Gold Standard Policy Under Review – Again

Mark Hibbs has a very good post at the moment over at Arms Control Wonk about Taiwan’s acceptance of what U.S. officials call the “gold standard” provision, committing not to engage in domestic enrichment or reprocessing activities, as a part of the renewal of their nuclear technology sharing treaty with the U.S. (such treaties with the U.S. are typically referred to as “Section 123 agreements” because of the section of the 1954 Atomic Energy Act that specifies the conditions necessary for the U.S. to enter into such agreements).  See the post here.  I’ll let Mark’s analysis speak for itself, though noting that I completely agree with it and I think it’s an important insight.

What I wanted to mention here is that in the comments to the post (where there’s a good discussion going on that I’d recommend checking out BTW), David Fite, who is a member of the Democratic professional staff for the House International Relations Committee, notes that the U.S. administration’s policy with regard to negotiating 123 agreements, specifically on the subject of the enrichment and reprocessing (ENR) “gold standard,” is currently under interagency review, for the third time.  This was news to me and I’m glad David mentioned it.  Its surprising because the policy under review was only about six months old, having been laid out in a January 10, 2012 letter by Deputy Secretary of Energy Daniel Poneman and Undersecretary of State for Arms Control and International Security Ellen Tauscher, which was sent to members of Congress.  See a summary of the letter and the policy here

Basically, the letter said that U.S. policy going forward would be to evaluate each new 123 agreement negotiation on a “case by case” basis, and not to have a predetermined, inflexible policy on the sorts of provisions that would have to be included in the final agreement.  There had been considerable pressure on the administration from Congress – and in fact there had been efforts to pass legislation legally requiring the administration – to adopt a policy of requiring all new 123 agreements to contain a gold standard provision in which the nuclear sharing partner state would legally commit not to engage in domestic ENR activities.  The Tauscher-Poneman letter manifested the administration’s resistance to that pressure, and its adoption of a more flexible policy that the administration felt would better serve U.S. interests.  As the letter explained:

Nuclear trade carries with it a critical nonproliferation advantage in the form of consent rights, along with other opportunities to influence the nuclear policies of our partners.  To obtain this advantage, we need to negotiate agreements that our partners can accept and that open doors to U.S. industry.  We are concerned that other options could have the opposite effect, by reducing the number of future U.S. partners, minimizing our nonproliferation influence, and raising questions about our reliability as a supplier.

Our competitors are not standing still.  France and Russia in particular are very aggressive in pursuing nuclear business worldwide, and offer favorable terms.  Neither imposes ENR conditions in their agreements.  Each billion dollars of American nuclear exports supports 10,000 jobs, and provides the U.S. with access and influence over the direction of nuclear programs, ensuring they meet the highest standards for nonproliferation, security, and safety.

This very sensible, practical realization about the limits of U.S. influence, the competitive realities of the international nuclear technology market, and the harm that an inflexible policy would do to U.S. nuclear technology vendors, was criticized by some at the time – including by John Bolton – as placing the profitability of the U.S. nuclear industry over nonproliferation goals.  Maybe enough Bush-era people, high enough up in the relevant USG agencies, have banded together to bring the policy back under review. I don’t know. 

But in my opinion, the balance of both practical and principled considerations weighs heavily on the side of maintaining the “case by case,” flexible approach to 123 agreement negotiations announced in the Tauscher-Poneman letter, and to a policy that places little to no emphasis on pressuring developing states to make legally binding commitments to forego their legal rights to full indigenous nuclear fuel cycle capability.

I’ll leave the principled NPT Article IV arguments for other posts.  I don’t think you really even need to get into them to see that the Tauscher-Poneman approach is the most prudent position for U.S. policy.  I think they are absolutely right to cite to the competitive realities of the international nuclear technology market, and make the point that if the U.S. requires a no-ENR commitment, when none of the other home states of major nuclear technology vendors do (e.g. France, Russia, South Korea, Japan, China), then buyer states will likely just go elsewhere for their nuclear technology.  And how would this help the nonproliferation cause? That’s of course if you even think that requiring developing states to commit not to have ENR technologies does somehow contribute to nonproliferation goals.  The reality is that most developing states don’t want to have indigenous enrichment and reprocessing capabilities. These are extremely expensive and technologically complex programs, and just don’t make sense for most developing states, when they can source nuclear fuel much more easily and cheaply from the private market.

But what developing states do care about, and this has been reiterated in NAM statements time after time, is not being pressured by supplier states to give up what they correctly view as their legal rights to have ENR capabilities if they choose to have them. That’s why states like Jordan have outright refused to enter into 123 agreements with the U.S. containing no-ENR commitment provisions. It’s a matter of principle and sovereign independence that matters to many developing states. Saudi Arabia and Vietnam also, for a variety of reasons, appear highly unlikely to be willing to make such commitments in their 123 agreement negotiations with the U.S.  

So if U.S. policy on 123 agreement negotiations changes through the current interagency review process, to a requirement of such a provision, who will lose out? Not the buyer states. They’ll be happy to sign deals with Rosatom or Areva or KEPCO or any number of other nuclear vendors not based in the U.S.  No, the only losers will be General Electric and Westinghouse who, in the absence of a 123 agreement, won’t be able to sell their nuclear technology to these countries.

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3 Comments on “Gold Standard Policy Under Review – Again”

  1. Nick says:

    Thanks for starting this timely website. As a fan or your articles and books, I will be visiting it regularly; one more site after armscontrolwonk to check.

  2. […] provision prohibiting ENR activities by partner states.  I previously blogged about this issue here and […]


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