ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries

Fred F. McGoldrick • Robert J. Einhorn • Duyeon Kim • James L. Tyson

Arms Control and Non-Proliferation Initiative ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries January 2015 at BROOKINGS The Brookings Institution | Arms Control and Non-Proliferation Initiative 01 acknowledgments

I would like to express my deep gratitude to Fred I also greatly appreciate the assistance of Alfred McGoldrick, the principal drafter of this report Imhoff, as well as Gail Chalef and her colleagues and my former colleague at the State Department, at Brookings, in the editing and production of the for his vast personal experience in U.S. nuclear report. export control and nonproliferation policies and painstaking research on current global nuclear en- Not least, I would like to thank the Korea Ad- ergy markets that provide the critical foundation vanced Institute of Science and Technology for its for this study. I would also like to thank Duyeon generous support for this study. Kim for her assistance in structuring the project, conducting research on South Korean government and nuclear industry policies and practices, and Robert Einhorn providing valuable comments on drafts of the re- Brookings port, as well as Brookings research assistant James Tyson for his strong support in the production of the report.

Brookings recognizes that the value it provides to any supporter is in its absolute commitment to quality, independence, and impact. Activities supported by its donors reflect this commitment, and the analysis and recommendations of the Institution’s scholars are not determined by any donation.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative i contents chapter 1 Introduction ...... 1 chapter 2 U.S. Legal and Policy Requirements for Nuclear Collaboration ...... 4 chapter 3 Comparison of the United States’ and Other Major Suppliers’ Nuclear Export Controls: Their Impact on U.S. Competitiveness ...... 16 chapter 4 Potential Markets for South Korean Nuclear Exports ...... 28 chapter 5 Potential Cooperation between the United States and South Korea in the Global Nuclear Market: Comparative Advantages and Disadvantages . . . . . 41 chapter 6 Potential Role of the U.S. Government in Facilitating U.S.-ROK Nuclear Collaboration in Third Countries ...... 56 chapter 7 ROK-U.S. Cooperation in Advancing Nuclear Nonproliferation, Security, and Safety Objectives ...... 66 chapter 8 Summary and Conclusions ...... 87

Endnotes...... 99

About the Contributors ...... 116

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative ii chapter 1 Introduction

he United States and the Republic of Korea nonproliferation standards. The conclusion of a (ROK) have enjoyed a lengthy and fruit- new ROK-U.S. civil nuclear cooperation agree- ful bilateral cooperative relationship in the ment, which is expected soon, should help en- Tpeaceful uses of nuclear energy and in promot- hance nuclear commerce and intergovernmental ing mutual nuclear nonproliferation objectives. collaboration between the two countries, and pro- The United States has long been a major exporter mote the development of partnerships between of nuclear materials, equipment, and technology. their industries in third markets. South Korea has recently entered the international nuclear market—for example, it has sold nuclear The United States’ nuclear exports to the ROK as reactors to the United Arab Emirates (UAE)—and well as U.S. cooperation with South Korea in the in- is positioning itself to become a leading supplier of ternational market are governed by the U.S. nucle- nuclear reactors, components, and services to oth- ar export control system. U.S. nuclear cooperation er countries. The nuclear industries of both coun- with other countries is subject to a range of laws, tries are already closely intertwined. regulations, and policies that are administered by various agencies of the U.S. government. This nu- The projected growth in the use of nuclear power clear export control system applies to direct U.S. worldwide creates new opportunities for deepen- nuclear exports to South Korea; to the retransfer ing and expanding existing U.S.-ROK collabora- from South Korea of U.S.-origin nuclear materials, tion to promote the civil uses of nuclear energy in equipment, components, and technology to third third countries.1 This expansion can build on the countries; and to joint cooperation between U.S. cooperation that is already taking place. For ex- and South Korean companies in the international ample, American companies are participating in market. the South Korean-led nuclear project in the UAE, and South Korean firms are significant suppliers U.S. legal instruments for nuclear trade with coop- to Westinghouse AP1000 reactors that are un- erating partners as well as the specific nonprolifer- der construction in China. The governments and ation assurances and controls required for partic- nuclear industries of both the U.S. and the ROK ular exports vary, depending on the sensitivity of also have a strong mutual interest in ensuring that the material, equipment, or technology involved. their cooperation in transferring nuclear mate- In addition, U.S. law specifies the particular stan- rials, equipment, and technology to third coun- dards and criteria that must be met before various tries is subject to the strictest safety, security, and kinds of cooperation may be authorized.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 1 This report attempts to answer a number of ques- • What steps could the U.S. government take tions, including the following: to facilitate the two countries’ collaboration in the international nuclear market? • What are the U.S. legal, regulatory, procedural, and policy requirements and criteria • What cooperative steps could the govern- for collaboration with South Korea involv- ments and companies of the ROK and the ing (1) direct exports from the U.S. to third U.S. take to ensure the establishment of the countries; and (2) reexports by the ROK to highest standards of nuclear nonprolifera- third countries of U.S.-origin nuclear mate- tion, security, and safety in countries ben- rials, facilities, components, and technology, efiting from U.S.-South Korean nuclear col- as well as dual-use items? laboration? • What kind of U.S. nuclear exports, or reex- The remainder of this report is organized as fol- ports from South Korea, to a third country lows: would require that a U.S. peaceful nuclear cooperation agreement (sometimes called a Chapter 2 identifies the legal, regulatory, and 123 agreement) be in effect with that third policy requirements that are necessary to enable country?2 South Korean and American nuclear industries to • What kinds of nuclear items may be export- cooperate in exporting U.S.-origin nuclear equip- ed or retransferred without a peaceful nu- ment, components, fuel, technology, and services clear cooperation agreement? to third countries. Collaboration between South Korean and U.S. companies may take many forms, • When a peaceful nuclear cooperation agree- including: ment is not required, what kinds of legal instruments and nonproliferation assurances • Direct physical exports of nuclear materi- would the U.S. require of the third county? als, equipment, and components from the Of South Korea? United States to South Korea or to a third country; • How do the United States’ nuclear export requirements differ from those of other major • The reexport of such U.S.-supplied items by nuclear suppliers? To what extent will dis- the ROK to a third country; parities in requirements between the U.S. • The transfer of nuclear technology from U.S. and other suppliers affect competitiveness companies to South Korea or the retransfer in the global nuclear marketplace and the of such technology by the ROK to a third prospects for U.S.-ROK collaboration in country, which could involve such transac- third countries? tions as the provision of design information, • In what countries is South Korea seeking to person-to-person contacts, and consulting promote its nuclear exports, and what are arrangements. the prospects for such exports? Because current South Korean power plants are • What are the prospects for U.S.-ROK collab- largely derived from U.S.-origin technology, the oration in third-country markets, given the United States is in a position to approve the con- relative strengths and weaknesses of their ditions under which South Korean reactors and respective industries, while bearing in mind related technology are exported to third countries. that American and South Korean companies This chapter examines the range of U.S. laws, reg- may sometimes be in direct competition for ulations, and policies that apply to direct U.S. nu- nuclear projects in third countries? clear exports as well as reexports. In addition, it

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 2 describes the statutory standards and criteria that identify particular countries or projects as prom- the U.S. would apply to the approval of U.S. peace- ising candidates for future cooperation between ful nuclear cooperation agreements; to individual South Korean and American nuclear companies, exports or reexports of nuclear material, facilities, because those are matters that the companies equipment, components, substances, and know- themselves will approach in light of their own how; and to dual-use items and technology. commercial interests. Rather, it seeks to identify the overall comparative advantages and disadvan- Chapter 3 compares U.S. nuclear export require- tages of the American and South Korean nuclear ments with those of other suppliers, and assesses industries, recognizing that such relative strengths whether and to what extent any differences may and weaknesses could promote collaboration in affect the ability of the United States to compete in some markets while giving one country an edge in the global nuclear market and to collaborate with competing for sales in other markets. South Korea in third-country nuclear projects. In making such assessments, it examines other fac- Chapter 6 describes the steps that the U.S. gov- tors, in addition to U.S. nuclear export controls, ernment might take to create a more promising that might affect the competitive position of U.S. framework for U.S.-ROK nuclear collaboration in nuclear firms. third countries, including concluding new peaceful nuclear cooperation agreements or replacing Chapter 4 examines the potential for, and obsta- existing agreements with countries that could be cles to, South Korean exports to the existing or recipients of South Korean nuclear exports, im- planned nuclear programs of other countries. In plementing such pacts in ways to better facilitate particular, it identifies those countries that are nuclear trade, broadening cooperation in research embarking on new nuclear programs, including and development, and improving America’s own countries in Central and Eastern Europe, Asia, nuclear export procedures and capabilities. and the Middle East that South Korea sees as likely prospects for its nuclear exports. Chapter 7 identifies the steps that the governments and companies of the ROK and the United States Chapter 5 examines the prospects for U.S.-ROK could take, either unilaterally or in collaboration, nuclear cooperation in third countries. It begins to ensure the establishment of the highest stan- with a description of the existing nuclear ties be- dards of nuclear nonproliferation, security, and tween the two countries, and follows with an at- safety in countries that might be the beneficiaries tempt to identify the strengths and weaknesses of of U.S. and/or ROK peaceful nuclear cooperation. the American and South Korean nuclear industries that might enhance the value of collaboration Chapter 8 briefly summarizes the report’s main between the two countries. Its purpose is not to points and conclusions.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 3 chapter 2 U.S. Legal and Policy Requirements for Nuclear Collaboration

he U.S. nuclear export control system is a • Items that are not on an export control list complex set of laws, regulations, policies, but that might be intended for nuclear ex- standards, criteria, and procedures admin- plosive purposes, unsafeguarded nuclear ac- Tistered by several different departments and agen- tivities, or sensitive nuclear activities. cies of the U.S. government. Direct U.S. Nuclear Exports Requiring This chapter examines the U.S. legal, regulatory, a U.S. Peaceful Nuclear Cooperation procedural, and policy requirements for various Agreement forms of U.S.-ROK nuclear collaboration in third countries, particularly (1) direct exports from the Under sections 54 and 123 of the U.S. Atomic Ener- United States to South Korea, (2) direct exports gy Act (AEA), peaceful nuclear cooperation agree- from the United States to third countries as part of ments (also known as 123 agreements) are required joint U.S.-ROK collaboration, and (3) the exercise for only two categories of nuclear exports: “special of so-called prior approval or consent rights for nuclear material,” and so-called production and uti- enrichment, reprocessing, and retransfers to third lization facilities and their major components. countries. It also describes the statutory standards a. Nuclear material that must be met before the U.S. government may authorize these actions and identifies the officials Special nuclear material is defined as pluto- and agencies that must make those determina- nium, uranium enriched in the isotope 233 tions. or in the isotope 235, or any other material that the Nuclear Regulatory Commission U.S. law and policy have varying requirements and (NRC) determines to be special nuclear ma- procedures for each of the following categories of terial. These are materials deemed most di- nuclear and nuclear-related exports or retransfers: rectly relevant for use in nuclear weapons. • Nuclear facilities and their major critical In addition, since the enactment of the components and nuclear materials; Nuclear Non-Proliferation Act (NNPA) of 1978, the U.S. government has consistently • Other U.S. nuclear components and sub- required that an agreement for cooperation stances; be in place for any commercial exports of • Nuclear technology; source material.3 (Source material includes uranium, thorium, or any other material • Dual-use materials, equipment, and tech- that the NRC determines by regulation to nology; and

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 4 be source material or ores containing one or • pressure vessels, more of the foregoing materials in such con- • fuel charging and discharging machines, centration as the NRC may determine from time to time.) • complete control rod drive units, and The United States requires special restraint • primary coolant pumps. on exports of highly enriched uranium (HEU)4 and plutonium.5 Similarly, the retransfer of only these U.S.-supplied items from South Korea to another country would b. Production and utilization facilities require the third country to have an agreement in force with the United States. 1) The term “utilization facility” means any nuclear reactor other than one designed A peaceful nuclear cooperation agreement does or used primarily for the formation of not commit the United States to any specific ex- plutonium or U-233. An agreement for ports or other cooperative activities, but rather es- cooperation is required to export such tablishes a framework of conditions and controls a reactor and its major components— to govern subsequent commercial transactions. namely, pressure vessels, the primary Exports under an agreement for cooperation coolant pumps, and the complete con- would still require a license from the NRC; and trol rod system and, in the case of heavy the exercise of prior consent rights over enrich- water reactors, the fuel charging and ment, reprocessing, and retransfers would need discharging machines.6 authorization from the U.S. Department of Energy 2) The term “production facility” means: (DOE).

(a) Any nuclear reactor designed or Legally Required Nonproliferation used primarily for the formation of Assurances and Guarantees for plutonium or uranium-233; or U.S. Peaceful Nuclear Cooperation (b) Any facility designed or used for Agreements the separation of the isotopes of plutonium, except laboratory-scale Section 123 of the AEA requires that all U.S. peace- facilities designed or used for ex- ful nuclear cooperation agreement with non–nu- perimental or analytical purposes clear weapon states contain several conditions, only; or assurances, and controls. These include guarantees that: (c) Any facility designed or used for the processing of irradiated materials • International Atomic Energy Agency containing special nuclear material.7 (IAEA) safeguards on transferred nuclear materials and equipment as well as nuclear The United States does not export nuclear produc- materials used in or produced through the tion facilities. use of such materials and equipment will continue in perpetuity, even if the peace- Thus, in practice, a peaceful nuclear cooperation ful nuclear cooperation agreement were to agreement between the United States and South lapse or terminate for whatever reason. Korea is necessary only for exports of: • Comprehensive IAEA safeguards will be • nuclear material, applied to all peaceful nuclear activities in non–nuclear weapon states. • reactors,

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 5 • Nothing transferred may be used for any nu- Presidential Determinations and clear explosive device, for research on or de- Congressional Review of Peaceful velopment of any nuclear explosive device, Nuclear Cooperation Agreements and or for any other military purpose, except in Termination of Cooperation the case of military cooperation agreements with nuclear weapon states. Under the AEA, the president must submit the text of a proposed peaceful nuclear cooperation agree- • The United States has the right to demand ment to Congress for its review. The text must be the return of transferred nuclear material accompanied by certain presidential findings. Be- and equipment, as well as any special nu- fore an agreement for cooperation may be signed clear material produced through their use, and executed, the president is required to make if the cooperating state detonates a nuclear the statutory determination that “the performance explosive device or terminates or abrogates of the agreement will promote, and will not consti- an IAEA safeguards agreement. This right of tute an unreasonable risk to the common defense return is typically broadened in U.S. peace- and security” of the United States. The secretary of ful nuclear cooperation agreements to in- state must also provide to the president an unclas- clude other triggering events, such as a vio- sified Nuclear Proliferation Assessment Statement lation of the agreement. that analyzes (1) the consistency of the text of the • Material, equipment or components, or re- proposed agreement with all the requirements of stricted data may not be retransferred with- the AEA, and (2) the adequacy of the safeguards out U.S. consent.8 and other control mechanisms and peaceful-use assurances contained in the agreement to ensure • Physical protection on nuclear material that any assistance furnished under the agreement is maintained. (In most agreements, this will not be used to further any military or nuclear means adhering to the Convention on the explosive purpose. Physical Protection of Nuclear Material (CPPNM) and/or to the IAEA Guidelines The proposed agreement must lie before Congress on Physical Protection, INFCIRC/225.) for its review for 90 days of continuous session Most recent agreements provide for con- before it may go into effect.11 During that period, sultation and review of physical protection Congress may enact a resolution disapproving measures by the parties. the agreement or approving it with conditions. • The recipient may not enrich or reprocess or Failing congressional action, the agreement may otherwise alter in form or content any trans- enter into force. However, if the proposed agree- ferred nuclear material or nuclear material ment does not include one or more of the guaran- produced with materials or facilities trans- tees and assurances specified in section 123 of the ferred pursuant to the agreement without AEA, then the agreement must be approved by an prior approval of the United States. affirmative vote of both houses of Congress. • Storage of plutonium and HEU subject to These presidential determinations and congres- the agreement must be approved in advance sional review procedures should apply to the new by the United States.9 peaceful nuclear cooperation agreement between • Any material or facility produced or con- the United States and the ROK, and to other agree- structed through the use of sensitive nuclear ments that the United States may negotiate with technology transferred under the cooper- other countries in the future. However, Congress ation agreement is subject to all the above has shown a growing interest in expanding its re- requirements.10 view and oversight of these agreements, and the

