United States General Accounting Office

GAO Report to the Chairman, Committee on

International Relations, House of

Representatives

July 1998 NUCLEAR

NONPROLIFERATION

Uncertainties With

Implementing IAEA’s

Strengthened

Safeguards System

GAO/NSIAD/RCED-98-184

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-280004 

July 9, 1998

The Honorable Benjamin A. Gilman

Chairman, Committee on International Relations

House of Representatives

Dear Mr. Chairman:

International Atomic Energy Agency (IAEA) safeguards are a cornerstone of

U.S. and international efforts to prevent nuclear weapons proliferation.

Since the early 1970s, the international community has relied on IAEA

safeguards to independently verify that non-nuclear weapon states are

complying with their obligations under the Treaty on the Non-proliferation

of Nuclear Weapons (NPT) not to manufacture or otherwise acquire

nuclear weapons or other nuclear explosive devices. Under the NPT, states

with comprehensive safeguards agreements must declare all nuclear

material to the Agency. IAEA then regularly inspects all facilities or

locations containing declared material to verify its peaceful uses. The

discovery that Iraq had developed a clandestine nuclear weapons program

while IAEA was inspecting Iraq’s civilian nuclear facilities caused the

Agency and its member states to initiate an intensive effort to strengthen

further the safeguards system. As you requested, this report (1) describes

the changes IAEA is undertaking to strengthen its safeguards program,

(2) assesses the reasonableness of IAEA’s assumptions regarding the impact

of these changes on program costs and efficiency, and (3) comments on

the extent of IAEA’s reliance on the United States to finance the Agency’s

safeguards activities.

Results in Brief In response to Iraq’s secret nuclear weapons program, the international

community, led by the United States, launched an intensive effort to create

a new capability within the IAEA’s safeguards system to detect secret or

undeclared activities. IAEA is beginning to implement a strengthened

safeguards system by introducing advanced safeguards techniques under

its existing safeguards agreements. It is also seeking additional rights to

conduct more intrusive inspections and collect information on nuclear

activities through an Additional Protocol that supplements the existing

safeguards agreements. IAEA expects that implementing the new measures

will add costs to its safeguards budget but believes that the increased

costs will be offset with future savings from greater efficiencies in

safeguards operations. IAEA thereby hopes to maintain current funding

levels over the long run. However, while IAEA has conducted some

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preliminary planning, it does not have a long-term plan for implementing

the new system. Furthermore, if IAEA’s assumptions about financing the

new system through costs savings do not materialize, and the Agency’s

funding priorities and constraints do not change, IAEA will likely seek

increased funding primarily through extrabudgetary contributions from

the United States.

IAEA’s changes to its safeguards system are intended to give its inspectors

greater ability to detect clandestine nuclear activities in non-nuclear

weapons states that are signatories to the NPT or other regional

nonproliferation treaties. Under existing safeguards agreements with

states and regional organizations, IAEA has increased its access to

information on all nuclear activities at declared facilities in non-nuclear

weapons states. It has done so by conducting routine short notice

inspections, taking environmental samples inside facilities, and testing

new safeguards technology that allows remote monitoring of facilities

under safeguards. When and if IAEA member states adopt the Additional

Protocol, the Agency will gain the ability to use more intrusive measures

such as collecting information on all aspects of a state’s nuclear industry,

including research and development activities and nuclear import and

export data; conducting short notice inspections of undeclared or suspect

sites and unannounced inspections at declared nuclear facilities; and

taking environmental samples beyond locations where inspectors

currently have access.

IAEA’s member states expect that the Agency will implement the

strengthened safeguards system through cost neutrality, that is, through

savings from expected future efficiency gains and cutbacks on certain

types of inspections that on an annual basis offset the cost increases

resulting from implementation.1

 However, IAEA’s assumptions about cost

neutrality may not materialize because IAEA officials do not yet know the

extent to which the new safeguards measures will allow the Agency to

reduce its existing inspections. In addition, savings in cost and inspector

effort of some new measures, such as remote monitoring and

environmental sampling at declared sites, may not be fully realized.

Furthermore, while IAEA has performed some preliminary planning, it does

not have a long-term implementation plan that (1) identifies the total

resource requirements for implementing the new measures, (2) provides

an implementation schedule with milestones for equipment and estimated

1

Although IAEA refers to cost neutrality, this does not mean that IAEA will recover its initial

implementation costs. Instead, IAEA use of this term means that once the new system is fully

implemented, IAEA expects that annual operation costs for its safeguards program will be about the

same as they are today, adjusted for inflation.

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projections for adoption of the Additional Protocol, and (3) provides

criteria for assessing the effectiveness of the new measures and their

usefulness for reducing inspection efforts.

IAEA is heavily dependent on U.S. financial support to meet its safeguards

obligations. For example, in 1997, the U.S. contribution to IAEA’s

safeguards budget was almost 40 percent of the Agency’s total safeguards

budget when extrabudgetary contributions were included. IAEA has limited

options for funding the new Strengthened Safeguards System because of

the practice, imposed by its major contributors, that limits the Agency’s

regular budget to zero-real growth, and by the Agency’s practice, insisted

on by IAEA’s less developed member states, of maintaining a balance

between IAEA’s technical cooperation and its safeguards programs. As a

result, if these constraints continue and IAEA’s assumptions about cost

neutrality for the new program are not borne out by experience, IAEA will

likely turn to the United States for substantial voluntary extrabudgetary

contributions to implement the Strengthened Safeguards System. A review

of the Agency’s overall program priorities by independent senior experts,

initiated in March 1998 by IAEA’s Director General, provides IAEA member

states with the opportunity to reevaluate, among other things, the budget

practice of zero real growth and the need to maintain a funding balance

between the safeguards and technical cooperation programs, in light of

IAEA’s increasing safeguards workload.

Background IAEA, an autonomous international organization affiliated with the United

Nations, was established in Vienna, Austria, in 1957. The Agency has the

dual role of promoting the peaceful uses of nuclear energy through its

nuclear safety and technical cooperation programs, and verifying, through

its safeguards program, that nuclear materials subject to safeguards are

not diverted to nuclear weapons or other proscribed purposes. IAEA’s

governing bodies include the General Conference, composed of

representatives of the 127 IAEA member states; and the 35-member Board

of Governors, which provides overall policy direction and oversight to

IAEA. A Secretariat, headed by the Director General, is responsible for

implementing the policies and programs of the General Conference and

Board of Governors.

IAEA derives its authority to establish and administer safeguards from its

statute, the NPT and regional nonproliferation treaties, bilateral

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commitments between states, and project agreements with states.2

Article III of the NPT binds each of the treaty’s 180 signatory states that had

not manufactured and detonated a nuclear device prior to January 1, 1967,

(referred to in the treaty as non-nuclear weapon states) to conclude an

agreement with IAEA that applies safeguards to all source and special

nuclear material in all peaceful nuclear activities within the state (known

as comprehensive safeguards agreements).3

 The regional treaties contain

similar obligations. As of March 1998, all but four of the non-nuclear

weapons states with significant nuclear activities had comprehensive

safeguards agreements with IAEA.

4

 India, Pakistan, Israel, and Cuba,

because they are not parties to the NPT or other regional nonproliferation

treaties, do not have comprehensive safeguards agreements with IAEA,

thus, they are not required to declare all of their nuclear material to the

Agency.5

 Instead, these four states have IAEA safeguards agreements that

limit the scope of the Agency’s safeguards activities to monitoring only

specific material, equipment, and facilities. India and Pakistan are known

to have nuclear weapons programs and detonated several nuclear devices

during May 1998.6

 Israel is also believed to have produced nuclear

weapons. The five nuclear weapon states that are parties to the

NPT—China, France, the Russian Federation, the United Kingdom, and the

United States—are not obligated by the NPT to accept IAEA safeguards but

have voluntarily submitted designated materials and facilities to IAEA

safeguards inspections to signal to the non-nuclear weapon states their

willingness to share in the administrative and commercial costs of

safeguards. (App. I lists states that are subject to safeguards inspections,

as of February 1998.)

IAEA safeguards are a set of technical measures and activities by which IAEA

seeks to verify that nuclear material subject to safeguards is not diverted

2

These regional treaties, the Treaty for the Prohibition of Nuclear Weapons in Latin America (the 1967

Treaty of Tlatelolco), the South Pacific Nuclear Free Zone Treaty (the 1985 Treaty of Rarotonga), the

Treaty of Pelindaba (for Africa, 1995), and the Treaty of Bangkok (for Southeast Asia, 1995) require

each participating country to conclude a comprehensive safeguards agreement with IAEA.

3

Nuclear materials include source materials, such as natural uranium, depleted uranium, and thorium;

and special fissionable materials, such as enriched uranium and plutonium.

4

According to a State Department official, a fifth country with a significant nuclear program, Georgia,

has signed but not yet ratified a safeguards agreement with IAEA pursuant to the NPT.

5

According to a State Department official, Cuba is not known to currently possess undeclared nuclear

material.

