VZCZCXYZ0000
OO RUEHWEB

DE RUEHUNV #0362/01 2111210
ZNR UUUUU ZZH
O 301210Z JUL 09
FM USMISSION UNVIE VIENNA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9895
INFO RUEHII/VIENNA IAEA POSTS COLLECTIVE PRIORITY
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 0280
RHEHNSC/NSC WASHDC PRIORITY
RHEBAAA/DOE WASHDC PRIORITY
RUEANFA/NRC WASHDC PRIORITY

UNCLAS UNVIE VIENNA 000362 
 
SENSITIVE 
SIPDIS 
 
STATE FOR D(S), P, T, IO, ISN 
DOE FOR NA-20, NA-21, NA-24, NA-25 
NSC FOR SCHEINMAN, CONNERY, HOLGATE 
NRC FOR DOANE, SCHWARTZMAN 
 
E.O. 12958: N/A 
TAGS: AORC PREL KNNP IAEA UN
SUBJECT: IAEA BUDGET: FRAGILE CONSENSUS BUILDING AROUND 
MODEST INCREASE 
 
REF: A. UNVIE 339 
     ¶B. UNVIE 328 
     ¶C. UNVIE 321 
 
¶1.  (U) This is an action request for IO; please see para 7. 
 
¶2.  (SBU) Summary:  After five months of budget 
negotiations, IAEA Member States appear to be moving toward 
a consensus to increase the IAEA's Regular Budget by 5.4 
percent from 2009 to 2010, a level that satisfies minimal 
U.S. objectives.  Bucking isolated protests from Germany 
(the lead budget hawk) and Pakistan (a champion of 
technical cooperation), negotiations leader Romania 
described this latest proposal as "minimally satisfying to 
all" and announced his intention to hold a special meeting 
of the Board of Governors August 3 to approve the 
proposal.  While an uneasy air of resistance remains among 
Member States, it is unlikely any one Member will stand in 
the way of the gathering consensus; Germany and France may 
however reinforce one another in holding out.  Mission 
requests Washington begin drafting a statement for 
presentation at the Special Board for the contingency of 
success, and welcomes further engagement with Berlin and 
Paris to ensure that success.  End Summary. 
 
¶3.  (SBU) Romanian Ambassador and Board of Governors Vice 
Chair Cornel Feruta convened just over two dozen G-77 and 
OECD Member States July 29 to release yet another iteration 
of the IAEA 2010-2011 budget proposal, known as the "Vice 
Chair's Proposal - Version Three."  The V3 is characterized 
by an overall increase of 5.4 percent (2.7 real growth plus 
2.7 price adjustment).  Satisfying minimal U.S. objectives, 
the proposal allocates 3.1 million Euros to "regularize" 
Nuclear Security.  It relies on savings and U.S. and 
Japanese extra-budgetary funding to whittle down the 
Regular Budget line item for the Major Capital Investment 
Fund to only 0.1 million.  In a nod to the G-77, the 
Technical Cooperation Fund (TCF) would be subject to a 
USD-Euros 50-50 split assessment starting in 2011, and 
increases to the 2012 TCF levels would be "considered." 
Incorporating language provided by the U.S., the Board 
would convene a working group "to consider priorities and 
resource requirements related to the 2011 budget level and 
the 2012-2013 biennium"; Charge had proposed, in a meeting 
July 28 with major contributor states only, the convening 
of a systematic assessment of Agency needs as a step toward 
preparing numbers for 2011, the second year of the 
biennium.  This aspect of Feruta's draft budget resolution 
for Board adoption (accompanying the V3 numbers) won strong 
endorsement from budget hawks France, Switzerland, and 
Canada, and drew no criticism.  The G-77 may still seek to 
include explicit reference to discussing TC funding in the 
mandate of the strategic needs assessment. 
 
