DECLASSIFIED Authority 5'4 3 55 May 12 1980 PRC PRESIDENTIAL DECISION PAPER Nonproliferation Planning Assumptions TABLE OF CONTENTS I Where We Stand p 1 II Why Do We Need Guidance Now 4 Planning Assumptions A Objectives Improved 5 Nonproliferation Regime B Reprocessing of US origin 7 Fuels and Use of the Derived Plutonium Option 1 Codify Current Practice 9 Option 2 Alternative Approaches 11 C International Plutonium Storage 17 D Improved Nonsensitive Supply 18 Assurances Reinforcing the NPT Regime IV Domestic and Congressional Implications 20 Annex A Where We Stand Annex EURATOM and Japanese Programs and Plutonium Supply and Demand Annex International Plutonium Storage Annex Nonsensitive Supply Assurances 5 W me DECLASSIFIED Autho wji ihS i'r May 12 1980 PRC PRESIDENTIAL DECISION PAPER Nonproliferation Planning Assumptions We face difficulties in implementing our nonproliferation policy and need guidance on planning assumptions for negotiations with EurOpe and Japan and for the Nonproliferation Treaty NPT Review Conference Our objectives are to avoid deterioration of our relationships with key allies on nuclear issues and to strengthen the nonproliferation regime The key issue is -- Should we for these objectives be prepared to consider longer term program-related approvals of reprocess ing of US-origin fuel and use of the derived plutonium in EuroPe and Japan If so under what terms Resolution of this issue has international and domestic implications of which you should be aware Other issues addressed in this paper are -- our attitude towards an international plutonium storage regime and longer term fuel assurances to reinforce the NPT regime None of the recommendations or alternatives presented require changes in law or entail direct budget implications While we would begin negotiations on the basis of preliminary guidance further Presidential guidance would be sought later as required This paper was developed at the request of the PRC by an interagency group including representatives of the Depart- ments of State Energy and Defense JCS ACDA NSC DPS and CEO I WHERE WE You initiated the International Nuclear Fuel Cycle Evaluation INFCE now completed to provide for an inter A more detailed description is set out at Annex A GDS 5 12 86 DECLASSIFIED Authorityji bg national technical reassessment of the fuel cycle from the point of View of both energy deve10pment and nonproliferation INFCE's analysis and the trends of the past few years are both encouraging and disappointing We have successfully dealt with potential problems in Korea and Taiwan Many countries now recognize that plutonium cycles and other sensitive aspects of the fuel cycle pose proliferation risks plutonium recycle in conventional reactors thermal recycle is marginally economic at best reprocessing is not technically or economically necessary for waste disposal and sufficient global production of uranium to meet the projected demand of current generation reactors at least into the first quarter of the next century appears feasible Further recent trends in nuclear power development slippage in demand increases in uranium supply more efficient conventional reactors increased capital costs of breeders technical and political difficulties with reprocessing reinforce our arguments against premature commitments to plutonium cycles On the other hand we have made no real progress on certain dangerous proliferation situations particularly in India Pakistan and South Africa Most of the key industrialized countries are even more concerned than we about energy security and hence remain committed to breeder and advanced reactor development for energy security reasons and to large amounts of reprocessing capacity beginning as early as the '905 a few Belgium Italy FRG Japan wish to preserve a thermal recycle option many UK France Japan and others still believe reprocessing is a desirable if not technically necessary pre- cursor to waste disposal and the UK and France continue to regard the provision of reprocessing services to other countries as a major commercial interest Planned EurOpean and Japanese reprocessing programs could result in an accumulation of plutonium between 1990 and 2000 substantially in excess of the Widespread thermal recycle means plutonium flows to wherever there are light water power reactors all DECLASSIFIED Aumoritym needs of planned breeders and advanced reactors This could increase pressures for thermal recycle While the desirability of restraint in the export of sensitive technologies is now generally acknowledged there remain differences between our selves and some of the other suppliers on what is sensitive and when and under what conditions such exports might be justified the Swiss sale of a heavy water production plant to Argentina Most countries view us as an unreliable supplier despite the fact that international nuclear markets have worked reason- ably well and the U S has generally met its commitments European countries and Japan cite uncertainty regarding our con- sent to use of US-origin material in their reprocessing and plutonium use programs and developing countries cite a lack of assured availability of nuclear fuel reactors and technical assistance These perceptions are creating tension We lack controls over US-origin spent fuel in EURATOM and they resent the U S Nuclear Nonproliferation Act NNPA threat to cut off nuclear c00peration if they do not provide us with a veto over repro- cessing Other industrialized countries in which we have con- trols over US-origin spent fuel Japan Sweden Switzerland resent the uncertainties of our case-by-case approach and being treated less favorably than EURATOM Developing countries consider nuclear fuel cycle restraints discriminatory and con- trary to the NPT Our supply leverage is waning If we are unable to negotiate controls over spent fuel attributable to future exports to EURATOM more than 70 percent of European Japanese Spent fuel will be free of U S controls by the year 2000 And even if we can negotiate such controls only 50 percent of such See Annex B There is great uncertainty regarding future plutonium supply and demand balances If past reprocessing difficulties c0ntinue there would be little or no excess plutonium through the year 2000 If on the other hand programs proceed exactly as planned European and Japanese produced plutonium could exceed breeder and advanced reactor needs by as much as 100 metric tons in 1990 and over 350 metric tons in 2000 One possible intermediate scenario indicates in 1990 a rough balance between supply and demand in Japan and only a 20 metric ton excess in but this particular scenario could increase to roughly a 100 metric ton excess in Europe and a 60 metric ton excess in Japan by the year 2000 DECLASSIFIED Authoritym i spent fuel will be U S controlled by that date Europe is rapidly replacing us as a vendor of fuel and reactors to the developing world II WHY DO WE NEED GUIDANCE Guidance is desirable for the following reasons Certain policies of the U S and other key nuclear partners in EURATOM Canada Australia were explicitly interim pending INFCE's completion Renegotiation of our agreements for cooperation is underway pursuant to the NNPA This includes our effort to obtain consent rights over reprocessing of U S fuel in you have extended the deadline for this until March 1981 but we need to move now if we are to have any chance of concluding an agreement by that date and influence these countries' schedules and rationales for future repro cessing and plutonium use On the other hand we could extend the EURATOM deadline annually and con- tinue case by-case treatment of reprocessing and plutonium return requests without affecting the physical needs of planned European and Japanese requirements for several more years Parallel Canadian and Australian negotiations with EURATOM threaten to undercut our own efforts Australia for example hopes to agree with EURATOM in early 1981 on a formulation permitting use of Australian origin plutonium for any peaceful non- explosive purpose breeders thermal