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PP RUEHWEB

DE RUEHUNV #0026/01 0321445
ZNR UUUUU ZZH
P 011445Z FEB 10
FM USMISSION UNVIE VIENNA
TO RUEHC/SECSTATE WASHDC PRIORITY 0522
INFO RUEHII/VIENNA IAEA POSTS COLLECTIVE PRIORITY

UNCLAS UNVIE VIENNA 000026 
 
SENSITIVE 
SIPDIS 
 
STATE FOR IO/GS, IO/MPR, ISN/MNSA; NSC FOR SCHEINMAN 
 
E.O. 12958: N/A 
TAGS: AORC KNNP PREL IAEA UN
SUBJECT: IAEA's Budget Working Group Fulfills a Promise - But Little 
Else 
 
REFS: A) 09 STATE 119320  B) 09 UNVIE 541  C) UNVIE 4 
 
¶1. (SBU) SUMMARY:  The Budget Working Group (BWG) January 13-15 
allowed a refreshingly non-polemical discussion on IAEA programs, 
but fell short of Geneva Group hopes to identify programs for 
emphasis or de-emphasis in the IAEA's 2011 budget.  In contrast to 
Geneva Group readiness, the G-77 did not meet until after the BWG 
had already started, and therefore managed to produce nothing more 
than the same statement (nearly word-for-word) the Group had issued 
during last year's budget negotiations over the 2010 level.  As a 
result, little was accomplished, and Finnish BWG Chair Ambassador 
Rasi polished off the proceedings in two-and-a-half days (half the 
allotted time).  Disappointed as we were at the lack of substance, 
the process was at least educational (more so, than, say, the Future 
of the Agency discussions).  We also witnessed some significant 
softening in the hard-line positions of some of the "budget hawks" 
(Canada and France) and a much more open UK.  Most importantly, the 
BWG represented the culmination of last year's budget deal, in which 
Geneva Group Members agreed to discuss Safeguards Financing and 
other topics of interest to the G-77 in exchange for G-77 support 
for a significant budget increase in 2010.  Viewed in this light, 
the BWG was small pain for great gain.  END SUMMARY. 
- 
¶2. (SBU) Under the efficient chairmanship of Finnish Ambassador 
Marjatta Rasi, the Budget Working Group (BWG) met January 13 - 15 to 
discuss programmatic priorities for the 2011 budget.  Sluggish from 
the holidays and ill-prepared for in-depth discussions, outgoing 
G-77 chair Argentina delivered a rote group statement (but not until 
the third day of the proceedings) and otherwise took a back seat in 
the discussion.  Even Egypt and Pakistan seemed caught unawares. 
Brazil was silent.  Only Iranian Ambassador Soltanieh remained 
energized throughout, but his politically-motivated ramblings 
prompted a private scolding from Rasi. 
 
¶3. (SBU) Fortunately for the U.S., the BWG revealed a softening of 
positions among major contributors and a greater willingness to 
think creatively about financing the Agency.  France and Canada in 
particular expressed solid support for upgrades in the Safeguards 
Analytical Laboratory.  The UK, normally a vocal budget hawk, was 
conspicuously silent (in part, a UK delegate admitted privately, 
because of the low level of contention).  Spain, Italy, Mexico, 
Australia and Germany - all staunch budget hawks during last year's 
negotiations - spoke little or confined their comments to 
programmatic priorities.  At one point Canada, while expressing 
appreciation for the informational value of the process, pointed out 
bluntly that nobody had yet said, "we should sunset this or that." 
Switzerland, another budget hawk, complained on the sidelines of the 
BWG that nothing had really changed in the budget process, and that 
discussions over the 2011 level would wind up the same as for 2010 - 
a fight over the overall level. 
 
NEXT STEPS 
---------- 
¶4. (SBU) The Secretariat will release an update of the 2011 draft 
budget proposal in late February, followed by an informal meeting of 
the Program and Budget Committee in early March, near or alongside 
the March 1 - 5 meeting of the Board of Governors.  The Finns will 
hold informal consultations with Member States in March regarding 
the overall 2011 levels, followed by a formal meeting of the Program 
and Budget Committee on May 3. 
 
¶5. (SBU) The Finns will recommend the continuation of the BWG when 
negotiations over the 2012-2013 biennium begin.  They will also 
recommend that 2012-2013 negotiations begin in the fall (November) 
in order to influence the Secretariat's proposal and bring greater 
transparency to the process (this is several months earlier than in 
the past, when budget negotiations did not begin until February). 
Finally, the Finns would like to confine the mandate of the BWG to 
priorities within each MP, rather than branching into philosophical 
discussions about the relative value of each of the Agency's 
"pillars" (safety, verification, science) and the resources they 
should command.  Instead, these philosophical questions should be 
ironed out in the Medium Term Strategy.  Ambassador Rasi reportedly 
enjoyed her stint at the podium as BWG chair, and may even consent 
to continue chairing the MTS process. 
 
