IAEA/RANF: PROGRESS WITH RUSSIA ON ASSURED FUEL

C O N F I D E N T I A L UNVIE VIENNA 000024

SIPDIS

STATE FOR T - TIMBIE, ISN/NESS, IO/T, ISN/MNSA
DOE FOR NA-24 SCHEINMANN, GOOREVICH, SYLVESTER;
NE-6 MCGUINNESS

E.O. 12958: DECL: 01/21/2014
TAGS: ENRG TRGY PREL IAEA RS
SUBJECT: IAEA/RANF: PROGRESS WITH RUSSIA ON ASSURED FUEL
SUPPLY, BUT ELBARADEI WARY ON BOARD CONSIDERATION OF THE
FUEL BANK

REF: A. 08 UNVIE 605

B. UNVIE 0005

Classified By: Ambassador Gregory L. Schulte, reasons 1.4 (b) and (d)


1. (SBU) The IAEA reports privately it is progressing toward
concluding an agreement with Russia on the supply of LEU and
on arranging the mechanics of an IAEA-administered fuel bank.


IAEA Reserve at Angarsk Enrichment Center
--------------


2. (C) The IAEA's head of verification and security policy
coordination, Tariq Rauf, told IAEACouns:

-- The IAEA and Russia are nearing completion of their legal
agreement and the separate, underlying commercial contract.
Rauf intends that meetings in Vienna in the first week of
February and in Moscow the following week will bring this
two-year negotiation to a successful close.

-- The legal agreement sets out mechanisms and obligations
under which the IAEA could secure a requested amount of LEU
reactor fuel, loaded aboard a ship in the port of St.
Petersburg and fully licensed for export and transfer to IAEA
control and transfer to a known recipient. The commercial
agreement provides for mechanisms and assurance that the
Russian supplier would get its agreed price for the LEU from
the recipient state through the hands of the IAEA. It also
provides arrangements that the IAEA would not be liable for
the cost of shipped LEU in the circumstance that a customer
country withdraws from an initiated transfer.

-- Regarding the criteria for countries to be eligible to
receive Angarsk-sourced LEU, Rauf asserted that the Russian
president's office had intervened to advance the
negotiations. The Russian MFA position, he said, had been to
require that Angarsk LEU may be transferred by the IAEA only
to states that were "non-nuclear weapons state signatories of
the NPT." As reported ref a, the IAEA position has been to
provide universal eligibility for IAEA Member States. The
compromise language under discussion would not cite the NPT
but require that (1) transferred material go only to the
reactor for which commercial fuel supply had been
unavailable, i.e., into the specific power plant for which
the consumer country made its request to the IAEA, and (2) it
must be placed under safeguards.

International Nuclear Fuel Bank
--------------


3. (C) Regarding the development of a fuel bank, Rauf said
his office was prevailing on DG ElBaradei to aim for
presentation of the concept for approval in the June IAEA
Board meeting. To make progress on this "legacy" project,
Rauf said, EXPO was arguing to ElBaradei not to hold off
until September, as he told Ambassador he was inclined to do
(ref b).


4. (C) Rauf acknowledged that under prevailing euro/USD
exchange rates the recent EU pledge of 25 million euros left
the IAEA short of the USD 150 million target stipulated in
the Nuclear Threat Initiative's (NTI) challenge grant. He
stated the IAEA was trying to persuade the Government of
Kuwait to match the USD 10 million pledge offered by the
United Arab Emirates to funding the fuel bank.


5. (SBU) On the USG's fuel bank donation of USD 50 million,
Mission is working with the IAEA to expedite the exchange of
the signed statement of work and the bank information to
effect the transfer of funds.

ElBaradei Remains Circumspect
--------------


6. (SBU) The IAEA has effectively retreated from
co-sponsorship of the Japanese Mission's January 26 seminar
on global fuel supply, where Rauf would have liked to
announce the U.S. funds transfer. Japan had asked EXPO to
make a presentation on the outlines of various national
proposals for fuel assurance mechanisms, but after initial
agreement was informed by the IAEA that presentation would
not be offered. Instead, the sole IAEA official on the
speakers program is Hans Forsstroem, director of the division


of nuclear fuel supply and waste technology, providing
"background information" on uranium sourcing, future demand,
and power plant systems. The conscious avoidance of terms
such as "fuel supply assurances" throughout the program is at
IAEA request. The Agency's posture toward this Vienna
seminar is consistent with ElBaradei's "unavailability" for
the March 17-18 conference planned by the United Kingdom as a
follow up to the April 2008 Berlin conference on fuel supply.
The UK Mission approached ElBaradei's office with
three-month lead time to secure his participation in London
this coming March, but was rebuffed on the grounds of the
DG's travel commitments.


7. (C) How the Secretariat and Board will use the remaining
Board meetings in ElBaradei's tenure to progress on fuel
assurances remains unclear. Romanian Ambassador and Board

Vice Chair Feruta told Ambassador Schulte it was possible
that Board Chairwoman Feroukhi (Algeria) may put the fuel
bank issue on the March agenda for discussion at the request
of "several" Member States. Feruta opined that the EU had
confirmed its 25 million euros pledge since the last Board
meeting and ought to find an occasion to talk about it.


8. (C) Comment: EXPO continues to harbor hope that the
internationalization of the fuel cycle is such a compelling
nonproliferation concept that the U.S. will engage others in
the NSG and IAEA Board to reconcile with ElBaradei's
principle of universal eligibility to a fuel bank. That EXPO
can even persuade ElBaradei to seek in June formal Board
acceptance of the NTI and other donated funds and
authorization to progress on detailed arrangements is not
clear. When approached, ElBaradei continues to put the onus
on supportive Member States to improve the atmosphere and
bring along the skeptics of his legacy project. End Comment.
SCHULTE