VZCZCXYZ0000
OO RUEHWEB

DE RUEHUNV #0052/01 0371416
ZNR UUUUU ZZH
O 061416Z FEB 09
FM USMISSION UNVIE VIENNA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8986
RHEBAAA/DOE WASHDC IMMEDIATE
INFO RUEHXX/GENEVA IO MISSIONS COLLECTIVE PRIORITY
RUEHII/VIENNA IAEA POSTS COLLECTIVE PRIORITY
RUEHRO/AMEMBASSY ROME PRIORITY 0410
RHEGGTN/DEPT OF ENERGY GERMANTOWN MD PRIORITY
RUEHFR/USMISSION UNESCO PARIS PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 1477

UNCLAS UNVIE VIENNA 000052 
 
SENSITIVE 
SIPDIS 
 
FOR D, P, T, IO, ISN 
DOE FOR NA-24, NA-25, NA-21 
 
E.O. 12958: N/A 
TAGS: AORC PREL KNNP IAEA UN
SUBJECT: DOUBLING THE IAEA BUDGET? WHERE TO PUT THE MONEY 
AND HOW TO OVERCOME THE OBSTACLES 
 
REF: A. UNVIE 0011 
     ¶B. UNVIE 0047 
 
¶1. (SBU) Summary: The Administration's stated aim of doubling 
the IAEA's budget has ignited high expectations within the 
IAEA Secretariat and high anxiety among most other Member 
States.  Anticipating a change in U.S. approach, DG ElBaradei 
has instructed managers to build significant increases into 
their upcoming budget presentations, to be unveiled later 
this month.  Conversely, fiscal austerity hawks among our 
closest allies (UK, Canada, Japan, Australia) have warned 
Mission officers the U.S. would find itself "isolated" among 
key allies should we press for significantly more resources 
this year.  A difficult struggle in 2001-3 to increase the 
budget presaged the challenges we would face in (a) gaining 
approval among Member States to increase the regular budget 
and (b) ensuring resources went to high priority programs. 
 
¶2. (SBU) To ensure that any new resources for the IAEA go to 
U.S. priorities, Mission proposes a hybrid strategy based on 
a rapid doubling of extra-budgetary contributions to support 
nuclear security, safeguards, safety, power, and technical 
cooperation.  This combination would serve to address U.S. 
nonproliferation priorities while mending relationships with 
developing countries bruised by past battles over safeguards 
in the Middle East, scrutiny of technical cooperation for 
Syria, and the role of the Director General.  Mission also 
proposes launching a high-level diplomatic campaign to 
convince the majority of Member States to increase the 
regular IAEA budget by forty percent over the next several 
years.  This initiative will take longer, but supports the 
IAEA's long-term health, effectiveness and bedrock programs. 
Finally, Mission proposes a "one-time" investment in a menu 
of initiatives that would not only support nonproliferation 
priorities, but also aid efforts to improve the Agency's 
performance and correct budgetary disparities between 
departments.  Preliminary numbers are attached to each of 
these proposals.  Overall, Mission estimates a price tag of 
160 million USD in increases over several years, effectively 
doubling the IAEA's overall resources with emphasis on 
national security priorities. 
 
 
¶3. (SBU) Action Request:  To begin progress toward a doubling 
of resources by 2012, or even 2020 as set out in the May 2008 
report of the ElBaradei-appointed Commission of Eminent 
Persons, the Department must examine quickly whether first 
installments are affordable in 2010-2011.  Negotiation of the 
Agency's biennial budget will begin with a Secretariat 
presentation of requested levels on February 20; intensive 
negotiations traditionally take up the spring.  Parallel to 
this, the Board Vice Chair will begin her own consultations 
keyed to the Commission of Eminent Persons report on the 
Future of the Agency (ref A).  There too, our counterparts 
will be seeking a signal of U.S. intentions.  End Summary. 
Core Activities, Basic Obstacles 
-------------------------------- 
 
¶4. (SBU) The IAEA is perennially under-funded, and several of 
its priority missions rely principally on funding outside the 
regular budget that is erratic and lacks universal support of 
the Agency's 146 Member States.  This message aims to 
contribute to the Department's approach to these 
circumstances with a discussion of four questions: 1) What 
are the IAEA's core activities we seek to support?  2) What 
other strategic gains can be won through a budget increase? 
3) What is the most effective way to increase IAEA resources 
- through the regular budget or targeted, extra-budgetary 
contributions?  4) What political, legal and organizational 
obstacles must we overcome? 
 
