[Senate Hearing 113-579]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-579

          SECTION 123: CIVILIAN NUCLEAR COOPERATION AGREEMENTS

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



                                 HEARING

                                BEFORE THE



                      COMMITTEE ON FOREIGN RELATIONS

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 30, 2014

                               __________

       Printed for the use of the Committee on Foreign Relations


      Available via the World Wide Web: http://www.gpo.gov/fdsys/




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                COMMITTEE ON FOREIGN RELATIONS         

             ROBERT MENENDEZ, New Jersey, Chairman        
BARBARA BOXER, California            BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland         JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire        MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware       RON JOHNSON, Wisconsin
RICHARD J. DURBIN, Illinois          JEFF FLAKE, Arizona
TOM UDALL, New Mexico                JOHN McCAIN, Arizona
CHRISTOPHER MURPHY, Connecticut      JOHN BARRASSO, Wyoming
TIM KAINE, Virginia                  RAND PAUL, Kentucky
EDWARD J. MARKEY, Massachusetts
               Daniel E. O'Brien, Staff Director        
        Lester E. Munson III, Republican Staff Director 


                              (ii)        



                            C O N T E N T S

                              ----------                              
                                                                   Page

Corker, Hon. Bob, U.S. Senator from Tennessee, opening statement.     2
    Prepared statement...........................................     4
Countryman, Hon. Thomas M., Assistant Secretary of State, Bureau 
  of International Security and Nonproliferation, U.S. Department 
  of State, Washington, DC.......................................    11
    Prepared statement...........................................    12
    Responses to questions submitted for the record by Senator 
      Robert Menendez............................................    70
    Responses to questions submitted for the record by Senator 
      Marco Rubio................................................    72
Fertel, Marvin S., president and CEO, Nuclear Energy Institute, 
  Washington, DC, prepared statement.............................    37
    Responses to questions submitted for the record by Senator 
      Marco Rubio................................................    77
    Attachment: List of Components in a Typical Nuclear Power 
      Plant......................................................    81
Menendez, Hon. Robert, U.S. Senator from New Jersey, opening 
  statement......................................................     1
Poneman, Hon. Daniel B., Deputy Secretary of Energy, U.S. 
  Department of Energy, Washington, DC...........................     6
    Prepared statement...........................................     8
    Responses to questions submitted for the record by Senator 
      Robert Menendez............................................    71
    Responses to questions submitted for the record by Senator 
      Marco Rubio................................................    73
Sokolski, Henry D., executive director, Nonproliferation Policy 
  Education Center, Arlington, VA, oral statement................    50
    Prepared statement...........................................    51
    Responses to questions submitted for the record by Senator 
      Marco Rubio................................................    75
Squassoni, Sharon, director and senior fellow, Proliferation 
  Preventioon Program, Center for Strategic and International 
  Studies, Washington, DC, prepared statement....................    43
    Responses to questions submitted for the record by Senator 
      Marco Rubio................................................    76

              Additional Material Submitted for the Record

A Statement and Seven Letters Submitted by Henry Sokolski:
    Prepared statement of Victor Gilinsky........................    58
    February 14, 2012, Letter to President Barack Obama..........    59
    November 15, 2010, Letter to President Barack Obama..........    60
    September 20, 2012, Letter to President Barack Obama.........    62
    Department of Energy letter to Henry Sokolski................    63
    Letter from the House Committee on Foreign Affairs to Daniel 
      Poneman and Ellen O. Tauscher..............................    65
    August 23, 2010, letter from Congress to President Barack 
      Obama......................................................    67
    Letter from Senator Richard Lugar to Hon. John F. Kerry......    69
Analysis of Export Licenses Under Nuclear Cooperation Agreements 
  Submitted by Senator Senator Edward J. Markey..................    96

                                 (iii)

 
          SECTION 123: CIVILIAN NUCLEAR COOPERATION AGREEMENTS

                              ----------                              


                       THURSDAY, JANUARY 30, 2014

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:35 a.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Robert 
Menendez (chairman of the committee) presiding.
    Present: Senators Menendez, Cardin, Shaheen, Murphy, Kaine, 
Markey, Corker, Risch, Rubio, Johnson, and McCain.

          OPENING STATEMENT OF HON. ROBERT MENENDEZ, 
                  U.S. SENATOR FROM NEW JERSEY

    The Chairman. Good morning. This hearing of the Senate 
Foreign Relations Committee will come to order.
    Let me welcome our panelists today. We appreciate your 
participation.
    This year we have several agreements before the committee: 
an updated agreement with Taiwan, an extension of the agreement 
with the IAEA, both of which have been submitted to Congress. 
The Vietnam agreement has been initialed, as I understand it, 
and we are looking forward to reviewing it when it is submitted 
to Congress. Other countries are also seeking to negotiate such 
agreements with the United States.
    Over the last several years, the administration has 
conducted and recently completed a policy review of 123 
agreements, and we are looking forward today to hearing the 
results of this review.
    One question is how the review dealt with what has become 
known as the ``gold standard.'' Should the United States 
require countries with which it enters into 123 agreements to 
completely forgo enrichment and reprocessing? And in that 
respect, I will look forward to hearing that response.
    You know, we have the United Arab Emirates Agreement, which 
is, in my mind, the gold standard. And yet, we are in the midst 
of negotiations with Iran which would permit, from everything I 
gather from the joint plan of action, some level of enrichment 
to take place. And so in one respect you have a very staunch 
ally who you have this very high standard for. In another 
respect, you have a country that ultimately engages in a series 
of support of terrorism across the globe, that is engaged in 
Syria, that has challenged the world with its nuclear 
ambitions, and we are headed to something that is far less than 
the UAE standard. So I think it is important to get a sense of 
how we pursue these agreements.
    If the administration has settled on a case-by-case basis, 
we would like to know what are the criteria for pursuing or not 
pursuing the gold standard.
    In the 1970s nonproliferation concerns prompted Congress to 
pass the Nuclear Nonproliferation Act of 1978 requiring states 
to comply with much more robust nonproliferation conditions 
before signing nuclear cooperation agreements with the United 
States.
    A lot of water has passed under the bridge since then. Iran 
and North Korea have sought to use the pretense of a civilian 
nuclear program to work toward nuclear weapons, and the A.Q. 
Khan network spread nuclear technology across the globe.
    Another important issue related to 123 agreements is the 
declining role of the United States in the global export market 
for nuclear technology. Until the end of the cold war, the 
United States was the dominant global supplier of commercial 
nuclear energy technology. Over the last 30 years, we have seen 
a significant decline in the U.S. share of the market and in 
our ability to promote national security objectives through 
peaceful nuclear cooperation.
    For Congress, the question is how can we support our 
nuclear industry while at the same time upholding high 
nonproliferation standards. Section 123 of the Atomic Energy 
Act charges the Congress and the Senate Foreign Relations 
Committee, in particular, with important oversight duties 
related to these agreements. It is now up to the Senate Foreign 
Relations Committee and the Congress, broadly, to decide 
whether we believe the agreement meets the nonproliferation 
criteria of the Atomic Energy Act and is in the best interests 
of the United States.
    We look forward to our panelists helping to shed light on 
these issues and understanding a better sense of how the 
administration views them in the performance of our oversight 
duties.
    Let me recognize Senator Corker, who has had a great deal 
of interest in this field, and we look forward to his remarks.

             OPENING STATEMENT OF HON. BOB CORKER, 
                  U.S. SENATOR FROM TENNESSEE

    Senator Corker. Mr. Chairman, thank you. Thank you very 
much for having this hearing. I know we had a number of 
discussions and I appreciate the way that the minority and the 
majority work together on these kinds of issues.
    And I want to thank our witnesses for being here today.
    I have some brief opening comments, and because this is a 
little more technical in nature, if I could, I would like my 
full written opening comments to be part of the record.
    The Chairman. Without objection.
    Senator Corker. Today we have the opportunity to examine 
and begin the process to weigh in on what shape U.S. policy in 
this arena should take and review and calls to be more robust 
the role that Congress plays in entering into these important 
decisions.
    I want to thank the witnesses for appearing before us 
today. I am particularly interested in hearing from our private 
panel as we examine U.S. policy in relation to civil nuclear 
cooperation agreements and the role that they play in achieving 
U.S. nonproliferation goals.
    I am concerned about the administration's current policy 
or, rather, lack of consistent policy toward the negotiation of 
civil nuclear cooperation agreements. Their acceptance of 
enrichment and reprocessing, E&R, capabilities in some but not 
all new agreements with countries where no such capability 
currently exists is inconsistent and confusing.
    The gold standard where nations foreswear domestic E&R 
capabilities was finalized under this administration with the 
completion of the civil nuclear cooperation agreement with the 
United Arab Emirates. This agreement signaled our country's 
strong commitment to nuclear nonproliferation and established a 
high standard to ensure tight control of potentially dangerous 
technologies.
    The absence of a consistent policy weakens our nuclear 
nonproliferation efforts and sends mixed signals to those 
nations we seek to prevent from gaining or enhancing such 
capability and signals to our partners that the gold standard 
is actually no standard at all.
    I am equally concerned that the current administration has 
taken an economics industry first national security second 
approach to entering into these 123 agreements. Also, we need 
to understand how the agreement with Iran, as the chairman 
mentioned and as we have talked about privately, relates to 
other civilian agreements in our overall nonproliferation 
strategy. I do not see how, in essence, agreeing to the type of 
thing that we have agreed to with Iran does not undermine our 
ability in these 123 agreements with every other country that 
seeks an agreement with us.
    This agreement with Iran is a de facto signoff on 
enrichment, and while we are not negotiating a 123 agreement 
with Iran, these negotiations will have implications for our 
global nuclear nonproliferation regime.
    This committee has an important obligation to review and 
provide recommendations to the full Congress on all 123 
agreements submitted for consideration under the Atomic Energy 
Act. The 123 agreement with Taiwan was submitted to our 
committee for consideration on January 7, 2014. While this 
agreement preserves the gold standard, I am concerned about the 
decision to make the agreement of unlimited duration, bypassing 
congressional review of the agreement beyond the current 60-day 
statutory review period.
    Later this year, we will be asked to review a 123 agreement 
with Vietnam. This agreement reportedly does not meet the gold 
standard. Rather, it relies on a political side note that 
Vietnam will seek to meet its fuel requirements through the 
international nuclear fuel market.
    With this great inconsistency across agreements, which 
standards can we expect the administration to reach for 
negotiating new agreements with Jordan or Saudi Arabia?
    I also appreciate the opportunity to raise prospects for an 
enhanced congressional role in the 123 process. I think most of 
us know the process that we now have is really no process at 
all and it really does not allow us to weigh in in the way we 
should appropriately weigh in. I am concerned that Congress 
will be increasingly marginalized if we do not explore changes 
to the current process for congressional review. We should 
examine whether it is time for Congress to provide a resolution 
for approval on all agreements except perhaps in the case where 
an agreement reaches the gold standard.
    I welcome our witnesses' comments and observations on this 
and other proposals.
    In closing, the United States must lead with high standards 
that prevent the proliferation of technologies if we are to 
have a credible and effective nuclear nonproliferation policy. 
I look forward to hearing from our witnesses on the most 
effective avenues for achieving this primary goal.
    And again, I want to thank the chairman for having this 
hearing and for those who are here pursuing appropriate 
oversight on something that is so important to our country. So 
thank you.
    [The prepared statement of Senator Corker follows:]

                Prepared Statement of Senator Bob Corker

    Chairman Menendez, thank you for agreeing to hold this important 
and timely hearing today.
    Not only have I requested that we hold this hearing for some time 
now, but nearly 2 years ago Senator Lugar sent a letter to then 
Chairman Kerry requesting this very same hearing.
    Now, 2 years later, we have the opportunity to examine and begin 
the process to weigh in on what shape U.S. policy in this arena should 
take and review--and cause to be more robust--the role that Congress 
plays in entering into these important decisions.
    I also want to thank the witnesses for appearing before us today. I 
am particularly interested in hearing from our private panel today, as 
we examine U.S. policy as it relates to civil nuclear cooperation 
agreements and the role they play in achieving U.S. nonproliferation 
goals.
    As I stated in a letter to Secretary Kerry on October 28 of last 
year, I am deeply concerned about the administration's current policy--
or rather lack of consistent policy--toward negotiation of civil 
nuclear cooperation agreements. The administration's acceptance of 
enrichment and reprocessing (ENR) capabilities in some, but not all, 
new agreements with countries where no ENR capability currently exists 
is inconsistent and confusing, potentially compromising our Nation's 
nonproliferation policies and goals.
    The ``gold standard,'' where nations forswear domestic ENR 
capabilities, was finalized under this administration with the 
completion of the civil nuclear cooperation agreement with the United 
Arab Emirates. The UAE 123 agreement signaled the United States strong 
commitment to nuclear nonproliferation and established a high standard 
to ensure tight control of potentially dangerous technologies that can 
also be used for the foundations of a nuclear weapons program.
    The absence of a consistent policy weakens our nuclear 
nonproliferation efforts, and sends a mixed message to those nations we 
seek to prevent from gaining or enhancing such capability, and signals 
to our partners that the ``gold standard'' is no standard at all.
    I am equally concerned that the current administration has taken an 
``economics''/industry first, national security second approach to 
entering into 123 agreements.
    Also, we need to understand how the agreement with Iran relates to 
our other civilian nuclear agreements and our overall nonproliferation 
strategy.
    The agreement with Iran is a de facto sign-off on enrichment, and 
while we are not negotiating a 123 agreement with Iran, these 
negotiations will have implications for our global nuclear 
nonproliferation regime.
    As many of us may recall, during the review of the India 123 
agreement several years ago, the administration at that time indicated 
that the value of the agreement, in addition to demonstrating a growing 
commitment to the bilateral relationship, was in the nature of 
contracts for our domestic nuclear suppliers.
    Those contracts have yet to appear for U.S. industry, likely never 
will appear, and we are left holding a bag of goods. To say many in 
Congress have buyer's remorse would probably be an understatement as it 
pertains to the concessions made in this agreement in order to ``open 
the market'' for U.S. industry.
    It was this administration, following in the disappointing 
footsteps of the India agreement that negotiated the first ``gold 
standard'' agreement between the United States and the UAE.
    This standard, welcomed by Congress, has since been set aside for a 
``case-by-case'' approach that no longer seeks these strong commitments 
from our partners.
    In a 2012 editorial titled ``Shall We Call it the Bronze 
Standard,'' the New York Times rightly pointed out the following with 
regard to the new, relaxed standard:

          American officials now say that asking for too much could 
        cost America's nuclear industry valuable new business. 
        Officials also insist that once American businesses have 
        contracts in hand, Washington can still use its nuclear trade 
        rules and suasion to urge countries signing nuclear deals to 
        limit enrichment and reprocessing and meet other 
        nonproliferation standards so there is no diversion.
          But if the administration doesn't make curbing the spread of 
        enrichment and reprocessing an explicit priority, it will never 
        happen. As for the business rationale, the Bush and Obama 
        administrations and the nuclear industry made similar claims 
        when they cast proliferation concerns aside and gave India an 
        overly generous nuclear deal in 2008. The Indians are still 
        mainly buying from others because they have yet to institute a 
        sufficient liability regime to protect American firms.
          The blowback from not pressing others to accept the same deal 
        as the U.A.E could also be significant. If Vietnam is given 
        easier terms, charges will inevitably arise that Washington is 
        tougher on the Arab world. If the provision is not in the 
        agreement with Jordan or others in the Mideast, the U.A.E. has 
        the right to renegotiate its deal.''

    Within this committee, we have an important obligation to review 
and provide recommendations to the full Congress on all 123 agreements 
submitted for consideration under the Atomic Energy Act.
    This year, we have already passed an extension to the ROK 123 
agreement, providing another 2 years for the administration to reach a 
new comprehensive deal. Maintaining uninterrupted civilian nuclear 
cooperation is important for U.S. political and commercial interests. 
And while I was pleased to support this extension, I am concerned that 
the administration will not hold the line on advanced consent for 
enrichment and reprocessing.
    We are also presently asked to review the 123 agreement with 
Taiwan, which was submitted to our committee for consideration on 
January 7, 2014.
    While this agreement preserves the ``gold standard,'' I am 
concerned about the decision to make the agreement of unlimited 
duration thereby bypassing congressional review of the agreement beyond 
this current 60-day statutory review period.
    I do hope that our government witnesses will address the reasons 
for concluding that this was the best approach, but caution that it 
should not become common practice.
    Later this year, we will be asked to review a 123 agreement with 
Vietnam. This agreement reportedly does not meet the ``gold standard.'' 
Rather it relies on a political side note that Vietnam will seek to 
meet its fuel requirements utilizing the international nuclear fuel 
market.
    If the Vietnamese are willing to buy their nuclear fuel on the 
international market, why aren't they willing to agree to legally 
binding language forswearing enrichment and reprocessing technologies?
    With this great inconsistency across agreements, which standards 
can we expect the administration to reach for in negotiating new 
agreements with Jordan or Saudi Arabia?
    I also appreciate the opportunity to raise prospects for an 
enhanced congressional role in the 123 approval process. While Congress 
provides an important check on the administration to ensure that our 
national security interests are placed first and are being met with 
each agreement, I am concerned that we will be increasingly 
marginalized if we do not explore changes to the current process for 
congressional approval.
    The law governing the current congressional role was written 
decades ago and has had little updating since. With a packed domestic 
agenda and a growing number of members with little to no background in 
civil nuclear cooperation agreements, the process by which an agreement 
goes into effect absent a resolution of ``disapproval'' opens the door 
for less and less review of these important agreements.
    We should examine whether it is time to call on Congress to provide 
a resolution of approval on all agreements prior to them becoming law, 
except perhaps in the case where an agreement reaches the ``gold 
standard.'' I welcome our witness's comments and observations on this 
and other proposals to update the Atomic Energy Act.

    The Chairman. Thank you, Senator Corker, and thank you for 
your contributions to this effort.
    Our first panel is Thomas Countryman, the Assistant 
Secretary of State for the Bureau of International Security and 
Nonproliferation, and the Deputy Secretary of Energy, Daniel 
Poneman. Thank you both for your presence here today. We look 
forward to your testimony. Your full statements will be 
included in the record without objection. And I would ask you 
to try to summarize your statements in about 5 minutes or so, 
so we could enter into a dialogue.
    With that, Mr. Secretary, do you want to start off?

   STATEMENT OF HON. DANIEL B. PONEMAN, DEPUTY SECRETARY OF 
       ENERGY, U.S. DEPARTMENT OF ENERGY, WASHINGTON, DC

    Mr. Poneman. Thank you, Mr. Chairman.
    Chairman Menendez, Ranking Member Corker, distinguished 
members of the committee, I appreciate the opportunity to 
testify before you today on the administration's policies 
regarding civil nuclear cooperation and nonproliferation.
    I first worked on this issue as a summer intern in 1975 for 
my home State senator, John Glenn. I was working on S. 1439, 
the Export Reorganization Act, which, in fact, became the 1978 
Nonproliferation Act that you referred to, Mr. Chairman. So I 
have nearly 40 years on this subject, including serving 6 years 
on the National Security Council staff both for President 
George Herbert Walker Bush and President Clinton.
    At the NSC, I was proud to be part of the team under 
President Bush that negotiated the deal to purchase 500 metric 
tons of highly enriched uranium from Russia, 20,000 weapons 
worth of bombs, three a day that have been taken down, and we 
have successfully concluded that deal just in December. I was 
also proud to serve on the team that stopped North Korea's 
plutonium production for a number of years under President 
Clinton.
    In short, for four decades my preeminent concern has been 
to stop the spread of nuclear weapons and to stop dangerous 
materials and technologies from falling into the wrong hands. 
Throughout our policy has benefited from an enormous degree of 
bipartisan cooperation and consensus, going back to President 
Eisenhower's 1953 ``Atoms for Peace'' speech in which he sought 
to secure the benefits of the peaceful use of the atom while 
guarding against misuse for military or other destructive aims. 
Every President since President Eisenhower has embraced these 
goals.
    So when President Obama delivered his compelling vision to 
advance our nuclear security in his 2009 speech in Prague, he 
was following firmly in the footsteps of all of his 
predecessors in advancing a strong vision of global leadership 
in reducing nuclear threats.
    It has always been U.S. policy that 123 agreements should 
support U.S. nonproliferation objectives. Indeed, our 123 
agreements are the world's strongest framework agreements for 
peaceful nuclear cooperation precisely because of the 1978 
Nonproliferation Act.
    Consider the specific provisions. The United States 
requires our partners to commit to the legal obligations 
contained in section 123 of the Atomic Energy Act. The U.S. 
Government requires non-nuclear-weapon state partner countries 
to have in place IAEA safeguards over all nuclear materials in 
peaceful nuclear activities. The United States requires 
guarantees that any nuclear material and the equipment 
transferred be used only for peaceful purposes; 123 agreements 
also provide the United States with the right to demand the 
return of any U.S.-obligated material and equipment if a non-
nuclear-weapon state detonates a weapon or abrogates its 
safeguard agreement. Partners may not retransfer any nuclear 
material or equipment supplied by U.S. companies without 
permission of the U.S. Government. Partners may not enrich, 
reprocess, or otherwise alter in form or content U.S.-obligated 
material without U.S. Government consent. Partners also must 
adhere to the U.S. requirements for physical security and 
storage of U.S. nuclear material and equipment.
    Our 123 agreements set the bar high discouraging a 
nonproliferation race to the bottom in which potential partners 
negotiate peaceful nuclear cooperation agreements with 
suboptimal nonproliferation controls.
    Therefore, in our view, the more 123 agreements that exist 
in the world, the stronger the nonproliferation controls that 
will apply to all nuclear commerce. Consequently, it is in the 
U.S. national security interest to maximize the number of 
countries with which the United States has 123 agreements.
    A decade ago, I joined with then-Professor Ernest Moniz and 
other colleagues to propose a global regime that minimized 
acquisition of enrichment and reprocessing technologies. Such a 
regime would achieve that minimization goal not by legal diktat 
or diplomatic pressure, but rather by addressing the underlying 
concern in many countries to secure reliable nuclear fuel 
services from the commercial marketplace. This approach of 
acquiring services from the existing market would save nations 
billions of dollars in unnecessary investments in fuel cycle 
facilitates, thereby becoming a far more attractive prospect.
    We want other nations to enter into 123 agreements with the 
United States because our standards are the highest in the 
world. When we enter into 123 agreements, we bring our 
nonproliferation standards to the partner country and thereby 
enhance our national security. Conversely, when a state opts to 
enter into an agreement for civil nuclear cooperation only with 
another country, not the United States, then U.S. influence on 
that nation's nonproliferation regime decreases, as does our 
influence over the global regime.
    In short, we have a variety of tools, in addition to the 
123 agreements, Mr. Chairman, which I think Mr. Countryman will 
go into in great detail, but the bottom line is that the United 
States has the highest nonproliferation standards in the world. 
Our 123 agreements remain a highly effective tool in 
promulgating those standards, though they are far from the only 
tool, and it is therefore in our national security interest to 
ensure that we can renew current and achieve new 123 agreements 
with partner countries.
    Thank you.
    [The prepared statement of Mr. Poneman follows:]

        Prepared Statement of Deputy Secretary Daniel B. Poneman

    Chairman Menendez, Ranking Member Corker, and distinguished members 
of the committee, I appreciate the opportunity to testify before you 
today on the administration's policies regarding civil nuclear 
cooperation.
    I first worked on this issue as a summer intern in 1975 for my home 
State Senator, John Glenn of Ohio. That summer I was assigned to work 
on S. 1439, the Export Reorganization Act, which was designed to 
address some of the shortcomings in our system and strengthen our 
nonproliferation controls. That legislation eventually evolved into the 
Nuclear Non-Proliferation Act of 1978. So I have nearly 40 years of 
experience with this issue, including 6 years on the National Security 
Council (NSC) staff under President George H.W. Bush and President Bill 
Clinton, for whom I served as the first Special Assistant to the 
President for Nonproliferation and Export Controls.
    At the NSC, I was proud to be part of the initial team under 
President Bush that negotiated the agreement with Russia to purchase 
500 metric tons of highly enriched uranium to be blended down into 
commercial reactor fuel. That 20-year deal concluded last month, having 
eliminated 20,000 bombs-worth of nuclear material, while providing one-
tenth of America's electricity for the last generation. And I was proud 
to serve on the team under President Clinton that worked to reduce the 
proliferation threat emanating from North Korea's nuclear programs, an 
issue that we continue to confront today.
    In short, for four decades I have done my best to prevent nuclear 
weapons or the materials and technologies that can be used to build 
them from falling into the wrong hands, and have benefited throughout 
from the wide degree of bipartisan consensus supporting U.S. 
nonproliferation policy. That consensus was well articulated by 
President Eisenhower in his historic 1953 ``Atoms for Peace'' speech, 
then institutionalized in 1957 with the creation of the International 
Atomic Energy Agency (IAEA), and ultimately universalized through the 
Nuclear Nonproliferation Treaty (NPT) of 1968, all of which seek to 
secure to humankind the benefits of the peaceful use of the atom while 
guarding against its misuse for military or other destructive aims. 
Every President since Eisenhower has embraced these goals, each 
applying the flexibility of his own policies to achieve these goals.
    This is indeed fortunate, since there is no more important task 
than succeeding in this daunting yet imperative national security 
mission. So when President Obama delivered his compelling vision to 
advance our global nuclear security in his 2009 Prague speech, he was 
following firmly in the footsteps of his predecessors in advancing a 
strong vision of global leadership in reducing nuclear threats. The 
Department of Energy (DOE), through its national laboratories and 
production plants, and in close partnership with the State Department, 
Department of Defense, Nuclear Regulatory Commission (NRC) and other 
U.S. Government and international partners, has worked and will 
continue to work tirelessly to reduce this threat and enhance the 
nuclear nonproliferation regime.
    In your letter, Mr. Chairman, you asked about the administration's 
policy on 123 agreements. At the broadest level, it is and always has 
been U.S. policy that 123 agreements should support U.S. 
nonproliferation objectives, to combat the threat that nuclear weapons 
and related materials and technologies should fall into the wrong 
hands. And, by their structure, 123 agreements serve that mission well. 
Indeed, our 123 agreements are the world's strongest framework 
agreements for peaceful nuclear cooperation. No government requires 
more stringent nonproliferation conditions than the United States.
    Consider the specific provisions of our 123 agreements. The United 
States requires our trading partners to commit to the legal obligations 
contained in section 123 of the Atomic Energy Act. These obligations 
are purposely stringent and set the global standard for nuclear 
commerce. The U.S. Government requires non-nuclear-weapon-state partner 
countries to have in place IAEA safeguards over all nuclear materials 
in peaceful nuclear activities within the territory of such state, 
under its jurisdiction, or carried out under its control anywhere. 
Additionally, the cooperating party must guarantee that safeguards as 
set forth in the agreement for cooperation will be maintained in 
perpetuity with respect to all nuclear materials and equipment 
transferred pursuant to the 123 agreement and any special nuclear 
material used in or produced by such material and equipment. The United 
States requires guarantees that any nuclear material and equipment 
transferred be used only for peaceful purposes. 123 agreements also 
require that the United States has the right to demand the return of 
any U.S.-obligated material and equipment if a non-nuclear-weapon state 
detonates a weapon or abrogates its safeguards agreement. Partners may 
not retransfer any nuclear material or equipment supplied by U.S. 
companies without the permission of the U.S. Government. Partners may 
not enrich, reprocess, or otherwise alter in form or content U.S.-
obligated material without U.S. Government permission. Partners also 
must adhere to U.S. requirements for physical security and storage of 
U.S. nuclear material and equipment.
    It is therefore in the U.S. national interest to encourage other 
governments that are considering commercial nuclear programs and that 
are in compliance with their nuclear nonproliferation obligations to 
sign 123 agreements with the United States. Our 123 agreements set the 
global nonproliferation standard, thereby discouraging a 
nonproliferation ``race to the bottom,'' in which potential partners 
negotiate peaceful nuclear cooperation agreements with suboptimal 
nonproliferation controls.
    The more 123 agreements that exist in the world, the stronger the 
nonproliferation controls that will apply to all nuclear commerce. 
Consequently, it is in the U.S. national security interest to maximize 
the number of countries with which the United States has 123 
agreements.
    There is nothing new in this logic. Indeed, a decade ago, I joined 
with then-professor, Ernest Moniz, and other colleagues to argue in 
favor of a global regime that minimized acquisition of enrichment and 
reprocessing technologies. Such a regime would achieve this 
minimization goal, not by legal diktat or diplomatic pressure, but 
rather by addressing the underlying concern in many countries to secure 
reliable nuclear fuel services from the commercial marketplace. This 
approach of acquiring services from the existing market would save 
nations billions of dollars in unnecessary investments in fuel cycle 
facilities, thereby becoming a far more attractive prospect. Of course, 
to be effective, these nuclear fuel service supply assurances would 
have to be credible--for example, they could only be revoked if the 
country in question violated its nonproliferation obligations, and not 
for other important but distinct issues of concern to the United 
States.
    We want other nations to enter into 123 agreements with the United 
States because our standards are the highest in the world--bar none. 
When we enter into new 123 agreements, we bring our nonproliferation 
standards to the partner country, and thereby enhance our national 
security. Conversely, when a state opts to enter into an agreement for 
civil nuclear cooperation only with another country but not the United 
States, then U.S. influence on that state's nonproliferation regime 
decreases.
    Some people have mistakenly viewed U.S. economic interests in 
nuclear trade as somehow at odds with a strong nonproliferation policy. 
This is a false dichotomy. A strong U.S. commercial nuclear industry 
does not weaken our nonproliferation; on the contrary it strengthens 
U.S. nonproliferation efforts, since it ultimately provides the basis 
for countries to enter into 123 agreements. Conversely, failure to 
reach a 123 agreement with a potential partner country prevents the 
United States from extending the coverage of its nonproliferation 
controls, thus weakening our nonproliferation efforts.
    The U.S. commercial nuclear industry is no longer dominant in the 
global marketplace. Over time, the U.S. share of global exports for 
enriched uranium and other sensitive nuclear materials declined 
dramatically. As reported in a 1987 GAO report, the U.S. share of the 
global non-Communist market in enriched uranium declined from 100 
percent in 1969 to 50 percent in 1987, Since that report, the decline 
in market share has continued to just 10 percent of the overall market 
in 2008. Diminishing U.S. market share means diminished controls over 
materials worldwide and diminished influence over the safety, security, 
and nonproliferation cultures of those markets.
    It is important to remember that 123 agreements are not the only 
tools in our nonproliferation arsenal. In addition, we have the NPT 
regime; IAEA safeguards, now strengthened by the Additional Protocol; 
U.N. Resolution 1540; nuclear fuel banks; the Nuclear Suppliers Group; 
as well as a number of nonproliferation conventions on such matters as 
physical protection, safety, and radioactive waste. All of these tools 
advance the U.S. national security interest in achieving the lowest 
number of sensitive nuclear fuel cycle facilities and technologies 
(specifically enrichment and reprocessing).
    Mr. Chairman, you asked whether the section 123 requirements need 
to be modified or updated. In our judgment, Mr. Chairman, the current 
requirements are strong, relevant, and effective. Indeed, in our view 
no country has more robust nonproliferation criteria, and the current 
requirements represent a major increase in rigor compared to those in 
effect prior to the 1978 Nuclear Nonproliferation Act. The 
nonproliferation criteria of section 123 should not lightly be changed. 
The U.S. Government has been persuading other countries to accept our 
existing rigorous set of constraints for 30 years, but we will 
undermine our ability to negotiate agreements and extend our strong 
nonproliferation controls if we keep changing the rules of the game and 
cause other countries to view the United States as an unreliable 
partner.
    I would argue that changes made in 1978 were justified, as they 
addressed genuine weaknesses in the nuclear export regime. Indeed, they 
have been very successful in minimizing the proliferation of sensitive 
nuclear technologies like enrichment and reprocessing. While I 
understand well-meaning efforts to further constrain the acquisition 
and development of enrichment and reprocessing around the world, 
ratcheting up restrictions yet again will drive countries away from the 
United States and therefore out of the reach of U.S. 123 controls. A 
perfect policy that applies to zero percent of the market would be a 
perfect failure.
    Mr. Chairman, you asked about the proposed Taiwan 123 Agreement. 
Recently, the President submitted this agreement to Congress for 
review. As required under the Taiwan Relations Act, the agreement was 
concluded between the American Institute in Taiwan (AIT) and the Taipei 
Economic and Cultural Representative Office (TECRO).
    Entry into force of this agreement constitutes an important step 
forward in our cooperation with the authorities on Taiwan in the field 
of civil nuclear energy. The United States supplies all of their power 
and research reactors, along with the fuel to power them. The AIT-TECRO 
123 Agreement will allow this cooperation to develop further.
    In the AIT-TECRO Agreement and the supporting side letter, the 
authorities represented by TECRO renew their commitment to strong 
nonproliferation norms, including giving legal weight to their existing 
policy not to seek enrichment and reprocessing technologies. The 
proposed agreement prohibits the possession by the authorities on 
Taiwan of sensitive nuclear facilities and any engagement in activities 
involving sensitive nuclear technology in the territory of the 
authorities represented by TECRO. Assistant Secretary of State Tom 
Countryman will discuss the Taiwan 123 Agreement in greater detail. I 
simply want to reaffirm the basic point that the 123 agreement with 
TECRO is another 123 agreement that implements the longstanding U.S. 
goal to use 123 agreements as one means to achieve the lowest number of 
enrichment and reprocessing facilities around the world.
    Finally, Mr. Chairman, you asked about the role of Congress in 
formulating 123 policy. As the committee knows, the role of Congress 
has been vital in this area, as has been expressed through the Atomic 
Energy Act of 1954, as amended. Congress developed and enacted this 
comprehensive framework, institutionalizing its vital review and 
oversight function. The documentation required to accompany a 123 
agreement is extensive and requires a joint letter from the Secretaries 
of State and Energy, supplemented by separate input from the Nuclear 
Regulatory Commission and the Director of National Intelligence. That 
documentation is reviewed by both Houses of Congress. We believe it is 
a good system, with a robust role for Congress. As long as the 
President retains his prerogatives in the area of foreign diplomacy, 
the nonproliferation criteria of section 123 should not lightly be 
changed, for the same reasons our policy should not lightly be changed; 
the United States should be both strong and steadfast.
                               conclusion
    The United States has the highest nonproliferation standards in the 
world. Our 123 agreements remain a highly effective tool in 
promulgating those standards--though they are far from the only tool. 
It is in our national security interests to assure that we can renew 
current and achieve new future 123 agreements.
    Though the strategy for engaging with individual nations is 
tailored to the nation at hand, the underlying principle remains the 
same: we must do what is necessary to minimize the acquisition and 
development of enrichment and reprocessing technology and provide 
persuasive alternatives.
    Well-intended changes to requirements for 123 agreements risk 
making the perfect the enemy of the good--arriving at a policy that is 
strong on paper and nowhere else. We run the risk of countries moving 
forward without us--choosing instead to partner with countries that 
have less stringent nonproliferation controls and losing the 
opportunity to help new partners and allies use peaceful nuclear power.
    The Department of Energy remains committed to implementing 
President Obama's policies and goals on nuclear nonproliferation and 
use of civil nuclear cooperation, as President Eisenhower expressed 60 
years ago--that cooperation in the peaceful use of nuclear power will 
bring together an international community committed to using ``their 
strength to serve the needs rather than the fears of mankind.''
    Thank you for the opportunity to address to committee, and I look 
forward to your questions.