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 6 House Foreign Affairs Committee has passed a bill mitments obtained with respect thereto that would require, among other things, an affir- pursuant to section 402 (a) of the Nu- mative vote of both houses of Congress if a future clear Non-Proliferation Act of 1978; or peaceful nuclear cooperation does not obligate (b) assisted, encouraged, or induced any the United States’ trading partner to make a legal non–nuclear weapon state to engage commitment to forswear enrichment and repro- in activities involving source or special cessing capabilities. nuclear material and having direct significance for the manufacture or acqui- Termination of cooperation. Section 129 of the sition of nuclear explosive devices, and AEA requires that no nuclear materials and equip- has failed to take steps which, in the ment or sensitive nuclear technology shall be ex- president’s judgment, represent suffi- ported to countries if they are found by the pres- cient progress toward terminating such ident to have engaged in certain nuclear activities assistance, encouragement or induce- 12 related to the proliferation of nuclear weapons. ment; or Specifically, section 129 provides that no nuclear materials and equipment or sensitive nuclear tech- (c) entered into an agreement after the nology shall be exported to: date of enactment of this section for the transfer of reprocessing equipment, (1) any non–nuclear weapon state that is found materials, or technology to the sover- by the president to have, at any time after the eign control of any non–nuclear weapon effective date of this section (March 10, 1978) state except in connection with an inter- (a) detonated a nuclear explosive device; or national fuel cycle evaluation in which the United States is a participant or (b) terminated or abrogated IAEA safe- pursuant to a subsequent international guards; or agreement or understanding to which (c) materially violated an IAEA safeguards the United States subscribes. agreement; or (d) engaged in activities involving source or The president may waive this section 129 require- special nuclear material and having di- ment to halt cooperation if he or she determines rect significance for the manufacture or that the cessation of such exports would be “se- acquisition of nuclear explosive devices, riously prejudicial to the achievement of United and has failed to take steps which, in the States non-proliferation objectives or otherwise president’s judgment, represent sufficient jeopardize the common defense and security.”13 progress toward terminating such activities; or Policy Requirements for U.S. Peaceful Nuclear Cooperation Agreements (2) any nation or group of nations that is found by the president to have, at any time after the In addition to the legal requirements described effective date of this section, above for U.S. peaceful nuclear cooperation agree- (a) materially violated an agreement for co- ments, the U.S. has also included in its agreements operation with the United States, or, with for cooperation, as a matter of policy, several other respect to material or equipment not provisions. These include: supplied under an agreement for cooper- • Fall-back safeguards. In the event that the ation, materially violated the terms un- IAEA cannot apply or is not applying safe- der which such material or equipment guards, the United States has the right to ap- was supplied or the terms of any comply bilateral safeguards.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 7 • Additional Protocol (AP) to the IAEA’s safe- place in facilities outside Egypt, and that the guards agreements. Recent U.S. agreements disposition of any resulting plutonium shall have included a requirement for the coop- be subject to the mutual agreement of the erating partner to have in effect the AP to parties. In the United States’ peaceful nu- their IAEA safeguards agreement. (The AP clear agreements with the UAE and Taiwan, expands the IAEA’s authority and practic- the UAE and Taiwan agreed not to possess es to obtain increased information about, enrichment and reprocessing facilities.14 and access to, a state’s nuclear activities and greatly enhances its ability to detect illegal, Both the U.S.-Egyptian and U.S.-UAE agreements clandestine activities.) provide that the terms and conditions accorded by the United States to each of these countries for co- • Perpetuity of all nonproliferation assurances operation in the peaceful uses of nuclear energy and controls. Even if a peaceful nuclear co- shall be no less favorable in scope and effect than operation agreement were to expire or ter- those that may be accorded by the United States to minate, all the nonproliferation assurances any other non–nuclear weapon state in the Middle and guarantees contained in the agreement East in a peaceful nuclear cooperation agreement. will continue in perpetuity. U.S.-obligated nuclear material will remain subject to these These “most-favored-nation” provisions of the agreements until it has been retransferred to agreements with Egypt and the UAE would have another party or until the material has been relevance to any U.S.-ROK collaboration with determined to be no longer usable for any countries in the Middle East, because they could nuclear activity relevant from the point of affect U.S. negotiations of peaceful nuclear coop- view of international safeguards. eration agreements with such states as Jordan and • Retroactivity of nonproliferation assurances. Saudi Arabia. The U.S. has been urging both these The nonproliferation controls contained in states to accept a legal commitment in any future post-NNPA agreements for peaceful nu- peaceful nuclear cooperation agreement with the clear cooperation (i.e., post-1978) apply U.S. to abstain from acquiring enrichment and re- retroactively to the nuclear materials and processing capabilities. equipment covered by the previous agreements that they replaced. Therefore, nuclear Licensing Nuclear Exports under an material that had been subject to a previous Agreement for Cooperation agreement has become subject to the full panoply of assurances and controls of the Peaceful nuclear cooperation agreements are not new post-NNPA agreement. self-executing. Section 126 of the Atomic Energy Act stipulates that each export made pursuant to • Special controls on reprocessing and/or en- an agreement for cooperation requires a license richment in regions of instability. The U.S. from the NRC and must satisfy the U.S. nuclear imposed special constraints on enrichment export criteria set forth in sections 127 and 128 of and reprocessing in its agreements with the AEA.15 Before issuing licenses for exports of two countries in the Middle East and with nuclear facilities and special nuclear and source Taiwan. The 1981 U.S.-Egypt agreement material, the U.S. obtains assurances that the re- for peaceful nuclear cooperation provides, cipient government will use the acquired items in among other things, that any reprocessing accordance with the applicable peaceful nuclear of U.S.-obligated nuclear material and any cooperation agreement. The NRC is an indepen- storage or fabrication of plutonium recov- dent agency of the U.S. government that cannot ered as a result of such reprocessing will take be required to issue a license by the executive

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 8 branch. At the same time, the NRC may not issue Reprocessing and enrichment. Section 131 of the an export license until it has received a notification AEA provides that the secretary of energy may not from the secretary of state that it is the judgment approve spent fuel reprocessing or retransfers in- of the executive branch that the proposed export volving plutonium in excess of 500 grams unless, “will not be inimical to the common defense and in his or her judgment and that of the secretary of security of the United States, or that any export in state, such reprocessing or retransfer: the category to which the proposed export belongs will not result in a significant increase of would not be inimical to the common defense and the risk of proliferation beyond that which security because it lacks significance for nuclear exists at the time that approval is request- explosive purposes.”16 ed. Among all the factors in making this judgment, foremost consideration will be Section 126 of the AEA also provides that the sec- given to whether or not the reprocessing or retary of state, in the event that he or she considers retransfer will take place under conditions it warranted, may also address the following addi- that will ensure timely warning to the Unit- tional factors, among others: ed States of any diversion well in advance of • whether issuing the license or granting the time by which the non–nuclear weapon the exemption will materially advance the state could transform the diverted material non-proliferation policy of the United States into a nuclear explosive device. by encouraging the recipient nation to adhere to the Treaty (i.e., the Treaty on the After making these determinations, the secretary Non-Proliferation of Nuclear Weapons); or of energy must then submit a report to Congress containing his or her reasons for entering into • whether failure to issue the license or grant such arrangement. A period of 15 days of contin- the exemption would otherwise be seriously uous session must elapse before the approval may prejudicial to the nonproliferation objec- enter into effect. tives of the United States. Section 402 of the NNPA requires that the approv- Nuclear exports from the U.S. to the ROK under a al of enrichment of U.S. nuclear material subject peaceful nuclear cooperation agreement would be to a U.S. peaceful nuclear cooperation agreement subject to these licensing requirements. shall be subject to the same procedures and criteria set out in section 131 described above. Exercising Prior Consent Rights under Peaceful Nuclear Cooperation Retransfers. If South Korea wished to retransfer Agreements nuclear material or equipment subject to the U.S.- ROK peaceful nuclear cooperation agreement, it As noted above, peaceful nuclear cooperation would have to obtain the consent of the U.S. gov- agreements accord the U.S. rights to approve re- ernment for the retransfer. Such consent would processing, enrichment, and the storage of plu- only be given if the recipient state agreed to place tonium and HEU as well as the retransfer of ma- the item under its peaceful nuclear cooperation terials and equipment subject to the agreement. agreement with the United States. As noted above, Section 131 of the AEA stipulates that approv- approvals of such retransfers are subsequent als of such activities are so-called subsequent arrangements and require the approval of the sec- arrangements, and it sets outs certain procedures retary of energy after he or she obtains the con- and criteria for considering requests for engaging currence of the secretary of state, and consults in these activities. with the NRC and the secretary of defense. The

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 9 secretary of energy must make a written determi- has in effect an agreement for cooperation with the nation that the proposed subsequent arrangement United States, and exports of such items invariably will not be inimical to the common defense and go to states that have such agreements. security. Direct Exports from the United States Granting consent in agreements. In a few instances the U.S. has given consent to reprocessing and The NNPA directed the NRC to determine which enrichment in a peaceful nuclear cooperation component parts and other items or substances agreement itself rather than as a subsequent ar- will require export licenses because of their signifi- rangement. But this has usually been the case only cance for nuclear proliferation, even if their export to countries that already possessed such capabili- does not require a peaceful nuclear cooperation ties. The U.S. gave advance consent to reprocessing agreement to be in place. These components, sub- and the use of plutonium in the European Atom- stances, or items are identified in 10 Code of Federal ic Energy Community (Euratom), Japan, and In- Regulations (CFR) part 110.17 Section 109 (b) of the dia. It also gave prior approval to the retransfer of AEA permits the export of such components only U.S.-obligated spent fuel from Japan and Switzer- if the following criteria or their equivalent are met: land to Euratom for reprocessing, and the return of • IAEA safeguards as required by article III.2 the recovered plutonium to those countries for use of the Treaty on the Non-Proliferation of Nu- in their peaceful nuclear programs. More recently, clear Weapons (NPT) will be applied with re- the United States gave prior approval to the UAE spect to the components, substances, or items; and Taiwan to transfer U.S.-obligated spent fuel to Euratom for reprocessing in Euratom. In these • No component, substance, or item will be latter cases, the U.S. retained a right to consent to used for any nuclear explosive device, or for the further disposition or retransfer of the recov- research on or the development of any nuclear ered plutonium. The U.S. has also given consent to explosive device; and enrich uranium up to 20 percent in its agreements • No component, substance, or item will be re- with Argentina, Australia, Brazil, Canada, Eura- transferred to the jurisdiction of any other na- tom, India, Japan, Russia, and Switzerland. tion or group of nations unless the prior con- Nuclear Exports and Reexports That sent of the United States has been obtained for Do Not Require an Agreement for such a retransfer. Cooperation The Department of State obtains a written assurance from the recipient government that it will ad- As described above, the export of nuclear materi- here to these conditions before the export of any als, nuclear facilities, and their major components such item. The NRC must also determine that the must be made pursuant to a peaceful nuclear co- licensing of such exports will not constitute an un- operation agreement. Other nuclear components, reasonable risk to the common defense and secu- items, and substances—such as fuel fabrication rity of the United States, and may not issue licenses plants, uranium conversion facilities, deuterium or for such exports if it is advised by the executive nuclear grade graphite, and other nuclear reactor branch that the export would be inimical to the components—must be licensed by the NRC but do common defense and security. not require an agreement for cooperation and are not made subject to a peaceful nuclear coopera- These requirements would need to be fulfilled for tion agreement with the recipient country. How- the export of such components, substances, or ever, in considering the licensing of such items, the items from the United States to South Korea or to U.S. gives weight to whether the recipient country

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 10 a third country in support of U.S.–South Korean authorization in a subsequent arrangement collaboration on a nuclear project in that country. under section 131 of the AEA; or

2) Reexports from South Korea to a Third Country upon authorization by the secretary of energy after a determination that such activi- If South Korea wished to retransfer one of these ty will not be inimical to the interest of the nuclear components or substances, it would need United States. to obtain the United States’ consent. The United States would grant its approval for such a retrans- The United States has exported nuclear technology fer only if the recipient government of the third under a peaceful nuclear cooperation in only one country provided written assurances to the United instance, namely in its agreement for cooperation States that the items proposed to be transferred will with Australia for the transfer of SILEX enrich- be used exclusively for peaceful purposes, subject ment technology. to IAEA safeguards, and will not be retransferred to another country without the consent of the U.S. Most nuclear technology exports have been sub- government. The recipient government would not, ject to authorization by the secretary of energy however, need to have a peaceful nuclear coopera- under 10 CFR part 810, which implements section 19 tion agreement with the United States. 57.b of the AEA.

In addition to the U.S. approval of the retransfer, The part 810 regulation applies, but is not limited the ROK would, of course, authorize the reexport to, activities involving nuclear reactors and other of such items in accordance with its own national nuclear fuel cycle facilities for the following: fluo- laws, regulations, and policies, and with the provi- ride or nitrate conversion; isotope separation (en- sions of the Nuclear Supplier Guidelines. richment); the chemical, physical or metallurgical processing, fabricating, or alloying of special nu- Exports and Reexports of Nuclear Technology clear material; production of heavy water, zirconi- um (hafnium-free or low-hafnium), nuclear-grade In addition to tangible commodities, U.S. law ap- graphite, or reactor-grade beryllium; production plies to the transfer of information and services of reactor-grade uranium dioxide from yellow- that might assist foreign nuclear programs—that cake; and certain uranium milling activities. is, nuclear technology. Specifically, section 57.b of the AEA requires prior approval of U.S. persons DOE has determined that transfers of certain “to directly or indirectly engage or participate in the technologies are generally authorized, (provided development or production of any special nuclear no sensitive nuclear technology is transferred) material outside of the United States.” The termi- and, therefore, do not require a special authori- nology of this legal requirement is broad enough zation by the secretary of energy. These include to cover such activities as the training of reactor information that is already in the public domain, operators (even in the United States) and assis- along with information or assistance for radio- tance in designing foreign nuclear facilities.18 logical emergencies or to enhance the operational safety of an existing civilian nuclear power plant. The transfer of nuclear technology to other coun- Generally authorized technology transfers also tries may be approved in two ways: include participation in programs of the IAEA or intergovernmental exchange programs, and open 1) as specifically authorized under an agree- meetings that are sponsored by educational, scien- ment for cooperation made pursuant to tific, or technical organizations or institutions. section 123 of the AEA, including a specific

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 11 However, certain kinds of assistance to foreign nu- the retransfer authorization process is implement- clear programs do require the secretary of energy’s ed through the companies involved and the U.S. specific authorization. These are: government and does not impose any obligations on the government of South Korea. Such retrans- 1) Assistance to enrichment, reprocessing, plu- fers from the ROK would, of course, need to be tonium fuel fabrication, heavy water produc- consistent with the ROK’s nuclear export laws and tion, or research and test reactors above 5 regulations. megawatts (MW) (thermal) in any country. As a matter of policy, the United States gen- If the ROK were to wish to reexport U.S.-origin erally does not export sensitive nuclear tech- nuclear technology to any of the 76 countries on nology.20 the 810.8 list, the retransfer would require the spe- 2) Assistance to civilian nuclear power in coun- cial authorization of the secretary of energy. The tries on a list contained in section 810.8 CFR. vast majority of these countries would not be likely This list presently contains 76 countries. candidates for nuclear cooperation with the ROK or the U.S. They include states that are not parties to the NPT, non–nuclear weapon states that do The ROK is not one of the countries on the section not have comprehensive safeguards agreements, 810.8 list. Therefore, with the exception of sensitive countries that do not share the United States’ nonnuclear technology, direct exports of nuclear tech- proliferation objectives, and developing nations nology from the United States to South Korea are with no nuclear programs. The list contains three generally authorized and do not require the spe- countries with major nuclear programs and that cial authorization of the secretary of energy. Thus, have agreements for cooperation with the United if a U.S. company such as Westinghouse Electric States—China, Russia, and India. Other countries Company were to desire to export its reactor tech- that are on the 810.8 list that would be potential nology to the Korean Electric Power Company candidates for nuclear cooperation with the U.S. (KEPCO), the export of this technology to South or the ROK are Jordan, Saudi Arabia, and the UAE Korea would be “generally authorized,” and would in the Middle East as well as Vietnam. Exports or not require Westinghouse to obtain a special au- reexports of U.S. technology to these countries thorization from DOE because the technology is would presently require special authorization by not considered sensitive, and, as noted, because the secretary of energy.21 South Korea is not on the 810.8 list. It merits emphasis that, even if a transfer to a par- However, DOE’s regulations oblige Westinghouse ticular country requires a specific authorization, to require the South Korean company to obtain it does not mean that the transfer or retransfer of the consent of Westinghouse before it retransfers U.S.-origin technology to that country is prohib- the technology to a third country. In other words, ited. The secretary of energy would approve the DOE holds Westinghouse responsible for com- transfer of technology to countries on this list by plying with the part 810 rules, not KEPCO or the determining that the activity “will not be inimical government of South Korea. In particular, DOE to the interest of the United States.” In making this requires Westinghouse to have a contractual rela- determination, the secretary will take into account tionship in place with its partner, KEPCO, which such factors as: obliges the South Korean company to obtain the approval of Westinghouse before approving a re- (1) Whether the United States has an agreement transfer to a third country. Westinghouse must for nuclear cooperation with the country; then follow the requirements of part 810 in con- (2) Whether the country involved is a party to sidering KEPCO’s request for the retransfer. Thus, the NPT, or a country for which the Treaty for

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 12 the Prohibition of Nuclear Weapons in Latin • Russia, China, and India—even though they America (Treaty of Tlatelolco) is in force;22 have peaceful nuclear cooperation agree- (3) Whether the country has entered into an agreements in effect with the United States— ment with the IAEA for the application of safe- would continue to require specific authori- guards on all its peaceful nuclear activities; zation. (4) Whether the country involved, if it has not • Certain projects in Mexico and Chile would entered into such an agreement, has agreed continue to be generally authorized.24 to accept IAEA safeguards when applicable to the proposed activity; For the most part, the countries that would require a specific authorization from the secretary of ener- (5) Other nonproliferation controls or conditions gy under the proposed new regulation have little or applicable to the proposed activity; no nuclear trade, have no peaceful nuclear cooper- (6) The relative significance of the proposed ac- ation agreement in place with the United States, or tivity; and have no experience with managing proliferation (7) The availability of comparable assistance from issues. However, China, Russia, and India would other sources. continue to require specific authorization because of U.S. concerns that these countries do not ade- (8) Any other factors that may bear upon the po- quately separate their civil nuclear activities from litical, economic, or security interests of the their military nuclear programs. In addition, the United States, including U.S. obligations un- reporting requirements contained in the Hyde Act der international agreements or treaties.23 (which exempted India from the AEA’s requirement for comprehensive safeguards), make it in- The U.S. has approved the transfer of technology feasible to grant India generally authorized status. to China and the UAE, two countries that are presently on the 810.8 list. Exports and Reexports of Nuclear Dual-Use Items and Technology DOE is presently proposing changes to part 810 that, among other things, would increase the num- Exports of dual-use items—items that have both ber of countries for which specific authorizations nuclear and nonnuclear uses—do not require a are required from 76 to 146. General authorization peaceful nuclear cooperation agreement. Section would apply to those countries that have an agree- 109 (c) of the Atomic Energy Act directs the De- ment for cooperation with the United States, with partment of Commerce (DOC) to control all export the exception of China, India, and Russia. The items, other than those licensed by the NRC, which, proposed new part 810 would add Kazakhstan, if used for purposes other than those for which the Ukraine, the UAE, and Vietnam to the generally export is intended, could be of significance for nu- authorized list of countries. The result of the pro- clear explosive purposes. Nuclear-related dual-use posed change would mean that: items can include such items as simulators, detec- • 44 major nuclear trading partners would tors, analytic equipment, and many types of pipes, remain generally authorized—and all these valves, and other parts. DOC’s Export Regulations countries have peaceful nuclear cooperation and the Commerce Control List contain such du- agreements with the United States. al-use items that require a license for export.25 DOC must consult with the Department of State, Depart- • 73 countries presenting proliferation issues ment of Energy, and the Department of Defense as would continue to require specific authori- well as the NRC before issuing licenses for dual-use zation. items. Cases that draw no consensus or that raise

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 13 significant nonproliferation issues are referred consent rights; and licensing exports of dual-use for discussion to an interagency group (the Sub- items and other relevant materials, equipment, committee on Nuclear Export Control). In 2014, and technology. Some of these standards and cri- DOC revised its Export Administration Regula- teria are specific, detailed, and well defined, and tions to implement the understandings reached at they are set out in sections 123, 127, and 128 of the 2005, 2012, and 2013 Plenary Meetings of the the Atomic Energy Act (AEA) for licensing nu- Nuclear Suppliers Group (NSG), and a 2009 NSG clear exports—for example, guarantees of peace- Intersessional Decision. ful nonexplosive use, comprehensive safeguards, adequate physical protection, and prior consent DOC implements its dual-use export controls by rights to retransfers and to various sensitive activ- requiring the U.S. exporting company to obtain ities. Other standards and criteria are expressed in an end-use certificate from the importing country. broad stipulations, such as: DOC may, depending on the nature of the item to • Whether an agreement will promote and will be exported and the country of destination or end not constitute a risk to the common defense user, impose a number of different conditions on and security, per section 123.c of the AEA. the export, such as no military use, no nuclear use, no retransfer of the item without the consent of • Whether a nuclear export will not “be inim- the U.S. exporter, and end-use checks. ical to the common defense and security,” per section 126. A (1) of the AEA. If the ROK wished to retransfer a dual-use item • Whether issuing the license or granting the obtained from the United States to a third country, exemption will materially advance the non- it would need to obtain the consent of the United proliferation policy of the United States by States government. It would, of course, need to encouraging the recipient nation to adhere abide by the provisions of its own nuclear export to the Treaty (i.e., the NPT), per section laws and the NSG guidelines for such retransfers.26 126a.1.A of the AEA. Catchall Controls • Whether failure to issue the license or grant the exemption would otherwise be seriously Even if an item to be exported is not on any export prejudicial to the nonproliferation objectives control list, its proposed exporter is required to ap- of the United States, per section 126 a.1 B; and ply for a license from DOC if the exporter knows • Whether the approval of a request for re- that the item will be used for nuclear explosive processing or retransfer for reprocessing activities; for unsafeguarded nuclear activities; or “will not result in a significant increase of for safeguarded nuclear activities involving repro- the risk of proliferation beyond that which cessing, heavy water production, enrichment, or exists at the time that approval is requested, plutonium fuel fabrication.27 The regulations gov- per section 131.” Section 131 of the AEA erning so-called catchall controls are found in the also adds: “Among all the factors in making Export Administration Regulations, Part 744.2.28 this judgment, foremost consideration will Standards and Criteria be given to whether or not the reprocessing will take place under conditions that will ensure timely warning to the United States U.S. law specifies various standards and criteria of any diversion well in advance of the time for approving U.S. peaceful nuclear cooperation at which the non–nuclear weapon state agreements; issuing licenses for nuclear exports; could transform the diverted material into a approving retransfers of U.S.-obligated nuclear nuclear explosive device.” material, equipment, and technology; exercising

