IAEA BUDGET: G-77 OPENS DOOR TO SAFEGUARDS, CLOSES

C O N F I D E N T I A L UNVIE VIENNA 000182

SIPDIS

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

E.O. 12958: DECL: 10/30/2018
TAGS: AORC PREL KNNP IAEA UN
SUBJECT: IAEA BUDGET: G-77 OPENS DOOR TO SAFEGUARDS, CLOSES
IT ON SECURITY

REF: A. UNVIE 174

B. UNVIE 109

C. UNVIE 65

D. UNVIE 52

Classified By: Ambassador Gregory L. Schulte for reasons 1.4 b/d


1. (SBU) Summary: IAEA Member States have refined their
positions in preparation for the April 27-28 meeting of the
Program and Budget Committee (PBC). There is growing support
for a real increase, but Member States await a U.S. position
to galvanize the discussion. Individual European hardliners
continue to rally around a Zero Real Growth (ZRG) position,
but the overall EU statement will simply request budgetary
"restraint." Predictably, the G-77 will support budget
increases for IAEA programs in energy, science and technical
cooperation. Less predictably, the G-77 appears prepared to
take a positive view of increases for safeguards and safety.
In an unsavory turn of events, the G-77 will vigorously
oppose increases aimed at moving Nuclear Security into the
regular budget, a U.S. priority. The U.S. now faces two
major hurdles at next week's PBC: Europeans who want to scrap
the draft budget and start over with ZRG as the point of
departure, and developing nations who refuse to legitimize -
much less fund - nuclear security activities, the IAEA's
principal counterterrorism role. The G-77 demonization of
nuclear security as "outside the IAEA's mandate" is
particularly galling, given its presumption that the U.S.
will fund a wide range of expensive G-77 priorities. End
Summary.

Europeans Hawks Haven't Won Over the Entire EU
-------------- -


2. (SBU) European budget hawks have grown increasingly
hardline on the draft IAEA budget as the April 27 PBC
approaches (reftel). France in particular is likely to use
the PBC to demand a "redraft" of the current proposal (which
is based on a 23 percent increase) and the submission of a
new budget proposal based on ZRG. The UK and Germany will
likely join France in support of a redraft, but the overall
EU statement appears to be heading toward a softer tone.
Thanks to the joint work of Romania, Finland and Austria, the
EU will state that it would be "grateful" if the Secretariat
could show more budgetary "restraint."

The G-77 Position: Flexible on Many Fronts...
--------------


3. (C) The G-77, for its part, has been unusually quiet and
only recently coordinated a budget position in time for the
PBC. Egyptian First Secretary Bassem Ghanem met with
MissionOff April 23 to share highlights of the G-77 position.
Like some Europeans, the G-77 statement may include language
that asks the Secretariat for a proposal that is more
"realistic." Unlike the European hawks, however, the G-77 is
not wedded to Zero Real Growth (ZRG). In general, the G-77
supports increases for Major Program 1 (Nuclear Power, Fuel
Cycle and Nuclear Science),Major Program 2 (Nuclear
Techniques for Development and Environmental Protection) and
Major Program 6 (Management of Technical Cooperation).
Ghanem also signaled a surprisingly positive stance on some
increases for Major Program 4 (Safeguards),though he
commented that the G-77 would likely request an informal
working group to study ways to relieve developing countries
of the burden of paying for expensive safeguards programs.

...but Stubborn on Nuclear Security
--------------


4. (C) Ghanem's fiscal flexibility vanished when MissionOff
moved on to the proposed increases for Major Program 3
(Nuclear Safety and Security). Ghanem indicated that some
increases for safety might be appropriate, but rejected
outright any increases geared at "mainstreaming" Nuclear
Security - i.e., moving it into the Regular Budget to lessen
its dependence on voluntary contributions. He refused any
hint of a "tit for tat" trade between Nuclear Security and
Technical Cooperation, as other G-77 representatives have
quietly suggested. He also denied a proposal to subject
Nuclear Security to a voluntary "scale of assessments" along

the lines of the Technical Cooperation Fund, saying that
Nuclear Security fell outside the IAEA's mandate and must be
maintained as a strictly voluntary program. Ghanem suggested
that Member States develop a Universal Convention on Nuclear
Security if they wished to treat Nuclear Security as a core
mission of the IAEA. Ghanem remained unmoved by arguments
that developing nations were the main recipients of nuclear
security assistance. Only when pressed did Ghanem agree that
the proposed 7 million Euro increase for Nuclear Security was
relatively small.

Budget Negotiators Guide the Process
--------------


5. (C) Board Chair Taous Feroukhi and Vice Chair Cornel
Feruta have lobbied hard for budgetary flexibility among
Member States until the U.S. (the IAEA's largest donor) has
developed a position. On April 24, Feruta told Ambassador
Schulte that the prevailing view among the majority of Board
Members was now in favor of a real increase, but that
individual Members would be cagey about their positions until
the U.S. weighed in. U.S. leadership was key to galvanizing
the discussion. Feruta also said that if he managed to keep
the way open for a real increase, he had performed
successfully in his role as coordinator of the budget
discussions. Both Feroukhi and Feruta have floated the idea
of spreading any increases over two biennia (four years) in
order to make them more palatable to Member States (and also
in tacit recognition of a statement by Secretary Clinton to
phase in budget increases over "four years.") Feruta
signaled that not all G-77 members agreed with Egypt's
hardline view, and his observation is supported by recent
signals from China and India that they are supportive and
flexible on the budget. Feruta's deputy, Dan Necalaescu, was
more pessimistic: "All the G-77 wants is their top three
major programs and to heck with the rest of it." (Necalaescu
has worked hard to inject more realistic negotiating behavior
among G-77 representatives and flexibility among EU members.)

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


6. (C) Mainstreaming Nuclear Security into the Regular Budget
is a priority for the U.S., Canada, and other OECD states.
Egypt's recalcitrance on the issue is worrisome, especially
given Egypt's active and vocal leadership among the G-77.
While other G-77 countries have indicated their willingness
to "do a deal" that would address both G-77 and OECD
priorities in Technical Cooperation and Nuclear Security
respectively, Egypt and other G-77 hardliners may be expected
to block any such negotiations or demand heavy trade-offs.
It is not clear whether they object to nuclear security
funding as a matter of principle or, knowing of Western
priorities, for leverage to gain increases elsewhere in the
budget. The prospect is particularly worrisome given the
U.S. is already heading into the PBC having taken heavy fire
from traditional allies for merely "considering the options"
for a budget increase. The U.S. now faces two major hurdles
at next week's PBC: Europeans who want to scrap the draft
budget altogether, and developing nations who refuse to
legitimize nuclear security. End Comment.
SCHULTE