recycle waste management Decisions on a number of plutonium use cases cannot easily be deferred and would be facilitated by guidance on these issues An IAEA Expert Group plans to produce a draft inter- national plutonium storage IPS agreement in 1981 we need to influence this effort so that it does not prejudice our controls over US-origin material and other nonproliferation interests While obtaining controls over non-US origin material used in U S reactors would increase our leverage we will not get such rights retroactively 59519 DECLASSIFIED Aulhority 33H 3 55 5 U S non-sensitive supply assurances would help ameliorate criticism at the August NPT Review Conference Also a UK-Yugoslav stimulated move in the IAEA to consider a universal nondiscrimi- natory code of nuclear trade will be influenced by our approach to supply assurance generally Part of the motivation behind the code is to limit supplier flexibility and restore confidence in supply relationships PLANNING ASSUMPTIONS A Objectives Improved Nonproliferation Regime This paper assumes that the Administration's basic nOnproliferation objectives should be maintained Accordingly we propose to -- seek specific improvements in the international nonproliferation regime -- restore confidence in the U S as a predictable reliable partner -- avoid overtly discriminatory approaches that would increase North-South tensions and erode support for the and -- reduce tensions with allies through a modus vivendi with those firmly committed to breeder and advanced reactor programs Support of the other major suppliers is of great importance to maintaining and improving the nonpro- liferation regime Recommendation We prOpose consistent with the NNPA to seek common approaches with the other major suppliers to 1 Limit reprocessing and plutonium use this would include -- deferral of commitments to commercial thermal recycle for a Specified period 45% DECLASSIFIED Autho tym -- avoidance of excess national stockpiles of plutonium -- obtaining from EURATOM controls over spent fuel derived from future exports and from all ecuntries over disposition of US-origin material after initial use in breeder and advanced reactor programs -- rigorous nonproliferation constraints for plutonium cycles and relating the timing of new reprocessing capacity to the extent possible to plutonium needs for specified breeder and advanced reactor programs 2 Continue restraint in the export of sensitive nuclear technology and material especially enrichment reprocessing and breeder technology 3 Require NPT type full-scope safeguards for significant new supply commitments 4 Increase political technical and financial support in the IAEA for improved safeguards 5 Strengthen supplier state export control and inter- national COOperation in dealing with problem countries like Pakistan This could include improvements in Supplier Guide- line implementation regarding dual use items gray area items sensitive technology and end use controls We would also continue to seek 6 stronger commitments to spent fuel storage including regional and international approaches as an alternative to reprocessing for waste manage- ment 7 multinational auspices where appropriate for sensitive facilities 8 commitments to design and dedicate future civil enrichment capacity to produce low enriched uranium only 9 additional emphasis on improvements in once through technology and low enriched uranium stockpiles as alternatives to breeders for providing energy security and 10 negotiation of additional rights and conditions required by the NNPA in our new agreements of cooperation Approve Disapprove DECLASSIFIED Authority SEERET -7- B Reprocessing of US-Orioin Fuels and Use of the Derived Plutonium Since our policy statement of April 1977 and enactment of the NNPA We have pursued a cautious case-by-case approach to the reprocessing of US-origin fuel over which we have consent rights Current practice permits case-by-case approvals of retransfers of US-origin fuel to the UK and France for reprocessing where there is spent fuel storage congestion or where the reprocessing contract predates our April 1977 policy and the country involved is being helpful on nonproliferation matters and ii limited reprocessing in Japan under the Tokai Mura agreement of 1977 and its extensions In addition there have been no retransfers of plutonium but some requests are now pending Our purpose has been to limit accumulations and use of separated plutonium in Eur0pe and Japan and thereby avoid precedents which if widely emulated could pose significant proliferation risks However our practice applies in fact now only to Japan Sweden Spain and Switzerland The primary contributors to any plutonium accumulation by the year 2000 over and above that needed for breeders and advanced reactors would be three major new light water reactor reprocessing facilities planned in the next two decades a new French facility under construction a new UK facility already licensed and under construction and a Japanese plant in pre- liminary planning stage corporation formed The U S influence on reprocessing programs in EurOpe is derived primarily through our control of the Japanese contribution 24 percent to the design through-put of these new facilities Since most of the rest of the material to be reprocessed in Europe is outside our control U S controls can at best reduce but not eliminate plutonium surpluses in Europe and consequent pressures for thermal recycle Moreover our vetoing Japanese transfers of U S spent fuel to Europe could cause Japan signi- ficant financial penalties the Japanese are committed to pay 27 percent of the construction costs of these new European repro- cessing plants and at lease five percent of the reprocessing charges have already been paid In terms of US-origin Spent fuel to be reprocessed between now and the year 2000 over 90 percent of the impact is on Japan If these plants operate at partial capacity the Japanese portion of the total could be higher but excess plutonium over and above that needed for breeders and advanced reactors would be significantly reduced DECLASSIFIED Authority We have a more substantial potential lever over Japanese reprocessing in that we control most of the spent fuel that would be involved However it will be politically diffi cult for the Jtoconstrain Japanese programs if we cannot constrain European programs andiletoforce Japan to forego a future domestic reprocessing alternative to the exorbitant rates uncertainties delays and foreign dependence involved in con- tracts for reprocessing in Europe U S leverage cannot prevent excess reprocessing capacity in Europe if this results in the unfortunate precedent of thermal recycle U S constraints on the Japanese program will be of limited if any precedential impact This argues strongly for a cooperative approach which has some chance of influencing European as well as Japanese programs On the other hand the U-S -is not legally obliged to permit use of US-origin Japanese material in a European or Japanese national plant It can be argued that U S acquiescence in a premature Japanese reprocessing plant would abdicate what influence we have set a damaging precedent and add to the excess of separated plutonium The basic policy questions are 1 Should we use existing supply controls to limit retransfers of US-origin spent fuel from Japan and other countries to European reprocessing plants even though this impacts on contractual commitments to attempt to slow European reprocessing and European and Japanese movement towards plutonium use generally 2 Alternatively should we accommodate under care- fully stated conditions breeders and advanced reactor and related reprocessing in allied countries in order to reduce tension try to extend our controls to EURATOM and elicit greater cooperation in mutually strengthening the nonprolifera- tion regime Options There are essentially two courses 1 codify the interim practice of case by-case approvals Option 1 or 2 move in limited ways to accommodate specified breeder and advanced and the UK are