6

India and Pakistan detonated their nuclear devices after January 1, 1967 and therefore cannot be

considered as nuclear weapons states under terms of the NPT.

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to nuclear weapons or other proscribed purposes. Material-accounting

measures verify quantities of nuclear material declared to the Agency and

any changes in the quantity over time. Containment measures use physical

barriers, such as walls and seals, to control the access to and the

movement of nuclear material, while surveillance devices, such as

cameras, detect the movements of nuclear material and any tampering

with IAEA’s containment measures. Finally, IAEA uses on-site inspections,

among other things, to help ensure that a state has reported all of the

material it is required to report.

In 1997, IAEA’s total expenditures were $313 million, of which about

$93 million was spent on the safeguards program. IAEA funds its programs

through its regular budget, for which all members are assessed, and by

voluntary extrabudgetary contributions from the United States and other

member states.7

 In 1997, IAEA spent about $82 million for safeguards

through its regular budget and almost $11 million from extrabudgetary

contributions. Since 1985, IAEA’s member states have generally limited the

Agency’s regular budget to zero real growth, allowing only nominal

increases for inflation and staff salaries.8

 Also, IAEA endeavors to meet the

demands of less developed member states to maintain a balance in funding

between its technical cooperation program and its safeguards program.

Changes to IAEA’s

Safeguards Program

Expected to Help

Detect Clandestine

Nuclear Activities

IAEA safeguards play a vital role in seeking to prevent nuclear weapons

proliferation by verifying the peaceful use of nuclear materials. According

to a State Department official, prior to the discovery of Iraq’s secret

nuclear weapons program, states had been reluctant to accept a more

intrusive safeguards regime. However, events in Iraq clearly demonstrated

the need for expanding the scope of safeguards. Following revelations

about Iraq in 1991, IAEA adopted several measures to strengthen certain

reporting requirements and to improve the Agency’s access to information.

The Agency and its member states also launched a thorough study of its

safeguards system, known as Programme 93 plus 2, which resulted in the

development of a new, two-part, strengthened safeguards system. IAEA

expects that changes to strengthen its safeguards program will enhance its

7

The U.S.-assessed contribution rate for IAEA’s regular budget is 25 percent. The United States

contributes a slightly higher amount for the safeguards component to the regular budget (an additional

2.7 percent on average), along with 32 other members, as part of IAEA’s effort to provide partial relief

to 95 lesser developed IAEA member states.

8

In 1993, we found that IAEA had difficulty funding its safeguards program because of limits on budget

growth. Further, we found that IAEA’s financial situation could worsen as more nuclear facilities

become subject to safeguards and as IAEA implements new measures to strengthen safeguards. See

Nuclear Nonproliferation and Safety: Challenges Facing the International Atomic Energy Agency

(GAO/NSIAD/RCED-93-284, Sept. 22, 1993).

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capability to detect clandestine or undeclared nuclear activities in

non-nuclear weapon states.

IAEA’s Initial Reaction to

the Revelations in Iraq

Following the revelations about Iraq’s clandestine nuclear program in

1991, IAEA adopted three measures to strengthen reporting and access to

information. In 1992 and 1993, IAEA’s Board of Governors reiterated the

Agency’s right to exercise authority to conduct special inspections at

locations other than those declared to the Agency, based on all

information available to it, including that provided by member states. The

Board also adopted changes requiring more timely reporting by states of

certain design information for new facilities that will handle safeguarded

materials. Furthermore, the Board also adopted a voluntary reporting

system for exports of certain nuclear materials and equipment on the

Nuclear Suppliers Group Trigger List.9

 Currently 52 states and Taiwan

have agreed to participate in the reporting system.

The Strengthened

Safeguards System: Part 1

Measures

IAEA’s Board of Governors approved part 1 of the new strengthened

safeguards system in 1995. Part 1 measures being implemented through

existing safeguards agreements include obtaining additional information

from states regarding facilities that once contained, or will contain,

nuclear material subject to safeguards; the expanded use of unannounced

inspections; the collection of environmental samples at locations where

inspectors now have access; and the use of advanced technology to

remotely monitor the movements of nuclear material.

Part 1 measures include the following:

• Non-nuclear weapons states are now required to provide IAEA with

additional information about nuclear activities undertaken prior to entry

into force of their safeguards agreements.

• IAEA’s inspectors are now allowed to perform environmental sampling at

facilities and locations where they currently have access. Environmental

samples taken from the surfaces of equipment and buildings and the air,

water, vegetation, and soil at declared nuclear facilities can help IAEA

detect the presence of certain types of undeclared activities, including

uranium enrichment and plutonium reprocessing.

9

The Nuclear Suppliers Group is an informal group of major nuclear suppliers that have established

nuclear export guidelines. The Trigger list is a list of nuclear items that the suppliers have agreed

should be transferred only if the receiving state has IAEA safeguards applied to all of their nuclear

material.

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• IAEA is increasing its access to all declared nuclear and nuclear-related

locations and will employ the use of unannounced inspections.

• IAEA is testing new safeguards measurement and surveillance systems that

can operate unattended and can transmit safeguards data remotely.

Remote monitoring technology—including electronic seals, radiation and

motion detectors, and video surveillance—is intended to make IAEA’s

traditional safeguards program effective, and at the same time more

efficient, by reducing many of the regular safeguards inspections,

particularly at light water nuclear power reactors and storage facilities.

• IAEA is increasing its cooperation with state and regional systems of

accounting and control, including those in the European Union, performed

by the European Atomic Energy Community (EURATOM) inspectorate of the

European Commission and those between Brazil and Argentina carried out

by their Agency for Accounting and Control of Nuclear Material in the

conduct of inspections.

Part 2 Strengthened

Safeguards Measures: the

Additional Protocol

In May 1997, IAEA’s Board of Governors approved part 2 of its strengthened

safeguards measures in the form of a model agreement known as the

Model (or Additional) Protocol.10 This new protocol supplements member

states’ safeguards agreements and will give the Agency new authority to

collect information and conduct inspections. Part 2 measures are designed

to more quickly and effectively alert the international community to the

possible production or diversion of nuclear material for nuclear weapons

or other proscribed purposes. Implementing part 2 measures will require

each state to adopt an Additional Protocol as a supplement to its existing

safeguards agreement that will give IAEA the additional legal authority the

Agency believes it needs to implement the new measures.

Part 2 measures include the following:

• IAEA will gather information about all aspects of a state’s nuclear fuel

cycle, including information about research and development on the

nuclear fuel cycle, the manufacture and export of sensitive and other key

nuclear-related equipment, and all buildings on a nuclear site.

• IAEA inspectors will be provided access (also referred to as

“complementary access”) to all aspects of a state’s nuclear fuel cycle

including; facilities at which nuclear fuel-cycle research and development

is carried out; manufacturing and import locations and all buildings on a

nuclear site, including undeclared or suspect sites. This is intended to

10The Model Protocol Additional to the Agreement(s) Between State(s) and the International Atomic

Energy Agency for the Application of Safeguards.

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provide, among other things, a deterrent to the co-location of clandestine

and peaceful activities. IAEA may exercise this right through short notice

inspections on sites where nuclear material is located and at other

locations. This access will include the right to take environmental samples.

• IAEA inspectors will be provided access to conduct “wide-area”

environmental monitoring, that is, collecting environmental samples

beyond declared locations when deemed necessary.11

• States will improve their administrative arrangements for designating

inspectors and issuing multiple-entry visas to facilitate unannounced/short

notice inspections and permit access to modern means of communication.

IAEA Is Beginning to

Implement the

Strengthened Safeguards

System

Since 1995, IAEA has tested and started to implement some of the

strengthened safeguards measures. For example, IAEA is conducting field

tests of remote monitoring systems in Switzerland, South Africa, and the

United States. IAEA has also held unannounced inspections in Sweden,

South Africa, and Canada. By the end of 1998, IAEA expects that seven

facilities in Switzerland will be remotely monitored and IAEA will begin

using this technology at light water nuclear power plants in Japan. IAEA has

collected environmental samples at 64 facilities (enrichment plants and

hot-cell installations that could be used to reprocess plutonium) in 34

countries in preparation for incorporating this technique into its routine

safeguards inspections. IAEA has also begun the collection of information

from states on decommissioned and closed-down facilities and

information provided on a voluntary basis on the imports and exports of

nuclear related equipment and material. IAEA has been developing a

broad-based information analysis system that will help it assess the

expanded declarations of nuclear activities provided by inspected states.

The new system will also include the results of ad hoc, routine, and special

inspections; information provided by other member states; data from

public sources; and results of environmental sampling. This information

will be incorporated into country profiles.

As of March 1998, seven of IAEA’s non-nuclear weapons states had signed

Additional Protocols to their safeguards agreement based on the Model

Protocol: Armenia, Australia, Georgia, Lithuania, the Philippines, Poland,

and Uruguay. Australia has also ratified the Protocol and Armenia is

implementing it provisionally. Other states with significant nuclear

programs, including Canada, France, the United Kingdom, the United

States, and the 13 non-nuclear weapon states of EURATOM, have submitted

11According to Article 9 of the Model Protocol, IAEA shall not seek access to carry out wide-area

environmental sampling until its use is approved by the Board of Governors.

