It’s Not as Easy as 1-2-3

You may not have noticed — hardly anyone has — but Barack Obama’s administration is rewriting the rules governing the global trade in civil nuclear technology. The revisions are the most significant in three decades, and the outcome will probably determine whether the anticipated expansion of nuclear power in the developing world — the so-called nuclear renaissance — happens without a corresponding spread of nuclear weapons programs.

In 2009, the United States seemed to signal a hard-line approach when it agreed to cooperate with the United Arab Emirates (UAE) on civilian nuclear technology only on the condition that the country not pursue the ability to enrich uranium to make fresh nuclear fuel or to reprocess plutonium from spent nuclear fuel to recycle it in reactors. These technologies, as every casual Iran watcher now knows, are the same as those used to make fissile material for a nuclear bomb. Officials from George W. Bush’s administration subsequently described the UAE pledge as the "gold standard" for new nuclear cooperation accords — known as "123 agreements."

The Obama administration has been more hesitant, saying instead that each new 123 agreement would be negotiated on a case-by-case basis. In other words, the administration would try to replicate the ban on enrichment and reprocessing when possible, while strongly suggesting that the UAE was a unique circumstance. That disappointed many nonproliferation experts — both within the administration and without — who believed that Washington was surrendering an opportunity to stem the spread of enrichment and reprocessing technology, even as the president continued to warn of the danger from weapons-usable nuclear material falling into the wrong hands. The gold standard languished in another policy review while the administration continued to negotiate 123 agreements — until last week anyway, when, according to a report published in National Journal, the State Department made a play for a new 123 agreement with Taiwan.

The Obama administration largely finds itself an accidental architect of the new civil nuclear order. In addition to a new wave of countries seeking nuclear help from the United States, many 123 agreements that were negotiated 30 years ago — during the last wave of enthusiasm for nuclear power — will expire between now and 2014. When this flurry of activity ends, the United States will have negotiated more than a dozen nuclear cooperation agreements in a four-year period, many with the most important emerging nuclear powers. Dick Stratford, a senior State Department official, told a conference that he carried around a little list in his pocket because he had trouble keeping all the negotiations straight.

Although the moment is largely one of circumstance, the Obama administration has revealed a distinct philosophical approach, taking a market-oriented approach to discouraging new countries from building their own facilities for enrichment and reprocessing (sometimes called "ENR"). In practice this means exploring how to offer fuel-cycle services at reasonable prices and providing assurances that states that rely on the market, rather than their own capabilities, will not have their supply of fuel disrupted. The thinking goes that the United States can best discourage states from developing their own enrichment and reprocessing capabilities by ensuring that the nuclear industry provides such comprehensive fuel services as part of any agreement to sell nuclear reactors. If that helps U.S. industry and its international partners, all the better. (This is not yet a capability that U.S. industry can provide, particularly in the arena of taking back spent nuclear fuel.) The Obama administration has also supported the creation of separate U.S. and International Atomic Energy Agency (IAEA) "fuel banks" that would provide states that relied on the market a supplier of last resort in the event of a disruption in the supply of nuclear fuel.

Before joining the Obama administration, Deputy Energy Secretary Daniel Poneman outlined a very similar approach in a 2004 article written with three colleagues titled "Making the World Safe for Nuclear Energy." A wag might note that a better goal is making nuclear energy safe for the world, but no matter. The best way to prevent the spread of ENR technology, Poneman and his colleagues argued, was to rely on "market forces … supplemented by government-to-government assurances that fuel services to users not be withheld for any reason other than a material violation of international non-proliferation commitments." This approach was decidedly all carrot and no stick because, Poneman and his colleagues warned, trying to dictate who is allowed to enrich and reprocess and who is not "will almost certainly ignite debates and passions that are more likely to strangle than to promote the prospects of this regime." Attempting to impose ENR restrictions, they concluded, might actually spur proliferation.

Creating market incentives to discourage the spread of enrichment and reprocessing seems like a reasonable thing to do — except that most states make nuclear decisions on something other than a cost basis. Nuclear power enthusiasts have been no strangers to wishful thinking, starting with claims that nuclear energy would be "too cheap to meter." Government decisions about nuclear power tend to prioritize concerns about sovereignty and keeping technological pace with neighbors. It is not hard to see national nuclear programs as something akin to national airlines — money-losing prestige projects that barely take market forces into account. Often, aspiring nuclear states look to countries like the United States and Japan as models. If such countries invest heavily in fuel-cycle services, developing states might try to copy them rather than simply become their customers.

