Uranium One

There is a lot of talk being bandied about these days concerning the "Uranium One" scandal.  There is a consensus that a lot of people are getting suckered on this.  But there is a lack of consensus as to who specifically is getting suckered.  Conservatives think the suckers are liberals and the general public.  They argue that the Clinton people are pulling the wool over everybody's eyes.  And, of course, the main stream media, who are in the tank for Hillary, are actively cooperating with the wool pulling.  First, though, a quick look at what the ruckus is all about.

Uranium One was (it no longer exists) a mining concern headquartered in Toronto Canada.  They controlled a lot of mining assets in the U.S. and elsewhere and one of the things they mined was Uranium.  Uranium is a "strategic material" because it is the key component in nuclear bombs and has other military uses.  So any important change in ownership must be approved by the U.S. Government.  In 2013 the Uranium One company was sold to a subsidiary of Rosatom, the Russian government Uranium monopoly.  And, of course, for this to happen the U.S. Government had to approve the sale, which they did.

So why is this a scandal?  Because supposedly Hillary Clinton put her thumb on the scale to make sure the sale was approved.  She did this back when she was Secretary of State.  If true, this would constitute some kind of scandal.  Before going into the rest of the details of the "scandal" let me back up and address whether the "liberal media" is actually in the tank for Hillary.  And to do that I want to start by going all the way back to the '60s.

President Kennedy was a lady's man.  He had a number of one night stands.  His most famous conquest was the actress Marilyn Monroe.  None of this came out at the time because there was a "gentleman's agreement" (and at time we are talking about the "gentlemen" of the press were almost all men) that this sort of thing was none of the press's business.  It all eventually came out but there was a decades long delay.

Fast forward to 1984.  By this time the rules had changed.  A Senator named Gary Hart was running for President.  As with the Kennedy case, people in the know knew he played around.  But now the press saw it as their jobs to tell the public about this sort of thing rather than covering it up.  So the press asked Hart about this and he adamantly denied it.  He in effect challenged the press to prove he was fooling around.  Well, they did.  They unearthed proof that he entertained a lady not his wife on a boat named "Monkey Business" of all things.  And this revelation sunk Hart's campaign.

Fast forward again, this time to 1992.  Now Bill Clinton is running for President.  And people in the know knew he played around.  The press geared up for a repeat of the Hart play book but Clinton outfoxed them.  He admitted to playing around without actually saying so.  He professed to being a sinner and asked forgiveness.  Without an outright denial the press were stymied in their ability to knock him out of the race and they were very unhappy about it.

But this turned out to be the first of a long list of "Clinton scandals".  The shorthand name for the whole list is "Whitewater", the one that came next.  "Whitewater" is the name of a real estate development the Clintons invested in.  Whitewater was supposed to be a classic "pay for play" deal.  The plan was the usual one.  Insiders would be let you (in this case the Clintons) in on the ground floor of an investment opportunity with the intent of giving you a risk free way to make a nice quick and apparently entirely legitimate profit.  You would then owe the insiders a favor to be redeemed later.  The problem is that things did not go according to plan.

Whitewater never got off the ground and the Clintons lost over $20,000 on the deal (a lot of money for them at the time).  So since they didn't get paid they didn't have to play (dole out a favor to be named later).  All of this came out fairly quickly.  But the very same press that is supposed to be in the tank for the Clinton's gave Whitewater wall to wall coverage for literally years.

You can often find patterns in people's behaviors.  The press should have quickly abandoned Whitewater because as a scandal it was fatally flawed by the fact that the Clintons lost money on the deal.  They should have lain in wait for a different pay for play example that went as planned.  But they didn't.  They continuously recycled Whitewater for years.  And if they had in fact been in the tank for the Clintons they should have made excuses for the Clintons from the very beginning and then promptly dropped the whole thing.  This is the opposite of what they actually did.

And there is an even more confusing aspect to all this.  There was an actual successful pay for play deal that went completely according to plan.  And it surfaced during the height of the "Clinton scandal" era.  Hillary (she was the moneymaker as a very successful lawyer while Bill made chump change as the Governor of Arkansas) invested in something called "cattle futures" exactly once in her entire life.  Through a brokerage firm in Little Rock she bought a "futures contract" tied to the price of cattle.  She sold it a couple of weeks later and made a tidy profit.

