The United States is currently negotiating bilateral agreements for peaceful nuclear cooperation under Section 123 of the U.S. Atomic Energy Act—so-called 123 agreements—with Jordan, Saudi Arabia, South Korea, and Vietnam. At some point—thus far no decision has been taken when—the United States will begin a fifth such negotiation, with Taiwan.

The negotiations with South Korea and Taiwan are to renew agreements set to expire in 2014, while the others are new. All five states want to deploy nuclear power reactors for electricity generation in the coming years and they seek benefits that would accrue from a formal legal framework for conducting its nuclear trade and diplomacy with the United States.

Mark Hibbs
Hibbs is a Germany-based nonresident senior fellow in Carnegie’s Nuclear Policy Program. His areas of expertise are nuclear verification and safeguards, multilateral nuclear trade policy, international nuclear cooperation, and nonproliferation arrangements.
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Although the Atomic Energy Act establishes criteria that 123 agreements must meet in order to conform to U.S. law without special Congressional consideration, for all of these negotiations to succeed the language and terms written into the five agreements will have to differ quite significantly. Why? Because the interest calculus and leverage balance of the two parties in each case won’t be the same.

Progress in negotiating these agreements has been held up because of a contentious two-year interagency debate in the United States over how to proceed in trying to limit the spread of uranium enrichment and spent fuel reprocessing (so-called ENR) capabilities worldwide. In 2009, the United Arab Emirates (UAE) concluded a 123 agreement that said it would not “engage in activities within its territory” for ENR. The UAE agreement also indicated that the no-ENR provision was to be included in future 123 agreements for countries in the Middle East.

Some administration officials, supported by lawmakers, sought to universalize the UAE no-ENR provision as a “gold standard” for all future agreements, but others preferred instead to apply it on a limited case-by-case basis.

Since 2004, when the Bush administration proposed that ENR technologies be restricted to the few states currently having them—which includes the United States—many countries have objected that this would violate their “rights” to peaceful nuclear development, expressed in both the International Atomic Energy Agency (IAEA) statute and in Article IV of the Nuclear Non-Proliferation Treaty.

The United States sought to codify this ban in nuclear trade guidelines upheld by the 46-member Nuclear Suppliers Group, but had to settle for a criteria-based approach adopted by the group in June 2011. Last fall, the U.S. House of Representatives introduced legislation that would set forth a blanket requirement that countries entering into nuclear cooperation with the United States forego ENR.

But neither Congress nor the administration at a senior level has set a firm policy course on what should be required in future 123 agreements, leaving it up to negotiators themselves to follow recommendations arising from lower-level internal deliberations. In practice, this means that there has been a strong difference of views between the State Department, which at high levels supports making the “gold standard” a requirement in all 123 agreements, and the Department of Energy, which favors a more differentiated approach also favored by the U.S. nuclear industry.

Currently, there is an interagency understanding that the State Department will aim to negotiate no-ENR provisions into nearly all future 123 agreements and that any exceptions to the no-ENR outcome must be jointly authorized by Secretary of State Hillary Clinton and Secretary of Energy Steven Chu.

Recent media accounts suggest that Taiwan has “volunteered” to adopt the “gold standard” and that one or more advocates at the State Department behind the scenes then pushed Taiwan to the top of the list of 123 agreements to be negotiated in order to quickly establish the “gold standard” as a precedent for all future agreements. But issues about the timing of the pending Taiwan negotiation were in fact triggered by a State Department staffer’s travel schedule and were unrelated to any policy discussion.

Taiwan and the United States have understood from the very outset that because the United States has immense leverage over Taiwan, a four decade-old policy of no enrichment and reprocessing in Taiwan enforced by the United States will be enshrined in the new agreement.

A new Taiwan agreement will not serve as a precedent for any of the agreements the United States is currently negotiating with other states because the United States enjoys far less leverage, and may have overriding policy goals, in these cases.

Vietnamese officials, for example, have informed their U.S. counterparts that they don’t want to negotiate a nuclear cooperation agreement on the basis that Vietnam must forfeit its ENR “rights.” Vietnam has little incentive to do so. While Taiwan’s nuclear infrastructure was set up decades ago hand-in-hand with U.S. industry, Vietnam will build reactors with the help of Russia and Japan and it doesn’t need an agreement with the United States to do that. Russia has agreed to supply fresh nuclear fuel to Vietnam and thereafter to take back and reprocess in Russia the spent fuel from reactors in Vietnam.

Hanoi has spelled out that it has no interest in setting up enrichment or reprocessing plants, and U.S. officials on the ground appear unworried that Vietnam will try to develop sensitive nuclear fuel cycle capabilities—a consideration that may matter should U.S. negotiators eventually ask Chu and Clinton to make an exception to the no-ENR policy for Vietnam.

Saudi Arabia might be a different story. While Vietnam has decided to bet its chips on nuclear energy partnerships with Russian and Japanese industry, Riyadh has so far not identified who its future industrial collaborators will be, and it is considering possible linkups with American firms. That would not be possible without a 123 agreement.

The Saudi government is also aware that should Riyadh not assure Washington that it won’t build sensitive enrichment and reprocessing installations, U.S. lawmakers, concerned about the security of Israel, would almost certainly forbid the United States to cooperate with Saudi Arabia on those terms. What’s more, like neighboring UAE, Saudi Arabia may want to accommodate the United States in the interest of its bilateral defense arrangements, especially in view of its perceived threat from Iran.

The U.S. State Department is highly aware of the differences in the calculus of each of its prospective nuclear trading partners and the varying extent of U.S. leverage in these cases. Before Washington began broaching nuclear cooperation with Vietnam and Saudi Arabia, it had been negotiating bilateral nuclear agreements with South Korea and Jordan.

