Authori 7515984 9 DEPARTMENT OF STATE ACTION MEMORANDUM 2 - SIS 0A To The Secretary Q L ydu Through The Deputy Secretary From EA - Philip C Habib g PM George S Vest - Winston Lord w Approact South Korea on Reprocessing On July 2 Mr Ingersoll forwarded to you at the White House a memorandum Tab 1 recommending that we ask the ROKG not to proceed with its planned national plutonium reprocessing plant and that we offer support instead for Korean participation in a multilateral reprocessing venture We know that you reviewed and did not accept the recommenda- tion However we have examined the alternatives described in that memo and continue to see pressing considerations which make it for you to consider our recommendation You may have felt that our proposed approach entailed applying undue pressure on an already uncertain ally As summarized below however we believe that resolution of the nuclear issue involved is a key factor in ensuring both the stability of the region and our relationship with the ROK We have redrafted the recommended instruction_cable Tab 3 to reflect these considerations more faithfully -- South Korea has launched an ambitious nuclear weapons program in which a key element is the acquisition of a French reprocessing plant ROK acquisition of this plant -combined with continued discrepancy between ROKG assurances and Korean nuclear weapons interests could seriously affect our ability to sustain the rationale and domestic support for our security relationship with Korea -- A Korean national reprocessing plant for which it has no economic need would make it highly difficult if not impos- sible for the USG to obtain Congressional approval of nuclear reactor credits At a minimum we should warn the ROKG of this prospect The Chairman of the cognizant House Banking subcom mittee has informed the Ex-Im Bank Tab 2 that unless the ROKG foregoes such a plant we will likely find it most in- advisable to proceed with the financing of $249 million in credits for a second Korean nuclear power reactor The Senate Banking Committee has expressed similar concerns 2 3 DECLASSIFIED Authority MID GHQ 590 2 Such a plant would be highly unsettling to Japan and could strengthen the hand of those favoring a nuclear option The PRC and North Korea could not ignore ROK efforts to secure a nuclear option -- In the course of consultations among nuclear sup- pliers in London French officials have indicated that they would not be disturbed if the Koreans decide to cancel pro- vided they receive reasonable financial compensation The Canadians have broached their reprocessing concerns with the ROKG and strongly support a parallel US approach In the absence of prompt US action however France will submit a safeguards agreement covering the plant to the IAEA immedi ately prior to the next suppliers' meeting in September We judge the prospects for Korean acceptance of our position to remain reaSOnably good The ROKG recognizes the economic stakes involved and acquiesced in recent Cana- dian and US demarches on the NPT and control over reprocess- ing of US-supplied fuel In any event we expect the ROK to give greater priority at present to its civil nuclear pro- gram than to reprocessing We do not believe that ROKG cancellation costs conceivably a few million dollars would be a major issue given Canadian and US credits massively dwarfing that amount If the ROKG asked us for direct com pensation which we do not expect then we would deflect them pointing to our overall economic relationship We cannot rule out the possibility that President Park will refuse to cancel the Korean reprocessing contract In that event we would have at least warned the ROKG in ad vance of the immediate consequences for its peaceful nuclear cooperation with the US which we will have done all we could to protect If the ROKG agrees to cancel we are prepared to discuss US cooperation in meeting peaceful ROK reprocessing needs and to assist their nuclear power programs Dick Sneider is here on consultations and badly needs instructions on the