VZCZCXYZ0038
PP RUEHWEB

DE RUEHSG #0958/01 2981931
ZNR UUUUU ZZH
P 241931Z OCT 08
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC PRIORITY 3872
INFO RUEHBU/AMEMBASSY BUENOS AIRES 1100
RUEHPE/AMEMBASSY LIMA 5762
RUEHLP/AMEMBASSY LA PAZ OCT BRASILIA 0494
RUEHMN/AMEMBASSY MONTEVIDEO 4076
RUEHAC/AMEMBASSY ASUNCION 3589
RUEHCV/AMEMBASSY CARACAS 1821
RUEHUNV/USMISSION UNVIE VIENNA 0052
RHMCSUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SANTIAGO 000958 	

STATE FOR WHA/BSC, WHA/EPSC AND EEB/ESC/IEC 

SENSITIVE 
SIPDIS 

E.O. 12958: N/A 
TAGS: ENRG SENV BTIO OEXC PGOV CI

SUBJECT: AMBASSADOR SCHULTE REVIEWS WITH CHILEANS IAEA OVERSIGHT ROLE IN DEVELOPMENT/CONTROL OF NUCLEAR POWER 

Summary 

¶1. (U) U.S. Ambassador to the IAEA Schulte, in Chile October 14-16 primarily to review developments on international efforts to rein in 	Iran's nuclear program (septel), also discussed the IAEA's role working with countries interested in safeguarding and sharing nuclear technology, as well as in developing a nuclear power generation capability.  The issue has special relevance to Chile, which faces an energy crunch, and which is considering developing nuclear power as one option to ease its energy deficit.  End summary. 

¶2. Ambassador Greg Schulte, U.S. Ambassador to International 	organizations in Vienna, including the International Atomic Energy Agency (IAEA) was in Chile October 14 -16, 2008 as part of a regional visit that included Argentina and Brazil.  The primary purposes of Ambassador Schulte's visit were bilateral consultations and public diplomacy on the Iran nuclear issue (septel). 

Leave Nuclear Power to the Pros 

¶3. (U) Going beyond a review of international efforts to rein in Iranian (and Syrian) nuclear programs, Schulte spent much of his visit discussing the IAEA's role in assisting countries interested in accessing nuclear energy.  He reminded his audiences of Chairman of the U.S. Nuclear Regulatory Commission Dr. Dale Klein's admonishment that ""owning a commercial nuclear reactor is not a 	business for amateurs.""   Countries seeking nuclear energy must have in place appropriate laws, an adequate regulatory framework and a culture that respects security/safety. 

¶4. (U) Ambassador Schulte highlighted the two main concerns of such countries:  the need to secure sources of fuel and the means to handle spent fuel.  Noting most countries buy fuel on a global market, Schulte outlined several proposals for the creation of a nuclear fuel bank: (1) the Russian proposal to develop stocks of low-level enriched uranium (LEU) to provide the international community with guaranteed fuel for power stations and (2) the $50 million contribution (to be matched by $100 million by IAEA member countries) from the Nuclear Threat Initiative (NTI) to create an LEU stockpile to support nations choosing not to build indigenous nuclear fuel cycle capabilities. 

Enrichment Rights and Responsibilities - Nuclear Education 

¶5. (U) Ambassador Simons hosted a breakfast iho Ambassador Schulte October 15, with a wide range of Chilean energy experts, including: ManlioCoviello, from the Economic Commission of the United Nations for Latin America and the Caribbean (ECLAC) Lucia Dammert, the 	Director of the Latin American Faculty of Social Sciences (FLACSO) Security and Citizenship Program Guillermo Holzman, Director of the Department of Political Science, University of Chile's Institute of Public Affairs Alejandro Jadresic, Dean of the School of Engineering, University Adolfo Ibanez Guillermo Patillo, a Professor of Economics at both Santiago University and Catholic University Fernando Lopez, the Executive Director Chile's Nuclear Energy Commission (ComisionChilena de Energia Nuclear - CchEN) and 	MatiasUndurraga, Minister Counselor and Deputy Director the MFA's Office of International Security.  Post's Information Officer, a Defense Attach Officer, Senior Poloff, ESTH officer and Economic Specialist were also present. 

¶6. (U) Jadresic asked about the IAEA's ability to restrict uranium enrichment for power generation.  Schulte clarified that under the Nuclear Non-Proliferation Treaty (NPT) countries have the right to enrich uranium for power generation, but the concern is about creating a race for enrichment technology, especially in the Middle East.  According to Ambassador Schulte, IAEA Director General Mohamed ElBaradei has described this as a ""loophole"" because countries can claim an interest in power generation, but use the enriched uranium and associated technology for weapons.  Asked about the timeframe for setting up a nuclear reactor, Schulte said it is generally 10-15 years, but depends on the country's decision-making process and requires a regulatory and legal framework and expertise, not just money. 

