VZCZCXYZ0004
PP RUEHWEB

DE RUEHUNV #0167/01 1070627
ZNR UUUUU ZZH
P 170627Z APR 09
FM USMISSION UNVIE VIENNA
TO RUEHC/SECSTATE WASHDC PRIORITY 9306
INFO RUEHII/VIENNA IAEA POSTS COLLECTIVE PRIORITY
RHEBAAA/DOE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEANFA/NRC WASHDC PRIORITY

UNCLAS UNVIE VIENNA 000167 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: AORC PARM KNNP IAEA
SUBJECT: IAEA SAFEGUARDS BUDGET ADVOCACY 
 
STATE FOR IO/T, IO/MPR, ISN/RA, ISN/MNSA 
DOE FOR NA-243 GOOREVICH 
NSC STAFF FOR CONNERY 
NRC FOR DOANE 
 
REF: UNVIE 065 
 
¶1.  (SBU) Summary:  At UNVIE request, IAEA DDG/Safeguards briefed 
Geneva Group members on April 15 regarding his department's 2010/11 
budget proposal.  Heinonen made a compelling case for the proposed 
budget increase, but key member states appear to remain skeptical. 
Heinonen began by explaining why savings from "Integrated 
Safeguards" will not be sufficient to address growing safeguards 
needs, then proceeded to describe major projects underway that 
require additional funding.  The Safeguards Analytic Laboratory 
(SAL) was most prominent in this regard.  In response to a question 
from DCM, Heinonen also described the consequences should new 
funding not be available.  He effectively dismissed a German 
assertion that because the IAEA did not expend the entire safeguards 
budget last year it was "hard to argue" for a budget increase in 
this budget cycle.  Also in response to German comments, Heinonen 
noted that the IAEA cannot be expected to "win tomorrow's war with 
yesterday's tools."  Heinonen's presentation was an effective 
opening salvo in the safeguards budget debate, but much work remains 
in convincing even our close friends to break away from zero real 
growth.  Questions and comments from Germany, Spain, and France 
underlined the challenge Mission sees to prompting consideration of 
the IAEA budget issue in the context of the overarching and 
highest-priority strategic nonproliferation objective, rather than 
by counting beans from the green-visored perspective of a finance 
ministry.  (Note: After the briefing Heinonen shared his 
presentation slides in confidence with us, e-mailed to ISN/RA and 
IO/T; some figures in those slides may evolve before appearing in 
final in the next Safeguards Implementation Report. End note.)  End 
Summary. 
 
¶2.  (SBU) IAEA Deputy Director General Olli Heinonen 
(DDG/Safeguards) began by describing the budget proposal as "very 
tight" despite the requested increase, and attributed much of the 
tightness to two large ongoing projects, Enhancing Capabilities of 
the Safeguards Analytic Services (ECAS) and the Safeguards 
Information System Re-engineering Project (IRP).  (Note:  ECAS 
involves upgrades/replacement of Safeguards Analytical Laboratory, 
SAL, facilities at Seibersdorf; IRP is replacement of the IT system 
for handling all safeguards information.) 
 
¶3.  (SBU) Heinonen prefaced detailed discussion of the above 
projects as well as others with an explanation of why savings from 
Integrated Safeguards (i.e., decreased routine inspection activity 
in states that provide wider-ranging access and information under 
the Additional Protocol) will not provide significant funds beyond 
the savings already achieved.  He showed slides depicting a decrease 
in routine inspection activities of approximately 20 percent since 
2001, while in the same timeframe there was an increase of 
approximately 25 percent in the quantity of nuclear material subject 
to safeguards.  But, Heinonen noted, this period of 
adjustment/savings resulting from the move to Integrated Safeguards 
is closing because the states with the most significant nuclear 
activities have already been folded into the Integrated Safeguards 
regime.  Thus, further states adopting the AP will result in little 
savings to offset the increasing demands on the safeguards regime as 
additional nuclear facilities and material increasingly come on-line 
worldwide. 
- 
¶4.  (SBU) Exacerbating this trend, Heinonen continued, is the fact 
that new facilities coming on-line tend to be labor intensive 
because they involve plutonium, which requires frequent inspections 
to meet IAEA "timeliness" goals.  He cited specifically the 
reprocessing and MOX fuel plants under development in Japan and the 
expected growth in the number of nuclear power reactors across the 
globe.  The DDG/Safeguards described the proposed safeguards budget 
increases as each falling into one of the four following areas: 1) 
replace old instrumentation and equipment; 2) new facilities subject 
to safeguards;  3) enhance detection of undeclared activities; 4) 
manage and analyze large amounts of information. 
 
