[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                        NUCLEAR COOPERATION AND
                    NON-PROLIFERATION AFTER KHAN AND
                     IRAN: ARE WE ASKING ENOUGH OF
                     CURRENT AND FUTURE AGREEMENTS?

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


                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 24, 2010

                               __________

                           Serial No. 111-124

                               __________

        Printed for the use of the Committee on Foreign Affairs


 Available via the World Wide Web: http://www.foreignaffairs.house.gov/

                                 ______



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                      COMMITTEE ON FOREIGN AFFAIRS

                 HOWARD L. BERMAN, California, Chairman
GARY L. ACKERMAN, New York           ILEANA ROS-LEHTINEN, Florida
ENI F.H. FALEOMAVAEGA, American      CHRISTOPHER H. SMITH, New Jersey
    Samoa                            DAN BURTON, Indiana
DONALD M. PAYNE, New Jersey          ELTON GALLEGLY, California
BRAD SHERMAN, California             DANA ROHRABACHER, California
ELIOT L. ENGEL, New York             DONALD A. MANZULLO, Illinois
BILL DELAHUNT, Massachusetts         EDWARD R. ROYCE, California
GREGORY W. MEEKS, New York           RON PAUL, Texas
DIANE E. WATSON, California          JEFF FLAKE, Arizona
RUSS CARNAHAN, Missouri              MIKE PENCE, Indiana
ALBIO SIRES, New Jersey              JOE WILSON, South Carolina
GERALD E. CONNOLLY, Virginia         JOHN BOOZMAN, Arkansas
MICHAEL E. McMAHON, New York         J. GRESHAM BARRETT, South Carolina
THEODORE E. DEUTCH,                  CONNIE MACK, Florida
    FloridaAs of 5/6/       JEFF FORTENBERRY, Nebraska
    10 deg.                          MICHAEL T. McCAUL, Texas
JOHN S. TANNER, Tennessee            TED POE, Texas
GENE GREEN, Texas                    BOB INGLIS, South Carolina
LYNN WOOLSEY, California             GUS BILIRAKIS, Florida
SHEILA JACKSON LEE, Texas
BARBARA LEE, California
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
MIKE ROSS, Arkansas
BRAD MILLER, North Carolina
DAVID SCOTT, Georgia
JIM COSTA, California
KEITH ELLISON, Minnesota
GABRIELLE GIFFORDS, Arizona
RON KLEIN, Florida
                   Richard J. Kessler, Staff Director
                Yleem Poblete, Republican Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable Thomas Graham, Jr., Executive Chairman of the 
  Board, Lightbridge Corporation (Former Special Representative 
  to the President for Arms Control, Non-Proliferation, and 
  Disarmament)...................................................    13
Ms. Sharon Squassoni, Director and Senior Fellow, Proliferation 
  Prevention Program, Center for Strategic and International 
  Studies........................................................    23
Mr. Jamie M. Fly, Executive Director, The Foreign Policy 
  Initiative.....................................................    36

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Howard L. Berman, a Representative in Congress from 
  the State of California, and Chairman, Committee on Foreign 
  Affairs: Prepared statement....................................     4
The Honorable Ileana Ros-Lehtinen, a Representative in Congress 
  from the State of Florida: Prepared statement..................     8
The Honorable Thomas Graham, Jr.: Prepared statement.............    16
Ms. Sharon Squassoni: Prepared statement.........................    25
Mr. Jamie M. Fly: Prepared statement.............................    39

                                APPENDIX

Hearing notice...................................................    60
Hearing minutes..................................................    61
The Honorable Russ Carnahan, a Representative in Congress from 
  the State of Missouri: Prepared statement......................    62
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    63
The Honorable Gene Green, a Representative in Congress from the 
  State of Texas: Prepared statement.............................    65
The Honorable Ileana Ros-Lehtinen: Material submitted for the 
  record.........................................................    67
Ms. Sharon Squassoni: Material submitted for the record..........    73
Written responses from the Honorable Thomas Graham, Jr., to 
  questions submitted for the record by the Honorable Russ 
  Carnahan.......................................................    78
Written responses from Ms. Sharon Squassoni to questions 
  submitted for the record by the Honorable Russ Carnahan........    79
Written responses from the Honorable Thomas Graham, Jr., to 
  questions submitted for the record by the Honorable Barbara 
  Lee, a Representative in Congress from the State of California.    83
Written responses from Ms. Sharon Squassoni to questions 
  submitted for the record by the Honorable Barbara Lee..........    86


 NUCLEAR COOPERATION AND NON-PROLIFERATION AFTER KHAN AND IRAN: ARE WE 
            ASKING ENOUGH OF CURRENT AND FUTURE AGREEMENTS?

                              ----------                              


                       FRIDAY, SEPTEMBER 24, 2010

                  House of Representatives,
                              Committee on Foreign Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:10 a.m., in 
room 2172, Rayburn House Office Building, Hon. Howard L. Berman 
(chairman of the committee) presiding.
    Chairman Berman. The committee will come to order. There is 
no particular reason why you would know, since I didn't know 
until this morning, but the House recessed for the week last 
night. So your testimony is greatly valued, but there will only 
be a few of us here to value it. But we will get the word out 
to everybody because a number of members have gone back to 
their districts.
    The committee will come to order. In a moment I will 
recognize myself and the ranking member for up to 7 minutes 
each for the purposes of making an opening statement. I will 
then, if they are here, recognize the chair and ranking members 
of the Terrorism, Nonproliferation, deg. and Trade 
Subcommittee for 3 minutes each to make their opening 
statements. We have to end today's hearing by noon because of 
another matter that members of the committee who are here will 
be participating in.
    Without objection, all other members can submit opening 
statements for the record.
    The Atomic Energy Act requires that this committee hold 
hearings on pending U.S. nuclear cooperation agreements with 
other nations. Today's hearing fulfills that requirement for 
the Australia and Russia agreements, which were submitted to 
the Congress in May.
    However, this hearing is really intended to serve a larger 
purpose--to consider changes that might be made in future 
nuclear cooperation agreements, and to the Atomic Energy Act 
itself.
    The global non-proliferation regime has received two major 
jolts in the last 6 years. The first was the revelation that 
Pakistani scientist A.Q. Khan had been running a clandestine 
nuclear black market, which accelerated the spread of sensitive 
nuclear facilities and nuclear weapon designs around the world. 
The second has come from one of Khan's clients, Iran, where 
centrifuges obtained from the Khan network continue to spin, 
making enriched uranium that could be refined into fuel for 
nuclear bombs.
    U.S. non-proliferation policies are adapting to counter 
these shocks to the global system. Congress has played a role 
in this effort by passing legislation, including the 
Comprehensive Iran Sanctions, Accountability, and Divestment 
Act of 2010. This law is already helping to ratchet up the 
economic pressure on Tehran, raising the cost for its defiance 
of the world's demand that it cease its illicit and dangerous 
nuclear activities.
    Regrettably, U.S. law and policy regarding civil nuclear 
cooperation with other countries has not undergone a similar 
evolution. The Atomic Energy Act was last amended in 1978 when 
Congress added the current set of nine conditions that any 
nuclear cooperation agreement--also known as 123 agreements--
must satisfy. Many argue--and I believe with great 
justification--that the law is now sorely out of date.
    Many suggestions have been offered to update the Atomic 
Energy Act for the post-Khan, post-Iran environment. Some of 
these include: A requirement for the foreign government to have 
agreed to and implemented the IAEA'S additional protocol for 
safeguards, which gives the IAEA more authority to inspect the 
country's nuclear-related activities and facilities; another 
suggestion is that the recipient country be willing to accept 
near-real-time video monitoring of its IAEA safeguarded 
facilities and activities, if the agency thinks it would be 
useful to verify that no diversion of nuclear material from 
civil purposes has occurred; if the recipient is a state that 
supplies civil nuclear technology to other countries, that its 
policies, practices, and regulations are comparable to, or at 
least do not undermine, U.S. law and policy; and if the 
recipient country, if it doesn't already possess uranium 
enrichment and/or spent-fuel reprocessing facilities, undertake 
a legally-binding commitment not to engage in such activities 
or develop such facilities.
    We have had five new or renewed nuclear cooperation 
agreements submitted to Congress in the last 4 years--and one 
before us today, Russia, twice. We will be seeing a raft of new 
or renewed nuclear cooperation agreements in the next 4. Nine 
existing agreements will expire between 2012 and 2015, 
including the U.S. agreement with China; presumably, all those 
will be renegotiated and submitted to Congress for review. We 
may see new agreements with Jordan and Vietnam in the next 
Congress. That makes at least 11 new or renewed agreements. In 
addition, the U.S. has concluded Memorandums of Understanding 
with Saudi Arabia and Kuwait, and we could eventually see 
nuclear cooperation agreements with them, as well.
    Given all this, it is clearly time to review whether U.S. 
nuclear cooperation agreements are fully serving U.S. and 
global non-proliferation objectives. This hearing continues a 
process begun by Mr. Sherman and the Terrorism, 
Nonproliferation, deg. and Trade Subcommittee at their 
hearing in May on the future of nuclear cooperation agreements.
    The linkage between civil and military nuclear applications 
has never been clearer, or more pressing. The key linchpins are 
uranium enrichment and spent fuel reprocessing facilities.
    For the majority of nuclear power reactors, natural uranium 
needs to be ``enriched.'' This is usually accomplished through 
the use of highly-sophisticated centrifuges--exactly what Iran, 
by way of Khan, is using. Unfortunately, the same basic process 
can be used to produce highly enriched uranium that can be used 
in a bomb. Another process--called ``reprocessing''--allows 
weapons-grade plutonium to be extracted from spent reactor 
fuel.
    The Khan network trafficked in the technology and hardware 
of enrichment to Iran, Libya, North Korea, and possibly 
elsewhere. In 2004, 2 months after the network was exposed, 
President Bush announced that the U.S. would seek to prevent 
the spread of enrichment or reprocessing facilities to any 
state that did not already possess such technologies.
    Regrettably, this approach ran into an immediate wall of 
opposition from many developing countries, which viewed it as 
an effort to deny their ``inalienable right'' to the benefits 
of peaceful nuclear energy under the NPT. The Bush effort was 
soon abandoned, and replaced by a drive to convince other 
members of the Nuclear Suppliers Group to institute more-
restrictive criteria when deciding whether to transfer 
enrichment and reprocessing technology to others.
    In this context, it is worth highlighting the importance of 
the recent U.S. nuclear cooperation agreement with the UAE. On 
its own, the UAE decided to forswear enrichment and processing, 
and agreed to make that a legally-binding commitment in the 
nuclear cooperation agreement itself.
    Even though the UAE ultimately decided to purchase nuclear 
reactors from a Korean vendor, the commitment in the U.S.-UAE 
agreement applies unconditionally, regardless of who provides 
equipment and material to the UAE.
    The State Department has since described this agreement as 
the ``Gold Standard'' for such agreements, and I agree. The 
U.S. should seek the same commitment for every nuclear 
cooperation agreement that it negotiates in all regions of the 
world. We should also consider making this an additional 
statutory requirement in the Atomic Energy Act.
    I am going to put the rest of my opening statement into the 
record because my time has expired, and yield to the ranking 
member.
    [The prepared statement of Chairman Berman follows:]

