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S. HRG. 110–279

SAFEGUARDING THE ATOM: NUCLEAR ENERGY

AND NONPROLIFERATION CHALLENGES

HEARING

BEFORE THE

COMMITTEE ON FOREIGN RELATIONS

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JULY 31, 2007

Printed for the use of the Committee on Foreign Relations

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

COMMITTEE ON FOREIGN RELATIONS

JOSEPH R. BIDEN, JR., Delaware, Chairman

CHRISTOPHER J. DODD, Connecticut

JOHN F. KERRY, Massachusetts

RUSSELL D. FEINGOLD, Wisconsin

BARBARA BOXER, California

BILL NELSON, Florida

BARACK OBAMA, Illinois

ROBERT MENENDEZ, New Jersey

BENJAMIN L. CARDIN, Maryland

ROBERT P. CASEY, JR., Pennsylvania

JIM WEBB, Virginia

RICHARD G. LUGAR, Indiana

CHUCK HAGEL, Nebraska

NORM COLEMAN, Minnesota

BOB CORKER, Tennessee

JOHN E. SUNUNU, New Hampshire

GEORGE V. VOINOVICH, Ohio

LISA MURKOWSKI, Alaska

JIM DEMINT, South Carolina

JOHNNY ISAKSON, Georgia

DAVID VITTER, Louisiana

ANTONY J. BLINKEN, Staff Director

KENNETH A. MYERS, JR., Republican Staff Director

(II)

CONTENTS

Page

Bayh, Hon. Evan, U.S. Senator from Indiana ....................................................... 5

Casey, Hon. Robert P., Jr., U.S. Senator from Pennsylvania, opening statement ...................................................................................................................... 1

Lugar, Hon. Richard G., U.S. Senator from Indiana, opening statement ........... 3

McGoldrick, Dr. Fred, former Director of Nonproliferation and Export Policy,

Department of State; Bengelsdorf, McGoldrick and Associates, LLC, Washington, DC ............................................................................................................. 36

Prepared statement .......................................................................................... 38

Scheinman, Dr. Lawrence, distinguished professor, James Martin Center for

Nonproliferation Studies, Monterey Institute of International Affairs, Washington, DC ............................................................................................................. 31

Prepared statement .......................................................................................... 33

Semmel, Dr. Andrew, Acting Deputy Assistant Secretary for Nuclear Nonproliferation Policy and Negotiations, Department of State, Washington,

DC .......................................................................................................................... 8

Prepared statement .......................................................................................... 12

Sokolski, Henry, executive director, Nonproliferation Policy Education Center,

Washington, DC ................................................................................................... 27

Prepared statement .......................................................................................... 28

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Biden, Hon. Joseph R., Jr., U.S. Senator from Delaware, prepared statement . 54

(III)

(1)

SAFEGUARDING THE ATOM: NUCLEAR ENERGY AND NONPROLIFERATION CHALLENGES

TUESDAY, JULY 31, 2007

U.S. SENATE,

COMMITTEE ON FOREIGN RELATIONS,

Washington, DC.

The committee met, pursuant to notice, at 9:34 a.m., in room

SD–419, Dirksen Senate Office Building, Hon. Robert P. Casey, Jr.,

presiding.

Present: Senators Casey and Lugar.

OPENING STATEMENT OF HON. ROBERT P. CASEY, JR.,

U.S. SENATOR FROM PENNSYLVANIA

Senator CASEY. This hearing shall come to order.

Today, the Foreign Relations Committee will examine policy options that can help strengthen the nuclear nonproliferation regime

and prevent the nightmare scenario of a nuclear weapon exploding

in an American city. To the extent that states like North Korea and

Iran succeed in acquiring nuclear weapons, and unstable regimes

like Pakistan continue to expand existing nuclear arsenals, that

threat will continue to grow. For this reason, we must renew our

efforts to reinforce the nuclear nonproliferation regime and prevent

additional states from acquiring the deadliest weapons known to

humanity.

I want to thank Chairman Biden for graciously offering to me

this opportunity to chair today’s hearing in his absence. And I

know that nuclear nonproliferation is an issue to which he has

dedicated much time and energy over his distinguished career in

the United States Senate. The chairman has prepared a formal

statement, which I ask be entered into the record.

Senator CASEY. Many years ago, back in 1963, President Kennedy predicted a world where 15 to 20 states would acquire nuclear

weapons. President Kennedy’s frightening vision has not come to

pass, and, for that, we largely have the nuclear nonproliferation

regime to thank. This regime, embodied by the Nuclear Non-Proliferation Treaty which entered into force in 1970, has done a remarkable job in limiting the spread of nuclear weapons. Beyond the

original five nuclear-weapon states recognized by the NPT, only

four additional states are known to have developed and tested nuclear weapons during the intervening 37 years. This is not a perfect

record, but, given the fears of President Kennedy at that time, it

speaks to the durability and effectiveness of the NPT.

2

However, the nonproliferation regime today faces a set of grave

challenges that call its future into question. Iran’s pursuit of a nuclear program, carried out in secrecy over the past two decades and

maintained today in defiance of United Nations resolutions, represents the most serious test.

Iran claims that it is pursuing a nuclear program for exclusively

peaceful purposes, in order to establish a source of civilian nuclear

power. Iran cites article IV of the treaty to defend its civilian program, contending that this article protects the, ‘‘inalienable right’’

of Iran to pursue a civilian nuclear program. Nonetheless, the very

expertise and technology Iran requires to develop a civilian nuclear

program, including a complete nuclear fuel cycle, is what it would

need to produce fissile material for nuclear weapons. Iran, or some

other state in the future, can accrue all of the benefits of the treaty

membership while assembling the building blocks of a nuclear

weapons program. If Iran succeeds in acquiring a nuclear weapon

through the guise of a civilian program, it will set a dangerous example for others to follow.

For that reason, nonproliferation experts are taking a fresh look

at the concept of assured fuel supply mechanisms. A commercial

nuclear program, by itself, does not give a state the means to develop the fissile material necessary for a nuclear weapon. Rather,

what is of concern is the construction of uranium enrichment and

plutonium reprocessing facilities, the so-called fuel cycle, to generate nuclear fuel power and nuclear fuel to power nuclear reactors. If we can conceive an approach that allows states to acquire

nuclear fuel at prevailing market prices from trusted and reliable

sources, they would no longer need to build and maintain costly

fuel cycle facilities, the same facilities that can serve as the basis

for a weapons program. A nonnuclear-weapons state that insisted

on doing so would immediately raise suspicions over its real intentions, and give warning to the international community, at the

same time Iran experienced—at the same time the Iran experience

demonstrates to all of us the sustained value of rigorous international safeguards in deterring and detecting illicit nuclear weapons programs.

What we know today about Iran’s nuclear program is largely due

to the diligent and painstaking work of the International Atomic

Energy Agency undertaken since 2002. The IAEA has gained access to Iranian facilities, interviewed Iranian officials, and published detailed reports on the progress and scope of Iran’s uranium

enrichment efforts, providing the international community with an

invaluable perspective on Iran’s program. Nonetheless, the IAEA

budget and staff are under great pressure, as it needs to keep pace

with a growing number of civilian nuclear facilities worldwide.

The ranking member on this committee, Senator Lugar, along

with Senator Bayh, working in a bipartisan manner, have introduced legislation to give the President authority to establish bilateral and multilateral fuel supply mechanisms and authorize appropriations to fortify the capability of the International Atomic

Energy Agency to implement nuclear safeguards. Their bill is a

promising one, and I look forward, today, to learning more about

it.

3

The nuclear nonproliferation regime today is in trouble, not only

due to the challenges I’ve outlined above, but also, frankly, due to

the wrongheaded policies of the Bush administration. Beginning

with its unilateral withdrawal from the ABM Treaty in 2001, the

administration has shown a blatant disregard for the diplomacy

and multilateral cooperation so essential to a strong nonproliferation regime.

In my opinion, the United States missed a golden opportunity in

2005 to use the NPT Review Conference as a forum to begin a serious dialog with other nations on how we can revitalize the regime

to address the new challenges posed by Iran and others.

The administration has not helped matters by explicitly adopting

a double standard when it comes to nuclear-weapon states, encouraging and assisting those we deem our friends at the same time we

are condemning others.

Finally, by focusing excessively on regime change instead of

change in behavior, the United States stood by as North Korea

quadrupled—quadrupled—the size of its fissile material stockpile

and tested a nuclear weapon, only coming to the belated recognition that diplomacy was the only solution with a chance of working.

Today, we’ll hear from a distinguished and extremely knowledgeable group of witnesses. Senator Bayh will first address the committee to discuss the reasoning behind the legislation that he and

the ranking member, Senator Lugar, have introduced to give a

jump start to assure fuel supply mechanisms and strengthened nuclear safeguards. The committee welcomes Senator Bayh, and we

look forward to his remarks.

And then, after Senator Bayh, we’ll hear from the executive

branch. Dr. Andrew Semmel, the Acting Deputy Assistant Secretary of State for Nuclear Nonproliferation Policy and Negotiations, will provide the administration’s perspective on how the

United States can further strengthen the nuclear nonproliferation

regime and the role that fuel supply mechanisms and enhanced

safeguards can play in that process. He has served in the State Department since 2003, and I understand that Dr. Semmel is no

stranger to the committee. From 1985 to 2001, he served as a senior staffer to Senator Lugar for foreign policy issues. So, we welcome him today.

Our final panel will include three experts on nuclear nonproliferation, who have all served in various capacities in the U.S.

Government, but now serve in private capacities. I’ll introduce

these three witnesses when we come to that panel, and I’ll look forward to their seasoned perspectives.

And, with that, I’ll turn the microphone over to the ranking

member, Senator Lugar.

OPENING STATEMENT OF HON. RICHARD G. LUGAR, U.S.

SENATOR FROM INDIANA

Senator LUGAR. Well, thank you very much, Senator Casey, for

chairing this hearing. And I join you in welcoming my friend and

Hoosier colleague and my partner in this endeavor, Senator Evan

Bayh, who has provided very important leadership on the issues we

will examine today.

4

The international nuclear nonproliferation regime has suffered

significant setbacks in recent years, and it’s vital that the United

States assign a high diplomatic priority to strengthening that regime. The Nuclear Non-Proliferation Treaty, the NPT, and the

International Atomic Energy Agency, the IAEA, have succeeded in

forestalling nuclear weapons programs in most of the world’s advanced industrial states, but the IAEA is hard-pressed to keep pace

with the global expansion of nuclear weapons technology, especially

uranium enrichment and spent nuclear fuel processing, both of

which can produce fissile material for weapons.

The construction of facilities for the enrichment of uranium and

reprocessing of spent nuclear fuel in new states, even for ostensibly

peaceful purposes, poses an unacceptable risk to the international

nonproliferation regime. This risk arises because enrichment and

reprocessing technology intended to produce fuel for civilian reactors can also be used to create weapons material. The spread of

these capabilities would dangerously increase the chances that new

nations could develop nuclear weapons and that terrorists could obtain nuclear materials for bombs.

The threat posed by the spread of nuclear fuel cycle technology

has been complicated by the growing attractiveness of nuclear

power, both in developed and developing countries. As energy costs

soar and concerns about global warming deepen, many states are

considering investing in nuclear power as a way to expand their capacity to generate electricity. The United States must help shape

a response to this dilemma. We should be making clear that there

is no technology or economic reason why the expansion of civilian

nuclear power must be accompanied by the construction of enrichment or reprocessing facilities.

Senator Bayh and I have proposed that the United States and

like-minded nations should establish a new international system

whereby countries that give up their enrichment and reprocessing

programs will be rewarded with a guaranteed supply of reasonably

priced fuel for nuclear power generation.

Before the July 4th recess, the Committee on Foreign Relations

unanimously approved Senate bill 1138, legislation that I offered

with Senator Bayh. The Lugar-Bayh bill embraces both bilateral

and multilateral fuel supply mechanisms and calls for a report on

the establishment of an international nuclear fuel authority. Our

bill makes it the policy of the United States to discourage the development of enrichment and reprocessing capabilities in additional

countries, to encourage the creation of bilateral and multilateral

assurances of nuclear fuel supply, and to ensure that all supply

mechanisms operate in strict accordance with the IAEA safeguard

system.

Our bill also specifies that this policy must not result in any additional unmet verification burdens for the system. This point is

important, because, even as the world demand for civilian nuclear

power grows, the IAEA, charged with ensuring that nuclear energy

programs are not used for weapons development, operates on a

shoestring budget, with old equipment. This situation threatens the

institution and the nuclear stability that the IAEA supports.

Last November, I visited the IAEA and its Safeguards Analytical

Laboratory, located just outside Vienna, Austria. Nuclear samples

5

from around the world are collected by IAEA inspectors and

brought to this laboratory. There, they are tested to determine if

nations are complying with their obligations under the NPT.

The laboratory is on the front lines in the struggle to prevent

states from pursuing undeclared nuclear weapons research and development. Unfortunately, the laboratory’s aging equipment and

dangerous working conditions hamper the important work that is

done there. In addition, the IAEA technicians are severely limited

in the time they can spend analyzing evidence in the so-called

‘‘hot,’’ or nuclear, part of the laboratory, because it is served by a

dilapidated air-purification system. The laboratory will become

increasingly stressed as more states expand their nuclear power

infrastructures.

The Lugar-Bayh bill calls for the refurbishment or possible replacement of the IAEA Safeguards Analytical Laboratory. The

IAEA is performing an absolutely indispensable security function

for the global community. The scientists working there must have

the state-of-the-art equipment necessary to do their jobs.

Fixing those problems will require global cooperation, but the

first step in this process is American leadership. We must lead an

international effort to ensure that the IAEA has the resources and

capabilities it needs to effectively conduct its critical safeguards

mission and to respond to the coming expansion of nuclear power.

I thank you, again, Mr. Chairman, for allowing me to make this

statement. I look forward to engaging in discussion with all of our

witnesses.

Senator CASEY. Thank you, Senator. And I’m honored to be here

with you, after all the work you’ve done on these issues over many

years.

And to make sure this is almost a 100-percent Hoosier hearing,

we now have the honor to have Senator Bayh make his statement.

And, Senator, we’re honored to have you, and the floor is yours.

STATEMENT OF HON. EVAN BAYH, U.S. SENATOR FROM

INDIANA

Senator BAYH. Thank you, Senator Casey. I’m sure that Dick

would be pleased to join with me in adopting you as an honorary

Hoosier, so we could make this a 100-percent Hoosier undertaking

here today.

Senator CASEY. Thank you.

Senator BAYH. At least we’re all part of the great Midwest. So,

it’s—thank you for chairing the hearing today, Senator Casey. It’s

been a pleasure, now, serving you within the Senate—in the Senate. And, as we’ve discussed before, I can’t help but think of your

father whenever we’re together. I had the privilege of serving with

him for 6 years as Governor, and I don’t know why, but I’m always

happy to see sons following fathers into public service. So, it’s a

pleasure to be with you here today.

Please give my regards and thanks to Chairman Biden. I know

how busy he is these days. As Senator Lugar mentioned, we’re

grateful that he brought our legislation before the committee, and

that it was passed unanimously. We’re also grateful that he’s afforded us this forum here today, so I hope you’ll please convey my

thanks to him.

6

And, Senator Lugar, it’s a privilege to be with you again, working on this matter. I think, as everyone in the room knows, my colleague and friend is a globally recognized expert in this area. It

may not always be the most glamorous of issues, but it’s vitally important to the future of our country, and I am privileged to have

my name associated with yours here today.

Mr. Chairman, the 21st century has begun with unprecedented

global demand for energy. This increase is the result of economic

expansion in the United States, in the industrial economies of Europe and Japan, and from emerging countries, like India and

China. Given the rapid rates of growth in the developing world,

prices for traditional sources of energy are likely to remain high.

Supplies of oil, gas, and coal are finite, so countries will be looking

elsewhere to secure stable, affordable sources of energy. Nuclear

power is an obvious place for them to look.

Environmental factors will reinforce this trend. Energy derived

from fossil fuels contributes to global climate change. Electricity

generated by nuclear power, on the other hand, does not produce

pollutants like sulfur or mercury, or greenhouse gases like carbon

dioxide. While alternative energy sources, like wind, solar, and geothermal power, show great promise, it is unlikely that they will be

sufficient to satisfy expanding global electricity needs in the near

term. For example, total world energy demand is expected to double by the year 2050, so there would be—so there will be both

strong economic and environmental incentives for countries to examine the nuclear option.

Increased use of nuclear power will mean new nuclear facilities

and material in the possession of many new states over the coming

decades, exponentially raising the risk that fissile material could be

acquired by rogue nations or terrorist groups. According to our latest public intelligence assessments, terrorist organizations continue

to pursue the acquisition of a nuclear device, and would not hesitate to use it. We must ensure that the International Atomic Energy Agency has the necessary resources and technology to cope

with this expansion of civilian nuclear power and to safeguard

against dangerous proliferation.

We must also ensure that this increased demand for civilian nuclear energy does not become a subterfuge for rogue nations seeking to acquire a nuclear military capability. Regrettably, that is

precisely what is happening today in Iran.

Because Iran claims to be enriching uranium for civilian uses,

the current global regulatory structure allows Tehran to walk right

up to the threshold of developing a nuclear bomb. This is dangerously naive. North Korea pursued precisely the same tactic to

realize its nuclear ambitions, and we are perilously close to seeing

history repeat itself, only this time with a nation actively supporting terrorist groups and deeply hostile to the United States.

Once this genie gets out of the bottle, there is no putting it back.

At a minimum, allowing Iran to obtain a nuclear warhead would

be a regionally destabilizing event certain to spark a Middle East

arms race. At worst, it would be a global security catastrophe in

which Tehran obtains the means to blackmail its European neighbors and to threaten Israel’s destruction.

7

This gaping loophole in the Nuclear Non-Proliferation Treaty

must be closed. The Lugar-Bayh Nuclear Safeguards and Supply

Act of 2007 begins to do just that. The Lugar-Bayh Act, as you

noted, passed out of this committee unanimously last month, and

it makes it the official policy of the United States to discourage the

development of enrichment and reprocessing capabilities. It also requires the President to begin exploring the creation of an international nuclear fuel bank.

Our legislation would authorize the President to negotiate both

bilateral and multilateral mechanisms to assure that nations seeking civilian nuclear power have a reliable and affordable supply of

nuclear fuel for peaceful purposes. In return, countries must agree

to forgo enriching uranium themselves, and submit to rigorous

IAEA inspections for their civilian reactors to guard against North

Korean and Iranian-style cheating.

This approach makes both economic and national security sense.

We’ve learned a lot about the economics of nuclear power since the

Non-Proliferation Treaty was negotiated, more than three decades

ago. Enrichment is expensive, as is the disposal of nuclear waste.

It is not economical for nations desiring civilian nuclear power to

enrich their own fuel. There is an enormous surplus of uranium

currently in existing enrichment facilities worldwide. And, due to

bigger economies of scale, it is now much cheaper for countries

lacking enrichment capability to purchase fuel from a central repository than it is to enrich or reprocess it themselves. An international fuel bank would provide affordable nuclear fuel to countries genuinely interested in pursuing civilian nuclear power. It

would allow countries to draw fuel for use in their own civilian nuclear reactors, and then return the spent fuel for safe oversight by

the IAEA.

The approach advocated by Senator Lugar and I would reduce

the potential for proliferation of fissile materials and reduce the

prospect of nuclear weapons falling into the hands of the world’s

most dangerous people.

Of equal importance, our approach would cut short the debate

over nuclear technology rights. Every nation would have access to

civilian nuclear power, so long as they are willing to abide by conditions that protect global security. Countries that refuse fuel bank

services would come under immediate suspicion about their weapons intentions. For example, as you noted, Mr. Chairman, Iran currently contends that it is pursuing a civilian nuclear program to reduce its domestic oil consumption, thereby conserving its reserves

for sale on the global market. If true, surely Iran would leap at the

opportunity for a more affordable supply of nuclear fuel. Fuel bank

services would provide Iran with a faster and cheaper path toward

achieving their stated objective of a purely civilian nuclear program. Of course, if the pursuit of civilian nuclear power is a disingenuous pretext, something which many, including I, strongly

suspect, that Tehran’s true ambitions will be revealed, making it

easier to rally world opinion for more aggressive action before it’s

too late.

Our proposal for a civilian nuclear fuel bank minimizes the risk

of inadvertent proliferation, maximizes the prospects for exposing

8

subterfuges for intentional proliferation, and will help forge consensus for more rigorous steps, should they prove necessary.

