ISN ACTING A/S MCNERNEY'S NONPROLIFERATION

S E C R E T CANBERRA 000671


STATE FOR ISN, T, VCI AND EAP

E.O. 12958: DECL: 06/30/2018
TAGS: KNNP MNUC PARM PREL AS

SUBJECT: ISN ACTING A/S MCNERNEY'S NONPROLIFERATION
CONSULTATIONS IN CANBERRA

Classified By: Deputy Chief of Mission Daniel A. Clune. Reasons: 1.4 (b
),(d)

SUMMARY
--------------

1. (S/NF) During ISN Acting Assistant Secretary Patricia
McNerney's June 30 consultations on nonproliferation in
Canberra, senior Australian officials said Prime Minister
Rudd wanted his proposed International Commission on Nuclear
Nonproliferation and Disarmament to have a strong disarmament
focus. They confirmed the initiative remains in a nascent
stage, with such details as consultations with Japan on
co-chairing the initiative, development of terms of
reference, and identification of representatives to sit on
the Commission remaining to be worked out. On Iran,
Australian officials confirmed the GOA was considering what
additional steps it could take to increase pressure on Iran,
including regarding Bank Melli. In response to the DPRK's
recent nuclear declaration, the GOA had renewed its offer to
provide bilateral development aid if the DPRK made progress
in abandoning its nuclear weapons but took on board AA/S
McNerney's concerns that Australia not provide
non-humanitarian aid prematurely. Discussions also covered
the Proliferation Security Initiative; the Global Initiative
to Combat Nuclear Terrorism; Civil Nuclear Outreach;
Trilateral Cooperation; Chemical, Biological, Radiological,
and Nuclear (CBRN) threat reduction, and Australian plans to
host the Missile Technology Control Regime (MTCR) Plenary in
November 2008. The Australian officials said strong
anti-nuclear sentiment in Australia ruled out consideration
in the short term of the use of nuclear energy to address
reduction of greenhouse gases. The new Rudd government is
not expected to make a decision for some months on whether to
continue the previous government's participation in the
Global Nuclear Energy Program (GNEP).


2. (S/NF) Acting Assistant Secretary McNerney discouraged an
International Commission predominantly focused on
disarmament, noting it would divert the spotlight away from
such proliferators and NPT violators as Iran, Syria and North
Korea, and ignored the positive progress that was being made
in disarmament. She discussed U.S. plans to announce
additional sanctions against Iran, noted EU's recent issuance
of further sanctions and urged Australia to consider more
expansive sanctions. On Australia's offer of bilateral
development assistance to North Korea, McNerney cautioned
against resuming aid before the DPRK had taken further steps
toward verifiably dismantling its nuclear program. She urged
Australia to remain engaged in GNEP, stressing GNEP's
importance in preventing nuclear proliferation and
facilitating the benefits promised by the NPT, and the
importance of Australian leadership on this international
issue. End Summary.


3. (SBU) The Department of Foreign Affairs and Trade (DFAT)
hosted an interagency roundtable for Acting Assistant
Secretary McNerney in Canberra June 30, including
representatives from the Australian Department of Defence,
Australian Safeguards and Nonproliferation Office, Department
of the Prime Minister and Cabinet, and the Office of National
Qof the Prime Minister and Cabinet, and the Office of National
Assessments. (A full list of participants is provided at
para 28.) A summary of the discussions follows.

NUCLEAR NONPROLIFERATION AND DISARMAMENT COMMISSION
-------------- --------------

4. (C) Jennifer Rawson, First Assistant Secretary for
International Security, DFAT, traced the genesis of Prime
Minister Rudd's International Nuclear Nonproliferation and
Disarmament Commission (NNDC) initiative from the Australian
Labor Party's (ALP) longstanding commitment to nuclear
disarmament and its experience with the 1995 Canberra
Commission on the Elimination of Nuclear Weapons, initiated
under the previous Labor government. The new Commission,
chaired by former foreign minister Gareth Evans, would build
on this history but take into account the current strategic
realities in seeking to make a practical contribution to
nuclear nonproliferation and disarmament. She stressed that
Prime Minister Rudd wanted the Commission to give a strong
focus to disarmament, a view shared by Evans. In
establishing the commission, the GOA re-emphasized the
importance of the U.S. alliance and its role in the region,
and planned to consult closely with the United States.
Rawson acknowledged the progress the U.S. had made on


disarmament, voicing the hope the U.S. could make additional
steps towards that goal. Development of the commission was
at an early stage. The GOA needed to continue discussions
with the Japanese government about the possibility of
co-chairing the Commission, which would be composed of
independent experts rather than government officials. Rawson
expressed optimism that the question of Japanese
co-chairmanship wold be resolved in a week or so. Another
remaining task is development of the commission's terms of
reference (TOR). Gareth Evans, who is not able to turn his
attention to the commission until mid-July, would have a hand
in drafting the TOR. Rawson said she hoped the United States
and other countries could contribute to it, too.


