UNCLAS UNVIE VIENNA 000167

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: AORC PARM KNNP IAEA
SUBJECT: IAEA SAFEGUARDS BUDGET ADVOCACY

STATE FOR IO/T, IO/MPR, ISN/RA, ISN/MNSA
DOE FOR NA-243 GOOREVICH
NSC STAFF FOR CONNERY
NRC FOR DOANE

REF: UNVIE 065


1. (SBU) Summary: At UNVIE request, IAEA DDG/Safeguards briefed
Geneva Group members on April 15 regarding his department's 2010/11
budget proposal. Heinonen made a compelling case for the proposed
budget increase, but key member states appear to remain skeptical.
Heinonen began by explaining why savings from "Integrated
Safeguards" will not be sufficient to address growing safeguards
needs, then proceeded to describe major projects underway that
require additional funding. The Safeguards Analytic Laboratory
(SAL) was most prominent in this regard. In response to a question
from DCM, Heinonen also described the consequences should new
funding not be available. He effectively dismissed a German
assertion that because the IAEA did not expend the entire safeguards
budget last year it was "hard to argue" for a budget increase in
this budget cycle. Also in response to German comments, Heinonen
noted that the IAEA cannot be expected to "win tomorrow's war with
yesterday's tools." Heinonen's presentation was an effective
opening salvo in the safeguards budget debate, but much work remains
in convincing even our close friends to break away from zero real
growth. Questions and comments from Germany, Spain, and France
underlined the challenge Mission sees to prompting consideration of
the IAEA budget issue in the context of the overarching and
highest-priority strategic nonproliferation objective, rather than
by counting beans from the green-visored perspective of a finance
ministry. (Note: After the briefing Heinonen shared his
presentation slides in confidence with us, e-mailed to ISN/RA and
IO/T; some figures in those slides may evolve before appearing in
final in the next Safeguards Implementation Report. End note.) End
Summary.


2. (SBU) IAEA Deputy Director General Olli Heinonen
(DDG/Safeguards) began by describing the budget proposal as "very
tight" despite the requested increase, and attributed much of the
tightness to two large ongoing projects, Enhancing Capabilities of
the Safeguards Analytic Services (ECAS) and the Safeguards
Information System Re-engineering Project (IRP). (Note: ECAS

involves upgrades/replacement of Safeguards Analytical Laboratory,
SAL, facilities at Seibersdorf; IRP is replacement of the IT system
for handling all safeguards information.)


3. (SBU) Heinonen prefaced detailed discussion of the above
projects as well as others with an explanation of why savings from
Integrated Safeguards (i.e., decreased routine inspection activity
in states that provide wider-ranging access and information under
the Additional Protocol) will not provide significant funds beyond
the savings already achieved. He showed slides depicting a decrease
in routine inspection activities of approximately 20 percent since
2001, while in the same timeframe there was an increase of
approximately 25 percent in the quantity of nuclear material subject
to safeguards. But, Heinonen noted, this period of
adjustment/savings resulting from the move to Integrated Safeguards
is closing because the states with the most significant nuclear
activities have already been folded into the Integrated Safeguards
regime. Thus, further states adopting the AP will result in little
savings to offset the increasing demands on the safeguards regime as
additional nuclear facilities and material increasingly come on-line
worldwide.
-

4. (SBU) Exacerbating this trend, Heinonen continued, is the fact
that new facilities coming on-line tend to be labor intensive
because they involve plutonium, which requires frequent inspections
to meet IAEA "timeliness" goals. He cited specifically the
reprocessing and MOX fuel plants under development in Japan and the
expected growth in the number of nuclear power reactors across the
globe. The DDG/Safeguards described the proposed safeguards budget
increases as each falling into one of the four following areas: 1)
replace old instrumentation and equipment; 2) new facilities subject
to safeguards; 3) enhance detection of undeclared activities; 4)
manage and analyze large amounts of information.


