NUCLEAR FUEL BANK - AMANO MOVES THE ISSUE BUT MAY

C O N F I D E N T I A L UNVIE VIENNA 000006 SIPDIS FOR T TIMBIE, ISN/NESS BURKART/HUMPHREY, IO/GS, S/SANAC DOE FOR NA-243 GOOREVICH/OEHLBERT NSC FOR SCHEINMAN/HOLGATE/CONNERY NRC FOR OIP E.O. 12958: DECL: 01/07/2015 TAGS: TRGY PREL ENRG KNNP AORC IAEA SUBJECT: NUCLEAR FUEL BANK - AMANO MOVES THE ISSUE BUT MAY ALLOW ALL YEAR FOR CONSIDERATION REF: 09 UNVIE 583 Classified By: Charge d'Affaires Geoffrey Pyatt, 1.4 (b) and (d) ¶1. (C) Summary: The IAEA's point man on developing the International Nuclear Fuel Bank (INFB) expects DG Amano to release a response to the G-77 and NAM's technical questions by the end of January, authorize a briefing in February, issue a detailed Secretariat proposal for discussion at the June BoG, but seek fuel bank approval only in November after the budget and other priority issues are resolved. Kazakhstan formalized its offer to host the INFB in a letter to Amano, and the Kazakh FM will likely address the issue when he sees the DG January 15. Sensing unease over too great a Russian imprint if the INFB becomes a mostly Kazakh-Russian undertaking, the Secretariat would welcome an experienced nuclear country from the Southern Hemisphere as an alternative host. Reinforcing his caution, Amano heard January 6 from the NAM troika that the BoG's November adoption of the Russian reserve still grates. Secretariat and UK contacts indicate the BoG could have a decision to take on the UK/URENCO nuclear fuel assurance concept by June. End Summary. Amano's INFB Timeline -------------- ¶2. (SBU) Tariq Rauf of IAEA's External Relations and Policy Coordination (EXPO) office told IAEACouns January 8 that DG Amano recognizes the (financial) supporters of an IAEA-administered International Nuclear Fuel Bank (INFB) will require forward movement of him toward approval of the fuel bank. Amano directed Rauf to make final edits, giving Amano's own "imprint," to the Secretariat's paper addressing technical issues raised in the NAM/G-77 and other statements on assurance of supply in the June 2009 meeting of the Board of Governors (BoG). The Secretariat plans to release the paper by the end of January and to base an informal technical briefing on that paper in February. The Secretariat is looking for a willing PermRep, notionally to lead an informal working group to extend discussion of implementation issues and inform the Secretariat's ongoing work. Concurrently, Rauf intends to continue developmental work on the mechanics of the INFB, with the aim of releasing a DG's report on the proposal for discussion by the BoG in June. ¶3. (C) According to Rauf, Amano does not want the still-contentious issue of an INFB to complicate what he sees as more important tasks, including adoption of the 2011 budget. Hence, the DG would not seek BoG approval of the INFB mechanism until the November 2010 meeting of the Board. (Others in the Secretariat have suggested Amano could be open to a de jure debate, but only out of deference to U.S. and EU interests.) Moreover, Amano did not want to risk putting a DG's document up directly for decision, lest it be defeated. Rauf said Amano favored borrowing from the Russian reserve approval process, such that the BoG would consider a resolution authorizing the Secretariat to implement the INFB project as detailed in a referenced Secretariat document or package. ¶4. (SBU) Rauf said he had alerted Amano to the twice-extended September 2010 deadline for acceptance of donated funds from the NGO Nuclear Threat Initiative, a USD 50 million offer that is contingent on BoG approval of an INFB. Amano reportedly judged that NTI could be persuaded to accept clear evidence that November would bring a positive decision, and in effect extend the pledge by two months. Further on the issue of funding, Rauf noted that Norway had recently deposited USD 3 million of its USD 5 million pledge (after an initial contribution of USD 1.5M). The suspense account of funds donated for the INFB now stood at USD 54 million, he said, and the EU was about to activate the first 10M-euro tranche of its 25 million-euro pledge. (Note: Rauf's information indicates that neither Kuwait nor the UAE has yet transferred pledged funds. End Note.) Host Country -------------- ¶5. (SBU) Rauf said the Government of Kazakhstan had formalized in a letter to Amano its offer to host the IAEA fuel bank. FM Saudabayev is expected in Vienna to kick off his