¶6. (SBU) NOTE: BWG has become shorthand for open-ended, informal 
budget negotiations.  The same process took place last year under 
the chairmanship of Ambassador Feruta.  In other words, budget 
negotiations, no matter what their name, follow a similar format. 
END NOTE. 
 
¶7. (SBU) According to the head of the IAEA's program and budget 
office, Carlo Reitano, there have been no signs that Director 
General Amano intends any major overhaul of the 2011 budget 
proposal, submitted by Amano's predecessor ElBaradei.  But that 
proposal does yield an 11 percent nominal increase unless 
substantial voluntary funding can be mobilized for the Safeguards 
Analytical Laboratory (SAL).  The bulk of the proposed 2011 increase 
 
is for capital investment, not for ongoing operations.  For example, 
other than a healthy injection to MP 3 for Nuclear Security, no 
Major Program would receive more than a percentage point or two over 
the 2010 level.  Instead, the 2011 proposal focuses on raising 30 
Million Euros for major capital investment projects, principal among 
them SAL modernization and the Agency-wide Information System for 
Program Support (AIPS). 
 
THE MEAT AND POTATOES OF EACH MAJOR PROGRAM 
------------------------------------------- 
¶8. (SBU) The BWG was organized by a discussion of each of the IAEA's 
six Major Programs, with Deputy Directors General or their 
colleagues kicking off discussion with a short presentation about 
how they had implemented the 2010 increase and where they needed 
additional resources (rarely did the presenters suggest programs to 
phase out).  Coached by the Finns in advance, each presentation was 
brief and focused.  Rasi then turned over discussion to Member 
States, who frequently asked informational questions about the 
programs and subprograms within each Major Program.  (Iranian 
Ambassador Soltanieh was an exception, dominating the floor with 
anecdotes and accusations reminiscent of his recent performance 
during "Future of the Agency" discussions.) 
 
ENERGY 
------ 
¶9. (SBU) On Major Program 1, Nuclear Energy DDG Sokolov, explained 
how the emphasis over the past five years had switched to the 
operation of facilities and innovative techniques.  Egypt and Russia 
complained that MP 1 was proportionally disadvantaged in the 2010 
budget increase, despite its work on popular initiatives such as 
INPRO (Innovative Nuclear Reactors and Fuel Cycles) and 
collaboration on technical cooperation projects.  The U.S. 
highlighted the Agency's role in technology transfer (as opposed to 
development) and offered broad support for MP 1 that nonetheless 
should include a critical look at programs that could be retired. 
 
SCIENCES AND APPLICATIONS 
------------------------- 
¶10. (SBU) On Major Program 2, Nuclear Sciences and Applications, DDG 
Burkart gave the day's most polished presentation that reflected 
Director General Amano's philosophy of sound management and focused 
priorities.  He laid out his main objectives for 2011: fighting 
cancer, understanding and responding to climate change, increasing 
efficient delivery of programs through partnerships, enhancing 
impact and delivery by concentrating efforts on fewer areas. 
Burkart even noted where MP 2 could do less (on pesticide 
measurements) and, in response to a question from the U.S., 
suggested that Member States review his chapter in the Budget Blue 
Book (GC(53)/5, pages 119-162) to see where completed and phased-out 
activities are listed (including dam safety).  In part due to 
Burkart's robust performance, Member States had little to critique 
on MP 2. 
 
SAFETY AND SECURITY 
------------------- 
¶11. (SBU) Things did not go so well for DDG Taniguchi on Major 
Program 3, Nuclear Safety and Security.  In response to a question 
from Canada, Taniguchi was forced to defend the Incident and 
Emergency Center, explaining that emergency response was a national 
responsibility but that the IAEA had a role in supporting Member 
State efforts to build that capacity.  Taniguchi was also forced to 
fend off an attack by Iran on the statutory relevance of Nuclear 
Security and the logic of placing it in the same department as 
Safety.  Taniguchi patiently explained that more and more developed 
countries were co-locating safety and security under the same 
regulatory agency, because of the obvious synergies.  Iran continued 
to worry that the Agency's work on nuclear security would lead an 
intrusion into national security issues and warned the Secretariat 
against ignoring the G-77 position on Nuclear Security. 
 
