[Senate Hearing 110-279]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-279
 
 SAFEGUARDING THE ATOM: NUCLEAR ENERGY AND NONPROLIFERATION CHALLENGES

=======================================================================

                                HEARING



                               BEFORE THE



                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE



                       ONE HUNDRED TENTH CONGRESS



                             FIRST SESSION



                               __________

                             JULY 31, 2007

                               __________



       Printed for the use of the Committee on Foreign Relations


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                     COMMITTEE ON FOREIGN RELATIONS

                JOSEPH R. BIDEN, Jr., Delaware, Chairman
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
JOHN F. KERRY, Massachusetts         CHUCK HAGEL, Nebraska
RUSSELL D. FEINGOLD, Wisconsin       NORM COLEMAN, Minnesota
BARBARA BOXER, California            BOB CORKER, Tennessee
BILL NELSON, Florida                 JOHN E. SUNUNU, New Hampshire
BARACK OBAMA, Illinois               GEORGE V. VOINOVICH, Ohio
ROBERT MENENDEZ, New Jersey          LISA MURKOWSKI, Alaska
BENJAMIN L. CARDIN, Maryland         JIM DeMINT, South Carolina
ROBERT P. CASEY, Jr., Pennsylvania   JOHNNY ISAKSON, Georgia
JIM WEBB, Virginia                   DAVID VITTER, Louisiana
                   Antony J. Blinken, Staff Director
            Kenneth A. Myers, Jr., Republican Staff Director

                                  (ii)

  
?

                            C O N T E N T S

                              ----------                              
                                                                   Page

Bayh, Hon. Evan, U.S. Senator from Indiana.......................     5
Casey, Hon. Robert P., Jr., U.S. Senator from Pennsylvania, 
  opening statement..............................................     1
Lugar, Hon. Richard G., U.S. Senator from Indiana, opening 
  statement......................................................     3
McGoldrick, Dr. Fred, former Director of Nonproliferation and 
  Export Policy, Department of State; Bengelsdorf, McGoldrick and 
  Associates, LLC, Washington, DC................................    36
    Prepared statement...........................................    38
Scheinman, Dr. Lawrence, distinguished professor, James Martin 
  Center for Nonproliferation Studies, Monterey Institute of 
  International Affairs, Washington, DC..........................    31
    Prepared statement...........................................    33
Semmel, Dr. Andrew, Acting Deputy Assistant Secretary for Nuclear 
  Nonproliferation Policy and Negotiations, Department of State, 
  Washington, DC.................................................     8
    Prepared statement...........................................    12
Sokolski, Henry, executive director, Nonproliferation Policy 
  Education Center, Washington, DC...............................    27
    Prepared statement...........................................    28

              Additional Material Submitted for the Record

Biden, Hon. Joseph R., Jr., U.S. Senator from Delaware, prepared 
  statement......................................................    54

                                 (iii)

  


 SAFEGUARDING THE ATOM: NUCLEAR ENERGY AND NONPROLIFERATION CHALLENGES

                              ----------                              


                         TUESDAY, JULY 31, 2007

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:34 a.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Robert P. 
Casey, Jr., presiding.
    Present: Senators Casey and Lugar.

        OPENING STATEMENT OF HON. ROBERT P. CASEY, JR.,
                 U.S. SENATOR FROM PENNSYLVANIA

    Senator Casey. This hearing shall come to order.
    Today, the Foreign Relations Committee will examine policy 
options that can help strengthen the nuclear nonproliferation 
regime and prevent the nightmare scenario of a nuclear weapon 
exploding in an American city. To the extent that states like 
North Korea and Iran succeed in acquiring nuclear weapons, and 
unstable regimes like Pakistan continue to expand existing 
nuclear arsenals, that threat will continue to grow. For this 
reason, we must renew our efforts to reinforce the nuclear 
nonproliferation regime and prevent additional states from 
acquiring the deadliest weapons known to humanity.
    I want to thank Chairman Biden for graciously offering to 
me this opportunity to chair today's hearing in his absence. 
And I know that nuclear nonproliferation is an issue to which 
he has dedicated much time and energy over his distinguished 
career in the United States Senate. The chairman has prepared a 
formal statement, which I ask be entered into the record.
    Senator Casey. Many years ago, back in 1963, President 
Kennedy predicted a world where 15 to 20 states would acquire 
nuclear weapons. President Kennedy's frightening vision has not 
come to pass, and, for that, we largely have the nuclear 
nonproliferation regime to thank. This regime, embodied by the 
Nuclear Non-Proliferation Treaty which entered into force in 
1970, has done a remarkable job in limiting the spread of 
nuclear weapons. Beyond the original five nuclear-weapon states 
recognized by the NPT, only four additional states are known to 
have developed and tested nuclear weapons during the 
intervening 37 years. This is not a perfect record, but, given 
the fears of President Kennedy at that time, it speaks to the 
durability and effectiveness of the NPT.
    However, the nonproliferation regime today faces a set of 
grave challenges that call its future into question. Iran's 
pursuit of a nuclear program, carried out in secrecy over the 
past two decades and maintained today in defiance of United 
Nations resolutions, represents the most serious test.
    Iran claims that it is pursuing a nuclear program for 
exclusively peaceful purposes, in order to establish a source 
of civilian nuclear power. Iran cites article IV of the treaty 
to defend its civilian program, contending that this article 
protects the, ``inalienable right'' of Iran to pursue a 
civilian nuclear program. Nonetheless, the very expertise and 
technology Iran requires to develop a civilian nuclear program, 
including a complete nuclear fuel cycle, is what it would need 
to produce fissile material for nuclear weapons. Iran, or some 
other state in the future, can accrue all of the benefits of 
the treaty membership while assembling the building blocks of a 
nuclear weapons program. If Iran succeeds in acquiring a 
nuclear weapon through the guise of a civilian program, it will 
set a dangerous example for others to follow.
    For that reason, nonproliferation experts are taking a 
fresh look at the concept of assured fuel supply mechanisms. A 
commercial nuclear program, by itself, does not give a state 
the means to develop the fissile material necessary for a 
nuclear weapon. Rather, what is of concern is the construction 
of uranium enrichment and plutonium reprocessing facilities, 
the so-called fuel cycle, to generate nuclear fuel power and 
nuclear fuel to power nuclear reactors. If we can conceive an 
approach that allows states to acquire nuclear fuel at 
prevailing market prices from trusted and reliable sources, 
they would no longer need to build and maintain costly fuel 
cycle facilities, the same facilities that can serve as the 
basis for a weapons program. A nonnuclear-weapons state that 
insisted on doing so would immediately raise suspicions over 
its real intentions, and give warning to the international 
community, at the same time Iran experienced--at the same time 
the Iran experience demonstrates to all of us the sustained 
value of rigorous international safeguards in deterring and 
detecting illicit nuclear weapons programs.
    What we know today about Iran's nuclear program is largely 
due to the diligent and painstaking work of the International 
Atomic Energy Agency undertaken since 2002. The IAEA has gained 
access to Iranian facilities, interviewed Iranian officials, 
and published detailed reports on the progress and scope of 
Iran's uranium enrichment efforts, providing the international 
community with an invaluable perspective on Iran's program. 
Nonetheless, the IAEA budget and staff are under great 
pressure, as it needs to keep pace with a growing number of 
civilian nuclear facilities worldwide.
    The ranking member on this committee, Senator Lugar, along 
with Senator Bayh, working in a bipartisan manner, have 
introduced legislation to give the President authority to 
establish bilateral and multilateral fuel supply mechanisms and 
authorize appropriations to fortify the capability of the 
International Atomic Energy Agency to implement nuclear 
safeguards. Their bill is a promising one, and I look forward, 
today, to learning more about it.
    The nuclear nonproliferation regime today is in trouble, 
not only due to the challenges I've outlined above, but also, 
frankly, due to the wrongheaded policies of the Bush 
administration. Beginning with its unilateral withdrawal from 
the ABM Treaty in 2001, the administration has shown a blatant 
disregard for the diplomacy and multilateral cooperation so 
essential to a strong nonproliferation regime.
    In my opinion, the United States missed a golden 
opportunity in 2005 to use the NPT Review Conference as a forum 
to begin a serious dialog with other nations on how we can 
revitalize the regime to address the new challenges posed by 
Iran and others.
    The administration has not helped matters by explicitly 
adopting a double standard when it comes to nuclear-weapon 
states, encouraging and assisting those we deem our friends at 
the same time we are condemning others.
    Finally, by focusing excessively on regime change instead 
of change in behavior, the United States stood by as North 
Korea quadrupled--quadrupled--the size of its fissile material 
stockpile and tested a nuclear weapon, only coming to the 
belated recognition that diplomacy was the only solution with a 
chance of working.
    Today, we'll hear from a distinguished and extremely 
knowledgeable group of witnesses. Senator Bayh will first 
address the committee to discuss the reasoning behind the 
legislation that he and the ranking member, Senator Lugar, have 
introduced to give a jump start to assure fuel supply 
mechanisms and strengthened nuclear safeguards. The committee 
welcomes Senator Bayh, and we look forward to his remarks.
    And then, after Senator Bayh, we'll hear from the executive 
branch. Dr. Andrew Semmel, the Acting Deputy Assistant 
Secretary of State for Nuclear Nonproliferation Policy and 
Negotiations, will provide the administration's perspective on 
how the United States can further strengthen the nuclear 
nonproliferation regime and the role that fuel supply 
mechanisms and enhanced safeguards can play in that process. He 
has served in the State Department since 2003, and I understand 
that Dr. Semmel is no stranger to the committee. From 1985 to 
2001, he served as a senior staffer to Senator Lugar for 
foreign policy issues. So, we welcome him today.
    Our final panel will include three experts on nuclear 
nonproliferation, who have all served in various capacities in 
the U.S. Government, but now serve in private capacities. I'll 
introduce these three witnesses when we come to that panel, and 
I'll look forward to their seasoned perspectives.
    And, with that, I'll turn the microphone over to the 
ranking member, Senator Lugar.

 OPENING STATEMENT OF HON. RICHARD G. LUGAR, U.S. SENATOR FROM 
                            INDIANA

    Senator Lugar. Well, thank you very much, Senator Casey, 
for chairing this hearing. And I join you in welcoming my 
friend and Hoosier colleague and my partner in this endeavor, 
Senator Evan Bayh, who has provided very important leadership 
on the issues we will examine today.
    The international nuclear nonproliferation regime has 
suffered significant setbacks in recent years, and it's vital 
that the United States assign a high diplomatic priority to 
strengthening that regime. The Nuclear Non-Proliferation 
Treaty, the NPT, and the International Atomic Energy Agency, 
the IAEA, have succeeded in forestalling nuclear weapons 
programs in most of the world's advanced industrial states, but 
the IAEA is hard-pressed to keep pace with the global expansion 
of nuclear weapons technology, especially uranium enrichment 
and spent nuclear fuel processing, both of which can produce 
fissile material for weapons.
    The construction of facilities for the enrichment of 
uranium and reprocessing of spent nuclear fuel in new states, 
even for ostensibly peaceful purposes, poses an unacceptable 
risk to the international nonproliferation regime. This risk 
arises because enrichment and reprocessing technology intended 
to produce fuel for civilian reactors can also be used to 
create weapons material. The spread of these capabilities would 
dangerously increase the chances that new nations could develop 
nuclear weapons and that terrorists could obtain nuclear 
materials for bombs.
    The threat posed by the spread of nuclear fuel cycle 
technology has been complicated by the growing attractiveness 
of nuclear power, both in developed and developing countries. 
As energy costs soar and concerns about global warming deepen, 
many states are considering investing in nuclear power as a way 
to expand their capacity to generate electricity. The United 
States must help shape a response to this dilemma. We should be 
making clear that there is no technology or economic reason why 
the expansion of civilian nuclear power must be accompanied by 
the construction of enrichment or reprocessing facilities.
    Senator Bayh and I have proposed that the United States and 
like-minded nations should establish a new international system 
whereby countries that give up their enrichment and 
reprocessing programs will be rewarded with a guaranteed supply 
of reasonably priced fuel for nuclear power generation.
    Before the July 4th recess, the Committee on Foreign 
Relations unanimously approved Senate bill 1138, legislation 
that I offered with Senator Bayh. The Lugar-Bayh bill embraces 
both bilateral and multilateral fuel supply mechanisms and 
calls for a report on the establishment of an international 
nuclear fuel authority. Our bill makes it the policy of the 
United States to discourage the development of enrichment and 
reprocessing capabilities in additional countries, to encourage 
the creation of bilateral and multilateral assurances of 
nuclear fuel supply, and to ensure that all supply mechanisms 
operate in strict accordance with the IAEA safeguard system.
    Our bill also specifies that this policy must not result in 
any additional unmet verification burdens for the system. This 
point is important, because, even as the world demand for 
civilian nuclear power grows, the IAEA, charged with ensuring 
that nuclear energy programs are not used for weapons 
development, operates on a shoestring budget, with old 
equipment. This situation threatens the institution and the 
nuclear stability that the IAEA supports.
    Last November, I visited the IAEA and its Safeguards 
Analytical Laboratory, located just outside Vienna, Austria. 
Nuclear samples from around the world are collected by IAEA 
inspectors and brought to this laboratory. There, they are 
tested to determine if nations are complying with their 
obligations under the NPT.
    The laboratory is on the front lines in the struggle to 
prevent states from pursuing undeclared nuclear weapons 
research and development. Unfortunately, the laboratory's aging 
equipment and dangerous working conditions hamper the important 
work that is done there. In addition, the IAEA technicians are 
severely limited in the time they can spend analyzing evidence 
in the so-called ``hot,'' or nuclear, part of the laboratory, 
because it is served by a dilapidated air-purification system. 
The laboratory will become increasingly stressed as more states 
expand their nuclear power infrastructures.
    The Lugar-Bayh bill calls for the refurbishment or possible 
replacement of the IAEA Safeguards Analytical Laboratory. The 
IAEA is performing an absolutely indispensable security 
function for the global community. The scientists working there 
must have the state-of-the-art equipment necessary to do their 
jobs.
    Fixing those problems will require global cooperation, but 
the first step in this process is American leadership. We must 
lead an international effort to ensure that the IAEA has the 
resources and capabilities it needs to effectively conduct its 
critical safeguards mission and to respond to the coming 
expansion of nuclear power.
    I thank you, again, Mr. Chairman, for allowing me to make 
this statement. I look forward to engaging in discussion with 
all of our witnesses.
    Senator Casey. Thank you, Senator. And I'm honored to be 
here with you, after all the work you've done on these issues 
over many years.
    And to make sure this is almost a 100-percent Hoosier 
hearing, we now have the honor to have Senator Bayh make his 
statement.
    And, Senator, we're honored to have you, and the floor is 
yours.

     STATEMENT OF HON. EVAN BAYH, U.S. SENATOR FROM INDIANA

    Senator Bayh. Thank you, Senator Casey. I'm sure that Dick 
would be pleased to join with me in adopting you as an honorary 
Hoosier, so we could make this a 100-percent Hoosier 
undertaking here today.
    Senator Casey. Thank you.
    Senator Bayh. At least we're all part of the great Midwest. 
So, it's--thank you for chairing the hearing today, Senator 
Casey. It's been a pleasure, now, serving you within the 
Senate--in the Senate. And, as we've discussed before, I can't 
help but think of your father whenever we're together. I had 
the privilege of serving with him for 6 years as Governor, and 
I don't know why, but I'm always happy to see sons following 
fathers into public service. So, it's a pleasure to be with you 
here today.
    Please give my regards and thanks to Chairman Biden. I know 
how busy he is these days. As Senator Lugar mentioned, we're 
grateful that he brought our legislation before the committee, 
and that it was passed unanimously. We're also grateful that 
he's afforded us this forum here today, so I hope you'll please 
convey my thanks to him.
    And, Senator Lugar, it's a privilege to be with you again, 
working on this matter. I think, as everyone in the room knows, 
my colleague and friend is a globally recognized expert in this 
area. It may not always be the most glamorous of issues, but 
it's vitally important to the future of our country, and I am 
privileged to have my name associated with yours here today.
    Mr. Chairman, the 21st century has begun with unprecedented 
global demand for energy. This increase is the result of 
economic expansion in the United States, in the industrial 
economies of Europe and Japan, and from emerging countries, 
like India and China. Given the rapid rates of growth in the 
developing world, prices for traditional sources of energy are 
likely to remain high. Supplies of oil, gas, and coal are 
finite, so countries will be looking elsewhere to secure 
stable, affordable sources of energy. Nuclear power is an 
obvious place for them to look.
    Environmental factors will reinforce this trend. Energy 
derived from fossil fuels contributes to global climate change. 
Electricity generated by nuclear power, on the other hand, does 
not produce pollutants like sulfur or mercury, or greenhouse 
gases like carbon dioxide. While alternative energy sources, 
like wind, solar, and geothermal power, show great promise, it 
is unlikely that they will be sufficient to satisfy expanding 
global electricity needs in the near term. For example, total 
world energy demand is expected to double by the year 2050, so 
there would be--so there will be both strong economic and 
environmental incentives for countries to examine the nuclear 
option.
    Increased use of nuclear power will mean new nuclear 
facilities and material in the possession of many new states 
over the coming decades, exponentially raising the risk that 
fissile material could be acquired by rogue nations or 
terrorist groups. According to our latest public intelligence 
assessments, terrorist organizations continue to pursue the 
acquisition of a nuclear device, and would not hesitate to use 
it. We must ensure that the International Atomic Energy Agency 
has the necessary resources and technology to cope with this 
expansion of civilian nuclear power and to safeguard against 
dangerous proliferation.
    We must also ensure that this increased demand for civilian 
nuclear energy does not become a subterfuge for rogue nations 
seeking to acquire a nuclear military capability. Regrettably, 
that is precisely what is happening today in Iran.
    Because Iran claims to be enriching uranium for civilian 
uses, the current global regulatory structure allows Tehran to 
walk right up to the threshold of developing a nuclear bomb. 
This is dangerously naive. North Korea pursued precisely the 
same tactic to realize its nuclear ambitions, and we are 
perilously close to seeing history repeat itself, only this 
time with a nation actively supporting terrorist groups and 
deeply hostile to the United States.
    Once this genie gets out of the bottle, there is no putting 
it back. At a minimum, allowing Iran to obtain a nuclear 
warhead would be a regionally destabilizing event certain to 
spark a Middle East arms race. At worst, it would be a global 
security catastrophe in which Tehran obtains the means to 
blackmail its European neighbors and to threaten Israel's 
destruction.
    This gaping loophole in the Nuclear Non-Proliferation 
Treaty must be closed. The Lugar-Bayh Nuclear Safeguards and 
Supply Act of 2007 begins to do just that. The Lugar-Bayh Act, 
as you noted, passed out of this committee unanimously last 
month, and it makes it the official policy of the United States 
to discourage the development of enrichment and reprocessing 
capabilities. It also requires the President to begin exploring 
the creation of an international nuclear fuel bank.
    Our legislation would authorize the President to negotiate 
both bilateral and multilateral mechanisms to assure that 
nations seeking civilian nuclear power have a reliable and 
affordable supply of nuclear fuel for peaceful purposes. In 
return, countries must agree to forgo enriching uranium 
themselves, and submit to rigorous IAEA inspections for their 
civilian reactors to guard against North Korean and Iranian-
style cheating.
    This approach makes both economic and national security 
sense. We've learned a lot about the economics of nuclear power 
since the Non-Proliferation Treaty was negotiated, more than 
three decades ago. Enrichment is expensive, as is the disposal 
of nuclear waste. It is not economical for nations desiring 
civilian nuclear power to enrich their own fuel. There is an 
enormous surplus of uranium currently in existing enrichment 
facilities worldwide. And, due to bigger economies of scale, it 
is now much cheaper for countries lacking enrichment capability 
to purchase fuel from a central repository than it is to enrich 
or reprocess it themselves. An international fuel bank would 
provide affordable nuclear fuel to countries genuinely 
interested in pursuing civilian nuclear power. It would allow 
countries to draw fuel for use in their own civilian nuclear 
reactors, and then return the spent fuel for safe oversight by 
the IAEA.
    The approach advocated by Senator Lugar and I would reduce 
the potential for proliferation of fissile materials and reduce 
the prospect of nuclear weapons falling into the hands of the 
world's most dangerous people.
    Of equal importance, our approach would cut short the 
debate over nuclear technology rights. Every nation would have 
access to civilian nuclear power, so long as they are willing 
to abide by conditions that protect global security. Countries 
that refuse fuel bank services would come under immediate 
suspicion about their weapons intentions. For example, as you 
noted, Mr. Chairman, Iran currently contends that it is 
pursuing a civilian nuclear program to reduce its domestic oil 
consumption, thereby conserving its reserves for sale on the 
global market. If true, surely Iran would leap at the 
opportunity for a more affordable supply of nuclear fuel. Fuel 
bank services would provide Iran with a faster and cheaper path 
toward achieving their stated objective of a purely civilian 
nuclear program. Of course, if the pursuit of civilian nuclear 
power is a disingenuous pretext, something which many, 
including I, strongly suspect, that Tehran's true ambitions 
will be revealed, making it easier to rally world opinion for 
more aggressive action before it's too late.
    Our proposal for a civilian nuclear fuel bank minimizes the 
risk of inadvertent proliferation, maximizes the prospects for 
exposing subterfuges for intentional proliferation, and will 
help forge consensus for more rigorous steps, should they prove 
necessary.
    Finally, the Lugar-Bayh legislation strengthens the 
International Atomic Energy Agency's safeguard system, as 
Senator Lugar was pointing out. The IAEA labs that examine 
nuclear samples collected by the international inspectors are 
horribly outdated. Their nuclear scientists are working with 
1970s equipment amid dangerous working conditions. I was 
shocked to learn from Senator Lugar that the IAEA laboratory 
staff is actually limited in the time they can spend analyzing 
evidence in the nuclear area of the lab because of a 
dilapidated air-purification system.
    Our legislation makes critical--it makes a critical 
investment to see that this laboratory is refurbished. As more 
countries expand their nuclear power infrastructure, the IAEA 
laboratory will be responsible for inspecting a growing number 
of samples. They need first-rate facilities and modern 
equipment to carry out their critical work. If the cop on the 
beat doesn't have the tools to patrol the streets, then no one 
in the world's nuclear neighborhood will be safe.
    In conclusion, too often in Congress we wait for crises to 
develop before taking action. In a prenuclear age, perhaps we 
could get away with this type of reactive posture. But we are 
living in a different era today. We cannot afford to be 
complacent when it comes to preventing the spread of nuclear 
weapons. The consequences of delay or inaction in confronting 
this threat could have dire consequences for ourselves and for 
our children.
    I urge our colleagues to support this legislation, as this 
committee unanimously has, and hope we can bring this important 
legislation to a vote before the entire Senate when we return 
from our August recess.
    And, again, Senator Casey, I want to thank you and Senator 
Lugar for airing this important subject today.
    Thank you.
    Senator Casey. Senator Bayh, thank you very much for your 
presence here today, your testimony for the work on this bill 
and all of the issues that pertain to doing everything we can 
to prevent some of the nightmare scenarios that you and others 
today have outlined. Thank you very much.
    Senator Bayh. Thank you.
    Senator Casey. Next, we'll have Dr. Semmel, if he's 
available.
    Doctor, we want to welcome you to the hearing and to this 
committee, and we appreciate the work that you've done, here in 
the Senate and the executive branch, on this critical issue. 
And we want to give you the time you need to make your 
statement, and then we'll have some questions.
    Thank you.