    The Chairman. Secretary Countryman.

STATEMENT OF HON. THOMAS M. COUNTRYMAN, ASSISTANT SECRETARY OF 
 STATE, BUREAU OF INTERNATIONAL SECURITY AND NONPROLIFERATION, 
            U.S. DEPARTMENT OF STATE, WASHINGTON, DC

    Mr. Countryman. Mr. Chairman, I want to thank you and the 
ranking member and the other members of the committee for this 
opportunity. Even more, I want to thank you for decades of 
strong congressional interest and support in the issue of 
nonproliferation. This enduring support, together with the 
direct interest of President Obama, has ensured that for the 
last several years the United States has maintained leadership 
of a nonproliferation regime globally that is not only strong 
but effective.
    The 123 agreements must be understood within the context of 
a comprehensive nonproliferation policy that the United States 
has long pursued and continues to strengthen. This includes our 
efforts to minimize the further production of fissile material 
around the world, an effort to prevent the proliferation of 
sensitive technologies. It includes the President's efforts 
under the nuclear security summit process to secure fissile 
material around the world. It includes U.S. leadership within 
the Nuclear Suppliers Group which, again, under U.S. leadership 
established 3 years ago the strongest possible standards for 
preventing transfer of enrichment and reprocessing technology. 
And it also includes the strong support of the United States 
and again with the crucial support of the Congress for making 
the International Atomic Energy Agency the most credible and 
expert institution in the world for preventing proliferation.
    Nonproliferation is an element of our dialogue with 
partners around the world. It is a crucial issue for the G8 
grouping. We have also not just done the diplomatic work. We do 
the hard work, in this case led by the Department of Energy, to 
establish world fuel banks in the United States, in Russia 
under the leadership of the IAEA that can assure a reliable 
supply for countries pursuing civilian nuclear power.
    It is in this context that 123 agreements have their 
importance. They are another vital tool in the toolkit that 
limits the proliferation of E&R technology and of weapons-grade 
material. As you know, by law 123 agreements contain stringent 
nonproliferation agreements, making them stronger than those 
pursued by any other country in the world when they sign 
nuclear cooperation agreements. They require partner countries 
to apply full-scope IAEA safeguards. They require that material 
and equipment transferred under the agreement will be used only 
for peaceful purposes. They require adequate physical 
protection of material which we can verify and many other 
requirements.
    In approaching any particular negotiation of a 123 
agreement, a process led by the Department of State, we 
consistently ask in every instance how we can best prevent the 
proliferation of sensitive nuclear technologies. It is simply 
not accurate to say that the economic interests have primacy 
over our nonproliferation interests, and the policy review 
conducted by the administration reaffirmed the primacy of our 
nonproliferation interests.
    An approach that would be more restrictive or that would 
seek to make 123 agreements not only meet high standards but to 
be uniform we fear would be self-defeating. On the particular 
issue of requiring a binding legal commitment from every 
country, we do believe that many countries would prefer not to 
pursue such an agreement rather than to agree to renounce 
forever a theoretical right.
    In any 123 agreement, we seek to meet the legal 
requirements of the Atomic Energy Act and to maintain our 
principled stance, our leadership stance on enrichment and 
reprocessing. These are the primary goals. The exact structure, 
the exact text of the agreement are the means by which we reach 
those goals.
    Mr. Chairman, you have in my written testimony additional 
comments about the specific questions raised on Vietnam and on 
Taiwan, which we are happy to expand on as you wish. I simply 
want to emphasize that we have crafted through the 123 
agreements nuclear cooperation policies that are not only 
strong, they are effective. And that is borne out by the record 
that we have sustained in limiting the spread of such 
technologies.
    Thank you very much. I look forward to your questions.
    [The prepared statement of Mr. Countryman follows:]

     Prepared Statement of Assistant Secretary Thomas M. Countryman

    Mr. Chairman and Ranking Member, thank you for the opportunity to 
testify today before the committee. The question of the appropriate 
role of our civil nuclear cooperation agreements in U.S. 
nonproliferation policy is an important one, and it is my privilege to 
be here to address it.
           limiting the spread of enrichment and reprocessing
    Since taking office, this administration has made minimizing the 
further proliferation of nuclear weapons material a top priority. In 
order to do so, the administration has undertaken a large number of 
different activities designed to reinforce our longstanding policy of 
minimizing the further proliferation of enrichment and reprocessing, or 
ENR, technologies and initiated new efforts to this end. We have many 
tools to achieve this end, and for many years we've focused our efforts 
on raising global standards in this regard.
    For example, in the Nuclear Suppliers Group (NSG), 6 years of 
effort culminated in the 2011 revised Guidelines establishing criteria 
for ENR transfers. These new criteria include full compliance by the 
recipient with the Nuclear Nonproliferation Treaty (NPT) and 
International Atomic Energy Agency (IAEA), safeguards; reporting on 
export controls to the United Nations Security Council's 1540 
Committee; commitment to IAEA safety standards and adherence to 
accepted international safety conventions; and conclusion of an 
intergovernmental agreement with the supplier nation including 
assurances regarding nonexplosive use, effective safeguards in 
perpetuity, and retransfer. Suppliers also undertook to avoid, as far 
as practicable, the transfer of enabling design and manufacturing 
technology associated with nuclear transfers. The NSG has committed to 
facilitate access to nuclear material for the peaceful uses of nuclear 
energy, and to encourage states, within the scope of Article IV of the 
NPT, to rely on the international commercial market and other available 
international mechanisms for nuclear fuel services that do not 
undermine the global fuel market.
    We've also worked with our global partners to create incentives for 
states to rely on international markets for low enriched uranium fuel, 
including separate fuel banks established by the U.S. Department of 
Energy, Russia, the IAEA, and a fuel assurance initiative from the 
United Kingdom.
                         123 agreements policy
    The implementation of agreements for peaceful nuclear cooperation, 
or 123 agreements, is another tool we have to limit the further 
proliferation of ENR. As you know, 123 agreements contain many 
stringent nonproliferation conditions, making them the strongest civil 
nuclear cooperation agreements in the world in terms of 
nonproliferation requirements. Our 123 agreements require partner 
countries to apply full scope IAEA safeguards to non-nuclear-weapon 
states; require that all material and equipment transferred under the 
agreement and special nuclear material used in or produced therefrom, 
will be for peaceful purposes; require adequate physical protection of 
material transferred under the agreement; and grant U.S. consent rights 
over storage of the most sensitive materials, and over the enrichment, 
reprocessing, alteration in form or content, storage, and retransfer of 
U.S.-obligated nuclear material. With such high standards, it follows 
that the more 123 agreements we conclude, the stronger the 
nonproliferation controls that will apply to global nuclear commerce. 
Consequently, it is in the national security interests of the United 
States to maximize the number of countries with which we conclude 123 
agreements. Put simply, global security is enhanced through our 123 
agreements.
    Some have advocated an approach that would require all future U.S. 
123 agreement partners to agree to legal obligations not to pursue ENR 
technologies from any source. We do not believe such a ``one size fits 
all'' approach is in our national security interests. This type of 
blanket requirement would reduce our ability to extend our strong 
nonproliferation norms to new parts of the world--norms that have a 
real impact in preventing proliferation. Instead this blanket approach 
would likely drive states with emerging nuclear power programs into the 
arms of suppliers with lower nonproliferation standards.
    Moving forward on future 123 agreement negotiations, we will 
maintain flexibility in the structure of our agreements in order to 
meet the requirements of U.S. law and advance our primary objective of 
combating the proliferation of ENR technologies. The commitments we 
seek may take a range of forms depending on the approach that best 
suits our primary policy objective of minimizing the further 
proliferation of ENR technologies.
                     our policy applied to vietnam
    The text of the agreement we initialed with Vietnam in October is a 
good example of how our 123 agreement policy advances our objective of 
minimizing the proliferation of ENR technologies. In the text, Vietnam 
states its political commitment to rely on international fuel services 
and comply with the supplier controls adopted by the NSG rather than 
pursuing its own ENR facilities. This was an important step taken by 
the Government of Vietnam, because it is a public affirmation that 
domestic ENR facilities are not necessary. The scale of Vietnam's 
intended program does not warrant the investment, and international 
fuel cycle services are adequate to provide for its needs. I would note 
that this is also the case for the vast majority of states with 
emerging civil nuclear programs. The text of the 123 agreement with 
Vietnam is also fully compliant with all Atomic Energy Act of 1954 
(AEA) requirements, including the requirement that Vietnam secure our 
consent before it can enrich or reprocess U.S.-origin materials. The 
agreement does not provide any advance consent in this regard.
    Our 123 agreement negotiations with Vietnam also demonstrate the 
additional follow-on nonproliferation benefits that can accrue when we 
enter into 123 agreements with new partners. Since we began 
negotiating, Vietnam has brought into force an Additional Protocol with 
the IAEA, begun participating in the Global Initiative to Combat 
Nuclear Terrorism, and ratified the 2005 Amendment to the Convention on 
the Physical Protection of Nuclear Material. We are also seeing greater 
interest from Vietnam in endorsing the Proliferation Security 
Initiative.
                       congressional role/taiwan
    In addition to outlining our 123 policy, you asked us to address 
three issues. First, you asked about the nonproliferation criteria each 
123 agreement is required to meet. In 1978, Congress amended the AEA, 
thereby strengthening the legal requirements for 123 agreements. These 
changes addressed major issues associated with civil nuclear 
cooperation, including nuclear security and nuclear safeguards, 
ensuring that U.S. civil nuclear cooperation agreements have the 
strongest nonproliferation requirements in the world. We feel that 
these requirements in our 123 agreements, in combination with the other 
tools I have discussed, are sufficient. With regard to the role of 
Congress in 123 agreements, we believe congressional oversight has 
worked well over the years. As mentioned previously, the changes that 
Congress made in 1978 to the AEA have addressed the primary 
nonproliferation concerns about U.S. civil nuclear cooperation. To the 
fullest extent consistent with Presidential prerogatives in the area of 
foreign diplomacy and the negotiation of international agreements, we 
will continue to keep Congress informed of our progress in negotiating 
specific 123 agreements, and address concerns that Congress may raise 
in the course of our 123 agreement negotiations with potential 
partners.
    Finally, you asked us to address the proposed Taiwan 123 Agreement, 
recently submitted for congressional review. Under the Taiwan Relations 
Act of 1979, any programs, transactions or other relations conducted or 
carried out by the President or any agency of the United States 
Government relative to Taiwan are entered into by the American 
Institute in Taiwan, or AIT, and such agreements are concluded with the 
Taipei Economic and Cultural Representative Office in the United 
States, or TECRO, as the representative of the authorities on Taiwan. 
As a consequence, this proposed agreement is between AIT and TECRO. 
Upon entry into force, this agreement would replace a similar 1972 
agreement for peaceful nuclear cooperation.
    The authorities on Taiwan have been longstanding partners of the 
United States in the peaceful uses of nuclear energy, and we have 
cooperated closely in developing their civil nuclear program. All their 
power reactors and their existing research reactor were supplied by 
U.S. companies. All fuel for these reactors is supplied by the United 
States. As the President noted in his message transmitting the AIT-
TECRO 123 agreement to Congress the authorities on Taiwan, over the 
last two decades, have established a reliable record on 
nonproliferation and on commitments to nonproliferation. For example, 
theirs was the first nuclear power program to accept application of the 
measures of the Additional Protocol to IAEA safeguards agreements. 
These commitments were reiterated in the letter from TECRO to AIT 
provided at the time the proposed agreement was signed.
    The AIT-TECRO agreement contains all the provisions required by 
section 123 of the AEA, as amended, but it also contains additional 
provisions. One important provision that the authorities on Taiwan 
reiterated as a legal element in the agreement is their longstanding 
policy not to seek enrichment and reprocessing technologies.
    Also under the terms of the agreement, all nuclear supply to the 
authorities on Taiwan from any source is treated as though it is 
supplied by the United States and is brought under the terms and 
conditions of the agreement. This provision ensures, inter alia, that 
all nuclear activities on Taiwan are subject to the safeguards 
requirements of the existing IAEA safeguards agreement, which normally 
applies only to material, equipment, components, or information 
supplied under the 1972 agreement and any superseding agreement. It has 
been U.S. practice for over 30 years to allow foreign suppliers to use 
the 1972 agreement, under appropriate conditions, and to bring nuclear 
activities on Taiwan under that agreement, in order to maintain full 
scope safeguards on Taiwan. The new AIT-TECRO agreement ensures that 
this continues to be the case, establishing a full scope safeguards 
requirement for the authorities on Taiwan and bringing the full scope 
of nuclear activities on Taiwan under the various consent requirements 
of the new agreement.
    A third important feature is the indefinite term of the new 
agreement, unless the agreement is terminated by either of the parties 
on 1-year's notice. A 30-year term with rolling renewal for 5-year 
terms has been the usual practice in recent U.S. nuclear cooperation 
agreements. In this case, however, the agreement provides more than 
just a vehicle for U.S. supply. According to its terms, the safeguards 
agreement among the authorities on Taiwan, the United States, and the 
IAEA remains in force only as long as the peaceful nuclear cooperation 
agreement between the authorities in the United States and the 
authorities in Taiwan, including any superseding agreement, remains in 
force. The new AIT-TECRO agreement will be such a superseding 
agreement. If the safeguards agreement is terminated the IAEA would 
have the right to apply safeguards to existing nuclear material and to 
produced special fissionable material; however, no new material or 
equipment could be safeguarded. Without a new safeguards agreement, all 
nuclear trade with the authorities on Taiwan that required safeguards 
would cease.
    In short, the AIT-TECRO agreement is unique, one of the strongest 
123 agreements that the United States has ever negotiated, and one that 
will ensure the continued ability of U.S. industry to work with its 
partners on Taiwan.
                               next steps
    Going forward, we will use our 123 agreement negotiations to 
achieve a broad range of nonproliferation commitments with our 
partners. Beyond these commitments, the conclusion of 123 agreements 
with new partners yields even more nonproliferation benefits: the 
ability to influence the partner's nuclear programs in such a way that 
it comports with the highest global standards of safety, security, and 
nonproliferation. When we establish new nuclear partnerships, our 
government and private sector experts build new relationships and open 
up new venues for cooperation across the spectrum of nuclear 
activities. This gives us the opportunity to guide and shape the 
policies and practices of emerging nuclear states, and these 
opportunities are only available to us if we forge new nuclear 
cooperation relationships.
                               conclusion
    With these nonproliferation benefits in mind, we have crafted 
nuclear cooperation policies that are practical and pragmatic. Make no 
mistake, our policy is to pursue 123 agreements that minimize the 
further proliferation of ENR technologies worldwide. The United States 
wants all nations interested in developing civil nuclear power to rely 
on the international market for fuel services rather than seek 
indigenous ENR capabilities. These capabilities are expensive and 
unnecessary, and reliable supply alternatives are available in the 
global fuel cycle market.
    We will continue to advance the highest possible nonproliferation 
standards worldwide, and at the center of these efforts is limiting the 
spread of ENR. Our 123 agreements are important tools in that regard, 
and the principles that we have established for their negotiation will 
maintain U.S. leadership in preventing the spread of nuclear weapons.
    Mr. Chairman and Ranking Member, thank you.

