.R. Part 800.

Originally, the law focused on protecting critical factors of production (like the steel industry) and the possibility that the production of war materials might come under foreign control. More recently, in the wake of the Sept. 11 attacks, the purview of CFIUS has broadened to include threats that might sound more in the nature of homeland security than as national security threats. The law was substantially revised and modernized in 2007—in part to accommodate this new scope of the review process (and in response to a perceived failure of that review when it permitted the transfer of certain port operations to a Dubai company). When I worked at the Department of Homeland Security (DHS), for example, we looked at foreign purchases that involved telecommunications companies and cybersecurity firms as well as transactions involving more traditional defense industry firms.

Notably, CFIUS rarely exercises its authority unilaterally by "pulling" a transaction into the CFIUS process—that is, by taken cognizance of a purchase and affirmatively requiring the parties to the transaction to submit information to the committee about the sale. Far more frequently, parties to a transaction voluntarily notify CFIUS of the pendency of a sale or transfer and seek affirmation that the transaction does not pose a national security threat. The reason for this is simple—in addition to the power to block a transaction before it occurs, the president also has the legal authority to "unwind" a transaction after it has occurred. The specter of unwinding a transaction—frequently involving tens if not hundreds of millions of dollars—long after it has been consummated is quite daunting. As a result, almost any transaction that is plausibly subject to presidential review commences the review process with a voluntary notice from the parties to the transaction.

The president's significant powers of blocking or unwinding a transaction are rarely used. Because CFIUS procedures are cloaked in confidentiality, many (if not most) of the committee's recommendations never see the light of day. Insofar as the public record reflects, since 1990, the president has only unwound two transactions (the most recent being an Obama-era decision to require a Chinese company to divest itself of four wind farms near a U.S. Navy testing facility) and has formally blocked only two or three others (again, the most recent being an action by President Obama to prevent a Chinese purchase). It is fair to say that the presidential power is more of in terrorem in nature than an actuality—often threatened but like any deterrent infrequently deployed.

As a result, the principal way that CFIUS operates is by using the threat of presidential action as a means of securing agreements from the parties to take steps to mitigate the perceived national security threat. These may, for example, involve promises not to transfer intellectual property or physical assets outside the United States. It may involve undertakings to maintain certain contractual relationships with the U.S. government for a period of years. They can also involve audit requirements or other requirements related to areas of corporate governance. In the end, CFIUS holds the upper hand and uses the possibility of presidential intervention to persuade transaction parties to modify their agreements.

The negotiations between CFIUS and the parties are not, however, the only negotiations that take place in this context. In my experience, often the more interesting and vigorous discussions occur within the committee. Typically the commercial agencies (the Treasury Department, which chairs the committee, joined by the Department of Commerce and the Office of the U.S. Trade Representative) will argue against most (and sometimes all) restrictions on the ability of parties to enter into contracts. They contend that such limitations make American companies less attractive to purchase and result in distortions of the market that fail to benefit American consumers. Usually, they are joined by the Department of State, which reaches the same conclusion from a different direction. State's concern is often that adverse action will disrupt foreign relations and might lead to reciprocal limitations being imposed by other nations. Standing on the other side are the security agencies (the Defense Department, DHS and, to a lesser extent, the Justice Department) who often see the potential threats as more significant and seek more robust mitigation measures. Finally, in addition to the standing members of the committee whose equities will be accounted for, the Office of the Director of National Intelligence is present ex officio to give the intelligence community's perspective. And if the question at issue involves a resource with special characteristics, an SME might join—if the sale relates to an agriculture product, then the Department of Agriculture will weigh in. n truth, my own experience is that often the discussions within CFIUS are more contentious than those with the parties to the transaction.

One final point—the CFIUS process has been around for a while. Most of the cases are relatively routine. Mitigation measures are often standard, with a little bit of crafting to meet a specific case. A regular meeting has career civil servants in attendance, not political appointees. Political staff is engaged (typically at the assistant secretary or undersecretary level) only in rare cases and secretarial engagement is even less common—except, of course, when the issue is going to be presented to the president for his actual decision.

Uranium One and Rosatom

Uranium One is a uranium mining and processing compay headquartered in Toronto. It has mining operations all over the world, including Canada, the United States, South Africa, Australia and Kazakhstan (these last are some of the biggest uranium mines in the world). The operations in the United States (in Wyoming) mine a volume of uranium that is roughly 20% of the annual American production. It is that production (reasonably considered a potential issue of national security interest) that caused Uranium One to come to the attention of the CFIUS.

In 2010 a Russian company, ARMZ Uranium Holding, purchased a 51% interest in Uranium One. ARMZ was, at the time, a subsidiary of Rosatom—the Russian State Atomic Energy Corporation (a non-profit appendage of the government). It is fair, then, to say that the 2010 transaction involved the purchase of a controlling interest in Uranium One by the Russian government. The transaction is said to have valued Uranium One at more than $1 billion. (Since that time, ARMZ has been extinguished in corporate reorganization and Rosatom purchased the remaining 49% of Uranium One, so today Rosatom owns the entire company directly.) In addition to approval from CFIUS, the Russian purchase required (and received) approval from Canadian, South African, and Kazakh authorities.

To secure approval from CFIUS, Rosatom is reported to have promised to retain the Uranium One corporate management and corporate structure, not breaking up the company. In addition, the mining licenses would remain with U.S. subsidiaries controlled by U.S. persons. In addition, the Nuclear Regulatory Commission reviewed the transaction and gave its approval (emphasis added below):

NRC’s review of the transfer of control request determined that the U.S. subsidiaries will remain the licensees, will remain qualified to conduct the uranium recovery operations, and will continue to have the equipment, facilities, and procedures necessary to protect public health and safety and to minimize danger to life or property. The review also determined that the licensees will maintain adequate financial surety for eventual decommissioning of the sites. Neither Uranium One nor ARMZ holds an NRC export license, so no uranium produced at either facility may be exported.

By all reports, there was little controversy over the transaction (which occurred during President Obama's "reset" with Russia). Still, it is fair to say that the degree of scrutiny of this transaction seems less than the 2009 proposed purchase of a gold mine by Chinese interests—which was ultimately withdrawn in light of CFIUS objections.

Takeaways

What can we glean from all this?