SPECIAL ENVOY WOLCOTT DELEGATION, GOE OFFICIALS

C O N F I D E N T I A L SECTION 01 OF 04 CAIRO 001307

SIPDIS

E.O. 12958: DECL: 06/23/2018
TAGS: ENRG ECON KNNP BEXP EG
SUBJECT: SPECIAL ENVOY WOLCOTT DELEGATION, GOE OFFICIALS
DISCUSS CIVILIAN NUCLEAR POWER

REF: A. CAIRO 574

B. CAIRO 190

Classified By: DCM Stuart Jones for reason 1.4 (b).


1. (C) Summary and comment: Ambassador Jackie Wolcott,
Special Envoy for Nuclear Nonproliferation, led an
interagency delegation to Cairo June 8-9 to discuss civilian
nuclear energy cooperation with current and former
Electricity Ministry and Atomic Energy Authority officials,
the MFA, and PGESCo Corporation, Bechtel's Egyptian partner
which is bidding on the consultant contract for developing
Egypt's nuclear power program. Ambassador Wolcott stressed
that the U.S. wants to partner with Egypt to develop civilian
nuclear energy with the highest safety and security
standards, and advocated on behalf of Bechtel for the
consulting contract. The delegation proposed cooperation
with the Electricity Ministry on feasibility studies,
infrastructure and human resources development, assistance
with effective and efficient IAEA safeguards implementation,
and regulatory framework development. Former Minister
Al-Saidi said that Egypt needs human resources expertise from
the U.S. for its program. He cautioned the delegation to be
careful about NPT and safeguards-related political
sensitivities when discussing nuclear power. Both Al-Saidi
and Nuclear Power Plant Authority Chairman Ibrahim suggested
forming a working group to hold technical, expert-level
talks. MFA officials recommended separating technical issues
from political sensitivities, and suggested they would be the
best interlocutors for the U.S. We believe the technical
experts at the Electricity Ministry will be the most
appropriate contacts for follow-up talks. End summary and
comment.

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Former Electricity and Energy Minister Al-Saidi
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2. (U) Ambassador Wolcott told former Minister of Electricity
and Energy and current chair of the ruling National
Democratic Party (NDP) Energy Committee Dr. Ali Al-Saidi that
the U.S. wants to reinvigorate its nuclear energy cooperation
with Egypt. She said the U.S. is interested in a partnership
with Egypt to develop nuclear energy in a safe, secure, and
non-proliferating fashion, building on previous bilateral
agreements. The Ambassador noted that she was appointed to
implement the 2007 Bush-Putin Joint Declaration on Nuclear
Energy and Nonproliferation. Al-Saidi said that the NDP
Energy Committee has assembled a team of technical experts to
implement President Mubarak's vision of a civilian nuclear
industry.


3. (U) Al-Saidi reviewed the history of Egypt's nuclear
energy program in the 1980's and its suspension after the
1986 Chernobyl accident. He said that after the program's
suspension, Egypt had not maintained its infrastructure and
human resources capabilities. Many Egyptian scientists had
emigrated, including to the United States. From the 1980's
to the present, Al-Saidi noted that Egypt had reached
cooperation agreements with all suppliers, including France,
the U.S., Germany, Canada, Australia, Niger, the UK,
Argentina, Brazil, South Korea, and most recently, Russia.
In 2006, he continued, when Egypt realized that its natural
gas reserves were not sufficient to keep up with demand,
President Mubarak launched a national energy strategy. One
component of this strategy calls for a more diverse energy
mix, including renewable sources and nuclear power, with a
first nuclear power plant (NPP) coming online around 2017,
which the GOE plans to expand to about 4000 MW by 2022.
Since 2006, the GOE has worked with the IAEA on a feasibility
study, "refurbished" a site survey for nuclear plants, and
begun a human resources development program, including a
management team and a safety group. In addition, Al-Saidi
noted that a "nuclear law" was now under consideration to
govern the management of nuclear and radioactive materials.


4. (C) Al-Saidi said that Egypt could benefit most from other
countries, including the U.S., in two areas: human resource
development (Egypt's "first priority") and international
nuclear energy and fuel partnerships. He also noted the
importance of assurance of supply, for both nuclear fuel and
reactors. Since nuclear power is a long-term commitment,
there is a need for sustainable, long-term relationships, he
said. Al-Saidi asserted that this fact is especially
important given the non-standardization issues related to
nuclear power, noting that one "can't buy Westinghouse fuel
from Russia." Regarding international partnerships, Al-Saidi
characterized the Global Nuclear Energy Partnership (GNEP) as
a worthwhile program "for the future," but said there needed
to be an international arrangement "for today." He expressed

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his view that when GNEP was first put forward, it suffered
from the "problem" that partnership was conditioned on
forgoing the right to pursue enrichment and reprocessing
(ENR). Now, he noted, opting not to pursue ENR technologies
was not a prerequisite, but an inherent component, which he
considered a "better approach." He characterized GNEP as a
long-term, U.S. initiative focused on new
proliferation-resistant fuels and spent nuclear fuel (SNF)
management, while noting that the "Russian initiative" of a
nuclear fuel bank is designed for today's needs. (Comment:
Though generally very well informed, Al-Saidi seemed unaware
of Russia's participation in GNEP or of U.S. plans for a
nuclear fuel reserve. End comment.)