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 14 How the executive branch has interpreted these • Global Initiative to Combat Nuclear Terror- standards may best be seen in the documenta- ism; tion—including Non-Proliferation Assessment • Proliferation Security Initiative; Statements that the president, and the State and Energy departments, have submitted, along with • Participation in international nuclear export proposed peaceful nuclear cooperation agree- control mechanisms, such as those of the ments, for congressional review. These documents Zangger Committee (ZC) and the NSG, or usually base their judgments primarily on the rela- adherence to their guidelines; and tionship that the cooperation partner has with the • Implementation of an effective export con- U.S. and its nonproliferation credentials, including trol system. such factors as whether the cooperating partner adheres to and supports the various components In the case of the “timely warning” criteria for re- of the international nonproliferation system, such processing, the executive branch of the U.S. gov- as: ernment has taken the position that “a broad range • The NPT or regional nuclear weapons free of political, technical and other factors, including zone treaties; but not limited to safeguards and physical protection, can be relevant to detecting diversion and • IAEA safeguards agreement and the AP to should be considered” in determining whether its IAEA safeguards agreement; timely warning exists.29 • Convention on the Physical Protection of Nuclear Material; • International Convention on the Suppres- sion of Acts of Nuclear Terrorism;

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 15 chapter 3 Comparison of the United States’ and Other Major Suppliers’ Nuclear Export Controls: Their Impact on U.S. Competitiveness

he United States has long had a reputation do other nuclear suppliers always reveal the spe- for its highly comprehensive, strict, and rig- cific nonproliferation undertakings they require or orous system for controlling its nuclear ex- describe the precise way in which they implement Tports as a key component of its policy to prevent them. Second, though the United States and the the proliferation of nuclear weapons. The pros- major suppliers adhere to the guidelines of the two pects for peaceful nuclear collaboration between multilateral nuclear control export mechanisms — the ROK and the U.S. in third markets could be the ZC and the NSG—these guidelines are volun- adversely affected if the comparative stringency tary. Some variation exists among members of the and scope of U.S. export controls were to turn po- NSG because some states are not consistent in im- tential customers away from cooperation with the plementing or interpreting the multilateral guide- U.S. and the ROK to other nuclear suppliers, or if lines. Because most U.S. nuclear export control South Korean companies were to decline to collab- requirements are set out in U.S. law, the U.S. must orate with U.S. nuclear firms because they believed include the same basic assurances and controls in the strictness of U.S. nonproliferation policies all its peaceful nuclear cooperation agreements would hurt the ROK’s prospects with third-party and export licenses. customers. The Evolution and Harmonization of This chapter attempts to compare the nuclear Supplier Export Policies export polices of the United States with those of other suppliers and to assess the extent to which In the early days of the nuclear era, the United the comparatively strict U.S. export controls could States was a monopoly supplier of nuclear mate- harm the prospects for U.S.-ROK cooperation in rials, equipment, and technology. As other suppli- competing in the global nuclear market. How- ers entered the market in the 1970s, many of them ever, it bears emphasis that reaching confident lagged significantly behind the United States in judgments about these matters is difficult. For one the nonproliferation conditions they imposed on thing, it is impossible to make a thorough compar- their nuclear exports. This was particularly true in ison of U.S. nuclear export laws and policies with the 1970s and 1980s, when the United States took those of the other major suppliers. Although the the lead in (1) requiring comprehensive safeguards U.S. publishes its export regulations and the texts as a condition of supply to non–nuclear weapon of its agreements for peaceful nuclear coopera- states, (2) imposing broad and restrictive con- tion, many suppliers do not make the texts of their sent rights over the enrichment and reprocessing peaceful nuclear cooperation agreements publicly of U.S.-supplied nuclear material, (3) restraining available or do not publish them in English. Nor the transfer of sensitive nuclear technology, and

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 16 (4) imposing export controls on nuclear dual-use “triggers” certain conditions of supply, including items and technology.30 the application of safeguards by the IAEA and peaceful, nonexplosive use assurances from recip- With the exception of Australia and Canada, most ient states that are not party to the NPT. other nuclear suppliers did not impose similar conditions on their nuclear exports. In some cas- The second multilateral group is the NSG, whose es, these disparities clearly hurt American com- guidelines were first published in 1978. The NSG petitiveness in the international nuclear market. adopted the ZC Trigger List of nuclear items, but For example, when the United States made the also applied conditions to nuclear exports that acceptance of comprehensive IAEA safeguards a went beyond the requirements of the NPT and condition of supply to non–nuclear weapon states ZC and added assurances of adequate physical in 1980, U.S. nuclear cooperation with a number protection and special restraints on the export of of states, including Argentina, Brazil, and India sensitive nuclear technology—that is, enrichment, was cutoff. Other suppliers then took the place of reprocessing, and heavy water production tech- the United States. During the late 1970s, the Unit- nology. In many respects, the NSG has surpassed ed States pursued a policy of strongly opposing the ZC in importance as the more comprehensive reprocessing and the civil use of plutonium in all of the two mechanisms. countries, and sought to use its prior consent rights to promote that objective. The delays and uncer- Both these mechanisms have evolved over time in tainties in the United States’ approval of requests order to keep pace with technical innovations and for reprocessing and retransfers for reprocessing political developments, and in response to various caused its foreign partners considerable problems challenges to the nonproliferation system. The ZC in moving forward with their civil nuclear power has clarified and updated its nuclear Trigger List, programs and increased their costs of operation. and the NSG has followed suit. Today, their ex- As a result, some foreign utilities turned to non- panded lists are essentially the same. U.S. sources for their uranium enrichment services as well as for other nuclear supplies. Beginning in the early 1990s, the members of the NSG took key steps to strengthen and harmonize However, over time, the disparities between the its nuclear export controls and to add controls on United States’ nuclear export controls and those dual-use items and technology. In 1991 and 1992, of other major supplier states have been greatly the NSG adopted two important new guidelines. diminished. The bilateral controls of each individ- The first was the decision to include nuclear du- ual supplier state were eventually supplemented al-use items and technology on its export con- by two internationally coordinated nuclear export trol lists. The second was to require non–nuclear control mechanisms. weapon state recipients to accept comprehensive IAEA safeguards as a condition of new supply of The first is the so-called Zangger Committee (ZC), items on the Trigger List. In subsequent years, the which was established in 1974 in order to imple- NSG guidelines incorporated important new prin- ment article III.2 of the NPT. That article of the ciples specifying that suppliers should be satisfied Treaty obliges states that are party to the NPT to that their nuclear transfers do not contribute to require IAEA safeguards on their exports of nu- the proliferation of nuclear explosives or to acts clear materials and equipment. The ZC’s members of nuclear terrorism. In 2004, the NSG adopted a defined the specific nuclear materials and equip- catchall mechanism that called for each member ment that were only generally identified in article to establish national laws and regulations to gov- III.2 of the Treaty and placed these items on a Trig- ern the export of items that are not on export con- ger List, so called because the export of listed items trol lists, in the event that such items are or may

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 17 be intended for use in connection with a nuclear of the United States in the global market. The U.S. explosive activity. In addition, the NSG adopted requires a number of nonproliferation conditions a guideline that provides for consultation in the that most other states do not, but these differences event a customer state violates its nonproliferation thus far have not, and should not in the future, have commitments, as well as a provision for back-up a significant impact on the competitiveness of the or fall-back safeguards if the IAEA is not applying U.S. in the international market. These include: safeguards in a recipient country. Finally, both the • All the nonproliferation controls and assur- ZC and the NSG have clarified, updated, and har- ances contained in U.S. agreements contin- monized their nuclear Trigger Lists. The nuclear ue in perpetuity, notwithstanding the termi- items and related technology on international con- nation or expiration of the agreement. trol lists have been given more specific definition, and their number has increased significantly. • The U.S. has also begun to require the AP as a condition of supply for its agreements. Today, all the major suppliers belong to either the • The grounds for the United States’ termina- ZC or the NSG.31 With progressive expansion of tion of nuclear cooperation are more exten- membership and the clarification and addition of sive than those set out by the NSG. new conditions of supply to the guidelines of the ZC and the NSG, the principal nuclear exporting states • The reasons for exercising the United States’ have established widely agreed international norms right of return are much more extensive for national export control systems. The conditions than those of the NSG. of supply set out in the NSG guidelines are broadly similar to the U.S. nuclear export controls described However, certain key differences between the nu- in the previous chapter, including peaceful, nonex- clear export policies of the United States and those plosive use assurances; comprehensive safeguards of other suppliers have been cited as adversely on nuclear exports to non–nuclear weapon states; affecting the competitiveness of U.S. companies, consent rights; catchall controls; and provisions for and, if such concerns are warranted, the differenc- the termination of cooperation and the return of es could affect U.S.–South Korean collaboration in supplied nuclear materials and equipment as well as the global nuclear market: controls on dual-use items.32 • U.S. consent rights over reprocessing, en- Differences Remaining between the richment and retransfers; United States and Other Nuclear • U.S. policy on technology exports; and Suppliers • The complexities and inefficiencies of the U.S. export licensing and approval system. As the discussion above has explained, in princi- ple, all the major nuclear suppliers require nonproliferation controls and conditions on their nu- Consent Rights for Reprocessing clear exports similar to those of the United States. Countries with existing nuclear power plants or However, as noted above, the multinational mech- states developing new nuclear programs place anisms are voluntary, and variations exist among critical importance on suppliers exercising their individual suppliers in their policies and practices prior consent rights over various aspects of their and in their interpretations of the international fuel cycle in a predictable and reliable manner. The guidelines. development and utilization of nuclear energy require a large-scale investment of capital and other In many cases, these differences should have little resources and long lead times. It would be difficult or no practical effect on the competitive position

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 18 for a country to develop nuclear power without a 1) Its reputation, gained largely from the 1970s, reasonable assurance that suppliers will not arbi- as an unreliable and unpredictable cooperat- trarily constrain or delay those programs. For the ing partner, particularly in the exercise of its same reason, individual industries would hesitate consent rights; to invest the billions of dollars that would be re- 2) quired to construct the necessary facilities without The legally mandated character of U.S. con- having adequate assurances from suppliers about sent rights; and whether and under what conditions a supplier will 3) The greater strictness and breadth of U.S. exercise its consent rights over key aspects of the consent rights compared with those of other fuel cycle. Thus, confidence in suppliers’ reliability suppliers. and predictability in these matters is essential for those countries that are dependent on or are inter- Reputational problems. Unfortunately, the Unit- ested in international nuclear cooperation. Chang- ed States acquired a reputation as an unreliable es in the policies of supplier governments or uncer- cooperating partner in the 1970s when it sought tainties related to their implementation can cause to oppose civil reprocessing in all countries, in- delays, inconvenience, and a financial loss for those cluding its allies, even after they had already con- engaged in the international nuclear trade. structed and begun to operate such facilities. The U.S. delayed giving its consent to reprocessing and As a study sponsored by the U.S. nuclear industry retransfers for reprocessing, and then gave it only 33 (hereafter, the Pillsbury Report) pointed out: grudgingly. Despite this policy, there were few actual denials, and they caused delays and additional In many instances, prospective purchasers expenses rather than damage to nuclear programs. of nuclear reactors, major components and They did, however, cause nervousness and unease nuclear fuel assign critical importance to among the industry and consumer governments such consent rights of the supplier nation. about the reliability of the U.S. as a cooperating Such consent rights control the transfer partner, and caused some to turn to other suppli- of used fuel from the recipient country to ers. The U.S. sought to reestablish its reputation as third countries for storage, reprocessing or a reliable supplier in the 1980s and 1990s by giving final disposition…Since countries that are advance consent to reprocessing and enrichment establishing new nuclear power programs to those cooperating partners that already had typically will not wish to construct expen- such capabilities, were close U.S. allies, and had sive facilities for long-term storage or dis- excellent nonproliferation credentials—for exam- position of used fuel, they will likely need to ple, Japan and Euratom—and that were located export their used fuel for storage, reprocess- in areas of little proliferation concern. Washing- ing or final disposition. Accordingly, a sup- ton gave similar advance consent to New Delhi in plier country’s requirement that a recipient its 2008 agreement with India. Nevertheless, the country obtain the supplier nation’s consent United States’ reputation during the 1970s still has is a very sensitive issue because recipient reverberations today. countries realize that their used fuel strategy could be disrupted by a failure to obtain The mandatory nature of U.S. consent rights. As supplier nation consent on a timely basis. required by section 123 of the AEA, consent rights are included in all U.S. agreements. As one recent Three aspects of U.S. policy on consent rights study published by the Center for Strategic and could place the U.S. at a competitive disadvantage International Studies (CSIS) pointed out, when in the international market: the NSG guidelines were being negotiated in the

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 19 mid-1970s, some states wanted the NSG to require Other states have different policies toward consent consent rights over nuclear materials transferred rights for reprocessing and alteration in form or or the materials produced therefrom.34 However, content. Russia has been taking back spent fuel there was strong opposition to making such rights from its customers, but it is not known whether all mandatory. The negotiations produced a formula- Russian nuclear cooperation agreements contain tion that stated: explicit consent rights, as recommended in the NSG guidelines. In any case, a country’s willing- Suppliers recognize the importance, in or- ness to take back spent fuel from its customers is der to advance the objectives of these guide- the equivalent of a consent right for reprocessing. lines and to provide opportunities further This also gives Russia a clear competitive advan- to reduce the risks of proliferation, of in- tage over other nuclear suppliers.37 cluding in agreements on supply of nuclear materials or of facilities which produce French agreements do not generally contain con- weapons-usable material, provisions call- sent rights for reprocessing because French pol- ing for mutual agreement between the sup- icy is to take back the spent fuel produced from plier and the recipient on arrangements for French-supplied nuclear materials for reprocessing reprocessing, storage, alteration, use, trans- in France. (However, unlike Russia, France requires fer or retransfer of any weapons-usable ma- its customers to take back the plutonium, uranium, terial involved. Suppliers should endeav- and high-level nuclear wastes recovered from re- our to include such provisions whenever processing.) In its recently concluded agreement appropriate and practicable. (Emphasis with New Delhi, Paris granted advance consent added). to reprocessing on essentially the same terms that Washington had approved for New Delhi’s repro- By contrast, U.S. law requires that all U.S. agree- cessing of material subject to the 2008 U.S.-Indian ments for peaceful nuclear cooperation contain agreement for peaceful nuclear cooperation. prior consent rights over: Japan generally requires consent rights in its • reprocessing and alteration in the form or peaceful nuclear cooperation agreements.38 South content of U.S.-obligated nuclear material, Korea requires consent rights for reprocessing in • storage of weapons-usable materials, its agreements with some countries but not others. Reportedly, it does not require consent rights • the enrichment of U.S.-supplied nuclear in its cooperation with “advanced nuclear states,” materials, and such as Argentina, Brazil, Canada, China, France, • the retransfer of nuclear materials and Germany, Russia, and the United Kingdom.39 The equipment subject to U.S. agreements. Pillsbury Report noted that the ROK included reprocessing consent language in its agreement with As a result, supplier policies on consent rights vary. the UAE, but not in other publicly available bilat- Only Australia, Canada, and the United States reg- eral agreements, such as its nuclear cooperation ularly require such consent rights over the nucle- agreement with Argentina and its 2012 agreement ar materials they export subject to their bilateral with Japan.40 agreements.35 The Pillsbury Report concluded that “the U.S. is the only country of those surveyed U.S. consent rights are stricter and more compre- (France, Japan, the Republic of Korea, Russia, and hensive than those of other suppliers: the United States) to consistently include the re- • U.S. consent applies to all future generation processing consent provision in its agreements.”36 of plutonium. The United States regards the

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 20 consent rights as applying to all future gen- may not have as much adverse effect on countries’ eration of plutonium used in or produced willingness to cooperate with the United States as through the use of U.S.-obligated nuclear they had in the past, for three reasons: (1) only a material and equipment. It is not known few countries have enrichment and reprocessing whether other suppliers regard their con- facilities, (2) newly emerging nuclear programs sent rights as applying to future generation in the developing world have demonstrated little of plutonium. interest in acquiring such capabilities, and (3) the economic and fuel supply and fuel management • U.S. reprocessing consent rights are broader cases for such fuel cycle facilities has not been than those of other countries. U.S. law re- proven, especially in countries with small nuclear quires the U.S. to have consent rights over energy programs.44 the reprocessing of not only spent fuel produced from nuclear material transferred, U.S. Retransfer Consent Rights pursuant to an agreement for cooperation, but also irradiated nuclear material “used in The NSG guidelines provide that suppliers should or produced through the use of nonnucle- transfer Trigger List items and related technology ar material, nuclear material or equipment only if (1) these items will not be used for nucle- transferred pursuant an agreement.”41 ar explosive devices, (2) they will be placed under effective physical protection, and (3) the recipient Consent Rights for Enrichment state has a full-scope safeguards agreement with the IAEA. The NSG guidelines require suppliers Section 123 (a) (7) of the AEA requires a guaran- to obtain the recipient’s assurance that, in the case tee by the cooperating party that no U.S.-obligated of retransfer of Trigger List items or items derived nuclear material may be enriched without the pri- from them, the recipient of the retransfer will have or approval of the United States. Some U.S. agree- provided the same assurances as those required by ments give consent to enrichment up to less than the supplier for the original transfer (i.e., peaceful 20 percent, whereas others require consent for any use, physical protection, and IAEA safeguards). enrichment.42 The retransfer consent right found in U.S. peaceful The NSG guidelines have no provision for consent nuclear agreements is broader than that found in to the enrichment of supplied nuclear materials. the NSG guidelines because specific U.S. consent Australia and Canada require consent for enrich- must be obtained for the retransfer of any material ment above 20 percent. Japan has reciprocal con- or item subject to the U.S. agreement. The Pills- sent rights on enrichment (beyond 20 percent) in bury Report concluded that the U.S. prior consent its agreements with the United States, Australia, right for retransfer is more restrictive and burden- Canada, and South Korea. In its agreement with some than the NSG requirement because the latter Russia, Japan has consent rights over enrichment. specifies the types of assurances that are standard Japan’s agreements with Jordan and Vietnam pro- and not controversial.45 The U.S. requirement to hibit them from enriching nuclear material subject obtain supplier country approval, conversely, plac- to their individual agreements with Japan.43 es the U.S. in a position to deny or delay such approval as it sees fit. It is noteworthy in this connec- Notwithstanding the various differences in the tion that the ROK, along with France and Japan, consent rights between the United States and oth- requires the same broad retransfer consent as does er major suppliers, the more extensive and stricter the United States. South Korea requires importing nature of U.S. consent rights on reprocessing, stor- countries to provide a governmental assurance age of weapon-usable materials, and enrichment that reexports of ROK-controlled items will not

