IAEA BUDGET: BOARD VICE CHAIR PROBES ON U.S. AMBITIONS

UNCLAS UNVIE VIENNA 000120

SENSITIVE
SIPDIS

STATE FOR D, T, IO/T, ISN/MNSA, ISN/NESS, ISN/RA
DOE FOR NA-20

E.O. 12958: N/A
TAGS: AORC KNNP IAEA ENRG TRGY EAID
SUBJECT: IAEA BUDGET: BOARD VICE CHAIR PROBES ON U.S. AMBITIONS

REF: A. UNVIE 65; B. UNVIE 57; C. UNVIE 52


1. (SBU) Summary: The Romanian Ambassador, vice chairman of the IAEA
Board and in charge of budget negotiations, pointedly asked
Ambassador Schulte on March 20 whether the U.S. position on the IAEA
budget would reflect U.S. campaign promises. Ambassador replied
that Washington was looking closely at options that ranged from the
traditional, zero real growth (ZRG) position to a "doubling" of the
IAEA budget, with the Secretariat's proposal as one of the
intermediate options. Feruta was frustrated over an early rush by
EU countries - particularly France - to lock in an inflexible, ZRG
position. In a separate conversation, the Japanese Ambassador
revealed that Japan was looking at a similar range of options from
ZRG upwards, and that G-8 consensus would be key to Japan's support
for a large, one-time budget increase. Mission notes that Japan's
uncommonly flexible position on the budget supports our observation
that budget negotiations in Vienna are entering uncommon ground.
Combined with ElBaradei's bold proposals to increase the Regular
Budget, the U.S. enjoys a rare opportunity to pursue longstanding
policy objectives to combat nuclear terrorism and advance practices
for safe and responsible nuclear power worldwide. End Summary.


2. (SBU) Romanian Ambassador and Vice Chair of the Board of
Governors Cornel Feruta launched consultations last week with IAEA
Member States on DG ElBaradei's proposed 24 percent increase in the
Regular Budget. As coordinator for budget negotiations among the
35-member Board, Feruta pressed for an early meeting with the U.S.
to assess the U.S. position. In a meeting with Ambassador Schulte
on March 20, Feruta pointedly asked how U.S. presidential campaign
promises would be reflected in the U.S. position.


3. (SBU) Ambassador explained that the U.S. was exploring a number
of options that ranged from Zero Real Growth (ZRG) to a "doubling"
of the IAEA budget, with the Secretariat's proposal as one of the
intermediate options. He noted that Member States enjoyed a rare
opportunity to resource the IAEA properly to carry out its duties in
safeguards, security and safety. He recognized that the Regular
Budget was the best vehicle for sharing these responsibilities among
all Member States and providing for the institutional health of the
Agency. He urged Feruta to encourage other major contributors to
remain flexible during this first round of budget negotiations.


4. (SBU) Aside from his role as budget coordinator, Feruta has been
privy to internal negotiations among EU countries. He indicated his
frustration with an EU rush to establish a common ZRG position.
Having read past EU statements, Feruta objected to European efforts
to cement a ZRG position, when in fact it was now time for them to
"put their money where their mouth is." During an EU meeting March
13, Feruta told his EU counterparts that it was hypocritical to call
for regularized funding of nuclear security and then ignore an
opportunity to implement it. According to Feruta, Germany and
Finland found these arguments compelling, while France remained
obstinate. Feruta promised to continue lobbying for flexibility and
keep the U.S. informed of developments in the EU and G-77 positions.
(Note: Egyptian Second Secretary Bassem Hassan told Msnoff that the
G-77 had started work last week on a common budget position that
ranged higher than - but did not rule out - ZRG. End note.)


5. (SBU) Feruta said he had personally looked closely at the
programs targeted for increases. He emphasized that ElBaradei's
proposal was essentially "an investment in the future" that
addressed the IAEA's laboratory needs, support for nuclear security,
capital investment and support for safeguards. He singled out the
issue of nuclear security, claiming that continuing to fund the
program with extrabudgetary funds falsely implied the issue was not
an IAEA core activity.


6. (SBU) Feruta ends the first round of formal budget consultations
on April 3. From there he will communicate the results to Board
Chair Taous Feroukhi (Algeria),indicating the areas of consonance
and dissonance. Feruta would like to see budget negotiations
settled at the April 27 meeting of the Program and Budget Committee
(PBC) but acknowledged that negotiations would more likely drag on
through the summer. Speaking separately to DCM on March 23, IAEA
Deputy Director General David Waller expressed concern about the
initial results of Feruta's consultations, noting that the
Secretariat was concerned about an EU veto of a long overdue debate
over IAEA resources.

Japanese Quietly Exploring Options
--------------


7. (SBU) In a separate conversation, Japanese Ambassador (and DG
candidate) Yukiya Amano told Ambassador that the Japanese were
working on a position that included ZRG as one of several options.
Amano also noted that a one-time increase endorsed by the G-8 would
be easier for Tokyo to accept than incremental increases over
several budget cycles. Amano also suggested that attempts to move
nuclear security under the umbrella of the Regular Budget would
require Technical Cooperation concessions for the G-77 Members (who
have long agitated for greater Regular Budget support for the
Technical Cooperation Fund).

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


8. (SBU) Ambassador Feruta claimed he did not want the job of
coordinating budget negotiations among Member States but appears
well poised to do so. He has already demonstrated a creative
approach by actively working to stymie French efforts to establish a
common EU position around ZRG. Mission recommends using available
fora at higher levels to encourage flexibility from our local French
counterparts. Similarly, Mission notes that strong G-8 consensus
would be of particular use to Japan, a traditional ZRG hawk that
might appreciate a convenient vehicle for relinquishing ZRG in favor
of a more expansive position at a time it hopes to launch a
potential Japanese DG into a successful tenure. It is unusual but
encouraging that Japan would look beyond ZRG and join the U.S. in
exploring ways to "right size" the IAEA (Japan and the U.S. together
account for nearly half the IAEA Regular Budget). Japan's
flexibility also presents further evidence that we are facing a
unique confluence of events in Vienna this budget season,
characterized by Japanese magnanimity, ElBaradei's boldness, G-77
quiescence, and signs of a growing consensus among global leaders on
the need to invest in the IAEA's future and strengthen its
foundations. End Comment.

SCHULTE