AMBASSADOR SCHULTE REVIEWS WITH CHILEANS IAEA OVERSIGHT

UNCLAS SANTIAGO 000958

STATE FOR WHA/BSC, WHA/EPSC AND EEB/ESC/IEC

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG SENV BTIO OEXC PGOV CI

SUBJECT: AMBASSADOR SCHULTE REVIEWS WITH CHILEANS IAEA OVERSIGHT
ROLE IN DEVELOPMENT/CONTROL OF NUCLEAR POWER

Summary


1. (U) U.S. Ambassador to the IAEA Schulte, in Chile October 14-16
primarily to review developments on international efforts to rein in
Iran's nuclear program (septel),also discussed the IAEA's role
working with countries interested in safeguarding and sharing
nuclear technology, as well as in developing a nuclear power
generation capability. The issue has special relevance to Chile,
which faces an energy crunch, and which is considering developing
nuclear power as one option to ease its energy deficit. End
summary.


2. Ambassador Greg Schulte, U.S. Ambassador to International
organizations in Vienna, including the International Atomic Energy
Agency (IAEA) was in Chile October 14 -16, 2008 as part of a
regional visit that included Argentina and Brazil. The primary
purposes of Ambassador Schulte's visit were bilateral consultations
and public diplomacy on the Iran nuclear issue (septel).

Leave Nuclear Power to the Pros


3. (U) Going beyond a review of international efforts to rein in
Iranian (and Syrian) nuclear programs, Schulte spent much of his
visit discussing the IAEA's role in assisting countries interested
in accessing nuclear energy. He reminded his audiences of Chairman
of the U.S. Nuclear Regulatory Commission Dr. Dale Klein's
admonishment that "owning a commercial nuclear reactor is not a
business for amateurs." Countries seeking nuclear energy must have
in place appropriate laws, an adequate regulatory framework and a
culture that respects security/safety.



4. (U) Ambassador Schulte highlighted the two main concerns of such
countries: the need to secure sources of fuel and the means to
handle spent fuel. Noting most countries buy fuel on a global
market, Schulte outlined several proposals for the creation of a
nuclear fuel bank: (1) the Russian proposal to develop stocks of
low-level enriched uranium (LEU) to provide the international
community with guaranteed fuel for power stations; and (2) the $50
million contribution (to be matched by $100 million by IAEA member
countries) from the Nuclear Threat Initiative (NTI) to create an LEU
stockpile to support nations choosing not to build indigenous
nuclear fuel cycle capabilities.

Enrichment Rights and Responsibilities - Nuclear Education


5. (U) Ambassador Simons hosted a breakfast iho Ambassador Schulte
October 15, with a wide range of Chilean energy experts, including:
Manlio Coviello, from the Economic Commission of the United Nations
for Latin America and the Caribbean (ECLAC); Lucia Dammert, the
Director of the Latin American Faculty of Social Sciences (FLACSO)
Security and Citizenship Program; Guillermo Holzman, Director of the
Department of Political Science, University of Chile's Institute of
Public Affairs; Alejandro Jadresic, Dean of the School of
Engineering, University Adolfo Ibanez; Guillermo Patillo, a
Professor of Economics at both Santiago University and Catholic
University; Fernando Lopez, the Executive Director Chile's Nuclear
Energy Commission (Comision Chilena de Energia Nuclear - CchEN); and
Matias Undurraga, Minister Counselor and Deputy Director the MFA's
Office of International Security. Post's Information Officer, a
Defense Attach Officer, Senior Poloff, ESTH officer and Economic
Specialist were also present.




6. (U) Jadresic asked about the IAEA's ability to restrict uranium
enrichment for power generation. Schulte clarified that under the
Nuclear Non-Proliferation Treaty (NPT) countries have the right to
enrich uranium for power generation, but the concern is about
creating a race for enrichment technology, especially in the Middle
East. According to Ambassador Schulte, IAEA Director General
Mohamed ElBaradei has described this as a "loophole" because
countries can claim an interest in power generation, but use the
enriched uranium and associated technology for weapons. Asked about
the timeframe for setting up a nuclear reactor, Schulte said it is
generally 10-15 years, but depends on the country's decision-making
process and requires a regulatory and legal framework and expertise,
not just money.