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 21 occur without an ex-ante (prior) request for ap- Euratom for reprocessing. Third, such retransfers proval from the ROK government.46 Thus the U.S. to France and the U.K. do not solve the nuclear and the ROK have the same and stricter retransfer waste management challenges of countries just consent rights as those set out in the NSG guide- starting their nuclear programs, because both Par- lines. is and London require that the plutonium, uranium, and high-level waste recovered from repro- The Pillsbury Report reached the following con- cessing be returned to the country of origin. clusion regarding retransfer consent rights: Moreover, the U.S. has shown a willingness to give In many instances, prospective purchasers advance consent to retransfer nonsensitive materi- of nuclear reactors, major components and als, equipment, and components to third countries nuclear fuel assign critical importance to with which the U.S. has an agreement for coop- such consent rights of the supplier nation. eration—for example, the U.S. gave such consent Such consent rights control the transfer of to Euratom. It has also given advance approval in used fuel from the recipient country to third some cases—for example, the UAE and Taiwan— countries for storage, reprocessing or final to transfer U.S.-obligated spent fuel to Euratom for disposition. reprocessing, which would reduce the perceived need to reprocess indigenously. Since countries that are establishing new nuclear power programs typically will not Hence, it is not at all clear that U.S. retransfer con- wish to construct expensive facilities for sent rights are likely to be a major impediment to long-term storage or disposition of used U.S. competitiveness in the international market. fuel, they will likely need to export their used fuel for storage, reprocessing or final Cumbersome and Inefficient disposition. Accordingly, a supplier coun- Regulations on Nuclear Technology try’s requirement that a recipient country Exports obtain the supplier nation’s consent is a very sensitive issue because recipient countries The U.S. nuclear industry has long argued that U.S. realize that their used fuel strategy could nuclear export controls, particularly over technol- be disrupted by a failure to obtain supplier ogy transfers and retransfers, have placed U.S. nation consent on a timely basis. companies at a competitive disadvantage in the international market. In particular, U.S. industry However, this conclusion is open to some reserva- regards part 810 specific authorizations for tech- tions and questions. First, though countries with nology transfers and retransfers as an impediment new nuclear programs may wish to export their to competitiveness, and has registered concerns used fuel to other countries for storage, repro- about the regulation’s overly broad scope, lack of cessing, or final disposal, they will find it difficult clarity and predictability, and outdated provisions. to identify a country that is willing to accept their In addition, industry has expressed concerns about used fuel for storage or disposal. Only Russia has the protracted period of time required by DOE to expressed a willingness to accept spent fuel from process applications for specific authorization. other countries, but this policy applies only to used fuel produced from Russian-supplied nuclear ma- The Pillsbury Report concluded that the U.S. ex- terial. Second, the U.S. has shown a willingness to port control system is complex and difficult to nav- give advance consent to some of its partners—for igate, evidenced by the division of export licensing example, Japan, Switzerland, the UAE, and Tai- and authorization powers among four agencies, wan—to retransfer U.S.-obligated used fuel to versus one or two at most in other nations, and by

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 22 inefficient U.S. processing of export licenses, often complained to the authors that the U.S. is slow in taking nearly a year or more, compared with far approving requests for reexports. faster processing in other nations. In comparing the export regimes of France, Russia, Japan, and The U.S. industry believes that an efficient and the ROK with that of the United States, that study expeditious part 810 process is particularly im- stated: portant because it is necessary for U.S. companies to build the groundwork for hardware sales. The Whereas most of these regimes provide for U.S. has to be on the front-end of projects, such a single export licensing agency to handle as engaging in the activities covered by part 810, exports of nuclear commodities and tech- or it will lose out on sales of nuclear equipment. nology, U.S. control of such items is divided Although exports of hardware may take place only among . . . DOE, the Department of State, . after a peaceful nuclear cooperation agreement is . . DOC, and the . . . NRC—which admin- concluded, the part 810 process can and, in the in- ister four very different sets of regulations, dustry view, should precede this in order to lay the coupled with a complex interagency review groundwork for sales of hardware. process. For U.S. exporters and their customers, navigating the bureaucratic maze The U.S. Government Accountability Office (GAO) for a U.S. export license presents a chal- issued a report in 2010 that, in many respects, reit- lenge in itself that has no parallel in the erated these concerns. The report stated: other countries surveyed in this study. U.S. industry representatives and U.S. for- The report also said that compared with the foreign government officials GAO interviewed eign systems reviewed, the U.S. system imposes identified challenges that, in their view, few deadlines for decision-making on export li- impede the U.S. nuclear industry’s ability cense applications. Although the AEA requires the to compete globally for nuclear trade, in- NRC to process export license applications “excluding a DOE process for authorizing the peditiously” and to endeavor to complete action transfer of U.S. nuclear technology and within 60 days after the executive branch recom- technical information overseas. In partic- mends that the license be issued, the consequence ular, industry representatives told us that of missing this deadline is mainly that the applicant they believe that DOE regulations are out- must be informed of the reason for the delay. The dated and place U.S. companies at a com- time consumed by DOE in processing applications petitive disadvantage. for a specific authorization to export nuclear technology and provide nuclear technical assistance The GAO also reported that a senior foreign-coun- to foreign entities ranges from six months to well try official told GAO that the U.S. government’s in- over one year. The NRC usually requires a year or ability to work cooperatively had influenced that more to process license applications for initial ex- country’s decision to purchase civilian nuclear ports of reactors, major reactor components and power reactor fuel from a non-U.S. supplier.47 nuclear fuel, and approximately nine months for applications for subsequent exports. An October 2014 GAO report highlighted the slowness and inefficiencies of the part 810 re- Interviews by the authors of this report with U.S. view process.48 That report concluded that DOE industry sources revealed complaints that the has consistently missed its 30-day target dates for part 810 approval process is so onerous and time-con- the initial and interagency stages of this process. suming that some U.S. firms have lost out on foreign From 2008 through 2013, DOE missed the target sales. South Korean industry representatives also for 80 of 89 of the applications it processed, and

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 23 interagency review times missed DOE’s 30-day cooperating partners to forswear the acquisition target for 85 applications. of enrichment and reprocessing capabilities. The United States’ 2009 agreement for cooperation The GAO 2014 report also concluded that: with the UAE contained such a commitment. In 2012, the House Foreign Affairs Committee unan- The scope of Part 810 is unclear, and DOE’s imously adopted a bill that would require such a inquiry process does not reasonably assure condition in all future U.S. agreements, with the that the regulation is consistently interpret- stipulation that any agreement submitted to Con- ed. For example, it is unclear what mar- gress without this provision would require an af- keting activities are covered by Part 810. firmative vote by the two houses of Congress. The DOE has not provided written guidance to committee reintroduced the same bill in 2013, but clarify the regulation’s scope, instead direct- it has not passed either house of Congress. ing exporters to inquire with DOE officials. DOE officials said that they do not docu- The administration eventually decided to adopt a ment all such inquiries or their responses. case-by-case approach toward this issue, whereby Without such documentation, DOE can the U.S. would press future partners, except for the neither reasonably assure that its responses ROK and the IAEA, to make a legal undertaking are consistent, nor can it analyze the inqui- to refrain from enrichment and reprocessing but ries to identify parts of the regulation that would not necessarily walk away from an agreement may need clarification. DOE is taking some if the other country refuses to accept this condition. steps to clarify Part 810, defining or refin- ing some key terms. However, DOE’s revi- This case-by-case approach is evident in three sions do not address all terms that export- recent agreements. The U.S. concluded an agree- ers haveidentified as unclear, and the time ment with Taiwan that contained a binding com- frame of DOE’s revisions is unknown. mitment by Taipei that it would not acquire enrichment or reprocessing capabilities. In contrast, Both U.S. and South Korean industries have also the administration sought a compromise formula complained about lengthy delays in the U.S. gov- in the recently concluded agreement for peaceful ernment’s negotiation of peaceful nuclear cooper- nuclear cooperation with Vietnam. That agree- ation agreements, thus allowing foreign competi- ment contained no legally binding commitment tors to enter the market before U.S. companies are on enrichment and reprocessing. Instead, in the able to export nuclear equipment and materials. agreement’s preamble, Vietnam affirmed its intent “to rely on existing international markets for fuel Efforts to Require Cooperating services rather than acquiring sensitive nuclear Countries to Abstain from Enrichment technologies.” In other words, Vietnam made a po- and Reprocessing litical commitment. The agreement also affirmed the intent of the United States to support those One proposed change to U.S. law or policy that has markets in order to secure a reliable nuclear fuel been under discussion for some time in Washing- supply for Vietnam. The new U.S. agreement with ton could have serious adverse effects on the com- the IAEA also contained no commitment to for- petitiveness of U.S. industry in the international swear enrichment and reprocessing. market. This issue has concerned a debate between Congress and the administration, and between At the same time, the U.S. is insisting on a legally executive branch agencies over the issue of wheth- binding pledge of no enrichment and reprocessing er the U.S. should require new nuclear cooperation from countries in areas of instability or prolifera- agreements to contain a legally binding pledge by tion concern, such as the Middle East.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 24 Despite the case-by-case approach that the admin- authorizing transfers of U.S. technology and mate- istration has adopted, many in Congress and the rial, a decline in domestic manufacturing capabil- U.S. nonproliferation community remain com- ities, increased international competition, and the mitted to enacting legislation that would require a U.S. industry’s liability concerns. The GAO study pledge of no enrichment and no reprocessing in all stated that the DOC reported in January 2010 that future U.S. agreements. There may be special cases the U.S. nuclear industry had atrophied, and ac- where such a pledge would be appropriate—for ex- cording to U.S. government officials and nuclear ample, in regions of instability and/or proliferation industry representatives, may lack the capability to concern. In addition, some potential partners will manufacture certain components and equipment have political and strategic reasons for concluding needed to produce large civilian power reactors.49 a peaceful nuclear cooperation agreement with the United States, and they may well be willing to The 2010 GAO report noted that since the 1980s, provide some form of commitment to abstain from other suppliers have emerged in the internation- enrichment and reprocessing, especially if they see al market, including Canada, France, Japan, and little practical nuclear energy need to acquire fuel Russia. Russian officials told the GAO that their cycle capabilities in the foreseeable future. Ministry of Foreign Affairs is aggressively seeking to sign as many nuclear cooperation agreements as However, adopting such a requirement for all fu- possible, with an eye on expanding into new nu- ture nuclear cooperation agreements would seri- clear markets. ously threaten the prospects for concluding new peaceful nuclear cooperation agreements, because Another factor that puts U.S. nuclear compa- most countries regard access to such technology nies at a competitive disadvantage is the strong as their right under the NPT, even though the financial and political support that foreign com- Treaty does not recognize the right to a particular panies receive through direct government owner- technology. Moreover, any attempt by the U.S. to ship or subsidies. Foreign governments may also impose this requirement will lead many states to place great emphasis on supporting bids through other suppliers that do not require a similar pledge high-level advocacy or by providing customers as a condition for their nuclear exports. with additional services and expertise. The GAO cited media reports that the president of France Observations, Caveats, and Conclusions and the president of South Korea had traveled to the UAE to advocate for their country’s respective Although the United States’ nuclear exports may bids to build new reactors in the UAE. In addition, suffer because of the strictness of some of its ex- French officials told the GAO that their govern- port controls and the inefficiencies of its export ment’s philosophy on nuclear cooperation in- control system compared with that of other nucle- cludes providing a package of regulatory, financial, ar suppliers, it is difficult to determine with any and technical assistance to partner countries that confidence whether and to what extent such dis- are developing their own civilian nuclear power parities affect the decisions of buyers to favor oth- programs. er suppliers over U.S. nuclear exporters, relative to other factors. By contrast, what financial support the U.S. nuclear industry does receive is from the Export-Import The 2010 GAO study confirmed in its interviews Bank of the United States (Ex-Im), and that is lim- with U.S. industry representatives that, in their ited. Financial support for U.S. nuclear exports has view, several factors impede the ability of U.S. long been controversial. More important, Ex-Im industry to compete globally for nuclear trade, now faces the possibility of extinction; its charter including the DOE part 810 requirement for faced expiration on September 30, 2014, and its

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 25 reauthorization became a divisive issue among Re- early days of nuclear energy. This was an in- publicans. Congress’ Tea Party members (Repub- evitable development, and the future is like- licans with a strong anti-tax and anti-government ly to see the arrival of even more suppliers. ideology), along with other conservatives in the • the fact that the international playing field House of Representatives, called for the abolition is not level. The nuclear export industries of of Ex-Im. But just before adjourning in Septem- other major suppliers have strong govern- ber, Congress was able to pass a bill that extended mental and financial support that the U.S. Ex-Im’s life until June 30, 2015. The next Congress nuclear export industry does not enjoy. will need to decide whether to extend its life per- manently or for a specified period, or to abolish it • the fact that the United States has not built altogether. The uncertain status of the bank leaves new domestic nuclear power plants in over the U.S. industry at a disadvantage compared with 30 years. Countries seeking to develop nu- other suppliers because its potential customers clear power are likely to turn for assistance will not know whether to expect financing. to those states that have growing domestic nuclear power programs, offer competitive According to the 2010 GAO report, some of the fuel cycle services, and support the develop- largest markets for nuclear goods and services— ment of advanced technologies. Although such as France, Russia, and South Korea—have U.S. skills in operating and regulating nu- significant barriers to entry for U.S. companies be- clear power plants are highly valued, man- cause of the presence of a state-owned competitor. ufacturing and construction effectiveness The report indicated that, according to DOC, of the (which brings down costs) do not have the 61 civilian nuclear reactors outside the United States reputation they once had. that began operating from 1994 through 2008, 18 reactors—almost 30 percent—went into operation Thus, it is difficult to determine the degree to in France, Russia, and South Korea—countries with which comparatively strict U.S. nuclear export their own state-owned nuclear companies. controls affect the United States’ competitiveness in the global market. There are anecdotal reports The 2010 GAO report concluded that the absence that some prospective customers of U.S. urani- of a comprehensive global liability program also um concentrates, uranium hexafluoride (UF6), hampers the U.S. industry’s ability to secure civilian enriched uranium, and fabricated fuels as well as nuclear contracts, and that U.S. firms fear that they major reactor components have turned away from may be held liable as suppliers. By contrast, foreign U.S. supply because of concerns about U.S. con- companies that are state-owned may not face the sent rights that attach to reprocessing or retrans- same problem because they may be indemnified by ferring U.S.-obligated spent fuel. However, there their government. In the absence of a global liability are no citations or documentation that confirm regime, U.S. industry cannot obtain insurance suf- actual cases of a country selecting other suppliers ficient to cover liabilities resulting from a potential over the U.S. due to consent rights or other nonnuclear reactor accident overseas. proliferation controls.

Other studies have confirmed the GAO’s obser- Moreover, other factors may favor the United vations and have pointed to factors that can affect States over its international competitors. The close U.S. competitiveness, including: political and strategic relationship that the U.S. enjoys with a number of countries may lead them • the fact that the emergence of other suppli- to select U.S. vendors rather than others. In addi- ers long ago undermined the monopoly of tion, the U.S. enjoys a reputation for the quality of supply that the United States enjoyed in the its advanced nuclear technology, particularly its

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 26 safety systems, that could lead foreign utilities to What seems clear is that the competitiveness of prefer U.S. technology over other vendors. For ex- the American nuclear industry in the global mar- ample, though China is purchasing nuclear tech- ket is adversely affected by the lack of clarity, the nology from a number of foreign suppliers, Beijing slowness, and the inefficiency of the U.S. export has made the Westinghouse AP1000 “the main ba- approval process, particularly the handling of sis of technology development.”50 requests for technology exports and reexports. South Korean officials have complained about the Although the U.S. may have stricter nonprolifera- slowness of U.S. approval of reexports. tion requirements than many other suppliers, this difference has not prevented the U.S. from con- Notwithstanding the widespread dissatisfaction cluding agreements with 19 individual countries, with the part 810 approval, it has apparently not Taiwan, and two international organizations, in- caused great harm to U.S. nuclear exports to South cluding Euratom and its 28 member states. Korea, or to the ROK’s retransfers of U.S.-origin technology to third countries. As noted in the pre- Finally, precisely because of the strict nature of vious chapter, DOE is in the process of updating U.S. nonproliferation requirements, some coun- its part 810 regulations, and this will hopefully tries are interested in concluding peaceful nucle- respond to most of industry’s concerns, while at ar cooperation agreements with the United States the same time, protecting U.S. national security in- because they view the United States’ willingness terests. Whether the new regulations will achieve to conclude such an agreement as a validation of these objectives remains to be seen. their nuclear nonproliferation credentials. It also appears clear that any attempt by the U.S. Thus, it is difficult to point to specific cases where to impose an overly rigorous pledge of no enrich- the U.S. has lost out on recent export sales because ment and reprocessing from future cooperating of its comparatively stricter nonproliferation con- partners could undermine prospects for nuclear ditions, because many factors go into a decision to cooperation with those countries. This has become purchase nuclear material and facilities, including a significant issue in U.S. efforts to conclude agree- the political relationship between the exporting ments with Jordan and Saudi Arabia (See chapter and importing states, the quality of the technolo- 6). In the future, South Korea will need to evalu- gy, the different layers of financial and diplomatic ate these various factors in assessing the pros and support that governments provide to their nuclear cons of collaboration with the U.S. in individual export industries, and the presence or absence of third-country markets. an effective liability regime.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 27 chapter 4 Potential Markets for South Korean Nuclear Exports

he ROK’s winning of the $20.4 billion bid increases in installed nuclear capacity. The pro- to build four APR1400 reactors in the UAE jected increase in China of 132 gigawatts (GW) by KEPCO—South Korea’s national nuclear exceeds the current installed capacity of the Unit- Tpower plant supplier—has demonstrated the capa- ed States and Russia combined. India’s and Russia’s bilities of South Korea’s nuclear energy industry, nuclear power capacities will increase by 33 GW and has increased the opportunities for the coun- and 19 GW, respectively, and South Korea’s will try’s companies to compete in the global market.51 more than double, to 49 GW.54 In 2010, the South Korean Ministry of Knowledge Economy (now the Ministry of Trade, Industry, Though it has moderated its ambitious nuclear ex- and Energy) stated that it aimed to achieve exports port objectives, Seoul remains intent on compet- of 80 nuclear power reactors worth $400 billion ing for nuclear projects in a number of countries, by 2030, in the course of becoming the world’s including India, Vietnam, Indonesia, Poland, Jor- third-largest supplier of such technology, with a 20 dan, Saudi Arabia, Turkey, South Africa, and Chi- percent share of the world market.52 However, cer- na.55 South Korea has signed nuclear cooperation tain events over the last few years may force South agreements with 27 states and has provided train- Korea to lower its ambitious objectives. These in- ing programs for countries that plan to launch new clude the Fukushima nuclear disaster in Japan, the civil nuclear programs. According to the World discovery in 2012 that the safety certificates for Nuclear Association, in addition to exporting re- parts of some of South Korea’s reactors had been actors, South Korea plans to enter the $78 billion forged, and the temporary shutdown of two reac- market for the operation, maintenance, and repair tors in October 2012 after malfunctions and cor- of reactors.56 ruption charges that were leveled at employees of the state nuclear power agency earlier in 2014.53 Potential Markets in Asia

