IAEA BUDGET HAWKS MOBILIZING

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. -------------- 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