C O N F I D E N T I A L UNVIE VIENNA 000227

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: DEEPENING IMPASSE IN IAEA BUDGET TALKS

REF: A. UNVIE 182

B. UNVIE 201

Classified By: Charge d'Affaires Geoff Pyatt for reasons 1.4 b/d


1. (SBU) Summary: IAEA Member States met on May 13 to "get
down to business" on the budget. European hardliners have
not relinquished their calls for a "revised" budget proposal
based on zero growth. Nor has the G-77 progressed beyond
general support for increases in technical cooperation and
"principled" opposition to regularizing nuclear security. In
a surprise intervention, South Korea supported a ten percent
increase in 2010 as a starting point for negotiations (the
only country to support an increase with a figure attached).
Lacking formal instructions, the U.S. signaled only support
for a "significant" budget increase and named a set of
general priorities in the areas of safety, safeguards and
security. Most positively, there was general support among
Member States on the need to upgrade the Safeguards
Analytical Laboratory. The presiding Board Vice Chairman
pointed to the lack of general progress and the looming
meeting of the Board of Governors June 15-19 (where the
budget is traditionally approved) to inspire a sense of
urgency. He will proceed by holding small group meetings
with "interested" members of the Geneva Group (of major
donors) and the G-77. The first Geneva Group meeting,
including the U.S., is scheduled for May 14. End Summary.


2. (SBU) IAEA Board Vice Chair Cornel Feruta (Romania) opened
budget talks on May 13 with most of the Board Ambassadors and
many others by announcing that "informal consultations are
over - it is time to get down to business." Deputy Director
General (DDG) David Waller then reiterated the Secretariat's
latest proposal to stretch the budget proposal over four
years (reftel). Member States responded predictably, with
the UK, Canada, Germany, and France (the European
"hardliners") repeating past requests for a revised budget
based on zero growth. Japan also asked for a more
"realistic" proposal. South Korea surprised everyone by

supporting a ten percent increase for 2010-11. (Mission was
previously unaware of Korea's position -- the only one at the
meeting that came anywhere close to U.S. support for a
significant increase.) G-77 countries, led by Argentina,
Egypt and Brazil, expressed disappointment that the
Secretariat had not revised its budget proposal with a
greater emphasis on technical cooperation, nuclear
applications and energy. Lacking formal instructions, the
U.S. signaled general support for a "significant" budget
increase to include a number of key priorities in safety,
security and safeguards, but noting also the need to discuss
management of the Agency's "growing" technical cooperation
program; the general nature of the statement was met with
calls for much more specificity from a number of participants
following the meeting.


3. (SBU) DDG Waller and Board Vice Chair Feruta played
active roles in the discussion, particularly in their
attempts to turn off calls for a revised budget. Waller
reminded participants that the Secretariat's proposal
maintained the current proportions of resources allocated
across the six major programs, except for a slight shift from
Verification and Management in favor of regularizing the
Nuclear Security program. G-77 representatives claimed they
had been dissatisfied with the proportions between major
programs at the time the 2009 budget was approved and that
the historic lack of emphasis on technical cooperation should
be rectified. They rejected the Secretariat's effort to
"regularize" the Nuclear Security program.


4. (SBU) The meeting was lean on substance, and the majority
of the time was spent rehashing country positions from the
April 27-28 Program and Budget Committee (PBC). One positive
sign, however, was support by Canada and Germany for nuclear
security as a priority and clear statutory activity of the
Agency. Germany went on to signal support for safeguards.
Most positively, there was general agreement across blocs on
the need to refurbish the Safeguards Analytical Laboratory
(SAL), with the Swiss delegate making the boldest statement
of the lab's physical needs and South Africa also speaking
strongly for resources to SAL.


5. (C) Romanian Second Secretary Dan Necalescu privately
expressed frustration that country positions had not become
more refined since the April PBC. To break the deadlock,
Romanian Vice Chair Feruta - in consultation with DDG Waller
- has determined to proceed with small group discussions
among blocs. To this end, Necalescu scheduled a meeting for
May 14 with Geneva Group co-chairs (the U.S. and UK) and
their "interested" Geneva Group colleagues (invitees will be
France, Germany, Canada, Japan, South Korea and Italy).
Canadian representative Anthony Hinton noted wryly that the
U.S. was right to draw G-8 chair Italy into the budget
discussions. Hinton, who vocally supports a ZRG position,
commented, "if you guys (the U.S.) are going to pull this
budget thing over on us, it will have to be through the G-8."
Hinton was also privy to private comments by the Italian
Deputy PermRep that "the U.S. is looking for a ten percent
increase."


6. (C) In another side conversation, Finnish First Secretary
Jani Raappana warned that Egypt's flexibility on the budget
could well be influenced by Member States' treatment of the
Safeguards Implementation Report (SIR). Raappana warned that
if the SIR discussion turned volatile during the June Board
and extended into the September General Conference, an
isolated Egypt could make trouble for the budget discussions.
Raappana also noted that the Czech position on the budget
had changed in favor of an increase, ensuring at the very
least that the European hardliners would fail to consolidate
the EU around a zero growth position. Anticipating that the
budget debate will drag into their EU presidency, the Swedish
DCM described to us his intention to play an honest broker
role - contrasting the traditional Nordic support for
non-proliferation with the hard line French and German budget
views.


7. (C) For her part, UK First Secretary Creena Lavery pleaded
with the U.S. to be more conservative on the budget and
sensitive to the positions of the other Member States. She
argued that the lack of a Geneva Group consensus would fuel
the G-77 to be more aggressive during negotiations, and that
the major donors would be left with increases "in all the
places we don't want." She also complained that the
Secretariat had done nothing to respond to Member States'
calls for a budget revision, and that DDG Waller appeared to
have "cloth in his ears."

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


8. (SBU) The U.S. has managed to keep the budget debate
wedged open by signaling general support for a "significant"
increase, though patience has worn thin. Today's events
revealed eroding support among other major donors for a
flexible approach to budget negotiations. End Comment.

PYATT