UPDATE ON UAE'S NUCLEAR POWER PLANS

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 000791

SIPDIS

STATE FOR NEA/ARP
STATE FOR T- WOLCOTT, ISN - MCNERNEY, ISN/NESS - BURKART
UNVIE FOR SHULTE

E.O. 12958: DECL: 7/2/2018
TAGS: ENRG KNNP ECON EINV AE
SUBJECT: UPDATE ON UAE'S NUCLEAR POWER PLANS

REF: A) STATE 68313, B) ABU DHABI 397, B) ABU DHABI 371, C) ABU DHABI
299

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1. (U) This is an action request. Please see para 10.


2. (C) Summary: Econchief and TDY Econoff met with Executive
Affairs Authority Director of Economic Affairs David Scott and EAA
member Hamad Al-Kaabi on July 1 to discuss UAE progress on the
Section 123 Nuclear Cooperation Agreement and to solicit a UAE pledge
to fund the Nuclear Threat Initiative (NTI) proposal for a nuclear
fuel bank. EAA officials proposed traveling to the U.S. to present
and explain their comments on the draft agreement to U.S.
negotiators. They expressed concern that some clauses in the
agreement, including the "terminate at convenience" provision and the
prohibition on reprocessing could serve as barriers to cooperation
especially with U.S. technology providers. They reiterated the UAE's
commitment to adhering to the highest standards of safety and
non-proliferation, including the renunciation of domestic enrichment
and reprocessing. Abu Dhabi is in the process of soliciting bids for
a managing agent to evaluate technology providers and a builder for
the first plant and hopes to have the winning bidder selected by
October 13. The EAA subsequently briefed the UAE foreign minister on
the NTI initiative, and he is considering it. End Summary.

Progress on 123
--------------


3. (SBU) In response to Econchief's question about the status of the
UAE review of the draft 123 agreement, Scott stressed that his
answers were informal and preliminary, since the EAA had not yet had
the opportunity to brief UAE Foreign Minister Sheikh Abdulla bin
Zayed Al-Nahyan (AbZ) and obtain his concurrence. He explained that
the EAA had reviewed the draft agreement carefully, comparing it both
with previous Article 123 Agreements and with the UAE's existing
agreement with France and with draft text from its ongoing
negotiations with the UK and other parties. The goal was to sign an
agreement that would facilitate cooperation with the USG and with
U.S. firms and would support the UAE's commitment to high standards
of non proliferation and safety.


4. (C) EAA officials expressed some concerns about certain sections
of the agreement, although they believed that these were resolvable.
Scott explained that some provisions could actually inhibit
cooperation with U.S. firms. By way of example, he cited the
"termination of convenience" clause, whereby the U.S. could terminate
the agreement with one year notice and no reason. He noted that this
provision was not in any previous 123 Agreement that the UAE had
reviewed. If the UAE signed up to this clause, he said, it would
need to factor the cost of any potential USG termination into its
decision about whether to buy U.S. technology, which would hurt the
competitiveness of U.S. firms. He also highlighted the prohibition
on reprocessing as potentially problematic. Although the UAE had
renounced both domestic reprocessing and enrichment, it needs to be
able to make an economic decision as to whether or not to avail
itself of foreign reprocessing as part of any waste management plan.
He suggested that, once the EAA had AbZ's guidance, it would send a
team to the U.S. to present its comments on the draft text and to
explain UAE reasoning.


5. (U) On July 2, Al-Kaabi contacted Econchief to say that the EAA
had briefed AbZ and had obtained his approval to move forward. He
proposed sending a team to the U.S. to discuss the UAE's 123
agreement comments with U.S. negotiators and asked Econchief to
explore possible dates. He stated that the UAE could send a team
either on the 13th of July or after July 26 if those dates work for
the USG.

Nuclear Fuel Bank
--------------


6. (C) Econchief also urged that the UAE consider pledging a
contribution to match the Nuclear Threat Initiative's proposal for a
nuclear fuel bank. He noted that the proposal was consistent with
the UAE's published nuclear energy policy. Al-Kaabi, who was very
familiar with the proposal and had a copy of the former Senator Nunn
letter to AbZ, stated that he planned to brief the initiative to AbZ.
He agreed that the idea of a fuel bank is consistent with the UAE's
policy. During the July 2 conversation, Al-Kaabi (protect) told
Econchief that he had briefed AbZ on the request and that AbZ said
that he would need to consider the matter. He speculated that AbZ
would need to consult with other senior members of the Abu Dhabi
ruling family on any potential expenditure, but suggested that AbZ
appeared positively disposed to the idea.

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Abu Dhabi Moving forward on plans
--------------


7. (SBU) On June 24, Thorium Vice President Dennis Hayes told
Econchief that EAA had reached out to about 20 companies for
expressions of interest in bidding for the position of managing
agent. EAA had reduced the number to around nine (including Bechtel,
Fluor, AMEC, and Jacobs) whom it had invited to a series of meetings
and briefings in Abu Dhabi. The managing agent would work within the
new Emirates Nuclear Energy Company (ENEC) and would evaluate
technology vendors, builders for the plant and site locations. It
would not be able to bid on either the plant construction or the
technology. Abu Dhabi's goal is to select a winning bidder by
October 13. Hayes added that Abu Dhabi hopes to select the reactor
technology by November 2009 (with some hope of moving it forward to
summer 2009). He noted that the EAA had been impressed with the
passive safety features in the Westinghouse technology. Although
Scott declined to go into details about the meeting, he expressed
irritation with AMEC for leaking the discussion to the news media,
especially since the media got the story wrong.


8. (SBU) Scott also said that the UAE was moving forward on
developing a nuclear regulatory authority and had made an offer to an
individual to head that authority. He declined to say who, but we
understand that both candidates are IAEA staff members. Scott said
that once the authority is up and running, they would like to explore
the possibility of cooperation with the NRC and examine whether the
NRC (and other regulators) could second personnel to the UAE
regulator.


9. (U) Action request. Please advise as to availability of
appropriate USG interlocutors to discuss UAEG comments on the draft
123 agreement. UAE proposed dates to travel to U.S. would be either
July 13 or after July 26. End Action request.
Quinn.