Seeing Black Swans
March 22, 2014 | Speech | International Peace & Security

The speech below is as prepared for delivery by MacArthur President Robert Gallucci at the Nuclear Knowledge Summit on March 22. View a video of his speech.

I was going to open my presentation by telling you that I feared I might be “preaching to the choir.” But Han Sung-Joo said just that in his keynote presentation yesterday. So now I'mm going to claim that my task is even harder—I am presenting the second sermon to the choir. So what do you say in the second sermon to the choir?

I know you are already convinced of the nuclear terrorism problem and that something must be done about it. Like you, I’m an insider. Or was once. Before joining the MacArthur Foundation I'd spent my life in the security community and I am persuaded by the threat, and of the need for urgent action. In fact, it seems so obvious to me that it hardly needs explaining.

When I began as the head of a foundation, I thought I could take this issue on the road and people would be persuaded by it. I was wrong. Dead wrong. I meet very smart and worldly people every day, who hold important jobs, but they do not all buy the nuclear terrorism threat. And because of that, they are not as motivated as you to take action to prevent nuclear terrorism. It’s not that they do not agree that a nuclear terrorist attack would be a terrible thing; it’s that they think the likelihood is so remote and, perhaps, difficult to prevent, that they find other problems more compelling to tackle.

I’ve been looking for an analytical frame to help me deal with this conundrum, and I think I’ve found one in the “Black Swan” concept. What does that mean? You may have heard the expression “a rare bird.” That has been used since ancient Rome to refer to something unusual or unlikely. The term “black swan” was an extension of the idea, a mythical animal that stood for something not just unlikely, but entirely impossible. A category error, if you like.

Then, in the seventeenth century, Europe found out that there were actual black swans in western Australia. After that inconvenient discovery, a black swan came to stand for an event or a discovery that dramatically overturned commonly held assumptions.

Most of you will know that Nassim Nicholas Taleb popularized the term and refined the concept in his 2007 book named, appropriately, The Black Swan. He put a fairly rigorous set of criteria around it. A Black Swan event must be truly surprising (like the emergence of the Internet or the fall of the Soviet Union), have major impact, and be rationalized after it happens as if it could have, in fact, been expected. In other words, the risk management models that were in place before the event overlooked the available data that might have led them to forecast it.

My fear is that a major nuclear terrorist attack would be another Black Swan event for most people. It would come as a shock, it would certainly have major impact, and yet, after the event, people would think it over-determined and say, “Of course. Whould have seen it coming.”

Taleb is predominantly an economics and financial writer. He started out trying to understand circumstances in which a lot of people lost a lot of money, such as the financial crisis of 2008. Most people, most investors, the “conventional wisdom,” thought that the mortgage market, and the institutions that supported it, were essentially sound. They were wrong, and paid for it. MacArthur's endowment lost one-third of its value, Harvard lost 40 percent. But there were a few people in the financial world who foresaw what might happen and did very well out of it. John Paulson shorted the subprime mortgage market and made himself $4 billion.

My argument is that we, the already persuaded, are like John Paulson. We can see what will happen in the extreme circumstance when everything goes wrong at the same time. Except, for us, there is no upside to being proved right. We don’t want to make a killing—we want to prevent a killing. We don’t want to have a secret formula—we want everyone to share it. We want our insider insight to become the common wisdom.

So how do we persuade ordinary people, smart people, but those who have not been immersed in the subject as have we, the insiders? We know that the human psyche tends to prefer the steady state, group think, confirmation bias, fears change, and is suspicious of the extravagant or the bizarre.

But remember how often the unexpected happens. Tsunamis, earthquakes, meteors, and volcanoes are constants of life on earth, but they still cause surprise and distress whenever they happen. People might say the scenario of nuclear terrorism is too much like a fictional disaster movie. But not that long ago, that’s what they said about the possibility of someone deliberately flying an airplane into a skyscraper.

Now, this morning I want to talk to you as insiders, review what we think is plausible, and commend some of the policy prescriptions out there, particularly those that focus on the control of fissile material. Then I will give you my thoughts on how we can communicate to outsiders, to conceptualize the threat for the public and officials to get them to deal with it.