    STATEMENT OF DR. ANDREW SEMMEL, ACTING DEPUTY ASSISTANT 
SECRETARY FOR NUCLEAR NONPROLIFERATION POLICY AND NEGOTIATIONS, 
              DEPARTMENT OF STATE, WASHINGTON, DC

    Dr. Semmel. Thank you, Mr. Chairman.
    Let me say, first of all, that I will abbreviate my 
statement somewhat in order to save some time, but I will 
concentrate on focusing on the question of the strength of the 
IAEA to do its mission, and, second, on the nuclear fuel supply 
issue.
    I also should say, at the outset, that, while I'm not a 
Hoosier, I do know that, as a result of working both on this 
committee's staff and for Senator Lugar for close to 15 years, 
I do feel somewhat an honorary Hoosier, nonetheless. And thank 
you for that introduction.
    Senator Casey and Senator Lugar, members of the committee 
who are not here, thank you for this opportunity to testify at 
this hearing on safeguarding nuclear energy and 
nonproliferation challenges.
    In his speech at the National Defense University, in 
February 2004, President Bush highlighted the importance of 
nuclear nonproliferation for American security in the post-9/11 
world. He described how the subjects of this hearing--
strengthened IAEA safeguards and assurance of reliable fuel 
supplies--support our nonproliferation policies. We must, the 
President stated, ensure that the IAEA has the tools it needs 
to fulfill its essential mandate. At the same time, he called 
for the creation of a safe, orderly system to field civilian 
nuclear plants without adding to the danger of weapons 
proliferation.
    To this end, he proposed that the world's leading nuclear 
exporters should ensure that states have reliable access at 
reasonable cost to fuel for civilian reactors, so long as those 
states renounce enrichment and reprocessing. Enrichment and 
reprocessing, he said, are not necessary for nations seeking to 
harness nuclear energy for peaceful purposes.
    Since the time of that speech, the promotion of these 
measures has been an important part of our nonproliferation 
policies. In this regard, we welcome the bill just discussed by 
Senator Bayh, the Lugar-Bayh bill, that is the focus of this 
hearing.
    In particular, I would like to call attention, in that 
legislation, to declaration of new policy, in section 102(b) of 
that bill, which reads, ``It shall be the policy of the United 
States to discourage the development of enrichment and 
reprocessing capabilities in additional countries, encourage 
the creation of bilateral and multilateral assurances of 
nuclear fuel supply, and ensure that all supply mechanisms 
operate in strict accordance with the IAEA safeguard system, 
and do not result in any additional unmet verification burdens 
for the system.''
    We're actively pursuing these goals through diplomacy and 
under existing constitutional and statutory authorities. We 
have already taken important measures to strengthen the IAEA 
safeguards and develop reliable fuel supply mechanisms.
    Let me focus on IAEA safeguards. As is pointed out in the 
Lugar-Bayh bill, in S. 1138, the array of challenges facing the 
IAEA safeguards in recent years is likely to continue and to 
require more safeguards resources in the future.
    First, the IAEA has been conducting prolonged and intensive 
investigations dealing with noncompliance, which it must 
undertake with the highest priority. The circumstances in Iran, 
and now, once again, with the DPRK, are well known to all of us 
here.
    Second, the number and size of declared nuclear activities 
under safeguards continue to grow. The agency is required, by 
legally binding safeguards agreements, to perform these 
activities. In the short term, the IAEA is being asked to 
safeguard large new fuel cycle facilities in Japan, and we also 
expect growth in safeguards activities in new areas, such as 
India. In the longer term, there is renewed interest worldwide 
in nuclear energy as an important component of the world's 
energy supply, and the number and size of nuclear facilities 
around the world will continue to grow, and likely accelerate.
    Third, the recent efforts to strengthen safeguards requires 
new safeguards activities. As more states bring safeguards 
agreements and additional protocols into force or adhere to 
strengthened versions of safeguards agreements, the agency's 
workload will increase, and does increase.
    Fourth, new safeguards activities require efficient, 
effective, and state-of-the-art technological, methodological 
information and communications infrastructure in support of its 
verification regime. Some of this infrastructure is provided 
for in the agency's regular budget. However, the IAEA must rely 
upon voluntary contributions from donor states to purchase 
other equipment and services to carry out its verification 
function.
    To address these challenges, the IAEA relies on funding 
from its regular budget and voluntary contributions. The United 
States has consistently been a strong supporter of the IAEA--
both the executive branch and the Congress have been of one 
mind on this and its verification activities, in particular. 
However, the distribution of the regular budget funding between 
verification activities and other agency activities is often a 
source of contention at the IAEA, with many developing 
countries relentlessly arguing for more resources to be devoted 
to technical cooperation.
    In 2003, a U.S. initiative resulted in an increase in the 
agency's regular budget, of approximately 20 percent, that was 
spread out over the last 4 years. This overcame, for the moment 
at least, the longstanding practice of zero real growth of the 
agency's regular budget. For 2008 and 2009, the agency 
requested an 8.5-percent increase in its regular budget. About 
a quarter of this increase was aimed at safeguards, and half of 
the remaining amount was for expenses, such as computer 
systems, that support the agency activities. However, the board 
of governors reduced this request down to 4.2 percent for 2008 
and 2009. This amount totals something like 1.4 percent in real 
growth in the agency's budget.
    Given the constraints in the regular budget, a significant 
portion of the agency's safeguards budget is derived from 
voluntary contributions. The United States is, by far, the 
largest contributor. This year, we're providing $53 million in 
voluntary contributions, including $21 million for safeguards. 
The safeguards contribution includes $14 million for the U.S. 
Program of Technical Assistance to IAEA Safeguards--the acronym 
is POTAS--and for funding sample analysis and safeguards 
equipment. There is also, in this amount, $3 million to be used 
as needed, for the DPRK.
    It's likely the agency will face challenges with regard to 
funding--finding additional and adequate resources in the 
future. The IAEA director general noted, in his June statement 
at the board of governors, that he believes that, and I quote, 
``The agency remains underfunded in many critical areas, a 
situation which, if it remains unaddressed, will lead to a 
steady erosion of our ability to perform key functions, 
including in the verification and safety fields. To this end, 
and to remedy this unsustainable situation,'' the director 
general said, ``I have initiated a study to examine the 
programmatic and budgetary requirements of the agency over the 
next decade or so. A solution to the long-term funding question 
will necessarily involve a variety of technical, institutional, 
and political elements.''
    Now, turning to--from the support for the IAEA safeguards 
to the promotion of reliable fuel supply, the administration 
has also used existing authority to actively pursue the 
development of fuel supply mechanisms for countries that forgo 
enrichment and reprocessing. The role of fuel supply mechanisms 
in nonproliferation policy was succinctly stated by the IAEA 
Director General, Mohamed ElBaradei as follows: ``By providing 
reliable access to fuel at competitive prices, we remove the 
incentive for countries to develop indigenous fuel cycle 
capabilities, and address concerns about dissemination of 
sensitive fuel cycle technologies.''
    I might point out, as noted in S. 1138, in 2005 the United 
States announced plans to downgrade 17.4 metric tons of highly 
enriched uranium, excess to our defense needs, to establish a 
reserve in support of the fuel supply assurances. The amount of 
HEU will produce some 290 metric tons of low-enriched uranium 
at a current market price, we're told by DOE, valued at about 
$1 billion. This was followed, in 2006, by several fuel supply 
initiatives.
    On May 1 of last year, the United States, France, Russia, 
Germany, the Netherlands, and the United Kingdom submitted to 
the IAEA a concept for reliable access to nuclear fuel. Under 
this six-country proposal, the IAEA would have a key role in 
facilitating new commercial arrangements if a country should 
find its fuel supply interrupted for reasons other than failure 
to comply with its nonproliferation obligations. As a last 
resort, reserves of nuclear fuel held nationally or by the IAEA 
could act as a backup mechanism. Eligibility to receive fuel 
supply would be based, among other things, on a country's 
record of compliance with the IAEA safeguards, its acceptance 
of international nuclear safety standards, and its reliance on 
international market, rather on indigenous sensitive fuel cycle 
activities.
    In the fall 2006, the United States participated in an IAEA 
special event on fuel supply assurances in Vienna. At that 
event, as noted in the legislation--the proposed legislation--
the Nuclear Threat Initiative announced plans to contribute $50 
million to the IAEA to help create a low-enriched uranium 
stockpile owned and managed by the IAEA, but made it contingent 
upon matching funds of $100 million in funding or an equivalent 
value of LEU from other sources. The United States supports 
this proposal to create the LEU stockpile administered by IAEA.
    To address fuel assurances over the long run--or the longer 
run--in February 2006, the United States announced the Global 
Nuclear Energy Partnership, or, as it's come to be called, the 
GNEP. Under GNEP, the United States, with other partner 
nations, would develop advanced nuclear fuel technologies that 
would result in less waste, more energy without pollution or 
greenhouse gas emissions, and reduce the risk of proliferation. 
When these technologies are fully deployed, states with 
advanced fuel cycle capabilities would join together to provide 
comprehensive, reliable fuel services to countries that choose 
not to pursue enrichment and reprocessing.
    Earlier this month, on July 3, President Bush and President 
Putin of Russia, issued a Joint Declaration on Nuclear Energy 
and Nonproliferation. Under the joint initiative, the United 
States and Russia will work together, with other nuclear 
supplier states, to develop mutually beneficial approaches for 
states considering nuclear energy, including the provision of 
reliable nuclear fuel services.
    Mr. Chairman, at this point in time, I will skip the next 
section in my statement in order to save time, and the next 
section deals more explicitly with S. 1138, and provides a 
description and some analysis of that legislation. And I'll 
just leave that with the committee.
    But let me just note, at this point in time, that, once 
again, the overall objectives of this bill--to enhance nuclear 
safeguards and to provide assurances of nuclear fuel supply to 
countries that forgo certain fuel cycle activities--comport 
very well with the policy objectives of this administration.
    Mr. Chairman, let me conclude by emphasizing, once again, 
the importance of nuclear nonproliferation for the security of 
the United States, both strong IAEA safeguards and the creation 
of reliable fuel supply mechanisms can make an important and 
effective contribution to preventing the spread of nuclear 
weapons. The potential of the latter was highlighted by 
President Bush in the 2004 speech that I alluded to, and every 
other administration since the founding of the IAEA has 
supported strong IAEA safeguards.
    Again, let me say that we welcome and appreciate the 
support for these policies reflected in S. 1138, and are more 
than willing to work with the committee and the staff to help 
move this forward.
    Thank you.
    [The prepared statement of Dr. Semmel follows:]

   Prepared Statement of Dr. Andrew Semmel, Acting Deputy Assistant 
      Secretary of State for Nuclear Nonproliferation Policy and 
           Negotiations, Department of State, Washington, DC

                              introduction

    Senator Casey, Senator Lugar, and members of the committee, thank 
you for the opportunity to testify at this hearing on ``Safeguarding 
the Atom: Nuclear Energy and Nonproliferation Challenges.'' In his 
speech at the National Defense University in February 2004, President 
Bush highlighted the importance of nuclear nonproliferation for 
American security in the post-9/11 world. He described how the subjects 
of this hearing--strengthened IAEA safeguards and assurance of reliable 
fuel supplies--support our nonproliferation policies. ``We must,'' the 
President stated, ``ensure that the IAEA has all the tools it needs to 
fulfill its essential mandate.'' At the same time he called for the 
creation of ``a safe, orderly system to field civilian nuclear plants 
without adding to the danger of weapons proliferation.'' To this end, 
he proposed that ``the world's leading nuclear exporters should ensure 
that states have reliable access at reasonable cost to fuel for 
civilian reactors, so long as those states renounce enrichment and 
reprocessing. Enrichment and reprocessing are not necessary for nations 
seeking to harness nuclear energy for peaceful purposes.''
    Since the time of that speech, the promotion of these measures has 
been an important part of our nonproliferation policies. The bill that 
is the focus of this hearing, S. 1138, the ``Nuclear Safeguards and 
Supply Act of 2007,'' also seeks to advance these goals. In particular 
I would call attention to the ``declaration of new policy'' in section 
102(b) of the bill, which reads: ``It shall be the policy of the United 
States to discourage the development of enrichment and reprocessing 
capabilities in additional countries, encourage the creation of 
bilateral and multilateral assurances of nuclear fuel supply, and 
ensure that all supply mechanisms operate in strict accordance with the 
IAEA safeguards system and do not result in any additional unmet 
verification burdens for the system.'' We are actively pursuing these 
goals through diplomacy and under existing constitutional and statutory 
authority. We have already undertaken important measures to strengthen 
the IAEA safeguards and develop reliable fuel supply mechanisms.

                            iaea safeguards

    As pointed out in S. 1138, the array of challenges facing the IAEA 
safeguards system in recent years is likely to continue and require 
more safeguards resources in the future.
    First, the IAEA has been conducting prolonged and intensive 
investigations dealing with noncompliance which it must undertake with 
high priority; the circumstances in Iran and now, once again, with the 
DPRK are well known to you.
    Second, the number and size of declared nuclear activities under 
safeguards agreements continue to grow. The agency is required by 
legally binding safeguards agreements to perform most of these 
activities. In the short term, the IAEA is being asked to safeguard 
large new fuel cycle facilities in Japan, and we also expect growth in 
safeguards activities in new areas, such as India.
    In the longer term, as pointed out in S. 1138, there is renewed 
interest worldwide in nuclear energy as an important component of the 
world's energy supply, and the number and size of nuclear facilities 
around the world will continue to grow, and likely accelerate.
    Third, the recent efforts to strengthen safeguards require new 
safeguards activities. As more states bring safeguards agreements and 
Additional Protocols into force, or adhere to strengthened versions of 
safeguards agreements, the Agency's workload increases.
    Fourth, new safeguards activities require efficient, effective, and 
state-of-the-art technological, methodological, information and 
communication infrastructure in support of its verification regime. 
Some of this infrastructure is provided in the Agency's regular budget; 
however, the IAEA must rely on voluntary contributions from donor 
states to purchase other equipment and services to carry out its 
verification function.
    To address these challenges the IAEA relies on funding from its 
regular budget and voluntary contributions. The United States has 
consistently been a strong supporter of the IAEA, and its verification 
activities in particular. However, the distribution of regular budget 
funding between verification activities and other Agency activities is 
often a source of contention, with many developing member states 
relentlessly arguing that more resources should be allocated for 
technical cooperation.
    In 2003, a U.S. initiative resulted in an increase in the Agency's 
regular budget of approximately 20 percent, spread out over the last 
few years. Much of this increase was allocated toward safeguards.
    For 2008-2009, the Agency requested an 8.5-percent increase in its 
regular budget. About a quarter of this increase was for safeguards, 
and over half of the remaining amount was for expenses (such as 
computer systems) that support all IAEA activities. However, the Board 
of Governors agreed to a 4.2-percent increase for 2008-2009, but this 
amounts to just 1.4 percent of which is real growth in the Agency's 
budget.
    Given the constraints in the regular budget, a significant portion 
of the Agency's safeguards budget is derived from voluntary 
contributions. The United States is by far the largest contributor; 
this year we are providing $53 million in voluntary contributions, 
including about $21 million for safeguards. The safeguards contribution 
includes $14 million for the U.S. Program of Technical Assistance to 
IAEA Safeguards--POTAS--and funding for sample analysis and safeguards 
equipment. There is also about $3 million to be used, as needed, in the 
DPRK.
    It is likely the Agency will face challenges with regard to finding 
adequate resources in the future. The IAEA Director General noted in a 
June statement that he believes that ``. . . the Agency remains 
underfunded in many critical areas, a situation which, if it remains 
unaddressed, will lead to a steady erosion of our ability to perform 
key functions, including in the verification and safety fields. To this 
end and . . . to remedy this unsustainable situation, I have initiated 
a study to examine the programmatic and budgetary requirements of the 
Agency over the next decade or so.'' A solution to the long-term 
funding question will necessarily involve technical, institutional, and 
political elements.

                          reliable fuel supply

    Turning from support for IAEA safeguards to the promotion of 
reliable fuel supply, the administration has also used existing 
authority to actively pursue the development of fuel supply mechanisms 
for countries that forgo enrichment and reprocessing. The role of fuel 
supply mechanisms in nonproliferation policy was succinctly stated by 
IAEA Director General Mohamed ElBaradei as follows: ``By providing 
reliable access to . . . fuel at competitive market prices, we remove 
the incentive for countries to develop indigenous fuel cycle 
capabilities . . . and [address] concerns about dissemination of 
sensitive fuel cycle technologies.''

                              u.s. actions

    As noted in section 203(2) of S. 1138, in 2005 the United States 
announced plans to downblend 17.4 metric tons of highly enriched 
uranium excess to our defense needs to establish a reserve in support 
of fuel supply assurances. This amount of HEU will produce about 290 
metric tons of low-enriched uranium, and at current market prices is 
valued at over $1 billion. This was followed in 2006 by several major 
fuel supply initiatives. On May 31 of that year, the United States, 
France, Russia, Germany, the Netherlands, and the United Kingdom 
submitted to the IAEA a concept for reliable access to nuclear fuel. 
Under this six-country proposal, the IAEA would have a key role in 
facilitating new commercial arrangements if a country should find its 
fuel supply interrupted for reasons other than failure to comply with 
its nonproliferation obligations. As a last resort, reserves of nuclear 
fuel, held nationally or by the IAEA, could act as a backup mechanism. 
Eligibility to receive fuel supply would be based, among other things, 
on a country's record of compliance with IAEA safeguards, its 
acceptance of international nuclear safety standards, and its reliance 
on the international market rather than on indigenous sensitive fuel 
cycle activities.
    In the fall 2006, the United States participated in an IAEA 
``Special Event'' on fuel supply assurances in Vienna. At that event, 
as noted in section 203(3) of S. 1138, the Nuclear Threat Initiative 
announced plans to contribute $50 million to the IAEA to help create a 
low enriched uranium stockpile owned and managed by the IAEA, but made 
it contingent on matching funds of $100 million in funding or an 
equivalent value of LEU from other sources. The United States supports 
this proposal to create an LEU stockpile administered by the IAEA.
    To address fuel assurances over the longer term, in February 2006 
the United States announced the Global Nuclear Energy Partnership, or 
GNEP. Under GNEP, the United States, with other partner nations, would 
develop advanced nuclear fuel technologies that will result in less 
waste, more energy without pollution or greenhouse gas emissions, and 
reduced risk of proliferation. When these technologies are fully 
deployed, states with advanced fuel cycle capabilities would join 
together to provide comprehensive, reliable fuel services to countries 
that choose not to pursue enrichment and reprocessing, to ensure the 
availability of fuel, and a commitment to take back spent fuel.
    Earlier this month, on July 3, President Bush and President Putin 
of Russia issued a Joint Declaration on Nuclear Energy and 
Nonproliferation. Under the Joint Initiative, the United States and 
Russia will work together with other nuclear supplier states to develop 
mutually beneficial approaches for states considering nuclear energy, 
including the provision of reliable nuclear fuel services.