¶5. (SBU) Any increase in IAEA resources should focus on the 
core U.S. priorities of strengthening the IAEA safeguards 
regime, preventing nuclear terrorism and ensuring that the 
international expansion of nuclear power occurs within a 
rigorous system of standards to ensure nonproliferation and 
safety.  Most critically, the U.S. supports a strong 
investigative role for the IAEA, particularly at present in 
regards to Iran and Syria, and robust verification in the 
DPRK.  The establishment of an IAEA-managed international 
nuclear fuel bank is also a U.S. priority (ref B). 
 
 
¶6. (SBU) From a political perspective, increased resources 
could do much to restore our stature in Vienna after highly 
divisive, recent battles over the annual resolution on 
safeguards verification in the Middle East and IAEA 
investigations in Syria and Iran.  In this respect, increased 
resources combined with good public diplomacy and outreach 
could win the day, riding a wave of expectations that others 
attach to the new Administration.  As with many international 
organizations, bloc divisions also plague relations between 
Member States.  Increased IAEA resources must take into 
account G-77 priorities and finance technical cooperation 
programs for peaceful uses of nuclear technology that will 
ultimately attract broad member support for our own 
initiatives. 
 
¶7. (SBU) Closer to the ground, increased resources for 
safeguards should take forward the transformation of 
safeguards into an "information-driven" verification regime, 
not just nuclear material accountancy.  It should also 
support the modernization of safeguards technology and 
infrastructure for investigations and lab work. 
Organizational and cultural changes are also needed, to 
ensure that IAEA personnel are well-trained, proactive, and 
effective.  Administrative improvements to enhance 
transparency and accountability are also high on Mission's 
agenda.  Such a cultural change will hopefully flow from the 
arrival of a new Director General in December.  As several 
U.S. commissions have pointed out -- including the recent 
Graham/Talent report -- there is ample opportunity for 
increased resources to modernize and improve the IAEA, 
ultimately leading to a safer and more secure place for the 
U.S. and the world.  As one IAEA staff member pointed out, 
"there are few institutions that give the U.S. so much bang 
for the buck." 
 
Mechanisms for Increasing the Level of Resources 
--------------------------------------------- --- 
 
¶8. (SBU) There are two basic ways to increase funding to the 
IAEA:  through regular budget assessments (RB) and extra 
budgetary contributions (XB).  RB assessments support the 
organization as a whole and are largely under the control of 
IAEA Management.  These are charged annually to all 145 
Member States, governed by a rates scale based on each 
Member's GDP.  As the largest donor, the U.S. pays 25 percent 
of the RB, or approximately 96 million USD for CY 2008. 
These assessments are paid from the State Department's 
Contributions to International Organizations (CIO) Account. 
 
¶9. (SBU) Unlike RB assessments, our XB contributions are 
highly discretionary.  They support programs that are of high 
priority to the U.S. but do not otherwise command sufficient 
resources from the RB (for political, operational or legal 
reasons).  The U.S. contributes XB funds to the IAEA from a 
variety of sources, the majority being from the State 
Department's NADR fund (Nonproliferation, Antiterrorism, 
Demining and Related Programs) as well as DOE and the Nuclear 
Regulatory Commission (NRC).  XB contributions support 
nuclear security, safety, power promotion and 
nonproliferation activities.  NADR funds also support 
technical cooperation projects for water conservation and 
human health, in particular the Plan of Action for Cancer 
Therapy (PACT), an activity that curries goodwill among the 
G-77 and builds political support for U.S. nonproliferation 
priorities.  Last year's aggregate XB contribution from the 
U.S. rivaled our RB contribution in total amounts. 
 