¶5.  (SBU) After so dismissing the "just look to savings" chimera, 
Heinonen proceeded to describe the safeguards needs that must start 
to be met to achieve and maintain a strong safeguards regime.  He 
noted that about 25 percent of the Secretariat's budget proposal is 
consumed by 8 projects:  1) India, 2) JMOX (safeguards systems for 
new MOX fuel plant in Japan), 3) Chernobyl (safeguards systems for 
monitoring and disposition of fuel containing material found at the 
site of the accident), 4) Safeguards Instrumentation (replacement of 
obsolescent instrumentation), 5) ECAS (SAL upgrade/ 
rebuild), 6) Novel Technologies (new tools, novel or not, to detect 
undeclared facilities and activities), 7) ICT Systems Support and 
Operations (Safeguards IT hardware and security infrastructure, 
including move to new location), and 8) Integrated Analysis 
(analysis tools specifically tailored to improve effectiveness and 
efficiency of drawing Safeguards conclusions).  Estimates for these 
eight projects assume regular budget amounts of 63 million euros, 
extrabudgetary contributions of 15 million euros, and capital 
investment of 39 million euros over the 2010-2011 budget cycle. 
 
¶6.  (SBU) During his presentation and in response to a question from 
DCM, Heinonen stressed in particular the imperative for enhancing 
SAL's ability to analyze environmental samples and for ensuring no 
interruption of the Agency's ability to analyze nuclear material 
samples.  In regard to analysis of environmental samples, Heinonen 
underlined that it will always be more efficient and effective to 
analyze most samples via the Network of Analytic Laboratories 
(NWAL), but that the IAEA needs to upgrade its own capability such 
that it can show it is not completely reliant on the NWAL for 
higher-sensitivity analysis of select samples in a timely fashion. 
On analysis of nuclear material samples, Heinonen stressed that the 
Agency is not in a position to rely on the NWAL for such analyses, 
in light of transportation and other pragmatic considerations. 
(Comment:  The facts that support this viewpoint should be examined 
and updated if it is found that NWAL labs could effectively and 
efficiently share part of the analysis and thereby reduce the risk 
of SAL being a single point of failure.  The risk would not change 
even when the laboratory is completely modernized if SAL continues 
to perform 99% of these analyses.  This is an ideal time to examine 
all old assumptions, because Safeguards is currently soliciting new 
labs to join or re-join the NWAL for nuclear materials analysis and 
developing more detailed requirements for the SAL of the future. 
End comment.) 
 
¶7.  (SBU) In response to a question from DCM, Heinonen said the 
consequence of inaction would be two-fold regarding SAL.  First, any 
delay would simply increase the cost, as it is not efficient to 
spend more money to keep the current SAL limping along in its 
current state.  Second, he noted that should the already 
deteriorating nuclear material laboratory at SAL fail in such a way 
that requires it to be out of service for some period, this would 
result in at least a temporary hiatus in the agency's ability to 
achieve its safeguards goals.  Addressing the consequences of a 
funding shortfall in respect to the Agency's legal obligations to 
monitor new facilities subject to safeguards agreements, in 
particular facilities in India and at Japan's JMOX facility, 
Heinonen asserted the IAEA cannot simply tell them "thanks, but no 
thanks."  Further commenting on consequences of further zero real 
growth, Heinonen said the department's IT-related efforts would be 
forced to continue to spend money "buying time" by keeping old 
systems in place before moving to new systems that will serve as the 
new platform for "information-driven" safeguards.  This would be 
inefficient and costs more in the end.  He noted, for example, that 
he had already been forced to cut away necessary training for 
inspectors on the new IT systems. 
- 
¶8.  (SBU) German, French, and Spanish representatives all queried 
Heinonen regarding the funding request for SAL, in particular. 
Prefacing his remarks by noting that the IAEA budget request is a 
"major problem" for Germany, but that Germany assigns "high 
political value" to the safeguards regime, the German DCM said the 
IAEA should seek more contributions from host-country Austria. 
Heinonen responded by explaining that, contrary to when it was 
founded, the Austrian Seibersdorf facility in which SAL is located 
no longer includes a vibrant nuclear research center.  Thus, the 
necessary infrastructure costs for handling nuclear material are not 
readily covered by existing Seibersdorf capabilities.  As to the 
suggestion that SAL be relocated to another country, Heinonen noted 
the costs associated with moving approximately 50 staff, and claimed 
one could have no long-term assurance that the economics of any move 
would be better than staying at nearby Seibersdorf. 
 
