From Theory to Reality: The Evolution of Multilateral Assurance of Nuclear Fuel

Developing a system to assure the supply of nuclear fuel to states lacking domestic enrichment capabilities has been on the international agenda for decades. Delays have in part resulted from many states' objections that such proposals will ultimately curtail each country's sovereign right to determine its own energy policies. Nevertheless, in the past year the International Atomic Energy Agency (IAEA) has approved two international nuclear fuel banks, and has endorsed an "enrichment bond" concept first proposed by the British government. Additionally, the Russian government already operates an International Uranium Enrichment Center, under IAEA safeguards.

Most states with nuclear power programs purchase enriched uranium fuel from foreign suppliers. Though the market generally works efficiently and reliably, some states have expressed concerns that their supply of enriched uranium could be cut off by the supplier state (or states) for political reasons. Such concerns can also be used to justify the development and construction of indigenous uranium enrichment programs. The international spread of enrichment capabilities is of serious proliferation concern to the international community, because the same enrichment facility with relatively small modifications can produce either low-enriched uranium (LEU) for civilian power plants, or highly enriched uranium (HEU) for use in nuclear weapons.

Consequently, states concerned with the possibility of further nuclear proliferation have looked favorably on multilateral mechanisms as a method of ensuring the supply of enriched uranium to states in the event of a market failure. States have proposed a variety of mechanisms, including the British concept of an enrichment bond (described below), IAEA-controlled stocks of LEU that could be released to states under certain circumstances, and internationally owned and controlled uranium enrichment centers.

Existing Mechanisms: Two Fuel Banks and an International Enrichment Center

To date, the IAEA Board of Governors has approved the creation of two separate fuel banks. The first, formally established by the IAEA and the Russian government in March 2010, is owned, operated, and paid for by the Russian Federation. The Russian reserve, consists of 120 tons uranium hexafluoride,[1] located near the Siberian city of Angarsk. The uranium ranges from 2 to 4.95 percent in enrichment level,[2] and is kept under IAEA safeguards.[3] The quantity of uranium is sufficient for two full fuel loads of a typical 1,000 MWe reactor.[4] The reserve has been fully stocked and became operational on 1 December 2010.[5]

In the event of a non-commercial disruption in the supply of LEU to an IAEA member state, the Agency would request that Russia release a certain portion of the reserve. The uranium would be transferred to the IAEA, which would in turn provide the material to the recipient state. The recipient state would pay market price for the transferred uranium. The decision to release the material would be made by the Director General of the IAEA, and not by Russian authorities. The Agency could refuse to grant access to the reserve if there were any issues relating to the application of IAEA safeguards under consideration by the Agency's Board of Governors. IAEA member states would only be eligible to draw from the reserve if they had an agreement in force requiring the application of IAEA safeguards to all of their peaceful nuclear activities.[6]

The Board of Governors approved a second fuel reserve in December 2010, which will be owned and operated by the IAEA itself. The start-up costs and initial operational expenses of the IAEA reserve will be paid out of approximately $100 million in donations from states and a $50 million donation by American billionaire Warren Buffett through the Nuclear Threat Initiative.[7] The IAEA reserve will be roughly half the size of the Russian reserve, with enough uranium to provide one full load for a typical 1000 MWe reactor.[8] The location of the IAEA reserve has not yet been determined. According to written answers from the IAEA secretariat to members' questions, the host state would preferably have an existing facility that already handles LEU, and should be geographically positioned to allow for easy international transport of the material. Kazakhstan has circulated position papers to the Agency announcing its interest in hosting an IAEA fuel reserve.[9]

In order to be eligible to receive LEU from the IAEA bank, a state must be unable to purchase the fuel on the world market, and must have a comprehensive safeguards agreement with the IAEA. In addition, the IAEA must conclude that there has been no diversion of declared nuclear material in that state, and no issues with the implementation of safeguards can be under consideration by the Board of Governors.[10]

The two fuel banks share several important characteristics that provide a precedent and guide for future IAEA-endorsed multilateral approaches to the fuel cycle:

• Formal eligibility criteria, with a final determination of supply made by the Director General;
• Non-interference with the existing market;
• Requirement that the receiving state have a comprehensive safeguards agreement in force (but not the Additional Protocol);
• Requirement that the receiving state enforce IAEA guidelines on safety and security;
• No change in the form or content of the LEU without the IAEA's consent;
• No cost to the IAEA's regular budget.