7. (SBU) Ambassador Schulte said both Brazil and Argentina have

enrichment technology and that regional cooperation might be an
option. He suggested it could make economic sense for Chile to
participate in a regional enrichment center, but recognized Chile
may not be at that point in its decision-making process. He also
pointed out the green movement in Brazil is active and that safety
concerns are under debate there. When a participant joked about
Brazil obtaining a nuclear-powered submarine, Schulte said countries
often seek the prestige of nuclear technologies not necessarily on
pragmatic or economic grounds, e.g., need for energy, unease about
climate change, etc. Chile, he said, is exploring nuclear energy
for the right reasons.

Taking it to the Bank


8. (SBU) Undurraga wondered if other countries supported possible
creation of a nuclear fuel bank. Ambassador Schulte said Brazil,
for example, is receptive to the idea of being a beneficiary and
possible donor, but worried it would infringe on a country's right
to enrich uranium. The IAEA view is that a fuel bank would make
nuclear energy more accessible and noted creating such a bank would
undercut Iran's claim that it needs to enrich uranium despite the
fact that it does not have a functioning reactor.


9. (SBU) Coviello supported creation of a fuel bank and outlined
three main issues in Chile's debate on nuclear energy: (1)
increasing energy demand; (2) the ability to full develop
hydropower; and (3) public opinion. He explained that Chile's
energy crisis has motivated the country to discuss all its options,
including nuclear. Coviello indicated the public and "some in
government" need be educated on new types of nuclear reactors that
produce less waste. Ambassador Schulte empathized with the
difficulties in distinguishing between nuclear energy and nuclear
weapons in the public debate. He also requested Chile's assistance
in persuading Brazil and Argentina to ratify the additional
protocols to their IAEA safeguards agreements.


10. (SBU) Dammert agreed there are misunderstandings about nuclear
both in the government and public sectors because of the confused
discussion that equates nuclear power with bombs. She pointed to
the need for long-term planning, noted a lack of consensus on the
issue, and expressed doubt that an agreement to develop nuclear
power would necessarily survive a change in administration.
Jadresic added that, despite Chilean President Bachelet's commitment
to green groups not to promote nuclear energy in Chile, the
government has formed a taskforce to study its feasibility.
According to Jadresic, the government is mostly in favor of pursuing
nuclear energy option but that Chile does not have a culture of
implementing long-term projects.


11. (U) Ambassador Simons praised Chile's adoption, in a recent GOC
presentation outlining the limits on using hydroelectric and coal
and the possibility of nuclear energy, of an International Energy
Association (IEA) recommendation to use a longer time horizon for
forecasting energy needs, i.e., out to 2030. He also mentioned a
pending IEA in-depth review of Chile's energy profile.

La Moneda MFA Offer Qualified Support


12. (SBU) At a meeting later in the day at the presidential palace
(La Moneda),Marcos Robledo, Bachelet's International Affairs
Advisor, affirmed Chile's commitment to a multilateral approach and
expressed qualified support for regard to the creation of a nuclear
fuel bank. Robledo also emphasized, however, the importance of a
country's right to nuclear technology. Throughout the discussion,
Robledo emphasized the complex political balance in the region and
inquired about Argentina and Brazil's positions, as well as noting
that Mexico would be invited to join in any regional discussions on
nuclear issues. Ambassador Schulte said Brazil is interested in the
fuel bank idea, but its MFA expressed concerns about giving up
rights; he also clarified that a fuel bank would not be used to
regulate the supply of nuclear material, but rather to help the
market function more effectively.


13. (SBU) Discussing the desirability of having Argentina and Brazil
adopt additional IAEA protocols, Schulte noted Brazil's "irrational
fear" that its scientists would be kidnapped if it signed the
protocols. He said Argentina was likely to adopt additional
protocols if Brazil agreed to them. Robledo noted Brazil did not
attend a recent regional conference on nuclear challenges hosted by

FLACSO in Santiago and provided assurances that Chile has appealed
to its neighbors to sign the additional protocols.


14. (SBU) MFA Director of Special Policies, Ambassador Juan Eduardo
Eguiguren also discussed with Ambassador Schulte the fuel bank
proposal, IAEA assistance to countries interested in developing
nuclear energy, and the future of IAEA. Eguiguren, a true believer
on the importance of nuclear disarmament and non-proliferation going
hand-in-hand, said Chile favors nuclear-free zones with other Latin
American countries. Ambassador Schulte commented on the poor job
the U.S. does of publicizing its progress on disarmament, including
that it has increased the rate of disarmament by 20 percent and our
nuclear arsenal is now at the lowest level since the Eisenhower
administration.