First to fissile material. We all agree that nuclear terrorism is neither remote nor incredible as a possibility. If so, what is the most critical variable in a terrorist being able to mount an attack? Fissile material.

Fissile material availability and its security is, as we say in the U.S., the “long pole in the tent,” without which the whole structure falls down. Put another way, it is the crucial but, thankfully, most difficult aspect of creating a nuclear device. It's why we are all here. There are certainly other obstacles to nuclear terrorism—the design, materials, testing, and delivery system, among others. But, as many in this room know all too well, designs for a nuclear explosive device are available on the Internet, and terrorists do not need a missile for delivery. Terrorist groups with some expertise in engineering and explosives could fashion, deliver, and detonate a crude device. It would change our way of life. But only if the terrorists had access to fissile material.

So why have we not raised that bar so that no terrorist could ever be able to get his hands on fissile material? This is where I think political sensitivities come in. Fissile material could come only from some country’s nuclear energy or nuclear weapons program through leakage or intentional transfer. Here I include plutonium as well as highly enriched uranium in fissile material that terrorists might acquire to create a device. Many view plutonium as self-protecting—in a terrorist scenario, as precluding use in an IND, an improvised nuclear device. It is not, and those who say that are wrong.  

Large amounts of plutonium are maintained in both weapons stockpiles and in active energy programs, and highly enriched uranium continues to be produced around the globe. Moreover, the prospects for secret transfer of such fissile material by a rogue state, or leakage from a state with an advanced but not perfectly secured energy sector, are real. Over decades, such transfer or leakage could easily provide a terrorist group with enough necessary fissile material to make an improvised nuclear explosive device.

It is this leakage or transfer that concerns me most. Transfer is far-fetched for some countries, such as Russia and China. I do not believe the governments of these nations would irresponsibly engage in such activities. But, transfer is not far-fetched for others, such as North Korea and potentially Iran. We have already seen North Korea sell a whole plutonium production reactor to Syria, and we have seen Iran’s track record on the transfer of conventional arms.

That said, leakage is a more likely scenario for most countries. We have seen leakage from Pakistan through the A.Q. Khan network, which spanned the globe with sales from the Middle East to Northeast Asia. Making matters worse, Pakistan is rapidly increasing its fissile material and weapons stocks—at the fastest pace of any country on earth. Its nuclear doctrine and policies regarding tactical nuclear weapon deployment early in a crisis create real vulnerabilities, particularly in an environment with extremely high-capability terrorist groups willing to take on heavily guarded facilities: think about the Rawalpindi Army headquarters in 2009; the Mehran naval base in 2011; and the Minhas air base in 2012. India is also increasing its stockpiles, reveals little about its nuclear material and facility security, and faces domestic and foreign terrorist threats.

Despite dramatic improvements in nuclear security since the collapse of the Soviet Union, Russia still has significant security weaknesses, in its accounting systems and from insider threats. Just a year-and-a-half ago, the Director of the Siberian Chemical Combine, one of Russia’s largest HEU and plutonium facilities, and two of his deputies were arrested for corruption.

The United States is hardly free from criticism. The 2012 intrusion at the Y-12 nuclear weapons production facility by an 82-year old nun and two other protestors was a major embarrassment. Even though the intruders set off alarms all the way to the building that housed hundreds of tons of HEU, only a single guard eventually responded. Apparently, guards had become wary of the many recent false alarms. The Department of Energy Inspector General found a massive security culture problem—“multiple systems failures on several levels” and “troubling displays of ineptitude.” This is all the more concerning because DOE once viewed that facility as one of its most secure sites, dubbing it the Fort Knox of HEU. I went to Catholic grammar school and always respected the abilities of those nuns, but this I never expected.

Worldwide, there are still far too many HEU-fueled reactors, particularly in the United States, and too much plutonium getting separated, processed, and shipped from place to place. All of these vulnerabilities create the potential for leakage.