    The Chairman. Well, thank you both. I listened to your 
testimony and it is largely a restatement of what the law is. 
So let us explore things that are beyond the restatement of 
what the law is.
    Secretary Countryman, is the United Arab Emirates a foe or 
an ally?
    Mr. Countryman. The United Arab Emirates is a crucial 
partner of the United States.
    The Chairman. And is Iran a foe or an ally?
    Mr. Countryman. I hesitate to call people foe, but there is 
no question that they are not an ally.
    The Chairman. All right. So we have one country that is an 
ally, another country that clearly is not an ally. We created a 
gold standard with the United Arab Emirates which basically 
makes a pledge to no enrichment in its 123 agreement with us. 
And then we take a country that is not an ally at least, which 
I think is the most charitable definition of Iran's 
relationship with us, and we in the interim agreement basically 
already have given up the essence of what the gold standard is, 
which is a commitment to have some level of enrichment.
    So how does that policy at the end of the day inure to our 
benefit to ask other countries in the world to live up to the 
gold standard? I just do not get it. So I must be missing 
something here.
    Mr. Countryman. Several points, if you will permit, Mr. 
Chairman.
    The Chairman. I know the State Department is great. They 
should be Senators because they can filibuster.
    Mr. Countryman. No, sir. [Laughter.]
    The Chairman. As long as you get to the core essence of my 
question, I am happy to listen to several points.
    Mr. Countryman. Thank you, sir.
    First, we were pleased that the United Arab Emirates 
volunteered to make these clearest possible statement to 
foreswear future attempts to have reprocessing and enrichment. 
That was valuable. It strengthens our ability to present this 
to you for your approval. It was the first such time that a 
country had volunteered to make such a commitment, and of 
course, we welcomed it.
    Secondly, we are not with Iran negotiating a 123 agreement. 
We are negotiating an end to a program that is a security 
threat not only to the United States but to our allies. We are 
not negotiating an agreement in which the United States would 
provide sensitive technology to Iran.
    Third, the current joint program of action under the 
interim agreement does not contain a right to enrich. The right 
to enrich is not explicitly stated in the Nuclear 
Nonproliferation Treaty.
    The Chairman. But we may not have said the right to enrich, 
but clearly there is no question--I think you would be 
insulting the intelligence of the committee to suggest that, in 
fact, there is not some level of enrichment, whether you 
consider it a right or not, that is contemplated in this 
agreement. I mean, the plain reading of it says that. Am I 
mistaken about that?
    Mr. Countryman. No, sir, you are not mistaken.
    The Chairman. Okay. So my core question is, okay, you are 
not negotiating a 123 agreement. I get that. I understand that. 
But the question is what standards do you set that ultimately 
say to UAE who is an ally, well, you know what? Here is your 
neighbor. They went on a path to not only nuclear enrichment, 
but from all accounts militarization of it, weaponization of 
it. And we are going to negotiate with them to stop, hopefully, 
their weaponization, but we will allow an enrichment to take 
place, and you, who live in the same neighborhood, cannot have 
that right which would give you a pathway at some time in the 
future if you decided you needed it for your national 
protection to achieve nuclear weapons.
    I just do not get it. I do not understand how we are going 
to be able to have a lot more gold standards if this is the 
path that we are on. And I understand that we are not 
negotiating with Iran a 123 agreement, but by the same token, I 
think the ability to negotiate future 123 agreements, which my 
view of it is to get the Good Housekeeping Seal of the United 
States on it, but at the same time has not necessarily 
generated the ability for our nuclear industry to ultimately be 
the provider of that sensitive technology and wherewithal.
    So I am trying to understand how it is that we are sending 
from my perspective mixed messages.
    Let me ask Secretary Poneman. You know, I referred to the 
UAE agreement as the gold standard by including a legally 
binding obligation not to engage in enrichment or reprocessing 
activities, period, no matter from where the uranium or spent 
fuel comes from. And the Obama administration in its first term 
actually toughened this commitment from that which the Bush 
administration originally required.
    I have not seen the Vietnam agreement yet. It has not been 
sent to us. But I have seen accounts of it.
    Can you explain in a straightforward way what the standard 
is? Are there different standards for the Middle East versus 
East Asia?
    Mr. Poneman. I can explain, Mr. Chairman, and thank you for 
the question. The standard is the less of these activities that 
is present, the safer we will all be. And Mr. Countryman said 
something very important. It was April 2008 that the UAE 
announced its own decision not to do these things. They took a 
sovereign decision they were comfortable with because they 
viewed that as in their best interest.
    What we are trying to do in Iran is drive them down. They 
are starting with a far more, unfortunately, advanced nuclear 
capability, and we are trying to roll it back. So the thing 
that we are trying to do in every case is to minimize those 
materials, that equipment that can produce nuclear weapons.
    The Chairman. So are there different standards for the 
Middle East versus East Asia?
    Mr. Poneman. There are different tools. The standard is 
always the same. Whatever we can do to minimize the threat that 
weapons will spread, including through these technologies, we 
will do. It may be that in a country you have more of a problem 
of a transit of loose export controls. That might be the higher 
value effort then in our effort in that country. We should 
always do that which is most likely to reduce the threat that 
the spread of weapons----
    The Chairman. So I understand that Vietnam was willing to 
declare its intention, which is not legally binding, to only 
use foreign-supplied fuel for foreign-supplied reactors. That 
is close to the gold standard, but it is not the gold standard. 
So maybe we could call it the silver standard.
    Why was Vietnam not required to make this lesser but still 
important statement of intent into a binding part of its new 
agreement?
    Mr. Countryman. First on the Middle East, if we are 
successful with Iran, we will dramatically reduce the 
temptation or incentive for any other country in the region to 
pursue the self-defeating path that Iran has taken.
    The Chairman. Not if all you do is mothball. We are hearing 
a lot of difference between dismantling their illicit nuclear 
program and permitting maybe some very low level for civilian 
enrichment and medical research versus largely allowing their 
infrastructure to stay in place, mothballing it, yes, having 
safeguards that will give us warning signs in the future if 
they decide to break out, but at that time, there will be no 
sanctions regime left, and the only option for this President a 
couple of years from now or some future President will be 
whether or not you accept a nuclear-armed Iran or you exercise 
a military option. That is really an undesirable set of 
circumstances. So I am not quite sure how we make that 
argument.
    Mr. Countryman. Mr. Chairman, I will not predict the 
outcome of negotiations that are just beginning, but I can 
assure you no one looks at the goal as simply mothballing 
facilities.
    The Chairman. Well, that is good to hear. We will see where 
we head on that.
    Senator Corker.
    Senator Corker. Yes, sir, thank you, and I appreciate your 
questions.
    Mr. Countryman, I guess one of the reasons this hearing is 
taking place is, look, we all talk with folks within the 
Department and get a general sense of how these negotiations 
take place. It is our understanding that when these 
negotiations begin, that the Department does not even 
necessarily begin by talking with other countries about the 
gold standard. It is an ad hoc decision that we will talk to 
this country this way, we will talk to this country that way. 
Why would we not in every single case begin with a strong 
definition of what our gold standard is and cause these 
countries--why is that not the beginning position in every 
single country we deal with? I do not understand that.
    Mr. Countryman. Thank you, Senator.
    The fact that we analyze each country differently does not 
mean that it is an ad hoc approach. We describe to each country 
what we are looking for and specifically how we can assure the 
world, and in particular the U.S. Congress, that this agreement 
is good for the global nonproliferation regime, and that is 
where we begin a discussion with all of our partners.
    Senator Corker. What is it you look at? So we are going to 
go to UAE, as the chairman mentioned--and I know they announced 
unilaterally, but let us use them for an example. And then we 
are going to go to Vietnam, and it is a little different. They 
are going to give a political statement. They are not actually 
going to sign something. I mean, what is it you look at? So you 
look at X country. What is the environment that you look at 
there to decide, well, we are not really going to push for a 
strong agreement with them.
    Mr. Countryman. Sir, there is a wide range of factors that 
we would look at. They would include the regional situation and 
the threat perception of not only that country but of 
neighboring countries. It would include their record on 
nuclear----
    Senator Corker. Those things change, do they not? I mean, 
we began ourselves working with Iran back in 1950, and 
situations change quite a bit. Why would you assume that a 
region is going to stay as it is? And does it not create 
tremendous hypocrisy when we go from one country to another and 
have differing kinds of agreements?
    Mr. Countryman. First, there is no such assumption that 
things never change. That is why our agreements, which include 
requirements for continued U.S. control on the use and 
retransfer of U.S.-provided materials, are backed up by 
vigorous cooperation and enforcement.
    Secondly, it is the fact that U.S. involvement by 
corporations, by the U.S. Government, and through the 
International Atomic Energy Agency are the most effective means 
of ensuring and monitoring any move in a dangerous direction.
    Senator Corker. So actually you brought up a point that-- 
I know Mr. Poneman is here and I know he was just down at Oak 
Ridge in Tennessee, and Tennessee is a great partner, if you 
will, in nuclear efforts. And I am really, really proud of that 
and I am a strong supporter of nuclear energy.
    On the other hand, in fairness--I say this with warmth, Mr. 
Poneman. I appreciate the role that you play at the Department 
of Energy. But I think there are concerns that all of our 
entities become captured by the people that they regulate and 
that your involvement actually in these negotiations is 
sometimes what drives us to have these happenstance, ad hoc 
agreements because potentially U.S. commercial interests trump 
the nuclear nonproliferation piece. So I would love for you to 
respond to that if you would.
    Mr. Poneman. Thank you, Senator. I will not be outflanked 
in my opposition to the spread of nuclear weapons. Period. 
There is no commercial benefit that is worth a proliferation 
risk. Period. I think it is an unfortunate thing that that 
impression may have been created. Of course, the Congress split 
the Atomic Energy Commission in 1974 into ERDA and NRC to avoid 
exactly the conflict that you said.
    I think the important thing is this, Senator. What we want 
is the 123 agreements to be in place. That is the prize. That 
is when we get the consent rights. That is when we have actual 
legal controls to stop retransfers, to stop subsequent use in 
reprocessing. So we want those agreements to be there. If we 
make those agreements hard for other governments to accept, 
nonproliferation loses first, and we have not even begun any 
kind of commercial discussion. So I think that is what we have 
to keep in mind.
    Senator Corker. Well, what is it that drives countries? You 
know, we have got all kinds of agreements relative to dealing 
with spent fuel. What is that drives countries? I know Jordan 
may talk with us. Our great friend, Jordan. I know they have 
some uranium deposits in their own country and they may want to 
talk with us about enrichment. And yet, we know that it is not 
financially something that is even productive to them.
    So you act as if entering into a 123 agreement that does 
not have the gold standard somehow--or let me put it having the 
gold standard is somehow something that disables us from 
entering into these agreements. And yet, what is it that drives 
these countries to want to enrich or to want to reprocess when 
we have other ways of dealing with that?
    Mr. Poneman. My experience, Senator--it is a great 
question. I do not think there is a lot of demand for this 
activity. It is very, very expensive. If you are just getting a 
couple of reactors, it does not make much sense. But I can tell 
you, sir, that I have had people say to me, because other 
governments have interagency processes too, why did you say 
these things. I did not have anybody in my country wanting to 
enrich, and now I do.
    What is a problem, in my judgment, is if we turn something 
into a test of what they will view as their national 
sovereignty for a purely theoretical proposition instead of 
negotiating a practical agreement which, once it enters into 
effect, will actually constrain them.
    Senator Corker. Could we shorten the duration of these 
agreements? I mean, if they are worried about forever, if you 
will, not being able to enrich or reprocess, would it make 
sense to look at the duration of these agreements and instead 
of entering into a 30-year agreement, enter into a 10-year 
agreement?
    Mr. Poneman. That is a great question, Senator. I would say 
two things.
    Number one, the 123 agreements themselves I think generally 
serve our purpose the longer they are in effect because we get 
all those great, tough nonproliferation controls--the best in 
the world. However, when we have done things, as Professor 
Moniz and I suggested in this article, to ask people to go 
further and to voluntarily give up some of these rights, then I 
think the ability for them to say, hey, I am not giving it up 
forever, we can revisit this in 10 years or whatever, I think 
that becomes a valuable negotiating tool.
    Senator Corker. One final question. I know that other 
panelists here have questions. Look, Congress plays zero role 
in this really. The way this is now set up, it is almost 
impossible for us to have an issue when you do not, in essence, 
negotiate a gold standard. Does it not make sense for us to 
have the ability as a Congress that if you do not enter into an 
agreement that is, in fact, a pure gold standard agreement, for 
us to vote up or down on it versus going through this 
resolution of disapproval process, which in essence gives us no 
real say because obviously the administration is negotiating 
these--they are going to veto. So would that not make sense and 
give you actually greater strength as you try to negotiate a 
gold standard with other countries?
    Mr. Poneman. So, first, Senator--and I was proud of this. 
The congressional role is actually dispositive. You all wrote 
the Atomic Energy Act. I worked on the Nonproliferation Act. 
There was robust oversight. All those great controls that we 
are now getting the benefit--those were all congressional 
creatures. And we come up every time we have a 123 agreement 
with a classified nonproliferation assessment statement with 
all the agencies. So we believe Congress has played a very 
strong----
    Senator Corker. Would it be inappropriate for us to vote up 
or down if you violate the gold standard?
    Mr. Poneman. First of all, with all due respect, Senator, I 
think the whole phrase, ``the gold standard,'' has reduced to a 
bumper sticker something in a very unhelpful way because we are 
now focusing on one tool out of a toolbox instead of the goal. 
The goal is stopping weapons, and the goal to get to that is 
stopping the technology. So if that is to be the standard, 
obviously we welcome, obviously, the oversight of the Congress, 
but in terms of doing more things that could make the United 
States appear in the eyes of other countries less reliable and 
less likely to sustain the commitments that we make to them 
through the course of these negotiations, I think that would 
create a problem in getting people to accept the 123 
restrictions that we already have in legislation.
    Mr. Countryman. Senator, could I make just one brief 
comment? And that is, Senator, the Congress is present even 
when you do not know that you are. At the beginning of our 
internal deliberations in approaching a 123 at the beginning of 
our bilateral consultations with a new partner, we go through 
and emphasize the strong interest of the Congress and the 
strong support of the Congress for nonproliferation goals. It 
is a huge influence.
    Senator Corker. Yes, I think we might want to express it 
ourselves, but thank you.
    The Chairman. Senator Cardin.
    Senator Cardin. Thank you, Mr. Chairman.
    Let me thank both of you for your long service to our 
country. We all share the nonproliferation objectives, and the 
123 agreements are certainly a very valuable part of that. So I 
agree with you. It is in the U.S. interest to negotiate these 
agreements.
    But I just really want to turn this around a little bit. It 
is in the interests of the countries we are negotiating with 
also to have a 123 agreement. This is not one-sided. They are 
getting access to the best technology in the world, the most 
reliable partner in the world. It is in their interest to have 
the United States as a partner in dealing with their 
nonmilitary use of nuclear material for purposes of energy or 
for purposes of medical.
    And my question really deals with our expectations in 
countries that do not share our values, whether this is used in 
the toolbox to advance those values. Vietnam is a country in 
transition. I think we all would acknowledge that. They have 
made incredible progress in a relatively short period of time, 
but they have a long way to go on respecting internationally 
recognized human rights.
    Can you share with me what discussions take place when you 
are determining countries to get involved with and how you use 
this tool in our toolbox, the 123 agreements, to advance 
universal values in countries that are deficient that we are 
engaged with?
    Mr. Countryman. Thank you, Senator.
    I can only speak generally about the reasons that have 
driven the United States and Vietnam to seek a strategic 
partnership with each other. These include a mutual interest in 
the security of Southeast Asia. It includes the great economic 
potential that the two countries offer each other.
    Senator Cardin. I understand. I am really interested in the 
human rights and good governance issues. I understand all that. 
And by analogy, we hear the same thing on trade agreements. You 
know, it is in our interest. We are in the country. We are 
enhancing security. I want to know what you are doing to 
enhance the change in Vietnam and other countries on basic 
internationally recognized human rights protections.
    Mr. Countryman. This is a central issue of the strategic 
dialogue that we have with Vietnam. It is constantly in the 
context that we have at senior levels. It is the important work 
of our Ambassador in Hanoi on a daily basis. We see some 
progress, but we also recognize that our engagement with 
Vietnam is a primary means for having seen some of that 
progress. We do not, however, link it directly to the 
negotiation of a 123 agreement. We have another channel for 
doing that.
    Senator Cardin. What is the other channel?
    Mr. Countryman. It is the strategic partnership dialogue 
which includes a human rights dialogue.
    Senator Cardin. Which is a consultation type of a process.
    Mr. Countryman. I think it is stronger than consultations.
    Senator Cardin. In what respect?
    Mr. Countryman. Well, sir, I am sorry but I will give you a 
detailed answer from our East Asia Bureau. I do not do this on 
a daily basis, and I apologize for that.
    Senator Cardin. Well, you also indicate that this is part 
of your discussions. Can you share with me in regards to 
Vietnam how this has come up in the 123 agreement? I understand 
from your point of view it is not tied to the agreement, but 
can you share with us how the discussions have taken place in 
regards to the 123 agreement with Vietnam--good governance and 
human rights?
    Mr. Countryman. Human rights has not been a topic in the 
123 agreement negotiations. It was among the topics that were 
considered, I believe, at the time that we decided to respond 
to Vietnam's request to negotiate such an agreement.
    Senator Cardin. I do not understand that. Was it or was it 
not talked about in regards to the 123 agreement?
    Mr. Countryman. Within the United States, yes. With 
Vietnam, I do not believe so but I would have to go back and 
look at the record of negotiation.
    Senator Cardin. So it is not on the table with Vietnam. It 
does not come up in any discussions. There are no expectations 
from our involvement with Vietnam in this agreement that we do 
not care what type of government they have as it relates to 
respect for their own people. That is the message we are 
sending in regards to these negotiations?
    Mr. Countryman. I do not agree that that is the message we 
are sending.
    Senator Cardin. And how are we sending a different message?
    Mr. Countryman. Because of our daily work with the 
Vietnamese Government and our pressing them through a number of 
other channels.
    Senator Cardin. I am talking about in regards to the 123 
agreement.
    Mr. Countryman. In regards to the 123 agreement, your first 
statement was correct. It is not linked to human rights issues.
    Senator Cardin. I did not asked if it was linked. I asked 
is it part of the conversation.
    Mr. Countryman. Briefly, no.
    Senator Cardin. I find that very disappointing. I think, as 
I pointed out before, there is mutual benefit. Vietnam gets 
benefits out of having U.S. technology. Yes, we get benefits, 
too. And I find it somewhat surprising that we work in tunnel 
vision and we do not try to coordinate a policy that can help 
advance the respect for basic international human rights. There 
are a lot of countries in the world we can work with, but why 
are we interested in making this type of information available 
to a country that abuses the rights of its own citizens? What 
type of protections are built in? I understand that we have 
military protections, but we do not have other protections 
built in because we are not talking about how this is used. So 
I find that somewhat surprising. I knew it was not tied 
together, but I thought you would use this opportunity to 
advance a central part of our strategic plan, as I thought it 
was, in dealing with Vietnam.
    Thank you, Mr. Chairman.
    Mr. Poneman. Senator, if I may. I am not part of the 
Vietnam negotiations. But as to the broader issue, there has 
been a longstanding bipartisan tradition that nuclear weapons 
are different, and when we are doing things, including in the 
days of the Soviet Union when it had horrible repression----
    Senator Cardin. There was a longstanding view that trade 
was different also. There was a longstanding view that 
bilateral discussions would leave out human rights because it 
was just not important in dealing with our relationships with 
other countries. As long as we take that position, human rights 
will always be a secondary matter. The basic protection of 
human rights should always be at the table in U.S. 
negotiations.
    The Chairman. Senator Risch.
    Senator Risch. Thank you, Mr. Chairman. I appreciate that 
and thank you for holding this hearing.
    Gentlemen, I want to come at this from a little different 
tack. As you know, Idaho is home to the Idaho National 
Laboratory, the lead nuclear energy laboratory in America. As 
you also know, they play a role in the 123 agreements in not 
only providing the background and help for negotiating but also 
in the execution of the agreements.
    The Idaho National Laboratory, as you know, has the 
experience over many, many years. It has got the technical 
expertise and the scientific research that are so crucial in 
successfully running nuclear facilities and in negotiating 
these agreements. And the lab has been a valuable and a proven 
asset when working with foreign countries in negotiating these 
agreements.
    So we are open for business. We are ready to help. We got 
great people working there, and we want to do all we can to 
help you.
    Having said that, some of the concerns that were expressed 
here I think are legitimate concerns, and they are going to 
have to be dealt with. Once you get past that, we are ready to 
help.
    I think that we are in the very insipient stages of other 
countries turning to the more developed countries to produce 
nuclear energy. As this century goes forward and even I think 
into the next century, countries are going to be looking for 
places like the Idaho National Laboratory and the United States 
of America to help them get their nuclear programs up and 
running. If we do not do it, there are other players in this 
sandbox, as we know, and they are very aggressive and they are 
out there competing against us. And it is in our national 
security interest, obviously, to have these agreements because 
it allows us to have a negotiated agreement as to how the 
materials will be handled, and also it gets us into their 
business that could be very dangerous if we were not in the 
business.
    So I admire what you do. I appreciate what you do, and just 
know that Idaho is ready to help.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Before I turn to Senator Shaheen, I want Senator Cardin to 
know that when the senior staff of the committee was in 
Vietnam, they told the Vice Foreign Minister that it would be 
my intention, when we consider a 123 agreement on Vietnam, to 
move a parallel resolution on human rights as part of our 
comprehensive partnership understanding. And so we would look 
forward to working with you in that regard.
    Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman.
    Mr. Poneman, in a 2012 letter, you said that you thought it 
best to deal with enrichment in each 123 agreement based on its 
merits, taking into account a partner's domestic politics and 
laws, proliferation concerns, and negotiability. Is that still 
the rough list of criteria that the administration applies? And 
can you elaborate on exactly what we are looking for in terms 
of politics and laws, negotiability? What exactly are you 
talking about?
    Mr. Poneman. Thank you, Senator.
    What we were trying to express is that, again, the zenith 
of what we are trying to do is to stop weapons. To stop 
weapons, we want as little possible fissile material that we 
can obtain. That means as little reprocessing and enrichment.
    Each country has a different set of factors that they take 
into account. Vietnam has nothing on the boards, but they had a 
pile of HEU. So we got the highly enriched uranium back. That 
was important. I would not want to waste negotiating leverage 
on getting something that they were not going for and then 
leave the highly enriched uranium sitting unprotected. So that 
is what I mean.
    It is very, very consistent. We want to get that stuff out 
of there. We want the least technology and the fewest weapons. 
Period.
    And because 185 countries all have--for the UAE, they did 
not care. What they did care about was setting a good example. 
That is what they cared a lot about, and they did a great job. 
And, of course, we embraced that. So that is what I mean. Every 
case is different, but we are always animated by that same top 
objective.
    Senator Shaheen. Well, to follow on Senator Risch's line of 
comment, as I understand it, most other nuclear suppliers use 
less restrictive export guidelines to govern their nuclear 
cooperation. Is that correct?
    Mr. Poneman. I would say we have the best in the world.
    Senator Shaheen. And so it seems like one concern that is 
out there about raising our own standards is that it would 
drive potential partners toward less demanding countries. Is 
that accurate?
    Mr. Poneman. That is very much our concern.
    Senator Shaheen. So what other steps, short of mandating a 
gold standard-like agreement, can we use to encourage countries 
not to seek enrichment capabilities? I mean, what else is out 
there that we can be doing that we should be doing?
    Mr. Poneman. Senator, we have been working very hard under 
the Prague framework that the President put out in April 2009 
where he called for a new framework of civil nuclear 
cooperation to assure countries that if they have a civil 
nuclear program, they do not need to enrich. It is multibillion 
dollars they do not need to spend. It makes no economic sense 
in most cases. And so if we can say to them, look, we have got 
an IAEA fuel bank, they will guarantee you fuel supplies, we 
can enter into long-term cooperation with them in which we can 
provide certain kinds of assurances, which we have done in the 
past. We can enter into various forms of infrastructure 
development together and even, to take Senator Risch's point, 
enter into peaceful cooperation in nonproliferative nuclear 
technology in places like the Idaho National Laboratory. There 
is a whole suite of tools that we can apply, and I think we 
have to be very muscular in putting those on the table.
    Senator Shaheen. Well, again, in your prepared remarks, you 
argued that even well-intentioned changes to the law would risk 
making the perfect the enemy of the good. But do you not think 
there are ways that we can tweak it or address the negotiations 
that would put the United States in a better position as we are 
trying to encourage other countries to not seek nuclear 
development?
    Mr. Poneman. Senator, I think we are always open, including 
working with the distinguished members of this committee, to 
think of constantly ways we can enhance what we have that we 
can put forward. And I just gave just a few examples, but I am 
sure there are many more. We would be very happy to work with 
you on that.
    Senator Shaheen. To switch to the Taiwan agreement, are 
there concerns about Taiwan's ability to enforce necessary 
export controls?
    Mr. Poneman. I will turn to my State Department colleague 
for that.
    Mr. Countryman. Thank you, Senator.
    Over the last two decades, the Taiwan authorities have 
established a very reliable record on nonproliferation and on 
commitments to nonproliferation. In a letter that accompanies 
this 123 agreement, they have assured us that they will 
cooperate only with responsible states in executing Taiwan's 
civil nuclear program, and they reaffirmed their commitment to 
abide by the NPT and by all United Nations Security Council 
resolutions addressing nuclear activities. They stated their 
intent to engage in cooperation with third parties in the 
peaceful uses of nuclear energy, consistent with the guidelines 
of the Nuclear Suppliers Group.
    In the nuclear proliferation assessment statement that we 
provided, together with the text of the 123, there is an 
assessment with a comprehensive analysis of the export control 
system of Taiwan with respect to nuclear-related matters. And 
this is an area in which we work very closely with Taiwan 
authorities, and I would be very happy to discuss our 
cooperation on these kinds of issues in a closed session.
    Senator Shaheen. Well, just to follow up to try and elicit 
whatever you can say about the situation, as Taiwan looks to 
more normalize their relationships with mainland China, how 
concerned are we about the exchange of technology and any 
opportunities that might exist from the 123 agreement to share 
information?
    Mr. Countryman. Again, in this setting, what I would say is 
I would not characterize it as a concern, but it is an area 
where we cooperate with Taiwan and have a good, practical, and 
effective relationship.
    Senator Shaheen. Thank you.
    Thank you, Mr. Chairman. Perhaps we should have a 
classified discussion.
    The Chairman. Thank you. We will certainly consider that.
    Senator Rubio has deferred to Senator Johnson.
    Senator Johnson. Thank you, Mr. Chairman.
    I am new to this issue, so I just want to step back and 
understand a little bit more of the history, understand a 
little bit more of the broad range and spectrum of what 
different countries are doing and what the capabilities are, 
where they are getting their supplies, and how it has all been 
handled. So I will start with you, Mr. Poneman.
    The chairman was talking about we have gone from the 
premier supplier at the end of the cold war till this point in 
time. Can you describe that transition for me?
    Mr. Poneman. Thank you, Senator.
    It has been a painful one to watch. In 1969, the United 
States had virtually 100 percent of the non-Communist fuel 
market in the world, and every fuel rod with a U.S. flag brings 
all those controls. We are now at 10 percent.
    Senator Johnson. And who has filled that gap?
    Mr. Poneman. Well, you have URENCO, which is providing fuel 
from Europe. You have countries that are developing their own 
capabilities. The French obviously have had their sales. And 
when it comes to reactors, now----
    Senator Johnson. Let us stick on fuels. So who does not 
maintain a good standard when they supply that fuel?
    Mr. Poneman. Well, in terms of a good standard versus a bad 
standard, I do not think anyone has the kind of controls under 
the Nonproliferation Act that we have in the 123. We are the 
only ones who have that kind of extended control over all 
aspects. And one fuel rod goes into the reactor and then the 
whole reactor is safeguarded.
    Senator Johnson. Is it more expensive for people to comply 
with 123 versus getting material from other countries?
    Mr. Poneman. Well, of course, the 123 is not a commercial 
arrangement.
    Senator Johnson. I understand.
    Mr. Poneman. But I think what is fair to say is that other 
competitors in the global marketplace have complete backing, 
including state loans and so forth, to sell their fuel. So when 
the Russians are out selling fuel, for example--and this is not 
confined to them--they can bring to bear--and people are 
looking for credit support. And so there are ways that they can 
make a more attractive commercial arrangement than is often 
available to a U.S. company.
    Senator Johnson. How many countries, just in general, 
utilize nuclear power? We have 23 countries with the 123 
agreement. How many countries actually engage in nuclear 
activity?
    Mr. Poneman. About 25 or 30. We can get you the exact 
number. There are about 365 gigawatts installed globally. There 
are 70 reactors now under construction in a dozen countries, 
but to give you a precise answer of how many there are, we will 
come back to you.
    Senator Johnson. Other than the nuclear powers, how many 
countries that are engaged in nuclear power actually enrich 
uranium themselves?
    Mr. Poneman. China and Russia, the URENCO countries. The 
consortium is the Netherlands, Germany, and the U.K. Japan has 
a modest enrichment capacity. France and the United States, of 
course.
    Senator Johnson. You said enriching uranium is very, very 
expensive. Can you put somewhat of a ball park dollar figure on 
that?
    Mr. Poneman. Sure. It costs billions of dollars. Rough 
order of magnitude, you can consider $4 billion or it could be 
more. The MIT study of 2003 said from a commercial standpoint, 
it does not make sense for a country to invest in its own 
enrichment unless it has roughly on the order of 25,000 
megawatts of installed power.
    Senator Johnson. So how many countries would have that 
level of installed power?
    Mr. Poneman. The only country outside of those that already 
have commercial scale enrichment that is in that ball pack 
would be South Korea.
    Senator Johnson. So it does not really make sense, unless 
you have a very large need for nuclear power, to have any 
enrichment whatsoever.
    Mr. Poneman. It makes much more sense to rely on the 
commercial marketplace.
    Senator Johnson. So why would Iran try and enrich uranium?
    Mr. Poneman. Senator, it is a very good point. And when we 
have the kind of proposal that Professor Moniz has before the 
Secretary and I put out, one of the things it does is it 
provides a safe harbor for all those other countries that 
actually want energy, and it puts a sharper spotlight on the 
countries like Iran.
    Senator Johnson. Mr. Countryman, answer the question. Why 
would Iran enrich uranium? There is really only one reason. Is 
there not?
    Mr. Countryman. There is no rational economic reason.
    Senator Johnson. There is only one reason. Is there not?
    Mr. Countryman. Yes, sir.
    Senator Johnson. And we should start acknowledging that as 
this Nation. Should we not?
    Mr. Countryman. Sure.
    Senator Johnson. I have no further questions.
    The Chairman. Thank you.
    Senator Kaine.
    Senator Kaine. Thank you.
    Just some basics, and I will start kind of like Senator 
Johnson. This is the first hearing I have been to about these. 
So I want to make sure I understand the process. Especially the 
concern about whether our policies are ad hoc or not worry me. 
So I kind of want to understand what part of our policies are 
ad hoc and what are not.
    The agreements we are talking about are all negotiated 
pursuant to a congressional statute, the U.S. Atomic Energy 
Act, and there are nine nonproliferation criteria in that 
statute that were all passed by Congress. Correct? And when a 
deal is negotiated, the administration has to come to Congress 
and specify how the deal meets each of the nine criteria. 
Correct?
    Mr. Countryman. Correct.
    Senator Kaine. One of the criteria deals with E&R activity, 
but it is E&R activity based on material from the United 
States, and the provision is that a country cannot engage in 
E&R capacity with material from the United States absent a 
separately negotiated agreement. Correct?
    Mr. Countryman. Correct.
    Senator Kaine. When the agreements come to the United 
States to Congress, there is a briefing of Congress and 
Congress can act by resolution of disapproval to disapprove an 
agreement. Correct?
    Mr. Countryman. A number of briefings all through the 
process, yes.
    Senator Kaine. And has Congress disapproved any of the 23 
current agreements when they have been presented to Congress?
    Mr. Countryman. No.
    Senator Kaine. Has any House of Congress disapproved? Not a 
total disapproval, but has any House of Congress disapproved of 
one of the 23 earlier agreements?
    Mr. Countryman. No, sir.
    Senator Kaine. The first of the 23 agreements that had a 
gold standard provision was the UAE agreement. Correct?
    Mr. Countryman. Yes.
    Senator Kaine. So the earlier agreements did not have a 
gold standard provision with respect to E&R activity that is 
domestic as opposed to the use of U.S. material. Correct?
    Mr. Countryman. Yes, and yet they have succeeded in 
preventing or in discouraging those countries from pursuing 
E&R.
    Senator Kaine. So countries that do not have the gold 
standard--many of them do not pursue E&R but some do as your 
answer to Senator Johnson indicated.
    Mr. Countryman. For the very strong economic reasons that 
the Deputy Secretary mentioned, it makes no sense for most 
countries to go down the E&R path.
    Senator Kaine. With respect to the issue about ad hoc, a 
President can recommend or the administration can recommend to 
Congress an agreement that does not meet all nine criteria. 
There is a waiver provision that allows such a recommendation, 
but none of the current agreements were recommended to Congress 
short of meeting all nine criteria. Correct?
    Mr. Countryman. My colleague reminds me that the exception 
is India, which required special legislation of the Congress.
    Senator Kaine. If a President were to recommend to Congress 
an agreement that did not meet all nine criteria, there is a 
special approval. It is not a resolution of disapproval in that 
instance. It is a resolution of approval.
    Mr. Countryman. It requires affirmative action by the 
Congress.
    Senator Kaine. Are the agreements fixed in time with 
periodic renegotiation required, or are they open-ended, once 
negotiated, there forever?
    Mr. Countryman. We have both.
    Senator Kaine. Can you just kind of generally--are half of 
them to be renegotiated periodically and half open-ended? Or 
describe that for me.
    Mr. Countryman. We could give you a list of the ones, but I 
think in general we are now seeking, and our partners are 
seeking, longer term or open-ended. I would emphasize that this 
does not mean that the U.S. role or the congressional role is 
ended.
    Senator Kaine. One of the ones that you are facing right 
now that is not an open-ended one is the status of the South 
Korea 123 agreement.
    Mr. Countryman. Yes, sir.
    Senator Kaine. And there is a 2014 renegotiation process 
underway with South Korea.
    Mr. Countryman. We are deep into the renegotiation process. 
I was in Seoul earlier this month for that purpose. And it is a 
good opportunity for me to thank the members of this committee 
for the action to extend the validity of the current agreement 
for 2 years so that we have time to complete a very complex 
agreement with the ROK.
    Senator Kaine. So would it be fair to say that with respect 
to the claim that the approach to these agreements is ad hoc, 
that there are nine criteria that are specified by Congress 
that have to be met with respect to all of these agreements? 
And so to that extent, the framework that Congress has set up--
and Congress has the ability to disapprove an agreement, which 
it has never done. Those are specified by Congress. They are 
not ad hoc.
    But this issue about E&R activity that a country may pursue 
domestically--that is an ad hoc criteria in the sense that you 
were describing, that on a case-by-case basis, you negotiate. 
The UAE provision has it and none of the others do.
    Mr. Countryman. I think we would make a decision as to 
whether and how strongly and in what form to seek such a 
commitment specific to the country with whom we are negotiating 
and the position that they present. But it will always be with 
the purpose of meeting that very high standard of preventing 
proliferation of such technology.
    Senator Kaine. Switching gears, to follow up on another 
line that Senator Johnson opened up that I think is 
interesting, you indicated that at an earlier period in history 
of the civilian nuclear capacity material sold around the 
world, in the non-Communist bloc we were essentially almost the 
sole supplier, but now we are down to about 10 percent of the 
supply.
    Would it be a good thing for the safety of the world, in 
your view, if the United States share of sales of our activity 
in this area was increasing rather than shrinking?
    Mr. Countryman. Let me say yes, but that is not the goal 
with which we pursue 123.
    Senator Kaine. Right. The 123 is about weapons. I 
understand.
    Mr. Poneman. Yes, and I would only reinforce, Senator, to 
say that from a security and a safety standpoint, we believe 
the U.S. fuel is as good as any in the world.
    And on your earlier question, I am reminded that after 
Tiananmen Square, Congress did pass legislation to suspend 
implementation of that 123 agreement.
    Senator Kaine. I see. Thank you for that correction.
    And then I will ask this of the second panel as well, just 
as my last question. If it would be in the better interests of 
nuclear safety for the United States to have a larger market 
share--and recognizing that is not the purpose of the 123 
agreements--what are the current opportunities that we have, 
either technology opportunities or relationships with 
particular countries that are interested in safe nuclear power? 
What are the current opportunities that the United States has 
to maybe regain a little bit of our market share to the good of 
the safety of these programs worldwide?
    Mr. Poneman. Senator, I have been around the world a lot 
since March 11, 2011, the Fukishima accident. And I can tell 
you at the IAEA, at the International Nuclear Framework for 
Nuclear Cooperation, there is much more interest in U.S. fuel 
because it is safe and reactor components as well. So because 
of our importance that we attach to nuclear security and 
nuclear safety, there is an opportunity within this horrible 
situation that the world has endured to emphasize that 
particular American advantage.
    Senator Kaine. And that kind of underlies a point that 
Senator Cardin was making, that these are not one-way deals. 
The countries that are engaged in these 123 negotiations with 
us--they really have something to gain from these negotiations, 
and that can affect our sense of leverage in the negotiations.
    Mr. Poneman. It certainly can, Senator. And again, since 
for us the prize is to get those legal constraints that you 
were talking about in place, that is why we want to get those 
American agreements signed up to with countries that are 
actually going to build these units.
    Senator Kaine. Thank you. No further question, Mr. Chair.
    The Chairman. Senator Rubio.
    Senator Rubio. Thank you, Mr. Chairman.
    I wanted to reexamine this issue again. It is new for a lot 
of us that have been here just a couple of years, as Senator 
Johnson signaled a moment ago.
    The competing equities--of course, you have the existing or 
the previous policy, the gold standard policy, largely driven 
toward nonproliferation, and then there is this notion that 
that now stands in the way of being able to execute some of 
these deals. And we want to have these sorts of transactions 
with these companies because it gives us more influence in 
terms of the direction that they are taking their energy 
programs.
    So here is my question about this new flexible approach, 
and perhaps it has been raised already by some members of the 
committee. How is this not a house of cards? How does this not 
begin to now implode? For example, if you are the Jordanians 
and you are seeing the current negotiations with Iran or even 
the Saudis for that matter, how would we ever go to them and 
say you cannot enrich and you cannot reprocess if in fact one 
of their neighbors is doing so? The same with the South Koreans 
who would look to Japan or perhaps other parts of the world and 
are insisting upon the same. How is this not a house of cards? 
In essence, how is it that at the end of the day we actually 
are going to be able to pick and choose in this so-called 
flexibility who we negotiate the ability to enrich and who does 
not?
    Mr. Poneman. Senator, I think it is important to get the 
premise right. The United States policy has not changed. We 
have always sought to minimize enrichment and reprocessing. It 
happened, as far as I know, once in history that a country on 
its own before the 123 agreement volunteered through their own 
white paper and so forth not to do this. So our policy has not 
changed, and there is no new flexibility.
    And I have been personally doing this, trying to talk the 
North Koreans out of it. I went to Vienna and got the Iranians 
to agree to ship 1,200 kilograms of LEU out of Natanz. So we 
are absolutely consistent in trying to minimize that wherever 
we go. We start from different starting points. If there is a 
country that, unfortunately, has gotten as far down the road as 
Iran has, we have got to pull them back from being out there 
into a place more compliant with international norms. So I do 
not see any inconsistency.
    Senator Rubio. Let me ask you that question. What has been 
the impact since this recent negotiation with Iran has been 
announced? What has been the impact that it has had in our 
conversations with other countries? What impact has that had? 
How do they view it now in light of what appears to be the 
acquiescence to some sort of enrichment capability on the part 
of Iran?
    Mr. Poneman. Allow me to make a brief comment and then the 
State Department may wish to add to this.
    We have had a continuing and robust conversation with those 
countries, including those countries in the region, that are 
deeply, deeply concerned. And they have been deeply concerned 
about the situation in Iran. That is why when I went out to 
talk them into making sure their oil exports kept up so the 
sanctions that you all passed could be effective, they were 
strong partners with us. They understand now where we are in 
terms of the negotiation with Iran and trying to bring them 
back to a much less nuclear----
    Senator Rubio. How can we, in the future or even now in the 
past, with some of our existing agreements ask a country, 
particularly a neighboring country, not to enrich if at the end 
of these negotiations, in fact, Iran retains any capability to 
do so? How do we go to an ally and say you guys are not going 
to get to do what a stated enemy of the United States--we have 
agreed to allow them to do or to acknowledge that they have the 
capability to do?
    Mr. Poneman. Senator, the other problem is countries make 
decisions internally. They do actually not need the United 
States permission to do these activities. So that is why 
getting to the whole discussion as if this were a right for the 
United States to confer upon them gets us into a dangerous 
place.
    Mr. Countryman. Let me add. I would say that Iran has an 
enrichment capability whether the United States acknowledges it 
or not. If we succeed in the Iran negotiations----
    Senator Rubio. But they did not get it from us.
    Mr. Countryman. Correct, and that is a crucial difference 
between the Iran case and a 123 negotiation. If we get to the 
point of assuring the world and the region that Iran no longer 
has the capability to pursue nuclear weapons, the temptation 
for any other regional state to go down the economically stupid 
path of pursuing enrichment and reprocessing--that will be 
greatly----
    Senator Rubio. But the enrichment or reprocessing 
capability--the infrastructure of reprocessing and the 
infrastructure behind enrichment--once it is in place, it is 
basically just a policy decision at that point about whether 
you want to continue to move forward toward at least a 
threshold weapons capability. So the retention of any 
enrichment process or any reprocessing capability does, in 
fact, put a country at the threshold of making such a move in 
pretty quick order. No?
    Mr. Countryman. That is an argument about Iran, on which I 
am not leading the negotiations, but I believe we will have 
other testimony next week on that point.
    In terms of our partners, those with whom we work, we do 
123 agreements with strong assurances on enrichment and 
reprocessing and with strong assurances on how they can do it 
in an economically rational way specifically so that that 
infrastructure is not developed.
    Senator Rubio. But again, my point is that once that 
infrastructure is in place in another country--let us say the 
country now has access to--because you talk about these 
assurances. Once a country has built the infrastructure that 
allows them to reprocess or enrich, if in the future the future 
leadership of that country decides that they want to turn that 
capability into a weapons capability--the design of a weapon is 
not nearly as complicated as the creation of that 
infrastructure. Is that not the singular, largest hurdle that a 
country has to overcome, is getting the fuel?
    Mr. Poneman. Typically, Senator, that is exactly right. 
That is exactly why we are doing everything we can to minimize 
the countries that have that material. There is not a lot of 
demand for these activities. We do not want to stimulate the 
demand by turning it into some kind of a test of national will. 
We are finding that if you go to countries and say we can 
satisfy your fuel requirements and you will not have to spend 
$4 billion or $6 billion, $8 billion, most countries other than 
Iran will welcome that opportunity. And I think we should 
embrace that. It works in our favor.
    Senator Rubio. But there are countries that do want to have 
that capability and that will point to the fact that other 
countries have that capability, especially if that number has 
now grown, to say, well, how come you are cooperative or seem 
to acquiesce to this country having that capability but us not 
having it.
    Mr. Poneman. You are absolutely correct. Other countries 
will make that argument. The agreement with Iran will not 
change our approach to seeking the highest nonproliferation 
standards in 123 agreements.
    Senator Rubio. And my argument--it may not change our 
approach, but it might change theirs.
    Mr. Poneman. Yes, sir. That is correct. And that is why the 
United States needs to stand firm on the consistent approach 
that we have had to seek to limit E&R technology around the 
world. That is what we do today. It is what we will continue to 
do if and when we succeed with Iran.
    Senator Rubio. Would we not be stronger in that insistence 
if our stated and open position in any negotiations was Iran 
does not have a right to enrich?
    Mr. Poneman. We will be stronger when we succeed in getting 
an agreement with Iran that gives us all confidence they cannot 
pursue nuclear weapons. That is the goal.
    The Chairman. Thank you, Senator Rubio.
    I am, unfortunately, going to have to go to the floor over 
the flood insurance legislation. So Senator Shaheen has 
graciously agreed to chair the rest of the hearing.
    To our second panel, I want you to know my staff is here 
and we are going to be listening intently to--we have your 
remarks, but to some of the answers to the questions.
    There are three questions that I want to pose for the 
record that I would like you to answer at length for the 
record.
    One is--we got deviated because we started talking about 
Iran. I put a question to you, Secretary Countryman, about why 
Vietnam was not made to include their lesser but nonetheless 
important statement into a binding part of the agreement. I 
would like to have an answer to that.
    Secondly, we may be the best in the world, which I believe 
we are, in this technology, but second best and far cheaper 
entities often win the bids. So has the administration 
considered filing a complaint with the World Trade Organization 
for unfair trading practice against these subsidized foreign 
competitors?
    And thirdly, when China joined the Nuclear Supplier Group, 
a move the United States had to support since the group does so 
by consensus, it agreed not to provide nuclear reactors to 
countries that do not have comprehensive IAEA safeguards on all 
their nuclear activities. Yet, China continues to build new 
reactors in Pakistan, which does not have such comprehensive 
safeguards. This arguably weakens in my view the Nuclear 
Suppliers Group. What price should China pay for its 
noncompliance? And should it be an issue when a new China 
cooperation agreement comes before the Congress?
    I would like very significant responses to those questions.
    Senator Markey is next. And, Senator Shaheen, I appreciate 
you taking the chair.
    Senator Markey. Thank you, Mr. Chairman, very much.
    In the 1970's, the United States was still in a bitter war 
with Vietnam while at the same time the Ford and Carter 
administrations were planning to sell six nuclear power plants 
to the Shah of Iran, our ally, thinking that he would stay in 
power forever. We would have been the supplier of the nuclear 
fuel, the nuclear power plants, in that country. Thank God we 
did not send it before the Shah fell.
    Now Iran may be on the brink of developing a nuclear weapon 
while the administration just completed a nuclear cooperation 
agreement with Vietnam that does not require Vietnam to forgo 
the most dangerous aspects of a nuclear program.
    So we should just be humble here. Iraq, Iran, North Korea. 
We are now living with the consequences of not having a high 
standard internationally on the transfer of nuclear 
technologies. And it is the United States that intervenes, 
plays the role of the policeman when these programs go awry.
    So there is a fine line between peaceful nuclear energy 
programs producing megawatts of electricity and a deadly 
nuclear weapons program producing megatons that can threaten 
the whole world.
    Sitting directly on that line are uranium enrichment and 
plutonium reprocessing technologies. These processes can 
produce both fuel for nuclear reactors and material for nuclear 
weapons. They have a dual identity. That is why it has been and 
should continue to be U.S. policy to limit the spread of 
enrichments and reprocessing around the world.
    The nuclear industry says requiring this of nuclear 
cooperation agreements comes down to a choice between 
nonproliferation and the industry's assertion that these 
agreements will bring billions of dollars to the economy. But a 
look at the facts tell quite a different story.
    Today I am releasing an analysis, which I would also 
request be added to the record of today's hearing, of every 
export license issued under nuclear cooperation agreements 
since 1996. It shows that exports of nuclear reactor 
technologies under nuclear cooperation agreements make up less 
than 1 percent of the nuclear industry's profits. In fact, 86 
percent of all exports under nuclear cooperation agreements 
come from the sale of nuclear fuel, and even that amounts to a 
very small fraction of the industry's total annual revenues.
    The industry exports nuclear fuel to almost two-thirds of 
the 53 countries with whom we have nuclear cooperation 
agreements. The way I see it is that limiting the spread of the 
technology that could be used to make nuclear fuel not only 
limits the competition for nuclear weapons but also limits 
competition to the main source of the industry's export 
revenues.
    So here are my questions. I think it is pretty clear and 
everyone understands that in order to build a nuclear weapon, 
you need to know either how to enrich uranium or to extract 
weapons-grade plutonium. We just stipulate that. And we do not 
want these countries to develop that capacity. We are very 
fortunate that we were not the enabler of the Shah.
    We cannot predict what the status of any of these countries 
is going to be 20 or 30 or 40 years from now, but they will 
have these nuclear power plants and they will have that fuel in 
their countries. So this is a very important decision that we 
have to make.
    When the administration negotiated its agreement with the 
United Arab Emirates, the UAE made a legally binding promise 
that it would not seek to acquire enrichment or reprocessing 
technology. That is the gold standard. They will not seek those 
technologies.
    Is it not true that if a future agreement allowed Jordan or 
Saudi Arabia to enrich or reprocess, then the United Arab 
Emirates could demand to renegotiate its nonproliferation 
commitments as well?
    Mr. Poneman. There is a most favored nation clause, 
Senator.
    Senator Markey. Precisely. So here it is. We got an 
agreement with the UAE. That is the gold standard, but in that 
deal is if we lower it, that they can renegotiate and they can 
go lower. So that is not, I think, where the United States 
wants to be.
    The administration has signed an agreement with Vietnam 
that does not require the same nonproliferation commitment that 
the United Arab Emirates made. So the UAE is the gold standard; 
Vietnam is not the gold standard.
    Your negotiations right now with South Korea reportedly 
stalled over South Korea's desire to develop fuel-making 
technologies. They do not have this capacity right now. So this 
is a big question. Do they move in that direction? Well, I 
think that the terms of the Vietnam agreement are going to make 
it more likely that South Korea is going to demand that they be 
given the same status as Vietnam, a Communist country that we 
were at war with.
    So I guess my question to you then is will you insist on 
South Korea having a gold standard so that Vietnam does not 
become the precedent that would then spread to country after 
country around the world.
    Mr. Countryman. Senator, I am currently leading the 
negotiations with the Republic of Korea on a renewal of the 123 
agreement. I do not want to get into great detail about exactly 
what we discuss. You are quite correct that the issue about 
advance consent for reprocessing and enrichment is a central 
issue on which we have a lot more work to do before we come to 
an agreement.
    I do not quite agree that the Vietnam agreement has a 
precedential value for the ROK agreement. We are already far 
along in our discussions and on kind of a different plane of 
discussion. I will simply reaffirm that with the ROK, despite 
the fact that it is one of our very best allies, we continue to 
focus not on the political, not on the economic, but on the 
consistent nonproliferation policy, what best strengthens the 
global nonproliferation regime. That remains our consistent 
guiding star.
    Senator Shaheen [presiding]. Thank you, Senator Markey.
    Senator McCain.
    Senator McCain. Well, thank you, Madam Chairman.
    In other words, if we do not support this agreement, it is 
pretty clear that the Vietnamese have other avenues of 
acquiring this capability. Would you agree, Mr. Countryman?
    Mr. Countryman. Yes, sir. Of acquiring nuclear technology, 
a nuclear power plant, yes.
    Senator McCain. Yes.
    And that could be France or China or Russia or who else?
    Mr. Countryman. According to the press, they have been in 
active discussion and signed some preliminary agreements with 
both Russia and Japan.
    Senator McCain. So it clearly would not be in our interest 
to see an agreement with Russia on the part of the Vietnamese.
    Mr. Countryman. Well, I think it would be in our interest, 
first, to make sure that they uphold all the reforms in 
nonproliferation they did as part of our negotiation process.
    Senator McCain. Do you think that that is a very likely 
demand that the Russians might make?
    Mr. Countryman. No. The Russians have strong export 
controls. What they and other suppliers do not have are the 
kind of language in their nuclear cooperation agreements that 
we have.
    I do want to note that Russia and the United States 
cooperated on the removal of highly enriched uranium from 
Vietnam last year, and that was an important achievement of the 
negotiation process itself.
    Senator McCain. Tell us how it is in the U.S. national 
interest to see Vietnam conclude a civil nuclear cooperation 
agreement with Russia or anybody else. How is it in any way in 
the United States national security interest?
    Mr. Countryman. That is a good question. I look at it this 
way, that it is in our national security interest that they 
conclude with us. We do not necessarily want to block them from 
agreeing with such an agreement with anyone else.
    Senator McCain. I am not sure we can.
    Mr. Countryman. No, we cannot.
    And they have a genuine interest in having a variety of 
bidders for their contracts.
    What we can do, both through our agreement through the 
Nuclear Suppliers Group, through the G8, and other bodies, is 
to ensure that we are not competing with each other on a 
loosening of nonproliferation standards.
    Mr. Poneman. If I might just add, Senator.
    Senator McCain. Could I just respond real quick? That is 
that if you think that these other countries would adhere to 
the same standards that we do I think flies in the face of past 
performances.
    Go ahead, Mr. Poneman.
    Mr. Poneman. I was just going to say, as I said in my 
testimony, Senator, we are trying to avoid a race to the 
bottom. We have very strong nonproliferation cooperation with 
all of the P5, including France and Russia and everybody else. 
So I am not casting aspersions on them, but I am very proud of, 
and feel confident in, the United States that we have the best 
standards in the world, bar none in terms of nonproliferation, 
safety, and security.
    Senator McCain. I hope that should surprise none of us that 
we have the highest standards.
    But again, I want to point out the important factor here is 
that the Vietnamese can shop in other places.
    The Vietnamese are still guilty of human rights abuses, 
much to my dismay. And there is a number of us that 
continuously raise this issue with the Vietnamese and are very 
disappointed from time to time at some of their actions. But if 
you look at the Vietnam of 15 years ago and you look at Vietnam 
today, it is a dramatically changed nation. There are 16,000 
Vietnamese students in the United States of America today 
studying in the United States. So as frustrated as some of us 
get over this human rights record--some of it just seems to be 
senseless like the persecution of Buddhists--the fact is that 
there has been dramatic improvement in Vietnamese behavior and 
in our relationship since we normalized relations between the 
two countries. Would you agree?
    Mr. Countryman. Yes, sir.
    Senator McCain. So this agreement is another step in what 
has evolved into a partnership between the United States and 
Vietnam, particularly given events that are transpiring now in 
that part of the world.
    Mr. Countryman. Yes, sir. And I think if more Americans 
recognized or were able to see how dramatically relations with 
Vietnam have improved in several different areas just in the 
last 20 years, it would be terribly impressive to all of us.
    Senator McCain. And so despite the fact that 20 years from 
now there may be an overthrow of the government and takeover by 

