INTERNATIONAL NUCLEAR FUEL SUPPLY GUARANTEES MARK A. CHRISTOPHER 1. Introduction

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1 INTERNATIONAL NUCLEAR FUEL SUPPLY GUARANTEES MARK A. CHRISTOPHER 1 Introduction The Nuclear Nonproliferation Treaty s compromise attempt at both preventing nuclear weapons proliferation and encouraging civilian nuclear power use has left an uncomfortable legacy of nuclear haves and have-nots. This dichotomy is obvious and easily understood in the context of whether a particular country possesses nuclear weapons. Equally salient, though, is whether a country has access to nuclear fuel cycle technology. Fuel supply issues cut to the heart of the nuclear conundrum because the equipment and know-how used to make and dispose of reactor fuel specifically, the ability to enrich uranium and reprocess plutonium are the same needed to manufacture the fissile material for a bomb. For this reason, proponents of a robust nonproliferation regime seek to limit the number of countries with access to this technology. Yet some countries that use nuclear power, or that are considering doing so in the future, have been hesitant to give up domestic fuel cycles. Iran, for example, has expressed discomfort about giving up its sovereign rights to enrichment and about relying on foreign fuel sources, and has cited these fears as drivers for its development of uranium enrichment capability. Attempts to limit or control the spread of nuclear fuel cycle technology date back to the 1940s, 2 but the topic has gained traction in recent years. The possibility of a forthcoming nuclear energy renaissance, combined with increasing awareness of the threat of catastrophic nuclear terrorism, present new challenges in terms of supplying fuel and preventing proliferation. To address these challenges, a variety of proposals have been put forth attempting to guarantee uninterrupted access to fuel, and thus convince countries to voluntarily forego developing their own fuel cycles. This paper examines a number of these proposed fuel supply assurance mechanisms. It opens with a description of the challenges associated with the nuclear fuel supply. It then describes the major proposals that have been thus far presented, outlining their goals and presenting some pros and cons of each. It concludes by identifying some commonalities across proposals and suggesting that, although increasing nuclear supply assurances is a laudable aim, there may be better ways to expend limited nonproliferation resources. 1 Mark Christopher graduated in 2008 from the masters program at Princeton University s Woodrow Wilson School of Public and International Affairs, where he focused on international relations and national security. He is grateful for the guidance of Dr. Frank von Hippel and Ambassador Robert Einhorn, for whom the first iteration of this paper was written, as well as for feedback from the leaders and participants of this year s PONI Nuclear Scholars Initiative. He welcomes any comments on this paper and can be reached at MarkAChristopher@gmail.com. 2 The first such attempt was the 1946 Baruch Plan, in which the United States proposed the creation of an International Atomic Development Authority. For a full timeline of multinational approaches to the nuclear fuel cycle, see In Focus: Revisiting the Nuclear Fuel Cycle, < 21

2 The Challenge: Proliferation Security and Supply Security The International Atomic Energy Agency (IAEA) Expert Group on Multilateral Approaches to the Nuclear Fuel Cycle has noted that one of the primary difficulties in creating multilateral assurances for the fuel supply system is the inherent tension between proliferation security and supply security. 3 Proliferation security refers to the security risks associated with civilian nuclear facilities: the diversion or theft of fissile materials or sensitive technology, the development of secret parallel programs, and the breakout scenario, in which a country openly withdraws from the Nuclear Nonproliferation Treaty (NPT) and begins producing fissile material. 4 It is in response to these security concerns that countries and organizations attempt to proscribe access to fuel cycle technology. Supply security, on the other hand, is the ability of nuclear energy users to maintain uninterrupted access to fuel. Legal guarantees that fuel supply contracts will be honored, economic disincentives to developing domestic fuel cycles, multilateral and international arrangements to override politically motivated fuel disruptions, and reserve sources of fuel (e.g., fuel banks), all increase security of supply. 5 For a fuel supply assurance system to work, it must simultaneously provide both proliferation and supply security. Unfortunately, the inherent push-pull dynamic between the two causes them to coexist uncomfortably. Civilian nuclear fuel cycles are particularly challenging in this manner. Access to enrichment and/or reprocessing technology assures a country a steady stream of fuel (assuming uranium can be procured), but these technologies inherently dual-use nature has presented a proliferation dilemma since the dawn of the nuclear age. Writing in 1946 on the subject of a nuclear weapons ban, Robert Oppenheimer noted: We know very well what we would do if we signed such a convention: We would not make atomic weapons, at least not to start with, but we would build enormous plants, and we would design these plants in such a way that they could be converted with the maximum ease and the minimum time delay to the production of atomic weapons saying, this is just in case somebody two-times us; we would stockpile uranium we would keep as many of our developments secret as possible; we would locate our plants, not where they would do the most good for the production of power, but where they would do the most good for protection against enemy attack. 6 Little about this dynamic has changed since Oppenheimer s day, and the Nonproliferation Treaty further compounds the difficulty he noted. Article IV of the NPT states: Nothing in this Treaty shall be interpreted as affecting the inalienable right of all the Parties to the 3 International Atomic Energy Agency (IAEA), Multilateral Approaches to the Nuclear Fuel Cycle, INFCIRC/640, 22 February 2005, p Ibid. 5 Ibid. 6 J. Robert Oppenheimer, Failure to Achieve International Control of Atomic Energy, in Morton Grodzins and Eugene Rabinowithc, eds., The Atomic Age (New York: Simon and Schuster, 1963), as quoted in International Panel on Fissile Materials, Global Fissile Material Report 2006, p

