IAEA/RANF: RUSSIAN PROPOSAL ON ASSURED FUEL SUPPLY

UNCLAS UNVIE VIENNA 000155

SENSITIVE
SIPDIS

STATE FOR T, IO/T, ISN/NESS, ISN/RA
DOE FOR NA-243 GOOREVICH, SYLVESTER
NRC FOR SCHWARTZMAN

E.O. 12958: N/A
TAGS: AORC ENRG PREL KNNP TRGY RS
SUBJECT: IAEA/RANF: RUSSIAN PROPOSAL ON ASSURED FUEL SUPPLY

REFS: (A)Wickes-Timbie Email 02/13/09 (B) UNVIE 95
(C) GOV/INF/2009/1 (D) UNVIE 104 (E) UNVIE 154

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SUMMARY
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1. (SBU) The Russian Government and IAEA Secretariat have the
proposal for a nuclear fuel assurance supply mechanism that is
nearest to coming before the IAEA Board for action. The arrangement
provides for an assured export license, fissionable material, a
storage location, and revenue, and on this basis is closer to
implementation than other fuel bank concepts. Uncertainty remains
on how IAEA Board states will interpret recipient country
eligibility - a crucial factor in whether the Board will approve the
arrangement. Further questions surround the application of
safeguards to the LEU being transferred, what role the IAEA would
play once it requests fuel from Russia, and how the supply of LEU
will relate to fuel fabrication. For the U.S., we need clarity on
whether we can interpret the proposal as consistent with NSG
guidelines, in particular the full-scope safeguards requirement,
which Russia has implied might not apply (in order to include
India). As in the parallel proposal for an IAEA-administered fuel
bank, the IAEA will advocate that the DG must be empowered to judge
if Board-approved criteria are met and, if so, to transfer
Agency-owned LEU on his own authority without involvement by others.
End summary.

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AN IAEA NUCELAR FUEL RESERVE IN RUSSIAN HANDS
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2. (SBU) Refs A-C provide background on the Russian Federation
Initiative to Establish a Reserve of Low Enriched Uranium (LEU) for
the supply of LEU to the IAEA for its member states. Director
General (DG) ElBaradei stated April 8 to the Ambassador (ref E) that
he favors using the next two meetings of the Board of Governors, in
mid-June and early September, first to increase understanding and
buy-in for the arrangement, and then to secure formal approval. The
Russian Mission in Vienna informed UNVIE it would conduct outreach
to Board states in advance of the June Board meeting, but only after
Moscow authorizes the texts of the two operative documents to be
circulated by the Agency. This has not happened as of early April;
indications are that the Russian Government may not approve release
of the texts in time, and that ElBaradei favors holding back the
documents past the Board meeting regardless of whether Moscow is
willing. Per IAEA fuel assurances point man Tariq Rauf on April 2,
ElBaradei remains wary that skeptics on the Board will question the
rapid progress from a three-page summary in March to two elaborated
legal documents. Feeling he still lacks a clear mandate from the
Board to develop and present an arrangement, ElBaradei has proposed
instead that Russia present a more detailed summary paper of its own
as a basis for further "conceptual" discussion and education of
interested parties. The Secretariat awaits Moscow's tactical
decision. Russian Msnoff told us April 8 the MFA lead on the issue,
IAEA Governor Berdennikov, takes the view the Russia has no more to
tell about the arrangement short of releasing the agreement texts;
his ROSATOM colleague Ambassador Spasskiy must also be heard from.