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drafts of Additional Protocols for IAEA’s Board of Governors approval in

June 1998.12 Japan and the Republic of Korea are expected to follow later

this year or early in 1999. India’s representative to IAEA told us that India

has no plans for ratifying the Additional Protocol. Pakistan’s

representative was unable to meet with us or answer our written questions

on the matter.

IAEA Will Likely Face

Difficulties

Implementing the

Strengthened

Safeguards System

Although IAEA recognizes that some new costs will be incurred in

implementing the Strengthened Safeguards System, it expects to offset

increased annual implementation costs with future savings from greater

efficiencies in safeguards operations, thereby maintaining current funding

levels in the safeguards program. However, IAEA does not know whether

anticipated cost savings through efficiencies can be achieved. Moreover,

IAEA does not know whether, or to what extent, the new safeguards

measures will allow a reduction in current inspection levels, and the

savings in cost and inspector effort of some measures such as remote

monitoring and environmental sampling at declared sites, may not be fully

realized. While IAEA has conducted some preliminary planning for

implementing certain aspects of the new system, IAEA does not know

whether in the long run it can implement the new system with existing

resources because it has not developed a long-term plan that (1) identifies

the total resource requirements for implementing the new measures,

(2) provides an implementation schedule with milestones for equipment

and estimated projections for adoption of the Additional Protocol, or

(3) establishes criteria for assessing the effectiveness of the new measures

and whether they could be used to reduce inspection efforts.

IAEA and Its Member

States Expect

Implementation to Be Cost

Neutral

In a May 1996 report, IAEA’s Director General outlined to IAEA’s Board of

Governors how the new system might be implemented to meet the goal of

eventual cost neutrality and provided some notional cost estimates for

implementing the new system. The report anticipates that implementation

would follow a step-by-step approach, with part 1 measures being

implemented first, followed by part 2 measures. As IAEA gains experience

with the new measures, the report stated that costs savings could be

achieved by reducing inspections at nuclear power plants. IAEA expects

that the implementation of part 1 and 2 measures would likely cost

$34 million over 6 years starting in 1997. The estimated annual

implementation costs range from $5.3 million to $6.5 millon a year. IAEA

12The Board of Governors must approve a state’s Additional Protocol before it can be implemented by

IAEA.

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projects that cost savings, resulting from a two-thirds reduction of interim

safeguards inspections at nuclear power reactors, starting in 1999, would

lead to cost neutrality by 2002.13

The representatives of member states we spoke to generally expect that

the implementation of the overall Strengthened Safeguards System will be

cost neutral.14 For example, the representatives to IAEA from China,

Germany, Japan, and the United Kingdom told us that IAEA may need

additional short-term funding increases to implement the new system, but

they expected that the savings resulting from increased efficiency will

offset implementation costs at a later date. The Canadian representative

also stated that cost increases resulting from the implementation of the

new system are not inevitable and that it is possible that IAEA can find the

necessary resources within the Safeguards Department by re-evaluating

existing programs and priorities.

IAEA’s Assumptions About

Cost Savings May Not

Materialize Unless New

Measures Prove to Be

Effective

IAEA hopes that by implementing the new measures it will be able to

achieve future cost savings through a reduction in inspections and an

increase in efficiency. However, IAEA’s assumptions about the extent of

cost savings may not materialize. Our discussions with IAEA officials

indicate that the amount of cost savings that can be expected during

implementation is uncertain because (1) IAEA does not have experience in

implementing the new measures, and there is no consensus among

member states to determine when and to what extent the new system will

allow for a reduction in existing inspections; (2) the savings in cost and

inspector effort of some measures, such as remote monitoring and

environmental sampling, may not be fully realized; and (3) the need to

analyze new information provided by member states under comprehensive

safeguards agreements and the Additional Protocols may require more

inspectors or other staff.

IAEA intends to reduce routine inspections if it can provide to its member

states a credible assurance regarding the absence of undeclared nuclear

13IAEA offered two cost savings scenarios, one for reduced interim inspections at light-water reactors

(which are refueled during a reactor shutdown and are generally less expensive to safeguard), and the

other for on-load power reactors (which are refueled while producing power and are generally more

expensive to safeguard). The projected cost savings did not involve changes in the safeguards

timeliness goals established for nuclear power reactors.

14We obtained information from the representatives of 14 member states to IAEA. They included the

representatives of the five nuclear weapon states (the United States, the United Kingdom, France, the

Russian Federation, and China); representatives from states with comprehensive safeguards

agreements (Australia, Argentina, Brazil, Canada, Japan, Germany, and South Africa); and

representatives from states without comprehensive safeguards agreements (Israel and India).

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activities, such as uranium enrichment and plutonium reprocessing, in

non-nuclear weapon states. However, our discussions with IAEA officials

indicate that there are many uncertainties about the effectiveness of the

new measures and the means by which the Agency will develop the

findings that could support such assurances. For example, according to an

IAEA Safeguards Division Director, the Agency’s new rights to inspect

suspected undeclared sites could be limited by the amount of access

provided to IAEA inspectors and the degree to which a country can conceal

information through deception and distraction, as was the case in Iraq. In

addition, while environmental sampling of the air, water, vegetation, and

soil has been demonstrated to be a powerful new tool to detect undeclared

activities such as plutonium reprocessing, the absence of data showing

enrichment or reprocessing may not be sufficiently credible to reduce

inspections. According to an IAEA official, the absence of such data does

not necessarily prove that the activities did not occur, but only that the

Agency did not find evidence of such activities. Moreover, Department of

Defense (DOD) officials told us that, in general, wide-area environmental

sampling, the feasibility of which is still under study, could be extremely

costly and vulnerable to countermeasures deployed by a safeguarded

state, that can undermine its effectiveness. According to IAEA’s former

Director General, member states should not expect that the new measures

will be 100 percent accurate and should expect that they will not detect

proliferators 100 percent of the time. He warned that no inspection regime

is perfect.

IAEA’s member states are not in agreement on when and to what extent

IAEA can reduce inspections based on credible assurances of the absence

of undeclared nuclear activities. According to the Canadian representative,

IAEA should start planning now for how it will integrate new safeguards

measures with the current system. Once IAEA can arrive at credible

assurances, it should be in a position to reduce inspections at nuclear

power reactors and concentrate its traditional safeguards measures on

nuclear materials, such as highly enriched uranium and reprocessed

plutonium, which can be directly used in building a nuclear weapon. In

contrast, U.S. officials believe that it is unwise to drop existing measures,

such as interim inspections that have proven effective, and replace them

with the untested new measures. U.S. officials stated that IAEA should

implement and assess the new system over a period of years and replace

existing measures as it builds confidence in the system.

IAEA hopes to reduce the costs of safeguards by implementing advanced

safeguards technologies that reduce inspector effort. These technologies

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include remote monitoring and environmental sampling. However, the

extent of potential savings from implementing these new technologies is

not fully certain. For example, in 1995 IAEA estimated that the use of

remote monitoring, for containment and surveillance of material at 

79 nuclear facilities located in Canada, Japan, South Korea, Switzerland,

and Taiwan, could save $2.3 million a year by reducing IAEA’s inspection

effort by two-thirds at these facilities. In addition, the use of unattended

monitoring systems to verify the nondiversion of nuclear material at

on-load reactors could save $2.9 million a year in inspection effort.

However, according to IAEA, several factors could reduce the amount of

savings derived from remote monitoring. IAEA noted that any failures of

equipment would jeopardize the potential savings in the inspection effort,

since additional inspections would be required to reestablish the

inventories of nuclear materials in the facilities.15 Also, according to an

IAEA Safeguards Division Director, while remote monitoring would reduce

the number of costly site visits, it may not significantly reduce the number

of inspectors (whose salaries accounted for 58 percent of the direct

safeguards inspection costs in 1996, according to our calculations)

because they would be needed to analyze the data transmitted to Agency

headquarters and regional offices. In addition, IAEA has stated that it may

have to use short notice inspections to provide additional assurances that

the remote monitoring equipment has not been tampered with.

The costs of analyzing environmental samples also may reduce potential

savings. For example, according to U.S. officials, the average costs of

analyzing environmental samples is about $2,700 and $4,000 per sample,

depending on the type of analysis performed. IAEA has not determined the

number or frequency of samples that will be taken during routine

inspections at enrichment facilities and hot cells. While IAEA plans to

reimburse, on a limited basis, member states participating in its network

of analytical labs, a large percentage of the costs of analyzing

environmental samples is being borne by the United States. In addition,

IAEA has not yet fully determined the impact that environmental sampling

at declared sites will have on reducing inspection efforts at the sites.

According to State and Department of Energy (DOE) officials, the United

States is currently studying alternative sample analyses techniques for IAEA

which may reduce these costs.

15There are also installation and operation costs for these systems. A February 1995 IAEA report

estimated that the total initial costs of installing remote monitoring for containment and surveillance

equipment at the 79 sites would be about $6.25 million and that yearly operating costs would be about

$995,000. The cost for installing unattended nondestructive assay equipment at eight sites would be

about $1.35 million, with yearly operating costs of $202,000.

