IAEA: NUCLEAR SUPPLIERS GROUP DISCUSSES TEXT BUT NO

UNCLAS SECTION 01 OF 03 UNVIE VIENNA 000029

SENSITIVE
SIPDIS

STATE FOR IO/T, ISN/MNSA, ISN/NESS, ISN/RA
NA-243-GOOREVICH/BRUNNS; NA-241 O'CONNOR, LAMONTAGNE
NRC FOR OIP - HENDERSON, SCHWARTZMAN

E.O. 12958: N/A
TAGS: ENRG ETTC KNNP MNUC PARM PREL ENR
SUBJECT: IAEA: NUCLEAR SUPPLIERS GROUP DISCUSSES TEXT BUT NO
AGREEMENT REACHED

REF: STATE 3082


1. (SBU) SUMMARY AND COMMENT: On January 15, interested NSG
Participating Governments (PGs) discussed the current "clean text"
to revise paragraphs 6 and 7 of the Part 1 NSG Guidelines regarding
conditions for approval of transfers of enrichment and reprocessing
(ENR) equipment and technology. During the day-long meeting, a
number of countries requested clarification on the meaning or
interpretation behind the proposed "clean text," often focusing on
how supply within and outside the group would be affected. Brazil
and Argentina spoke out against any references to the Additional
Protocol (AP) because of their unique regional arrangement and
Brazil's unwillingness to sign an AP at this point. A number of
European PGs spoke in favor of requiring an AP. While many PGs
reiterated previously known positions, Switzerland opposed the
language in 6a(ii) and 7 (b) and (c),proposing new language which
did not meet with the approval of those present. The Swiss said
they would consider whether to formally table the language or not at
the next CG, proposed for mid-March. Ambassador Schulte as U.S.
head of delegation along with like-minded PGs noted the strong
support for approving the language "as is" in recognition that it is
a compromise text which has taken five years to negotiate. South
Africa and Luxembourg did not attend the informal meeting. The
Indian delegation in Vienna has taken active interest in this
exercise, complaining that the NPT supply condition is inconsistent
with the US-India nuclear deal.


2. (SBU) COMMENT: It is possible we may be able to make progress
and obtain PG agreement on the Additional Protocol as a criterion
for transfer of sensitive technologies if we can be flexible and
creative in the CG Chair's report to the Plenary. PGs are hesitant
to make any changes to the Nov 2008 "clean text". Both China and
Russia have already signaled in writing that they can accept the
text as it is. It is also clear suppliers do not intend to
establish criteria to immediately cut off supply to two PGs. This
needs to be balanced with PG positions that only through the
combination of a CSA and an AP does the IAEA have the means to draw
conclusions about the absence of undeclared activities. The CG
Chair is working with a group of Friends of the Chair on a text that
would note consultations with the IAEA on a possible future regional
arrangement approved by the Board that combines the tools of both
instruments. If the Chair is successful, we will still need to
lobby reticent PGs to support the text in advance of the Plenary.
One important key to the success of this approach is for PGs to
understand that such a hybrid safeguarding arrangement does not
exist today. END SUMMARY AND COMMENT

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PARAGRAPH 6a(ii)
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3. (SBU) After a brief opening statement by the Chair urging
interested members to come to a conclusion on the text. Ambassador
Schulte noted the emphasis of the incoming US Administration on
nonproliferation and its desire to achieve effective multilateral
results. Now was an opportunity to show that the NSG could reach a
conclusion, after nearly five years of work, on an issue of utmost
importance to the World's nonproliferation regime. Subsequent
discussion focused on 6a(ii) and how to make the AP a criterion for
transfers of sensitive technologies. Brazil noted the text is
ambiguous, and observed that Brazil has made a concession to agree
to the AP as a condition of supply in certain circumstances. Brazil
said it wishes to avoid ambiguity but it could only live with the
text if it is clear that the Quadrapartite safeguards agreement
between Brazil, Argentina, ABACC and the IAEA can meet the criteria
set forth in 6(a)ii, and acknowledged that not all PGs agreed that
does so. Brazil suggested the group think about making an exception
for Argentina and Brazil, noting this would not be the first
exception. Argentina supported.


