OPPONENTS TO IAEA 2011 BUDGET GROWTH MOBILIZING

UNCLAS UNVIE VIENNA 000491 SENSITIVE SIPDIS IO FOR ANDERSON; ISN FOR JENKINS; DOE FOR NA-24, NA-25, NA-21; NSC FOR SCHEINMAN, HOLGATE, CONNERY; NRC FOR DOANE, SCHWARTZMAN E.O. 12958: N/A TAGS: AORC PREL KNNP IAEA UN SUBJECT: OPPONENTS TO IAEA 2011 BUDGET GROWTH MOBILIZING REF: UNVIE 368 ¶1. (SBU) SUMMARY: In a speech October 21 at the U.S. Institute for Peace, Secretary Clinton implied USG support for a further increase in the IAEA's budget and authorities. Formal negotiations among Member States to determine the 2011 level will not begin until later this winter, but the UK and other zero growth hawks have already warned Mission that they do not welcome another increase. (Budget negotiations earlier this year resulted in a moderate increase of 5.4 percent for 2010; the increase was a coup for the U.S. and was achieved over the objections of our closest allies.) The point of departure for negotiations over the 2011 level is unclear; much will depend on the expressed desires of Member States and the inclinations of incoming Director General Yukiya Amano. Finnish Ambassador and Budget Group Chair has expressed a strong preference for a more member-driven process. For these reasons, Mission urges Washington's early consideration of the budget issue, with the goal of determining a firm, top-line position by the end of December. Once clear about our goal, USG should take advantage of the April Nuclear Security Summit, May NPT RevCon and ongoing meetings of the G8 Non-Proliferation Directors Group to highlight the importance of resourcing the IAEA. Securing an increase in the 2011 budget is not outside the realm of possibility, but our allies are already cementing their positions in favor of zero growth. Bringing them around to a more flexible position requires thoughtful argumentation and early, frequent, and high-level action. END SUMMARY. ¶2. (SBU) Public statements by the U.S. Administration over the past year clearly affirm the importance of the IAEA's mission and the need to transcend the zero-real-growth policy applied across the UN system. This policy approach was implemented on the ground in Vienna, leading to Member State approval of an increase in the IAEA's 2010 budget. Unfortunately, the hard-won, real increase of 2.7 percent (5.4 percent nominal, with price adjustment) isolated the U.S. from our traditional allies and created a schism among major donors that diverted friend and foe alike from priority issues such as Iran, Syria and North Korea. The budget controversy also meant that Member States failed to come to a strong consensus on indicative figures for the second half of the two-year biennium (i.e., 2011). Instead, the 2009 General Conference approved the Regular Budget (RB) for 2010, per its statutory duty, but labeled the 2011 figures "preliminary" and "subject to the outcome of deliberations..." ¶3. (SBU) The 2011 "preliminary" figures envision an 11.4 percent real increase (approximately 14 percent nominal, with price adjustment). While these figures would fund the Agency in 2011 below the level recommended by DG ElBaradei in his February 2009 proposal for the biennium 2010-11, they still project significant growth and, thereby, run contrary to the desires of the mostly European "budget hawks" (UK, France, Germany, Italy, Switzerland, et. al.). France and Germany are the least flexible, having adopted positions that are not only fiscally conservative, but incorporate a near-philosophical rejection of additional resources for technical cooperation activities. Mexico, a "swing state" between the OECD and G-77, was recently described by a Secretariat observer as "militantly zero growth." Canada is similarly entrenched, stemming from a much-publicized position of zero growth for international organizations. Mission suspects that the budget hawks are silently supported by a minority of middle-income, G-77 countries, such as South Africa, Brazil and Argentina. (Note: This silent split in the G-77 renders the larger group useless to the U.S. in budget negotiations. Even if the majority of G-77 Members support an increase - as is likely the case - they refuse to break G-77 solidarity by vocalizing their opinion. End Note.) ¶4. (SBU) In reftel para 5, commenting on the Board's recommendation for the 2010 budget, we noted the unresolved capital requirements of the IAEA's safeguards lab and that "Member States are depending on re-engaging in budget negotiations after a short hiatus." Indeed, shortly after this year's General Conference, European diplomats began gingerly approaching us about the 2011 budget. The questions foremost in their minds were: "Will the U.S. support the 2011 preliminary overall increase of 11.4 percent? If not, would the U.S. support any real increase in the IAEA budget?" Spanish Counselor Jose Luis de Guzman pointedly reminded MsnOff that the 2011 numbers were "merely preliminary." Spain's approach typifies similar overtures in the past month from the missions of Switzerland, Germany, Canada and Italy. ¶5. (SBU) The IAEA Secretariat is reportedly in some disarray over how to present the 2011 budget at the informal meeting of the Program and Budget Committee in February. One option would be simply to leave the preliminary figure of an 11.4 increase as they are and present nothing new. Another option would be to drop the 2011 preliminary figures and propose new figures that are more realistic and closer to zero growth. The final decision will fall to incoming Director General Amano, who takes