VZCZCXYZ0000
PP RUEHWEB

DE RUEHUNV #0301/01 1751455
ZNR UUUUU ZZH
P 241455Z JUN 09
FM USMISSION UNVIE VIENNA
TO RUEHC/SECSTATE WASHDC PRIORITY 9726
RHMCSUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEANFA/NRC WASHDC PRIORITY
INFO RUEHII/VIENNA IAEA POSTS COLLECTIVE PRIORITY
RUEHTA/AMEMBASSY ASTANA 0167
RUEHUL/AMEMBASSY SEOUL 0385
RUEHNY/AMEMBASSY OSLO 0183
RUEHAM/AMEMBASSY AMMAN 0097
RUEHVI/AMEMBASSY VIENNA 1434
RUEHSM/AMEMBASSY STOCKHOLM 0249
RUEHNE/AMEMBASSY NEW DELHI 0330

UNCLAS UNVIE VIENNA 000301 
 
SENSITIVE 
SIPDIS 
 
STATE FOR T, IO/T, ISN/NESS, ISN/MNSA 
DOE FOR NA-243-GOOREVICH; 
NRC FOR JSCHWARTZMAN, MDOANE 
 
E.O. 12958: N/A 
TAGS: AORC KNNP IAEA ENRG TRGY RU IN GR
SUBJECT: IAEA JUNE BOARD: MOVES FUEL BANKS FORWARD 
 
------- 
SUMMARY 
------- 
 
¶1. (SBU) In its debut as formal item on the IAEA Board of Governors 
agenda, the issue of nuclear fuel assurances concluded with the IAEA 
Secretariat empowered to continue developing select proposals and 
with the way cleared for continued Board discussions and eventual 
Board action.  For the first time, the G-77 statement went beyond 
rhetoric to raise specific concerns that need to be addressed and 
specific changes it thought should be made in the proposals.  A 
number of G-77 countries expressed interest in the concept of fuel 
assurances - and more would have done so if necessary to preserve 
the topic for future agendas.  While the Board did not take the 
recommended decisions on either the Director General's proposal for 
an IAEA Fuel Bank or the proposal for a Russian Fuel Reserve, the 
Chair's Conclusion provided a clear mandate for work and 
consultations to continue in order to articulate views and to 
address and allay concerns.  Despite repeated UNVIE and Russian 
discussions with the Indian Mission regarding their eligibility 
concerns, the Indian Ambassador played a particularly unhelpful role 
in the debate. And while some press fell for Iran's immediate spin 
(a defeat for the West at the hands of the G-77), U.S. delegation 
believes time will show that the outcome at this Board laid the 
groundwork for long-term success on fuel assurances. 
 
¶2. (SBU) Mission intends to approach the Secretariat to discuss the 
best format for follow-up discussions between potential recipients, 
supplier states and the Secretariat. Mission will push for 
Secretariat leadership on the issue in hopes of keeping momentum 
generated by the June Board discussions and the Board Chair's 
intention to sustain a dialog.  Mission will continue to seek 
opportunities to galvanize support for discussion and further 
development of concepts in the run-up to the September Board. 
However, not all are happy with the Board debate.  A subsequent 
conversation with the German Charge Guido Kemerling revealed extreme 
German unhappiness with the debate.  Kemerling said the German Perm 
Mission reported to Berlin that assured supply is dead for at least 
a year.  This assessment also reflects the views of the German Perm 
Rep who said he was deeply unhappy with how the board chair 
characterized (and downplayed in his view) the German Multilateral 
Enrichment Sanctuary Project (MESP) paper. 
 
 
--------- 
PROPOSALS 
--------- 
 
¶3. (U) The Board had for its consideration three proposals.  The 
first was a "Proposal for the Establishment of an IAEA Low Enriched 
Uranium (LEU) Bank" arising from the Nuclear Threat Initiative (NTI) 
challenge grant of USD 50 million.  The Board was asked to take note 
of the report on the proposal and to request the Director General to 
bring for its consideration a detailed proposal for the 
establishment of an IAEA LEU fuel bank for assurance of supply.  The 
second was a "Russian Federation Initiative to Establish a Reserve 
of Low Enriched Uranium (LEU) for the Supply of LEU to the IAEA for 
its Member States."  The Board was asked to take note of the Russian 
proposal and request the Director General to bring for its 
consideration the draft of an agreement that could be concluded 
between the Russian Federation and the IAEA for the supply of LEU to 
the IAEA and of a model agreement that could be concluded between 
the IAEA and a Member State.  The third was a proposal by Germany 
for "Establishing an Independent Access to Nuclear Fuel Supply 
Services: The Multilateral Enrichment Sanctuary Project (MESP).  The 
Board was asked to take note of the proposal. 
 
----------------- 
PRE-BOARD CHATTER 
----------------- 
 
¶4. (SBU) A considerable amount of uncertainty accompanied the 
discussions in the margins prior to Board debate.  Statements of 
support from various G-77 countries made in capitals in response to 
Washington's demarches seemed to be melting away under pressure from 
G-77 hardliners (thought to include Argentina, Brazil, Cuba, Egypt 
and India).  Earlier assurances from G-77 leaders that their 
statement would not block progress seemed to be coming unglued. 
There was considerable uncertainty about just what the G-77 would 
say, even among G-77 members.  And overlaid on all this was the 
uncertainty about whether or not the U.S., Germany and Russia would 
issue a Joint Statement, particularly in view of the Mission 
recommendation that it would be counterproductive to our desire to 
get the Board to focus on the two concrete fuel bank proposals. 
 
