EURATOM, a group of 15 western European countries in the European Union, was established in 1957 to promote and facilitate the growth of nuclear industries through the research and development of nuclear energy in the Union, to ensure a supply of nuclear materials, and to foster progress in the peaceful uses of nuclear energy. Figure 1 shows EURATOM’s 15 member countries. The U.S.-EURATOM agreement was signed in 1958. According to a State Department official, the agreement has served as the basis for substantial and historic peaceful nuclear cooperation and trade between the United States and the EURATOM countries for nearly 40 years. Negotiations are currently under way to try to secure a new U.S.-EURATOM agreement before the present agreement expires at the end of 1995. According to a State Department official, if a new agreement is not concluded prior to the expiration date, significant nuclear commerce between the two parties must be suspended. According to a Department of Energy (DOE) official, the existing U.S.-EURATOM agreement prohibits the EURATOM countries from using U.S.-origin nuclear materials or equipment for nuclear weapons or for other military purposes, and it requires that EURATOM safeguards or controls be applied to U.S.-origin materials in a EURATOM country. These safeguards are augmented by full-scope International Atomic Energy Agency safeguards in the EURATOM states that do not have nuclear weapons. The EURATOM nations are required to obtain U.S. consent before transferring U.S.-origin nuclear materials or equipment to a third party outside of the European Union. However, the agreement does not contain any other U.S. consent rights and therefore differs significantly from other U.S. nuclear cooperation agreements, which contain U.S. consent rights over the use (including reprocessing) of U.S.-origin nuclear materials. The largest amount of U.S. nuclear materials exported to EURATOM and Japan during the last 15 years was made up of depleted, natural, and enriched uranium. Table 1 shows the total amount of U.S. nuclear materials exported to EURATOM from 1980 through 1994 that are controlled by the agreement. Table 2 summarizes the total amount of nuclear materials exported to Japan during the same period. (App. I contains detailed information on U.S. exports to EURATOM and Japan.) Japan uses enriched and natural uranium as fuel for nuclear power reactors. The used or spent fuel is transferred to EURATOM for reprocessing, which chemically separates the depleted uranium and plutonium. Enriched uranium, totaling 4,542,383 kgs, constituted the largest amount of U.S.-origin nuclear materials transferred from Japan to EURATOM. From 1980 through 1994, Japan transferred to EURATOM between 115,651 kgs and 404,935 kgs annually of enriched uranium. Japan also exported about 37,187 kgs of plutonium to EURATOM during this period. Table 3 summarizes the total amount of U.S.-origin nuclear materials Japan transferred to EURATOM during the period. (App. I contains information on the amount of U.S.-origin nuclear materials Japan transferred to EURATOM annually during this period.) According to NRC officials, no nuclear power reactors were exported to EURATOM or Japan from 1980 through 1994. However, NRC issued licenses for the export of four major reactor components for use in research and nuclear power reactors to EURATOM in 1986, 1991, and 1992. In addition, nuclear reactor equipment and components have been exported by the United States to Japan annually between 1980 and 1994 under NRC’s general licenses. We obtained the dollar values of the uranium and plutonium exports from the Department of Commerce’s National Trade Data Base. However, this data base excludes the cost of loading the merchandise aboard the exporting carrier and also excludes freight, insurance, and any other charges or transportation costs beyond the port of exportation. The reliability of the data also depends on the accuracy of reporting by shippers on their export declarations. According to the Department of Commerce’s data base, the dollar value of U.S. exports to EURATOM countries of uranium (natural, enriched, and depleted) and plutonium in 1989 through August 1994 was about $1.1 billion. The value of these U.S. exports to Japan for the same period was about $4 billion. (App. II contains detailed information on the dollar value of U.S. exports to EURATOM and Japan.) According to U.S. nuclear industry officials, the services related to exported nuclear materials, such as uranium mining, enrichment, and fuel fabrication, should be factored into the value of U.S. nuclear exports. In the past, DOE provided uranium enrichment services to EURATOM and Japan. In 1993, uranium enrichment services were transferred to the U.S. Enrichment Corporation (USEC), a government-owned corporation, which was created to operate the U.S.