VZCZCXRO8135
PP RUEHLN RUEHVK RUEHYG
DE RUEHMO #0400/01 0451315
ZNR UUUUU ZZH
P 141315Z FEB 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 6578
INFO RUCNCIS/CIS COLLECTIVE
RUEHII/VIENNA IAEA POSTS COLLECTIVE
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 03 MOSCOW 000400 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KNNP PARM RS
SUBJECT: ANGARSK INTERNATIONAL ENRICHMENT CENTER: MOVING 
FROM VIRTUAL TO ACTUAL 
 
REF: 07 MOSCOW 5591 
 
Sensitive but unclassified.  Please protect accordingly. 
 
Summary 
------- 
 
¶1. (SBU) Development of the International Uranium Enrichment 
Center (IUEC) in Angarsk continues to move forward, though 
the center is still a "virtual" one to be carved out of the 
existing Angarsk Chemical Complex.  Embassy was warmly 
received during a visit to the complex.  Embassy toured the 
cascade hall, the central analytical laboratory, and LEU 
transport containers.  IUEC senior management in Moscow 
confirmed that the Angarsk complex has ample excess 
enrichment capacity from which the IUEC can draw for its 
first few years.  They admitted, however, that they need to 
do more work on the IUEC's business plan.  Russian officials 
highlight the role they expect the IAEA to play in the center 
in providing safeguards and managing a fuel bank; they expect 
the IAEA to consider participation in the Angarsk IUEC at the 
March or June BOG.  Armenia's entry into the Angarsk IUEC as 
an equity partner should add momentum to the project.  The 
Angarsk IUEC project is consistent with U.S. 
non-proliferation goals, and according to Russian officials, 
is compatible with GNEP.  End Summary. 
 
Embassy Visits Angarsk 
---------------------- 
 
¶2. (SBU)  The Angarsk Electrolysis Chemical Complex (AECC), 
40 km from Irkutsk and in operation since 1957, is the home 
(or, more accurately, the home-to-be) for the International 
Uranium Enrichment Center (IUEC).  The Angarsk complex 
produces uranium hexafloride (UF6), enriching U-235 to a 
maximum of five percent, which is suitable for civilian uses 
only.  EST Counselor and DOE Director visited the AECC in 
December.  Rosatom Director Kiriyenko personally approved the 
visit to the once-closed city.  AECC management provided 
Embassy a tour of the complex that included stops in the 
centrifuge cascade hall, central analytical laboratory, the 
"Chelnok" facility where UF-6 is loaded into containers, and 
the Rosatom information center.  As of January, delegations 
from only the IAEA, France, Kazakhstan and Ukraine had 
visited Angarsk to explore preparations for the International 
Center. 
 
¶3.  (SBU) Aleksandr Teterin, head of public relations for 
AECC, escorted Embassy officers throughout their stay in 
Angarsk.  Teterin underlined AECC's commitment to support the 
development of the International Enrichment Center as it 
becomes operational.  He made it clear, however, that TENEX 
-- manager for the project in Moscow -- is the source for all 
strategic and major operational decisions.  Teterin recounted 
that the AECC complex is situated on six square kilometers of 
land, and employs 6300-6400 personnel (down from about 12,000 
in the late Soviet era).  The average wage is 21,000 
rubles/month (approx. $857), high for the area.  Rosatom 
opened an Information Center at AECC in March 2007 to improve 
public relations in the wake of the announcement of plans for 
the International Enrichment Center. 
 
¶4.  (SBU) Over the next ten years, Teterin affirmed, AECC 
hopes to double its enrichment capacity.  The IUEC would play 
a significant part in that growth, assuming the concept meets 
with success.  Teterin was reluctant to confirm how much 
spare capacity exists at present.  Current capacity is 
estimated at about 2.6 million SWU.  Rosatom officials have 
told us that a considerable amount of that capacity -- 
perhaps half -- is spare. 
 