¶5. (SBU) Confusion and concern ebbed somewhat after a meeting with 
the Board chair on Tuesday in which she revealed her intention to 
pursue a conclusion modeled after the one from the March Board - no 
decision but continue work - and the Secretariat indicated that it 
could accept such a decision as a mandate for continued efforts. 
When a draft of the G-77 statement surfaced, it became clear that in 
addition to a repeat of earlier rhetoric there was a substantial 
amount of substantive comment, indicating that the G-77 was now 
willing to engage in a debate on the issues and not just put off a 
decision.  And following Russian reluctance to participate, the idea 
of a three party statement dissolved. G-77 Ambassadors urged us to 
capitalize on the opportunity their statement presented to at last 
begin a substantive conversation on the fuel assurance concept. 
 
------------------- 
G-77 LEADS IN BOARD 
------------------- 
 
¶6.  (U)  Argentina led off the debate speaking for the G-77 and NAM. 
 In a break from usual practice, China assured us they would not 
associate with the statement.  The statement reiterated most of the 
same points made in March and previous boards: the need for caution 
while addressing thoroughly the associated technical legal and 
economic aspects as well as the underlying political dimensions; any 
proposal must be in full accordance with the Statute; concerns about 
nuclear proliferation must not restrict the rights of States; and 
rejection of the notion that the pursuit of any technology should be 
discouraged because of alleged sensitivity. 
 
¶7. (U) While stating the view that "no decision or recommendation 
can be made regarding the issue at this stage" the G-77 statement 
went on to provide some preliminary ideas and concerns about the 
proposals.  This was the first evidence of G-77 engagement and 
willingness to discuss the issues rather than postpone discussion as 
premature. 
 
¶8. (U) One important point was the view that none of the proposals 
provided a proper assurance of supply of nuclear fuel, dealing only 
with low enriched uranium.  Recipient states' need for a guaranteed 
supply of fuel assemblies and fabrication was not addressed by the 
proposal.  The G-77 also expressed its view that it was important to 
address the supply of natural uranium, both from the point of view 
of ensuring fuel for the reactors that use natural uranium fuel but 
also to address the perception that the real aim of the proposal was 
to restrict and discourage States from developing or expanding 
national enrichment capabilities rather than providing a viable 
assurance of supply.  The Group also expressed concerns about the 
reliability of the triggering mechanism, both from the point of view 
of the supplier misrepresenting the nature of the disruption and of 
the supplier seeking to block triggering of the mechanism within the 
Agency.  The Group also expressed skepticism about the financial 
neutrality of the proposals and also about diverting high-level 
attention from other important activities.  The G-77 also objected 
to the eligibility criteria conditioning access to the fuel to 
Member States "with respect to which...no specific report relating 
to safeguards implementation...is under consideration by the Board 
of Governors." 
 
¶9. (U) With regard to the Fuel Bank proposal, the Group concluded 
that the document did not present a coherent and comprehensive 
conceptual framework that can form the basis of a more detailed 
proposal to be brought to the Board.  It also stated that in light 
of existing policies on accepting voluntary contributions it was 
premature to authorize the Agency to accept any financial pledges 
directed to finance the proposed LEU bank.  The Group also expressed 
the view that it did not consider that the document on the Fuel 
Reserve proposal contained a comprehensive framework that can form 
the basis for developing draft model agreements.  As to the German 
proposal, the Group expressed the view that an international 
organization such as the IAEA should not administer a commercial 
company for the supply of nuclear fuel or enrichment services. 
Finally, the Group recommended that any decision regarding the 
implementation of the fuel assurance proposals be taken by consensus 
by the General Conference. 
 
--------------- 
THE DG RESPONDS 
--------------- 
 
¶10. (U) Following the conclusion of the G-77 Statement, Director 
General El Baradei took the unusual step of requesting the floor to 
respond (one of four long rebuttal statements the DG made during the 
course of the June Board meeting).  He emphasized that proposals for 
fuel supply were under discussion for 60 years and were firmly 
rooted in the Statute, which had envisioned all supply as coming 
through the Agency. The issue was whether States believed assurance 
of fuel supply was needed, citing the cutoff of Iran in 1979 
following the Revolution as the sort of situation that might require 
it.  The Director General went on to say that he agreed with almost 
all of what the G-77 said.  He reiterated that the proposal will not 
touch rights - the right to develop the fuel cycle, the right to 
conduct research and development or the right to transfer 
technology. 
 
¶11. (U) The DG went on to agree that a supply of LEU was not 
sufficient and that this is recognized in the Fuel Bank proposal in 
a footnote.  The Agency needs to work on how to deal with the 
question of providing fuel assemblies.  He also admitted that the 
G-77 had a good point about needing to look at fuel for natural 
uranium fueled reactors as well.  ElBaradei defended the criteria 
for the Fuel Bank as being consistent with the Statute, noting that 
Russia applied other limits.  He stated that he hoped other 
proposals would come forward to ensure that nobody got penalized. 
He also stated that the triggering mechanism would be managed by the 
DG and that he hoped his successor would not accede to pressure in 
how/when it would be applied. 
 