                                s. 1138

    I would like to focus the remainder of my comments more narrowly on 
the text of S. 1138. Let me begin by noting once again that the overall 
objectives of this bill--to enhance nuclear safeguards and to provide 
assurances of nuclear fuel supply to countries that forgo certain fuel 
cycle activities--comport well with the policy objectives that the 
administration is seeking to achieve. However, some individual 
provisions raise issues which we believe could make it more difficult 
to achieve these objectives. My comments are offered with the intention 
of further improving this legislation.
    We agree generally with the various assessments in section 101 
identifying challenges facing the IAEA's safeguards regime. The United 
States and the IAEA are working to strengthen safeguards by seeking 
universal adherence to the Additional Protocol and by upgrading the 
Small Quantities Protocols. We welcome the attention given to the 
IAEA's human capital problems, an area we have repeatedly raised with 
the Agency. This is a concern not only for the operation of the 
Safeguards Analytical Laboratory, or SAL, in Seibersdorf, Austria, but 
more generally for the IAEA Safeguards Department as a whole.
    Turning to section 103 of the bill, we agree that there is a need 
for carefully considered upgrades to SAL. It is not clear, however, 
that expending the full $10 million solely on the refurbishment or 
replacement of SAL, as proposed by section 103(a), would be the most 
effective way to strengthen the IAEA's analytical capabilities. In 
November 2006, the IAEA held a workshop at SAL, attended by laboratory 
experts from member states, to determine what should be done to ensure 
that SAL would be able to continue to perform its mission. These 
experts generally agreed that while some infrastructure upgrades were 
needed, and the possibility of expansion should be considered, there 
was no pressing need for an entirely new laboratory. U.S. experts 
believe that the biggest threat to SAL's analytical capabilities is not 
the age of the equipment, which, if properly maintained, can have a 
long service life. Rather, it is the availability of qualified staff to 
run the machines and interpret the results, a problem also identified 
in section 101(13). We also understand that the Director General of the 
IAEA has set up a committee to further review the need for improvements 
at SAL. We therefore suggest the funds be targeted more flexibly, to 
address not just the refurbishment of SAL, but also to meet other IAEA 
safeguards equipment and personnel needs.
    I would note with regard to section 104 of the bill, that the U.S. 
Program of Technical Assistance to IAEA Safeguards, or POTAS, is a 
well-established program, by far the strongest in the world, supporting 
the technical implementation of IAEA safeguards and safeguard-related 
R&D. The current level of sophistication of IAEA safeguards is due in 
no small part to the contributions made by the U.S. support program 
over approximately 30 years. We fully agree with the objectives 
indicated in that section and the need for a strong U.S. technology 
base. This is of fundamental importance to continuing U.S. leadership 
and the credibility of the IAEA safeguards system.

                           s. 1138: title ii

    As a general matter, we welcome the support for our efforts to 
establish reliable nuclear fuel supply mechanisms provided by title II. 
We also welcome the support in section 203 for the concept of an 
international fuel bank involving the IAEA. However, we believe that 
title II should instead be drafted as a resolution expressing the sense 
of Congress, or as Statements of Policy, because, as section 201(c) 
makes clear, this legislation is not intended to provide any authority 
additional to that under the Atomic Energy Act or other preexisting 
laws and regulations. The President already has the authority to work 
both bilaterally and multilaterally toward achieving such mechanisms, 
and such efforts are well underway.
    In our discussions at the IAEA and elsewhere, we have found that 
other countries are deeply sensitive to whether a fuel supply mechanism 
will impose actual or apparent limitations on their sovereignty. 
Avoiding the appearance of such limits will be important in determining 
whether or not a supply mechanism will be widely accepted. Section 
201(a) of the bill acknowledges the importance of honoring national 
sovereignty by stating that fuel supply mechanisms should be open to 
states that ``decide'' to forgo enrichment and reprocessing.
    However, section 201(b) describes several factors that, if 
incorporated into legislation on fuel supply mechanisms, will almost 
certainly be perceived as an effort to erode the sovereignty of 
potential recipients. For example, it is unclear whether section 
201(b)(7) contemplates that all the legal restrictions on retransfer of 
U.S.-origin nuclear material should apply to transfers of foreign-
origin nuclear material funded in whole or in part by United States 
contribution. If this is the intent of the provision, consideration of 
this factor may make it more difficult, as a practical matter, for the 
United States to financially support an IAEA fuel bank as proposed by 
the Nuclear Threat Initiative in 2006.
    Moreover, section 201(b)(9) provides that the supply mechanism 
should take into account whether potential recipients have export 
controls ``comparable'' to our own. Section 201(b)(10) provides the 
mechanism to take into account the ``conformity'' of the recipient 
state's safety and regulatory regimes with similar U.S. laws and 
regulations. Legislation containing these or similar provisions would 
likely be seen by other States as an unacceptable attempt to impose our 
domestic standards, rather than internationally accepted standards, and 
may ultimately be counterproductive to our efforts.
    The required ``Report on the Establishment on an International Fuel 
Authority'' in section 202(a) can make an important contribution to the 
discussion of nuclear fuel supply assurances. The issues identified as 
requiring evaluation in section 202(b) are important ones. However, 
producing a solid and credible report will require significant time and 
resources, both financial and personnel. We are frankly concerned about 
our ability to produce a quality report in the timeframe specified in 
section 202(a).
    At the June meeting of the IAEA Board of Governors, the Secretariat 
provided members of the Board with a draft report on fuel supply 
mechanisms and the potential role of the IAEA. This report will be 
discussed and debated at subsequent meetings of the Board. The 180-day 
deadline in section 202(a) may not be long enough for the report to 
Congress to take account of the debate and decisions of the Board on 
fuel supply. We suggest that a deadline of 365 days, with a brief 
progress report after 180 days, might be a more realistic timeframe.

                               conclusion

    Let me conclude by emphasizing once again the importance of nuclear 
nonproliferation policy for the security of the United States. Both 
strong IAEA safeguards and the creation of reliable fuel supply 
mechanisms can make an effective contribution to preventing the spread 
of nuclear weapons. The potential of the latter was highlighted by 
President Bush in 2004, and every U.S. administration since the 
founding of the IAEA has supported strong IAEA safeguards. We welcome 
the support for these policies reflected in S. 1138.

    Senator Casey. Doctor, thank you very much for your 
testimony.
    We'll start questions now, and we'll start with 7-minute 
time periods. And I'll start and ranking member, Senator Lugar, 
will follow me and we'll see from there where we go.
    Doctor, you and others today have highlighted this question 
of worldwide demand in the growth of nuclear power and the 
urgency that some countries feel to have a reliable source of 
energy. Currently, there are 435 commercial nuclear powerplants 
operating in 30 countries around the globe, with a combined 
capacity of 370 gigawatts, or approximately 16 percent of the 
world's electricity. We have states like China, India, 
Pakistan, Japan, Russia, the Republic of Korea, and the United 
States all stating their intention to expand their nuclear 
power sectors. And then, we have several other states--namely, 
Egypt, Jordan, Nigeria, Indonesia, and Turkey--announcing 
intentions to build their first nuclear reactors. Now, many of 
these countries are planning or constructing enrichment or 
reprocessing facilities. They're doing that for the first time.
    Doctor, the first question I'd ask is: By how much, and 
where, will nuclear power expand globally in the coming two 
decades? If you can elaborate on what I just outlined.
    Dr. Semmel. Thank you, Senator.
    We know that all the forecasts that have been made by those 
who watch this issue very closely are that there will be this 
expansion that you alluded to. There is agreement that the 
countries you listed--you mentioned in your preface to your 
question, China and South Korea, and--certainly have intentions 
to build new power reactors in large numbers, particularly in 
China. I think it's very likely that we'll see a growth in the 
number of power reactors in India in the coming future. 
Obviously, there will be a growth, as we saw even in the 
Washington Post this morning, the front page--there would be 
growth in the number of reactors here in the United States and 
in Russia, and in a number of other countries. I think, in the 
case of France, which I believe derives something like 70 
percent of its electricity from nuclear power--it may be the 
largest country that does that--will probably hold steady and 
perhaps have some limited growth.
    The other countries you mentioned--Egypt, Turkey, Jordan--
Jordan, there was a Jordanian delegation that came to see us 
not too long ago, expressing some interest in developing some 
nuclear capabilities. Vietnam is another country--Yemen, 
Turkey, too. These are countries that have expressed an 
interest to begin to develop power reactors in their countries. 
I would say, on that score, Senator, that, given the lack of 
infrastructure in the latter set of countries that I just 
mentioned, the prospect of their having nuclear facilities in 
operation would probably be at least a decade or more in the 
future, rather than something that we would face immediately.
    So, I think you--those are the countries you mentioned--I 
think those are the right countries. We are certainly going to 
see an upward growth in interest in nuclear energy that would 
be reflected in the number of nuclear reactors that countries 
will have; yes.
    Senator Casey. And are there countries that you would add 
to that list--I know you mentioned two that I had not, Yemen 
and Vietnam, and maybe one other--but is----
    Dr. Semmel. I'm sorry?
    Senator Casey [continuing]. The combined list that we both 
outlined, you don't think you'd add any other countries to 
that.
    Dr. Semmel. Well, there may be others out there. I think 
there's a growing interest in this for countries that want to 
engage in deriving nuclear power that is environmentally 
friendly, that it's not going to emit emissions. I suspect, in 
some of the more--even in the nuclear weapons states, we're 
going to see a growth in nuclear reactors. Certainly, that's 
the case here in the United States--we'll see substantial 
growth--and in Russia, as well, and China.
    Senator Casey. Then, when you juxtapose that demand and 
that reality with the ability of the United States, and 
certainly the ability of the IAEA, to deal with this challenge, 
what can you tell us about that? How do you--what do you see? 
If you were looking forward into the future, as it stands now, 
with the current capacity and budget and infrastructure and all 
of the factors that we would analyze with regard to what the 
IAEA can do, as well as what the United States is currently 
doing, and able to do, what's your analysis of that--in other 
words, the current capacity to deal with a real threat, in 
terms of the demand for nuclear power?
    Dr. Semmel. In terms of the real threat, I think there's 
much that needs to be done. I think some of the proposals--the 
proposals, certainly, that are in the legislation that Senator 
Bayh described earlier, are critical components of dealing with 
that threat. We certainly--as a very high priority--we 
certainly don't want countries that have aspirations for 
developing nuclear power to develop their nuclear fuel cycle by 
getting access to enrichment and reprocessing technology. That 
is very, very high priority, in terms of our nonproliferation 
approach to the nuclear issue. In some of the countries that we 
mentioned, I think you will find that the expansion in these 
countries may be contingent upon a number of things. We've--I 
mentioned a number of countries, you've mentioned a number of 
countries, but I think the reality is that this growth that we 
anticipate is likely to be conditioned by a number of other 
factors, not the least of which would be domestic sensibilities 
in certain countries, access to capital--it's very expensive to 
build nuclear reactors--the question of whether countries, like 
the latter list of countries I mentioned, have the appropriate 
infrastructure to be able to actually build and maintain and 
run, and manage satisfactorily, nuclear reactors, remains to be 
seen. That's why I say, these countries are not likely to have 
nuclear reactors, power reactors for some time, for a decade or 
so, until they develop this necessary infrastructure.
    So, a number of countries have to build up from the base 
because they lack that infrastructure at this point in time. 
So, these are the kinds of factors, I think, that will be 
critical in shaping the growth rate trends that we're likely to 
see over time.
    Senator Casey. My time is up, but I'll come back. Thank 
you.
    Dr. Semmel. Sure.
    Senator Lugar.
    Senator Lugar. Well, thank you very much, Mr. Chairman. I 
would just mention what is, I suppose, obvious, but probably 
important to say, in terms of common sense, as to why the 
American public would be interested in the subject that we are 
discussing today. And it comes down to this, that, as a 
country, we're busy proposing to the Chinese, to the Indians, 
to others, that they utilize nuclear power to a much greater 
extent. We believe that this is important as we take a look at 
the climate change issue, as well as the fact that the scarce 
resources of the Earth could bring about a vast contest among 
nations, and potential conflict, if we and they are not 
thoughtful about the sources of energy that are going to be 
required; in this particular case, electricity.
    And so, as a result, even as we push nations who already 
have these supplies, in part--and industries--to do more, we 
are also stimulating interest and demand of other nations that 
may not have gotten into the nuclear business; or, if they 
have, have slid in through the side door in ways that may not 
be desirable. So, in an international way, the IAEA is 
mentioned again and again as a party that deals not as a United 
States fuel bank, but as an international fuel bank in which we 
encourage that, and we encourage a budget for IAEA, and the 
staff and the facilities and what have you, to do their jobs, 
so that there can be an umpire in this huge international 
contest, in essence, to make certain that the fuel is available 
at reasonable prices, but that it's used for peaceful purposes, 
and that the other side of the bargain is that you do not 
progress on to try to enrich uranium and build nuclear weapons.
    Now, that's a fairly simple focus, but it's a profoundly 
important one as all the nations of the world try to divine 
their foreign policies and their security policies. And it's 
important, really, to be able to state it forthrightly and 
clearly so that every nation knows where we are headed, what 
our support is, and what we are prepared to do, really, to 
enhance this international understanding.
    Now, you've stated that very well in your testimony, Dr. 
Semmel, as has my colleague Evan Bayh, but let me just ask 
these questions.
    The administration--our administration has taken steps 
toward creation of a nuclear fuel bank with an announcement by 
the Department of Energy it's awarded a contract to download 
17.4 metric tons of United States highly enriched uranium and 
store this material for use in a reliable fuel supply program. 
Material would be converted to low-enriched uranium and 
administered by the IAEA. Has the administration done, just in 
terms of the nitty-gritty of this, a legal analysis of its 
proposed approach to ensure that all U.S. laws and regulations 
will be met? And, if not, which of these need to be changed to 
permit fuel supply to certain countries? And, if you do not 
have the answer on top of your head, would you furnish the 
committee with such analysis for the benefit of our record?
    Dr. Semmel. Thank you for the last part of that question, 
Senator. We will get you a response on that, in detail.
    Senator Lugar. I think it's important----
    Dr. Semmel. Yes.
    Senator Lugar [continuing]. Just as we round out all parts 
of this approach.
    [The written information submitted by Dr. Semmel follows:]

    The administration has been and will continue to be sensitive to 
the need to comply with existing laws and regulations when implementing 
any mechanism for fuel supply assurances to other countries. The legal 
analysis process will continue as the details of the various proposals 
are developed in discussions at the IAEA and elsewhere. In particular, 
we will want any fuel supply mechanism we support to have strong 
nonproliferation obligations as a condition of supply and we will 
continue to press for a mechanism that will enable the greatest 
possible U.S. involvement, consistent with our existing laws and 
regulations. However, until the details of such a mechanism are worked 
out we will not be in a position to evaluate whether any specific 
changes in the law would be required to support a program beneficial to 
our nonproliferation goals.