al-Qaeda, the fact is that they are on a path that should 
encourage all of us, and this agreement many of us feel is 
another step in the direction of a better nation with a better 
relationship and with, frankly, a nation that we can, to some 
degree, count on as times may worsen in the Asia-Pacific 
region.
    Mr. Countryman. I absolutely agree. And two additional 
quick points.
    As we said before, we do not assume, in negotiating these 
agreements, that times never change. That is why we retain 
controls, inspections, and everything else.
    And secondly, if al-Qaeda takes over Vietnam in 20 years--
God forbid--a binding political agreement today--or legal 
agreement never to seek E&R will not mean a damn thing at that 
point.
    Senator McCain. I thank you.
    Madam Chairman, let me say that I believe that this 
agreement is not a perfect agreement, and we focused on the 
technical details. But I think from a macro point of view, that 
this is an important agreement and one that we should support 
and one that I think will pay a benefit to us in more ways than 
one.
    I thank you, Madam Chairman.
    Senator Shaheen. Thank you, Senator McCain.
    Thank you very much, Deputy Secretary Poneman and Assistant 
Secretary Countryman, for your testimony.
    As Chairman Menendez has said, we have a very limited 
amount of time. So I am going to ask the next panel to come 
forward. With Ranking Member Corker's agreement, what we will 
do is take your statements for the record, and for those 
Senators who wish to remain, go right into questioning. Is that 
agreeable to you, Senator Corker?
    Senator Corker. That would be fine.
    [The prepared statements of Mr. Fertel, Ms. Squassoni, and 
Mr. Sokolski follow:]

                 Prepared Statement of Marvin S. Fertel

    Chairman Menendez and Ranking Member Corker, thank you for the 
opportunity to testify today on this important issue. I am Marvin 
Fertel, President and Chief Executive Officer of the Nuclear Energy 
Institute \1\ (NEI). Our 350 members represent all aspects of peaceful 
nuclear technology, from nuclear power plant operators and reactor 
vendors, to major architect/engineering firms, to fuel suppliers and 
component manufacturers, to educational and research organizations. On 
behalf of our members, we appreciate the opportunity to provide 
testimony on U.S. peaceful nuclear energy cooperation to the Senate 
Foreign Relations Committee.
                industry view on section 123 agreements
    U.S. nuclear cooperation and commercial engagement in other 
countries' new and expanding nuclear power programs advance global 
nuclear safety, security, and nonproliferation. U.S. commercial 
involvement ensures the highest possible levels of nuclear power plant 
safety and reliability, maintains U.S. leadership in nuclear energy 
technology and maintains U.S. influence over global nuclear 
nonproliferation policy and practices. Noted national security experts 
agree that ``one of our Nation's most powerful tools for guaranteeing 
that countries acquiring this [nuclear] technology continue to use it 
exclusively for peaceful purposes is to ensure that the U.S. commercial 
nuclear industry continues to play a leading role in the international 
civil nuclear marketplace.'' \2\
    In order to create American jobs and support critical U.S. foreign 
policy interests, the United States must be fully engaged in the global 
expansion of nuclear energy already underway. The U.S. nuclear energy 
industry:

   Supports efforts to limit the spread of uranium enrichment 
        and used fuel reprocessing (E&R) technologies consistent with 
        current U.S. policy. The United States has a broad portfolio of 
        bilateral and multilateral policy instruments that can be used 
        to advance this policy, including: Nuclear Suppliers Group 
        guidelines, assurances of fuel supply, multilateral guarantees 
        of fuel supply and used fuel disposition, bilateral 
        commitments, and other assurances required by the Atomic Energy 
        Act.
   Opposes initiatives to condition U.S. nuclear cooperation on 
        new terms that our potential partners will not accept and other 
        supplier nations will not require. Each bilateral relationship 
        is unique and complex. Whether and how E&R provisions should be 
        included in a Section 123 agreement, beyond what is already in 
        practice and in statute, should reflect the unique 
        circumstances of each bilateral relationship. Pragmatism should 
        continue to guide the United States as it negotiates Section 
        123 agreements. NEI supports the flexibility in the Atomic 
        Energy Act that allows the executive branch to negotiate 
        agreements based on the concerns and imperatives specific to 
        each nation or region.
   Supports prompt negotiation of new and renewal bilateral 
        agreements for peaceful nuclear energy cooperation. These 
        agreements are essential for substantial U.S. nuclear exports. 
        We are concerned that the Republic of Korea agreement has 
        required a temporary extension to avoid a lapse and that the 
        renewal Taiwan agreement was submitted for congressional review 
        so late that it may lapse as well. We also note that three 
        agreements were allowed to expire in the past 21 months \3\ and 
        that two others will almost certainly expire by July of this 
        year.\4\
      Prompt negotiation of 123 agreements will allow Congress the 
        necessary time to conduct deliberative and effective oversight. 
        It will also avoid the uncertainly created by the ``just in 
        time'' nature of new and renewal agreements that, according to 
        foreign customers, casts doubt on the United States as a 
        reliable supplier nation.
   Supports a proactive approach for the negotiation of Section 
        123 agreements with nations with new or expanding peaceful 
        nuclear energy programs. It is in the U.S. national security, 
        nuclear safety, and economic interest to secure agreements 
        early and with a broad set of partners rather than to sit idly 
        by as these nations partner with other nuclear suppliers. 
        Without agreements in force, we forfeit exports, jobs, and 
        commercial benefits, and we will fail to influence these 
        programs in terms of their nuclear safety, security and 
        nonproliferation norms.
            the global nuclear market and u.s. market share
    Beginning with President Eisenhower's ``Atoms for Peace'' vision 60 
years ago, American expertise established the world's largest nuclear 
energy program and fostered the use of this technology around the 
world. Our dedication to excellence maintains 100 U.S. reactors at 
world-class levels of safety and reliability. More than 60 percent of 
the world's 437 operating reactors are based on technology developed in 
the United States. Our nuclear industry has the knowledge, experience, 
and infrastructure to support nuclear facility construction, operation, 
and maintenance around the world. In addition, U.S. firms are making 
major investments in technology development to continue their tradition 
of innovation. These investments include development of small modular 
reactors, advanced technologies for uranium enrichment, more advanced 
large reactors with improved safety features and advanced manufacturing 
techniques to improve quality and reduce costs.
    Today, there are 71 new nuclear power stations under construction 
worldwide, of which 5 are under construction in the United States. An 
additional 172 are in the licensing and advanced planning stages and 
virtually all of these plants will be built abroad where the demand for 
reliable, affordable, and clean baseload electricity is growing. 
Electricity from nuclear energy will help economies expand and lift 
hundreds of millions from poverty while having a minimal impact on the 
environment. But with this growing nuclear market comes growing 
competition from other nuclear supplier nations, which can now provide 
a full range of products and services.
    Over the past two decades, new supplier nations have entered the 
growing global nuclear market and multinational partnerships and 
consortia have been formed to develop nuclear energy facilities. 
According to a 2010 GAO report, ``while the value of U.S. exports of 
nuclear reactors, major components and minor components have increased, 
the U.S. share of global exports declined slightly'' from 1994 to 
2008.\5\ Over the same period, the U.S. share in the fuel market 
declined sharply from one-third to one-tenth of the market.
    The declining U.S. share of the global reactor, major component and 
minor component market is largely attributable to the growth of 
international competitors who began as suppliers to their domestic 
markets and over time expanded their offerings to the global market. 
For example, France's AREVA and Russia's Rosatom have steadily 
increased their presence in the global market. Although 11 of the 
reactors under construction today are U.S. designs, four are French and 
16 are Russian.\6\ One of the newest entrants in the global nuclear 
market is the Republic of Korea. In December 2009, Emirates Nuclear 
Energy Corporation awarded a multibillion dollar tender to a Korea 
Electric Power Corporation-led consortium to build the first nuclear 
power plant in the United Arab Emirates (UAE). In addition, there has 
been an expansion of indigenous technologies developed for domestic 
markets. For example, 20 of the 71 nuclear plants under construction 
globally are Chinese reactors being built in China.\7\
    As additional reactors are brought into service, a growing portion 
of the global nuclear market is nuclear fuel: uranium, conversion, 
enrichment and fuel fabrication. Over the past 20 years, economically 
attractive supplies of nuclear fuel have become available from an 
increasing number of supplier nations. Australia holds the most 
extensive identified resources, at 31 percent of the world's total. In 
recent years, Kazakhstan has emerged at the world's largest uranium 
producer, producing over 36 percent of global primary production in 
2012. Conversion, enrichment and fabrication of fuel also operate as a 
wide-ranging international commercial market.
          state of the u.s. commercial nuclear energy industry
    Although major components such as ultra-large forgings and reactor 
pressure vessels are no longer manufactured in the United States, the 
U.S. nuclear industry continues to manufacture a wide range of 
equipment, components, and fuel for nuclear power plants around the 
world. U.S. firms also supply the global market with high-value 
services, including site evaluation, engineering and construction, fuel 
supply and transport, expertise in plant operation, decommissioning and 
more. After a nuclear power plant is constructed, U.S. firms can remain 
engaged throughout its life, which can last half a century or more, 
thus having a physical presence at nuclear facilities and influence 
over safe operational practice.
    For example, Westinghouse Electric Company, headquartered near 
Pittsburgh, PA, employs nearly 13,000 people, including engineers, 
technicians, and other professionals (8,000 in the United States) who 
support its global business to provide fuel, services, technology, 
plant design and equipment to electric utility and industrial customers 
in the worldwide commercial nuclear electric power industry. Four 
Westinghouse AP1000 nuclear power reactors are currently under 
construction in China. Westinghouse is in discussions to contract 
support for an additional eight plants, with more expected. Support of 
these follow-on projects employs significant quantities of U.S. content 
from high-end precision manufacturing to instrumentation and control 
systems.
    GE Hitachi Nuclear Energy, headquartered in Wilmington, NC, employs 
more than 1,500 skilled professionals in its U.S. operations. GE 
Hitachi designs, services, and manufactures nuclear components and fuel 
for the U.S. and global markets, including Taiwan and Mexico. Nearly 
one-fifth of nuclear reactors in operation around the world are based 
on GE's boiling water technology and GE Hitachi has made significant 
investments in advanced reactor designs and innovative uranium 
enrichment technology.
    The U.S. nuclear industry does not just supply technology. For 
example, Curtiss-Wright, an American company that traces its roots back 
to the Wright Brothers' first flight, employs 10,000 skilled 
professionals with facilities in some 30 states, is a manufacturer of 
precision nuclear components such as reactor coolant pumps, advanced 
valves, and electrical components. These safety-critical components are 
produced to the highest quality and safety standards for customers in 
the United States and abroad. As with many nuclear suppliers, Curtiss-
Wright's business is increasingly abroad where it supplies components 
to nuclear facilities around the world including China, Korea, Taiwan, 
Mexico, UAE and the U.K. Roughly a quarter of Curtiss-Wright's nuclear 
energy business comes from international markets and this is expected 
to grow significantly in the coming years as nuclear construction 
outside of the United States accelerates.
    In addition to large companies, small businesses also benefit from 
nuclear exports. For example, Precision Custom Components of York, PA, 
employs 270 Americans to manufacture high-end specialized components 
such as reactor vessel internals and integrated head packages for the 
U.S. and international markets including China. Nuclear exports support 
manufacturing jobs in more than 30 States.
               section 123 agreements of current interest
    NEI and our members are grateful that this committee recently 
approved an extension of the current Section 123 agreement with the 
Republic of Korea (ROK), and will soon consider renewal agreements with 
Taiwan and the International Atomic Energy Agency (IAEA), and a new 
agreement with Vietnam. Each of these agreements has significant 
potential benefits for U.S. exports and U.S. jobs. For every $1 billion 
in exports, between 5,000 and 10,000 U.S. jobs are created or 
sustained.

   Republic of Korea.--South Korea is the world's fourth-
        largest generator of nuclear energy and a major global supplier 
        in its own right. Nineteen of South Korea's 23 operating 
        plants--and all of South Korea's power plants under 
        construction, on order or planned--are based on U.S. 
        technology.\8\ South Korea's licensing of U.S. technologies and 
        export of U.S. components, fuel and services have earned 
        billions for U.S. suppliers. Significant U.S. content in the 
        Korean APR-1400 power plant and other U.S.-South Korea supply 
        relationships earned U.S. suppliers more than $2 billion in the 
        U.A.E. tender. That project alone is supporting thousands of 
        jobs across 17 states.\9\
   Taiwan.--Two General Electric nuclear energy facilities are 
        under construction in Taiwan at Lungmen, and other U.S. 
        companies provide equipment, services, and fuel to Taiwan's six 
        operating nuclear power plants. Fuel exports to Taiwan's 
        reactors from AREVA North America in Richland, Washington, help 
        support the more than 650 jobs at this facility. Renewal of the 
        bilateral cooperation agreement will result in up to $10 
        billion of U.S. exports.
   IAEA.--The IAEA does not operate nuclear power plants, but 
        the IAEA agreement is commercially significant because, in 
        combination with other agreements, it enables U.S. nuclear 
        energy trade with Mexico. Currently, Mexico operates two 
        General Electric-supplied Boiling Water Reactors at Laguna 
        Verde. In 2012, the Mexican Government announced plans to 
        explore expansion of its nuclear program with additional units 
        at the Laguna Verde site.
   Vietnam.--Vietnam is implementing an ambitious national plan 
        to develop up to 10,000 megawatts of nuclear generating 
        capacity by 2030 with the first reactors coming on line in 
        2020. Russia and Japan have already secured agreements to 
        develop nuclear energy projects in Vietnam, while U.S. firms 
        have been sidelined absent this important agreement. Conclusion 
        of a Section 123 agreement with Vietnam has the potential to 
        result in $10-20 billion in U.S. nuclear exports.
        section 123 agreements ensure u.s. nonproliferation aims
    Section 123 agreements provide critical nonproliferation benefits. 
These include significant commitments to safeguard materials, to 
prevent material diversion for nonpeaceful purposes, and to provide 
adequate security for materials. The agreements provide for U.S. 
consent rights over the enrichment, reprocessing and retransfer of U.S. 
materials. This means that obligations are attached to these materials, 
which include stringent nonproliferation assurances that these 
materials will not contribute to weapons programs.
    Within this framework, Section 123 agreements ensure that U.S. 
partners agree to rigorous nonproliferation and nuclear security 
requirements as a prerequisite to nuclear cooperation with the United 
States. The nine U.S. requirements include prior U.S. consent for any 
enrichment or reprocessing of U.S. materials and, in post-Nuclear Non-
Proliferation Act agreements, consent for reprocessing of nuclear fuel 
that has been used in a U.S.-supplied reactor. The U.S. nuclear energy 
industry has always supported this approach.
    U.S. nuclear energy cooperation is an essential element of the 
Nuclear Nonproliferation Treaty, which forms the basis of the global 
nonproliferation regime. Countries commit not to pursue nuclear weapons 
and, in exchange, are guaranteed support for their right to develop 
civil nuclear power and other peaceful uses of nuclear energy, subject 
to international supervision. The United States has relied on this 
framework for decades to advance its global nuclear nonproliferation 
agenda.
               limiting enrichment and reprocessing (e&r)
    The nuclear industry supports efforts to limit the spread of E&R 
consistent with current U.S. policy. The United States currently has in 
force 23 nuclear cooperation agreements covering 50 countries, Taiwan, 
and the IAEA. All agreements negotiated since the Nuclear Non-
Proliferation Act of 1978 provide for U.S. consent rights for 
enrichment or reprocessing of U.S.-flagged materials.
    A unilateral and inflexible requirement that potential trading 
partner countries forswear their rights to E&R as a condition for a 
Section 123 agreement would have the perverse effect of undermining 
U.S. nonproliferation interests by significantly reducing the number of 
countries willing to engage in civil nuclear commerce with the United 
States.
    Other nuclear suppliers--like Russia, France, Japan, and South 
Korea--stand ready to engage in nuclear commerce with other countries, 
whether or not those countries have concluded a 123 agreement with the 
United States. As a result, the net effect of refusing to conclude 123 
agreements with countries that are unwilling to renounce E&R would be 
to encourage them to do business with other suppliers, thereby forgoing 
the economic and national security benefits of commercial nuclear 
engagement.
    When a country like the UAE is willing, in the context of a Section 
123 agreement with the United States, to renounce E&R, the United 
States should include that commitment in the Section 123 agreement. But 
when a country, which otherwise demonstrates its intent to develop an 
exclusively peaceful commercial nuclear energy program, makes clear 
that it is unwilling to renounce these rights in a bilateral agreement 
with the United States, it would be self-defeating to forgo the 
nonproliferation and other benefits to the United States of concluding 
a Section 123 agreement with that country.
    Industry is pleased that Taiwan and UAE have committed not to 
develop E&R, but we believe they are special cases. Taiwan, for 
example, has minimal need for E&R because its fleet of nuclear power 
plants is small and will eventually be phased out under the current 
national energy policy. The United States had unusual leverage in 
negotiation of the renewal agreement because Taiwan relies on it to 
enable its nuclear trade with other supplier countries, and because of 
the important U.S.-Taiwan security partnership. For all of these 
reasons, we believe the Section 123 with Taiwan is not a realistic 
model for other countries.
                               conclusion
    NEI believes that the global expansion of nuclear energy 
infrastructure provides the United States a unique opportunity to meet 
several national imperatives at the same time: (1) increasing U.S. 
influence over nuclear nonproliferation policy and practices around the 
world; (2) ensuring the highest possible levels of nuclear power plant 
safety and reliability around the world, by exporting U.S. advanced 
reactor designs and America's world-class operational expertise; (3) 
maintaining U.S. leadership in nuclear energy technology; and, (4) 
creating tens of thousands of jobs and maintaining a healthy 
manufacturing base for nuclear energy technology and services.
    If U.S. exporters were able to capture 25 percent of the global 
market--estimated at $500 billion to $750 billion over the next 10 
years--this would create (or sustain) up to 185,000 high-paying 
American jobs.
    To maintain U.S. influence over global nonproliferation policy and 
international nuclear safety, the U.S. commercial nuclear energy sector 
must participate in the rapidly expanding global market for nuclear 
energy technologies (437 commercial nuclear reactors in operation 
around the world, 71 under construction, 172 planned or on order).
    The U.S. nuclear industry is competitive, but we must be allowed to 
compete. This requires Section 123 agreements in place. The industry:

   Supports efforts to limit the spread of uranium enrichment 
        and used fuel reprocessing (E&R) technologies consistent with 
        current U.S. policy.
   Opposes initiatives to require new conditions for U.S. 
        nuclear cooperation unilaterally that our potential partners 
        will not accept and that other supplier nations do not impose. 
        Pragmatism should continue to guide the United States as it 
        negotiates Section 123 agreements.
   Supports prompt negotiation of new and renewal bilateral 
        agreements for peaceful nuclear energy cooperation. These 
        agreements are essential for meaningful U.S. nuclear exports.
   Supports a proactive approach for the negotiation of Section 
        123 agreements with nations with new or expanding peaceful 
        nuclear energy programs, including the ROK, Taiwan, and 
        Vietnam. It is in the U.S. national security, nuclear safety 
        and economic interest to secure agreements early and with a 
        broad set of partners rather than to sit idly by as these 
        nations partner with other nuclear suppliers. Without 
        agreements in force, we forfeit exports, jobs, and commercial 
        benefits, and we will fail to influence these programs in terms 
        of their nuclear safety, security and nonproliferation norms.

