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PP RUEHWEB

DE RUEHUNV #0541/01 3370859
ZNR UUUUU ZZH
P 030859Z DEC 09
FM USMISSION UNVIE VIENNA
TO RUEHC/SECSTATE WASHDC PRIORITY 0360
RHEHNSC/NSC WASHDC PRIORITY
RHEBAAA/DOE WASHDC PRIORITY
RUEANFA/NRC WASHDC PRIORITY
INFO RUEHII/VIENNA IAEA POSTS COLLECTIVE PRIORITY

UNCLAS UNVIE VIENNA 000541 
 
SENSITIVE 
SIPDIS 
 
STATE FOR IO/GS, IO/MPR, ISN/MNSA; NSC FOR SCHEINMAN, HOLGATE 
 
E.O. 12958: N/A 
TAGS: AORC KNNP IAEA PREL IAEA UN
SUBJECT: IAEA Budget Kick-Off Reveals Old Fissures, New Rifts 
 
REF: STATE 119320 
 
¶1. (SBU) SUMMARY: The first meeting of the Budget Working Group was 
short and perfunctory, but elicited four telling statements from the 
G-77, EU, U.S., and Canada.  Subsequent conversations also revealed 
much about the issues facing Member States as they aim for intense 
budget negotiations January 13 - 18.  As in previous budget 
negotiations, the G-77 remains wedded to programmatic increases for 
Technical Cooperation.  More positively, this time, the UK, France 
and Germany have this time failed to coalesce around zero growth.  A 
U.S. proposal to establish an Advisory Group on Management Reform 
was received unenthusiastically by a Member State and Secretariat 
audience feeling acute "governance overload."  Some of our friends 
have also pointed out privately that the U.S. call for continued 
regularization of Nuclear Security could lead to a quid pro quo 
situation with the G-77 over corresponding increases for Technical 
Cooperation.  In developing more detailed budget guidance, 
Washington may wish to consider countering incipient "negotiation 
exhaustion" with a more explicit focus on funding capital investment 
(including the Safeguards Analytical Laboratory) in 2010.  This 
would leave the hard push for programmatic priorities to be 
initiated simultaneously through the vehicle of the Medium Term 
Strategy, a product geared to wield considerable influence over the 
2012-2013 budget biennium.  END SUMMARY. 
 
¶2. (SBU) Finnish Chair Ambassador Rasi used the first meeting of the 
Working Group on Financing the Agency (heretofore the "Budget 
Working Group" in Mission reporting) November 25 to outline her 
vision of the Working Group's mandate and time table.  She 
formalized her notion that the Working Group would focus on the 
priorities within each Major Program and the 2011 budget during 
meetings scheduled for Jan. 13-18.  The first two days of meetings 
(Jan. 13-14) would be dedicated to the IAEA's six Major Programs 
while the remaining two days (Jan. 15-18) would focus on thematic 
topics, including safeguards financing and the political discount to 
developing states (i.e., "shielding") and incentive schemes for 
on-time payment of assessments.  The informal meeting of the Program 
and Budget Committee (PBC) to present the Secretariat's draft budget 
proposal would be postponed from February to early March.  Following 
the informal PBC, Rasi would hold consultations on the level of the 
2011 budget.  On May 3rd the Working Group is scheduled to report to 
the annual formal PBC and on June 7 the Board of Governors could 
expect to approve the 2011 budget. 
 
¶3. (SBU) In an attempt to minimize contention and stick to 
practicalities, Rasi held the first meeting of the Working Group 
late in the day and did little to encourage general discussion.  The 
four statements presented were few in number but significant.  The 
statement issued by Argentina on behalf of the G-77 was practically 
a carbon copy of G-77 statements issued during the previous round of 
budget negotiations.  It emphasized "balance among the three 
pillars" (technical cooperation, safety, safeguards) and sufficient, 
assured, and predictable (SAP) resources for Technical Cooperation. 
The statement also noted that Major Programs 1, 2 and 6 (Energy, 
Nuclear Applications, Management of Technical Cooperation) lacked 
sufficient funding from the regular budget.  Finally, the statement 
noted that Nuclear Security, "though an important consideration, was 
NOT a statutory of the agency." 
 
¶4. (SBU) The EU statement took a more thematic approach, emphasizing 
a strict prioritization of activities in the context of the 2011 
budget.  The EU also requested that the discussion bear in mind the 
need to improve accountability, effectiveness, and efficiency, and 
where possible, to avoid redundancy with the Medium Term Strategy 
process.  To that end, the EU praised Rasi's proposal to focus 
discussions mainly on the framework of the 2011 budget as "realistic 
and pragmatic" (implying that the original mandate of the BWG was 
too far reaching). 
 