5. (SBU) After so dismissing the "just look to savings" chimera,
Heinonen proceeded to describe the safeguards needs that must start
to be met to achieve and maintain a strong safeguards regime. He
noted that about 25 percent of the Secretariat's budget proposal is
consumed by 8 projects: 1) India, 2) JMOX (safeguards systems for
new MOX fuel plant in Japan), 3) Chernobyl (safeguards systems for
monitoring and disposition of fuel containing material found at the
site of the accident), 4) Safeguards Instrumentation (replacement of
obsolescent instrumentation), 5) ECAS (SAL upgrade/
rebuild), 6) Novel Technologies (new tools, novel or not, to detect
undeclared facilities and activities), 7) ICT Systems Support and
Operations (Safeguards IT hardware and security infrastructure,
including move to new location), and 8) Integrated Analysis
(analysis tools specifically tailored to improve effectiveness and
efficiency of drawing Safeguards conclusions). Estimates for these
eight projects assume regular budget amounts of 63 million euros,
extrabudgetary contributions of 15 million euros, and capital
investment of 39 million euros over the 2010-2011 budget cycle.


6. (SBU) During his presentation and in response to a question from
DCM, Heinonen stressed in particular the imperative for enhancing
SAL's ability to analyze environmental samples and for ensuring no
interruption of the Agency's ability to analyze nuclear material
samples. In regard to analysis of environmental samples, Heinonen
underlined that it will always be more efficient and effective to
analyze most samples via the Network of Analytic Laboratories
(NWAL), but that the IAEA needs to upgrade its own capability such
that it can show it is not completely reliant on the NWAL for
higher-sensitivity analysis of select samples in a timely fashion.
On analysis of nuclear material samples, Heinonen stressed that the
Agency is not in a position to rely on the NWAL for such analyses,
in light of transportation and other pragmatic considerations.
(Comment: The facts that support this viewpoint should be examined
and updated if it is found that NWAL labs could effectively and
efficiently share part of the analysis and thereby reduce the risk
of SAL being a single point of failure. The risk would not change
even when the laboratory is completely modernized if SAL continues
to perform 99% of these analyses. This is an ideal time to examine
all old assumptions, because Safeguards is currently soliciting new
labs to join or re-join the NWAL for nuclear materials analysis and
developing more detailed requirements for the SAL of the future.
End comment.)


7. (SBU) In response to a question from DCM, Heinonen said the
consequence of inaction would be two-fold regarding SAL. First, any
delay would simply increase the cost, as it is not efficient to
spend more money to keep the current SAL limping along in its
current state. Second, he noted that should the already
deteriorating nuclear material laboratory at SAL fail in such a way
that requires it to be out of service for some period, this would
result in at least a temporary hiatus in the agency's ability to
achieve its safeguards goals. Addressing the consequences of a
funding shortfall in respect to the Agency's legal obligations to
monitor new facilities subject to safeguards agreements, in
particular facilities in India and at Japan's JMOX facility,
Heinonen asserted the IAEA cannot simply tell them "thanks, but no
thanks." Further commenting on consequences of further zero real
growth, Heinonen said the department's IT-related efforts would be
forced to continue to spend money "buying time" by keeping old
systems in place before moving to new systems that will serve as the
new platform for "information-driven" safeguards. This would be
inefficient and costs more in the end. He noted, for example, that
he had already been forced to cut away necessary training for
inspectors on the new IT systems.
-

8. (SBU) German, French, and Spanish representatives all queried
Heinonen regarding the funding request for SAL, in particular.
Prefacing his remarks by noting that the IAEA budget request is a
"major problem" for Germany, but that Germany assigns "high
political value" to the safeguards regime, the German DCM said the
IAEA should seek more contributions from host-country Austria.
Heinonen responded by explaining that, contrary to when it was
founded, the Austrian Seibersdorf facility in which SAL is located
no longer includes a vibrant nuclear research center. Thus, the
necessary infrastructure costs for handling nuclear material are not
readily covered by existing Seibersdorf capabilities. As to the
suggestion that SAL be relocated to another country, Heinonen noted
the costs associated with moving approximately 50 staff, and claimed
one could have no long-term assurance that the economics of any move
would be better than staying at nearby Seibersdorf.