¶9.  (SBU) German DCM also noted that the Safeguards Department had 
not spent its entire 2008 budget allocation and posited it was 
therefore "hard to argue" for a budget increase.  Heinonen's retort 
began by an implied reference to the underlying imperative for 
strengthening the safeguards regime by recalling EC Commissioner 
Barroso's comment that you cannot "win tomorrow's war with 
yesterday's tools."  On the specific substance, Heinonen responded 
that funds went unexpended last year due to the fact that projects 
that had been budgeted for were delayed by the host state, such as 
at JMOX.  It would have been foolish and inefficient for the Agency, 
for example, to "buy equipment early and put it on a shelf" just to 
expend the funds in the same budget year.  The funds were still 
needed and this delay in expenditure in no way implied some sort of 
"cushion" in the safeguards budget; there is no such cushion, 
Heinonen asserted. 
 
¶10.  (SBU) DCM asked if staffing in the Safeguards Department was 
adequate to the task and how much staff growth the proposed budget 
would allow.  Heinonen said he was currently requesting 20 new 
safeguards slots.  He observed that the move toward strengthened and 
integrated safeguards (an approach that requires a state-level 
evaluation to help assure the absence of undeclared activities) 
requires an evolution in the work of inspectors.  Specifically, 
there is a relative decrease in traditional inspection activity, and 
a relative increase in the need for analysis of all available 
information on a state's nuclear program.  So, the Safeguards 
Department needs sufficient people, but also needs to keep evolving 
their skill set.  Looking to the future and as an example of the 
ongoing evolution in safeguards, Heinonen noted the possibility of 
"remote inspections" in which data from inspection equipment is 
accessed and analyzed in Vienna. 
 
¶11. (SBU) Alluding to ongoing activities in Iran, DCM asked Heinonen 
whether the department would have what it needs should another such 
issue emerge.  Noting that the exercise in Iran had been a larger 
resource drain when Iran was actually providing more information and 
access earlier in the investigation, Heinonen said there is "no 
cushion" in the safeguards budget and that he would have to go to 
the Board to ask for more funds if a new compliance issue arose. 
 
¶12. (SBU) Referring to two measures of safeguards effort displayed 
on viewgraphs used by Heinonen for his presentation, German DCM 
asked whether "person days of inspection" (PDI) or "calendar days in 
the field" (CDF) was the more accurate of the two measures. 
Heinonen said they are very similar, but there are differences 
between, for example, the CDF costs going to Canada vice going to 
Japan.  He also made a broader point by acknowledging that the 
Safeguards Department is not well positioned to do specific cost 
estimates in this regard and that SAGSI is looking at the issue.  He 
said he hopes once the AIPS project is finalized the department will 
have available the data it needs in a usable form.  For now, doing 
such cost analysis is "a manual job" and inefficient. 
 
¶13.  (SBU) Comment:  Heinonen ably described the imperative for more 
safeguards resources, but the reaction from Germany, in particular, 
(and France outside the meeting) shows that there is still much work 
to be done to persuade even our close friends that the time has come 
to put our money where our mouth is in support of the critically 
important IAEA safeguards mission.  Following the briefing, MsnOff 
engaged Frederic Claude, Safeguards Advisor for Heinonen, and Alicia 
Reynaud, Section Head for Safeguards Programme and Resources, on 
taking forward the budget debate.  One possibility for sharpening 
the IAEA's case would be to develop further the argument implied by 
Heinonen's recall of the Barroso quote about "yesterday's tools." 
At several points in the presentation Heinonen referred to the fact 
that key ongoing projects are to put in place the platform from 
which "information-driven" safeguards could operate.  Of the four 
categories identified by Heinonen into which ongoing projects fall, 
the last two (detect undeclared activities, manage/analyze large 
amounts of information) reflect the challenge of strengthened 
safeguards.  In order to place member states' consideration of the 
safeguards budget issue on a higher strategic plane, the Agency 
might further stress the resources it will need to ensure that new 
"information-driven" safeguards can provide the solid assurances the 
international community must have.  These assurances include not 
only the traditional safeguards function of accountancy for declared 
nuclear material, but also for the strengthened safeguards goal of 
providing assurances of the absence of undeclared activities.  The 
cases now before the IAEA Board of Governors (Iran, Syria, DPRK) 
underline the pivotal juncture the IAEA faces in that regard.  End 
Comment. 
 
SCHULTE