¶7. (SBU) Ambassador Schulte said both Brazil and Argentina have enrichment technology and that regional cooperation might be an option.  He suggested it could make economic sense for Chile to participate in a regional enrichment center, but recognized Chile may not be at that point in its decision-making process.  He also pointed out the green movement in Brazil is active and that safety concerns are under debate there.  When a participant joked about 	Brazil obtaining a nuclear-powered submarine, Schulte said countries often seek the prestige of nuclear technologies not necessarily on pragmatic or economic grounds, e.g., need for energy, unease about climate change, etc.  Chile, he said, is exploring nuclear energy 	for the right reasons. 

Taking it to the Bank 

¶8. (SBU) Undurraga wondered if other countries supported possible creation of a nuclear fuel bank.  Ambassador Schulte said Brazil, for example, is receptive to the idea of being a beneficiary and possible donor, but worried it would infringe on a country's right to enrich uranium.  The IAEA view is that a fuel bank would make nuclear energy more accessible and noted creating such a bank would undercut Iran's claim that it needs to enrich uranium despite the fact that it does not have a functioning reactor. 

¶9. (SBU) Coviello supported creation of a fuel bank and outlined three main issues in Chile's debate on nuclear energy:  (1) increasing energy demand (2) the ability to full develop hydropower and (3) public opinion.  He explained that Chile's energy crisis has motivated the country to discuss all its options, including nuclear.  Coviello indicated the public and ""some in 	government"" need be educated on new types of nuclear reactors that produce less waste.  Ambassador Schulte empathized with the difficulties in distinguishing between nuclear energy and nuclear weapons in the public debate.  He also requested Chile's assistance in persuading Brazil and Argentina to ratify the additional protocols to their IAEA safeguards agreements. 

¶10. (SBU) Dammert agreed there are misunderstandings about nuclear both in the government and public sectors because of the confused discussion that equates nuclear power with bombs.  She pointed to the need for long-term planning, noted a lack of consensus on the issue, and expressed doubt that an agreement to develop nuclear power would necessarily survive a change in administration. 	Jadresic added that, despite Chilean President Bachelet's commitment to green groups not to promote nuclear energy in Chile, the government has formed a taskforce to study its feasibility. According to Jadresic, the government is mostly in favor of pursuing nuclear energy option but that Chile does not have a culture of 	implementing long-term projects. 

¶11. (U) Ambassador Simons praised Chile's adoption, in a recent GOC presentation outlining the limits on using hydroelectric and coal and the possibility of nuclear energy, of an International Energy 	Association (IEA) recommendation to use a longer time horizon for forecasting energy needs, i.e., out to 2030.  He also mentioned a pending IEA in-depth review of Chile's energy profile. 

La Moneda MFA Offer Qualified Support 

¶12. (SBU) At a meeting later in the day at the presidential palace (La Moneda), Marcos Robledo, Bachelet's International Affairs 	Advisor, affirmed Chile's commitment to a multilateral approach and expressed qualified support for regard to the creation of a nuclear fuel bank.  Robledo also emphasized, however, the importance of a country's right to nuclear technology.  Throughout the discussion, Robledo emphasized the complex political balance in the region and inquired about Argentina and Brazil's positions, as well as noting that Mexico would be invited to join in any regional discussions on 	nuclear issues.  Ambassador Schulte said Brazil is interested in the fuel bank idea, but its MFA expressed concerns about giving up rights he also clarified that a fuel bank would not be used to regulate the supply of nuclear material, but rather to help the market function more effectively. 

¶13. (SBU) Discussing the desirability of having Argentina and Brazil adopt additional IAEA protocols, Schulte noted Brazil's ""irrational fear"" that its scientists would be kidnapped if it signed the protocols.  He said Argentina was likely to adopt additional 	protocols if Brazil agreed to them.  Robledo noted Brazil did not attend a recent regional conference on nuclear challenges hosted by FLACSO in Santiago and provided assurances that Chile has appealed to its neighbors to sign the additional protocols. 

¶14. (SBU) MFA Director of Special Policies, Ambassador Juan Eduardo Eguiguren also discussed with Ambassador Schulte the fuel bank 	proposal, IAEA assistance to countries interested in developing nuclear energy, and the future of IAEA.  Eguiguren, a true believer on the importance of nuclear disarmament and non-proliferation going hand-in-hand, said Chile favors nuclear-free zones with other Latin American countries.  Ambassador Schulte commented on the poor job the U.S. does of publicizing its progress on disarmament, including that it has increased the rate of disarmament by 20 percent and our nuclear arsenal is now at the lowest level since the Eisenhower administration. 	

