'k 2 Date THE SECRETARY OF STATE WASHINGTON j g 73Pd - 2 3 MEMORANDUM FOR THE PRESIDENT PROM Cyrus Vince e5 SUBJECT Nonproliferation Strategy for 1980 and Beyond Attached is a memorandum on this subject from Gerry Smith which has the concurrence of State Energy and ACDA I believe you should be aware of and recommend you approve the general strategy he is suggesting The strategy represents largely clarifications of current policy and does not require changes in the law we will ask for authority to make specific moves as required As the International Nuclear Fuel Cycle Evaluation INPCE draws to a close it is important that we remove unnecessary causes of division with our Allies which do not help nonproliferation and that we begin to build a better international nonproliferation regime An indispensable element is that the v 3 be considered a reliable and predictable supplier If you approve the strategy we will work closely with DOE and ACDA in implementing it Attachment a Stated SECRET Authority 3556mm Date I DEPARTMENT OF STATE AMBASSADORAJLARGE WASHINGTON February 16 1900 seesaw ursonannon son was - sane Ambassador Gerard Smith Special Reprelentative for anproliferation SUBJECT Nonproliferation Strategy for 1980 and Beyond The purpose of this memorandum ilm leek approval of a general strategy to improve our nonproliferation policy in 1980 we will ask for authority to make specific moves as required The strategy in large part makes elements of our current policy more detailed and specific The most critical issues involve European and Japanese reprocessing of U S origin material and use of the resulting plutonium and ii improvements to the nonproliferation regime Nothing proposed for 1980 would require any change in the law I At the start of your administration it was impor- tant to increase awareness of the need to slow the spread of sensitive facilities which were making control of nuclear proliferation more difficult Since 1977 the International Nuclear Fuel Cycle Evaluation INFCE which you initiated and bilateral discussions have provided us and others with better perceptions of both the problems and possible solutions Several things have become c1ear 1 We are seen to be an unreliable supplier and ambivalent about nuclear power Alternate suppliers are emerging and our influence over nuclear trade and programs is becoming increasingly limited Our influence over re- processing and Plutonium use is particularly limited in that we lack consent rights re- garding BURATOM countries and cannot politi- cally treat Japan less favorably than Europe easy SECRET -2- 2 While for domestic reasons many nuclear programs have been slowed in recent years and the proliferation dangers inherent in plutonium based fuel cycles are now better perceived in large part as a result of 0 5 efforts breeder and advanced reactor optionsa are still perceived to be of great importance by major countries in Europe and Japan These programs will continue even if we do not agree their importance is affirmed by INFCE To the extent 0 8 policy attempts to interfere with these programs it is seen to threaten these countries energy security 3 The NPT regime is the foundation of nonpro- liferation policy but is increasingly attacked by countries who see nuclear suppliers as not keeping their part of the bargain--'fullest possible the peaceful uses of nuclear energy I 0 8 policy is singled out as particularly damaging 4 we need to develop a joint strategy with the major suppliers our allies with the most advanced nuclear programs--UX France FRG Japan to improve the nonproliferation regime and agree on criteria for plutonium uses and related reprocessing 5 we need also to make NPT or equivalent Tlatelolco obligations more attractive provide greater supply assurances to countries accepting these obligations and isolate to a greater extent the problem countries II We face major decisions in 1980 that were deferred for the period of INFCE These involve requests for consent to reprocessing of 0 5 origin fuel in France the UK and Japan the conditions of our consent to the use of the resulting plutonium and renego- tiation aimed at giving us such consent rights where we SECRET SECRET - 3 - will have to specify how we would exercise them we also face decisions on implementation of the'statu- tory requirement that countries with which we cooperate have safeguards on all their nuclear activities full- scope safeguards hnd we face an NPT eview Conference - in August where restraints on international nuclear - cooperation will be a major issue Following INFCE's concluding Plenary February 25-27 we should demonstrate that its analysis is being taken into account in 0 8 policy and that we are willing to become a more reliable supplier This is essential if we are to limit the spread of sensitive facilities and stop the current move towards multilateral negotitions of criteria for nuclear trade which could result in 0 5 isolation North-South confrontation and setbacks for our nonproliferation policy Beyond 1980 we should consider amendment of the NNPA to eliminate its retroactive provisions and ii if not already accomplished by reorganization plan relieve the NRC of its role in export control except possibly with respect to safety These issues need not however now be resolved and nothing proposed in this memorandum limits your freedom of action here - Any strategy to reduce proliferation risks asso- ciated with the fuel cycle must begin with the other major suppliers Without their support 0 8 nonpro- liferation policy can have only limited effect These countries are allies have accepted NPT or equivalent obligations and have large electric grids and advanced nuclear programs Their investigation or pursuit of breeders and other advanced fuel cycle options is understandable The proposed strategy involves private negotiations with these countries aimed at achieving s bargain that helps meet their wish for more predictable use of SECRET 1 2 3 SECRET - 4 - 0 5 origin spent fuel our wish to avoid precedents which could lead to premature spread of plutonium and our mutual interest in an improved nonproliferae tion regime In addition the strategy seeks to -reduce apparent discrimination by providing 1 for new benefits to those accepting NPT or equivalent obligations and ii for the possibility of additional - countries joining the preferred group when their programs and nonproliferation assurances warrant The highlights of the strategy are To seek supplier and other support for making NPT or equivalent full-scope safeguards F85 a condition of new supply commitments relating reprocessing and plutonium use to well defined