on notice that we would not necessarily approve transfers of US-origin Japanese fuel for reprocess ing under contracts entered into after April 1977 DECLASSIFIED Authorityj j g 9 reactor RDED programs in certain countries OptiOn 2 There are a number of variations to the second course this paper presents you with two and The options envisage that our consent to reprocessing would relate to specified reprocessing plants We would make every effort to relate consent to reprocessing in new reprocess- ing plants to need for additional capacity for breeders and advanced reactors All of the Options could also subject to budgetary limitations be combined with international coopera- tion on improving the efficiency of once through technologies and permitting stockpiling of low enriched uranium The impact of the Options on our ability to retard or pre- vent the spread of sensitive technologies reprocessing for thermal recycle or advanced reactor to countries beyond EURATOM and Japan will depend on two considerations the likely ability of the proposed approach to elicit from EURATOM and Japan increased restraints on the export of such technologies EURATOM countries are currently the principal potential suppliers and ii the degree to which the option permits undesirable precedents for other countries with respect to plutonium use Supplier cooperation can halt export of sensitive technologies but an undesirable precedent could create pressures for access to such technologies Our analysis on these points is presented in the advantages and disadvantages of each Option Option Codify current practice Codify the practice adopted in September 1978 for the interim period of INFCE of case by case decisions on requests for retransfer of US-origin spent fuel for reprocessing in the UK or France approving such requests only where there is a clear showing of need spent fuel congestion and the requesting country has made appropriate efforts to expand its storage capacity and where congestion is not demonstrated but the reprocess ing contract predates 1977 if the requesting country is actively COOperating in exploring more proliferation resistant methods of spent fuel disposition and approval would directly further major nonproliferation objectives Requests for the return and use of the resulting plutonium would be treated on a case-by-case basis consistent with the NNPA Current practice does not 9 _apply to EURATOM DECLASSIFIED Authority 10 The purpose of this Option would be to discourage foreign reprocessing and plutonium use by avoiding predictable use of US-origin material except in very limited circumstances Advantages This option would emphasize U S non-cooPeration in breeder programs reprocessing and plutonium stockpiles which could trigger thermal recycle and greater plutonium use It would avoid the risk of the US being perceived domestically and in other countries as endorsing plutonium use If current trends continue with respect to nuclear power growth and schedules for new reprocessing and breeders we may find that pressures in Japan and Europe to reprocess US-origin fuel will diminish This argues for avoiding any accommodation involving relaxation of our opposition to plutonium separation and use when it is not clear that such an accommodation will prove necessary This is especially so if with waning leverage we cannot in fact negotiate significant nonproliferation improvements in return for an accommodation on reprocessing and plutonium use There are no technical reasons why comprehensive settlement of reprocessing and plutonium use issues cannot be postponed for a while Returns of US-origin plutonium to Japan need not be faced on any significant scale for 5-6 years reprocessing requests in the same period will involve pre-1977 contracts This Option would avoid any risk of creating additional domestic pressures for commercial reprocessing and thermal re- cycle for Clinch River or for otherwise accelerating our breeder program Disadvantages This approach would have very negative impact on our allies in Europe and Japan at a time when broader U S interests argue for increased cooperation It would be perceived as hostile to European and Japanese breeder and advanced reactor programs insensitive to their energy security needs and an attempt to dictate their fuel cycle choices This option would not be an acceptable basis for renegotia- tion of our agreements for cooperation including obtaining limits to reprocessing and plutonium use in EURATOM which accounts for 70 percent of the spent fuel projected from EURATOM and Japan through the year 2000 DECLASSIFIED 53m 11 Perpetuating a discriminatory stance controls over Japan and others but not EURATOM may cause Japan and others to question their close nuclear tie with the U S and encourage them to disengage Such an effort would also likely catalyze early Japanese construction of a second reprocessing plant The practical consequence is to penalize a key ally and a country which has been exceptionally helpful in comparison to EURATOM on sensitive country questions and on promoting NPT adherence Since many other key countries are waiting to see how we come Out with EURATOM our renegotiation efforts with Japan Korea Spain Switzerland Sweden and others would be delayed Whatever remaining influence we have over European programs would be further impaired While we might restrict somewhat plutonium flows in the short term 5-10 years we would lose the opportunity to exact concessions to improve the nonproliferation regime in return for easing exercise of our consent rights Further this option would have little impact on the legitimacy of breeder and advanced reactor in advanced countries this has been acknowledged by INFCE and would continue in Europe Japan and the U S Alternative Approaches In considering how we might exercise our consent rights more predictably we rejected two alternatives the Australian approach of permitting programmatic approvals of re- processing and or use of the derived material for any specified non-explosive peaceful purpose thermal recycle and waste dis- posal as well as breeders and advanced reactors and ii the Yugoslav approach with which the UK and Canada have shown some sympathy of moving towards a phaseout of bilateral controls in favor of an international code of nuclear trade and international pluto- nium storage While would reduce remaining tensions with allies and ii would reduce discriminatory aspects of current practice and the options described below they both involve excessive proliferation risks There follows an option on limited generic and program DECLASSIFIED Authorityi b n12 matic agreements in certain cases This option assumes negotia tors would seek the best possible nonproliferation regime in return for greater predictability regarding consent rights There are two areas of difference among your advisors1 These are explained following the option Option 2 Case-by case consideration of reprocessing or plutonium use requests as in Option 1 but we would offer advance understand- ings consistent with the NNPA covering certain limited cate- gories of requests Generic agreement to transfers for reprocessing in France or the UK under contracts predating the April 1977 policy including Spain Switzerland Sweden and Japan and Programmatic agreement to reprocessing and plutonium use in specified countries when required to meet the scheduled lifetime plutonium needs of specifically identified breeder and advanced reactor programs This means in the case of agreements covering the next ten years program- matic agreement to reprocessing and plutonium use in EURATOM and Japan The proposal would agree to As used herein generic agreement envisages agreement in principle in accordance with an agreed schedule to a series of transfers of specified US origin spent fuel for reprocessing in an agreed facility in another country such agreement would not cover use of the derived plutonium over which we would retain a veto Programmatic agreement envisages agreement in principle in accordance with an agreed schedule