the reins December 1. (COMMENT: Amano's desire to avoid an early confrontation with the Europeans and take into account Japan's own fiscal constraints may compel him to retreat from advocating a double-digit percentage increase. On the other hand, Amano floated with USG officials - in several encounters on the margins of the General Conference - the ambitious idea of marshalling new resources for worldwide nuclear security activities through a G-8 appeal modeled on the 2002 "10 Plus 10 Over 10" campaign and Global Partnership for cooperative threat reduction. END COMMENT.). UK: DISPARITY BETWEEN POLICY AND PURSE? -------------- ¶6. (SBU) In Vienna, UK representatives have been the most forthcoming about discussing their likely zero growth position for 2011. Former UK Deputy Head of Mission Tim Andrews, currently seconded to the IAEA's Office of Nuclear Security, noted UK general elections will take place on or before June 3, but that both major parties had already staked out zero growth positions for international organizations. First Secretary Creena Lavery echoed this view, warning MsnOff that the U.S. had behaved prematurely and unilaterally in its drive for a budget increase last year. Lavery counseled the U.S. to take a conservative approach to the budget that would maintain "Geneva Group solidarity" in order to 1) maintain a solid front in the face of thorny Middle East issues, 2) ensure smooth relations in the run-up to the May NPT Review Conference, and 3) support incoming IAEA Director General Amano. Lavery felt the U.S. could do little to loosen the UK's zero growth position, though she admitted the April 12-13 Nuclear Security Summit in Washington would be an opportunity for nudging the UK away from zero growth. ¶7. (SBU) Away from Vienna, calls for robustly resourcing the IAEA have come from the highest levels in the UK and seem to be at odds with the fiscal conservatism our contacts here represent to us. PM Brown's July 2009 report to Parliament entitled "The Road to 2010; Addressing the Nuclear Question in the Twenty-First Century" speaks boldly about nuclear issues and dedicates an entire chapter to the IAEA. In this report (http://www.cabinetoffice.gov.uk/ media/224864/roadto2010.pdf),PM Brown claims the UK is "playing a leading role in tackling nuclear challenges" and notes his desire to ensure that nuclear material does not fall into the hands of terrorist groups or hostile states. Chapter Six on "International Governance and the IAEA" acknowledges the need for IAEA reform, but also calls for strengthening of the safeguards regime. In a telling comment (paragraph 6.3) that seems to contradict a zero growth budget position, the Report states that the UK wants the IAEA "to maintain and strengthen its position as the lynchpin of the international community's efforts to ensure a safe and secure nuclear future." Paragraph 6.11 states the belief that the IAEA needs to be "properly resourced." Paragraph 6.15 calls for an expansion of the Nuclear Security Program to ensure that the IAEA has the funds and expertise to underpin its activities. Paragraph 6.12 proposes that the UK host a senior-level meeting of the Geneva Group of major donors to "discuss future funding and staffing requirements of the IAEA." ¶8. (SBU) In short, there seems to be ample UK political declaration in support of a robust IAEA. This stance differs fundamentally from the approach of France and Germany, two large contributors that do not appear to have invested in the IAEA at the political level. Unfortunately, we have not seen the UK's political commitment translate into budgetary flexibility in Vienna or high-level activism. (Lavery confessed, for example, that there had been no movement on the Report's proposal to hold a Geneva Group meeting of senior officials from capitals.) The "Road to 2010" is there, however, and should be used to pressure the UK into a more flexible position. Regarding the Nuclear Security Summit, Washington may even propose that the UK publicly support a regular budget increase for the IAEA as their Summit "house gift." DECIDE EARLY AND LOBBY OFTEN -------------- ¶9. (SBU) COMMENT: The Secretary's remarks at the U.S. Institute for Peace clearly indicate U.S. commitment to adequate financing and an expanding mission for the IAEA. PM Brown's report appears to mirror this commitment. Mission admits to some alarm, however, at how quickly the UK and other traditional allies in Vienna have moved to draw the line at zero growth for 2011. Clearly, we will need to go over the heads of local representatives if we expect London and other capitals to "put their money where their mouths are." Washington action to determine our own budget position would enable Mission to keep Vienna expectations from hardening around zero. Specifically, Mission advocates that USG set its top-line position on the 2011 budget level as soon as possible and fix specifics on the position by the first week of January. (Mission will submit a formal guidance request septel, but plants this seed now for inter-agency consideration.) Further, the earlier the U.S. determines its budget position, the sooner Washington can begin incorporating this position into preparations for the April Nuclear Security Summit, the May NPT RevCon, and meetings of the G8 Non-Proliferation Directors Group. Though it will take months of negotiations throughout 2010 to effect even a moderate increase in the 2011 budget, early, emphatic and high-level action will put us on the path toward achieving the goal. END COMMENT. DAVIES