5. (C) After Wolcott explained the objective of the Joint
Declaration, namely the provision of diverse assistance
measures to promote the responsible expansion of nuclear
energy in the near term, ISN/NESS Deputy Director Alex
Burkart briefly outlined the types of cooperation that
various USG agencies can provide, noting that the Nuclear
Regulatory Commission (NRC) and the National Nuclear Security
Administration (NNSA) already had relationships with their
Egyptian counterparts that could be reinvigorated. In
response, Al-Saidi expressed interest in "translating the
framework into practical steps" and commented on the
importance of a "first case." He added that the U.S. and
Egypt need to work together closely and transparently to
manage the sensitive political questions concerning
nonproliferation and Israel's nuclear program. He noted that
close bilateral coordination would be necessary to prepare
the Egyptian public to accept a U.S.-Egyptian nuclear energy
partnership.


6. (C) Al-Saidi closed the meeting by offering his advice on
how to facilitate civil nuclear cooperation. First, he
recommended that the U.S. not urge Egypt to forgo enriching
uranium or to sign the IAEA Additional Protocol. If Egypt
sees "good U.S. intentions" through the course of
cooperation, nonproliferation aspects will "naturally" be
resolved, he said. Noting that the U.S. and Egypt already
have standing agreements that could be revived, Al-Saidi
suggested that we move forward by building a "joint team"
charged with an "action plan." He also noted the importance
of language and clear communication, cautioning that since
"those in the driver's seat have neither a technical
background nor strong (English) language skills," we must
work hard to avoid misunderstandings. One possible solution
would be to "enrich" the joint team with "old timers" on the
Egyptian side that had studied in the U.S. and Egyptian
scientists and engineers that had emigrated to the United
States.

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Electricity Ministry and Atomic Energy Authority Officials
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7. (C) Ambassador Wolcott's delegation also held an expanded
meeting with Atomic Energy Authority Chairman Dr. Aly Islam,
Nuclear Power Plant Authority Chairman Dr. Yassien Ibrahim,
Electricity Ministry U/S Mohammed Omran, Electricity Ministry
Advisor Saiyed El-Bahi and others. U/S Omran and other
Egyptian officials outlined the history of Egypt's engagement
with civilian nuclear energy, covering the 1986 suspension,
the 2006 national energy plan, President Mubarak's October
2007 announcement regarding nuclear power, and the 2008 bid
invitation for consulting services for Egypt's first nuclear
power plant. In terms of current activities, the Egyptian
side noted efforts to reform the legislative, organizational,
financing, and human resource basis of its nuclear energy
program. Burkart noted that Egypt is now at Milestone 2 with
respect to the IAEA "Milestones" document, and emphasized
that existing regulatory and "sister lab" agreements between
the U.S. and Egypt could be reinvigorated to form the basis
of renewed cooperation. He then briefly outlined the types
of cooperation the various USG agencies could engage in,
noting that the U.S. is the largest contributor to the IAEA
and the IAEA Technical Cooperation program, and that the U.S.
would be glad to partner with Egyptian counterparts within
the context of the IAEA. USG representatives from the
Department of Energy, the Nuclear Regulatory Commission, and
the National Nuclear Security Administration then explained
in detail the types of cooperation possible with their
respective agencies, both bilaterally and through GNEP.


8. (C) Burkart also encouraged the GOE to ratify four nuclear
conventions in order to codify best practices: the Nuclear
Safety Convention, the Joint Convention on the Safety of
Spent Fuel Management and the Safety of Waste Management, the
Convention on the Physical Protection of Nuclear Material and
its amendments, and the Convention on Supplementary

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Compensation. Nuclear Power Plant Authority Chairman Ibrahim
said that the draft nuclear energy regulatory law, which will
be sent to parliament in the fall of 2008, includes
provisions on human resource development and infrastructure
construction. He added that the GOE will choose a company
for the nuclear energy consulting services contract in the
next 3-4 months, and the winner will be tasked with choosing
a reactor type and advising on long-term fuel supply and
financing options. Ambassador Wolcott advocated on behalf of
Bechtel for the consulting contract.


9. (C) Wolcott explained that the Bush-Putin Joint
Declaration, which she has been tasked to implement,
envisions a framework under which all supplier states could
provide support in promotion of the safe, secure,
transparent, and responsible expansion of nuclear energy.
She stressed that, although the U.S. doesn't want to see the
proliferation of sensitive fuel cycle technologies, and is
encouraging Egypt to carefully consider adopting
international safety and security conventions, the U.S. is
placing no conditions on enhancing cooperation. She noted
that the U.S. has "lots to offer" and is interested in
"beginning an ongoing conversation." In response, Dr. Ali
Islam noted that Egypt is currently undergoing a period of
serious reevaluation of many facets of its nuclear energy
sector. Noting that the U.S. and Egypt have a "long history
of cooperation," Ibrahim suggested that the two sides form a
"working group" to form a "solid basis" of cooperation. He
said that he hoped such technical, working-level discussions
would yield tangible results, and proposed that each side
write down its objectives and priorities to facilitate the
establishment of a working group. The delegation agreed to
his proposal.

