IAEA/DG: ELBARADEI MOVING FORWARD ON FUEL BANKS

S E C R E T UNVIE VIENNA 000104

SIPDIS

DEPT FOR ISN/NESS, ISN/MNSA, IO/T

E.O. 12958: DECL: 03/15/2019
TAGS: AORC PREL ENRG TRGY KNNP MNUC IAEA IR SY
SUBJECT: IAEA/DG: ELBARADEI MOVING FORWARD ON FUEL BANKS

REF: UNVIE 95

Classified By: Ambassador Gregory L. Schulte for reasons 1.4 b and d

Summary
--------------


1. (C) Ambassador Schulte assured Director General ElBaradei
of steadfast U.S. support for the IAEA on March 13. The DG
looked to U.S. leadership on budget issues. In a detailed
discussion of fuel bank proposals, ElBaradei expressed
increased optimism that the stage had been set for a good
Board discussion in June. The Secretariat was preparing its
paper on the International Nuclear Fuel Bank (INFB) and
expected Russia to also present a detailed proposal in June,
which would enable the Secretariat to negotiate an agreement
with Russia to be submitted to the September Board. He
confirmed that the Nuclear Threat Initiative was discussing
with Kazakhstan the prospect of being the host country for
the INFB. Although he was optimistic, ElBaradei noted that a
few key G-77 outliers need to be persuaded, including Brazil,
Argentina, South Africa and most problematicly Egypt. He
suggested a high-level approach to Cairo to address Egyptian
concerns, about which he was personally dismissive, that the
fuel bank would provide Israel access to nuclear material.
Progress on disarmament and dialogue with Iran would also be
helpful, as Iran could continue to play a spoiler role with
respect to fuel banks. Finally, the DG suggested that a
symbolic contribution to the INFB on the part of other G-77
countries, besides Gulf allies, would also lend credibility
to this proposal.


2. (S) On the Iran and Syria investigations, the Director
General argued as before that the IAEA had reached the end of
its technical mandate and that only a political opening could
lead to a breakthrough. He acknowledged, however the need
for Syria to "come clean" and for Iranian cooperation with
the IAEA simultaneous with diplomatic negotiations, including
U.S. engagement. The DG continued to believe that allowing
Iran only a limited enrichment capacity would be a more
realistic objective than full suspension. End Summary.

Support for the IAEA
--------------


3. (C) The Ambassador reaffirmed strong support for the IAEA
in the U.S. administration. He acknowledged campaign pledges
to double the IAEA budget but advised that he was awaiting
guidance on our approach to the Secretariat's 2010-2011
budget proposal. The Ambassador cautioned that there would
be opposition on the part of other Member States, including
the EU, who might caucus for zero real growth. ElBaradei
repeated his quip that Member States will get the kind of
Agency they pay for. The Ambassador assured the Director
General that the budget proposal was "on our radar screen."
ElBaradei looked to U.S. leadership and advised that without
the U.S. leading the charge, "nothing would happen."

Moving Forward on Fuel Banks
--------------


4. (C) Noting strong Administration support for the
international nuclear fuel bank (INFB),Ambassador Schulte
thanked the Director General for his leadership on this issue
and introductory remarks to the March Board (reftel).
Reflecting on the Board debate, ElBaradei expressed optimism
for the first time. He acknowledged a change in the dynamic
at the Board with more G-77 countries speaking in favor of
such mechanisms than in opposition. Although it had
required some "acrobatics" on the part of the Secretariat,
the DG felt he had sufficient authority to develop a concept
for the INFB. The criteria would be broad to cover all
member states "under safeguards" and not linked to the NPT;
he specified the broad applicability by citing "India,
Pakistan, etc." He also reported that former Senator Sam
Nunn, on the part of the Nuclear Threat Initiative (NTI),was
speaking to the government of Kazakhstan about hosting the
INFB. When the Ambassador noted that the new Kazak
Ambassador in Vienna had not heard from the Secretariat,
ElBaradei explained that NTI was making the initial overture.
Upon agreement in principle, the IAEA would follow up on
legal issues, custody, physical protection and other details
with Kazakhstan.