reasonably safe and limited programs breeders and advanced reactors and deferring commit- ments to commercial thermal recycle an effective international plutonium storage IPS regime and enhanced cooperation in dealing with countries posing significant proliferation risks To provide 0 3 agreement for a period of years for the advanced countries in EURATOM and Japan to reprocess 0 5 origin spent fuel and use the resulting plutonium in well defined breeder and advanced reactor programs To provide new benefits including longer term and possibly up to 'life-of-reactor' fuel assurance L80 to countries which accept NPT or equivalent PSS and do not otherwise demonstrably pose a significant proliferation risk Iv_ Much of this proposed 1980 strategy is consistent with present policy none of'it requires changes in law The principal differences involve longer term gem See Tab 3 for details authority 4 I Date SECRET - 5 and possibly up to 'life-of-reactor' fuel assurance ii agreement for a period of years for the advanced countries to rsprocess U S origin spent fuel and use the resulting plutonium for breeder and advanced reactor RDED and support for an effective IPS These differences and their rationale'are discussed in Tabs c and B I propose we 1 Conduct negotiations along these lines in 1980 2 Seek the support of other suppliers for increased fuel supply assurance and appropriate technical assistance and cooperation for NPT or equivalent countries particularly developing countries Approve Attachments Tab A- Summary of Strategy Tab - Country Distinction Analysis Tab - Major Differences Between Proposed Strategy and Current Policy Tab - Foreign Reactions to 0 8 Policy and Law Tab - Summary of INFCE Results Tab - Views on Major Problems and Opportunities for the Period Tab - Issues Paper on Approval of Reprocessing and Plutonium Use Tab 3 - Issues Paper on International Plutonium Storage c SECRET -- SECRET TAB A Post INFO Strategy_for 1980 Our general strategy should link nonproliferation assurance and improvement of the international nonpro- liferation regime to improved supply assurance It should remove unnecessary irritants with Allies and make NPT or equivalent undertakings more attractive It should provide preference for those who accept NPT or equivalent with particular consideration for countries who have made progress in reneio otiating their agreements with us and thus accepu'addit onal NNPA requirements we should also improve the administrative process for approving exports and retransfers A The US should work with other key nuclear countries in particular the other major nuclear suppliers to develop an improved nonproliferation regime Emphasis would be placed on 1 supplier consensus on requiring or equivalent full scope safeguards as a condition for major new supply commitments 2 an effective IAEA International Plutonium Storage 1P5 regime to provide for inter- national oversight of plutonium from separation at a reprocessing plant until irradiation in a reactor as well as commitments of excess separated civil plutonium including ours to such a regime 3 deferral of commitments to thermal recycle on a commercial basis and 4 enhanced supplier cooperation in dealing with countries posing significant pro- s- liferation risks - we would also seek 5 continued adherence to the Supplier Guidelines and expanded-commitments not to offer to export for national use sensitive technologies especially enrichment and reprocessing 6 support where appropriate for multinational auspices for sensitive facilities 7 commitments to design and dedicate future enrichment capacity to produce LEU only and 8 increased political and financial support in the IAEA for improved safeguards SECRET Af ne Date SECRET -2- B In exchange for concrete movement by other countries towards these elements of an improved nonproliferation regime noted above the US should improve its supply assurances - 1 For those countries which are indispensable to improving the nonproliferation regime the major Suppliers who are also our Allies have committed themselves to NPT or equivalent nonproliferation obligations and do not otherwise demonstrably pose a significant proliferation risk and have large electric grids and advanced nuclear programs -- provide batch or generic authorizations for a period of years for reprocessing of US supplied nuclear materials and use of the derived plutonium for breeder and advanced reactor and increase cooperation on advanced nuclear technologies The authorizations would provide both for transfers for reprocessing or in limited cases such as Japan reprocessing in-country under appropriate conditions In the case of EURATOM where we lack a veto on reprocessinc and plutonium use our effort to get a veto would be linked to pre-agreement on its exercise along the above lines we would also seek acknowledgment of a linkage between the timing of new reprocessing capacity and breeder and advanced reactor programs taking into account plutonium availability from other sources 2 For all countries with or equivalent commitments that do not otherwise demonstrably pose a proliferation risk -- continue present policy of'considering on a case-by-case basis spent fuel transfers to advanced countries for reprocessing but not plutonium return where there is spent fuel congestion expand this policy to consider on a case-by-case basis similar or possibly even generic approvals'for such transfers where this furthers Us nonproliferation ob actives and approve on a batch or gener basis such transfers where a contract for such repro- cessing predates the April 1977 Nonproliferation Policy Statement SECRET D SECRET - 3 3 for all countries with NPT or equivalent commitments that do not otherwise demonstrably pose a proliferation risk - expand nuclear fuel licensing to longer term and possibly up to fuel assurances We should also simplify export procedures regarding small quantities of special nuclear material and reactor components provide enhanced nonsensitive technical cooperation and assistance in dealing with the problems of nuclear power encourage if necessary backup_fuel supply arrangements cross guarantees linked stockpiles Fuel Bank and encourage national and international interim spent fuel storage as an alternative to reprocessing For countries having as required by the NNPA full scope safeguards at the time of export but not a commitment to place future nuclear activities under safeguards NPT or equivalent PBS and that do not otherwise demonstrably pose a proliferation risk -- pending supplier consensus on making NPT or equivalent PSS a condition of new commitments 1 continue present policy of considering