That’s why others in the nonproliferation community have argued that the United States should use its desirability as a partner in nuclear cooperation as leverage. States are unlikely to forgo ENR programs simply because the United States or others offer cheap alternatives. A little muscle is called for — and circumstances have offered leverage: With more than a dozen new agreements to be negotiated, the Obama administration has an opportunity to write into many agreements a new, stronger nonproliferation standard.

So far, however, the administration has been reluctant to put the squeeze on potential partners. Many Obama officials took the view outlined by Poneman in his article — that asking states to renounce ENR could make the situation worse. (It is important to note that I am not aware of Poneman’s view inside the interagency deliberations.) So the administration has largely avoided pressuring states to renounce enrichment and reprocessing capabilities. Despite early talk of the "gold standard," this January the administration announced it would take what officials described as a case-by-case approach. In bureaucratic terms, this amounts to having no standard at all. It is hard to imagine a less restrictive policy. I suppose the administration could announce it would not even try. As it is, they will try — but not very hard.

The reaction on Capitol Hill to the "case-by-case" approach was bipartisan and hostile, in no small part because the UAE’s pledge contains an "out" in the event another country in the region receives a 123 agreement without a "no ENR" pledge. It is one thing to not get a nonproliferation pledge; it is another thing to lose such a pledge, especially in a region as volatile and proliferation-prone as the Middle East. The possibility of losing the nonproliferation assurance in the UAE agreement became a central matter in negotiations with Jordan, and it looms as an issue with Saudi Arabia. Congressional Democrats and Republicans, including Howard Berman and Ileana Ros-Lehtinen, have introduced different pieces of legislation that would make it very difficult for any new 123 agreements that did not contain a pledge to forgo enrichment and reprocessing to receive approval on the Hill. In response, the Obama administration announced it would undertake another review. But it keeps negotiating.

Enter Taiwan. According to the National Journal report, the Obama administration, through an interagency review process, had agreed that it would not begin negotiation of a new 123 agreement with Taiwan until 2013 or 2014. Instead, it would first pursue its negotiations with a series of other countries such as South Korea. The State Department suddenly jumped Taiwan to the front of the line, sending a draft 123 agreement to the Energy Department — at a time when that department was busy with other matters — that contained a "no ENR" provision basically identical to the one found in the UAE agreement.

Why? Because someone in the State Department is apparently not willing to give up on the gold standard. Like many interagency fights, a battle over process is really a battle over substance. In this case, the order the agreements are negotiated may matter a great deal. Proponents of the gold standard would rather start with their best chance, hoping to create a precedent for following agreements. Taiwan is almost certainly the most likely candidate to make a no-ENR pledge because it has very little leverage. Taiwan is not a state, and it is not a member of the IAEA. Its safeguards agreements are administered through the United States. If Taiwan walks away from its agreement with the United States, it has no other partners. We should not be at all surprised that someone at the State Department who would put a no-ENR provision in the Taiwan draft would also try to jump it forward in the queue.

By the same token, if you believe that the "gold standard" is a dangerous illusion that will prevent the United States from reaching many important 123 agreements, you do not want to negotiate with Taiwan first. You would see Taiwan in the same way you see the UAE — a sui generis case unlikely to be replicated that creates a misleading impression about U.S. leverage over certain partners. And you would hope no one spoke Latin.

Happily, I can explain this in plain English: "One is an accident; two is a coincidence; three is a trend." Someone at the State Department is trying to start a trend. He or she is probably tired of hearing the argument that negotiating another "gold standard" 123 agreement is not possible, when he or she knows opportunities do exist. If the administration really can persuade Taiwan and Jordan to agree to accept the gold standard, doing so will demonstrate that the United States can negotiate nuclear trade agreements that also have strong nonproliferation provisions. And this, in turn, will put pressure on the tougher cases, like South Korea and Saudi Arabia, to conform with what will appear to be an emerging global standard — 24 carats and nothing less.