5. (C) ElBaradei envisioned a good Board discussion in June
would realistically set the stage for approval by the
September Board, allowing time to work over the two or three
remaining skeptics during the summer. In addition to the
Secretariat's paper on the INFB, he wanted the Russians to
also come to the June Board with a more specific proposal.
The Secretariat would then be able to prepare an agreement
with Russia for approval by the September Board. At the
present time, the Director General did not believe the
Secretariat had negotiating authority from the Board to
conclude such an agreement. (Comment: Presumably he would
look to the June Board to grant him such authority. End
comment.) He also noted that the June Board agenda was
"overtaxed" and thus favored putting off approval until
September.


6. (C) The Director General had also spoken to the Germans
about their multilateral fuel bank proposal but it was not
clear that they were ready to operationalize this construct.
The DG viewed the German proposal as long term and benefiting
only the five or six countries involved, contrasting this
with the INFB, which was open to all and "free."

Persuading the Critics
--------------


7. (C) The Secretariat would now draft a concept paper on the
INFB for the June Board, which for the "umpteenth" time would
clarify that this would not impinge on anyone's NPT rights
and reflected a Statutory function. States should view this
as an additional insurance policy, he noted. Among those who
voice skepticism, ElBaradei sees Brazil, Argentina and South
Africa as needing further assurance that they were not being
singled out and that there was no impediment to indigenous
enrichment. By contrast, Egypt's opposition was entirely
predicated on concern that such fuel banks would give Israel
access to nuclear material. ElBaradei was personally
dismissive of this worry, assessing that Israel already had
nuclear weapons and had no interest in LEU for a nuclear
power program, which "would be a sitting target." He agreed
that this was not about Israel but about "the neighborhood"
and advised a high level approach to Cairo to this effect
before Board approval of a fuel bank mechanism. The DG also
noted that he would be traveling soon to Cuba and Venezuela,
and could talk to them as well.


8. (C) The Director General further advised that "symbolic"
contributions to the INFB from countries besides Gulf allies
UAE and Kuwait would add credibility to the fuel bank
concept. He suggested ideally Brazil, Indonesia, Malaysia or
South Africa, perhaps Turkey and one or two Latin countries
such as Chile or Colombia. Even a nominal contribution from
Indonesia or Vietnam would be "perfect."


9. (C) More broadly, ElBaradei suggested that progress on
disarmament, such as some announcement before June on START
II or FMCT talks would also be helpful as would the
initiation of a dialogue with Iran. Iran remained the
"guerrilla in the room" and would continue to seek to
undercut discussion of fuel banks. He cautioned that Iran
could exploit the lack of trust on the part of developing
countries, which remained "skin deep," despite his increased
optimism.

Syria and Iran
--------------


10. (S) On both Syria and Iran, the DG repeated his refrain
that the IAEA had reached the end of "what we can do
technically" and that only a political opening could deliver
a breakthrough. While Ambassador Schulte acknowledged that
the IAEA also cannot "solve" these issues alone, both Iran
and Syria need to be held to their safeguards commitments.
The DG agreed that Syrian President Asad needs to come clean,
and suggested that the U.S. develop an "agreed scenario" with
Syria that would allow it to do so while saving face.
ElBaradei continued to question, "if it was a reactor," what
exactly the Syrians would have been up to, when did it start,
and whether it was the DPRK or Syria that initiated the
project? He noted the lack of reprocessing capability in
Syria and surmised that perhaps it could have been a large
research reactor but in that case, questioned why Syria would
not have declared it. He discounted that Asad would try
anything like this again and believed that Syrian Atomic
Energy head Othman was not informed given the division
between military and civilian authority in Syria. The
Ambassador reminded the DG that Othman was photographed with
a North Korean counterpart in Syria.


11. (S) Ambassador Schulte also stressed the need for Iranian
cooperation with the IAEA. ElBaradei argued that cooperation
with the IAEA would have to be "simultaneous" with a
diplomatic approach. He continued to believe that full
suspension was out of reach now that Iran has the "know-how;"
rather it was a matter of limiting capacity under strict
safeguards to prevent a breakout capability or covert
program. However, he did not rule out Iran agreeing to
suspension sometime in the future. ElBaradei recognized that
it would take time but also continued to view steps toward
U.S. diplomatic engagement with Iran as essential. Iran's
interest to be recognized as a regional power and to be given
security assurances was key, he postulated.


12. (S) Comment: There does not seem to be a great evolution
in ElBaradei's perspective on IAEA cooperation in Iran or
Syria being predicated on diplomatic agreement. He supports
the Administration's new approach in both cases, and is thus
more inclined to press for cooperation, as was evident in his
introductory remarks to the March Board and respective
reports on Iran and Syria.
SCHULTE