¶12. (U) ElBaradei made a number of comments about financial 
implications.  He noted that Russia would fully finance the Fuel 
Reserve proposal.  He said that he was hopeful of getting the NTI 
money, but confirmed that he would not accept a contribution until 
the project was approved by the Board.  He also mentioned trying to 
get the fuel bank in the regular budget.  He then indicated that he 
expected it to be self-financing, even suggesting that the Agency 
might attach a surcharge to benefit Technical Cooperation. 
 
¶13. (U) The DG emphasized the preliminary nature of the proposals, 
his desire for transparency in further development and his welcoming 
of additional thoughts and proposals.  While mentioning the 
authority of the Board to adopt proposals, he first acknowledged 
that Board Members might want to send it to the General Conference 
and seemed to agree with this approach. 
 
--------------------- 
SUPPORT FROM THE WEST 
--------------------- 
 
¶14. (U) The statement by the G-77 and NAM and the DG's rebuttal was 
followed by a supportive statement from the European Union.  The 
statement noted that a number of EU members had brought forth 
proposals and the EU's 25 million euro contribution to the fuel 
bank.  The EU also emphasized the nonproliferation benefits of fuel 
assurances, while emphasizing that the rights of states would remain 
undiminished.  The EU statement recognized the Russian proposal and 
stated that it looks forward to hearing more about the initiative 
from the Secretariat, but did not explicitly endorse the recommended 
action.  The EU supported taking note of the German proposal and 
stated that it was ready to further consider the potential framework 
for pursuing the suggested multinational enrichment sanctuary. 
 
¶15. (U)  Russia followed with a statement describing its own 
proposal in detail.  While describing the broad range of countries 
that would be eligible, it also stated its criteria for full scope 
safeguards and peaceful uses and security guarantees required by 
Russian law.  Russia also emphasized the financial aspects of its 
proposal, in particular that it would not cost the IAEA anything. 
Russia concluded by supporting the recommended action for its own 
proposal. 
¶16.  (U)  Germany followed with a national statement in which it 
described, at some length, its multinational enrichment sanctuary 
project and how it saw this project as addressing concerns about 
rights, the need to control sensitive technology, the absolute 
assurance of supply provided by plant ownership, the absence of 
interference in the market, and the question of consistency with the 
Statute.  Germany concluded by stating that it was not seeking an 
endorsement of its proposal, but an offer to be taken note of. 
 
¶17. Following an intervention from Egypt (more below), the United 
States delivered its strongly supportive statement (reprinted below) 
with a note of thanks to the G-77 for identifying several issues for 
discussion.  The United Stated supported the recommendations on both 
the Fuel Bank Proposal and the Fuel Reserve proposal.  It noted its 
own unilateral action to create a fuel reserve by downblending high 
enriched uranium.  The U.S. statement recognized the need for any 
proposal to reflect the rights of suppliers to supply in conformity 
with its laws and noted provisions in the Russian proposal 
reflecting that. 
 
¶18. (U) Canada later endorsed the recommended actions for all three 
proposals, but also raised some issues it felt needed further 
elaboration.  It asked for a clearer estimate of resource 
implications for the Agency and how these would be covered.  It 
noted that while one state had volunteered to host the fuel bank, 
there was no process yet identified to address this question. 
Canada also felt that the eligibility criteria and the type of 
safeguards agreement required were neither clear nor consistent with 
respect to the Russian and Agency proposals.  It also pointed out 
the need to clarify what other nonproliferation obligations might 
attach to the LEU and that the liability requirements differed 
between the proposals. 
 
¶19. (U) Switzerland took note of all three proposals and articulated 
aspects that it found attractive in each.  It expressed satisfaction 
that none questioned the rights of States, and said that the 
mechanisms should deal with disruptions to the supply of the initial 
core, as well as to reload fuel.  Switzerland also expressed concern 
that supply of LEU was not enough if a country could not fabricate 
the fuel.  Switzerland also wanted the DG to provide more 
information on the consequences on the human and financial resources 
of the Agency. 
 
¶20.  (U) Japan supported the recommended actions on all three 
proposals.  It also raised some points it thought should be 
clarified.  With respect to the Fuel bank, Japan identified legal 
and financial conditions and liability as areas that required a 
careful look.  It also thought particularly important the questions 
of which country would host the bank, how it would be managed, and 
the scope of the host's and Agency's legal and financial 
responsibilities.   Japan regarded the Russian proposal to be the 
most mature and, since it is based on existing facilities and LEU 
reserves, a good basis for constructive discussions at Board 
meetings to determine how the mechanism would work and to identify 
the issues to be further addresses and clarified.  Japan also took 
note of its own proposal "IAEA Standby Arrangements System for the 
Assurance of Nuclear Fuel Supply" and promised to further elaborate 
it based on discussions held at the Board meeting, with feedback to 
the Board in due course. 
 
¶21.  (U) In another strongly supportive statement, the UK noted the 
complementarity of the three proposals before the Board.  It took 
note of the March 2009 London conference on the International 
Nuclear Fuel Cycle as a valuable forum for discussion of fuel 
assurances.  It also recalled its own Nuclear Fuel Assurance 
(formerly known as the Enrichment Bond) and confirmed the UK 
intention to bring forward proposals for consideration by the Board 
at its next meeting. 
 
