VIETNAM NUCLEAR SECTOR MOVING FORWARD WITH U.S. SAFETY AND

UNCLAS SECTION 01 OF 04 HANOI 000898

DEPT FOR T (JWOLCOTT, MHUMPHREY),ISN/NESS (ABURKART,PMCNERNEY),
ISN/RA (RBEISECKER) AND EAP/MLS
STATE PLEASE PASS TO NUCLEAR REGULATORY COMMISSION (KFOGGIE,
JMCLELLAND-KERR)
DEPT OF ENERGY FOR DOE/NE (EMCGINNIS, CWELLING),NNSA/NA-21
(SFRAZER, KAPT, DKOVACIC, SDICKERSON, IBOLSHINSKY, SMOSES,
ABIENIAWSKI)
COMMERCE PLEASE PASS TO USTDA (DROSSITER)
COMMERCE FOR ITA/MAC/HONG-PHONG PHO

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG ECON TRGY BEXP PARM KNNP VM
SUBJECT: VIETNAM NUCLEAR SECTOR MOVING FORWARD WITH U.S. SAFETY AND
SECURITY ASSISTANCE

HANOI 00000898 001.2 OF 004


SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY.


1. (SBU) Summary: A high-level Department of Energy (DOE)
delegation recently visited Vietnam to discuss the safe and secure
development of the Vietnamese nuclear sector and Vietnamese entry
into the Global Nuclear Energy Partnership (GNEP). Vietnamese
officials seemed quite interested in GNEP, but slow, consensus-based
decision-making processes may delay Vietnam's immediate, active
participation. The delegation's meetings with different Government
of Vietnam (GVN) entities with responsibility for development and
regulation of the nuclear sector highlighted Vietnam's determination
to develop civilian nuclear power and the important role the United
States has played in furthering nuclear safety and security. End
summary.

DOE Delegation Highlights GNEP Benefits
--------------


2. (SBU) In meetings with GVN nuclear officials, DOE Office of
Nuclear Energy Deputy Assistant Secretaries Ed McGinnis and Craig
Welling previewed the soon-to-arrive invitation to the GVN from the
21 current GNEP partner countries to join that organization. The
partners had unanimously decided to invite Vietnam and noted their
enthusiasm for including Vietnam based on its serious consideration
and responsible approach to the development of civilian nuclear
energy. McGinnis stressed that GNEP covers nuclear power from
mining to final disposition of radioactive waste from spent fuel
with the goal to ensure reliable and affordable commercial fuel
supplies for a safe and secure civilian nuclear power sector. GNEP
was designed to complement, not replace the International Atomic
Energy Agency (IAEA),which supports GNEP, and other international
initiatives. McGinnis emphasized that GNEP was a voluntary
partnership of equals, which operated by consensus, not through the
will of a few states with advanced nuclear capacities.

Vietnam Interested in GNEP, but not Ready to Commit
-------------- --------------


3. (SBU) High-level Vietnamese officials noted their strong interest
in GNEP, with which they had become increasingly familiar.
Ministry of Science and Technology (MOST) Vice Minister Tran Quoc
Thang noted the close connection between ongoing GNEP discussions
and GVN plans to conduct nuclear safety feasibility studies.
Additionally, Vietnam was anxious to tap into GNEP resources to
improve its infrastructure and human resources. However, several
interlocutors, including Thang, stated that the GVN would complete
an in-depth review before making a final decision on whether to
join. Vietnam Atomic Energy Commission (VAEC) Vice-Chairman Le Van
Hong reiterated Thang's comments and added that the GVN likely would
seek additional information. Dr. Ngo Dang Nhan, the Chairman of the
Vietnam Agency for Radiation and Nuclear Safety & Control
(VARANSAC),saw "the obvious benefits" to GNEP but mentioned
concerns about possible Vietnamese obligations. Additionally, as
several GVN entities play important roles in developing Vietnamese
nuclear policy (though Thang noted that Ministry of Industry and
Trade (MOIT) would likely represent the GVN with GNEP),it may take
a while for the GVN to reach internal consensus on how quickly to
move forward on GNEP membership. McGinnis acknowledged GVN comments
and reiterated the voluntary nature of the organization, with no
resource obligations - in fact, countries just beginning to develop
their nuclear sectors would be in position to receive, not provide,
resources.