    
    
    
    
    Ms. Ros-Lehtinen. Let me begin by expressing my great 
disappointment regarding the missing subject of today's 
hearing; namely, the proposed nuclear cooperation agreement 
with Russia. As we understand it, the administration, despite 
being informed of this hearing weeks in advance, has refused to 
provide a witness. The result? The Russia and Australia 
agreements will not be addressed. Apparently, it is as simple 
as that. As a result, this committee is in danger of violating 
the statutory requirements in section 123(d) of the Atomic 
Energy Act which states that during the current period of 
congressional review, ``the Committee on Foreign Affairs of the 
House of Representatives and the Committee on Foreign Relations 
of the Senate shall each hold hearings on the proposed 
agreements for cooperation and submit a report to the 
respective bodies recommending whether it should be approved or 
disapproved.''
    Mr. Chairman, this hearing does not fulfill the statutory 
requirement to hold a hearing on the Russia 123 and Australia 
123 Agreements. You can call it whatever you wish, but it does 
not fulfill the requirement.
    We can understand why the executive branch wanted to kill a 
hearing on the Russia 123 Agreement. Certainly, none of us who 
have been following the overtures to the Russian Government, 
including the removal of sanctions on Russian entities 
assisting Iran's nuclear missile program, are surprised. After 
all, it is abundantly clear that the Russia 123 Agreement is a 
political payoff to the Russians, pure and simple, and cannot 
be defended on its merits.
    The administration has as much admitted this by promoting 
the nuclear deal as part of the ``reset'' of our relationship. 
But the U.S. has no business engaging in nuclear cooperation 
with any country with a record like Russia's, especially one 
that continues to provide assistance to Iran's nuclear program.
    From the outset, there has been strong opposition by many 
Members in both Chambers to the Russia 123 Agreement, even 
prior to its first submission to Congress by President Bush in 
May 2008. The principal objection has been the inability of the 
previous and the current administrations to certify that the 
Russian Government, businesses, and individuals were no longer 
assisting Iran's nuclear and missile program and that the 
Russian Government was fully cooperating with the U.S. in our 
efforts to stop Iran from acquiring a nuclear weapon.
    Does that not sound reasonable? Are these not the types of 
requirements that should be met before a country is rewarded 
with a nuclear cooperation agreement with the United States?
    Faced with the reality that both administrations were 
determined to push through this agreement regardless of Russian 
behavior, and to say nothing about similarly troubling 
agreements such as the one with the United Arab Emirates, it 
has fallen to Congress to shore up U.S. non-proliferation 
policy. Even before President Obama resubmitted the Russia 123 
Agreement to Congress in May of this year, Chairman Berman and 
I, along with several other members of the committee, 
introduced H.R. 2194, the Iran Refined Petroleum Sanctions Act, 
subsequently known as the Comprehensive Iran Sanctions, 
Accountability, and Divestment Act, or CISADA, which was signed 
into law, as we know, on July 1. The House-passed legislation 
included a prohibition on the entry into force of any 123 
agreement with any country that was assisting Iran's nuclear 
missile and other weapons program.
    Now, while the administration requested that this be 
removed and while the provision was weakened as the bill 
proceeded through the House and the Senate conference 
discussions, some limitations did survive. A key provision of 
the act prohibits the issuance of export licenses or approval 
of transfers under a 123 agreement for any country whose 
nationals have engaged in assisting Iran's nuclear weapons and 
missiles program, among others.
    Nevertheless, the Russia 123 Agreement is moving forward. 
The political pressure driving the agreement was underscored by 
the latest report from GAO, the Government Accountability 
Office, regarding the Nuclear Proliferation Assessment 
Statement, or NPAS, that is required of all 123 agreements. The 
GAO had found in its previous report on the Russia 123 
Agreement submitted in 2008 by President Bush that the original 
NPAS had been rushed through the vetting process and that the 
intelligence agencies in particular had not been given 
sufficient time or opportunity to thoroughly review the final 
assessment. Then, in the report released last week on the most 
recent NPAS submitted by the Obama administration, GAO found 
that its recommendations to prevent a repeat of this flawed 
preview had not been fully implemented and that once again the 
process had been rushed to meet a suddenly urgent political 
deadline. It's deja vu all over again.
    So just what has the reset gotten us? Well, the nuclear 
fuel is being loaded into the Bushehr reactor, which certainly 
makes the Iranians very happy. And Russia has reiterated that 
it wants to build several more reactors for Iran.
    But the problem is far broader than simply Iran's nuclear 
program, as disturbing as that might be. Just last week, Russia 
announced it would proceed with the delivery of anti-ship 
missiles and other weapons to Syria, despite U.S. protests that 
these destabilizing weapons are a threat to the region and 
especially to our ally, Israel. Brushing U.S. concerns aside, 
Russia has said it will likely sell even more advanced weapons 
to Syria even though that country continues to arm Hezbollah 
and pursue chemical, biological, and nuclear weapons.
    I wish we had the opportunity today to have the 
administration explain Russia's behavior, give us assurances 
that Congress will be provided with the information members 
have repeatedly sought on Russia's cooperation regarding Iran 
and other adversaries, and reassure us that the provisions of 
CISADA and Iran non-proliferation sanctions laws will be 
faithfully implemented and enforced. But it appears that this 
committee's responsibilities are to be determined by the 
Department of State, and members will simply have to accept 
that.
    I hope that our constituents will let us know how well they 
think we are carrying out our oath of office.
    Turning to the expert witnesses before us today, we look 
forward to receiving your recommendations on this vital 
subject. And I have the rest of my opening statement to be 
placed into the record.
    Mr. Chairman, I ask unanimous consent, if you please, to 
enter into the record written testimony and two short articles 
by Henry Sokolski on the subject of today's hearing. Mr. 
Sokolski is not able to be here today, but is well known to 
this committee both as a valuable witness and a trusted 
resource. I look forward to working with him on revising the 
Atomic Energy Act and other measures to strengthen U.S. non-
proliferation policy.
    I thank the chair.
    [The prepared statement of Ms. Ros-Lehtinen follows:]

    
    
    
    
    
    
    
    