on a case-by-case basis supply of nonsensitive material equipment and facilities and 2 encourage where appropriate multinational alternatives to national sensitive facilities For countries without of any kind or which otherwise demonstrably pose a proliferation risk we should 1 refuse new commitments 2 continue to urge'other suppliers not to export sensitive nuclear material equipment and facilities 3 where these measures fail use available leverage to get the country to accept IAEA safeguards on any sensitive facility or material ii to foreswear development manufacture and testing of nuclear explosives and refrain from transfer of the tech- M m rgy g 2 i Date SECRET 4 4 seek advance consensus on sanctions for a nuclear explosion by a country not now nuclear weapon state I SECRET n- 1 wane-we At mv L Date i SECRET 33 3 Country Distinction Analysis Energy needs and proliferation risks associated with the nuclear fuel cycle are different in different countries For purposes of analysis we need to deal with three categories of countries from a nonproliferation point of view 1 those who accept NPT or equivalent nonprolifera- tion obligations including a commitment to safeguards on all existing and future peaceful nuclear activities NPT or equivalent F58 and do not otherwise demonstrably pose a proliferation risk - low risk countries 2 those who as required by the NNPA accept safeguards on all peaceful nuclear activities at the time of export de facto PSS and do not otherwise demonstrably pose a proliferation risk medium risk countries and 3 those who do not accept de facto FSS or otherwise demonstrably pose a proliferation risk high riskncountries 1 Among low risk countries there are three sub- categories countries with large electric grids and advanced nuclear power programs countries with reactors in place and realistic plans for a large number of additional reactors and countries with smaller nuclear programs we propose to link increased supply assurance to economic and energy program needs in these countries All countries with nuclear power programs need assured access to uranium enrichment and spent fuel storage services reactors and components and cooperation on dealing with the problems of nuclear power reactor safety spent fuel storage waste disposal Further developing countries need technical assistance regarding such problems and general development of nuclear energy In addition more advanced nuclear countries may have a legitimate need to carry out research on breeders or advanced reactors we should encourage their collaboration with the most advanced countries on these technologies rather than purely indigenous experimentation Finally some of the countries with smaller nuclear programs may require some additional certainty in dealing with potential future spent fuel problems SECRET 0 Amy - 31p ENARA Date I SECRET - 2 - Although views differ as to timing for advanced countries development of such nuclear technologies as breeders and advanced reactors is understandable They have a resulting need for access to reprocessing and plutonium These countries are committed to nonprolifera- tion and nothing we can do regarding theirifuel cycles will have much effect on their weapons potential As suppliers their support is essential to restrain the spread of sensitive nuclear materials and technology to other countries and deal with would-be proliferators 2 Medium risk countries should be treated on a_ case-by-case basis Although the NNPA and our current renegotiation of 0 8 cooperation agreements effort only require de facto PBS for continued cooperation we should seek supEIier consensus on making new commitments contracts under existing agreements contingent on NPT or equivalent Fss Pending development of such consensus we should continue present policy of considering new commit- ments on a caseeby-case basis While most countries with whom we have made progress in renegotiating our cooperation agreements have accepted NPT or equivalent FSS one or two have not It is possible that these countries would consider supplier agreement on making NPT or equivalent FSS a condition of new commitments another example of suppliers' upping the ante retroactively We believe the advantages of our proposed approach outweigh the disadvantaga in that NPT or equivalent safeguards is a much more substantial nonproliferation commitment ii the countries affected will have no alternative if all suppliers agree and we should know whether such agreement is possible before too much further progress is made on renegotiating on a g facto FSS basis It should be noted that the approach suggested in this paper has been an element of 0 5 policy since 1975 3 High risk countries should not receive increased supply assurance we should nonetheless continue case- by-case consideration of individual exports to countries in this category with NPT or de facto P53 where this is in our overall interest although the presumption would be against cooperation In accordance with the NNPA we cannot SECRET Am rPty 1 Byc mm Date SECRET -3- continue cooperation with countries not accepting at least Qg_facto PBS although we might consider in 1981 elimination of retroactive application of this require- ment to existing commitments - finally while we may get supplier support_for nuclear export restraintregarding these countriesc we have usually 3 found little or no support for sanctions in cases of largely indigenous development of sensitive facilities While it may be very difficult to do so we should none- theless in these cases use relevant leverage to get such facilities under safeguards and obtain a commitment not to manufacture develop or test a nuclear explosive device These categories are not static Proliferation risks and energy requirements change So do countries' political and security interests Our policy should provide for evolution but begin with an accommodation of the priorities of those who pose minimal proliferation risk consistent with their state'of nuclear development This accommodation should take account of both real needs and precedential impacts It should aim at getting the support of these countries in containing proliferation generally ease Am rgy SECRET I83 Ma or Differences Between rro sad trategy and Current PoIigy - Much of this proposed 1980 strategy is consistent with present policy none of it requires changes in law The principal differences involve 1 longer term and possibly up to 'life-of-reactor' fuel assurances 2 agreement for a period of years for the advanced countries to reprocess 0 8 origin spent fuel and use the resulting plutonium for breeder and advanced reactor RDED