Despite these problems, the International Energy China. China is in the middle of a huge nuclear Agency’s World Energy Outlook 2014 report notes reactor building program. According to recent re- that nuclear power is one of a limited number of ports, Chinese leaders have begun accepting the options available at scale to reduce carbon diox- industry’s consensus to rapidly develop nuclear ide emissions, and it projects that installed nucle- power.57 The State Council published theEnergy ar capacity will increase significantly globally by Development Strategy Action Plan, 2014–2020 on 2040, but that this growth would be concentrated November 19, 2014, which calls for reducing Chi- in just a few countries. China, India, South Ko- na’s dependence on coal and promoting the use rea, and Russia will likely see the most significant of clean energy. The plan calls for China’s current

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 28 19.1 gigawatts-electric (GWe) of installed nuclear significantly ramp up its nuclear safety and regu- generating capacity to increase to 58 GWe by 2020. latory agency, and exercise independent authority over plant design, construction, and operation.60 Whether this is a realistic target remains to be seen. One nuclear expert, Li Ning, dean of the China has become largely self-sufficient in reactor School of Energy Research at China’s Xiamen Uni- design and construction, as well as other aspects of versity, questions whether China can meet this tar- the fuel cycle, but is still making full use of Western get because the government still has not approved technology while adapting and improving it. Chi- any new projects and will not approve too many na has acquired technology from France, Canada at the same time because it will create bottlenecks. (including four CANDU reactors), and Russia. Its New construction projects are unlikely to speed up latest technology acquisition has been Westing- until the third-generation AP1000 reactor—which house technology from the United States. China forms the basis for China’s reactors—goes into op- is basing its technology development for the im- eration at the end of 2015. Meeting the 2020 target mediate future on the Westinghouse AP1400, par- of 58 GW would require around 40 reactors to en- ticularly with the local development of CAP1400, ter operation in the next six years—a task already which is based on that technology.61 thought to be beyond China’s capabilities. Assum- ing the 28 GW now under construction is com- Westinghouse is building four AP1000 nucle- pleted in time, China would need to approve and ar plants in China—two in pairs at Sanmen, and build another 12 reactors quickly if it is to have any two at Haiyang. These plants represent the coun- hope of hitting 58 GW by 2020.58 try’s first construction of advanced U.S. nuclear plants.62 The role of Westinghouse in the construc- China also plans to have a further 30 GWe or tion of these plants is significant. Westinghouse more of new nuclear generating capacity under and Shaw CBI have complete responsibility for the construction by 2020. The plan calls for the time- scheduling and the technology for units 1 and 2 at ly launch of new nuclear power projects on Chi- each site. Westinghouse is also responsible for the na’s eastern coast and for feasibility studies for the technology at the second of two plants at each site. construction of inland plants. China will focus It supplies major components, equipment, and en- its efforts on promoting the use of large, pressur- gineering to the nuclear island. Westinghouse and ized-water reactors (including the AP1000 and Shaw CBI also have significant “execution” respon- CAP1400 designs); high-temperature, gas-cooled sibility for the nuclear islands for all four reactors. reactors; and fast reactors.59 Westinghouse is taking advantage of the experience it gained in building reactors in South Car- Realizing its civil nuclear power ambitions will re- olina and is applying it to the Chinese situation. quire China to greatly increase its institutions for education and training to produce the engineers Westinghouse is also in negotiations to build eight and skilled trades necessary to build and operate additional AP1000s at coastal sites in China, and the plants. In addition, although China is head- in July 2014 the company and China indicated that ed toward self-sufficiency in reactor component they intend to build 26 of the company’s AP1000 manufacturing, it has suffered problems with reactors at inland sites in China for an estimated the quality of parts and with systems integration $20 billion.63 during plant construction. The construction of new reactors projected in the energy plan will need Westinghouse has agreed to transfer technology a major boost in nuclear reactor pressure vessel to China for the first four AP1000 units so that foundry capacity, and also in the manufacturing of China can build the following ones on its own. In steam generators and turbines. China will need to 2014, China signed an additional agreement with

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 29 Westinghouse to deepen cooperation in relation for both Qinshan Phase II units (Qinshan 2 and to AP1000 and CAP1400 technology globally.64 In 3), as well as equipment for the two AP1000 units September 2014, Westinghouse signed two agree- at Sanmen and two at Haiyang.68 In 2008, Doosan ments with China’s State Nuclear Power Technolo- Heavy Industries signed a memorandum of un- gy Corporation (SNPTC) for the supply of instru- derstanding (MOU) with China National Nuclear mentation and controls (I&C) systems. The first Company to bid jointly on nuclear power projects agreement extends an I&C systems cooperation in southwest Asia and Africa.69 agreement signed in November 2010 with China for AP1000 nuclear plant I&C systems. The exten- South Korea hopes that the contract with Westing- sion covers the strategic relationship of Westing- house will be a stepping stone for its companies house and China’s State Nuclear Power Automa- to expand in the nuclear power market in China tion System Engineering Company in supplying and other countries. However, China wants to I&C systems for AP1000 new plant projects into progressively become self-sufficient in deploying the future. The second agreement covers I&C sys- AP1000s and its own derivatives.70 China is plac- tems for future global SNPTC nuclear power plant ing emphasis on using domestic products in the projects, using designs derived from the AP1000 key equipment and components of nuclear re- design by SNPTC.65 actors.71 Whether and to what extent Doosan or other South Korean companies will be able to par- South Korea is also playing an important role in ticipate in future Chinese nuclear projects may de- Westinghouse’s sales to China. South Korea’s Doo- pend on whether China has the domestic capacity san Heavy Industries & Construction has part- to meet its ambitious nuclear power goals and to nered with Westinghouse to supply two pressure what extent it may have to resort to foreign com- vessels and four steam generators for the two panies to fill the gaps. AP1000 nuclear power reactors it is constructing in China.66 Doosan delivered the Sanmen 1 reac- Continuation of South Korean cooperation with tor pressure vessel, which arrived on site in July Westinghouse in the Chinese nuclear program 2011. The pressure vessels for the other two units could depend heavily on the peaceful nuclear co- are being made by Chinese manufacturers. China operation agreement that the U.S. has in effect with First Heavy Industries (CFHI) has successfully China. This nuclear pact is set to expire in 2015, but completed the manufacture of the reactor pres- the two countries are expected to conclude negoti- sure vessel for Sanmen 2 under the supervision of ations on a replacement agreement soon. Without Westinghouse.67 a new U.S.-China agreement, it will be impossible for U.S. companies to export nuclear equipment, A similar arrangement occurred with the purchase and very difficult to transfer nuclear technology, of the two Taishan EPR reactors from France, to China. Thus, to the extent that exports to China when China purchased the pressure vessel from by Doosan and other South Korean companies are Mitsubishi Heavy Industries (MHI) in Japan and tied to Westinghouse’s exports to China, it will be the steam generators from Areva Chalon / St. Mar- essential that Washington and Beijing renew their cel in France for unit 1. peaceful nuclear cooperation agreement (For a discussion on renewing this pact, see chapter 6). Doosan also has an agreement with China to supply heavy forgings and equipment for other India. India already has a large nuclear program projects in China, apparently in the 1,000 mega- and is seeking to expand it by importing foreign watts-electric (MWe) category. Doosan has sup- technology. New Delhi has signed a succession of plied the steam generators for both Qinshan Phase agreements with Russia’s Atomstroyexport to build III units (Qinshan 4 and 5), and the reactor vessels VVER reactors. A 1,000-MW reactor is operating

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 30 at the Russian-built Kudankulam power station in been initiated, including the Jaitapur reactor being India’s Tamil Nadu Province, with a second due built with French assistance and the Kudankulam 3 to come on line in 2015. In December 2014, In- and 4 reactors being built with Russian assistance. dia and Russia signed a strategic vision document The construction of these plants—along with the on nuclear power that said that both sides would Mithi Virdhi nuclear plant, to be built with the as- strive to complete the construction and commis- sistance of the U.S.—has been delayed because of sioning of “not less than 12 units” in the next two either supplier-country concerns about India’s nu- decades. India agreed to expeditiously identify a clear liability law or scheduling problems.79 second site, in addition to Kudankulam, for the construction of the Russian-designed nuclear The South Koreans are now awaiting allotment of power units in India.72 a site by the Indian government for building a nuclear reactor. In addition to the economic benefits New Delhi has also signed agreements with Wash- that might ensue from establishing a nuclear rela- ington and Paris. Beijing also recently entered tionship between India and South Korea, the two the picture, when Chinese president Xi Jinping, countries are also likely to find political and stra- during his September 2014 visit to New Del- tegic advantages in a strong civil nuclear relation- hi, agreed with Indian prime minister Narendra ship. Some have argued that it could help “build Modi to open talks on nuclear cooperation.73 India a strategic hedge—supported by other regional also signed a nuclear cooperation agreement with players, such as the United States, Japan, and Viet- Australia in September 2014, clearing the way for nam—against the emergence of China and the importing Australian uranium. It is also engaged possibility of a Sino-centric continent.”80 in talks with the European Union to sign a civil nuclear cooperation agreement.74 However, the initiation of the ROK’s peaceful nuclear trade with India faces several obstacles, par- On June 13, 2012, Westinghouse Electric Com- ticularly if it involves the retransfer of U.S. nuclear pany LLC and Nuclear Power Company of India technology from the ROK to India. First, many Limited signed an MOU agreeing to negotiate an potential nuclear suppliers, including the United Early Works Agreement (EWA) supporting future States and South Korea, will not export to India construction of AP1000 nuclear power plants at because New Delhi’s 2010 law on civil liability for the Mithivirdi site in Gujarat.75 GE-Hitachi also nuclear damage provides that operators of nuclear plans to build a nuclear reactor at Gujarat.76 plants can hold foreign suppliers liable in the event of an incident due to faulty equipment or material South Korea has expressed interest in participat- supplied. This law conflicts with international con- ing in this market, but it is behind its competitors. ventions on liability and supplementary compen- In August 2009, Nuclear Power of India Ltd and sation, which channel responsibility for nuclear KEPCO announced that they would conduct a liability and compensation to the nuclear operator. study into the “licensability and constructability” Until this issue is resolved, India’s hopes for im- of KEPCO’s AP1400 reactors in India,77 and on porting nuclear technology from some suppliers July 25, 2011, India and South Korea signed a civil- will be delayed. However, Russia and India have ian nuclear cooperation agreement.78 A team from recently reached an agreement related to their on- South Korea’s Ministry of Science visited India in going construction of units 3 and 4 at the Kudank- late 2013 and early 2014 to promote the sale of a ulam nuclear plant. The terms resolved a disagree- nuclear power plant. However, the Indian government over the implementation of the Indian civil ment appears to want to limit its cooperation with liability law,81 reportedly because Russia agreed to the ROK to research for the time being. First, it bear the cost of any compensation.82 France has wants to complete the projects that have already also indicated that it would decide on the best way

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 31 to work within the framework of the Indian liabil- to the agreement or to apply U.S. nonproliferation ity law to provide nuclear reactors to India.83 conditions to this material, including consent to reprocessing. The U.S. has a peaceful nuclear cooperation in effect with India, but actual cooperation has been Moreover, section 104 of the Henry J. Hyde Act, delayed for several reasons. The first and most which amended the Atomic Energy Act to permit publicized of these is India’s nuclear liability law. U.S.-Indian nuclear cooperation, calls for a nucle- The two countries are endeavoring to resolve this ar accountability program in implementing the issue, and during Prime Minister Modi’s visit to U.S.-India nuclear cooperation agreement. It spe- Washington in September 2014, he and President cifically states: Obama agreed to establish an interagency contact (A) IN GENERAL The President shall ensure all group to resolve all the outstanding issues hinder- appropriate measures are taken to maintain ing the rapid deployment of U.S.-origin nuclear accountability with respect to nuclear mate- reactors in India, including the liability issue.84 rials, equipment, and technology sold, leased, Modi has reportedly asked his officials for an -ur exported or re-exported to India so as to en- gent solution to the liability problem. India has sure reportedly offered to establish an insurance pool to indemnify foreign nuclear suppliers against li- i) Full implementation of the protections ability in the case of a nuclear accident in order to required under section 123 (a) (1) of the resolve this issue.85 Atomic Energy Act of 1954 . . . and ii) United States compliance with article I of For some countries, a second obstacle to opening the NPT. nuclear trade with New Delhi has been India’s in- (B) MEASURES— The measures taken pursuant ability to conclude a nuclear cooperation agreement to subparagraph (A) shall include the follow- with Japan. Japan has expressed interest in concluding: ing a nuclear pact with India, but it has insisted on India’s acceptance of nonproliferation commitments i) Obtaining and implementing assurances that India has thus far rejected. The absence of an and conditions pursuant to the export li- Indian-Japanese nuclear pact could block the sup- censing authorities of the Nuclear Regula- ply of U.S. reactor vendors—Westinghouse-Toshiba tory Commission and the Department of and GE-Hitachi—along with a range of other global Commerce and the Department of Energy, nuclear reactor manufacturers, because the reactor including as appropriate, conditions re- pressure vessel for many reactors is made by Japan garding end-use monitoring. Steel Works. Without an agreement, Japan will not permit nuclear exports to India.86 Finally, article 17 of the U.S.-Indian agreement calls for an administrative arrangement which A third obstacle to U.S. nuclear exports to India will provide that the principles of fungibility and is New Delhi’s reported refusal to provide the U.S. equivalence must apply to the nuclear material with information that tracks and accounts for ma- subject to the agreement. This refers to the need terial subject to the U.S.-Indian agreement.87 The for tracking and accounting of U.S. material sub- provision of such information is common practice ject to the agreement. The U.S. and India have not among the major suppliers, but India has report- completed the administrative arrangements for 88 edly taken the same negative position with Austra- operationalizing these aspects of the agreement. lia and Canada. Without such reporting, the U.S. The U.S. and India have not completed the admin- cannot know whether India is meeting its obliga- istrative arrangements for operationalizing these 89 tions to account for all the material that is subject aspects of the agreement.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 32 Until all these issues are resolved, U.S. nuclear retransfer of U.S.-origin technology from South exports to India as well as South Korean nuclear Korea to Vietnam. In October 2014, a U.S. nuclear trade with India that is tied to U.S. export controls firm, Lightbridge Corporation, signed an agree- will be problematic. ment with the Vietnam Atomic Energy Institute for consulting services related to the construction Vietnam. Vietnam plans to build 10 nuclear re- and safe operation of Vietnam’s Atomic Energy actors by 2030 for a total capacity of 10.7 GWe, Research Center, including a nuclear research re- accounting for 10.1 percent of electricity produc- actor.94 tion. Vietnam selected Russia to build its first two nuclear power plants, with the commissioning of Indonesia. According to the World Nuclear As- unit 1 commencing in 2023 and the second unit sociation, South Korea, Russia, and Japan, have following a year later. The reactors are to be built expressed interest in helping Indonesia develop from 2017 to 2023 as turnkey projects. Russia’s a nuclear power program. In July 2007, KEPCO Ministry of Finance is prepared to finance at least and Korea Hydro & Nuclear Power Co. (KHNP) 85 percent of this first project, supply the nuclear signed an MOU with Indonesia’s PT Medco En- fuel, and take back the used fuel for the life of the ergi Internasional to undertake a feasibility study plant. The schedule for the country’s second nu- on building two 1000 MWe OPR-1000 units from clear power project—to be supplied by Japan—at KHNP at a cost of $3 billion. This was part of a wid- the Vinh Hai site (also in Ninh Thuan Province), er energy collaboration. In addition, the National will be delayed because of safety concerns follow- Atomic Energy Agency (BATAN) has undertaken ing the March 2011 disastrous accident at Japan’s a feasibility study for a small Korean SMART reac- Fukushima Daiichi plant.90 The Japanese Inter- tor for power and desalination on Madura Island. national Nuclear Energy Development Company However, this awaits the building of a reference (JINED) will work with Electricity Vietnam on the plant in South Korea.95 project, which will also involve financing and insurance of up to 85 percent of the total cost. JINED Russia wants to export floating nuclear power is a consortium of Japan’s METI, nine utilities (led plants on a fully serviced basis to Indonesia as a by Chubu, Kansai, and Tepco), and three manu- means of providing power to its smaller inhabit- facturers (Mitsubishi Heavy Industries, Toshiba, ed islands. The Province of Gorontalo on Sulawesi and Hitachi). 91 was reported to be considering a floating nuclear power plant from Russia.96 South Korea seems best positioned for the supply of the third nuclear project, consisting of two The Japanese and Indonesian governments signed 1,000 MW reactors. The two reactor projects are a cooperation agreement in November 2007 for worth about $10 billion. South Korea and Vietnam the preparation, planning, and promotion of Indo- launched a preliminary feasibility study in June nesia’s nuclear power development and assistance 2013 on candidate sites and the safety of the third for public relations activities. In August 2014, the nuclear project.92 When the project is approved by Japan Atomic Energy Agency announced that it the Vietnamese National Assembly, South Korea is has agreed to extend this cooperation agreement reportedly likely to receive the order for the proj- with BATAN to include R&D on high-tempera- ect.93 ture, gas-cooled reactors.