country's year as OSCE Chairman-in-Office, but separately an office call with Amano is on his schedule for Friday, January 15. The Secretariat expects the FonMin to have the fuel bank at the top of his agenda. Rauf noted that Kazakhstan would host a major international nonproliferation gathering in April, with participation by the UNSYG and NTI Chairman Senator Nunn, and here again the GOKZ would pitch itself as host (an idea NTI spurred from the beginning). (Mission notes in this connection the description of the Ulba facility in "International fuel bank - helping world peace?" at http://news.bbc.co.uk.) ¶6. (C) Asked about Kazakhstan's suitability from a geographic standpoint, Rauf shared that Kazakhstan, as a commercial partner in the International Uranium Enrichment Center in Angarsk, Russia, may aim to sell natural uranium to the IAEA for the INFB. Kazakh-sourced, IAEA-owned uranium would undergo enrichment in Angarsk and return to Kazakhstan for storage in Ulba. Rauf allowed as how in this scenario some Member States would be concerned over the Russian role in an INFB, taken together with the Russian LEU reserve already approved; unfortunately, no potential host state other than Kazakhstan had come forward as yet. He recalled that in its paper for the June 2009 BoG discussion the Secretariat indicated that an experienced nuclear country with qualifying facilities already in operation would be the most desirable as host, and preferable for cost reasons to "green field" construction of an IAEA-dedicated facility. Rauf went on that a Southern Hemisphere country -- he mentioned specifically South Africa and Argentina -- would be attractive. He dismissed Egypt as a possibility due to its lack of an approved State System of Accounting and Control (SSAC) for nuclear material. Cairo's follow-up to IAEA engagement in this area and relevant safeguards questions so far had been "not to our satisfaction," Rauf concluded. Diversifying the Issue in the BoG -------------- ¶7. (SBU) Rauf noted briefly that the United Kingdom's Nuclear Fuel Assurance proposal (described in GOV/INF/2009/7 and presented orally in the September 2009 BoG) could come before the Board in March. Seeking a deliverable prior to elections for the House of Commons, the UK Government, Rauf said, may seek BoG authorization for the IAEA to enter into assurance agreements as foreseen in the proposal. UK DCM Cliff confirmed to us subsequently that the Department of Energy and Climate in London was "slowly going ahead" in consultation with Rauf and with counterparts in the other URENCO countries Germany and Netherlands. She said we may expect an agenda item, more likely in June than in March, seeking a BoG decision to give the IAEA DG the authority the UK proposes. In Rauf's words, such authority would lie "on the shelf" unless and until a country uncertain enough about its commercial arrangements sought the safety net of an export license guarantee. Rauf added that he would query the German Ambassador in this connection as to whether Berlin would bring its proposal -- another one that can simply lie there, available, once approved -- for Board action in parallel with the UK's. Not Before its Time -------------- ¶8. (C) Comment and Recommendation: Rauf acknowledged at the outset of this conversation that Amano would like to be able to do nothing on this issue for the time being but expects the advocates, including the U.S., will insist on keeping at it. Rauf added that he had heard Amano's January 6 initial office call by the NAM Troika Ambassadors (Egypt joined by Cuba and Iran) was an unpleasant one, partially over the bruised feelings the NAM were still nurturing over Russia's tactics in gaining BoG approval of the Angarsk LEU reserve. With a dispute simmering over management reform in Technical Cooperation and a confrontational budget process ahead, Amano does not want the Secretariat to be party to waiving another political red flag before the NAM. Nevertheless, we are persuaded by Rauf and his EXPO boss Vilmos Cserveny that in internal discussions Amano has engaged on the substance of the proposal and approves of spade work going forward to develop the IAEA fuel bank mechanism. Washington interlocutors should reinforce with him the attractiveness and merits of a truly international fuel bank anchored in the IAEA. But, we should also work with his prudent approach to timing. End Comment and Recommendation. PYATT