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Moreover, analyzing new information available to the Agency from

safeguards agreements and the new protocol will increase inspector

efforts. According to IAEA, the analysis of the new information is a

fundamental part of the Strengthened Safeguards System. When the

evaluation indicates possible inconsistences in state declarations, IAEA

intends to take certain follow-up actions, including, where appropriate,

requesting access to sites or other locations to increase its confidence that

there are no undeclared materials or activities. According to an IAEA

safeguards official, this analysis is being performed by IAEA’s three

safeguards operations divisions and the new system is expected to

produce an influx of information to the Agency. According to IAEA’s

Safeguards Division Director of Concepts and Planning, IAEA will need

more inspectors because of the increase in information flowing into the

Agency and the increase in material placed under safeguards. In its draft

1999-2000 program and budget, IAEA estimates that information analysis

will require the equivalent of six staff, although this is absorbed within

existing staff levels. In total, five new inspectors were added in the draft

1999-2000 program and budget to handle protocol related activities.

IAEA Does Not Have a

Long-term Plan to

Implement the

Strengthened Safeguards

System

Although IAEA is beginning to implement some parts of the strengthened

safeguards system, such as installing remote monitoring equipment, it has

not yet developed a plan or a total resource estimate for implementing the

full system. While some planning documents exist, the Agency has not

developed a long-term plan that (1) identifies the total resources needed to

implement the new measures, (2) provides an implementation schedule

with milestones for equipment, and estimated projections for adoption of

the Additional Protocol and (3) provides criteria for assessing the

effectiveness of the new measures and the ways they may contribute to

reducing inspection efforts.16 A long-term plan would allow IAEA and its

member states to better manage cost uncertainties and funding limitations.

According to the Deputy Director General for Safeguards, IAEA has not

developed a plan or a cost estimate because of the uncertainties involving

the implementation of the new Strengthened Safeguards System and

because they have concentrated their efforts on gaining adoption by the

Board of the Model Protocol and conclusion by individual member states

of their Additional Protocols. In IAEA’s draft program and budget for 1999

and 2000, the Agency states that it is difficult to estimate the cost of

activities resulting from the implementation of the part 2 measures under

16Such documents include IAEA’s June 1997 Preliminary Implementation Plan for Remote Monitoring,

July 1997 Protocol Implementation Action Plan, and December 1997 Plan for Implementation of the

Protocol Additional to Safeguards Agreements.

Page 13 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
B-280004 

the Model Protocol, because there is no certainty about the number of

member states that will adhere to the Protocol through the year 2000 or

the volume of activities in each member state. In November 1997, we

discussed the lack of a plan with the U.S. Ambassador to the U.S. Mission

to the U.N. System Organizations in Vienna. He told us that the United

States should not be alarmed that IAEA did not have a plan for the early

implementation of the Strengthened Safeguards System because it was

more important for the United States to push for the early ratification of

the Additional Protocols by a large number of IAEA’s member states.

According to the Ambassador, early ratification is important to encourage

the limited number of countries of proliferation concern to accept the

Additional Protocol.

IAEA is beginning to implement elements of part 1 of the new system,

which will require large initial expenditures for equipment and is

beginning to develop information that can be used as the basis for

establishing a long-term plan. During their review of IAEA’s draft 1999-2000

program and budget, the Geneva Group of major donors states posed

questions to the IAEA Secretariat concerning the uncertainties involving

implementation of the new, Strengthened Safeguards System.17 They

expressed their concern about the lack of a plan and a cost estimate,

including costs and time frames for implementing remote monitoring, and

the lack of details on the Agency’s assumption that costs for activities

related to the model protocol can be absorbed within existing resource

levels. They also expressed concerns about how projected funding

increases for safeguards in the draft 1999-2000 program and budget related

to the increased costs for implementing the new system. In response to

their questions, IAEA provided information that could be used as the basis

for developing a long-term plan. IAEA indicated that by the end of 2000 it

expects that (1) remote monitoring will be implemented at as many as 100

sites, (2) as many as 50 states with nuclear programs will have adopted an

Additional Protocol, and (3) activities related to the Protocol will account

for about 10 percent of staff costs in the field for countries where the

Additional Protocol is being implemented. IAEA’s Standing Advisory Group

on Safeguards Implementation (SAGSI), a group of safeguards experts that

advise IAEA’s Director General, has called on IAEA’s Secretariat to develop a

work plan, with milestones and cost estimates, so that the Agency can

evaluate different approaches to efficiency, effectiveness, and costs during

its implementation of the new system. According to the IAEA Deputy

17The Geneva Group represents 14 member states that are major donors to U.N. agencies, including

IAEA. The major donors include Australia, Belgium, Canada, France, Germany, Italy, Japan, the

Netherlands, the Russian Federation, Spain, Sweden, Switzerland, the United Kingdom, and the United

States.

Page 14 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
B-280004 

Director General for Safeguards, in early 1998, SAGSI and the Agency

embarked on a project called “Integration of Safeguards” to assess the

relative effectiveness of the new measures in comparison with traditional

verification activities and to seek potential reductions in inspection efforts

in states that have adopted the Additional Protocol.

U.S. Financial Support

Expected to Increase

as IAEA Implements

Strengthened

Safeguards System

IAEA is heavily dependent on U.S. financial support to meet its safeguards

obligations. For 1997, the U.S. contribution to IAEA’s safeguards budget

grew to almost 40 percent of the Agency’s total safeguards budget when

extrabudgetary contributions are included. IAEA has limited options for

funding the new, Strengthened Safeguards System as long as its regular

budget is held to zero real growth and competing funding priorities and

political constraints inhibit reallocation of resources. U.S. and IAEA

officials agree that IAEA will continue to seek increased U.S. financial

support as the Agency implements its new safeguards measures.

The United States Is the

Largest Financial

Contributor to IAEA’s

Safeguards Program

The United States has historically been a primary supporter of IAEA and its

largest contributor. It considers the NPT and IAEA safeguards to be key

elements of international efforts to prevent nuclear weapons proliferation.

In 1997, the United States spent over $53 million for IAEA’s safeguards

program: about $22 million from assessed contributions; almost

$17 million from extrabudgetary contributions; and almost $16.5 million

from various U.S. agencies’ in-kind contributions, such as the use of

laboratory facilities and personnel. These in-kind contributions are not

reflected in IAEA’s total safeguards budget. As shown in table 1, the U.S.

contribution to IAEA’s safeguards budget through its regular and

extrabudgetary contributions has grown since 1989 to almost 40 percent of

IAEA’s total safeguards budget in 1997, making the United States the largest

financial contributor to IAEA’s safeguards program.18

18We chose 1989 as a base year for analysis because it was the last year of IAEA safeguards operations

before the Persian Gulf War and the breakup of the former Soviet Union.

Page 15 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
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Table 1: U.S. Contributions to IAEA’s Safeguards Budget, 1989-1997

Dollars in millions

Year

IAEA’s total

safeguards

budget

U.S. contributions

to IAEA’s total

safeguards budget

(and percentage of

total)

IAEA’s regular

safeguards

budget

U.S. contributions

to IAEA’s regular

safeguards budget

(and percentage of

total)

Extrabudgetary

contributions to

IAEA’s safeguards

budget

U.S.

extrabudgetary

contributionsa (and

percentage of total)

1989 $56.4 $16.6 (29%) $52.7 $14.6 (28%) $3.8 $2.1 (55%)

1990 59.9 18.2 (30) 54.2 15.0 (28) 5.6 3.3 (58)

1991 61.4 18.4 (30) 57.1 15.8 (28) 4.3 2.6 (60)

1992 66.1 21.3 (32) 59.7 16.5 (28) 6.4 4.8 (74)

1993 73.8 24.1 (33) 64.9 18.0 (28) 8.9 6.1 (69)

1994 74.9 23.5 (31) 68.1 18.9 (28) 6.8 4.6 (67)

1995 86.3 32.1 (37) 72.2 20.3 (28) 14.0 11.8 (84)

1996 83.1 25.8 (31) 74.7 21.0 (28) 8.5 4.8 (57)

1997 97.8 38.6 (39) 78.3 21.6 (28) 19.5 17.0 (87)

Note: Numbers may not add due to rounding.

aU.S. extrabudgetary contributions to IAEA do not include some U.S. in-kind assistance, such as

U.S. facilities and laboratory support to IAEA.

Source: GAO’s analysis of IAEA’s budget data from the Division of Budget and Finance, IAEA’s

Department of Administration.

In 1997, the United States contributed nearly $22 million to IAEA’s regular

safeguards budget that funded core inspection activities, such as staff

salaries, travel, training, and other direct costs in IAEA’s safeguards

program operations and other program areas. The United States also

contributed almost $17 million in extrabudgetary cash contributions to

IAEA from funds provided by the Department of State. This includes over

$7 million to assist the Agency in funding activities essential to

implementing the strengthened safeguards system through the U.S.