The U.S. has recently concluded an agreement for Indonesia initially planned to build a nuclear power peaceful nuclear cooperation with Vietnam that plant in 1997 but abandoned the idea the same year could facilitate American–South Korean nuclear col- due to economic and political crises that occurred laboration with that country and, in particular, the in the country. Indonesia is considering building

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 33 nuclear power plants with an initial capacity of a proposal to build two 1,000 MW nuclear pow- 5,000 MW by 2025 despite strong domestic oppo- er plants on the back burner. Nuclear energy is a sition to nuclear power. A senior official of Indone- highly sensitive issue in Malaysia and, according sia’s Energy and Mineral Resources Ministry said to government sources, “it may be revisited some that the government is still considering the tech- time down the line.”101 The U.S. has no peaceful nology used to build the nuclear power plant, with nuclear cooperation agreement with Malaysia, and technology offered by Russia expected to take the the Malaysians do not appear ready to conclude first place. A visiting Russian delegation offered one at this time. cooperation in building a nuclear power plant in Indonesia during its meeting with Indonesian vice Potential Markets in Europe president Jusuf Kalla in November 2014.97 Rus- sian Federation senior trade expert representative Romania. The South Korean government has in- Sergey Kukushkin said that Rosatom was ready to dicated its interest in entering the Romanian nu- not only transfer its nuclear knowledge and tech- clear energy market. The European markets have nology to Indonesia but also to finance the proj- traditionally been dominated by French com- ect.98 Indonesian officials have also recently ex- panies,102 but China recently entered the picture pressed interest in building small reactors (10–20 when the China General Nuclear Power Corpora- MW) in the Serpong area.99 tion (CGN) submitted, on September 23, 2014 a binding offer to build two nuclear reactors for the The United States has an agreement for cooper- town of Cernavoda.103 China now appears to be a ation in effect with Indonesia that would enable leading contender for the Romanian nuclear mar- and facilitate retransfers of U.S.-origin technolo- ket. Economy Minister Constantin Nita said in an gy or components to that country if South Korea interview that “we will build the reactors with the were to build a nuclear reactor there. However, it help of Chinese investors. It’s going to be a trans- appears that Russia is in the lead for the provision parent procedure so that other investors would be of Indonesia’s first reactor, if that country proceeds able to participate too, but we have waited for 10 with a nuclear power program. years for them to come and they haven’t.” 104 Ro- mania turned to Chinese investors after compa- The Philippines. The Philippines built the Bataan nies such as ArcelorMittal and Enel SpA withdrew Nuclear Power Plant in the early 1980s, but it nev- from a joint project set up to build the reactors er went into operation because it sits on a tectonic to focus on other plans. According to Nita, once fault and volcano. The Fukushima disaster gave an accord is reached, CGN will hold the majority pause to efforts to revive the plant. South Korea stake in the project, which the ministry estimates is expected to agree to conduct a feasibility study is worth about €6.5 billion ($8.8 billion), and will into reviving the Bataan nuclear power plant proj- secure the funding. Nuclearelectrica SA, Roma- ect.100 But prospects for nuclear power in the Phil- nia’s state-owned nuclear power generator, will ippines remain highly problematic. The U.S. has keep a minority stake, which has yet to be deter- no peaceful nuclear cooperation agreement with mined.105 the Philippines. On October 19, Romania and CGN signed a joint Malaysia. Although Malaysia has established a letter of intent to build two new reactors in Ro- nuclear agency and has periodically reviewed mania’s Cernavoda nuclear plant, for which the plans for a nuclear plant, these efforts are at the Chinese company has been designated an investor. feasibility stage. A nuclear plan was floated in De- According to Romania’s state-owned nuclear util- cember 2010 “to correct an imbalance” in energy ity, Nuclearelectrica, CGN was the only company sources. However, the government has quietly put that submitted qualifying documents.106 China’s

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 34 willingness to invest in the project appears to have KEPCO has shown interest in making a new ten- been a deciding factor in Romania’s favoring the der. Areva and a consortium including Russia’s Chinese over other competitors. Atomstroyexport and Westinghouse are also interested.108 Westinghouse has reportedly offered to The U.S. has an agreement with Euratom that cofinance the construction of new nuclear plants could facilitate U.S.-ROK nuclear cooperation in the Czech Republic.109 China is also making a with Romania, because that country is a member high-level effort to promote its nuclear technology of the European Union. However, China appears to Prague. Chinese premier Li Keqiang met with to have locked up this market for the time being, Czech president Milos Zeman during his visit to and South Korea seems to be facing an uphill bat- Beijing October 27, promoting China’s technol- tle in penetrating the Romanian market. ogy, pricing, and experience in building nuclear power plants.110 The Czech government has indi- Poland. Poland plans to construct at least two cated that the investor might be asked to take eq- plants to provide 15 percent of its electricity needs. uity in the project.111 KEPCO intends to bid for these Polish units, but it seems to be behind other suppliers at the pres- The Netherlands. On November 3, 2014, Delft ent time. In November 2009, France and Poland University of Technology signed a $24 million signed a joint declaration on energy and climate contract with a South Korean consortium consist- that, among other things, calls for France to as- ing of the Korean Atomic Energy Research Insti- sist Poland in the construction of nuclear power tute (KAERI), Hyundai Engineering, and Hyundai plants. The state-owned Polska Grupa Energety- Engineering & Construction to upgrade the Re- czna SA then signed an agreement to work with actor Institute Delft’s 2 MW (thermal) pool-type Électricité de France to investigate using the Eu- research reactor. KAERI signed an MOU with TU ropean Pressurized Water Reactor technology for Delft for further cooperation in research on radi- Poland, and Areva has said that it would bid in con- ation safety, the development of nuclear reactor junction with Électricité de France. Poland signed technology, experimental nuclear reactors, radio- a similar nonexclusive agreement with GE Hitachi active waste management, radiation technology, early in 2010 regarding advanced boiling-water re- nuclear medicine, and isotopes.112 These steps il- actor (ABWR) and economic simplified boiling-wa- lustrate South Korea’s interest in the European ter reactor (ESBWR) technology. Westinghouse market. However, the Netherlands has only one has signed an agreement for its AP1000. Russian power reactor, and has made no decision on fur- technology does not appear to be under consider- ther builds. ation. The Polish National Atomic Energy Agency has signed cooperation agreements with the NRC The Middle East and the French Autorité de Sureté Nucléaire, and it expects to also do so with the new South Korean Jordan. KEPCO and Doosan were reported to Nuclear Safety and Security Commission.107 The have offered Jordan the OPR1000 nuclear reactor. United States has an agreement with Euratom that However, the OPR is not designed to meet Jordan’s could facilitate South Korean participation with seismic requirements and would need to be up- U.S. nuclear firms in the Polish market. graded. Jordan then considered the APR1400, but did not proceed with it. In August 2014, the Jorda- The Czech Republic. The Czech government is nian government confirmed that it had concluded considering opening a new selection process for an agreement with Russia’s Rosatom to build the building nuclear power units after the majori- nation’s first nuclear plants and had also designat- ty state-owned utility CEZ canceled a tender to ed a site for construction. Rosatom beat out Are- build two new reactors of 1,200 MW each in April. va/MHI and Canada’s CANDU to build two 1,000

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 35 MW pressurized water reactors. Russia will pro- Technology and Management has worked with vide 49.9 percent of the project capital, with the re- Jordanian regulators since at least 2011 as part of mainder raised from public and private sources in the U.S. NRC’S International Regulatory Develop- Jordan. Rosatom will also own and operate the re- ment Partnership, which helps countries establish actors, and the parties will work toward an agree- licensing programs for power reactors. On January ment over power pricing, hoping to break ground 22, 2014, Jordan and Saudi Arabia signed a nucle- on the $10 billion plant by 2015. That construction ar-trade pact in Amman allowing cooperation on will take place near Qusayr Amra, northeast of the development of peaceful atomic energy.117 Amman.113 Despite these steps to move forward with a nuclear South Korea will have a role in this project. On program, Jordan faces a number of problems in re- October 30, 2014, KEPCO Engineering & Con- alizing its nuclear ambitions. For one thing, it does struction Company signed a contract with the not have the financial resources to fund a domestic Jordan Atomic Energy Commission to assess the nuclear power program. Amman also needs to es- suitability of the candidate site for Jordan’s first nu- tablish a nuclear infrastructure and the necessary clear power plant at Al Amra. The contract is val- human resources as well as a legal and regulatory ued at around $15.3 million. It follows a compet- framework for the construction and operation of itive tender, concluded in April that involved bids nuclear facilities. Moreover, there is strong oppo- from companies in seven countries, including the sition in Jordan’s Parliament and among the public U.S., U.K., and Canada. Over the next 24 months, to acquiring nuclear power.118 KEPCO will assess the site’s suitability, examining detailed site plans, conducting environmental im- Amman may have selected Russia to build its first pact assessments, and providing licensing support nuclear power plant for financial reasons. Russia’s for site approval.114 state-owned nuclear company, Rosatom, is offering as a special package deal to “build, own, and Although Russia has won the initial contract to operate” nuclear power stations abroad in a bid to build Jordan’s power plants, South Korea and the win business from developing countries. The offer United States may also have an opportunity to to build, own, and operate also includes financing participate in the Jordanian nuclear program. On for countries seeking to build nuclear plants. Ro- November 6, 2013, Khaled Toukan, head of the satom won the bid to provide nuclear power plants Jordan Atomic Energy Commission, said that after to Turkey under similar financial terms. the Russian-built reactor is ready, Jordan plans to build several nuclear reactors with small capacities The U.S. does not have a peaceful nuclear cooper- for power generation: “We plan to build several ation agreement in effect with Jordan. For a dis- small nuclear reactors. Each of the small reactors cussion of the status of negotiating a U.S. peaceful will have two power plants with each having a ca- nuclear cooperation agreement, see chapter 6. pacity of 180 megawatts.”115 Saudi Arabia. On September 2, 2014, Saudi Ara- South Korea has a $130 million agreement to build bia announced plans to construct more than a Jordan’s first research reactor by 2015—the Jorda- dozen nuclear power reactors over the next 20 nian Research and Training Reactor—a 5 MW re- years at a cost of more than $80 billion, with the actor to run on 19 percent enriched fuel.116 In Feb- first reactor coming on line in 2022.119 Riyadh ruary 2014, Jordan signed a $1.9 million contract has been in discussions with a number of poten- with Advanced Systems Technology and Manage- tial suppliers to achieve this goal. Saudi Arabia ment, an American firm, to help oversee develop- has signed nuclear cooperation agreements with ment of the research reactor. Advanced Systems several potential suppliers: with France in early

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 36 2011; with Argentina in 2011, apparently aimed agreement, see chapter 6. It bears emphasis, how- at small plants for desalination; and with South ever, that despite signing these various interna- Korea in 2011, calling for cooperation in nuclear tional agreements, the Saudi government has not R&D, including building nuclear power plants and yet authorized the initiation of a nuclear energy research reactors, as well as training, safety, and program. waste management. In June 2013, KEPCO offered support for the localization of nuclear technology Egypt. In October 2006, the Egyptian minister (i.e., employing local firms, along with joint R&D for energy announced that a 1,000 MWe reactor of nuclear technologies), if Saudi Arabia purchas- would be built at El Daba’a by 2015. In December es South Korean reactors. Mohammed al-Jasser, 2013, Egypt issued an international tender to build Saudi Arabia’s minister of economy and planning, the Daba’a nuclear plant and to establish a bidding told South Korean president Park Geun-hye that process for the rights to build the nuclear reactor South Korea will be one of the countries to be in- at that site. Egypt plans to construct four nuclear vited to the Kingdom, if Saudi Arabia pursues a power plants for the generation of electricity. The project to build nuclear reactors.120 The Saudis also plants are planned to be operational between 2015 signed a 2012 agreement with China that relates and 2025. Egypt has said that seven international to nuclear plant development and maintenance, companies have already applied to build Egypt’s research reactors, and the provision of fabricated first nuclear power plant.124 nuclear fuel. In addition, the Saudis also indicated that they were negotiating with Russia, the Czech In April 2013, the Egyptian government ap- Republic, the U.K., and the U.S. regarding “further proached Russia to renew its nuclear cooperation cooperation.” The Saudis signed a nuclear coop- agreement, which focused on the construction of eration pact with Japan in January 2011, under a nuclear power plant at El Daba’a and the joint which Tokyo will provide Riyadh with a range of development of uranium deposits. In November assistance, such as training Saudis in nuclear pow- 2013, the Russian foreign minister said that Russia er generation technology, compiling the necessary was ready to finance an Egyptian nuclear plant.125 laws, and other means.121 Egypt announced on April 7, 2014, that Russia will provide Cairo with the fuel needed to operate In September 2013, both GE Hitachi Nuclear En- the country’s research reactor.126 Egypt has agreed ergy and Westinghouse signed contracts with Ex- that the Russians will help in conducting studies at elon Nuclear Partners, a division of Exelon Gen- the Daba’a nuclear station and in developing the eration, to pursue reactor construction deals with experimental reactor in Anshas. Work is expect- the King Abdullah City for Nuclear and Renew- ed to begin with the Russians on plans for build- able Energy. GE Hitachi is proposing its ABWR ing 4 GW (thermal) of nuclear power facilities by and ESBWR, while Westinghouse is proposing the 2025.127 AP1000 and its ABWR version. Areva is also interested in supplying its technology.122 Russia appears to be the clear partner of choice to develop Cairo’s first nuclear power plant. Russia’s China is also interested in the Saudi market, and willingness to finance Egyptian reactors is clear- the Chinese National Nuclear Energy Company ly a key factor in that choice. South Korea is also (CNNC) signed an MOU with Saudi Arabia’s King interested in nuclear cooperation with Egypt, and Abdullah City in August 2012.123 The U.S. has been on May 10, 2013, signed an MOU with Cairo that in discussions with the Saudi government about called for the two countries to cooperate to train a civil nuclear cooperation agreement, but the the workforce for a nuclear power plant, share talks have been stalled for some time. For an ex- technical information, and discuss ways to appease amination of the prospects for concluding such an the concerns of local residents.128 In addition, in

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 37 November 2014, Korea Hydro & Nuclear Power, KEPCO agreed to prepare a bid to build the plant KEPCO Engineering & Construction Company, at Sinop, with four APR1400 reactors starting Daewoo Engineering &Construction, and Daelim operation from 2019. The bid included the local Building participated in a “Korea Nuclear Industry construction group Enka Insaat ve Sanayi. KEP- Roadshow” in Cairo to promote exports of South CO was to take 40 percent equity in the plant, and Korean nuclear power reactors to Egypt.129 would help with financing. However, this proposal foundered due to KEPCO’s insistence on receiving The Egyptian government is expected to give no- electricity sales guarantees from the government, tice for an international bid for building a second rather than from the Turkish Electricity Trade & nuclear plant at El Daba’a next year.130 However, Contract Corporation.133 Egypt faces considerable political uncertainty in the aftermath of the overthrow of the Mubarak The United States has a peaceful nuclear coopera- and Morsi governments. Its economy is in serious tion in effect with Turkey that would facilitate the decline, and it is far too early to conclude that it retransfer of U.S.-origin technology to Turkey if will pursue a nuclear power program. The U.S. has Ankara decides to purchase Seoul’s reactors. a peaceful nuclear cooperation agreement with Egypt that will expire in 2021. It contains severe Potential Markets in South Africa restrictions on reprocessing and plutonium use. According to the World Nuclear Association, the Turkey. Turkey wants to build a domestic nucle- 2011 Draft Integrated Electricity Resource Plan ar industry over the next decade in order to re- for South Africa for 2010 to 2030 included six new duce reliance on imported oil and gas. Turkey’s 1,600 MWe reactors coming online in 18-month first nuclear plant, at Akkuyu, under the owner- intervals from 2023. The South African electric ship of Russia’s Rosatom, aims to be operational utility Eskom has said that it would be looking for in 2019. Rosatom invited Électricité de France, the lower-cost options than the earlier AP1000 or EPR French electric utility company, largely owned by proposals it had received from Westinghouse and the French government, to help build the power Areva, and would consider Generation II designs plant. A $22 billion contract has been awarded to from China (perhaps CPR1000) or South Korea a Japanese-French consortium to build Turkey’s (perhaps OPR).134 South Korea is interested in the second nuclear power plant at Sinop on the Black South African market but faces aggressive compe- Sea coast.131 tition from Russia, France, and China.

In November 2014, Westinghouse, China’s SNPTC, On September 22, 2014, Russia’s state-owned Ro- and the state-owned Electricity Generation Com- satom and the South African Department of En- pany (Elektrik Üretim A.Ş. Genel Müdürlüğü), ergy announced that they had reached an accord the largest electric power company in Turkey, an- that laid the foundation for ordering as many nounced an agreement to enter into exclusive ne- as eight Russian VVER pressurized-water reac- gotiations to develop and construct a four-unit nu- tors. A joint statement issued by Rosatom and clear power plant site in Turkey based on AP1000 the South African Energy Department said that reactor technology. The project also covers all life the agreement “lays the foundation for the large- cycle activities, including operations, nuclear fuel, scale nuclear power plants procurement and de- maintenance, engineering, plant services, and development programme of South Africa based on commissioning.132 the construction in South Africa of new nuclear power plants with Russian VVER reactors with to- South Korea has also expressed interest in the tal installed capacity of up to 9.6GW (up to eight Turkish market, and in a March 2010 agreement, [reactor] units)”—which would be South Africa’s

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 38 total planned nuclear capacity. This announce- China’s SNPTC, the Industrial & Commercial ment prompted accusations that President Jacob Bank of China, and South Africa’s Standard Bank Zuma’s government had engaged in improper Group signed a power project financing frame- procurement practices. South Africa immediate- work agreement enabling cooperation on the fi- ly announced that it had not yet awarded Russia a nancing of a nuclear power plant construction deal worth as much as $50 billion to develop eight project in South Africa. The third agreement, also nuclear reactors and that the two countries had signed by SNPTC and Necsa, will see SNPTC pro- merely signed a cooperation agreement. The pres- vide training to South African nuclear personnel ident authorized the signature of an agreement by providing training to about 300 South Afri- with France, and said that South Africa planned can nuclear professionals in a plan involving two accords with China and Japan.135 years of basic training, professional training, and in-service training. This program will be officially In October 2014, South Africa signed a nuclear launched in March 2015, according to SNPTC.139 cooperation agreement with France that will pave the way for establishing a nuclear procurement In October 2013, Westinghouse signed an agree- process. Areva is interested in developing nuclear ment with the Sebata Group of engineering com- projects in South Africa, notably through its Gen- panies to prepare for the “potential construction” eration III+ EPR reactor technology.136 of new nuclear plants. The U.S. has a peaceful nuclear cooperation agreement in effect with South In March 2014, China’s main nuclear power com- Africa, but U.S. involvement in the South African panies were reportedly seeking to bid for a con- nuclear program at this point appears to be limited tract to build six reactors by 2030. China’s Ministry to a March 2013 cooperation agreement with Nec- of Commerce reported that negotiations toward a sa for the development of local facilities for fuel nuclear cooperation agreement were proceeding. assembly components.140 The energy minister said that this could involve the joint Chinese–South African marketing and South Africa held a second nuclear vendor work- supply of nuclear energy products, along with in- shop in late November 2014 (the first workshop frastructure funding to promote nuclear power was held in October in Moscow). The workshop developments across the region. In February, the involved presentations by vendors from China, Nuclear Energy Corporation of South Africa (Nec- France, the United States, and South Korea on sa) signed a skills development and training agree- how they propose to meet South Africa’s nuclear ment with the two Chinese state-owned nuclear power needs, including in areas such as conver- energy corporations, CGN and SNPTC, funded up sion, enrichment, fuel fabrication, localization and to 95 percent by China.137 On November 7, Chi- industrialization, power generation, safety and lina and South Africa signed an intergovernmental censing, job creation, R&D, skills transfer, and de- agreement on nuclear cooperation.138 This was fol- velopment. The workshop was designed to form lowed in December 2014 with the signing of sev- part of the government’s technical investigation in eral nuclear accords, including an MOU on a nu- preparation for a procurement decision.141 clear fuel cycle partnership, a financing framework agreement for the construction of a new nuclear Conclusion power plant in South Africa, and an agreement on nuclear personnel training. The MoU signed by Some of the countries that South Korea is target- Necsa and CNNC establishes a cooperative part- ing for its nuclear exports are in the early stages of nership between the two companies that will see planning nuclear power programs, whereas others CNNC support South Africa’s nuclear industry. are more advanced. Given the poor financial condition of some of these countries and their lack of