Organization 
------------ 
 
¶5. (SBU) The International Uranium Enrichment Center emerged 
as a joint venture between Kazakhstan's Kazatomprom and 
Russia's Techshabexport (TENEX) in September 2007. 
Kazakhstan acquired a 10% equity stake in the center.  In 
early February, Armenia joined as an equity partner; its 
equity is also expected to be 10%.  TENEX officials have told 
us that Ukraine might be the next equity partner.  Presidents 
Putin and Yushchenko discussed Ukraine's participation the 
IUEC on February 12 in Moscow.  TENEX officials stress that 
what differentiates the IUEC from a typical commercial 
enrichment enterprise is that it allows equity partners that 
do not currently have an enrichment capability the 
opportunity to realize economic profit from the center. 
 
¶6. (SBU) The Director General of TENEX, Aleksey Grigoriev, 
 
MOSCOW 00000400  002 OF 003 
 
 
serves as Director for the International Uranium Enrichment 
Center.  The center will maintain offices in Angarsk and 
Moscow.  The center's board will likely include government 
representatives from each equity partner.  The IAEA, if it 
agrees to participate, would act in an advisory role.  At 
this point, it appears that the center has no assets; each 
partner's investment is based on the promise of future center 
revenues. 
 
Role of IAEA 
------------ 
 
¶7. (SBU) The International Center will operate as a 
black-box.  TENEX Deputy DG Aleksey Lebedev underlined to us 
-- as the GOR's concept paper to the IAEA has made clear -- 
that government-to-government agreements required of each new 
partner stipulate that none will get access to enrichment 
technology.  Lebedev told us negotiations regarding IAEA 
participation in the center had gone well.   He expected the 
March or June IAEA Board of Governors meeting to consider the 
IAEA's role in the project. 
 
¶8. (U) While in Moscow in December, IAEA DG ElBaradei 
commended Putin's initiative in establishing the IUEC at 
Angarsk.  He noted: "The Agency has joined Russia in working 
to develop a proposal to set aside a fuel bank under IAEA 
control at Angarsk that would be available (to members) as a 
last resort.  I trust this proposal will attract broad 
international support." 
 
¶9. (SBU) Negotiations continue on the modalities and scope of 
possible IAEA safeguards.  Lebedev told us TENEX was open to 
more intrusive activities by the IAEA at AECC, but that the 
IAEA was not interested.  He explained that IAEA already has 
safeguards on an identical Russian-supplied facility in China 
and knows the operation well.  IAEA safeguards at IUEC will 
thus target the center's storage areas, not the enrichment 
complex.  Russia has agreed to pay IAEA for the cost of 
providing the safeguards. 
 
Two Reactor Loads in Reserve 
---------------------------- 
 
¶10. (SBU)  Lebedev confirmed the IUEC would set aside a 
guaranteed uranium stock under IAEA supervision (if the IAEA 
approves) at the Angarsk facility.  The stock, enough for up 
to two 1000-MW reactor core loads, would be a physical supply 
of uranium, not a virtual stock.  It could be placed in an 
existing storage at Angarsk facility this year.  Lebedev told 
us the stock would consist of varying enrichment assays to 
accommodate the requirements of various types of reactors. 
AECC's Teterin told us AECC had already set aside an area to 
house the reserve.  The volume, he said, would amount to 
about one hundred containers of LEU. 
 
Business Plan 
------------- 
 
¶11. (SBU) Lebedev expressed the hope that the center might be 
able to conclude initial contracts for uranium services with 
customers by the end of 2008.  Nonetheless, he admitted that 
many issues remained to be worked out regarding how the IUEC 
would operate as a business.  He expected that equity in the 
IUEC joint stock company would provide a guaranteed share of 
the dividends resulting from contracts and center operations. 
 Lebedev also surmised that the center, and therefore each 
partner, would likely have the opportunity to make an equity 
investment into the Angarsk Chemical Complex when it adds 
enrichment capacity.  He speculated this might occur in 3-4 
years, once existing capacity becomes insufficient to meet 
the combined requirements of the Angarsk plant and the IUEC. 
 