-------------------------- 
The G-77 Speaks: Parts are 
More than the Whole 
-------------------------- 
 
¶22. (U) Thirteen G-77 Board members gave national statements in 
addition to associating themselves with the G-77 Statement.  Most 
expressed at least some support for continuing work.  Only Uruguay's 
statement reaffirming the right of countries to use nuclear energy 
in compliance with the provisions of the NPT had nothing to add. 
 
¶23. (U) Egypt thanked the DG for his ideas and indicated that they 
would contribute to rapprochement within the Board.  He noted that 
the DGs explanation confirmed the need for earlier consultations 
(which Egypt had previously opposed).  Egypt's major concern is that 
only the Russian proposal makes the NPT a criteria of supply.  This 
devalues the NPT.  Egypt believes that proposals to provide fuel to 
non-NPT parties violated the resolutions of the 1995 NPT Review 
Conference.   IN a back and forth with the Board Chair, Russia then 
clarified that it did not consider NPT a condition of supply under 
its proposal leading the Egyptian Ambassador to remark that in that 
case Egypt disagrees with Russia also.  (COMMENT: The Russian 
proposal does not actually say that NPT adherence is a supply 
criteria.  Russia believes that its criteria, an agreement between a 
non-nuclear-weapon State and the IAEA requiring safeguards on all 
peaceful nuclear activities, would allow supply to India, although 
India was not reassured.  However, what is clear is that the Russian 
proposal would not allow supply to Israel (or Pakistan) which is its 
most important consideration. END COMMENT) 
 
¶24. (U) Malaysia stated that it was ready to engage in discussions 
of proposals for nuclear fuel assurances with a view to addressing 
the technical, legal, financial and political aspects of the issue. 
It noted that none of the proposals offered the transfer of fuel 
cycle technology and stated that it would welcome proposals that 
did. 
 
¶25. (U) The major Brazilian concern was the ability to achieve a 
credible mechanism for assurance of supply of nuclear fuel without 
interfering with the international market.  Brazil had inquired 
about situations when a State would actually benefit from these fuel 
banks/reserves.  It made sense to have a reserve that a country 
could draw from if there was a fire or the supplier went bankrupt. 
But Brazil said it was told (it was not stated by whom) that the 
assurances would not apply here.  Supply could only take place where 
the cutoff was for political conditions, and then only if other 
suppliers were unable to supply.  It seemed that the only way for a 
country to benefit from the reserve was to behave in such a way as 
to cause all suppliers to adopt formal or informal sanctions against 
it.  And if the country lacks its own fuel fabrication plant, the 
LEU it gets will be of no avail.  The argument that fuel assurances 
enhanced nonproliferation by discouraging the development of an 
enrichment capability was not relevant if a country could not 
benefit from the assurance.  He also noted that there had not been a 
single case of diversion from a safeguarded enrichment facility. 
While Brazil was willing to be constructive, a mechanism to benefit 
states without interfering with the market was needed. 
 
¶26. (U) Mexico expressed direct support for fuel assurance 
activities and considered the three proposals complementary.  Mexico 
believed that the proposals made allowance for points it considered 
important - universal participation, ensure access under 
nonproliferation standards, not hampering research and development - 
but that there were still questions and it looked forward to more 
discussions.  It felt that it was important for the IAEA to be 
involved in proposals. 
 
¶27. (U) The Philippines started by associating itself with the G-77 
and NAM statement, but then proceeded with a strongly supportive 
statement with a number of substantive issues it thought needed to 
be addressed.  It explicitly stated its support for a multilateral 
approach to the nuclear fuel cycle with the IAEA having a central 
role.  It stated the view that the DGs proposal was a step in this 
direction and that the Russian proposal complemented it.  It 
explicitly supported further consultations to help clarify issues. 
It noted that "the points raised today should be taken into account 
in the detailed proposal that the Director General will prepare" 
which was an explicit recognition that the process was moving 
forward.  It identified a number of areas for further work: 
long-term financing for the Fuel Bank that reflects its voluntary 
and optional nature and ensures economic sustainability and 
commercial competitiveness; triggering conditions; the undertakings 
of States that would participate; process and modalities of 
selection of a host state, the form and content of legal 
instruments; any needed institutional arrangements at the State and 
international levels; and ways of securing the physical security of 
multilateral facilities.  It also wished to ensure that the 
resulting mechanism should lead to equal access to fuel and not lead 
to monopolistic control by a State or group of States over nuclear 
fuel supply. 
 
¶28.  (U)  In its national statement, Argentina indicated that it 
rejected the notion that parts of the fuel cycle were sensitive, 
that it should be possible for a country to be both a supplier and 
recipient and that it questioned the term "current market prices." 
In looking at the DGs proposal, it did not find sufficient clarity 
on liability and responsibility for the fuel, safeguards, physical 
protection, third party shipments, the rights of States, and the 
role of the Board in authorizing supply.  Argentina also had 
questions about shipment standards and transit conditions for the 
Russian proposal.  On the German proposal, Argentina explicitly 
stated that it did not share the view of the risk of proliferation. 
 
It also stated that it was not clear how the company might establish 
and maintain a buffer stock available to the DG to cover an 
interruption of supply. 
 
¶29. (U) Among the G-77 States, Cuba took a national position most 
closely mirroring the group position.  But in calling for a full 
study of the costs and benefits of the proposals, it acknowledged 
the superiority of the Russian proposal in accounting for all costs, 
and it seemed to prefer the Russian proposal generally.  Cuba also 
wanted the proposals to promote fuel fabrication technology. 
 
