UNCLAS UNVIE VIENNA 000174

SENSITIVE
SIPDIS

FOR D, P, T, ISN, IO
DOE FOR NA-24, NA-25, NA-21
NSC STAFF FOR CONNERY
NRC FOR DOANE, SCHWARTZMAN

E.O. 12958: N/A
TAGS: AORC PREL KNNP IAEA UN
SUBJECT: IAEA BUDGET HAWKS MOBILIZING

REF: A. UNVIE 109

B. UNVIE 65

C. UNVIE 52

D. STATE 34576


1. (SBU) Summary: IAEA regional groups have begun clarifying
their positions on the IAEA draft budget in preparation for
the April 27-28 meeting of the Program and Budget Committee
(PBC). Most Member States have criticized Director General
ElBaradei's proposed increase of 23 percent, but there are
both major donors and developing countries that acknowledge
areas where more resources are justified. Some budget hawks
in the large-contributor Geneva Group would prefer to stymie
the process at its start by asking DG ElBaradei to present a
new budget that is more "realistic" rather than engage on the
Secretariat,s proposal. While awaiting a final U.S.
position, Mission has urged flexibility in the face of EU
contributors (France, Germany, UK) pushing a lock-down in
favor of Zero Real Growth (ZRG). While inter-agency
coordination continues, Mission requests authority to assume
an opening bargaining position at the April 27-28 Program
Budget Committee (PBC) of support "in principle" for a
meaningful real increase in the 2010-11 budget to meet the
IAEA,s increasing responsibilities. Such a position offers
the best prospect of keeping budget negotiations open beyond
the April PBC. End Summary.


2. (SBU) Member States have begun preparing in earnest for
the April 27-28 meeting of the PBC. The PBC Agenda includes
a number of administrative items (to be reported septel), but
the real action will surround Agenda Item 3: The Agency's
Draft Program and Budget for 2010-2011. Most countries have
developed their initial positions on DG ElBaradei's proposal,
which envisions a 23 percent increase in the Regular Budget
(refs A-C). At this stage, there is little prospect that
budget negotiations during the PBC will result in a
recommendation for the June 15-19 meeting of the Board of
Governors. Formally, the Board submits a recommendation to
the General Conference (convenes September 15-19) for
approval and the budget goes into effect at the beginning of
the next calendar year (in this case, 2010). Faced with the

Secretariat,s proposals for significant year-on-year
increases in many programs and the launch of a capital
investment fund, Member States have divided between those
open to a debate on the budget target and a group of EU
budget hawks committed to ZRG. Uncertainty about this
month,s possible outcomes is heightened also because the
U.S. - the IAEA's largest contributor - has not indicated a
position on the budget.

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Focus on the Program, Not Just Cost
--------------


3. (SBU) During an April 15 meeting with Ambassadors from the
Western European and Others Group (WEOG) to preview the
PBC, Ambassador Schulte noted that in past years the U.S.
Permanent Representative would have received instructions to
support Zero Real Growth (ZRG), but that at present
Washington was considering a broad range of options,
including both ZRG and the budget proposed by DG ElBaradei.
Ambassador Schulte urged WEOG members not to lock into a ZRG
position, even in this time of financial crisis. Following
the meeting, WEOG Members expressed their appreciation for
the U.S. intervention, since, as one European diplomat put
it, "something is better than nothing." A Japanese diplomat
commented, "that was very nice, but is it supposed to be a
position?" Ambassador also used the WEOG meeting to
reiterate the public statement by Deputy Secretary Steinberg
(at the recent Carnegie Endowment conference) that the U.S.
wants to strengthen the IAEA's authorities and ensure that
the Agency receives the increased resources it needs to carry
out its rapidly growing responsibilities. Ambassador Schulte
drew attention to President Obama's April 5 speech in Prague,
citing the President's call to strengthen the Nuclear
Non-Proliferation Treaty, build a new framework for civil
nuclear cooperation, and secure all vulnerable nuclear
material around the world within four years.

