U.S. UNVIE AMBASSADOR SCHULTE AND PRC DG CHENG

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 001120 SIPDIS STATE FOR EAP/CM, ISN E.O. 12958: DECL: 04/27/2034 TAGS: PARM PREL MNUC IAEA CH IR NK SUBJECT: U.S. UNVIE AMBASSADOR SCHULTE AND PRC DG CHENG DISCUSS FUEL ISSUES, IAEA REFORM, NORTH KOREA AND IRAN Classified By: Political Minister Counselor Aubrey Carlson. Reasons 1.4 (b) and (d). SUMMARY -------------- ¶1. (C) In Beijing to represent Energy Secretary Chu at the April 20-24 International Nuclear Energy Ministerial, U.S. Ambassador to UNVIE Greg Schulte met with MFA Arms Control and Disarmament Department Director General Cheng Jingye on April 22. Ambassador Schulte complimented DG Cheng for China's role in sponsoring a successful Ministerial. On nuclear fuel assurance issues, DG Cheng said China was "open-minded" about fuel bank proposals, stressing that the positive aspects of a dependable and "impartial" nuclear fuel supply source should be emphasized with developing countries. China was open to "balanced and justified" International Atomic Energy Agency (IAEA) budget increases, Cheng said, but played coy when asked to indicate who China would support in the upcoming election for IAEA Director General. On North Korea, Cheng said China saw the United States playing the central role in "de-escalating" the situation and bringing North Korea back to the Six-Party Talks after a "cool down period." Underscoring the fact that the United States wanted the Chinese to use its influence to prod Iran to agree to the recent E3-plus-3 overture, Cheng said China was "cautiously optimistic" on Iran. Finally, Cheng agreed "we should find a way" to resolve Kazakhstan's inability to find a welcoming regional grouping within the IAEA. End Summary. ENERGY MINISTERIAL -------------- ¶2. (C) Ambassador Schulte complimented Cheng for China's role in holding the Nuclear Energy Ministerial. Noting that participation was greatly improved since the last Ministerial held in Paris, Schulte said it reflected the growing worldwide interest in nuclear power. The message he delivered on behalf of Secretary Chu to the Ministerial, Schulte said, was threefold: the new U.S. administration believed nuclear energy was important; it was critical to secure global collaboration in the Global Nuclear Energy Partnership (GNEP); and the International Atomic Energy Agency (IAEA) played an important role in the process. GNEP AND FUEL ASSURANCE ISSUES -------------- ¶3. (C) Cheng commented that, of the dozens of ideas "out there" on nuclear fuel cycle issues, the U.S.-sponsored GNEP "is the only one China had decided to be a part of." In response to Cheng's question about the U.S. policy review of GNEP, Schulte noted that the U.S. Department of Energy was holding an internal, science-based review of options for the GNEP steering group, including how to best structure the international fuel cycle and related internal working groups. Secretary Chu had been briefed on China's involvement and support in the GNEP, Schulte remarked. ¶4. (C) Raising fuel assurance issues, Schulte cited President Obama's remarks about fuel banks being an important tool to promote nonproliferation and to prevent the spread of enrichment technologies by providing a reliable fuel source to developing countries. Schulte said the U.S. hoped there would be a "good discussion" of fuel bank and other proposals at the June IAEA Board of Governors meeting. Cheng replied that China was "open-minded" about these ideas. To overcome the widespread impression evinced in previous discussions that interested countries would have to forgo their rights, Cheng suggested the emphasis at the June meeting should be placed on the benefits, encouraging nations to support fuel banks and not develop their own facilities or capabilities. ¶5. (C) Cheng said China supported IAEA Director General El Baradei's approach on fuel assurance issues, including the need to ensure the "impartiality" of an international fuel supply. Schulte was pleased to hear of China's support, saying China's views "carry a lot of weight in the IAEA." IAEA DIRECTOR GENERAL ELECTION -------------- ¶6. (C) Ambassador Schulte noted the recent stalemate in the election a new IAEA Director General, and after running through the list of potential candidates asked Cheng for China's views. Cheng played coy, only noting China had been approached by several countries asking for support for particular candidates. Schulte stressed that the United States sought a good leader with substantial management BEIJING 00001120 002 OF 002 skills and a strong nuclear background. IAEA BUDGET -------------- ¶7. (C) Turning to the IAEA budget, Schulte said the United States would be seeking to ensure the IAEA "had the resources it needed" and hoped countries wouldn't seek to do "business as usual." Cheng replied that China could support "justified and balanced" increases in the budget. Schulte noted the United States sought to make nuclear security a "core function" of the IAEA rather than one funded on an ad hoc basis. NORTH KOREA AND IRAN -------------- ¶8. (C) Schulte raised the likelihood of discussions on North Korea and Iran at the June IAEA Board of Governors meeting. Saying he "hoped there wouldn't be too much discussion of North Korea," Cheng suggested it was largely up to the United States to "de-escalate" the current situation and bring North Korea back to the Six-Party Talks after a "cool-down" period. ¶9. (C) Schulte noted China's important role in getting Iran to agree to the recent E3-plus-3 overture. Cheng replied China was "cautiously optimistic" on Iran, but would need to "wait and see" how things went. KAZAKHSTAN IAEA ROLE -------------- ¶10. (C) Schulte noted Kazakhstan's ongoing difficulty finding a welcoming regional grouping within the IAEA and how that prevented Kazakhstan from gaining a seat on the Board of Governors. Asked whether China might agree to Kazakhstan being a part of the East Asia grouping with China, Cheng would only say that China agreed "we should find a way out" of the current situation. PICCUTA