Finally, the Lugar-Bayh legislation strengthens the International

Atomic Energy Agency’s safeguard system, as Senator Lugar was

pointing out. The IAEA labs that examine nuclear samples collected by the international inspectors are horribly outdated. Their

nuclear scientists are working with 1970s equipment amid dangerous working conditions. I was shocked to learn from Senator

Lugar that the IAEA laboratory staff is actually limited in the time

they can spend analyzing evidence in the nuclear area of the lab

because of a dilapidated air-purification system.

Our legislation makes critical—it makes a critical investment to

see that this laboratory is refurbished. As more countries expand

their nuclear power infrastructure, the IAEA laboratory will be responsible for inspecting a growing number of samples. They need

first-rate facilities and modern equipment to carry out their critical

work. If the cop on the beat doesn’t have the tools to patrol the

streets, then no one in the world’s nuclear neighborhood will be

safe.

In conclusion, too often in Congress we wait for crises to develop

before taking action. In a prenuclear age, perhaps we could get

away with this type of reactive posture. But we are living in a different era today. We cannot afford to be complacent when it comes

to preventing the spread of nuclear weapons. The consequences of

delay or inaction in confronting this threat could have dire consequences for ourselves and for our children.

I urge our colleagues to support this legislation, as this committee unanimously has, and hope we can bring this important legislation to a vote before the entire Senate when we return from our

August recess.

And, again, Senator Casey, I want to thank you and Senator

Lugar for airing this important subject today.

Thank you.

Senator CASEY. Senator Bayh, thank you very much for your

presence here today, your testimony for the work on this bill and

all of the issues that pertain to doing everything we can to prevent

some of the nightmare scenarios that you and others today have

outlined. Thank you very much.

Senator BAYH. Thank you.

Senator CASEY. Next, we’ll have Dr. Semmel, if he’s available.

Doctor, we want to welcome you to the hearing and to this committee, and we appreciate the work that you’ve done, here in the

Senate and the executive branch, on this critical issue. And we

want to give you the time you need to make your statement, and

then we’ll have some questions.

Thank you.

STATEMENT OF DR. ANDREW SEMMEL, ACTING DEPUTY ASSISTANT SECRETARY FOR NUCLEAR NONPROLIFERATION

POLICY AND NEGOTIATIONS, DEPARTMENT OF STATE,

WASHINGTON, DC

Dr. SEMMEL. Thank you, Mr. Chairman.

Let me say, first of all, that I will abbreviate my statement somewhat in order to save some time, but I will concentrate on focusing

9

on the question of the strength of the IAEA to do its mission, and,

second, on the nuclear fuel supply issue.

I also should say, at the outset, that, while I’m not a Hoosier, I

do know that, as a result of working both on this committee’s staff

and for Senator Lugar for close to 15 years, I do feel somewhat an

honorary Hoosier, nonetheless. And thank you for that introduction.

Senator Casey and Senator Lugar, members of the committee

who are not here, thank you for this opportunity to testify at this

hearing on safeguarding nuclear energy and nonproliferation challenges.

In his speech at the National Defense University, in February

2004, President Bush highlighted the importance of nuclear nonproliferation for American security in the post-9/11 world. He

described how the subjects of this hearing—strengthened IAEA

safeguards and assurance of reliable fuel supplies—support our

nonproliferation policies. We must, the President stated, ensure

that the IAEA has the tools it needs to fulfill its essential mandate.

At the same time, he called for the creation of a safe, orderly system to field civilian nuclear plants without adding to the danger

of weapons proliferation.

To this end, he proposed that the world’s leading nuclear exporters should ensure that states have reliable access at reasonable

cost to fuel for civilian reactors, so long as those states renounce

enrichment and reprocessing. Enrichment and reprocessing, he

said, are not necessary for nations seeking to harness nuclear energy for peaceful purposes.

Since the time of that speech, the promotion of these measures

has been an important part of our nonproliferation policies. In this

regard, we welcome the bill just discussed by Senator Bayh, the

Lugar-Bayh bill, that is the focus of this hearing.

In particular, I would like to call attention, in that legislation,

to declaration of new policy, in section 102(b) of that bill, which

reads, ‘‘It shall be the policy of the United States to discourage the

development of enrichment and reprocessing capabilities in additional countries, encourage the creation of bilateral and multilateral assurances of nuclear fuel supply, and ensure that all supply

mechanisms operate in strict accordance with the IAEA safeguard

system, and do not result in any additional unmet verification burdens for the system.’’

We’re actively pursuing these goals through diplomacy and under

existing constitutional and statutory authorities. We have already

taken important measures to strengthen the IAEA safeguards and

develop reliable fuel supply mechanisms.

Let me focus on IAEA safeguards. As is pointed out in the LugarBayh bill, in S. 1138, the array of challenges facing the IAEA safeguards in recent years is likely to continue and to require more

safeguards resources in the future.

First, the IAEA has been conducting prolonged and intensive investigations dealing with noncompliance, which it must undertake

with the highest priority. The circumstances in Iran, and now, once

again, with the DPRK, are well known to all of us here.

Second, the number and size of declared nuclear activities under

safeguards continue to grow. The agency is required, by legally

10

binding safeguards agreements, to perform these activities. In the

short term, the IAEA is being asked to safeguard large new fuel

cycle facilities in Japan, and we also expect growth in safeguards

activities in new areas, such as India. In the longer term, there is

renewed interest worldwide in nuclear energy as an important

component of the world’s energy supply, and the number and size

of nuclear facilities around the world will continue to grow, and

likely accelerate.

Third, the recent efforts to strengthen safeguards requires new

safeguards activities. As more states bring safeguards agreements

and additional protocols into force or adhere to strengthened

versions of safeguards agreements, the agency’s workload will increase, and does increase.

Fourth, new safeguards activities require efficient, effective, and

state-of-the-art technological, methodological information and communications infrastructure in support of its verification regime.

Some of this infrastructure is provided for in the agency’s regular

budget. However, the IAEA must rely upon voluntary contributions

from donor states to purchase other equipment and services to

carry out its verification function.

To address these challenges, the IAEA relies on funding from its

regular budget and voluntary contributions. The United States has

consistently been a strong supporter of the IAEA—both the executive branch and the Congress have been of one mind on this and

its verification activities, in particular. However, the distribution of

the regular budget funding between verification activities and

other agency activities is often a source of contention at the IAEA,

with many developing countries relentlessly arguing for more resources to be devoted to technical cooperation.

In 2003, a U.S. initiative resulted in an increase in the agency’s

regular budget, of approximately 20 percent, that was spread out

over the last 4 years. This overcame, for the moment at least, the

longstanding practice of zero real growth of the agency’s regular

budget. For 2008 and 2009, the agency requested an 8.5-percent increase in its regular budget. About a quarter of this increase was

aimed at safeguards, and half of the remaining amount was for expenses, such as computer systems, that support the agency activities. However, the board of governors reduced this request down to

4.2 percent for 2008 and 2009. This amount totals something like

1.4 percent in real growth in the agency’s budget.

Given the constraints in the regular budget, a significant portion

of the agency’s safeguards budget is derived from voluntary contributions. The United States is, by far, the largest contributor.

This year, we’re providing $53 million in voluntary contributions,

including $21 million for safeguards. The safeguards contribution

includes $14 million for the U.S. Program of Technical Assistance

to IAEA Safeguards—the acronym is POTAS—and for funding

sample analysis and safeguards equipment. There is also, in this

amount, $3 million to be used as needed, for the DPRK.

It’s likely the agency will face challenges with regard to funding—finding additional and adequate resources in the future. The

IAEA director general noted, in his June statement at the board of

governors, that he believes that, and I quote, ‘‘The agency remains

underfunded in many critical areas, a situation which, if it remains

11

unaddressed, will lead to a steady erosion of our ability to perform

key functions, including in the verification and safety fields. To this

end, and to remedy this unsustainable situation,’’ the director general said, ‘‘I have initiated a study to examine the programmatic

and budgetary requirements of the agency over the next decade or

so. A solution to the long-term funding question will necessarily involve a variety of technical, institutional, and political elements.’’

Now, turning to—from the support for the IAEA safeguards to

the promotion of reliable fuel supply, the administration has also

used existing authority to actively pursue the development of fuel

supply mechanisms for countries that forgo enrichment and reprocessing. The role of fuel supply mechanisms in nonproliferation policy was succinctly stated by the IAEA Director General, Mohamed

ElBaradei as follows: ‘‘By providing reliable access to fuel at competitive prices, we remove the incentive for countries to develop indigenous fuel cycle capabilities, and address concerns about dissemination of sensitive fuel cycle technologies.’’

I might point out, as noted in S. 1138, in 2005 the United States

announced plans to downgrade 17.4 metric tons of highly enriched

uranium, excess to our defense needs, to establish a reserve in support of the fuel supply assurances. The amount of HEU will

produce some 290 metric tons of low-enriched uranium at a current

market price, we’re told by DOE, valued at about $1 billion. This

was followed, in 2006, by several fuel supply initiatives.

On May 1 of last year, the United States, France, Russia, Germany, the Netherlands, and the United Kingdom submitted to the

IAEA a concept for reliable access to nuclear fuel. Under this sixcountry proposal, the IAEA would have a key role in facilitating

new commercial arrangements if a country should find its fuel supply interrupted for reasons other than failure to comply with its

nonproliferation obligations. As a last resort, reserves of nuclear

fuel held nationally or by the IAEA could act as a backup mechanism. Eligibility to receive fuel supply would be based, among other

things, on a country’s record of compliance with the IAEA safeguards, its acceptance of international nuclear safety standards,

and its reliance on international market, rather on indigenous sensitive fuel cycle activities.

In the fall 2006, the United States participated in an IAEA special event on fuel supply assurances in Vienna. At that event, as

noted in the legislation—the proposed legislation—the Nuclear

Threat Initiative announced plans to contribute $50 million to the

IAEA to help create a low-enriched uranium stockpile owned and

managed by the IAEA, but made it contingent upon matching

funds of $100 million in funding or an equivalent value of LEU

from other sources. The United States supports this proposal to

create the LEU stockpile administered by IAEA.

To address fuel assurances over the long run—or the longer

run—in February 2006, the United States announced the Global

Nuclear Energy Partnership, or, as it’s come to be called, the

GNEP. Under GNEP, the United States, with other partner nations, would develop advanced nuclear fuel technologies that would

result in less waste, more energy without pollution or greenhouse

gas emissions, and reduce the risk of proliferation. When these

technologies are fully deployed, states with advanced fuel cycle caVerDate 11-MAY-2000 14:42 Mar 07, 2008 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 ATOM.TXT sforel1 PsN: sforel1
12

pabilities would join together to provide comprehensive, reliable

fuel services to countries that choose not to pursue enrichment and

reprocessing.

Earlier this month, on July 3, President Bush and President

Putin of Russia, issued a Joint Declaration on Nuclear Energy and

Nonproliferation. Under the joint initiative, the United States and

Russia will work together, with other nuclear supplier states, to

develop mutually beneficial approaches for states considering nuclear energy, including the provision of reliable nuclear fuel services.

Mr. Chairman, at this point in time, I will skip the next section

in my statement in order to save time, and the next section deals

more explicitly with S. 1138, and provides a description and some

analysis of that legislation. And I’ll just leave that with the committee.

But let me just note, at this point in time, that, once again, the

overall objectives of this bill—to enhance nuclear safeguards and to

provide assurances of nuclear fuel supply to countries that forgo

certain fuel cycle activities—comport very well with the policy objectives of this administration.

Mr. Chairman, let me conclude by emphasizing, once again, the

importance of nuclear nonproliferation for the security of the

United States, both strong IAEA safeguards and the creation of reliable fuel supply mechanisms can make an important and effective

contribution to preventing the spread of nuclear weapons. The potential of the latter was highlighted by President Bush in the 2004

speech that I alluded to, and every other administration since the

founding of the IAEA has supported strong IAEA safeguards.

Again, let me say that we welcome and appreciate the support

for these policies reflected in S. 1138, and are more than willing

to work with the committee and the staff to help move this forward.

Thank you.

[The prepared statement of Dr. Semmel follows:]

PREPARED STATEMENT OF DR. ANDREW SEMMEL, ACTING DEPUTY ASSISTANT SECRETARY OF STATE FOR NUCLEAR NONPROLIFERATION POLICY AND NEGOTIATIONS,

DEPARTMENT OF STATE, WASHINGTON, DC

INTRODUCTION

Senator Casey, Senator Lugar, and members of the committee, thank you for the

opportunity to testify at this hearing on ‘‘Safeguarding the Atom: Nuclear Energy

and Nonproliferation Challenges.’’ In his speech at the National Defense University

in February 2004, President Bush highlighted the importance of nuclear nonproliferation for American security in the post-9/11 world. He described how the

subjects of this hearing—strengthened IAEA safeguards and assurance of reliable

fuel supplies—support our nonproliferation policies. ‘‘We must,’’ the President stated, ‘‘ensure that the IAEA has all the tools it needs to fulfill its essential mandate.’’

At the same time he called for the creation of ‘‘a safe, orderly system to field civilian

nuclear plants without adding to the danger of weapons proliferation.’’ To this end,

he proposed that ‘‘the world’s leading nuclear exporters should ensure that states

have reliable access at reasonable cost to fuel for civilian reactors, so long as those

states renounce enrichment and reprocessing. Enrichment and reprocessing are not

necessary for nations seeking to harness nuclear energy for peaceful purposes.’’

Since the time of that speech, the promotion of these measures has been an important part of our nonproliferation policies. The bill that is the focus of this hearing, S. 1138, the ‘‘Nuclear Safeguards and Supply Act of 2007,’’ also seeks to advance these goals. In particular I would call attention to the ‘‘declaration of new

policy’’ in section 102(b) of the bill, which reads: ‘‘It shall be the policy of the United

13

States to discourage the development of enrichment and reprocessing capabilities in

additional countries, encourage the creation of bilateral and multilateral assurances

of nuclear fuel supply, and ensure that all supply mechanisms operate in strict accordance with the IAEA safeguards system and do not result in any additional

unmet verification burdens for the system.’’ We are actively pursuing these goals

through diplomacy and under existing constitutional and statutory authority. We

have already undertaken important measures to strengthen the IAEA safeguards

and develop reliable fuel supply mechanisms.

IAEA SAFEGUARDS

As pointed out in S. 1138, the array of challenges facing the IAEA safeguards system in recent years is likely to continue and require more safeguards resources in

the future.

First, the IAEA has been conducting prolonged and intensive investigations dealing with noncompliance which it must undertake with high priority; the circumstances in Iran and now, once again, with the DPRK are well known to you.

Second, the number and size of declared nuclear activities under safeguards

agreements continue to grow. The agency is required by legally binding safeguards

agreements to perform most of these activities. In the short term, the IAEA is being

asked to safeguard large new fuel cycle facilities in Japan, and we also expect

growth in safeguards activities in new areas, such as India.

In the longer term, as pointed out in S. 1138, there is renewed interest worldwide

in nuclear energy as an important component of the world’s energy supply, and the

number and size of nuclear facilities around the world will continue to grow, and

likely accelerate.

Third, the recent efforts to strengthen safeguards require new safeguards activities. As more states bring safeguards agreements and Additional Protocols into

force, or adhere to strengthened versions of safeguards agreements, the Agency’s

workload increases.

Fourth, new safeguards activities require efficient, effective, and state-of-the-art

technological, methodological, information and communication infrastructure in support of its verification regime. Some of this infrastructure is provided in the Agency’s regular budget; however, the IAEA must rely on voluntary contributions from

donor states to purchase other equipment and services to carry out its verification

function.

To address these challenges the IAEA relies on funding from its regular budget

and voluntary contributions. The United States has consistently been a strong supporter of the IAEA, and its verification activities in particular. However, the distribution of regular budget funding between verification activities and other Agency

activities is often a source of contention, with many developing member states relentlessly arguing that more resources should be allocated for technical cooperation.

In 2003, a U.S. initiative resulted in an increase in the Agency’s regular budget

of approximately 20 percent, spread out over the last few years. Much of this increase was allocated toward safeguards.

For 2008–2009, the Agency requested an 8.5-percent increase in its regular

budget. About a quarter of this increase was for safeguards, and over half of the

remaining amount was for expenses (such as computer systems) that support all

IAEA activities. However, the Board of Governors agreed to a 4.2-percent increase

for 2008–2009, but this amounts to just 1.4 percent of which is real growth in the

Agency’s budget.

Given the constraints in the regular budget, a significant portion of the Agency’s

safeguards budget is derived from voluntary contributions. The United States is by

far the largest contributor; this year we are providing $53 million in voluntary contributions, including about $21 million for safeguards. The safeguards contribution

includes $14 million for the U.S. Program of Technical Assistance to IAEA Safeguards—POTAS—and funding for sample analysis and safeguards equipment. There

is also about $3 million to be used, as needed, in the DPRK.

It is likely the Agency will face challenges with regard to finding adequate resources in the future. The IAEA Director General noted in a June statement that

he believes that ‘‘. . . the Agency remains underfunded in many critical areas, a situation which, if it remains unaddressed, will lead to a steady erosion of our ability

to perform key functions, including in the verification and safety fields. To this end

and . . . to remedy this unsustainable situation, I have initiated a study to examine

the programmatic and budgetary requirements of the Agency over the next decade

or so.’’ A solution to the long-term funding question will necessarily involve technical, institutional, and political elements.

14

RELIABLE FUEL SUPPLY

Turning from support for IAEA safeguards to the promotion of reliable fuel supply, the administration has also used existing authority to actively pursue the development of fuel supply mechanisms for countries that forgo enrichment and reprocessing. The role of fuel supply mechanisms in nonproliferation policy was succinctly

stated by IAEA Director General Mohamed ElBaradei as follows: ‘‘By providing reliable access to . . . fuel at competitive market prices, we remove the incentive for

countries to develop indigenous fuel cycle capabilities . . . and [address] concerns

about dissemination of sensitive fuel cycle technologies.’’

U.S. ACTIONS

As noted in section 203(2) of S. 1138, in 2005 the United States announced plans

to downblend 17.4 metric tons of highly enriched uranium excess to our defense

needs to establish a reserve in support of fuel supply assurances. This amount of

HEU will produce about 290 metric tons of low-enriched uranium, and at current

market prices is valued at over $1 billion. This was followed in 2006 by several

major fuel supply initiatives. On May 31 of that year, the United States, France,

Russia, Germany, the Netherlands, and the United Kingdom submitted to the IAEA

a concept for reliable access to nuclear fuel. Under this six-country proposal, the

IAEA would have a key role in facilitating new commercial arrangements if a country should find its fuel supply interrupted for reasons other than failure to comply

with its nonproliferation obligations. As a last resort, reserves of nuclear fuel, held

nationally or by the IAEA, could act as a backup mechanism. Eligibility to receive

fuel supply would be based, among other things, on a country’s record of compliance

with IAEA safeguards, its acceptance of international nuclear safety standards, and

its reliance on the international market rather than on indigenous sensitive fuel

cycle activities.

In the fall 2006, the United States participated in an IAEA ‘‘Special Event’’ on

fuel supply assurances in Vienna. At that event, as noted in section 203(3) of S.

1138, the Nuclear Threat Initiative announced plans to contribute $50 million to the

IAEA to help create a low enriched uranium stockpile owned and managed by the

IAEA, but made it contingent on matching funds of $100 million in funding or an

equivalent value of LEU from other sources. The United States supports this proposal to create an LEU stockpile administered by the IAEA.

To address fuel assurances over the longer term, in February 2006 the United

States announced the Global Nuclear Energy Partnership, or GNEP. Under GNEP,

the United States, with other partner nations, would develop advanced nuclear fuel

technologies that will result in less waste, more energy without pollution or greenhouse gas emissions, and reduced risk of proliferation. When these technologies are

fully deployed, states with advanced fuel cycle capabilities would join together to

provide comprehensive, reliable fuel services to countries that choose not to pursue

enrichment and reprocessing, to ensure the availability of fuel, and a commitment

to take back spent fuel.

Earlier this month, on July 3, President Bush and President Putin of Russia

issued a Joint Declaration on Nuclear Energy and Nonproliferation. Under the Joint

Initiative, the United States and Russia will work together with other nuclear supplier states to develop mutually beneficial approaches for states considering nuclear

energy, including the provision of reliable nuclear fuel services.