    Chairman Berman. As to the Sokolski statements, without 
objection, they will be introduced and included in the record 
of this hearing.
    Now I am pleased to recognize the ranking member of the 
Terrorism, Nonproliferation, deg. and Trade 
Subcommittee, Mr. Royce of California.
    Mr. Royce. Thank you, Mr. Chairman. I am going to make 
three quick points.
    First, I would just join the ranking member in her 
observation and her concerns over the administration's absence 
today. The administration really should be here to discuss and 
debate the pending nuclear agreements, especially with Russia. 
This is a very difficult time for nuclear non-proliferation. 
The blurry line between commercial and military use of nuclear 
technology makes it possible to run right up in having that 
capability to manufacture nuclear fuel and then you are just 
one step away from having a nuclear weapon. And that is because 
the NPT has been distorted, really, to allow that practice.
    I am glad that Mr. Henry Sokolski's testimony is being put 
in the record. There are many out there in think tanks that 
have looked at this that have urged the U.S. and the 
international communities to address this issue in the past 
because that is the game that Iran is playing here.
    It is very unfortunate that the past administrations and 
that the Obama administration has done nothing to challenge 
this very critical weakness. I am not sure it is a weakness of 
the NPT. It is the way in which it is being interpreted. Right? 
It is the assertion. Congress needs to be more involved in 
nuclear export policy.
    We should pass legislation to reclaim powers surrendered to 
the executive back when the world was a much simpler place. And 
we should be made to positively, not passively, okay a 123 
agreement.
    The administration has embarked on striking a nuclear 
agreement with Vietnam. It is reported that we would allow 
Vietnam to manufacture nuclear fuel and that there would be no 
requirement that it beef up IAEA nuclear inspections; in other 
words, the additional protocol. That would be far from a model 
agreement if we do that that way.
    Vietnam's human rights record is abysmal. I have a 
resolution calling on the State Department to designate that 
country as a country of particular concern for its religious 
persecution, and I think the State Department so far has 
resisted this. I would suggest to our diplomats that they can 
press human rights aggressively and still deal with nuclear 
issues. It is called using leverage and standing up for human 
dignity.
    Lastly, the title of this hearing, which is ``Nuclear 
Cooperation and Non-Proliferation after Khan and Iran,'' that 
is basically a focus on the notorious Pakistani proliferator, 
A.Q. Khan. Pakistan greatly damaged global security by allowing 
this rogue free rein in that country. China's plan to build 
another two nuclear reactors in Pakistan violates Nuclear 
Suppliers Group rules. It should be stopped.
    I remember years ago raising the issue of the ring magnets 
that China was transferring to Pakistan to develop a nuclear 
weapon. That was obviously what was intended on the part of 
Pakistan. And now we know that yes, China's responsibility in 
proliferation, and that gave rise to the capability of 
Pakistan, which subsequently trumped China's irresponsibility 
with its own because that knew no limits in terms of A.Q. 
Khan's ability to proliferate.
    So the fact that A.Q. Khan, supposedly Pakistan's most 
popular man, 2 weeks ago went on Pakistani television and spoke 
about his future as the nation's President--as the nation's 
President--that should be more than troubling to us in terms of 
Pakistan and the future. The government there just is not a 
responsible nuclear power. That needs to be addressed.
    Thank you, Mr. Chairman.
    Chairman Berman. The time of the gentleman has expired. I 
think regular order would require me now to introduce the 
witnesses rather than respond to all the things that are said, 
and so I think I will do that.
    Ambassador Thomas Graham, Jr. is executive chairman of the 
board of the Lightbridge Corporation and is a former special 
representative for arms control, non-proliferation, and 
disarmament to President Clinton. He was general counsel of the 
Arms Control and Disarmament Agency for 15 years. He has 
advised five U.S. Presidents on these issues and led the U.S. 
delegation in 1995 that achieved the permanent extension of the 
Treaty on the Non-Proliferation of Nuclear Weapons.
    Sharon Squassoni is a senior fellow and director of the 
Proliferation Prevention Program at the Center for Strategic 
and International Studies. Prior to joining CSIS, Ms. Squassoni 
was a senior associate at the Carnegie Endowment for National 
Peace. Ms. Squassoni served as an adviser to Congress from 2002 
to 2007 as a senior specialist in weapons of mass destruction 
at the Congressional Research Service and was director of 
policy coordination for the Nonproliferation Bureau at State.
    Did I pronounce your name right? Okay.
    Jamie Fly is executive director of the Foreign Policy 
Initiative, a nonprofit, nonpartisan organization to promote 
U.S. international engagement. Prior to joining the FPI, Mr. 
Fly served in the Bush administration at the National Security 
Council as the director for counterproliferation strategy and 
in the Office of the Secretary of Defense. He was an assistant 
for transnational threats policy.
    It is really an excellent panel on a very important 
subject.
    Ambassador Graham, why don't you begin with your testimony.
    Your entire statements will be included in the record. So 
feel free to summarize as you choose.

   STATEMENT OF THE HONORABLE THOMAS GRAHAM, JR., EXECUTIVE 
CHAIRMAN OF THE BOARD, LIGHTBRIDGE CORPORATION (FORMER SPECIAL 
     REPRESENTATIVE TO THE PRESIDENT FOR ARMS CONTROL, NON-
                PROLIFERATION, AND DISARMAMENT)

    Ambassador Graham. Thank you, Mr. Chairman. I just want to 
say to you, Mr. Chairman, and to Ms. Ros-Lehtinen and other 
members of the committee how pleased and happy I am to be here. 
I have been coming to this committee off and on for many, many 
years, back into the eighties, and it is always a pleasure. I 
have known your staff assistant, David Fite, for many years and 
it has been a pleasure working with him.
    Today's subject, principal subject, is the 123 agreement 
concept in the context of non-proliferation. So I am going to 
talk a little bit about non-proliferation first and then move 
into the way I see the 123 agreement issue and then perhaps at 
the end a few comments on Russia and Australia.
    John F. Kennedy, when he was President, in a press 
interview in 1963, said that he was haunted by the concern that 
by 1970 there would be 10 nuclear weapon states in the world 
and by 1975, 15 or 20. He said he regarded that as the 
``greatest possible danger and hazard.'' I think those words 
are ones that are worth remembering.
    Later on, Mohamed ElBaradei, the distinguished Director 
General of the IAEA, opined that more than 40 countries have 
the capability to build nuclear weapons. If nuclear weapons had 
spread that widely, every conflict would have run the risk of 
escalation into nuclear weapons and it would have been very 
difficult to keep nuclear weapons out of the hands of 
terrorists they would be so widespread. It would have created a 
security situation that would have made today's world seem like 
paradise to have nuclear weapons all over the world, such as 
President Kennedy feared.
    But the principal reason that this didn't happen--and it 
didn't happen, as we all know--was the 1970 entry into force of 
the Nuclear Non-Proliferation Treaty, accompanied by the 
extended deterrence policies of the U.S. and the Soviet Union. 
Really, only two countries have acquired nuclear weapons since 
that date. Israel already had a nascent capability in 1970, as 
did India, and you can add Pakistan and North Korea to that 
list--far from what President Kennedy feared.
    But the NPT is based on a central bargain: Non-
proliferation for most of the world in exchange for nuclear 
disarmament and peaceful nuclear cooperation by the NPT nuclear 
weapon states. There has been a lot of difficulty in 
implementing the commitment by the nuclear weapon states to 
effectively pursue disarmament. The number one disarmament 
issue that the nonnuclear weapon states wanted was the 
comprehensive test ban. It goes back to 1968. We still don't 
have it today. There was fissile material cutoff. We still 
don't have that today. Much of the disarmament agenda that was 
the quid pro quo for preventing nuclear weapons from spreading 
all over the world has not been realized.
    The other half of the obligations of the nuclear weapon 
states--peaceful cooperation--has gone better. In my judgment, 
it is important to support that process, not only for its own 
sake but for the health of the NPT bargain.
    We now are concerned as a society, as a world community, 
about climate change. As a result, it is quite possible that 
nuclear power will spread more widely than before. This is 
consistent with the NPT, as I just indicated. But if this is to 
happen, it is very important that we safeguard the non-
proliferation norm.
    The standard 123 agreement that the U.S. uses follows 
closely NPT obligations and thus doesn't have things in it such 
as a prohibition on uranium enrichment. But while this has 
worked well for years, perhaps it is in today's world no longer 
sufficient.
    The United Arab Emirates has embarked on a very significant 
nuclear program. They are in the business of selling oil and 
they import gas. In a few years they will face a great energy 
shortfall. They didn't want to use coal. They looked at all 
technologies and settled on nuclear energy as the soundest and 
best choice for them to make on economic grounds. But they 
wanted to make their anticipated quite large program a model. I 
have heard that from many UAE officials, beginning with the 
Crown Prince.
    Working with Lightbridge Corporation, my company, the UAE 
forswore, first on a nationally legally binding basis, and then 
on an internationally legally binding basis uranium enrichment 
and plutonium reprocessing. That obligation, as was stated a 
few moments ago, is in the U.S.-UAE 123 Agreement, but it is 
not yet a model as had been anticipated.
    The NPT is the centerpiece of world security. Article VI, 
even with President Obama's strong commitment, remains 
uncertain. It is important that Article IV remain strong to 
help the NPT. We need nuclear power now more than ever, but 
proliferation remains a serious threat.
    With respect to the specific issues, certainly a 
requirement that the IAEA additional protocol added to the 123 
agreement could be a useful addition. The United Arab Emirates 
made it clear that it hoped its program, including the non-
proliferation commitments that they have made, which are 
enshrined in the U.S.-UAE 123 Agreement, would be a model for 
others. Thus far it has not been. There are no indications that 
U.S. 123 agreements with other countries will follow this 
model. But they should. While, of course, recognizing in some 
cases there are difficulties.
    It is not desirable that enrichment and reprocessing 
technology spread more widely, as Mr. Royce said in his 
comments. This is an issue on which both President Bush and 
President Obama agree. Other efforts, such as the nuclear fuel 
bank at the International Atomic Energy Agency, have been 
pursued to reduce the incentive for additional countries to 
acquire the full fuel cycle. Legislation requiring that the UAE 
model be followed in future 123 agreements, perhaps absent 
Presidential waiver, could help further to inhibit the spread 
of fuel cycle technology. In my judgment, it is a good idea. In 
today's interdependent world, such a change would make sense 
and new technology can work with a non-proliferation system to 
make nuclear power even more available to serve humanity, as 
envisioned by the NPT.
    So I applaud very much the committee's interest in this 
subject and urge you to pursue it.
    With respect to the Russian agreement, in my judgment, the 
adoption of the U.S.-Russia 123 Agreement will correct an 
historical anomaly. I understand the politics and the 
difficulties we had 2 years ago and at other times. But 
nevertheless, we traditionally over many years have done more 
nuclear trade, more nuclear work with Russia than any other 
country, both trade and cooperation.
    There was a program nearly 20 years ago now called Megatons 
to Megawatts. It has resulted in some 15,000 Russian nuclear 
weapons being dismantled, the HEU and the weapons blended down, 
which now provides about 50 percent of the nuclear fuel in U.S. 
nuclear reactors. I was part of the delegation that negotiated 
that agreement. But there were many other examples. And Russia 
is our number one non-proliferation partner.
    I have heard from many serious analysts of the situation, 
such as former Secretary Defense Bill Perry, that we could be 
on the verge of a whole new wave of proliferation. As has been 
mentioned earlier, we have everything that A.Q. Khan did. We 
have the Iranian situation, we have the North Korean situation, 
and the possibility that those countries could trigger wider 
proliferation throughout the Middle East or Northeast Asia.
    Chairman Berman. Ambassador Graham, if you could just bring 
it to a conclusion.
    Ambassador Graham. 1 minute. In my judgment, we can't 
succeed with our non-proliferation program without the help of 
Russia. They are indispensable, and I think it is important to 
have this agreement with them.
    Australia has always had an outstanding non-proliferation 
record, and they have a significant nuclear industry that 
serves themselves and many other countries.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Graham follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Berman. Thank you, Ambassador.
    Ms. Squassoni.