to a series of shipments of US-origin spent fuel for reprocessing in an agreed facility either in country or in another country and or in accordance with an agreed schedule 222 of the derived plutonium in specified breeder and advanced reactors which are part of an agreed program In both cases the schedules would be subject to periodic review and adjustment permits MB-10's would then be routinely granted in accord- ance with the agreement in principle and schedule except where changed circumstances demonstrably posed a significant proliferation risk DECLASSIFIED Authorityw 13 - use of U S plutonium in cases where other plutonium is not reasonably available Advantages Predictable ground rules along these lines covering repro- cessing and use of plutonium would facilitate negotiations with EURATOM and Japan on an improved nonproliferation regime This approach has a chance of obtaining limits on European plutonium use and thus achieving a greater degree of equality It would show sensitivity to allied energy security needs and would help remove an irritant in our relations This option is consistent with present U S domestic policy and law It strongly discourages for a limited time thermal recycle which was one of the economic justifications for our own commercial reprocessing It supports breeder and advanced reactor in advanced industrialized countries only It leaves decisions on breeder and advanced reactor commercializa- tion to national governments this is consistent with your April 1977 statement This option would cover for ten years most of the physical needs of existing EURATOM and Japanese programs on a predictable basis By limiting the amount of spent fuel to be reprocessed it could reduce incentives to build new reprocessing capability and to produce surplus plutonium Disadvantages This option could be read abroad as relaxation of U S resistance to movement toward plutonium cycles It may be diffi- cult to provide a clear breakpoint between EurOpe and Japan and developing countries there could thus be pressures to extend the coverage of generic or programmatic approvals It does not address distinctions between and commercialization Once presented it would be hard to retreat from the option if we do not achieve meaningful concessions for improving the In practice this would be worked out in negotiations with the country concerned we would seek to ensure that available non- US-origin plutonium was used first we would try to achieve this within reasonable commercial and economic parameters and periodically review foreign programs to determine actual requirements for U S plutonium taking into account as fully as possible other plutonium availability SEGRET DECLASSIFIED Aumorityj bi SEE 14 - nonproliferation regime Some EURATOM countries might resist an effort to curtail thermal recycle U S industry could try to use the option to press for commercial reprocessing and breeder commercialization in this country It could be intro- duced as an election campaign issue Sub-Oetions There are two different ways to implement Option 2 as it applies to breeder and advanced reactor programs and ii transfers for reprocessing under post 1977 contracts Sub-Option 2 a ii Grandfather breeder and advanced reactor pro- grams substantiallv committed to_prior to April 197 only in EURATOM and Japan without deciding at this point either in favor of or against future commit- ments to permit US-origin fuel to be used in addi- tional programs post 197 programs would be addressed on their merits at a later time and do not indicate willingness to consider generic agreements to transfers for reprocessing under post 1977 contracts Sub-Option 2 b 1 ii An evolutionary approach which would provide for agreement to programs substantially committed to in the next ten years in countries where there is no demonstrable proliferation risk which have undertaken NPT or equivalent obligations and have or participate in a large electrical grid and an advanced nuclear program only western European countries and Japan currently fit this definition but without commit- ment this approach does not foreclose eligibility of additional countries in future and indicate willingness to consider generic agreements with countries with good nonproliferation credentials and no spent fuel storage alternatives or where it is in our nonproliferation interest to remove spent fuel because of specific proliferation concerns the F75weden is a case where we might wish to approve transfer for reprocessing but where there is no interest in plutonium return The Swedish plutonium could well be absorbed in the approved breeder program of another state 3M DECLASSIFIED Authority -15- request is for general guidance to permit flexi- bility in negotiations concrete proposals would be referred for specific approval Under either sub option the list of programs committed to in the next ten years for which we would initially be prepared to provide plutonium would be essentially the same with One minor possible exception in Japan This exception should be addressed in the course of working out the arrangement with the Japanese Advantages - Sub-Option 2 a This would maintain our 1977 position that additiOnal com- mitments to plutonium cycles are premature and pose proliferation risks But it accommodates as a matter of equity and fairness breeder and advanced reactor RDED programs where substantial commitments had been made prior to adoption of this policy It would draw a clear line against retransfers for repro- cessing for countries with no breeder or other advanced reactor RDED programs Disadvantages This approach would substantially reduce our ability to harmonize our policy with key allies since it leaves open our posture toward their longer-range programs our agreements normally run 30-40 years It would not halt new breeder and advanced reactor in EURATOM Assuming this option delays Japanese programs but does not permit agreement with EURATOM EURATOM will continue its programs and we would be accused by the Japanese and other EuroPeans of discrimination Under this assumption the option would make nuclear cooperation with EURATOM contingent on annual waivers of export criteria under the NNPA It would reduce our ability to obtain nonproliferation improvements such as deferral of thermal recycle and full-scope safeguards for future supply The option could be viewed by countries such as Korea where we have considerable cooperation as discriminatory While it would treat all future breeder and advanced reactor pragrams equally it implicitly favors the most advanced countries and makes no explicit provision for others to be eligible in future Developing countries such as Yugoslavia and Mexico NPT non- aligned leaders could see this as discriminatory and a denial of a comparable benefits to the have-nots It could thus cause problems at the August NPT Review Conference and additional North-South tension I r DEC LASSIFIED Authority 5 3% -16- The Option would not be conducive to working out satis factory new nuclear cooperation arrangements with such key supporters of our non proliferation efforts as Sweden It does not permit us to work out arrangements for taking fuel from countries of specific proliferation concern under circumstances where interim storage in the U S or elsewhere is not available Advantages - Sub-Option 2 b Predictable ground rules for programs committed to over a ten year period would facilitate negotiations with our allies obtain some limits on European plutonium separation and use and achieve greater European Japanese equality The evolutionary approach is publicly defensible on energy eCOnomic and nonproliferation grounds and is less likely to stimulate North South confrontation while limiting plutonium separation and use for a considerable period to a few major countries This option is consistent with present U S domestic nuclear policy and law Disadvantages While this option is less vulnerable to charges of discrimi- nation than other options it may still raise some developing country opposition Developing countries who