S. 1138

I would like to focus the remainder of my comments more narrowly on the text

of S. 1138. Let me begin by noting once again that the overall objectives of this

bill—to enhance nuclear safeguards and to provide assurances of nuclear fuel supply

to countries that forgo certain fuel cycle activities—comport well with the policy objectives that the administration is seeking to achieve. However, some individual provisions raise issues which we believe could make it more difficult to achieve these

objectives. My comments are offered with the intention of further improving this

legislation.

We agree generally with the various assessments in section 101 identifying challenges facing the IAEA’s safeguards regime. The United States and the IAEA are

working to strengthen safeguards by seeking universal adherence to the Additional

Protocol and by upgrading the Small Quantities Protocols. We welcome the attention given to the IAEA’s human capital problems, an area we have repeatedly raised

with the Agency. This is a concern not only for the operation of the Safeguards Analytical Laboratory, or SAL, in Seibersdorf, Austria, but more generally for the IAEA

Safeguards Department as a whole.

15

Turning to section 103 of the bill, we agree that there is a need for carefully considered upgrades to SAL. It is not clear, however, that expending the full $10 million solely on the refurbishment or replacement of SAL, as proposed by section

103(a), would be the most effective way to strengthen the IAEA’s analytical capabilities. In November 2006, the IAEA held a workshop at SAL, attended by laboratory

experts from member states, to determine what should be done to ensure that SAL

would be able to continue to perform its mission. These experts generally agreed

that while some infrastructure upgrades were needed, and the possibility of expansion should be considered, there was no pressing need for an entirely new laboratory. U.S. experts believe that the biggest threat to SAL’s analytical capabilities is

not the age of the equipment, which, if properly maintained, can have a long service

life. Rather, it is the availability of qualified staff to run the machines and interpret

the results, a problem also identified in section 101(13). We also understand that

the Director General of the IAEA has set up a committee to further review the need

for improvements at SAL. We therefore suggest the funds be targeted more flexibly,

to address not just the refurbishment of SAL, but also to meet other IAEA safeguards equipment and personnel needs.

I would note with regard to section 104 of the bill, that the U.S. Program of Technical Assistance to IAEA Safeguards, or POTAS, is a well-established program, by

far the strongest in the world, supporting the technical implementation of IAEA

safeguards and safeguard-related R&D. The current level of sophistication of IAEA

safeguards is due in no small part to the contributions made by the U.S. support

program over approximately 30 years. We fully agree with the objectives indicated

in that section and the need for a strong U.S. technology base. This is of fundamental importance to continuing U.S. leadership and the credibility of the IAEA

safeguards system.

S. 1138: TITLE II

As a general matter, we welcome the support for our efforts to establish reliable

nuclear fuel supply mechanisms provided by title II. We also welcome the support

in section 203 for the concept of an international fuel bank involving the IAEA.

However, we believe that title II should instead be drafted as a resolution expressing the sense of Congress, or as Statements of Policy, because, as section 201(c)

makes clear, this legislation is not intended to provide any authority additional to

that under the Atomic Energy Act or other preexisting laws and regulations. The

President already has the authority to work both bilaterally and multilaterally toward achieving such mechanisms, and such efforts are well underway.

In our discussions at the IAEA and elsewhere, we have found that other countries

are deeply sensitive to whether a fuel supply mechanism will impose actual or apparent limitations on their sovereignty. Avoiding the appearance of such limits will

be important in determining whether or not a supply mechanism will be widely accepted. Section 201(a) of the bill acknowledges the importance of honoring national

sovereignty by stating that fuel supply mechanisms should be open to states that

‘‘decide’’ to forgo enrichment and reprocessing.

However, section 201(b) describes several factors that, if incorporated into legislation on fuel supply mechanisms, will almost certainly be perceived as an effort to

erode the sovereignty of potential recipients. For example, it is unclear whether section 201(b)(7) contemplates that all the legal restrictions on retransfer of U.S.-origin

nuclear material should apply to transfers of foreign-origin nuclear material funded

in whole or in part by United States contribution. If this is the intent of the provision, consideration of this factor may make it more difficult, as a practical matter,

for the United States to financially support an IAEA fuel bank as proposed by the

Nuclear Threat Initiative in 2006.

Moreover, section 201(b)(9) provides that the supply mechanism should take into

account whether potential recipients have export controls ‘‘comparable’’ to our own.

Section 201(b)(10) provides the mechanism to take into account the ‘‘conformity’’ of

the recipient state’s safety and regulatory regimes with similar U.S. laws and regulations. Legislation containing these or similar provisions would likely be seen by

other States as an unacceptable attempt to impose our domestic standards, rather

than internationally accepted standards, and may ultimately be counterproductive

to our efforts.

The required ‘‘Report on the Establishment on an International Fuel Authority’’

in section 202(a) can make an important contribution to the discussion of nuclear

fuel supply assurances. The issues identified as requiring evaluation in section

202(b) are important ones. However, producing a solid and credible report will require significant time and resources, both financial and personnel. We are frankly

16

concerned about our ability to produce a quality report in the timeframe specified

in section 202(a).

At the June meeting of the IAEA Board of Governors, the Secretariat provided

members of the Board with a draft report on fuel supply mechanisms and the potential role of the IAEA. This report will be discussed and debated at subsequent meetings of the Board. The 180-day deadline in section 202(a) may not be long enough

for the report to Congress to take account of the debate and decisions of the Board

on fuel supply. We suggest that a deadline of 365 days, with a brief progress report

after 180 days, might be a more realistic timeframe.

CONCLUSION

Let me conclude by emphasizing once again the importance of nuclear nonproliferation policy for the security of the United States. Both strong IAEA safeguards and the creation of reliable fuel supply mechanisms can make an effective

contribution to preventing the spread of nuclear weapons. The potential of the latter

was highlighted by President Bush in 2004, and every U.S. administration since the

founding of the IAEA has supported strong IAEA safeguards. We welcome the support for these policies reflected in S. 1138.

Senator CASEY. Doctor, thank you very much for your testimony.

We’ll start questions now, and we’ll start with 7-minute time periods. And I’ll start and ranking member, Senator Lugar, will follow me and we’ll see from there where we go.

Doctor, you and others today have highlighted this question of

worldwide demand in the growth of nuclear power and the urgency

that some countries feel to have a reliable source of energy. Currently, there are 435 commercial nuclear powerplants operating in

30 countries around the globe, with a combined capacity of 370

gigawatts, or approximately 16 percent of the world’s electricity.

We have states like China, India, Pakistan, Japan, Russia, the

Republic of Korea, and the United States all stating their intention

to expand their nuclear power sectors. And then, we have several

other states—namely, Egypt, Jordan, Nigeria, Indonesia, and Turkey—announcing intentions to build their first nuclear reactors.

Now, many of these countries are planning or constructing enrichment or reprocessing facilities. They’re doing that for the first time.

Doctor, the first question I’d ask is: By how much, and where,

will nuclear power expand globally in the coming two decades? If

you can elaborate on what I just outlined.

Dr. SEMMEL. Thank you, Senator.

We know that all the forecasts that have been made by those

who watch this issue very closely are that there will be this expansion that you alluded to. There is agreement that the countries you

listed—you mentioned in your preface to your question, China and

South Korea, and—certainly have intentions to build new power reactors in large numbers, particularly in China. I think it’s very

likely that we’ll see a growth in the number of power reactors in

India in the coming future. Obviously, there will be a growth, as

we saw even in the Washington Post this morning, the front page—

there would be growth in the number of reactors here in the United

States and in Russia, and in a number of other countries. I think,

in the case of France, which I believe derives something like 70

percent of its electricity from nuclear power—it may be the largest

country that does that—will probably hold steady and perhaps

have some limited growth.

The other countries you mentioned—Egypt, Turkey, Jordan—Jordan, there was a Jordanian delegation that came to see us not too

long ago, expressing some interest in developing some nuclear caVerDate 11-MAY-2000 14:42 Mar 07, 2008 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 ATOM.TXT sforel1 PsN: sforel1
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pabilities. Vietnam is another country—Yemen, Turkey, too. These

are countries that have expressed an interest to begin to develop

power reactors in their countries. I would say, on that score, Senator, that, given the lack of infrastructure in the latter set of countries that I just mentioned, the prospect of their having nuclear

facilities in operation would probably be at least a decade or more

in the future, rather than something that we would face immediately.

So, I think you—those are the countries you mentioned—I think

those are the right countries. We are certainly going to see an upward growth in interest in nuclear energy that would be reflected

in the number of nuclear reactors that countries will have; yes.

Senator CASEY. And are there countries that you would add to

that list—I know you mentioned two that I had not, Yemen and

Vietnam, and maybe one other—but is——

Dr. SEMMEL. I’m sorry?

Senator CASEY [continuing]. The combined list that we both outlined, you don’t think you’d add any other countries to that.

Dr. SEMMEL. Well, there may be others out there. I think there’s

a growing interest in this for countries that want to engage in deriving nuclear power that is environmentally friendly, that it’s not

going to emit emissions. I suspect, in some of the more—even in

the nuclear weapons states, we’re going to see a growth in nuclear

reactors. Certainly, that’s the case here in the United States—we’ll

see substantial growth—and in Russia, as well, and China.

Senator CASEY. Then, when you juxtapose that demand and that

reality with the ability of the United States, and certainly the ability of the IAEA, to deal with this challenge, what can you tell us

about that? How do you—what do you see? If you were looking forward into the future, as it stands now, with the current capacity

and budget and infrastructure and all of the factors that we would

analyze with regard to what the IAEA can do, as well as what the

United States is currently doing, and able to do, what’s your analysis of that—in other words, the current capacity to deal with a

real threat, in terms of the demand for nuclear power?

Dr. SEMMEL. In terms of the real threat, I think there’s much

that needs to be done. I think some of the proposals—the proposals,

certainly, that are in the legislation that Senator Bayh described

earlier, are critical components of dealing with that threat. We certainly—as a very high priority—we certainly don’t want countries

that have aspirations for developing nuclear power to develop their

nuclear fuel cycle by getting access to enrichment and reprocessing

technology. That is very, very high priority, in terms of our nonproliferation approach to the nuclear issue. In some of the countries that we mentioned, I think you will find that the expansion

in these countries may be contingent upon a number of things.

We’ve—I mentioned a number of countries, you’ve mentioned a

number of countries, but I think the reality is that this growth that

we anticipate is likely to be conditioned by a number of other factors, not the least of which would be domestic sensibilities in certain countries, access to capital—it’s very expensive to build nuclear reactors—the question of whether countries, like the latter

list of countries I mentioned, have the appropriate infrastructure to

be able to actually build and maintain and run, and manage satisVerDate 11-MAY-2000 14:42 Mar 07, 2008 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6602 ATOM.TXT sforel1 PsN: sforel1
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factorily, nuclear reactors, remains to be seen. That’s why I say,

these countries are not likely to have nuclear reactors, power reactors for some time, for a decade or so, until they develop this necessary infrastructure.

So, a number of countries have to build up from the base because

they lack that infrastructure at this point in time. So, these are the

kinds of factors, I think, that will be critical in shaping the growth

rate trends that we’re likely to see over time.

Senator CASEY. My time is up, but I’ll come back. Thank you.

Dr. SEMMEL. Sure.

Senator Lugar.

Senator LUGAR. Well, thank you very much, Mr. Chairman. I

would just mention what is, I suppose, obvious, but probably important to say, in terms of common sense, as to why the American

public would be interested in the subject that we are discussing

today. And it comes down to this, that, as a country, we’re busy

proposing to the Chinese, to the Indians, to others, that they utilize

nuclear power to a much greater extent. We believe that this is important as we take a look at the climate change issue, as well as

the fact that the scarce resources of the Earth could bring about

a vast contest among nations, and potential conflict, if we and they

are not thoughtful about the sources of energy that are going to be

required; in this particular case, electricity.

And so, as a result, even as we push nations who already have

these supplies, in part—and industries—to do more, we are also

stimulating interest and demand of other nations that may not

have gotten into the nuclear business; or, if they have, have slid

in through the side door in ways that may not be desirable. So, in

an international way, the IAEA is mentioned again and again as

a party that deals not as a United States fuel bank, but as an

international fuel bank in which we encourage that, and we encourage a budget for IAEA, and the staff and the facilities and

what have you, to do their jobs, so that there can be an umpire in

this huge international contest, in essence, to make certain that

the fuel is available at reasonable prices, but that it’s used for

peaceful purposes, and that the other side of the bargain is that

you do not progress on to try to enrich uranium and build nuclear

weapons.

Now, that’s a fairly simple focus, but it’s a profoundly important

one as all the nations of the world try to divine their foreign policies and their security policies. And it’s important, really, to be able

to state it forthrightly and clearly so that every nation knows

where we are headed, what our support is, and what we are prepared to do, really, to enhance this international understanding.

Now, you’ve stated that very well in your testimony, Dr. Semmel,

as has my colleague Evan Bayh, but let me just ask these questions.

The administration—our administration has taken steps toward

creation of a nuclear fuel bank with an announcement by the

Department of Energy it’s awarded a contract to download 17.4

metric tons of United States highly enriched uranium and store

this material for use in a reliable fuel supply program. Material

would be converted to low-enriched uranium and administered by

the IAEA. Has the administration done, just in terms of the nittyVerDate 11-MAY-2000 14:42 Mar 07, 2008 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6602 ATOM.TXT sforel1 PsN: sforel1
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gritty of this, a legal analysis of its proposed approach to ensure

that all U.S. laws and regulations will be met? And, if not, which

of these need to be changed to permit fuel supply to certain countries? And, if you do not have the answer on top of your head,

would you furnish the committee with such analysis for the benefit

of our record?

Dr. SEMMEL. Thank you for the last part of that question, Senator. We will get you a response on that, in detail.

Senator LUGAR. I think it’s important——

Dr. SEMMEL. Yes.

Senator LUGAR [continuing]. Just as we round out all parts of

this approach.

[The written information submitted by Dr. Semmel follows:]

The administration has been and will continue to be sensitive to the need to comply with existing laws and regulations when implementing any mechanism for fuel

supply assurances to other countries. The legal analysis process will continue as the

details of the various proposals are developed in discussions at the IAEA and elsewhere. In particular, we will want any fuel supply mechanism we support to have

strong nonproliferation obligations as a condition of supply and we will continue to

press for a mechanism that will enable the greatest possible U.S. involvement, consistent with our existing laws and regulations. However, until the details of such

a mechanism are worked out we will not be in a position to evaluate whether any

specific changes in the law would be required to support a program beneficial to our

nonproliferation goals.

Now, in May of this year, I wrote to Secretaries Rice and Gates

questioning why it’s taken more than 8 months since the passage

of implementing legislation for the U.S. Additional Protocol for the

administration to bring it into force. A month later, I was given a

response from the State Department which essentially said that all

regulations were not yet completed. Two months later, the Department of Defense wrote to me, stating they were waiting for the

Departments of Commerce and others to finalize the regulations.

Can you give us any indication by what date all the necessary regulations from all the necessary Departments will have been approved to implement the U.S. Additional Protocol?

Dr. SEMMEL. Thank you, Senator.

Let me say, first of all, thank you for responding to President

Bush’s urgings in February 2004, and the response that the Foreign Relations Committee and the Senate was very rapid in terms

of providing its advice and consent on the Additional Protocol by

the end of March 2004; a very expeditious response. And the implementing legislation that was passed December of last year puts us

on a fairly high level to move the additional protocol forward, in

terms of ratification down the line. It’s my understanding on this

that the Department of Commerce and the Department of Defense,

Department of Energy, are deeply involved in looking at all the requirements that are built into the implementing legislation. This is

a very costly process. I know the Department of Commerce commented to us in the past of how expensive it really is for them to

do the vulnerability assessments and the like.

I can’t give you a precise timetable. If we were to get these necessary elements of the implementing legislation done in a reasonable way, I would suspect that we would not be able to do it before

the end of the year, as I’m told by those who are responsible for

the mechanics of getting this information—deriving this informaVerDate 11-MAY-2000 14:42 Mar 07, 2008 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6602 ATOM.TXT sforel1 PsN: sforel1
20

tion. It likely would be sometime next year, but I can’t precisely

predict that.

I’m as interested as you expressed to move this legislation

quickly. I think, with the United States ratifying the Additional

Protocol, it sends a signal to other countries that have not yet either signed an additional protocol or put one in force, that we had

done this. I think this is a positive sign. And, of course, this is

what we want other countries to do.

So, we ought to act expeditiously by example. I’m hoping we can

move this process. I can tell you that there is considerable amount

of energy being devoted to fulfilling the requirements of the implementing legislation so that we can get the necessary regulatory

measures in order.

Senator LUGAR. Well, I thank you for that response. You’ve acknowledged how important this is. One of the purposes of our legislation we’re considering today is, once again, to try to bring some

unity with all of these different aspects. But this is something on

which we’ve taken action, and the administration asked us to take

action. And so, we will continue to try to monitor this in our oversight capacity, which you understand, we are very hopeful that the

administration will move forward more rapidly.

Let me yield to the chairman. I’ll have a couple of more questions, if that’s possible, in a second round.

Senator CASEY. Sure.

Senator LUGAR. Thank you.

Senator CASEY. Absolutely.

Doctor, I wanted to return to some of the matters that we dealt

with a few moments ago, and, in particular, one—for people watching this and listening or reading the testimony, I think they get a

sense of what we’re talking about here with regard to the challenge, generally, or globally, but also the particular challenge that

the IAEA faces in being the one agency in the world that has to

deal with this surge of demand for nuclear power and also the

threat posed by terrorists, of course, and certainly in states like

Iran, to abuse the process, or to use a civilian cover for what is a

nuclear weapons intention. And I wanted to ask you just to—if you

could, in very basic terms, to describe the current state of the IAEA

with regard to—we’ve heard a lot about workforce, and the retirement or turnover of key personnel, their inability to bring in, sometimes, the expertise they need; Senator Bayh, in his testimony, referred to 1970s equipment or technology; and all of those kinds of

descriptions. If you can just give us an assessment of—even if you

have a short list or examples of what this means, in terms of what

the IAEA has to—IAEA has to deal with every day, and how the

United States can be a leader across the world in making sure that

this shortfall on infrastructure or personnel or expertise or technology or equipment can be rectified rapidly because of the threat.

Dr. SEMMEL. Well, thank you. I think—at the end of the day our

interests are that the IAEA have the capability to be able to deter

and detect undeclared facilities and activities in the world. And so,

it has to have the capability to do that. And the capabilities range

across a spectrum of issues, anywhere from those that you mentioned—you’ve got to have skilled practitioners and personnel, not

only in the Seibersdorf Analytical Lab that was mentioned earlier,

21

but also other managers and skilled personnel. You’ve got to have

adequate resources to be able to buy the equipment, to pay salaries, to build infrastructure, so that it is a modern, up-to-date,

skilled, smooth operation. You have to have the cooperation of the

international community. It’s very difficult. I mentioned, I think, in

my opening statement about the difficulties, for example, of the

IAEA securing anything close to what the Director General had

proposed in his budget, which was an 8.5-percent increase for the

next biennium. The member states themselves, which operate in a

consensus-based decision process, obviously did not agree with

that. So, it’s very difficult to get the international community to

agree on the same priorities that we have, or that the Director

General of the IAEA may have, as well. So, trying to convince the

rest of the world that these are the high priorities that we know

they are, is a very difficult process, and that requires a lot of diplomacy, occasional demarches, and so forth.

We also have got to make an effort to ensure that the IAEA has

the tools necessary to do its job; that countries have comprehensive

safeguards agreements, which allows the IAEA to do the inspections, to gather information, to report on their activities, and so

forth; that the countries sign on to, and put in force, additional protocols which allows the IAEA to do even more in terms of timely

inspections, to gather more information that would otherwise not

be available; to interview individuals to ensure that the materials

that they have are not being diverted from peaceful to nonpeaceful

purposes.

These are the kinds of things that the IAEA needs; any organization that has a defined mission needs these kinds of attributes.

And, in some cases as has been alluded, they’re a need in the

IAEA, and we, as the principal funder I might point out—we, the

United States, as the principal funder—both the assessed budget

as well in the voluntary budget—have been in the forefront of trying to provide these kinds of resources and these kinds of skills,

equipment, technology, and the like.

So, the credibility of the IAEA is absolutely essential to the

strengthening of the nuclear nonproliferation regime. If the IAEA

is unable to measure up to the changes that have taken place, that

we’ve alluded to here, in terms of the growth of reactors, a growth

in nuclear power, and the nexus between nuclear materials, nuclear weapons, and the desire on the part of terrorists to acquire

them, or use them, and to deal with that issue by protecting physical plant, protecting the materials, I think the chances that—the

consequence of that would be a weakening of the nonproliferation

regime, and we don’t want that to happen.