3 Treaty to develop research, production and use of nuclear energy for peaceful purposes without discrimination and in conformity with Articles I and II of this Treaty. 7 The right of each country to pursue nuclear energy technology is part of the NPT s central bargain; without it, no agreement would have been struck. Nevertheless, Article IV guarantees NPT signatories the right to pursue nuclear technologies such as enrichment and reprocessing that could produce the fissile material needed for a weapons program. Since states cannot, under the NPT, be prohibited from developing nuclear technology, numerous proposals have been put forth attempting to dissuade them from doing so by offering assurances that fuel will be available. The underlying rationale for these schemes is that countries that feel confident in the nuclear fuel supply market and backup systems will voluntarily forego the considerable investments necessary to develop their own fuel cycles. The following sections of this paper introduce the major proposals to date, ordered roughly from most comprehensive to most focused. IAEA: Multilateral Nuclear Approaches (MNA) In October 2003, IAEA Director General Mohamed Elbaradei penned an op-ed in The Economist in which he called for the eventual internationalization of all nuclear enrichment and reprocessing facilities, as well as the creation of international permanent repositories for spent fuel. 8 The next year, the IAEA convened a working group on the subject, which released its findings in the February 2005 Information Circular 640, Multilateral Approaches to the Nuclear Fuel Cycle. 9 The report describes and analyzes various multilateral approaches, indicating some pros and cons of each generally avoiding making strong recommendations about the specific merits of any particular proposal. Instead, the IAEA working group offers five suggested multilateral nuclear approaches (MNAs) which, if implemented gradually, could improve both supply and non-proliferation security: Market mechanisms. The group recommends reinforcing market mechanisms on a case-by-case basis to provide supply assurances. It recommends using long-term contracts and augmenting transparent suppliers arrangements with government backing. Examples of this approach include fuel leasing and take-back schemes, commercial spent fuel storage and disposal systems, and commercial fuel reserves. 2. Supply Guarantees with IAEA Involvement. International supply guarantees could be developed and implemented with IAEA participation. It is possible that the IAEA may come to serve as a guarantor of enrichment services and/or a fuel bank administrator. 3. Conversion to Multinational Approaches. Existing facilities (e.g., enrichment facilities) could gradually be converted to MNAs. These MNAs could then serve as 7 International Atomic Energy Agency, Treaty on the Non-Proliferation of Nuclear Weapons, 22 April 1970, INFCIRC/ Mohamed Elbaradei, Towards a Safer World, The Economist, 16 October IAEA, INFCIRC/ Ibid, p

4 confidence-building measures, inviting the participation of weapons states, nonweapons states, and non-npt members. 4. New Regional MNAs. Multinational, especially regional, MNAs could be created to include joint ownership, drawing rights, and co-management for front- and back-end nuclear activities. 5. Broader cooperation. Should a nuclear energy renaissance come to pass, achieving nonproliferation goals in this new environment will require a more robust multilateral (possibly regional) fuel cycle system, as well as broader cooperation between and among states, the IAEA, and the international community. The type of multinational fuel centers discussed in the IAEA study have been studied extensively since the 1970s but have never been put into practice, largely due to the difficulty of overcoming concerns of sovereignty, security, and national control. 11 Russia s GNPI proposal, described below, comes closest to the IAEA MNAs, but it has only recently begun operation. It remains to be seen whether the international uranium enrichment center at Angarsk actually develops into the type of international facility envisioned by the IAEA working group. On the whole, the IAEA s suggestions are sound. As befits international body, its efforts lean toward inclusiveness rather than division. Yet the IAEA will not ultimately be the decision-making body determining the type of fuel supply assurance system created (if any). It will serve as the primary forum for discussing the issue, but decisions about whether and to what degree to participate will be made by leaders in their own capitals, based on how they perceive their own national interests. Indeed, the report itself notes, countries will enter into multilateral arrangements according to the economic and political incentives and disincentives offered by these arrangements. 12 As such, the IAEA s middle-of-the-road proposals may accurately reflect the type of bargains that are eventually possible, but they may also be too timid to instill the passion needed to catalyze political will on the matter. Russia: Global Nuclear Power Infrastructure (GNPI) At the January 2006 EurAsEC summit in St. Petersburg, President Vladimir Putin announced the creation of a Global Nuclear Power Infrastructure (GNPI) that aimed to provide access to nuclear fuel on a non-discriminatory basis to any countries that were interested and in compliance with their non-proliferation requirements. 13 The GNPI plan makes universal a 2005 offer by Russia to enrich Iranian uranium at the Angarsk Electrolysis Chemical Complex in Eastern Siberia. This offer, which Iran rejected, was intended as an 11 See IAEA, Regional Nuclear Fuel Cycle Centers, Report of the IAEA Study Project, Vols. I, II, Vienna, Austria, 1977; see also Charles McCombie and Neil Chapman, Nuclear Fuel Cycle Centers An Old and New Idea, World Nuclear Associaton Annual Symposium, London, UK, 8 September 2004, accessed on 18 October 2007 at both as cited in Chaim Braun, Nuclear Fuel Supply Assurance, paper prepared for the IPFM, 2007, DRAFT COPY, pp. 7 and IAEA, INFCIRC/640, p IAEA Information Circular, Communication received from the Resident Representative of the Russian Federation to the Agency, transmitting the Text of the Statement of the President of the Russian Federation on the Peaceful Uses of Atomic Energy, Report INFCIRC/667, Vienna, Austria, February 8,