do not meet the tests could claim they have the same right as more advanced nations to for possible future energy requirements The option opens the door to others joining the plutonium club Although there is a weaker case for accelerating breeder RDED in the U S U S industry could use the Option to argue that we should proceed with commercial reprocessing and early breeder deployment in this country On the other hand the option could be criticized by some domestic critics as backing away from policies announced at the outset of your Administration Presidential Decision Approved Option 1 Codify current practice The following support this option L DECLASSHHED Authorityjf SECRET - 17 Option 2 Accommodate breeder and advanced reactor programs in EURATOM and Japan The following support this Option Sub-Option 2 a Grandfather'approach The following support this alternative Sub-Option 2 b Evolutionary approach The following support this alternative C International Plutonium Storage Most of the key countries including Australia Canada Brazil the UK France Netherlands and Sweden want to establish an IPS for excess plutonium in the next year or two by implement ing that part of the IAEA statute providing for IPS There is however as yet no consensus on the scope and content of the regime A few countries FRG Argentina worry it could be too restrictive An IAEA Expert Group with participation by the representatives of 24 countries including the 0 5 hopes to produce in 1981 a draft charter for political-level consideration See Annex for details The FRG has recently indicated it would prefer to avoid an IPS unless it provides certainty of return of German plutonium from any this could reflect their negative attitude towards French desires to use IPS as a part of the mechanism for con- trolling plutonium in EURATOM while not subjecting all French civil plutonium to the scheme DECLASSIFIED Authority 5% 3 55 13 PD-B which predates the IAEA Expert GrouQJdirected that we should discourage the IPS concept because it could by reducing nonproliferation objections to plutonium cycles catalyze them On the other hand the NNPA instructs us to seek international arrangements for the storage of sensitive nuclear materials The primary advantages of an effective IPS would be to reduce national stockpiling of excess plutonium and provide greater international oversight and obligations regarding separated plutonium The principal risk is that IPS could reduce our political ability not legal right to deny plutonium releases for certain purposes or to certain countries But there may be an IPS with or without us An IPS without us but with participation of other key countries would likely be weaker than one with us and would also make it politically more diffi- cult for us to deny plutonium releases sanctioned by others The issue is how should we participate in the IAEA Expert Group so as to steer its discussions in directions that enhance not hurt our nonproliferation objectives Recommendation We should participate actively in the IAEA IPS study and generally seek the best possible IPS from a nonproliferation point of view we should however reserve on our ultimate willingness to participate in any IPS that might be established and make every effort to assure that IPS neither significantly erodes our bilateral controls over US-origin plutonium nor signi- ficantly impacts military uses of U S plutonium Approve Disapprove D Improved Non-Sensitive Supply Assurances--Reinforcing the NPT Regime Prospects for a favorable outcome to the-August 1980 NPT Review Conference could be improved by additional non- sensitive supply benefits longer term fuel licensing low enriched uranium stockpiling and improved technical assistance for countries which accept NPT or equivalent obligations and do not demonstrably pose a significant proliferation risk See Annex for background DECLASSIFIED Authority 5% -19 Because such benefits would be of particular interest to developing country NPT parties initiatives in this area could reduce North South tension regarding nuclear energy develop- ment and mitigate perceived discrimination inherent in agreeing to reprocessing and plutonium use only in certain cases Addi- tional non-sensitive assurances coupled with effective spent fuel storage programs could also make the once through cycle more attractive Finally such assurances could benefit U S industry in a period of industry weakness through reducing foreign perceptions of our unreliability and possibly through increased U S enrichment sales On the other hand longer term licensing would reduce somewhat our ability routinely to use licensing to influence quietly countries' nuclear fuel cycle choices when we judge them to increase weapons capability Such assurances could also make nuclear power marginally more attractive to developing countries This paper offers an initiative only in the area of longer term fuel licensing Initiatives in the areas of low enriched uranium stockpiling and technical assistance will be submitted to you separately following examination of their budgetary implications The issue is do the additional political and fuel assurance benefits of moving toward long term up to life of- reactor licensing outweigh the reduction of supplier leverage this would entail Recommendation Lengthen the period of licensing longer than five years for LEU power reactor fuel for NPT or equivalent countries which do not demonstrably pose a proliferation risk There are a variety of potential implementing options all of which have the objective of providing increased fuel assurance to countries in good nonproliferation standing What we seek is authority in these cases to be able to provide up to life-of-reactor assurances While it is unclear whether the NRC will agree to this approach there are indications that Congressman Bingham and Senator Glenn believe something along these lines would be help- ful If you approve this approach the Executive Branch will work with the NRC on measures we could announce at the NPT Review Conference Approve Disapprove low enriched uranium DECLASSIFIED Authority SEERET -20 IV DOMESTIC AND CONGRESSIONAL IMPLICATIONS A Implications for Domestic Programs Option 2 on reprocessing and plutonium use recognizes and accommodates breeder and advanced reactor programs in advanced nations with good nonproliferation credentials We assume however that the future pace of the U S breeder development program should continue to be dictated by our own economic energy resource environmental and nonproliferation considerations Given the continued decline in the projected demand for electric power and our large domestic uranium reserves we do not now foresee basic changes in the pace of our breeder program The proposed options are consistent with con- tinued opposition to construction of the Clinch River Breeder Reactor as uneconomic technically obsolete and unnecessary to timely development of our breeder option They are also consis- tent with our view that given net disadvantages of thermal recycle the Barnwell reprocessing facility is not needed The U S energy situation is different from that of Europe and Japan Our mix of natural resources including indigenous natural uranium permits more flexibility in choos- ing a long term energy stragegy It is for this reason that Europe and Japan have adopted a relatively more aggressive posture regarding breeders and advanced reactors and related reprocessing While Europe and Japan could rely for some years on conventional nuclear power they have chosen to pursue breeder and advanced reactor options to enhance their energy security You should be aware nonetheless that the Scientists and Engineers for Secure Energy including seven Nobel laureates have in a recent letter asked you in light of INFCE to urge the NRC to proceed with and conclude the Generic Environ mental Statement on Mixed Oxide Fuels GESMO to assess wide scale use of plutonium in the U S Representative Dan Marriott R Utah has recently introduced a bill which would force the NRC to reopen this was defeated