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 39 any kind of nuclear infrastructure, it is far from India, Abe has been promoting Japanese technol- certain that the ambitious nuclear power programs ogy in the Eastern European market. At a June of many of these countries will be realized. 2013, summit in Warsaw of the so-called Visegrad Group—the Czech Republic, Hungary, Poland, Moreover, in pursuing its nuclear export goals, South and Slovakia—Abe sought to interest the four Korea will face competition from the traditional sup- countries in purchasing Japanese nuclear technol- pliers, such as the United States, France, and Russia. ogy. Promoting Japanese nuclear technologies is Of these, France’s Areva has suffered a major set- high on Abe’s agenda for boosting overall Japanese back as a nuclear supplier as a result of the huge exports.145 MHI’s European version of its advanced financial losses it has incurred in the much-delayed pressurized water reactor (EU-APWR) has recent- construction of the Olkiluoto 3 nuclear reactor in ly been certified as compliant by the European Finland, charges of disseminating misleading in- Utility Requirements organization.146 formation, and continuing disputes with the Finn- ish utility TVO over compensation claims for costs Although China is facing strains in its capacity to and start-up dates before the arbitration court of meet its domestic construction goals, Beijing is the International Chamber of Commerce.142 Are- also aiming to sell nuclear technology in the global va, which narrowly escaped seeing its debt down- market. According to the World Nuclear Associa- graded to junk status by Standard & Poor’s rating tion, China’s policy is to “go global” by exporting agency in October 2014, is cutting investments and nuclear technology, including heavy components in increasing sales of nonstrategic assets as it tries to the supply chain. It says Beijing has a “determined” shore up its finances.143 One analyst recently noted policy of exporting nuclear technology, based on that “it was clear that Areva had been struggling China’s development of the CAP1400 reactor, with in the current environment,” but that it now “looks Chinese intellectual property rights and backed by more difficult than expected.”144 full fuel cycle capability. The policy is being pursued at a high level politically, and will make use of Chi- However, though prospects for French nuclear na’s economic and diplomatic influence.147 As noted exports may not be good, South Korea and the above, China is pursuing aggressive financing tac- United States are confronting Russia’s particular- tics, as is evidenced by its willingness to invest in the ly aggressive nuclear export promotion policies. reactors it is proposing to build in Romania. How- Moscow is winning competitions by offering be- ever, as Shanghai’s China Business News reports, low-market financing and providing a complete it will not be easy for China to market its nuclear range of products and services, including manu- power technology in the international market, be- factured parts, engineering services, construction, cause the country has not built a reactor that has operations, maintenance, and fuel. It is also agree- adopted the reactor technology it is trying to sell ing to take back spent fuel produced from the nu- abroad. The two Chinese companies involved in the clear material it supplies. In countries with little or development of this reactor technology—CNNC no domestic nuclear infrastructure or experience, and CGN—have had several disagreements during including Turkey and Vietnam, Russia has offered their partnership and have been competing, instead a full build-own-operate model. of joining forces, to explore international opportunities.148 However, the Chinese authorities are South Korea will also face competition from new considering a plan to merge these two companies nuclear suppliers such as China and Japan. Despite in order to increase China’s competitiveness on the the Fukushima nuclear disaster, Japanese prime international stage.149 In addition, as noted above, minister Shinzo Abe has been eager to promote China has shown its willingness to team up with Japanese nuclear exports. In addition to efforts Westinghouse in making a joint bid to sell Westing- to move forward with nuclear cooperation with house technology to Turkey.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 40 chapter 5 Potential Cooperation between the United States and South Korea in the Global Nuclear Market: Comparative Advantages and Disadvantages

he U.S. and the ROK already have extensive Existing Cooperation ties in the nuclear field, which include bilateral trade, cooperation in third-country Bilateral nuclear cooperation between the U.S. Tmarkets, and collaboration in various R&D proj- and the ROK has been extensive and has involved ects. The conclusion of a new U.S.-ROK peaceful (1) trade between the two countries, including nuclear cooperation agreement should enhance American exports of nuclear materials, parts, and opportunities in all these phases of cooperation. technology to South Korea as well as imports of South Korean nuclear equipment to support nu- This chapter assesses the prospects for increased clear projects in the United States; (2) direct U.S. collaboration in the global market. It does not seek exports to third countries to support South Kore- to identify specific projects or markets in third an projects; (3) U.S.–South Korean joint ventures; countries in which the South Korean and Amer- and (4) participation in bilateral and international ican nuclear companies could cooperate, because R&D projects. that is an issue that only the private firms themselves can decide, in light of their own commer- U.S. exports to South Korea. The United States has cial interests. Rather, its purpose is to identify the played a vital role in the development of the South overall comparative advantages and disadvantages Korean nuclear industry. A total of 19 of South of the American and South Korean nuclear indus- Korea’s existing 23 reactors—along with those un- tries, recognizing that such relative strengths and der construction, on order, or planned—are based weaknesses could in certain cases promote collab- on U.S. technology.150 Since the start-up of South oration in some markets, while giving one country Korea’s first commercial nuclear energy facility or the other an edge in competing for sales in other in 1978 (Kori-1), Westinghouse technology has cases. formed the foundation of the South Korean nuclear energy program.151 With this end in mind, the chapter begins with a description of the existing nuclear ties between As South Korea’s nuclear program has grown and the two countries and follows with an attempt to matured, the country’s companies have come to identify the strengths and weaknesses of the nucle- play the major role in designing and construct- ar capabilities of the American and South Korean ing its nuclear power plants. The percentage of nuclear industries that might provide a basis for U.S. content in South Korean nuclear power proj- collaboration between the two countries. ects has declined over the years, as South Korean content has increased. Nonetheless, there remains substantial U.S. content in South Korean plants,

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 41 and Westinghouse and other U.S. nuclear com- provision of control equipment, instrumentation, panies still supply the country with such items as and major components. In addition, a number of instrumentation and control equipment, pumps, U.S. nuclear companies have provided engineer- other major components, and technical and engi- ing, construction management, training, legal, reg- neering services.152 ulatory, environmental, and other services to the UAE project. U.S. exports to the UAE project are Westinghouse is still working on five reactors expected to exceed $1.5 billion.155 The transfer of under construction: Shin-Kori 2, 3, and 4; and the APR 1400 technology from Korea to the UAE Shin-Wolsong 1 and 2. The company is supplying technology as well as other nuclear know-how was components such as reactor coolant pumps and approved by the U.S. DOE, in accordance with the reactor vessel internals to the plants. U.S. suppli- 10 CFR part 810 regulations described in chapter ers have also provided South Korean reactors with 2. Similarly, either the NRC or DOC approved the nuclear fuel and fuel services. For example, since direct export of tangible items from the U.S. to the the inception of the South Korean civil nucle- UAE project. All these approvals were facilitated ar program, a facility in Metropolis, Illinois, has by the U.S.-UAE agreement for cooperation. provided uranium conversion services to KEP- CO.153 South Korea has also purchased enrichment Another important example of U.S.-ROK par- services from the U.S., first from DOE and then ticipation in third-country nuclear markets is from the United States Enrichment Corporation the provision by South Korean companies of key (USEC), when the private company took over the equipment to Westinghouse reactors under con- government enrichment facilities. struction in China. In April 2007, Westinghouse signed a letter of intent for a contract with South U.S. imports from South Korea. South Korean firms Korea’s Doosan Heavy Industries for the supply are significant suppliers to the eight Westinghouse of two pressure vessels and four steam generators AP1000 reactors under construction in the United for two AP1000 nuclear power reactors to be con- States. For example, the two Westinghouse AP1000 structed in China—the Sanmen 1 and Haiyang reactors currently under construction in South Car- 1.156 The Sanmen 1 reactor pressure vessel arrived olina will use reactor vessels and steam generators on site from Doosan in July 2011. As noted in the from Changwon, condensers from Sacheon, de- preceding chapter, the South Koreans hope that mineralizers and heat exchangers from Ansan, and the contract will be a stepping stone for South Ko- valves from Cheonan.154 Since 2006–2007, South rean companies to expand in the nuclear power Korean content in U.S. nuclear plants has become market in China and other countries. The pressure greater than U.S. content in South Korean plants. vessels for the other two units are being made by Chinese manufacturers.157 Collaboration in third countries. In 2009, the UAE awarded a contract to construct four nuclear pow- R&D cooperation. The U.S. and the ROK have a er reactors to a consortium led by KEPCO. The long history of R&D cooperation. The U.S. and consortium includes Westinghouse Electric Com- South Korea built a 100-kilowatt research reactor, pany. The reactors that KEPCO is building in the which began operating in 1962, and was later up- UAE—APR1400s—use a Westinghouse-based de- graded to 250 kilowatts and finally to 2 MW.158 sign. As a result of the U.S. content in the APR1400 reactors and other U.S.-ROK supply relationships, The U.S. and South Korea also established the Joint American companies have a significant role in the Standing Committee on Nuclear Energy Cooper- UAE project. Westinghouse’s contribution to the ation in the early 1980s to provide a forum for ex- UAE reactors includes design, technical support changing views on nuclear R&D and other nuclear services, consulting on licensing issues, and the energy issues. In the 1990s, KAERI conducted a

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 42 joint research program with DOE national labo- and joint R&D. The extent of this growth will de- ratories and Atomic Energy of Canada Limited on pend on the relative strengths and weaknesses of the DUPIC fuel cycle (direct use of PWR spent fuel the two countries’ nuclear programs. in CANDU reactors, in which light water reactor spent fuel would be made into CANDU fuel with- Comparative Advantages and out reprocessing). In 2002, the U.S. and the ROK Disadvantages of the U.S. Nuclear undertook studies on pyroprocessing, in which Industry U.S. and ROK scientists engaged in joint pyroprocessing experiments involving used nuclear fuel The U.S. nuclear industry enjoys a number of at U.S. laboratories. In 2011, the U.S. and South strengths in competing in the international mar- Korea agreed to a 10-year Joint Fuel Cycle Study ket, including its long experience, advanced tech- (JFCS) on pyroprocessing, in which KAERI scien- nology, and high safety standards. On the oth- tists would conduct spent fuel separation work at er hand, the American nuclear industry has lost the Idaho National Laboratory and other U.S. facil- much of its manufacturing capacity and has failed ities, while work in South Korea would be restrict- to build a new reactor in decades. It also does not ed to simulated material. The purpose of the JFCS benefit from the financial and political support is to explore the technical and economic that many of its competitors enjoy. feasibility and proliferation implications of the electrochemical recycling process and Strengths of the U.S. Industry of other spent fuel management options. Ar- gonne National Laboratory and KAERI signed an The United States has considerable experience MOU on August 25, 2014, covering “a broad field and expertise in nuclear energy development that of technical cooperation on nuclear science and it can bring to bear in the international market. technology.” KAERI’s Sodium-Cooled Fast Reac- As the Nuclear Energy Institute (NEI) has re- tor Development Agency has provided $6.78 mil- cently pointed out, more than 60 percent of the lion funding to date for Argonne’s contributions world’s 436 operating reactors are based on U.S. to the development of a Prototype Generation-IV technology. Many of the 71 nuclear plants under Sodium-Cooled Fast Reactor.159 construction around the world rely on U.S. companies for reactor designs, engineering, precision In addition to bilateral research projects, South components, and high-performance nuclear fuel. Korea and the United States have worked together NEI has summarized what it regards as the major on several international R&D programs, including advantages in deploying U.S. reactor technology projects on advanced reactors under the Genera- and in employing U.S. companies to implement tion IV International Forum and the IAEA’s Inter- nuclear power development programs abroad. national Project on Innovative Nuclear Reactors These include three major components: advanced and Fuel Cycles, and the International Framework reactor designs; services, fuel, and components; on Nuclear Energy Cooperation, focusing on the and excellence in nuclear safety: development of international reliable comprehensive fuel service arrangements and R&D priorities. Advanced reactor designs: U.S. companies are at the forefront of developing a fleet of A new peaceful nuclear cooperation agreement world-class reactors, incorporating modu- between the United States and the ROK should lar techniques for easier construction. New offer opportunities for significant growth of the designs include large reactors such as the already extensive collaboration between the U.S. GE Hitachi ABWR, the only Generation and the ROK in all three areas of bilateral trade, III reactor in operation; the Westinghouse collaboration on joint projects in third countries, AP1000, a Generation III+ design now

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 43 under construction in the United States and Energy Holding in December 2013 for AP1000 China; and the GE Hitachi ESBWR, an- technology, although it is unclear whether Bulgar- other Generation III+ design. In addition, ia will have the financial resources to purchase a the U.S. Department of Energy is funding nuclear power plant.163 through public-private partnerships two U.S. companies to bring small, modular de- DOE conducts programs to develop advanced re- signs into operation by 2022.160 actor technologies, including research, development, and deployment (RD&D) through its Next The U.S. is a leader in nuclear plant technology, Generation Nuclear Plant (NGNP), Advanced with the two advanced reactors with passive safety Reactor Concepts, and Advanced Small Modular systems—Westinghouse’s AP1000 and GE’s ESB- Reactor (aSMR) programs to promote safety, tech- WR. The industry hopes that these new plants— nical, economical, and environmental advance- with their simplified design, greater fuel efficiency, ments of innovative Generation IV nuclear energy and improved safety features, plus a new construc- technologies. DOE pursues these advancements tion method and a new system of nuclear regula- through RD&D activities at its national laborato- tion—will result in faster and cheaper plants that ries and U.S. universities, as well as through col- will lead the way for a new generation of reactors laboration with industry and international part- and demonstrate the economic feasibility of nucle- ners. These activities focus on advancing scientific ar power. However, the success of efforts to build understanding of these technologies, establishing new advanced nuclear power plants in the U.S. and an international network of user facilities for civil to export this technology abroad will depend on nuclear RD&D, improving economic competitive- the ability of the U. S. industry to demonstrate that ness, and reducing the technical and regulatory it can build these new facilities within projected uncertainties of deploying new nuclear reactor costs and on schedule. technologies.

Prospects for the United States’ exports of its ad- However, U.S. programs for Generation IV reac- vanced nuclear reactor designs have received a re- tors are not as advanced as those in such countries cent boost with reports that China’s main nuclear as China, France, Russia, and South Korea. The power companies are in various stages of negotia- U.S. does not have a very broad-based, integrated tions to purchase eight third-generation Westing- technology program aimed at developing any par- house AP1000 reactors, which, with the inclusion ticular technology at this time.164 of machinery and services, are expected to cost $24 billion.161 Export prospects were also given a Small modular reactors. Both the American boost by the announcement by Toshiba Corpo- nuclear industry and the U.S. government have ration that it has reached agreements with GDF been placing increasing emphasis on developing Suez of France and Iberdrola of Spain to take a and marketing so-called small modular reactors 60 percent stake in NuGeneration Limited, the (SMRs)—less than 300 MW. The potential benefits U.K.-based nuclear energy company that plans to of small reactors are lower unit capital costs com- develop nuclear power plants at the Moorside site pared with current reactors, factory fabrication, in West Cumbria, northwest England. As the ma- shorter construction times, lower financial risks, jority owner of NuGen, Toshiba, in collaboration and the ability to add incremental capacity as it be- with its group company Westinghouse, intends comes needed, instead of having to find a gigawatt to begin the construction of three Westinghouse of demand at once. AP1000 nuclear reactors with a combined capacity of 3.4 GW at the U.K. site.162 Westinghouse also DOE has pledged close to half a billion dollars in fi- entered into an exclusive agreement with Bulgaria nancing the development of SMRs and determining

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 44 whether they can be made cost-effective. DOE 90 percent, U.S. firms lead the world in op- chose Babcock and Wilcox (B&W) in November erational expertise. U.S. companies excel in 2012 and NuScale in December 2013 as recipients the full range of nuclear services, including of a portion of the $452 million made available engineering and construction, nuclear fuel for SMR research for a six-year period starting in services and more. Services for uranium 2012. B&W and its partners—Bechtel Internation- conversion, enrichment and fabrication are al and the Tennessee Valley Authority (TVA)— available, and substantial new, advanced had hoped to deploy B&W’s 180-MW mPower by enrichment capacity is in various stages 2022.165 of technological development and deployment.169 However, the development of SMRs faces significant challenges, including cost of development NEI has also pointed out that: and challenges in obtaining NRC licensing.166 NuScale, which hopes to build an SMR at the site the U.S. nuclear industry has a proven re- of the Idaho National Laboratory, has warned that cord in working with partners around the the design and design certification of an SMR world on technology transfer, localization, take a long time and are very expensive (about $1 education and training, to enable broad and billion), and thus NuScale may need to seek new enduring industrial development. Many of investors in its SMR program. In addition, B&W the 71 nuclear plants under construction announced in November 2013 that it was facing a around the world rely on U.S. companies long-term financing problem and was accelerating for reactor designs, engineering, precision its efforts to attract more investors. In April 2014, components and high-performance nuclear B&W announced that it was significantly restruc- fuel.170 turing its SMR program and that it may shut down a testing facility related to that program.167 On the The U.S. has long been a supplier of uranium con- other hand, the TVA, which had hoped to partner version, fuel fabrication, and uranium enrichment with B&W, has announced that it plans to move services. The Honeywell Metropolis Works plant ahead to develop an Oak Ridge site for a small nu- in southern Illinois converts uranium oxide ore clear reactor even if B&W decides not to proceed into uranium hexafluoride, a key raw material with the development of SMR technology.168 used to produce enriched uranium for use in nuclear power plants as fuel.171 Although the commercial use of SMRs is about a decade away, the long-term objective of DOE and The U.S. has five fuel fabrication facilities that con- the nuclear industry is to help the U.S. capture the vert enriched uranium oxide into solid pellets for early lead in the race to commercialize SMRs in fuel rods. Areva, Westinghouse, B&W, and Gener- the international market. DOE believes that SMRs al Electric operate fabrication facilities in Virgin- are ideal for small electrical markets and areas ia, Washington State, North Carolina, and South with limited water resources—that is, developing Carolina. countries that may wish to launch new nuclear programs in the decades ahead. U.S. nuclear exports include reactors, pumps, valves, piping, electrical wiring and components, The second major advantage of U.S. nuclear indus- engineering and construction services, supply of try that NEI identified is: fuel and fuel services, operational support, training, and other services. In general, the U.S. indus- Services, fuel, and components. With a U.S. try has a cost advantage over European vendors, fleet average capacity factor of approximately but its products are more expensive than those

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 45 of Asian countries. However, comparing relative enrichment capacity, which has delayed the con- costs is often difficult, particularly in cases where struction of new enrichment capacity in the U.S. foreign companies are government-owned. In such and questions surrounding the future of the cases, labor and productivity costs are not known USEC—now known as Centrus Energy Corpora- because of a lack of transparency. For example, it is tion.173 The U.S. currently has only one enrichment not clear whether Chinese nuclear plants are being plant174—the Urenco USA centrifuge enrichment built within budget because of the lack of transpar- facility in Eunice, New Mexico. (In November ency in Chinese labor and productivity costs. This 2012, it was reported that KEPCO was going to is also true to a significant extent in South Korea, buy a stake in this Urenco plant.) In November which has a completely different transparency sys- 2012, Urenco applied for a license to increase its tem than the U.S. Russia also lacks transparency in capacity from 3.7 to 10 million SWU per year, to its cost structure. allow for future commercial opportunities.175