Program of Technical Assistance to IAEA Safeguards (POTAS), and over

$7 million through the Nonproliferation and Disarmament Fund (NDF) for

the purchase of new safeguards equipment.19 In addition to the United

States’ regular safeguards and extrabudgetary contributions to IAEA, we

estimated that, in fiscal year 1997, the Department of State, DOE, and DOD

provided in-kind assistance valued at $16.5 million to support IAEA’s

19The United States authorizes extrabudgetary funds to IAEA by fiscal year, while IAEA budgets by

calendar year. As a result, U.S. extrabudgetary funds that are appropriated for IAEA in any fiscal year

may be accounted for by IAEA in the previous calendar year. In addition, U.S. extrabudgetary funds

may be carried over and disbursed in subsequent calendar years. For fiscal year 1997, the United

States authorized $9.1 million for the POTAS program.

Page 16 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
B-280004 

safeguards program. Of this amount, DOE’s Office of Arms Control and

Nonproliferation, International Safeguards Division, provided about

$10 million from its international safeguards program to support

high-priority projects at IAEA and DOE laboratories for the strengthened

safeguards program. In addition, during 1997, State and DOD spent about

$2.5 million to analyze environmental samples for IAEA. The remaining

$4 million in funds supported POTAS research and development at DOE

laboratories and management of the POTAS program at Brookhaven

National Laboratory. (App. II discusses U.S. extrabudgetary contributions

and in-kind assistance to IAEA’s safeguards program in 1997.)

With Limited Budget

Options, IAEA May

Increase Reliance on U.S.

Extrabudgetary Support

Increases in the amount of nuclear materials subject to safeguards, and

new initiatives for verifying that excess nuclear weapons material in the

United States will not be used for nuclear explosive purposes, have caused

IAEA’s safeguards requirements to grow. According to IAEA, IAEA’s

requirements to safeguard nuclear materials exceed, and will continue to

exceed, the resources provided to the safeguards program under the

regular budget. (App. III discusses the growth in the amount of nuclear

materials subject to IAEA’s safeguards since 1989.) Since IAEA’s regular

budget is subject to zero-real growth, IAEA has only been able to meet its

safeguards requirements because of its heavy reliance on extrabudgetary

support from its member states, which is not subject to zero-real growth

limitations. Our analysis shows that IAEA’s total safeguards budget (regular

and extrabudgetary contributions) grew 37 percent from 1989 to 1997.20

While IAEA’s regular safeguards budget grew at an average annual real rate

of 2.28 percent, extrabudgetary contributions, which are not subject to

zero-real growth limitations, grew at an average annual rate of 10.2 percent

since 1989, or almost four times the rate of annual real growth in regular

budget expenditures.21 As a result, extrabudgetary expenditures in the

safeguards program have almost doubled since 1989 (see app. IV for our

analysis of real growth in IAEA’s safeguards program from 1989 to 1997).

Further, IAEA’s draft 1999 and 2000 program and budget shows that the

Agency will continue to require substantial extrabudgetary contributions

from its member states for initial equipment purchases for the new

safeguards measures. (See app. V for more details on IAEA’s proposed

safeguards budget for 1999 and 2000.)

20Our calculations of average annual real growth rate includes any increases in expenditures above the

average rate of inflation, including salary increases.

21Our analysis does not include all in-kind contributions to IAEA’s safeguards program. According to

the State Department, the existence of substantial in-kind contributions underscores IAEA’s heavy

reliance on extrabudgetary support from its member states.

Page 17 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
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IAEA’s draft program and budget for 1999 and 2000 states that the cost of

upgrading and replacing obsolete equipment with new technology,

including the majority of remote monitoring components, will depend

heavily on extrabudgetary resources—$15.2 million and $12.4 million for

1999 and 2000, respectively. IAEA’s Deputy Director General for Safeguards

has stated that without strong U.S. extrabudgetary support, IAEA could not

afford to replace its obsolete surveillance equipment with new systems,

which must occur before remote monitoring can be widely used.

According to an IAEA official, approximately 300 to 400 obsolete

surveillance systems will need to be replaced over the next 5 years. (See

app. V for IAEA resources spent and required for purchasing new

safeguards equipment for 1994 to 2000.) IAEA’s Secretariat warns that if

there is a shortfall in extrabudgetary contributions, they will have to

modify the Agency’s strategy for replacing equipment. The inability to

replace obsolete and unreliable equipment may have a negative effect on

IAEA’s ability to attain its safeguards goals, thus providing a lower level of

assurance to member states that nuclear material has not been diverted to

military purposes.

According to IAEA’s Secretariat, its overall programmatic requirements will

continue to exceed the resources available with zero real growth. In

addition, the Secretariat stated that the overreliance on extrabudgetary

resources should not continue. However, the Secretariat further stated

that unless IAEA member states seek alternative funding sources or reduce

or eliminate specific activities, the Agency will have to continue to rely on

extrabudgetary contributions to achieve its objectives in the safeguards

program.

To ensure the implementation of IAEA’s Strengthened Safeguards System,

officials from the State Department and the U.S. Mission to the U.N.

System Organizations in Vienna have stated that the United States is

prepared to provide the Agency with additional extrabudgetary funding.

However, this is subject to the availability of appropriated funds. State

Department and DOE officials also hope to continue to rely on the use of

alternative funding sources, like the NDF, to help finance the high priority

needs of IAEA’s strengthened safeguards program, such as acquiring new

safeguards equipment. For example, for 1998, IAEA has already requested

funds from State Department appropriations, including the NDF, to

purchase high priority safeguards equipment not funded under the regular

budget. IAEA’s equipment requirements, totaling $10.7 million, include new

radiation monitoring equipment and 76 units for a new digital surveillance

system.

Page 18 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
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IAEA Maintains a Funding

Balance Between Its Dual

Responsibilities

In addition to the limitations of zero real growth in IAEA’s regular budget,

IAEA’s safeguards budget is affected by other considerations, specifically

the need to maintain a funding balance between safeguards and the

technical cooperation program.22 Since 1958, in promoting the peaceful

uses of nuclear energy through its technical cooperation program, IAEA has

provided technical assistance to its member states by supplying

equipment, expert services, and training that support the establishment or

upgrading of nuclear techniques and facilities. Although the United States

does not receive technical assistance, it has been the leading financial

donor to IAEA’s technical cooperation program. Furthermore, the United

States is effectively paying a disproportionate share of the technical

cooperation fund, a voluntary fund that finances technical assistance

projects, because many member states are not paying their designated

shares. Yet, many of these states are receiving the benefits of IAEA’s

technical assistance. While the United States and other major donors to

IAEA believe that applying safeguards is IAEA’s most important function,

most developing countries believe that receiving technical assistance

through the technical cooperation program is just as important and

participate in IAEA for the technical assistance it provides. The United

States and other major donors principally participate in the program to

help ensure that member states fully support IAEA’s safeguards and the NPT.

Accordingly, IAEA has endeavored to maintain a balance in funding

between its dual statutory responsibilities of providing technical

assistance and ensuring compliance with safeguards agreements. As seen

in figure 1, in 1997 IAEA spent about 29 percent and 30 percent of its overall

budget resources on technical assistance and safeguards activities,

respectively.

22See Nuclear Nonproliferation and Safety: Concerns With the International Atomic Energy Agency’s

Technical Cooperation Program (GAO/RCED-97-192, Sept. 16, 1997).

Page 19 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
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Figure 1: IAEA’s 1997 Expenditures by

Major Activity (dollars in millions)

• 5%

Nuclear safety ($15.3)

30% • Safeguards ($93.2)

29% • Technical assistance ($90.2)

20%•

Other programs ($63.8)

•16%

Administration ($50.7)

Source: IAEA’s Division of Budget and Finance, Department of Administration.

IAEA’s draft program and budget for 1999 continues to maintain this

funding balance in the regular budget. However, in November 1997, IAEA’s

Director General stated that there should not be a dollar-for-dollar balance

between the technical cooperation and safeguards programs and that

developing countries should realize that IAEA’s safeguards are also

important to their well-being. In February 1998, the Geneva Group of

major donor countries asked IAEA to set priorities for its programs more

strategically, and some wanted to break the one-for-one balancing of IAEA

resources for technical cooperation and safeguards. In March 1998, IAEA’s

Director General began a review of IAEA’s overall program priorities to

ensure that, in view of budgetary constraints, IAEA’s program activities

meet the priorities of its member states. According to executive branch

officials, pressures for balance remain, compounded by the recent failure

of several major donors to pay their share of the technical cooperation

fund.