and 3 support for an effective international plutonium storage IDS regime l Longer term and_possibly up to licensing of low enriched fuel for power in NPT or uivalent countries From a utility point of view fuel supply assurance is vital to timely reactor investment Recently adopted policy authorizes batch licensing up to five annual reloads for these countries we have just started to implement this policy which should have some impact on improving perceptions of 0 5 reliability as a supplier While we should capitalize on this development five years may well not be enough to satisfy some countries Further while unpredictability associated with our controls on spent fuel is probably the major cause of our being perceived as an unreliable supplier many customers view case-by-case licensing and associated delays as burdensome There is also a need to enhance the benefits accruing to all those who undertake NPT or equivalent obligations Under long term licensing we would retain the right to prohibit an export in cases of clear proliferation risk but the burden would be on the 056 to stop the export rather than on the customer to obtain it It should be recognized this will decrease our ability to prevent stock- piling of LEU in the countries affected and that revocation of a license would be an extraordinary remedy requiring public justification Before offering such assurances beyond the five reloads already being implemented we would need to make sure that the use would be prepared to SECRET In A rgy SECRET implement such a policy without imposing addi- tional conditions and that there would be no strong Congressional objections we do not anticipate much Congressional opposition and hope to be able to persuade the NRC Agreement for a period of years for eggivalent advanced countries to reprocess 0 8 origin spent fuel and use the resulting plutonium in well defined and advanced reactor RDSD Current policy authorizes case-by-case approvals during INFCE of reprocessing not plutonium use where there is spent fuel congestion or ii the reprocessing contracts predate your-1977 Nonproliferation Policy State- ment and the country involved is exploring more proliferation resistant spent fuel disposition and approvals further 0 5 nonproliferation objectives Since-we lack prior consent rights over repro- cessing within EURATOM current policy is now applicable in practice only to Japan Sweden Switzerland and Spain While the law requires us to seek consent rights regarding EURATOH our European Allies have stated that they will not agree to this on the present case-by-case uncertain basis which is the current manifestation of 0 5 policy The proposed change would be responsive to the needs of countries with large advanced nuclear power programs Your 1977 Policy Statement specifically stated we were not trying to impose our will on nations like Japan France Britain and Germany which already have reprocessing plants and have special energy needs Further the INFCE analysis acknowledges the potential of breeders and advanced reactors in countries like these the NNPA stipulates that its provisions on reprocessing not prejudice open and objective consideration of INFCE results Finally EURAIOM will not accord us a prior consent-right that does not recognize this and relations with Japan would be severely damaged if we treated it differently than EURATOM 0 5 movement here should be used to obtain Allied support for an improved nonproliferation regime These countries can be distinguished on economic Fleming Date a SECRET - 3 grounds from others although we should not under- estimate the difficulty of convincing other coun- tries that the policy does not discriminate against them The recommended approach is also consistent with Illustrative Elements which we were authorized to discuss informally with con- cerned Congressional leaders and key foreign countries initial Congressional reactions have been cautious but not unfavorable although close questioning can be expected from Bingham Zablocki and Glenn particularly regarding expected non- proliferation benefits and the terms of our pro- posed approvals of plutonium returns we should be able to justify such approvals as meeting NNPA requirements but can anticipate Congressional hearings on this 3 Support for an effective international plutonium system IFS The NNPA urges you to seek inter national approaches to the storage of special nuclear material but you had previously indicated a wish to discourage this effort lest it give impetus to premature plutonium separation and use ThVirtually all countries with important nuclear programs want early agreement on the exceptions are Argentina and India who fear IPS would prove too restrictive Given this general sentiment and UK ERG Dutch and Brazilian commitments to establish an IPS before the first shipments of fuel from Europe to Brazil--there will be an IPS with or without us While an effective IPS will not solve nonprolifera- tion problems associated with plutonium it could enhance current and future arrangements when coupled with long term bilateral agreements with the major countries on plutonium separation and use it could make the exercise of national controls less onerous A weak IPS which will be created unless we actively participate in its formulation would constitute an undesirable precedent and the 0 5 could find itself isolated by refusing to join This would make U S exercise of national controls even more onerous politically SECRET Ahmo w_ c f SECRET TAB Foreign Reactions to 0 8 Policy and Law u s actions have led to heightened awareness of the risk of nuclear proliferation but most countries still give more weight to energy needs than to nonproliferation They believe we overemphasize the risks of'misuse of civil-' fuel cycles as opposed to those from dedicated explosives programs although there is more acknowledgment of the risk of fuel cycle misuse than was the case a few years ago While other advanced industrial nations appear to be willing to continue to condition their exports on the Nuclear Suppliers Guidelines most of them believe that there should be no constraints on commerce in non-sensitive facilities and materials as long as nations accept inter- national safeguards There is very little support for the 0 5 preference that trade in non-sensitive equipment and materials should be conditioned on nations foregoing indigenous development ofmsensitive facilities Meet nations believe U S policy with respect to these matters is contrary to Article IV of the NPT - There is virtually universal disagreement with the 0 8 Nuclear Nonproliferation Act of 1978 particularly its