So far, you will note, I have focused on nuclear terrorism and securing fissile material as a means to prevent it. You should not assume, though, that I would dismiss traditional concerns about the very real dangers nuclear weapons pose—nuclear war in South Asia, a proliferation domino effect in Northeast Asia and the Middle East, and the erosion of the NPT. But for each of these genuine concerns, I am even more concerned about its implications for nuclear terrorism. Do I worry about nuclear war between India and Pakistan? Yes, but I worry equally about leakage from both, and A.Q. Khan-like transfer from Pakistan. Do I worry about proliferation and a domino effect stemming from North Korean and Iranian activities? Yes, but I worry equally about transfer from both. Do I worry about arms control and Article VI of the NPT? Yes, but I worry equally about Russia’s still unsecured fissile material and the U.S.’ continued use of HEU in naval reactors, as well as all that fissile material in both countries’ nuclear weapons. Do I worry about the safety of the nuclear power plants and think everything should be done to avoid another Fukushima? Yes, but I worry equally about the nuclear power practices that make fissile materials more or less vulnerable for diversion to states and non-state actors. Do I worry about climate change and support the use of fossil fuel alternatives to address energy demands and pollution? Yes, but I worry more about game-changing back-end fuel-cycle choices in France, India, Japan, the ROK, and China.

When a state becomes interested in reprocessing technology, it is perfectly understandable that its neighbors will fear that it is using an energy program as a cover to produce the material for a weapons program. Or, at the least, as part of a hedging strategy. This concern is felt quite sharply in Asia, where Japan’s and the Republic of Korea’s possible plans cause anxiety. Am I concerned about the possibility that these countries could stockpile weapons-useable material that they might later divert for weapons purposes? Well maybe, but I am more concerned that these stockpiles present attractive targets for terrorist groups.

Japan’s dogged pursuit of reprocessing technology is puzzling when you consider the enormous costs, technical difficulties, and high proliferation risk. Those considerations persuaded many other countries, including the United States, to abandon their efforts. Can Japan’s continued interest in this technology be understood when one considers the time and effort already invested, the sunk costs of this massive program? Yes, but we should not allow institutional politics and path dependence to get in the way of sensible and responsible decision making in this high-stakes area.

China’s continued exploration of a closed, plutonium-based nuclear fuel cycle with spent fuel reprocessing for thermal reactors and, eventually, fast reactors presents serious security and proliferation risks. Its projected growth in nuclear power, even if only partially realized, could vastly increase opportunities for diversion if not managed with an eye to proliferation risks. China’s fuel cycle choices are all the more important because of the influence those choices will have in the region and beyond, as countries developing nuclear power programs look to China as an example. Does China have a legitimate need to increase its energy sources to meet consumption demands? Yes, but without considering the example it would set by embracing plutonium recycle, it makes the world a more dangerous place.
It is this “yes, but…” equation that troubles me.

My bottom line is that no country is above needing to pay acute attention to the accumulation of its fissile material and its security. Particular problems lie in nuclear weapons states, however, where a large percentage of the world’s fissile material resides—around 98 percent of the HEU and 98 percent of the separated plutonium is in weapons states. It is not all for military purposes, of course, but that’s where it’s located. It seems, however, that the Summit process has focused on civilian stocks of HEU and needs to focus more on plutonium and on military stocks of HEU and plutonium. But there are those political sensitivities I alluded to before. So this is precisely where we have to overcome our concern about political correctness and confront the principal threat head on.

I do not mean to detract from the considerable progress we have made since President Obama in 2009 articulated his vision of securing nuclear material worldwide over four years. The Nuclear Security Summits, beginning in Washington in 2010, have rightly thrown a spotlight on the threat of nuclear terrorism. They have elevated global dialogue above the technical experts to the head-of-government level.

It is my hope, and belief, that the official Summit here in the Netherlands will place greater priority on plutonium and military stocks. With another Summit scheduled for 2016 in the United States, we have an opportunity to build lasting and meaningful global standards to prevent nuclear terrorism. We need to pay more than just lip service to nuclear security—we need to address the totality of the problem where it lies in civilian and military applications, we need to reduce stockpiles of fissile material, and we need to question new facilities that would separate plutonium and enrich uranium.