¶12.  (SBU) Lebedev stressed that Angarsk would phase in 
additional capacity so as not to harm the market, initially 
adding 300-400K SWU and ultimately ramping up to a total of 
one million additional SWU.  He speculated that the IUEC 
might be allowed to own 10-15% of the new capacity.  He 
pointed out that the transition of the AECC from a federal 
state unitary enterprise to a joint stock company (JSC) would 
need to be finalized before any outside investment could 
occur.  Lebedev indicated that the plant's conversion to a 
JSC should be complete by mid-2008.  This would also make the 
IUEC free from reliance on the state budget. 
 
Partners and Customers 
---------------------- 
 
¶13. (SBU) Russia does not exclude the participation of fuel 
cycle states as partners in the center.  However, the GOR's 
 
MOSCOW 00000400  003 OF 003 
 
 
intent, Lebedev made clear, is for equity partners to be from 
those countries without enrichment capabilities, particularly 
those with uranium reserves of their own.  The goal is to 
provide not only security of access to fuel supply for these 
countries, but also the additional incentive of offering 
ownership in an enrichment center without having to develop 
the capability indigenously.  In addition to Kazakhstan and 
Armenia, the GOR has extended invitations to join the IUEC to 
Ukraine, Uzbekistan, South Korea, Australia, Mongolia, and 
Belarus.  The center's customers would include those 
countries which have small nuclear power programs or those 
countries which have expressed interest in nuclear power, but 
lack domestic enrichment capabilities.  Customers do not have 
to be equity partners. 
 
Iran 
---- 
 
¶14.  (SBU) Iran remains a "potential client" if it were in 
compliance with its IAEA obligations, Lebedev said.  He 
surmised that Russia's release of fuel for the Bushehr 
reactor might eventually make it easier for Iran to 
participate.  To date, however, Iran had refused to meet the 
conditions the GOR had set out for participation: no 
indigenous enrichment and no technology transfer. 
 
Environmental Concerns 
---------------------- 
 
¶15. (SBU) Angarsk's Teterin emphasized to us the safe 
environmental record of AECC.  He claimed that only one tenth 
of one percent of the pollution in the Angarsk area came from 
AECC.  Despite this, Teterin acknowledged that environmental 
groups had been vociferous in their protest of plans for the 
international enrichment center.  Embassy met in Irkutsk with 
the head of the most prominent (and most critical) 
environmental NGO in the area, "Baikal Wave."  She and her 
group strongly oppose the IUEC because plans for eventual 
expansion of the complex, spurred in part by IUEC, will 
result in the production of more depleted uranium hexafloride 
waste at the AECC site.  They fear an accident could poison 
Lake Baikal, only 100 km away and home to 20% of the earth's 
supply of fresh water (in addition to being a UNESCO world 
heritage site).  Teterin said he is trying to reach out to 
the activists, but to no avail.  Baikal Wave claims it is 
being harassed by the GOR. 
 
No Back-end 
----------- 
 
¶16. (SBU) TENEX officials have underlined to us that the IUEC 
concept does not, as currently envisioned, include guarantees 
on spent fuel reprocessing or return to Russia.  The IUEC 
focus is on assured supply, not on the back-end.  Angarsk is 
an enrichment facility, Lebedev noted, not a reprocessing 
facility. 
 
Comment 
------- 
 
¶17. (SBU) The addition of Armenia as an equity partner should 
help spur IUEC development.  A greater impetus will come if 
there is IAEA BOG approval for involvement in the project. 
The fact that the Angarsk Chemical Complex has excess 
enrichment capacity available now means the IUEC's move from 
virtual to actual can take place quickly once management 
works out the details of the business model.  GOR officials 
welcome US interest in and support for the Angarsk IUEC, and 
proclaim its compatibility with GNEP.  However, they have not 
solicited equity participation by US entities.  The Angarsk 
IUEC project remains consistent with US non-proliferation and 
fuel security goals. 
BURNS