Senator CASEY. I’ve only got a little more than a minute, I want

to get one more question in here. We’ll try to come back to this,

because I have others. But, in light of the recent news about the

article 123 agreement and what the United States is doing with regard to India, do you have a concern about, and should we be concerned about, a perception of a double standard when we say this—

we’re saying what we’re articulating today about the concern we

have about proliferation, and then there are some countries around

the world who raise questions about our agreement with India?

22

And if you could—I know I only have about 30 seconds, I’ll try to

come back to it, as well—but what’s your sense of that?

Dr. SEMMEL. Well, this is an issue that’s obviously been debated,

not just out on the airways and the mass media and the think

tanks, but also here in the Congress. Congress, in both Chambers

last year, voted very strongly in both the House and the Senate,

in support of the bill that would basically treat India as an exception to the standards that countries lacking full-scope safeguards

ought to be treated.

Without getting into the particulars of the 123 agreement, needless to say, it was a very difficult negotiation, it took several years.

I think, on balance, when you measure the outcome, what comes

out the back end of that negotiation, is that we’re very pleased that

India has made a number of commitments that it would not, perhaps, have otherwise made, in terms of adhering to a number of

international nonproliferation standards—in the Nuclear Suppliers

Group, in the Missile Technology Control regime, and others. So,

I think one of the net effects of this initiative, from the positive

standpoint of nonproliferation—and I don’t want to oversell the

nonproliferation gains here, I think it’s implicit in your question—

but one of the benefits is that we do bring India closer into what

has been dubbed the mainstream of international nonproliferation

practices. And I think that’s clearly a net gain.

The relationship between the United States and India goes beyond, obviously, the 123 agreement and the Civil Nuclear Cooperation Initiative. It has much to do with our relationship, our strategic relationship, in terms of what the world is evolving into in the

next decade or so, with a country that has a burgeoning economy;

a country that is the second largest population in the world, soon

to be the largest, perhaps; a country that is a practicing democracy.

These are all positives. I think that we need to solidify that relationship. And the Civil Nuclear Cooperation Initiative, which would

allow India to begin to address its own energy problem in its growing economy is a very strong positive.

Senator CASEY. Thank you. I’m out of time, and I’m actually

over.

Senator LUGAR. Why don’t you just go ahead?

Senator CASEY. Well, I’ll defer to the ranking member.

Senator LUGAR. Thank you, Mr. Chairman.

Let me just follow through on some of the questions that the

chairman has raised about the IAEA. You’ve discussed the budget

problems, and the United States at least has attempted to be helpful, with an increase in our allocation. Obviously, the viability of

the legislation we’re discussing today is dependent upon the IAEA,

because the United States would have made a conscious decision

that the international community, as a whole, as represented by

that agency, is going to be the major monitor of all of this. So, if,

in fact, the facilities are inadequate, the budget is inadequate, we

have a major problem to begin with.

In other words, from the beginning, rather than being accused of

unilateralism, in which we have the fuel bank here, the United

States, everybody comes to the well here, and we take care of their

needs, and so forth; we recognize the importance of the international understanding and the other parties involved, in the headVerDate 11-MAY-2000 14:42 Mar 07, 2008 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 ATOM.TXT sforel1 PsN: sforel1
23

quarters in Vienna and elsewhere. And so, that’s an important foreign policy declaration, but this is why the budget situation is

important.

Now, you’ve pointed out that when the nations met to talk about

the budget, and the director, Mr. ElBaradei, says, ‘‘I need 81⁄2 percent more,’’ or whatever—so forth, they were not very forthcoming.

Now, can you describe that process a little bit? What are the interests of the other nations involved in this? And how intense, really,

is their interest in the IAEA? And, in the event we were to proceed

with the assumption that this really does become the monitor of

the fuel bank business, what confidence level can we, or anybody

else, place in this monitoring agency if it has a need for international understanding each year simply to have a budget?

Dr. SEMMEL. Senator, I agree, totally, with the premise of your

question. If the IAEA’s going to be preeminent in monitoring peaceful nuclear programs around the world, it has to have the resources

and the capability to do that.

In terms of the dynamics of what took place at the IAEA, it

wasn’t in those protracted budgetary discussions. We know about

protracted budgetary discussions on the Hill. I can say that, back

in 2004, the United States took the lead, in fact, eventually succeeded, after what I like to call a sort of, hand-to-hand combat, was

able to increase the budget by 20 percent over the 4 years, as I

mentioned. It was not an easy task. And some of our friends, as

well as others, were resistant to this budget increase. We saw the

same reoccurrence of this phenomenon in this latest budget debate,

which, again, took several sessions in the IAEA. There are a number of countries who simply, for a variety of reasons, don’t want

these funds to increase—they may have problems back home, so it’s

pure bureaucratic problems finding additional resources there that

is not perceived to benefit any domestic needs, and so forth.

But I’m surprised that there are a number of countries in Western Europe, for example, who have been resistant to budget increases. Many of the countries would like budget increases, but

would like the funds allocated in different ways. And, if they’re not

going to be allocated in different ways, they’re resistant to having

those budget increases. For example, many of the nonaligned countries—so-called developing countries—want substantially larger

portions of those resources devoted to technical cooperation in the

areas of medicine and health, environment, desalinization, and so

forth.

And if they don’t perceive that these funds would move in that

direction, they’re more resistant to actually supporting increases.

Now, many of these countries derive most of those benefits from

the voluntary contribution, rather than from the regular budget,

because the regular budget is geared more toward safeguards and

salaries and the like.

So, the dynamics vary from state to state. Each state looks at

their own interests. And, with the exception of the United States

and a number of our friends—including the Russians, I might point

out, who have been very forthcoming in terms of wanting to

strengthen the IAEA, strengthen IAEA safeguards, strengthen the

resources at the agency—they’ve been very supportive of these increases. But it requires consensus decisionmaking. Everybody has

24

to agree, or you don’t agree on anything. And that, then, because

of that process, you’ve had to get some lowest common denominator, and that lowest common denominator was a 4.2-percent increase. So, that’s the dynamic.

Senator LUGAR. Well, as I’ve heard your testimony, my mind has

sort of wandered over how we can make a difference in this situation. For example, I’ve mentioned this personal visit out in Vienna

in November. I visited with representatives from several countries

that were in the headquarters that day, and we had very good conversations. But when I went out to the laboratory and I asked how

many representatives of other countries have ever visited this laboratory; a very short list. And I will not embarrass any country by

indicating that its ambassador or its representatives never darkened the door of the laboratory, but this is not a regular stop, nor

the nitty-gritty of the process.

Now, this August, I’m—plan to visit with my former colleague

Sam Nunn, with the Russians again, and you’ve indicated they’ve

been helpful. This may be a way in which we try to work together

to encourage others, because clearly we’re going to need some allies

out there at the IAEA if we’re going to have a budget, if we’re

going to have laboratories and facilities. And when I talk about the

threat to the personnel, you know, I’ve experienced the fact that

the blowback and so forth is a dangerous situation; you don’t want

to stay in the laboratories too long.

So, we talk in generalities about international organizations and

how, in the best of things, these all work out, but the nitty-gritty

is pretty important, too, and this is why I’ve taken this opportunity

of this hearing for somebody to try to make some statements, as

well as raise some questions, about the need for international understanding if we’re really to progress in what I think is a big idea,

and an important one, which we generally would agree. The same

predicament, often, with our—as you know, with our NATO budgets, everybody’s downsizing the defense budget, downsizing the

number of people that might be available for duty. And such is the

nature of international negotiations. But this is a pretty critical

one. It can’t start and stop every year. The need for continuity is

really of the essence.

So, I thank you very much for your testimony and this opportunity to visit with you.

Dr. SEMMEL. Senator, if I may offer just one comment on that.

Because of the strains on the regular budget that we were talking

about, the agency has had to rely more on voluntary contributions,

not just from the United States, but from other countries as well.

Senator LUGAR. I see.

Dr. SEMMEL. Voluntary contributions in cash, as well as in kind.

And, of course, this is very helpful, because the voluntary contributions are designed to fill gaps that the regular budget cannot

handle, cannot fund. But voluntary contributions oftentimes have

strings attached to them. Up here in Congress, they are called earmarks. They can fund, adequately, one-time projects, whatever it

may be—equipment and things like that. But, it’s very difficult to

fund long-term projects.

And so, we have tried to do that. As I say, we are the largest

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25

tributions. I think our contribution this year is $53 million. Much

of that goes to—a good chunk of that goes to safeguards, obviously.

So, that’s one way in which we make up, in terms of showing our

bona fides, by making funds available to the IAEA through the voluntary contribution, in addition to our assessed contribution.

Senator LUGAR. Thank you.

Thank you, Mr. Chairman.

Senator CASEY. Doctor, I have one more question. Any system of

an assured nuclear fuel supply mechanism has to have as its foundation—the undergirding of that, really—is a sense of reliability,

that countries agree to pursue this peaceful track, so to speak, so

that—with the understanding that they have a reliable source of

fuel. And that’s the bargain. But one question which has been

raised, and I think I skipped over it before—and I wanted to highlight this—is, we talk about market rates as being enough, and one

question that’s been raised is whether or not market rates would

be an adequate incentive for some countries to make this deal, to

agree to this bargain, so to speak. And one question we should ask

is whether or not—and I’d ask for your opinion, on behalf of the

administration—whether or not it might be necessary to subsidize

the nuclear fuel in order to deal with countries that might have

trouble with paying the market rate, so to speak. What’s your

sense of that?

Dr. SEMMEL. On the question of subsidization, that’s probably

above my paygrade. I think, at this point in time, most of the concepts—all the concepts that we’re talking about—the six-country

concept that the United States introduced early last year, and all

the other reliable access concepts are still in the process of formulation. I don’t know whether or not subsidization of nuclear fuel

below market rates would make sense, in terms of the market.

I would say this, Senator, that I think people who have looked

at this issue much more intensely than I have, have almost universally come to the conclusion that right now the market itself is

working well; that is to say there’s no problem of availability of nuclear fuel for those countries that seek it, that need it, and because

there’s ample supply out there right now, and the market is working, and there is some competition. So, there may be more competition in the future as this looks like a much more attractive market

with new enrichment facilities being thought of and being developed and constructed. If that competition does, in fact, increase, I

think you would find that the market prices would be competitive,

would be perhaps even reduced as a consequence of that. But I

think what we find is that, in the growth of the demands, if there’s

not an adequate response in terms of supply, you would then find

some pressure on the upward pricing of nuclear fuel and the cost

of nuclear fuel.

But subsidization, I think I’ll just pass on that one, at this point.

Senator CASEY. And if there’s any way that you or the administration can supplement the record on that, I’d appreciate it.

Dr. SEMMEL. Okay. We’ll take that.

[The written information submitted by Dr. Semmel follows:]

None of the recent proposals for fuel assurances, including the six-country concept

backed by the United States, has raised the issue of subsidies for the purchase of

nuclear fuel. The international nuclear fuel market is working well, and all the proVerDate 11-MAY-2000 14:42 Mar 07, 2008 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6621 ATOM.TXT sforel1 PsN: sforel1
26

posals under discussion assume that the price of fuel will continue to be set by the

market. As Dr. Semmel noted in his testimony, the fuel supply proposals are still

being discussed and the details are being developed. However, developing an indigenous enrichment or reprocessing capability is a very expensive proposition. With regard to the need for subsidies, we do not currently foresee the market price increasing so drastically that investment in new enrichment or reprocessing facilities would

be more economically attractive to any country now considering the adoption of nuclear energy than purchasing nuclear fuel at market rates without subsidy.

Senator CASEY. Doctor, thank you very much for your testimony.

And then, we’ll move, now, to the third panel. If those three individuals are here in the room, if they would approach the witness

table.

Well, we want to thank the witnesses for their appearance today,

and we want to welcome a distinguished group of witnesses here,

all of whom today serve in private capacities, and are leading experts on assured fuel supply mechanisms and nuclear safeguards.

Each of our witnesses can draw upon substantial experience working on these issues in the United States Government, dating all the

way back to the Nixon administration. And I’ll give a brief summary of some of their work.

Mr. Henry Sokolski is the executive director of the Nonproliferation Policy Education Center, a nonprofit organization he founded

in 1994 to focus on strategic weapons proliferation issues. He

served from 1989 to 1993 as Deputy for Nonproliferation Policy in

the Office of the Secretary of Defense. Mr. Sokolski has also served

as a senior congressional staffer, working for both Senator Gordon

Humphrey and Senator Dan Quayle, and he also is a prolific writer

on the multiple proliferation challenges facing the international

community today.

Thank you very much, sir, for appearing.

Dr. Lawrence Scheinman is a distinguished professor for the

Center for Nuclear Nonproliferation Studies at the Monterey Institute of International Affairs. Dr. Scheinman has been involved in

nuclear-related matters as an academic and as a government official for over 35 years. He most recently served as Assistant Director for Nonproliferation and Regional Arms Control at the U.S.

Arms Control and Disarmament Agency, which, unfortunately, no

longer exists. Dr. Scheinman is one of the world’s foremost experts

on the IAEA and nuclear safeguards.

And, third, Dr. Fred McGoldrick is a principal partner in an

international consulting firm and does work for the Departments of

State and Energy on nuclear nonproliferation issues. He retired

from a distinguished civil service career in 1998, after serving in

a variety of positions in both the State and Energy Departments,

as well as representing the United States to the International

Atomic Energy Agency, where he served as a leading expert on

U.S. civilian nuclear cooperation and nonproliferation challenges.

Gentlemen, for the interest of time and for a good dialog with

each of our witnesses, I’d ask each of you to limit your oral presentations to 5 minutes each. The remainder of your prepared statements will be formally entered into the record. And I appreciate

your cooperation with that, because of time.

And we’ll proceed in the order of witnesses as I introduced them.

So, Mr. Sokolski, we would begin with you and thank you for your

testimony.

27

STATEMENT OF HENRY SOKOLSKI, EXECUTIVE DIRECTOR,

NONPROLIFERATION POLICY EDUCATION CENTER, WASHINGTON, DC

Mr. SOKOLSKI. Thank you. In the interest of time, I will keep it

to 5 minutes. There’s a good chance you’ll get half a thought, but

I will proceed.

I want to thank you for giving me this opportunity to testify.

I think, just from listening today, you get the strong sense that

we really want to think that the peaceful and military atoms are

distinct. They’re not.

A study done for my center, in 2004, spelled out the diversion

dangers associated with civilian nuclear energy. Tehran, for example, is building a large light water reactor at Bushehr. When completed, this plant could make 330 kilograms of near-weapons-grade

plutonium in the first year of operation. That’s enough for 50 or

more crude nuclear weapons. To extract this plutonium from the

reactor’s spent fuel, Iran would need to build no more than a small

crude chemical extraction facility, 30 by 130 by 65 feet. If you flip

over my testimony, the very last page, that thick thing, you’ll see

a picture of it. It’s not big. This would be easy to hide, could be

built in roughly 6 months, and be able to be on the ready until

needed. Once operating, this plant could produce a bomb’s worth of

plutonium in as little as 10 days, and another bomb’s worth each

subsequent day it continued to function.

Bushehr, like all light water reactors, also requires 20 tons of

lightly enriched uranium to be on the site at all times to expedite

fueling operations that might be forced by safety-related shutdowns. This uranium also presents a danger; it can be used to accelerate an effort to make bomb-grade uranium. Estimates done for

my center indicate that if this lightly enriched fuel was seized,

technicians could quickly convert it into enriched feed, reducing the

amount of effort needed to produce bomb-grade uranium by as

much as fivefold, as compared to using natural uranium. So, instead of a year to make one bomb’s worth in its 1,500-odd centrifuges, Iran could make a weapon’s worth in about 7 weeks. It

should be noted that North Korea is now asking that it be supplied

with a large light water reactor in exchange for dismantling its

plutonium production facilities.

Conventional wisdom, of course, has it that the IAEA could detect such diversions of fresh and spent fuel rods. Allowing that it

might, our recent experience with North Korea and Iran suggest

that the short notice that the IAEA’s detections could conceivably

afford—that would be 2 to 7 weeks—would hardly be sufficient to

permit the world’s key nations the time they would need to take

decisive action. More important—and I want to emphasize this—

under a number of scenarios, the IAEA might not detect these rods’

theft at all. It’s not generally known, but, for most of the nuclear

facilities it inspects, the IAEA simply does not know, day-to-day, if

its remote cameras and monitors are on.

Not long ago, the IAEA assessed this vulnerability. It learned

that over the previous 6 years there had been camera blackouts

that lasted, ‘‘more than 30 hours’’ on at least 12 separate occasions.

What’s worse, the IAEA learned of these blackouts only after inspectors went to the sites and downloaded the camera recordings,

28

as they are required to do every 90 days. During these blackouts,

entire fuel rods could be removed and replaced with dummy rods.

Within 90 days, a state could possibly convert this material into

bomb fuel.

The study also discussed several other diversion scenarios. All of

them—I repeat, all of them—were subsequently validated by the

State Department, the National Weapons Laboratories and officials

working on the safeguards advisory panels to the IAEA.

I am not going to get into any of the recommendations, to observe the 5-minute period. But I do think there is one that does deserve attention. One of these recommendations is made in ‘‘Falling

Behind: International Scrutiny of the Peaceful Atom,’’ a major report by the Center on the IAEA Nuclear Safeguards System, which

I’m releasing today and ask be placed in the record. I should note

that this study took 2 years, and was backed by the Carnegie Corporation of New York, and involved officials from many countries,

and IAEA officials, as well.

In any case, one of the recommendations that I suggest be taken

was briefed to the scientific advisor to Mr. ElBaradei, and that is

that the United States take the lead in supplementing current

IAEA contributions with what I would describe as a safeguards

user fee. I believe this can be done incrementally, starting with

how the United States formulates its own current voluntary contributions. A fee ultimately would be based on a percentage of the

costs associated with the production of civilian nuclear energy, so

you would not have this enormous gap and constant negotiations

over whether or not to increase the IAEA’s safeguards budget.

I will end there, because I want to observe your rule about 5

minutes. So, I’ll stop right there.

[EDITOR’S NOTE.—The report submitted for the record by Mr.

Sokolski was too voluminous to include in the printed hearing. It

will be maintained in the permament record of the committee. It

can also be accessed on line at: http://www.acamedia.info/politics/

nonproliferation/references/cochran—2007.pdf.]

[The prepared statement of Mr. Sokolski follows:]

PREPARED STATEMENT OF HENRY SOKOLSKI, EXECUTIVE DIRECTOR, THE

NONPROLIFERATION POLICY EDUCATION CENTER, WASHINGTON, DC

Mr. Chairman, Senator Lugar, members of the committee, I want to thank you

today for giving me an opportunity to testify on the dangers the United States and

other countries may face if, as some predict, civilian nuclear energy spreads to a

large number of additional countries.

We like to think that the peaceful and military atoms are distinct and divisible

from one another. In fact, they are not.

A detailed study done for my center in 2004 by an experienced U.S. nuclear

bombmaker, a veteran nuclear safeguards expert, and a former U.S. Nuclear Regulatory Commission commissioner spelled out the military diversion dangers associated with civilian nuclear energy. Their analysis speaks to many cases, including

Iran and North Korea.

Tehran is building a large light water power reactor at Busheir. When completed

and online, this plant will make 330 kilograms of near-weapons-grade plutonium in

the first 12 to 15 months of operation. This is enough material to make 40 to 65

crude nuclear weapons. To extract such material from the reactor’s spent fuel, which

is expected to remain in Iran for at least a year or more, Iran would need only to

build a relatively crude chemical extraction plant that could be as small as 30 feet

by 130 feet by 65 feet (see Figure IV). Such a plant would be easy to hide. It could

be built in roughly 6 months and could be kept on the ready until needed. Once

29

it began operating, though, this plant could produce a bomb’s worth in as little as

10 days and one bomb’s worth for each subsequent day it continued to function.

The Busheir reactor, like all light water reactors, also requires one-third of a fuel

loading—approximately 20 tons of lightly enriched urarnium—to be available at the

site at all times. This fuel is needed to expedite refueling operations; both those that

are routine and those that might be forced by a safety-related shutdown of the

plant. This lightly enriched uranium, however, presents a danger: It can be used

as feed material to accelerate an enrichment effort to make bomb-grade uranium.