These provisions represent the current consensus within the IAEA Board of Governors regarding the Agency's role in the front end of the nuclear fuel cycle. Apart from the safeguards requirement, the fuel banks are non-exclusive, available for use by any IAEA member state which is in compliance with its comprehensive safeguards agreement.[11] States need not have signed an Additional Protocol with the Agency to be eligible. In both cases, the decision to release LEU from the reserve is made by the Director General of the Agency based on pre-established criteria. Taken together, these elements provide assurance of supply; that is, any IAEA member state may request LEU from the bank, and its request will be evaluated according to known criteria by a neutral third party, the Director General.

Some states, especially those that have come under criticism from the IAEA for their nuclear activities (e.g., Iran), may not consider the IAEA and the Director General to be objective parties. However, the eligibility criteria have been designed to provide a large degree of objectivity. A state will be excluded if there are safeguards issues under consideration by the Board of Governors—a 35-member panel of states that could reject a spurious accusation of safeguards violations by a majority vote.

In exchange for accepting a shipment from the reserve, the recipient state must manage the LEU according to the basic norms set down by the IAEA, commit not to use the material for any purpose other than civilian power generation, and commit not to further enrich the LEU or reprocess the resulting spent fuel. In this sense, purchasing LEU from either of the reserves requires a state to commit only to very basic nuclear nonproliferation and security standards. Enticing states to embrace a stricter nonproliferation standard is not the stated aim of fuel bank proposals. Rather, it is to provide a safety net for states which choose not to develop their own enrichment capacities.[12] Since developing enrichment capabilities is expensive and technically demanding, such a safety net will—in theory—allow states to voluntarily opt to rely on the international market for enriched uranium. It should be noted, however, that the absence of a national uranium enrichment program is not a prerequisite to participate in the fuel banks; the only criteria for participation are those listed above.

In addition to the two fuel banks, the Russian Federation has also established an International Uranium Enrichment Center (IUEC), also located at Angarsk. The IUEC is set up as a joint stock company, with Russia's Rosatom Corporation holding 80% of the shares, Kazakhstani and Ukrainian corporations holding ten percent each, and the government of Armenia slated to join the company in the future. Armenia's shares, as well as the shares of any future participants, will be drawn from Russia's total, with the proviso that Russia will always hold the majority stake.[13]

The IUEC differs from the two fuel banks in several important ways. First, it is a for-profit entity owned by state-backed companies. As a result, unlike the fuel banks, it is preferential and exclusive in its provision of enrichment services. The IUEC gives preferential treatment to its shareholders when selling enrichment services, and is only available to states that do not have domestic enrichment capabilities[14] and "perform [their] obligations under the Nuclear Non-Proliferation Treaty."[15] Like the fuel banks, it provides an alternative to the expensive start-up costs of an indigenous enrichment capacity and, unlike the fuel banks, it provides a further financial incentive to its shareholders in the form of dividends.

The IUEC is able to maintain its more exclusive position since the IAEA has no decision-making role in its operation (the Agency does, of course, safeguard the material). It remains unclear whether the IUEC itself will gain greater political acceptance among states, and whether the model it represents is exportable to other regions.

