VZCZCXYZ0000
OO RUEHWEB

DE RUEHUNV #0221/01 1311507
ZNR UUUUU ZZH
O 111507Z MAY 09
FM USMISSION UNVIE VIENNA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9448
RHEBAAA/DOE WASHDC IMMEDIATE

UNCLAS UNVIE VIENNA 000221 
 
SENSITIVE 
SIPDIS 
 
IO/T, ISN/MNSA COCKERHAM, IO/UNP, ISN CTR CURRY; NA-243 
GOOREVICH; NA-241 SIEMON, O'CONNOR, LAMONTAGNE; AFTAC FOR 
CHARLES BRENNAN 
 
E.O. 12958: N/A 
TAGS: AORC KNNP IAEA ENRG TRGY
SUBJECT: IAEA/SAFEGUARDS/BUDGET: LEADING WITH OUR STRONG 
SUIT BY SECURING CONSENSUS FOR A NEW SAFEGUARDS ANALYTIC 
LABORATORY 
 
REF: A. UNVIE 00219 
     ¶B. SWINDLE-KESSLER EMAIL ON JULY WORKSHOP FORWARDED 
        TO SSTS 
     ¶C. MAY 5 PBC REPORT 
 
------- 
Summary 
------- 
 
¶1.  (SBU) DDG for Safeguards Olli Heinonen recently told 
MsnOff that he has been approached by "many Missions" to 
inquire about "stretching out" the funding for the requested 
upgrades to the Safeguards Analytical Laboratories (SAL), in 
particular replacement of the Nuclear Materials Laboratory 
(NML).  Heinonen expressed concern that delays in funding NML 
would result in additional costs related to short-term fixes 
to keep the facility operating, as well as 
repairing/replacing old and ailing equipment.  Heinonen 
believes, therefore, that delay of the NML project would end 
up costing the Agency and its Member States more money in the 
long run.  Heinonen also noted that the decision has largely 
been taken to move management of SAL into the Safeguards 
Department. 
 
¶2.  (SBU) Comment and Recommendation:  Heinonen expressed his 
concerns in advance of IAEA Boar of Governors Chair 
Feroukhi's May 8 informal meeing on the IAEA budget process, 
at which Feroukh asked the Secretariat to lay out a plan for 
phaing over two biennia the Agency's requested budget 
increase (see Ref A).  Although SAL funding was ot proposed 
for postponement, Heinonen is clearlyconcerned by the 
prospect of a delay.  In light f the fundamental importance 
to the safeguards rgime of a viable NML sample analysis 
capability,Mission recommends we enhance engagement with key 
Board Members, in Vienna and in capitals, to secur firm 
consensus that replacement of the NML is anecessity and use 
that as part of our argument fr moving beyond zero real 
growth.  Mission beliees achieving consensus that the Agency 
must havea viable replacement option is achievable. 
 
¶3.  (BU) Based on technical input regarding the likely est 
scenario timeline for the NML project from aU.S. consultant 
assisting the IAEA on SAL enhancment, we recommend 
Washington consider a possibl two-step endgame on SAL.  The 
first step is to esure sufficient regular budget funds (the 
IAEA Scretariat's proposed 9.325 million Euros in 2010) re 
included in the pending 2010/2011 budget for arrying the NML 
project forward through design t the construction phase, a 
process that the consutant estimates would take until at 
least spring 011.  The second step -- securing funds for 
consruction -- could then take place during negotiatio of 
the next budget biennium and would be conduced on a stronger 
footing, given the existence the of a detailed design for 
the NML, better cost etimates, etc.  This approach could 
create negotiting space for other safeguards priorities in 
th broader ongoing budget debate, because it would, n 
effect, remove approximately 21 million euros, urrently 
proposed by the Secretariat for 2011, fom the current 
biennium budget proposal.  Indeed the lack of a detailed 
project plan and cost esimate makes it difficult to justify 
the higher fgure at this time.  And, according to the 
estimatd timeline for the full design phase, it would not 
result in the delay feared by Heinonen so long a 
construction funds are secured (whether regularor 
extrabudgetary) by summer 2011 for the next (012/2013) 
budget biennium.  Some member states ar also exploring 
creative financing mechanisms for SAL, including the proposal 
by the External Auditor to allow the Agency to borrow from 
the Technical Cooperation Fund.  Mission will keep Washington 
informed as this or other funding concepts take shape.  End 
summary, recommendation and comment. 
 
------------------------------- 
"Band-Aid" Fixes More Expensive 
In the Long Run 
------------------------------- 
 
¶4.  (SBU) Heinonen told MsnOff on May 7 that he has been 
approached by "many Missions" to inquire about "stretching 
out" the funding for the requested upgrades to the Safeguards 
Analytical Laboratories.  Heinonen said that if the 
replacement of the NML is delayed, it will mean that "hard 
decisions" will have to be made about how much more money 
will have to be spent in the interim to keep the current 
laboratory "hobbling" along, including security and 
ventilation upgrades and other renovations.  The current 
 
facility cannot be relied upon, especially in light of needed 
ventilation and security upgrades, and there is no viable 
plan at the moment for using the IAEA's Network of Analytic 
Laboratories (NWAL) to replace the NML should it fail before 
a replacement is built.  (Comment: The U.S. consultant 
assisting the IAEA on ECAS planning, Dave Swindle, has 
underlined to both Mission and Heinonen that the Secretariat 
has no backup plan for how to continue necessary safeguards 
work should the NML fail.)  Heinonen said the Secretariat 
could, if member states demanded, again revisit the options 
for where to put the NML or the issue of renovation versus 
replacement.  However, he did not believe renovation would be 
the cost-effective alternative in the long run, nor that 
continued delays for revisiting options would be 
cost-effective.  He said he had discussed the issue with DG 
ElBaradei and DDG for Management Waller, who both agreed that 
"band-aid" fixes would cost more in the end.  Speaking with 
Charge on May 11, Waller reported a conversation earlier that 
day with the Austrian Research Center Director who indicated 
active attention to the long-running issue of host nation 
support. 
 