9. (SBU) German DCM also noted that the Safeguards Department had
not spent its entire 2008 budget allocation and posited it was
therefore "hard to argue" for a budget increase. Heinonen's retort
began by an implied reference to the underlying imperative for
strengthening the safeguards regime by recalling EC Commissioner
Barroso's comment that you cannot "win tomorrow's war with
yesterday's tools." On the specific substance, Heinonen responded
that funds went unexpended last year due to the fact that projects
that had been budgeted for were delayed by the host state, such as
at JMOX. It would have been foolish and inefficient for the Agency,
for example, to "buy equipment early and put it on a shelf" just to
expend the funds in the same budget year. The funds were still
needed and this delay in expenditure in no way implied some sort of
"cushion" in the safeguards budget; there is no such cushion,
Heinonen asserted.


10. (SBU) DCM asked if staffing in the Safeguards Department was
adequate to the task and how much staff growth the proposed budget
would allow. Heinonen said he was currently requesting 20 new
safeguards slots. He observed that the move toward strengthened and
integrated safeguards (an approach that requires a state-level
evaluation to help assure the absence of undeclared activities)
requires an evolution in the work of inspectors. Specifically,
there is a relative decrease in traditional inspection activity, and
a relative increase in the need for analysis of all available
information on a state's nuclear program. So, the Safeguards
Department needs sufficient people, but also needs to keep evolving
their skill set. Looking to the future and as an example of the
ongoing evolution in safeguards, Heinonen noted the possibility of
"remote inspections" in which data from inspection equipment is
accessed and analyzed in Vienna.


11. (SBU) Alluding to ongoing activities in Iran, DCM asked Heinonen
whether the department would have what it needs should another such
issue emerge. Noting that the exercise in Iran had been a larger
resource drain when Iran was actually providing more information and
access earlier in the investigation, Heinonen said there is "no
cushion" in the safeguards budget and that he would have to go to
the Board to ask for more funds if a new compliance issue arose.


12. (SBU) Referring to two measures of safeguards effort displayed
on viewgraphs used by Heinonen for his presentation, German DCM
asked whether "person days of inspection" (PDI) or "calendar days in
the field" (CDF) was the more accurate of the two measures.
Heinonen said they are very similar, but there are differences
between, for example, the CDF costs going to Canada vice going to
Japan. He also made a broader point by acknowledging that the
Safeguards Department is not well positioned to do specific cost
estimates in this regard and that SAGSI is looking at the issue. He
said he hopes once the AIPS project is finalized the department will
have available the data it needs in a usable form. For now, doing
such cost analysis is "a manual job" and inefficient.


13. (SBU) Comment: Heinonen ably described the imperative for more
safeguards resources, but the reaction from Germany, in particular,
(and France outside the meeting) shows that there is still much work
to be done to persuade even our close friends that the time has come
to put our money where our mouth is in support of the critically
important IAEA safeguards mission. Following the briefing, MsnOff
engaged Frederic Claude, Safeguards Advisor for Heinonen, and Alicia
Reynaud, Section Head for Safeguards Programme and Resources, on
taking forward the budget debate. One possibility for sharpening
the IAEA's case would be to develop further the argument implied by
Heinonen's recall of the Barroso quote about "yesterday's tools."
At several points in the presentation Heinonen referred to the fact
that key ongoing projects are to put in place the platform from
which "information-driven" safeguards could operate. Of the four
categories identified by Heinonen into which ongoing projects fall,
the last two (detect undeclared activities, manage/analyze large
amounts of information) reflect the challenge of strengthened
safeguards. In order to place member states' consideration of the
safeguards budget issue on a higher strategic plane, the Agency
might further stress the resources it will need to ensure that new
"information-driven" safeguards can provide the solid assurances the
international community must have. These assurances include not
only the traditional safeguards function of accountancy for declared
nuclear material, but also for the strengthened safeguards goal of
providing assurances of the absence of undeclared activities. The
cases now before the IAEA Board of Governors (Iran, Syria, DPRK)
underline the pivotal juncture the IAEA faces in that regard. End
Comment.

SCHULTE