SAFEGUARDS 
---------- 
¶12. (SBU) Safeguards Operations A Division Director Marco Marzo did 
a creditable job of presenting Major Program 4, Safeguards, in the 
absence of DDG Heinonen.  Most positively, there was considerable 
rhetorical support among Geneva Group members for upgrades in the 
Safeguards Analytical Laboratory.  Secretariat staff from Safeguards 
and the budget office fumbled somewhat their pitch for SAL, however, 
by stating contradictory figures on SAL funding needs in 2011. 
Russia aired the contradiction for anyone who missed it, 
embarrassing some members of the Secretariat.  The U.S. intervention 
noted that although the establishment of the Major Capital 
Investment Fund in 2010 was a significant accomplishment, it was, as 
yet, an unfunded "empty shell" that could not yet address the needs 
of SAL and AIPS.  The U.S. asked the Secretariat to be more 
forthcoming about SAL needs in 2011 to keep the modernization on 
track.  Regarding integrated safeguards, the U.S. asked how the 
upfront costs would diminish over time, and when Member States might 
see the results of economizing efforts. 
 
 
MANAGEMENT, TECHNICAL COOPERATION, OTHER TOPICS 
----------- ---------------------- ------------ 
¶13. (SBU) DDG Waller on Major Program 5, Management, parried 
questions about procurement reform and Program Support Costs. 
Waller took care to take special note of the packed governance 
agenda in 2010, including budget negotiations and the Medium Term 
Strategy.  DDG Cetto on Major Program 6, Management of Technical 
Cooperation, took several spears during her difficult session.  Her 
assertion that the budget increases for 2010 barely covered the 
human resources requirements to manage the growing Technical 
Cooperation program unleashed a vigorous series of interventions 
from Canada regarding the large overhead of MP 6 relative to the 
monies and projects it disbursed.  In a tacit rejection of G-77 
claims that technical cooperation is undervalued at the IAEA, Canada 
asked incisive questions about resource flows from other MPs that in 
fact support the implementation of technical cooperation.  In 
response to a debate over performance indicators, the U.S. asked how 
the Secretariat would report on the number of projects in the 
current cycle that had been completed on time and have met their 
objectives.  Pakistan and others queried Cetto for information on a 
move by the Secretariat to establish regional offices, the tone of 
which was generally critical. 
 
¶14. (SBU) Following the examination of Major Programs, the BWG 
delved into other topics as instructed in the budget deal approved 
by the last General Conference.  These topics included capital 
investment, safeguards financing (i.e., shielding), incentive 
schemes for on-time payment of contributions, the methodology for 
price adjustments, and other topics.  Again, the G-77's failure to 
prepare for the BWG resulted in little more than perfunctory 
comments.  One flare-up occurred when Egypt eloquently linked 
increasing safeguards costs to the G-77 perception that technical 
cooperation was falling behind.  Pakistan clumsily proposed to 
freeze the process of de-shielding for six years.  The U.S. weighed 
in strongly regarding NPT safeguards, their critical underpinning of 
the non-proliferation regime that protects all Member States, and 
the insistence that everyone pay their fair share.  In a soft-spoken 
threat, Egypt mused that the original de-shielding arrangement must 
have occurred against the backdrop of a successful NPT Review 
Conference. 
 
A BETTER PLACE THAN THIS TIME LAST YEAR 
--------------------------------------- 
¶15. (SBU) COMMENT:  The BWG absorbed much preparation by both UNVIE 
and Washington, work which did not immediately bear fruit during the 
meetings.  The UK delegation reminded us, however, that in a basic 
sense the BWG was a victory: It fulfilled the budget deal worked out 
in 2009, in which the G-77 had insisted on a discussion of 
safeguards financing (de-shielding) in exchange for the 2010 
increase.  The BWG paid a debt, even if its remaining value was 
little more than educational. 
 
¶16. (SBU) Looking forward to March negotiations over the general 
2011 level, Mission notes that the draft proposal is very much in 
line with U.S. priorities.  Nuclear Security, SAL and AIPS represent 
top U.S. priorities, to the point where the budget proposal appears 
practically tailor-made to meet U.S. goals.  That said, the proposal 
will not survive in its current form.  If early voluntary 
 
commitments do not sufficiently reduce the SAL-related capital 
investment request in the budget update, the overall proposal will 
come under attack by the European budget hawks for its gross size 
(11 percent) and by the G-77 for its operational plus-up for Nuclear 
Security.  All the same, the 2011 proposal cleaves nicely to U.S. 
priorities in all the major areas and merits our support as a basis 
for opening negotiations once we see how DG Amano and his team 
adjust the levels inherited from his predecessor.  END COMMENT. 
 
¶17. (U) A detailed summary of statements from the BWG are available 
from Steven Adams (adamsjs@state.gov). 
DAVIES