    Engaging in nuclear energy markets allows the United States to 
promote several of its interests at the same time; disengagement is a 
net loss for safety, security, and the U.S. economy. Without U.S. 
commercial engagement, the United States would have substantially 
diminished influence over other nations' nonproliferation policies and 
practices. U.S. technology and U.S. industry form a critical engine 
that drives U.S. nonproliferation policies.

----------------
End Notes

    \1\ The Nuclear Energy Institute is responsible for establishing 
unified nuclear industry policy on matters affecting the nuclear energy 
industry, including regulatory, financial, technical, and legislative 
issues. NEI members include all companies licensed to operate 
commercial nuclear power plants in the United States, nuclear plant 
designers, major architect/engineering firms, fuel cycle facilities, 
materials licensees, and other organizations and individuals involved 
in the nuclear energy industry.
    \2\ April 25, 2013, letter to President Obama from Senator William 
S. Cohen, Dr. James Schlesinger, Admiral Michael Mullen, Dr. John 
Hamre, General Brent Scowcroft, General James Jones, Senator Pete 
Domenici and Ms. Susan Eisenhower (attached).
    \3\ Bangladesh (June 2012), Peru (April 2012) and Columbia 
(September 2013).
    \4\ Thailand (June 2014) and Norway (July 2014).
    \5\ ``Global Nuclear Commerce: Governmentwide Strategy Could Help 
Increase Commercial Benefits From U.S. Nuclear Cooperation Agreements 
with Other Countries,'' United States Government Accountability Office 
Report to the Committee on Foreign Affairs, House of Representatives, 
November 2010.
    \6\ International Atomic Energy Agency, 2014.
    \7\ Ibid.
    \8\ ``Nuclear Power in South Korea,'' World Nuclear Association, 
December 2012.
    \9\ Ex-Im Bank News Release, September 7, 2012.

ATTACHMENT:
                                              CSIS,
                                            Washington, DC,
                                                    April 25, 2013.
President Barack Obama,
The White House,
Washington, DC.
    Dear Mr. President: We write to underscore the importance of 
preventing nuclear weapons proliferation, and to caution against the 
adoption of policies that could inadvertently weaken the ability of the 
United States to continue to provide international leadership on this 
critically important issue.
    For more than half a century, the cornerstone of global efforts to 
prevent nuclear weapons proliferation has been the ``atoms for peace'' 
formula. With very few exceptions, the countries of the world have 
accepted this formula. Countries that enter into it commit not to 
pursue nuclear weapons, and in exchange are guaranteed support for 
their right to develop civil nuclear power and other peaceful uses of 
atomic energy, and submit to international supervision.
    The Atoms for Peace formula has been very successful. Access to 
commercial nuclear technology was not seen as a threat to the nuclear 
nonproliferation regime, but rather as a sign of the health of that 
regime and an essential means for implementing it. One of our nation's 
most powerful tools for guaranteeing that the countries acquiring this 
technology continue to use it exclusively for peaceful purposes is to 
ensure that the U.S. commercial nuclear industry continues to play a 
leading role in the international civil nuclear marketplace. Here the 
news is not encouraging.
    While the United States and one or two other countries had a near-
monopoly on civil nuclear technology in the 1950s, today the list of 
countries actively competing in the international civil nuclear 
marketplace includes Russia, France, Canada, Great Britain, Germany, 
the Netherlands, Japan and South Korea. And it is likely soon that 
China and India will become active participants in the international 
nuclear marketplace. According to a November 2010 Government 
Accountability Office (GAO) report on nuclear commerce, the U.S. share 
of global exports of ``nuclear reactors, major components and 
equipment, and minor reactor parts'' fell from 11 percent to just 7 
percent between 1994 and 2008. The U.S. share of global exports of 
nuclear fuel fell from 29 percent to just 10 percent over that same 
period of time.
    This decline in U.S. market share translates to substantially 
diminished U.S. influence in such areas as nuclear nonproliferation and 
nuclear safety. As a result, the United States is in an increasingly 
weak position to unilaterally impose onerous requirements on potential 
buyers of civil nuclear technology, simply because buyers have so many 
alternatives to U.S. sources of supply. It follows that, in order to 
restore its nonproliferation influence around the globe, the United 
States Government must find ways to strengthen the competitiveness of 
the U.S. nuclear industry, and avoid policies that threaten to further 
weaken it.
    We therefore urge that, as part of your export control reform 
initiative, streamlining of the process for licensing civil nuclear 
exports be made a top priority. We know that there are experts who 
argue that we should make access to American nuclear technology even 
more restrictive in the future. This would have the unintended effect 
of further diminishing America's competitiveness in the global nuclear 
marketplace. America's ability to lead the global nuclear 
nonproliferation regime will diminish steadily as America abandons the 
field.
    Consistent with the Atoms for Peace policy framework, America 
restricts the right of other countries to buy from American nuclear 
suppliers unless those countries agreed to stringent security 
procedures and conditions (the so-called 123 process). Historically we 
have managed this process on a sensible case-by-case basis. If we adopt 
a much more restrictive approach, we will not prevent countries from 
acquiring nuclear technology, but instead will encourage nations to 
turn to suppliers that do not impose difficult standards. The 
nonproliferation regime is weakened in that circumstance.
    We share your administration's concern about the risks associated 
with the potential spread of sensitive nuclear fuel cycle technologies 
such as enrichment and reprocessing. But as our Nation seeks to reduce 
these risks, we must be careful not to diminish America's influence in 
the international civil nuclear marketplace. America's nuclear industry 
exports are shrinking, and this is bad for nonproliferation policy.
    The U.S. Government must recognize that the U.S. civil nuclear 
industry is one of its most powerful tools for advancing its nuclear 
nonproliferation agenda. It is critical to adopt policies that will 
strengthen that tool. Weakening it will merely cede foreign markets to 
other suppliers less concerned about nonproliferation than the United 
States.
            Sincerely,
                    Senator William S. Cohen, Former Secretary of 
                            Defense; General Brent Scowcroft, Former 
                            National Security Adviser; Dr. James 
                            Schlesinger, Former Secretary of Energy, 
                            Secretary of Defense and Director, CIA; 
                            General James Jones, Former National 
                            Security Adviser; Admiral Michael Mullen, 
                            Former Chairman, Joint Chiefs of Staff; 
                            Senator Pete Domenici, Former Chairman 
                            Senate Budget Committee; Dr. John Hamre, 
                            Former Deputy Secretary of Defense; Ms. 
                            Susan Eisenhower, Chairman Emeritus, 
                            Eisenhower Institute.
                                 ______
                                 

                  Prepared Statement Sharon Squassoni

    Mr. Chairman, Mr. Ranking Member, members of the committee, I would 
like to thank you for this opportunity to appear before the Senate 
Foreign Relations Committee to discuss U.S. policy on peaceful nuclear 
cooperation and specifically, the draft agreement with Taiwan recently 
submitted to Congress.
                               background
    For almost 70 years, trade in nuclear materials, equipment, and 
technology has been heavily regulated by the United States and many 
other countries for one fundamental reason: supplies intended for 
peaceful purposes can be diverted to help make nuclear weapons. For 
almost a decade after the first atomic explosion, the United States 
discouraged the spread of any nuclear technology, advocating 
international control of nuclear materials and technology to deter or 
prevent their military use. The 1946 Atomic Energy Act expressly 
prohibited even exchanges of information until ``effective and 
enforceable international safeguards against the use of atomic energy 
for destructive purposes'' were in place. A few years later, the Soviet 
and British nuclear tests, as well as nascent nuclear weapons programs 
in other countries, underscored the futility of trying to keep the lid 
on this Pandora's box of nuclear energy, and a new approach was born: 
the Atoms for Peace program. President Eisenhower's December 1953 
initiative boldly coupled engagement in the peaceful uses of nuclear 
energy with reducing the nuclear threat. The establishment of the 
International Atomic Energy Agency followed within a few years, but the 
Nuclear Nonproliferation Treaty took more than a decade to take shape.
    Ensuring that nuclear energy is used only for peaceful purposes is 
a sine qua non of the nuclear nonproliferation regime that has grown up 
since then. To do this, the regime has focused on making diversion from 
peaceful purposes difficult--from the legal agreements signed by 
recipients of technology (i.e., NPT and IAEA safeguards agreements) to 
implementation of accounting and inspections by the IAEA, supplier 
guidelines promulgated within the Nuclear Suppliers Group (NSG), 
multilateral and national sanctions, and finally, national export 
control regimes. Peaceful nuclear cooperation agreements are a 
mechanism for sharing the benefits of peaceful nuclear energy, but also 
for promoting national priorities in export control and 
nonproliferation. In the U.S. case, they establish the scope and 
guidelines for collaboration, including expectations for and 
demonstrations of nonproliferation.
    The United States has been a leader in both the military and 
civilian uses of nuclear energy, but its dominance of the civilian 
market faded some decades ago. While early cooperation agreements 
envisioned the United States supplying all reactors and enriched 
uranium for small nuclear power programs in, for example, South Korea 
and even EURATOM, that kind of supplier relationship is no longer 
desired or possible. Today, three factors are leading to a reassessment 
of the role of U.S. nuclear cooperation policy: the need to renew many 
of the agreements renegotiated after passage of the landmark Nuclear 
Nonproliferation Act of 1978 (NNPA); the potential for new agreements 
with countries considering nuclear power for the first time; and a 
desire to enshrine policy restrictions on sensitive nuclear 
technologies like enrichment and reprocessing.
           renewal of existing nuclear cooperation agreements
    The 1978 Nuclear Nonproliferation Act amended the Atomic Energy Act 
of 1954 in several important respects, but particularly by 
incorporating nine requirements in section 123 that helped to ensure 
that U.S. nuclear cooperation would not be diverted for military uses. 
India's 1974 nuclear test certainly played a role in increasing 
concerns that there were not enough safeguards in place to ensure that 
peaceful nuclear atoms were not misused for weapons, but attempts by 
countries like Brazil, Pakistan, and South Korea to openly acquire full 
fuel cycle capabilities from U.S. allies also played a role. The nine 
provisions, briefly, included requirements for:

          1. The perpetuity of safeguards on all material and equipment 
        supplied;
          2. Full-scope safeguards (safeguards on all nuclear material 
        in a country) for nonnuclear weapon states;
          3. Assurances that nothing transferred or subsequently 
        produced from U.S. material, equipment, or technology would be 
        used for nuclear explosive purposes or for any other military 
        purpose;
          4. The right of return in the event a recipient state 
        detonates a nuclear explosive device or terminates or abrogates 
        an IAEA safeguards agreement;
          5. Prior consent by the United States for any transfers;
          6. Adequate physical protection;
          7. Prior consent by the United States for enrichment, 
        reprocessing, or other alteration in form or content of U.S.-
        supplied material or material used in or produced through the 
        use of U.S.-supplied material equipment or facilities;
          8. Approval in advance of storage facilities; and
          9. Application of all the previous requirements by a 
        recipient state to any special nuclear material, production 
        facility or utilization facility produced or constructed by or 
        through the use of any sensitive nuclear technology transferred 
        under a peaceful nuclear cooperation agreement.

A detailed analysis of these requirements and how they have been 
applied over time and how they can be strengthened is available in a 
report written by Fred McGoldrick and published by CSIS entitled 
``Nuclear Trade Controls: Minding the Gaps'' (January 2013).\1\
    These requirements provided a benchmark against which the U.S. 
Congress could judge the adequacy of peaceful nuclear cooperation 
agreements and were folded into export licensing requirements. Many, 
but not all, existing U.S. nuclear cooperation agreements were 
renegotiated after the NNPA was enacted (section 404 of the NNPA 
required renegotiation of all existing cooperation agreements) and the 
few that remained outside are now up for renewal, including those with 
Thailand, Taiwan, and South Korea. The agreement with Taiwan was 
submitted to this committee on January 7, 2014, and the Senate recently 
voted to extend the existing South Korean agreement for 2 years.
    Other agreements with approaching expirations include Norway 
(2014), China (2015), Egypt (2021) and Morocco (2022). The 1988 
agreement with Japan has a 30-year duration but specifies that it will 
remain in force thereafter (2018) unless terminated by either party 
with 6-months notice. Since the negotiation of the agreement with 
Japan, subsequent U.S. nuclear cooperation agreements have adopted 
increasingly creative approaches to duration, with the practical impact 
of reducing congressional approval responsibilities. Whereas agreements 
written prior to the NNPA did not commonly include language on 
extensions of duration (for example, the Taiwanese and South Korean 
agreements have simple 42- and 41-year durations, respectively), those 
following the NNPA all refer to either mutually agreed extensions, 
automatic 5- or 10-year rolling extensions, or in the case of the 
agreement with Japan and the draft agreement with Taiwan, indefinite 
extensions or indefinite duration. While mutually agreed extensions may 
require legislative action, the automatic, rolling and indefinite 
extensions seem designed to circumvent the congressional approval 
process in the long run.
                   the proposed agreement with taiwan
    Earlier this month, the President submitted the Proposed Agreement 
for Cooperation Between the American Institute in Taiwan (AIT) and the 
Taipei Economic and Cultural Representative Office in the United States 
(TECRO) Concerning Peaceful Uses of Atomic Energy to this committee.
    The draft agreement supersedes a 1972 agreement (amended in 1974) 
signed with the Republic of China (the first such cooperation agreement 
dates back to 1955) that is similar to the 1974 agreement signed with 
South Korea. It provided for all enriched uranium fuel for Taiwan's 
reactors at the time (ChinShan I and II) with an option to seek outside 
sources if the then-U.S. Atomic Energy Commission could not supply the 
requisite amount. It also allowed for reprocessing ``in facilities 
acceptable to both Parties`` upon a joint determination that safeguards 
could be applied. Taiwan would retain title to special nuclear material 
resulting from reprocessing. Although the Republic of China ratified 
the NPT in 1970, the agreement provided for U.S. safeguards and the 
application of IAEA safeguards under a 1964 trilateral (U.S., ROC, 
IAEA) that could be replaced by IAEA NPT safeguards once they came into 
effect. In light of what we now know about Taiwan's clandestine 
activities at the time, the fuel assurances on the front end and 
relative lack of restrictions on the back end seem too little and too 
late.
    Although the unclassified Nuclear Proliferation Assessment 
Statement refers only to ``the direction of the nuclear program of the 
authorities on Taiwan in the 1970s and 1980s'' as having been ``widely 
reported in the press,'' the classified version should provide this 
committee with the details of a Taiwanese nuclear weapons program that 
reportedly began in the mid-1960s and continued somewhere into the 
1980s, at least according to IAEA reports of undeclared plutonium 
activities and other sources. The plutonium program included a research 
reactor (from Canada), heavy water production, and plutonium 
separation. U.S. official documents released under the Freedom of 
Information Act detail repeated demarches to Taiwanese representatives 
by U.S. Government officials in the mid-1970s to halt clandestine 
nuclear activities.\2\
    With the establishment of U.S. diplomatic relations with the 
People's Republic of China in 1979, Taiwan's political status changed 
and although Taiwan is prevented from formally joining multilateral 
treaties and export control regimes, the authorities on Taiwan have 
voluntarily committed to adhering to all the major nonproliferation-
related agreements and initiatives. A U.S.-Taiwan nuclear cooperation 
agreement is critical for Taiwan to engage in nuclear supply 
relationships with other countries, since the trilateral safeguards 
transfer agreement provides the functional equivalent of Taiwan's 
adoption of full-scope safeguards under the NPT. In other words, the 
123 agreement with the United States is critical for Taiwan's nuclear 
power program as long as it intends to operate those reactors. From 
November 2011, authorities on Taiwan have declared they will phase out 
nuclear power eventually.
    The current Taiwan agreement has a few notable characteristics: 
Article 7 provides that TECRO shall not possess sensitive nuclear 
facilities or otherwise engage in activities related to enrichment or 
reprocessing of material or alteration in form or content and it is the 
first agreement to specify an indefinite duration. Like the UAE 
agreement, there is a provision for advance consent to transfer 
irradiated source or special fissionable material to France or other 
countries as agreed for storage or reprocessing. In the Agreed Minute, 
the scope of the agreement specifically covers tritium, an item that is 
not found in many other agreements.
    The Taiwan agreement has been heralded in some press reports as a 
victory for the ``gold standard''--that is, for the United States 
requiring that its nuclear partners rely on the international market 
for fuel supply services instead of leaving future options open for 
domestic enrichment or reprocessing. As a country of unique political 
status that is overwhelmingly dependent on U.S. nuclear technology and 
trade, with a documented history of clandestine nuclear activities, it 
is hard to see how Taiwan would have otherwise reacted to a U.S. 
request for such restrictions. In light of Taiwan's envisioned phase-
out of nuclear energy, it would also have been difficult to insist on 
leaving its options open for future domestic enrichment or 
reprocessing. Thus, while the Taiwan agreement may helpfully build a 
norm of countries declaring they will rely on the international market, 
it is hardly a bellwether for future agreements.
         new agreements with countries and policy restrictions 
                     on enrichment and reprocessing
    The rising enthusiasm for nuclear energy of the past decade, 
tempered somewhat by the 2011 accident at Japan's Fukushima Daiichi 
nuclear power plant, has spurred interest in cooperation agreements 
with new nuclear partners, including those in the Middle East (the 
United Arab Emirates, Saudi Arabia, and Jordan) and in Southeast Asia 
(Vietnam). Concerns about the spread of sensitive nuclear technology 
are particularly high in the Middle East in light of Iran's continued 
development of uranium enrichment technology. The conclusion of an 
agreement in 2009 with the UAE that incorporated language in Article 7 
specifying that the UAE would not possess sensitive nuclear facilities 
on its soil or otherwise engage in reprocessing of spent fuel or 
enrichment of uranium raised expectations that the United States would 
require similar commitments by other nuclear partners in the Middle 
East, or even globally. In fact, the 1981 U.S. agreement with Egypt 
contains an agreed minute that any reprocessing that might in future 
take place would be conducted outside of Egypt, which has the same 
practical effect of the UAE agreement (although Egypt did not make the 
same commitment for uranium enrichment).
    Like Taiwan, the nonproliferation ``win'' in the UAE case may also 
have resulted from other mitigating circumstances. The UAE already had 
a policy not to seek domestic enrichment and reprocessing, whether to 
burnish its nonproliferation credentials as the first state in the 
Middle East with nuclear power or because it simply did not make 
economic sense. Although it would be useful for the UAE to enlist other 
countries in the region to create an Enrichment-&-Reprocessing-Free-
Zone, other countries currently seeking nuclear power are slow to 
follow. For example, Saudi Arabia reportedly has signed a memorandum of 
understanding with the United States to that effect, but there is no 
evidence that Saudi officials are eager to tout their nonproliferation 
credentials openly or that such language would make its way into a 
formal peaceful nuclear cooperation agreement. Jordan has resisted U.S. 
requirements for similar restrictions in its draft agreement with the 
United States. Outside of the Middle East, Vietnam reportedly has 
agreed to rely on the international market for fuel cycle services but 
is not eager to put such language in a legally binding agreement.
    New agreements, particularly with states that have few if any 
nuclear power plants operating, are not an unreasonable place to begin 
to strengthen standards for nuclear cooperation agreements. Since 2009, 
the policy debate about the ``gold standard'' has centered on whether, 
in the absence of a consistent policy that applies to all U.S. nuclear 
partners, the executive branch can persuade other countries that it is 
pursuing a politically neutral nonproliferation goal. Critics of the 
case-by-case approach believe that a consistent policy strengthens U.S. 
negotiating leverage because it cuts off debates in negotiations about 
prestige, national sovereignty or allies' worthiness while proponents 
believe that an inflexible approach will result in fewer nuclear 
cooperation partners for the United States, with diminished 
nonproliferation returns.
    U.S. policy for many years has proceeded on a ``case-by-case'' 
basis in order to preserve flexibility in negotiating, despite an 
extended period of review under the Obama administration. Recently, 
administration officials have reiterated their policy goal of 
discouraging the spread of enrichment and reprocessing technologies. 
However, this has been articulated as a comprehensive policy that 
extends beyond the scope of peaceful nuclear cooperation agreements and 
officials have suggested that other policy tools to achieve this 
objective may be preferable to incorporating specific language in 123 
agreements. Acting Under Secretary of State Rose Gottemoeller told an 
Atlantic Council audience in December 2013 that legally binding 
requirements were too inflexible and that many tools were available, 
referring to the 2011 revised NSG guidelines on restraint in 
transferring sensitive nuclear technology and to the availability of 
fuel banks of low-enriched uranium for fuel. Privately, administration 
officials have suggested that Vietnam's reported willingness to rely on 
the international market for nuclear fuel and the U.S. consent rights 
for enrichment or reprocessing are enough.
    Clearly, the Obama administration should use multiple tools to 
discourage the spread of enrichment and reprocessing. In thinking about 
the broader nonproliferation tools that could be applied, however, it 
is important to step back and place this debate in context.
                          a changing landscape
    The proliferation landscape has shifted over time, both in terms of 
the technologies that are perceived as posing significant proliferation 
risks and the countries (or nonstate actors) that may have clandestine 
intentions. For example, at the time of NPT negotiations, experts 
assumed that the tremendous costs, energy requirements and physical 
footprint of uranium enrichment plants (based on gaseous diffusion 
technology) would make clandestine enrichment very difficult if not 
impossible. This is certainly not the case today, as we have discovered 
with Iran and North Korea. In fact, the major difficulty is in 
detecting such clandestine enrichment. Looking forward, the commercial 
development of laser enrichment could shrink detection parameters even 
further.
    Not all elements of the system adapt at the same time in the face 
of changing technical and/or political proliferation risks and some do 
not adapt at all. The NPT remains constant, while IAEA safeguards were 
strengthened in response to Iraq's nuclear weapons program in the early 
1990s (i.e., with the adoption of the Additional Protocol in 1998). 
Although some observers might wish for stronger withdrawal provisions 
or penalties for noncompliance in the NPT, the tension among its states 
parties makes amendment a rather risky enterprise. The Nuclear 
Suppliers Group, for its part, responded relatively quickly to Iraq's 
noncompliance by finally implementing a requirement for full-scope 
safeguards for nuclear trade in 1992 that several members had adopted 
more than a decade earlier (e.g., Canada, Japan, United States, 
Australia). In response to revelations in 2004 about the A.Q. Khan 
nuclear black market network, the NSG was a bit slower: after 7 years 
of debate, the NSG tweaked its restrictions regarding sensitive nuclear 
technology transfers in 2011.
    Sanctions, on the other hand, can be quite flexible, for better or 
worse: some U.S. sanctions imposed on Pakistan and India after the 1998 
nuclear tests were famously short-lived, while imposition of other 
sanctions was delayed until it was no longer possible to hold them off 
(e.g., declaring that Pakistan was in possession of nuclear weapons). 
In the multilateral realm, U.N. sanctions have generally been slower to 
ramp up but fairly flexible: in the case of Iran, the scope of 
sanctions has expanded from those targeted on the nuclear program and 
the Iranian Revolutionary Guard to wider petroleum-related investments 
and trade over the course of a decade. They could shrink substantially 
if Iran responds well to the latest negotiated deal.
    National export control regimes, including policies and laws 
governing nuclear cooperation and exports, can also be flexible 
compared to other tools and powerful if harmonized with those of other 
countries. In the United States, the Atoms for Peace program required a 
big shift from the 1946 Atomic Energy Act to allow international 
cooperation. Section 3e of the Atomic Energy Act of 1954 called for ``A 
program of international cooperation to promote the common defense and 
security and to make available to cooperating nations the benefits of 
peaceful applications of atomic energy as widely as expanding 
technology and considerations of the common defense and security will 
permit.'' The scope of activities included: ``(1) refining, 
purification, and subsequent treatment of source material; (2) civilian 
reactor development; (3) production of special nuclear material; (4) 
health and safety; (5) industrial and other applications of atomic 
energy for peaceful purposes; and (6) research and development relating 
to the foregoing.'' The United States put in place bilateral research 
agreements, the first of which was signed in 1955 with Turkey. 
According to the Congressional Research Service, the ``United States 
established its own program for promoting the peaceful uses of atomic 
energy with the idea that later they would be coordinated with and even 
undertaken by the International [Atomic Energy] Agency.'' \3\ By the 
end of 1967, the United States had 34 agreements in place with 
countries or groups of countries (e.g., EURATOM); of these, about two-
thirds were strictly for research.
    Comparing U.S. nuclear cooperation agreements of almost 50 years 
ago with those of today, two changes are striking: We have changed 
partners several times (sometimes in reaction to bad behavior and 
sometimes not) and we have changed what we are willing to supply. This 
is fairly unsurprising over a span of 50 years, but provides a few 
lessons.
    In 1967, the United States had agreements with some countries with 
which it does not now have agreements: Iran, Israel, Venezuela, and 
Vietnam. Cooperation with the Soviet Union over the years was sporadic 
until a 123 agreement entered into force in 2010.\4\ In addition to 
Iran and Israel, two others on the 1967 list of partner countries are 
still cooperating partners, but had at that time nuclear weapons 
programs that were subsequently abandoned: South Korea and South 
Africa.\5\
    The nature of cooperation has also changed over time. First, the 
1954 Atomic Energy Act allowed for cooperation in the production of 
special nuclear material. The Ford administration adopted the first 
restraint policy in the transfer of sensitive nuclear technology and 
facilities in 1974, prohibiting export of reprocessing and other 
nuclear technologies, firmly opposing reprocessing in Korea and Taiwan, 
and negotiating agreements for cooperation with Egypt and Israel that 
contained ``the strictest reprocessing provisions.'' \6\ In his 1976 
statement on nuclear policy, President Ford called on all nations to 
join the United States ``in exercising maximum restraint in the 
transfer of reprocessing and enrichment technology and facilities by 
avoiding such sensitive exports or commitments for a period of at least 
3 years.'' \7\ This policy of restraint has endured despite the fact 
that the Atomic Energy Act itself does not prohibit sharing of 
enrichment and reprocessing technologies (although the NNPA amendments 
ensured that any production facilities transferred would be subject to 
all the nonproliferation requirements outlined in section 123).
    Second, for many years, the United States exported quantities of 
uranium enriched between 20 percent and 90 percent (in U-235), U-233 
and plutonium routinely under nuclear cooperation agreements. In 1993, 
the U.S. Nuclear Regulatory Commission reported to Congress that the 
United States had exported 25 metric tons of HEU, at which time about 
17 metric tons were still abroad. By 1978, the United States began a 
program (the Reduced Enrichment for Test Reactors program, now 
encompassed in the Global Threat Reduction Initiative Convert Program) 
to encourage the use of lower enriched uranium in research reactors 
abroad that continues today. The current policy of the U.S. Government 
is to support the minimization of HEU in civilian nuclear commerce 
where technically and economically feasible.\8\
    The examples above illustrate that nuclear cooperation does and 
must shift over time to reflect changing circumstances, whether or not 
laws change. The trend over time largely has been to tighten 
restrictions. Exceptions to that trend should be undertaken only in 
circumstances where a country overwhelmingly has demonstrated its 
commitment to nonproliferation. Even then, it is far better to adopt an 
approach that is justifiable for how it reduces the risk of 
proliferation than what was simply politically possible at the time.
    The current justification for adopting a case-by-case approach to 
U.S. 123 agreements is the need for diplomatic flexibility. But the 
examples above should also suggest that a principled approach could 
weather political changes in governments much better and help minimize 
the costs of walking back less restrictive policies.
                          the role of congress
    Although peaceful nuclear cooperation agreements tend to be treated 
as foreign policy initiatives, they fall squarely within the Congress' 
constitutional mandate to regulate trade. Activism on this issue by 
Congress has varied with the agreements: more controversial countries 
and capabilities have attracted more attention. Although early 
legislation may have envisioned a bigger role for committees in vetting 
peaceful nuclear cooperation agreements (for example, in the 30-day 
period after initial transmittal), many are submitted as boilerplate 
agreements (the India agreement notwithstanding). The NNPA's adoption 
of a more streamlined approval process for new agreements, as well as a 
relatively short (15 days) approval process for subsequent arrangements 
(e.g., arrangements for partner countries to reprocess U.S.-origin 
material) has made significant congressional involvement less likely. 
The fact that 123 agreements compliant with section 123 requirements 
enter into force unless Congress passes a law otherwise presents a 
serious bar for disapproval that subsequent legislation (e.g., 1984 
Proxmire amendment to the Export Administration Act) has attempted to 
address without success.
    Members of Congress may want to consider the following issues:
1. Approval of 123 agreements may become a historical relic
    Administrations since the enactment of the 1978 Nuclear 
Nonproliferation Act have lengthened the duration of agreements, 
including bestowing rolling or indefinite extensions on certain nuclear 
cooperation partners (Australia, Canada, EURATOM, Switzerland and 
Turkey have 5-year rolling extensions; India has a 10-year rolling 
extension and Peru has one automatic 10-year extension). Japan's 
agreement from 1987 has such an ``indefinite'' extension while the 
Taiwan agreement duration itself is indefinite. Whether this is 
intended to minimize congressional interference by eliminating the need 
for congressional approval for renewals or whether this is the result 
of demands from cooperating partners is not clear. However, it seems 
similar to the Reagan administration's development of the practice of 
``advance consent'' as a form of prior consent. In other words, it 
seems to contradict the intention of the law. Members of Congress may 
want to consider whether specific language regarding extensions or 
congressional review is desirable to protect its equities in ensuring 
that U.S. nuclear cooperation does not contribute inadvertently to 
proliferation.
2. The Atomic Energy Act does not reflect longstanding policies
    There are several key nuclear nonproliferation policy initiatives 
that usefully could be supported and strengthened by incorporation into 
law.
            a. Additional Protocol
    The first is to require all new nuclear partners (and in renewal 
agreements) to have Additional Protocols in force before a 123 
agreement can be approved. U.S. policy is to seek inclusion of language 
in 123 agreements but this could be strengthened legally. It should be 
noted that the NSG has not been able to make the Additional Protocol a 
condition of supply, despite the fact that many members do require it. 
Two particular holdouts are Argentina and Brazil, although there are 
others. Making the Additional Protocol a legally binding requirement 
could eventually help NSG adoption, in much the same way that countries 
adopted full-scope safeguards as a condition of supply before the NSG 
did. In addition, Congress might consider whether additional language 
in the AEA would be useful regarding the incorporation of improvements 
in the IAEA safeguards system into U.S. 123 agreements beyond the 
Additional Protocol. There has been talk of provisions that might 
amount to the ``Additional Protocol Plus'' in the case of Iran. 
Language requiring the executive branch to report on status of IAEA 
safeguards improvements, particularly with respect to safeguards for 
reprocessing and enrichment plants, including an IAEA assessment of the 
effectiveness of current black-boxing techniques for enrichment 
technology could help inform the Congress and potentially lead to some 
on-the-ground improvements.
            b. Interim storage over reprocessing
    The United States as a matter of policy prefers interim storage 
over reprocessing, both for itself and its partners where proliferation 
or security risks might be a concern. And yet, recent 123 agreements do 
not reflect this. In the UAE and Taiwan agreements, advance consent is 
given for transfer to storage or reprocessing facilities (in third 
countries like the U.K., France, or other). Although some flexibility 
with regard to the final destination for irradiated fuel may be 
desirable, U.S. policy clearly places priority on interim storage over 
reprocessing and this should be reflected in all future agreements.
3. Implementation of certain Atomic Energy Act and 1978 Nuclear 
        Nonproliferation Act provisions are weak
            a. NPAS makeover
    The 1978 NNPA requires the executive branch to submit a Nuclear 
Proliferation Assessment Statement with each new agreement or renewal 
agreement. If the current trend toward indefinitely extended agreements 
deepens, the ability of Congress to judge the nonproliferation 
worthiness of partner countries will diminish even more. Even if 
Members of Congress see no drawback to these agreements of indefinite 
duration, it may be worthwhile to mandate periodic NPASs from the 
executive branch. Separately, the Atomic Energy Act provides no 
guidance to either Congress or the executive branch on the kinds of 
issues that should be covered in an NPAS. Some of these documents (at 
least the unclassified versions) do little more than recite how the 
agreement meets section 123 criteria. At a minimum, the Congress could 
require the executive branch to consult with Members on the general 
scope of Nuclear Proliferation Assessment Statements or about 
individual NPASs before they are written or more substantially, 
Congress could enact legislation to specify reporting requirements for 
NPASs.
            b. Title V
    Title V of the NNPA required the United States to conduct 
nonnuclear energy cooperation and energy assessment assistance with 
developing states. All countries need help pursuing low-carbon, 
renewable options for generating electricity. This title should be 
funded, implemented and monitored by Congress.
            c. International fuel cycle collaboration and multilateral 
                    approaches
    A holistic and multilateral approach that reduces proliferation 
risks from nuclear cooperation and fuel cycle activities continues to 
elude the U.S. Government. This, however, was not always the case. In 
the late 1970s, U.S. nonproliferation policies at both ends of 
Pennsylvania Avenue seemed to recognize that promotion of nuclear 
energy cannot come at the expense of nuclear nonproliferation. In the 
words of Henry Kissinger, ``We must take into account that plutonium is 
an essential ingredient of nuclear explosives and that in the immediate 
future the amount of plutonium generated by peaceful nuclear reactors 
will be multiplied many times. Heretofore the United States and a 
number of other countries have widely supplied nuclear fuels and other 
nuclear materials in order to promote the use of nuclear energy for 
peaceful purposes. This policy cannot continue if it leads to the 
proliferation of nuclear explosives. Sales of these materials can no 
longer be treated by anyone as a purely commercial competitive 
enterprise.'' \9\
    This dilemma is no longer painted so starkly. More often now, one 
hears the argument that if the United States adopts stricter controls, 
other states will step in to supply nuclear reactors and components 
with lower requirements, creating a lose-lose proposition for both U.S. 
nuclear industry and nonproliferation.
    However, the nuclear industry has shrunk since the 1980s, and a 
truly zero-sum competitive market does not exist--there are many more 
interdependent suppliers than was the case decades ago. Rather than 
undercutting each other with government subsidies for nuclear deals, 
suppliers should be cooperating to encourage the sustainability of 
their enterprise. Fundamentally, this will require confronting nuclear 
waste challenges up front to provide favorable options for new 
recipients (like interim storage for spent nuclear fuel or space in a 
shared repository) and opportunities to invest in nuclear capacities 
they cannot themselves develop. A market-driven twist on collaborative 
fuel cycle approaches, if it is implemented in an equitable fashion 
among advanced and developing nuclear states, could overcome the 
inertia that has swallowed virtually all proposals to internationalize 
the fuel cycle and perhaps, finally, bring much-needed balance to the 
task of reducing proliferation risks.