in committee by one vote but will likely be re-introduced GESMO and related plutonium licensing proceedings were suspended in 1977 for the duration of INFCE because of their possible adverse impact on our policy of setting a nonproliferau tion example by deferring indefinitely in the U S commercial reprocessing and thermal recycle This is not the time or place to take on this issue but some believe a more accommodating posture toward breeder and advanced reactor programs abroad 5% DECLASSIFIED Au io tym signs -21- could increase domestic pressures to reopen GESMO If GESMO were to be reopened it could be interpreted by other countries as reconsideration of our nonproliferation objections to thermal recycle All of the alternate planning assumptions maintain our opposition to thermal recycle All agree that we should continue to oppose reopening the GESMO Barnwell and thermal recycle Finally a principal thrust of the planning assumptions is improving U S reliability as a supplier This could enhance the U S commercial position and curtail the erosion in our share of nuclear markets B Congressional Reactions We have consulted with members and staff in the House and Senate in particular Congressmen Zablocki Bingham and Fugue and Senators Glenn Javits and Percy No one argued necessarily for standing pat on our present practices Nor was there opposi- tion as such to accommodating specified breeder and advanced reactor RDED programs in Europe and Japan although there may well be differences of view as to the nonproliferation improve- ments we should seek in return and the extent and precise terms of such an accommodation With White House concurrence we exposed Congressional members and staff to the details of Option 2 and Sub-Option there were no objections of principle The spectrum of views ranged from the cautious to those who thought a change was long overdue All agree that our leverage is declining to some extent and that we need to move to a more predictable approach to reprocessing and plutonium use in Europe and Japan Congressman Bingham and Senator Glenn both want to be sure that we obtain the best possible bargain in terms of improving the nonprolifera- tion regime Senator Glenn believes a rigorous IAEA inter- national plutonium storage regime for excess plutonium could be an important element of what he had in mind in drafting Section 104 of the NNPA which urges you to seek international approaches to the fuel cycle Congressmen Zablocki and Bingham hope for parallel progress on dealing with problem countries and develop- ment of improvements in light water reactor efficiencies and possibly breeder developments such as the fast mixed spectrum reactor Congressman Bingham thought providing Europe and Japan greater predictability on reprocessing and plutonium use was much less sensitive than for example granting the pending licenses DECLASSIFIED Authority -22- for Tarapur Congressman Fuqua believes that harmonization of policies with the Europeans and Japanese on reprocessing and plutonium use would be desirable and could bring us significant nonproliferation benefits Our staff level consultations indicate that many on the Senate Foreign Relations Committee believe we should stop trying to dictate European and Japanese fuel cycle choices Attachments Annex A Annex Annex Annex DECLASSIFIED mm - aw WHERE WE STAN Net assessments of the success of our nonproliferation poliCies are difficult We have had some successes but also some reversals and resistance On the positive side we have gained broad not universal recoqnition or agreement on - major suppliers embargoing for now new exports of repro- cessing technologies - substitution of low for highly enriched uranium in many research reactors - the marginal economics of plutonium recycle in light water reactors thermal recycle and safe nuclear waste management not requiring reprocessing the uncertainty of breeder economics and breeder options' making sense now only in highly industrialized states - reprocessing plants being limited in number and designed to facilitate safeguards - new enrichment plants generally avoiding production of weapons usable material and general recognitiion of the need for improved safeguards and physical security of nuclear material including an interna- tional physical security convention We have also concluded agreements containing the new NNPA-required controls with Australia the IAEA Indonesia Norway Peru and Canada In addition recent trends in nuclear power development reinforce our arguments against early or widespread commitments to plutonium separation and use The steady decline in projections of nuclear power growth and electricity demand and increased estimates of prospective uranium reserves strengthen the economic case for the once through strategy Similarly increased estimated capital costs of breeders as compared to conventional reactors and improve- ments in light water reactors are delaying breeder deployment even in France the nation most nearly committed to breeders Following political objections to the construction of a large reprocessing facility in the FRG the earlier assumption of reprocessing as a precondition to waste di5posal is no longer beyond question Political DECLASSIFIED Authority obstacles to new reprocessing facilities have caused major adjust- ments in the German program and similar obstacles could possibly arise elsewhere Chancellor Schmidt believes the PEG must continue breeder it is premature to decide on commercialization 0n the negative side - countries such as France Japan the UK and the USSR are committed to breeder and advanced reactor development which they judge vital to their energy security notwith- standing our disclaimers they view our policies as a threat to their programs the UK France and Japan still believe in the desirability of reprocessing as a precursor to waste disposal - Japan is determined to proceed with a new 1200 ton reprocessing plant although timing is uncertain and large new light water reprocessing plants in France and the UK are in part being financed through commitments to reprocess fuels for Japan and others - within the last year the Germans have begun to consider addi- tional reprocessing unfortunately with emphasis on small dispersed facilities - several nations will not relinguish the thermal recycle option - several of the major countries EURATOM Japan Korea Spain are not moving very fast on renegotiating their agreements with us - we have not achieved acceptance of full scope safeguards in Israel India South Africa and Argentina and support for safeguards has not been translated into real commitments of resources necessary to make them effective - INFCE did not produce technological fixes to eliminate plutonium and - several countries continue to export sensitive nuclear tech- nology to countries of proliferation concern EURATOM countries and Japan share our worries about problem countries like Pakistan India Iraq and South Africak but they view our nonproliferation policies as counterproductively harsh when they impact on countries like themselves who do not pose proliferation risks They continue to attach greater urgency than we to movement towards plutonium cycles Also many nations resent the NNPA surveys DECLASSIFIED Authority m1 of our Embassies suggest that most cooperating countries no longer view the U S as a reliable supplier In INFCE unilateral changes in supplier state policies were strongly criticized as was the lack of predictability in the exercize of supplier states' control and retransfer rights Japan is pressing us to move away from case-by-case approvals and provide long-range predictability as to how we would exercize our rights While Australia and Canada generally share our views on export policies Australia appears willing in current negotiations with EURATOM to go further than all the options in this paper to assure Europe that supplier rights will be exercised in a more predictable manner We also face moves in the IAEA and UN designed to constrain supplier flexibility YugoslaVia has successfully