retro- active provisions Many nations feel that our imposition of new conditions for nuclear trade has contributed to uncertaint about access to uranium enrichment services and technology thereby stimulating other nations to move towardodevelopment of national fuel cycle facilities They believe our policy will be counterproductive The short term effects are also seen to be adverse in that the law has made planning difficult for the advanced industrial countries about which there is little or no proliferation concern and has been resented by them while having little if any effect on countries for which there is concern Although many nations are apprehensive about future fuel supply the bank is not seen as responsive to those concerns There is also little impetus for internationalization or mnltinationalization of enrichmen1 fuel fabrication reprocessing spent fuel storage or waste disposal although certain suppliers indicate willingness to consider on a case-by-case basis some multinational element for enrichment and reprocessing He are exploring with other interested countries multinational alternatives to national sensitive facilities sees A meg ag mm Date a i TAB SECRET INFCE The analytical work for INFCE is complete and the final summary report is under review we will be reporting on the results in more detail separately l INFCE succeeded at least for its duration in easing tensions over nuclear policies It expressed inter- national agreement on the twin goals of non-proliferation and use of nuclear power 2 Although proliferation risks are recognized no single or simple solutions are identified The importance of 1333 safeguards was emphasized With regard to technical options changes in reprocessing and the colocation of reprocessing and fuel fabrication facilities can reduce risks of theft and proliferation risks somewhat but there is little prospect of eliminating or greatly reducing through technical means proliferation risks in reprocessing and mixed oxide fuel fabrication Thorium use was seen as having little net advantage 3 There is general acceptance of the U S view that at present uranium and enrichment prices there is little if any economic advantage in the recycling of plutonium in thermal reactors However some states argue that thermal recycle may be important for other reasons because of insecurity about access to uranium to avoid the accumulation of plutonium contained in spent fuel and because reprocessing may be politically desirable even though technically unnecessa as a precondition to waste disposal 4 It is generally agreed that limiting reprocessing and enrichment to a few large facilities has both economic and nonproliferation advantages and that plant design should take account of safeguardability and perhaps include a multi- national dimension 5 There is a consensus that breeder and advanced reactor options should be kept open but that breeder programs should not be attractive to'countries with small electrical grids and limited experience with nuclear power There is a range of judgment about breeder economics and timing of commercialization 6 There is general agreement that reduced use of highly enriched uranium in research programs is a desirable goal and feasible in most cases but such changes should not result in an economic burden or decreased technical capabilities to meet research objectives i ng ate 3 4 1L SECRET - 2 - Those opposed to nuclear power may criticize the absence of in-depth treatment of safety and environmental problems INFCE's terms of reference focused on the relationships between nuclear energy and proliferation There will be criticism in the United States and in other countries that their views did not prevail Our views are reflected in the report so are those of other countries and often they differ Where there are differences more often than not the United States' views are shared by only a small minority On a few points we will want to register some comment or qualification on the INFCE report probably at the final INFCE plenary For example we will point out that the projections for growth of nuclear power are outdated and much too high and that there is far less need for early commercialization of the breeder than some parts of the report suggest I believe that INFCE has been useful this is a widely shared view It facilitated understanding of national views and consensus on certain important points and it provides a great deal of material of use to countries with- out well developed nuclear power programs geezer SECRET 1A3 Problems and Opportunities Because of concern about predictability and security of supply of uranium enrichment serviceq and eguipment a number of influential countries have indicated interest in moving toward more widely agreed international guide- lines for nuclear trade Many including the Director General of the 1385 see this as necessary to head off a North-South confrontation and damage to the NET This could be troublesome since most nations will want to reduce the constraints on nuclear trade that we deem necessary for nonprOliferation purposes Key supplier nations share our concerns and believe that for the near- term trade must be based on bilateral agreements Resistance by us and others to this effort and the perception that we are not complying with Article IV of the NPT mean that we will face heavy going at the NPT Review Conference this summer Resentment concerning nuclear trade policies and failure to conclude a compre- hensive test ban treaty pose major risks to the NPT regime There is substantial interest abroad in an International Plutonium Storage IPS System This represents a problem and an opportunity Earlier we tried to discourage such a system because of our concern that it might legitimize reprocessing It now seems clear that reprocessing will continue in a few countries and that some kind of IPS regime will be established There is no agreement about its coverage whether it should apply only to storage at reprocessing and possibly fuel fabrication plants or involve international oversight from the time plutonium is separated at a reprocessing plant until it is irradiated in a reactor criteria that should apply to release of plutonium and the mechanism to administer the regime There is also theaguestion of nuclear weapons states subjecting their excess civil plutonium to the regime See Issues Paper on 1P5 at Tab H While the great majority of nations agree on the desirability of safeguards on reactors and sensitive parts of the nuclear power fuel cycle we have been unable to get complete acceptance that assured nuclear supply should be conditioned on acceptance of full scope