Conclusions IAEA’s safeguards program plays a vital role in seeking to prevent nuclear

proliferation by verifying that non-nuclear weapon states are adhering to

their treaty obligations not to acquire nuclear weapons. However, for

Page 20 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
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those countries that are not subject to comprehensive safeguards such as

India and Pakistan, the Strengthened Safeguards System will have little

effect. The future effectiveness of IAEA’s safeguards depends on whether

IAEA will receive sufficient legal and financial support from its member

states to permit full implementation of the new safeguards measures and

how well the Agency implements changes to strengthen its ability to detect

clandestine nuclear activities in countries with treaty obligations not to

develop nuclear weapons. We believe that without a long-term plan, IAEA

may not be able to effectively and efficiently implement these changes. A

long-term plan, that includes cost estimates for implementing the new

measures, an implementation schedule and milestones, and criteria for

assessing the effectiveness of the new measures could help IAEA and its

member states better manage the uncertainty facing the Agency as

implementation of the new measures begins. In addition, we concur with

the position of U.S. officials who told us that they believe that it would be

unwise to drop existing safeguards measures until the new measures are

proven effective.

IAEA is heavily dependent on U.S. financial support to meet its safeguards

obligations, with U.S. contributions now accounting for almost 40 percent

of the Agency’s total safeguards budget. IAEA’s mandated requirements to

safeguard nuclear materials will continue to exceed resources in its

regular budget because IAEA’s member states are continuing their practice

of zero real growth and their practice of maintaining a one-for-one balance

between its safeguards and technical cooperation programs. IAEA’s draft

budget for 1999 continues the one-for-one funding balance and requests

strong extrabudgetary support from its member states, including the

United States, to replace obsolete equipment and otherwise support the

implementation of the strengthened safeguards system. The Director

General’s effort to review IAEA’s overall program priorities presents

member states with an opportunity to reevaluate the budget policies of

zero real growth and the need to maintain a funding balance between the

safeguards and technical cooperation programs, in light of IAEA’s

increasing safeguards workload. Reprogramming funds into the

safeguards budget, at least during the transition to a new strengthened

system, and removing the budget limitations of zero real growth could

reduce IAEA’s reliance on extrabudgetary contributions from the United

States.

Recommendations We recommend that the Secretary of State, working with other IAEA

member states, request the Director General to develop and circulate a

Page 21 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
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plan for implementing parts 1 and 2 of the Strengthened Safeguards

System. Such a plan should include (1) an estimate of the total cost of

program implementation; (2) a schedule, with milestones, for

implementing the strengthened safeguards measures, and (3) criteria for

assessing the effectiveness of the new measures. This plan should be used

by IAEA and its member states to determine when the new measures can

replace existing safeguards measures. Furthermore, IAEA should

periodically revise and update the plan as it implements the strengthened

safeguards measures and use the plan to develop its budgetary

requirements for the program.

To reduce reliance on U.S. extrabudgetary contributions, we also

recommend that the Secretary of State reevaluate the United States’ policy

of supporting zero real growth for IAEA’s regular budget and the need to

maintain a one-for-one funding balance between the safeguards and

technical cooperations programs.

Agency Comments The Department of State, in coordination with the Departments of Energy

and Defense, the Arms Control and Disarmament Agency; the Nuclear

Regulatory Commission, and the U.S. Mission to the United Nations

System Organizations in Vienna, Austria, provided oral comments on a

draft of this report. These agency officials generally agreed with the facts

presented in the report. However, these officials raised a concern about

our recommendation that the members require the IAEA Secretariat to

develop a strategic plan for the implementation of the Strengthened

Safeguards System. The officials were concerned that by using such a

plan, IAEA’s Secretariat could be pressured by the Board of Governors to

meet arbitrary target deadlines for phasing out old measures for cost

reasons even through the effectiveness of the new measures had not yet

been established. According to the officials, the United States has

emphasized to IAEA that the effectiveness of the Strengthened Safeguards

System must be established before some of the current measures can be

phased out.

We agree that it would be unwise to drop existing safeguards measures

until the new measures are proven effective. However, we believe that a

long-term implementation plan that establishes criteria for assessing the

effectiveness of the new measures so that IAEA and its member states can

determine when the new measures can replace existing measures is

consistent with the U.S. position and would not require IAEA to phase out

existing measures before the new measures are in place and working.

Page 22 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
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Such a plan is important because it would establish the basis for making

any decision on phasing out some of the existing measures and would

provide IAEA and its member states a clearer understanding of

implementation costs for the new system.

In commenting on this report, IAEA’s Deputy Director General for

Safeguards also expressed some doubts about the utility of a long-term

implementation plan. He has stated that a long-term plan with milestones

fails to recognize the unique and special nature of the Additional Protocol

and that while existing safeguards are implemented with rigid quantitative

requirements, the Additional Protocol will be implemented more

qualitatively. The Deputy Director General said that implementation of

inspection activities under the new Protocol will be on a case-by-case

basis, subject to overall budgetary appropriations for the implementation

of safeguards. As a result, the Agency’s management will have flexibility in

deciding how, where, and when to engage resources in order to provide

greater assurances of nonproliferation. He also said that IAEA has

attempted to derive cost estimates based on general assumptions about

the number of states joining the Additional Protocol and a projection of

the level of effort required in implementation.

We recognize that the Additional Protocol will be implemented differently

than the existing safeguards system. However, the Additional Protocol is

only one of two parts to the new Strengthened Safeguards System. We

believe that a long-term implementation plan for the Strengthened

Safeguards System is valuable for several reasons. First, the Strengthened

Safeguards System involves potentially large expenditures for equipment

and services (such as environmental sampling). A flexible long-term plan,

updated periodically, would allow member states to better forecast their

contributions. Second, while there is uncertainty regarding the level of

activity under the Additional Protocol, we noted in our report that IAEA has

started to estimate some costs associated with its implementation. By

incorporating these costs and the assumptions used to derive them into a

long-term implementation plan, IAEA’s Secretariat and member states will

be in a better position to adjust resources as needed and respond to any

unforeseen needs. Third, while the Deputy Director General commented

that IAEA will only spend the money it has to implement the new system, a

plan would allow IAEA to better focus its resources as it gains experience

and maximize the potential benefits of the new system.

The State Department agreed with our recommendation that the budget

policy of supporting zero real growth in IAEA’s regular budget and the need

Page 23 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
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for maintaining the one-for-one balance between safeguards and technical

cooperation be reevaluated, but it raised several concerns. First, the

United States, as one of the founding members of the Geneva Group of

major donors, has traditionally been a staunch supporter of the Group’s

zero real growth approach to U.N. budgets, and changes in this policy for

IAEA might undermine the U.S. budget positions in other international

organizations. Second, given limited resources and congressional interest

in “capping” the amount of money made available for assessed

contributions, funding increases at IAEA would force the United States to

seek reductions in other international organizations’ budgets. Third, with

respect to the one-for-one balance between safeguards and technical

cooperation programs, a State Department official noted that without a

decision to alter this balance, not only are reallocations within existing

budget levels hampered, but any budget increase to fund the safeguards

program would politically need to be matched by an equal increase in

other areas of IAEA’s budget, effectively doubling the cost.

We recognize that State’s concerns need to be addressed, but we believe

that reevaluating the zero-real growth policy for IAEA and the one-for-one

balance between IAEA’s safeguards and technical cooperation programs

could (1) provide a more stable funding basis for the safeguards program

while the Agency is implementing the Strengthened Safeguards System

and (2) reduce IAEA’s reliance on extrabudgetary contributions from the

United States.

The Executive Branch also provided several technical corrections that

have been incorporated as appropriate into the report.

Scope and

Methodology

To describe changes IAEA is undertaking to strengthen its safeguards

program and to assess the reasonableness of IAEA’s assumptions regarding

the impact of these changes on program costs and efficiency, we visited

IAEA headquarters in Vienna, Austria, in October and November 1997. In

Vienna, we met with various IAEA officials, including the Director General,

the Deputy Director General for Administration, the Director of the

Division of Budget and Finance, the Deputy Director General for

Safeguards, and other IAEA staff in the departments of Administration and

Safeguards. We also analyzed financial and programmatic data from IAEA

on its safeguards program, including documents from meetings of IAEA’s

General Conference and its Board of Governors. In general, we reported

IAEA’s annual expenditure data, except in the cases where budget data

were most appropriate, such as table 1 which demonstrated the share of

Page 24 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
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the U.S. contributions to IAEA’s safeguards budget from 1989 to 1997.

Differences between IAEA’s budget and expenditure data are due to the use

of a fixed UN budgetary exchange rate of 12.70 Austrian schillings to 1 U.S.

dollar to express the budget in dollars, while dollar expenditures are

calculated using the average annual exchange rates. Although we could

not independently verify the quality or accuracy of IAEA’s financial data, we

analyzed the data to determine whether it supported IAEA’s assumptions

about cost neutrality.

While in Vienna, we also observed a demonstration of remote monitoring

and other surveillance equipment at IAEA headquarters. We met with the

representatives from the following 13 IAEA member states—Argentina,

Australia, Canada, China, France, Germany, India, Israel, Japan, the

Russian Federation, South Africa, the United Kingdom, and the United

States—to obtain their perspectives on the Agency’s Strengthened

Safeguards System. We obtained a written response to our questions from

Brazil. We toured IAEA’s Siebersdorf Analytical Laboratory and the Clean

Laboratory, which were financed by U.S. extrabudgetary contributions. In

addition, we met with officials and obtained documents from the U.S.