Military Analysts Comment on Russia, Brazil 

¶15. (SBU) Ambassador Schulte also met with several academics and analysts working on non-proliferation from a military standpoint. The group included:  Col. Jorge Pena, Associate Professor and Head Department of Military History, Strategy and Geopolitics at of Chilean War College, Ricardo Neeb, Professor at Pontifica Universidad Catolica and Non-Proliferation Analyst for Ministry of Interior, retired General Alvaro Guzman, Nuclear Engineer from Centro de EstudiosNucleares del Ejercito (CEME), a military think tank. 

¶16. (SBU) Guzman noted France and Russia's willingness to sell nuclear technology to Chile, but dismissed the possibility of Chile purchasing Russian technology.  The group discussed Russia's recent diplomatic efforts to engage in Latin America, including a meeting between the Russian Ambassador to Chile and the Chilean War College and a Russian request to join in the Union of South American Nations-UNASUR (NFI).  Neeb noted Russia's need to support its military industry and general speculation that Russia is looking for markets for its military goods, and possibly nuclear technology. 

¶17. (SBU) Guzman raised the issue of reliable access to fuel and the possibility of a nuclear fuel bank, which generated a discussion of regional cooperation.  Neeb noted research in Argentina and Brazil, but said environmental and technical concerns may affect Brazil's s ability to expand enrichment.  He was dismissive of the idea Brazil has unique proprietary technology.  He also mentioned the Brazilian military's plans for a nuclear submarine, but noted it has been under discussion for 20 years and has never been funded by the Brazilian government.  He expressed his opinion that Brazil, because of a constitutional provision prohibiting WMD proliferation, was very unlikely to proliferate.  Pena did not think the submarine is a question of prestige so much as one of military independence and a reflection of Brazil's desire to be a power in the region, despite the fact its military is essentially broke. 	

Meeting With Nuclear Energy Commission 

¶18. (SBU) Representatives of Chile's Nuclear Energy Commission (ComisionChilena de Energia Nuclear - CChEN), seemed generally receptive to Ambassador Schulte's points on the proposed nuclear 	fuel bank.  Board member Dr. Julio Vergara noted uranium prices are going down and there is not enough uranium mining or enrichment capability to meet the demand for nuclear fuel.  Ambassador Schulte referenced the latest report on the subject from the IAEA, which indicated supplies through at least 2030 and the expectation the commercial market will respond to increased demand.  [Note:  The June 2008 IAEA staff report found that new discoveries and re-evaluations of known conventional uranium resources will be 	adequate to supply nuclear energy needs for at least 100 years at present consumption level.  End note.] 

¶19. (U) Touting the Global Nuclear Energy Partnership (GNEP), which 	now boasts 25 countries and Chile may possibly eventually join, Ambassador Schulte outlined spent nuclear fuel recycling and storage options.  Vergara criticized the IAEA budget for supporting nuclear energy and emphasized the need for technical assistance.  He also asked about the IAEA taking on the additional responsibility of the fuel bank.  Ambassador Schulte responded that IAEA SecGen El Baradei favors making all steps of the fuel-cycle part of a multilateral system, as does GNEP, but the fuel bank is the easiest place to start.  He added Brazil and Argentina are discussing a regional enrichment center.  Vergara agreed there might be issues with the two countries using different technologies (gaseous vs. centrifuge). Ambassador Schulte highlighted two GNEP working groups studying options for reliable fuel services under long-term contracts and spent fuel handling, including the value of fuel leasing.  Vergara noted some countries legal prohibitions on waste importation, including the U.S. 	

Prominent Senator on the Fence on Nuclear Energy 

¶20. (SBU) Senator Jaime Gazmuri, Head of the Chilean Senate's International Relations Commission, told Schulte that despite the need to diversify its current electricity grid, there are strong arguments against Chile using nuclear power.  These include:  1) earthquake/seismic concerns (2) disposal of nuclear waste (3) the 10-15 year gap between the decision and actually having nuclear 	generated power.  Yet, citing Japan's success with nuclear energy despite the risk of earthquakes, he allowed that all new sources of 	energy have potentially major costs.  Schulte explained nuclear waste management through recycling and through use of geo-repositories.  Gazmuri noted the discussion is on-going and that the decision is ultimately a strategic one for Chile. 

Comment 

¶21. (U) Ambassador Schulte's provided opportunities to engage on both nuclear non-proliferation and nuclear energy issues.  The visit got good press coverage and as Chile's debate on nuclear energy 	moves forward, it is important to continue to provide reliable technical information and policy advice on what remains a controversial subject in Chile.  End comment. 

¶22. (U) Ambassador Schulte did not clear this message. 	

SIMONS