5. (C) Acting A/S McNerney cautioned that the commission
should not veer too far towards disarmament either in terms
of focus or members' backgrounds. While the United States
agreed the NPT was under serious pressure, it would not be
helpful to focus on disarmament at the expense of continuing
to spotlight proliferators and NPT violators such as Iran,
Syria and North Korea. Moreover, the U.S. record on
disarmament was a good one, she argued, adding the United
States reduced the role of nuclear weapons in its strategic
posture and that the total number of U.S. nuclear weapons had
been reduced significantly and was at one of the lowest
points in history. McNerney, observing that Australia had
set an ambitious agenda for itself before the 2010 NPT Review
Conference (RevCon),asked what timetable the GOA had in
mind, and whether it contemplated asking the United States to
join the Commission. She also cautioned against allowing the
Commission to be used as a platform to attack the United
States. On timing, Rawson responded the commission would
have an as-yet-undetermined number of meetings before
producing at least an interim report in advance of an
international conference that Australia planned to host at
the end of 2009, approximately six months before the RevCon.
She said the question of representation on the Commission
remained to be discussed with Gareth Evans, but offered her
personal view that it would be unrealistic not to include the
United States and other P-5 states. Rawson took on board the
caution about allowing unhelpful elements to highjack the
agenda, reassuring McNerney that Australia would not let that
happen. Rawson also noted the important work by Chris Ford
over the last year in NPT meetings publicizing USG success on
disarmament.

IRAN
--------------

6. (S/NF) Acting A/S McNerney briefed her Australian
interlocutors on the status of Iran's enrichment activities
and the latest P5 plus 1 offer, noting the international
community needed to be ready to respond with increased
pressure if Iran rejected the offer. She cautioned that,
rather than rejecting the offer outright, Iran would
prevaricate and attempt to play countries off against each
other to buy time. She observed that Iran was low on yellow
cake, and that the United States had approached Rio Tinto to
ensure Iran did not have access to new supplies from that
Qensure Iran did not have access to new supplies from that
source. She urged further outreach to other companies to
close off other possible markets. McNerney advised the
United States was continuing to push for a new UN Security
Council resolution. The U.S. planned to announce additional
sanctions against Iran possibly during the second week of
July. McNerney asked the GOA to consider more expansive
sanctions as well, including designating Bank Melli. In
addition to sending a signal that Iran faced consequences for
its action, she asserted, further GOA steps would indirectly
help our strategy of encouraging the Gulf nations to pressure
Iran. She disputed commentary that claimed sanctions were
failing, describing the practical effects banking, shipping
and travel sanctions were having in isolating Iran, but that
the total effect of sanctions requires additional time and
increased effort. McNerney highlighted cooperative efforts
in denying IRISL vessels unfettered access to international
shipping as one example of further steps to implement UNSCR

1803.


7. (S/NF) Rawson confirmed the Australian government was
looking at additional measures it could take, especially in
light of the EU announcement of additional sanctions. The
GOA had scope to do more and understood the importance of
having the international community united in forcing Iran to
halt its activities. She was pessimistic that Iran would


pull back from its course. Iran wanted, at a minimum, to
move to a breakout capacity in its nuclear development, she
asserted. The global community needed to maintain pressure
to force Iran to consider the consequences of its actions.
Iran's neighbors, such as Saudi Arabia, were worried.


8. (S/NF) John Carlson, Director-General of the Australian
Safeguards and Non-Proliferation Office, commented that the
Iranians had a sufficient stockpile of LEU at Natanz to
produce HEU by the middle of 2009, if its centrifuges
continued operating at their current rates of efficiency,
which he put at two-thirds of 80 percent. The fact that Iran
was able to keep its older centrifuges operating continuously
at that level, and was bringing more advanced centrifuges on
line, was not good news, he observed. Carlson handed
McNerney three ASNO documents: "Further Nuclear Facilities in
Iran: Obligation for Early Provision of Design Information to
the IAEA"; "Iran Nuclear Issue -- Brief Critique of Options
for a Negotiated Outcome"; and "Safeguards in a Changing
Environment." (Papers have been forwarded to ISN separately.)