The estimates done for NPEC indicate that if this fresh fuel was seized, technicians would quickly cut open the fuel cladding, crush the ceramic fuel pellets inside,

heat the material, and run hexaflouride gas over it to produce lightly enriched uranium feed. This enriched feed, in turn, could be used to reduce the amount of effort

needed to produce highly enriched uranium by as much as five-fold over using natural uranium. Instead of taking a year to make one bomb’s worth of highly enriched

uranium in its 1,500 odd centrifuges, Iran could get a bomb’s worth in as little as

7 weeks. North Korea, it should be noted, is now asking that it be supplied with

a large light water reactor in exchange for dismantling its plutonium production facilities at Yongbyong.

Conventional wisdom, of course, has it that the International Atomic Energy

Agency (IAEA) could detect such diversions of fresh or spent fuel rods. Allowing that

it might, the agency’s experience, though, with North Korea Iran suggests that it

would be unreasonable to expect that the notice that such detections could afford—

2 to 7 weeks—would be sufficient to rally the world’s key nations to take decisive

action.

Perhaps even more worrisome is that under a number of scenarios, the IAEA

might not detect the theft of these rods at all. It’s not generally known, but for most

of the nuclear facilities it inspects, the IAEA simply does not know day to day if

its remote cameras and monitors are on. Not long ago, the IAEA assessed this vulnerability and learned that over the previous 6 years, there had been camera ‘‘blackouts’’ that lasted for ‘‘more than 30 hours’’ on at least 12 separate occasions. The

IAEA learned of these blackouts, moreover, only after inspectors went to the sites

and downloaded the camera recordings as they are required to do every 90 days.

During these blackouts, entire fuel rods could be removed and replaced with dummy

rods. Within 90 days, a state could possibly convert this material into bomb fuel or

come close to doing so. The study also discussed several other diversion scenarios.

All of them were subsequently validated by State Department, national weapons

laboratory, and IAEA advisory officials.

30

The good news is much can be done to correct this problem with the deployment

of additional near-real time surveillance capabilities. Full deployment of such systems, however, costs money that the IAEA currently lacks. This funding gap is only

likely to increase if, as predicted, more nuclear powerplants are built in new locations. Thirty-one states currently operate large nuclear reactors or fuel making

plants. In just the last 18 months, 15 more—Algeria, Bangladesh, Saudi Arabia,

Yemen, Egypt, Libya, Algeria, Morocco, Tunisia, Turkey, Australia, Indonesia, Vietnam, Kazakhstan, Nigeria—have announced plans to build fuelmaking plants or

large reactors before 2020.

One of the recommendations made in NPEC’s IAEA safeguard report, which I am

releasing today and ask be placed into the record, is that the United States take

the lead supplementing current IAEA contributions with a safeguards user fee. This

might be done through several incremental steps leading to imposition of a fee on

each IAEA member. The fee would be based on a percentage of the costs associated

with the production of civilian nuclear energy and the operation of fuel making

plants in each member state.

A second type of safeguards challenge NPEC investigated is the difficulty the

IAEA has inspecting nuclear fuelmaking plants. As the IAEA’s director general has

made clear, once a country has nuclear weapons usable fuels, such as highly enriched uranium and separated plutonium, there is little the IAEA can do but hope

that the country doesn’t decide to make bombs.

The dangers relating to nuclear fuelmaking, however, go much deeper. First, the

plants themselves can be diverted to make bombs overnight. Second, the nuclear

weapons usable materials these plants make or handle—e.g., separated plutonium

in the case of reprocessing and mixed oxide fuelmaking plants—cannot be accounted

well enough to prevent the possible ‘‘loss’’ or diversion of many bombs’ worth of

material each year. It is projected, for example, that the IAEA will have to report

nearly 50 crude bombs’ worth of separated plutonium to be ‘‘material unaccounted

for’’ (or MUF) each year Japan’s latest large, commercial reprocessing plant is fully

operational. Similar, worrisome MUF and inspection gaps are also possible at enrichment and certain fuel fabrication plants. Finally, the IAEA keeps secret how

much nuclear material each country has by type that would be directly usable to

make bombs. Instead, it only makes the global aggregates public, claiming that this

information is commercially proprietary.

These practices have long been tolerated. This is a mistake. One of the key recommendations my center’s report makes is to get the IAEA to distinguish much

more clearly between what the agency can only monitor and what it can inspect in

a manner that will reliably detect military diversions before they are completed.

Only the later fulfills the IAEA’s official definition of what a safeguard is. Making

this distinction more clearly between what can be monitored versus what can actually be safeguarded is important. It certainly makes it easier to understand what

the IAEA can and cannot safeguard and just how dangerous certain nuclear facilities are. Fuelmaking centers, including the one that might be built in Kazakhstan

would stand out as being unsafeguardable as would the commercial reprocessing

plant India is proposing to build solely to recycle U.S.-origin spent fuel.

It certainly would make sense to increase inspections at such plants but not because more inspections would meet the IAEA’s official safeguarding criteria. Instead, such intensified monitoring would be useful to assure a greater chance of detecting diversions, at least, some time after they have occurred. It also would make

sense to upgrade physical security at many of these sites to make them as stringent

as the toughest security measures currently being implemented at nuclear weapons

production and storage sites in the United States.

Finally, the United States and other members of the IAEA should reassess the

key assumptions behind the IAEA’s current timeliness detection goals. Just how

much material does it take to make a bomb? How much time is needed to convert

different key nuclear materials into bomb fuel? How often should the IAEA check

against diversions of safeguarded materials? All of the current safeguarding premises were set nearly 30 years ago. Many of them are overly generous. It’s time that

they were updated.

Mr. Chairman, there are a number of other specific recommendations that the

NPEC safeguards report makes that deserve this committee’s attention. One is to

clarify the benefits or lack of them relating to nuclear energy by getting the executive branch to implement title V of the Nuclear Nonproliferation Act of 1978. Under

this provision, the executive is required to conduct analyses of what can be done

to meet the energy needs of developing nations without fossil fuels or nuclear power.

Unfortunately, it is something no President, Democratic or Republican, has yet chosen to do. There also are several recommendations to encourage states to act against

those that engage in nuclear misbehavior.

31

What’s encouraging is that none of these recommendations need wait upon consensus at the IAEA Board of Governors or the United Nations. Nearly all, in fact,

can be acted upon by this committee.

Senator CASEY. Mr. Sokolski, thank you very much. And I have

to apologize to you, I think I added at least one syllable to your

last name when I pronounced it before, and I’m sorry about that.

That’s my fault. And I appreciate your testimony. And we’ll have

time during questions, I think, to amplify and to enlarge upon

some of the recommendations which you lightly skipped over in the

interest of time. Thank you.

Mr. SOKOLSKI. One syllable’s not bad, actually. [Laughter.]

Senator CASEY. I’ve to admit it. Sorry.

Dr. Scheinman, you’re next. Thank you.

STATEMENT OF DR. LAWRENCE SCHEINMAN, DISTINGUISHED

PROFESSOR, JAMES MARTIN CENTER FOR NONPROLIFERATION STUDIES, MONTEREY INSTITUTE OF INTERNATIONAL

AFFAIRS, WASHINGTON, DC

Dr. SCHEINMAN. Thank you, Mr. Chairman. It’s a pleasure to be

here, particularly with Senator Lugar, as the Monterey Institute

has just stood up its Nunn-Lugar Chair in Nonproliferation. We’re

very pleased that that has come to pass.

I’ll apologize for my voice. I am husky today.

Safeguards are a central feature of the nuclear nonproliferation

regime and of the era introduced with President Eisenhower’s

Atoms for Peace Initiative in 1953. Their importance to a viable

and effective international nonproliferation regime cannot be exaggerated. They are, for all intents and purposes, a condition sine

qua non for cooperative development of civil nuclear energy and

practicable international nuclear commerce. There is no identifiable

acceptable substitute, short of some form of international ownership and control of the nuclear fuel cycle, a formulation advanced

unsuccessfully by the United States in 1946, with the Baruch Plan.

This approach is being revisited again today in the form of initiatives for multilateral, multinational fuel cycle arrangements, for

enrichment and reprocessing, as the international community grapples with a number of challenges, ranging from the end of the cold

war, the loss of disciplines imposed by the superpowers, the increasing spread of nuclear knowledge, diversification of sources of

supply, the prospect of states and regions of tension developing capabilities that would put them in a position to quickly develop the

nuclear weapon, and the rising threat of nonstate actors, including

apocalyptic terrorists, acquiring nuclear explosives and the means

to produce them.

Viable institutional arrangements, such as multinational enterprises, may provide additive stability and security, but safeguards

are, and will remain, the core constituent of an effective and credible nonproliferation regime.

The traditional comprehensive safeguard system focused on

verification of state declarations using quantitative measures supported by containment and surveillance. This system provided a

high degree of confidence regarding the accountability of all

declared nuclear material, but did not answer the question of

whether undeclared nuclear activity might be present on the terriVerDate 11-MAY-2000 14:42 Mar 07, 2008 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6602 ATOM.TXT sforel1 PsN: sforel1
32

tory or under the control of a safeguarded state, although the system incorporated the principle that safeguards extended to

undeclared activity, as well. This is a problem that we are grappling with today, and hopefully will be able to come to an effective

solution, some elements of which are already on the table.

In the interest of time, let me come to the legislation on safeguards, in section 113—in the Senate bill 1138, and, in particular,

section 104, Safeguards Technology and Development Program.

The provisions in section 104 are laudable and point in the right

direction, but it reads as an unfunded mandate and, without the

authorization and appropriation of resources, it cannot move forward at the level, and with the energy, necessary for there to be

an impact on the safeguards system.

As I understand it, there’s only a modest amount of research

going on at the present time, although training and development

continue. Twenty, even 15, years ago, substantial resources were

deployed to national laboratories for research and development relevant to international safeguards. It has been said that, not withstanding bilateral activities, with particular states, there has really

not been significant relevant research activity in place here since

the 1990s. Since that time, the technology made available to the

IAEA has been based on research done earlier, and, if we were to

continue, we would soon be transferring 20-year-old technology to

new reactor and fuel designs, which is not a good idea. The POTAS program does exist, this year with $14 million, and

that is to provide assistance to the agency. But this isn’t in the nature of research, but rather in the nature of transfer of things that

already have been done.

The importance of timely and properly directed technology, research, and development can be seen, for example, in the case of

the Japanese Rokasho Reprocessing Facility, which raises daunting

challenges, in terms of verification. Here, the development and use

of containment and surveillance, unattended radiation monitors,

process monitors were necessary to keep tabs on the operation and

integrity of the facility, and material accountancy alone certainly

would not give us any kind of confidence that we could be counting

on.

If the Congress is serious about this issue, as I am sure it is,

then it needs to consider funded mandates, and call for a program

of action, for technology development that engages the laboratories

and the IAEA in an interactive relationship, wherein the agency

identifies the needs and terms of its programmatic development,

and the U.S. Government, through its laboratories, responds in a

targeted way. It also should encourage the administration to develop a comprehensive plan, with coordinated and mutually reinforcing activity on the part of the agencies and departments that

would be involved. Given our considerable stake in a strong and reliable nonproliferation regime and our historic leadership in the

field, it’s incumbent on the United States reestablishing its traditional leadership role to work to strengthen IAEA’s safeguards to

deal with current and future challenges arising from a potential

significant rise in nuclear spread and use, flow and accumulation

of nuclear materials, and the like. Compliance with treaty undertakings, which we have strongly asserted as an imperative need, is

33

a legitimate concern, and we are right to pursue it, but emphasis

on providing the most effective tools for IAEA to meet its inspection goals is no less important. Our focus should be on considering

how the United States can continue to help strengthen the IAEA

safeguards system and prepare for future challenges by providing

technology, tools, and expertise.

Thank you. Sorry I went over.

[The prepared statement of Dr. Scheinman follows:]

PREPARED STATEMENT OF DR. LAWRENCE SCHEINMAN, DISTINGUISHED PROFESSOR, JAMES MARTIN CENTER FOR NONPROLIFERATION STUDIES, MONTEREY INSTITUTE OF

INTERNATIONAL STUDIES, WASHINGTON, DC

Safeguards are a central feature of the nuclear nonproliferation regime and of the

era introduced with President Eisenhower’s December 1953 Atoms for Peace initiative at the United Nations. Their importance to a viable and effective international

nonproliferation regime cannot be exaggerated. They are for all intents and purposes a condition sine qua non for cooperative development of civil nuclear energy

and practicable international nuclear commerce. There is no identifiable and acceptable substitute short of some form of international ownership and control of the

nuclear fuel cycle, a formulation—based on the judgment of the Acheson-Lilienthal

Report that a system of inspection superimposed on an otherwise uncontrolled exploitation of atomic energy by national governments will not be an adequate safeguard and could not ensure effective separation of civil and military uses of nuclear

energy—advanced by the United States in 1946 at the onset of the nuclear age as

the Baruch Plan. This approach is being revisited today in the form of initiatives

for multilateral/multinational fuel cycle arrangements for enrichment and reprocessing as the international community grapples with the challenges raised by (i) the

disappearance of the disciplines imposed on proliferation by the superpowers during

the cold war; (ii) the increasing spread of nuclear knowledge; (iii) the diversification

of sources of supply of nuclear materials, equipment, and technology including the

emergence of a nuclear black market, which, according to recent reports appears to

be alive and well; (iv) the prospect of states in regions of tension developing fuel

cycle capabilities that puts them in a position to quickly proliferate if the political

decision to do so is taken; and (v) the rising threat of nonstate actors including apocalyptic terrorists acquiring nuclear explosives or the means to produce them which

was an important stimulant to the passage of U.N. Security Council Resolution

1540.

Viable institutional arrangements such as multinational enterprises may provide

additive stability and security to international nuclear activity, but safeguards are

and will remain the core constituent of an effective and credible nonproliferation regime. The statute of the IAEA, created as an outcome of Atoms for Peace was

charged with two missions: To promote the peaceful uses of atomic energy, and to

ensure, as far as it is able, that assistance provided by the agency, or under its supervision and control, not be used to further any military purpose. To this end the

IAEA was authorized to establish and administer safeguards which it did over the

course of the 1960s. That experience made it the logical choice to administer

safeguards required by the 1968 NPT of all nonnuclear weapon states party to the

treaty. Many of these states were prepared to forswear the acquisition of nuclear

weapons and accept international safeguards on their peaceful nuclear activities,

even though nuclear weapon states were not so required, but not prepared to accept

an extension of that discrimination to the civil nuclear field, even for a limited

time—hence the insistence on article IV providing for an ‘‘inalienable right’’ to develop nuclear energy for peaceful purposes; and for standing up a safeguards regime

that minimized intrusion and maximized the opportunity to develop nuclear energy

for peaceful purposes while at the same time standing the test of credibility and providing the necessary level of confidence regarding nonproliferation. Among their

principal concerns were: Protecting proprietary and commercial interests such as

being able to compete on equal footing with the weapon states in the civil nuclear

marketplace, limiting the intrusiveness of onsite inspections (in particular capping

the frequency of inspections), minimizing the discretionary authority of the international inspectorate, and protecting sovereign prerogatives in general.

The comprehensive safeguards system concentrated on the flow of nuclear material; limited onsite inspections under normal or routine circumstances to preagreed

‘‘strategic points’’ where inspectors could conduct independent verification activities,

while providing for special inspections, which could be carried out anywhere in the

34

state, if the Agency were unable to meet its verification responsibility through routine inspections. Material accountancy, complemented by containment and surveillance, was the heart of the system based on a reciprocal obligation of the state and

right and obligation of the IAEA to apply safeguards on all source and special fissionable material in all peaceful activities to verify nondiversion. In practice the emphasis on material accountancy during the 1970s and 1980s meant focused attention

on the correctness of state declarations and less on whether the declarations were

complete, and this became the culture of the inspectorate as time went on. It is important to bear in mind that in law, as distinguished from practice, safeguards extend to all nuclear material whether or not declared, and access to any place may

be had under the IAEA’s special inspection authority to verify full accountability.

From the 1970s until the North Korean situation in 1993, insofar as the traditional comprehensive safeguards system is concerned no diversion of nuclear material under safeguards was ever detected. However, the revelations in the wake of

the 1991 gulf war of extensive undeclared nuclear activity and a significant clandestine nuclear weapons program in Iraq underscored the limitations of the safeguards

system as it was practiced. In the wake of these revelations the Board of Governors,

starting in 1992, took a number of decisions for which legal authority already existed including reaffirming the requirement that safeguards provide assurance

about the completeness as well as the correctness of nuclear material declarations,

reaffirming the right of special inspections (unfortunately with a caveat that it

would be used rarely); environmental sampling at locations already accessible to inspectors, requiring states to present design information on new facilities or changes

in existing facilities handling safeguarded nuclear material as soon as the decision

to construct or modify is made (in lieu of the practice that developed that such information needed to be made 180 days before introducing nuclear material into a facility), introducing unattended and remote monitoring to detect movements of declared

nuclear material, calling for voluntary reporting of imports and exports not only of

nuclear material, but specified equipment as well, and using instruments and other

techniques at strategic point to the extent present or future technology permits.

Many of these measures relate to section 204 of the legislation before us.

Of equal if not greater significance was agreement on a model Additional Protocol

granting new authority related to information a state is required to provide to the

Agency and complementary access aimed at ferreting out undeclared nuclear materials or activities: With an additional protocol in place the IAEA is better positioned

to draw statewide conclusions regarding whether all nuclear material and activities

has been declared and placed under safeguards, leading to the ability of the IAEA

to draw broader safeguards conclusions. It is a case of more information and more

access leading to more comprehensive understanding of a state’s nuclear status; it

raises the level of confidence in one’s conclusions about a state but it is not absolutely indisputable.

To summarize: The traditional comprehensive safeguards system focused on

verification of state declarations using quantitative measures supported by containment and surveillance. This system provided a high degree of confidence regarding

the accountability of all declared nuclear material but did not answer the question

of whether undeclared nuclear activity might be present on the territory or under

the control of a safeguarded state, although the system incorporated the principle

that safeguards extended to undeclared activity as well as declared. The strengthened safeguarded system, which is statewide rather than facility-specific, builds out

from that base and focuses on verifying not only the correctness of state declarations

regarding nuclear material but also the absence of undeclared nuclear material and

activities. To build a state nuclear profile the strengthened safeguard system puts

much greater emphasis on qualitative measures including export and import information, on expanded declarations of nuclear and nuclear-related activities in the

state, and on information analysis supported by environmental sampling and quantitative indicators. As well, it provides broader access for inspections of declared and

undeclared activities. Greater access to information and broader access to sites and

locations in the state are accompanied by access to the UNSC in the event of noncompliance with safeguards undertakings. On its face the Additional Protocol, in

conjunction with measures adopted earlier by the Board of Governors provides the

basis for a robust verification system based on a comprehensive picture of a safeguarded state’s nuclear fuel cycle, inventory of nuclear materials, material production capabilities, nuclear-related infrastructure, and overall nuclear activities. The

AP with its significantly increased information base and right of access, when fully

implemented, offers greater transparency of nuclear assets and nuclear cooperation

and a correspondingly greater insight into plans and intentions of safe-guarded

states and to this extent contributes to increased credibility of and confidence in

verification regime. An often overlooked caveat to this rather sweeping conclusion

35

is that even under the comprehensive safeguards system rights of ad hoc inspections

and special inspections where conditions warrant it provide significant access to locations anywhere in the state.

The strengthened safeguards system is a work in progress in several respects. The

legal and technical requirements have been identified and agreed upon, and the

foundations for both have been or are being put in place. Much remains to be done

on both counts. For example 31 states party to the NPT still have not signed safeguards agreements despite the obligation to do so within 18 months of adherence,

and the Agency has not pressed those states to fulfill their obligations. Without a

safeguards agreement there is no basis for carrying out verification activities. Many

states with safeguards agreements have Small Quantity Protocols that absolve them

from some of the obligations in comprehensive safeguards agreements but many of

these have not put in place State Systems of Accountancy and Control which would

provide the legal and administrative mechanism to take actions that would help the

governments develop means by which to ensure against the risk of nonstate actors

setting up shop in their jurisdiction and pursuing nuclear relevant activities without

state knowledge that could undermine the regime.