    Now, in May of this year, I wrote to Secretaries Rice and 
Gates questioning why it's taken more than 8 months since the 
passage of implementing legislation for the U.S. Additional 
Protocol for the administration to bring it into force. A month 
later, I was given a response from the State Department which 
essentially said that all regulations were not yet completed. 
Two months later, the Department of Defense wrote to me, 
stating they were waiting for the Departments of Commerce and 
others to finalize the regulations. Can you give us any 
indication by what date all the necessary regulations from all 
the necessary Departments will have been approved to implement 
the U.S. Additional Protocol?
    Dr. Semmel. Thank you, Senator.
    Let me say, first of all, thank you for responding to 
President Bush's urgings in February 2004, and the response 
that the Foreign Relations Committee and the Senate was very 
rapid in terms of providing its advice and consent on the 
Additional Protocol by the end of March 2004; a very 
expeditious response. And the implementing legislation that was 
passed December of last year puts us on a fairly high level to 
move the additional protocol forward, in terms of ratification 
down the line. It's my understanding on this that the 
Department of Commerce and the Department of Defense, 
Department of Energy, are deeply involved in looking at all the 
requirements that are built into the implementing legislation. 
This is a very costly process. I know the Department of 
Commerce commented to us in the past of how expensive it really 
is for them to do the vulnerability assessments and the like.
    I can't give you a precise timetable. If we were to get 
these necessary elements of the implementing legislation done 
in a reasonable way, I would suspect that we would not be able 
to do it before the end of the year, as I'm told by those who 
are responsible for the mechanics of getting this information--
deriving this information. It likely would be sometime next 
year, but I can't precisely predict that.
    I'm as interested as you expressed to move this legislation 
quickly. I think, with the United States ratifying the 
Additional Protocol, it sends a signal to other countries that 
have not yet either signed an additional protocol or put one in 
force, that we had done this. I think this is a positive sign. 
And, of course, this is what we want other countries to do.
    So, we ought to act expeditiously by example. I'm hoping we 
can move this process. I can tell you that there is 
considerable amount of energy being devoted to fulfilling the 
requirements of the implementing legislation so that we can get 
the necessary regulatory measures in order.
    Senator Lugar. Well, I thank you for that response. You've 
acknowledged how important this is. One of the purposes of our 
legislation we're considering today is, once again, to try to 
bring some unity with all of these different aspects. But this 
is something on which we've taken action, and the 
administration asked us to take action. And so, we will 
continue to try to monitor this in our oversight capacity, 
which you understand, we are very hopeful that the 
administration will move forward more rapidly.
    Let me yield to the chairman. I'll have a couple of more 
questions, if that's possible, in a second round.
    Senator Casey. Sure.
    Senator Lugar. Thank you.
    Senator Casey. Absolutely.
    Doctor, I wanted to return to some of the matters that we 
dealt with a few moments ago, and, in particular, one--for 
people watching this and listening or reading the testimony, I 
think they get a sense of what we're talking about here with 
regard to the challenge, generally, or globally, but also the 
particular challenge that the IAEA faces in being the one 
agency in the world that has to deal with this surge of demand 
for nuclear power and also the threat posed by terrorists, of 
course, and certainly in states like Iran, to abuse the 
process, or to use a civilian cover for what is a nuclear 
weapons intention. And I wanted to ask you just to--if you 
could, in very basic terms, to describe the current state of 
the IAEA with regard to--we've heard a lot about workforce, and 
the retirement or turnover of key personnel, their inability to 
bring in, sometimes, the expertise they need; Senator Bayh, in 
his testimony, referred to 1970s equipment or technology; and 
all of those kinds of descriptions. If you can just give us an 
assessment of--even if you have a short list or examples of 
what this means, in terms of what the IAEA has to--IAEA has to 
deal with every day, and how the United States can be a leader 
across the world in making sure that this shortfall on 
infrastructure or personnel or expertise or technology or 
equipment can be rectified rapidly because of the threat.
    Dr. Semmel. Well, thank you. I think--at the end of the day 
our interests are that the IAEA have the capability to be able 
to deter and detect undeclared facilities and activities in the 
world. And so, it has to have the capability to do that. And 
the capabilities range across a spectrum of issues, anywhere 
from those that you mentioned--you've got to have skilled 
practitioners and personnel, not only in the Seibersdorf 
Analytical Lab that was mentioned earlier, but also other 
managers and skilled personnel. You've got to have adequate 
resources to be able to buy the equipment, to pay salaries, to 
build infrastructure, so that it is a modern, up-to-date, 
skilled, smooth operation. You have to have the cooperation of 
the international community. It's very difficult. I mentioned, 
I think, in my opening statement about the difficulties, for 
example, of the IAEA securing anything close to what the 
Director General had proposed in his budget, which was an 8.5-
percent increase for the next biennium. The member states 
themselves, which operate in a consensus-based decision 
process, obviously did not agree with that. So, it's very 
difficult to get the international community to agree on the 
same priorities that we have, or that the Director General of 
the IAEA may have, as well. So, trying to convince the rest of 
the world that these are the high priorities that we know they 
are, is a very difficult process, and that requires a lot of 
diplomacy, occasional demarches, and so forth.
    We also have got to make an effort to ensure that the IAEA 
has the tools necessary to do its job; that countries have 
comprehensive safeguards agreements, which allows the IAEA to 
do the inspections, to gather information, to report on their 
activities, and so forth; that the countries sign on to, and 
put in force, additional protocols which allows the IAEA to do 
even more in terms of timely inspections, to gather more 
information that would otherwise not be available; to interview 
individuals to ensure that the materials that they have are not 
being diverted from peaceful to nonpeaceful purposes.
    These are the kinds of things that the IAEA needs; any 
organization that has a defined mission needs these kinds of 
attributes. And, in some cases as has been alluded, they're a 
need in the IAEA, and we, as the principal funder I might point 
out--we, the United States, as the principal funder--both the 
assessed budget as well in the voluntary budget--have been in 
the forefront of trying to provide these kinds of resources and 
these kinds of skills, equipment, technology, and the like.
    So, the credibility of the IAEA is absolutely essential to 
the strengthening of the nuclear nonproliferation regime. If 
the IAEA is unable to measure up to the changes that have taken 
place, that we've alluded to here, in terms of the growth of 
reactors, a growth in nuclear power, and the nexus between 
nuclear materials, nuclear weapons, and the desire on the part 
of terrorists to acquire them, or use them, and to deal with 
that issue by protecting physical plant, protecting the 
materials, I think the chances that--the consequence of that 
would be a weakening of the nonproliferation regime, and we 
don't want that to happen.
    Senator Casey. I've only got a little more than a minute, I 
want to get one more question in here. We'll try to come back 
to this, because I have others. But, in light of the recent 
news about the article 123 agreement and what the United States 
is doing with regard to India, do you have a concern about, and 
should we be concerned about, a perception of a double standard 
when we say this--we're saying what we're articulating today 
about the concern we have about proliferation, and then there 
are some countries around the world who raise questions about 
our agreement with India? And if you could--I know I only have 
about 30 seconds, I'll try to come back to it, as well--but 
what's your sense of that?
    Dr. Semmel. Well, this is an issue that's obviously been 
debated, not just out on the airways and the mass media and the 
think tanks, but also here in the Congress. Congress, in both 
Chambers last year, voted very strongly in both the House and 
the Senate, in support of the bill that would basically treat 
India as an exception to the standards that countries lacking 
full-scope safeguards ought to be treated.
    Without getting into the particulars of the 123 agreement, 
needless to say, it was a very difficult negotiation, it took 
several years. I think, on balance, when you measure the 
outcome, what comes out the back end of that negotiation, is 
that we're very pleased that India has made a number of 
commitments that it would not, perhaps, have otherwise made, in 
terms of adhering to a number of international nonproliferation 
standards--in the Nuclear Suppliers Group, in the Missile 
Technology Control regime, and others. So, I think one of the 
net effects of this initiative, from the positive standpoint of 
nonproliferation--and I don't want to oversell the 
nonproliferation gains here, I think it's implicit in your 
question--but one of the benefits is that we do bring India 
closer into what has been dubbed the mainstream of 
international nonproliferation practices. And I think that's 
clearly a net gain.
    The relationship between the United States and India goes 
beyond, obviously, the 123 agreement and the Civil Nuclear 
Cooperation Initiative. It has much to do with our 
relationship, our strategic relationship, in terms of what the 
world is evolving into in the next decade or so, with a country 
that has a burgeoning economy; a country that is the second 
largest population in the world, soon to be the largest, 
perhaps; a country that is a practicing democracy. These are 
all positives. I think that we need to solidify that 
relationship. And the Civil Nuclear Cooperation Initiative, 
which would allow India to begin to address its own energy 
problem in its growing economy is a very strong positive.
    Senator Casey. Thank you. I'm out of time, and I'm actually 
over.
    Senator Lugar. Why don't you just go ahead?
    Senator Casey. Well, I'll defer to the ranking member.
    Senator Lugar. Thank you, Mr. Chairman.
    Let me just follow through on some of the questions that 
the chairman has raised about the IAEA. You've discussed the 
budget problems, and the United States at least has attempted 
to be helpful, with an increase in our allocation. Obviously, 
the viability of the legislation we're discussing today is 
dependent upon the IAEA, because the United States would have 
made a conscious decision that the international community, as 
a whole, as represented by that agency, is going to be the 
major monitor of all of this. So, if, in fact, the facilities 
are inadequate, the budget is inadequate, we have a major 
problem to begin with.
    In other words, from the beginning, rather than being 
accused of unilateralism, in which we have the fuel bank here, 
the United States, everybody comes to the well here, and we 
take care of their needs, and so forth; we recognize the 
importance of the international understanding and the other 
parties involved, in the headquarters in Vienna and elsewhere. 
And so, that's an important foreign policy declaration, but 
this is why the budget situation is important.
    Now, you've pointed out that when the nations met to talk 
about the budget, and the director, Mr. ElBaradei, says, ``I 
need 8\1/2\ percent more,'' or whatever--so forth, they were 
not very forthcoming. Now, can you describe that process a 
little bit? What are the interests of the other nations 
involved in this? And how intense, really, is their interest in 
the IAEA? And, in the event we were to proceed with the 
assumption that this really does become the monitor of the fuel 
bank business, what confidence level can we, or anybody else, 
place in this monitoring agency if it has a need for 
international understanding each year simply to have a budget?
    Dr. Semmel. Senator, I agree, totally, with the premise of 
your question. If the IAEA's going to be preeminent in 
monitoring peaceful nuclear programs around the world, it has 
to have the resources and the capability to do that.
    In terms of the dynamics of what took place at the IAEA, it 
wasn't in those protracted budgetary discussions. We know about 
protracted budgetary discussions on the Hill. I can say that, 
back in 2004, the United States took the lead, in fact, 
eventually succeeded, after what I like to call a sort of, 
hand-to-hand combat, was able to increase the budget by 20 
percent over the 4 years, as I mentioned. It was not an easy 
task. And some of our friends, as well as others, were 
resistant to this budget increase. We saw the same reoccurrence 
of this phenomenon in this latest budget debate, which, again, 
took several sessions in the IAEA. There are a number of 
countries who simply, for a variety of reasons, don't want 
these funds to increase--they may have problems back home, so 
it's pure bureaucratic problems finding additional resources 
there that is not perceived to benefit any domestic needs, and 
so forth.
    But I'm surprised that there are a number of countries in 
Western Europe, for example, who have been resistant to budget 
increases. Many of the countries would like budget increases, 
but would like the funds allocated in different ways. And, if 
they're not going to be allocated in different ways, they're 
resistant to having those budget increases. For example, many 
of the nonaligned countries--so-called developing countries--
want substantially larger portions of those resources devoted 
to technical cooperation in the areas of medicine and health, 
environment, desalinization, and so forth.
    And if they don't perceive that these funds would move in 
that direction, they're more resistant to actually supporting 
increases. Now, many of these countries derive most of those 
benefits from the voluntary contribution, rather than from the 
regular budget, because the regular budget is geared more 
toward safeguards and salaries and the like.
    So, the dynamics vary from state to state. Each state looks 
at their own interests. And, with the exception of the United 
States and a number of our friends--including the Russians, I 
might point out, who have been very forthcoming in terms of 
wanting to strengthen the IAEA, strengthen IAEA safeguards, 
strengthen the resources at the agency--they've been very 
supportive of these increases. But it requires consensus 
decisionmaking. Everybody has to agree, or you don't agree on 
anything. And that, then, because of that process, you've had 
to get some lowest common denominator, and that lowest common 
denominator was a 4.2-percent increase. So, that's the dynamic.
    Senator Lugar. Well, as I've heard your testimony, my mind 
has sort of wandered over how we can make a difference in this 
situation. For example, I've mentioned this personal visit out 
in Vienna in November. I visited with representatives from 
several countries that were in the headquarters that day, and 
we had very good conversations. But when I went out to the 
laboratory and I asked how many representatives of other 
countries have ever visited this laboratory; a very short list. 
And I will not embarrass any country by indicating that its 
ambassador or its representatives never darkened the door of 
the laboratory, but this is not a regular stop, nor the nitty-
gritty of the process.
    Now, this August, I'm--plan to visit with my former 
colleague Sam Nunn, with the Russians again, and you've 
indicated they've been helpful. This may be a way in which we 
try to work together to encourage others, because clearly we're 
going to need some allies out there at the IAEA if we're going 
to have a budget, if we're going to have laboratories and 
facilities. And when I talk about the threat to the personnel, 
you know, I've experienced the fact that the blowback and so 
forth is a dangerous situation; you don't want to stay in the 
laboratories too long.
    So, we talk in generalities about international 
organizations and how, in the best of things, these all work 
out, but the nitty-gritty is pretty important, too, and this is 
why I've taken this opportunity of this hearing for somebody to 
try to make some statements, as well as raise some questions, 
about the need for international understanding if we're really 
to progress in what I think is a big idea, and an important 
one, which we generally would agree. The same predicament, 
often, with our--as you know, with our NATO budgets, 
everybody's downsizing the defense budget, downsizing the 
number of people that might be available for duty. And such is 
the nature of international negotiations. But this is a pretty 
critical one. It can't start and stop every year. The need for 
continuity is really of the essence.
    So, I thank you very much for your testimony and this 
opportunity to visit with you.
    Dr. Semmel. Senator, if I may offer just one comment on 
that. Because of the strains on the regular budget that we were 
talking about, the agency has had to rely more on voluntary 
contributions, not just from the United States, but from other 
countries as well.
    Senator Lugar. I see.
    Dr. Semmel. Voluntary contributions in cash, as well as in 
kind. And, of course, this is very helpful, because the 
voluntary contributions are designed to fill gaps that the 
regular budget cannot handle, cannot fund. But voluntary 
contributions oftentimes have strings attached to them. Up here 
in Congress, they are called earmarks. They can fund, 
adequately, one-time projects, whatever it may be--equipment 
and things like that. But, it's very difficult to fund long-
term projects.
    And so, we have tried to do that. As I say, we are the 
largest contributor to the voluntary--the so-called extra-
budgetary contributions. I think our contribution this year is 
$53 million. Much of that goes to--a good chunk of that goes to 
safeguards, obviously. So, that's one way in which we make up, 
in terms of showing our bona fides, by making funds available 
to the IAEA through the voluntary contribution, in addition to 
our assessed contribution.
    Senator Lugar. Thank you.
    Thank you, Mr. Chairman.
    Senator Casey. Doctor, I have one more question. Any system 
of an assured nuclear fuel supply mechanism has to have as its 
foundation--the undergirding of that, really--is a sense of 
reliability, that countries agree to pursue this peaceful 
track, so to speak, so that--with the understanding that they 
have a reliable source of fuel. And that's the bargain. But one 
question which has been raised, and I think I skipped over it 
before--and I wanted to highlight this--is, we talk about 
market rates as being enough, and one question that's been 
raised is whether or not market rates would be an adequate 
incentive for some countries to make this deal, to agree to 
this bargain, so to speak. And one question we should ask is 
whether or not--and I'd ask for your opinion, on behalf of the 
administration--whether or not it might be necessary to 
subsidize the nuclear fuel in order to deal with countries that 
might have trouble with paying the market rate, so to speak. 
What's your sense of that?
    Dr. Semmel. On the question of subsidization, that's 
probably above my paygrade. I think, at this point in time, 
most of the concepts--all the concepts that we're talking 
about--the six-country concept that the United States 
introduced early last year, and all the other reliable access 
concepts are still in the process of formulation. I don't know 
whether or not subsidization of nuclear fuel below market rates 
would make sense, in terms of the market.
    I would say this, Senator, that I think people who have 
looked at this issue much more intensely than I have, have 
almost universally come to the conclusion that right now the 
market itself is working well; that is to say there's no 
problem of availability of nuclear fuel for those countries 
that seek it, that need it, and because there's ample supply 
out there right now, and the market is working, and there is 
some competition. So, there may be more competition in the 
future as this looks like a much more attractive market with 
new enrichment facilities being thought of and being developed 
and constructed. If that competition does, in fact, increase, I 
think you would find that the market prices would be 
competitive, would be perhaps even reduced as a consequence of 
that. But I think what we find is that, in the growth of the 
demands, if there's not an adequate response in terms of 
supply, you would then find some pressure on the upward pricing 
of nuclear fuel and the cost of nuclear fuel.
    But subsidization, I think I'll just pass on that one, at 
this point.
    Senator Casey. And if there's any way that you or the 
administration can supplement the record on that, I'd 
appreciate it.
    Dr. Semmel. Okay. We'll take that.
    [The written information submitted by Dr. Semmel follows:]

    None of the recent proposals for fuel assurances, including the 
six-country concept backed by the United States, has raised the issue 
of subsidies for the purchase of nuclear fuel. The international 
nuclear fuel market is working well, and all the proposals under 
discussion assume that the price of fuel will continue to be set by the 
market. As Dr. Semmel noted in his testimony, the fuel supply proposals 
are still being discussed and the details are being developed. However, 
developing an indigenous enrichment or reprocessing capability is a 
very expensive proposition. With regard to the need for subsidies, we 
do not currently foresee the market price increasing so drastically 
that investment in new enrichment or reprocessing facilities would be 
more economically attractive to any country now considering the 
adoption of nuclear energy than purchasing nuclear fuel at market rates 
without subsidy.

    Senator Casey. Doctor, thank you very much for your 
testimony.
    And then, we'll move, now, to the third panel. If those 
three individuals are here in the room, if they would approach 
the witness table.
    Well, we want to thank the witnesses for their appearance 
today, and we want to welcome a distinguished group of 
witnesses here, all of whom today serve in private capacities, 
and are leading experts on assured fuel supply mechanisms and 
nuclear safeguards. Each of our witnesses can draw upon 
substantial experience working on these issues in the United 
States Government, dating all the way back to the Nixon 
administration. And I'll give a brief summary of some of their 
work.
    Mr. Henry Sokolski is the executive director of the 
Nonproliferation Policy Education Center, a nonprofit 
organization he founded in 1994 to focus on strategic weapons 
proliferation issues. He served from 1989 to 1993 as Deputy for 
Nonproliferation Policy in the Office of the Secretary of 
Defense. Mr. Sokolski has also served as a senior congressional 
staffer, working for both Senator Gordon Humphrey and Senator 
Dan Quayle, and he also is a prolific writer on the multiple 
proliferation challenges facing the international community 
today.
    Thank you very much, sir, for appearing.
    Dr. Lawrence Scheinman is a distinguished professor for the 
Center for Nuclear Nonproliferation Studies at the Monterey 
Institute of International Affairs. Dr. Scheinman has been 
involved in nuclear-related matters as an academic and as a 
government official for over 35 years. He most recently served 
as Assistant Director for Nonproliferation and Regional Arms 
Control at the U.S. Arms Control and Disarmament Agency, which, 
unfortunately, no longer exists. Dr. Scheinman is one of the 
world's foremost experts on the IAEA and nuclear safeguards.
    And, third, Dr. Fred McGoldrick is a principal partner in 
an international consulting firm and does work for the 
Departments of State and Energy on nuclear nonproliferation 
issues. He retired from a distinguished civil service career in 
1998, after serving in a variety of positions in both the State 
and Energy Departments, as well as representing the United 
States to the International Atomic Energy Agency, where he 
served as a leading expert on U.S. civilian nuclear cooperation 
and nonproliferation challenges.
    Gentlemen, for the interest of time and for a good dialog 
with each of our witnesses, I'd ask each of you to limit your 
oral presentations to 5 minutes each. The remainder of your 
prepared statements will be formally entered into the record. 
And I appreciate your cooperation with that, because of time.
    And we'll proceed in the order of witnesses as I introduced 
them. So, Mr. Sokolski, we would begin with you and thank you 
for your testimony.

       STATEMENT OF HENRY SOKOLSKI, EXECUTIVE DIRECTOR, 
    NONPROLIFERATION POLICY EDUCATION CENTER, WASHINGTON, DC

    Mr. Sokolski. Thank you. In the interest of time, I will 
keep it to 5 minutes. There's a good chance you'll get half a 
thought, but I will proceed.
    I want to thank you for giving me this opportunity to 
testify.
    I think, just from listening today, you get the strong 
sense that we really want to think that the peaceful and 
military atoms are distinct. They're not.
    A study done for my center, in 2004, spelled out the 
diversion dangers associated with civilian nuclear energy. 
Tehran, for example, is building a large light water reactor at 
Bushehr. When completed, this plant could make 330 kilograms of 
near-weapons-grade plutonium in the first year of operation. 
That's enough for 50 or more crude nuclear weapons. To extract 
this plutonium from the reactor's spent fuel, Iran would need 
to build no more than a small crude chemical extraction 
facility, 30 by 130 by 65 feet. If you flip over my testimony, 
the very last page, that thick thing, you'll see a picture of 
it. It's not big. This would be easy to hide, could be built in 
roughly 6 months, and be able to be on the ready until needed. 
Once operating, this plant could produce a bomb's worth of 
plutonium in as little as 10 days, and another bomb's worth 
each subsequent day it continued to function.
    Bushehr, like all light water reactors, also requires 20 
tons of lightly enriched uranium to be on the site at all times 
to expedite fueling operations that might be forced by safety-
related shutdowns. This uranium also presents a danger; it can 
be used to accelerate an effort to make bomb-grade uranium. 
Estimates done for my center indicate that if this lightly 
enriched fuel was seized, technicians could quickly convert it 
into enriched feed, reducing the amount of effort needed to 
produce bomb-grade uranium by as much as fivefold, as compared 
to using natural uranium. So, instead of a year to make one 
bomb's worth in its 1,500-odd centrifuges, Iran could make a 
weapon's worth in about 7 weeks. It should be noted that North 
Korea is now asking that it be supplied with a large light 
water reactor in exchange for dismantling its plutonium 
production facilities.
    Conventional wisdom, of course, has it that the IAEA could 
detect such diversions of fresh and spent fuel rods. Allowing 
that it might, our recent experience with North Korea and Iran 
suggest that the short notice that the IAEA's detections could 
conceivably afford--that would be 2 to 7 weeks--would hardly be 
sufficient to permit the world's key nations the time they 
would need to take decisive action. More important--and I want 
to emphasize this--under a number of scenarios, the IAEA might 
not detect these rods' theft at all. It's not generally known, 
but, for most of the nuclear facilities it inspects, the IAEA 
simply does not know, day-to-day, if its remote cameras and 
monitors are on.
    Not long ago, the IAEA assessed this vulnerability. It 
learned that over the previous 6 years there had been camera 
blackouts that lasted, ``more than 30 hours'' on at least 12 
separate occasions. What's worse, the IAEA learned of these 
blackouts only after inspectors went to the sites and 
downloaded the camera recordings, as they are required to do 
every 90 days. During these blackouts, entire fuel rods could 
be removed and replaced with dummy rods. Within 90 days, a 
state could possibly convert this material into bomb fuel.
    The study also discussed several other diversion scenarios. 
All of them--I repeat, all of them--were subsequently validated 
by the State Department, the National Weapons Laboratories and 
officials working on the safeguards advisory panels to the 
IAEA.
    I am not going to get into any of the recommendations, to 
observe the 5-minute period. But I do think there is one that 
does deserve attention. One of these recommendations is made in 
``Falling Behind: International Scrutiny of the Peaceful 
Atom,'' a major report by the Center on the IAEA Nuclear 
Safeguards System, which I'm releasing today and ask be placed 
in the record. I should note that this study took 2 years, and 
was backed by the Carnegie Corporation of New York, and 
involved officials from many countries, and IAEA officials, as 
well.
    In any case, one of the recommendations that I suggest be 
taken was briefed to the scientific advisor to Mr. ElBaradei, 
and that is that the United States take the lead in 
supplementing current IAEA contributions with what I would 
describe as a safeguards user fee. I believe this can be done 
incrementally, starting with how the United States formulates 
its own current voluntary contributions. A fee ultimately would 
be based on a percentage of the costs associated with the 
production of civilian nuclear energy, so you would not have 
this enormous gap and constant negotiations over whether or not 
to increase the IAEA's safeguards budget.
    I will end there, because I want to observe your rule about 
5 minutes. So, I'll stop right there.

[Editor's note.--The report submitted for the record by Mr. 
Sokolski was too voluminous to include in the printed hearing. 
It will be maintained in the permament record of the committee. 
It can also be accessed on line at: http://www.acamedia.info/
politics/nonproliferation/references/cochran--2007.pdf.]

    [The prepared statement of Mr. Sokolski follows:]

     Prepared Statement of Henry Sokolski, Executive Director, the 
        Nonproliferation Policy Education Center, Washington, DC

    Mr. Chairman, Senator Lugar, members of the committee, I want to 
thank you today for giving me an opportunity to testify on the dangers 
the United States and other countries may face if, as some predict, 
civilian nuclear energy spreads to a large number of additional 
countries.
    We like to think that the peaceful and military atoms are distinct 
and divisible from one another. In fact, they are not.
    A detailed study done for my center in 2004 by an experienced U.S. 
nuclear bombmaker, a veteran nuclear safeguards expert, and a former 
U.S. Nuclear Regulatory Commission commissioner spelled out the 
military diversion dangers associated with civilian nuclear energy. 
Their analysis speaks to many cases, including Iran and North Korea.
    Tehran is building a large light water power reactor at Busheir. 
When completed and online, this plant will make 330 kilograms of near-
weapons-grade plutonium in the first 12 to 15 months of operation. This 
is enough material to make 40 to 65 crude nuclear weapons. To extract 
such material from the reactor's spent fuel, which is expected to 
remain in Iran for at least a year or more, Iran would need only to 
build a relatively crude chemical extraction plant that could be as 
small as 30 feet by 130 feet by 65 feet (see Figure IV). Such a plant 
would be easy to hide. It could be built in roughly 6 months and could 
be kept on the ready until needed. Once it began operating, though, 
this plant could produce a bomb's worth in as little as 10 days and one 
bomb's worth for each subsequent day it continued to function.


