VZCZCXYZ0000
PP RUEHWEB

DE RUEHUNV #0155/01 0981752
ZNR UUUUU ZZH
P 081752Z APR 09
FM USMISSION UNVIE VIENNA
TO RUEHC/SECSTATE WASHDC PRIORITY 9282
RHMCSUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
INFO RUEHII/VIENNA IAEA POSTS COLLECTIVE PRIORITY
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 0239
RUEHTA/AMEMBASSY ASTANA PRIORITY 0091
RUEANFA/NRC WASHDC PRIORITY

UNCLAS UNVIE VIENNA 000155 
 
SENSITIVE 
SIPDIS 
 
STATE FOR T, IO/T, ISN/NESS, ISN/RA 
DOE FOR NA-243 GOOREVICH, SYLVESTER 
NRC FOR SCHWARTZMAN 
 
E.O. 12958: N/A 
TAGS: AORC ENRG PREL KNNP TRGY RS
SUBJECT: IAEA/RANF: RUSSIAN PROPOSAL ON ASSURED FUEL SUPPLY 
 
REFS: (A)Wickes-Timbie Email 02/13/09   (B) UNVIE 95 
(C) GOV/INF/2009/1   (D) UNVIE 104  (E) UNVIE 154 
 
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SUMMARY 
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¶1.  (SBU) The Russian Government and IAEA Secretariat have the 
proposal for a nuclear fuel assurance supply mechanism that is 
nearest to coming before the IAEA Board for action.  The arrangement 
provides for an assured export license, fissionable material, a 
storage location, and revenue, and on this basis is closer to 
implementation than other fuel bank concepts.  Uncertainty remains 
on how IAEA Board states will interpret recipient country 
eligibility - a crucial factor in whether the Board will approve the 
arrangement.  Further questions surround the application of 
safeguards to the LEU being transferred, what role the IAEA would 
play once it requests fuel from Russia, and how the supply of LEU 
will relate to fuel fabrication.  For the U.S., we need clarity on 
whether we can interpret the proposal as consistent with NSG 
guidelines, in particular the full-scope safeguards requirement, 
which Russia has implied might not apply (in order to include 
India).  As in the parallel proposal for an IAEA-administered fuel 
bank, the IAEA will advocate that the DG must be empowered to judge 
if Board-approved criteria are met and, if so, to transfer 
Agency-owned LEU on his own authority without involvement by others. 
 End summary. 
 
--------------------------------------------- 
AN IAEA NUCELAR FUEL RESERVE IN RUSSIAN HANDS 
--------------------------------------------- 
 
¶2.  (SBU) Refs A-C provide background on the Russian Federation 
Initiative to Establish a Reserve of Low Enriched Uranium (LEU) for 
the supply of LEU to the IAEA for its member states.  Director 
General (DG) ElBaradei stated April 8 to the Ambassador (ref E) that 
he favors using the next two meetings of the Board of Governors, in 
mid-June and early September, first to increase understanding and 
buy-in for the arrangement, and then to secure formal approval.  The 
Russian Mission in Vienna informed UNVIE it would conduct outreach 
to Board states in advance of the June Board meeting, but only after 
Moscow authorizes the texts of the two operative documents to be 
circulated by the Agency.  This has not happened as of early April; 
indications are that the Russian Government may not approve release 
of the texts in time, and that ElBaradei favors holding back the 
documents past the Board meeting regardless of whether Moscow is 
willing.  Per IAEA fuel assurances point man Tariq Rauf on April 2, 
ElBaradei remains wary that skeptics on the Board will question the 
rapid progress from a three-page summary in March to two elaborated 
legal documents.  Feeling he still lacks a clear mandate from the 
Board to develop and present an arrangement, ElBaradei has proposed 
instead that Russia present a more detailed summary paper of its own 
as a basis for further "conceptual" discussion and education of 
interested parties.  The Secretariat awaits Moscow's tactical 
decision.  Russian Msnoff told us April 8 the MFA lead on the issue, 
IAEA Governor Berdennikov, takes the view the Russia has no more to 
tell about the arrangement short of releasing the agreement texts; 
his ROSATOM colleague Ambassador Spasskiy must also be heard from. 
 
