BERLIN: INTERNATIONAL CONFERENCE ON NUCLEAR FUEL

UNCLAS SECTION 01 OF 04 BERLIN 000558

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E.O. 12958: N/A
TAGS: PARM AORC IAEA KNPP ENRG GM
SUBJECT: BERLIN: INTERNATIONAL CONFERENCE ON NUCLEAR FUEL
SUPPLY - A THREE PILLAR CIRCUS

SUMMARY
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1. (SBU) Originally intended as a venue for formally rolling
out German Foreign Minister Steinmeier's proposal to
establish a new IAEA-run uranium enrichment facility, the
scaled-back "International Conference on Nuclear Fuel Supply:
Challenges and Opportunities," hosted by Germany, the
Netherlands, and the UK in Berlin April 17-18, was instead
billed as a forum for consideration of "proliferation-proof"
solutions to the demands of countries interested in
developing small and medium scale nuclear energy programs.
Notwithstanding the change in focus, IAEA Director General
ElBaradei and Steinmeier both pushed the German proposal in
their opening statements. Apart from the Russian Fuel Bank
proposal, however, most participants did not discuss in
detail the various reliable accesses to nuclear fuel (RANF)
proposals currently under consideration by IAEA members.


2. (SBU) Both keynote speakers also injected disarmament into
the mix with ElBaradei quoting German President Koehler as
saying the best way to build trust is by focusing on
disarmament, arms control, and non-proliferation. South
Africa's Abdul Minty subsequently raised the issue of
"trust," referring to disarmament and to the potential
"cartelization" of nuclear fuel services as the underlying
motive of the RANF proposals. Representatives of other
potential nuclear power states picked up on this theme,
repeating concerns about trust with regard both to nuclear
weapons states and fuel service providers. Panelists spoke
on behalf of countries that rely on outside sources for
enriched uranium, countries that produce enriched uranium for
sale on the world market, and commercial providers of
enriched uranium. END SUMMARY.

OPENING STATEMENTS BY STEINMEIER AND ELBARADEI
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3. (SBU) The conference opened with statements from German
Federal Foreign Minister Frank-Walter Steinmeier and IAEA
Director General Mohamed ElBaradei. Both acknowledged the
world's growing energy needs, particularly in developing
countries, and the increasing role nuclear energy will play.
Steinmeier focused on the need to respect the rights of
countries to pursue the peaceful use of nuclear energy and
emphasized the responsibility of NNWS to support
non-proliferation. ElBaradei made statements focusing on the
disarmament of nuclear weapons states (NWS),singling out the
U.S. and Russia as sending "the wrong message" to the rest of
the world on disarmament. ElBaradei outlined a three-stage
vision aimed at successful nuclear fuel cooperation between
supplier and consumer states; first, set up a system to
assure reliable access to nuclear fuel supply, second, place
all new enrichment and reprocessing facilities under
multilateral control -- the core concept behind Steinmeier's
Multilateral Enrichment Sanctuary Project (MESP) proposal ---
and finally place ALL existing and future ENR facilities
under multilateral control consistent with the Fissile
Materials Cut-Off Treaty. ElBaradei ended by emphasizing the
importance of building "trust" between supplier and consumer
states, which underscores his position as a mediator in the
middle of this debate. Both Steinmeier and ElBaradei briefly
mentioned -- but did not stress -- that all NPT signatories
should be held accountable for violations and failure to meet
non-proliferation commitments.

VIEWS FROM NUCLEAR POWER COUNTRIES NOT PURSUING ENRICHMENT
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4. (SBU) Representatives from Finland, the Ukraine, and Korea
gave presentations detailing their approaches to meeting
their respective nuclear fuel demands. Mr. Jae Min Ahn,
Manager of the Korea Hydro Nuclear Corporation, said the ROK
generates 35.5 percent of its electricity from nuclear power
and yet is 100 percent dependent on foreign nuclear fuel
supply. He said the ROK approaches its fuel supply needs
with a focus on stable security, long-term fuel contracts,
advanced procurement, overseas investment, and
diversification -- an approach that has yielded successful
results. This approach was echoed by representatives from
the Ukraine and Finland, who voiced similar satisfaction that
the nuclear fuel market has successfully satisfied their
needs.