Military Analysts Comment on Russia, Brazil


15. (SBU) Ambassador Schulte also met with several academics and
analysts working on non-proliferation from a military standpoint.
The group included: Col. Jorge Pena, Associate Professor and Head
Department of Military History, Strategy and Geopolitics at of
Chilean War College, Ricardo Neeb, Professor at Pontifica
Universidad Catolica and Non-Proliferation Analyst for Ministry of
Interior, retired General Alvaro Guzman, Nuclear Engineer from
Centro de Estudios Nucleares del Ejercito (CEME),a military think
tank.


16. (SBU) Guzman noted France and Russia's willingness to sell
nuclear technology to Chile, but dismissed the possibility of Chile
purchasing Russian technology. The group discussed Russia's recent
diplomatic efforts to engage in Latin America, including a meeting
between the Russian Ambassador to Chile and the Chilean War College
and a Russian request to join in the Union of South American
Nations-UNASUR (NFI). Neeb noted Russia's need to support its
military industry and general speculation that Russia is looking for
markets for its military goods, and possibly nuclear technology.


17. (SBU) Guzman raised the issue of reliable access to fuel and the
possibility of a nuclear fuel bank, which generated a discussion of
regional cooperation. Neeb noted research in Argentina and Brazil,
but said environmental and technical concerns may affect Brazil's s
ability to expand enrichment. He was dismissive of the idea Brazil
has unique proprietary technology. He also mentioned the Brazilian
military's plans for a nuclear submarine, but noted it has been
under discussion for 20 years and has never been funded by the
Brazilian government. He expressed his opinion that Brazil, because
of a constitutional provision prohibiting WMD proliferation, was
very unlikely to proliferate. Pena did not think the submarine is a
question of prestige so much as one of military independence and a
reflection of Brazil's desire to be a power in the region, despite
the fact its military is essentially broke.

Meeting With Nuclear Energy Commission


18. (SBU) Representatives of Chile's Nuclear Energy Commission
(Comision Chilena de Energia Nuclear - CChEN),seemed generally
receptive to Ambassador Schulte's points on the proposed nuclear
fuel bank. Board member Dr. Julio Vergara noted uranium prices are
going down and there is not enough uranium mining or enrichment
capability to meet the demand for nuclear fuel. Ambassador Schulte
referenced the latest report on the subject from the IAEA, which
indicated supplies through at least 2030 and the expectation the
commercial market will respond to increased demand. [Note: The
June 2008 IAEA staff report found that new discoveries and
re-evaluations of known conventional uranium resources will be
adequate to supply nuclear energy needs for at least 100 years at
present consumption level. End note.]


19. (U) Touting the Global Nuclear Energy Partnership (GNEP),which
now boasts 25 countries and Chile may possibly eventually join,
Ambassador Schulte outlined spent nuclear fuel recycling and storage
options. Vergara criticized the IAEA budget for supporting nuclear
energy and emphasized the need for technical assistance. He also
asked about the IAEA taking on the additional responsibility of the
fuel bank. Ambassador Schulte responded that IAEA SecGen El Baradei
favors making all steps of the fuel-cycle part of a multilateral
system, as does GNEP, but the fuel bank is the easiest place to
start. He added Brazil and Argentina are discussing a regional
enrichment center. Vergara agreed there might be issues with the

two countries using different technologies (gaseous vs. centrifuge).
Ambassador Schulte highlighted two GNEP working groups studying
options for reliable fuel services under long-term contracts and
spent fuel handling, including the value of fuel leasing. Vergara
noted some countries legal prohibitions on waste importation,
including the U.S.

Prominent Senator on the Fence on Nuclear Energy


20. (SBU) Senator Jaime Gazmuri, Head of the Chilean Senate's
International Relations Commission, told Schulte that despite the
need to diversify its current electricity grid, there are strong
arguments against Chile using nuclear power. These include: 1)
earthquake/seismic concerns; (2) disposal of nuclear waste; (3) the
10-15 year gap between the decision and actually having nuclear
generated power. Yet, citing Japan's success with nuclear energy
despite the risk of earthquakes, he allowed that all new sources of
energy have potentially major costs. Schulte explained nuclear
waste management through recycling and through use of
geo-repositories. Gazmuri noted the discussion is on-going and that
the decision is ultimately a strategic one for Chile.

Comment


21. (U) Ambassador Schulte's provided opportunities to engage on
both nuclear non-proliferation and nuclear energy issues. The visit
got good press coverage and as Chile's debate on nuclear energy
moves forward, it is important to continue to provide reliable
technical information and policy advice on what remains a
controversial subject in Chile. End comment.


22. (U) Ambassador Schulte did not clear this message.
SIMONS