ACTION REQUEST: IAEA BUDGET TALKS HIT WALL,

C O N F I D E N T I A L UNVIE VIENNA 000320

SENSITIVE
SIPDIS

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

E.O. 12958: DECL: 06/12/2019
TAGS: AORC PREL KNNP IAEA UN
SUBJECT: ACTION REQUEST: IAEA BUDGET TALKS HIT WALL,
SOLUTIONS NEEDED

REF: A. UNVIE 279

B. UNVIE 313

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


1. (SBU) This is an action request. Please see paragraph 8.


2. (SBU) Summary: Mission is concerned that a months-long
effort to achieve an increase in the IAEA budget is
increasingly likely to end in failure. Hewing to a policy of
zero growth, France and Germany have blocked Mission's
efforts to build consensus around a proposal for an 8.5
percent increase that fulfills U.S. priorities in Nuclear
Security and Safeguards. Many other Member States, including
Russia and China, support an increase but avoid taking a
public stance. As the U.S. appears increasingly isolated and
opportunities to negotiate dwindle, the specter of stalemate
grows. U.S. lobbying efforts in Berlin and Paris at the
working level had no effect. The G-8 Summit at L'Aquila July
6 - 10 is our best - if not our only - remaining opportunity
to alter the positions of Germany and France at the political
level to break through the deadlock on the ground. Without a
change in the E3 position and its renewed commitment to the
IAEA, Member States may be forced to forfeit the progress we
have made in G-77 budget negotiations and accept a zero
growth budget in September. End Summary.


3. (C) Efforts to negotiate an increase in the IAEA budget
have reached a dead end in Vienna. Germany and France - the
leaders of a small group of "budget hawks" - have locked into
a zero growth position that has successfully blocked
Mission's attempts to build consensus for an increase.
Germany and France routinely argue that despite ample
evidence to the contrary, the IAEA does, in fact, command
adequate resources. Since the release of its original
proposal in February, the IAEA Secretariat has proposed
millions of dollars of proposed cuts in travel, services and
consultant contracts, but Germany and France still insist
there is greater scope for savings. The arrival of a new
French ambassador has done nothing to change France's
hard-line position, and the German ambassador grows more
strident as the months pass. U.S. demarches in Berlin and
Paris at the working level have fallen on deaf ears. The UK,
Italy, Spain, Canada, Mexico and Switzerland, also members of
the group of "budget hawks," keep up the zero growth drum
beat.


4. (C) Ironically, the U.S. has made better progress on other
fronts. China and Russia have indicated support for an
increase (though only Russia publicizes its position).
Egypt, Argentina and Pakistan have negotiated productively
among the G-77 to offer points for negotiation, including
Regular Budget support for Nuclear Security (a U.S. priority)
and categorical support to refurbish the Safeguards
Analytical Laboratory (another U.S. priority). Pending
reciprocal gestures of support from the U.S. in the area of
technical cooperation, the G-77 is likely to agree to an
increase that meets U.S. objectives. A handful of Europeans,
including the Netherlands, Austria, Finland and Sweden,
support an increase. Even the UK ambassador, who associates
himself closely with the "hawks," admitted to Charge July 3
that Germany and France were too rigid, and that London would
be comfortable with a budget increase above zero real growth.



5. (SBU) Negotiation with other Members and the Secretariat
led to the July 1 tabling of a compromise budget based on an
8.5 percent increase (reftels). This latest proposal meets
U.S. priorities and, pending additional political and
financial gestures, will likely win the support of the G-77.
In the positive atmosphere of Yukiya Amano's election as the
next IAEA Director General, many of Vienna's diplomatic
missions are ready to come to consensus on a budget and be
done with the exercise. Only the budget hawks, led by France
and Germany, stand in the way, refusing to negotiate any
amount above inflation and quibbling over the magnitude of
that factor.


6. (SBU) Breaking this stalemate will require a high-level
political solution. Convincing France and Germany is key to
this exercise, since the remaining "budget hawks" will follow

the lead of the E3. Time is running short, given IAEA Member
States must approve the budget at the IAEA General Conference
in September. (August is moribund in Vienna, which leaves
only July to convince other Member States to agree to the 8.5
percent proposal.) Our best opportunity - and perhaps our
only remaining opportunity - to go over the heads of the
local budget hawks is the G-8 Summit in L'Aquila July 8 - 10.



7. (SBU) As a basis for discussion, E3 representatives should
be reminded that an 8.5 percent increase would raise the IAEA
budget by only 25 million Euros (35 million dollars),spread
across 148 Member States. None of the "budget hawks" would
pay more than two million Euros annually above their current
assessments, and Spain would pay less than a million. This
is a minor increase for an organization that is legally
obligated to address the mounting duties that preserve our
collective security. As the nuclear landscape dims in Iran,
North Korea and Syria, leaders of the G-8 should appreciate -
and pay for - the IAEA's services.

Action Request
--------------


8. (C) With a view to continued cooperation with the E3 on
safeguards priorities, Mission requests Washington pursuit of
a rapid, high-level solution to our current stalemate. The
G-8 Summit in L'Aquila may provide the best opportunity to
approach the E3, France in Germany in particular, at a high
enough level to break through the deadlock. Those in the EU
who support an increase have recommended that our approach to
the Germans be addressed to the Chancellery and Ministry of
Economics and Technology (the latter being the source of the
FRG's IAEA assessments) as well as the Foreign Office; the
approach in France should likewise go to those who can decide
politically over budget resources. Only when the E3 agree at
the political level to strengthen the IAEA will Vienna's
local Ambassadors be released from obduracy.

Suggested Points for Delivery
--------------


9. (U) Mission recommends the following points be included in
any forthcoming conversations about the IAEA budget:

- We share a recognition of the importance of the IAEA and
its work keeping nuclear material out of the hands of
terrorists and monitoring the nuclear ambitions of rogue
states. Iran, North Korea and Syria are all high-risk
investigations that demand the IAEA's constant attention.

- Despite these risks, your position denies any increase in
the budget. You stand in direct contradiction to the many
IAEA Member States who recognize the need for an increase -
including China, Russia, half a dozen of your fellow
Europeans and the G-77 as a group.

- We appreciate the burden of the financial crisis and are
struggling with it ourselves. At the same time, there is no
excuse for neglecting our mutual security needs.

- The current budget proposal is based on an 8.5 percent
increase for 2010. We ask that you support this proposal.
This scenario would raise your assessment by only 1.96
million Euros (Germany) / 1.5 million Euros (UK) / 1.45
million Euros (France) / 1.2 million Euros (Italy) / 680,000
Euros (Spain).

- This should be a time of mutual congratulation, as we usher
in Yukiya Amano as the IAEA's next Director General. The
United States and Japan have already offered additional
extrabudgetary resources to support his tenure and the
institution as a whole. Now is the time to make a positive
commitment to this new era by agreeing to the negotiated
budget proposal.





PYATT