4. (SBU) Spain and Switzerland both suggested references to INFCIRC
540 as a compromise, to which Brazil was unwilling to agree. Brazil
continued to argue that a regional arrangement between Brazil and
Argentina might be on the same level as an AP, but admitted they are
not there yet. U.S. Del noted its aspiration for the
universalization of the AP, however in recognition of the compromise
text, strongly supports the text as written. Switzerland again
noted regional agreements are counter to the intent of PGs adding
the AP to their safeguards obligations. U.S., Canada, France,
Japan, Spain, Italy, the UK, Ireland, South Korea, Australia and
Belarus all agreed that approval of text as circulated would be
best. The CG Chair observed that the NSG has past precedents for
phasing in new supply arrangements, citing the adoption of the dual
use regime and full scope safeguards as a condition of supply, and
urged PGs to keep an open mind on text that might be used for the

UNVIE VIEN 00000029 002 OF 003


Chairman's report to the Plenary for this case.


5. (SBU) An uncomfortable but necessary discussion ensued about the
AP criteria. The Chair observed that the group is considering an
arrangement that clearly limits transfers to PGs that are in good
standing, and suggested PGs consider why Argentina and Brazil would
agree to something that would change their eligibility status.
Japan stressed the importance of universality of the AP, but offered
the consideration of special treatment for Brazil and Argentina,
possibly in the form of a grandfather arrangement. Canada and New
Zealand called attention to the NSG being seen as a "cartel" and
cautioned that the group not be perceived as having a double
standard for those in the NSG. Reaching no informal agreement, the
Chair proposed to use the CG Chair's report to the Plenary as a
vehicle to clarify the meaning of para 6 as a way of addressing
concerns. France suggested Brazil and Argentina offer language for
that purpose. Several PGs welcomed the suggestion that the CG
Chair's report should note that there is an on going dialogue
between the IAEA and the parties to the Argentina/Brazil
Quadripartite Safeguards Agreement, which would indicate that
eventually the Agreement could be appropriately structured to
achieve the same objective as an AP. The Chair was left the task,
with the assistance of a group of friends, of capturing an
understanding for the Chair's report to the Plenary, with thoughts
on how to phase in this new criterion for transfers.


6. (SBU) Without reaching informal agreement on 6a(ii),discussion
moved on to para 7. Switzerland, Turkey and Spain voiced concerns
about the concept of para 7, which they view as imposing
restrictions on technology development, and Turkey in particular
noted we should ensure we are not prohibiting access to PGs and NPT
parties in good standing - as provided for in NPT Article IV. US
Del noted that PGs can purchase technology on the commercial market,
receive turnkey facilities, or by joint development followed by
transfer controls, and pursue indigenous efforts, but the point
remains that the language in paras 6 and 7 strikes a balance in the
interest of all PGs and remains the best compromise text after five
years of effort.

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INFORMAL SWISS PROPOSALS
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7. (SBU) Toward the close of the meeting, the Swiss Delegation
informally proposed the following language for para 7:

(b) For a transfer of an enrichment facility or equipment based on
enrichment technologies which have been demonstrated to produce
enriched uranium on a significant scale. Participating Governments
should: (Bullets not changed)

(c) Before exporting new enrichment technologies Participating
Governments should inform the NSG of arrangements governing
transfers of such technologies. Such arrangements should be, at a
minimum, equivalent to those in 7(b). (Balance not changed)


8. (SBU) After comments, including from US Del, that these proposed
changeswould not help PGs reach agreement the Swiss said tey would
consider whether to table the language ormally or not prior to or
at the next CG. Late in the meeting, a clarification on supply
chain was worked out among the U.S., Japan, and URENCO parties which
will go in the Chair's report

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6(b)
--------------


9. (SBU) Turkey expressed support for the criteria-based approach,
but it does not share the need for, nor the understanding of, the
subjective criteria. Turkey assured PGs it is ready to consider how
to strengthen and expand 6(a),but 6(b) causes concern. Turkey
noted all PGs have the right to apply subjective criteria and
suggested that be left to PGs to do so. Others noted the subjective
criteria are simply factors for consideration and that Turkey's
concerns were already addressed in the version of the text that was
produced at the Nov 2008 CG meeting. The CG chair suggested PGs
keep Turkey's comments in mind and hoped differences could be
resolved through diplomatic consultations.


10. (SBU) COMMENT: The Indian delegation in Vienna has taken active
interest in this exercise, complaining that the NPT supply condition
is inconsistent with the US- India nuclear deal. Mission has
countered by noting that the US goal of NSG restrictions on ENR
transfers pre-dates the US-India deal and has been well known to
officials in Delhi. END COMMENT

UNVIE VIEN 00000029 003 OF 003



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NEXT STEPS
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11. (SBU) The Chair proposed the next CG be in March, possibly
right after the Board of Governors (March 2-6). In an effort to
reach informal agreement prior to the CG, the Chair said he would
continue consultations with interested PGs, brief PGs not in
attendance, and seek support for bringing this to an end in March.

SCHULTE