reprocessing question before he returns to Seoul in mid-August He supports the approach we have described above as does Hal Sonnenfeldt and CBS Recommendation That you approve our revised instruction cable Tab 3 Approve Disapprove ii-1H - I- 1 - DECIASSIFI Authority MUD qq'q 590 Attachments Tab 1 - Memorandum of July 2 1975 Tab 2 Rees Letter of June 24 1975 transmitted by Ex-Im to State on August 4 1975 Tab 3 - Revised Instruction Cable to Embassy Seoul AL at A 0 r Drafted x27xxlz8 4 75 Clearances - Mr Kelly CBS Mr Beng lsdorfva' cc NSC - Dr Elliott Hr Lodal DECLASSIFIED Authority END 511% $30 DEPARTMENT OF STATE WASHINGTON July 2 1975 DISSEM 70 THE ASSISTANT TO THE PRESIDENT hon NATIONAL SECURITY AFFAIRS Subject Approach to South Korea on Reprocessing I am forwarding for NSC clearance and your consideration the attached action memorandum Tab 1 which reflects views received from the interested agencies and has my concurrence It requests approval to transmit an instruction cable Tab 2 to Embassy Seoul on ROK reprocessing plans which State ACDA Defense ERDA and CIA have cleared through the Non Proliferation Backstopping Committee The memorandum responds to Mr Lodal s request of June 30 for a paper considering various approaches to the ROK on this problem Since the proposed approach to the ROKG is highly time sensitive for both diplomatic and Congressional reasons we be- lieve that both the memorandum and the instruction 'cable should be considered at the earliest possible time Robert S Inge soll Acting Secre ary DISSEM - I 2 3 55 1195 zaua - 33 EEqu Ixiatvsn - H DECLASSHHED - Authority m0 DISSEM ACTION MEMORANDUM Approach to South Korea on Reprocessing Background The South Korean Government has been negotiating to purchase a small pilot scale reprocessing plant from France which would give them direct access to plutonium that could be used in nuclear weapons Our intelligence indicates strongly that the Koreans have decided to develop a nuclear capability as quickly as possible while continuing to give paper assurances internationally and specifically to its nuclear suppliers Canada the U S and France of its non-nuclear intentions Perhaps more than any other likely near-term case of potential proliferation South Korea's acquisition of nuclear weapons would be extremely dangerous and directly damaging to important U S interests As recognized in the Korean nuclear policy cable approved at the White House in March Tab 2 these effects would be felt even if Korea were merely to hover at the nuclear threshold a prospect which has become more tangible as a result of President Park's recent press statement that Korea would exercise its nuclear option if the U S removed its nuclear umbrella If Korea has direct access to separated plutonium it will eventually be widely assumed that she either has nuclear weapons or could acquire them in a short interval No special safeguards short of a complete prohibition on reprocessing and storage of plutonium in South Korea are likely to provide adequate protection against the most troublesome contingency already mentioned in internal ROKG discussions in which South Korea abrogates some or all of her safeguards agreements including those in- herent in the NPT which she ratified in May Reprocessing will not be necessary for the South Korean nuclear fuel economy for the foreseeable future If at some time it should become necessary it could be provided more safely and economically through regional plants or supplier services Of much greater economic importance are the power reactors for which the South sscagp aonxs NOFORu cofbrornas nIser - recs 1 2 3 mamanmms 533 2 TITS -- DECLASSHHED Authority Mm Cl F l 590 DISSEM 2 Korean Government is currently negotiating with the United States and Canada A request for an Export- Import Bank loan of $132 million and an additional $117 million of credits guarantees to finance South Korea's purchase of a second U S reactor KORI II is now before Congress We believe this loan and the sale of the U S reactor would be beneficial to South