safeguards all peaceful nuclear activities France has been the major obstacle But a change here now appears possible Had such a safeguards requirement been in effect in recent years 5 SECRET SECRET -2- there would now be no problem'with Argentina and suppliers' hands would have been greatly strengthened in dealing with some of the other problem nations Perhaps assent to full scope safeguards could be announced at the Review Conference it would be a positive nonprolifration develop ment at a Conference that will be highly critical of suppliers and of the nuclear weapons states in particular On the other hand to achieve this and minimise criticism it would be helpful to have developed a supply package for those who accept NPT or similar nonproliferation obli- gations and do not otherwise demonstrably pose a proliferation risk we should not try now to reach agreements that would need a broad consensus on a new international nuclear regime Our differences with others remain great changes in our law or clarifications that would permit more flexi bility may eventually be required It is unrealistic to expect to make those changes and secure early international consensus in an election year in the United States and in the ERG and Canada For at least the coming year we should focus on what can be accomplished within the framework of the NNPA recognizing that this may inhibit to some extent our ability to pursue our nonproliferation and foreign policy objectives SECRET uh--0 BVQENARA Date a SECRET TAB Issues Paper on A rovals of Reprocessing an Plutonium Use A Background The U Sf has a right of prior consent over repro- cessing of U S supplied fuel and use of the resulting plutonium in the case of all countries where we have cooperation agreements I except EURAEOM we do however have controls over the flow of US origin spent fuel to EURAEOM from other countries and in-country reprocessing Regarding those countries which plan to reprocess soon either in-country or by transfers to EURAIOM countries this means we have rights only with respect to India Japan Sweden Switzerland and Spain With regard to EURATOM the NNPA requires we obtain such rights by March 10 1980 subject to annual extension of the deadline Since EURAEOM will not accord us an approval right without considerable confidence in how it would be applied and it is not in our interest to terminate nuclear cooperation you have extended the deadline-for another year Our policy pending completion of INFCE has been to exercise our right of prior consent with regard to transfer of US origin spent fuel for reprocessing in another country only on a case-by case basis where there is either spent fuel congestion or ii a reprocessing contract signed prior to the April 1977 Nonproliferation Policy Statement and where it serves US nonproliferation interests we have not in fact denied any requests The n only instance in which we have approved reprocessing in-country has been at Tokai Mura That agreement is r also of an interim nature and is being extended until l981 as an interim measure-the countries concerned Japan and in Europe do not view our current policy and the - extension of the EURATOM deadline as satisfactory it causes them uncertainty in their spent fuel disposition plans and in some cases in the operation of their reactors INFCE reflects this concern and specifically states that if circumstances have not changed prior consent rights should be exercised in a predictable manner that conforms to understandings at the time the right of prior consent was established The 0 5 is constrained by the NNPA Section 131 not to authorize reprocessing or retransfers for repro- cessing unless the reprocessing will not result in a significant increase in the risk of proliferation In SECRET It a 3 EPIENARA Date SECRET -2- making this judgment the 0 8 must give 'foremost consideration' to timely warning to the United States of any diversion where the reprocessing takes place in a non-nuclear weapon state On the other hand 5ection 131 stipulates that nothing in Section 131 is intended' to prohibit permanently or unconditionally reprocessing of US origin spent fuel preclude full 03 participation in limit US consideration in INFCE of any fuel cycle or prejudice open and objective consideration of INPCE results As noted in Tab 2 INPCE has concluded that breeders and other advanced reactors could prove attractive to countries with large electric grids and advanced nuclear programs A number of countries including the US have substantial breeder and other RDED programs involving reprocessing and plutonium use With the major countries in Europe and Japan US attempts to stop these programs would either be unsuccessful EURATOM countries where we lack consent rights or-severely damage relations Japan There could be Congressional and public opposition to interpretation of NNEA criteria in a more forthcoming and generic way On the other hand we have discussed with concerned Congressional leaders Glenn Bingham and the Europeans and Japan Elements cleared by the relevant agencies and the NSC staff which fore- shadow recognition of breeder and advanced reactor RDED and deferral for the time being of commercial thermal recycle This approach was greeted cautiously but with favor There is ample legislative history to permit an interpretation of the NNPA which would permit greater predictability in the exercise of the 0 5 prior consent right although we can anticipate Congressional hearings on this po nt 3 Issues 1 Should we at minimum continue post INFCE the present_policy of approving reprocessing not 'plutonium use on a case-by-case basis where there is spent fuel congestion or ii a re rocessin ontract redatin the A rii 1977 Non rolEferatIon PoIicy Statement The present policy is designed to deal with 1 physical need and ii contractual commitments entered into in good faith prior to the change in secess- In Atipv orlty_ SECRET -3- U s policy where there is no significant proliferation risk It is essential to at least continue such approvals if we are not to cause serious tens on with our Allies and possible shut downs of reactors or financial loss to utilities because of a policy imposed retroactively However this approval policy does not satisfy the needs of countries with advanced nuclear programs for greater certainty and thus could not serve as an acceptable basis for fashioning a post INPCE regime Should we in the case of NPT or equivalent coun- triesz go beyond present_policy to_provide generic approvals of not_pIu- tonium use in the advanced countries for contracts predating the April 1977 Nonproliferation Policy Statement and ii provide