¶3.  (U) As described in refs, the Russian LEU reserve arrangement 
would operate through two legal agreements.  Agreement 1 sets out a 
Russian Federation undertaking to maintain a reserve of LEU at its 
international enrichment center in Angarsk, for transfer to IAEA 
ownership under certain circumstances and conditions.  Russia would 
in effect donate to the Agency its costs for holding and managing 
the special fissionable material in reserve, for the contingency 
that the IAEA would effect a transfer.  Agreement 2 would be a model 
transfer agreement the IAEA would sign with a member state that is 
experiencing a politically-motivated cut-off of LEU fuel for a 
civilian nuclear power plant reactor and which has exhausted other 
sources (i.e., commercial and state-to-state) for LEU procurement. 
IAEA nuclear energy department official Alan McDonald praises the 
Russian arrangement in particular for "solving" what he sees as the 
tallest hurdle to nuclear fuel supply assurance - the guarantee of 
an export license.  Moreover, he points out, Russia accepts that the 
IAEA would re-transfer LEU without requiring the recipient state to 
commit that it will not separately acquire uranium enrichment 
capability.  With known material in a known location and 
arrangements for revenue to flow from the acquiring state through 
the IAEA to the Russian source, the proposal is, in McDonald's 
assessment, closer to being implementable than any other 
multilateral "reliable access to nuclear fuel" (RANF) proposal in 
which the IAEA would be involved, including its own (the 
NTI-supported fuel bank). 
 
¶4.  (SBU) As IAEA officials (Tariq Rauf, EXPO; Wolfram Tonhauser, 
nuclear and treaty law adviser; Alan McDonald, nuclear energy 
department) briefed to T Special Assistant Timbie (Ref A, based on 
February conference call with UNVIE and Russian mission personnel 
participating), Agreement 1 between Russia and the Agency will allow 
the Agency to call upon Russia to make LEU available in the event a 
country has its fuel supply cut off, requests LEU, and enters into 
Agreement 2 with the Agency.  Agreement 2, between a recipient 
country and the Agency, would apply a "model agreement" previously 
approved by the Board that authorizes the DG, under specified 
conditions, to effect a delivery of LEU to a specific country for a 
specific power reactor  without going to the Board for case-specific 
approval.  Rauf stressed that Agreement 2 would have all the 
nonproliferation and safety obligations necessary, and that both 
agreements 1 and 2 would state the applicable pricing formula.  The 
recipient country would have to sign such an agreement and deposit 
payment into an Agency account before the DG would request the LEU 
from Russia.  Rauf did not discuss how the LEU would be made into 
fuel. 
 
¶5.  (U) During the February telcon Rauf said the Agency does not 
believe it a good idea to require a recipient state to have an 
Additional Protocol (AP) in force as an eligibility criterion under 
the Russian proposal.  He said that if member states were to push 
for this, we would lose on universalization of the AP as well as the 
fuel bank.  Russian Mission First Secretary Mikhail Kondratenkov 
said the AP was not a requirement for Russia.  However, Rauf raised 
Agency concern about how Agreement 1 and 2 would work with NSG 
guidelines.  He said the Agency still felt that it needed to be able 
to provide LEU according to the Statute, meaning to any member state 
in compliance with its Agency obligations. 
 
------------------------------------------- 
ELIGIBILITY - MOSCOW'S INDIA-INCLUSIVE VIEW 
------------------------------------------- 
 
¶6. (U) Ref B relates Russia's release of a three-page summary 
document (published to IAEA Member States as ref C) and the 
commentary it elicited from member states and the DG under "Any 
Other Business" on the concluding day of the March Board meeting. 
After the March Board, Russian Msnoff Kondratenkov told us the 
Russian MFA had tried to word its Agreement 1 with the IAEA in such 
a fashion as not to require Duma approval of the document, although 
Russian law requires Duma approval of each civil nuclear export 
agreement.  He added that relevant Russian law is "practically based 
on" and does not exceed NSG Guidelines/limitations on transfers. 
Russia did not want with this agreement to "create a limitation on 
NSG guidelines."  (NOTE: We understood him to mean "erode" or 
"undercut" them. END NOTE.)  We saw a copy of draft Agreement 1, 
which still had language in italics that tracked closely with the 
sentence in REF C authorizing transfer of LEU to "any 
non-nuclear-weapon state" having an "agreement with the IAEA 
requiring the application of safeguards on all its peaceful nuclear 
activities."  Kondratenkov agreed this phrase could be read as 
allowing transfers to civil facilities in India under its separation 
plan.  (NOTE: In an unrelated conversation with MsnOff, safeguards 
legal adviser Laura Rockwood expressed concern that India might not 
place under indefinite safeguards all civil facilities identified in 
its separation plan.  That possibility raises the question of 
whether India's safeguards "requires" application of safeguards to 
"all its peaceful nuclear activities."  END NOTE.)  Subsequently, on 
April 8 Kondratenkov told us the IAEA had accepted the "non-nuclear 
weapons state" formulation.  The draft Agreement 1 we saw in March 
further sets out recipient state conditions: 
 