Mission to the United Nations System Organizations in Vienna.

To comment on the extent of IAEA’s reliance on the United States to

finance safeguards activities, we met with officials and gathered data from

the Arms Control and Disarmament Agency, The Department of Energy,

DOD, the Department of State, DOD’s Air Force Technical Application

Center, and the Nuclear Regulatory Commission. We compared this

information with information we had obtained from IAEA. In October 1997,

we attended the second annual U.S.-IAEA Safeguards Policy Review

Meeting and the semiannual U.S. Support Program meeting with U.S. and

IAEA officials held in Washington, D.C. We also visited Los Alamos and

Sandia National Laboratories in New Mexico to discuss U.S. technical

support to IAEA’s safeguards program.

We performed our work from June 1997 through June 1998 in accordance

with generally accepted government auditing standards.

We are sending copies of this report to other appropriate congressional

committees; the Secretaries of Defense, Energy, and State; the Director,

Arms Control and Disarmament Agency; the Nuclear Regulatory

Commission; and other interested parties. Copies will be made available to

others upon request.

Page 25 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
B-280004 

If you have any questions concerning this report, we can be reached at

(202) 512-4128 and (202) 512-3841, respectively. Major contributors to this

report are listed in appendix VI.

Sincerely yours,

(Mr.)Harold J. Johnson, Associate Director

International Relations and Trade Issues

National Security and International

 Affairs Division

(Ms.)Gary L. Jones, Associate Director

Energy, Resources, and Science Issues

Resources, Community, and

 Economic Development Division

Page 26 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Page 27 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Contents

Letter 1

Appendix I 

States Subject to

Safeguards

Inspections, as of

February 1998

30

Appendix II 

U.S. Extrabudgetary

Contributions and

In-kind Assistance to

the International

Atomic Energy

Agency’s Safeguards

Program in 1997

32

Appendix III 

Amount of Nuclear

Material Subject to

IAEA Safeguards,

1989-96

34

Appendix IV 

GAO’s Analysis of Real

Growth in IAEA’s

Safeguards Program,

1989-97

36

Page 28 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Contents

Appendix V 

IAEA’s Safeguards

Program Budget for

1999 and 2000

38

Appendix VI 

Major Contributors to

This Report

40

Tables Table 1: U.S. Contributions to IAEA’s Safeguards Budget,

1989-1997

16

Table IV.1: Results of GAO’s Analysis of Annual Real Growth in

IAEA Safeguards’ Program Budget and Expenditures, 1989-1997

36

Figures Figure 1: IAEA’s 1997 Expenditures by Major Activity 20

Figure V.1: Total Resource Estimates for IAEA’s Safeguards

Program, 1998 to 2000

38

Figure V.2: Resources Spent and Required for Purchasing New

Safeguards Equipment 1994 through 2000

39

Abbreviations

DOD Department of Defense

DOE Department of Energy

EURATOM European Atomic Energy Community

GAO General Accounting Office

GDP gross domestic product

IAEA International Atomic Energy Agency

NDF Non-proliferation and Disarmament Fund

NPT Treaty on the Non-proliferation of Nuclear Weapons

POTAS U.S. Program of Technical Assistance to IAEA Safeguards

SAGSI Standing Advisory Group on Safeguards Implementation

Page 29 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix I 

States Subject to Safeguards Inspections, as

of February 1998

Non-nuclear Weapons States With comprehensive Safeguards Agreements in Forcea

Afghanistan Grenada Peru

Algeria Guatemala Panama

Antigua and Barbuda Guyana Philippines

Argentina Holy See Poland

Armenia Honduras Portugal

Australia Hungary Republic of Korea

Austria Iceland Romania

Bahamas Indonesia St. Kitts and Nevis

Bangladesh Iraq St. Lucia

Barbados Ireland St. Vincent and the Grenadines

Belarus Islamic Republic of Iran Samoa

Belgium Italy Senegal

Belize Jamaica Singapore

Bhutan Japan Slovakia

Bolivia Jordan Slovenia

Bosnia Herzegovina Kazakhstan Solomon Islands

Brazil Kiribati South Africa

Brunei Darussalam Latvia Spain

Bulgaria Lebanon Sri Lanka

Canada Lesotho Sudan

Chile Libyan Arab Jamahiriya Suriname

Colombia Liechtenstein Swaziland

Costa Rica Lithuania Sweden

Cote d’Ivoire Luxembourg Switzerland

Croatia Madagascar Syrian Arab Republic

Cyprus Malawi Thailand

Czech Republic Malaysia The Former Yugoslva Republic of

Macedonia

Democratic People’s Republic of Korea Maldives Tonga

Democratic Republic of the Congo Malta Trinidad and Tobago

Denmark Mauritius Tunisia

Dominica Mexico Turkey

Dominican Republic Monaco Tuvalu

Ecuador Mongolia Ukraine

Egypt Morocco Uruguay

El Salvador Myanmar Uzbekistan

Estonia Nauru Venezuela

(continued)

Page 30 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix I 

States Subject to Safeguards Inspections, as

of February 1998

Ethiopia Nepal Viet Nam

Federal Republic of Yugoslavia (Serbia and

Montenegro)

Netherlands Western Samoa

Fiji Nicaragua Zimbabwe

Finland Nigeria

Gambia Norway

Germany Panama

Ghana Papua New Guinea

Greece Paraguay

Non-nuclear Weapons States Where Safeguards are Applied to Facilities, Equipment, or Material Specific Safeguards

Agreements

Cuba

India

Israel

Pakistan

Nuclear Weapons States with Voluntary Offer Agreements in Force

China

France

Russia Federation

United Kingdom

United States

Note: Comprehensive safeguards also apply to Taiwan.

aRefers to states which have safeguards agreements with the International Atomic Energy Agency

under the Treaty on the Non-Proliferation of Nuclear Weapons (including countries in the

European Atomic Energy Community), the Treaty of Tlatelolco, the Treaty of Rarotonga, or the

Treaty of Bangkok.

Source: IAEA.

Page 31 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix II 

U.S. Extrabudgetary Contributions and

In-kind Assistance to the International

Atomic Energy Agency’s Safeguards

Program in 1997

For 1997, the United States contributed almost $17 million of the total

extrabudgetary contributions to the International Atomic Energy Agency’s

(IAEA) safeguards budget of nearly $20 million from funds provided by the

Department of State. Specifically, the United States contributed

$7.1 million to IAEA through the U.S. Program of Technical Assistance to

IAEA Safeguards (POTAS).1 POTAS is assisting the Agency in funding activities

essential to implementing the strengthened safeguards system by

providing cost-free experts to the safeguards program, evaluating

environmental monitoring techniques, and field-testing new digital

surveillance systems.2

 To purchase safeguards equipment for IAEA, the

United States provided $7.2 million through the Nonproliferation and

Disarmament Fund (NDF). For example, these funds were used to replace

obsolete surveillance equipment and analytical equipment for the Clean

Laboratory at the Siebersdorf Analytical Laboratory in Austria, where

environmental samples are collected and screened for IAEA.

3

 The United

States also paid $1.4 million to IAEA for its verification of nuclear fissile

material that had been declared excess to U.S. defense needs.4

 The

remaining $1.2 million was provided to IAEA to assist member states to

account for and protect nuclear materials.

In addition to the U.S. contribution to IAEA’s extrabudgetary resources, we

estimated that in fiscal year 1997 the Departments of State, Energy (DOE),

and Defense (DOD) provided in-kind assistance valued at $16.5 million in

support of IAEA’s safeguards program. DOE’s Office of Arms Control and

Nonproliferation, International Safeguards Division, made $10 million in

funds available from its international safeguards program to support

high-priority projects at IAEA and at DOE laboratories for IAEA’s

strengthened safeguards program. In addition, about $2.5 million was

provided during fiscal year 1997 by DOD and State for conducting

environmental sample analysis to assist IAEA in establishing its baseline

1

The United States Member State Support Program to IAEA includes POTAS, which is managed by

Brookhaven National Laboratory and is overseen by an interagency coordinating committee composed

of representatives from the Departments of State, Energy, and Defense; the Nuclear Regulatory

Commission; and the Arms Control and Disarmament Agency.

2

Through POTAS, the United States is also providing funds to the International Remote Monitoring

Project, which examines potential cost-saving measures such as reducing inspector presence through

the use of unattended monitoring.

3

According to IAEA’s budget data, from 1993 through February 1998 the United States contributed

almost $2.6 million in extrabudgetary resources for constructing and equipping the Clean Laboratory.

4

In September 1993, President Clinton announced that nuclear material (plutonium and highly

enriched uranium) excess to U.S. defense needs would be placed under IAEA safeguards on an

indefinite basis. The President offered such materials to illustrate the U.S. commitment to the Treaty

on the Non-proliferation of Nuclear Weapons and demonstrate that the materials will not be used in

nuclear weapons.