STATEMENT OF MS. SHARON SQUASSONI, DIRECTOR AND SENIOR FELLOW, 
  PROLIFERATION PREVENTION PROGRAM, CENTER FOR STRATEGIC AND 
                     INTERNATIONAL STUDIES

    Ms. Squassoni. Thank you, Mr. Chairman, Ranking Member Ros-
Lehtinen, and members of the committee, for inviting me to 
speak today about nuclear cooperation and non-proliferation. I 
have a prepared statement that I would like to submit for the 
record.
    Chairman Berman. It will be included in its entirely in the 
record.
    Ms. Squassoni. Thank you. May I also submit for the record 
an article from the Arms Control Today on the impact of the 
U.S.-India nuclear cooperation agreement.
    Chairman Berman. Without objection, that will be included.
    Ms. Squassoni. Thank you.
    I focus my remarks today on the challenges of restricting 
transfers of uranium enrichment and reprocessing. We have been 
working on this for decades, but the task is more urgent today, 
as you have noted, because of A.Q. Khan and Iran and because 
more states are interested in acquiring nuclear power and less 
interested in restricting their fuel cycle options.
    One exception to this is the United Arab Emirates, which 
agreed to rely on the international fuel market and not to 
develop domestic enrichment or reprocessing. I say it is an 
exception because other countries don't appear to be following 
its lead.
    As the path-breaker for nuclear energy in the Middle East, 
the UAE had much to gain. Other STATES that follow have less to 
gain, and all have other nuclear supply options. Jordan has 
signed nine nuclear cooperation agreements, but none yet with 
the United States. It is considering reactors offered by 
Canada, Russia, and Japan, and none of those suppliers will be 
seeking commitments to forego enrichment and reprocessing by 
Jordan.
    This U.S. bilateral approach appears to be losing momentum 
elsewhere. Turkey and Vietnam apparently do not intend to give 
up their fuel cycle rights, which Turkey made very clear in a 
most recent Nuclear Suppliers Group plenary meeting in June.
    Well, if the U.S. can't do this alone, how does it seek to 
persuade other suppliers to join it? The International 
Framework for Nuclear Energy Cooperation--it is a funny 
acronym, IFNEC, which is the successor to the Global Energy 
Nuclear Partnership, that is one approach, and the other 
approach is the Nuclear Suppliers Group. IFNEC, like its 
predecessor, does not require partners to give up any rights. 
Unless IFNEC promotes cradle-to-grave fuel supply, that is, 
where countries are provided incentives to rely on the 
international market, its value in this area will be extremely 
limited.
    As for the Nuclear Suppliers Group, 6 years of discussion 
on new criteria for sensitive transfers have yielded no 
consensus. At this point, the new criteria appear less helpful 
than the old policy of restraint.
    I would like to make one other point about the UAE 
agreement as a model. This agreement included advance consent 
for storage and/or reprocessing the UAE's spent fuel abroad, 
and this is a unique feature in an agreement for a state like 
the UAE. It would be unfortunate if other states concluded from 
this that even modest reliance on nuclear power could require 
reprocessing for spent fuel management. Reprocessing is costly, 
creates more and different radioactive waste streams, and is 
unnecessary.
    Before my recommendations, I would like to briefly comment 
on the Russian and Australia 123 Agreements. The Russian 
agreement is critical to several U.S. objectives, especially 
pursuing this kind of cradle-to-grave fuel supply system. It is 
necessary but not sufficient. Russia and other states will need 
to be persuaded to become such full service suppliers.
    The Australian agreement is vital for another reason. As 
Ambassador Graham pointed out, the U.S. procures significant 
uranium supplies from Australia.
    I have a longer list of recommendations in my prepared 
statement, but I will summarize them here.
    The additional protocol is a critical component of the non-
proliferation regime. All U.S. 123 agreements should require 
it, and so should the Nuclear Suppliers Group. Congress should 
amend the Atomic Energy Act to include the additional protocol 
as a requirement in Section 123. To get agreement at the 
Nuclear Suppliers Group, the U.S. should abandon current 
discussions on enrichment and reprocessing criteria, which have 
gotten in the way of NSG consensus on the additional protocol.
    My second recommendation is that we should focus 
internationally on the full nuclear fuel cycle and on 
multilateral solutions. It is not enough to suggest that 
cradle-to-grave fuel cycle assurances would be a good thing. We 
need to create opportunities in this country and abroad. And if 
you were listening to the Blue Ribbon Commission on America's 
Nuclear Future this week, we heard some of these 
recommendations to that group.
    The U.S. should explore paths to ending national ownership 
of uranium enrichment and reprocessing facilities. It is not 
enough to require new facilities to be multinational, since 
this would be viewed as discriminatory. An agreement that 
ensured that all facilities would be required to be 
multinational would reduce the risks of states developing 
latent nuclear weapons capabilities and then breaking out of 
the Non-Proliferation Treaty.
    A fissile material production cutoff treaty could include 
such a provision. So structured, the FMCT could fulfill both 
its disarmament and non-proliferation missions, level the 
playing field, and help ease the tension within the NPT about 
perceived rights to fuel cycle capabilities.
    And lastly, Congress and the executive branch need to 
implement current legislation and close some gaps. Funding, 
implementing, and monitoring Title V of the 1978 Nuclear Non-
Proliferation Act, which requires the U.S. to conduct 
nonnuclear energy cooperation and energy assessment assistance 
with developing states, could provide incentives for developing 
countries to focus on nonnuclear solutions to their electricity 
needs, and this would take the pressure off somewhat the non-
proliferation regime.
    Finally, there is a provision in the Arms Export Control 
Act, the so-called Symington Amendment, that restricts foreign 
military and export assistance to countries that deliver or 
receive enrichment equipment, materials, or technology unless 
the recipient has full-scope safeguards and unless the supplier 
and recipient have agreed to place all such items under 
multilateral auspices and management when available. This 
provision could be tightened by deleting the phrase ``when 
available.'' If we are serious about multinationalizing the 
fuel cycle, this could help.
    Thank you very much, and I look forward to your questions.
    [The prepared statement of Ms. Squassoni follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Berman. Thank you.
    Mr. Fly.