South Korea may become one of the exceptions made to a no-ENR outcome, as Seoul is hardly inclined to abandon its interest to enrich and reprocess. To the contrary, South Korea argues that Washington should afford it the same freedom to reprocess its growing inventory of spent fuel to minimize nuclear waste as the United States provided Japan when its 123 agreement was renegotiated in the 1980s.

The United States has long argued that a 1991 bilateral agreement between South Korea and North Korea, which commits both to renounce ENR, stands in the way. But South Korean officials argue that the bilateral agreement is null and void in the wake of North Korea’s revelation that it is now enriching uranium outside of IAEA safeguards, not to mention that it also produced plutonium outside of safeguards and used it in two nuclear explosions in 2006 and 2009. Officials argue that the size of South Korea’s ever-expanding nuclear program—the country now has 23 power reactors—will soon justify the establishment of a domestic uranium enrichment capacity.

With the exception of the ENR issue, negotiation of a 123 agreement with Jordan is virtually complete. But Jordan, like Vietnam, will likely build power reactors in cooperation with non-U.S. vendors (in this case French or Canadian firms) and Jordan has informed the United States it will not negotiate away its generic “right” to enrich uranium or reprocess spent fuel.

Amman’s refusal to legally forfeit its ENR options doesn’t have to mean that Jordan can’t accommodate the United States on this point if both sides really want a nuclear cooperation agreement. Instead of forcing Jordan to legally commit itself not to enrich or reprocess, the U.S.-Jordan agreement might include a declaration by Jordan—in a preamble or in a side letter—to the effect that Jordan will not set up sensitive fuel cycle infrastructure because it is not justified by the anticipated requirements of Jordan’s nuclear power program.

Such a declaration may or may not be legally binding, but it would be politically robust in the context of a bilateral agreement with the United States. Jordan would retain its “right” to develop or acquire reprocessing and enrichment capabilities, but it could agree not to exercise this option. Jordan and the United States might agree to periodically reassess Jordan’s nuclear fuel supply requirements.

A similar approach was successfully taken by Canada in a somewhat different context concerning its interest in enriching uranium. When the United States proposed to the Nuclear Suppliers Group in 2004 that transfers of ENR items to newcomers be banned, Canada objected. Unlike Vietnam, but like Jordan, Canada has domestic uranium reserves (indeed it’s currently the world’s leading uranium exporter) and, like Jordan, Canada does not want to forfeit its option to add value by processing the uranium into commercial power reactor fuel in coming years. In 2008, Ottawa overcame an impasse with the United States on this issue by voluntarily suspending its freedom to import enrichment technology for a limited period of time pending successful negotiation of global ENR trade rules.

U.S. resolve to include a no-ENR pledge in the body of new bilateral agreements will be seen by some countries as arrogant and unacceptable. Incorporating ENR terms into side-letters or preambles may be less offensive. That approach would also more easily facilitate including reciprocal commitments by the United States into its 123 bargains with foreign countries. These might include guaranteeing nuclear fuel supply through participation in the U.S. fuel bank, facilitating the country’s access to other back-up sources of nuclear fuel, and, in the future, perhaps even taking back U.S.-origin spent fuel.

The outcome of any negotiation for a bilateral nuclear cooperation agreement will depend on the leverage both sides bring to the table. When the United States negotiated most of the 22 such agreements in force today, it was the world’s leading provider of nuclear technology, equipment, and fuel. As the examples of Jordan and Vietnam show, unlike half a century ago, nuclear newcomers today don’t need to buy American.

The vendor field is populated by firms in Argentina, Australia, Canada, the European Union, Japan, Kazakhstan, Namibia, Niger, Russia, and South Korea, and in the future they will be joined by others in China and India. Governments in these countries do not seek to establish a no-ENR requirement as a condition for foreign nuclear cooperation. Some of them, Australia and Canada for example, have strong nonproliferation track records. Countries now seeking to form foreign industrial partnerships to set up nuclear power programs have numerous options and they will favor arrangements that provide them the most freedom and flexibility.

Equity in international nuclear affairs matters. By negotiating with its partners voluntary political agreements, including side benefits to limit the application of sensitive technologies, instead of trying to legally compel them to make concessions that are politically onerous, the United States can serve its nonproliferation and security interests while avoiding the challenge to U.S. credibility that would follow from rigid application of a one-size-fits-all policy.

The United States should show nonproliferation leadership by generally discouraging countries without enrichment and reprocessing capabilities from embarking in this direction. But negotiators need policy guidelines that provide for flexibility and encourage them to create incentives to get desired results. To some extent, the current policy may be informed by the insight that trying to negotiate no-ENR terms into the operative text of an agreement may fail, and that other approaches may be more productive. It also reflects the reality that U.S. leverage on nuclear trade is declining.

In any case, negotiators and especially U.S. lawmakers—who must review and approve any new agreement—should not make the perfect the enemy of the good. If at the end of the day the United States must choose between having no agreement with a country and having an agreement without an unconditional and legally binding commitment to forego ENR, in specific instances, where the United States has little leverage and little to offer, the latter choice may be the right choice.

Right now, however, negotiators are not getting clear instructions from the top of the administration or from lawmakers about what new 123 agreements should require. In the case of some pending agreements, for example with Saudi Arabia, temporizing by U.S. leaders could set back U.S. economic and security interests. In some other countries, such as Australia and Canada, the cabinet approves a negotiating mandate before any bilateral nuclear cooperation talks take place. This kind of direction is needed in the United States, whether initiated by the White House or by Congress.