----------------
End Notes

    \1\ Available at: http://csis.org/publication/nuclear-trade-
controls.
    \2\ National Security Archive Electronic Briefing Book No. 221, 
available at http://www2.gwu.edu/nsarchiv/nukevault/ebb221/.
    \3\ Ellen C. Collier, ``United States Foreign Policy on Nuclear 
Energy,'' Library of Congress Legislative Reference Service, May 6, 
1968, p. LRS-7.
    \4\ Collier, op. cit., describes an arrangement in 1967 for 
cooperation in atomic desalination; in 1973, the United States and the 
Soviet Union signed a 10-year agreement for cooperation in fast breeder 
reactors, fusion, and fundamental research. See Mary Beth Nikitin, 
``U.S.-Russian Civilian Nuclear Cooperation Agreement: Issues for 
Congress,'' CRS Report, RL34655, January 11, 2011.
    \5\ In the case of South Africa, the U.S. first signed a 50-year 
nuclear cooperation agreement in 1957. Cooperation lapsed in the 1970s 
because of evidence of South Africa's nuclear weapons program. When 
South Africa dismantled its nuclear weapons and joined the NPT in 1991, 
the United States negotiated a new cooperation agreement that entered 
into force in 1997.
    \6\ President Ford, ``Statement on Nuclear Policy,'' October 28, 
1976, reprinted in Nuclear Proliferation Factbook, Senate Print 103-
111, December 1994, pp. 48-62.
    \7\ President Ford, ``Statement on Nuclear Policy,'' op. cit., page 
54.
    \8\ ttp://www.whitehouse.gov/the-press-office/2012/03/26/belgium-
france-netherlands-united-states-joint-statement-minimization-he.
    \9\ Henry Kissinger, ``An Age of Interdependence: Common Disaster 
or Community,'' Address before the 29th United Nations General 
Assembly, September 23, 1974.
                                 ______
                                 

                    Oral Statement of Henry Sokolski

    Mr. Menendez, Mr. Corker, members of the committee, I want to thank 
you for holding this hearing. Let me start by noting that the last time 
Congress adjusted the Atomic Energy Act to proliferation realities of 
the day was over 35 years ago. After watching India set off a 
``peaceful'' nuclear explosive with U.S. technology and materials, 
Congress required new deals with non-NPT states be backed by a joint 
congressional resolution of approval. Since then, Iraq, North Korea, 
Iran, Syria, and Libya all developed weapons programs in violation of 
their NPT pledges, used their safeguarded ``peaceful'' programs as 
covers to import nuclear technology and goods from nuclear suppliers, 
including the U.S., and endeavored to enrich or reprocess nuclear 
weapons usable fuels to make bombs.
    In light of this history, the U.S. has recently insisted that the 
UAE and Taiwan forswear engaging in these nuclear activities in their 
nuclear cooperative agreements with the U.S. It now is trying to 
persuade South Korea to do the same. What all of this suggests is that 
there's a clear need for Congress to adjust, again, what kinds of 
agreements should require a congressional joint resolution. In trying 
to determine the specifics any such adjustment, this committee should 
focus on three points:
    1. Arguments that further congressional involvement in reviewing 
and approving nuclear deals is unnecessary or will somehow undermine 
nonproliferation are dead wrong. Nuclear industry's supporters and 
Foggy Bottom clearly prefer the status quo. They argued against the 
Nuclear Nonproliferation Act (NPPA) of 1978 using the very same 
arguments they are now making against any additional congressional 
involvement in nuclear negotiations. Passage of the NNPA, though, was 
needed to impose controls over the export of dual use nuclear goods 
which, in turn, made it possible for the U.S. to persuade the Nuclear 
Suppliers Group (NSG) to adopt similar restraints. This now enables the 
Proliferation Security Initiative to track and interdict the fulsome 
list of nuclear goods. Getting other nuclear suppliers to uphold the 
Gold Standard, which is not yet the focus of our diplomacy but should 
be, will require no less. Foggy Bottom is hardly 100 percent behind 
this. As such, unless Congress makes it clear that new 123s that don't 
meet the Gold Standard must secure a joint congressional resolution of 
approval, the Executive will, in due course, give up.
    2. Congressional review of the Executive's nuclear dealmaking 
should extend beyond what has already been proposed. Many in Congress 
have been frustrated in their attempts to engage the Executive over the 
final shape of any nuclear deal with Iran. Congress was equally 
frustrated a decade ago regarding the implementation of the North 
Korean nuclear Agreed Framework. H.R. 3677 addresses a number of needed 
changes to the Atomic Energy Act. In specific, it understands that 123s 
that don't meet the Gold Standard are more like a mutual security pact 
than a technical trade agreement. Yet, what 3677 does not consider is 
amending the act so any nuclear understanding the Executive reaches 
with states violating existing U.N. resolutions relating to dangerous 
nuclear activities, IAEA safeguards agreements or the NPT must be voted 
on within 30 days and secure a congressional joint resolution of 
approval. As with nuclear cooperative agreements that fail to meet key 
nonproliferation criteria, the long-term national security implications 
of such agreements are serious. Such agreements deserve to be treated 
more like treaties or laws than minor understandings that need only sit 
before Congress a number of days before automatically coming into 
force. Here, the committee's own 2001 study of teatking making done by 
CRS is excellent reading.
    3. Finally, the primary premise for any revisions to the act should 
be security. Business can only be good business if it's safe. We 
learned this after conducting nuclear commerce under lax conditions 
with India in the l960s and after sharing reactor technology under the 
Agreed Framework with North Korea free of routine IAEA safeguards. We 
now are learning it with Iran and risk learning it yet with South 
Korea, Japan, Turkey, the UAE, and Saudi Arabia. The hearing today 
should aim to prevent that.
                                 ______
                                 

                Prepared Statement of Henry D. Sokolski

    Mr. Menendez, Mr. Corker, members of the committee, I want to thank 
you for holding this hearing. The principles behind U.S. nuclear export 
and control policies, nonproliferation, and our diplomacy efforts to 
reduce the spread of enrichment and reprocessing activities have been 
matters of keen interest for several years.\1\ Generally, these matters 
have been discussed in the context of promoting nuclear power's further 
expansion overseas, of increasing the number of jobs or of concluding 
nuclear agreements and cooperation initiatives more generally. All of 
these considerations are important. They are not, however, the 
primarily lens that should be used for weighing these matters.
    I've served in the U.S. Senate as military legislative aide to a 
senior member of the Senate Armed Services Committee, in the Pentagon 
as a deputy assistant secretary-level official responsible for nuclear 
proliferation matters, as a member of two congressionally mandated 
commissions on strategic weapons proliferation threats, as a former 
consultant on proliferation issues to the CIA and the Commission on 
Strategic Posture of the United States, and as a DOD contractor with a 
Pentagon office that details future threat assessments directly to the 
Secretary of Defense. In each of these positions, my key focus has been 
on clarifying the national and international security implications of 
the further spread of dual-use nuclear technology.
    These security concerns should be the first business of our 
government. Certainly, the most profound contributions Congress has 
made to promoting and controlling truly peaceful foreign nuclear 
activities were premised on putting U.S. national security first. This 
was true in 1946 when Congress created the Atomic Energy Commission, in 
1978 when it passed the Nuclear Nonproliferation Act, in the 1990s when 
it conditioned the Nuclear Agreed Framework with North Korea, and today 
as it considers legislation relating to our nuclear negotiations with 
Iran.
    That said, the last time Congress revamped the Atomic Energy Act 
signficantly was over 35 years ago. That overhaul, finalized in 1978, 
followed Taiwanese and South Korean efforts to acquire nuclear weapons 
and India's explosion of a ``peaceful'' nuclear explosive. India's bomb 
used U.S. civilian nuclear technology and materials in violation of 
India's peaceful pledges to the United States. Given these events, 
Congress demanded that any future U.S. nuclear deals with states that, 
like India (which did not have all of its nuclear facilities under IAEA 
safeguards and were not members of the NPT), could only come into force 
with a congressional joint resolution of approval.
    That was three and half decades ago. Since then, Iraq used its 
safeguarded ``peaceful'' nuclear program to develop a nuclear weapons 
option; India and Pakistan broke their pledges (including several to 
the United States) not to develop nuclear weapons or to test; North 
Korea developed a covert enrichment program, in violation of the Agreed 
Framework, and withdrew from the NPT even as it imported and perfected 
U.S. light water reactor technology; Syria and Libya both violated 
their IAEA safeguards agreements and nearly completed an enrichment 
plant (in Libya's case) and a plutonium production reactor (in Syria's) 
covertly; and Iran imported foreign and U.S. nuclear assistance (which 
began in 1957) under IAEA safeguards, developed a nuclear weapons 
option by enriching uranium claiming it is peaceful and now is 
negotiating to keep as much of its nuclear program as it can.
    Most recently, and in light of the concerns that other states might 
inch closer to making bombs by enriching or reprocessing, the United 
States insisted that the UAE and Taiwan foreswear engaging in these 
nuclear activities in their nuclear cooperative agreements with the 
United States. It now is trying to persuade South Korea to do the same.
    This is a good deal of history--more than enough to suggest that 
there is a clear need for Congress to adjust again what kinds of 
agreements should be expedited under the Atomic Energy Act and which 
should require a congressional joint resolution.
    In trying to determine the specifics of any such adjustment, three 
general points are worth keeping in mind:
    1. One should resist arguments that further congressional 
involvement in reviewing and approving nuclear deals is either 
unnecessary or unhelpful. Nuclear industry's supporters and our own 
government negotiators clearly prefer that no additional congressional 
review or voting be allowed. They argued against the Nuclear 
Nonproliferation Act (NPPA) of 1978 using the very same arguments they 
are now using for any additional congressional involvement in nuclear 
deal making.\2\ Passage of the NNPA, though, was critical to raise U.S. 
nonproliferation standards and impose controls over the export of dual 
use nuclear goods. This, in turn, made it possible for the United 
States to persuade all of the members of the international Nuclear 
Suppliers Group (NSG) to adopt similar restraints on their own exports. 
Without NSG adoption of these controls, the Proliferation Security 
Initiative would be unable to track the fulsome list of nuclear goods 
it does with so many other states. This would clearly be against our 
national security interests. Similarly, if as our government claims, we 
want other nuclear suppliers to promote the Gold Standard, we must be 
willing to set an example. Establishing a stronger international 
presumption against ever more states enriching uranium and reprocessing 
weapons usable plutonium certainly is unlikely unless Congress makes it 
clear to the Executive that if it brings new nuclear cooperative 
agreements to the Hill that don't meet the Gold Standard, they will not 
come into force until Congress votes to approve them because both 
Houses are persuaded that they are in the Nation's security interest. 
Delay in voting on these matters should not be allowed.
    2. Congressional review of nuclear deals ought to be considered 
beyond what has already been proposed in the House. Congress is 
currently frustrated by its inability to engage the Executive over what 
the final shape of a nuclear agreement with Iran might look like. It 
was equally frustrated a decade ago regarding the implementation of the 
nuclear Agreed Framework with North Korea. Congresswoman Ileana Ros-
Lehtinen and Congressman Brad Sherman recently reintroduced draft 
legislation H.R. 3677 that the House Foreign Affairs Committee first 
approved back in 2011. It addresses a number of needed changes to the 
Atomic Energy Act of 1954. What it does not consider, however, is 
amending the act so that any nuclear understanding that the Executive 
might reach with a state that is in violation of existing United 
Nations resolutions relating to suspect nuclear activities, IAEA 
safeguards agreements or the NPT need to be approved by a joint 
resolution of Congress before it can come into force. The rational for 
such a provision would be the same as for voting on nuclear cooperative 
agreements with states that fail to meet key nonproliferation criteria: 
Such agreements and their long-term national security implications 
should be treated not as executive agreements or as minor 
understandings that need only sit before Congress a number of 
legislative days before automatically coming into force. Instead, they 
should be treated as being as important as a treaty or, at the very 
least, as being at least as important as a law.\3\ Certainly, the 
national security implications of the U.S.-Iran nuclear cooperative 
agreement of 1957 (which Congress did not even bother to hold a hearing 
on) now dwarfs the importance of benign trade agreements that Congress 
routinely votes upon. Finally, it would be useful to amend the Atomic 
Energy Act to require the Executive to routinely assess what the IAEA's 
ability is to prevent military diversions of the declared materials and 
activities it must safeguard and to detect undeclared covert nuclear 
efforts and materials. This would be in line with the recommendations 
of the Congressional Commission on the Prevention of WMD Proliferation 
and Terrorism and the most recent Defense Science Board report on 
monitoring nuclear threats.\4\ These assessments should be shared with 
Congress and the IAEA. Additional routine assessments should be made of 
what our own intelligence system can detect. Without this baseline 
information, there is no way to know whether the risks of nuclear 
proliferation are growing or are under control.
    3. The primary point of departure for considering any revisions to 
the act should be security. Any business the United Staes engages in 
can only be considered to be good business if it safe. If not, it's not 
just bad business, it's dangerous. We learned this after conducting 
nuclear commerce under lax conditions with India in the l960s. We 
learned after sharing reactor technology with North Korea with no 
routine IAEA safeguards in place under the Agreed Framework. We 
certainly are learning it now with Iran. If we do not take proper care, 
we may come to learn it with others including South Korea, Japan, 
Turkey, the UAE, and Saudi Arabia. The most recent Defense Science 
Board study on nuclear monitoring warns us all that the proliferation 
threat will be far more challenging in the future than it ever has been 
in the past. All of this recommends that we take our nuclear dealings 
and their potential security implications more seriously. We say we 
want South Korea not to enrich or reprocess. Yet, we have encouraged 
Japan to do so even now that its nuclear fleet is unlikely ever to be 
more than half of its pre-911 size. Worse, the State Department 
believes the United States should not bother taking the option of 
renewing its agreement with Japan even though we are insisting on doing 
so with our other key Asian ally, South Korea. This not only is 
insulting to Seoul, but reckless. If Japan ever decided to open its 
large reprocessing plant at Rokashho, it would be producing roughly 
2,000 bombs worth of nuclear weapons usable plutonium a year. This 
would almost certainly prompt South Korea to initiate nuclear 
enrichment or reprocessing of their own as hedge or weapons option. And 
China? What would it do in response? We don't know but whatever it 
might choose to do would likely challenge not only Japan's and South 
Korea's security, but our own treaty commitment to defend our Asian 
allies. For all these reasons, Congress should demand that our 
government encourage Japan to review its nuclear plans openly by 
calling for renegotiation of our nuclear cooperative agreement with 
them. We may not chose to change any of the terms of the current 
agreement but we should do all we can to encourage Japan to use the 
negotiations to clarify their own plans. More congressional review, not 
less will help assure the best policies are pursued.

----------------
End Notes

    \1\ This hearing was first requested nearly 2 years ago. See letter 
from Senator Richard Lugar to Senator John Kerry, February 10, 2012 
available at http://www.npolicy.org/article_file/
Letter_from_Senator_Lugar_to_Senator_Kerry.pdf.
    \2\ See Jodi Lieberman, ``Nonproliferation, Congress, and Nuclear 
Trade: Plus ca chang, plus c'est la meme chose,'' CSIS Policy 
Perspectives (Washington, DC: CSIS November 15, 20111), available at 
http://csis.org/files/publication/
111116_nonproliferation_congress_and_nuclear 
trade.pdf.
    \3\ U.S. Senate Committee on Foreign Relations, Treaties and Other 
International Agreements; The Role of the United States Senate: A Study 
Prepared for the Senate Foreign Relations Committee, (Washington, DC: 
Committee Print, January 2001), pp. 24-25. Available at http://
www.gpo.gov/fdsys/pkg/CPRT-106SPRT66922/html/CPRT-106SPRT66922.htm.
    \4\ See Bob Graham, et. al., ``World At Risk,'' (New York, NY: 
Vintage Books, 2008), pp. xx. Also see 44-46, 49-50 and U.S. Department 
of Defense Defense Science Board, Task Force Report: Assessment of 
Nuclear Monitoring and Verification Technologies, January 2014, 
available at http://www.acq.osd.mil/dsb/reports/
NuclearMonitoringAndVerificationTechnologies.pdf.

    Senator Shaheen. While they are changing out panels, let me 
just introduce the second panel who is going to be here with 
us. First we have Mr. Marvin Fertel, who is the president and 
CEO of the Nuclear Energy Institute. We have Ms. Sharon 
Squassoni--hopefully I am pronouncing your name correctly--
director and senior fellow with the Proliferation Prevention 
Program at the Center for Strategic and International Studies, 
and Mr. Henry Sokolski--close enough? Good?--who is executive 
director of the Nonproliferation Policy Education Center.
    Again, let me apologize to each of you for the fact that 
the Senate schedule has changed since this hearing was 
scheduled. We have four votes beginning at 11:15. So having 
people run back and forth probably is not the most expeditious 
way to do this. So if you all are agreeable, we will go right 
into questions.
    I will pose to each of you the question that I asked Mr. 
Poneman. Are their potential reforms to the 123 agreement 
process that would improve our ability to serve what they both 
acknowledged was the U.S. goal? And that is to reduce 
proliferation of nuclear materials in the world. And I do not 
know who would like to answer that first.
    Ms. Squassoni. Thank you, Senator.
    May I ask? These are potential reforms for Congress to 
consider?
    Senator Shaheen. You are welcome to address Congress or if 
you think there are things that the administration should be 
looking at differently, feel free to address that as well.
    Ms. Squassoni. Well, I think members of this committee 
correctly identified the fact that the process itself has 
really limited congressional input, particularly this trend 
over time of increasing the duration of these agreements. So 
many of the agreements for the last 20 years or so have had 5-
year rolling extensions, 10, and now we see the Taiwan 
agreement with indefinite extension.
    I think that members may want to consider whether they 
would like to put specific language regarding extensions or 
some kind of congressional review. The earlier panel talked 
about the gold standard, should gold standard agreements have 
the option of indefinite extension because that is good for 
nonproliferation. Deputy Secretary Poneman said, well, 
countries, if you have to twist their arm a little bit, might 
want a shorter duration. In any event, I think that Congress 
needs to look very specifically at that issue of duration and 
tie it so that there are incentives to countries.
    One other point on the nuclear proliferation assessment 
statement. We did not talk very much about Taiwan, but Taiwan 
is one of the few agreements that was never renegotiated after 
the 1978 NNPA. And what this means for you is this is the first 
time that there has ever been or that you have received a 
nuclear proliferation assessment statement.
    I would suggest--I hope that the classified version of that 
document details the activities that Taiwan was involved in in 
the 1970s and 1980s and how U.S. engagement and cooperation 
helped bring them back from the brink of nuclear weapons.
    But what is very interesting is you might consider how you 
might direct the administration better to scope its nuclear 
proliferation assessment statements. Right now, they look 
almost as if they are just checking the box on all the 
criteria. I think you need something a little more substantial, 
and that is perfectly within your purview. I think that would 
help the process.
    Senator Shaheen. Thank you.
    Mr. Sokolski.
    Mr. Sokolski. First, I think it is critical that you 
reverse the question of how do we influence customers to 
stomach conditions on nonproliferation and start understanding 
that the real leverage is convincing other allied and friendly 
nuclear suppliers to come up to this plate. I think we have 
lost the bubble on this. Not once in the previous panel was 
that focused on. But that is the game. It has always been the 
game. It has not been the customer so much as the supplier.
    In that regard, I think there have been 4 years of pleas to 
the Executive to be more consistent. I have a list of letters--
I would love to submit them for the record--that have been 
sent.
    Senator Shaheen. We will accept those for the record.
    Mr. Sokolski. Congress needs now to step up and say here is 
the deal.
    I know you cannot always do this. I know there are lots of 
cases where we have to pay attention like India. You know, you 
voted for India. But the presumption has got to be if you do 
not do it, we are definitely going to bind us, the Congress, to 
review it, and that means a vote. Without a vote, you know as 
well as I, there have been nuclear cooperative agreements where 
you have not even held a hearing. I can list those if you would 
like.
    Last of all, I think this point that Sharon has raised 
complies with the points that were raised by the commission I 
served on. Pay attention to each one of those. And I think one 
other.
    You folks ought to expand your review. There are these 
deals with countries that have violated U.N. resolutions, 
safeguards. They are called the great frameworks. They are 
called interim deals. I think when that happens, you ought to 
be voting before they go into force. I would not tell them what 
they should look like. Vote on them, and believe me, they will 
be coming to you to ask for your advice. Do not vote? Back of 
the hand. That is the way it works.
    Senator Shaheen. Thank you.
    Mr. Fertel.
    Mr. Fertel. Thank you, Madam Chairman.
    I would, first of all, say I think a little bit more 
transparency on the process would be good for everybody, and 
that might even include a timeline of when they are starting 
and when they expect to finish and what they will be producing.
    I actually would very carefully think about whether you 
want to be voting on this. Right now, the United States is at a 
disadvantage in the market. I heard what Henry said about 
dealing with the suppliers. The suppliers are countries, 
particularly the Russians who are very aggressive, the Chinese 
who will be aggressive. And we are competing against them.
    And if I put the commercial interests aside for a second 
and talk about the two things that you discussed in the 
previous panel--mostly it was nonproliferation. My background 
is much more safety than nonproliferation, and I think that is 
a bigger risk in the near term, to be honest, than 
nonproliferation. You are not going to get to weapons very 
quickly, but you can certainly mess up in safety.
    As you heard from the previous panel, we not only have the 
best technology from a safety standpoint, but we also have 
really the best safety culture, the best operating experience, 
and the best regulator. And us in the marketplace as a country, 
not just the commercial side, will make a difference on how we 
deal with nuclear safety, how we deal with nonproliferation, 
and to be honest, how we deal with addressing issues like 
climate change.
    Senator Markey raised a number of very good points on fuels 
and so forth. A real advantage of the 123 process today is 
consent rights. So if our fuel is in a reactor, we have consent 
rights. It goes a little bit to what Secretary Countryman said. 
If they go rogue, it does not matter whether we have legal 
binding conditions or not. They will do what they want. But if 
we have consent rights, they cannot do anything without our 
permission. So us either providing them a reactor and they can 
put any fuel in it, we still have consent rights or us 
providing them fuel in someone else's reactor actually gives us 
a significant nonproliferation lever.
    Senator Shaheen. Thank you.
    Senator Corker.
    Senator Corker. Thank you, Madam Chairman.
    I appreciate you being here and we apologize again for you 
not being able to set the tone with opening comments.
    But I think there has been some allusion to this already in 
some of the other comments made, but do the three of you 
believe that the administration does have a clearly articulated 
approach to the 123 agreements that are being negotiated?
    Mr. Sokolski. In a word, no. I think they wanted to and 
they backed off when they realized it would cause friction with 
the people they were negotiating with. And if you take a look 
at the statements, at one point the administration officials 
were quoted saying, well, one standard should apply to the 
Middle East but we do not need to apply it to Asia. Now they 
have backed off that because they feel the pressure coming from 
this committee. Fine.
    First it was about reactors. Well, we can sell reactors. 
Vietnam is the biggest market in Asia they claimed. Now, of 
course, Vietnam announced it is not even going to build its 
first reactor for 6 years. So now it is about fuel.
    I think you need to understand that unless you bring these 
agreements before the committee and you exercise your authority 
to approve them, it does not matter what they do. They will be 
able to do it. And the reasoning will change country to country 
because Vietnam--that is an agreement about China I think and 
pressuring China. The agreement about the UAE. Well, there are 
other things going on. In other words, these agreements are 
poor man's mutual security pacts as much as they are about 
nuclear commerce. If indeed this is about selling nuclear fuel 
after all, you need to keep in mind there is no way on God's 
green earth the United States is going to dominate that market 
any more than it is going to dominate reactor sales. Therefore, 
if we do not use our leverage with the suppliers--and we do 
have leverage, and I can go through that if you would like--to 
get them to raise their standards, you have lost the ball. And 
you will not get the Executive to lean on those suppliers 
unless they realize they have to to get their agreements past 
you. It is hard ball, but that is the way it is played.
    I have watched this as long as Mr. Poneman. He and I are 
contemporaries, and we both went to the same schools and we 
studied the same things. We ended up in different places as to 
how we think, but I do not think he would disagree about that 
point. Not at all.
    Senator Corker. Others?
    Ms. Squassoni. Thank you. I am not a contemporary. I am 
younger, Henry. [Laughter.]
    Senator Corker. It is very noticeable too.
    Ms. Squassoni. Thank you.
    But I fundamentally agree with you. I understand. I did 
work in the Arms Control and Disarmament Agency in the State 
Department. I understand the need for diplomatic flexibility. 
But when you do not have a consistent policy, what you will 
come up against as a negotiator is one country, such as South 
Korea, arguing that we are just as good an ally as the next 
country. Why are you not providing us those benefits? So I 
think that our negotiating position would actually be stronger 
with a consistent policy. And it is not just on whether or not 
a country should foreswear enrichment and reprocessing but this 
issue of consent rights. That is exactly what we are--and they 
are very important--coming up against in the ROK agreement.
    One last point. The administration should not undersell the 
value of building norms in our 123 agreements. A lot of the 
multilateral improvements that we have made came from national 
policies. You need those national policies such as full-scope 
safeguards as a requirement of supply. Countries did that 
individually before the Nuclear Suppliers Group managed to get 
it. So I think we do need more consistency.
    Mr. Fertel. I actually thought that Deputy Secretary 
Poneman and Assistant Secretary Countryman certainly stayed to 
one standard that they talked about, which was to control the 
fissile material. And what they are saying is that they are 
looking at the toolbox for doing that.
    I do not think--and again, Sharon and Henry are much more 
steeped in this than I am. I do not think that since the 1978 
amendments, in any agreement we have signed, anybody has gone 
and done anything from the standpoint of weapons development. 
And I think that since that time, as a country and also as a 
world with the enhanced safeguards that IAEA has come out with 
and we mandate and require, we probably have improved the 
process.
    As far as actually the committee approving things all the 
time, with all due respect, one of the problems that I have 
from a commercial business standpoint this time is the 
uncertainty it creates, not that you will disapprove. I am 
willing to accept you are allowed to do that and you might. It 
is the time. We are competing against really other--not just 
other competitors, not other suppliers but governments, and 
they can offer a lot of things that the United States actually 
cannot from the standpoint of even financing at times, even 
taking spent fuel back, which the Russians are willing to do. 
We think that would be a good thing for our country to be able 
to do, but until we have our own program working, it is very 
hard to discuss that in America.
    So I would caution gravely against moving to an approval 
process without a lot more discussion of the impact of 
unintended consequences where all we would do is not get 
agreements or get agreements that nobody ever exercises on the 
other side.
    Mr. Sokolski. Might I add? I actually agree with Marvin. If 
you do law, get the vote on a time-certain basis. The idea, 
though, that Congress should somehow see that it is an 
impediment to the review process or somehow is going to be 
unhelpful--I do not think that is right. You can do this. You 
put a time limit on how you vote and you get it done. You can 
tighten up the current process for sure.
    Senator Corker. So we are both going to have to run for a 
vote. But just briefly, how much of a rub is there? First of 
all, I am a strong proponent of nuclear energy, and I come from 
a State that, generally speaking, strongly supports nuclear 
energy, and I hope we continue along that path here in the 
United States.
    On the other hand, look, I have been in business too for a 
long time, and I understand the rubs that can exist. Is there 
pressure on the administration and other administrations from 
the nuclear industry to pursue agreements in a way that water 
down some of the standards in order to get them done to be able 
to compete appropriately against other countries? And I will 
ask you, Mr. Fertel, only and if you think he said something 
totally inappropriate, respond. Otherwise, we are probably 
going to bolt.
    Mr. Fertel. Thank you, Senator Corker.
    The simple answer, to be honest, is no. From my personal 
perspective, let alone our whole industry, the last thing we 
ever want to see are accidents from a safety standpoint or 
proliferation out of control. Okay. That is absolutely the last 
thing we would ever want as an industry is to have that happen.
    The pressure that I think we try to put on is actually 
timely behavior by the administration, whichever one it is, and 
greater transparency. But it is never to cut corners. And to be 
honest, in this country we never know what they are saying 
anyway. They do not tell us anything. In other countries, the 
industry may even know because the industry is owned by the 
government and they do it collaboratively.
    But the answer to your question, sir, is absolutely not.
    Senator Corker. Well, Madam Chairman, thank you for letting 
me go over a little bit.
    I thank the three of you for being here, and if you do not 
object, since we did not really have the full kind of 
discussion we normally have, our office would like to follow up 
with you all and ask additional questions. But thank you so 
much for being here. I appreciate it.
    Senator Shaheen. Thank you and thank you all very much.
    Let me just point out, as Senator Corker suggested, we will 
leave the record open until close of business tomorrow for 
other questions.
    Yes, sir?
    Mr. Sokolski. Madam Chairman, is it possible for us to 
submit an oral version of our statement in addition to the 
statement if they are different?
    Senator Shaheen. Absolutely. If you have additional 
comments that you would like to submit, please do that. We will 
include it in the record.
    Mr. Sokolski. Okay, because there are several things I need 
to submit. Thank you.
    Senator Shaheen. Good. Thank you.
    [Whereupon, at 11:30 a.m., the hearing was adjourned.]
                              ----------                              