-- No use of LEU received from the IAEA for weapon purposes, 
explosions, and "any military purpose" 
-- Physical protection per INFCIRC 225, Rev. 4 
-- LEU may be used only for production of energy.  Safety standards 
and measures for handling, shipping, and storage to be per INFCIRC 
18, Rev. 1 
-- No re-export, further enrichment, or reprocessing of spent fuel 
unless agreed to by the IAEA 
 
Kondratenkov said these provisions, which he characterized as 
"minimal conditions consistent with the NSG," were "practically 
agreed" between the IAEA and Russia. 
 
--------------- 
THE WAY FORWARD 
--------------- 
 
¶7.  (U)  Kondratenkov, when asked about the way ahead, offered the 
following timeline of events: 
-- Russian IAEA Governor Berdennikov's oral statement under AOB at 
the March Board will be circulated as an INFCIRC (done); 
-- Agreement 1 needs to be concluded between Russia and IAEA 
(done); 
-- Moscow must receive a letter from the DG affirming agreement of 
the Agreement 1 text in full.  Upon receipt of that letter, the 
Russian inter-agency process would ensue to approve agreement 
outside Duma process.  (Done - Kondratenkov affirmed April 8 that 
this review is under way but would likely not be complete in time 
for the June Board meeting.) 
-- Agreement 2 needs to be finalized by IAEA, involving further 
"informal" consultation between IAEA and Moscow. (Done, per 
Kondratenkov on April 8.) 
-- In early May, texts of Agreements 1 and 2 would be presented in 
all Board capitals.  Russia would undertake targeted outreach, 
especially with "skeptics" - Egypt (will oppose eligibility for 
non-NPT signatories), Cuba, Brazil and Argentina, the latter two 
being the hardest. 
 
¶8.  (SBU) Our IAEA contacts McDonald and Rauf tell us this timeline 
on the last point is slipping on the Russian side.  Moreover, 
ElBaradei has written to the Russians with the proposal that, in 
place of the two agreement texts as finished documents, for purposes 
of information and confidence building in the June Board the Russian 
Federation should circulate a detailed summary of the arrangements, 
including key legal points in each agreement.  The IAEA would 
characterize this document as describing a "model" under discussion 
with Russia.  The Russian Mission tells us that IAEA Governor 
Berdennikov and ROSATOM's Spasskiy will decide on ElBaradei's 
tactical proposal.  Despite his caution at this juncture, DG 
ElBaradei did affirm to the Ambassador his aim of September Board 
approval for the agreement texts (ref E). 
 
-------------------------- 
WHAT WE STILL NEED TO KNOW 
-------------------------- 
 
¶9. (SBU) Comment: Based on the information in the Russian summary 
document (ref C) and separate conversations with Russian officials 
after the March Board meeting a number of questions need to be 
answered in the run-up to the June Board: 
 
Would arrangements for fabricating LEU, stored in the form of UF6, 
into power reactor fuel assemblies be specified as part of these 
agreements, or would they be addressed separately?  UNVIE 
understanding thus far is that fuel fabrication is not addressed in 
the Russian proposal. 
 
Would the supply of LEU to India be consistent with the NSG 
Guidelines or require some modification?  Would the United States 
support such a modification?  Would the United States read the 
Indian safeguards agreement as clearly "requiring" safeguards on all 
its declared civil facilities? 
 
Is India prepared to define itself "in" under the Agreement 1 
criterion? 
 
How can advocates persuade the skeptical states that would have no 
need of a "last-resort" supplier of LEU to acquiesce in the 
establishment of a facility desired by other developing countries? 
 
Would the proposed Russian arrangement, as outlined in REF C, 
establish any unhelpful precedents in relation to the NTI fuel bank, 
the U.S. national reserve, or model arrangements envisioned under 
the 2006 RANF proposal? 
 
Mission is continuing consultations with Russian and Indian 
counterparts, Secretariat staff, and other member state missions as 
appropriate on these questions. 
 
SCHULTE