State willingness to adopt and incorporate new verification technologies depends

on a balance of considerations about effectiveness, intrusiveness, and expense. This

relates to environmental sampling; remote and unattended monitoring devices; satellite imagery; and, if ultimately approved by the Board of Governors, wide area environmental sampling. For some it’s a question of redistribution of resources relieving some of the effort devoted to material accounting which weighs most heavily on

states with substantial nuclear activities, e.g., Canada and Japan.

This brings me to the legislation on safeguards in S. 1138, in particular Section

104: Safeguards Technology Development Program. The provisions in section 104

are laudable and pointed in the right direction. But it reads as an unfunded mandate and without the authorization and appropriation of resources it cannot move

forward at the level and with the energy necessary for there to be an impact on the

safeguards system.

As I understand it, there is only a modest amount of research going on at the

present time although training and development continue. Twenty or even fifteen

years ago substantial resources were deployed to national laboratories for research

and development relevant to international safeguards. It has been said that notwithstanding bilateral activities with particular states there has not really been a

significant research activity in place since the early 1990s. Since that time, technology made available to the IAEA is based on research done at that time and if

that were to continue we would be transferring 20-year-old technology to new reactor and fuel cycle designs. Through the POTAS program assistance (this year on the

order of $14 million) is provided to the Agency. The question is more one of how

we, in the United States are organized and funded to keep at the cutting edge of

technological developments that can be deployed when needed.

The importance of timely and properly directed technology research and development can be seen in the case of the Japanese Rokkasho reprocessing facility which

raises daunting challenges in terms of verification. Here, the development and use

of containment and surveillance, unattended radiation monitors, process monitors,

were necessary to keep tabs on the operation and integrity of the facility; material

accountancy alone would not yield results in which one would have great confidence.

The same is true for Candu-type on load reactors where radiation monitors and

camera system including real time monitoring systems are crucial to addressing

timeliness issues, and hence the degree of confidence one can have in the safeguards

applied at the facility.

A good deal of the influence that the United States has had on the safeguards

system has come from the safeguards technology that we provided to the Agency;

that has not been the case in recent years and others, such as France and Japan

with their vibrant nuclear industries are gaining increasing influence in IAEA affairs according to some observers. To ensure that we do not lose our influence and

that the safeguards system remains credible and effective we should recapture our

earlier role in developing safeguards technology. The provisions in section 104 of the

legislation point in the right direction; what needs to be done is to fund the base

technical capability here in the United States that the IAEA has for many years

been reliant. With the end of the cold war and downsizing of the U.S. weapons complex coupled and with the moribund state of civil nuclear activities in the 1990s,

what used to be a robust R&D program diminished substantially, with only modest

funding from diverse agencies and departments, and an apparent absence of overall

coordinated strategy. Some have noted that at relevant national laboratories at the

same time as retirements are taking place quality young staff members are moving

away from international safeguards because they do not see pursuing it as leading

36

to a promising career. With the prospect of a surge of nuclear energy development

in the years ahead involving new reactor and facility types implying a need for programs to address probable new challenges the trend line in our human and financial

resource base is moving exactly in the wrong direction. Action and particularly commensurate resources need to be put behind well-meaning words.

So, the bottom line is that if Congress is serious about this issue, as I am sure

that it is, then it needs to consider funded mandates and call for a program of action

for technology development that engages the laboratories and the IAEA in an interactive relationship wherein the agency identifies needs in terms of its programmatic

development and the United States Government, through it laboratories responds

in a targeted way. It also should encourage the administration to develop a comprehensive plan with coordinated and mutually reinforcing activity on the part of

the agencies and departments that would be involved. Given our considerable stake

in a strong and reliable nonproliferation regime and our historic leadership in this

field it is incumbent on the United States (bringing others in a position to do so

along) to work to strengthen IAEA safeguards to deal with current and with future

challenges arising from a potential significant rise in nuclear spread and use, flow

and accumulation of nuclear materials, and the like. Compliance with treaty undertakings which we have strongly asserted as an imperative need is a legitimate concern and we are right to pursue it. But emphasis on providing the most effective

tools for IAEA to meet its inspection goals is no less important. Our focus should

be on considering how the United States can continue to help strengthen the IAEA

safeguards system and prepare for future challenges by providing technology, tools,

and expertise.

Senator CASEY. Thank you, Doctor. You were right on time. For

this committee, that’s perfect. Many examples of people going

much, much further.

Next, and our final witness for this panel, Dr. McGoldrick. And

appreciate your presence here, and your testimony.

STATEMENT OF DR. FRED McGOLDRICK, FORMER DIRECTOR

OF NONPROLIFERATION AND EXPORT POLICY, DEPARTMENT OF STATE; BENGELSDORF, McGOLDRICK AND ASSOCIATES, LLC, WASHINGTON, DC

Dr. MCGOLDRICK. Thank you, Senator Casey, Senator Lugar.

Thank you for the opportunity to testify on the bill sponsored by

Senators Lugar and Bayh.

My testimony will primarily be on the fuel bank and fuel assurances, but I will be happy to take any questions on international

safeguards.

As you know, a number of proposals have emerged, in recent

years, offering nuclear fuel guarantees as an incentive to discourage states from acquiring their own enrichment and reprocessing

facilities. I will address several questions, the answers to which are

important if we are to devise feasible and effective methods to discourage the spread of these technologies.

The first question is: Why do states want to acquire uranium enrichment and reprocessing capabilities? Over the years, countries

have sought such capabilities for a variety of reasons, to carry out

entirely legitimate peaceful programs, for example, for energy security or management of nuclear waste. A few have sought such technologies in order to develop nuclear weapons or to acquire the

option to do so.

The second question is: What policies has the U.S. Government

employed in the past to dissuade states from acquiring their own

enrichment and reprocessing plants, and how effective have they

been? The concerns here are not new. During the 1970s, several

countries sought sensitive nuclear technologies on the international

37

market. The United States is most successful in stopping the

spread of these technologies when the countries in question were

highly dependent upon the United States for their security or their

nuclear supplies. The Republic of Korea and Taiwan are good examples. Where the United States had little leverage, it was unable

to halt the efforts by countries determined to acquire such technologies. Argentina, Brazil, and South Africa are good examples.

In 1978, the members of the Nuclear Suppliers Group agreed,

among other things, to exercise restraint in the transfer of sensitive nuclear technology. Since the establishment of the NSG, to

my knowledge, major suppliers have made only a small number of

transfers of reprocessing and enrichment technology for civil

projects, and these have taken place openly and legally, and have

been made to states that already possessed enrichment and reprocessing capabilities.

However, countries such as Iran, Iraq, North Korea, and Pakistan have been able to obtain enrichment and reprocessing technology on the international market by using surreptitious and

illegal methods of procurement. U.S. efforts, from the 1970s to the

present, to prevent the spread of such technologies, have had some

effect in delaying and increasing the costs of the nuclear weapons

program of some of these states, but, in most cases, they did not

prevent these states from acquiring the equipment and technology

they were seeking.

Finally, the United States made efforts to offer enhanced fuel assurances, such as the 1978 Nuclear Nonproliferation Act call for a

international nuclear fuel authority, and U.S. initiatives, in the

1970s, for an international fuel bank. However, none of these fuel

assurance initiatives were able to generate enthusiasm among suppliers or consumers at that time.

My third question is: What lessons can we draw from the past?

First, enhanced fuel assurances are highly unlikely to have a direct

impact on a country like Iran, who is determined to acquire such

facilities for national security reasons. Second, an international fuel

bank is not going to be a magic bullet. There are limitations to

what nuclear fuel guarantees can do to prevent the spread of sensitive nuclear technologies. Third, an international fuel bank can

be only one tool among several that the United States and other

suppliers will need to deal with this problem. The United States

will also have to employ export controls, much improved intelligence capabilities, cooperation with other nuclear exporters, and

political persuasion in order to discourage the spread of these technologies. Fourth, they can help deprive states such as Iran and

North Korea of a credible explanation for acquiring sensitive nuclear technologies under the cover of a peaceful nuclear program.

They will also establish an international norm that most countries

have no need to develop their own enrichment and reprocessing facilities. And it’s important to note, in this connection, that several

states in the Middle East have recently announced that they are

giving serious consideration to the initiation of peaceful nuclear

programs.

The establishment of a nuclear fuel bank could play an important role in helping to eliminate any justification for these counVerDate 11-MAY-2000 14:42 Mar 07, 2008 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 ATOM.TXT sforel1 PsN: sforel1
38

tries to acquire their own sensitive technologies, particularly in an

area as volatile as the Middle East.

In the interest of time, I will just list a few brief attributes of

an international fuel bank.

First of all, I think the Congress needs to enact legislation in

support of an international fuel bank, and it should emphasize that

the United States is offering incentives to states, not requiring

them to renounce their rights—what they regard as their rights—

under article IV of the NPT.

A bank should also serve as a supplier of last resort, since the

principal mechanism for providing adequate assurances of nuclear

fuel should be a competitive market. It also should be structured

so as to avoid destabilizing the market. It should be modest in size.

It should be able to respond to sudden interruptions in a prompt

and reliable manner, and would, therefore, have to employ an

agreed set of predetermined release criteria. It will also have to

take into account the nonproliferation requirements of suppliers,

including the guidelines of the Nuclear Suppliers Group and, in the

case of U.S.-origin material, the requirements of the Atomic Energy

Act.

Finally, active U.S. support will be crucial for the establishment

of an international fuel bank. And I, therefore, strongly endorse the

legislation introduced by Senators Lugar and Bayh.

[The prepared statement of Dr. McGoldrick follows:]

PREPARED STATEMENT OF DR. FRED MCGOLDRICK, BENGELSDORF, MCGOLDRICK AND

ASSOCIATES, LLC, WASHINGTON, DC

Thank you for the opportunity to testify on S. 1138, a bill sponsored by Senators

Lugar and Bayh, to enhance international safeguards and to provide assurances of

nuclear fuel to countries that forgo certain fuel cycle activities. My remarks will

focus primarily on proposals for strengthening nuclear fuel guarantees, especially an

international fuel bank, but I will touch briefly on the importance of increasing financial support to the safeguards system of the International Atomic Energy Agency

(IAEA).

IMPROVES FUEL ASSURANCES

Enrichment and reprocessing technologies present risks of proliferation since they

provide states with materials that are directly usable in a nuclear weapon or a nuclear explosive device. In recent years a number of proposals have emerged offering

nuclear fuel guarantees as an incentive to discourage states from acquiring their

own enrichment and reprocessing facilities. These include:

• IAEA Director General ElBaradei’s suggestion to place all enrichment and reprocessing facilities under some form of multinational auspices or control.

• President Bush’s proposal that (a) the world’s leading nuclear exporters should

ensure that states have reliable access at reasonable cost to fuel for civilian reactors, so long as those states renounce enrichment and reprocessing, and (b)

the members of the Nuclear Suppliers Group (NSG) should refuse to sell enrichment and reprocessing equipment and technologies to any state that does not

already possess full-scale, functioning enrichment and reprocessing plants.

• A proposal by the six states that currently possess commercial uranium enrichment facilities for a multilayered nuclear fuel assurance scheme.

• President Vladimir Putin’s proposal for an international fuel cycle center in

Russia.

• Germany’s suggestion for establishing an enrichment facility on international

territory administered by the IAEA.

• A proposal by the United Kingdom for the use of enrichment bonds that would

involve agreement among supplier states, recipient states, and the IAEA to cope

with supplier disruptions not related to nonproliferation considerations.

• A Japanese proposal calling upon states that supply uranium and enrichment

service to register with the IAEA in order to supply nuclear fuel through the

39

IAEA to countries that suffer a disruption in supply not related to their nonproliferation obligations.

• A U.S. proposal to establish a strategic reserve of 17.4 tons of highly enriched

uranium that will be blended down to help qualified states deal with any disruptions in their nuclear fuel supply.

• A proposal by the Nuclear Threat Initiative (NTI) for the establishment of an

international fuel bank under the auspices of the IAEA that would serve as a

supplier of last resort. Legislation has been introduced in both the House and

the Senate that would provide U.S. Government funding for such a bank.

• The U.S. Department of Energy’s Global Nuclear Energy Partnership (GNEP)

under which the supplier states would offer so-called ‘‘cradle-to-grave’’ fuel cycle

services by, for example, leasing enriched uranium to consumer nations that do

not have enrichment and reprocessing facilities and taking back the used fuel

that produced as a result of irradiation in reactors.

Having labored in the trenches of the nonproliferation field for 34 years, I believe

we should evaluate proposals such as these from a very pragmatic point of view,

and with our feet planted firmly on the ground.

With that spirit in mind, I will try to answer several questions.

The first is: Why do states want to acquire uranium enrichment and/or reprocessing capabilities?

The second is: What policies has the U.S. Government employed in the past

to discourage states from acquiring their own enrichment and reprocessing

plants, and how effective have these policies been in thwarting the spread of

sensitive nuclear technologies?

The third is: What lessons can we learn from the efforts of various countries

to acquire enrichment and reprocessing technologies and the corresponding policies of the United States to prevent the dispersion of such technologies?

The fourth question is: Will our current offers of improved fuel assurances enhance or hurt our chances to prevent the spread of sensitive nuclear technologies.

Fifth and finally: What approach will most likely maximize our chances of advancing the nonproliferation objective of minimizing the dispersion of enrichment and reprocessing capabilities?

I believe the answers to these questions are important, if we are to deal with this

issue realistically and if we are to devise feasible and effective methods to discourage the spread of sensitive nuclear technologies.

Let me then begin by attempting to answer the first question.

Why do states seek enrichment and reprocessing capabilities?

Over the years, several countries have sought such capabilities for a variety of

reasons—to carry out entirely legitimate, peaceful programs, to remove doubts about

the reliability of fuel supply from foreign sources, to conserve nuclear fuel resources

through reprocessing, to improve the management of their nuclear waste problems,

to achieve the prestige of possessing advanced, sophisticated fuel cycle facilities, and

to sell enrichment or reprocessing services on the international market. Still others

sought enrichment or reprocessing technologies as a symbol of national achievement

or as an important component of their national security. Some states made a decision to construct domestic enrichment and reprocessing facilities even though they

could have availed themselves of less costly means of purchasing external enrichment or reprocessing services from abroad to meet their civil nuclear needs. A few

states have sought such technologies in order to develop nuclear weapons or to acquire the option to do so. Some have used ostensibly civil sensitive nuclear facilities

as a cover for a nuclear weapons program.

What policies has the U.S. Government employed in the past to discourage states

from acquiring their own enrichment and reprocessing plants, and how effective have

these U.S. policies been in thwarting the spread of these sensitive nuclear technologies?

U.S. concerns about the spread of reprocessing and enrichment capabilities are

not new. In the mid-1970s the United States became alarmed that some major nuclear exporting states were planning to transfer enrichment and reprocessing technology to South Korea, Taiwan, Pakistan, and Brazil. France was seeking to sell reprocessing technology to Pakistan and South Korea and Germany was planning to

sell reprocessing and enrichment technology to Brazil. These were developing countries whose small nuclear programs did not justify these expensive technologies.

Some of them faced severe national security threats or had apparent ambitions to

acquire nuclear weapons.

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The United States was most successful in stopping the spread of sensitive nuclear

technologies during the 1970s when countries such as the Republic of Korea and

Taiwan were highly dependent on the United States for their security and for nuclear supplies. In a few cases the United States was able to convince the suppliers

to halt the transfer of reprocessing technology because of the proliferation risks they

involved. It failed to do so in other cases, e.g., the Federal Republic of Germany proceeded with the supply of enrichment and reprocessing technology to Brazil despite

U.S. protestations.

Where the United States had little leverage, it was unable to halt the establishment of enrichment or reprocessing plants by countries determined to acquire such

technologies. Argentina, Brazil, and South Africa are good examples.

In response to this problem and to the Indian nuclear test of 1974, the United

States took the initiative with other major nuclear exporters to form the Nuclear

Suppliers Group (NSG). In 1978, the members of the NSG adopted specific guidelines for the export of nuclear materials, equipment, and technology. Under these

guidelines the NSG members agreed, among other things, to exercise restraint in

the transfer of sensitive nuclear facilities, technology, and weapons-usable materials. They also agreed to encourage recipients to accept, as an alternative to national plants, supplier involvement and/or other appropriate multinational participation in sensitive nuclear facilities. In subsequent amendments to the guidelines,

suppliers also agreed to authorize the transfer of nuclear materials, equipment, or

related technology only when they were satisfied that the transfers would not contribute to the proliferation of nuclear weapons or other nuclear explosive devices.

Thus the members of the NSG already exercise considerable restraint in the transfer of sensitive nuclear technologies.

To my knowledge, since the establishment of the NSG major suppliers have made

only a small number of transfers of reprocessing and enrichment technology for civil

projects by the major suppliers, and these have taken place openly and legally and

have been made to states that already possessed enrichment or reprocessing capabilities.

However, countries such as Iran, Iraq, North Korea, and Pakistan have been able

to obtain materials, equipment, and technology related to enrichment and reprocessing on the international market by using surreptitious and illegal methods of procurement. They were often able to obtain such items from states that did not have

adequate export control laws. In addition the A.Q. Khan network was successful in

the clandestine transfer of enrichment technology to the DRPK, Iran, and Libya.

The United States made concerted efforts from the 1970s to the present, using

intelligence sources, export controls, and the cooperation of other suppliers to prevent countries such as Pakistan, Iran, Iraq, and North Korea from acquiring items

on the international market to furbish their enrichment and reprocessing programs.

These efforts had some effect in delaying and increasing the cost of the nuclear

weapons programs of some of these states, but in most cases did not prevent these

states from acquiring the equipment and technology they were seeking when they

were determined to do so.

Finally, the United States also made efforts to offer enhanced fuel guarantees to

discourage the spread of enrichment and reprocessing capabilities. These included

Congress’s attempts in the Nuclear Non-Proliferation Act of 1978 to promote an

International Nuclear Fuel Authority, and U.S. initiatives to win support for an

international nuclear fuel bank during the 1970s and 1980s. However, none of those

fuel assurance initiatives were able to generate enthusiasm among other suppliers

or consumers. Based on the reactions of states and nuclear utilities from the 1970s

and 1980s to the idea of backup nuclear fuel supply arrangements or an international fuel bank, one should not be surprised if the idea of establishing new fuel

assurances schemes meets with some indifference. One of the reasons is that commercial markets for nuclear supply and the contractual system on which such markets are based have generally worked satisfactorily in terms of assurance of supply.

At the present time, the global enrichment market is operating in a relatively

smooth fashion and competition among several enrichment companies has provided

a source of security for importing states.

What lessons can we learn from the efforts of various countries to acquire enrichment

and reprocessing technologies and the corresponding policies of the United States to

prevent the dispersions of such technologies?

The history of this issue should enable us to draw certain lessons.

First, it is doubtful that several of these states would have been prepared to relinquish an independent fuel cycle capability, including small-scale facilities, even if

they had been offered guarantees of nuclear fuel, or if they had opportunities to participate in multinational fuel cycle facilities. In several instances the availability of

41

reliable external sources of supply was irrelevant to the decisions of some countries

to acquire enrichment and reprocessing. Such states are likely to be reluctant to forswear irrevocably enrichment or reprocessing capabilities even if they are offered attractive nuclear supply assurances from other countries or participation in multinational enrichment and reprocessing facilities.

If states are determined to acquire enrichment and/or reprocessing facilities for

military purposes, they will do so for what they perceive to be compelling national

security reasons, and they most likely will not be willing to alter their policy because the United States and/or other nuclear exporting states offer improved nuclear fuel assurances. Enhanced fuel assurances and opportunities to participate in

multinational fuel cycle facilities are unlikely to have a direct impact on countries

such as Iran and North Korea.

Second, nuclear fuel assurances are not going to be a magic bullet. There are limitations to what fuel guarantees or participation in multinational fuel cycle services

can do to prevent the spread of sensitive nuclear capabilities.

Third, fuel assurances such as an international nuclear fuel bank can be only one

tool among several that the United States and other suppliers will need to employ

in order to encourage other states to refrain from acquiring their own national sensitive nuclear facilities. The United States will also need to utilize a range of policy

initiatives, such as export controls, much improved intelligence capabilities, cooperation with other nuclear exporters and political persuasion in order to discourage the

spread of enrichment and reprocessing plants.