Obviously she knew nothing about the futures market for cattle (or any other commodity for that matter) so how did she make a nice profit in such a short period of time?  Most likely because the fix was in.  There is something called "front running" that can be applied to transactions like the one Hillary made.  A number of transactions are typically handled at the same time.  And there is often some price variation even though the transactions are supposedly "simultaneous".  Front running consists of giving the lowest purchase price and the highest sale price to the transaction belonging to the favored customer.  This is likely what happened here.  And the people running the brokerage rang up a future favor.

As I said all of this came out right in the middle of the years long season of "Clinton scandals".  Yet many people I talk to who were paying attention at the time are completely unfamiliar with this event.  And the reason is simple.  This successful example of pay for play never got much coverage.  It didn't even get much coverage in conservative media.  So what we see is tons of coverage of a failed pay for play "scandal" and almost no coverage of a successful example of pay for play.  It would have made sense to devote little coverage to the former and a lot of coverage to the latter but that's not what happened.

And These are just two of the several "scandals" that occurred while Bill Clinton was running for President or in office.  And most of the "scandals" were entirely made up so they had even less substance than Whitewater.  The last in line was the Monica Lewinski affair.  Clinton had an affair (but not sex in the biblical sense) with her.  Still it was a bona fide scandal.  The press, liberal and otherwise, used the fact that this affair was a real scandal to justify all of the coverage heaped on the other not so real (and in some cases completely fake) "scandals".  But the unmistakable conclusion to be drawn from all this is that the liberal press in definitely not in the tank for Clinton.

But wait, there's more.  And, of course the "more" is the Clinton email server "scandal".  This came to dominate coverage of Hillary's Presidential run to the exclusion of pretty much everything else.  Various studies indicate that twice as much of the time devoted to covering the Clinton campaign was spent on emails as was spent on pretty much everything else.  And we got headlines about "new email revelations" for week after week after week.  But interestingly enough while pretty much everyone else's email server was hacked the server Hillary used wasn't.  And the 30,000 emails that were made public showed a competent and careful person going about the day to day business of being Secretary of State and doing it well.

But the coverage in the liberal media was based on cherry picking nits and nats that could be taken out of context to make her look bad.  And the FBI did manage to unearth some emails that weren't turned over but they all were initiated on some other mail server and would not have been in the archive of the Clinton mail server.  And a couple of emails contained classified information.  The classified information consisted of pictures of damage done in Pakistan by drone strikes.  At the time the emails were sent similar pictures could easily be obtained from unclassified sources.  And the fact that the pictures were classified was not obvious and all of them were buried deep in reply chains where they were easily missed.

So, while it could be argued that laws were broken, the violations were minor.  That's why the FBI concluded what they concluded.  And meanwhile various much more serious email scandals were breaking out all over the place.  These other scandals have seen far less coverage in the press, liberal or otherwise.  And the coverage of Hillary's email "scandal" was essentially the same in the liberal and the conservative press.

So if there was a juicy Uranium One scandal the liberal press would be all over it.  But they aren't.  So let's dive a little deeper into the conservative coverage of Uranium One, whatever it is, and see what we can find there.

Uranium One is supposed to be another pay for play deal.  Hillary was paid through one of the Clinton charities, The Clinton Foundation or the Clinton Global Initiative.  Later, the theory goes, Clinton "played" by making sure the Uranium One deal got approved.  But there are major problems with both the "pay" part and the "play" part.  Let's look at them in order.

The Clintons are rich.  They are now worth millions of dollars.  But they are not fabulously wealthy.  They own a large nice but not all that fancy house in upstate New York.  It certainly wouldn't meet Trump's standards.  And they only own the one house.  They also own no boats, helicopters, airplanes, or other toys of the truly wealthy.  They are certainly not hurting financially but neither of them is driven by the need to accumulate fantastic amounts of wealth.  We know this because we have access to decades of Clinton Income Tax returns.