¶5.  (SBU) Heinonen stressed again the risk of delay given the 
growing risk that the current NML could go out of service and 
thereby bring safeguards implementation to a virtual, albeit 
temporary, halt.  The lab's aging ventilation system is a 
particular concern.  (Note: At a briefing to "Friends of SAL" 
in March, lab officials noted how an accident with a stored 
plutonium reference sample had caused the shut down of the 
facility that had analyzed radioactive swipe samples, which 
are typically taken inside hot cells.)  Heinonen made the 
point that member states that have pledged to help analyze 
samples through the NWAL so far have not done so, nor have 
they agreed to fund SAL.  Member states must do one or the 
other, he argued.  (Note: Unlike the NWAL for environmental 
samples, which handles a significant fraction of bulk swipe 
samples and most particle samples, all analysis of bulk 
nuclear material samples is conducted at SAL's NML.  Even if 
new NWAL facilities come online for nuclear material 
analysis, medium-term projections are that they would only 
handle a small percentage of all samples necessary for 
routine implementation of safeguards.) 
 
-------------------------- 
New Division in Safeguards 
-------------------------- 
 
¶6.  (SBU) Heinonen also updated MsnOff regarding the future 
of SAL management.  Although an internal review as to the 
specifics is continuing, he said the DG has already endorsed 
moving SAL to the Department of Safeguards (its "management" 
currently sits under the Department for Nuclear Sciences and 
Applications).  According to Heinonen, Gabriele Voigt 
(currently the Director of Seibersdorf Laboratories, of which 
SAL is a part) will be the initial director of a new analytic 
division of the Safeguards Department, at least for a 
transitional period, while the IAEA advertises the position 
in hopes of getting a "real expert."  (Comment: 
Administrative details of the move are still not complete, 
and the plan will still require formal approval by the DG, 
but Heinonen has clearly wired the outcome here to bring SAL 
to the Safeguards Department.  We understand that proposals 
to place SAL under the current Divisions of Technical Support 
and Information Management were considered and rejected.  The 
move will facilitate the communication, management, and 
efficiency of SAL, as it will be directly linked to its 
customer - the Department of Safeguards.  End Comment.) 
 
------------- 
July Workshop 
------------- 
 
¶7.  (SBU) U.S. Support Program (USSP)-funded consultant David 
Swindle has been advising the IAEA on its planning for the 
project "Enhancing Capabilities of the Safeguards Analytical 
Services" (ECAS), to which the lab upgrade is central.  This 
consultancy includes both planning for the NML replacement 
and selecting contractors for the near-term project on the 
Clean Lab Extension (CLE), which aims to enable better 
environmental sample analysis and is separate from the NML, 
and which will be paid for with 2008-2009 regular budget 
funds freed up by delays in other major safeguards projects 
(JMOX and Chernobyl).  On the NML replacement, Swindle has 
proposed, and Heinonen has agreed, that the Agency host a 
workshop in late July for IAEA Member States that may be 
interested in supporting SAL (Ref B).  According to the 
 
current draft scope of the July meeting, the stated 
objectives are (1) for the Agency to present plans for the 
management of sample analytical services (i.e. the new 
Division in Safeguards), (2) for the Agency to present the 
alternatives it considered and its preferred approach for 
meeting long-term (through 2035) infrastructure needs, (3) to 
discuss possible future SAL missions, and (4) to discuss 
possible financial support by Member States for SAL.  In 
consultation with Mission, Swindle envisions the last segment 
of the meeting to be an opportunity to discuss any necessary 
process for coordinating/securing donors willing to consider 
pledges of extrabudgetary funding.  Another political 
objective of the meeting would be to overcome earlier 
perceptions that the Secretatiat's machinations on SAL were 
not sufficiently transparent, comprehensive, and 
well-reasoned. 
 
------------------------------ 
Linkage to Budget Negotiations 
------------------------------ 
 
¶8.  (SBU) In the April 27-29 meeting of the Program and 
Budget Committee (Ref C), many Board Members expressed 
support for SAL and the need for the Agency to maintain an 
independent analytical capability.  Particularly noteworthy 
were statements by the G-77/China and GRULAC, who were 
otherwise unreceptive to WEOG priorities in safeguards and 
security.  This suggests the opportunity for a quid pro quo 
where we might obtain an increase for SAL in exchange for 
increases in promotional activities of interest to the 
G-77/China.  However, this does not necessarily match the 
full range of U.S. priorities, which include the need to 
incorporate management of Nuclear Security into the regular 
budget, meet expanding safeguards operational needs, and 
support the transition to an "information-driven" safeguards 
culture.  DDG Waller has suggested privately that a U.S. 
offer of extrabudgetary funding for the Agency's capital 
investment projects, including SAL, "could significantly 
improve the negotiating environment."  Mission sees merit in 
Waller's approach, and recommends consideration of the United 
States making such an offer later in this summer's budget 
negotiations, perhaps pursuant to a possible two-step 
solution referred to above in paragraph 3. 
 
 
PYATT