¶30. (U) Iraq thanked the DG for his proposal and explanations and 
his efforts to find options.  It felt the proposals met needs 
without compromising rights.  It stated that establishing fuel 
assurance programs will help States hasten the development of 
nuclear power programs with confidence that they can obtain fuel and 
such assurances enhanced the NPT regime. 
 
¶31. (U) In a surprisingly positive statement, South Africa thanked 
the DG and Secretariat for its thought-provoking proposal and 
welcomed the proposals of other States.  It noted that credible 
mechanisms for reliable supply of nuclear fuel should involve the 
IAEA and welcomed further discussion.  It welcomed the move away 
from giving up rights and fully supported the statement by President 
Obama (quoted by the U.S. delegation) on maintaining rights.  South 
Africa stated that States should have reliable supply at reasonable 
cost and that the IAEA had the obligation to assist underdeveloped 
states.  South Africa acknowledged that the availability of supply 
may convince States not to pursue enrichment but should not impose 
unwarranted restrictions and must respect the rights of States. 
 
¶32.  (U)  Ghana's statement almost repudiated the G-77 statement in 
key respects.  It never mentioned associating itself with that 
statement, only expressed appreciation for the DGs clarifications. 
It recognized fuel assurances as an alternative to expansion of 
enrichment and reprocessing.  It stated that it had no intention to 
be involved in enrichment and reprocessing and found it useful to 
have a fuel bank.  Ghana observed that the proposals did not deal 
with the return of spent fuel or the supply of uranium hexafluoride 
to Member States to fabricate fuel (a confusing observation since 
that is exactly what is supplied).  Ghana stated that the proposals 
could benefit from further discussion. 
 
--------------- 
CHINA AND INDIA 
--------------- 
 
¶33. (SBU) China and India were noteworthy in this discussion for 
different, and opposite, reasons.  China did not associate itself 
with the statement of the G-77 and the NAM, which is highly unusual 
and usually only occurs when it is protecting its political/nuclear 
weapons State status.  China encouraged the Board of Governors to 
seriously discuss the issue of assurances of supply.  It expressed 
the hope that the establishment of the relevant mechanism will help 
promote the peaceful use of nuclear energy and effectively prevent 
nuclear proliferation.  It also took note of relevant concerns. 
China stated its view that in establishing a fuel assurance 
mechanism, it was necessary to appropriately deal with the 
relationship between non-proliferation and peaceful use of nuclear 
energy to make sure that it is handled equitably, free from 
discrimination and respecting countries' rights to make their own 
decisions in line with their own conditions.  It expressed the hope 
that by incorporating different views, the DG and the relevant 
countries will submit better proposals in order for the Board to 
seek a specific solution that can be universally accepted. 
(COMMENT: Throughout the week, it was unclear just how China was 
going to come down on this issue.  While reaffirming its willingness 
to enter into an open and constructive exchange of views, it also 
seemed to be huddling frequently with G-77 and NAM members.   U.S. 
Delegations speculates, based on an examination of the Chinese 
statement and the text of the G-77 statement, that the split between 
them was due to China's willingness to accept that there was a 
nonproliferation issue associated with sensitive technologies and 
that fuel assurances, properly constructed, could be part of a 
solution. END COMMENT) 
 
¶34. (U) India, on the other hand, wanted to step back from any 
specific proposals and discuss a more general "consensus on certain 
basic principles and norms."  It suggested that an understanding 
might be reached that: recognized the inalienable right of all 
Member States to develop all aspects of nuclear technology and that 
nothing in any proposal would ever be construed as a restriction on 
the sovereign right to develop and run national fuel cycle 
capabilities; reaffirmed that all Member States with relevant fuel 
cycle capabilities would have the right to participate in all 
proposals as a supplier; and clarified that no elements would be 
introduced that discriminated between Member States or brought in 
extraneous conditions not in the Statute.  It closed by reiterating 
the need for a cautious approach. 
 
----------------------- 
Rule 50 - More Positive 
than Negative 
----------------------- 
 
¶35. (U) Kazakhstan, in a long statement supporting both the DGs 
proposal and the Russian proposal and calling the German proposal 
"interesting and deserving attention" called attention to the 
declaration of the Head of State of Kazakhstan that in case of an 
establishment of an IAEA nuclear fuel bank, Kazakhstan could 
consider hosting it on its territory.  The Republic of Korea stated 
that the time was ripe for a fuel bank and that it supported the 
recommended action.  It also expressed its hope for more discussion 
of the back end of the fuel cycle.  Norway expressed its support for 
all recommended actions and noted its contribution to the Fuel Bank. 
 Jordan stated its commitment to launching a nuclear power program 
and believed it was appropriate to engage in discussions on fuel 
assurance proposals. 
 
¶36.  (U) Austria, while restating its own views against nuclear 
power, also indicated its understanding of others' desire for it and 
recognized the need to obtain nuclear fuel in an assured and 
predictable manner.  It recalled its own proposal entitled 
"Multilateralisation of the Nuclear Fuel Cycle: Increasing 
Transparency and Sustainable Security, which it proceeded to 
describe.  Key features include establishment of  a new IAEA 
information system that would provide a fully comprehensive picture 
of the global nuclear industry, including each States capabilities, 
activities, and national and trans-national transactions at each 
stage of the fuel cycle; the IAEA gradually assuming the role of 
virtual broker for all transactions involving nuclear materials and 
fuel cycle services; and finally transformation existing fuel cycle 
facilities into new forms of regional and multilateral ownership. 
 