Fourth, effective fuel guarantees could help establish global nonproliferation

norms for the nuclear fuel cycle that would help remove excuses for countries to

pursue their own enrichment and reprocessing facilities. In particular, they can help

deprive states such as Iran and North Korea of a credible explanation for acquiring

sensitive nuclear facilities under the cover of a peaceful nuclear program when their

intent is use such technologies for nuclear weapons. They would also help establish

a norm that the vast majority of countries have no need to develop their own national indigenous enrichment or reprocessing capabilities. In this connection, it is

important to note that several states in the Middle East have recently announced

that they are giving serious consideration to the initiation of peaceful nuclear programs. If these countries proceed with civil nuclear programs, they are likely to be

small and restricted to one or two research or power reactors for the foreseeable

future. It would make no economic or programmatic sense for these countries to

acquire either enrichment or reprocessing plants. Moreover, the presence of these

sensitive nuclear technologies in such a politically volatile area would only threaten

regional stability. I believe the establishment of an effective fuel assurance scheme

such as an international fuel bank could play an important role in helping to eliminate any justification for the countries in this region to acquire their own enrichment and reprocessing facilities.

Will our current offers of improved fuel assurances enhance or hurt our chances to

prevent the spread of sensitive nuclear technologies?

In answering this question it is imperative that we recognize the bargain that we

made in negotiating the Treaty on the Non-Proliferation of Nuclear Weapons (NPT),

a bargain that was essential to the success of the negotiations and the entry into

force of the treaty. Article IV of that treaty contained a basic understanding that,

in exchange for forswearing the manufacture and acquisition of nuclear weapons

and accepting IAEA safeguards on all their peaceful nuclear activities, nonnuclear

weapon-states party to the treaty would be assured the right to obtain the full benefits of the peaceful uses of nuclear energy. In addition, the bargain included the

commitment by the advanced nuclear powers to assist the peaceful nuclear programs of other parties, with special attention to the needs of developing countries.

Unfortunately, the language that the Bush administration initially used in offering improved fuel assurances has produced a regrettable reaction from many nonnuclear weapon states. For example, the President’s February 11, 2004, speech proposed improved fuel assurances only to states that renounced enrichment and

reprocessing plants. John Bolton, then-Under Secretary of State for Arms Control

and International Security gave a speech to the NPT Preparatory Conference in

2005 in which he said that, ‘‘The Treaty provides no right to such sensitive nuclear

technologies.’’

The reaction of many nonnuclear weapon-states parties to the NPT to these statements was sharply negative. Nonnuclear weapon states warned against establishing

a new discriminatory nonproliferation regime that would be inconsistent with the

provisions of article IV of the NPT.

42

For example, the Non-Aligned Movement submitted a working paper to the 2005

NPT Review Conference making clear that the members of this group intended to

defend their rights under article IV of the treaty. It stated,

The Group of Non-Aligned States Parties to the Treaty continues to note

with concern that undue restrictions on exports to developing countries of

material, equipment and technology for peaceful purposes persist. In this

regard, the Group believes that any undue restrictions or limitations on

peaceful uses of nuclear energy, incompatible with the provisions of the

Treaty, should be removed.

In this regard, we recall that the NPT fosters the development of peaceful

uses of nuclear energy by providing a framework of confidence and cooperation within which those uses can take place. It is in this context that we

reaffirm the inalienable right of the States Parties to the NPT to engage

in research, production and use of nuclear energy for peaceful purposes

without discrimination and that free and unimpeded and nondiscriminatory

transfer of nuclear technology for peaceful purposes be fully ensured.

At the May 2007 Preparatory Committee for the 2010 NPT Review Conference,

the spokesperson for the NAM emphasized that ‘‘access to equipment, material, and

technology for civilian purposes should not be restricted.’’ South African representative Abdul Minty highlighted the concerns of many consumer states about the proposals by the United States that would restrict improved fuel assurances only to

those countries that renounce enrichment and reprocessing plants. ‘‘With regard to

current discussions on the fuel cycle, it is imperative that we do not create another

kind of cartel that would exclude full participation, particularly by States in full

compliance with their safeguards obligations. We wish to recall that nothing in the

NPT shall be interpreted as affecting the inalienable right of all Parties to develop

research, production and use of nuclear energy for peaceful purposes without discrimination and in conformity with Articles I, I and III.’’

NPT parties may find it particularly exasperating that the U.S. proposal appears

to acquiesce in the reprocessing and enrichment programs of non-NPT parties such

as India, Israel, and Pakistan simply because they already possess such facilities

while denying such capabilities to NPT parties that are in full compliance with their

treaty obligations.

A representative of Argentina has recently made it clear that the right to nuclear

technology goes beyond article IV of the NPT and goes to the rights of states as sovereign entities.

In addition, some states have seen the Department of Energy’s Global Nuclear

Energy Partnership (GNEP) as a program that aims to create a new discriminatory

regime that would divide the world into two classes of states: ‘‘So-called fuel cycle

states,’’ which would be allowed to have enrichment and reprocessing facilities and

so-called ‘‘reactor states’’ which would not be allowed to have such technologies.

The result of this approach as well as the language used by the Bush administration requiring states to renounce enrichment and reprocessing or denying that

states have to rights to such technologies has already backfired to some extent. Several states, including Argentina, Australia, Brazil, Canada, Kazakhstan, Ukraine,

and South Africa have made it clear that, while they might not require an enrichment capability in the immediate future, they are not prepared to forswear their

rights to do so.

Thus the Bush administration’s rather inflexible and unbending language in laying out its requirements for states to qualify for fuel assurances did not get off to

a very auspicious start.

What approach is most likely to maximize our chances to advance our objective of

minimizing the dispersion of enrichment and reprocessing capabilities?

What is needed in my view is a much more sophisticated and deft approach to

this issue. It is quite clear that article IV does not oblige NPT parties to engage

in nuclear cooperation or to transfer sensitive nuclear technologies to any particular

NPT party. Moreover, the United States has always believed that suppliers should

withhold nuclear cooperation from any state that is pursuing a nuclear weapons

program or is otherwise violating its nonproliferation obligations. The United States

has long believed that there is no economic justification for the spread of enrichment

and reprocessing to most countries. The vast majority of NPT parties have not

sought enrichment or reprocessing for this very reason. Moreover, the United States

has never supported the view that Parties to the NPT have an unfettered right to

acquire enrichment and reprocessing plants.

However, the success of our efforts will depend critically on the language we use

and the conditions we impose. If we demand that countries renounce what they reVerDate 11-MAY-2000 14:42 Mar 07, 2008 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6621 ATOM.TXT sforel1 PsN: sforel1
43

gard as the rights under article IV of the NPT or indeed their sovereign rights as

states, we will face strong opposition. This suggests that the United States and

other supplier countries may not wish to insist that states forgo for all time what

they regard as their right to acquire enrichment and reprocessing plants, but instead offer fuel assurances or cradle-to-grave benefits to those countries that have

no perceived interest in acquiring sensitive fuel cycle facilities or that have agreed

voluntarily to forgo such facilities.

In this connection, I have been encouraged by less inflexible statements from the

administration on this issue.

For example, U.S. Special Envoy for Nuclear Nonproliferation Robert G. Joseph

gave a press conference recently that seemed to back away from the rigid position

of earlier statements and place stress on the voluntary nature of countries’ decisions

to forgo enrichment and reprocessing. He said, ‘‘And finally, I would emphasize that

this is not about the rights of countries under the NPT. This is not about changing

or taking away rights. This is about encouraging sovereign states to make sovereign

choices based on their own interests, financial as well as nonproliferation interests.

It’s about providing an alternative path to energy development that becomes a win

for energy security, a win for environmental security and a win for nonproliferation.’’

It remains to be seen whether the administration will demonstrate any new flexibility in its approach to this issue, or whether it will stick to its rigid requirements

for renouncing enrichment and reprocessing as a condition for receiving improved

fuel assurances

In any event, a certain amount of damage has already been done. This makes it

all the more important that the legislation enacted by Congress in support of an

international fuel bank avoid language that challenges the article IV rights of NPT

Parties or requires them to forgo such rights. Rather, I believe any new legislation

in support of an international fuel bank should emphasize that the United States

is offering incentives to states, not requiring them to renounce what they regard as

their fundamental rights. Incorporating such a positive approach in U.S. law will

be giving legal force to U.S. policy and is more likely to win acceptance with other

countries than a policy of denial. The formulation used in Senate bill S. 1138 requires that fuel from an international fuel bank should go to countries that ‘‘decide

to forgo a national uranium enrichment program and spent nuclear fuel reprocessing facilities.’’ Presumably this means a voluntary decision. The House bill H.R. 885

specifies, among other things, that a recipient of fuel from an international fuel

bank, ‘‘does not possess uranium enrichment or spent-fuel reprocessing facilities of

any scale.’’ Either of these formulations is more likely to be acceptable to consumer

states and therefore have a better chance of success than the approach initially

taken by the Bush administration. In other words we need to make sure that we

offer supply assurances to states that voluntarily choose to rely on the international

market for their nuclear fuel requirements. No country should be asked or expected

to give up or abridge any of their rights under the NPT.

Other attributes of a successful fuel assurance arrangement, such as an international fuel bank, that will help the chances of success in discouraging the spread

of sensitive nuclear fuel cycle facilities include the following:

• The principal and preferred mechanism for providing for adequate assurances

of nuclear fuel supply should be a competitive market. Any mechanism for offering improved fuel supply such as an international bank should serve as a supplier of last resort and should be structured so as to avoid destabilizing the

market. • An IAEA nuclear fuel bank should be designed to meet short-term supply interruptions that may occur in small countries that are unfamiliar with the workings of the international nuclear market. It therefore may only have to be modest in size. Moreover, a modest-sized bank is more likely to obtain the required

financing than a large one and is not likely to be seen as a threat to the stability of the market. • A nuclear fuel assurance arrangement or international fuel bank should be able

to respond to sudden supply interruptions in a prompt and reliable manner. It

should therefore employ an agreed set of predetermined release criteria which,

when met, would automatically trigger fuel supplies to countries suffering an

interruption in supply for reasons unrelated to their nonproliferation obligations.

• It will also have to take into account fully the nonproliferation requirements of

suppliers. Presumably this would mean that the recipient would have to agree

in advance to accept the export guidelines of the Nuclear Suppliers Group and,

in the case of U.S.-origin material, the requirements of the Atomic Energy Act

for peaceful nuclear cooperation.

44

Finally I believe that active U.S. support will be crucial for the successful establishment of a strengthened system of fuel assurances, including an international nuclear fuel bank, and I therefore strongly endorse the legislation introduced by Senators Lugar and Bayh.

GLOBAL NUCLEAR ENERGY PARTNERSHIP

Let me make a few comments on the Global Nuclear Energy Partnership because

it contains an important component that is designed to discourage the spread of enrichment and reprocessing facilities. GNEP proposes that, if the United States and

other supplier states can successfully demonstrate and commercialize advanced reprocessing and nuclear reactors, it should be more physically and politically feasible

than it is today for supplier countries to lease nuclear fuel or to offer a spent-fuel

take-back arrangements to consumer countries.

In my view, a ‘‘credible cradle to grave’’ fuel supply program by the United States

and other suppliers may prove far more effective than some other techniques in discouraging the spread of enrichment and reprocessing facilities since it would relieve

states of the burden of disposing of their own nuclear wastes.

However, none of the major fuel-cycle states, with the possible exception of Russia, appear to be in a position to offer such options to consumer states on any widespread basis. Moreover, the prospect of offering cradle-to-grave services appears to

be several years, indeed possibly decades, away from being realized. In addition, the

United States Government would face formidable public and congressional acceptance problems if it were to try to initiate a program to take back power reactor

spent fuel. Most importantly, the inability of the U.S. Government to meet its responsibilities under Nuclear Waste Policy Act to take spent fuel off the hands of

American utilities means that United States would have no credibility in offering

a cradle-to-grave policy to foreign countries unless and until it can move to solve

its own waste management problems.

SAFEGUARDS

Before closing, let me say a few words about the provisions in S. 1138 for providing financial support to the IAEA’s Safeguards Analytical Laboratory (SAL). I

strongly support the United States providing $10 million to the Safeguards Analytical Laboratory, and I hope the other Member States of the Agency will come forward with voluntary contributions to add another $10 million to bring the laboratory up to snuff. This laboratory has a lot of equipment that is antiquated, and the

Agency must rely on a very small number of external laboratories for analyses of

environmental samples. The IAEA needs additional as well as new types of equipment for conducting its safeguards activities. The IAEA does not have a state-ofthe-art lab for particle analysis, which has become an indispensable tool in determining the existence of undeclared enrichment or reprocessing activities.

Let me end by saying a few words about the overall budget for IAEA safeguards.

Starting in the mid-1980s, Member States imposed a ‘‘zero real growth’’ budget on

the IAEA. The Bush administration can take credit in leading the effort to increase

financial support for the IAEA safeguards system in 2003. However, the IAEA’s

safeguards workload is likely to increase in the years ahead. The demands on the

IAEA safeguards system are likely to increase as more countries turn to nuclear

power. The Vienna Agency also will need to devote more resources to evaluating information supplied by Member States in connection with Additional Protocols to

their safeguards agreements. In addition, the IAEA will have to verify the freezing,

disablement, and dismantlement of the North Korean nuclear program. On June 15,

2007, the Director General of the IAEA, Mohamed ElBaradei, warned that Agency’s

‘‘safeguards function is being eroded over time’’ and said he was ‘‘very distressed’’

by the failure of the Board of Governor’s to approve a 4.8-percent funding increase

for 2008.

I, therefore, hope that the United States will take the lead again in urging Member States to provide the resources the IAEA needs to carry out its vital safeguards

mission.

Senator CASEY. Doctor, thank you very much for your testimony,

and for all the testimony presented.

I’d ask that the prepared statement for each witness be entered

into the record for purposes of amplifying the record.

Thank you very much, to each of you.

Let me ask a question, and I’ll throw it out for all three, and you

may all have the same answer. It’s a true-or-false question. And it’s

45

this, very simply: No country has ever successfully diverted nuclear

material from a facility with IAEA safeguards. Is that true or

false?

Mr. SOKOLSKI. False.

Dr. MCGOLDRICK. False.

Senator CASEY. And can you tell us why?

Dr. MCGOLDRICK. Well, there have been instances—a diversion is

a violation of IAEA safeguards, and the IAEA has found Iraq in

violation of the safeguards agreement; it has found Romania in

violation of the safeguards agreement. I might add, in the case of

Romania, Romania discovered this after the overthrow of the

Ceausescu regime and volunteered the information. There have

been other minor violations that the agency has discovered, such

as in South Korea and Egypt, and perhaps a few others that I can’t

recall. But the fact is, there have been violations of IAEA safeguards. And, of course, Iran—I neglected to mention Iran, which

has been found in violation of the safeguards agreements.

Senator CASEY. And, in light of that, the real worry that we

have, among others, is that diversion. And how about the diversion

of a very small proportion of nuclear material that a facility handles, such as the amount that collects in crevices between machine

parts? I guess they call that ‘‘material unaccounted for,’’ or MUF.

Tell us about that, and tell us about the risks involved with that

kind of even seemingly limited diversion. Any one of you, it

doesn’t——

Dr. MCGOLDRICK. Well, I wouldn’t necessarily call what you have

called a MUF a diversion. For example, a reprocessing plant consists of miles and miles of pipes and pumps and so on and so forth,

and it is only normal that a certain amount of the material is going

to get caught up and not flow through. And, in most cases, this is

just—or is a result of the nature of the facility itself, and is not a

deliberate diversion of nuclear material to nuclear weapons purposes. I think the IAEA has made efforts to try to minimize the

MUF in each case, and the MUF is usually larger in cases like reprocessing and enrichment facilities, and therefore, requires more

intensive safeguards.

But, in addition to the material accountancy control, the IAEA

also has containment and surveillance methods, which is in addition to material accountancy, which helps, also, to prevent the diversion of nuclear material, in addition to material accountancy

and control.

Dr. SCHEINMAN. I think it’s important though, to understand

that, in a large reprocessing facility, it is impossible for the agency

to be able to detect the diversion of small quantities of material.

It could be, kind of, tablespoons at a time, as we used to say. And,

over time, it’s very conceivable that, in a large reprocessing plant,

sufficient quantities of plutonium could be diverted, and the agency

would never actually have been able to catch that, because there’s

always a degree of uncertainty in any inspection activity, and if

you’re talking about the standard which we use, which is 8 kilograms of plutonium diverted to constitute the risk of a nuclear device being constructed, in a facility like the Rokkasho-mura plant,

which is extremely large, no possibility at all that you could ever

catch that small a degree of diversion. But, as Dr. McGoldrick just

46

said, if you’re talking material accountancy, I would say you are

skating on thin ice. If you’re talking about the total capacity put

in, material accountancy, yes, but containment, surveillance, realtime monitoring, cameras, et cetera, then you have a better chance

of being able to lower that prospect that a successful diversion will

take place. But, again, if you’re getting down to very, very small

quantities in a very large facility, that risk will always be there.

Senator CASEY. Thank you, Doctor.

Mr. Sokolski.

Mr. SOKOLSKI. I almost am tempted to say now for something entirely different. I don’t think—I think we’re edging toward the

truth here. Let me push a little further.

If you turn to page 18 of the report that’s part of the testimony

that I asked be placed in the record, you’re not talking about small

quantities, you’re talking about 50 bombs’ worth per year, in the

case of the Japanese reprocessing plant. I don’t think that’s small.

I think that’s a big number. If you are——

Senator CASEY. If you could explain that, when you say ‘‘50

bombs per year’’; derived from what?

Mr. SOKOLSKI. They—when you do the calculations of what it is

the IAEA itself admits it’s going to have a statistical probability of

not knowing about, given those crevices, solution, it comes out to

be a rather large figure. Now, you’re going to have the administration come up here, if they haven’t already, and they’re going to tell

you, ‘‘Oh, we’re going to safeguard the reprocessing plant that’s

going to be built in India,’’ or you may find proposals to create big

fuel centers that’ll enrich, eventually, in Kazakhstan, and they’ll

say, ‘‘Oh, we’re going to safeguard that.’’ One of the key recommendations in the report that I’m releasing today is that the

distinction needs to be made between what you can monitor—

which is ‘‘look at’’—and maybe, with enough effort, find out about

diversions after they occur, and what you can safeguard, which the

IAEA defines as being able to monitor in such a manner that you

can detect a diversion before it occurs or is completed—I should

say, before it’s completed.

Now, in addition, one last comment, you focused on material unaccounted for. I think you need to also understand—and you might

turn to page 14, because there’s a nice graphic there—there’s a big

problem with material accounted for. One of the things the agency

does not do is list publicly how much weapons-usable material is

on hand that they need to safeguard, of which type, by country.

They’ve refused to do this, I think, largely on the preposterous

proposition that it’s proprietary industrial information. If you take

a look at this chart, you’ll see that the amounts of those materials

grew about sixfold over the last 20 years, but the IAEA’s safeguards budget no more than doubled to account for that. That

amount of nuclear weapons usable material is going to continue to

grow as long as you keep propounding, with a fuel bank or not,

that everyone has a right to make nuclear fuel. So, it may well be

that you need to push your bank on the basis that you’re not going

to dictate to people that they can’t make nuclear fuel, and you’re

not going to get into the question of rights. But the U.S. Government probably needs to have a position that doesn’t say what it

currently says, which is everyone has an absolute, unqualified right

47

to make nuclear fuel. Our position—right now, publicly by the

State Department—is identical to that of the state of Iran. You’re

not going to win with a fuel bank if you keep saying that.

Senator CASEY. Just want to—before I turn it over to Senator

Lugar—just for the record, you referred to page 18 in your report.

And I just wanted you to tell us exactly what you’re referring to

there, so the record is clear, so if someone is reading——

Mr. SOKOLSKI. OK.

Senator CASEY [continuing]. The record, they don’t have to go

back——

Mr. SOKOLSKI. Well, in there——

Senator CASEY [continuing]. And find it.

Mr. SOKOLSKI [continuing]. There is a somewhat—reference, but

detailed description of a report done—or, I should say, a study done

for this report, by Dr. Ed Lyman, who used to run the Nuclear

Control Institute. And what he lays out are the incidents of material unaccounted for, and what had to be done to finally come to

some reckoning of what the figures were, in the case of several facilities in Japan and the United Kingdom. It is not a very flattering

picture. It took years, as it’s described on these pages, to know

that, oh, my gosh, we don’t know where several bombs’ worth of

material went in pilot facilities, small facilities. And the numbers

get larger, the bigger the amounts are.

So, I really think that candor, sunlight, is very important here.