--------------
Budget Positions by Bloc
--------------


4. (SBU) Romanian Ambassador Cornel Feruta as Board Vice
Chairman has completed his first round of budget
consultations with IAEA Board Members and shared the results
of his discussion with the U.S. The EU has proved the most
problematic, according to Feruta, with France aggressively
arguing in favor of an EU intervention at the PBC stating,
"the EU is not in a position to support the proposed budget."
The Romanians, supported by the Austrians and the Finns,
managed to block consensus on this hard-line position. More
likely, the EU will present a statement at the PBC indicating
that it is important to be "realistic" and to "look
carefully" at the budget proposal. Aside from the EU
statement, it appears increasingly likely that some EU
countries - particularly France - will lead an effort among
Member States to request the Secretariat to "start over" by
presenting a new budget proposal based on ZRG. (Ireland, the
UK, and most recently Germany have all received instructions
in support of ZRG.)


5. (SBU) Outside the EU, Canada, Mexico and Australia have
also emerged as budget hard-liners in support of ZRG, or, in
Australia's case, Zero Nominal Growth (ZNG). Japan, normally
a supporter of ZRG, has been coy about its stance in light of
Japanese Ambassador Amano's candidacy for Director General.
In contrast, a colleague from (non-Board member) Norway
signaled to us appreciation for the view that the Agency is
under-resourced.


6. (SBU) G-77 countries have allowed more room for
flexibility in their approach to the budget, particularly
regarding proposed increases for Major Programs 1 and 2
(Nuclear Energy and Nuclear Techniques for Development).
There are also hard-liners among the G-77, however, who have
stated outright that they will not accept any increases for
Major Program 3 (Nuclear Safety and Security). Egypt and
Cuba have led the charge against Major Program 3. Other G-77
allies, most notably China, may be more willing to negotiate.


--------------
Board Chair Gets Involved
--------------


7. (SBU) Board Chair Taous Feroukhi met with Ambassador
Schulte April 16 to speak more privately about the budget.
Ambassador Schulte solicited Feroukhi's aid in pressing for
flexibility in budget positions. Feroukhi admitted that
ElBaradei's draft budget proposal had been jeopardized by
Member States' calls for a "do-over." Feroukhi feared that
the present proposal would lead quickly to deadlock and the
PBC would be unable to make a recommendation to the June
Board. This would prolong budget negotiations and complicate
an already difficult June agenda, itself already overshadowed
by the DG selection process. Feroukhi suggested that an
incremental approach to the budget proposal might be more
palatable to Member States, spreading moderate increases over
two biennia. She agreed, however, that such an approach
risked allowing Member States to "forget" their commitments
over time and lead to prolonged budget negotiations that
would dominate Member States' energies from one biennium to
the next. DCM noted the need for DG ElBaradei to take a
leadership role in explaining to member states how additional
resources might be deployed to advance the IAEA mission.
Echoing her comments in Washington (ref D), Feroukhi called
for managing nuclear security resources under the nuclear
safety pillar, and noted the clear signal from her Washington
interlocutors that the Obama administration wants to be
supportive of the IAEA's mission.

--------------
Forestalling a Lock-Down
--------------


8. (SBU) COMMENT: Mission has pressed for flexibility while
the U.S. develops a position on the budget. Despite these
efforts, momentum is clearly building behind an EU-led
movement to ask the DG to start over by submitting a more
"realistic" budget proposal based on ZRG. The G-77 may be
our ally in keeping some areas for budget growth in play,
particularly if we can convince heavy hitters like China to
negotiate with flexibility. Board Chair Feroukhi and Vice
Chair Feruta are also working behind the scenes on our
behalf, and both are strategically placed within the G-77 and
EU, respectively. More problematically, our traditional
allies in Europe and North America are edging closer to a
hard-line budget position that will prove increasingly
difficult to budge.


9. (SBU) The prospects for rightsizing the IAEA budget to
match U.S. priorities in nuclear security, safety, and
safeguards will diminish if our allies on these substantive
issues lock into opposition on resources. Mission urges
Washington inter-agency coordination that will allow for a
U.S. position at the April 27-28 PBC that indicates, at the
very least, "in principle" support for a meaningful real
increase in the 2010-11 budget to meet the IAEA,s increasing
responsibilities. Such a position will keep our options open
as we head into what will likely be a long summer of budget
negotiations. END COMMENT.
PYATT