KAZAKHSTAN: DEPUTY SECRETARY OF ENERGY'S BILATERALS

UNCLAS SECTION 01 OF 03 ASTANA 001886

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, ISN, EEB

E.O. 12958: N/A
TAGS: PARM PGOV PREL ECON MNUC KNNP KZ
SUBJECT: KAZAKHSTAN: DEPUTY SECRETARY OF ENERGY'S BILATERALS
EMPHASIZE NON-PROLIFERATION AND PEACEFUL NUCLEAR DEVELOPMENT

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REFTEL: ASTANA 1814


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: Deputy Secretary of Energy Daniel Poneman
discussed cooperation on counter-proliferation and peaceful nuclear
energy production with several of Kazakhstan's most influential
non-proliferation policymakers during his October 6-8 visit to
Kazakhstan. Poneman and his delegation, which included
representatives from the Department of Defense, Department of State,
and the National Security Council, met Sauat Mynbayev, Minister of
Energy and Mineral Resources; Vladimir Shkolnik, Director of
Kazatomprom; and Timur Zhantikin, Director of the Kazakhstani Atomic
Energy Committee. The delegation toured the decommissioned BN-350
reactor in Aktau and inspected the remaining 300 metric tons of
spent-fuel -- which contains enough plutonium and highly enriched
uranium to fabricate 775 weapons of mass destruction -- which the
United States and Kazakhstan are preparing to ship to a secure
storage facility. Deputy Secretary Poneman's interlocutors thanked
the U.S. government for its assistance in securing nuclear
materials, and asked for increased cooperation to enhance nuclear
safeguards and facilitate commercial developments in the nuclear
industry. END SUMMARY.

SECURING SPENT-FUEL AT BN-350 REACTOR CONTINUES


3. (SBU) On October 6, the Deputy Akim of Mangystau Oblast, a Vice
Director of the Mangystau Atomic Energy Company (MAEC),and the
BN-350 nuclear reactor Plant Director led Deputy Secretary Poneman
on tour of the reactor, which the United States decommissioned in

1999. In addition to the reactor itself, they saw the spent fuel
storage area and the casks of spent fuel that will be loaded for
transportation to a secure site for up to 50 years of safe storage.
MAEC's BN-350 representatives demonstrated the U.S. technology used
to ensure physical security at the BN-350 facility. Due to the long
history of U.S.-Kazakhstani cooperation at the site in Aktau, the
atmosphere throughout the visit was positive and upbeat. Poneman's
interlocutors thanked the United States for "its tremendous help on
all aspects of decommissioning BN-350" and proudly discussed plans
to build a new (non-plutonium -producing) reactor on the BN-350 site
to produce nuclear energy and desalinate water for Mangystau Oblast
-- as BN-350 once did.


4. (SBU) MAEC and BN-350 officials also gave the delegation a
guided tour of the U.S.-funded $3.35 million sodium processing
facility (SPF). Once the government of Kazakhstan completes a
planned geo-cement stone facility, the SPF will be used to process
radioactive sodium for safe storage in cement blocks fabricated in
the geo-cement stone facility -- the final step in the safe disposal
of waste from the nuclear reactor.

KAZATOMPROM WANTS TO SELL URANIUM TO U.S. COMPANIES


5. (SBU) Vladimir Shkolnik, President of Kazakhstan's National
Atomic Company, Kazatomprom, met the delegation in Almaty on October

7. Shkolnik -- a nuclear physicist and former director of BN-350
with close relationships with U.S. officials from his prior tenure
as the Minister of Industry and Trade -- said the United States and
Russia are Kazakhstan's leading partners in nuclear
non-proliferation. Appearing friendly and relaxed throughout the
meeting, Shkolnik expressed disappointment that Kazatomprom does not
supply uranium to any U.S. companies, and advocated for an event to
introduce U.S. and Kazakshtani nuclear companies to one another.

CRADLE-TO-GRAVE FUEL CYCLE


6. (SBU) In response to Poneman's comments that the international
commercial nuclear sector should provide fuel assurances to
compliant members of the Nuclear Non-proliferation Treaty, Shkolnik
welcomed the concept as a necessary prerequisite to the expansion of
the nuclear energy industry. He replied jokingly that Kazakhstan
"cannot refuse" to cooperate with the United States on the
development of a reliable system of fuel assurances. Shkolnik told

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Poneman that, as a physicist, he is convinced that the closed
nuclear cycle, which generates no waste, is the future. Therefore,
re-fabrication should be considered as one element of the proposed
"cradle-to-grave" fuel assurance cycle.

GLOBAL NUCLEAR ENERGY PARTNERSHIP


7. (SBU) Poneman proposed that U.S. and Kazakhstani experts
continue to discuss such issues over the next few weeks and on the
margins of the October 23 Global Nuclear Energy Partnership (GNEP)
Ministerial in China. (COMMENT: Kazatomprom's President said he
would be in China on October 15, but he appeared unfamiliar with
GNEP. Kazakhstan is a member of the GNEP, but Ministry of Energy
and Mineral Resource officials told PolOff that Kazakhstan has not
participated actively over the last year. END COMMENT.)