THE NUCLEAR FUEL SUPPLY MARKET IS IN GOOD SHAPE
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5. (SBU) Robert Vance, Energy Analyst with Canada's Nuclear
Energy Agency, gave testimony pertaining to the healthy state
of the nuclear fuel supply market and its excellent future
prospects. Vance stated uranium is very plentiful and that
current rates of consumption would yield a 100-year supply
(potentially thousands with next-generation reactors).


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SOUTH AFRICA: RESUMPTION OF FUEL PROCESSING
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6. (SBU) Ambassador Abdul Minty, South African MFA Deputy
Director General for Nonproliferation made strong statements
advocating the unobstructed right for countries to pursue
nuclear energy and access to advanced nuclear fuel
technologies. Minty specifically took exception to the
technology-restrictive pre-conditions weaved into earlier
nuclear fuel assurance proposals stating "Any proposal must
protect a state's right for all aspects of peaceful nuclear
power." Minty cited the last Non-Aligned Movement (NAM)
Summit in Cuba and said NAM nations agreed to ensure the
sovereignty/management of their own resources and agreed
there should be no restrictions on processing rights.


7. (SBU) Minty stated there is a "lack of trust" among the
NAM that supplier states would not hold nuclear fuel as
collateral to impose political agendas on consumer states.
This is the overwhelming factor in South Africa's
reservations about nuclear fuel assurance proposals.
Specifically, Minty stated it is not enough to have fuel
assurances and he "doubts" the ability of the IAEA, as a
proposed central authority in nuclear fuel distribution, to
withstand political pressure in its decision making.


8. (SBU) Minty announced South Africa is significantly
increasing its investment in nuclear energy and is seeking
reprocessing and enrichment capabilities. His stated reasons
were an effort to become nuclear fuel independent citing
concerns about the possibility of a future nuclear fuel
supply cartel. Minty added, in the future South Africa will
restrict uranium exports in order to maintain a strategic
fuel supply.

NEW PLAYERS PLANNING NUCLEAR POWER PROGRAMS
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9. (SBU) Egypt and Turkey gave presentations highlighting
their plans for nuclear power programs. In addition,
Albania, Morocco, and Indonesia made brief comments
announcing their intentions to start nuclear power programs
as well. Mr. Aly Serry, Head of the Department for
Disarmament Affairs - Egypt, said Egypt's nuclear power
program is progressing in compliance with the IAEA and Egypt
is carefully reviewing the various fuel assurances proposals.
Serry remarked the proposals are all very supplier-centric
and he views these proposals as a way for NWS to regulate
NNWS. Serry added he has a serious problem with NPT article
IV in connection with the proposals and interprets article IV
as giving states access to all peaceful nuclear technology -
something he feels is being restricted in the proposals.


10. (SBU) Mr. Ali Tanrikut, the Vice President of the Turkish
Atomic Energy Commission, said Turkey is pursuing a
public-private-partnership (PPP) in its nuclear power
program. Tanrikut added, under PPP Turkey will encourage the
private sector to pursue nuclear fuel fabrication in Turkey
with an aim to decrease dependence on foreign fuel.

PURSUING ENRICHMENT FOR A SMALL MARKET: DOES NOT MAKE SENSE
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11. (SBU) Several representatives from nuclear fuel producers
remarked that it does not make economic sense for states to
pursue fuel enrichment unless it is on a very large scale.
Mr. Alexey Lebedev, the Deputy Director General, Tenex -
Russia, spoke at length about the Russian International
Uranium Enrichment Center (IUEC) in Angarsk as a nuclear fuel
services option so that developing countries do not have to
embark on "very expensive" enrichment programs. Lebedev
stated, "We would like to advise against countries developing
fuel processing - it is simply not economically viable." Mr.
Mikkola of Finland echoed this statement and said, "It is not
economical to create nuclear fuel supplies for small markets."