Korea's economy and could also be arranged helpful to our non proliferation objec tives Exim Bank President Casey has obtained Con- gressional agreement to postpone hearings on the loan request pending notification by the Executive Branch that we are satisfied with the non-proliferation arrangements relating to the recycling and use of spent fuel in South Korea Present indications are that we will be unable to make the'loan unless we can give the Congress some assurance that South Korea has cancelled its plans for a national reprocessing plant Attitudes of Canada and France Pursuant to the March policy guidance we have spoken to the Canadians in the context of general nuclear export policy discussions who have indicated that the ROK would need to receive Canadian consent before reprocessing of spent fuel from reactors sold by Canada The Canadians indicated serious reservations about any in-country reprocessing and undertook to co- ordinate future Korean nuclear assistance policy with us We have also spoken to the French prior to the recent-suppliers meeting in London and exPlained that we were considering an approach to the ROKG to dis courage its acquisition of a reprocessing plant from France Despite the relatively advanced status of the arrangements the French understood our concerns they indicated that the reprocessing sale was of little commercial interest and that they would have no objection to our requesting Korean cancellation of the deal provided the French firm is reimbursed for termination costs Preliminary intelligence in dicates that ROKG atomic energy officials would be prepared to absorb such costs given their stake in expanding Korea's nuclear power program as quickly as SBCRETKNODIS NOFORN CONTROLLED DISSEM him I I Authority DISSEM possible through Canadian and U S assistance Approach to Korea In the context of ongoing consultations with ROKG atomic energy officials we have recently reminded them of the provision in our Agreement for Cooperation which we understand wives us a veto over reprocessing of spent fuel fr-1 U S reactors supplied to South Korea We have regue -ed their confirmation of this understand ing and in response to their expression of interest have told them that we would also like to hold further discussions with them on the broader question of re- processing in general After receiving confirmation of our interpretation of the Agreement we would propose to recommend that the Nuclear Regulatory Commission issue the necessary export license for the fuel already contracted and due to be delivered in August for the KORI I nuclear power reactor Thus far the Koreans have indicated significant flexibility in their reaponse to Canadian concerns on non proliferation and to our preliminary approaches on the reprocessing question On the basis of both diplomatic and intelligence reports at hand we believe that there is a good possibility that the ROK can be influenced to abandon its present plans for a national reprocessing capability The ROK might participate_in a regional facility as described in our earlier message to Ambassador Sneider Tab 3 Such a plant which would be preferably located outside Korea could meet their future reprocessing needs both safely and eco nomically Proposed Course of Action On the basis of this apparent Korean receptivity and the willingness of the other nuclear suppliers Canada and France to coordinate their actions with us our consensus is that the best approach at this stage is a relatively limited one roughly along the lines proposed in our earlier message Tab 3 We would 1 state our concern about Korean national reprocessing plans and point out that such a develop ment could jeopardize U S nuclear assistance DISSEM Authority M590 DISSEM -4- particularly the pending Exim loan for the KORI II reactor 2 ask the ROKG not to proceed with its planned pilot reprocessing plant but 3 offer support for the idea of ROK participation in a multinational regional reprocessing plant for East Asia At this stage the approach would not need to be