5 interim solution to break the negotiating deadlock between Iran and its U.S./EU 3 negotiating partners over Iran s desire for a domestic nuclear fuel cycle. Iran s unfavorable reaction notwithstanding, at the July 2006 G-8 summit in St. Petersburg, the head of Russia s Federal Atomic Energy Agency announced that Angarsk was to become the first of a number of international uranium enrichment centers (IUEC). 14 The key principles of the IUEC plan include the following: 15 Equal, non-discriminatory access to enriched fuel for any interested countries that forego developing their own domestic nuclear fuel cycles and meet established nonproliferation requirements. Investors will be able to purchase enrichment services or enriched product and will be eligible for profit sharing, but they will not be given access to enrichment technology. 16 Financial independence for the Angarsk IUEC, which will operate as joint-stock company not beholden to the budget of any of its participating member countries. Foreign owners will have access to pricing and contract information and will be able to participate in the facility s management. 17 Transparency of commercial IUEC enrichment activities, including IAEA safeguards and the possibility of IAEA involvement in IUEC management. Russia took the first step toward making Angarsk a true international facility by signing a bilateral agreement with Kazakhstan in May 2007 to set up a joint enrichment center at the IUEC using Kazakh uranium. In September 2007, a joint stock company called Angarsk IUEC was registered with 10% ownership by Kazatomprom, the Kazakh state-owned nuclear holding company. Russia s Tenex owns the remainder of the company but has announced its intent to sell shares to other partners until it eventually holds only a 51% stake. 18 In 2008, Armenina joined. 19 Ukraine has also signed an agreement indicating that it is exploring the possibility of joining the Angarsk IUEC. 20 Mongolia, South Korea, and Japan are reported to be interested as well. 21 Three phases of development are planned for Angarsk. In the first phase, the facility will utilize existing enrichment capacity under IAEA supervision. Because Angarsk is currently 14 NTI brief, Russia: Nuclear Fuel Cycle Developments, last updated 14 February 2007, accessed on 18 October 2007 at 15 INFCIRC/667. See also, S.V.Ruchkin and Vladimir Loginov, Securing the Nuclear Fuel Cycle: What Next?, IAEA Bulletin, Volume 48, no. 1 (2006), pp Rosatom Nuclear Chief Says Int l Uranium Center to e Set Up in Siberia, ITAR-TASS, 19 September 2006, as referenced in IPFM, Global Fissile Report 2007, p IPFM, Global Fissile Report 2007, p UIC, Briefing Paper # 62, Nuclear Power in Russia, October Russia, Armenia sign uranium production, enrichment deals, RIA Novosti, February 6, 2008; as quoted in Mary Beth Nikitin et. Al., Managing the Nuclear Fuel Cycle: Policy Implications of Expanding Global Access to Nuclear Power, Congressional Research Service Report for congress, updated 7 March UIC, Briefing Paper # 63, Nuclear Power in Ukraine, September UIC, Briefing Paper #