If they had tried they certainly could have milked their charitable opreations for large amounts of money but they haven't.  I'm sure they get handsomely reimbursed for Foundation related expenses like travel and lodging costs.  But none of the Clinton family draws a salary from the Foundation (the Clinton Global Initiative is a subsidiary of the foundation).  And the Foundation's books are audited annually so any large kickbacks to the Clintons would be obvious.

We can see where they get their money by checking their tax returns.  They get it from book sales, speaking fees, remuneration for sitting on boards where they are not expected to put in much time or effort, and that sort of thing.  For better or worse you can make a lot of money doing that sort of thing if you have the right kind of name recognition.  So there was no straight up bribe-type "pay".  How about something more subtle?

The Clinton Foundation is a charitable operation, one that is very well thought of.  It routinely gets top marks from all the "charity watch" type organizations.  Very little of the money goes to overhead.  Most of it is spent on things like medicines in Africa that result in doing good but also in good publicity.  In a certain sense you can call the operation a money laundering operation.

If you have a bad reputation and want to get your name associated with some kind of "do gooder" program it's hard to beat the Clinton Foundation.  They actually do good.  But they also make sure that the people that give them money with which to do good get lots of positive publicity.  And the Foundation has a reputation around the world of being effective.  People think their programs work well, are sensitive to local concerns, etc.  They have a reputation for running a first class operation in an area where there are a lot of fly by night operators.

This has allowed the Foundation to raise and spend about $2 billion over its lifetime.  If you are say a Russian Oligarch who has done a lot of shady deals an obvious way to burnish your reputation is to go into partnership with The Clinton Foundation.  And various Russian Oligarchs including those associated with Uranium One have done just that.  And so have other shady people like Saudi princes.  And so have lots of good upstanding people.  It's what the Foundation does.

And there is no kickback to either the Clintons or to the shady or otherwise people making the contributions.  That's where the Foundation differs from a standard money laundering operation.  In a standard money laundering operation the point is to launder dirty money into clean money then return the clean money to the original "investor".  A fee for service is taken along the way but most of the dirty money put in is supposed to come back as clean money.  As a money laundering operation The Clinton Foundation is all "fee" and no "return".  All the investor gets out of the deal is good will.  That's worth something.  The question is how much?

Various investigators have identified $145 million in contributions to the Clinton Foundation on behalf of various people who had an interest in the Uranium One deal.  That is lot to pay for good will.  The standard pay for play calculus starts with you kicking in the $145 million.  Then the sweetheart deal happens.  Then you make way more than $145 in additional profit (the clean money) down the road.  Set that aside for a moment and look at the timing however.

$131 million of the total came from one guy, a Canadian named Frank Guistra.  But he sold the company in 2007.  If it made a ton of money after 2013 then he wouldn't make a dime on the deal.  Another $1 million came from another Canadian associated with the company.  So most of the so called bribe money actually came from Canadians, not Russians.  But let's now return to the "play" part.

Supposedly Hillary did sneaky underhanded things while Secretary of State to get the deal to go through.  But the deal had to be approved by nine different agencies of the Federal Government.  They all did.  Let's skip the whole "she secretly corrupted all nine agencies" idea and go to the most fundamental one.  Was there a reason why the deal needed a boost to get approved?  To answer that question it is useful to look at the history of Uranium mining.

Before World War II no one cared about Uranium.  So no one spent much time trying to figure out where it could be found.  Then Einstein wrote a letter to President Roosevelt and the Manhattan Project got under way.  All of a sudden the government needed a bunch of Uranium.  But the whole thing was ultra-top-secret.  So efforts to locate Uranium had to be done very quietly.  As a result of this the impression was built up at the time that Uranium was very hard to find.

Then Hiroshima happened and the secret was out.  And a nuclear reactor for powering submarines and later electricity plants was developed.  And all of a sudden there was a market for Uranium  And so mining companies started looking for it.  And it turns out it is all over the place.  Uranium is a commodity.  People will buy it from whatever source that is cheapest of the sources available to them.  As mining companies looked around they found Uranium in lots of places so the race was on to find places where it could be mined very cheaply.

Most of the mining in the immediate postwar period in the U.S. took place on or near the Navajo Reservation in Arizona and New Mexico.  These mines have since all been shut down not because they ran out of Uranium but because they are not cost competitive against mines located in other places in the world.