Who's Who in Vietnamese Nuclear Power Sector
--------------


4. (SBU) While MOIT and state-owned Electricity of Vietnam (EVN)
have responsibility for investment in Vietnam's planned civilian
nuclear power sector, MOST exercises oversight over Vietnam's
nuclear program and serves as the designated regulator. The VAEC,
with a staff of 600, an administrative and scientific agency under
MOST, advises MOST on nuclear policy and operates the Dalat research
reactor. VARANSAC was established in 2003 under MOST and assists
the Minister in the state management of radiation and nuclear safety
and control. Its main roles include developing policies, programs,
legal documents, regulations and standards on radiation and nuclear
safety, licensing, regulatory inspections, environmental monitoring,
emergency response, and safety assessment. VARANSAC played a key

HANOI 00000898 002.2 OF 004


role in the drafting of Vietnam's new Atomic Energy Law. At the
same time, however, nuclear power's high profile and importance to
energy security and economic development ensure that the Prime
Minister's office will track, and perhaps direct, the progress of
nuclear development. In fact, despite VARANSAC's rapid growth and
human resource and training upgrades, EVN noted its belief that a
special task force headed by a deputy Prime Minister would supervise
preparation for the nuclear sector, including the creation of the
safety and security infrastructure.

With U.S. Assistance, Vietnam Developing
Nuclear Safety and Security Infrastructure
--------------


5. (SBU) Vietnam's participation in the U.S.-sponsored GNEP would
continue the trend of increasingly close cooperation between the two
nations on nuclear nonproliferation and safety and security issues.
Vietnamese officials recognize the value of U.S. assistance, with
MOST Vice Minister Thang highlighting the 2007 joint U.S.,
Vietnamese, and Russian initiative to convert Dalat nuclear research
reactor and return fresh highly enriched uranium to Russia. In
August 2007 the Department of Energy concluded a "Sister Lab"
arrangement with MOST, pursuant to which DOE signed several "action
sheets" with VAEC and VARANSAC detailing additional cooperation
between Lawrence Livermore and Oak Ridge national laboratories and
Vietnamese technical personnel on specific measures to promote
nonproliferation and security objectives. VARANSAC and VAEC praised
the recent Memorandum of Understanding for the Exchange of Technical
Information and Cooperation in Nuclear Safety Matters between
VARANSAC and the U.S. Nuclear Regulatory Commission (NRC),signed
during Prime Minister Dung's June visit to Washington D.C. Both DOE
and the NRC provided significant assistance to VARANSAC efforts to
draft the new Atomic Energy Law, which recently passed the National
Assembly. Building upon these efforts, the United States and
Vietnam have begun to negotiate to sign a broader MOU on nuclear
cooperation, which may form the basis for an eventual Section 123
Agreement, which would facilitate U.S. commercial nuclear exports to
Vietnam. EVN officials noted the upcoming U.S. Trade and
Development Agency-sponsored orientation visit to the United States
and wanted to ensure that their policymakers and technical experts
had the opportunity to learn more about the U.S. civilian nuclear
power sector.

As Energy Demand Spikes,
Vietnam to Increase Nuclear Energy Sources
--------------


6. (SBU) Vietnamese energy sector experts increasingly point to
nuclear energy to supplement Vietnam's limited domestic energy
generation capacity. Vietnam will soon run out of new sources of
hydropower and by 2011 expects to begin importing coal. Substantial
offshore natural gas reserves may be blocked by political
maneuvering over control of the South China Sea. In 2006, the Prime
Minister approved a strategy for the development of the nuclear
power for civilian purposes (power and other applications) through

2020. Pursuant to the master plan approved by the Prime Minister,
Vietnam intends to produce 10,000 megawatts from nuclear energy by

2030. Per VARANSAC, Vietnam hopes to generate 3.3 percent of its
energy from nuclear power by 2020 and 4.7 percent by 2025. On June
3, the National Assembly passed the Atomic Energy Law. VARANSAC now
is working to draft three government decrees to implement the law
and to facilitate the growth of nuclear power. Several
interlocutors explained that a recent review of energy production
and demand figures led the GVN to upgrade the importance of nuclear
in Vietnam's planned energy mix. Demonstrating this increasingly
prominent role for nuclear power, at the same time that McGinnis and
Welling visited Hanoi, the EVN Director General and VAEC chairman
accompanied the Prime Minister to Ninh Thuan province south of Nha
Trang to study a possible site for Vietnam's first reactors.