3. (U) As described in refs, the Russian LEU reserve arrangement
would operate through two legal agreements. Agreement 1 sets out a
Russian Federation undertaking to maintain a reserve of LEU at its
international enrichment center in Angarsk, for transfer to IAEA
ownership under certain circumstances and conditions. Russia would
in effect donate to the Agency its costs for holding and managing
the special fissionable material in reserve, for the contingency
that the IAEA would effect a transfer. Agreement 2 would be a model
transfer agreement the IAEA would sign with a member state that is
experiencing a politically-motivated cut-off of LEU fuel for a
civilian nuclear power plant reactor and which has exhausted other
sources (i.e., commercial and state-to-state) for LEU procurement.
IAEA nuclear energy department official Alan McDonald praises the
Russian arrangement in particular for "solving" what he sees as the
tallest hurdle to nuclear fuel supply assurance - the guarantee of
an export license. Moreover, he points out, Russia accepts that the
IAEA would re-transfer LEU without requiring the recipient state to
commit that it will not separately acquire uranium enrichment
capability. With known material in a known location and
arrangements for revenue to flow from the acquiring state through
the IAEA to the Russian source, the proposal is, in McDonald's
assessment, closer to being implementable than any other
multilateral "reliable access to nuclear fuel" (RANF) proposal in
which the IAEA would be involved, including its own (the
NTI-supported fuel bank).


4. (SBU) As IAEA officials (Tariq Rauf, EXPO; Wolfram Tonhauser,
nuclear and treaty law adviser; Alan McDonald, nuclear energy
department) briefed to T Special Assistant Timbie (Ref A, based on
February conference call with UNVIE and Russian mission personnel
participating),Agreement 1 between Russia and the Agency will allow
the Agency to call upon Russia to make LEU available in the event a
country has its fuel supply cut off, requests LEU, and enters into
Agreement 2 with the Agency. Agreement 2, between a recipient
country and the Agency, would apply a "model agreement" previously
approved by the Board that authorizes the DG, under specified
conditions, to effect a delivery of LEU to a specific country for a
specific power reactor without going to the Board for case-specific
approval. Rauf stressed that Agreement 2 would have all the
nonproliferation and safety obligations necessary, and that both
agreements 1 and 2 would state the applicable pricing formula. The
recipient country would have to sign such an agreement and deposit
payment into an Agency account before the DG would request the LEU
from Russia. Rauf did not discuss how the LEU would be made into
fuel.


5. (U) During the February telcon Rauf said the Agency does not
believe it a good idea to require a recipient state to have an
Additional Protocol (AP) in force as an eligibility criterion under
the Russian proposal. He said that if member states were to push
for this, we would lose on universalization of the AP as well as the
fuel bank. Russian Mission First Secretary Mikhail Kondratenkov
said the AP was not a requirement for Russia. However, Rauf raised
Agency concern about how Agreement 1 and 2 would work with NSG
guidelines. He said the Agency still felt that it needed to be able
to provide LEU according to the Statute, meaning to any member state
in compliance with its Agency obligations.

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ELIGIBILITY - MOSCOW'S INDIA-INCLUSIVE VIEW
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6. (U) Ref B relates Russia's release of a three-page summary
document (published to IAEA Member States as ref C) and the
commentary it elicited from member states and the DG under "Any
Other Business" on the concluding day of the March Board meeting.
After the March Board, Russian Msnoff Kondratenkov told us the
Russian MFA had tried to word its Agreement 1 with the IAEA in such
a fashion as not to require Duma approval of the document, although
Russian law requires Duma approval of each civil nuclear export
agreement. He added that relevant Russian law is "practically based
on" and does not exceed NSG Guidelines/limitations on transfers.
Russia did not want with this agreement to "create a limitation on
NSG guidelines." (NOTE: We understood him to mean "erode" or
"undercut" them. END NOTE.) We saw a copy of draft Agreement 1,
which still had language in italics that tracked closely with the
sentence in REF C authorizing transfer of LEU to "any
non-nuclear-weapon state" having an "agreement with the IAEA
requiring the application of safeguards on all its peaceful nuclear
activities." Kondratenkov agreed this phrase could be read as
allowing transfers to civil facilities in India under its separation
plan. (NOTE: In an unrelated conversation with MsnOff, safeguards
legal adviser Laura Rockwood expressed concern that India might not
place under indefinite safeguards all civil facilities identified in
its separation plan. That possibility raises the question of
whether India's safeguards "requires" application of safeguards to
"all its peaceful nuclear activities." END NOTE.) Subsequently, on
April 8 Kondratenkov told us the IAEA had accepted the "non-nuclear
weapons state" formulation. The draft Agreement 1 we saw in March
further sets out recipient state conditions:

-- No use of LEU received from the IAEA for weapon purposes,
explosions, and "any military purpose"
-- Physical protection per INFCIRC 225, Rev. 4
-- LEU may be used only for production of energy. Safety standards
and measures for handling, shipping, and storage to be per INFCIRC
18, Rev. 1
-- No re-export, further enrichment, or reprocessing of spent fuel
unless agreed to by the IAEA

Kondratenkov said these provisions, which he characterized as
"minimal conditions consistent with the NSG," were "practically
agreed" between the IAEA and Russia.

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THE WAY FORWARD
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7. (U) Kondratenkov, when asked about the way ahead, offered the
following timeline of events:
-- Russian IAEA Governor Berdennikov's oral statement under AOB at
the March Board will be circulated as an INFCIRC (done);
-- Agreement 1 needs to be concluded between Russia and IAEA
(done);
-- Moscow must receive a letter from the DG affirming agreement of
the Agreement 1 text in full. Upon receipt of that letter, the
Russian inter-agency process would ensue to approve agreement
outside Duma process. (Done - Kondratenkov affirmed April 8 that
this review is under way but would likely not be complete in time
for the June Board meeting.)
-- Agreement 2 needs to be finalized by IAEA, involving further
"informal" consultation between IAEA and Moscow. (Done, per
Kondratenkov on April 8.)
-- In early May, texts of Agreements 1 and 2 would be presented in
all Board capitals. Russia would undertake targeted outreach,
especially with "skeptics" - Egypt (will oppose eligibility for
non-NPT signatories),Cuba, Brazil and Argentina, the latter two
being the hardest.


8. (SBU) Our IAEA contacts McDonald and Rauf tell us this timeline
on the last point is slipping on the Russian side. Moreover,
ElBaradei has written to the Russians with the proposal that, in
place of the two agreement texts as finished documents, for purposes
of information and confidence building in the June Board the Russian
Federation should circulate a detailed summary of the arrangements,
including key legal points in each agreement. The IAEA would
characterize this document as describing a "model" under discussion
with Russia. The Russian Mission tells us that IAEA Governor
Berdennikov and ROSATOM's Spasskiy will decide on ElBaradei's
tactical proposal. Despite his caution at this juncture, DG
ElBaradei did affirm to the Ambassador his aim of September Board
approval for the agreement texts (ref E).

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WHAT WE STILL NEED TO KNOW
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9. (SBU) Comment: Based on the information in the Russian summary
document (ref C) and separate conversations with Russian officials
after the March Board meeting a number of questions need to be
answered in the run-up to the June Board:

Would arrangements for fabricating LEU, stored in the form of UF6,
into power reactor fuel assemblies be specified as part of these
agreements, or would they be addressed separately? UNVIE
understanding thus far is that fuel fabrication is not addressed in
the Russian proposal.

Would the supply of LEU to India be consistent with the NSG
Guidelines or require some modification? Would the United States
support such a modification? Would the United States read the
Indian safeguards agreement as clearly "requiring" safeguards on all
its declared civil facilities?

Is India prepared to define itself "in" under the Agreement 1
criterion?

How can advocates persuade the skeptical states that would have no
need of a "last-resort" supplier of LEU to acquiesce in the
establishment of a facility desired by other developing countries?

Would the proposed Russian arrangement, as outlined in REF C,
establish any unhelpful precedents in relation to the NTI fuel bank,
the U.S. national reserve, or model arrangements envisioned under
the 2006 RANF proposal?

Mission is continuing consultations with Russian and Indian
counterparts, Secretariat staff, and other member state missions as
appropriate on these questions.

SCHULTE