    The Busheir reactor, like all light water reactors, also requires 
one-third of a fuel loading--approximately 20 tons of lightly enriched 
urarnium--to be available at the site at all times. This fuel is needed 
to expedite refueling operations; both those that are routine and those 
that might be forced by a safety-related shutdown of the plant. This 
lightly enriched uranium, however, presents a danger: It can be used as 
feed material to accelerate an enrichment effort to make bomb-grade 
uranium.
    The estimates done for NPEC indicate that if this fresh fuel was 
seized, technicians would quickly cut open the fuel cladding, crush the 
ceramic fuel pellets inside, heat the material, and run hexaflouride 
gas over it to produce lightly enriched uranium feed. This enriched 
feed, in turn, could be used to reduce the amount of effort needed to 
produce highly enriched uranium by as much as five-fold over using 
natural uranium. Instead of taking a year to make one bomb's worth of 
highly enriched uranium in its 1,500 odd centrifuges, Iran could get a 
bomb's worth in as little as 7 weeks. North Korea, it should be noted, 
is now asking that it be supplied with a large light water reactor in 
exchange for dismantling its plutonium production facilities at 
Yongbyong.
    Conventional wisdom, of course, has it that the International 
Atomic Energy Agency (IAEA) could detect such diversions of fresh or 
spent fuel rods. Allowing that it might, the agency's experience, 
though, with North Korea Iran suggests that it would be unreasonable to 
expect that the notice that such detections could afford--2 to 7 
weeks--would be sufficient to rally the world's key nations to take 
decisive action.
    Perhaps even more worrisome is that under a number of scenarios, 
the IAEA might not detect the theft of these rods at all. It's not 
generally known, but for most of the nuclear facilities it inspects, 
the IAEA simply does not know day to day if its remote cameras and 
monitors are on. Not long ago, the IAEA assessed this vulnerability and 
learned that over the previous 6 years, there had been camera 
``blackouts'' that lasted for ``more than 30 hours'' on at least 12 
separate occasions. The IAEA learned of these blackouts, moreover, only 
after inspectors went to the sites and downloaded the camera recordings 
as they are required to do every 90 days. During these blackouts, 
entire fuel rods could be removed and replaced with dummy rods. Within 
90 days, a state could possibly convert this material into bomb fuel or 
come close to doing so. The study also discussed several other 
diversion scenarios. All of them were subsequently validated by State 
Department, national weapons laboratory, and IAEA advisory officials.
    The good news is much can be done to correct this problem with the 
deployment of additional near-real time surveillance capabilities. Full 
deployment of such systems, however, costs money that the IAEA 
currently lacks. This funding gap is only likely to increase if, as 
predicted, more nuclear powerplants are built in new locations. Thirty-
one states currently operate large nuclear reactors or fuel making 
plants. In just the last 18 months, 15 more--Algeria, Bangladesh, Saudi 
Arabia, Yemen, Egypt, Libya, Algeria, Morocco, Tunisia, Turkey, 
Australia, Indonesia, Vietnam, Kazakhstan, Nigeria--have announced 
plans to build fuelmaking plants or large reactors before 2020.
    One of the recommendations made in NPEC's IAEA safeguard report, 
which I am releasing today and ask be placed into the record, is that 
the United States take the lead supplementing current IAEA 
contributions with a safeguards user fee. This might be done through 
several incremental steps leading to imposition of a fee on each IAEA 
member. The fee would be based on a percentage of the costs associated 
with the production of civilian nuclear energy and the operation of 
fuel making plants in each member state.
    A second type of safeguards challenge NPEC investigated is the 
difficulty the IAEA has inspecting nuclear fuelmaking plants. As the 
IAEA's director general has made clear, once a country has nuclear 
weapons usable fuels, such as highly enriched uranium and separated 
plutonium, there is little the IAEA can do but hope that the country 
doesn't decide to make bombs.
    The dangers relating to nuclear fuelmaking, however, go much 
deeper. First, the plants themselves can be diverted to make bombs 
overnight. Second, the nuclear weapons usable materials these plants 
make or handle--e.g., separated plutonium in the case of reprocessing 
and mixed oxide fuelmaking plants--cannot be accounted well enough to 
prevent the possible ``loss'' or diversion of many bombs' worth of 
material each year. It is projected, for example, that the IAEA will 
have to report nearly 50 crude bombs' worth of separated plutonium to 
be ``material unaccounted for'' (or MUF) each year Japan's latest 
large, commercial reprocessing plant is fully operational. Similar, 
worrisome MUF and inspection gaps are also possible at enrichment and 
certain fuel fabrication plants. Finally, the IAEA keeps secret how 
much nuclear material each country has by type that would be directly 
usable to make bombs. Instead, it only makes the global aggregates 
public, claiming that this information is commercially proprietary.
    These practices have long been tolerated. This is a mistake. One of 
the key recommendations my center's report makes is to get the IAEA to 
distinguish much more clearly between what the agency can only monitor 
and what it can inspect in a manner that will reliably detect military 
diversions before they are completed. Only the later fulfills the 
IAEA's official definition of what a safeguard is. Making this 
distinction more clearly between what can be monitored versus what can 
actually be safeguarded is important. It certainly makes it easier to 
understand what the IAEA can and cannot safeguard and just how 
dangerous certain nuclear facilities are. Fuelmaking centers, including 
the one that might be built in Kazakhstan would stand out as being 
unsafeguardable as would the commercial reprocessing plant India is 
proposing to build solely to recycle U.S.-origin spent fuel.
    It certainly would make sense to increase inspections at such 
plants but not because more inspections would meet the IAEA's official 
safeguarding criteria. Instead, such intensified monitoring would be 
useful to assure a greater chance of detecting diversions, at least, 
some time after they have occurred. It also would make sense to upgrade 
physical security at many of these sites to make them as stringent as 
the toughest security measures currently being implemented at nuclear 
weapons production and storage sites in the United States.
    Finally, the United States and other members of the IAEA should 
reassess the key assumptions behind the IAEA's current timeliness 
detection goals. Just how much material does it take to make a bomb? 
How much time is needed to convert different key nuclear materials into 
bomb fuel? How often should the IAEA check against diversions of 
safeguarded materials? All of the current safeguarding premises were 
set nearly 30 years ago. Many of them are overly generous. It's time 
that they were updated.
    Mr. Chairman, there are a number of other specific recommendations 
that the NPEC safeguards report makes that deserve this committee's 
attention. One is to clarify the benefits or lack of them relating to 
nuclear energy by getting the executive branch to implement title V of 
the Nuclear Nonproliferation Act of 1978. Under this provision, the 
executive is required to conduct analyses of what can be done to meet 
the energy needs of developing nations without fossil fuels or nuclear 
power. Unfortunately, it is something no President, Democratic or 
Republican, has yet chosen to do. There also are several 
recommendations to encourage states to act against those that engage in 
nuclear misbehavior.
    What's encouraging is that none of these recommendations need wait 
upon consensus at the IAEA Board of Governors or the United Nations. 
Nearly all, in fact, can be acted upon by this committee.

    Senator Casey. Mr. Sokolski, thank you very much. And I 
have to apologize to you, I think I added at least one syllable 
to your last name when I pronounced it before, and I'm sorry 
about that. That's my fault. And I appreciate your testimony. 
And we'll have time during questions, I think, to amplify and 
to enlarge upon some of the recommendations which you lightly 
skipped over in the interest of time. Thank you.
    Mr. Sokolski. One syllable's not bad, actually. [Laughter.]
    Senator Casey. I've to admit it. Sorry.
    Dr. Scheinman, you're next. Thank you.

 STATEMENT OF DR. LAWRENCE SCHEINMAN, DISTINGUISHED PROFESSOR, 
  JAMES MARTIN CENTER FOR NONPROLIFERATION STUDIES, MONTEREY 
       INSTITUTE OF INTERNATIONAL AFFAIRS, WASHINGTON, DC

    Dr. Scheinman. Thank you, Mr. Chairman. It's a pleasure to 
be here, particularly with Senator Lugar, as the Monterey 
Institute has just stood up its Nunn-Lugar Chair in 
Nonproliferation. We're very pleased that that has come to 
pass.
    I'll apologize for my voice. I am husky today.
    Safeguards are a central feature of the nuclear 
nonproliferation regime and of the era introduced with 
President Eisenhower's Atoms for Peace Initiative in 1953. 
Their importance to a viable and effective international 
nonproliferation regime cannot be exaggerated. They are, for 
all intents and purposes, a condition sine qua non for 
cooperative development of civil nuclear energy and practicable 
international nuclear commerce. There is no identifiable 
acceptable substitute, short of some form of international 
ownership and control of the nuclear fuel cycle, a formulation 
advanced unsuccessfully by the United States in 1946, with the 
Baruch Plan. This approach is being revisited again today in 
the form of initiatives for multilateral, multinational fuel 
cycle arrangements, for enrichment and reprocessing, as the 
international community grapples with a number of challenges, 
ranging from the end of the cold war, the loss of disciplines 
imposed by the superpowers, the increasing spread of nuclear 
knowledge, diversification of sources of supply, the prospect 
of states and regions of tension developing capabilities that 
would put them in a position to quickly develop the nuclear 
weapon, and the rising threat of nonstate actors, including 
apocalyptic terrorists, acquiring nuclear explosives and the 
means to produce them.
    Viable institutional arrangements, such as multinational 
enterprises, may provide additive stability and security, but 
safeguards are, and will remain, the core constituent of an 
effective and credible nonproliferation regime.
    The traditional comprehensive safeguard system focused on 
verification of state declarations using quantitative measures 
supported by containment and surveillance. This system provided 
a high degree of confidence regarding the accountability of all 
declared nuclear material, but did not answer the question of 
whether undeclared nuclear activity might be present on the 
territory or under the control of a safeguarded state, although 
the system incorporated the principle that safeguards extended 
to undeclared activity, as well. This is a problem that we are 
grappling with today, and hopefully will be able to come to an 
effective solution, some elements of which are already on the 
table.
    In the interest of time, let me come to the legislation on 
safeguards, in section 113--in the Senate bill 1138, and, in 
particular, section 104, Safeguards Technology and Development 
Program.
    The provisions in section 104 are laudable and point in the 
right direction, but it reads as an unfunded mandate and, 
without the authorization and appropriation of resources, it 
cannot move forward at the level, and with the energy, 
necessary for there to be an impact on the safeguards system.
    As I understand it, there's only a modest amount of 
research going on at the present time, although training and 
development continue. Twenty, even 15, years ago, substantial 
resources were deployed to national laboratories for research 
and development relevant to international safeguards. It has 
been said that, not withstanding bilateral activities, with 
particular states, there has really not been significant 
relevant research activity in place here since the 1990s. Since 
that time, the technology made available to the IAEA has been 
based on research done earlier, and, if we were to continue, we 
would soon be transferring 20-year-old technology to new 
reactor and fuel designs, which is not a good idea.
    The POTAS program does exist, this year with $14 million, 
and that is to provide assistance to the agency. But this isn't 
in the nature of research, but rather in the nature of transfer 
of things that already have been done.
    The importance of timely and properly directed technology, 
research, and development can be seen, for example, in the case 
of the Japanese Rokasho Reprocessing Facility, which raises 
daunting challenges, in terms of verification. Here, the 
development and use of containment and surveillance, unattended 
radiation monitors, process monitors were necessary to keep 
tabs on the operation and integrity of the facility, and 
material accountancy alone certainly would not give us any kind 
of confidence that we could be counting on.
    If the Congress is serious about this issue, as I am sure 
it is, then it needs to consider funded mandates, and call for 
a program of action, for technology development that engages 
the laboratories and the IAEA in an interactive relationship, 
wherein the agency identifies the needs and terms of its 
programmatic development, and the U.S. Government, through its 
laboratories, responds in a targeted way. It also should 
encourage the administration to develop a comprehensive plan, 
with coordinated and mutually reinforcing activity on the part 
of the agencies and departments that would be involved. Given 
our considerable stake in a strong and reliable 
nonproliferation regime and our historic leadership in the 
field, it's incumbent on the United States reestablishing its 
traditional leadership role to work to strengthen IAEA's 
safeguards to deal with current and future challenges arising 
from a potential significant rise in nuclear spread and use, 
flow and accumulation of nuclear materials, and the like. 
Compliance with treaty undertakings, which we have strongly 
asserted as an imperative need, is a legitimate concern, and we 
are right to pursue it, but emphasis on providing the most 
effective tools for IAEA to meet its inspection goals is no 
less important. Our focus should be on considering how the 
United States can continue to help strengthen the IAEA 
safeguards system and prepare for future challenges by 
providing technology, tools, and expertise.
    Thank you. Sorry I went over.
    [The prepared statement of Dr. Scheinman follows:]

Prepared Statement of Dr. Lawrence Scheinman, Distinguished Professor, 
James Martin Center for Nonproliferation Studies, Monterey Institute of 
                 International Studies, Washington, DC

    Safeguards are a central feature of the nuclear nonproliferation 
regime and of the era introduced with President Eisenhower's December 
1953 Atoms for Peace initiative at the United Nations. Their importance 
to a viable and effective international nonproliferation regime cannot 
be exaggerated. They are for all intents and purposes a condition sine 
qua non for cooperative development of civil nuclear energy and 
practicable international nuclear commerce. There is no identifiable 
and acceptable substitute short of some form of international ownership 
and control of the nuclear fuel cycle, a formulation--based on the 
judgment of the Acheson-Lilienthal Report that a system of inspection 
superimposed on an otherwise uncontrolled exploitation of atomic energy 
by national governments will not be an adequate safeguard and could not 
ensure effective separation of civil and military uses of nuclear 
energy--advanced by the United States in 1946 at the onset of the 
nuclear age as the Baruch Plan. This approach is being revisited today 
in the form of initiatives for multilateral/multinational fuel cycle 
arrangements for enrichment and reprocessing as the international 
community grapples with the challenges raised by (i) the disappearance 
of the disciplines imposed on proliferation by the superpowers during 
the cold war; (ii) the increasing spread of nuclear knowledge; (iii) 
the diversification of sources of supply of nuclear materials, 
equipment, and technology including the emergence of a nuclear black 
market, which, according to recent reports appears to be alive and 
well; (iv) the prospect of states in regions of tension developing fuel 
cycle capabilities that puts them in a position to quickly proliferate 
if the political decision to do so is taken; and (v) the rising threat 
of nonstate actors including apocalyptic terrorists acquiring nuclear 
explosives or the means to produce them which was an important 
stimulant to the passage of U.N. Security Council Resolution 1540.
    Viable institutional arrangements such as multinational enterprises 
may provide additive stability and security to international nuclear 
activity, but safeguards are and will remain the core constituent of an 
effective and credible nonproliferation regime. The statute of the 
IAEA, created as an outcome of Atoms for Peace was charged with two 
missions: To promote the peaceful uses of atomic energy, and to ensure, 
as far as it is able, that assistance provided by the agency, or under 
its supervision and control, not be used to further any military 
purpose. To this end the IAEA was authorized to establish and 
administer safeguards which it did over the course of the 1960s. That 
experience made it the logical choice to administer safeguards required 
by the 1968 NPT of all nonnuclear weapon states party to the treaty. 
Many of these states were prepared to forswear the acquisition of 
nuclear weapons and accept international safeguards on their peaceful 
nuclear activities, even though nuclear weapon states were not so 
required, but not prepared to accept an extension of that 
discrimination to the civil nuclear field, even for a limited time--
hence the insistence on article IV providing for an ``inalienable 
right'' to develop nuclear energy for peaceful purposes; and for 
standing up a safeguards regime that minimized intrusion and maximized 
the opportunity to develop nuclear energy for peaceful purposes while 
at the same time standing the test of credibility and providing the 
necessary level of confidence regarding nonproliferation. Among their 
principal concerns were: Protecting proprietary and commercial 
interests such as being able to compete on equal footing with the 
weapon states in the civil nuclear marketplace, limiting the 
intrusiveness of onsite inspections (in particular capping the 
frequency of inspections), minimizing the discretionary authority of 
the international inspectorate, and protecting sovereign prerogatives 
in general.
    The comprehensive safeguards system concentrated on the flow of 
nuclear material; limited onsite inspections under normal or routine 
circumstances to preagreed ``strategic points'' where inspectors could 
conduct independent verification activities, while providing for 
special inspections, which could be carried out anywhere in the state, 
if the Agency were unable to meet its verification responsibility 
through routine inspections. Material accountancy, complemented by 
containment and surveillance, was the heart of the system based on a 
reciprocal obligation of the state and right and obligation of the IAEA 
to apply safeguards on all source and special fissionable material in 
all peaceful activities to verify nondiversion. In practice the 
emphasis on material accountancy during the 1970s and 1980s meant 
focused attention on the correctness of state declarations and less on 
whether the declarations were complete, and this became the culture of 
the inspectorate as time went on. It is important to bear in mind that 
in law, as distinguished from practice, safeguards extend to all 
nuclear material whether or not declared, and access to any place may 
be had under the IAEA's special inspection authority to verify full 
accountability.
    From the 1970s until the North Korean situation in 1993, insofar as 
the traditional comprehensive safeguards system is concerned no 
diversion of nuclear material under safeguards was ever detected. 
However, the revelations in the wake of the 1991 gulf war of extensive 
undeclared nuclear activity and a significant clandestine nuclear 
weapons program in Iraq underscored the limitations of the safeguards 
system as it was practiced. In the wake of these revelations the Board 
of Governors, starting in 1992, took a number of decisions for which 
legal authority already existed including reaffirming the requirement 
that safeguards provide assurance about the completeness as well as the 
correctness of nuclear material declarations, reaffirming the right of 
special inspections (unfortunately with a caveat that it would be used 
rarely); environmental sampling at locations already accessible to 
inspectors, requiring states to present design information on new 
facilities or changes in existing facilities handling safeguarded 
nuclear material as soon as the decision to construct or modify is made 
(in lieu of the practice that developed that such information needed to 
be made 180 days before introducing nuclear material into a facility), 
introducing unattended and remote monitoring to detect movements of 
declared nuclear material, calling for voluntary reporting of imports 
and exports not only of nuclear material, but specified equipment as 
well, and using instruments and other techniques at strategic point to 
the extent present or future technology permits. Many of these measures 
relate to section 204 of the legislation before us.
    Of equal if not greater significance was agreement on a model 
Additional Protocol granting new authority related to information a 
state is required to provide to the Agency and complementary access 
aimed at ferreting out undeclared nuclear materials or activities: With 
an additional protocol in place the IAEA is better positioned to draw 
statewide conclusions regarding whether all nuclear material and 
activities has been declared and placed under safeguards, leading to 
the ability of the IAEA to draw broader safeguards conclusions. It is a 
case of more information and more access leading to more comprehensive 
understanding of a state's nuclear status; it raises the level of 
confidence in one's conclusions about a state but it is not absolutely 
indisputable.
    To summarize: The traditional comprehensive safeguards system 
focused on verification of state declarations using quantitative 
measures supported by containment and surveillance. This system 
provided a high degree of confidence regarding the accountability of 
all declared nuclear material but did not answer the question of 
whether undeclared nuclear activity might be present on the territory 
or under the control of a safeguarded state, although the system 
incorporated the principle that safeguards extended to undeclared 
activity as well as declared. The strengthened safeguarded system, 
which is statewide rather than facility-specific, builds out from that 
base and focuses on verifying not only the correctness of state 
declarations regarding nuclear material but also the absence of 
undeclared nuclear material and activities. To build a state nuclear 
profile the strengthened safeguard system puts much greater emphasis on 
qualitative measures including export and import information, on 
expanded declarations of nuclear and nuclear-related activities in the 
state, and on information analysis supported by environmental sampling 
and quantitative indicators. As well, it provides broader access for 
inspections of declared and undeclared activities. Greater access to 
information and broader access to sites and locations in the state are 
accompanied by access to the UNSC in the event of noncompliance with 
safeguards undertakings. On its face the Additional Protocol, in 
conjunction with measures adopted earlier by the Board of Governors 
provides the basis for a robust verification system based on a 
comprehensive picture of a safeguarded state's nuclear fuel cycle, 
inventory of nuclear materials, material production capabilities, 
nuclear-related infrastructure, and overall nuclear activities. The AP 
with its significantly increased information base and right of access, 
when fully implemented, offers greater transparency of nuclear assets 
and nuclear cooperation and a correspondingly greater insight into 
plans and intentions of safe-guarded states and to this extent 
contributes to increased credibility of and confidence in verification 
regime. An often overlooked caveat to this rather sweeping conclusion 
is that even under the comprehensive safeguards system rights of ad hoc 
inspections and special inspections where conditions warrant it provide 
significant access to locations anywhere in the state.
    The strengthened safeguards system is a work in progress in several 
respects. The legal and technical requirements have been identified and 
agreed upon, and the foundations for both have been or are being put in 
place. Much remains to be done on both counts. For example 31 states 
party to the NPT still have not signed safeguards agreements despite 
the obligation to do so within 18 months of adherence, and the Agency 
has not pressed those states to fulfill their obligations. Without a 
safeguards agreement there is no basis for carrying out verification 
activities. Many states with safeguards agreements have Small Quantity 
Protocols that absolve them from some of the obligations in 
comprehensive safeguards agreements but many of these have not put in 
place State Systems of Accountancy and Control which would provide the 
legal and administrative mechanism to take actions that would help the 
governments develop means by which to ensure against the risk of 
nonstate actors setting up shop in their jurisdiction and pursuing 
nuclear relevant activities without state knowledge that could 
undermine the regime.
    State willingness to adopt and incorporate new verification 
technologies depends on a balance of considerations about 
effectiveness, intrusiveness, and expense. This relates to 
environmental sampling; remote and unattended monitoring devices; 
satellite imagery; and, if ultimately approved by the Board of 
Governors, wide area environmental sampling. For some it's a question 
of redistribution of resources relieving some of the effort devoted to 
material accounting which weighs most heavily on states with 
substantial nuclear activities, e.g., Canada and Japan.
    This brings me to the legislation on safeguards in S. 1138, in 
particular Section 104: Safeguards Technology Development Program. The 
provisions in section 104 are laudable and pointed in the right 
direction. But it reads as an unfunded mandate and without the 
authorization and appropriation of resources it cannot move forward at 
the level and with the energy necessary for there to be an impact on 
the safeguards system.
    As I understand it, there is only a modest amount of research going 
on at the present time although training and development continue. 
Twenty or even fifteen years ago substantial resources were deployed to 
national laboratories for research and development relevant to 
international safeguards. It has been said that notwithstanding 
bilateral activities with particular states there has not really been a 
significant research activity in place since the early 1990s. Since 
that time, technology made available to the IAEA is based on research 
done at that time and if that were to continue we would be transferring 
20-year-old technology to new reactor and fuel cycle designs. Through 
the POTAS program assistance (this year on the order of $14 million) is 
provided to the Agency. The question is more one of how we, in the 
United States are organized and funded to keep at the cutting edge of 
technological developments that can be deployed when needed.
    The importance of timely and properly directed technology research 
and development can be seen in the case of the Japanese Rokkasho 
reprocessing facility which raises daunting challenges in terms of 
verification. Here, the development and use of containment and 
surveillance, unattended radiation monitors, process monitors, were 
necessary to keep tabs on the operation and integrity of the facility; 
material accountancy alone would not yield results in which one would 
have great confidence. The same is true for Candu-type on load reactors 
where radiation monitors and camera system including real time 
monitoring systems are crucial to addressing timeliness issues, and 
hence the degree of confidence one can have in the safeguards applied 
at the facility.
    A good deal of the influence that the United States has had on the 
safeguards system has come from the safeguards technology that we 
provided to the Agency; that has not been the case in recent years and 
others, such as France and Japan with their vibrant nuclear industries 
are gaining increasing influence in IAEA affairs according to some 
observers. To ensure that we do not lose our influence and that the 
safeguards system remains credible and effective we should recapture 
our earlier role in developing safeguards technology. The provisions in 
section 104 of the legislation point in the right direction; what needs 
to be done is to fund the base technical capability here in the United 
States that the IAEA has for many years been reliant. With the end of 
the cold war and downsizing of the U.S. weapons complex coupled and 
with the moribund state of civil nuclear activities in the 1990s, what 
used to be a robust R&D program diminished substantially, with only 
modest funding from diverse agencies and departments, and an apparent 
absence of overall coordinated strategy. Some have noted that at 
relevant national laboratories at the same time as retirements are 
taking place quality young staff members are moving away from 
international safeguards because they do not see pursuing it as leading 
to a promising career. With the prospect of a surge of nuclear energy 
development in the years ahead involving new reactor and facility types 
implying a need for programs to address probable new challenges the 
trend line in our human and financial resource base is moving exactly 
in the wrong direction. Action and particularly commensurate resources 
need to be put behind well-meaning words.
    So, the bottom line is that if Congress is serious about this 
issue, as I am sure that it is, then it needs to consider funded 
mandates and call for a program of action for technology development 
that engages the laboratories and the IAEA in an interactive 
relationship wherein the agency identifies needs in terms of its 
programmatic development and the United States Government, through it 
laboratories responds in a targeted way. It also should encourage the 
administration to develop a comprehensive plan with coordinated and 
mutually reinforcing activity on the part of the agencies and 
departments that would be involved. Given our considerable stake in a 
strong and reliable nonproliferation regime and our historic leadership 
in this field it is incumbent on the United States (bringing others in 
a position to do so along) to work to strengthen IAEA safeguards to 
deal with current and with future challenges arising from a potential 
significant rise in nuclear spread and use, flow and accumulation of 
nuclear materials, and the like. Compliance with treaty undertakings 
which we have strongly asserted as an imperative need is a legitimate 
concern and we are right to pursue it. But emphasis on providing the 
most effective tools for IAEA to meet its inspection goals is no less 
important. Our focus should be on considering how the United States can 
continue to help strengthen the IAEA safeguards system and prepare for 
future challenges by providing technology, tools, and expertise.