The Enrichment Bond Concept

In 2007, the British government submitted a paper to the IAEA outlining a proposal for an enrichment bond, a legal undertaking among supplier states, recipient states, and the IAEA. Supplier governments "would guarantee that, subject to compliance with international law and to meeting the non-proliferation commitments to be assessed by the IAEA, national enrichment providers will not be prevented from supplying the recipient state with enrichment services in the event that the guarantee is invoked."[16] Supplier states would give advance legally binding assurances that export approvals would be granted if the IAEA determined that the receiving state was upholding its obligations, a provision that would cover exports from both government-owned and privately owned enrichment enterprises. The concept was approved by the IAEA Board of Governors in March 2011.

The approved bond concept shares many characteristics with the two fuel banks. A recipient state will only be able to participate in the bond if: (1) it is a party to the Treaty on the Non-Proliferation of Nuclear Weapons (NPT); (2) it has brought into force a comprehensive safeguards agreement; (3) the IAEA has concluded that there has been no diversion of declared nuclear material in that country; and (4) no issues of safeguards implementation are under consideration by the Board of Governors. If the IAEA Director General certifies to the supplier state that all four conditions have been met, the supplier is legally committed by the bond to issue the necessary export licenses.

Under the original British proposal, the bond would have required the recipient state to have concluded both a comprehensive safeguards agreement and an Additional Protocol with the IAEA. However, the version of the agreement approved by the Board of Governors dropped the requirement for membership in the Additional Protocol. The decision to eschew the Additional Protocol was likely driven by the AP's optional nature, the unwillingness of non-parties to the AP (e.g., Egypt) to be pressured into joining, and the absence of a precedent for requiring an AP in the two fuel bank agreements.

The agreement places other requirements on the receiving state that are also typical of fuel bank arrangements. These include a requirement not to enrich the material to a higher level or transfer the material to third parties without the consent of the supplier state, and requirements to store the material under IAEA safeguards and at the level of physical protection suggested in IAEA guidelines. Additionally, in the event that the recipient state breaches any of these conditions, the supplier state may request the return of the LEU.[17]

The IAEA's role in the bond will be crucial. A supplying state could still renege on its promise and forbid the supply of enriched uranium; there is no court to penalize such a breach of international contract. However, with the IAEA involved in the bond, an impartial third-party with political credibility would be introduced into the decision-making process. If the IAEA certified that a recipient state was in compliance with its nonproliferation obligations, and a supplier state nevertheless broke the bond and refused to provide enrichment services, the supplier state would expose itself to the charge that its decision was purely political. In essence, the proposed enrichment bond could increase assurance of supply by making the IAEA, and not national authorities, the arbiter of whether a state is in compliance with its nonproliferation responsibilities.

Authorizing the IAEA to engage in such bonding mechanisms will help bolster assurances of fuel supply to member states at little cost to the Agency, and is a modest activity compared to the establishment of physical stocks of IAEA-owned LEU envisioned by the second fuel bank. The approved version of the bond reflects the precedents created by the two fuel reserves, which represent the current consensus on multilateral assurances of fuel supply.

Debate and Consensus Criteria

Given these precedents, what can the international community expect from the IAEA in the near-term with regard to multilateral approaches to the fuel cycle? Any proposal will likely have to satisfy the core criteria that the fuel banks and fuel bond proposals have established. These are: (1) regular, formal criteria applied by the IAEA; (2) non-interference with the existing market; (3) non-exclusive eligibility criteria that represent the basic nonproliferation and other norms established by the Agency, and possibly; (4) no impact on the IAEA's regular budget.

The first criterion is essential to the concept of an assurance of supply. The remaining three criteria have emerged as the threshold for IAEA approval of a multilateral approach to fuel supply, as a result of the varying degrees of skepticism towards such plans on the Agency's Board of Governors. Many countries, especially in the developing world, have expressed concern that multilateral assurances of supply are the first step towards the restriction of national nuclear energy policies in the areas of uranium enrichment and spent fuel reprocessing. For example, at the 2010 NPT Review Conference, the Non-Aligned Movement (representing more than 100 countries, and the largest bloc at the conference) urged caution, saying:

    In order to reach a consensual conclusion, it is premature of [sic] this issue to be considered before undergoing extensive, comprehensive and transparent consultations. In this context, [we] reject, in principle, any attempts aimed at discouraging certain peaceful nuclear activities on the grounds of their alleged "sensitivity"; and emphasize that any ideas or proposals, pertaining to the non-proliferation of any peaceful nuclear technology, which are used as a pretext to prevent the transfer of such technology, are inconsistent with the objectives of the NPT.[18]

Fourteen members of the IAEA's 35-member Board of Governors are also members of the Non-Aligned Movement.[19] A simple majority is sufficient to approve most matters before the board.[20] Board members who are skeptical of multilateral fuel cycle arrangements have used their influence to ensure that such arrangements do not impose limits on states beyond the comprehensive safeguards agreement, which is mandatory for all state parties to the NPT.[21]

If this push for lowest-common-denominator criteria for access to multilateral fuel supply mechanisms were unacceptable to nonproliferation-minded states, such proposals might have continued to linger unapproved. However, even from a nonproliferation standpoint, the mechanisms benefit from being as widely accessible as possible within the basic norms of fissile material safety and security. The objective of the proposals, after all, is to allow states to rely on the international fuel market, not to leverage assurance of supply to achieve other ends such as adherence to the Additional Protocol. Making the fuel banks and fuel bond widely accessible expands the number of states who might decline to develop sensitive fuel cycle capabilities as a result of those assurances. Proponents of the multilateral assurance approach, in other words, have no reason to antagonize the very states they hope to entice into making use of their proposals.

This confluence between skeptical states' desire to see minimal multilateral assurance of supply proposals, and advocates' interest in widely-available assurances, has enabled the existing mechanisms to advance.

Ways Forward

As of 2008, the IAEA had twelve proposals on the table relating to multilateral assurances of fuel supply, including early versions of the two fuel banks, the IUEC, and the fuel bond concept.[22] Some of the proposals in the list of twelve have been eclipsed by the enactment of these concepts, including a 2006 proposal by the World Nuclear Association to combine governmental and IAEA commitments (a fuel bond of sorts) with stocks of uranium that could be released in times of need (a fuel bank). The items remaining on the list, not counting those that duplicate the functions of existing instruments, fall into two categories: information-sharing and transparency measures, and significantly more complex steps toward a multilateral nuclear fuel cycle. Those proposals falling in the second category are unlikely to be approved in the near future, as they fail to meet the core criteria laid out above.

A 2006 Japanese proposal envisions states voluntarily agreeing to share information with the IAEA regarding their current stocks and production capacities throughout the entire front end of the nuclear fuel cycle: uranium ore supply capacity, uranium conversion capacity, uranium enrichment capacity, and fuel fabrication capacity. In the event of a disruption of supply, the IAEA would work as an intermediary to link up spare production capacity in one state with the needs of the recipient. The process would be governed by "standby agreements" negotiated between supplier states and the IAEA, creating a virtual reserve of front-end services.[23]

While the IAEA and its member states will no doubt take time to implement and analyze those measures that have already been endorsed, the Japanese proposal could be made to fit the four core criteria listed above. In addition, it could add value to the existing architecture by providing assurance of supply in areas of the fuel cycle that are not covered by the current, enrichment-focused instruments. Since enrichment capacity is the focus of those states concerned about proliferation, expanding the assurance mechanisms to include other aspects of the fuel cycle where a disruption of supply could occur (for example, fuel fabrication), might ease the concern that "assurance of supply" is a subtle attempt to erode states' NPT rights to pursue peaceful nuclear energy.

Austria issued a proposal in 2007 that proceeds along two tracks, one focused on transparency and another that foresees full international control of the nuclear fuel cycle. The first track would ask states to submit information to the IAEA on their nuclear programs, future development plans, and transfers of nuclear material, equipment, and related technologies. Under the second track, all "transactions regarding nuclear fuel would take place under the auspices of a Nuclear Fuel Bank." Eventually all civilian enrichment and reprocessing facilities would operate through the Bank.[24] Neither track is detailed in the proposal. However, it seems clear that under any configuration the second track—which would place current enrichment facilities under international control—would not meet the criteria of non-interference with the existing market or adherence to the most basic nonproliferation norms of the Agency.