¶37. (U) Libya was less positive, noting that the DGs proposals 
needed more clarification in a manner that is open and transparent 
and that more discussion and further consultations were needed. 
Libya also stated that assurance of supply was needed for supply of 
nuclear items. 
 
¶38. (U) Iran provided the most negative speech of the day.  It 
pointed out that the issue had been discussed for the last 30 years 
but that there was still an absence of trust.  It was of the view 
that any multilateral proposal for fuel assurances will impinge on 
states' rights.  Iran felt it was premature to consider the subject 
until the question of rights was answered.  It also stated that any 
criteria beyond the Statute was bound to fail, noting the failure of 
the Committee on Assurance of Supply.  Iran also supported the need 
for any decision to be taken by the General Conference.  Iran closed 
by noting that any donations and financial assistance has 
consequences, implying that those giving the money will want 
something from the Agency in return. 
 
------------------- 
CHAIR'S CONCLUSIONS 
------------------- 
 
¶39. (SBU) The Chair proposed a lengthy summing up, ending with the 
sense that the Board may continue with its consultations and 
discussions on the proposals by the Director General and the Russian 
Federation, and the Secretariat will assist in further elaborating a 
conceptual framework that could form the basis for developing 
detailed proposals that would adequately address the views and 
concerns of Member States.  The only placard raised was India, which 
made multiple interventions.  India said complained that the Chair 
appeared to be approving the recommendation even though delegations 
had said they were, "not in a position to approve."  The Indian 
Ambassador added that there must be more consultation before 
proceeding, to which the Chair replied by re-reading the final 
summary paragraph.  India reiterated that the findings were "not in 
accordance" with the sentiment India had observed. The Chair 
acknowledged that member states had called for review of the 
concept's political, legal, technical, financial, and strategic 
implications, and that she thought the summary captured those 
concerns well. India for a third time intervened to say they did 
not, and that it "was not ready to proceed on the recommended 
action," a sentiment which it thought many member states shared. The 
Chair reiterated that her findings did not urge the Director General 
to produce a detailed report on the concept.  Rather, the findings 
took note of issues the Secretariat must clarify.  India protested 
once more, and the Chair asked India to propose alternative 
language, at which point, meeting with silence from India, the Chair 
called on Argentina.  Argentina noted that it did not want any 
specific action taken on the proposals the Board considered, but 
reiterated its openness to "all kinds of further proposals and 
negotiations." The Chair repeated that the Chair's findings did not 
require action on the assurance of supply proposals.  Germany 
intervened to note its dissatisfaction with the summary, which it 
felt did not properly mention its MESP and had a lengthy exchange 
with the chair which did not result in any change to the conclusion. 
 Iran intervened to note that the core issue of the summary's 
concluding language was that it called for "discussion," not 
"consultation," and that if the Chair replaced the former with the 
latter in her summary, the problem would be solved.  (Comment:  The 
clear intent of the Iranian intervention was that eliminating the 
reference to discussions in the Board would keep the issue off the 
agenda.)  The Chair read the revised concluding language, replacing 
discussions with "informal discussions." India relented.  However, 
the UK objected to this change stating that it had found the Board 
debate very helpful and that it wanted discussions at the Board, 
consultations outside the Board, and any other activity that works 
to elaborate, clarify and address issues.  Russia seconded the UK 
proposal and the Chair assented, without further objection from the 
room.  (The full text of the Chair's Conclusion is at para 43.) 
 
------- 
COMMENT 
------- 
 
¶40. (SBU) Despite Iran's short-term success in spinning the press to 
believe that the Board outcome was a defeat for the West, the 
outcome was positive, met the U.S. objective of enabling further 
development of the proposals, and laid the groundwork for long-term 
adoption of one or more of them.   Russian Ambassador Berdenekov, 
who had been very worried early in the week, walked away satisfied 
and appreciative of U.S. efforts.  The G-77 has begun to engage on 
the issue.  And a number of G-77 countries were willing to go on 
record in support of the concept.  The round of demarches before the 
Board had the desired effect and UNVIE appreciates this capital 
level engagement. Specific issues were identified for further 
discussion.  This clearly validated the wisdom of bringing proposals 
to the Board for discussion, even in the absence of definitive 
action on those proposals.  The Secretariat believes it has the 
mandate it needs for continued work. 
 
¶41. (SBU) But there is still a long road ahead.  Final proposals or 
resolving all issues before the September Board meeting, or even 
this year, will be difficult, and the upcoming transition of the 
Director General will complicate this as well.  The supply criteria 
issue remains critical, with Egypt demanding NPT adherence, India 
and the Director General calling for "Statutory criteria" and others 
seeking non-discrimination, but without articulating what form that 
would take.  As several states observed, it will probably be 
necessary to think further about what situations involving supply 
interruption the fuel bank/reserve proposals should address.  The 
combination of the failure of a supplier to be able to supply 
according to a pre-existing contract, for whatever reason, and the 
failure of the market to be able to step in to provide replacement 
supply, for whatever reason, creates an absence of assurance that 
may be entirely unrelated to the actions of the recipient State.  Is 
the Director General's reference to Iran being cut off from supply 
after the Revolution and the seizure of the U.S. Embassy the real 
"problem" we want to fix?  Many of the other issues look difficult 
as well, in particular the need to ensure not only the supply of 
enriched uranium but the supply of fuel fabrication services. 
 