¶5. (SBU) The U.S. statement, delivered by IO/GS Officer Jim 
DeTemple, emphasized the centrality of the Agency to the U.S. 
strategy on nonproliferation and established that we do not seek a 
zero growth approach.  The U.S. reminded participants that the IAEA 
Board had instructed the Working Group to address both the 2011 
budget level and the 2012-2013 biennium.  The statement then went 
into detail on cost savings, prioritization of programs, and budget 
formulation.  The statement also touched on two concepts laid out in 
Washington budget guidance: a Needs-based Assessment and an Advisory 
Group on Management Reform (REFTEL).  (Note: Upon clarification to 
UNVIE by Washington that the Needs-based Assessment was an internal 
USG process, Mission subsequently contacted senior Secretariat 
officials to walk back the proposal.  End note.) 
 
¶6. (SBU) The final statement came extemporaneously from Canada. 
Taking a conservative tack, Canada touched on issues of fiscal 
constraint, the futility of revisiting shielding, and the 
senselessness of channeling further resources to the Technical 
Cooperation Fund as long as millions of Euros sat in the Fund 
unspent.  (A Canadian diplomat later confessed privately that the 
impromptu statement had been intended to counterbalance the U.S. and 
G-77 statements). 
 
¶7. (SBU) Private conversations in the days following the Working 
Group were as illustrative as the statements themselves.  A Finnish 
diplomat on Rasi's staff was particularly frustrated by the U.S. 
call to delve into the 2012-2013 biennium, potentially disrupting 
the proceedings of the Medium Term Strategy.  The Finn, among 
others, was confounded by the proposal for an Advisory Group on 
Management Reform, which they viewed as burdensome.  Mission has 
heard little from the G-77, but a Romanian diplomat relayed the 
G-77's view of the Medium Term Strategy process as the place where 
the "real battle" would take place (we are pleased that Romania will 
chair the MTS process).  DDG for Management David Waller likewise 
expressed concern to us that the proposed Advisory Group would level 
yet another burden on the Secretariat and Member States already 
overloaded with multiple, interlocking budget review mechanisms. 
 
¶8. (SBU) By the time Rasi reconvenes the Working Group in January, 
the U.S. will have to determine whether to forge ahead with the 
proposed Advisory Group on Management Reform, despite DDG Waller's 
counsel against overloading the circuits.  Comparable advisory 
groups on IAEA Major Program areas comprise up to twenty individual 
experts per group, appointed by the DG and serving in a personal 
capacity.  If the proposed Advisory Group on Management Reform is 
intended to inform the 2012-2013 budget process, DG Amano would have 
to be persuaded quickly to establish it, and members must be 
prepared to work intensely.  DG Amano's personal interest in 
management, labeling himself the Agency's "chief administrative 
officer," suggests we might hold the advisory group in reserve 
(perhaps another nine months) until we see the results of budget 
talks, initial MTS negotiations, and the new Director General's 
handling of management issues. 
 
MAKE 2011 THE "YEAR OF CAPITAL INVESTMENT" 
----------------------------------------- 
¶9. (SBU) COMMENT:  This initial discussion of the 2011 budget 
revealed familiar divisions between the G-77's focus on technical 
cooperation and western preoccupation with fiscal restraint.  Likely 
in consideration that their EU colleague from Finland was chairing 
an IAEA gathering for the first time and confident no substantive 
decisions were at stake, European budget hawks did not use this 
meeting to insist explicitly on zero growth.  This demand will come, 
driven by fiscal belt-tightening in most capitals and a broad belief 
among our like-minded states that the Agency persists in wasteful 
activities. 
 
¶10. (SBU) As the U.S. inter-agency process moves ahead on detailed 
budget guidance, Mission recommends an emphasis on major capital 
investments and a few crucial programs over pursuing a broad agenda 
of programmatic priorities for 2011.  In negotiating to 2010 Regular 
Budget increase, we and the Secretariat gave way most on the capital 
investment portion of the Regular Budget (including upgrades for the 
Safeguards Analytical Laboratory), and focused on programmatic 
increases for Nuclear Security.  Rather than replaying the 
enervating game of chicken between Nuclear Security and Technical 
Cooperation, it might be wiser to make 2011 the "year of capital 
investment."  (We remain attracted to the idea of a special 
assessment for this purpose.)  Simultaneously, Mission will be 
deeply involved in the Medium Term Strategy process, which will set 
the stage for programmatic increases in safeguards, security and 
safety that can be operationalized in next year's negotiation of the 
2012-2013 budget. 
 
¶11. (SBU) Mission is committed to informing and responding to the 
inter-agency process as it unfolds, and is particularly grateful for 
Washington's timely guidance thus far.  We look forward to greater 
elaboration of the U.S. position and invite IO/MPR's travel to 
Vienna to participate in the January negotiations.  END COMMENT. 
 
¶12. (SBU) Electronic copies of the Finnish Chair's budget timetable 
are available from Kristen Weaver (weaverke@state.gov).