    Senator Casey. Thank you, Doctor. You were right on time. 
For this committee, that's perfect. Many examples of people 
going much, much further.
    Next, and our final witness for this panel, Dr. McGoldrick. 
And appreciate your presence here, and your testimony.

     STATEMENT OF DR. FRED McGOLDRICK, FORMER DIRECTOR OF 
   NONPROLIFERATION AND EXPORT POLICY, DEPARTMENT OF STATE; 
  BENGELSDORF, McGOLDRICK AND ASSOCIATES, LLC, WASHINGTON, DC

    Dr. McGoldrick. Thank you, Senator Casey, Senator Lugar. 
Thank you for the opportunity to testify on the bill sponsored 
by Senators Lugar and Bayh.
    My testimony will primarily be on the fuel bank and fuel 
assurances, but I will be happy to take any questions on 
international safeguards.
    As you know, a number of proposals have emerged, in recent 
years, offering nuclear fuel guarantees as an incentive to 
discourage states from acquiring their own enrichment and 
reprocessing facilities. I will address several questions, the 
answers to which are important if we are to devise feasible and 
effective methods to discourage the spread of these 
technologies.
    The first question is: Why do states want to acquire 
uranium enrichment and reprocessing capabilities? Over the 
years, countries have sought such capabilities for a variety of 
reasons, to carry out entirely legitimate peaceful programs, 
for example, for energy security or management of nuclear 
waste. A few have sought such technologies in order to develop 
nuclear weapons or to acquire the option to do so.
    The second question is: What policies has the U.S. 
Government employed in the past to dissuade states from 
acquiring their own enrichment and reprocessing plants, and how 
effective have they been? The concerns here are not new. During 
the 1970s, several countries sought sensitive nuclear 
technologies on the international market. The United States is 
most successful in stopping the spread of these technologies 
when the countries in question were highly dependent upon the 
United States for their security or their nuclear supplies. The 
Republic of Korea and Taiwan are good examples. Where the 
United States had little leverage, it was unable to halt the 
efforts by countries determined to acquire such technologies. 
Argentina, Brazil, and South Africa are good examples.
    In 1978, the members of the Nuclear Suppliers Group agreed, 
among other things, to exercise restraint in the transfer of 
sensitive nuclear technology. Since the establishment of the 
NSG, to my knowledge, major suppliers have made only a small 
number of transfers of reprocessing and enrichment technology 
for civil projects, and these have taken place openly and 
legally, and have been made to states that already possessed 
enrichment and reprocessing capabilities.
    However, countries such as Iran, Iraq, North Korea, and 
Pakistan have been able to obtain enrichment and reprocessing 
technology on the international market by using surreptitious 
and illegal methods of procurement. U.S. efforts, from the 
1970s to the present, to prevent the spread of such 
technologies, have had some effect in delaying and increasing 
the costs of the nuclear weapons program of some of these 
states, but, in most cases, they did not prevent these states 
from acquiring the equipment and technology they were seeking.
    Finally, the United States made efforts to offer enhanced 
fuel assurances, such as the 1978 Nuclear Nonproliferation Act 
call for a international nuclear fuel authority, and U.S. 
initiatives, in the 1970s, for an international fuel bank. 
However, none of these fuel assurance initiatives were able to 
generate enthusiasm among suppliers or consumers at that time.
    My third question is: What lessons can we draw from the 
past? First, enhanced fuel assurances are highly unlikely to 
have a direct impact on a country like Iran, who is determined 
to acquire such facilities for national security reasons. 
Second, an international fuel bank is not going to be a magic 
bullet. There are limitations to what nuclear fuel guarantees 
can do to prevent the spread of sensitive nuclear technologies. 
Third, an international fuel bank can be only one tool among 
several that the United States and other suppliers will need to 
deal with this problem. The United States will also have to 
employ export controls, much improved intelligence 
capabilities, cooperation with other nuclear exporters, and 
political persuasion in order to discourage the spread of these 
technologies. Fourth, they can help deprive states such as Iran 
and North Korea of a credible explanation for acquiring 
sensitive nuclear technologies under the cover of a peaceful 
nuclear program. They will also establish an international norm 
that most countries have no need to develop their own 
enrichment and reprocessing facilities. And it's important to 
note, in this connection, that several states in the Middle 
East have recently announced that they are giving serious 
consideration to the initiation of peaceful nuclear programs.
    The establishment of a nuclear fuel bank could play an 
important role in helping to eliminate any justification for 
these countries to acquire their own sensitive technologies, 
particularly in an area as volatile as the Middle East.
    In the interest of time, I will just list a few brief 
attributes of an international fuel bank.
    First of all, I think the Congress needs to enact 
legislation in support of an international fuel bank, and it 
should emphasize that the United States is offering incentives 
to states, not requiring them to renounce their rights--what 
they regard as their rights--under article IV of the NPT.
    A bank should also serve as a supplier of last resort, 
since the principal mechanism for providing adequate assurances 
of nuclear fuel should be a competitive market. It also should 
be structured so as to avoid destabilizing the market. It 
should be modest in size. It should be able to respond to 
sudden interruptions in a prompt and reliable manner, and 
would, therefore, have to employ an agreed set of predetermined 
release criteria. It will also have to take into account the 
nonproliferation requirements of suppliers, including the 
guidelines of the Nuclear Suppliers Group and, in the case of 
U.S.-origin material, the requirements of the Atomic Energy 
Act.
    Finally, active U.S. support will be crucial for the 
establishment of an international fuel bank. And I, therefore, 
strongly endorse the legislation introduced by Senators Lugar 
and Bayh.
    [The prepared statement of Dr. McGoldrick follows:]

Prepared Statement of Dr. Fred McGoldrick, Bengelsdorf, McGoldrick and 
                    Associates, LLC, Washington, DC

    Thank you for the opportunity to testify on S. 1138, a bill 
sponsored by Senators Lugar and Bayh, to enhance international 
safeguards and to provide assurances of nuclear fuel to countries that 
forgo certain fuel cycle activities. My remarks will focus primarily on 
proposals for strengthening nuclear fuel guarantees, especially an 
international fuel bank, but I will touch briefly on the importance of 
increasing financial support to the safeguards system of the 
International Atomic Energy Agency (IAEA).

                        improves fuel assurances

    Enrichment and reprocessing technologies present risks of 
proliferation since they provide states with materials that are 
directly usable in a nuclear weapon or a nuclear explosive device. In 
recent years a number of proposals have emerged offering nuclear fuel 
guarantees as an incentive to discourage states from acquiring their 
own enrichment and reprocessing facilities. These include:

   IAEA Director General ElBaradei's suggestion to place all 
        enrichment and reprocessing facilities under some form of 
        multinational auspices or control.
   President Bush's proposal that (a) the world's leading 
        nuclear exporters should ensure that states have reliable 
        access at reasonable cost to fuel for civilian reactors, so 
        long as those states renounce enrichment and reprocessing, and 
        (b) the members of the Nuclear Suppliers Group (NSG) should 
        refuse to sell enrichment and reprocessing equipment and 
        technologies to any state that does not already possess full-
        scale, functioning enrichment and reprocessing plants.
   A proposal by the six states that currently possess 
        commercial uranium enrichment facilities for a multilayered 
        nuclear fuel assurance scheme.
   President Vladimir Putin's proposal for an international 
        fuel cycle center in Russia.
   Germany's suggestion for establishing an enrichment facility 
        on international territory administered by the IAEA.
   A proposal by the United Kingdom for the use of enrichment 
        bonds that would involve agreement among supplier states, 
        recipient states, and the IAEA to cope with supplier 
        disruptions not related to nonproliferation considerations.
   A Japanese proposal calling upon states that supply uranium 
        and enrichment service to register with the IAEA in order to 
        supply nuclear fuel through the IAEA to countries that suffer a 
        disruption in supply not related to their nonproliferation 
        obligations.
   A U.S. proposal to establish a strategic reserve of 17.4 
        tons of highly enriched uranium that will be blended down to 
        help qualified states deal with any disruptions in their 
        nuclear fuel supply.
   A proposal by the Nuclear Threat Initiative (NTI) for the 
        establishment of an international fuel bank under the auspices 
        of the IAEA that would serve as a supplier of last resort. 
        Legislation has been introduced in both the House and the 
        Senate that would provide U.S. Government funding for such a 
        bank.
   The U.S. Department of Energy's Global Nuclear Energy 
        Partnership (GNEP) under which the supplier states would offer 
        so-called ``cradle-to-grave'' fuel cycle services by, for 
        example, leasing enriched uranium to consumer nations that do 
        not have enrichment and reprocessing facilities and taking back 
        the used fuel that produced as a result of irradiation in 
        reactors.

    Having labored in the trenches of the nonproliferation field for 34 
years, I believe we should evaluate proposals such as these from a very 
pragmatic point of view, and with our feet planted firmly on the 
ground.
    With that spirit in mind, I will try to answer several questions.

          The first is: Why do states want to acquire uranium 
        enrichment and/or reprocessing capabilities?
          The second is: What policies has the U.S. Government employed 
        in the past to discourage states from acquiring their own 
        enrichment and reprocessing plants, and how effective have 
        these policies been in thwarting the spread of sensitive 
        nuclear technologies?
          The third is: What lessons can we learn from the efforts of 
        various countries to acquire enrichment and reprocessing 
        technologies and the corresponding policies of the United 
        States to prevent the dispersion of such technologies?
          The fourth question is: Will our current offers of improved 
        fuel assurances enhance or hurt our chances to prevent the 
        spread of sensitive nuclear technologies.
          Fifth and finally: What approach will most likely maximize 
        our chances of advancing the nonproliferation objective of 
        minimizing the dispersion of enrichment and reprocessing 
        capabilities?

    I believe the answers to these questions are important, if we are 
to deal with this issue realistically and if we are to devise feasible 
and effective methods to discourage the spread of sensitive nuclear 
technologies.
    Let me then begin by attempting to answer the first question.

Why do states seek enrichment and reprocessing capabilities?

    Over the years, several countries have sought such capabilities for 
a variety of reasons--to carry out entirely legitimate, peaceful 
programs, to remove doubts about the reliability of fuel supply from 
foreign sources, to conserve nuclear fuel resources through 
reprocessing, to improve the management of their nuclear waste 
problems, to achieve the prestige of possessing advanced, sophisticated 
fuel cycle facilities, and to sell enrichment or reprocessing services 
on the international market. Still others sought enrichment or 
reprocessing technologies as a symbol of national achievement or as an 
important component of their national security. Some states made a 
decision to construct domestic enrichment and reprocessing facilities 
even though they could have availed themselves of less costly means of 
purchasing external enrichment or reprocessing services from abroad to 
meet their civil nuclear needs. A few states have sought such 
technologies in order to develop nuclear weapons or to acquire the 
option to do so. Some have used ostensibly civil sensitive nuclear 
facilities as a cover for a nuclear weapons program.

What policies has the U.S. Government employed in the past to 
discourage states from acquiring their own enrichment and reprocessing 
plants, and how effective have these U.S. policies been in thwarting 
the spread of these sensitive nuclear technologies?

    U.S. concerns about the spread of reprocessing and enrichment 
capabilities are not new. In the mid-1970s the United States became 
alarmed that some major nuclear exporting states were planning to 
transfer enrichment and reprocessing technology to South Korea, Taiwan, 
Pakistan, and Brazil. France was seeking to sell reprocessing 
technology to Pakistan and South Korea and Germany was planning to sell 
reprocessing and enrichment technology to Brazil. These were developing 
countries whose small nuclear programs did not justify these expensive 
technologies. Some of them faced severe national security threats or 
had apparent ambitions to acquire nuclear weapons.
    The United States was most successful in stopping the spread of 
sensitive nuclear technologies during the 1970s when countries such as 
the Republic of Korea and Taiwan were highly dependent on the United 
States for their security and for nuclear supplies. In a few cases the 
United States was able to convince the suppliers to halt the transfer 
of reprocessing technology because of the proliferation risks they 
involved. It failed to do so in other cases, e.g., the Federal Republic 
of Germany proceeded with the supply of enrichment and reprocessing 
technology to Brazil despite U.S. protestations.
    Where the United States had little leverage, it was unable to halt 
the establishment of enrichment or reprocessing plants by countries 
determined to acquire such technologies. Argentina, Brazil, and South 
Africa are good examples.
    In response to this problem and to the Indian nuclear test of 1974, 
the United States took the initiative with other major nuclear 
exporters to form the Nuclear Suppliers Group (NSG). In 1978, the 
members of the NSG adopted specific guidelines for the export of 
nuclear materials, equipment, and technology. Under these guidelines 
the NSG members agreed, among other things, to exercise restraint in 
the transfer of sensitive nuclear facilities, technology, and weapons-
usable materials. They also agreed to encourage recipients to accept, 
as an alternative to national plants, supplier involvement and/or other 
appropriate multinational participation in sensitive nuclear 
facilities. In subsequent amendments to the guidelines, suppliers also 
agreed to authorize the transfer of nuclear materials, equipment, or 
related technology only when they were satisfied that the transfers 
would not contribute to the proliferation of nuclear weapons or other 
nuclear explosive devices. Thus the members of the NSG already exercise 
considerable restraint in the transfer of sensitive nuclear 
technologies.
    To my knowledge, since the establishment of the NSG major suppliers 
have made only a small number of transfers of reprocessing and 
enrichment technology for civil projects by the major suppliers, and 
these have taken place openly and legally and have been made to states 
that already possessed enrichment or reprocessing capabilities.
    However, countries such as Iran, Iraq, North Korea, and Pakistan 
have been able to obtain materials, equipment, and technology related 
to enrichment and reprocessing on the international market by using 
surreptitious and illegal methods of procurement. They were often able 
to obtain such items from states that did not have adequate export 
control laws. In addition the A.Q. Khan network was successful in the 
clandestine transfer of enrichment technology to the DRPK, Iran, and 
Libya.
    The United States made concerted efforts from the 1970s to the 
present, using intelligence sources, export controls, and the 
cooperation of other suppliers to prevent countries such as Pakistan, 
Iran, Iraq, and North Korea from acquiring items on the international 
market to furbish their enrichment and reprocessing programs. These 
efforts had some effect in delaying and increasing the cost of the 
nuclear weapons programs of some of these states, but in most cases did 
not prevent these states from acquiring the equipment and technology 
they were seeking when they were determined to do so.
    Finally, the United States also made efforts to offer enhanced fuel 
guarantees to discourage the spread of enrichment and reprocessing 
capabilities. These included Congress's attempts in the Nuclear Non-
Proliferation Act of 1978 to promote an International Nuclear Fuel 
Authority, and U.S. initiatives to win support for an international 
nuclear fuel bank during the 1970s and 1980s. However, none of those 
fuel assurance initiatives were able to generate enthusiasm among other 
suppliers or consumers. Based on the reactions of states and nuclear 
utilities from the 1970s and 1980s to the idea of backup nuclear fuel 
supply arrangements or an international fuel bank, one should not be 
surprised if the idea of establishing new fuel assurances schemes meets 
with some indifference. One of the reasons is that commercial markets 
for nuclear supply and the contractual system on which such markets are 
based have generally worked satisfactorily in terms of assurance of 
supply. At the present time, the global enrichment market is operating 
in a relatively smooth fashion and competition among several enrichment 
companies has provided a source of security for importing states.

What lessons can we learn from the efforts of various countries to 
acquire enrichment and reprocessing technologies and the corresponding 
policies of the United States to prevent the dispersions of such 
technologies?

    The history of this issue should enable us to draw certain lessons.
    First, it is doubtful that several of these states would have been 
prepared to relinquish an independent fuel cycle capability, including 
small-scale facilities, even if they had been offered guarantees of 
nuclear fuel, or if they had opportunities to participate in 
multinational fuel cycle facilities. In several instances the 
availability of reliable external sources of supply was irrelevant to 
the decisions of some countries to acquire enrichment and reprocessing. 
Such states are likely to be reluctant to forswear irrevocably 
enrichment or reprocessing capabilities even if they are offered 
attractive nuclear supply assurances from other countries or 
participation in multinational enrichment and reprocessing facilities.
    If states are determined to acquire enrichment and/or reprocessing 
facilities for military purposes, they will do so for what they 
perceive to be compelling national security reasons, and they most 
likely will not be willing to alter their policy because the United 
States and/or other nuclear exporting states offer improved nuclear 
fuel assurances. Enhanced fuel assurances and opportunities to 
participate in multinational fuel cycle facilities are unlikely to have 
a direct impact on countries such as Iran and North Korea.
    Second, nuclear fuel assurances are not going to be a magic bullet. 
There are limitations to what fuel guarantees or participation in 
multinational fuel cycle services can do to prevent the spread of 
sensitive nuclear capabilities.
    Third, fuel assurances such as an international nuclear fuel bank 
can be only one tool among several that the United States and other 
suppliers will need to employ in order to encourage other states to 
refrain from acquiring their own national sensitive nuclear facilities. 
The United States will also need to utilize a range of policy 
initiatives, such as export controls, much improved intelligence 
capabilities, cooperation with other nuclear exporters and political 
persuasion in order to discourage the spread of enrichment and 
reprocessing plants.
    Fourth, effective fuel guarantees could help establish global 
nonproliferation norms for the nuclear fuel cycle that would help 
remove excuses for countries to pursue their own enrichment and 
reprocessing facilities. In particular, they can help deprive states 
such as Iran and North Korea of a credible explanation for acquiring 
sensitive nuclear facilities under the cover of a peaceful nuclear 
program when their intent is use such technologies for nuclear weapons. 
They would also help establish a norm that the vast majority of 
countries have no need to develop their own national indigenous 
enrichment or reprocessing capabilities. In this connection, it is 
important to note that several states in the Middle East have recently 
announced that they are giving serious consideration to the initiation 
of peaceful nuclear programs. If these countries proceed with civil 
nuclear programs, they are likely to be small and restricted to one or 
two research or power reactors for the foreseeable future. It would 
make no economic or programmatic sense for these countries to acquire 
either enrichment or reprocessing plants. Moreover, the presence of 
these sensitive nuclear technologies in such a politically volatile 
area would only threaten regional stability. I believe the 
establishment of an effective fuel assurance scheme such as an 
international fuel bank could play an important role in helping to 
eliminate any justification for the countries in this region to acquire 
their own enrichment and reprocessing facilities.

