1. (C) The June 15-19 IAEA Board of Governors meeting will
take place against the backdrop of impasse over the 2010
budget and the ongoing race for IAEA Director General, with
an election likely later in June. The politics of the DG
race will distract from the regular June Board meeting's
overloaded agenda, which includes several of our priorities.
Given a limited number of deliverables, Mission wishes to
alert inter-agency stakeholders to the need to "prioritize
our priorities." The traditional focus of the June Board is
on the annual Safeguards Implementation Report (SIR) and the
budget, which is currently so divisive it will very likely
not be resolved until later in the summer despite the Board
Chair's advocacy for progress. The Board agenda (available
on govatom) also includes formal discussion of the
International Nuclear Fuel Bank (INFB), Russian LEU reserve,
and German "enrichment sanctuary" proposals; verification
issues in Iran, Syria and the DPRK; a related issue on
de-restriction of Board documents; and consideration of the
Agency's annual report, Technical Cooperation Report, and
provisional General Conference agenda.



2. (S) Among these issues, Mission considers Board discussion
of nuclear fuel assurances to be the area most ripe for
advancing priority U.S. objectives. The SIR report could be
a vehicle for a U.S. statement exhorting the strongest
support for the IAEA's full use of its safeguards
capabilities and for ensuring the Agency has all the
authorities it needs to provide assurances about the absence
of undeclared activities. Given the ongoing safeguards
investigation mentioned in the SIR (ref A), the SIR
discussion can also provide opportunity to influence Egypt to
be more cooperative on nonproliferation objectives in the
Board (ref A.) Mission assumes the timing of the June Board
-- in juxtaposition to the presidential election in Iran --
makes any progress on Iran unlikely, though we see virtue in
considering another EU3 3 joint statement on Iran following
the March Board precedent. Mission recommends deferral of
any Board action on Syria until September, when we have
reason to believe we may be in a stronger position, to avoid
the risk now of an abortive run at a Board resolution
detracting from momentum on the Syria investigation. We do
not see much prospect for Board action on DPRK beyond strong
national statements calling for return to the six-party
process and IAEA verification; we would expect the UN
Security Council in the event of a nuclear test, with a
resolution in the September IAEA General Conference to
follow. The Secretariat has not been requested to produce a
report on safeguards compliance in Iraq in advance of the

June Board (ref B). Mission recommends downplaying the
de-restriction issue, placed by the NAM on the agenda as a
diversion, though we should stand by the precedent of
releasing the Iran report and continue to argue in favor of
release of Syria reports. End Summary and Action Request.

Two Guerrillas in the Boardroom


--------------------------





3. (C) The agenda for the June 15-19 meeting of the IAEA
Board of Governors is overloaded, by traditional standards.
Casting a pall over the atmosphere in which the Board will
address this agenda are the divisive questions of who will
succeed Mohamed ElBaradei as Director General, and what level
of financial resources Member States will accord the agency
in 2010 (in conjunction with a biennium progam and budget for
2010-11). Round two of the selection procedure for Director
General, complicated by expansion of the field from two to
five candidates, will run in installments before and after
the Board's regularly scheduled week-long meeting. The
uncertainty about DG succession at this time feeds an aura of
"suspended animation" about the Agency that is reinforced by
the frustrated safeguards verification cases in Iran and
Syria (more below). The program and budget process is,
ostensibly, even more accurately described as being at an
impasse. First attempts May 13-14 by the empowered Board
Vice Chairman, Romanian Ambassador Cornel Feruta, to lead
negotiations between states resulted in more observable
rejectionism than compromise. States are calling for
different proposed numbers from the Secretariat rather than
indicating funding levels on which they are prepared to
engage. Board Chair Feroukhi (Algeria) and her Romanian
deputy are reliably committed to achieving real growth in the
Agency's resources in this budget cycle, but the path from
here to there will be marked by confrontation and protracted
negotiations. Feroukhi is urging Board member states to
engage and compromise with a view, probably in vain, toward
securing in June, per tradition, the Board's recommendation
on the program and budget (for adoption by the General
Conference in September). On both these issues, U.S.
activism is ongoing and crucial.

Setting Priorities


--------------------------





4. (C) Among the priority issues formally before the June
Board, Mission believes the issue most ripe for progress is
the "Assurance of Supply" agenda item, which includes three
sub-items. We are informed the Secretariat will present
discussion papers on its own fuel bank concerpt and on the
Russian LEU reserve proposal; Germany indicated its intention
to circulate a paper on its "enrichment sancturay" concept.
The DG must secure authorization from the Board to accept the
contributed funding, currently held in trust, for development
of the International Nuclear Fuel Bank (INFB), including
nearly 50 million USD from the United States. The Director
General also requires authorization to conclude model
agreements with Russia on its LEU reserve proposal; Russia
has yet to circulate the two relevant texts to the Board. At
this writing the Secretariat is signaling it will seek no
Board decisions in June. If achievable, however, preliminary
agreement from the June Board on acceptance of funds and the
broad outlines of a fuel bank, to be set out in a Secretariat
discussion paper, would pave the way for the September Board
of Governors meeting to approve establishment of fuel bank
mechanisms in advance of the September deadline for the
Nuclear Threat Initiative challenge grant for the INFB.
Securing such agreement will not be easy given residual
G-77/NAM resistance and may come at the expense of other
priorities, i.e. in order to enlist their support, other
issues may need to be deferred.