STATEMENT OF MR. JAMIE M. FLY, EXECUTIVE DIRECTOR, THE FOREIGN 
                       POLICY INITIATIVE

    Mr. Fly. Thank you. I would like to begin by thanking 
Chairman Berman, Ranking Member Ros-Lehtinen, and other members 
of the committee for the invitation to appear today at this 
very important hearing.
    I am going to summarize key points from my written 
testimony. The main point I want to convey today is that I 
increasingly fear that we are on the precipice of proliferation 
of nuclear weapons unlike anything we have witnessed since the 
development of the atomic bomb. Ambassador Graham went into 
some of the historical points about this issue, and others have 
noted the jolt to the non-proliferation regime that we have 
witnessed in recent years.
    In addition to those that have already been mentioned, I 
would like to add to that North Korea's actions over the last 
decade. We have seen North Korea withdraw from the NPT, develop 
nuclear weapons, transfer sensitive nuclear technology to 
Syria, a state sponsor of terrorism, and now possibly do the 
same thing with Burma, according to press reports. This action 
by North Korea has added to the concerns that we should 
currently have because of the actions of A.Q. Khan and Iran's 
continued illicit nuclear weapons program.
    Administrations of both political parties have failed to 
prevent this proliferation, so this should not be a partisan 
issue. My fear going forward is that in addition to just 
failing to prevent this proliferation, we are contributing to 
the problem by failing to refute the notion that all states 
have the right to sensitive nuclear technology and processes, 
and this will result in an additional cascade of proliferation, 
especially if Iran develops nuclear weapons.
    That is why it is so important for this committee and this 
Congress to engage in a serious debate about our nuclear 
cooperation policy.
    The fact that we are meeting today to in part discuss the 
Australia and Russia 123 Agreements without anyone from the 
executive branch present, I believe says much about what is 
wrong with the current state of affairs with the Atomic Energy 
Act.
    In my written testimony I go into greater detail about 
concerns that I have with the timing of the Russia 123 
Agreement. Some of the facts are that Russia still occupies 
Georgian territory and continues to threaten its neighbors, 
including our NATO allies. Despite the positive step this week, 
where Russia announced that for now it will not fulfill its 
contract to deliver the advanced S-300 air defense system to 
Iran, other Russian officials have announced they will still 
maintain their extensive military relationship with Iran, and 
as others have noted, Russia recently announced that they would 
send advanced cruise missiles to Syria.
    There are ongoing questions about past Russian assistance 
to Iran's nuclear program and, as others have already noted, 
its cooperation with the nuclear reactor at Bushehr.
    In recent weeks, on the human rights front, we have 
witnessed a series of crackdowns on the Russian political 
opposition. Prime Minister Putin, who is widely rumored to be 
on his way back to the presidency in 2012, was quoted as saying 
that peaceful protesters would ``be beaten upside the head with 
a truncheon, and that's it.''
    I believe all of this should give us pause and should mean 
that we have a serious debate, including administration 
officials explaining how the U.S.-Russia 123 Agreement fits 
into our overall strategy toward Russia and why it is in our 
interest to conclude it now.
    Moving beyond Russia, I have four recommendations about how 
this committee and Congress can ensure that we have a more 
fulsome debate about future 123 agreements as well as actions 
Congress could take to move away from the nuclear precipice I 
described at the outset.
    My first recommendations deg. has already been 
mentioned by others. It is to modify the Atomic Energy Act to 
allow greater congressional scrutiny of future 123 agreements. 
As Congress did with the U.S.-India agreement, I would suggest 
that Congress require an up-or-down vote on all agreements that 
do not conform to the UAE model, and as others again have 
noted, I believe that this is especially important given press 
reports about the agreement in the works with Vietnam.
    My second recommendation is that we as a country need to 
get serious about stopping proliferation. I, unfortunately, 
believe that administrations of both parties have become 
fundamentally unserious about punishing proliferators. The 
current administration's focus on disarmament and nuclear 
security is only one aspect of the problem. We must punish 
proliferators severely. I think that we as a country have 
failed to use the case of Syria as a teachable moment. To this 
date, under my understanding, there have been no Syrian 
entities designated by the U.S. Government for their 
construction of an illicit nuclear reactor. North Korean 
entities have been designated, but some of them only years 
after the fact.
    I would suggest that the committee explore ways to make 
sanctions automatic in such cases or require the executive 
branch to designate certain entities and individuals involved 
in proliferation or to justify to the Congress why they are 
unable to do so.
    My third recommendation is to restore the balance between 
proliferation concerns and promotion of the U.S. Nuclear 
industry. I do not think that we should be chasing after the 
latest exotic market just because other countries' nuclear 
industries are entering. We also need to work with countries 
expressing an interest in nuclear energy to determine if it is 
truly in their best interest, and I would suggest the committee 
explore options for using international companies' interest in 
operating in the United States to hold them to certain 
standards.
    I also would suggest to the U.S. Nuclear industry that they 
first focus on existing markets before expanding. I was 
recently on a trip through Central Europe where two of our 
allies have bids out for nuclear reactors, and I heard frequent 
complaints that U.S. companies are not doing enough to compete 
for their business.
    My fourth and final recommendation is that we should take 
all actions necessary to prevent Iran from developing nuclear 
weapons. If Iran goes nuclear, others in the region will 
follow, including several U.S. allies currently interested in 
civilian nuclear cooperation. The only way to avoid this 
scenario is to prevent Iran from reaching that point.
    The committee has passed significant legislation invoking 
sanctions on Iran, but to date we have not been successful in 
altering Tehran's calculus. I would thus advocate a serious 
exploration by the Obama administration and this Congress of 
all available remaining options, including the use of military 
force, because the consequences of a nuclear Iran are truly 
unthinkable.
    Mr. Chairman, the challenges we face in this area are truly 
unprecedented, but by recognizing that we need a serious 
bipartisan examination of the pros and cons of future nuclear 
cooperation agreements, I believe we can take a small step 
toward a more sensible U.S. non-proliferation policy.
    Thank you.
    [The prepared statement of Mr. Fly follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Berman. Well, thank you, and thank all of you very 
much. There are a lot of suggestions in all of that.
    I will yield myself 5 minutes to begin the questioning.
    I want to focus on a point that Ms. Squassoni referred to, 
and her written testimony lays it out a little more fully, but 
I think it is good to get all of you commenting on it.
    Mr. Fly's testimony perhaps was a little broader, but I 
think all of you seem to think that--well, let me ask you. Do 
you buy, as a legal matter, the notion that the rights under 
the NPT and the right to peaceful nuclear energy demands there 
be a right to in-country enrichment and reprocessing?
    I know one individual who has been mentioned here, Henry 
Sokolski, has argued for a long time that that is not a right 
within the meaning of the treaty. I am curious about your 
opinions on that.
    Ambassador Graham.
    Ambassador Graham. Well, I regret differing with Henry 
Sokolski, but the negotiating record of the NPT makes it 
abundantly clear in spades over and over and over again that 
many countries, such as Germany, Spain, Switzerland, would not 
have joined the NPT if the Article IV inalienable right and 
other inalienable right language and other provisions did not 
give them access to that.
    Chairman Berman. Access to?
    Ambassador Graham. To sensitive nuclear technology, among 
other things, not just that. But then after the NPT, the 
Zangger Committee was created to provide some limitation on 
such access, and then subsequently the Nuclear Suppliers Group 
put still more constraints on it. The NPT itself does give that 
right, but it has been significantly limited by the evolution 
of the Nuclear Suppliers Group.
    Chairman Berman. Do any of you disagree with that? Ms. 
Squassoni.
    Ms. Squassoni. I would just add to Tom's statement that 
when the NPT was under negotiation gaseous diffusion was the 
technology for uranium enrichment. It was incredibly expensive, 
a huge industrial undertaking, and so the assumption there was 
that many states would not go down that route. Clearly, that 
has changed over the years, and I suppose because I am maybe a 
purist on arms control, having worked for Tom at ACDA many 
years ago, that it is better not to approach this problem as 
taking away a right but to level the playing field. We should 
come to an understanding as an international community that 
this is a sensitive technology, and multinationalize it for 
everyone.
    Chairman Berman. Mr. Fly, do you have anything to add to 
that?
    Mr. Fly. I certainly would not question Ambassador Graham's 
knowledge on this issue. I would just say, even if it is a 
right under the NPT, going back to what was in my statement, I 
believe it is imperative that we work with other countries that 
want this technology to find alternatives, as Ms. Squassoni 
just mentioned, whether it is fuel banks, multinational 
enrichment centers, things like that. I think those are the 
ways that we should go.