To my knowledge Uranium mining is or has taken place in the U.S. (obviously), Canada (home of Uranium One), Europe (to support the German effort during World War II), South Africa (to support the bomb program they later abandoned), Russia (successful bomb program), China (successful Chinese and North Korean bomb programs), Brazil (bomb program that was abandoned before the first bomb was built), and Central Africa (remember the "yellowcake" Saddam was supposedly importing into Iraq).  I don't doubt that it can also be found in lots of other places.

And then there are the ups and (mostly) downs of demand for Uranium.  There was essentially no demand before World War II.  Then the market for bomb grade Uranium opened up.  It was quickly followed by the opening up of the market for reactor grade Uranium.  Then the U.S. and Russia started signing nuclear arms reduction treaties.  That dried up the bomb grade market (at least in the U.S. and Russia).  Then the Three Mile Island happened in 1979.  All of a sudden we were building no nuclear power plants in the U.S. and construction also slowed down in the rest of the world.  Then Chernobyl and later Fukushima happened.  There is now almost no market for reactor grade Uranium any more.  The market for Uranium peaked many decades ago and has been on a decline ever since.

But it's worse than you think.  Above I mentioned "bomb grade" and "reactor grade" Uranium.  I need to drill down on them a little.  Uranium comes in "isotopes".  The important ones are U-235 and U-238.  Natural Uranium, the kind that comes out of mines, is composed of about 99% U-238, 7/10 of 1% U-235, and traces of everything else.  To make reactor grade Uranium the percentage of U-235 needs to be "enriched" to 6%.  This is a difficult and expensive process.  But roughly 9 pounds of natural Uranium can be enriched to make 1 pound of 6% U-235 Uranium and 8 pounds of "depleted" Uranium.  The enrichment level of bomb grade Uranium is classified.  But it is rumored to be 90%.  Making 1 pound of bomb grade Uranium is fantastically difficult and expensive.  But the point is that a whole lot of depleted Uranium is left over.  And the stuff is pretty useless so it tends to just sit around.

Reactor grade Uranium still has a market.  But as disarmament has kicked in a lot of bomb grade Uranium has become surplus.  Using the 90% figure to make the math easy, if we start with 10 pounds of bomb grade Uranium it contains 9 pounds of U-235.  If we "downblend" our 10 pounds of bomb grade Uranium with 140 pounds of depleted Uranium (assumed to have no U-235 left in it, again to make the math simple) we end up with 150 pounds of reactor grade Uranium.  My point is it doesn't take much bomb grade Uranium to make a lot of reactor grade Uranium.

The U.S. has decommissioned thousands of nuclear weapons..  The Russians have decommissioned a similar number.  That's a lot of surplus bomb grade Uranium available with which to make a whole lot of reactor grade Uranium by downblending it with depleted Uranium.  And then there is Iran.  They made a bunch of Uranium that was enriched to 20% U-235.  It all went to the Russians as part of the nuclear treaty we did with Iran.  That's still more enriched Uranium that can be downblended to make still more reactor grade Uranium which can then be flooded into the already shrunken reactor fuel market which depresses prices and demand still more.

My point is there isn't a lot of  money in the Uranium mining business and there hasn't been for a long time.  And part of the deal the U.S. signed off on when it approved the Uranium One deal guaranteed that the U.S. would continue to have access to all the natural Uranium it traditionally had access to.

But this is not very important because Uranium is a commodity.  We are good as long as we can get as much as we need from somewhere.  And we have lots of somewheres to pick from.  There was never any reason to block the Uranium One deal.  All the agencies did their due diligence and decided there was no reason to block it so they all signed off on it.

With no "play" needed there was no reason for any of the participants to "pay".  The deal was absolutely non-controversial at the time.  So there was no reason for Hillary to interfere.  And all evidence indicates that she didn't.

Of course, in some circles it is sometimes useful to gin up yet another Hillary controversy so you can stoke up your base.  So the suckers in the Uranium One story are the conservatives who are buying the snake oil the conservative media and conservative politicians are trying to sell them.  The market for this sort of snake oil, unlike the market for Uranium, is strong and getting stronger.