more specific about what leverage we would be prepared to exercise or about our expectation that we would be satisfied with a multinational plant only if located outside of Korea we have considered both weaker and stronger alternatives to the recommended approach The weaker alternative would be to make no further approach to the ROKG but rely on our rights to Veto the reprocessing of spent fuel from U S re actors only However this'would not stop the construction of the French reprocessing plant and preclude the ROK from eventually finding another source of spent fuel Making no further approach would thus leave our proliferation con cerns open It would also jeopardize the Exim loan and with it the Westinghouse sale given Congressional reactions and it would not meet Canadian French or for that matter Korean expectations A stronger possible approach would be 1 to ask directly for a commitment not to build any national reprocessing plants in the future 2 to state that we will veto the reprocessing of U S fuel and probably oppose the licensing of any further transfers of U S reactors to Korea if such a plant is built and 3 to state that we would also Oppose any multinational plant located in the ROK While some of these stronger approaches or perhaps still stronger measures might need to be made at a later stage we believe they are unnecessary now and could prove counterproductive We have therefore incorporated our preferred course of action in a proposed instruction cable Tab 1 which draws upon the earlier message to Ambassador Sneider and has been re cleared by State DECLASSHHED Authority 5 30 DISSEM ACDA Defense ERDA CIA and the NSC staff In order for this relatively limited approach to have the maximum positive effect on Korea the other suppliers and Congress we believe it should be made as soon as possible After observing its results we will be in a better position to consider future courses of action If our expectations for this approach are borne out we will have significantly complicated Korean acquisition of a nuclear capability At the same time we expect President Park to continue with this program probably on a more covert and delayed basis Based on the results of the present preliminary dialogue on reprocessing an interagency paper on the shape and direction of our overall non proliferation strategy and NSSM 226 the interagency review of our policy in Korea we will later want to recommend for your consideration alternative ways of addressing these underlying problems Recommendation That you approve the approach outlined above and incorporated in the instruction cable to Ambassador Sneider at Tab 1 Approve Disapprove Attachments Tab 1 - Instruction Cable to Embassy Seoul Tab 2 - Policy Cable State 48673 Tab 3 - Earlier Message State 135500 Elk 5 6 30 75 ext 27771 Concurrences ACDA Dr Ikle 4 Mr Dobbins EA - Mr Zurhellen 51 - Mr Bartholomew PM Mr Vest OES - Mr Bengelsdorf cvr n um Iunn 'r r1 DECLASSIFIED Authority GHQ SQO l I SECRET JKALICKI 7 2 75 X27771 THE SECRETARY ACDA - FCIKLE C-JDOBBINS EA - JOZURHELLEN PM - GVEST OES - HBENGELSDORF JCS - COL NILMOT IMMEDIATE SEOUL PRIORITY PARIS1 TAIPEI1 TOKYO IAEA VIENNA EXDIS E O 11553 TAGS MNUC1 TECH1 FARM KS1 JA1 TH CH SUBJECT ROK NUCLEAR FUEL REPROCESSING PLANS REFS LONDON LONDON STATE 1355nna STATE 133126 SEOUL 5qba 1 AS REPORTED IN REFS A AND 81 BILATERAL TALKS NERE HELD AT LONDON MEETING UITH FRENCH AND CANADIAN REPRESENTATIVES- ATTITUDES OF BOTH COUNTRIES NERE AS FORTH- COMING AS NE HAD THOUGHT POSSIBLE- FRENCH INDICATED NO OBJECTION TO A US EFFORT TO GET THE ROKG TO CANCEL THE RE- PROCESSING DEAL PROVIDED FRENCH COMPANY RECEIVED REIM- BURSEMENT FOR TERMINATION COSTS- CANADIANS INDICATED A GENERALLY COOPERATIVE ATTITUDE REGARDING OUR KOREAN CONCERNS AND AGREED TO CONSULT CLOSELY ON FUTURE STEPS THEY IN- DICATED THAT CANADA IS INSISTING ON REQUIREMENT FOR QUOTE MUTUAL CONSENT UNQUOTE BEFORE REPROCESSING OF SPENT FUEL FROM REACTORS SOLD BY CANADA E SITUATION IN CONGRESS1 AS REPORTED IN REF C1 IS THAT RELEVANT COMMITTEES HAVE AGREED TO