-owned uranium enrichment plants and to market enrichment services. We contacted DOE and USEC to obtain the amount billed to EURATOM and Japan for enrichment services from 1989 through 1994. According to information from DOE, EURATOM was billed a total of $167,527,507 for enrichment services in fiscal years 1989 through 1993. Japan was billed a total of $1,593,567,205 for the same period. DOE’s billings under EURATOM and Japanese contracts, by fiscal year (FY), are shown in figure 2. The amounts billed by DOE included the cost of enriching the uranium delivered to the enrichment plant and of packaging and handling the services at the enrichment plant. The enriched uranium is delivered to the customer at the enrichment plant, but its cost does not include any subsequent services, such as fabricating reactor fuel assemblies. According to USEC, the amount billed under Japanese contracts for the period from 1989 through 1994 was $350 million to $400 million per year. Industry representatives anticipate that if the U.S.-EURATOM agreement is allowed to expire, EURATOM and Japan would turn to other suppliers of nuclear products and services outside the United States. U.S. participation in the European nuclear markets would be greatly reduced. In addition, because Japan also exports U.S.-origin spent fuel to EURATOM for reprocessing, Japan would be less likely to purchase uranium fuel sources from the United States in the future. The absence of a U.S.-EURATOM agreement would prohibit Japan from transferring this U.S.-origin spent fuel for reprocessing in any EURATOM country. Furthermore, these industry representatives point out that part of nuclear commerce includes relationships with the customers and the guarantee of reliable supply and services to them. A break in any of these ties, such as a failure to renew the U.S.-EURATOM agreement, would weaken the U.S. nuclear industry substantially, because the industry needs both its domestic and foreign markets. U.S. nuclear industry representatives stated that the nuclear industry is a market industry that can exist only in a global environment. According to USEC officials, if the U.S.-EURATOM agreement for cooperation expires, USEC’s future enrichment services would be seriously affected. Specifically, existing contracts with EURATOM, worth approximately $160 million, could be terminated. Other contracts, valued at approximately $470 million, would be in jeopardy. Another $1.8 billion in potential new business from EURATOM and Japan might be lost. According to a nuclear industry representative, the U.S. share of the European nuclear industry market currently is about $100 million and may reach $300 million annually after the year 2000. In addition, Japan currently is the largest single foreign purchaser from U.S. suppliers of nuclear power systems equipment, materials, and services. In the next 5 years, according to industry officials, anticipated U.S. participation in construction, equipment, start-up services, spare parts, and fuel for 10 nuclear power plants in Japan is expected to amount to about $500 million to $800 million annually throughout the plants’ lives. During May 1995, we provided drafts of this report to officials in NRC and the Departments of Commerce, Energy, and State to obtain their comments on the facts presented in this report. In general, these officials agreed with the facts presented in the draft report. NRC officials, including the Director, Division of Nonproliferation, Exports, and Multilateral Relations, Office of International Programs, made several editorial suggestions to improve the clarity of the information and noted that they had some questions about the Department of Commerce’s National Trade Data Bank information presented in table II.8 in appendix II. In particular, NRC officials stated that they were puzzled by the reported plutonium sales to some of the listed countries, especially Denmark, Greece, and Portugal. According to the NRC officials, these countries have very small nuclear research programs and no nuclear power programs; thus, they doubt that these countries have in fact imported plutonium from the United States. In addition, NRC stated that NRC’s export licensing data base shows no licenses for exports to Greece or Portugal, one small (0.005 kg) plutonium export case for Denmark, and only three plutonium export cases for Spain. However, NRC noted that U.S.-supplied nuclear materials to any country within EURATOM can be freely transferred within EURATOM without prior notification to, or approval by, the United States. Thus, according to NRC, it is possible, although not considered likely, that U.S.-supplied plutonium has gone to the countries in question and has been reported to the Department of Commerce’s National Trade Data Bank system without appearing in NRC’s export licensing records. (The text of NRC’s comments appears in app. III.)