6 Russia s smallest commercial enrichment facility, 22 once additional funding has been secured from new partners, the second phase will involve expanding the facility to increase perhaps double its enrichment capacity. Finally, the facility will be fully internationalized, operating with many customers under IAEA auspices. 23 In addition to providing natural uranium and enrichment services on the front end, Russia also has some capability for fuel takeback. Like the United States, Australia, and other countries, however, it is not yet ready to serve as an international destination for spent fuel and hazardous waste. The Soviet Union propagated a policy, which Russia has maintained, of taking back and reprocessing spent fuel that was Russian in origin and had been irradiated in Soviet/Russian-designed reactors. At present, Bulgaria and Ukraine ship roughly 40 and 220 tons of spent fuel per year, respectively, back to Russia. 24 In the late 1990s, Russia s Ministry of Atomic Energy (Minatom) overcame public opinion to push through legislation allowing importation of non-russian origin spent fuel from other countries, for temporary technological storage and (or) reprocessing. 25 However, owing to legal difficulties, liability issues, and vocal public opposition, Russia has yet to import foreign spent fuel not irradiated in Soviet-designed reactors. In July 2006, the head of Rosatom, Minatom s successor, proclaimed: Russia has not imported foreign spent fuel, is not importing and will not import it in the future. 26 Yet Russia still remains willing to implement takeback agreements pertaining to Russian-origin fuel, including states that forego domestic fuel cycles. Russia s current back-end policy is to reprocess spent fuel from its six VVER-440 reactors and its prototype BN-600 reactor, which together account for roughly 15% of generating capacity. Spent fuel from the reactors providing the remaining 85% of capacity is currently stored in pools either on-site or centrally, with a dry cask facility capable of storing 37,785 metric tons scheduled to come online in Russia has no facility for the permanent disposal of nuclear waste but is currently evaluating the possibility of siting one near the uranium mining and milling center at Krasnokamensk. For such a facility to be built, however, Russia will have to satisfy critics who descry, the unenviable record of environmental pollution in the former Soviet Union, its poor nuclear industry safety performance, and the continuing lack of transparency and variable integrity of Russia's industrial and financial systems. 28 Whatever the eventual fate of the Krasnokamensk repository, some type of permanent disposal facility must be built if Russia is to overcome 22 World Information Services on Energy (WISE), World Nuclear Fuel Facilities Fact Sheet, last updated 29 June 2007, accessed on 18 October 2007 at 23 Ibid. 24 K.G. Kudinov, Creating an Infrastructure for Managing Spent Nuclear Fuel, in G.E. Schweitzer and A.C. Sharber (eds.), An International Spent Nuclear Fuel Storage Facility-Exploring a Russian Site as a Prototype, National Academies Press, Washington, DC, 2005, as referenced in IPFM, Global Fissile Material Report 2007, p Article 50 of the Law of the Russian Soviet Federal Republic (RSFSR) on Environmental Protection, 10 July 2001, No. 93-FL, as referenced in IPFM, Global Fissile Report 2007, p Kirienko: Russia is Not Planning to Bring Foreign Spent Fuel, Interfax, 11 July 2006, as referenced in IPFM, Global Fissile Report 2007, p On Compliance with the Obligations of the Joint Convention on the Safety of Spent Fuel Management and the Safety of Radioactive Waste Management, Russian Federation National Report, prepared for the Second Review Meeting of the Joint Convention on the Safety of Spent Fuel Management and Safety of Radioactive Waste management, Vienna, May 2006, as referenced in IPFM, Global Fissile Report 2007, p Neil Chapman and Charles McCombie, Nine requirements to develop an international repository in Russia, Arius Newsletter, #11, October

7 political opposition and serve as a viable takeback destination for international spent fuel. Many nuclear power users, the United States and the European Union included, are unlikely to send spent fuel to a country that is only willing to guarantee temporary storage. In a final supply assurances-related move, Russia has also offered to contribute to an internationally controlled nuclear fuel stockpile. In September 2007, Sergei Kiriyenko, the head of Russia s nuclear agency, announced to the IAEA General Conference Russia s intent to provide $300 million worth of LEU enough for two full reactor cores to be placed under IAEA control. 29 Additional information concerning Russia s fuel bank offer appears below in the section on the NTI-backed IAEA fuel bank. The pros of Russia s proposal are many. It is international in scope and can potentially accommodate any states in good proliferation standing. It has already made progress at the Angarsk facility. It offers the opportunity to sell Uranium, and it also includes preparations (at least rhetorical) for fuel takeback on the back-end. Yet there are a number of drawbacks also associated with this. Russia may be setting itself up to provide a service for which few countries make up the demand side. Moscow already offered the Angarsk arrangement whereby uranium enrichment services and waste takeback are provided to Iran, which declined. It is possible that other countries might be more eager to avail themselves of the multilateral scheme, but it is also possible that the investment will prove equally unattractive to other countries. Similarly, until Russia solves the legal hurdles surrounding its offers to take back spent fuel especially with regards to the current policy of only servicing fissile material either of Russian origin or used in Russia-designed reactors the back-end portion of the offer may also languish. USA: Global Nuclear Energy Partnership (GNEP) In his January 2006 State of the Union address, President Bush announced a new Advanced Energy Initiative, 30 part of which was the creation of the Global Nuclear Energy Partnership (GNEP). GNEP s overall goals are to expand the use of nuclear power, increase proliferation and supply security, and use new technology to recycle spent fuel without separating plutonium, thereby generating more energy from nuclear fuel while reducing both waste and proliferation threats. 31 GNEP consists of seven programmatic implementing elements: nuclear power expansion, integrated spent fuel recycling capability, minimizing nuclear waste, advanced recycling reactors, reliable fuel services, grid-appropriate reactors, and nuclear safeguards. 32 The reliable fuel services component includes two proposals: a fuel leasing and takeback arrangement, and an LEU fuel stockpile. 29 Miles A. Pomper, Russia Offers to Jump-Start IAEA Fuel Bank, Arms Control Today, October 2007, accessed on 18 October 2007 at 30 George W. Bush, State of the Union Address by the President, 31 January 2006, accessed on 18 October 2007 at 31 United States Department of Energy, Announcing the Global Nuclear Energy Partnership, Press Briefing by Deputy Secretary of Energy Clay Sell, 6 February 2006, accessed on 18 October 2007 at 32 Information on GNEP is available at 27