I think we need to understand that when we’re talking about what

they call bulk handling facilities, facilities that make nuclear fuel

or handle sensitive materials that are called ‘‘direct-use materials,’’

like separated plutonium and highly enriched uranium, that what

you’re really talking about are factories and facilities that need to

be viewed much like we view nuclear weapons plants and nuclear

weapons storage facilities. They aren’t. That’s part of your problem.

Senator CASEY. Thank you. And I’m over time, so Senator Lugar

has at least 10 minutes.

Senator LUGAR. Thank you, Mr. Chairman.

Dr. Scheinman, let me thank you again for being a member of

our Policy Advisory Group that met over in S–116 in 2005 for a

number of meetings and really formed the basis of understanding

for the legislation that is before us today.

You’ve indicated your enthusiasm for the legislation, but let me

ask you, and then each of the other distinguished panel members,

What thoughts do you have about our legislation, how it compares

with other proposals before Congress or the administration, and

what, if anything, we should do to enhance what we’ve written?

Dr. SCHEINMAN. Well, Senator, in my initial comments, I remarked that what you’ve put forward here in this legislation with

respect to section 104—or, is it 204? I’m not sure—relating to technology related matters, is a laudable thing to be proposing to do,

but the problem is: Are we organized nationally to do it? Is there

someone who has oversight, that will bring together the departments and the various services that might be tasking national laboratories to do certain kinds of activities, to pursue certain kinds

of research? And do we have the resources there that will go to the

laboratories in order to do this?

48

The laboratories have been fundamental to this, of course, over

the many years, and, in the case of Los Alamos, which I, perhaps,

know a little bit better than some of the other laboratories, many

people who were in the business of research and development are

now retiring. Younger people are looking at what their career path

ought to be. And many of them have come to be concerned about

whether they should get into research and development on safeguards and verifiability issues. Why? Because there’s not much

demonstration that there is a sound financial basis to take them

forward. So, it strikes me that we have a double problem here:

First the resources that would go into enabling us to get back into

leadership positions with respect to research and development on

things related to safeguardability and the like, and, second, having

a cadre of young people who are prepared to put the next 20 or 25

years of their professional lives into this.

I understand that sometimes people will be deployed to the IAEA

as inspectors. And they don’t get welcomed back with the flags flying, they get allowed back, but no certainty about where they’re

going to be placed and what kinds of activities they’ll be best deployed to.

So, these are problems that we have—personnel problems, financial problems, and the commitment, which I see in this legislation,

to enable us to take leadership again. If you go to the IAEA now,

you find that the French are all over the place, the Japanese are

all over the place, getting their points in. What we need to do is

to be able to get our points in. We have to do this with leadership.

And leadership will require organization, on the one hand, and the

resources necessary to carry things forward. And this is particularly the case in an era when we are talking about GNEP and new

technologies, new facilities, new kinds of fuel cycles. We’d better be

in the front line on this kind of an—of these questions in order to

avoid some of the problems that Dr. Sokolski mentioned, that exist

with respect to the current fuel cycle.

Senator LUGAR. Those are excellent suggestions.

Dr. McGoldrick, do you have some thoughts in this same area?

Dr. MCGOLDRICK. I would certainly echo Larry Scheinman’s comments. I agree with them completely. I do think the safeguards laboratory is in desperate need of upgrading equipment, and I think

what’s particularly important is its particle analysis, which is essential to the detection of undeclared enrichment and reprocessing

facilities. And so, I very much favor the efforts you’re making to

give the agency additional funds to get the right kind of equipment,

advanced equipment, state-of-the-art equipment to do this kind of

analysis.

Senator LUGAR. I think, likewise, I would just pick up the point

that both of you have made about unfunded mandates and what

have you. And this is a subject that I’ve raised earlier today. Our

enthusiasm may wax and wane, but this is a situation that, sort

of, goes on in an international setting, and the need for solid budgetary debate here, and some structure, probably, is of the essence

if this is to have promise down the trail.

Dr. MCGOLDRICK. I would also add that the IAEA safeguards

budget is really inadequate——

Senator LUGAR. Yes.

49

Dr. MCGOLDRICK [continuing]. For the agency to carry out its

responsibility. I don’t recall what the assessed budget is. It’s

someplace in the vicinity of $110 or $120 million. But, what does

an F–16 cost compared to that? And what is the cost-benefit analysis comparing the two of them? I really think it is shameful,

frankly, that the international community cannot come forward

and finance the agency with the resources it needs to carry out its

growing safeguards responsibility.

Senator LUGAR. Yes, Dr. Sokolski.

Mr. SOKOLSKI. I want to be careful here. I’m no doctor.

Senator CASEY. That’s all right.

Mr. SOKOLSKI. I have——

[Laughter.]

Mr. SOKOLSKI [continuing]. A higher degree. It’s called an ABD,

‘‘all but dissertation,’’ and it’s actually harder to get, because nobody tells you when you get it. [Laughter.]

First, let me say that I’ve already defended your legislation in

the House, so, ‘‘I gave at the office.’’ It’s good stuff. I think it’s good,

for three reasons, and then I’m going to suggest ways you might

think about improving it.

It’s concrete, literally, in making a suggestion about the lab. It’s

kind of embarrassing, to the IAEA and to the Government, that

Congress actually is doing its oversight job. You’re not supposed to

do that. That’s point one. Take more trips, please.

Second, I think somebody had the presence of mind to actually

say ‘‘market price’’—‘‘competitive market price.’’ Don’t drop that

language. The last thing you want to do if you’re concerned about

Yemen building a large near-bomb factory is to have a loss leader

in the form of subsidized fuel. It is the least expensive part of the

life-cycle costs of a reactor, but—I can just see it now, just as, perhaps—I guess I’ll try not to be sexist, so I’ll use a male example—

you go into Sears, and you get a free special tool if you buy $500

worth of tools you don’t need. And so, you put your credit card

down and you buy the whole kit-and-caboodle. When you start subsidizing fuel, that is what you’re doing. It is a very counterproductive thing to do. Go with the market.

Second, I think it actually is a plus that there’s no mandate for

funding in your bill, and that you actually ask for a report. What

a novel idea. Get some idea of what you’re doing before you fund

it. Now, this isn’t the way the House wants to proceed. I would

stick to your guns. You want the answers before you give the

money over. And don’t be rushed because of Iran. I mean, I think

the testimony we’ve heard—Mr. McGoldrick laid out—is very good.

It should be reread and rethought about. He made all the good arguments. Iran should not be the driver. And the idea that this Government, with—what is it, $3 trillion budget, should be worried

about a $50 million private contribution over something this important, is mildly obscene. I mean, that can’t be the argument. Take

your time, get it right.

Now, two changes I would make, or think about.

First, OK, you don’t want to dictate to people what you think the

NPT says or doesn’t say, or how they should think about that. But

could you please at least repeat in your bill the language that you

passed under the Hyde Act. You voted for it already. I’m not asking

50

you to do anything new, and it’s in the House bill. Recede to their

position, please. And what it states is, there is, in the view of the

U.S. Government at least, not an inalienable per se right to any

and all, or any particular, nuclear technology. It has to meet certain criteria to be peaceful.

Second—and here, I’m going out on a limb, but I actually think

it’s a great idea, so I’m going to say it—why not, if you’re going to

put money—more volunteer money for safeguards—come up with a

formula that would say, ‘‘We’re coming up with $10-million-plus,

whatever it is, for POTAS and everything else, that’s going to be

based on a certain percentage of what our installed nuclear capacity in the United States is.’’ It won’t change the amount of money.

It won’t obligate you to do more. But it’ll set the example that,

somehow, if there’s growth, and if there are people using nuclear

power, part of the price of doing business, from here on out, will

be to pay for safeguards. Now, you can start with this voluntary

thing. It won’t obligate you to do anything with regard to the bigger picture, but it might prompt a lot of interesting discussion. And

I’d be happy to work with you on this, as would Tom Shea, who

came up with the idea, who has more IAEA experience than, I

don’t know, probably this entire room times five. I recommend that

you talk with him.

Anyway, those are the two things I would do to improve it. And

I think it’s pretty good. So, don’t retreat on what’s sound.

Senator LUGAR. Yes.

Dr. MCGOLDRICK. Oh, I’m sorry.

Dr. SCHEINMAN. Could I just add one thing? That the mil kilowatt hour produced by a nuclear power plant has been discussed,

time and time again. It’s a good idea, but it has never gotten to

first base. So, I concur that this is something that really ought to

be looked into.

The other thing I’d like to just mention is that the budget for the

IAEA safeguards is $130 million this year. The Portland, OR, Police Department has a budget of $141 million. One of them deals

with the world, and the other one deals with a city—modest-sized

city, in a relatively tame state.

Mr. SOKOLSKI. There is one problem, though. When the United

States piles on voluntary contributions, it turns out that it becomes

the biggest funder of the safeguards budget, even though it’s a ridiculously small amount. That has political implications. What you

want is for us and others to pay more in some kind of more routinized, country-neutral formula. The problem right now is, they use

this U.N. assessment model, and that model has a country like

Italy, that has no power reactors online, paying more than South

Korea, which has 20 reactors online. That’s got to change. I mean,

I don’t know whether nuclear power, by the way, is going to expand. I mean, they talk about all the reactors they’re going to

build, they forget about all the reactors they’ve got to take down

and decommission, which is about, I don’t know, 300 or 400 machines in the next 30 years, so it’s not so easy to see a net increase.

It’s not a given. But, if there is, you doubly want to pay attention

to this point.

Senator LUGAR. Yes, Doctor.

51

Dr. MCGOLDRICK. Yes, may I just make a comment? I would like

to dissent from my colleague’s statement urging you to put in the

legislation language that the United States does not believe that

countries have inalienable rights to any of these technologies. I’m

afraid that’s very counterproductive. I think it’s hamfisted. It’s

going to produce just the opposite result of what we intend.

When the President announced his policy, in February 2004, he

promised fuel assurances to countries that renounced enrichment

and reprocessing. John Bolton, at the 2005 NPT PrepCom to the

NPT, said, explicitly, that states party to the treaty don’t have

rights to these technologies. Well, this produced a very sharp reaction, very negative reaction among states. And I, frankly, think

that we need to have a more sophisticated and more deft approach.

We need to offer these as incentives to urge countries to forgo enrichment and reprocessing, but not to go out and challenge their

rights to have it, because this is a visceral reaction that we get,

and we’re not going to get support for this.

Mr. SOKOLSKI. By the way, I would agree, don’t tell them what

their rights are. But I think it’s untenable for the United States to

be insisting that countries clearly have the right. If you could at

least make our policy neutral on this question, to say at least we

don’t believe Iran has a right to enrich, I think you get it about

right. Where we’re headed is saying that, ‘‘Well, we won’t say that

you don’t have a right; in fact, we’re going to say you do, and we’re

going to let you get access to fuel while you continue to insist that,

at any given time, you can start making fuel yourself.’’ That’s not

a—really where you want the bank to be working its magic. So, if

you can just at least get the U.S. Government to not have the same

official position as the Government of Iran, I’ll settle for that. And

the Hyde language, that you’ve already approved, would do that.

Senator LUGAR. Well, thank you very much, gentlemen. I return

to the chairman.

Senator CASEY. I know we have to wrap up, and I want to thank

Senator Lugar for allowing the witnesses to engage each other,

which doesn’t happen enough, often, at these hearings, and I appreciate his willingness to allow you to mix it up a little bit.

I know we have to wrap up, and I’ll just ask one final question

for each of you, and you can be very brief, if you can. You can amplify your answer in the record.

But I guess I’d ask you a two-part question. No. 1—we’ll start

with the bad news and then move to good news—the bad news is:

What’s your worst fear, in terms of our present situation, with regard to all of the limitations and the inability of the IAEA to do

what it must do because of those limitations, whatever they are—

budgetary, personnel, infrastructure, equipment, go down the list—

but what’s your worst fear, based upon that reality and the reality

of the interests of Iran and others? And, second, on a more positive

note, what are the two or three specific things that this Government should be doing, in addition, of course, to the legislation we’ve

been here to discuss—what are the two or three steps that this

Government should take to forestall or to mitigate or deal with

that nightmare that you would outline? If you could do that rather

quickly. And I think we’ll start with Dr. McGoldrick, in reverse

order of the introduction of the witnesses.

52

Dr. MCGOLDRICK. I’d—thank you—my worst fear. Your question

relates to—specifically to the IAEA?

Senator CASEY. Well, I think it really relates to—in light of these

limitations and problems that the IAEA is dealing with, and we’re

talking about today, what’s your worst fear, based upon that—that

in addition to what we’ve talked about with regard to Iran?

Dr. MCGOLDRICK. Well, I think—I guess my worst fear is that,

while the IAEA may find—or declare a state in violation of its safeguards agreement, my worst fear is that the international community—and specifically the U.N. Security Council—will not have the

political will to take appropriate action to deal with that problem.

Senator CASEY. And what steps would you take to deal with that

fear?

Dr. MCGOLDRICK. Well, that’s a difficult challenge. One has to

work very closely with countries such as China and Russia, in particular, to impress upon them the importance of preventing the

spread of nuclear weapons and to try to convince them to take appropriate actions, when necessary, when a country is in—obviously

in violation of its safeguards agreement. That, and I would also go

back to the issue of financing. I would hope that the international

community would find a way to provide the agency with the resources—and the financial and technical—that it needs to do its

job.

Senator CASEY. Dr. Scheinman.

Dr. SCHEINMAN. Well, I thought that was a pretty good comment

by Fred, with respect to a worst fear. I would take one step back,

to say that one of the problems I see in the agency today is gridlock

on the board of governors. All you need to do is look at what happened with this Special Committee on Safeguards; it came to

naught, had 18 proposals before it, and couldn’t get any agreement,

because political issues are intervening, preventing anybody from

being able to reach consensus. Iran played its cards very well, mobilized support among members of the board. The United States

pressed very hard to say, ‘‘What this is really all about is Iran,’’

which probably was not the best tactic to take, even if true. And

if we have continued gridlock on the board, we’re going to have ourselves problems in getting anything done. They are the governing

body, and they both direct and encourage and enforce the Secretariat to take actions in particular directions. Therefore, I would

encourage the United States to shift its diplomacy, in terms of

dealing with some of these issues and try to build consensus, build

linkages with other countries—China and Russia, certainly—but

also to get at some of the nonaligned countries. There’s a powerful

force there, being led largely by South Africa, that really intends

to hold our feet to the fire, and we ought to find ways and means

to be able to address legitimate concerns and, at the same time,

promote our national interest.

Senator CASEY. Thank you, Doctor.

Mr. Sokolski.

Mr. SOKOLSKI. All of what’s been said, I would agree with. I

would add, perhaps, one other thing that is a worry and that is

that the agency is increasingly running the risk of not doing its

mission at all, which is material accountancy. And what it’s going

to, perhaps, become is a kind of glorified Keystone Cop operation

53

that you call in when you have a problem and you want to buy

time by having them inspect the daylights out of something and

not come to a conclusion. You don’t want that. That’s where it’s

headed.

I think part of the reason why is the funding, but the other is

this false consciousness, that if we look at something, we’re safeguarding it; when their own definitions make very clear, that’s not

enough to meet the criteria.

The other fear I have is the one that’s just been raised. If you

don’t arrange a number of country-neutral rules for proceeding

against noncompliant and violating parties, to say nothing of withdrawing parties, you run the risk of them enforcing nothing.

In the report, there are a number of very specific proposals on

what you can do without the U.N. Security Council and the IAEA

consensus. You should perhaps review those and see whether any

are to your liking, because the committee actually can act on them.

In addition to the fee idea—and I would start with a voluntary

thing, because that’s harmless—and making a distinction between

safeguarding and monitoring, three specific ideas:

First, money needs to go to what they call ‘‘near real-time surveillance capabilities.’’ There is a way to actually know whether the

cameras and monitors are on. It costs money. It’s more than their

budget can bear, but it’s not heroic. You might, the next time you

visit—I’ll give you the names of who to talk to—take a brief on it.

Second, here’s something I would do, for sure, and the United

States can do this by itself. We need to reassess all of the technical

premises behind what it takes to make a bomb, how long it takes

to convert different materials into bomb fuel, and how frequently

you would have to inspect to detect a diversion before it was completed. The premises that the IAEA has on each one of those fronts

are woefully out of date, and that’s detailed in the report.

Last, but not least—and I like this one the best—if you’re really

in doubt about what to do as a Senator about a problem, sometimes

it pays—and I’m—I guess I’m being a little sarcastic here, but I

can’t resist—to enforce the laws you already passed. It’s not done

all the time, but it surprises and astonishes people when you do

it, and it really keeps them off-guard. There is a title V—I recommend it—of the Nuclear Nonproliferation Act, that was passed

in 1978. And what it does is, it asks for reports and efforts to identify nonnuclear, nonfossil-fuel energy sources that could help developing countries. To my knowledge, no President, Democrat or Republican, has ever enforced this law or obeyed what was dictated

as something they had to follow. It would be tremendous fun to just

ask where the report is, after 30 years. And, by the way, it’s supposed to annual. And there are recommendations in that title of

other things that should be done. I would actually start there.

Senator CASEY. Thank you very much.

Senator Lugar.

Well, with that, we want to thank each of our witnesses for your

testimony today, and I want to thank Senator Lugar for his work

on this issue, and, in particular, a meeting we had a couple of

months ago, when he was reviewing a lot of these issues with me.

And I’m grateful for his continued dedication to this issue.

54

And there are no further proceedings, and, for that reason, this

meeting is adjourned.

[Whereupon, at 11:47 a.m., the hearing was adjourned.]

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF SENATOR JOSEPH R. BIDEN, JR., U.S. SENATOR FROM

DELAWARE

Today our committee is holding a hearing on a subject of vital importance for U.S.

national security and for peace and stability around the world: How can the world

enjoy the benefits of civilian nuclear energy without increasing the risk that more

countries will acquire nuclear weapons?

In his time President Kennedy worried that by the mid-1970s the United States

might face a world in which 15 or 20 countries possessed nuclear weapons. By that

standard, the nuclear nonproliferation regime has been remarkably successful. A

central part of that success has been the system of safeguards on civilian nuclear

technology overseen by the International Atomic Energy Agency (IAEA). The purpose of safeguards is to ensure that countries are fulfilling the pledges they have

made to forgo nuclear weapons, even if they are making use of civilian nuclear technology. A well-functioning IAEA safeguards system is essential to nonproliferation.

But the IAEA and its safeguards system are facing intense challenges. The world

rightly keeps asking more of the IAEA safeguards system, but the IAEA is not getting the funds it needs to meet those demands. Many countries are looking to nuclear power as a response to climate change and energy insecurity, but the IAEA

struggles to find and retain enough qualified nuclear inspectors to keep up even

with today’s demands.

Even if the IAEA safeguards system can overcome these challenges, it may not

be able to cope with a wide diffusion of the technology to enrich uranium or to reprocess spent fuel to extract plutonium. These technologies are used to create the

fuel for civilian nuclear power, but they also can be used to create weapons-usable

material. Producing material suitable for nuclear weapons is the most difficult hurdle for countries in acquiring nuclear weapons, so the spread of enrichment and reprocessing technology beyond the small number of countries already possessing it

poses serious risks for U.S. national security.

To address these risks while meeting a growing demand for nuclear fuel, several

nuclear fuel supplier states, including the United States, along with the IAEA and

nongovernmental groups such as the Nuclear Threat Initiative, have proposed some

type of guaranteed access to nuclear fuel for states that play by the rules and are

looking to make peaceful use of nuclear power. With confidence in such fuel supply

assurances, it is hoped, countries could forgo the costly and risky pursuit of enrichment and reprocessing technology.

I want to thank Senator Casey for agreeing to chair today’s hearing in my absence; he could not have chosen a topic more important to the long-term national

security of the United States. The committee is fortunate today to hear from wellqualified witnesses, including our colleague Senator Bayh of Indiana. Senator Bayh

and the ranking member of our committee, Senator Lugar, are the coauthors of

S. 1138, the Nuclear Safeguards and Supply Act. On June 27, our committee unanimously ordered that bill to be reported to the full Senate. The Lugar/Bayh bill addresses the same challenges the committee is meeting on today, and is an important

contribution to congressional consideration of these important questions. I hope today’s hearing will contribute to perfecting that bill and to gaining the full Senate’s

support for it.

I look forward to the insights and recommendations from all our witnesses on how

the IAEA safeguards system can meet the challenges it already faces and how it

might accommodate an expansion of nuclear power without increasing the chances

that more states will acquire nuclear weapons.

Æ