Big Sale Is On as U.S. Moves to Trim Strategic Stockpile

The Pentagon is putting its money where its mouth is on the question of whether the Cold War really is over: It is selling off a big chunk of the nation’s strategic stockpile, which was created to hoard scarce commodities that might be needed in a global war.

Over the last few months, the National Defense Stockpile, the Arlington, Va., agency that oversees the nation’s $6.3-billion strategic inventory, has greatly expanded the volume of goods it seeks to sell.

The original stockpile was set up in the early 1940s after the United States found itself short of strategic materials--metals, minerals, ores and industrial jewels--when the nation entered World War II.

It was enlarged significantly during the 1950s and has been maintained at high levels ever since. The strategic materials actually are stored at some 88 locations around the country--at military bases and at warehouses leased from commercial firms.

But with the Cold War now history, the United States believes it will have more warning before any conflict begins and therefore does not need to keep such a large cache.

At the same time, officials say, the Pentagon can count on obtaining many of these goods from foreign suppliers--even if the nation becomes embroiled in the kinds of Desert Storm-type regional wars that policy-makers say now are likely.

“It’s all changed quite drastically since the end of the Cold War,” says Richard J. Connelly, administrator of the defense stockpile.

Perhaps the most glamorous sale by the agency in recent years was of a significant portion of the stockpile’s industrial diamonds. The sale, in mid-February, unloaded 1.08 million carats, at a price of $68.3 million.

But as Connelly points out, the agency’s operations are not all glitter. It also is selling such dull-sounding commodities as aluminum, antimony, cadmium, fluorspar, iodine, manganese, mica, nickel, quartz, rutile, sebacic acid, silicon carbide, talc and tin.

The materials are used in the manufacture of an array of weapons. Aluminum, for example, is used to make aircraft frames and ship parts. Bismuth is used in castings and pharmaceuticals, cobalt in jet engines and manganese to make batteries.

Agency officials say it isn’t just the volume of sales that has changed since the Cold War days. Because of the cut in force size, authorities also are shifting the types of materials sold, offering more metals, which previously would have been needed for weapons, and proportionally less minerals and ores.

One problem Connelly faces is how to unload the higher volume of strategic materials and still meet the two conflicting goals established for his agency by Congress--avoiding undue disruption of world markets and obtaining maximum return for taxpayers.

Indeed, such trade groups as the Tannin Extract Producers’ Assn. and the American Zinc Assn. and countries such as Argentina, Australia, Bolivia and Canada occasionally have protested that the planned sales are driving world prices down.

Connelly’s solution has been to proceed slowly, keep everything out in the open and be prepared to put off any sale if it threatens to prove too upsetting. A special interagency Market Impact Committee provides advice.

One factor making Connelly’s job more difficult these days is that, with most of the world still in the economic doldrums, the markets are near a low point--making Uncle Sam less likely to reap a big return and industry more likely to complain about U.S. sales.

As a result, Connelly estimates that it may take 10 to 20 years for the agency to work off the excess it now believes it has. This year it plans to sell between $350 million and $400 million worth of goods--up from $139 million a year in the Cold War days.

Connelly’s “buy” and “sell” orders come directly from the Pentagon, which decides once a year which materials the military is likely to need for the next 12 months.

The agency essentially has stopped buying anything, unless it is to upgrade the quality of its holdings. If the Cold War were rekindled, Connelly says, it would start buying once again. But for now, the big sale is on.