promoted a UNGA resolution calling for a Conference on Nuclear Trade by 1983 and the IAEA is considering an initiative to develop an international code on nuclear trade Finally there will be criticism at the NPT Review Conference of suppliers' not living up to their commitments to provide for the fullest possible cooperation with NPT parties in the peaceful uses of nuclear energy Many NPT parties developed and developing see little benefit in NPT Some complain that large non-NPT parties India are treated better than smaller NPT parties While we have since 1975 sought supplier agreement to make NPT or equivalent full scope safeguards a condition of major new supply commitments thus providing major incentive to accept NPT type obligations - France and Germany have resisted this approach There are indications that France is now considering moving in this direction but France has intimated its attitude on this issue could be influenced by our attitude towards greater predictability in the exercise of our consent rights Germany will not move in the absence of France DECLASSIFIED Authority 5'4 3 55 - ANNEX EURATOM and Japanese Reprocessing and Breeder and Advanced Reactor Programs and Plutonium Supply_ nd Demand France the UK and Japan all have ambitious reprocessing and breeder and advanced reactor plans and programs These programs have slipped substantially in recent years due to diffi culties in making the technologies work and public acceptance problems and are not likely to proceed on schedule in the future but the countries concerned remain committed to them Reprocessing capacity and more than 15 tonnes of separated plutonium already exist in these countries 2-3 tonnes of it in non-nuclear weapon states The French program is the most ambitious Their current civilian light water reactor reprocessing facility has been operating since 1972 they plan considerable additional light water reactor reprocessing capacity in the late 19805 and a major fast breeder reprocessing facility in the 90s This re- processing capacity is intended to meet French breeder program requirements and offer reprocessing services to Germany Belgium Sweden Switzerland Spain Italy and Japan The French Phenix breeder program has one demonstration reactor Phenix in operation and plans operation of four large prototype reactors by the mid 905 The FRG has a pilot light water reactor fuel reprocessing plant in Operation and is thinking of a larcer scale plant the firs to begin ooeration in the early 905 It is currently working on a pilot breeder reactor to begin operation in 1985 it will decide at that time whether to proceed with a large breeder demonstration in the mid 90s Projections as to the plutonium supply and demand relevant to these programs depends on the assumptions as to CB the timing and actua throughput of existing and new reprocessing capacity and ii the timing of actual operation of breeder and advanced reactors Largely to meet legal requirements on waste disposition as opposed to specific plutonium needs unsure DECLASSIFIED Amhariryjli b - 5E1- -- If as has been the case in the past delays in con- struction of commercial light water reprocessing plants continue and when constructed they operate at less than a third of design capacity there would be little or no surplus of plutonium over and above breeder and advanced reactor needs through 2000 -- If on the other hand reprocessing and breeder and advanced reactor programs were to proceed exactly in accordance with plan separated fissile plutonium in EURATOM and Japan could exceed breeder and advanced reactor needs by as much as 100 metric tons in 1990 and over 350 metric tons in 2000 There is thus great uncertainty United Reprocessors which had originally been designed to control excess capacity in Europe from a commercial point of view has become defunct its European members believe that for the foreseeable future spent fuel arisings will greatly exceed reprocessing capacity 0n the other hand existing and planned breeder reprocessing facilities roughly match after-1990 breeder program needs in both EURATOM and Japan excepting needs for initial cores which could be supplied by one light wear reprocessing plant of about half the capacity of the current French plant One possible intermediate scenario indicates that until 1990 there is a rough balance between Japanese reprocessing and likely returns of plutonium from Europe and plutonium demand for its breeder and advanced reactor programs There could be a roughly 20 tonne excess in Europe all in the UK and France in the same period From 1990 to 2000 plutonium supply could sub- stantially outstrip demand roughly 100 tonnes in Europe and 60 tonnes in Japan if new light water reactor spent fuel reprocessing generally comes on stream as planned and operates after a 4- 5 year start-up period at or near design capacity If this happens pressures to use excess plutonium in thermal recycle would be substantial The only existing commercial plant 2 in France has been operating at less than 25 percent of capacity since 1972 the Tokai pilot plant in Japan has so far been shut down more than it has operated The cumulative throughput of the Eurochemic plant in gelgium over a seven year period now shut down was less than twice itsannual total capacity the Windscale facility in the UK shut down after reprocessing 100 MTU of_high burn-up fuel and the_on1y commercial reprocessing plant ever operated in the US was shut down after 5% years in which it reprocessed less high burn-up fuel than it was designed to handle in one year DECLASSHHED Aumoriwm seeme- Most of the projected EURATOM excess supply in the year 2000 is attributable to two plants in France under con struction and one in the UK on which licensing is comr pleted delay of either of these plants until after 2000 or delay of both until l995 would reduce the potential European excess to the year 2000 by over 75 percent - Most of the Japanese excess capacity in the year 2000 is attributable to the planned commercial light water repro- cessing plant corporation formed and site selection beginning deferral of this plant's operation until 2000 would bring Japanese supply more in balance with their breeder and advanced reactor demand until that time but keep Japan dependent on existing contracts with Europe for reprocessing services The U S lacks veto rights over reprocessing of EURATOM spent fuels within EURATOM We do however control essentially all spent fuel presently being stored in Japan Even if we are successful in negotiating reprocessing rights over US-origin light water reactor spent fuel exported in future to EURATOM and are able to maintain present controls over materials already exported to Japan U S control will cover less than 50 percent by the year 2000 This is due in large part to projected new non US enrichment capacity If no new controls are negotiated with EURATOM and Japan U S controls will decrease to less than 30 percent of total spent fuel in EURATOM and Japan by the year 2000 Further roughly 65 percent of total annual reprocessing capacity projected by 2000 is attributable to plants in EURATOM and it is unlikely that EURATOM countries will give us controls over plants where construction or front-end financing has begun and or licensing been completed On the other hand if we were to seriously limit transfers of 0 5 controlled spent fuel from Japan to France and the UK for reprocessing to meet only the immediate plutonium needs of current programs we could conceivably delay additional European reprocessing capacity in France and the UK But such action on our part could cause the Japanese major financial penalties The Japanese have contracted with France and the UK to pay 27 percent of the construction costs of the new reprocessing plants roughly $335 million in 1970 dollars and $2 2 billion in 1970 dollars for reprocessing charges $110 million of which was paid at the time the contract was signed These commitments have probably now doubled The Japanese have in addition already paid the French 5100-200 million in front-end