              Additional Material Submitted for the Record

A Statement and Seven Letters Submitted by Henry Sokolski:

Prepared Statement of Victor Gilinsky, Energy Consultant and Served as 
 a Nuclear Regulatory Commissioner Under Presidents Ford, Carter, and 
                                 Reagan

    The issue before the committee--what standard to apply to U.S. 
nuclear exports--is one Congress and the Executive have struggled with 
since the beginning of the nuclear age.
    A bit of history provides a useful perspective on current 
arguments.
    The security dangers associated with nuclear fuel technologies were 
clear from the beginning. A country that can enrich uranium, or 
reprocess spent fuel to extract plutonium is within easy reach of the 
Bomb.
    In the early days of the cold war, despite an awareness of the 
dangers, we could not resist taking political and commercial advantage 
of our then-leading position in nuclear technology. Atoms for Peace, 
launched by President Eisenhower, allowed worldwide access with minimal 
protection to most of our nuclear technology, including reprocessing. 
The 1954 version of Section 123 of the Atomic Energy Act, covering 
agreements for cooperation, hardly required more than a recipient's 
promise to stick to peaceful uses.
    President Eisenhower rationalized that so long as projects were 
small, they did not pose problems. But information flow did pose a 
problem, and in time nuclear projects got bigger.
    The shock of the 1974 Indian nuclear explosion brought home how 
easily plutonium separated for ``peaceful purposes'' can end up in a 
bomb. It became evident that effective nonproliferation had to include 
restrictions on fuel cycle technologies. In 1975 the United States took 
the lead in creating the Nuclear Suppliers Group as a way of informally 
plugging the gaps in permissive trade rules.
    In 1976 President Ford changed U.S. nuclear policy to exclude 
plutonium separation. He urged other countries to adopt the same course 
until ``the world community can effectively overcome the associated 
risks of proliferation.'' President Carter continued in this direction.
    The 95th Congress was powerfully affected by the discovery that 
India had used U.S.-supplied heavy water to produce its bomb plutonium, 
in violation of a peaceful uses pledge. In the 1978 Nuclear Non-
Proliferation Act, Congress substantially tightened Section 123 
provisions, including adding the requirements that recipients accept 
comprehensive IAEA safeguards on all their facilities and prior U.S. 
consent over reprocessing of U.S.-supplied materials.
    That was the ``gold standard'' of the time. It required 
renegotiating some agreements for cooperation--a process strongly, and 
even bitterly, opposed by commercial interests.
    It was said we would lose business and jobs to nuclear suppliers 
with laxer rules, and that only if we are a major exporter and apply 
flexible rules will we have the leverage to influence recipients to act 
responsibly (``you have to play the game if you want a hand in setting 
the rules'').
    We hear the same arguments repeated today in opposition to 
including the current ``gold standard''--which requires a country 
buying U.S. power plants to promise not to enrich or reprocess--in 
future Section 123 agreements. The standard reflects our increased 
understanding that centrifuge technology threatens to make uranium 
enrichment widely available; and that there is no economic rationale 
for reprocessing so that it should have no place in the commercial 
nuclear fuel cycle.
    The fundamental question before us, now as in the past, is one of 
priorities. Which comes first--short-term commercial gain, or long-term 
national security? Do we accept prevailing standards, and stamp as 
futile any hope of reining in dangerous nuclear technologies? Or do we 
set higher standards, and provide leadership to convince the rest of 
the world to aim higher, too?
    President Ford's 1976 answer was: ``We must be sure that all 
nations recognize that the U.S. believes that nonproliferation 
objectives must take precedence over economic and energy benefits if a 
choice must be made.'' We need such leadership today, because 
ultimately the only way we can make the gold standard stick is by 
persuading countries that it is in their interest.
    Business and jobs are of course important, but it needs to be said 
that the jobs issue has been very much exaggerated. The projections of 
future nuclear capacity that are tossed about by opponents of tighter 
export standards are based on extremely bullish IAEA forecasts and 
equally overly optimistic estimates of the U.S. share of foreign 
business. Recall that India was held out as a case where U.S. nuclear 
business prospects were excellent if we only relaxed our export 
restriction. We did that in 2008--at great political cost among Non-
Proliferation Treaty members--and have yet to see any business.
    As to the notion that flexible export rules gain us leverage--
history tells us that when the circumstances require using our leverage 
the flexibility proponents argue strenuously against applying it. The 
truth is that flexibility is just code for going with the flow.
    There remains the immediate legislative question whether Congress 
should at least have to explicitly approve non-gold standard 123 
agreements. That it should makes good sense, especially as gold 
standard waivers could have far-reaching national security 
consequences. In fact, the entire process of negotiating 123 agreements 
would be improved if Congress had a greater role.
    This may be our last chance to craft a system of rules on the 
international use of nuclear energy that is compatible with 
international security. It's important to understand there is no 
technical fix. As a 2006 Bush administration nuclear strategy paper 
underlined (the italics were in the original), ``there is no technology 
`silver bullet' that can be built into an enrichment plant or 
reprocessing plant that can prevent a country from diverting these 
commercial fuel cycle facilities to non-peaceful use.''
    Our choice is to do the hard but necessary thing, or resign 
ourselves to a world full of countries with fuel facilities that put 
them within arm's reach of a bomb. It is to avoid that future that we 
need strict 123 agreements.
                                 ______
                                 
                                                 February 14, 2012.
Hon. Barack Obama,
President of the United States,
The White House, Washington, DC.
    Dear President Obama: We write to urge you to uphold the so-called 
nonproliferation ``Gold Standard'' in all future U.S. civil nuclear 
cooperative agreements with countries that lack nuclear weapons. This 
new standard--which was created by the U.S. civil nuclear cooperation 
agreement with the United Arab Emirates (U.A.E.) that President Bush 
began and that you finalized--requires non-nuclear-weapons states not 
only to forgo uranium enrichment, spent-fuel reprocessing, and other 
nuclear fuel-making activities, but also to open themselves up to 
intrusive international inspections.
    The nonproliferation Gold Standard enjoys strong bipartisan support 
because it creates a powerful model for constructive nuclear behavior 
throughout the world--one that isolates Iran's dangerous efforts to 
acquire nuclear weapons capability in violation of its international 
obligations. News reports, however, suggest that your administration 
has decided to abandon this standard in favor of a ``case-by-case 
review.'' We believe that dropping this standard is a prescription for 
nuclear proliferation mischief that will only embolden Iran and other 
potential nuclear weapons-seeking states.
    The ``case-by-case'' approach risks displeasing our friend, the 
United Arab Emirates. The Emirates was asked to meet the 
nonproliferation Gold Standard and obliged. The U.A.E. agreement, 
however, stipulated that if the United States negotiates more generous 
terms with any other Middle Eastern state, then the Emirates has a 
right to demand similar treatment. If your administration takes the 
``case-by-case'' approach in negotiating future civil nuclear 
cooperation agreements with Jordan, Saudi Arabia, and other countries, 
then this will only ensure the undoing of the new standard entirely. 
Undermining our good relations with the Emirates would only add insult 
to this injury.
    More important, if the United States is willing to allow Vietnam, 
Jordan, or South Korea to make nuclear fuel--a process that brings 
nations to the very brink of acquiring nuclear weapons--how will the 
United States and its supporters be able to persuade other states, 
including Iran, to forgo such dangerous nuclear activities? The 
question answers itself.
    The counterargument made by officials in the State and Energy 
Departments is that the United States must be in the nuclear export 
business to have any hope of controlling it, and that tightening 
nonproliferation conditions on U.S. nuclear exports will only reduce 
America's sales opportunities. This line of argument, however, is 
misguided and poorly informed. Certainly, after the Fukushima nuclear 
disasters in Japan, demand for nuclear power has declined, especially 
for reactors from U.S. vendors, all of whom require the prospective 
recipient to forswear ever suing them in the case of a nuclear 
accident. As such, new significant exports of controlled U.S. nuclear 
goods are unlikely.
    Instead, the United States itself is an important market for 
foreign nuclear fuel-making and reactor vendors. Rather than abandon 
efforts to tighten nonproliferation controls on civil nuclear exports, 
the United States should be leveraging access to our market to 
encourage French, Russian, and Asian nuclear suppliers to tighten their 
own rules to meet the nonproliferation Gold Standard.
    We stand ready to support you in making such an effort. We 
certainly believe the current course that you have reportedly set is 
the wrong one.
            Sincerely,
                    John R. Bolton; Stephen J. Hadley; Kori Schake; 
                            Jack David; John P. Hannah; Gary J. 
                            Schmitt; Paula A. DeSutter; Robert G. 
                            Joseph; Henry D. Sokolski; Eric S. Edelman; 
                            Clifford D. May; William H. Tobey; Jamie M. 
                            Fly; Gary Milhollin; Mark D. Wallace; 
                            Christopher A. Ford; Samantha Ravich; R. 
                            James Woolsey; Victor Gilinsky; Henry S. 
                            Rowen; Dov S. Zakheim.
                                 ______
                                 
                                                 November 15, 2010.
President Barack Obama,
The White House,
Washington, DC.
    Dear Mr. President: We are writing to ask that you begin to apply a 
more forward-leaning policy to prevent the international spread of 
easy-to-militarize nuclear fuel making activities, such as uranium 
enrichment and spent fuel recycling. As part of this policy, we believe 
the U.S. Government should declare that it will not provide U.S. 
federal energy loan guarantees, federal contracts, or other subsidies 
or assistance to help foreign government-backed nuclear firms expand 
their nuclear business in the U.S. unless they have committed to apply 
the nonproliferation standards (including with respect to enrichment 
and spent fuel recycling) established in the U.S.-United Arab Emirates 
(UAE) civilian nuclear cooperation agreement in all of their future 
civilian nuclear cooperation agreements.
    Consistent with this policy, we urge you not to grant Electricitee 
de France (EDF), a French Government-owned utility, any federal energy 
loan guarantees for the construction of a new nuclear power plant at 
Calvert Cliffs, Maryland, unless the French Government is willing to 
uphold the nonproliferation standards established in the U.S.-UAE 
agreement in its future civilian nuclear cooperation agreements. 
Further, we recommend that the $2 billion conditional loan guarantee 
recently approved by the U.S. Department of Energy (DOE) to Areva, 
another French Government-owned firm, to build a uranium enrichment 
facility in Idaho be conditioned upon adoption by the French Government 
of these standards.
    Some of the signatories below oppose federal loan guarantees for 
any energy commercialization project. A few oppose loan guarantees 
specifically for commercial nuclear energy; and a smaller number have 
taken no position on the general advisability of federal energy loan 
guarantees. Yet, all of us believe that it makes no sense for our 
government to help foreign firms expand their nuclear business in the 
U.S. with federal loan guarantees, government contracts, or Nuclear 
Regulatory Commission licenses unless they are willing to support the 
very toughest nuclear nonproliferation standards our own government has 
developed in the U.S.-UAE deal.
    Under the U.S.-UAE deal, initially negotiated under the Bush 
administration but refined and finalized under yours, the U.S. extended 
nuclear cooperation and the sale of U.S.-controlled nuclear goods in 
exchange for the UAE promising not to 
enrich uranium or recycle spent fuel and to ratify a enhanced nuclear 
inspection agreement known as the Additional Protocol with the 
International Atomic Energy Agency. This set of sound nonproliferation 
conditions was rightly hailed as a major nonproliferation breakthrough. 
Unfortunately, too little was done to get other major nuclear supplier 
states, including close allies such as France, to adopt a similar set 
of nonproliferation conditions.
    We are concerned that approving $9.5 billion dollars in federal 
loan guarantees to help the French Government expand its nuclear 
business here in the U.S. without first securing its commitment to 
support the nonproliferation standards of the U.S.-UAE agreement will 
set a bad precedent. First, it cannot help but be seen as a reward to a 
nuclear supplier that has given U.S. nonproliferation policy 
insufficient support. Second, a key argument that U.S. policy makers 
(both Democratic and Republican) have made repeatedly is that nuclear 
fuel making (uranium enrichment and recycling of spent reactor fuel) is 
unnecessary and uneconomical for emerging nuclear power programs. 
Certainly, our government's willingness to assume virtually all of the 
financial risks associated with several domestic reactors and nuclear 
fuel plant projects demonstrates that they are not yet commercially 
viable in the U.S. either. If the U.S. Government is willing to assume 
these financial risks, on what grounds can our government argue that 
other governments should not do likewise?
    In this regard, limiting future federal assistance to building only 
power reactors in the U.S. would do little to reduce this moral hazard. 
The reason why is plain: First-generation nuclear fuel making 
facilities generally cost much less to build than new, large nuclear 
power plants. If our government is willing to massively subsidize the 
construction of new nuclear power plants, it naturally follows that the 
lack of profitability of much less expensive fuel making facilities 
should weigh even less in other governments' calculations.
    These points are basic. The success of U.S. efforts to reduce the 
dangers of nuclear proliferation depends critically upon the U.S. 
upholding the standards it sets and doing all it can to encourage 
others to do likewise. That is why we believe that guaranteeing 
billions of dollars in federal loans to foreign nuclear suppliers, such 
as EDF, to expand their nuclear business in the U.S. without first 
requiring such suppliers to uphold the nonproliferation standards that 
U.S. nuclear vendors must live by is not just bad business, but 
dangerous.
            Respectfully,

Henry Sokolski, Executive Director, The Nonproliferation Policy 
        Education Center, DOD Deputy for Nonproliferation Policy under 
        Bush (41);
Charles Ferguson, President, Federation of American Scientists;
Jamie Fly, Executive Director, Foreign Policy Initiative, NSC director 
        for Counterproliferation Policy under Bush (43);
Jeffrey Kueter, President, George C. Marshall Institute;
Victor Gilinsky, U.S. Nuclear Regulatory Commissioner under Ford, 
        Carter, and Reagan;
Henry S. Rowen, Hoover Institution, Assistant Secretary of Defense 
        under Bush (41), Chairman of the National Intelligence Council 
        under Reagan;
Daryl Kimball, Executive Director, Arms Control Association;
Stephen Rademaker, Assistant Secretary of State for Arms Control and 
        Nonproliferation under Bush (43);
Peter Bradford, University of Vermont, U.S. Nuclear Regulatory 
        Commissioner under Carter;
Thomas Cochran, Chief Nuclear Scientist, Natural Resources Defense 
        Council;
Chris Ford, Hudson Institute, U.S. Representative to NPT Review 
        Conference under Bush (43);
David Albright, President, Institute for Science and International 
        Security;
Mark Wallace, President, United Against Nuclear Iran, U.S. Ambassador 
        to the U.N. under Bush (43);
Gary Milhollin, Director, Wisconsin Project on Nuclear Arms Control;
Frank Von Hippel, Princeton University, Assistant Director for National 
        Security in the White House Office of Science and Technology 
        Policy under Clinton;
Jack David, Hudson Institute, Deputy Assistant Secretary of Defense for 
        Combating WMD and Negotiations Policy under Bush (43).
                                 ______
                                 
                                                September 20, 2012.
Hon. Barack Obama,
President of the United States,
The White House, Washington, DC.
    Dear Mr. President: We are encouraged by reports that Taiwan has 
embraced the nonproliferation ``Gold Standard'' for civil nuclear 
activities in the forthcoming renewal of its existing nuclear 
cooperative agreement with the U.S., expressly giving up enriching 
uranium and recycling spent fuel to extract plutonium. We are 
concerned, however, that the State Department may not secure similar 
commitments in negotiations for civil nuclear cooperation agreements 
with Saudi Arabia, South Korea, Jordan, Vietnam, and other non-nuclear-
weapon states. We therefore urge you to clarify U.S. policy on seeking 
such commitments before either negotiating or initialing any additional 
civil nuclear cooperation agreements beyond that with Taiwan.
    As recent experience with Iran demonstrates, mastery of the 
technical steps involved in making nuclear fuel brings states 
perilously close to acquiring nuclear weapons. That is why the U.S. 
civil nuclear cooperation agreement with the United Arab Emirates 
(U.A.E.), which entered into force in December 2009, was path-breaking. 
Through this agreement, the U.A.E. pledged not only to foreswear 
nuclear fuel-making activities, but to sign and implement the so-called 
``Additional Protocol,'' which allows the International Atomic Energy 
Agency to conduct much more intrusive nuclear inspections than those 
permitted under standard safeguards agreements.
    When the text of the U.S.-U.A.E. nuclear agreement was made public, 
the State Department described it as creating a new nonproliferation 
``Gold Standard'' for civil nuclear cooperation agreements. At the 
time, you praised the agreement as a ``tangible expression'' of 
America's desire to cooperate to develop peaceful nuclear power with 
states in ``the Middle East, and elsewhere'' in ``a manner consistent 
with the highest nonproliferation, safety and security standards.'' 
Yet, in an unfortunate reversal of policy earlier this year, senior 
officials from the State and Energy Departments told Congress in a 
letter that they believed efforts to universally apply the new standard 
would disadvantage the U.S. nuclear industry and, as a consequence, the 
U.S. instead would take a ``case-by-case'' approach.
    We understand that in response to congressional and public 
criticism of the decision to abandon the nonproliferation ``Gold 
Standard,'' the executive branch launched an interagency review, which 
the State Department has now completed and submitted to the National 
Security Council.
    Defining the nonproliferation conditions the United States intends 
to place on its civil nuclear cooperation in general is essential to 
protecting U.S. interests, and we believe requiring that the ``Gold 
Standard'' be met in all U.S. nuclear cooperative agreements with 
states that lack nuclear weapons is the necessary set of conditions to 
achieve that end.
    Indeed, we believe our government should not only support such 
requirements, but actively encourage other nuclear supplier states to 
do so as well. Therefore, we urge you to end the ambiguity that has 
arisen concerning this vital issue and to clearly state that it is U.S. 
policy to apply the ``Gold Standard.''
            Sincerely,
                    Congressman Howard L. Berman; Ambassador John R. 
                            Bolton; Peter A. Bradford; Charles D. 
                            Ferguson; Jamie M. Fly; Congressman Jeff 
                            Fortenberry; Victor Gilinsky; Daryl G. 
                            Kimball; Jodi Lieberman; Congressman Edward 
                            J. Markey; Gary Milhollin; Christopher E. 
                            Paine; Kingston Reif; Congresswoman Ileana 
                            Ros-Lehtinen; Congressman Ed Royce; 
                            Congresswomen Loretta Sanchez; Gary J. 
                            Schmitt; Congressman Brad Sherman; Henry D. 
                            Sokolski; Leonard S. Spector; William H. 
                            Tobey; Leonard Weiss.
                                 ______
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 ______
                                 

           Responses of Hon. Thomas Countryman to Questions 
                  Submitted by Senator Robert Menendez

    Question. I understand that Vietnam was willing to declare its 
intention, which is not legally binding, to only use foreign-supplied 
fuel for foreign-supplied reactors. That is close to the Gold Standard, 
if Vietnam cannot build its own reactors; call it, the ``Silver 
Standard.''

   My question is, why wasn't Vietnam required to make this 
        lesser, but still important, statement of intent into a binding 
        part of its new agreement? Have you asked them to do that?

    Answer. Our approach to 123 agreements allows for flexibility in 
structuring the legal and political commitments while meeting the 
requirements for U.S. law and maintaining our principled stance that 
seeks the fewest number of additional weapons and enrichment and 
reprocessing facilities around the world. The United States firmly 
believes that it is in our national interest to enter into 123 
agreements with as many countries as possible so that we can maximize 
the reach of U.S. nonproliferation controls, which are the most 
stringent in the world.
    With respect to Vietnam, the United States secured a political 
commitment from the Government of Vietnam to rely on the existing 
international market to satisfy their need for nuclear fuel services, 
rather than acquiring sensitive nuclear technologies. Vietnam has 
stated that it has no intent to enrich or reprocess nuclear material, 
and lacks the capability to do so. Given that there is no evidence that 
Vietnam has interest, activity, or capability in the ENR area, the 
United States concluded the agreement that incorporates the Vietnamese 
political commitment in the context of other legally binding U.S. 
nonproliferation controls contained in all 123 agreements.
    Along with the terms of the 123 Agreement, the United States also 
secured Vietnam's support for significant nonproliferation initiatives 
and steps. Since 2010, Vietnam has:

   Brought into force an Additional Protocol with the IAEA;
   Brought into force the Convention on the Physical Protection 
        of Nuclear Materials;
   Endorsed the Global Initiative to Combat Nuclear Terrorism;
   Completed conversion of the Dalat reactor from using HEU 
        fuel to LEU and returned the last of its HEU fresh fuel and 
        spent fuel to Russia;
   Acceded to the Convention on Nuclear Safety; and
   Brought into force the Joint Convention on the Safety of 
        Spent Fuel Management and on the Safety of Radioactive Waste 
        Management.

    Question. When China joined the Nuclear Suppliers Group--a move 
that the United States had to support, since the NSG operates on 
consensus--it agreed not to provide nuclear reactors to countries that 
do not have comprehensive IAEA safeguards on all their nuclear 
activities. Yet, China continues to build new reactors in Pakistan, 
which does not have such comprehensive safeguards; this arguably 
weakens the NSG.

   What price should China pay for such noncompliance? Should 
        it be an issue when a new China cooperation agreement comes to 
        the Congress next year?

    Answer. China's expanding civil nuclear cooperation with Pakistan 
raises serious concerns and we urge China to be more transparent 
regarding this cooperation.
    The United States believes that the announced agreement for Chinese 
provision to Pakistan of new nuclear reactors extends beyond 
cooperation that was ``grandfathered'' when China was approved for 
Nuclear Security Group (NSG) membership in 2004. NSG Participating 
Governments have discussed the issue of China's expansion of nuclear 
cooperation with Pakistan at the last several NSG plenary sessions, 
with the United States and other NSG members stating that they view the 
Chinese supply of these reactors as being inconsistent with the NSG 
Guidelines. We expect that the issue will continue to be raised by 
Participating Governments at NSG plenary sessions until China provides 
a comprehensive explanation or the cooperation is halted.
    The administration is currently in negotiations with China on a new 
123 agreement. The issue of China's potential nuclear cooperation with 
Pakistan will be further addressed when the new 123 agreement package 
for China comes before Congress.

    Question. In past section 123 agreements, we have touched upon 
environmental, health, and safety issues related to the use of nuclear 
energy. For example, in our agreement with Russia, article 17 has the 
parties cooperate in protecting the international environment from 
contamination arising from peaceful nuclear activities, and our 
agreements with Japan and the Republic of Korea calls on the parties to 
exchange information in matters of health and safety. However, these 
treaty requirements are quite vague.

   In light of the Fukushima disaster, should we consider 
        changing this approach to flesh out and detail our conditions 
        for addressing health, safety, and environmental impacts in 
        future nuclear agreements?
   Shouldn't we be insisting that nations entering into new 
        agreements commit to international best practices with regards 
        to safety and protecting the environment?

    Answer. The United States has always placed the highest priority on 
ensuring that civil nuclear power reactors are operated in the safest 
and most reliable manner possible. The tragic events at Fukushima 
served to heighten U.S. efforts in this regard.
    The United States has a wide variety of means to enhance the safety 
of civil nuclear power. In this regard, the United States is currently 
working in bilateral and multilateral fora to encourage states to apply 
high standards of safety and environmental responsibility in conducting 
nuclear activities for peaceful purposes. We urge all states 
considering nuclear programs to take early account of the obligations 
of Contracting Parties under the Convention on Nuclear Safety, to 
become parties to that Convention, and participate in International 
Atomic Energy Agency peer review missions. All countries to which we 
have supplied a power reactor subject to one of our Agreements for 
Cooperation are parties to this Convention.
    The United States has a robust engagement strategy to work with 
those countries considering nuclear power programs to help them 
incorporate nuclear safety standards. We work bilaterally through 
programs such as the safety assistance programs offered by the U.S. 
Department of Energy and Nuclear Regulatory Commission, and 
internationally through the International Atomic Energy Agency (IAEA) 
and regional nuclear safety organizations, such as the Asia Nuclear 
Safety Network. We also play a leadership role in the IAEA's safety 
activities, working to establish a set of internationally accepted best 
practices. We believe this current combination of efforts has been, and 
will continue to be, extremely effective in raising the bar on global 
nuclear safety efforts in the post-Fukushima era.
    The United States also addresses the nuclear safety issues in the 
context of 123 agreements. In both the terms of the agreements, and the 
NRC's export licensing process, the United States ensures that any 
country engaging in civil nuclear cooperation with the United States 
abides by the highest nuclear safety standards in the world.
                                 ______
                                 

              Responses of Daniel B. Poneman to Questions 
                  Submitted by Senator Robert Menendez

    Question. Over the last 30 years, we have seen a significant 
decline in the U.S share of the market and in our ability to promote 
national security objectives through peaceful nuclear cooperation. What 
are the principle reasons behind this decline?

    Answer. The reasons for the decline in U.S. share of the global 
civilian nuclear market are mainly due to three factors: (1) Lack of 
financing for U.S. technology; (2) more competition in the market; and 
(3) concerns about reliability of supply given the debate about the 
future of the U.S. civil nuclear program. While the first two elements 
are not within the administration's direct control, assuring our 
partners that U.S. companies will remain reliable suppliers is of 
paramount importance.
    As our vendors become more engaged in finding solutions to 
financing concerns and buyers realize that the U.S. has the safest most 
reliable technology, our ability to put more 123s in place and promote 
our national security objectives will increase.

    Question. As you know, U.S. vendors are usually outbid by state-
subsidized foreign competitors; U.S. reactors may be the best in the 
world, but second-best and far cheaper often win the bids. U.S. reactor 
vendors do not play on a fair playing field: what is the administration 
doing about that? Has the administration considered filing a complaint 
with the World Trade Organization for unfair trading practices against 
these subsidized foreign competitors?

    Answer. The administration has not considered filing a complaint 
with the World Trade Organization (WTO) for unfair trading practices 
against foreign competitors. In looking at the situation, while many 
competitors are partly or wholly owned by their governments, we do not 
believe that taking action in the WTO would be beneficial for our 
vendors or the global nuclear industry. Instead we are seeking ways to 
find financing solutions for U.S. companies to take advantage of when 
bidding on foreign projects. The administration has been working with 
Ex-Im Bank and other financial institutions to provide options that 
would place U.S. vendors on a level playing field with our foreign 
competitors.
                                 ______
                                 

           Responses of Hon. Thomas Countryman to Questions 
                    Submitted by Senator Marco Rubio

    Question. Do nonnuclear weapons states have the right to enrich 
uranium or reprocess plutonium under the Nuclear Nonproliferation 
Treaty (NPT)?

    Answer. The NPT does not specifically delineate rights that Non-
Nuclear Weapon States have to any particular type of nuclear 
technology. Rather, the treaty states that all parties to the treaty 
have the inalienable right to develop research, production, and use of 
nuclear energy for peaceful purposes. However, the treaty makes an 
important qualification; the right to peaceful uses of nuclear energy 
must be exercised according to a party's nonproliferation obligations. 
A party, like Iran, that has repeatedly developed clandestine 
capabilities that could support a nuclear weapons program, remained in 
chronic violation of IAEA safeguards, and failed satisfactorily to 
explain that possible military dimensions are, in fact, part of a 
purely peaceful program, has not fulfilled its nonproliferation 
obligations under the NPT, therefore has no right to technologies--like 
enrichment--that otherwise could be permissible under Article IV of the 
treaty. NPT states party that violate the terms of their safeguards 
agreements are not entitled to the benefits of peaceful nuclear 
cooperation under the treaty.

    Question. Do you think the existence of a (now internationally 
accepted) uranium enrichment program in Iran will make it more or less 
difficult to limit the spread of ENR technology?

