INTERNATIONAL NUCLEAR FUEL BANK -- AMANO ADVANCING

C O N F I D E N T I A L UNVIE VIENNA 000030 SIPDIS FOR T, ISN/NESS, S/SANAC, IO/GS, AND L/NPV DOE FOR NA-243 GOOREVICH, OEHLBERT NSC FOR SCHEINMAN, HOLGATE, CONNERY NRC FOR OIP DOANE, SCHWARTZMAN E.O. 12958: DECL: 02/01/2015 TAGS: TRGY ENRG KNNP AORC IAEA KZ SUBJECT: INTERNATIONAL NUCLEAR FUEL BANK -- AMANO ADVANCING WITH NONPAPER, TECHNICAL BRIEFING, AND "SOFT CONSULTATIONS" REF: A. STATE 07701 NOTAL ¶B. UNVIE 00006 NOTAL Classified By: Ambassador Glyn Davies, reasons 1.5(b) and (d) ¶1. (C) SUMMARY: IAEA Secretariat released its Note on Assurance of Supply January 28 and will offer a technical briefing February 12 to elaborate on that document. Fuel bank point man Tariq Rauf received from us the same day the proposed elements for a Recommended Action that USG favors DG Amano bring to the Board in its June meeting. Rauf welcomed the U.S. proposal on timing. He also confirmed a draft host country agreement for Kazakhstan was in preparation by IAEA legal staff; he acknowledged shipment of material to and from Ulba would be an issue for efficient fuel bank operations. Rauf will provide a briefing on the fuel banks issue to participants at a February 1-2 NPT-related meeting in Manila. END SUMMARY. FUEL BANK PATH FORWARD -------------- ¶2. (SBU) NSC Senior Director Laura Holgate and IAEACouns met January 28 with Tariq Rauf, Head of Verification and Security Policy Coordination in the IAEA's Office of External Relations and Policy Coordination (EXPO). This was post's first opportunity to carry out ref A instruction. The Secretariat's release earlier that day of its 2010/Note 1 on "Assurance of Supply" preempted ref A para 10 instruction. (The Secretariat paper is available on the IAEA's Govatom website, and UNVIE e-mailed it to ISN and IO). Rauf explained that Director General (DG) Amano and Secretariat staff had that day had their initial consultation with Algerian Ambassador Feroukhi in her new capacity as G-77 chairperson, and had released the Note in a demonstration of responsiveness to the Group. ¶3. (SBU) Rauf began with a recounting for Holgate of Amano's posture on the fuel bank issue and timing, consistent with paras 2-3 of ref B. He said the DG starts from an awareness of Board divisions over the "bulldozing" adoption of the Russian fuel reserve in November 2009. With release of its Note the Secretariat would now proceed with a technical briefing open to all delegations on February 12 and "soft consultations," in Amano's phrase, with leading-voice states, �0A;including skeptics, in ones and twos. Further, Amano had instructed the Secretariat to revise the issue paper presented to the Board last June (GOV/2009/30 of May 20, 2009) for discussion by the Board this June, but with a view toward decision in November. Rauf did not indicate prior awareness but was pleased to hear from us that Amano had heard several times in his recent Washington meetings that we favor setting up Board action in June. ¶4. (C) Interestingly, Rauf said Amano does not want to undertake and publicize any goals that cannot be achieved within eight years (two DG terms). Taking Rauf's advice that farther-reaching "multilateralization of the fuel cycle" (ElBaradei's vision) was a project with a much longer horizon, Amano had dismissed it as a goal but would aim for the achievable -- an international nuclear fuel bank as advocated by over 30 financial contributor states. ¶5. (C) IAEACouns walked Rauf through the action requests in ref A and conveyed a nonpaper comprising the proposed elements for a DG's Recommended Action we would favor having presented as a GOV/2010 document for the Board's June meeting. IAEACouns drew also from ref A treatment of the issue of consent rights of suppliers of low enriched uranium (LEU) and reaffirmed USG reliance on Statue Article IX C in regulating transfers of material from an IAEA-administered fuel bank. KAZAKHSTAN AS HOST? -------------- ¶6. (SBU) Rauf confirmed the Secretariat had met several times with Kazakhstani Ambassador Kazykhanov, on one occasion with expert reinforcement from Astana, to develop the idea that facilities at Ulba could host an IAEA LEU reserve. The Secretariat had taken relevant elements from the draft host country agreement developed for Germany's multilateral enrichment sanctuary project (INFCIRC 765 of July 22, 2009, available at iaea.org) and provided them to the GOK as an illustrative list of issues. Secretariat lawyers were still working on a draft host country agreement for Astana to consider. ¶7. (SBU) NSC Senior Director Holgate asked about Ulba's geographic suitability given the technological constraints on transporting LEU. Rauf said he anticipated the Ulba facility could not perform the necessary mixing of material to meet the varying specifications of potential "customer" states' reactor fuels. If LEU of varying characterizations would have to be stored, transported in proportioned shipments, and blended elsewhere before re-transport to a purchasing state, this was a cost and efficiency issue that had to be resolved. Holgate noted, and Rauf agreed, that any fuel bank location not co-located with an enrichment plant would have this same limitation, and that fuel fabricators, rather than either enrichers or fuel banks, traditionally play the role of fine-tuning enrichment rates for customers. ADVANCING THE ISSUE -------------- ¶8. (SBU) Rauf shared with us that he and Secretariat colleagues had met two days prior with representatives of Westinghouse Nuclear (Fernando Naredo of the Brussels government affairs office and Cheryl Collins from uranium asset management in North Carolina) and requested a technical scoping paper from them on the company's management of the "fungible" DoE reserve of downblended uranium. Rauf intended to offer Member States a lunchtime briefing during the March 2010 meeting of the Board with representatives of the World Nuclear Association's fuel security working group. Finally, and more immediately, Rauf himself would participate in a Philippine Government-hosted event February 1-2 looking forward to the NPT RevCon and would provide participants a briefing on the assurance of supply issue, including the fuel bank concept. ¶9. (U) NSC Senior Director Holgate cleared this report. DAVIES