NORTH KOREA
--------------

9. (S/NF) Acting A/S McNerney described U.S. actions taken in
response to the DPRK's nuclear declaration, along with next
steps in the Six-Party process, but stressed that while these
actions are positive, the United States remained
appropriately skeptical of North Korea's direction and would
test it through verification activities. She noted a
verification implementation plan had not yet been finalized,
and none of the disabling actions the DPRK had taken to date
would be difficult to reverse. Moreover, the DPRK had not
yet taken the significant actions, such as removal of fissile
material and disposal of fuel rods, that would show its
serious intent in dismantling its nuclear program. Taking
note of Foreign Minister Smith's announcement following the
DPRK declaration that Australia had renewed its offer of
development assistance, McNerney cautioned Australia against
prematurely resuming development aid and urged Australia to
wait until North Korea had taken more concrete actions to
dismantle its nuclear program, adding she had delivered the
same message to the Europeans. She warned that the DPRK was
skilled in extracting maximum assistance by doing as little
as possible.


10. (S/NF) First Assistant Secretary Rawson reaffirmed
Australia's support for the Six-Party Talks and its intention
to consult closely with the 6PT states. Australia shared
U.S. concerns about North Korea's proliferant behavior,
particularly with Syria and Burma, and procurement networks.
It was unclear to Australia whether the DPRK had made the
decision to give up its nuclear weapons, but it was important
to involve them in a process that promised to bring them
closer to giving up their weapons and fissile material,
estimated to be in the range of 30 to 55 kg. On resumption
of aid, Rawson assured McNerney that if the GOA begins
providing assistance to North Korea, it would be on a very
small scale, for example in agriculture, and would be linked
Qsmall scale, for example in agriculture, and would be linked
to further progress in dismantling its nuclear program.
Roger Hodgkins, Senior Analyst with the Office of National
Assessments, observed the DPRK declaration dealt only with
plutonium. It had been crafted in such a way to make access
to an HEU program a challenge. McNerney noted that the U.S.
verification plan was being drafted to cover all aspects of
the North's nuclear and weapons programs.


11. (S/NF) Turning to Syria's suspected nuclear site,
McNerney said the Syrians had not been helpful in providing
full access to IAEA inspectors. Carlson opined that the
inspectors could be expected to find graphite from the
reactor, but the Syrians would likely concoct a cover story
attributing the presence of graphite to missile engines. The
best way to verify the existence of a nuclear facility would
be to get to the rubble underneath the new building
constructed on the site, he said. McNerney interjected it
was also worrisome that Syria had denied IAEA access to the
other suspected nuclear sites.

PROLIFERATION SECURITY INITIATIVE (PSI)
--------------

12. (C) DFAT Acting Assistant Secretary for Arms Control and
Counter-Proliferation Gerry McGuire said Australia was
pleased with the evolution and course of the PSI program,


which now included 91 countries. He described Australia's
outreach activities in the Asia-Pacific region, including
plans to host a regional PSI meeting in 2009. He hoped to
flesh out GOA plans at the PSI meeting in Paris in September.


13. (C/NF) Acting A/S McNerney described U.S. outreach
efforts with Thailand and Indonesia. Apparently, Thailand
was not yet ready to join PSI, despite positive signals from
the Ministry of Foreign Affairs, because of opposition from
the military. Indonesia had shown itself to be increasingly
open-minded towards PSI, but preferred more bilateral
cooperation. A possible strategy would be to continue to
engage bilaterally with Indonesia, for example through
activities in the Malacca Strait, until it was comfortable
with cooperation and might find it easier to endorse the PSI.


14. (C/NF) Rawson agreed, suggesting that PSI countries
engage with Indonesia bilaterally in the same kinds of
exercises and activities that are compatible with PSI, but
without badging them as PSI activities.

Global Initiative to Combat Nuclear Terrorism (GI)
-------------- --------------

15. (SBU) Jennifer Rawson expressed satisfaction with the
progress of the GI, but hoped to see more countries in the
Asia-Pacific region engaged. Australia was planning
additional outreach, and was examining what can be done at
the practical level to make the program more meaningful. It
was more important to engage in practical activities than to
simply sign up more countries, she observed. Australia was
looking at possible activities for 2009 that focused on
prevention as well as consequence management.