THE ANGARSK OPTION
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12. (U) Lebedev summarized the basic principles of IUEC as an
IAEA safeguarded, commercially operated uranium enrichment
service where member states are guaranteed access to Enriched
Uranium Product (EUP) based on existing market orientated
principles. Lebedev described IUEC through three stages of
evolvement; Stage I) (current stage) establishment of the
initial share distribution of the chartered IUEC capital,
presently 90% Tenex (Russian state owned) and 10% Kazatomprom
(Kazakhstan),Stage II) reorganization of the Russian nuclear
industry, and State III) inclusion of new member states
joining the IUEC.


13. (U) In transition to Stage II, the IUEC will create a
nuclear materials fuel bank adhering to a draft agreement
between the IAEA and the Russian Federation and consisting of

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120 metric ton of low-enriched uranium (LUE) to assure
supply, delivery price, safety, physical protection and
liability of EUP to any member state of the IAEA. This fuel
bank is intended to protect IAEA member states from EUP
supply disruptions unrelated to technical or commercial
considerations. Stage III will begin with the pending
membership of Armenia in the IUEC (after the exchange of
notes). After the membership with Armenia is finalized, the
IUEC shares breakdown will be 51% Tenex and 10% Kazatomprom,
10% Armenia, and 29% remaining for future IUEC member states.



14. (SBU) COMMENT: Lebedev's presentation on the Russian
IUEC program generated a significant amount of interest from
conference participants, particularly Canada, Great Britain,
Brazil, Jordan, and Egypt. IUEC is not just simply a
proposal but a real program with a fair amount of momentum.
This is more likely the result of countries' interest in
short term access to nuclear fuel, rather than an indication
of widespread support for the various multilateral fuel cycle
initiatives. END COMMENT.

JAPANESE PROPOSAL: FOCUS ON FRONT END NFC ACTIVITIES
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15. (U) Ms Tomiko ICHIKAWA, of the Japanese MFA Energy
Division, provided a briefing outlining the Japanese IAEA
Standby Arrangements Systems (SAS) for Nuclear Fuel Supply
proposal. Billed as a compatible and complementary proposal
to the existing RANF proposals, the goal of SAS is to enhance
transparency nd predictability of the NFC front-end market.
Te SAS proposal framework identifies the IAEA as a entral
information repository of IAEA member stats NFC activities:
uranium supply, storage, convesion, enrichment, and fuel
fabrication. Under SS, IAEA member states would notify the
IAEA by priodically registering their current uranium oresupply, reserve supply, conversion, enrichment, and fuel
fabrication activities and this information would be made
available to all IAEA members.

THOUGHTS ON SHARING NUCLEAR FUEL PROCESSING TECHNOLOGY
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16. (SBU) Mr. Lebedev indicated that Russia is not opposed to
sharing (some) enrichment technology and cited Kazakhstan as
an example where technology sharing is taking place. Lebedev
emphasized a "black box" approach to this technology sharing
and stated no classified information would be shared even
under IUEC. Mr. Arthur de Montalembert, the Vice President
for International Affairs and Marketing, Areva - France,
voiced strong opposition to sharing enrichment technology
citing nuclear enrichment as a clear dual use technology.