RB versus XB 
------------ 
 
¶10. (SBU) RB contributions support the Agency as a whole, 
i.e., the IAEA as an institution - its human capital, 
physical infrastructure and major programs (including 
safeguards verification).  Programs funded from the RB enjoy 
stable resource flows from year to year and are well 
positioned to engage in long-term planning.  RB programs have 
little to fear from changes in the political tides or the 
whims of donors, and are less apt to be dismissed as 
political pawns carrying out the pet projects of rich Member 
States.  Most importantly, RB programs enjoy the legitimacy 
 
that comes from the support of all 146 Member States.  For 
these reasons, UNVIE strongly supports increasing the RB and 
bringing U.S. priority programs in nuclear security and 
safety under this umbrella. 
 
¶11. (SBU) Unfortunately, the U.S. cannot unilaterally effect 
an RB increase.  Because of the RB scale of assessments, an 
increase for one Member State is an increase for all, and a 
majority of Members must agree to it.  Each move upwards will 
likely require paying off the developing countries with 
technical cooperation while pressing for better financial 
stewardship and sensible investments in projects to win over 
the budget hawks.  Early in the process, close allies who 
agree with us on the Agency's priorities will need to be 
convinced to join us in paying more for them.  Allies who 
supported the U.S. in its past "zero growth" policy are 
asking aggressive questions about U.S. campaign promises and 
making preemptive warnings to UNVIE officers about any 
attempt to increase the RB.  (The Australian Ambassador 
stated February 4 in a "like-minded" meeting that his 
government would not be alone in looking "aghast" at any 
increases during this year's budget negotiations.)  Others 
have pointed to legal obstacles that inhibit the 
straightforward inclusion of many IAEA programs into the RB. 
Given these hindrances, UNVIE expects that any attempt to 
increase the RB would take some time and require extensive 
and high-level lobbying by U.S. officials.  Fiscal realities 
in the current financial crisis make this challenge even 
tougher.  Nonetheless, senior IAEA staff have confirmed to us 
that ElBaradei is committed to setting a trajectory that will 
put a growing share of safety and security activities under 
the RB, which will ultimately require a budget increase. 
 
¶12. (SBU) Assuming the U.S. wishes to strengthen IAEA 
capabilities, XB contributions would be the logical solution 
to increasing resources without the long time lags and 
political confrontation with allies of an RB increase.  Even 
better - most XB contributions support the programs of 
importance to the U.S., and are under greater U.S. control. 
XB contributions do not establish the legitimacy, stability 
and long-term institutional health gained by an RB increase, 
but XB funds are quick to deploy and can wield significant 
public diplomacy impact if properly presented. 
 
¶13. (SBU) Weighing the advantages and disadvantages of RB 
versus XB, UNVIE recommends a hybrid approach that begins 
with a quick and dramatic increase in annual NADR funding for 
nuclear security, safeguards, safety, power, and technical 
cooperation.  At the same time, the USG should begin a 
high-level push to gain support from other Member States for 
a 40 percent increase in the RB over the next several cycles. 
 The combined cost of these two steps would eventually amount 
for the State Department to a roughly 80 million USD 
increase, bringing U.S. XB and RB contributions to over 200M 
USD annually. 
 
¶14. (SBU) In addition, UNVIE proposes approximately 50M USD 
in "one-time" costs for XB initiatives that would require 
five years or less of attention, including an overhaul of the 
IAEA's main laboratory faciliy and funds to jump-start fuel 
bank operations. Finally, UNVIE proposes an additional menu 
of XB projects that would improve the workings of the 
oganization and rectify RB disparities between progams. 
While it is difficult to estimate the cost f organizational 
reforms up front and without futher consultation among USG 
interagency experts, UNVIE estimates 20M to 40M USD. 
 