    Chairman Berman. Taking that then to the point that Ms. 
Squassoni specifically addressed in her testimony, what is our 
leverage to get the UAE-type of provision not simply as part of 
our agenda for new nuclear cooperation agreements, such as we 
are now negotiating with Jordan and Vietnam, but to get other 
countries who are being approached to have nuclear cooperation 
agreements with these countries to insist on the same 
provision, and what is our leverage to in a sense--how central 
is a nuclear cooperation agreement with the United States to 
these countries' pursuit of nuclear energy?
    Ambassador.
    My time is--I am going to be a little looser, if it is all 
right. That is my last question, but I would like to hear the 
answers, and we will give, obviously, the other members the 
same latitude.
    So why don't we just answer that question?
    Ambassador Graham. Mr. Chairman, that is a very important 
question that to accurately answer it would take a small book, 
but it is a very important question and one that needs to be 
thought about very carefully. It is different for different 
countries. A country like the UAE, it wants to demonstrate its 
close relationship with the United States. It wants to 
demonstrate that it is not pursuing this technology because of 
Iran. It is because they want the nuclear power. There are 
reasons why it makes sense for them.
    I think that kind of argument might apply to some other 
countries in that region, but perhaps not all. The issue is, of 
course that--and this actually came out in the NPT 
negotiations, to which I referred to before--as the Italian 
delegate said that we have one level of discrimination with 
nuclear weapons; we shouldn't have another with the fuel cycle.
    So many countries see the fuel cycle as their sovereign 
right, even though they don't intend to ever utilize it. I 
don't know if there is any sort of magic formula. I think it is 
probably just that the United States should champion this 
outcome and should try to persuade, as Sharon said, some of our 
allies, who are suppliers, that this is good for everybody, 
that fuel cycle technology has spread far enough, and gradually 
try to persuade countries such as Jordan that it would be a 
good thing for them in various ways and then make the same 
argument with countries in Asia.
    For many countries, having an agreement with the United 
States is politically a good thing. That can help. Not all 
countries, but many.
    But it is a very important question and one that needs 
careful analysis and answer in detail.
    Chairman Berman. Ms. Squassoni.
    Ms. Squassoni. I agree largely with Ambassador Graham. It 
is a tough question. From a non-proliferation perspective, a 
U.S. 123 agreement is kind of the gold stamp. That is what 
India found out, that is what the UAE found out. So from a 
political perspective, these U.S. nuclear cooperation 
agreements are still important.
    On the supply side--you asked the question in the summary 
of the hearing, What can we do with vendors? This is a topic a 
lot of people have debated. I think my answer is ``not much,'' 
because the vendors themselves will follow the leads of their 
governments. So AREVA will not require--will do business with a 
country that doesn't have an additional protocol until the 
Government of France says, ``You shall not do that.'' France is 
not going to do that until the Nuclear Suppliers Group comes to 
that agreement. Then you face the problem of the Nuclear 
Suppliers Group and China and Pakistan. Consensus has eroded, I 
believe, dangerously, since the U.S.-India deal because of the 
pressure placed on other suppliers.
    So I think we need to be creative in dealing with the other 
suppliers, and it is not just the advanced suppliers. It is 
China, South Korea, and India, also. So now is the time. India 
is prepared to export its reactors. Now is the time to get 
serious about India's commitments from the U.S. Agreement and 
make sure that it does the right thing in terms of its export.
    Chairman Berman. Mr. Fly, quickly, if you could, just 
because my time has so expired.
    Mr. Fly. Just very quickly, I would say I agree with what 
has been said. We need to certainly use every element of 
persuasion that we have to try to convince other countries to 
adopt that standard.
    I would also say though we need to be prepared to not 
conclude cooperation agreements when necessary if we are unable 
to conclude agreements that fit that model, and I understand 
the argument that other countries will rush in, but we cannot 
be the leader of global non-proliferation efforts if we are 
chasing after AREVA and Rosatom.
    My second point would just quickly be that we can't let the 
market drive this.
    One note I included in my testimony is, less than a year 
after Israel bombed the al Kibar reactor in Syria, there were 
press reports that AREVA was interested in building a nuclear 
reactor in Syria. I think it is pretty clear cut, and most 
Americans would agree, that that does not mean that we, the 
U.S., should suddenly be conducting nuclear cooperation with 
Syria. We cannot follow these other countries' standards.
    And finally I think, as I mentioned as one of my 
recommendations, we need to find points of leverage with these 
foreign companies, whether we can somehow limit their ability 
to do business in the U.S. if they do not follow these 
standards. But I think all aspects of this need to be pursued 
in addition to trying to work with members of the Nuclear 
Suppliers Group and our allies.
    Chairman Berman. Well, thank you very much.
    Mr. Wilson, the gentleman from South Carolina, is 
recognized for at least 5 minutes.
    Mr. Wilson. Thank you, Mr. Chairman; and I thank all of you 
for being here today.
    Ambassador Graham and Ms. Squassoni, a question: If China 
proceeds with the sale of the two new reactors to Pakistan, 
what is the likely impact on the Nuclear Suppliers Group? 
Should the U.S. attempt to persuade the NSG to disapprove the 
sale? Should China be expelled from the NSG? What is the cost 
of doing nothing?
    Ms. Squassoni. The Nuclear Suppliers Group can essentially 
not disapprove a sale. It is a voluntary gathering of nuclear 
suppliers. There is nothing that the Nuclear Suppliers Group 
can do as a body. And one example is, right before President 
Bush went to New Delhi, Russia decided in advance of the 
exemption for India that it would resupply the Tarapur reactors 
with fuel. So it decided, well, you know, the game is up. We 
can all go ahead and do what we want.
    We shouldn't throw China out of the Nuclear Suppliers 
Group. Even though that might be attractive, they are building 
nuclear power reactors like crazy domestically, and they will 
be a major exporter. So I think we need to keep them in that 
group. There may be other ways outside of the nuclear realm 
that we can influence their actions, but I think those reactors 
are a done deal.
    Mr. Wilson. And I would hope it would be in China's 
interest to consider the consequences of what they are doing.
    Ambassador Graham. Mr. Wilson, I entirely agree with what 
Sharon just said. In addition, I might just say that for a long 
time the Nuclear Suppliers Group held the line pretty well with 
respect to most transfers. Prior to the U.S.-India agreement, 
there was some Russian playing around with the guidelines, but, 
overall, the record was reasonably good.
    The U.S. has now made the exception for India, pursuant to 
the Indian agreement, and pushed that through the NSG. It is 
difficult to see how a proposal like China's could be stopped 
within the NSG, given the Indian precedent. Perhaps--perhaps 
the NSG can be persuaded that this exception for India is India 
only and won't apply to any other country, most especially 
Pakistan. But where does that leave China? And my guess is that 
they probably go ahead and sell them anyway. It is not a 
situation over which we have much control. The NSG is not quite 
the effective instrument it was, in my judgment, a few years 
ago because of various developments.
    Mr. Wilson. Well, I appreciate both of your input; and, Mr. 
Fly, I share your concern about the consequences of a nuclear 
Iran being truly unthinkable. Even though it is unthinkable, 
the American people need to know of what some of those 
consequences would be, consequences to our country and to our 
regional allies that are also important to us. So could you 
expound a bit on the unthinkable?
    Mr. Fly. Certainly. I guess my concern would be that, 
setting aside the issue--and there is an active debate about 
this--whether Iran can be contained in terms of its actual use 
of a nuclear weapon. My concern is that, given its history of 
sponsorship of terrorist groups like Hamas and Hezbollah, it 
would certainly allow those terrorist groups--regardless, 
again, of whether it actually transferred any sensitive 
material--it would allow those terrorist groups to be 
emboldened in terms of their attacks on a country, one of our 
closest allies, Israel.
    One of my greater concerns is actually the cascade of 
proliferation I described previously. I don't see any way 
around the fact that countries in the region will feel that 
they need to develop their own nuclear weapons programs in 
response. Many of them are U.S. allies. But I cannot come up in 
my mind with a system under which the U.S. will be able to 
convince countries like Saudi Arabia, Jordan, Egypt that we are 
going to extend our nuclear umbrella to those countries; and I 
doubt that the American people are willing to extend our 
nuclear umbrella to those countries. I doubt the American 
people are ready to commit to defend Riyadh as we would respond 
to an attack on Chicago. I just don't think that is going to 
happen.
    So I see think we will see a polynuclear Middle East. And 
it is the sort of situation which I don't think nuclear 
strategists in the past have had to deal with, and I just think 
it is a frightening scenario. That is why I argue that we need 
to take every action possible to make sure that Iran does not 
develop nuclear weapons.
    Mr. Wilson. Again, thank you for your input; and I agree 
with your assessment. Thank you all for being here.
    Chairman Berman. The time of the gentleman has expired.
    The gentlewoman from California, Ambassador Watson, is 
recognized for 5 minutes.