16. (SBU) McNerney agreed on the need to show concrete
outcomes. Membership had had the benefit of making countries
reorganize themselves internally in a way that made them view
nuclear terrorism differently. Outreach remained important.
McNerney encouraged Australia to enlist the participation of
the private sector and local governments in the GOA's efforts
to prevent and respond to nuclear terrorism. McNerney also
suggested that the GOA host an exercise in 2009. Rawson
noted the GOA was considering an exercise, and would more
likely focus on prevention rather than consequence management.

Civil Nuclear Outreach
--------------

17. (C/NF) Acting A/S McNerney described U.S. civil nuclear
outreach programs, and the U.S. HEU downblending program to
create an assured fuel supply. She expressed U.S.
appreciation for Australia's support for the United States'
revised criteria-based proposal for controlling transfers of
enrichment and reprocessing (ENR) facilities and technology
in the Nuclear Suppliers Group. Canada opposition to the
turnkey - blackbox criteria appeared to be rooted in a
fixation on rights. She described fuel bank proposals,
including the Nuclear Threat Initiative fuel bank fund
challenge. She also noted MOUs signed with Gulf states that
set a precedent for responsible civil nuclear development.
McNerney expressed hope that Australia would remain in the
Global Nuclear Energy Partnership (GNEP),and that Australia
QGlobal Nuclear Energy Partnership (GNEP),and that Australia
would help advocate for nonproliferation as aspects of civil
nuclear development, including under GNEP.


18. (C/NF) Rawson replied that there had not yet been a
decision by the new Labor government on Australia's continued
participation on GNEP. A GOA decision was two or three
months away at least, as the issue was not high on the
government's list of priorities. She recounted the
Australian Labor Party's history of opposition to nuclear
power plants, and noted that the party had had a bitter
dispute in 2007 over whether to abandon its policy to limit
uranium mines to three nationwide. In the end, the policy
was scrapped but the polarization it occasioned would make it
even more difficult for a Labor prime minister to reverse the
long-standing opposition to nuclear energy in Australia.
There had been some discussion about revisiting the nuclear
energy question, driven by concerns over climate change and
the imperative of developing an emissions trading scheme, but
it was a minority view. Some in Australia saw GNEP as merely
a scheme to promote nuclear energy rather than a
nonproliferation program. Rawson said she had had some
success in educating the Minister for Foreign Affairs on
GNEP's value on nonproliferation. It would take several


months for the issue to play out, she predicted, voicing hope
that the nonproliferation assurances in a reliable fuel
supply would prevail. In her view, Australia needed to be a
player in the global nuclear energy picture, of which GNEP
was a part. There was a visceral anti-nuclear feeling in
Australia, but it was up to the government to manage it.


19. (C/NF) Carlson commented that while in opposition, the
Australian Labor Party believed GNEP was a plot by nuclear
countries to send spent fuel back to Australia for storage.
It would be hard to overcome entrenched views on GNEP.
Carlson noted an Executive Committee of Cabinet would meet at
the beginning of October to take up the issue. Carlson
stated flatly that there was no way to get to a workable
cap-and-trade system without nuclear energy, a point he had
made directly to Prime Minister Rudd. Carlson did not
foresee a shift to embrace nuclear energy emanating from the
federal level. Decisions about energy were made at a state
level, he explained. He predicted there would be no movement
towards nuclear energy in Australia unless a state or
territory concluded that it needed to have nuclear power in
its energy mix.


20. (C) Carlson said Australia was interested in seeing
adherence to the Additional Protocol as a condition of
supply. Acting A/S McNerney confirmed that this was
consistent with U.S. policy, which supported the Additional
Protocol as a condition of supply. In reponse to Rawson's
question on the status of the "square brackets," McNerney
said the U.S. hoped the issue would be addressed in the G8
statement.

U.S.-India Civil Nuclear Agreement
--------------

21. (C) In response to Rawson's question about the status of
the U.S.-India civil nuclear agreement, McNerney acknowledged
that prospects for passage before the end of the current
Administration appeared slim, although there was a small
window of opportunity. Rawson reiterated the Rudd
government's policy that it would not sell uranium to India
as a non-NPT member. The GOA would decide on an exception
for India in the NSG for the U.S.-India deal "at the
appropriate time," she added.

Trilateral Strategic Dialogue (TSD)
--------------

22. (C/NF) Acting A/S McNerney discussed the possibility of
using the TSD to advance nonproliferation goals, perhaps
through a new working group. One area for trilateral work
could be in export controls and border security; another
would be bioterrorism. Japan could focus on industry, with
the U.S. contributing on the legal angle. Each country could
use its strengths, and target specific countries in capacity
development. Biosecurity engagement with Indonesia, for
example, would be an area for collaboration. She thanked
Australia for contributing to the success of the trilateral
May 2008 bioterrorism workshop in Kuala Lumpur.


