IAEA TO PROPOSE LARGE BUDGET INCREASE FEBRUARY 13

C O N F I D E N T I A L UNVIE VIENNA 000057

SIPDIS

C O R R E C T E D C O P Y (PARAGRAPH 3)

FOR D, P, T, IO, ISN
DOE FOR NA-24, NA-25, NA-21

E.O. 12958: DECL: 10/30/2012
TAGS: AORC PREL KNNP IAEA UN
SUBJECT: IAEA TO PROPOSE LARGE BUDGET INCREASE FEBRUARY 13
- REQUEST FOR GUIDANCE

REF: A. UNVIE 0052

B. UNVIE 0011

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


1. (U) This a request for guidance. Please see paragraph 7.


2. (C) Summary: Top officials at the IAEA have informed
Mission they will propose a 20 percent increase in the IAEA
budget when the 2010-2011 draft budget document is released
on Friday, February 13 (strictly protect). Mission requests
talking points that respond to the proposed increase.
Mission notes that allied Member States (UK, Japan, others)
will likely react to the proposed increase with extreme
negativity. Member States may also view U.S. presidential
campaign references to doubling the IAEA budget as proof that
the Mission has colluded with the IAEA to inspire the
proposed increase. Given this potentially awkward situation,
Mission suggests talking points that support the IAEA but
remain momentarily noncommittal regarding the increase.
Mission expects budget issues to color all formal
interactions between Member States from now until the budget
is approved at the June Board of Governors meeting. End
Summary.


3. (C) Following a February 6 discussion in Munich between
Ambassador Schulte and DG ElBaradei, Deputy Director for
Management David Waller and Director of Budget and Finance
Gary Eidet met with Mission Officers to outline in strict
confidence the IAEA's proposed budget for 2010 and 2011.
Waller confirmed that the IAEA will request a 20 percent
increase in the budget, from just under 300 million euro in
2009 to nearly 360 million euro for the 2010-11 biennium.


4. (C) The first half of the increase the IAEA will propose
revolves around programmatic expansion and modernization,
most notably, an effort to integrate - or "mainstream" - the
Nuclear Security and Safety programs into the Regular Budget.
The programmatic increase also includes an equivalent uptick
for the Department of Safeguards, driven mainly by the costs
of expanding operations in India. This half of the increase
includes an allocation for the (nonprogrammatic) Management
Department, but the monies are destined for physical security
upgrades and the development of donated land toward the
expansion of the Safeguards Analytical Laboratory (the
broader issue of SAL refurbishment is not addressed in this
increase request). Other Management support issues, such as
human resources and information technology, are, according to
Waller, "essentially flat-lined."


5. (C) The second half of the budget increase is destined to
establish and then initiate financing for a Capital
Investments Fund (CIF). (Note: The CIF constitutes a
renaming and expansion of the "Essential Investments"
increase approved during the last budget go-around in 2008.
End Note.)


6. (C) Waller and Eidet reminisced over an earlier battle to
increase the RB by 15 million in 2002-03 (ref A). They
recalled the exemptions and arrangements that went into a
"package deal" to convince other Member States to approve the
increase, acknowledging that 15 million was very little
compared to the 50 million-plus they were about to put
forward next week. Eidet commented that his division had
initially put forward a more moderate increase, but that the
DG had thrown it out "as ridiculous," and instructed his
managers to request a budget that more accurately reflected
their needs.


7. (C) Comment and Guidance Request: Post has spent the past
several weeks assuring our like-minded allies that U.S.
campaign proposals to "double" the IAEA budget had not been
elaborated, let alone operationalized. DG ElBaradei's
proposed budget increase will likely renew criticism. Most
seriously, Mission expects to deal with other Member States'
assumption that the U.S. has been working with ElBaradei to
engineer the increase. It is therefore important that DG
ElBaradei adopt a strong and inspiring stance that describes
the Agency's needs and exhorts Member States to fulfill them.
A forceful stance by ElBaradei will hopefully dampen our
allies' disgruntlement and deflect criticism from the U.S.
(Charge stressed this point with Waller and Eidet).

Meanwhile, Mission recommends that USG talking points for now
focus on the importance of the Agency's work while
momentarily offering only to "consult" or "study" any
proposed budget increases. Mission requests guidance to this
effect. End Comment.


8. (C) Mission expects budget issues to infuse every formal
interaction with other Member States from now until the June
Board of Governors meeting, including the year-long "Future
of the Agency" exercise (ref B). Dates to watch:

February 13 - Release of the draft budget
February 19 - Initial meeting of the "Future of the Agency"
February 20 - Budget "kickoff" presentation by IAEA
March 2 - 5 - Board of Governors Meeting
March 26 - Possible Extraordinary Board to vote on DG
succession
April 27 - Program and Budget Committee (budget talks)
June 15 - Board of Governors Meeting (budget vote)


PYATT