8 GNEP s creation followed a proposal put forth by President Bush in 2004 that was greeted with controversy. In a speech at National Defense University, 33 he recommended that the Nuclear Suppliers Group attempt to close the dual-technology loophole by refusing to sell enrichment and reprocessing technology to any country not already in possession of it. The speech s main point of contention involved the President s recommendation that countries, explicitly renounce pursuit of enrichment or reprocessing technologies in exchange for reliable access to nuclear fuel. 34 In response, a number of countries that had previously sought nuclear energy only perfunctorily suddenly changed policies and worked to develop domestic fuel cycles. They did so to create maneuver room for themselves in the hope that, should a system like President Bush was proposing actually come to pass, they could be grandfathered into it as nuclear fuel suppliers. The President s announcement was meant to remove the rhetorical justification for states to pursue domestic fuel programs, but it had the unintended consequence of inducing a number of states that had been on the fence to actually pursue the technology. The GNEP fuel-leasing program is therefore a more sophisticated packaging of a similar idea. The program places no preconditions on membership: states do not have to promise to renounce nuclear fuel in order to participate. Instead, the United States is now attempting to limit the spread of enrichment technology by creating commercial incentives for countries to forego domestic nuclear fuel cycle capabilities. The hope is that commercially attractive fuel leasing will prove compelling enough to induce countries to forego a full fuel cycle, despite their NPT Article IV rights to develop peaceful nuclear technology should they so choose. Under GNEP, the United States would provide fresh fuel for nuclear power programs in countries that agree not to seek enrichment technology. The plan includes a back end element as well: after leasing fuel, the United States would be responsible for the return and final disposition of spent fuel and waste. GNEP also offers support for research into new, proliferation-resistant spent-fuel reprocessing as a means to reduce the volume of radioactive waste requiring permanent disposal. The GNEP fuel assurance plan involves creating an LEU fuel bank by removing highly enriched uranium (HEU) from U.S. nuclear weapons and downblending it for civilian reactor use. In a September 2005 videotaped address to the IAEA, Energy Secretary Samuel Bodman announced a U.S. plan to provide up to 17.4 metric tons of HEU to be downblended to LEU as part of an IAEA-verifiable guaranteed fuel supply. 35 This proposal s ability to generate supply security internationally is limited, however, because some states of concern may be disinclined to view a fuel bank using U.S.-origin fuel as solving the problem of a politically motivated fuel cutoff. U.S. Ambassador to the IAEA Gregory Schulte 33 George Bush, Remarks by the President on Weapons of Mass Destruction Proliferation, National Defense University, Fort Lesley J. McNair - Washington, D.C., 11 February Ibid. 35 Samuel Bodman, Remarks Prepared for International Atomic Energy Agency 49th Session of the General Conference, 26 September 2005, accessed on 18 October 2007 at See also IAEA, Communication dated 28 September 2005 from the Permanent Mission of the United States of America to the Agency, INFCIRC/659, 29 September The following month, Secretary Bodman announced a separate plan to remove 200 tons of HEU from the nuclear weapons stockpile, of which 20 tons was to be reserved for the creation of a fuel bank (Samuel Bodman, Remarks Prepared for 2005 Carnegie International Nonproliferation Conference, 7 November 2005), but this fuel has not been designated part of the GNEP fuel assurances program. 28

9 recognized as much, saying: for some countries, [a U.S. fuel bank] will provide reassurance, but for others, perhaps it won t. 36 Fundamentally, GNEP offers access to fuel and technology, but only to recipients who meet Washington s approval. In September 2007, the GNEP partnership expanded from the five original members the United States, Russia, Japan, France, and China to also include Australia, Bulgaria, Ghana, Hungary, Jordan, Kazakhstan, Lithuania, Poland, Romania, Slovenia, and Ukraine. The likely contributions to GNEP vary based on each country s particular experience with nuclear technology, but a rough grouping based on relevant characteristics appears below in Table 1. Table 1: GNEP Partners and their Roles 37 GNEP Partners China France Russia United States Japan Australia Kazakhstan Bulgaria Hungary Lithuania Romania Slovenia Ukraine Poland Ghana Jordan Roles within GNEP Founding members Nuclear weapons states Major nuclear energy users Full fuel cycle experience and facilities Founding member Major nuclear energy user Full fuel cycle experience and facilities Major uranium suppliers Significantly dependent on nuclear power No major fuel cycle facilities Emerging nuclear energy user Countries further from domestic nuclear power use Additionally problematic, the ambitious GNEP fuel takeback plan has yet to overcome the obvious major hurdle of identifying a storage facility for long-term fuel disposal. The United States has constructed a geologic repository beneath Yucca Mountain in Nevada, but its use is being challenged on environmental and political grounds. Until Yucca Mountain begins operating which appears unlikely in the near-term or some other permanent disposal solution is reached, the political feasibility of the United States accepting returned spent fuel from other countries is low. 36 Ibid. 37 UIC, Briefing Paper #