POSTPONE HEARINGS ON EXIM BANK LOAN REQUEST FOR KORI II REACTOR ON CONDITION THAT EXIM PRESIDENT CASEY NILL NOTIFY THEM TMENTY-FIVE DAYS PRIOR TO SIGNING AGREEMENT NITH THE ROK THAT EXECUTIVE BRANCH IS SATISFIED NITH NON-PROLIFERATION ARRANGEMENTS '11 I Authority FoRn DS SECRET Ia RELATING TO THE REACTOR AND TO THE USE OF SPENT FUEL IT IS OUR ASSESSMENT THAT PROSPECTS FOR APPROVAL OF THE LOAN MILL BE SMALL UNLESS ROK HAS AGREED NOT TO DEVELOP A NATIONAL REPROCESSING CAPABILITY- NITH SUCH AN ACTION NE UOULD HOPE THAT THE LOAN COULD BE APPROVED- 3 NE BELIEVE THAT IT NOULD NON BE TIMELY TO EXECUTE SECOND PHASE OF APPROACH NITH KOREANS ON REPROCESSING OUTLINED IN REFS AND E- THIS MESSAGE HAS BEEN PREPARED ON ASSUMPTION THAT ROK NILL HAVE ALREADY ACCEPTED OUR INTERPRETATION OF AGREEMENT FOR COOPERATION SINCE REF INDICATES ROKG CONFIRMATION OF US INTERPRETATI0N1 EMBASSY SHOULD EXPRESS APPRECIATION FOR ROKG AIDE MEMOIRE BEFORE USING TALKING POINTS IN PARA AND SPECIFICALLY REQUEST- ING THE ROKG NOT TO PROCEED NITH ITS PLANNED REPROCESSING PLANT ACCORDINGLY YOU SHOULD APPROACH ROKG NITH THE FOLLON- ING REVISED FROM THE OUTLINE IN REF D A THE US HAS BEEN GIVING SERIOUS ATTENTION TO ASPIRATION TO ACQUIRE ITS OUN REPROCESSING CAPABILITY1 STARTING NITH A PILOT FACILITY THAT MIGHT EVOLVE INTO A LARGER-SCALE REGIONAL CAPABILITY ALTHOUGH RECOGNIZING THAT AT SOME FUTURE TIME THE NATIONS IN THE AREA MIGHT HAVE A COMMERCIAL NEED FOR REPROCESSING NE HAVE SERIOUS CONCERNS ABOUT MOVING IN THIS DIRECTION ON ITS ONN B IN PARTICULAR1 ALTHOUGH KOREA HAS NPT1 STEPS TONARD EVEN A PILOT REPROCESSING FACILITY IN KOREA COULD BE DESTABILIZING AND COULD RAISE SERIOUS APPREHENSIONS NHICH COULD IMPAIR NUCLEAR RELATIONSHIPS C THERE ARE NIDESPREAD CONCERNS NITHIN THE EXECUTIVE BRANCH AS NELL AS IN THE CONGRESS ON THE SUBJECT OF REPROCESSING AND STORAGE OF PLUTONIUM FROM SPENT FUEL THAT ARE VERY LIKELY TO AFFECT OUR ABILITY TO MOVE ON NUCLEAR REQUESTS SHOULD KOREA CONTINUE IN ITS DESIRE TO ACQUIRE AN INDEPENDENT NATIONAL RE- PROCESSING STARTING UITH A PILOT FACILITY- D IT IS TO BE NOTED IN THIS REGARD THAT THE ISSUE OF AN EXPORT-IMPORT BANK LOAN FOR THE ROK IS BEFORE CON- GRESS THIS LOAN MAY NELL BE DISAPPROVED UNLESS THESE CONCERNS REGARDING REPROCESSING AND STORAGE OF FISSILE DECLASSHNED 7 Authority NND 590 FORM I 3 MATERIALS FROM SPENT FUELS ARE SATISFIED ME FRANKLY ANTICIPATE SERIOUS DIFFICULTIES UNLESS ME CAN ASSURE CON- GRESS THAT THE ROK HAS TERMINATED ITS PLANS TO ACQUIRE A PILOT REPROCESSING PLANT E ME BELIEVE IT MUST BE STRESSED THAT THE CONSTRUCTION OF A REPROCESSING PLANT IS AN EXPENSIVE1 RISKY AND COMPLICATED VENTURE- THERE HAVE BEEN UNSUCCESS- FUL LARGE-SCALE VENTURES BY VERY COMPETENT INDUSTRIAL ORGANIZATIONS SUCH AS GENERAL ELECTRIC FEM COUNTRIES HAVE ENGAGED IN LARGE-SCALE REPROCESSING IN THE PAST1 AND THOSE FEM HAVE ALL EXPERIENCED CONSIDERABLE DIFFICULTY F ON THE OTHER HAND1 ME RECOGNIZE THAT THE NATIONS OF EAST ASIA1 INCLUDING THE ROK1 MAY IN TIME HAVE COM- MERCIAL REASONS FOR MISHING TO DEVELOP A REGIONAL PROCESSING CAPABILITY THE USG IS PREPARED TO COOPERATE MITH THE NATIONS OF THE REGION IN EXAMINING THIS POSSIBILITY ME BELIEVE IT IS SIGNIFICANT THAT THE NPT REVIEM CONFERENCE RECENTLY RECOGNIZED THE POTENTIAL ADVANTAGES OF ESTABLISHING FUTURE REPROCESSING FACILITIES ON A MULTINATIONAL REGIONAL BASIS TO EASE PROLIFERATION CONCERNS G MHILE THERE COULD BE SUBSTANTIAL PLACE FOR ROK PARTICIPATION IN A MULTINATIONAL REGIONAL REPROCESSING FACILITY FOR ASIA1 ME QUESTION THE MISDOM OF THE ROK PROCEEDING MITH ITS PROPOSED PILOT PLANT OR CONDUCTING DETAILED PLANNING FOR LARGER PLANTS IN THE ABSENCE OF CLOSE CONSULTATION MITH THE US AND OTHER CONCERNED COUNTRIES -- ESPECIALLY JAPAN ON QUESTIONS OF DEMAND1 TIMING1 TECHNICAL CAPABILITIES ECONOMICS AND1 PARTI- POTENTIAL LOCATION ME MOULD BE MILLING TO DISCUSS THIS SUBJECT MITH THE ROK AND ALSO THE JAPANESE AS SUGGESTED BY THE ROK HOMEVER1 SUCH DIS- CUSSIONS MILL HAVE TO BE FREE TO CONSIDER A NUMBER OF ALTERNATIVE SITES AS MELL AS DIFFERENT ARRANGEMENTS FOR OMNERSHIP