Will our current offers of improved fuel assurances enhance or hurt our 
chances to prevent the spread of sensitive nuclear technologies?

    In answering this question it is imperative that we recognize the 
bargain that we made in negotiating the Treaty on the Non-Proliferation 
of Nuclear Weapons (NPT), a bargain that was essential to the success 
of the negotiations and the entry into force of the treaty. Article IV 
of that treaty contained a basic understanding that, in exchange for 
forswearing the manufacture and acquisition of nuclear weapons and 
accepting IAEA safeguards on all their peaceful nuclear activities, 
nonnuclear weapon-states party to the treaty would be assured the right 
to obtain the full benefits of the peaceful uses of nuclear energy. In 
addition, the bargain included the commitment by the advanced nuclear 
powers to assist the peaceful nuclear programs of other parties, with 
special attention to the needs of developing countries.
    Unfortunately, the language that the Bush administration initially 
used in offering improved fuel assurances has produced a regrettable 
reaction from many nonnuclear weapon states. For example, the 
President's February 11, 2004, speech proposed improved fuel assurances 
only to states that renounced enrichment and reprocessing plants. John 
Bolton, then-Under Secretary of State for Arms Control and 
International Security gave a speech to the NPT Preparatory Conference 
in 2005 in which he said that, ``The Treaty provides no right to such 
sensitive nuclear technologies.''
    The reaction of many nonnuclear weapon-states parties to the NPT to 
these statements was sharply negative. Nonnuclear weapon states warned 
against establishing a new discriminatory nonproliferation regime that 
would be inconsistent with the provisions of article IV of the NPT.
    For example, the Non-Aligned Movement submitted a working paper to 
the 2005 NPT Review Conference making clear that the members of this 
group intended to defend their rights under article IV of the treaty. 
It stated,

          The Group of Non-Aligned States Parties to the Treaty 
        continues to note with concern that undue restrictions on 
        exports to developing countries of material, equipment and 
        technology for peaceful purposes persist. In this regard, the 
        Group believes that any undue restrictions or limitations on 
        peaceful uses of nuclear energy, incompatible with the 
        provisions of the Treaty, should be removed.
          In this regard, we recall that the NPT fosters the 
        development of peaceful uses of nuclear energy by providing a 
        framework of confidence and cooperation within which those uses 
        can take place. It is in this context that we reaffirm the 
        inalienable right of the States Parties to the NPT to engage in 
        research, production and use of nuclear energy for peaceful 
        purposes without discrimination and that free and unimpeded and 
        nondiscriminatory transfer of nuclear technology for peaceful 
        purposes be fully ensured.

    At the May 2007 Preparatory Committee for the 2010 NPT Review 
Conference, the spokesperson for the NAM emphasized that ``access to 
equipment, material, and technology for civilian purposes should not be 
restricted.'' South African representative Abdul Minty highlighted the 
concerns of many consumer states about the proposals by the United 
States that would restrict improved fuel assurances only to those 
countries that renounce enrichment and reprocessing plants. ``With 
regard to current discussions on the fuel cycle, it is imperative that 
we do not create another kind of cartel that would exclude full 
participation, particularly by States in full compliance with their 
safeguards obligations. We wish to recall that nothing in the NPT shall 
be interpreted as affecting the inalienable right of all Parties to 
develop research, production and use of nuclear energy for peaceful 
purposes without discrimination and in conformity with Articles I, I 
and III.''
    NPT parties may find it particularly exasperating that the U.S. 
proposal appears to acquiesce in the reprocessing and enrichment 
programs of non-NPT parties such as India, Israel, and Pakistan simply 
because they already possess such facilities while denying such 
capabilities to NPT parties that are in full compliance with their 
treaty obligations.
    A representative of Argentina has recently made it clear that the 
right to nuclear technology goes beyond article IV of the NPT and goes 
to the rights of states as sovereign entities.
    In addition, some states have seen the Department of Energy's 
Global Nuclear Energy Partnership (GNEP) as a program that aims to 
create a new discriminatory regime that would divide the world into two 
classes of states: ``So-called fuel cycle states,'' which would be 
allowed to have enrichment and reprocessing facilities and so-called 
``reactor states'' which would not be allowed to have such 
technologies.
    The result of this approach as well as the language used by the 
Bush administration requiring states to renounce enrichment and 
reprocessing or denying that states have to rights to such technologies 
has already backfired to some extent. Several states, including 
Argentina, Australia, Brazil, Canada, Kazakhstan, Ukraine, and South 
Africa have made it clear that, while they might not require an 
enrichment capability in the immediate future, they are not prepared to 
forswear their rights to do so.
    Thus the Bush administration's rather inflexible and unbending 
language in laying out its requirements for states to qualify for fuel 
assurances did not get off to a very auspicious start.

What approach is most likely to maximize our chances to advance our 
objective of minimizing the dispersion of enrichment and reprocessing 
capabilities?

    What is needed in my view is a much more sophisticated and deft 
approach to this issue. It is quite clear that article IV does not 
oblige NPT parties to engage in nuclear cooperation or to transfer 
sensitive nuclear technologies to any particular NPT party. Moreover, 
the United States has always believed that suppliers should withhold 
nuclear cooperation from any state that is pursuing a nuclear weapons 
program or is otherwise violating its nonproliferation obligations. The 
United States has long believed that there is no economic justification 
for the spread of enrichment and reprocessing to most countries. The 
vast majority of NPT parties have not sought enrichment or reprocessing 
for this very reason. Moreover, the United States has never supported 
the view that Parties to the NPT have an unfettered right to acquire 
enrichment and reprocessing plants.
    However, the success of our efforts will depend critically on the 
language we use and the conditions we impose. If we demand that 
countries renounce what they regard as the rights under article IV of 
the NPT or indeed their sovereign rights as states, we will face strong 
opposition. This suggests that the United States and other supplier 
countries may not wish to insist that states forgo for all time what 
they regard as their right to acquire enrichment and reprocessing 
plants, but instead offer fuel assurances or cradle-to-grave benefits 
to those countries that have no perceived interest in acquiring 
sensitive fuel cycle facilities or that have agreed voluntarily to 
forgo such facilities.
    In this connection, I have been encouraged by less inflexible 
statements from the administration on this issue.
    For example, U.S. Special Envoy for Nuclear Nonproliferation Robert 
G. Joseph gave a press conference recently that seemed to back away 
from the rigid position of earlier statements and place stress on the 
voluntary nature of countries' decisions to forgo enrichment and 
reprocessing. He said, ``And finally, I would emphasize that this is 
not about the rights of countries under the NPT. This is not about 
changing or taking away rights. This is about encouraging sovereign 
states to make sovereign choices based on their own interests, 
financial as well as nonproliferation interests. It's about providing 
an alternative path to energy development that becomes a win for energy 
security, a win for environmental security and a win for 
nonproliferation.''
    It remains to be seen whether the administration will demonstrate 
any new flexibility in its approach to this issue, or whether it will 
stick to its rigid requirements for renouncing enrichment and 
reprocessing as a condition for receiving improved fuel assurances
    In any event, a certain amount of damage has already been done. 
This makes it all the more important that the legislation enacted by 
Congress in support of an international fuel bank avoid language that 
challenges the article IV rights of NPT Parties or requires them to 
forgo such rights. Rather, I believe any new legislation in support of 
an international fuel bank should emphasize that the United States is 
offering incentives to states, not requiring them to renounce what they 
regard as their fundamental rights. Incorporating such a positive 
approach in U.S. law will be giving legal force to U.S. policy and is 
more likely to win acceptance with other countries than a policy of 
denial. The formulation used in Senate bill S. 1138 requires that fuel 
from an international fuel bank should go to countries that ``decide to 
forgo a national uranium enrichment program and spent nuclear fuel 
reprocessing facilities.'' Presumably this means a voluntary decision. 
The House bill H.R. 885 specifies, among other things, that a recipient 
of fuel from an international fuel bank, ``does not possess uranium 
enrichment or spent-fuel reprocessing facilities of any scale.'' Either 
of these formulations is more likely to be acceptable to consumer 
states and therefore have a better chance of success than the approach 
initially taken by the Bush administration. In other words we need to 
make sure that we offer supply assurances to states that voluntarily 
choose to rely on the international market for their nuclear fuel 
requirements. No country should be asked or expected to give up or 
abridge any of their rights under the NPT.
    Other attributes of a successful fuel assurance arrangement, such 
as an international fuel bank, that will help the chances of success in 
discouraging the spread of sensitive nuclear fuel cycle facilities 
include the following:

   The principal and preferred mechanism for providing for 
        adequate assurances of nuclear fuel supply should be a 
        competitive market. Any mechanism for offering improved fuel 
        supply such as an international bank should serve as a supplier 
        of last resort and should be structured so as to avoid 
        destabilizing the market.
   An IAEA nuclear fuel bank should be designed to meet short-
        term supply interruptions that may occur in small countries 
        that are unfamiliar with the workings of the international 
        nuclear market. It therefore may only have to be modest in 
        size. Moreover, a modest-sized bank is more likely to obtain 
        the required financing than a large one and is not likely to be 
        seen as a threat to the stability of the market.
   A nuclear fuel assurance arrangement or international fuel 
        bank should be able to respond to sudden supply interruptions 
        in a prompt and reliable manner. It should therefore employ an 
        agreed set of predetermined release criteria which, when met, 
        would automatically trigger fuel supplies to countries 
        suffering an interruption in supply for reasons unrelated to 
        their nonproliferation obligations.
   It will also have to take into account fully the 
        nonproliferation requirements of suppliers. Presumably this 
        would mean that the recipient would have to agree in advance to 
        accept the export guidelines of the Nuclear Suppliers Group 
        and, in the case of U.S.-origin material, the requirements of 
        the Atomic Energy Act for peaceful nuclear cooperation.

    Finally I believe that active U.S. support will be crucial for the 
successful establishment of a strengthened system of fuel assurances, 
including an international nuclear fuel bank, and I therefore strongly 
endorse the legislation introduced by Senators Lugar and Bayh.

                   global nuclear energy partnership

    Let me make a few comments on the Global Nuclear Energy Partnership 
because it contains an important component that is designed to 
discourage the spread of enrichment and reprocessing facilities. GNEP 
proposes that, if the United States and other supplier states can 
successfully demonstrate and commercialize advanced reprocessing and 
nuclear reactors, it should be more physically and politically feasible 
than it is today for supplier countries to lease nuclear fuel or to 
offer a spent-fuel take-back arrangements to consumer countries.
    In my view, a ``credible cradle to grave'' fuel supply program by 
the United States and other suppliers may prove far more effective than 
some other techniques in discouraging the spread of enrichment and 
reprocessing facilities since it would relieve states of the burden of 
disposing of their own nuclear wastes.
    However, none of the major fuel-cycle states, with the possible 
exception of Russia, appear to be in a position to offer such options 
to consumer states on any widespread basis. Moreover, the prospect of 
offering cradle-to-grave services appears to be several years, indeed 
possibly decades, away from being realized. In addition, the United 
States Government would face formidable public and congressional 
acceptance problems if it were to try to initiate a program to take 
back power reactor spent fuel. Most importantly, the inability of the 
U.S. Government to meet its responsibilities under Nuclear Waste Policy 
Act to take spent fuel off the hands of American utilities means that 
United States would have no credibility in offering a cradle-to-grave 
policy to foreign countries unless and until it can move to solve its 
own waste management problems.

                               safeguards

    Before closing, let me say a few words about the provisions in S. 
1138 for providing financial support to the IAEA's Safeguards 
Analytical Laboratory (SAL). I strongly support the United States 
providing $10 million to the Safeguards Analytical Laboratory, and I 
hope the other Member States of the Agency will come forward with 
voluntary contributions to add another $10 million to bring the 
laboratory up to snuff. This laboratory has a lot of equipment that is 
antiquated, and the Agency must rely on a very small number of external 
laboratories for analyses of environmental samples. The IAEA needs 
additional as well as new types of equipment for conducting its 
safeguards activities. The IAEA does not have a state-of-the-art lab 
for particle analysis, which has become an indispensable tool in 
determining the existence of undeclared enrichment or reprocessing 
activities.
    Let me end by saying a few words about the overall budget for IAEA 
safeguards. Starting in the mid-1980s, Member States imposed a ``zero 
real growth'' budget on the IAEA. The Bush administration can take 
credit in leading the effort to increase financial support for the IAEA 
safeguards system in 2003. However, the IAEA's safeguards workload is 
likely to increase in the years ahead. The demands on the IAEA 
safeguards system are likely to increase as more countries turn to 
nuclear power. The Vienna Agency also will need to devote more 
resources to evaluating information supplied by Member States in 
connection with Additional Protocols to their safeguards agreements. In 
addition, the IAEA will have to verify the freezing, disablement, and 
dismantlement of the North Korean nuclear program. On June 15, 2007, 
the Director General of the IAEA, Mohamed ElBaradei, warned that 
Agency's ``safeguards function is being eroded over time'' and said he 
was ``very distressed'' by the failure of the Board of Governor's to 
approve a 4.8-percent funding increase for 2008.
    I, therefore, hope that the United States will take the lead again 
in urging Member States to provide the resources the IAEA needs to 
carry out its vital safeguards mission.