10 Like the Russian proposal, GNEP is a relatively comprehensive attempt at dealing with many different aspects of a multifaceted problem. As a result, it has also drawn criticism from a number of quarters. First, some have suggested it goes too far too fast. In October 2007 the National Academies of Science published a report recommending that plans for new plant construction under GNEP be scaled back to allow for more time on research, development, and peer review. 38 Second, whether GNEP could eventually be used to engage a country that presents a more dire proliferation concern, such as Iran, remains an open question, as does whether countries wishing to expand their nuclear programs would be willing to sign on to its fuel cycle limitations. Third, the decision to back plutonium reprocessing overturns decades of previous U.S. policy on the subject in favor of a technology some say will be unable to provide self-protecting plutonium (i.e., plutonium that is sufficiently dangerous to handle that it dissuades those with malicious intent from trying to steal it). 39 Finally, a lingering uncertainty is GNEP s fate after The initiative is closely associated with the Bush Administration. It is impossible to know whether the next U.S. President will continue to support the program, especially if he or she is less committed than President Bush to core GNEP tenets such as utilizing a closed fuel cycle in the United States or exporting small power reactors to developing countries. Nuclear Threat Initiative (NTI)-Backed IAEA Fuel Bank Separate from the measures proposed in INFCIRC/640, the IAEA has also taken steps toward developing its own LEU fuel bank. In September 2006, Nuclear Threat Initiative Chairman Sam Nunn announced a $50 million donation from NTI financial backer Warren Buffett intended to jumpstart the creation of an LEU stockpile owned and controlled by the IAEA. 40 The stockpile could serve as a fuel source of last resort for states that experienced politically motivated supply disruptions, provided they met nonproliferation standards and did not possess domestic fuel cycle capabilities. Buffett s donation came in the form of a two-year challenge grant with two conditions. First, the IAEA needed to take the necessary steps to approve creation of the fuel reserve. Second, one or more IAEA member states needed to provide $100 million or more in additional funding or an equivalent value of LEU. As noted above, in September 2007, Russia announced its intent to provide $300 million worth of LEU to an IAEA-controlled fuel bank. Assuming Moscow follows through on this promise, it should provide sufficient impetus to get the IAEA fuel bank up and running. An IAEA-controlled fuel bank would go far to serve as a fuel supplier of last resort. It would not address other related challenges, such as the disposition of countries to pursue independent fuel cycles, but by creating a credible source of fuel in the event of a supply 38 National Academies of Science News Release DOE s Spent Nuclear Fuel Reprocessing R&D Program Should Be Scaled Back;Boosted Efforts to Get New Nuclear Power Plants Online Needed,, 27 October 2007, < 39 For example, see Frank von Hippel, Managing Spent Fuel in the United States: The Illogic of Reprocessing, International Panel on Fissile Materials, January 2007, at < 40 IAEA press release, Nuclear Threat Initiative Commits $50 Million to Create IAEA Nuclear Fuel Bank, 19 September 2006, accessed on 18 October 2007 at 30

11 disruption, it could go far in removing one rhetorical justification for domestic enrichment or reprocessing. World Nuclear Association: Assuring Security of Supply Proposal The World Nuclear Association (WNA), a London-based group representing the nuclear industry, convened its own taskforce parallel to the IAEA MNA working group whose findings are presented above. The goal of the MNA group was to provide the IAEA with industry and consumer perspectives on the subject of multilateral fuel guarantee systems. It was the only major effort of its kind to seek out and incorporate fuel consumers views. The WNA proposal makes some general suggestions regarding the back end of the fuel cycle, basically concluding that further study is needed to determine whether increased nuclear power generation will create demand for new reprocessing and/or recycling capabilities. The report suggests that the overall goal for the back end of the fuel cycle should be, to achieve a situation in which countries without back-end fuel cycle facilities have a clear-cut option of having their spent fuel reprocessed and MOX fuel manufactured, at affordable prices, at national or multinational back-end facilities located in countries with expertise and a high level of industrial development in this area. 41 The WNA report offers a more detailed suggestion for front-end supply security. It recommends a three-layered system, in which supply security is maintained by the following successive tiers: 42 Level 1: The existing world market. The world market for enrichment and fuel supply services has a long track record of successfully supplying the entire civilian nuclear fuel industry. The WNA notes that, in the multi-decade history of the fuel market, there has never yet been a supply disruption that led to loss of electricity generation. 43 Level 2: Collective guarantees by enrichers. The unique aspect of the WNA proposal is its suggestion that uranium enrichers collectively form their own layer in the supply assurance framework. According to this proposal, in the event that commercial delivery of supplies were disrupted for political reasons, the other uranium enriching corporations would be committed to supply the contracted amount, in equal shares under terms previously specified between the IAEA and the enrichers. Terms would be set by means of a standard backup supply clause inserted in commercial contracts. 44 Level 3: International Fuel Bank. As a last resort, an international body such as the IAEA would have access to a reserve of LEU in case enrichers are unable to meet their level 2 commitments. The WNA recommends that this fuel bank be created by 41 World Nuclear Association (WNA), Ensuring Security of Supply in the International Nuclear Fuel Cycle, May 2006, p Ibid, p Ibid, p Ibid., p. 3 31