    Answer. The United States and its international partners have not 
``accepted'' Iran's uranium enrichment program and certainly do not 
accept Iran's claim that it has a ``right'' to enrich. The Joint Plan 
of Action (JPOA) in no way acknowledges Iran's quest for recognition of 
any ``right to enrichment.''
    In line with the Obama administration's long-standing policy 
opposing the spread of enrichment and reprocessing (ENR) technologies, 
the JPOA halts progress on the most worrisome elements of Iran's 
nuclear program and rolls it back in key respects, including by 
limiting Iran's enrichment capacity and diluting or converting Iran's 
stockpile of near 20 percent low enriched uranium.
    As the United States conducts negotiations on a long-term 
comprehensive solution to provide confidence that Iran's nuclear 
program is exclusively peaceful, we will continue our efforts to combat 
the proliferation of ENR technologies, making use of the various tools 
at our disposal to achieve our nonproliferation goals.

    Question. Do you agree with the assessment in the recently released 
Defense Science Board study that there is a serious and growing gap in 
our nuclear monitoring and verification capabilities to prevent further 
nuclear proliferation diversions from ostensibly ``peaceful'' nuclear 
programs?

    Answer. The United States has long supported efforts to strengthen 
international verification of peaceful nuclear activities through the 
safeguards system of the International Atomic Energy Agency (IAEA). 
Thanks in no small measure to U.S. technical assistance that dates back 
to 1977, the IAEA has a robust technical capability to monitor declared 
nuclear materials and facilities.
    Even with this capability, we recognize that there are limits to 
the capability of nuclear monitoring techniques to detect clandestine 
nuclear activities, especially at undeclared locations. Since the early 
1990s, when Iraq's clandestine nuclear activities came to light, we 
have made it a priority to strengthen the IAEA's ability to respond to 
indications of undeclared nuclear activities, in order to fulfill its 
mandate to apply safeguards to all nuclear material in a given state. 
The international community now expects the IAEA to follow up on 
credible information from any source, including intelligence sources. 
The Additional Protocol gives the IAEA expanded information and access 
rights to enable it to provide an assurance of the absence of 
undeclared activities. Since 1997, 122 countries, including the United 
States, have brought additional protocols in force.
    We have also redoubled our efforts to strengthen IAEA technical 
tools to detect clandestine nuclear activity. The State Department 
provided financial and technical support to the successful project to 
upgrade the Safeguards Analytical Laboratories. In 2008, the Department 
of Energy launched the Next Generation Safeguards Initiative (NGSI) to 
strengthen its technical capabilities to support IAEA safeguards, 
including by revitalizing the technology and human capital base at 
national laboratories.
    For any comment on our intelligence posture and capabilities I 
would refer you to the Intelligence Community. As for the report itself 
we are reviewing the findings and recommendations and will continue to 
look for ways to enhance international verification measures.

    Question. Have you or any other administration official actually 
asked their foreign counterparts in other key nuclear supplier states--
e.g., Russia, China, Japan, Korea, Holland, Germany, France--if they 
would be willing to adhere to the Gold Standard in their own exports of 
nuclear goods?

    Answer. The United States has ongoing, robust discussions with the 
major nuclear suppliers about efforts to strengthen the nuclear 
nonproliferation regime and prevent further proliferation of enrichment 
and reprocessing (ENR) technologies.
    In 2004, the United States proposed a new initiative in the Nuclear 
Suppliers Group (NSG), which includes all the major nuclear supplier 
states, to ban new transfers of ENR technologies to states that did not 
already possess such fully operational facilities. It took years of 
U.S.-led global diplomatic efforts and a new approach to finally 
achieve a revision in 2011 to the NSG Guidelines that significantly 
tightened the criteria regarding possible ENR technology transfers. The 
revision limits transfers of ENR technology to only those partners that 
meet significant nonproliferation and economic criteria and can only be 
transferred in a way that does not allow recipients to gain access to 
key sensitive technologies (a so-called ``black box.'') The NSG 
continues to explore ways to further tighten and clarify its 
guidelines.
    Additionally, the United States consults bilaterally with other 
supplier states on a regular basis, and we consistently reinforce our 
long-standing policy to combat the proliferation of ENR technologies 
and our desire for other suppliers to adopt similar measures. Through 
these consultations, we see no indication that other suppliers have any 
interest in providing these sensitive technologies to states that do 
not already possess them.
                                 ______
                                 

              Responses of Daniel B. Poneman to Questions 
                    Submitted by Senator Marco Rubio

    Question. Do nonnuclear weapons states have the right to enrich 
uranium or reprocess plutonium under the Nuclear Non-Proliferation 
Treaty (NPT)?

    Answer. The NPT does not specifically delineate rights that Non-
Nuclear Weapon States have to any particular type of nuclear 
technology. Rather, the treaty states that all parties to the treaty 
have the inalienable right to develop research, production and use of 
nuclear energy for peaceful purposes. However, the treaty makes an 
important qualification; the right to peaceful uses of nuclear energy 
must be exercised according to a party's nonproliferation obligations. 
A party, like Iran, that has repeatedly developed clandestine 
capabilities that could support a nuclear weapons program, remained in 
chronic violation of IEA safeguards, and failed satisfactorily to 
explain that possible military dimensions are in fact part of a purely 
peaceful program, has not fulfilled its nonproliferation obligations 
under the NPT, therefore has no right to technologies--like 
enrichment--that otherwise could be permissible under article IV of the 
treaty. NPT States Party that violate the terms of their safeguards 
agreements are not entitled to the benefits of peaceful nuclear 
cooperation under the treaty.

    Question. Do you think the existence of a (now internationally 
accepted) uranium enrichment program in Iran will make it more or less 
difficult to limit the spread of ENR technology?

    Answer. The United States and its international partners have not 
``accepted'' Iran's uranium enrichment program and certainly do not 
accept Iran's claim that it has a ``right'' to enrich. The Joint Plan 
of Action (JPOA) in no way acknowledges Iran's quest for recognition of 
any ``right to enrichment.''
    In line with the Obama administration's long-standing policy 
opposing the spread of enrichment and reprocessing (ENR) technologies, 
the JPOA halts progress on the most worrisome elements of Iran's 
nuclear program and rolls it back in key respects, including by 
limiting Iran's enrichment capacity and diluting or converting Iran's 
stockpile of near 20-percent low enriched uranium.
    As the United States conducts negotiations on a long-term 
comprehensive solution to provide confidence that Iran's nuclear 
program is exclusively peaceful, we will continue our efforts to combat 
the proliferation of ENR technologies, making use of the various tools 
at our disposal to achieve our nonproliferation goals.

    Question. Do you agree with the assessment in the recently released 
Defense Science Board study that there is a serious and growing gap in 
our nuclear monitoring and verification capabilities to prevent further 
nuclear proliferation diversions from ostensibly ``peaceful'' nuclear 
programs?

    Answer. The United States has long supported efforts to strengthen 
international verification of peaceful nuclear activities through the 
safeguards system of the International Atomic Energy Agency (IAEA). 
Thanks in no small measure to U.S. technical assistance that dates back 
to 1977, the IAEA has a robust technical capability to monitor declared 
nuclear materials and facilities.
    Even with this capability, we recognize that there are limits to 
the capability of nuclear monitoring techniques to detect clandestine 
nuclear activities, especially at undeclared locations. Since the early 
1990s, when Iraq's clandestine nuclear activities came to light, we 
have made it a priority to strengthen the IAEA's ability to respond to 
indications of undeclared nuclear activities, in order to fulfill its 
mandate to apply safeguards to all nuclear material in a given state. 
The international community now expects the IAEA to follow up on 
credible information from any source, including intelligence sources. 
The Additional Protocol gives the IAEA expanded information and access 
rights to enable it to provide an assurance of the absence of 
undeclared activities. Since 1997, 122 countries, including the United 
States, have brought additional protocols in force.
    We have also redoubled our efforts to strengthen IAEA technical 
tools to detect clandestine nuclear activity. The State Department 
provided financial and technical support to the successful project to 
upgrade the Safeguards Analytical Laboratories. In 2008, the Department 
of Energy launched the Next Generation Safeguards Initiative (NGSI) to 
strengthen its technical capabilities to support IAEA safeguards, 
including by revitalizing the technology and human capital base at 
national laboratories.
    For any comment on our intelligence posture and capabilities I 
would refer you to the intelligence community. As for the report itself 
we are reviewing the findings and recommendations and will continue to 
look for ways to enhance international verification measures.

    Question. Have you or any other administration official actually 
asked their foreign counterparts in other key nuclear supplier states--
e.g., Russia, China, Japan, Korea, Holland, Germany, France) if they 
would be willing to adhere to the Gold Standard in their own exports of 
nuclear goods?

    Answer. The United States has ongoing, robust discussions with the 
major nuclear suppliers about efforts to strengthen the nuclear 
nonproliferation regime and prevent further proliferation of enrichment 
and reprocessing (ENR) technologies.
    In 2004, the United States proposed a new initiative in the Nuclear 
Suppliers Group (NSG), which includes all the major nuclear supplier 
states, to ban new transfers of ENR technologies to states that did not 
already possess such fully operational facilities. It took years of 
U.S.-led global diplomatic efforts and a new approach to finally 
achieve a revision in 2011 to the NSG Guidelines that significantly 
tightened the criteria regarding possible ENR technology transfers. The 
revision limits transfers of ENR technology to only those partners that 
meet significant nonproliferation and economic criteria and can only be 
transferred in a way that does not allow recipients to gain access to 
key sensitive technologies (a so-called ``black box.'') The NSG 
continues to explore ways to further tighten and clarify its 
guidelines.
    Additionally, the United States consults bilaterally with other 
supplier states on a regular basis, and we consistently reinforce our 
long-standing policy to combat the proliferation of ENR technologies 
and our desire for other suppliers to adopt similar measures. Through 
these consultations, we see no indication that other suppliers have any 
interest in providing these sensitive technologies to states that do 
not already possess them.
                                 ______
                                 

              Responses of Henry D. Sokolski to Questions 
                    Submitted by Senator Marco Rubio

    Question. Do you agree with the Congressional Research Service's 
tally of U.S.-controlled nuclear exports over the last 4 years being 
roughly $1.4 billion (i.e., just roughly $300-$400 million a year) and 
that most of these exports were nuclear fuel services (enriched gas)?
    How many American jobs do you estimate are generated by these 
nuclear exports? Have you done a nuclear specific analysis?

    Answer. The Congressional Research Service and the Government 
Accountability Office (GAO) and, Senator Markey recently released 
analyses based on official and industry trade figures and U.S. Nuclear 
Regulatory Commission export license records. According to the GAO 2010 
report, which tracked exports from 1994-2008, the United States on 
average exported $1.4 billion annually in nuclear fuel and $290 million 
in reactor components. Using the Commerce Department figure of $1 
billion in exports is worth 5,000-10,000 jobs, the number of jobs U.S. 
nuclear exports represents would be 8,500 to 17,000. This range, 
however, may need to be pushed downward because GAO determined U.S. 
share of global nuclear exports annually declined during this period 25 
percent down to 10 percent. Also, the amount of U.S. domestic 
manufacturing of U.S.-designed reactor parts declined significantly 
during this period. So it would be likely that the exports represented 
U.S.-designed parts that were manufactured oversees in whole or in part 
much more today than in 1994. This would reduce the jobs numbers even 
further.

    Question. Isn't it correct that given that most of the U.S. nuclear 
industry's business is in nuclear fuel services, the industry actually 
benefits when countries commit to not enrich or reprocess?

    Answer. Yes. The nuclear vending industry, however, is opposed to 
any additional restrictions on potential future markets, perhaps, 
because the value of their industry will only decline unless they can 
convince investors that every one of the inflated number of reactor 
sales they claim are possible are certain and will actually occur.

    Question. The nuclear industry has argued that Vietnam is the 
largest prospective nuclear market for U.S. companies in Asia. If so, 
what do you make of Vietnam's recent announcement that it is delaying 
the start of construction of its first Russian nuclear plant by at 
least 6 years to 2020?

    Answer. The take away from this news is that our negotiators 
apparently were overeager in striking this deal with Vietnam as early 
as they did. It appears that, at the very least, they prematurely short 
on the nonproliferation conditions they might otherwise have gotten. 
Whether the United States could have gotten a better deal would have 
depended largely on whether or not our negotiators made a serious 
effort to convince ROSATOM, URENCO, AREVA, and Japanese and Korean 
nuclear vendors who either wish to do significant business in the 
United States or who currently do, to adopt nonproliferation conditions 
similar to those we asked for of the UAE and Taiwan. Since we have yet 
to seriously negotiate for the adoption of the Gold Standard with other 
nuclear suppliers, though, we don't yet know what is possible.

    Question. If this is the best market for U.S. nuclear exports in 
East Asia, what does this tell us about the prospects for sales 
elsewhere? Where exactly are these U.S. reactor markets outside of 
countries with which we already have 123 agreements?

    Answer. What it tells us is that the prospects for the United 
States selling any reactors to states that don't already have a 123 
agreement are poor with the possible exception of Saudi Arabia. Outside 
of the Saudi market, U.S. reactor sales will be few and far between for 
quite awhile. Europe is closing down at least as many reactors as it 
might be interested in building and the handful of new Euro builds are 
more likely to be Russian and French machines than plants built by 
Westinghouse or GE in cooperation with Japanese nuclear vendors. Japan 
will not be importing new U.S. reactors nor will Korea or China. Each, 
moreover, has scaled back their pre-Fukushima nuclear building plans. 
Whatever reactors they do build will be constructed almost entirely 
with domestic engineers and domestic content. India, meanwhile, is 
unlikely to change its nuclear accident liability laws to suit the 
demands of any U.S. nuclear exporter. This leaves the Saudi market, 
which is most controversial. The Saudis, who have sovereign credit of 
their own, say they want to import 16 reactors by 2030. Senior Saudis, 
though, have also made it clear that Saudi Arabia is interested in 
developing a bomb option if Iran is allowed to get nuclear weapons. 
U.S. nuclear industry officials and State officials have not yet come 
out in favor yet of cutting any deal that would allow Saudi Arabia to 
enrich or reprocess. This possibility, however, deserves watching.
                                 ______
                                 

              Responses of Sharon Squassoni to Questions 
                    Submitted by Senator Marco Rubio

    Question. Do you agree with the Congressional Research Service's 
tally of U.S. nuclear exports over the last 4 years being roughly $1.4 
billion (roughly $300-$400 million per year) and that most of these 
exports were nuclear fuel services?

    Answer. Assigning a figure to U.S. nuclear exports has been 
difficult because of deficiencies in reporting. The November 2010 GAO 
report on Nuclear Commerce (GAO 11-36) highlighted the fact that the 
government does not track the amount and value of exports associated 
with U.S. peaceful nuclear cooperation agreements. The only figures 
available are from the industry itself, but even industry experts 
acknowledge that it is difficult to tally.
    The U.S. has not exported reactors in the last 4 years, but it has 
probably exported major components and certainly it has exported 
services, including uranium enrichment. Its engineering, procurement 
and construction firms (e.g., Bechtel, URS, Shaw) have been involved in 
many reactor retrofits and new construction projects. In the case of 
reactor sales to China (AP-1000), the Westinghouse agreement allowed 
for significant indigenous supply, reducing the potential for U.S. 
exports.
    Fuel exports and services (conversion, uranium enrichment) 
certainly constitute a significant market within the nuclear industry. 
Of a total market of about $25 billion annually for reactor fuel 
(estimate from 2009 from URENCO for 2015), the market value is broken 
down as follows:

    Yellowcake (U3O8)--$14 billion;
    Conversion--$1 billion;
    Enrichment--$8 billion;
    Fuel fabrication--$2 billion.

    In enrichment, U.S. enrichment (USEC) was supplying about a quarter 
of that market, or $2 billion.

    Question. How many American jobs do you estimate are generated by 
these 
nuclear exports? Have you done a nuclear-specific analysis?

    Answer. I have not done an analysis of the employment implications 
of U.S. nuclear exports because the relative lack of data does not 
support a credible analysis. However, if one assumes that those exports 
are confined to nuclear fuel services, then one could estimate 
employment levels in uranium conversion (the only plant is the 
Honeywell-Converdyn facility in Metropolis, IL) and enrichment (USEC 
and the URENCO LES facility) and the percentage of that employment 
devoted to exports. However, the numbers are tricky because of the 
globalization of nuclear industry services. Although USEC supplies 25 
percent of the international market, U.S. reactors constitute 25 
percent of global enrichment demand. However, U.S. utilities have 
purchased a predominant portion of their enrichment from overseas, 
precisely because USEC is exporting its enrichment services. This 
``swap'' actually serves U.S. nonproliferation policy quite well by 
attaching U.S. conditions on fuel that otherwise might not have such 
nonproliferation conditions.

    Question. Isn't it correct that, given that most of the U.S. 
nuclear industry's business is in nuclear fuel services, the industry 
actually benefits when countries commit to not enrich or reprocess?

    Answer. Current providers of enrichment and reprocessing services 
do benefit from a market wherein entry is constrained, either by virtue 
of the industry's oligopolistic nature or because of political 
commitments. Since the United States does not reprocess, it has no 
industry that would benefit from commitments not to reprocess. In the 
case of enrichment, U.S. firms would benefit as would French, Russian, 
and European firms. That market is characterized by high barriers to 
entry (in terms of investment and technology), a small number of 
technology holders, long-term contracts, and longstanding supply 
arrangements. It is very difficult for new suppliers to enter into the 
market. Nonetheless, this argues for emphasis on political commitments, 
precisely because it calls into question the economic motivations for 
new entrants into the fuel cycle services market.

    Question. The nuclear industry has argued that Vietnam is the 
largest prospective nuclear market for U.S. companies in Asia. If so, 
what do you make of Vietnam's recent announcement that it is delaying 
the start of construction of its first Russian nuclear plant by at 
least 5 years to 2020?

    Answer. Any significant growth in nuclear power globally will occur 
in Asia--mostly in China and Korea, with new entrants into nuclear 
power in Southeast Asia, like Vietnam. Since both China and Korea are 
moving aggressively to indigenize their own supply chains, there is 
likely little opportunity for U.S. fuel services. Vietnam is the first 
of several countries in Southeast Asia to move forward with nuclear 
power and is significantly more organized than other countries in the 
region. The extent to which this represents a market for U.S. nuclear 
fuel is another question. If Vietnam builds Russian VVER reactors, the 
first few fuel cores are likely to be sourced solely by Russia. In the 
future, perhaps, Vietnam could contract out for other fuel services on 
the front end. In any event, the postponement of construction of the 
first VVERs is a negative development for all nuclear suppliers 
involved.

    Question. If this is the best market for U.S. nuclear exports in 
Southeast Asia, what does this tell us about the prospects for sales 
elsewhere? Where exactly are these U.S. reactor markets outside of 
countries with which we already have 123 agreements?

    Answer. The countries most likely to build nuclear power plants in 
the next 10 years include Saudi Arabia, the UAE, Turkey, and Jordan. 
The United States has 123 agreements with the UAEA and Turkey, but no 
agreements yet with Saudi Arabia or Jordan. Those two countries are 
unlikely to agree to a clause in their 123 agreements restricting 
enrichment and reprocessing. In fact, the delay in signing agreements 
with those countries is in part due to negotiations over such 
provisions.
                                 ______
                                 

              Responses of Marvin S. Fertel to Questions 
                    Submitted by Senator Marco Rubio

    Question. Do you agree with the Congressional Research Service's 
tally of U.S.-controlled nuclear exports over the last 4 years being 
roughly $1.4 billion (i.e., just roughly $300-$400 million a year) and 
that most of these exports were nuclear fuel services (enriched gas)?

    Answer. We disagree for the following reasons:

   The CRS tally is $9.1 billion over the last 4 years. The 
        only recent Congressional Research Service (CRS) tally of 
        commercial nuclear exports of which we are aware is dated 
        November 19, 2013. It totals $9.1 billion for 2009 to 2012 
        ($7.7 billion in natural and enriched uranium and plutonium and 
        $1.4 billion in nuclear reactors and major components) or 
        roughly $2.3 billion per year. Although the CRS tally indicates 
        that there were more substantially more exports under specific 
        commodity codes for natural uranium (284410) and enriched 
        uranium/plutonium (284420) than for nuclear reactors (8401), 
        the report does not specify that ``most of these nuclear 
        exports were nuclear fuel services (enriched gas.)'' If your 
        question refers to a different assessment, please forward it 
        and we would be happy to provide you with feedback.
   Both GAO and CRS note data omissions. The November 2013 CRS 
        tally aims to update a 2010 GAO analysis of U.S. nuclear 
        exports from 1994 to 2008. The GAO analysis indicates that ``no 
        single federal agency systematically tracks and reports the 
        data necessary to determine the amount and value of U.S. 
        nuclear exports . . .'' (p.10). The GAO adopted a methodology 
        which uses U.N. Comtrade data as a proxy for nuclear exports 
        and notes further that there was ``no available data regarding 
        exports of services.'' The CRS memo also mentions significant 
        inconsistencies in the data available to assess nuclear 
        exports. It specifically cites the absence in U.N. Comtrade 
        data of Taiwan as an importer of U.S. nuclear products or 
        components. During CRS' data period, GE-Hitachi has been 
        constructing two nuclear power plants in Taiwan, and the United 
        States is the main exporter of nuclear components, fuel and 
        services to Taiwan. Coupled with the acknowledged lack of 
        services data, it appears that the U.N. Comtrade data (on which 
        both the CRS tally and GAO report are based) contains 
        significant omissions.
   GAO and CRS methodology does not accurately reflect the 
        scope of nuclear 
        exports. Both the GAO report and the CRS memo count exports 
        based only on a limited subset of the items that are typically 
        included in the export scope of a nuclear energy project. 
        Depending on the maturity of the nuclear market, the project 
        scope can include many elements from the Nuclear Island, 
        Turbine Island, Balance of Plant and Construction and Site 
        Preparation (see attached list of components in a typical 
        nuclear plant). In addition to components, such things as 
        project management services, engineering and design, 
        construction management, commissioning, training, licensing and 
        other ongoing service and support are typically exported as 
        part of a nuclear power project's full scope.
      U.S. nuclear exports to China provide a good example of the 
        difference 
        between the U.N. Comtrade's reported value of a narrow set of 
        exports (8401) and the total value of nuclear exports 
        associated with a project's scope. U.N. Comtrade indicates the 
        total value of Chinese imports from the United States under 
        code 8401 from 2009 to 2012 at less than $100 million, yet the 
        U.S. manufactured equipment and manpower scope for just the 
        four Westinghouse AP1000 units in China exceeds $3 billion. 
        Coupled with the data limitations noted above, this clearly 
        demonstrates that the GAO and CRS tallies underestimate the 
        value of U.S. nuclear exports by a substantial degree.

    Question. How many American jobs do you estimate are generated by 
these 
nuclear exports? Have you done a nuclear specific analysis?

    Answer. Although no nuclear-specific analysis exists, the 
Department of Commerce estimates that each $1 billion in exports 
creates or sustains 5,000 to 10,000 jobs. If U.S. exporters were able 
to capture 25 percent of the global nuclear market--estimated at $500 
billion to $750 billion over the next 10 years--this would create (or 
sustain) up to 185,000 high-paying American jobs.

    Question. Isn't it correct that given that most of the U.S. nuclear 
industry's business is in nuclear fuel services, the industry actually 
benefits when countries commit to not enrich or reprocess?

    Answer. As stated above, the U.N. Comtrade data that GAO and CRS 
selected omit all high-value service exports and many high-value 
component exports. Based on these omissions and the other flaws in the 
data noted above, it is not possible to conclude that exports of 
nuclear fuel services are greater than other types of nuclear exports.
    We are aware of claims by foreign critics of binding restrictions 
on enrichment and reprocessing (such as the so-called ``gold 
standard'') that the U.S. Government is promoting such restrictions in 
order to advance the economic interests of the U.S. civil nuclear 
industry. While we cannot speak for the U.S. Government, we have no 
reason to believe that the U.S. Government is promoting such 
restrictions for reasons other than nuclear nonproliferation. And like 
the U.S, Government, the U.S. nuclear industry has a vested interest in 
ensuring that peaceful nuclear technology is not diverted for other 
purposes. As I stated in my testimony, the nuclear industry supports 
efforts to limit the spread of uranium enrichment and used fuel 
reprocessing (E&R) consistent with current U.S. policy. But all 
indications are that a unilateral and inflexible requirement that 
potential trading partner countries forswear E&R as a condition for a 
Section 123 agreement would have the perverse effect of undermining 
U.S. nonproliferation interests by significantly reducing the number of 
countries willing to engage in civil nuclear commerce with the United 
States.
    Other nuclear suppliers--like Russia, France, Japan and South 
Korea--stand ready to engage in nuclear commerce with other countries, 
whether or not those countries have concluded a 123 agreement with the 
United States, and in many cases whether or not they intend to refrain 
from E&R. As a result, the net effect of refusing to conclude 123 
agreements with countries that are unwilling to renounce E&R would be 
to encourage them to do business with other suppliers, thereby forgoing 
the economic and national security benefits of commercial nuclear 
engagement.
    When a country like the United Arab Emirates (U.A.E.) is willing, 
in the context of a Section 123 agreement with the United States, to 
renounce E&R, the United States should include that commitment in the 
Section 123 agreement. But when a country, which otherwise demonstrates 
its intent to develop an exclusively peaceful commercial nuclear energy 
program, makes clear that it is unwilling to renounce E&R in a 
bilateral agreement with the United States, it would be self-defeating 
to forego the nonproliferation and other benefits to the United States 
of concluding a Section 123 agreement with that country.
    Industry respects the decisions by Taiwan and U.A.E. to commit not 
to develop E&R, but the circumstances that led these governments to 
make that commitment will not be present in all cases. Taiwan, for 
example, has minimal need for E&R because its fleet of nuclear power 
plants is small.
    The United States also had unusual leverage in negotiation of the 
renewal agreement because Taiwan relies on the United States to enable 
its nuclear trade with other supplier countries, and because of the 
important United States-Taiwan security partnership.

    Question. The nuclear industry has argued that Vietnam is the 
largest prospective nuclear market for U.S. companies in Asia. If so, 
what do you make of Vietnam's recent announcement that it is delaying 
the start of construction of its first Russian nuclear plant by at 
least 6 years to 2020?

    Answer. We have seen media reports that the Vietnamese Government 
has decided to delay the construction of two VVER-1000 reactors 
supplied by Russia's AtomStroyExport at Ninh Thuan and may also delay 
the Japanese-supplied units at Vinh Hai. Although some early reports 
mentioned a delay of up to 6 years, recent statements indicate that the 
delay is expected to be only 2 or 3 years.
    News reports and public statements attribute this delay to 
technology selection and ensuring that nuclear energy is developed in a 
safe manner. The U.S. nuclear industry places paramount value on 
nuclear safety and stands ready to assist the Vietnamese in developing 
a world-class, safe and secure nuclear energy program. We see the 
obvious priority Vietnam is attaching to nuclear safety as an 
encouraging sign for future U.S. nuclear cooperation. We therefore 
commend the Vietnamese Government for placing a very high priority on 
ensuring nuclear safety, and we also laud the International Atomic 
Energy Agency (IAEA) for its leadership in ensuring that new nuclear 
nations have the support needed to understand the true requirements of 
implementing a nuclear energy program.

    Question. If this is the best market for U.S. nuclear exports in 
East Asia, what does this tell us about the prospects for sales 
elsewhere? Where exactly are these U.S. reactor markets outside of 
countries with which we already have 123 agreements?

    Answer. Worldwide, 172 nuclear power plants are planned or on 
order. According to the World Nuclear Association, over 45 countries 
are, as of January 2014, actively considering embarking on nuclear 
power programs. These range from sophisticated economies to developing 
ones. Multiple countries planning to develop nuclear energy for the 
first time lack a Section 123 agreement with the United States. Among 
these countries, Saudi Arabia has the most ambitious development 
plans--16 nuclear power plants at an estimated cost of $112 billion. In 
addition to Vietnam and Saudi Arabia, nations like Jordan and Malaysia 
have near-term plans for nuclear development. Longer term, nations like 
the Gulf States, Chile, and the Philippines have expressed interest in 
developing nuclear energy programs. Further, several existing nuclear 
trading partners have Section 123 agreements that require renewal in 
the next 2 years. These include China and the Republic of Korea. All of 
these markets provide excellent prospects for U.S. nuclear exports if 
we are allowed to participate in them.

    Question. Mr. Fertel, given the stakes if countries seeking 
civilian nuclear programs exploit that technology and knowhow to 
develop a nuclear weapons program, what, if any, additional 
congressional oversight is the U.S. nuclear industry willing to accept 
to mediate the proliferation risk?

    Answer. Section 123 of the Atomic Energy Act (AEA) provides 
Congress with substantial oversight responsibilities. Congress may 
request briefings, hold hearings, and report a recommendation to 
approve or disapprove agreements for civil nuclear cooperation. Our 
industry would be pleased to provide briefings or testimony on the 
merits of any specific agreement. If Congress finds an agreement 
lacking, Section 130i of the AEA provides expedited procedures for a 
resolution of disapproval to be filed and acted on.
    As stated in my testimony, securing these agreements early and with 
a broad set of partners serves the U.S. national security, nuclear 
safety, and economic interest. Any change in the process introduces 
additional obstacles or delays will increase the risk that these 
nations will partner with other nuclear suppliers. Without agreements 
in force, we forfeit exports, jobs, and commercial benefits, and we 
will fail to influence these programs in terms of their nuclear safety, 
security, and nonproliferation norms.
    There may, of course, be room to improve the consultative process 
between Congress and the executive branch as 123 agreements are 
negotiated, but as an industry we defer to those two branches of 
government to work out any improvements to that process.

    Question. Mr. Fertel, what nuclear deal or commerce would be 
jeopardized if Congress was allowed to vote on any new nuclear 
cooperation agreement that did not meet the Gold Standard?

    Answer. It is my belief that a requirement for affirmative approval 
of Section 123 agreements will discourage their entry into force. And 
certainly supporters of this idea acknowledge that their intention is 
to make it harder to bring into force certain 123 agreements. Nothing 
in current law prevents Congress from voting to disapprove or modify a 
Section 123 agreement. As stated above, Section 130i of the AEA 
provides expedited procedures to facilitate a vote. In the past, 
Congress has taken the initiative to legislate on Section 123 
agreements with China, India, and most recently the Republic of Korea.
    As stated in my testimony, we believe that few potential export 
markets will be willing to follow the United Arab Emirates and Taiwan 
in renouncing E&R in a bilateral 123 agreement with the United States. 
In practice, a statutory requirement that Congress vote on agreements 
without the ``gold standard'' would require an affirmative vote on most 
future Section 123 agreements. The delay and uncertainty associated 
with an affirmative vote requirement would send a discouraging signal 
to prospective partners, and cause an immediate decline U.S. exports, 
jobs and influence on global nuclear safety, security, and 
nonproliferation.

    Attachment: List of Components in a Typical Nuclear Power Plant

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   Analysis of Export Licenses Under Nuclear Cooperation Agreements 
                 Submitted by Senator Edward J. Markey

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