 
¶42. (U) Nevertheless, having engaged the G-77 in identifying the 
issues, we can now engage them selectively, including Argentina, 
Brazil, Egypt, Mexico, the Philippines and South Africa in a 
dialogue to address their concerns.  India will need to be handled 
separately, in the context of our civil-nuclear relationship.  In 
the end, many states are likely to agree with us on the supply 
criteria - full scope safeguards, adequate physical protection, 
liability protections - that are necessary for the fuel assurance 
proposals to go forward.  We should also begin consulting in more 
detail on how our own fuel reserve (which will be bigger that the 
Russian fuel reserve and the IAEA Fuel Bank combined) can be 
deployed. 
 
 
-------------------- 
TEXT - Chairperson's 
Conclusion 
-------------------- 
¶43.  (U)  Begin Text. 
 
I have no more speakers on my list. All comments made and views 
expressed will be reflected in the summary record of this meeting. 
Therefore, I do not intend to sum up in detail. 
 
Several members welcomed the initiative to create a LEU bank under 
the auspices of the Agency which would serve as a last resort for 
Member States in the event that their supplies were disrupted for 
reasons not related to technical or commercial considerations. In 
this regard, they expressed appreciation to the Director General and 
the Secretariat for the proposal contained in document GOV/2009/30, 
entitled "Proposal for the Establishment of an IAEA Low Enriched 
Uranium (LEU) Bank" and welcomed the financial pledges towards this 
project. 
 
Several members took note of the offer by Kazakhstan to consider 
hosting the IAEA LEU bank on its territory. 
 
Several members expressed the view that there was a need for caution 
when addressing the different aspects associated with the issue of 
the assurances of nuclear fuel supply, and that any proposal in this 
regard should be in full accordance with the Statute and take into 
consideration the respective legal rights and obligations of Member 
States and the principle of non-discrimination. 
 
Several members emphasized that any proposal for the assurances of 
supply should not discourage Member States from developing or 
expanding their own nuclear fuel cycle capabilities and should not 
hamper research, development and international cooperation in the 
field of peaceful nuclear activities.  They reiterated in this 
regard the inalienable right of all States to develop all aspects of 
nuclear science and technology for peaceful purposes. 
 
Several members encouraged the Agency to continue pursuing the 
proposals on fuel assurances and noted that the rights of Member 
States with regard to the establishment or expansion of their own 
nuclear fuel cycle capabilities would remain undiminished by the 
establishment of multilateral fuel supply mechanisms which would 
instead offer additional options for the supply of nuclear fuel. 
 
Several members expressed the view that none of the proposals before 
the Board provided a proper assurance of supply of nuclear fuel, 
since it simply created a back up mechanism to provide LEU when the 
supply of fuel is disrupted for political reasons but did not 
provide assurances of fuel fabrication services. 
 
Several members raised diverse technical, financial, political and 
legal queries on issues such as the proposition that the development 
of an enrichment capability posed a proliferation risk, the 
reliability or credibility of the triggering mechanism, the 
eligibility criteria, the supply of natural uranium as fuel, and the 
financial implications of the proposals. 
 
Several members expressed the view that any decision regarding the 
implementation of the proposals should be taken by consensus by the 
General Conference. 
Several members expressed the view that the proposal as contained in 
document GOV/2009/30 could not be a basis for a more detailed 
proposal for an IAEA LEU bank to be brought forward for the Board's 
consideration. They also expressed the view that it was premature to 
authorize the Agency to accept any financial pledges directed to 
finance the proposed LEU bank. 
 
Several other members welcomed the proposal for an IAEA LEU bank and 
encouraged the Secretariat to continue its work to develop an IAEA 
LEU bank for assurance of supply and welcomed the financial pledges 
made by some Member States for this purpose. 
 
With regard to the proposal contained in document GOV/2009/31, 
entitled "Russian Federation Initiative to Establish a Reserve of 
Low Enriched Uranium (LEU) for the Supply of LEU to the IAEA for its 
Member States", several members noted the Russian initiative to 
establish a reserve of low enriched uranium for supply to the IAEA 
Member States in Angarsk. They looked forward to hearing further 
details from the Secretariat about the initiative in due course. 
 
Several other members expressed the view that the proposal put 
forward by the Russian Federation might entail less financial 
burdens, as far as the Agency was concerned, than the proposal for 
an IAEA LEU bank. However, they were of the view that the document 
did not contain a comprehensive conceptual framework that could form 
a basis for developing a draft model agreement that could be 
approved by the Board. 
 
With regard to the proposal of Germany, contained in document 
GOV/2009/32, entitled "Establishing an Independent Access to Nuclear 
Fuel Cycle Services: The Multilateral Enrichment Sanctuary Project 
(MESP)", several members expressed their readiness to further 
consider the potential framework for pursuing the suggested 
multilateral enrichment sanctuary. They looked forward to an 
extensive and detailed discussion of the issue with a view to 
promoting a multilateral LEU supply mechanism compatible with the 
existing market and with the proposed IAEA and Russian LEU 
reserves. 
 
Several other members expressed the view that the Agency should not 
administer a commercial company for the supply of nuclear fuel or 
enrichment services. 
 