BRAZIL: A FUTURE FUEL PROVIDER - NO CONFLICT GOOD VS EVIL
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17. (SBU) Ambassador Antonio Guerreiro, the Brazilian
permanent representative at the IAEA, made statements about
how Brazil has become "energy self sufficient" despite being
cut off by the U.S. in the 1970's and voiced Brazil's role as
a future nuclear fuel provider. Guerreiro specifically
mentioned the agreement met last February between Brazil and
Argentina to create a bilateral enterprise for nuclear fuel
enrichment as an "important initiative." Guerreiro
emphasized Brazil's neutrality on the nuclear fuel supply
debate between supplier verses consumer states stating
"Brazil has no conflict between what is good and what is
evil; we only see two legitimate points of view." Guerreiro
stressed countries seeking nuclear energy should be dissuaded
from enrichment activities for economic reasons and that
nuclear fuel assurances should not request the transfer of
sensitive nuclear technology.

A REMINDER - THIS IS ABOUT AVOIDING "FUTURE IRANS"
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18. (SBU) During a panel presentation on political aspects of
the fuel cycle, David Noble, UNVIE Nuclear Counselor, made a
strong opening statement, "If not for the particular case of
Iran, it is likely we would not be having a conference like
this." Up to this point in the conference, Iran had hardly
been mentioned. Ambassador Guerreiro of Brazil commented
previously "regardless if Iran's nuclear ambitions are
legitimately peaceful or not, these ambitions are making
Iran's neighbors very nervous." Noble emphasized the
suspicious nature of Iran's "peaceful" nuclear power program
and Iran's failure to meet its obligations to the
international community as spelled out in three UNSCRs. He
said it is U.S. policy to encourage countries to consider
Nuclear Power, but to discourage the spread of sensitive
technologies. Noble described practical efforts to pursue
this path through RANF, GNEP and the U.S./Russia initiative.
After Noble's presentation, both Minty and Serry questioned
the U.S. commitment to meet its NPT disarmament obligations

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and accused the U.S. of continuing development of nuclear
weapons. Noble emphasized the fact that the U.S. has made
considerable progress reducing nuclear weapon stockpiles and
pointed out that ElBaradeis' assertion that all NWS are
&extending and modernizing8 their arsenals is wrong.

CONFERENCE CLOSING REMARKS
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19. (SBU) Even though Germany's RANF proposal to establish an
IAEA-run enrichment facility was hardly discussed beyond
ElBaradei and Steinmeier's keynote addresses, German MFA
Deputy Commissioner for Arms Control and Disarmament Ruediger
Luedeking reinforced the proposal in his conference summary
by saying the future of fuel services runs through the IAEA.
He also highlighted the recurring theme emphasizing the need
to build mutual trust between NWS and NNWS. Political
considerations remain the only concern for future disruption
of nuclear fuel supplies. Luedeking summarized the
conference offering eight points of consideration; 1) We
should consider nuclear supply arrangements not in isolation,
but within the strict guidelines of the NPT with a joint
vision of creating a world free of nuclear weapons, 2) we
should avoid created dividing lines created amongst NPT
members and refrain from discriminatory tactics, 3) we should
not amend or re-interpret NPT article 4, 4) there is
recognition of the dual-use aspects of civilian nuclear
technology, 5) the worldwide nuclear industry expansion is
happening, 6) any nuclear supply initiative must be
economically viable and attractive to states, 7) The IAEA is
the right place to work out solutions, and 8) the path
forward is dependent on future understanding and overcoming
psychological barriers.

COMMENTS
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20. (SBU) Although there was little discussion of the various
RANF proposals, the conference was extremely useful in
bringing representatives of potential nuclear power states
together with industry representatives. Most of the
developing country representatives were from technical
agencies. For instance, Malaysia,s delegation included the
Deputy Director General of the Technical Services Program of
the Malaysian Institute for Nuclear Technology, the Principal
Assistant Director of the Malaysian Nuclear Agency, and the
Director of the Energy Section of the Prime Minister,s
Economic Planning Unit. The technical details and practical
aspects of the presentations and subsequent discussion were
in stark contrast to the theoretical/legal points of
ElBaradei. Russia,s presentation by Lebedev was
particularly useful, as were presentations by Finland,
Ukraine and Korea, who all argued that it possible to develop
a nuclear power program without developing indigenous fuel
services.
TIMKEN JR