12 downblending former weapons material so as not to disrupt existing uranium supply markets. 45 The WNA proposal is attractive in that it is narrowly focused and adds an extra layer of assurance to the already-robust commercial market for fuel and fuel-related services. It does, however, present two major implementation challenges. First, it calls for the creation of complex, difficult-to-negotiate arrangements among suppliers and between consumers and enrichers. Second, it does not bind the governments in which enrichment companies are located to follow whatever commercial agreements are eventually negotiated. 46 An additional potential problem is its focus on enrichment. The WNA proposal s creation of shared responsibility for meeting enrichment supply contracts does nothing to increase supply security for other stages of the nuclear fuel cycle. From the fuel consumer s point of view, electricity generation is equally impossible whether the fuel supply is blocked at the enrichment stage, the mining or the fuel fabrication plant. Enrichment Providing Countries: Reliable Access to Nuclear Fuel (RANF) Proposal The six countries that provide commercial uranium enrichment services for export the United States, Russia, France, the U.K., Germany and the Netherlands (the last three being the managers of URENCO) presented their own joint proposal for reliable fuel access in June Like the WNA proposal, it recommends relying on existing commercial mechanisms to provide a first tier of supply security. Unlike the WNA plan, in the event of a politically motivated market failure, the RANF proposal recommends dipping into LEU stockpiles controlled by the governments of uranium enriching states. This proposal does not take a firm position on whether LEU reserves should be controlled nationally or by an international body such as the IAEA, but it does note that there are potential benefits to maintaining diversity of reserves. The difficulties associated with the RANF proposal are related to how it defines fuel producers and consumers. Like the WNA plan, it only takes into account blockages at the uranium enrichment stage of the fuel cycle. In other words, it defines fuel producers only as those countries providing uranium enrichment services. Since the group is composed of enrichment-providing countries, this definition is perhaps understandable. However, it fails to take into account parts of the uranium fuel manufacturing process that take place in other countries, including mining, milling, conversion, and fuel fabrication. As noted above with regards to the WNA proposal, uranium enrichment is not the only potential choke point on the front end of the nuclear fuel cycle; a blockage at any point in the system would cause the same effects. If the overall aim is to affect the behavior of fuel consuming countries by reassuring them and promoting supply security, a recommendation that narrowly defines suppliers will not be the most effective tactic. 45 Ibid., pp Braun, p IAEA Board of Governors (BOG) Document, Communication dated May 31, 2006 received from the Permanent Missions of France, Germany, the Netherlands, the Russian Federation, the United Kingdom of Great Britain and Northern Island, and the United States of America, regarding a Concept for a Multilateral Mechanism for Reliable Access to Nuclear Fuel, IAEA Document GOV/INF/2006/10, Vienna, Austria, 1 June

13 Japan: IAEA Standby Arrangements System for the Assurance of Nuclear Fuel Supply Despite possessing significant domestic uranium enrichment capabilities, Japan was not invited to participate in the group of six countries that drafted the RANF proposal. In September 2006, Japan put forth its own proposal designed to address some of the shortcomings of the RANF plan by incorporating additional components of the front end fuel cycle and by restructuring the RANF plan s narrowly defined fuel supplier vs. consumer architecture. 48 Under Japan s proposed Standby Arrangements System, countries would report their nuclear fuel capabilities every year. This report would include an inventory of surplus capacity. Whereas the RANF proposal applied only to uranium enrichment, the Standby Arrangements System is meant to apply to all dimensions of the nuclear fuel cycle s front end, including capacity data on uranium supply, storage, conversion, enrichment and fuel fabrication. 49 The volume of data collected is intended to provide security assurances to countries concerned about supply disruptions outside of the uranium enrichment stage. Additionally, by requesting that all countries with fuel cycle capabilities report to the IAEA, and by requesting data for all types of front-end activities, Japan s proposal does away with the inherent dichotomy of the RANF plan s division into supplier and recipient states. The Standby Arrangements System has a number of potential weaknesses. It creates no binding strictures or dispute mediation mechanisms. It also depends for its success on voluntary disclosure of information by national and industry representatives. However, its non-discriminatory nature makes it a politically palatable improvement to the RANF proposal. Germany: Internationalized Fuel Cycle Enclave In April 2007, Germany put forth a creative proposal for creating a multilateral fuel enrichment center located in an extraterritorial space controlled by the IAEA. 50 The proposal calls for a country to give up part of its territory to the IAEA. On this land, the IAEA would open an enrichment facility, with states and/or firms invited to open separate, additional facilities in the same extraterritorial space. LEU production in this territory would operate according to market dynamics (i.e., without additional taxes or subsidies), but the IAEA would retain control over all LEU produced for export. Functionally speaking, this control would mean that LEU could only be sold to countries whose IAEA nonproliferation commitments were in good standing. So as not to create market distortions, the IAEA enrichment plant would be financed either commercially or by member states. The IAEA would neither own nor manage the facility. It would, however, retain a supervisory 48 IAEA, Communication received on 12 September 2006 from the Permanent Mission of Japan to the Agency concerning arrangements for the assurance of nuclear fuel supply, INFCIRC/683, 15 September Ibid., p IAEA, Communication received from the Resident Representative of Germany to the IAEA with regard to the German proposal on the Multilateralization of the Nuclear Fuel Cycle, INFCERC/704, 4 May