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MFA Assistant Minister Naela Gabr
--------------


10. (C) In a separate meeting, Ambassador Wolcott informed
MFA Assistant Minister Gabr, her Chief of Staff Khalid Shama,
and MFA Disarmament Director Aly Sirry that the U.S. is
interested in reinvigorating its civil nuclear cooperation
with Egypt to promote the safe, secure, and responsible
development of nuclear energy. Gabr responded that when
Egypt began reconsidering nuclear energy, she had been
pleased to discover cooperation agreements with several
countries already in place, including the 123 Agreement with
the United States. She informed Ambassador Wolcott that the
draft law on nuclear energy regulation would form the basis
of Egypt's international cooperation on nuclear energy. She
said there would be no contradiction between cooperation
within an IAEA framework and cooperation through bilateral
partnerships though she stressed that Egypt would prefer to
start within a multilateral framework. MFA Disarmament
Director Aly Sirry stressed that the MFA deals with the
political, not the technical, aspects of nuclear energy
cooperation. He said that Egypt and the U.S. could achieve
progress on nuclear energy cooperation if technical issues
(e.g., safety and security) were separated from politically
sensitive issues.


11. (C) A/Minister Gabr said that she appreciated Wolcott's
focus on technical cooperation to develop high nuclear safety
and security standards, as opposed to additional
nonproliferation conditions. Although she initially stated
that it would be difficult for Egypt to adopt any new nuclear
conventions due to sensitivities from the public and
parliament that the GOE would be bowing to U.S. pressure, she
later added that these would be considered as long as the
focus was strictly technical. She said the MFA would be
interested in more extensive discussions to understand what
specific proposals the U.S. is offering, and she asked
Wolcott to provide a list of what the U.S. can easily provide
to form the basis of discussion. "It is easier to discuss
with my people" than with the Electricity Ministry, she said,
asserting that the MFA understands what technical assistance
the IAEA can provide. She also made it clear that Egypt was
seeking assistance from other countries and left the
impression that Egypt planned to play one supplier off
against another in order to get the "best deal." (Comment:
We believe that while it will be useful to keep the MFA
apprised of our engagement, the most appropriate contacts for
follow-up talks will be the technical experts in the
Electricity Ministry. End comment.)


12. (C) Disarmament Director Sirry expressed concern over the
term "responsible" with regard to the expansion of nuclear
energy, in particular, asking if enrichment was
"irresponsible." In response, Wolcott explained that this
was an all-encompassing term to reflect international best

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practices. She acknowledged that one U.S. objective was to
increase access to nuclear energy without the need for
developing the full fuel cycle. Burkart added that the U.S.
was not seeking to prevent states from enriching, but plans
to provide economic and political incentives to dissuade
countries from enrichment. Wolcott noted that Saudi Arabia,
Bahrain and the UAE had voluntarily committed not to pursue
indigenous fuel cycles in Memoranda of Understanding signed
with the U.S. Shama responded that the GOE does not want
these commitments to constitute pre-conditions for Egypt.
Shama concluded that the most important issue is not
terminology, but a positive end result, and he advised both
sides to concentrate on how to establish practical areas of
cooperation.

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PGESCo
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13. (U) Wolcott also met with representatives of Power
Generation Engineering and Services Company (PGESCo),a joint
partnership of Bechtel Power Corporation, the Egyptian
Ministry of Electricity and Energy, and the Commercial
International Bank of Egypt. It is acting as the local
partner for Bechtel's bid on consulting services for the
Egyptian nuclear program. The company's General Manager,
Asem El-Gawhary, is also Bechtel's Principal Vice President
for Overseas Power. El-Gawhary described PGESCo's extensive
energy projects in Egypt and throughout the region. He said
there is a need to develop Egypt's infrastructure in order to
launch a civilian nuclear energy industry, and that Bechtel
has proposed a human resources training program to support
its bid for the GOE consulting contract. He suggested that
Egypt has the historical experience and technical expertise
to be a model for U.S. nuclear energy cooperation in the
region. Ambassador Wolcott stressed to El-Gawhary that the
USG is advocating on Bechtel's behalf for the GOE consulting
contract. In response to a question about the greatest
obstacles to winning the bid, El-Gawhary expressed confidence
that Bechtel would fare well in the technical evaluation, but
conceded concern that the selection would be based on price
only. Burkart advised El-Gawhary to emphasize Bechtel's role
in the IAEA "Milestones" program to gain competitive
advantage for the bid. PGESCo officials appeared very
familiar with the document.


14. (U) Ambassador Wolcott cleared this message.
SCOBEY