    Ms. Watson. Yes, I thank you for holding this hearing. This 
is information that we need to start dealing with, and I see 
that our members have gone back to their districts.
    But, really, there is a bottom-line question in my mind, 
and what forms of influence should we, as the United States, 
use with foreign supplier countries and their nuclear vendors 
to convince them to adopt these non-proliferation criteria in 
their foreign sales or at least not undercut the U.S. goals? I 
mean, what can we do? Mr. Graham.
    Ambassador Graham. That is another very good question. I 
don't have really a particularly good answer.
    Ms. Watson. We are just kind of winging it, huh?
    Ambassador Graham. We have to just use diplomacy and 
negotiate with them and try to persuade them that nuclear bombs 
in their backyards are not any better than in our backyard and 
that we shouldn't want the fuel cycle to spread any further. It 
is in their interest just as much as it is in our interest. 
That kind of diplomacy, it might work with some countries. It 
might work with all of them. But I don't see any other 
alternative to just classic diplomatic discussions to try to 
bring the governments around to our point of view.
    Ms. Watson. Well, with Ahmadinejad's speech that he made 
yesterday, I would hope that people would see the danger that 
Iran offers not only us but the world. I mean, with the kinds 
of remarks he made about 9/11--in some way, we were involved in 
that? I would hope they would see what a true danger Iran would 
offer not only us--you know, we are a little ways away--but 
areas in----
    But can I hear from the rest of you? What kind of an 
approach can we use to convince? I hope everyone was tuned in 
to Ahmadinejad's words yesterday because I think that really 
would chill them, what an irrational human being he is. Do you 
want to comment?
    Ambassador Graham. Well, I think--maybe I am naive, but I 
think statements like that are so extreme and so off the wall 
that him saying them and giving them worldwide treatment is 
only going to damage Iran. More and more countries are going to 
think that Iran is led by a leader who is crazy, and that is 
not good for a country. Now there may be a few countries that 
liked what he said, although I offhand can't think of who they 
might be. But, generally speaking, I don't see how Iran gains 
from such incredibly, apparently, irrational behavior. Now I 
assume, on the other hand, what his objective is is to be as 
widely known as possible, and he is definitely succeeding in 
that.
    Ms. Watson. I kind of got the sense in the beginning that 
maybe there was an issue with allowing him to develop it for 
domestic use. But the more I watch the behavior coming from him 
over the last year or so, I see that there is not a scintilla 
of hope that that is going to change. I think he is really 
being isolated, I feel, from people in his own country. He is 
just kind of speaking off the top of his head, am I correct?
    Ambassador Graham. He just damages his cause, I think. 
Those kinds of statements are so absurd.
    Ms. Watson. Please, I still have 15 seconds.
    Ms. Squassoni. I would say, it is exactly Iran and the 
danger of Iran that causes some states to want to develop 
certain capabilities as a way to hedge against Iran.
    But I would like to make a few points. One is, you attack 
this problem of how do we convince other countries to do the 
same thing we are doing from the supply side and from the 
demand side. On the supply side, you support allies, like 
Japan. It is one of the few countries that requires the 
additional protocol as a condition of supply. Support them and 
urge other countries to join them.
    On the demand side, fuel leasing, and multinationalizing 
fuel facilities dampen this demand for domestic enrichment and 
reprocessing and, in fact, take away the prestige that has 
accrued to these highly technical endeavors. The UAE is very 
proud of its nuclear program because it will be the first to do 
this in the Middle East.
    And, lastly, there is a question about can we exert 
commercial pressure on some of the other nuclear firms? And 
Henry Sokolski had a very creative idea, which is we have a lot 
of foreign investment in the nuclear energy in this country. I 
would put a slight twist on that and say, well, are there ways 
to give countries--firms from countries that adopt the same 
requirements, as we do, preferential treatment? There are 
certainly a lot of subsidies for the nuclear industry. Maybe we 
can use those to our advantage.
    Ms. Watson. Mr. Fly?
    Mr. Fly. I actually agree with everything Ms. Squassoni 
just said.
    One additional point, I agree we need a multifaceted 
approach to this problem. The one recommendation I would have--
and it is not a criticism of just this administration. I know 
many outside observers accused the Bush administration of 
focusing too much on counterproliferation and not focusing 
enough on arms control. I would argue we have now reversed this 
problem, and this administration has focused its efforts on 
disarmament and arms control. And although it does still have 
some of these programs to gain international agreement to limit 
proliferation of the fuel cycle, I don't hear the President or 
other senior members of the administration talking about those 
programs on a regular basis and I would encourage them to do 
so. We need to talk about both sides of the coin more 
frequently.
    Ms. Watson. Thank you, Mr. Chairman.
    Chairman Berman. The time of the gentlelady has expired.
    The gentleman from California, Mr. Royce, is recognized for 
5 minutes.
    Mr. Royce. Thank you.
    Mr. Chairman, I will follow up with Ms. Squassoni's 
observation there on the carrot approach. But I wonder if what 
Henry Sokolski was thinking about was more the stick approach.
    Chairman Berman. Sounds like it.
    Mr. Royce. You know, that we use their access to the U.S. 
market and the U.S. Government loan guarantees and so forth to 
try to leverage these countries' support for our non-
proliferation policies, especially with respect to Iran. And I 
would just ask you briefly what you think of strategy. More of 
the stick end of this.
    Ms. Squassoni. I am sorry. Could you repeat that? As 
applied to----
    Mr. Royce. Well, you know, there is access to U.S. 
Government loan guarantees, to the U.S. market, to the 
necessity of interacting with our own industry on this front. 
What if we were to use that basically as leverage to say, if 
you want to continue that relationship with the United States--
there are certain players here that we are talking about that 
are the ones that aren't stepping up in the international 
community and doing what needs to be done.
    Ms. Squassoni. I think there is some merit in that 
approach. I think it would be controversial for the U.S. 
nuclear industry, which does not have the capital it needs to 
go out there and build these plants itself. I mean, one of the 
reasons why EDF, the French electric utility, is involved in 
the new reactor or the proposed reactor at Calvert Cliffs is 
because U.S. utilities don't have the kind of money.
    Mr. Royce. Because GE is really the only American company 
still on the field, right? And it runs in last place, if we 
take the half dozen major companies.
    Ms. Squassoni. There are two parts to this. One is foreign 
investment in U.S. nuclear activities here, including 
manufacturing. AREVA has built a facility down in Lynchburg. 
They are pouring millions of dollars into our economy, and you 
know better than I do the impact of that.
    The other part is the reactor vendors like GE and 
Westinghouse. And there it is hard to see how----
    Mr. Royce. But the French are on board anyway.
    But here is my other question to you.
    Chairman Berman. The French are on board?
    Mr. Royce. Well, in terms of--vis-a-vis Iran.
    Chairman Berman. Oh, yes.
    Mr. Royce. But my other question, the worry I have is that 
our one player might quit the business at some point; and I 
think that is a result of some policy decisions, bad decisions 
that we made decades ago and have continued in terms of 
abandoning nuclear power and also the red tape that the 
industry faces today that really hasn't been addressed. I would 
ask, does the U.S. nuclear industry's low standing weaken our 
ability to shape the rules of the international nuclear game 
going forward?
    Ms. Squassoni. I would say our standing is certainly not 
what it was in the 1970s. That is absolutely clear. We do have 
some leverage through patents, through the fact that many of 
the reactors around the world were based on U.S. designs. And 
it is true that, you know, when the UAE made its decision and 
bought a Korean reactor, that Korean reactor was based on a 
Westinghouse design. So there is a window I think in which we 
have some leverage through these complicated relationships. But 
I would agree with your assessment that that is definitely 
dwindling.
    Mr. Royce. Now I wanted to ask Mr. Graham a question and 
Mr. Fly. Mr. Graham, in discussing the NPT, you suggest that 
the treaty is strengthened to the extent that the nuclear 
weapons--that those states involved with nuclear weapons, if 
they ultimately eliminate their nuclear weapons, that is going 
to move us forward. Using that logic, are you suggesting that 
North Korea or Iran may react this way?
    Years ago, Hwang Jang Yop was the minister of propaganda 
who defected; and in South Korea I had a chance to talk to this 
former North Korean minister. He had told me that for 40 years 
this was their objective. It is kind of like the old adage: We 
build, they build; we have stopped building, they build. They 
had one thing in mind, according to him, and that was 
developing this nuclear capability. So I am just wondering, are 
you sure with respect to Ahmadinejad or North Korea that that 
is the logic?
    And then, lastly, Mr. Fly, the 123 agreement with the UAE 
is supposed to be the model, and its prohibition on the UAE 
enriching nuclear material is a good thing. That was supposed 
to be the cornerstone of other agreements. I think it was 
supposed to be a cornerstone of the Vietnam agreement, but that 
doesn't seem to be happening, and I was going to ask you why.
    So, gentlemen, if you could respond. Thank you.