Construction Timetable
--------------


7. (SBU) According to the timetable laid out by VARANSAC, Vietnam
will break ground to construct its first two-reactor nuclear plant
in 2013, after taking two years to finalize site location followed
by a three year bidding process. VARANSAC expects construction to
last seven years, with an estimated completion date of 2020.

HANOI 00000898 003.2 OF 004


Vietnam plans to initially construct a 2,000 megawatts nuclear
facility consisting of two reactor units of approximately 1,000
megawatts each (note: per VARANSAC, this figure could vary slightly
depending upon EVN negotiations with contractors),which would be
integrated by an exclusive line into a 500 kv grid, which would then
be integrated into the national grid. VARANSAC stated that the
first site at Phuc Dinh would be based next to the national grid.
Aditional sites in Hoa Tam and Vinh Hai in Phu Yen province, to the
north of Ninh Thuan, would be placed in rural areas far from
population centers. VARANSAC Chairman Ngo Dang Nhan stated his
desire for one common design for the first several units to promote
better nuclear safety, but acknowledged that political calculations
would impact design decisions.

Contracting Opportunities
--------------


8. (SBU) VAEC and EVN recently completed a pre-feasibility study for
the construction of the initial two reactors, which was approved by
the Ministry of Planning and Investment, and which they expect to
submit to the National Assembly for approval early next year. Once
approved by the National Assembly, EVN will coordinate the tender
process to draft a full feasibility study, which Nguyen Phu Gia,
Deputy Director of the Project Approval Department at EVN, expected
to issue in October or November of this year. Subsequently, per
Gia, all options for nuclear vendors and financing will be on the
table and the GVN would decide upon what type of contractor and
technology that it would use. (Note: VARANSAC stated that the first
plant would rely upon light water technology). By March or April
2010, EVN would tender the engineering, procurement, and
construction (EPC) contract, with the bid listed in the Vietnam
Economic Times and on the Ministry of Planning and Investment
website. EVN intended to contract with a contractor to build and
operate the facility for a period of time before transferring the
operations to EVN. MOIT Vice Minister Do Huu Hao noted that while
EVN would be the sole investor in the first two nuclear reactors,
Vietnam might open up subsequent facilities to foreign investment,
possibly up to 100 percent.

Vietnamese Nuclear Concerns
--------------


9. (SBU) Various interlocutors noted four particular concerns with
the development of civilian nuclear power - financing, safety, fuel
supply, and management of spent fuel. EVN acknowledged possible
financing problems given Vietnam's current economic uncertainty.
Indeed, Vietnam had not yet identified sources of funding to build
its first nuclear plants. EVN anticipated that it would request
construction bidders to identify these sources. EVN noted that it
could not rely upon Official Development Assistance for the
reactors, estimated to make up 45 percent of all costs, though it
might be able to do so for other components. EVN expected to rely
completely upon fuel imports for the first nuclear facilities and
stressed its particular desire to ensure adequate fuel supplies and
its concerns about any fuel supply monopolies. Though Vietnam was
pondering eventual nuclear fuel production and has some nuclear
mining and milling capacity, EVN noted that it did not have the
ability to enrich uranium. Therefore, Vietnam sought GNEP
assistance to identify needed imports for the foreseeable future.
EVN is also concerned about how to dispose of or recycle spent fuel.
McGinnis again noted the benefits of GNEP membership for nations
looking for sustainable fuel supplies and highlighted growing U.S.
enrichment capacity, while emphasizing GNEP's focus on all stages of
nuclear power, including proper handling of spent fuel.

Comment
--------------


10. (SBU) Vietnam is serious about developing a civilian nuclear
power sector and highly values U.S. safety and security assistance
to meet that target. At the same time, the United States recognizes
Vietnam's responsible approach to nuclear power, which seeks to
further joint nonproliferation goals. Over the next few years, we
expect to see even closer cooperation between the two countries,
which we hope to leverage into Vietnamese entry into GNEP. Our
increasingly tight safety and security relationship may provide
opportunities for U.S. commercial firms to enter a rapidly
developing market. However, we are not alone, as Japan, Korea,

HANOI 00000898 004.2 OF 004


China, Russia, and France actively promote their nuclear sectors in
Vietnam. We will need to fight for this market.


11. (U) This cable has been cleared with the DOE delegation.

MICHALAK