23. (C/NF) Rawson agreed that the TSD represented an
important means of pursuing practical nonproliferation
cooperation. The Japanese needed to be cajoled, however, and
were more "siloed" than Australia or the United States, but
Qwere more "siloed" than Australia or the United States, but
it was still worth the investment and effort to enlist
Japan's participation. Rawson noted it was important to both
consolidate our current trilateral activities and expand into
new areas.

CBRN Threat Reduction
--------------

24. (SBU) Ms. McNerney described ISN's threat reduction
activities in Southeast Asia, particularly Indonesia and
Thailand, flagging U.S. success in developing good relations
with scientists. The proliferation risk from misuse of
scientists' knowledge was a very thorny issue. ISN also
worked closely with the Philippines aimed at reducing
bioterrorism. McNerney said the U.S. had also focused on the
threat posed by Pakistani nuclear weapon scientist A.Q. Khan,
demarching Pakistan to keep him under house arrest when the
Pakistani government was considering allowing him more
freedoms. Turning to the G8 Global Partnership, McNerney
acknowledged the need to expand the program's scope beyond
Russia and the former Soviet Union, despite opposition by
Russia. She expressed hope that Australia would continue to


be supportive, noting its contribution for submarine
dismantlement, and promised to revisit the issue with
Australia, once the G8 had issued its statement. The U.S.
was concerned about nuclear smuggling, and how the G8 could
organize itself to address the issue. More secure shipping
was one answer.


25. (C/NF) First Assistant Secretary Rawson outlined
Australia's parallel activities, which had a counterterrorism
focus. The Rudd government wanted to focus strongly on
Southeast Asia, as well as India and Pakistan.

MTCR Plenary
--------------

26. (C) Acting A/S McGuire reviewed Australian preparations
for hosting the MTCR Plenary in Canberra during November 3-7,

2008. The GOA had not yet named the Chair, as the nominee,
who would be DFAT's Assistant Secretary for Strategic
Affairs, was not yet in place. McGuire said the Plenary
would have a strong Southeast Asia focus. He welcomed the
U.S. outreach proposal for discussion at the Small Group.
McGuire inquired whether the U.S. planned to continue to seek
support for its UAV proposal at the Plenary.


27. (C/NF) Acting A/S McNerney responded that the U.S. needed
to get past opposition from Russia, Brazil, and South Africa.
Russia, especially, was unwilling to agree to an UAV
proposal that would reduce its own flexibility. The United
States was still considering how to carry the proposal
forward.

PARTICIPANTS
--------------

28. (SBU) Participants in the June 30 DFAT-hosted roundtable
in Canberra included:

United States:

-- Acting Assistant Secretary Patricia McNerney, Bureau of
International Security and Nonproliferation (ISN),Department
of State
-- Bridget McGovern, Special Advisor, ISN
-- Randall Beisecker, Action Officer for Southeast Asia,
Office of Regional Affairs, ISN
-- Daniel A. Clune, Deputy Chief of Mission, U.S. Embassy
-- John W. Crowley, Deputy Political Counselor, U.S. Embassy
(notetaker)
-- Carol M. Hanlon, Political-Military Officer, U.S. Embassy

Australia:

-- Jennifer Rawson, First Assistant Secretary, International
Security Division, Department of Foreign Affairs and Trade
(DFAT) (Chair)
-- Gerry McGuire, Acting Assistant Secretary, Arms Control
and Counter-Proliferation Branch, DFAT
-- Chris de Cure, First Assistant Secretary, Americas
Division, DFAT
-- Craig Chittick, Assistant Secretary, United States Branch,
DFAT
-- Rebecca Skinner, First Assistant Secretary, Strategic
Policy Division, Australian Department of Defence (ADOD)
-- Kathryn Hitchings, Acting Assistant Secretary, Security,
Policy and Programs Branch, Department of Defence (ADOD)
-- John Carlson, Director-General, Australian Safeguards and
Non-Proliferation Office (ASNO)
-- Rob Floyd, Acting Head, Office of National Security,
Department of the Prime Minister and Cabinet (PM&C)
-- Roger Hodgkins, Senior Analyst, Office of National
Assessments (ONA)



29. (U) AA/S McNereny reviewed and cleared this reporting
cable prior to her departure from Australia.

MCCALLUM


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