    Ambassador Graham. Thank you, Congressman Royce.
    I would just like to address briefly the previous question 
before I answer that question.
    In terms of the Henry Sokolski approach, I think it would 
have merit as long as it is done in a very subtle, diplomatic 
way. You don't just hit them over the head with it. What it is 
that Teddy Roosevelt said, ``Speak softly but carry a big 
stick.''
    Yes, of course, various things like loan guarantees can 
play a part. But that is not what you open with. You try to 
work the problem with each one of these countries; and, in the 
end, it might prove to be possible. Because, fundamentally, it 
is in their interest to do these sort of things. It is in their 
security interest, perhaps not their economic interest as much.
    And the nuclear industry--I have been involved in that to 
some degree in the last several years. And the United States, 
primarily because of our 30-year hiatus with nuclear power, has 
pretty much abandoned the field. The field today is dominated 
by AREVA, the French company, and by the Koreans, using a 
derivative of Westinghouse technology to be sure but moving on. 
Westinghouse is owned by a Japanese company. GE does most of 
their deals with another Japanese company, and it still only 
represents about 1 percent of their earnings. Nuclear is a 
small part of GE. And then, of course, there are the Russians 
who are trying to get into various markets. So if the U.S. 
wants to play a major role in nuclear commerce, it is going to 
have to really change things.
    Lastly, with respect to nuclear weapons and strengthening 
the NPT, essentially what I was talking about was the basic 
bargain that created the NPT, that it was nuclear disarmament 
by the five nuclear weapons states and peaceful nuclear 
cooperation in exchange for the rest of the world not having 
nuclear weapons. So it was arguably a balanced treaty.
    But not much was ever done with respect to the disarmament. 
But the prevailing view at the time the treaty was signed and 
the prevailing view when the treaty was indefinitely extended 
in 1995 from the nonnuclear weapons states was not so much we 
want to see zero nuclear weapons but we understand that that is 
going to take a very, very long time. But at least you can stop 
testing. That was kind of the attitude.
    I think it is very important to strengthen the NPT to do 
some of these interim measures, like the test ban, like the 
fissile material cutoff treaty, and so forth. Zero is a very 
long way off. And many problems, such as the one you mentioned 
with North Korea, the one you mentioned in Iran, and a number 
of others will have to be addressed over a long period of time 
before the world community can get there.
    Mr. Fly. Congressman, on the question about why the UAE 
model may not be what the Congress ends up seeing in the 
Vietnam 123, I don't have any information on the status of the 
Vietnam agreement, other than what I have read in the press. So 
I will just say, my sense is, as someone who just has limited 
experience in some multilateral arms control negotiations, 
Ambassador Graham probably experienced the same thing during 
his years at ACDA. The party that is willing to walk away in 
the end is the one that is going to be able to achieve whatever 
principle they hold dear and whatever principle they want to 
maintain through the agreement. So my guess is that, in the 
case of Vietnam, the political concerns and our interest in 
moving closer to Vietnam and improving ties between the U.S. 
and Vietnam are probably outweighing our interest in 
maintaining the UAE model.
    Mr. Royce. It is a bad precedent, Mr. Fly.
    Mr. Fly. Yes, and I completely agree.
    Mr. Royce. I understand your point.
    Mr. Fly. I completely agree.
    One additional note I would add, just from my experience 
working on these issues in the U.S. Government, unfortunately, 
I think the proliferation bureaus and the various offices in 
the U.S. Government that work on non-proliferation are treated 
much like a lot of the other functional bureaus, including 
those who work on democracy and human rights, which is an issue 
this committee has done a lot on and our regional bureaus often 
hold more sway over policy decisions. And I think if we as a 
country are actually concerned about the potential 
proliferation of nuclear weapons, that is going to have to 
change.
    Mr. Royce. We are undermining it while we undermine human 
rights there, and we have failed to use what leverage we could 
have even to obtain a modicum of change in behavior in Vietnam. 
It is very unfortunate.
    I yield back, Mr. Chairman. Thank you.
    Chairman Berman. The Vietnam story is not over yet. Keep 
hope alive.
    I am going to ask the chair of the Subcommittee on 
Terrorism, Nonproliferation, deg. and Trade if he 
would be willing, at least for a while as he recognizes 
himself, to sit here and recognize himself while I make a phone 
call.
    Mr. Sherman [presiding]. The chair recognizes himself for 5 
minutes.
    The Convention on Supplementary Compensation for Nuclear 
Damages, the CSC, establishes an international liability regime 
for compensation for nuclear damage. Some have argued that the 
U.S. nuclear industry is at a competitive disadvantage for 
nuclear contracts because competitors such as French AREVA and 
the Russian Rostam are at least partially state owned and 
consequently allegedly enjoy sovereign immunity from liability 
in the wake of a nuclear accident.
    Can the U.S. nuclear industry be competitive for nuclear 
contracts in countries that have not signed on to the 
Convention on Supplementary Compensation for Nuclear Damages? 
What are the benefits and drawbacks of an international nuclear 
liability regime such as the one described by the Convention on 
Supplementary Compensation? And should the United States 
establish some sort of state ownership in order to compete and 
to provide sovereign immunity to those American workers who 
would like a piece of this world economic pie?
    I am trying to determine--why don't I address that to 
Ambassador Graham, unless I see any of you volunteer--and I do 
not.
    Ambassador Graham. Well, I will begin, Congressman, and 
then perhaps Sharon could weigh in here.
    In terms of state ownership, I mean, that is just not going 
to happen in the United States. But we do have to face the fact 
that all of our competitors are virtually state owned, if not 
actually state owned. AREVA is 96 percent owned by the French 
Government. The Russian program is entirely owned by the 
Russian Government. The Korean program is very close to the 
government.
    Mr. Sherman. Close enough to enjoy sovereign immunity?
    Ambassador Graham. I don't know. I would have to ask a 
lawyer. But their bid in the United Arab Emirates was 50 
percent subsidized by the government.
    Mr. Sherman. I am not talking here about government 
subsidies, although that could have been a separate question.
    Let me build on this. Should the United States Government 
build on a 123 agreement with any country which fails to adopt 
the CSC?
    Ambassador Graham. I think we shouldn't. But, I mean, that 
is something we need to have. But it is unquestionably a 
disadvantage that we have in dealing with these state-owned 
companies, although even they worry a bit about unlimited 
nuclear liability.
    So, Sharon, do you want to add more detail there?
    Ms. Squassoni. Sure. I think there are two things. The 
Convention on Supplementary Compensation is something that 
improves on the two existing conventions, the Paris and the 
Vienna. So I am not sure--it is just essential that a country 
with which we conduct nuclear trade has a liability, has signed 
one of the conventions. A 123 agreement is just a framework for 
cooperation. It doesn't guarantee----
    Mr. Sherman. But it is the one opportunity for Congress to 
have some role in the process, and we have a State Department 
bureaucracy that is utterly disinterested in American jobs.
    Ms. Squassoni. Well, do you care about just signing the 
convention? Because it will be a while before it enters into 
force.
    Mr. Sherman. Clearly--well, if we can be guaranteed that it 
will enter into force before the new nuclear plants begin 
significant construction or reach a stage where liability would 
be an issue, as a practical matter, that achieves the 
objectives. But I have seen situations where the State 
Department will consider something from 92 different angles and 
produce 500-page position papers, and jobs isn't there. As a 
matter of fact, if anything, if you could provide jobs to some 
other country, that is thought of as a plus.
    So I think Congress has to be involved in making sure that, 
as the world tries to reduce carbon output, moves toward more 
nuclear facilities, that the American worker has a place. And 
hence my question.
    My time has expired. I believe Chairman Berman already 
announced that people would have time to enter statements into 
the record. I will be entering my opening statement into the 
record, and I thank the witnesses for being here.
    We are adjourned.
    [Whereupon, at 11:46 a.m., the committee was adjourned.]
                                     

                                     

                            A P P E N D I X

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     Material Submitted for the Hearing RecordNotice deg.



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                               Ros-Lehtinen FTR deg.__

   Material submitted for the record by the the Honorable Ileana Ros-
    Lehtinen, a Representative in Congress from the State of Florida













[Note: The statement of Mr. Henry Sokolski, Executive Director, The 
Nonproliferation Policy Education Center, is not reprinted here but is 
available in committee records or may be accessed via the Internet at: 
http://www.hcfa.house.gov/111/ros092410a.pdf.]

                               Squassoni FTR deg.__

Material submitted for the record by Ms. Sharon Squassoni, Director and 
 Senior Fellow, Proliferation Prevention Program, Center for Strategic 
                       and International Studies











                               Carnahan QFRs deg._

                               
                               
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