14 responsibility analogous to a normal government s supervision of commercial uranium enrichment taking place within its territory. A number of practical concerns make implementing the German proposal difficult. At the most basic level, the IAEA s legal status might preclude the organization from managing and controlling an international territory at all. Furthermore, the operational details of creating an international enclave beginning with the search for a country willing to cede territory for the purpose, and continuing with questions such as who would be responsible for security and infrastructure are daunting. The proposal is interesting, but the high hurdles it would have to overcome, coupled with the unclear payoff upon implementation make it unlikely to succeed. United Kingdom: Government Enrichment Bonds In May 2007, the U.K. submitted a non-paper to the IAEA Board of Governors concerning the use of voluntary enrichment bonds to augment the fuel supply security proposals put forth in the aforementioned RANF proposal. 51 Under the enrichment bond system, a fuel supplier and consumer would enter into a legally binding bonded agreement guaranteeing fuel delivery, with the IAEA acting as guarantor and arbiter. Essentially, the proposal would provide additional, voluntary contractual protection for fuel recipient countries concerned about politically motivated fuel disruptions by giving the IAEA an official role as dispute mediator. The proposal may be relatively politically palatable due to its limited scope, but for the same reason it is also unlikely to solve the root of the problem. A robust system of commercial guarantees and/or fuel banks is more likely to address the concerns of states worried about foregoing domestic fuel production than is adding a single additional layer of protection to existing commercial transactions. Conclusions As difficult as it has proven to create a system offering proliferation and supply security simultaneously, some consensus has been reached in recent years outlining the general characteristics that a successful multilateral nuclear fuel cycle assurance system would display: 52 Market neutrality. Four large commercial enrichment services export companies USEC, URENCO, Tenex, and AREVA currently provide sufficient services to satisfy enrichment demand in countries whose domestic capacity is insufficient to meet their needs. Any eventual fuel supply guarantee system should not disturb the functioning of this market by introducing fuel subsidies or other measures. Proposals that include fuel banks generally limit them to use when a country has experienced a politically motivated supply disruption, keeping them otherwise separate from the day-to-day functioning of the fuel market. 51 IAEA, Communication dated 30 May 2007 from the Permanent Mission of the United Kingdom of Great Britain and Northern Ireland to the IAEA concerning Enrichment Bonds - A Voluntary Scheme for Reliable Access to Nuclear Fuel, INFCIRC/707, 4 June Oliver Meier, News Analysis: The Growing Nuclear Fuel-Cycle Debate, Arms Control Today, September 2006, accessed on 18 October 2007 at 34

15 Focus on the front end. Front-end fuel cycle issues, particularly those related to uranium enrichment and the provision of low-enriched uranium (LEU) for reactors, are generally viewed as more pressing than back-end issues. Many proposals seek to address the front end first and deal with questions of reprocessing and disposal later. Diversity of reserve supplies. Potential access to a number of fuel banks in various locations is better than reliance on a single reserve. Stockpiled LEU rather than fabricated fuel. Because each fuel assembly must be fabricated to fit the specifics of the reactor into which it will be placed, it is generally preferable when planning for the creation of fuel banks to hold in reserve quantities of LEU rather than fabricated fuel. Behind these general commonalities, however, there exists a common problem. Fuel supply assurance mechanisms are all fundamentally solutions to the wrong problem. They purport to assuage the fears of skittish fuel consumers by making the market for nuclear fuel more robust and less susceptible to political disruption. But the demonstrable reality of the nuclear energy market, according to the findings of the IAEA Expert Group on Multilateral Approaches, is that it already works. Fuel consumers are not overwhelmingly skittish and are not loudly calling for the creation of these mechanisms. What, then, is the actual purpose of the fuel supply assurances outlined above? Their purpose is to remove a country s rhetorical justification for pursuing a domestic fuel cycle. The most obvious example of this case is Iran. Many in the international community, the United States included, would like to be able to state unequivocally that Iran s pursuit of a fuel cycle is clear evidence of intent to develop a nuclear weapons option. If additional arrangements such as fuel banks, redundant commercial guarantees, and the like were put in place, concerned leaders in Washington and elsewhere would find it that much easier to build a robust case for forcing Iran to give up its nuclear ambitions. The question that must be asked, however, is whether that stronger case would then translate into greater international support for action. The answer is an unhelpful maybe. Even in the absence of additional fuel supply assurances, the international community is already well aware which states are of concern from a proliferation standpoint. Yet the reason that action is or is not taken against these states in the form of censure, sanctions, or military strikes has as much to do with geopolitical realities as with making an airtight rhetorical case for action. Developing international norms and building consensus are laudable goals, and all of the proposed supply assurance mechanisms would likely make marginal gains toward these aims. However, as an expenditure of a government s scarce diplomatic and financial resources, other priorities, both grandiose (such as the Nunn, Schulz, Kissinger, Perry proposal to work toward the ultimate elimination of nuclear weapons) and technical (such as improved nuclear forensics databasing), might provide more bang for the nonproliferation buck. 35