construction costs Finally the roughly 5600 metric tons of Japanese spent fuel planned to be reprocessed before 2000 nearly all of which is of U S origin represents only 24 percent of these European plants designed throughput The effect of limiting the Japanese transfers to these additional European reprocessing plants is thus very uncertain DECLASSIFIED Aumo w ANNEX International Plutonium Storage IPS The IAEA Statute to which the U S is a party states that in order to prevent national stockpiling of plutonium provision should be made for the deposit with the IAEA of excess plutonium not being used for specified peaceful purposes under safeguards This provision has never been implemented but most of the key countries including Australia Canada Brazil the UK France the Netherlands and Sweden want to implement it in the next few years Establishment of IPS is a precondition for shipment of fuel from URENCO the UK ERG Dutch group to Brazil A few countries FRO Argentina worry that IPS could be too restrictive An IAEA Expert Group with representatives from 24 countries has been studying IPS since 1978 it hopes in 1981 to forward a draft IPS charter to the IAEA Director General who will refer it to the IAEA Board of Governors and member states for further action U S participation in the study has made it clear that IPS should not be used to legitimize unjustified reprocessing and that a 0 8 decision to support IPS cannot be made until after it becomes clearer that an effective regime can be worked out There r however may well be an IPS with or without us While PD-B discouraged IPS Sec 104 of the NNPA instructs us to seek inter alia international arrangements for the storage of special nuclear material A separate provision called for comparable efforts with respect to spent fuel storage The potential advantages of an effective IPS are -- reduction of national stockpiling of excess plutonium -- greater international oversightof separated plutonium through permitting plutonium release only for specified immediate end uses and international verification of such uses Existing IAEA safeguards are not designed to ensure dedication to particular end uses -- some increases in the political disincentive to IPS when IPS conditions are breached and SEERET DECLASSIFIED Aumo w -- a new mechanism for imposing as a condition of release from international storage a guarantee of non explosive use and enhanced safeguards and physical protection One key problem with IPS is the risk that IPS release provisions could be used to diminish bilateral control rights We must assure that IPS will not make it difficult to exercise bilateral controls both over the and uses to which US-origin plutonium is put not thermal recycle and the countries in which it would be used not countries such as Libya There will be pressures in any IPS negotiation to circumscribe national controls and an agreed international release mechanism will make it more difficult politically to deny releases for certain purposes or in certain countries even thought we preserve the legal right to do so On the other hand there may be an IPS subscribedtokymajor suppliers and it may be politically difficult to influence an international release permitted by say France or the UK if we stay outside IPS Other risks include 1 the possibility of IPS being used to legalize premature reprocessing or MOX fuel fabrication activities 2 IPS international storage sites becoming too widespread or being located in regions that pose proliferation risks and 3 pressures to apply IPS to military plutonium in nuclear weapon states DECLASSIFIED Authori ym ANNEX IMPROVED NON-SENSITIVE SUPPLY ASSURANCES REINFORCING THE NPT REGIME Background As noted in the paper additional measures are needed with respect to supply assurances and enhanced technical assistance These measures would serve three ends 1 They could improve prospects for a favorable outcome to the NPT Review Conference by reducing some of the acrimony on Article IV A number of countries -- both developing and developed -- believe that by denying access to sensitive technology and changing the conditions of supply regarding non-sensitive materials and equipment we have failed to live up to our obligations under this Article 2 If additional supply benefits are restricted to NPT parties it could enhance prospects for further adherents and reduce the likelihood of withdrawals from the Treaty Except for a few minor IAEA technical assistance programs and new supply assurance measures taken within the past few months see below the U S provides no concrete benefits for being an NPT party which are not available to other states as well 3 Improved reliability of supply should be of direct assistance to U S commerce and industry While the primary reasons for a reduction in our nuclear exports are the declining demand for reactors abroad and the fact that U S firms through their licensing arrangements built their own foreign competition some loss of sales of equipment and components mav have been due to foreign perceptions of our unreliability Supply Assurance Measures Taken to Date In the past twelve months a number of measures have been taken to improve the nuclear export licensing process eliminate unnecessary reviews enhance our reputation of reliability reduce administrative burdens and place most of our residual emphasis on export measures dealing with states of real proliferation concern Several of these steps are significant The U S has announced that all benefits available to NPT parties would also be available to full parties to the Treaty of Tlatelolco who have concluded an appropriate safeguards agreement with the IAEA We did so because Tlatelolco parties with safeguards agreementshave accepted all of the obligations of NPT parties For the moment the practical consequence of this announcement is limited to Colombia DECLASSIFIED Authority 1 In the past we only licensed individual reloads of power reactor fuel requiring a country to obtain another license roughly' each year Recently we announced that we were willing to license up to five reloads in time periods up to ten years to all power reactors located in NPT parties with whom we have a nuclear relationship 2 We have approved a general license for components for all US-supplied reactors and a substantial number of others located in NPT parties This eliminated from licensing approxi mately $100 million per year in components which is one of our most important nuclear exports 3 In the context of the Export Disincentives Study the President decided to eliminate the requirement of an for retransfer in those cases where the retransfer was foreseen on the face of the NRC license 4 In the same study the President also directed that for those dual-purpose items which we control for non-proliferation purposes including over a billion dollars in computer exports the licensing process should be adjusted to focus primarily on states of proliferation concern and eliminate licensing reviews for others This has been accomplished S The President has a proposal under consideration in context of the NRC reorganization which will eliminate the need for Presidential review for approximately 75 per cent of the high enriched uranium the 0 5 supplies This has been a sore point to our allies Need for Additional Measures in the Fuel Assurance Area A recommendation for a further lengtheninc of the period of validity for low enriched uranium fuel licenses is made in this paper If this measure is approved a suitable announcement will be prepared for the NPT Review Conference We shall also be coming forward to you shortly with initiatives on low enriched uranium stockpiling and technical assistance Because of its special status and other problems we have not extended this liberalization to Taiwan Any accommodation for Taiwan needs to be given separate consideration                     National Security Archive    Suite 701  Gelman Library  The George Washington University    2130 H Street  NW  Washington  D C 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