AND OPERATION- S FYI IT IS OUR SPECIFIC INTENTION IN THIS PRELIMINARY APPROACH TO BE NON-COMMITTAL ABOUT MHAT US ACTION81 OTHER THAN PROBABLE CONGRESSIONAL DISAPPROVAL OF THE EXIM LOAN FOR KORI II1 MOULD FOLLOM IF THE CONCERNS DESCRIBED ARE NOT SATISFIED- ALSO MHILE ME EMPHATICALLY DO NOT MANT TO ENCOURAGE KOREAN HOPES THAT A MULTINATIONAL PLANT MIGHT BE LOCATED IN THE ROK1 ME HAVE PREFERRED TO RESERVE AN EXPLICIT STATEMENT ABOUT LOCATING A MULTI- NATIONAL PLANT ELSEMHERE UNTIL A SUBSEGUENT AS APPROPRIATE VV I Authority GHQ 5 0 ADDITIONAL CLEARANCES ERDA - CIA - DBRASTED NSC - 3 LLASSIFIED Authoritym- C110lt'u r 0' an 3- m J- HI ah - U S HOUSE OF REPRESENTATIVES I I - Jr d I a t sumo no INTER no AL rams j r Hemmramm' A e r-oucv 13 muse rm- COMMH TEE 0H BANKING cunnurlc r Ann HousmG 21- - - - tannin OHIO f NINETY-FOURTH Conant-'55 WASHINGTON D C 20515 June 24 1975 Mr William J Ce T Chairman Export-Import Bank of the United States Washington D C 20571 Dear Bill We have received your letter of June 18 outlining our agreement on inmbank financing of the Korean nuclear Power Project After we are notified of Lhe safeguard arrangements negotiated with Korea we may hold hearings on the advisability of the financing Given our heavy schedule in July recess in August it is unlikely we could consider this matter until after Labor Day However given your cormdt ment not to sign the credit agreerent for at least days of continuous session of Conr ress after notification of the safeguard arrangements we anticipate no problem with primary concern is that Korea commit' herself not to acquire a reprocessing plant under her wclusive control Short of such a commitment e will likely find it most inadvisable to proceed with the financing scerely THOLSS M RLES Chairman TIiRzmaf and the Congressional n -l UKLLASSI FIED CLHQO Tab 3 TO SEOUL INFO OTTAWA PARIS TAIPEI TOKYO SUBJECT ROK NUCLEAR FUEL REPROCESSING PLANS REFS A London 9224 B London 9295 C State 148895 D State 13550 E State 133128 F State 48673 G Seoul 5462 1 As Embassy aware resolution of pressing nuclear issue will significantly contribute to preserving our close political and security relationship with ROK March policy cable on ROK nuclear weapons plans Ref F stated basic US objective QUOTE to inhibit to the fullest possible extent any ROK development of a nuclear explosive capability UNQUOTE while maintaining peaceful nuclear cooperation within US policy guidelines Acquisition of national re- processing plant would be key element in weapons program and is not justified by ROK civil nuclear needs Indeed Korean national reprocessing plant would seriously affect our ability to continue to provide support for Korea's peaceful nuclear energy program 2 As reported in Refs A and B bilateral talks were held at London suppliers' meeting with French and Canadian representatives Attitudes of both countries were so forthcoming as we had thought possible French officials indicated they would not be disturbed with a US effort UECLASSIFIED Authority wao 2 to get the ROKG to cancel the reprocessing deal provided' French company received reimbursement for termination I costs Canadians have broached their concerns about Korean reprocessing plans with ROKG and strongly support a parallel US approach 3 Situation in Congress as reported in Ref C is that relevant commit_ees have agreed to postpone hearings on Exim Bank loan request for KORI II reactor on condition that Exim president Casey will notify them twenty-five days prior to signing agreement with the ROK that Executive Branch is satisfied with non-proliferation arrangements relating to the reactor and to the use of spent fuel Communications from Senate and House Banking Committees support assessment that prospects for approval of the loan will be small unless ROK has agreed not to develop a national reprocessing capability With such an action we would hope that the loan could be approved 4 We believe that it would now be timely to execute second phase of approach with Koreans on reprocessing outlined in Refs and E