for case-by-case con- sideration_of similar or posSibly even generiE approvals for reprocessing in the advanced countries under post April 1977 contracts where this serves our nonproliferation interests One of the principal complaints about current US policy and law involves its retroactive pro- visions in particular those that would impose financial penalties The INFCE conclusion noted above was formulated by the Japanese who particularly resent seeking case-by-case US determinations of whether we will permit them to abide by reprocessing contracts entered into in good faith on the basis of previous understandings with the US Since all of the prior contracts involve NPT or equivalent advanced countries we are hopeful Spain will assume such nonproliferation obligations and reprocessing in the UK or France we should remove - this thorn in our relations We should also be prepared to permit case-by-case consideration of case-by-case or possibly even generic approval of retransfers for reprocessing in the advanced countries under post April 1977 contracts where this serves our nonproliferation interests There may be cases where we will wish to encourage shipment of spent fuel out of the country from India or Korea we may also SECRET - wow mummup m u -- HA I Duh nut- - SECRET - 4 wish in the case of countries with reactors in place and realistic plans for a large number of additional reactors to permit participation in breeder and advanced reactor RDED in the advanced countries as an alternative to indigenous Frog 0 Should we_go beyond our present policy to provide go NPT or equivalent countries with large electric grids and advanced nuclear programs batgh_or generic a period of years for repro- cessing and plutonium use for breeder RDED subject to interruption only where there is a material breach of agreement While this change in our present policy would recognize the legitimacy of certain countries proceeding now with breeder and advanced reactor RDGD and reprocessing including possible new reprocessing facilities for this purpose the shift would be consistent with INFCE and recognize a reality that in most of the concerned countries we cannot and should not try to prevent The 0 8 decision to mothball Barnwell is distinguishable we already had ample plutonium stocks for what in dollar terms is still a very large breeder Ran program And Barnwell was predicated in large part on commercial thermal recycle which we now hope to discourage All of the countries involved have or are expected to have NPT or equivalent obligations and the analysis supports a breeder option as 13 3 fiable forfcountries with larg Electric grids and advanced nuclear programs These countries can also be distinguished from others about which there may be greater concern on either nonproliferation or economic grounds Most of the countries with an interest in advanced nuclear technologies which would not be included have not accepted NPT or equivalent obligations Approval of plutonium use as well as reprocessing is justified in these cases as consistent with our policy of linking reprocessing to specified justi- fiable needs breeders and advanced reactors in countries where pursuing this option is not SECRET SECRET -5- illegitimate It is also consistent with your 1977 Nonproliferation Policy Statement in which you indicated you did not wish to interfere with the nuclear programs of coun- tries like the UK France ERG and Japan that have special energy needs 'diven the nature and nonproliferation commi ments of the countries involved we should be able to justify such approval as meeting RN23 require- ments How should a new approach be structured and negotiated2 e It is important that the approach be based on recognizable economic and nonproliferation con- siderations and minimize apparent discrimination There must be real possibilities for additional or equivalent countries that do not other- wise pose a significant proliferation riskrparti- cularly those that have accepted NNEA conditions as a part of revised cooperation agreements to participate in advanced nuclear technologies-- perhaps through multilateral arrangements --as their economies and nuclear programs warrant International agreement on formal economic criteria to justify plutonium use will not be possible But the actions of suppliers should be consistent with the general formulation expressed above Current policy discourages new reprocessing capacity in excess of specified needs We favor limiting the number of such plants to a few large ones located in countries with major pro- grams In addition to existing and planned - increased capacity in France and the U K Japan has enacted legislatidn tO proqged with a commercial plant and Belgium plans to reactivate the relatively - small plant at Idol The and French plants and planned new capacity do not directly pose an increased proliferation risk as they are located in nuclear weapon states although we have concerns regarding the terms of their return of plutonium The EURDCHEMIC plant was the forerunner of the British and french plants and can be grandfathered under the law Given the lack of prior consent with respect to EURAIOM we seems f A MR 2 if I BEQQNARA Date a I SECRET - 6 - could not halt these plants in any eysnt While we could attempt to obstruct reprocessing in Japan such action would cause major damage to U S -Japanese relations and only indirectly contribute to nonproliferation Japan already has the ability to produce weapons grade material at the Tokai Mura pilot plant their proposed commercial facility is less of a problem from the point of view of precedent vis a vis a more troublesome country than the pilot facility which is already in operation We therefore propose to seek a mutually agreeable arrange- ment with the Japanese as to timing safeguards and other institutional and technical measures regarding their followhon commercial plant Authorizations for either retransfers or repro- cessing in-country can be structured on the basis of specified programs This structure should be consistent with our views on the release mechanism of any international plutonium storage 1P5 system see Tab H For example the 0 5 could ask the country owning the spent fuel to specify quantities and timing for reprocessing in an agreed reprocessing plant the resulting plu- tonium to be used in specified breeder or advanced feagtor spas programs The specifications could nc ude -- deposit in an effective IP33 -- release in accordance with IPS to a specified M03 fabrication plant and end use and -- conditions on the resulting fuel or unirradiated plutonium to be used in a specified research Finally