NO PROGRESS ON NUCLEAR FUEL BANK


8. (SBU) Concerning Kazakhstan's offer to create a nuclear fuel
bank, Shkolnik said although the fuel bank would be feasible for
Kazakhstan, the government has not initiated negotiations with the
International Atomic Energy Agency (IAEA). Shkolnik said Kazakhstan
-- number one in uranium output this year -- possesses both the
technology and the uranium resources to host the bank. According to
Schkolnik, "for us, an international nuclear fuel bank is just a
derivative from our production." Shkolnik concluded by stating that
Kazakhstan's decision to renounce its nuclear weapons allows it to
serve as a good example to other countries -- and a good host for a
fuel bank.

KAZATOMPROM SEEKS COOPERATION ON BUILDING SMALL REACTORS


9. (SBU) Kazatomprom's President, a well-known advocate of nuclear
power, affirmed that Kazakhstan plans to build a nuclear reactor at
Aktau. He explained that since the electric grid in Mangystau
cannot accommodate a high-capacity reactor, Kazakhstan is
considering constructing two 300-megawatt reactors. Shkolnik said
that Kazatomprom, which sees a need to develop reliable small to
medium-size reactors in Southeast Asia, Africa, and South America,
is considering expanding into this new commercial arena. Poneman
suggested that DOE and Kazatomprom experts discuss potential
cooperation in the development of small, modular reactors -- an area
in which DOE already has significant experience.

ONLY 20 KILOGRAMS


10. (SBU) When asked about DOE's project to down-blend highly
enriched uranium (HEU) from the experimental reactor at the
Institute of Nuclear Physics (INP),Shkolnik -- a former director of
the INP -- quickly told Poneman "this project is not in my
jurisdiction." Kazatomprom's President nonetheless remarked, "the
supply of HEU for the INP reactor is only 20 kilograms of uranium,
and it is very important for Kazakhstan to have new low enriched
uranium fuel that will enable research."

KAZAKHSTAN SEEKS COOPERATION ON NUCLEAR DEVELOPMENT AND SAFEGUARDS


11. (SBU) On October 8, Timur Zhantikin, another nuclear physicist
well-known to U.S. officials and Director of Kazakhstan's primary
regulatory body in charge of nuclear physical security, thanked the
United States for cooperation on the BN-350 and INP projects.
Zhantikin reiterated Shkolnik's call to cooperate on the physical
security of small nuclear reactors. Zhantikin said the Kazakhstani
Atomic Energy Committee (KAEC) is working to produce nuclear
isotopes for medicines and develop a research center for biophysics
and nuclear medicine at INP. Deputy Secretary Poneman expressed
interest in potential cooperation in these fields.


12. (SBU) Poneman also told Zhantikin that the United States would
like to discuss fuel assurances and Kazakhstan's nuclear fuel bank
proposal, and that liability protection is an important
pre-requisite for civil nuclear cooperation. Zhantikin confirmed
that Kazakhstan plans to ratify the convention on liability

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protection this year, but said Kazakhstan has not been considering
any other liability-related conventions. Zhantikin, Kazakhstan's
highest-ranking delegate to this year's U.S.-Kazakhstan energy
partnership working group on atomic energy and nuclear security,
said he had already discussed -- and reached basic agreement with
U.S. delegates -- on next steps for U.S.-Kazakhstani cooperation on
nuclear safeguards (reftel).

KAZAKHSTAN RELUCTANT TO GIVE UP HEU


13. (SBU) Poneman told Zhantikin that the U.S. government would
like to proceed with the down-blending of the bulk HEU at the INP
reactor as soon as possible. Zhantikin explained that the INP
project consists of several stages: design of the reactor to use
low enriched uranium (LEU) fuel instead of highly enriched uranium
(HEU) fuel, verification of its operability, and down-blending of
the remaining HEU after the new LEU fuel is qualified. When asked
about "de-linking" fuel qualification from HEU down-blending,
Zhantikin admitted that the Kazakhstani government is not yet
convinced that the new fuel will work. Poneman promised further
explanation and evidence that the new fuel will work. Zhantikin
also admitted that Kazakhstan's possession of HEU may be perceived
as "a political problem," but reiterated that the INP's bulk HEU is
protected under strict nuclear safeguards. Zhantikin also asserted
that HEU is less efficient for production of isotopes. He proposed
the introduction of a tariff -- or other market mechanism -- on
HEU-produced isotopes to compensate for the efficiency losses faced
by Kazakhstan and other countries utilizing LEU. According to
Zhantikin, such a proposal would use market forces to promote
nuclear non-proliferation. Alternatively, Zhantikin suggested
nuclear certification "licenses," "just as companies are rewarded
with ISO certifications for compliance with industrial standards."

ENERGY PARTNERSHIP PROMOTES COOPERATION


14. (SBU) COMMENT: Poneman's interlocutors on non-proliferation
issues -- in Aktau, Almaty and Astana -- praised U.S.-Kazakhstani
cooperation and asked for collaboration on small and medium-sized
reactors and nuclear safeguards. Shkolnik and Zhantikin, both
scientists who were part of Kazakhstan's former nuclear program, are
anxious to help Kazakhstan build a strong, peaceful nuclear program
and reluctant to give up Kazakhstan's supply of bulk HEU until new
LEU fuel is qualified. Kazakhstan's influential nuclear
policymakers want to ensure that the new LEU fuel will work before
down-blending the bulk HEU. By signing the October 8 Joint
Statement and Action Plan in the context of the 6th U.S.-Kazakhstani
Energy Partnership, the United States reiterated the importance the
U.S. government attaches to a partnership which has promoted, and we
hope will continue to promote, nuclear security and peaceful nuclear
development. END COMMENT.

HOAGLAND