Page 32 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix II 

U.S. Extrabudgetary Contributions and

In-kind Assistance to the International

Atomic Energy Agency’s Safeguards

Program in 1997

samples. Specifically, DOD’s Air Force Technical Applications Center and

several DOE (at State Department expense) laboratories perform

environmental sample analysis in the United States for IAEA. Although IAEA

plans to begin reimbursing the United States in part for future analyses on

a limited basis, the United States has financed almost all of IAEA’s

environmental sampling studies to date. The remaining $4 million in

assistance helped fund POTAS supported research and development

activities at DOE laboratories, and management of the POTAS program at

Brookhaven National Laboratory.

Page 33 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix III 

Amount of Nuclear Material Subject to IAEA

Safeguards, 1989-96

From 1989 through 1996, the amount of nuclear material under IAEA

safeguards has increased by 80 percent, from 52,413 significant quantities

of nuclear material in 1989 to 94,294 significant quantities in 1996.1 IAEA

attributes this growth to (1) the increase in the number of states with

significant nuclear programs that now have safeguards agreements with

the Agency, including Argentina, Brazil, South Africa, and the newly

independent states of the former Soviet Union; (2) the continued growth in

the amount of nuclear material in civilian nuclear fuel cycles; and (3) the

inclusion by the United States of excess nuclear material from its nuclear

weapons program under its voluntary safeguards agreement with the

Agency.

IAEA has been able to manage the increase in its safeguards responsibilities

by increasing the efficiency of its safeguards operations and reducing

costs. From 1989 through 1996, the cost, in real terms, for safeguarding

one significant quantity of nuclear material decreased by 28 percent, from

$1,359 to $978. According to IAEA, the increased efficiency is the result of

improvements in safeguards approaches and technology, direct technical

support from member states, and greater cooperation and resource

sharing with state and international organizations with safeguards

responsibilities. For example, IAEA has implemented a more efficient

working relationship with the European Atomic Energy Community

(EURATOM)—known as the New Partnership Approach—which resulted in

better coordination of inspections and a sharing of costs for common

safeguards equipment in EURATOM member states. According to IAEA’s

Deputy Director General for Safeguards, the New Partnership Approach

has resulted in a reduction of more than 1,500 person days of inspection at

EURATOM facilities in the non-nuclear weapons states of the European

Union.

Despite the improvements in safeguards efficiency, U.S. officials are

concerned about IAEA’s safeguards goal attainment for unirradiated direct

use material, which, according to a June 1997 State Department cable, has

not kept pace with IAEA’s increasing workload.2

 According to IAEA, the

primary reason for its inability to attain its safeguards goals has been

failures in the camera equipment used for surveillance of safeguarded

nuclear material. According to IAEA, the inability to attain safeguards goals

1

A “significant quantity” is the approximate amount of nuclear material needed to build a nuclear

explosive device.

2

Unirradiated direct use material consists of highly enriched uranium and plutonium that has not been

exposed to radiation or has been separated from highly radioactive materials. It presents a high

proliferation risk because it is relatively easy to handle and can be readily used for nuclear weapons.

Page 34 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix III 

Amount of Nuclear Material Subject to IAEA

Safeguards, 1989-96

for some types of material has not affected IAEA’s safeguards conclusions

that, based on all information available, material under safeguards has not

been diverted. However, it has reduced the level of confidence in the

conclusions. IAEA warned member states in May 1997 that it does not have

the resources to continue to meet its expanding workload.

Page 35 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix IV 

GAO’s Analysis of Real Growth in IAEA’s

Safeguards Program, 1989-97

Table IV.1 provides the results of GAO’s analysis of annual real growth in

IAEA’s safeguards program budget and expenditures from 1989 through

1997.

Table IV.1: Results of GAO’s Analysis of Annual Real Growth in IAEA Safeguards’ Program Budget and Expenditures,

1989-1997

Dollars in millions for 1997

Year

Total safeguards

budget

Total safeguards

expenditures

Regular

safeguards

budget

Regular

safeguards

expenditures

Extrabudgetary

safeguards

budget

Extrabudgetary

safeguards

expenditures

1989 $73.5 $71.3 $68.7 $65.7 $4.8 $5.5

1990 75.3 73.8 68.4 67.7 6.9 6.1

1991 74.3 73.9 69.3 68.5 5.0 5.3

1992 77.0 74.7 69.7 68.7 7.3 6.0

1993 83.2 80.9 73.4 71.9 9.9 9.0

1994 81.9 79.1 74.5 71.7 7.4 7.5

1995 92.2 88.6 77.4 77.8 14.8 10.9

1996 87.3 88.4 78.5 78.3 8.7 10.1

1997 $100.7 $92.2 $80.9 $81.5 $19.8 $10.7

Annual Real

growth rate

(percent)

3.72 3.38 2.28 2.68 15.31 10.20

Note: Annual real growth rates for 1989 through 1997 were estimated using ordinary least square

regression methodology.

To calculate annual real growth in IAEA’s safeguards program from 1989

through 1997, we took into account the share of IAEA’s safeguards program

budget and expenditures that were made in Austrian schillings and in U.S.

dollars, and converted IAEA’s annual safeguards budget and expenditures

for both the regular budget and extrabudgetary contributions into 1997

dollars. Based on IAEA’s 1999 budget estimates, we assumed that about

83 percent of its regular budget was in Austrian schillings. Based on the

U.S. average share of IAEA’s total extrabudgetary contributions to the

safeguards program from 1989 through 1997, which is made in U.S. dollars,

we also assumed that about 32 percent of the extrabudgetary

contributions was in Austrian schillings. These percentages were then

used to estimate the schilling-to-dollar shares of the regular and

extrabudgetary budgets and expenditures during this period. A fixed

exchange rate of 12.70 Austrian schillings to the U.S. dollar and average

annual U.N. exchange rates, that were provided to us by IAEA, were used to

convert the share of the budget and expenditures, respectively, that were

Page 36 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix IV 

GAO’s Analysis of Real Growth in IAEA’s

Safeguards Program, 1989-97

in Austrian schillings to the current year figures. The Austrian gross

domestic product (GDP) deflator and official Austrian exchange rates from

the International Monetary Fund’s International Financial Statistical

Yearbook, 1997 were then used to convert these figures back into 1997

dollars. The U.S. GDP deflator was used to convert the share of IAEA’s

safeguards budget and expenditures that were in U.S. dollars into 1997

dollars.1

1

According to a State Department official, IAEA measures real growth differently from GAO. First,

IAEA excludes exchange rate fluctuations from its calculations by using a fixed exchange rate for

comparison purposes. Second, instead of applying U.S. and Austrian GDP deflators, IAEA applies

actual changes experienced in the preceding year in the prices of goods and services that it procures,

and anticipated salary increases. As a result, IAEA understates growth in comparison with GAO’s

methodology.

Page 37 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix V 

IAEA’s Safeguards Program Budget for 1999

and 2000

According to IAEA’s draft program and budget for 1999 and 2000, the

Agency will require a total of about $160 million in funds through its

regular budget and $40 million in extrabudgetary resources in 1999 and

2000 to fund its existing safeguards program and to begin implementing

part 1 of its strengthened safeguards measures, as demonstrated in

figure V.1.

Figure V.1: Total Resource Estimates

for IAEA’s Safeguards Program, 1998

to 2000

1998 1999 2000

0

20

40

60

80

100

120

92.8

101.3 98.8

AAAA AAAA

AAAA

Regular budget

Extrabudgetary

Dollars in millions

Year

13.7

79.1

18.7

79.8 80.1

21.5

Note: Cost estimates are in 1998 dollars.

Source: IAEA’s Draft Program and Budget for 1999 and 2000.

Page 38 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix V 

IAEA’s Safeguards Program Budget for 1999

and 2000

Although IAEA has not developed detailed cost estimates for implementing

the strengthened safeguards measures over the next several years, it has

estimated the costs of replacing obsolete surveillance equipment and

installing some remote monitoring equipment. The installation of

safeguards equipment will depend heavily on extrabudgetary

resources—$15.2 million and $12.4 million for 1999 and 2000, respectively,

as seen in figure V.2.

Figure V.2: Resources Spent and Required for Purchasing New Safeguards Equipment 1994 Through 2000

1994 1995 1996 1997 1998 1999 2000

0

5

10

15

20

25

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

A

A

A

6.8

9.5

5.3 5.3 8.6

15.2

6.2

11.4 11.1

8.0 7.8 7.8

12.4

13.6

Year

Dollars in millions

AAAA AAAA

AAAA

Regular budget

Extrabudgetary

Source: IAEA’s Draft Program and Budget for 1999 and 2000.

Page 39 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
Appendix VI 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

F. James Shafer, Jr., Assistant Director

Charles T. Bolton, Evaluator-in-Charge

Jo Ann T. Geoghan, Evaluator

Beth A. Hoffman León, Senior Evaluator

Bruce L. Kutnick, Assistant Director and Senior Economist

Resources,

Community, and

Economic

Development

Division, Washington,

D.C.

Gene Aloise, Assistant Director

Sarah E. Veale, Evaluator-in-Charge

(711274)(141079) Page 40 GAO/NSIAD/RCED-98-184 Nuclear Nonproliferation
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