A final proposal, elaborated by Germany in 2008, envisions the creation of an international uranium enrichment center on international territory. The proposal would require a state to cede sovereign and administrative rights to a parcel of territory to the Agency, which would be responsible for "licensing, inspection, enforcement, and import and export controls…."[25] Interested states would partner together to charter an enrichment company, with one of the existing holders of enrichment technology providing that service. The working details of the enrichment technology would not be shared with the other partners. The Board of Governors would draw up binding criteria under which the IAEA-owned facility could provide enrichment services to states, and the Director General would determine whether these criteria had been met.[26]

The German proposal could conceivably be made to meet the four consensus criteria listed above, as its eligibility requirements would be drawn up by the Board of Governors. However, responsibility for the supervision of an enrichment center would represent a significant new undertaking for the Agency. Such a shift in the IAEA's role would likely prompt a major debate among the Agency's board members and, as such, is likely a distant prospect.

Conclusions

Prior to 2010, no multilateral approaches to the nuclear fuel cycle had been endorsed by the IAEA. By March 2011, the global landscape included two reserves of low-enriched uranium (one already established and another in the planning stages), one international uranium enrichment center, and a bonding process that would help to reduce the political element from the supply of enrichment services. These structures share some common characteristics that represent an emerging IAEA consensus on multilateral approaches to the fuel cycle, a consensus which includes non-interference with the existing market, and a commitment to the basic norms of security and nonproliferation promulgated by the Agency.

These developments represent a remarkable institutional change in the nuclear fuel services market, but their impact on nonproliferation remains to be seen. The existence of the fuel banks and the enrichment bond process will likely reduce the perceived risk of supply disruption in states that are genuinely committed to the peaceful use of nuclear energy. However, a state that is interested in developing an enrichment capacity for reasons of prestige or the desire to have at least the capability to produce fuel for nuclear weapons will remain unconstrained.

Resources

• "Fuel for Thought," IAEA Bulletin, www.nti.org.
• The Board of Governors decision authorizing an IAEA fuel bank, www.nti.org.
• The official IAEA proposal describing the bank, www.nti.org.
• Proposal for the establishment of the Angarsk fuel reserve, www.nti.org.

Sources:

[1] While it is common to refer to reserves of LEU as 'fuel banks,' the LEU stored there is not kept in a form that can readily be used to fuel a reactor. The LEU must first be converted from uranium hexafluoride to a form suitable for use in a reactor (typically a metal oxide), and then fashioned into the appropriate shape for the individual reactor in question.
[2] "Development of the initiative of the Russian Federation to establish a reserve of low enriched uranium (LEU) for the supply of LEU to the International Atomic Energy Agency for its member states," working paper submitted by the Russian Federation to the 2009 NPT Preparatory Committee, 6 May 2009, NPT/CONF.2010/PC.III/WP.25, www.reachingcriticalwill.org.
[3] Peter Kaiser, "Russia Inaugurates World's First Low-Enriched Uranium Reserve," International Atomic Energy Agency, 17 December 2010, www.iaea.org.
[4] "Uranium Supplies: Supplies of Uranium," World Nuclear Association, December 2010, www.world-nuclear.org.
[5] "The first in the world guaranteed reserve of nuclear fuel has been set up in the Russian Federation," Rosatom press release, 1 December 2010, www.rosatom.ru.
[6] "Request by the Russian Federation regarding its Initiative to Establish a Reserve of Low Enriched Uranium (LEU) for the Supply of LEU to the IAEA for its Member States," International Atomic Energy Agency, GOV/2009/76, 11 November 2009, p. 5, https://lewis.armscontrolwonk.com.
[7] "Factsheet: IAEA Low Enriched Uranium Reserve," International Atomic Energy Agency, accessed 17 February 2011, www.iaea.org.
[8] "Factsheet: IAEA Low Enriched Uranium Reserve," International Atomic Energy Agency, accessed 17 February 2011, www.iaea.org.
[9] "Note by the Secretariat: Assurance of Supply," International Atomic Energy Agency, 28 January 2010, p. 7, https://lewis.armscontrolwonk.com.
[10] "Factsheet: IAEA Low Enriched Uranium Reserve," International Atomic Energy Agency, accessed 17 February 2011, www.iaea.org.
[11] States with item-specific safeguards agreements, namely India, Israel and Pakistan, would be ineligible, along with the 17 states that have not brought into force a comprehensive safeguards agreement.
[12] Note that the IAEA-endorsed institutions do not impose restrictions on states—they are meant to provide assurance of supply to states lacking domestic enrichment capabilities, but a state that does possess such capabilities is still eligible to take advantage of these institutions.
[13] "Corporate Structure | JSC IUEC," International Uranium Enrichment Center, 5 May 2010, https://eng.iuec.ru.
[14] "Agreement Between the Government of the Russian Federation and the Government of the Republic of Kazakhstan on Foundation of the International Uranium Enrichment Center," Article 3, 10 May 2007, https://eng.iuec.ru.
[15] "Agreement Between the Government of the Russian Federation and the Government of the Republic of Kazakhstan on Foundation of the International Uranium Enrichment Center," Article 5, 10 May 2007, https://eng.iuec.ru.
[16] "Communication dated 30 May 2007 from the Permanent Mission of the United Kingdom of Great Britain and Northern Ireland to the IAEA concerning Enrichment Bonds – A Voluntary Scheme for Reliable Access to Nuclear Fuel," International Atomic Energy Agency, INFCIRC/707, 4 June 2007, www.iaea.org.
[17] Descriptions of the IAEA-approved fuel bond arrangement are taken from conversations with sources at the IAEA. The Board of Governors document on the subject, GOV/2011/10, has not been published.
[18] "Statement of the Group of Non-Aligned States to Main Committee III at the 2010 Nuclear Nonproliferation Treaty Review Conference," 10 May 2010, p. 3, www.reachingcriticalwill.org.
[19] Non-Aligned Movement membership, www.namegypt.org. Membership in the IAEA Board of Governors: www.iaea.org. Note that two members of the NAM and the IAEA Board, India and Pakistan, are not members of the NPT and therefore did not join in the 2010 statement.
[20] Article VI of the IAEA Statute, www.iaea.org.
[21] India, Israel, and Pakistan, non-members of the NPT, have item-specific safeguards agreements in force with the IAEA, www.iaea.org.
[22] Tariq Rauf and Zoryana Vovchok, "Fuel for Thought," IAEA Bulletin, March 2008, pp. 62-63, www.iaea.org.
[23] "Communication received on 12 September 2006 from the Permanent Mission of Japan to the Agency concerning arrangements for the assurance of nuclear fuel supply," International Atomic Energy Agency, INFCIRC/683, 15 September 2006, www.iaea.org.
[24] Communication received from the Federal Minister for European and International Affairs of Austria with regard to the Austrian proposal on the Multilateralization of the Nuclear Fuel Cycle," International Atomic Energy Agency, INFCIRC/706, 31 May 2007, www.iaea.org.
[25] "Communication dated 22 September 2008 received from the Permanent Mission of Germany to the Agency regarding the German proposal on a Multilateral Enrichment Sanctuary Project," International Atomic Energy Agency, INFCIRC/735, 25 September 2008, www.iaea.org.
[26] "Communication dated 22 September 2008 received from the Permanent Mission of Germany to the Agency regarding the German proposal on a Multilateral Enrichment Sanctuary Project," International Atomic Energy Agency, INFCIRC/735, 25 September 2008, www.iaea.org.