The Board noted the Director General's comments on issues raised, 
which will also be reflected in the summary records of our 
discussion. 
 
Based on the discussion, the sense that I get from listening to the 
various speakers is that the Board may continue with its 
consultations and discussions on the proposals by the Director 
General and the Russian Federation and the Secretariat will assist 
in further elaborating a conceptual framework that could form the 
basis for developing detailed proposals that would adequately 
address the views and concerns of Member States. 
 
Is this summing-up acceptable? 
 
It is so agreed. 
 
End Text. 
 
-------------- 
U.S. STATEMENT 
-------------- 
 
¶42.  (U)  Begin Text. 
 
Madam Chair, 
 
As part of his Prague speech, President Obama called for the 
creation of "a new framework for civil nuclear cooperation" so that 
countries, and especially developing countries, can access peaceful 
power without increasing the risks of proliferation. In support of 
this new approach, our delegation has emphasized the desirability of 
establishing a revived "Spirit of Vienna". We believe that the 
establishment of one or more international fuel banks, under IAEA 
auspices, will be an important element of this new framework. 
 
Over the last few years, many proposals have been put forward to 
establish fuel banks or other mechanisms to ensure reliable access 
to reactor fuel. Such mechanisms would increase access to peaceful 
nuclear energy, by providing States that are acquiring nuclear 
energy with access to reactor fuel, as a backup to the international 
market. These mechanisms could provide an alternative to expensive 
enrichment and reprocessing technologies, which pose proliferation 
risks. We believe that the time has come for an open discussion 
within the Board, and among Member States more broadly, of 
technical, legal and financial aspects of these proposals. We thank 
the Group of 77 for identifying several issues for discussion in its 
statement under this agenda item, and we look forward to engaging in 
an intense and productive dialogue. 
 
The papers prepared by the Secretariat on the Director General's 
proposal for the establishment of an IAEA LEU bank and on the 
Russian Federation's initiative to establish an LEU reserve for 
supply to the IAEA each provide a sound basis for these discussions, 
and we thank the Secretariat for the work that went into preparing 
them. We support the proposal that the Board request the Director 
General to submit detailed proposals for the Board's subsequent 
consideration. We would advocate efforts to bring draft texts of the 
agreements called for by these papers to the Board by September. 
 
I would note that the United States has already taken practical 
measures to make reliable access to nuclear fuel a reality. Our 
Congress authorized almost $50 million to help match the Nuclear 
Threat Initiative's challenge grant to create a 
nuclear fuel reserve for the IAEA. We also welcome pledged 
contributions from the European Union, Kuwait, Norway and the United 
Arab Emirates. In March, 2008, the United States started 
down-blending 17.4 metric tons of highly enriched uranium for a 
nuclear fuel reserve in the United States. This work should be 
completed by 2010. 
 
During discussion of the various proposals before the Board, we 
should keep in mind that the purpose of these proposals is to 
expand, not to restrict, access to the peaceful use of nuclear 
energy. President Obama declared in Prague that no approach to 
nonproliferation "will succeed if it is based on the denial of 
rights to nations that play by the rules," He also reaffirmed that 
access to peaceful nuclear power "must be the right of every nation 
that renounces nuclear weapons, especially developing countries." 
The discussion papers on the Director General's proposal and the 
Russian proposal both clearly explain that the rights of Member 
States, including establishing or expanding their own production 
capacity in the nuclear fuel cycle, would remain intact and not be 
contravened, infringed, or diminished by these proposals. 
 
Of course the rights and obligations of Member States donating LEU 
to a fuel bank must also be respected. In this regard we note that 
Article IX C of the Statute contemplates that a Member State's 
donation of nuclear material to the Agency will be "in conformity 
with its laws." We also note that the Secretariat's paper on the 
Russian proposal appears to include provisions aimed at compliance 
with the laws of the Russian Federation on export of nuclear 
material. 
 
In 2006, the Nuclear Threat Initiative, a nongovernmental 
organization, offered the Agency $50 million to establish a fuel 
bank under IAEA auspices, on the condition that $100 million be 
raised from other donors, and that the Board adopt a mechanism for 
administering the fuel bank. The first of these conditions has been 
met, and the Secretariat's paper on the Director General's proposal 
for the establishment of an IAEA LEU bank is an important step 
towards meeting the second. Approval by the Board of a model 
agreement and other details would meet the second condition for the 
Nuclear Threat Initiative's grant. In developing the agreement text 
and other details for consideration by the Board, we look forward to 
consultations among the donors to the Nuclear Threat Initiative 
challenge, among other Board members, other suppliers, and potential 
beneficiary states. We believe such consultations, among Member 
States and with the Secretariat, to be essential and that they need 
to be undertaken at an early date for the Board to ultimately take 
action. 
 
Madam Chair, 
 
In keeping with the Board's authority under Article XI of the 
Statute, these proposals deserve the Board's continued active 
consideration, informed by expert views from the Secretariat and all 
Member States that wish to contribute to our deliberations. 
 
We are very close to success in establishing two mechanisms that 
will help to realize the full economic potential and environmental 
contribution of peaceful nuclear energy. We look forward to working 
with the Secretariat and Member States in developing, in particular, 
the Director General's detailed proposal for an LEU reserve for the 
Board's approval. 
 
Thank you. 
 
END TEXT 
 
PYATT