We insiders all agree that nuclear terrorism is plausible and we have good policy prescriptions. So what? How do we make the outsiders, especially those with the power to act, pay attention? They are not steeped in our assumptions, our analysis, or even our language.

Let me suggest three ways. First, we need to make clear the practical extent of a catastrophe. We need to convince them that a simultaneous detonation of ten-kiloton nuclear explosions in, say, four international cities—notionally New York, Paris, Mumbai, and Sydney—is not the stuff of sensational fiction. Roughly a million people would die relatively promptly from blast, fire, and radiation following the detonations. There would be large-scale loss of life, wide-spread panic, and long-term psychological effects.

Second, we need to convince them of its plausibility. I see nothing less probable about detonations happening in multiple locations, not just in one. Attacking several cities is something terrorists like to do for maximum audience impact. Compared to the quantity of fissile material that may credibly be accessible to terrorists, the amount needed for a yield only slightly less than Hiroshima-size is tiny. In other words, the number of cities attacked may not be sensitive to the amount of fissile material required for each weapon.

Third, in delivering this news, we need to tell outsiders there is good news too: if we take care of the nuclear terrorism problem, then we begin to deal with the nuclear weapons problem writ large. I have come across a concept, promoted by some in this room, that I agree with: nuclear terrorism should not be seen as just the fourth pillar in the nuclear regime. Instead, it should be seen as the foundation upon which the other pillars of the NPT—disarmament, nonproliferation, and peaceful uses—rest.

You won’t get disarmament in a world awash in fissile material and without good nuclear security, because the nuclear weapon states won’t give up their nuclear weapons if they think other states or terrorist groups can get them from theft. You won’t get nonproliferation without good nuclear security, because states, not just terrorist groups, could make bombs from stolen nuclear material. And you won’t get peaceful use without good nuclear security—because nuclear power won’t get the public, investor, utility, and government support it needs unless it is seen as being safe and secure. We need to tell people the bad news about nuclear terrorism, but present the prescriptions as the good news—precisely by addressing nuclear terrorism, and the problem of accumulating and securing fissile material we are dealing with the broader threat to international peace and security that nuclear weapons pose.

This is where we, the experts in this room, might disagree. We might disagree on the priority we should afford to each component of the nuclear weapon concern—arms control, disarmament, proliferation to states, and nuclear terrorism. But I firmly believe the priority should be nuclear terrorism and am trying to persuade you of this.

In conclusion, I want to endorse some of the prescriptions that many in this room have advanced to address nuclear terrorism. I support proposals to strengthen the current weak and ad hoc system of commitments in favor of something that is truly comprehensive and global in nature. I support work to make security standards robust and durable, surviving long after the final in this Summit series. But I also want to urge you to pay particular attention to the looming game changers: first, important fuel cycle choices that await many states, particularly China, Japan, and South Korea; second, North Korean behavior with its export to Syria, and the failure of the international community to respondother than Israel with its own version of a nonproliferation policy; and, third, the emergence of A.Q. Khan-like rogue suppliers who could provide a short cut to catastrophe.

But most importantly, beyond any specific initiative, I want to encourage you to be politically incorrect in ways that governments and diplomats cannot be. In acknowledging the view of many that nuclear terrorism is a low probability event—although not as low as they might think—let’s convince them that they need to take action to keep the probability low, and reduce it further. We have grantees doing this, and the probability of catastrophe is not higher today precisely because of the work many of you in this room have done. The evolution of the dialogue and adoption of specific activities since the first Summit is proof of just that. But we are by no means there. It is a heavy lift. We need to continue to insist that the entire problem be addressed—not just the low-hanging fruit, but also the thorny problems of military stocks and separated plutonium.

I started by casting this problem as a possible Black Swan event. Our charge is to warn governments so that we lengthen the odds against this event ever happening. There would be no joy in being proved right after the fact. Black swans do exist.

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