¶15. (SBU) The ovrall price tag for these annual and one-time 
inceases hovers at 160M per year, effectively doublin U.S. 
contributions to approximately 300M USD.   notional 
breakdown of this proposal is included below.  Additional 
details are contained in an inormal UNVIE paper emailed to 
IO/T and are refleced in part in our FY-2011 Mission 
Strategic Plan 
 
¶16. (U) Proposals for Annual Increases: 78M US 
 
- Increase U.S. Contributions to the Regular Budget by 40 
percent (38M increase, from 96M to 134) 
 
- Increase NADR Funding (non TCF) by 133 percnt (30M 
 
increase, from 30M to 60M) 
 
- Increase NADR Funding for TCF by 25 percent (5M increase, 
from 20M to 25M) 
 
- Establish an annual fund of 5M to support and reward 
Top-Performing IAEA Programs (medical applications, emergency 
preparedness, disease eradication, etc.) 
 
¶17. (U) Proposals for One-Time Expenditures: 53M 
 
- Overhaul the Safeguards Analytical Laboratory (40M) 
 
- "Operationalize" the Nuclear Fuel Bank (8M) 
 
- Reform the Technical Cooperation Department (5M) 
 
¶18. (U) Strategic and Organizational Goals: 20M - 40M 
 
- Create a CEO position to oversee IAEA program operations. 
 
- Reorganize the Nuclear Security and Safety programs as 
separate departments. 
 
- Increase RB resources for Nuclear Security and Safety. 
(Septel will offer more detailed UNVIE thoughts on 
"mainstreaming" the Nuclear Security program into the RB, 
building on Secretariat moves in this direction.  If moving 
these activities into the RB proves unworkable for political 
or legal reasons, including the interpretation of the IAEA 
Statute, the two programs could be subjected to a scale of 
assessments along the lines of TCF.) 
 
- Dedicate additional RB resources to administer the Nuclear 
Fuel Bank in addition to the $50 million already authorized. 
 
- Dedicate RB resources to support the Program of Action for 
Cancer Therapy. 
 
- Achieve RB increases for the Incident and Emergency Center 
(IEC). 
 
- Expand the duties of the Management Division to cover all 
administrative support services across the Agency. 
 
- Support the "Nuclear Renaissance" with technical training 
and infrastructure development for countries embarking on 
nuclear power programs. 
 
- Enhance cooperation with DOE on the research and 
development of next generation nuclear reactors. 
 
A Note From Past Experience 
--------------------------- 
 
¶19.  (SBU) Mission's effort to marginally increase funding 
for safeguards, nuclear security, and safety after September 
11, 2001, foreshadows the issues we may face in the future. 
The 2002-03 effort raised energetic opposition and took well 
over a year to achieve, beginning with a letter in May 2002 
by the Deputy Secretary to the Geneva Group (of major UN 
donors) advocating a budget increase.  That opening salvo was 
supported by extensive technical information about safeguards 
activities and projections of growth in nuclear materials 
stocks.  U.S. officials consulted closely with the IAEA 
Secretariat to bring about a needs assessment and budget 
plans, while Mission negotiated within a budget working group 
at the IAEA.  Building support within the G-8 was central and 
resulted in the 2003 summit declaration including an 
affirmation the IAEA should be granted "the necessary means 
to implement its monitoring tasks."  Over a year after the 
process began, a special meeting of the Board in July 2003 
finally adopted the USD 15 million budget increase, the first 
in more than fifteen years. 
 
¶20.  (SBU) Some of the opposition faced during that budget 
exercise may be expected in any effort to more broadly 
increase IAEA resources.  The financial situation has 
exacerbated the problem, and both UK and France have admitted 
that they may have trouble making timely payments to the 
Technical Cooperation Fund in 2009.  The UK has also 
 
suggested that it may retrench to a "zero nominal growth" 
position, with no allowances even for inflation or exchange 
rate fluctuations.  Mexico has also become a budget hawk, 
thanks to its rising status in the OECD and increasing 
assessments.  Canada locally is among the most vocal skeptics 
of IAEA financial management.  In short, to the extent the 
changes we want involve increased assessments across the 
Agency's 146 members, some of our closest allies may require 
the most convincing.  In other quarters, especially with 
developing countries and their political champions, the 
disagreements will be about how to distribute the funds among 
programs. 
 
PYATT