    Senator Casey. Doctor, thank you very much for your 
testimony, and for all the testimony presented.
    I'd ask that the prepared statement for each witness be 
entered into the record for purposes of amplifying the record.
    Thank you very much, to each of you.
    Let me ask a question, and I'll throw it out for all three, 
and you may all have the same answer. It's a true-or-false 
question. And it's this, very simply: No country has ever 
successfully diverted nuclear material from a facility with 
IAEA safeguards. Is that true or false?
    Mr. Sokolski. False.
    Dr. McGoldrick. False.
    Senator Casey. And can you tell us why?
    Dr. McGoldrick. Well, there have been instances--a 
diversion is a violation of IAEA safeguards, and the IAEA has 
found Iraq in violation of the safeguards agreement; it has 
found Romania in violation of the safeguards agreement. I might 
add, in the case of Romania, Romania discovered this after the 
overthrow of the Ceausescu regime and volunteered the 
information. There have been other minor violations that the 
agency has discovered, such as in South Korea and Egypt, and 
perhaps a few others that I can't recall. But the fact is, 
there have been violations of IAEA safeguards. And, of course, 
Iran--I neglected to mention Iran, which has been found in 
violation of the safeguards agreements.
    Senator Casey. And, in light of that, the real worry that 
we have, among others, is that diversion. And how about the 
diversion of a very small proportion of nuclear material that a 
facility handles, such as the amount that collects in crevices 
between machine parts? I guess they call that ``material 
unaccounted for,'' or MUF. Tell us about that, and tell us 
about the risks involved with that kind of even seemingly 
limited diversion. Any one of you, it doesn't----
    Dr. McGoldrick. Well, I wouldn't necessarily call what you 
have called a MUF a diversion. For example, a reprocessing 
plant consists of miles and miles of pipes and pumps and so on 
and so forth, and it is only normal that a certain amount of 
the material is going to get caught up and not flow through. 
And, in most cases, this is just--or is a result of the nature 
of the facility itself, and is not a deliberate diversion of 
nuclear material to nuclear weapons purposes. I think the IAEA 
has made efforts to try to minimize the MUF in each case, and 
the MUF is usually larger in cases like reprocessing and 
enrichment facilities, and therefore, requires more intensive 
safeguards.
    But, in addition to the material accountancy control, the 
IAEA also has containment and surveillance methods, which is in 
addition to material accountancy, which helps, also, to prevent 
the diversion of nuclear material, in addition to material 
accountancy and control.
    Dr. Scheinman. I think it's important though, to understand 
that, in a large reprocessing facility, it is impossible for 
the agency to be able to detect the diversion of small 
quantities of material. It could be, kind of, tablespoons at a 
time, as we used to say. And, over time, it's very conceivable 
that, in a large reprocessing plant, sufficient quantities of 
plutonium could be diverted, and the agency would never 
actually have been able to catch that, because there's always a 
degree of uncertainty in any inspection activity, and if you're 
talking about the standard which we use, which is 8 kilograms 
of plutonium diverted to constitute the risk of a nuclear 
device being constructed, in a facility like the Rokkasho-mura 
plant, which is extremely large, no possibility at all that you 
could ever catch that small a degree of diversion. But, as Dr. 
McGoldrick just said, if you're talking material accountancy, I 
would say you are skating on thin ice. If you're talking about 
the total capacity put in, material accountancy, yes, but 
containment, surveillance, real-time monitoring, cameras, et 
cetera, then you have a better chance of being able to lower 
that prospect that a successful diversion will take place. But, 
again, if you're getting down to very, very small quantities in 
a very large facility, that risk will always be there.
    Senator Casey. Thank you, Doctor.
    Mr. Sokolski.
    Mr. Sokolski. I almost am tempted to say now for something 
entirely different. I don't think--I think we're edging toward 
the truth here. Let me push a little further.
    If you turn to page 18 of the report that's part of the 
testimony that I asked be placed in the record, you're not 
talking about small quantities, you're talking about 50 bombs' 
worth per year, in the case of the Japanese reprocessing plant. 
I don't think that's small. I think that's a big number. If you 
are----
    Senator Casey. If you could explain that, when you say ``50 
bombs per year''; derived from what?
    Mr. Sokolski. They--when you do the calculations of what it 
is the IAEA itself admits it's going to have a statistical 
probability of not knowing about, given those crevices, 
solution, it comes out to be a rather large figure. Now, you're 
going to have the administration come up here, if they haven't 
already, and they're going to tell you, ``Oh, we're going to 
safeguard the reprocessing plant that's going to be built in 
India,'' or you may find proposals to create big fuel centers 
that'll enrich, eventually, in Kazakhstan, and they'll say, 
``Oh, we're going to safeguard that.'' One of the key 
recommendations in the report that I'm releasing today is that 
the distinction needs to be made between what you can monitor--
which is ``look at''--and maybe, with enough effort, find out 
about diversions after they occur, and what you can safeguard, 
which the IAEA defines as being able to monitor in such a 
manner that you can detect a diversion before it occurs or is 
completed--I should say, before it's completed.
    Now, in addition, one last comment, you focused on material 
unaccounted for. I think you need to also understand--and you 
might turn to page 14, because there's a nice graphic there--
there's a big problem with material accounted for. One of the 
things the agency does not do is list publicly how much 
weapons-usable material is on hand that they need to safeguard, 
of which type, by country. They've refused to do this, I think, 
largely on the preposterous proposition that it's proprietary 
industrial information. If you take a look at this chart, 
you'll see that the amounts of those materials grew about 
sixfold over the last 20 years, but the IAEA's safeguards 
budget no more than doubled to account for that. That amount of 
nuclear weapons usable material is going to continue to grow as 
long as you keep propounding, with a fuel bank or not, that 
everyone has a right to make nuclear fuel. So, it may well be 
that you need to push your bank on the basis that you're not 
going to dictate to people that they can't make nuclear fuel, 
and you're not going to get into the question of rights. But 
the U.S. Government probably needs to have a position that 
doesn't say what it currently says, which is everyone has an 
absolute, unqualified right to make nuclear fuel. Our 
position--right now, publicly by the State Department--is 
identical to that of the state of Iran. You're not going to win 
with a fuel bank if you keep saying that.
    Senator Casey. Just want to--before I turn it over to 
Senator Lugar--just for the record, you referred to page 18 in 
your report. And I just wanted you to tell us exactly what 
you're referring to there, so the record is clear, so if 
someone is reading----
    Mr. Sokolski. OK.
    Senator Casey [continuing]. The record, they don't have to 
go back----
    Mr. Sokolski. Well, in there----
    Senator Casey [continuing]. And find it.
    Mr. Sokolski [continuing]. There is a somewhat--reference, 
but detailed description of a report done--or, I should say, a 
study done for this report, by Dr. Ed Lyman, who used to run 
the Nuclear Control Institute. And what he lays out are the 
incidents of material unaccounted for, and what had to be done 
to finally come to some reckoning of what the figures were, in 
the case of several facilities in Japan and the United Kingdom. 
It is not a very flattering picture. It took years, as it's 
described on these pages, to know that, oh, my gosh, we don't 
know where several bombs' worth of material went in pilot 
facilities, small facilities. And the numbers get larger, the 
bigger the amounts are.
    So, I really think that candor, sunlight, is very important 
here. I think we need to understand that when we're talking 
about what they call bulk handling facilities, facilities that 
make nuclear fuel or handle sensitive materials that are called 
``direct-use materials,'' like separated plutonium and highly 
enriched uranium, that what you're really talking about are 
factories and facilities that need to be viewed much like we 
view nuclear weapons plants and nuclear weapons storage 
facilities. They aren't. That's part of your problem.
    Senator Casey. Thank you. And I'm over time, so Senator 
Lugar has at least 10 minutes.
    Senator Lugar. Thank you, Mr. Chairman.
    Dr. Scheinman, let me thank you again for being a member of 
our Policy Advisory Group that met over in S-116 in 2005 for a 
number of meetings and really formed the basis of understanding 
for the legislation that is before us today.
    You've indicated your enthusiasm for the legislation, but 
let me ask you, and then each of the other distinguished panel 
members, What thoughts do you have about our legislation, how 
it compares with other proposals before Congress or the 
administration, and what, if anything, we should do to enhance 
what we've written?
    Dr. Scheinman. Well, Senator, in my initial comments, I 
remarked that what you've put forward here in this legislation 
with respect to section 104--or, is it 204? I'm not sure--
relating to technology related matters, is a laudable thing to 
be proposing to do, but the problem is: Are we organized 
nationally to do it? Is there someone who has oversight, that 
will bring together the departments and the various services 
that might be tasking national laboratories to do certain kinds 
of activities, to pursue certain kinds of research? And do we 
have the resources there that will go to the laboratories in 
order to do this?
    The laboratories have been fundamental to this, of course, 
over the many years, and, in the case of Los Alamos, which I, 
perhaps, know a little bit better than some of the other 
laboratories, many people who were in the business of research 
and development are now retiring. Younger people are looking at 
what their career path ought to be. And many of them have come 
to be concerned about whether they should get into research and 
development on safeguards and verifiability issues. Why? 
Because there's not much demonstration that there is a sound 
financial basis to take them forward. So, it strikes me that we 
have a double problem here: First the resources that would go 
into enabling us to get back into leadership positions with 
respect to research and development on things related to 
safeguardability and the like, and, second, having a cadre of 
young people who are prepared to put the next 20 or 25 years of 
their professional lives into this.
    I understand that sometimes people will be deployed to the 
IAEA as inspectors. And they don't get welcomed back with the 
flags flying, they get allowed back, but no certainty about 
where they're going to be placed and what kinds of activities 
they'll be best deployed to.
    So, these are problems that we have--personnel problems, 
financial problems, and the commitment, which I see in this 
legislation, to enable us to take leadership again. If you go 
to the IAEA now, you find that the French are all over the 
place, the Japanese are all over the place, getting their 
points in. What we need to do is to be able to get our points 
in. We have to do this with leadership. And leadership will 
require organization, on the one hand, and the resources 
necessary to carry things forward. And this is particularly the 
case in an era when we are talking about GNEP and new 
technologies, new facilities, new kinds of fuel cycles. We'd 
better be in the front line on this kind of an--of these 
questions in order to avoid some of the problems that Dr. 
Sokolski mentioned, that exist with respect to the current fuel 
cycle.
    Senator Lugar. Those are excellent suggestions.
    Dr. McGoldrick, do you have some thoughts in this same 
area?
    Dr. McGoldrick. I would certainly echo Larry Scheinman's 
comments. I agree with them completely. I do think the 
safeguards laboratory is in desperate need of upgrading 
equipment, and I think what's particularly important is its 
particle analysis, which is essential to the detection of 
undeclared enrichment and reprocessing facilities. And so, I 
very much favor the efforts you're making to give the agency 
additional funds to get the right kind of equipment, advanced 
equipment, state-of-the-art equipment to do this kind of 
analysis.
    Senator Lugar. I think, likewise, I would just pick up the 
point that both of you have made about unfunded mandates and 
what have you. And this is a subject that I've raised earlier 
today. Our enthusiasm may wax and wane, but this is a situation 
that, sort of, goes on in an international setting, and the 
need for solid budgetary debate here, and some structure, 
probably, is of the essence if this is to have promise down the 
trail.
    Dr. McGoldrick. I would also add that the IAEA safeguards 
budget is really inadequate----
    Senator Lugar. Yes.
    Dr. McGoldrick [continuing]. For the agency to carry out 
its responsibility. I don't recall what the assessed budget is. 
It's someplace in the vicinity of $110 or $120 million. But, 
what does an F-16 cost compared to that? And what is the cost-
benefit analysis comparing the two of them? I really think it 
is shameful, frankly, that the international community cannot 
come forward and finance the agency with the resources it needs 
to carry out its growing safeguards responsibility.
    Senator Lugar. Yes, Dr. Sokolski.
    Mr. Sokolski. I want to be careful here. I'm no doctor.
    Senator Casey. That's all right.
    Mr. Sokolski. I have----
    [Laughter.]
    Mr. Sokolski [continuing]. A higher degree. It's called an 
ABD, ``all but dissertation,'' and it's actually harder to get, 
because nobody tells you when you get it. [Laughter.]
    First, let me say that I've already defended your 
legislation in the House, so, ``I gave at the office.'' It's 
good stuff. I think it's good, for three reasons, and then I'm 
going to suggest ways you might think about improving it.
    It's concrete, literally, in making a suggestion about the 
lab. It's kind of embarrassing, to the IAEA and to the 
Government, that Congress actually is doing its oversight job. 
You're not supposed to do that. That's point one. Take more 
trips, please.
    Second, I think somebody had the presence of mind to 
actually say ``market price''--``competitive market price.'' 
Don't drop that language. The last thing you want to do if 
you're concerned about Yemen building a large near-bomb factory 
is to have a loss leader in the form of subsidized fuel. It is 
the least expensive part of the life-cycle costs of a reactor, 
but--I can just see it now, just as, perhaps--I guess I'll try 
not to be sexist, so I'll use a male example--you go into 
Sears, and you get a free special tool if you buy $500 worth of 
tools you don't need. And so, you put your credit card down and 
you buy the whole kit-and-caboodle. When you start subsidizing 
fuel, that is what you're doing. It is a very counterproductive 
thing to do. Go with the market.
    Second, I think it actually is a plus that there's no 
mandate for funding in your bill, and that you actually ask for 
a report. What a novel idea. Get some idea of what you're doing 
before you fund it. Now, this isn't the way the House wants to 
proceed. I would stick to your guns. You want the answers 
before you give the money over. And don't be rushed because of 
Iran. I mean, I think the testimony we've heard--Mr. McGoldrick 
laid out--is very good. It should be reread and rethought 
about. He made all the good arguments. Iran should not be the 
driver. And the idea that this Government, with--what is it, $3 
trillion budget, should be worried about a $50 million private 
contribution over something this important, is mildly obscene. 
I mean, that can't be the argument. Take your time, get it 
right.
    Now, two changes I would make, or think about.
    First, OK, you don't want to dictate to people what you 
think the NPT says or doesn't say, or how they should think 
about that. But could you please at least repeat in your bill 
the language that you passed under the Hyde Act. You voted for 
it already. I'm not asking you to do anything new, and it's in 
the House bill. Recede to their position, please. And what it 
states is, there is, in the view of the U.S. Government at 
least, not an inalienable per se right to any and all, or any 
particular, nuclear technology. It has to meet certain criteria 
to be peaceful.
    Second--and here, I'm going out on a limb, but I actually 
think it's a great idea, so I'm going to say it--why not, if 
you're going to put money--more volunteer money for 
safeguards--come up with a formula that would say, ``We're 
coming up with $10-million-plus, whatever it is, for POTAS and 
everything else, that's going to be based on a certain 
percentage of what our installed nuclear capacity in the United 
States is.'' It won't change the amount of money. It won't 
obligate you to do more. But it'll set the example that, 
somehow, if there's growth, and if there are people using 
nuclear power, part of the price of doing business, from here 
on out, will be to pay for safeguards. Now, you can start with 
this voluntary thing. It won't obligate you to do anything with 
regard to the bigger picture, but it might prompt a lot of 
interesting discussion. And I'd be happy to work with you on 
this, as would Tom Shea, who came up with the idea, who has 
more IAEA experience than, I don't know, probably this entire 
room times five. I recommend that you talk with him.
    Anyway, those are the two things I would do to improve it. 
And I think it's pretty good. So, don't retreat on what's 
sound.
    Senator Lugar. Yes.
    Dr. McGoldrick. Oh, I'm sorry.
    Dr. Scheinman. Could I just add one thing? That the mil 
kilowatt hour produced by a nuclear power plant has been 
discussed, time and time again. It's a good idea, but it has 
never gotten to first base. So, I concur that this is something 
that really ought to be looked into.
    The other thing I'd like to just mention is that the budget 
for the IAEA safeguards is $130 million this year. The 
Portland, OR, Police Department has a budget of $141 million. 
One of them deals with the world, and the other one deals with 
a city--modest-sized city, in a relatively tame state.
    Mr. Sokolski. There is one problem, though. When the United 
States piles on voluntary contributions, it turns out that it 
becomes the biggest funder of the safeguards budget, even 
though it's a ridiculously small amount. That has political 
implications. What you want is for us and others to pay more in 
some kind of more routinized, country-neutral formula. The 
problem right now is, they use this U.N. assessment model, and 
that model has a country like Italy, that has no power reactors 
online, paying more than South Korea, which has 20 reactors 
online. That's got to change. I mean, I don't know whether 
nuclear power, by the way, is going to expand. I mean, they 
talk about all the reactors they're going to build, they forget 
about all the reactors they've got to take down and 
decommission, which is about, I don't know, 300 or 400 machines 
in the next 30 years, so it's not so easy to see a net 
increase. It's not a given. But, if there is, you doubly want 
to pay attention to this point.
    Senator Lugar. Yes, Doctor.
    Dr. McGoldrick. Yes, may I just make a comment? I would 
like to dissent from my colleague's statement urging you to put 
in the legislation language that the United States does not 
believe that countries have inalienable rights to any of these 
technologies. I'm afraid that's very counterproductive. I think 
it's hamfisted. It's going to produce just the opposite result 
of what we intend.
    When the President announced his policy, in February 2004, 
he promised fuel assurances to countries that renounced 
enrichment and reprocessing. John Bolton, at the 2005 NPT 
PrepCom to the NPT, said, explicitly, that states party to the 
treaty don't have rights to these technologies. Well, this 
produced a very sharp reaction, very negative reaction among 
states. And I, frankly, think that we need to have a more 
sophisticated and more deft approach. We need to offer these as 
incentives to urge countries to forgo enrichment and 
reprocessing, but not to go out and challenge their rights to 
have it, because this is a visceral reaction that we get, and 
we're not going to get support for this.
    Mr. Sokolski. By the way, I would agree, don't tell them 
what their rights are. But I think it's untenable for the 
United States to be insisting that countries clearly have the 
right. If you could at least make our policy neutral on this 
question, to say at least we don't believe Iran has a right to 
enrich, I think you get it about right. Where we're headed is 
saying that, ``Well, we won't say that you don't have a right; 
in fact, we're going to say you do, and we're going to let you 
get access to fuel while you continue to insist that, at any 
given time, you can start making fuel yourself.'' That's not 
a--really where you want the bank to be working its magic. So, 
if you can just at least get the U.S. Government to not have 
the same official position as the Government of Iran, I'll 
settle for that. And the Hyde language, that you've already 
approved, would do that.
    Senator Lugar. Well, thank you very much, gentlemen. I 
return to the chairman.
    Senator Casey. I know we have to wrap up, and I want to 
thank Senator Lugar for allowing the witnesses to engage each 
other, which doesn't happen enough, often, at these hearings, 
and I appreciate his willingness to allow you to mix it up a 
little bit.
    I know we have to wrap up, and I'll just ask one final 
question for each of you, and you can be very brief, if you 
can. You can amplify your answer in the record.
    But I guess I'd ask you a two-part question. No. 1--we'll 
start with the bad news and then move to good news--the bad 
news is: What's your worst fear, in terms of our present 
situation, with regard to all of the limitations and the 
inability of the IAEA to do what it must do because of those 
limitations, whatever they are--budgetary, personnel, 
infrastructure, equipment, go down the list--but what's your 
worst fear, based upon that reality and the reality of the 
interests of Iran and others? And, second, on a more positive 
note, what are the two or three specific things that this 
Government should be doing, in addition, of course, to the 
legislation we've been here to discuss--what are the two or 
three steps that this Government should take to forestall or to 
mitigate or deal with that nightmare that you would outline? If 
you could do that rather quickly. And I think we'll start with 
Dr. McGoldrick, in reverse order of the introduction of the 
witnesses.
    Dr. McGoldrick. I'd--thank you--my worst fear. Your 
question relates to--specifically to the IAEA?
    Senator Casey. Well, I think it really relates to--in light 
of these limitations and problems that the IAEA is dealing 
with, and we're talking about today, what's your worst fear, 
based upon that--that in addition to what we've talked about 
with regard to Iran?
    Dr. McGoldrick. Well, I think--I guess my worst fear is 
that, while the IAEA may find--or declare a state in violation 
of its safeguards agreement, my worst fear is that the 
international community--and specifically the U.N. Security 
Council--will not have the political will to take appropriate 
action to deal with that problem.
    Senator Casey. And what steps would you take to deal with 
that fear?
    Dr. McGoldrick. Well, that's a difficult challenge. One has 
to work very closely with countries such as China and Russia, 
in particular, to impress upon them the importance of 
preventing the spread of nuclear weapons and to try to convince 
them to take appropriate actions, when necessary, when a 
country is in--obviously in violation of its safeguards 
agreement. That, and I would also go back to the issue of 
financing. I would hope that the international community would 
find a way to provide the agency with the resources--and the 
financial and technical--that it needs to do its job.
    Senator Casey. Dr. Scheinman.
    Dr. Scheinman. Well, I thought that was a pretty good 
comment by Fred, with respect to a worst fear. I would take one 
step back, to say that one of the problems I see in the agency 
today is gridlock on the board of governors. All you need to do 
is look at what happened with this Special Committee on 
Safeguards; it came to naught, had 18 proposals before it, and 
couldn't get any agreement, because political issues are 
intervening, preventing anybody from being able to reach 
consensus. Iran played its cards very well, mobilized support 
among members of the board. The United States pressed very hard 
to say, ``What this is really all about is Iran,'' which 
probably was not the best tactic to take, even if true. And if 
we have continued gridlock on the board, we're going to have 
ourselves problems in getting anything done. They are the 
governing body, and they both direct and encourage and enforce 
the Secretariat to take actions in particular directions. 
Therefore, I would encourage the United States to shift its 
diplomacy, in terms of dealing with some of these issues and 
try to build consensus, build linkages with other countries--
China and Russia, certainly--but also to get at some of the 
nonaligned countries. There's a powerful force there, being led 
largely by South Africa, that really intends to hold our feet 
to the fire, and we ought to find ways and means to be able to 
address legitimate concerns and, at the same time, promote our 
national interest.
    Senator Casey. Thank you, Doctor.
    Mr. Sokolski.
    Mr. Sokolski. All of what's been said, I would agree with. 
I would add, perhaps, one other thing that is a worry and that 
is that the agency is increasingly running the risk of not 
doing its mission at all, which is material accountancy. And 
what it's going to, perhaps, become is a kind of glorified 
Keystone Cop operation that you call in when you have a problem 
and you want to buy time by having them inspect the daylights 
out of something and not come to a conclusion. You don't want 
that. That's where it's headed.
    I think part of the reason why is the funding, but the 
other is this false consciousness, that if we look at 
something, we're safeguarding it; when their own definitions 
make very clear, that's not enough to meet the criteria.
    The other fear I have is the one that's just been raised. 
If you don't arrange a number of country-neutral rules for 
proceeding against noncompliant and violating parties, to say 
nothing of withdrawing parties, you run the risk of them 
enforcing nothing.
    In the report, there are a number of very specific 
proposals on what you can do without the U.N. Security Council 
and the IAEA consensus. You should perhaps review those and see 
whether any are to your liking, because the committee actually 
can act on them.
    In addition to the fee idea--and I would start with a 
voluntary thing, because that's harmless--and making a 
distinction between safeguarding and monitoring, three specific 
ideas:
    First, money needs to go to what they call ``near real-time 
surveillance capabilities.'' There is a way to actually know 
whether the cameras and monitors are on. It costs money. It's 
more than their budget can bear, but it's not heroic. You 
might, the next time you visit--I'll give you the names of who 
to talk to--take a brief on it.
    Second, here's something I would do, for sure, and the 
United States can do this by itself. We need to reassess all of 
the technical premises behind what it takes to make a bomb, how 
long it takes to convert different materials into bomb fuel, 
and how frequently you would have to inspect to detect a 
diversion before it was completed. The premises that the IAEA 
has on each one of those fronts are woefully out of date, and 
that's detailed in the report.
    Last, but not least--and I like this one the best--if 
you're really in doubt about what to do as a Senator about a 
problem, sometimes it pays--and I'm--I guess I'm being a little 
sarcastic here, but I can't resist--to enforce the laws you 
already passed. It's not done all the time, but it surprises 
and astonishes people when you do it, and it really keeps them 
off-guard. There is a title V--I recommend it--of the Nuclear 
Nonproliferation Act, that was passed in 1978. And what it does 
is, it asks for reports and efforts to identify nonnuclear, 
nonfossil-fuel energy sources that could help developing 
countries. To my knowledge, no President, Democrat or 
Republican, has ever enforced this law or obeyed what was 
dictated as something they had to follow. It would be 
tremendous fun to just ask where the report is, after 30 years. 
And, by the way, it's supposed to annual. And there are 
recommendations in that title of other things that should be 
done. I would actually start there.
    Senator Casey. Thank you very much.
    Senator Lugar.
    Well, with that, we want to thank each of our witnesses for 
your testimony today, and I want to thank Senator Lugar for his 
work on this issue, and, in particular, a meeting we had a 
couple of months ago, when he was reviewing a lot of these 
issues with me. And I'm grateful for his continued dedication 
to this issue.
    And there are no further proceedings, and, for that reason, 
this meeting is adjourned.
    [Whereupon, at 11:47 a.m., the hearing was adjourned.]
                              ----------                              


              Additional Material Submitted for the Record


 Prepared Statement of Senator Joseph R. Biden, Jr., U.S. Senator From 
                                Delaware

    Today our committee is holding a hearing on a subject of vital 
importance for U.S. national security and for peace and stability 
around the world: How can the world enjoy the benefits of civilian 
nuclear energy without increasing the risk that more countries will 
acquire nuclear weapons?
    In his time President Kennedy worried that by the mid-1970s the 
United States might face a world in which 15 or 20 countries possessed 
nuclear weapons. By that standard, the nuclear nonproliferation regime 
has been remarkably successful. A central part of that success has been 
the system of safeguards on civilian nuclear technology overseen by the 
International Atomic Energy Agency (IAEA). The purpose of safeguards is 
to ensure that countries are fulfilling the pledges they have made to 
forgo nuclear weapons, even if they are making use of civilian nuclear 
technology. A well-functioning IAEA safeguards system is essential to 
nonproliferation.
    But the IAEA and its safeguards system are facing intense 
challenges. The world rightly keeps asking more of the IAEA safeguards 
system, but the IAEA is not getting the funds it needs to meet those 
demands. Many countries are looking to nuclear power as a response to 
climate change and energy insecurity, but the IAEA struggles to find 
and retain enough qualified nuclear inspectors to keep up even with 
today's demands.
    Even if the IAEA safeguards system can overcome these challenges, 
it may not be able to cope with a wide diffusion of the technology to 
enrich uranium or to reprocess spent fuel to extract plutonium. These 
technologies are used to create the fuel for civilian nuclear power, 
but they also can be used to create weapons-usable material. Producing 
material suitable for nuclear weapons is the most difficult hurdle for 
countries in acquiring nuclear weapons, so the spread of enrichment and 
reprocessing technology beyond the small number of countries already 
possessing it poses serious risks for U.S. national security.
    To address these risks while meeting a growing demand for nuclear 
fuel, several nuclear fuel supplier states, including the United 
States, along with the IAEA and nongovernmental groups such as the 
Nuclear Threat Initiative, have proposed some type of guaranteed access 
to nuclear fuel for states that play by the rules and are looking to 
make peaceful use of nuclear power. With confidence in such fuel supply 
assurances, it is hoped, countries could forgo the costly and risky 
pursuit of enrichment and reprocessing technology.
    I want to thank Senator Casey for agreeing to chair today's hearing 
in my absence; he could not have chosen a topic more important to the 
long-term national security of the United States. The committee is 
fortunate today to hear from well-qualified witnesses, including our 
colleague Senator Bayh of Indiana. Senator Bayh and the ranking member 
of our committee, Senator Lugar, are the coauthors of
S. 1138, the Nuclear Safeguards and Supply Act. On June 27, our 
committee unanimously ordered that bill to be reported to the full 
Senate. The Lugar/Bayh bill addresses the same challenges the committee 
is meeting on today, and is an important contribution to congressional 
consideration of these important questions. I hope today's hearing will 
contribute to perfecting that bill and to gaining the full Senate's 
support for it.
    I look forward to the insights and recommendations from all our 
witnesses on how the IAEA safeguards system can meet the challenges it 
already faces and how it might accommodate an expansion of nuclear 
power without increasing the chances that more states will acquire 
nuclear weapons.

                                  
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