negotiation of't ese generic authorizations would be in the context of concrete movement by these countries towards an improved nonproliferation regime In conjunction with US willingness to accommodate the priorities in these countries programs we should seek their support for - deferral for the time being of commercial recycle of plutonium in current generation '3 uh- d A r y SECRET -7- light andfheesy water reactors -- an eifective_IPS end -- a number of other additive nonproliferation element identified in Tab A that go beyond reprocessing and plutonium use In the case of EURAIOM we should seek prior consent rights in the context of US agreement to exercise then in the above manner Recent bilaterals with the UK and France indicate their willingness'to consider this kind of pragmatic solution 292T A l rgy i 1' ALMJ A Date a SECRET TAB Lsaurxf vur View on International Plutonium torage Re gme - A Background The genesis of IPS primarily stemmed from the desire of the URENCO enrichment partners 0 3 Netherlands PBS to have satisfactory international arrangements for any plutonium that might be produced from URENCO supplied fuel in Brazil Dutch requirements necessitate establish- ment of some kind of IPS in this respect The french also want IPS as a chapeau for their bilateral arrangements on plutonium return The IAEA convened an expert group which plans to produce in 1981 a draft IPS agreement All relevant countries are participating and with the exception of Argentina and perhaps India want to move towards early agreement on a scheme 0 8 representatives have participated constructively but have been agnostic as to whether a satisfactory IPS could be devised we have been concerned that IPS not legitimize premature separation of plutonium and supplant national controls It is widely assumed however that the 0 5 could not afford to stay out of IPS 1 What is the most effective 1P5 we are likel to realize It is an international regime administered in accordance with Article of the IAEA Statute which a Establishes a norm that all civil plutonium for which there is no specified immediate use 7- should be deposited in an international store subject to release by the IAEA_only upon satis- faction of certain conditions b Provides for international oversight over and above existing safeguards which are continuous for separated plutonium of plutonium from separation to irradiation and requires specification and verification of end use and intermediate processing and transport A rgy I a SECRET -2- 11 Limits on release timing and quan- tities consistent wirh end use and - intermediate processing and'transport requirements best available safeguards'hnd physical - protection iv return to an international store if a breach of these conditions occurs and special review of plutonium research c Does not prevent exercise of national controls by the 0 8 or other suppliers when'releaSe would be prejudicial to the achievements of 0 8 nonproliferation objectives or would otherwise jeopardize 0 5 defense and security interests he long as the 0 8 participates actively with other countries the above may be achievable Without such participation a significantly less effective regime is likely to be agreed 2 How does this regime enhance nonproliferation and not legitimate wide spread plutonium use The legitimacy of plutonium use is a function of what countries in fact do Advanced countries will experi- ment with breeders and advanced reactors INFCE recognizes the importance of such experimentation in countries with large economies and electric grids reprocessing and plutonium exist Existence of IPS will not materially affect this but even if it did there most probably will be an IPS with or without us 0 5 ability to defer plutonium use until clearly needed is a function of-the acceptance of our argu- ments as well as our legal rights IPS will reinforce the perception that plutonium is a particularly dangerous material and legitimize actions to assure that it is used only for specified peaceful purposes under safe- guards On the other hand 1P8 will also produce arguments that national controls should be subsumed by it And IPS does not remove the possibility of abrogation or physical seizure during domestic unrest or war 1 SECRET SECRET -3- We must thus continue to emphasise that other nonproliferation measures to restraint on commercial thermal recycle are also necessary -and avoid the perception that IPS solves the plutonium prob amassure that IPS doesn t abridge the rights of the 0 5 and other suppliers to prohibit plutonium release where there is a significant proliferation risk IPS will not prescribe particular uses or particular programs The 0 x and France -- and if it does not affect their programs the ERG and Japan -- agree that national controls may need to be applied in addition to the international system The acceptability of this approach will depend on the degree to which we are able bilaterally to accommodate most countries which now have or plan to use plutonium This is why we propose moving forward with bilateral understandings that reflect the priorities in these countries' programs In order to avoid double or even triple jeopardy uranium producer enricher and reprocessing state controls in addition to IP31 there is also a need to harmonize national controls 4 How will IPS help deal with unsafeguarded plutonium in non-nuclear weapon states Today this involves only India and probably Israe1 and Pakistan It is unlikely that these countries which will not put their plutonium under safeguards will agree to IPS On the other hand all other such countries currently with civil plutonium have it under safeguards and are prepared to submit to IPS Of countries which might in the near future have plutoniumr-Brazil and Argentina--Brazil will er force agree to IPS Argentina is a question mark buth all the others agree pressures on Argentina to join would be great In either event the non-joiners would clearly be a small exposed minority 5 Will the 0 8 and other nuclear was on states need to place their excess civil_plutonium in we believe as do the 0 x and France that this is essential fer purposes although there are differences as to the definition of what civil plutonium would be subject to IPS In 1976 President Ford stated that the 0 5 would be prepared to place SECRET - SECRET - - its excess civil plutonium into an effecgiwiPs if one were established 1 1 I In OfSECRET - In                     National Security Archive    Suite 701  Gelman Library  The George Washington University    2130 H Street  NW  Washington  D C  20037    Phone  202 994‐7000  Fax  202 994‐7005  nsarchiv@gwu edu