¶4.  (SBU) Confronted with Feruta's proposal to meet again 
July 30, France, Switzerland and Argentina begged for more 
time to share the proposal with capitals, France pointing 
out that there were complex decisions to be made between 
ministries (Foreign Affairs and Finance).  The Swiss 
Ambassador in particular emphasized that departing from 
"zero real growth" would not be without precedential impact 
and was therefore a major step requiring time to digest. 
Ambassador Feruta deftly rejected calls for much more time 
as equivalent to failure, relented on convening again until 
July 31, but went ahead with his stated intent to hold a 
Special Board on Monday, August 3.  France and Germany both 
stated that 5.4 was too high, but French Ambassador Mangin 
used more conciliatory language that referred to 
"flexibility" while Germany opined that even a 2.7 percent 
price adjustment was "generous."  French Ambassador and 
German Charge each undertook, nevertheless, to advocate to 
capital to join consensus.  The UK, another budget hawk, 
was the most conciliatory about respecting the fact that 
"some Member States" had come down very far in their 
aspirations (a reference to the U.S.) and that London must 
approach these final negotiations with some give-and-take. 
 
¶5. (SBU) Among the G-77, only Pakistan spoke on substance, 
while fellow heavyweights Egypt (ambassador was present), 
Brazil, India, South Africa and China remained silent 
throughout.  Pakistan complained that the budget proposal 
did not contain a linkage or method of automaticity to 
 
increase the TCF along the same lines as the Regular 
Budget.  The complaint was quickly rebutted by a number of 
OECD representatives, while other G-77 heavy hitters 
remained mum.  That Brazil, Egypt and South Africa (all 
active participants in budget parrying thus far) refrained 
from contributing to the discussion in any way suggests the 
G-77 may go along with the "V3" proposal as it stands, (and 
a side conversation between Romanian Ambassador Feruta, the 
Pakistani representative, and A/DCM after the meeting added 
to our sense that the Group will join consensus).  In the 
large group meeting, Charge reiterated the U.S. desire for 
sufficient financing for the IAEA and offered to support 
the modest increase in V3 "reluctantly and with a sense of 
disappointment." 
 
Comment and Next Steps 
---------------------- 
 
¶6. (SBU) The tone of today's group meeting was palpably 
unenthusiastic, but Board Vice Chair Feruta made important 
progress toward bringing the budget negotiations to a 
close.  Many of those present welcomed Feruta's insistence 
that Member States move to close the deal now rather than 
let it drag on and disrupt September proceedings (most 
notably, the annual General Conference and appointment of 
the new IAEA Director General).  Given the financial crisis 
and hard-line position of the European budget hawks, the 
ability to secure even a modest real increase is a 
significant U.S. achievement.  As Ambassador Feruta 
described it, the V3 is not perfect, but is at least 
"minimally satisfying" to most Member States.  For the 
United States this budget is minimally sufficient to meet 
our objectives.  With its adoption we would: 
 
-  establish that the IAEA's mission is sufficiently 
important that the Agency cannot be bound by zero real 
growth policies we apply at other International 
Organizations; 
 
-  build a regular budget foundation under the Nuclear 
Security program and establish the principle that nuclear 
security is a core function of the IAEA; and, 
 
-  thanks largely to American and Japanese funding, set a 
course to deal with the IAEA's overhang of capital expenses 
while ensuring the continued readiness of the Safeguards 
Analytical Laboratory, even though out-year funding remains 
to be identified. 
 
¶7. (SBU) Timeline and Action Request:  Feruta has convened 
a broader budget meeting open to all Member States on 
Friday, July 31, and will follow with a Special Board 
Meeting to approve the budget on Monday, August 3.  Mission 
encourages Washington preparation of a brief statement for 
the Special Board that highlights: U.S. political 
commitment to the IAEA, willingness to support this 
commitment with financial resources (i.e., through extra 
budgetary and regular budgetary support), and our 
expectations for the strategic review.  UNVIE POC Usha 
Pitts (pittsue@state.gov) conveyed the full V3 budget 
proposal via email to Washington inter-agency colleagues. 
 
PYATT