Since ROK has accepted our interpretation of agreement for cooperation Ref G Embassy should express appreciation for ROKG aide memoirs before using talking points in para 5 and Specifically requesting the ROKG not to proceed with its planned DECLASSHUED I Authority mu qiq 530 3 reprocessing plant 5 Accordingly you should approach ROKG with the following- points revised from the outline in Ref D a We wish to express appreciation for your recent concurrence in our interpretation of our Agreement for Nuclear Cooperation As you know our continuing dis- cussions on nuclear energy issues have taken place in con- text of our mutual interest in maintaining constructive relationship designed to meet Korea's growing energy needs B In this context we have been giving serious attention to Korea's aSpiration to acquire its own repro- cessing capability starting with a pilot facility that might evolve into a larger scale regional capability In spirit of our candid consultations on nuclear questions we must convey our serious concerns about Korea's moving in this direction on its own We recognize of course that at some future time the nations in the area might see a commercial need for reprocessing C In particular steps toward even a pilot reproces sing facility in Korea could be perceived as destabilizing and thus impair our ability to sustain US-Korean peaceful nuclear cooperation as well as to move on peaceful nuclear assistance to Korea It is to be noted in this regard that the proposed Export-Import Bank loan for the KORE II reactor requires Congressional approval The cognizant committees of Congress have indicated that they DECLASSIFIEI Authority 4 would be unlikely to approve this loan unless they can be assured that the ROK has terminated its plans to acquire a pilot reprocessing plant D Construction of a reprocessing plant is an expensive risky and complicated venture There have been unsuccessful large-scale ventures by very competent industrial organizations such as General Electric Few countries have engaged in large-scale reprocessing in the past and those few have all experienced considerable difficulty E Nevertheless should the nations of East Asia including the ROK see commercial reasons for wishing to develop a regional reprocessing capability the USG is prepared to cooperate with the nations of the region in examining this possibility We believe it is significant that the NPT Review Conference recently recognized the potential advantages of establishing future reprocessing facilities on a multinational regional basis to ease proliferation concerns F There could be substantial place for ROK partici pation in a multinational regional reprocessing facility for Asia we suggest close bilateral consultations as well as discussions with other concerned countries -- especially Japan on questions of demand timing DECLASSHUED Authority @590 I 5 technical capabilities economics and particularly - potential location We would be willing to discuss this subject with the ROK and also the Japanese as suggested by the ROK ref B Such discussions should of course consider a number of alternative sites as well as different arrangements for ownership and operation 6 FYI In br ader terms it should be emphasized that candid approach LO ROK at this juncture is in context of mutual interest in ensuring a constructive economic and political association with ROK and enhanced stability of Northeast Asian region We wish to assure the ROKG of continued US interest in wholly peaceful nuclear cooperation including reactor exports and credits but to clearly forewarn it of probable Congressional disapproval of the Exim loan for KORI II should it proceed with its planned reprocessing plant While we do not want to encourage Korean hopes that a multinational plant might be located in the ROK we have preferred to reserve an explicit statement about locating a multinational plant elsewhere until a subsequent stage as appropriate This document is from the holdings of The 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