5. (S) The June Board's consideration of the annual SIR
report is traditionally an opportunity to highlight
strengthening safeguards. In addition to promoting the
Additional Protocol, we could help set the stage for later
consideration of any concrete proposals we may wish to put
forward on expanding the IAEA's legal authority, resources
and technical capacity, including support for modernization
of the Safeguards Analytical Laboratory (SAL) in the ongoing
budget deliberations. We would not expect any decisions to
come out of the June Board on these issues, but the U.S. and
like-minded should continue to make the case for more robust
IAEA safeguards and investigative authority in dealing with
undeclared nuclear activities. As previewed ref A, Mission
is also considering using the SIR reporting on Egypt to
carefully leverage Egyptian cooperation on other safeguards
issues. Although the June Board traditionally recommends the
biennial program and budget for apporval by the General
Conference, we fully expect the ongoing budget deliberations
to spill over into the summer, with a special Board meeting
likely before July 20.

Iran, Syria, DPRK


--------------------------





6. (S) Weighing our country-specific verification priorities,
the June Board would not appear to be a propitious time for
pursuing Board resolutions on Iran, Syria or DPRK. The
Director General's published reports and introductory
statement on these issues are unlikely to break any new
ground. With the Iranian presidential election scheduled the
weekend before the IAEA meeting, the Board can be expected to
take a wait-and-see approach. This could also complicate any
U.S. national statement on Iran, in terms of creating an
expectation that we would be conveying a full iteration of
our policy at a time that we may not want to be seen as
attempting to influence the Iran election outcome. We may,
however, wish to consider another EU3 3 statement at the June
Board, reiterating our united stance. Such a statement would
also help set a further precedent, as in March, for a joint
EU3 3 approach on Iran in the Board of Governors. As in
March, there would have to be Political Director-level
agreement to pursue such a statement as a point of departure
for any successful Vienna negotiation of text. The
desirability and content of a statement will be a function in
part of whether Iran has accepted the EU3 3 offer of
negotiations.



7. (S) Although the Israeli Ambassador is pushing for Board
action on Syria, Mission has reason to believe we may be in a
stronger position in September for an initial Board
resolution on the Syrian safeguards investigation. For the
June Board, the U.S. national statement should nevertheless
convey a strong message marking a year gone by since the
first and only June 2008 IAEA visit to Al-Kibar with no sign
of additional Syrian cooperation since then, despite the
IAEA's repeated requests. The U.S, in concert with other
like-minded could also consider signaling our support for any
prospective special inspection request by stressing the
importance we attach to the Agency using the full range of
its safeguards authorities in Syria.



8. (S) We do not see much prospect for Board action on DPRK,
but expect strong national statements from the Core Group and
others calling on the DPRK to return to the six-party process
and IAEA verification. The annual September General
Conference resolution on DPRK continues to be the main
vehicle for registering IAEA member states' concern about the
DPRK nuclear file. Given the UN Security Council's active
involvement on DPRK, we do not see Board resolution as adding
value at this juncture, or as an effective means of
pressuring non-IAEA member North Korea. In the event of
another test, we would expect the UNSC to take the lead as in
the past. The Board did not issue a resolution following the
first DPRK nuclear test, which was condemned in the annual GC
resolution.

De-restriction: Not Taking the Bait


--------------------------





9. (S) The NAM, abetted by Brazil's "principled" stance at
the March Board, insisted on the inclusion of de-restriction
on the June Board agenda as means of airing well-worn
grievances about safeguards confidentiality and media leaks,
and to counter Western efforts to release the DG's report on
Syria. Aside from a symbolic victory, there is little to be
gained from engaging this debate as means of exerting
"pressure" on Syria. The Syria report is leaked almost
instantaneously, and pursuing this issue is not a substitute
for Board action on Syria. Our primary objective should be
to hold the line on release of the Iran reports consistent
with past Board practice and as a matter of transparency on
an issue of international concern, but otherwise downplay the
debate. We should reassert the Board's authority to release
its own reports on a case-by-case basis as noted in the cover
note to the DG's report on the de-restriction issue, which
cites the Board Chair's explicit statement in this regard
upon adoption of the policy in 1997. Such a U.S. posture
would leave the door open for release of future Syria
reports, especially should the IAEA stand-off with Syria
escalate, for example, in the wake of any future special
inspection request. (Note: The Secretariat formally submits
DG reports on Iran requested by the Security Council and
passes a courtesy copy of Iran reports informally to IAEA
members on the UNSC even when it is not a formal requirement.
End note.)



10. (C) The 1996 Board document/decision circulated by the
Secretariat on de-restriction does not add much to the
debate. The IAEA has no proactive policy for publishing
de-restricted reports on its website. The policy of
de-restriction after two years is applied on a case-by-case
basis in response to one or two requests a year from
researchers who seek access to the documents; similar to our
FOIA process. The two-year rule includes exceptions for
confidential information and legal impediments to release as
well as a blanket exception on non-release of the annual SIR
report. In practice, the Secretariat has released some
safeguards reports on Iraq, for example, dating back to the
early 1990s. In short, this process is not comparable to and
has no bearing on Board decisions on release of the Iran and
Libya reports -- the Board can make a decision on release
regardless of the two-year rule on de-restriction. Clearly,
the NAM is attempting to conflate these issues. Our approach
should be to stand by the Board's prerogatives with respect
to specific cases while downplaying de-restriction as an
issue. To counter likely NAM rhetoric on this agenda item,
we could note the fact the IAEA Board decisions, unlike UN
Security Council resolutions or those of other UN bodies, are
not accessible to the public, i.e. they are only available on
govatom once incorporated into the record of the meeting, and
call for greater transparency.

Any Other Business - Pakistan, Gaza


--------------------------





11. (C) There is still a possibility of Arab delegations
raising the Gaza DU issue under AOB though they refrained
from doing so in the March Board. Mission would like to draw
on our previous guidance to not engage such a debate unless
it spills over into areas outside the IAEA's authority.



SCHULTE