U.S. industry also has an advantage in the quali- USEC has closed its two large gaseous diffusion ty of its products and services. The U.S. does not enrichment plants, but it continues to sell enriched make large pressure vessels but makes the prod- uranium based on its 2011 contract with Tenex.176 ucts that are challenging to manufacture, such as USEC had been counting on developing a new high-precision components, rotating apparatuses advanced centrifuge technology—the American like flywheels, reactor coolant pumps, and reactor Centrifuge Project (ACP)—to replace the outdat- vessels internals—all precision-engineered, highly ed and costly gaseous diffusion technology and machined parts. U.S. quality assurance standards to keep it in the enrichment market in the future. and codes are the “gold standard” internationally. However, USEC’s efforts were set back by its fail- The U.S. also has a superior ability to troubleshoot ure to qualify for a DOE loan guarantee. Instead, problems when nuclear plants age and problems DOE agreed to help USEC finance an RD&D pro- arise. U.S. industry is the first one to which opera- gram for the ACP technology. But the RD&D pro- tors look in order to fix problems. gram has also run into considerable difficulties. DOE lost confidence in USEC’s handling of the U.S. nuclear industries operate plants economical- ACP, and in March 2014 announced that it would ly and safely, and are known for the high quality of take over management of the project. In addition, their management, and human performance. The on March 5, 2014, USEC filed for bankruptcy af- U.S. also has a demonstrated ability to build plants ter it determined that it would be unable to repay internationally. For example, the second AP1000 its debt due later in the year. On September 30, plants being built in China at each site are well 2014, USEC announced that it had emerged from ahead of schedule. bankruptcy and had changed its name to Centrus Energy Corporation. Centrus’s fate will depend For many years, the U.S. played a dominant role on continued financial support from Congress at in the international enrichment market. This role a time of great fiscal austerity, on the ACP’s tech- has declined substantially with the entry of oth- nical success, on the commercial feasibility of the er enrichers, such as Urenco, Areva, and Russia. ACP technology, and on the future of the enrich- As of 2013, the U.S. had an enrichment capacity ment market. of 3.5 million separative work units (SWUs) per year, compared with a total world capacity of 51.5 Another enrichment facility under development million SWUs.172 in the United States is the GE-Hitachi Global Laser Enrichment (GLE) facility in Wilmington, Dela- The future of the U.S. enrichment industry is high- ware. Some believe this laser technology will cut ly uncertain, largely due to the excess in global the cost of enrichment drastically. On January 20,

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 46 2014, GLE advised the NRC of GLE’s intent to excellence in nuclear safety. Based on more prepare a license application for the authority to than 50 years of experience, the U.S. nucle- construct and operate a laser enrichment plant, ar industry continues to perform as one of referred to as the Paducah Laser Enrichment Fa- the safest industrial working environments cility (PLEF). PLEF would be deployed as part in the world. The U.S. supply chain leads of an agreement between GLE and DOE to pur- the world in safety-conscious workforce chase and reenrich DOE inventories of depleted training, operational excellence, and con- UF6. The GLE technology clearly works, and ap- tinuous improvement. Regulated by the pears able to offer more competitive prices than NRC—the gold standard for nuclear regu- its centrifuge competitors. However, whether lators around the world—U.S. suppliers are GLE will decide to fund the construction of a known for process excellence, human per- large, commercial facility in the face of today’s formance and safety culture.179 excess global enrichment capacity remains to be seen. Thus it may require a few years before we The diversity of the plant designs that U.S. indus- know how the U.S. will compete in the global try deployed historically obliged the NRC to de- enrichment market. velop a substantially stronger and more independent system of scientific and technical assessment The United States has also been a major support- compared with the systems of other national nu- er of international efforts to ensure that coun- clear regulatory agencies, which explains why the tries have access to a reliable nuclear fuel supply. most important recent advances in commercial As part of this effort, the U.S. has supported the reactor technology have been made in the United IAEA’s low-enriched uranium (LEU) bank and States. In addition, the Three Mile Island accident the Russian and U.K. fuel assurance mechanisms prompted U.S. utilities to increase their coopera- for IAEA member states. In addition, the United tion by sharing detailed information about their States has announced the availability of approxi- operations, an effort that greatly improved the re- mately 230 metric tons of LEU from the American liability of U.S. nuclear plants.180 As a result, other Assured Fuel Supply (AAFS), which resulted from nations not only look to the United States nuclear the down-blending of 17.4 metric tons of U.S. sur- industry for operational expertise but also see the plus HEU. The AAFS—the largest LEU fuel bank NRC as setting the international gold standard for in the world—will serve as a backup fuel supply in safety and physical protection regulations. the event of a fuel supply disruption. Weaknesses of the U.S. Industry In addition to U.S. nuclear fuel supply capabilities, the DOC has reported that the United States has On the other hand, the nuclear industry in the top-performing companies all along the nuclear United States suffers from a number of significant value chain—including 12 of the world’s 25 high- weaknesses, including the failure to build a single est-performing reactors; the only Generation II domestic nuclear plant in 40 years, the atrophying reactor in operation (GE Hitachi’s ABWR reactor of U.S. manufacturing capability, and inadequate is only Generation III); 255 companies with so- financial and high-level political support from the called N-Stamps in mid-2008, up from 120 in the U.S. government for its nuclear exports. early 2000s;177 and more than 20,000 U.S. small and medium-sized supply companies.178 Failure to build. The United States has not built a single new nuclear facility in 40 years. The last The third major advantage of the U.S. nuclear in- year that a commercial nuclear reactor came on- dustry identified by NEI is: line in the U.S. was in 1993—the Watts Barr plant in Tennessee, which began construction in 1973.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 47 As a result of a number of factors—inexpensive follow in developing plans to address greenhouse natural gas, limited electricity demand, the costs gas emissions from existing fossil-fuel-fired elec- of constructing new plants and the need to im- tric generating units. Power plants account for plement new NRC regulations in response to the roughly one-third of all domestic greenhouse gas Fukushima nuclear disaster, and the failure to find emissions in the United States. The proposed EPA a permanent repository for high-level nuclear guidelines aim to cut carbon emission from the waste—the U.S. nuclear energy industry has been power sector by 2030 by 30 percent nationwide declining both domestically and internationally. below 2005 levels, which is equal to the emissions from powering more than half the homes in the The Obama administration is trying to give a boost United States for one year. If properly drafted, the to nuclear power through a loan-guarantee pro- guidelines could favor the construction of new nu- gram. DOE first offered loan guarantees for new clear reactors. However, the nuclear industry has nuclear power reactors in 2005, with Congress been highly critical of the guidelines, arguing that authorizing up to $17.5 billion. And in 2011, the they would penalize nuclear generation.182 The EPA administration asked that this amount be raised to has recently acknowledged that the nuclear pro- $36 billion. However, demand for these loan guar- visions of the CPP “have raised concerns among antees failed to materialize. Only two new reactors stakeholders” and “would likely be revised.”183 under construction in Georgia obtained a loan Moreover, the implementation of the guidelines guarantee. In February, DOE formalized $6.51 bil- faces a number of obstacles, including likely legal lion in federal loan guarantees to support the con- challenges and congressional opposition. struction of two new nuclear reactors at the Alvin W. Vogtle Electric Generating Plant. The Scana Five nuclear plants are under construction in the nuclear plant under construction in South Caro- United States—two AP1000 units at the Vogtle lina decided to forgo the DOE loan program and units 3and 4 in Georgia, two AP1000 reactors at to rely on commercial financing. Thus, the loan the VC Summer Nuclear Station in South Caroli- guarantee program has had a limited effect on new na, and the TVA Watts Bar Unit 2. The TVA plant construction to date. is expected to be completed in early 2015. How- ever, all have faced significant delays and cost in- In addition, for the longer term, on December10, creases. Vogtle is the only nuclear power plant to 2014, DOE announced a solicitation of up to $12.6 receive a federal loan guarantee so far, and though billion in loan guarantees “to support construction there are additional applications to build nuclear of innovative nuclear energy and front-end nucle- power plants on file with the NRC, only a few new ar projects in the United States that reduce, avoid, reactors are projected to be built. Investment in or sequester greenhouse gas emissions.” Although new reactors is taking place only in states in the any such project may apply, DOE said that the fo- Southeast, where the marketplace is more regu- cus would be on four key areas: advanced nuclear lated and utility regulators guarantee the rate of reactors, SMRs, upgrades and uprates at existing return utilities receive for building and operating reactors, and front end (fuel) projects.181 new plants. Outside the Southeast, most utilities do not operate in a regulated market. In these The building of new nuclear plants and the life ex- markets, the industry is experiencing a number of tension of older ones also may critically depend nuclear power plant closures. Five nuclear plants on whether the U.S. government adopts a policy were retired last year, with three closings resulting preference for the use of carbon-free, reliable fuel from the fact that the plants could not compete forms. On June 2, 2014, the U.S. Environmen- with cheap natural gas prices and two occurring tal Protection Agency (EPA) proposed emission because of the plants’ poor maintenance records. guidelines—the Clean Power Plan—for states to

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 48 Nevertheless, the fact that the United States has In addition, U.S. government financial policies to not built new domestic nuclear power plants in support U.S. nuclear exports are comparatively more than 30 years, combined with the uncertain- weak. The current policy of the Overseas Private ty facing the industry’s future, hurts U.S. prospects Investment Corporation (OPIC), which is the U.S. globally because countries seeking to develop government’s development finance institution, cur- nuclear power are likely to turn for assistance to rently prohibits nuclear power financing.189 What those countries that have growing domestic nucle- little financial support the U.S. nuclear industry ar power programs.184 has received comes from the U.S. Export-Import Bank, whose support of nuclear exports, though Decline in manufacturing capability. The shut- far from robust, has not been insignificant.190 Ex- down of old nuclear power plants and only limited Im does offer loans, whereas most of its foreign new construction have led to a decline in Amer- equivalents offer only loan guarantees. However, ica’s nuclear manufacturing capability. The DOC financial support for U.S. nuclear exports has long has reported that the U.S. nuclear industry has been controversial. More important, as noted in atrophied and, according to U.S. government of- the previous chapter, Ex-Im’s continued existence ficials and nuclear industry representatives, may has been the subject of considerable controversy lack the capability to manufacture certain compo- in Congress, and its charter has been extended nents and equipment needed to produce large ci- only to June 30, 2015. As noted, the uncertainty of vilian power reactors.185 In the 1980s, for example, Ex-Im’s future places the U.S. nuclear industry at a 100 percent of equipment for U.S. nuclear plants competitive disadvantage. was manufactured in America, compared with less than 25 percent today.186 All but one of the U.S. The U.S. nuclear industry regards Ex-Im as one nuclear power plant vendors and nuclear fuel de- of the most important tools available to promote signers and manufacturers for light water reactors U.S. nuclear energy exports to the large and grow- have now been acquired by their non-U.S.-based ing global market. Marvin Fertel, president of the competitors.187 A recent report concluded: “Un- NEI, argued before the House Financial Services fortunately, the three-decade drought in the con- Committee on June 25, 2014, that the continua- struction of new plants in the United States, cor- tion of Ex-Im is essential to the global competi- responding with enormous growth in the nuclear tiveness of the U.S. nuclear industry. Among other energy infrastructure internationally, has led to things, he pointed out that Ex-Im has given the this country becoming primarily a global service United States the leverage to impose discipline provider in nuclear energy.”188 on the export credit agencies of other countries. Under the Nuclear Sector Understanding of the Inadequate financial and political support. The Organization for Economic Cooperation and De- governments of other nuclear suppliers provide velopment (OECD), export credit financing terms strong financial and political support, including and trade-related aid in the nuclear energy sector direct government ownership or subsidies. In ad- must conform to agreed-on limits. If the United dition, although U.S. executive branch support States shuts down Ex-Im, it would lose its greatest for U.S. nuclear exports is excellent, foreign source of leverage for disciplining the 59 export governments place greater emphasis on sup- credit agencies operating worldwide. Fertel made porting bids through high-level diplomatic particular note of the fact that China and Russia and political assistance. U.S. industry cannot do not abide by the discipline of the OECD, and expect the kind of high-profile support for its nu- he took particular aim at Russia and its efforts to clear exports that has been given by the presidents expand its influence through nuclear exports. He of France, Russia, and South Korea to their nuclear asserted that Russia has used aggressive financing exporters. terms, utilizing funds from the Russian treasury,

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 49 rather than an export credit agency, to increase its simply do not have the requisite finances to invest share of the global nuclear energy market. Accord- heavily in foreign reactor projects. ing to reports, Russia is providing 85 percent of the financing for the completion of two plants in Another key factor that hurts U.S. exports is the Ukraine, and 85 percent of the financing for two fact that the U.S. nuclear industry, unlike most of plants in Vietnam. Hungary cited below-market its competitors, is independent from the govern- interest rates for its recent award to Rosatom of a ment. Other nuclear suppliers offer their potential $13.5-billion tender for two new nuclear plants.191 customers more assistance than the United States does in terms of financing, training, and educa- The U.S. government’s failure to supply adequate tional exchanges. They also provide high-level financial support may be particularly damaging to political and diplomatic support to their nuclear the prospects for U.S. nuclear exports in develop- industries. The secretary of commerce has estab- ing countries undertaking new nuclear programs. lished the Civil Nuclear Trade Advisory Commit- Caroline Reda, president and chief executive offi- tee (CINTAC) to advise him or her on the devel- cer of GE Hitachi Nuclear Energy, recently wrote opment and administration of programs to expand that “global opportunities in nuclear energy are U.S. exports of civil nuclear goods and services. concentrated mostly in emerging markets where CINTAC supports DOC in its role as a member financing is most critical and financial assistance, of the Civil Nuclear Trade Working Group of the including the type Ex-Im provides, is often a pre- Trade Promotion Coordinating Committee.193 requisite to bid. Many of our competitors are sub- This group has recommended a number of steps sidized or wholly owned by governments that offer that the U.S. government, industry, and others low-cost financing and other assistance through could take to advance the competitive position of their Export Credit Agencies. These include com- U.S. nuclear exports.194 petitors from France, the Republic of Korea, Rus- sia, and others.”192 The GAO reported in 2010 that the Civil Nu- clear Trade Initiative—established by DOC in Another factor that puts U.S. industry at a disad- October 2008 to help promote the competi- vantage is the growing trend among suppliers to- tiveness of the U.S. nuclear industry—had ward investment in plants they sell abroad. Most made limited progress and does not have a importing countries, especially developing econ- well-defined strategy to support and promote omies, want co-investment as part of any deal U.S. nuclear industry efforts to compete glob- to purchase foreign nuclear technology. Russia ally. Although some progress has been made and France are best positioned for meeting such since that report, the U.S. still remains far behind demands. In South Korea, KEPCO also appears its competitors in providing a coordinated, sus- ready to follow suit and invest in plants it sells tained, and high-level governmental support for abroad. The Japanese have an Ex-Im bank, but its nuclear export industry.195 they also have an investment bank that could be employed for co-investment in reactors they sell As a consequence of these weaknesses in the U.S. on the global market. nuclear position, the 2010 GAO report concluded that the United States’ share of global exports The U.S. is at a distinct disadvantage when it comes of nuclear material, reactors, and components to this kind of financing. GE’s and Westinghouse’s has declined in the past 15 years. Although policies are evolving in support of building reac- the volume of U.S. exports of natural and en- tors in the U.K., where both are taking some in- riched uranium has remained stable, the U.S. vestment positions in their projects. However, this share of global exports for these materials has approach has its limits because U.S. companies decreased significantly, from 29 percent to 10

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 50 percent during the period 1994–2008. The • South Korea has a close relationship with GAO also found that the United States im- the United States and Westinghouse partici- ports nuclear material, nuclear reactors, ma- pated in the South Korean consortium. jor components and equipment, and minor • KEPCO has the highest “capacity factor”— reactor parts from other countries, conclud- the proportion of time that the reactor is ing that the United States was a net import- generating electricity—and the lowest “un- er of nuclear components and materials and planned shutdown” rate in the world. suggesting a lack of comparative advantage in this industry.196 • South Korean companies have proved themselves able to build nuclear power reactors Comparative Advantages of the South in a relatively short time and follow a pre- Korean Nuclear Industry dictable schedule. • The business model that KEPCO and its The ROK civil nuclear program has emerged from core group of subcontractors have used over its rather modest beginnings in the 1960s to rap- the years is similar to the one that the UAE idly acquiring the technology to design, build, and is planning to implement. operate nuclear power reactors, and is poised to • South Korea committed to human resource become a major player in the international market. development in the UAE in support of the Although public support for nuclear energy has development of a domestic nuclear energy declined as a result of the Fukushima nuclear di- workforce that is dominated by competent saster and a 2012 safety scandal over the supply of national talent.200 reactor parts with fake security certificates, South Korea still plans to add 11 more nuclear reactors • South Korea presented a very favorable fi- by 2024. Twenty-three reactors currently supply nancial package, with its bid significantly a third of the country’s power.197 Until recently, lower than those of its competitors. South Korean nuclear expertise has been largely confined to building its domestic civil nuclear South Korea may be among the few countries power and R&D programs. However, with the that will have the industrial capacity to provide growing global interest in nuclear power, the ROK major nuclear systems.201 Doosan Heavy Indus- has begun to compete in the international nuclear tries & Construction provides the main compo- export market. KEPCO’s successful $20.4 billion nents for the nuclear steam supply system, such bid to build four APR1400 reactors in UAE was as steam generators, reactors (including internal a key step in establishing the status of the South structures), reactor coolant pumps, and instru- Korean nuclear energy industry in the global nu- mentation and control systems, among other com- clear energy market as the ROK beat out much ponents. Doosan signed a $200 million contract more experienced nuclear exporters—France and with Westinghouse in 2008 to supply the main a U.S.-Japan consortium.198 A recent study identi- plant components of the third-generation plant, fied several political, technical, and economic fac- the AP1000TM model, by 2014.202 Doosan, in a tors that contributed to the South Korean success consortium with KHNP and other South Korean in the UAE and that are indicative of the strengths and foreign firms, is now in a position to market of the South Korean nuclear industry in the inter- a successor to the APR1400 in collaboration with national market:199 Westinghouse.203 Namjin Lee, general manager for Doosan Heavy Industries America Corp. has said • The South Korean government gave high-lev- that, with this experience, Doosan is now one of el policy support to the Korean consortium, two suppliers in the world that can provide the including leadership at the highest levels.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 51 total solution—from heavy forging material to fi- Government ownership of KEPCO presents a ma- nal assembly.204 jor competitive advantage for South Korean companies compared to the U.S. industry. Indeed, the Another South Korean strength is that its nuclear highly coordinated support that the South Korean industry is well integrated. It is able to quote an nuclear industry receives from the ROK govern- accurate total price because key subcontractors are ment is an important factor bolstering the ROK’s part of the team. Westinghouse does not have such position in the global nuclear market. In 2011, the an integrated team and has to assemble a group of South Korean government announced that it was subcontractors, and cannot be certain about a total planning to launch a task force led by the Ministry project price. It is also not a construction compa- of Strategy and Finance in collaboration with the ny, and this is a disadvantage compared to South Ministry of Knowledge Economy and financial in- Korean companies. stitutions such as Financial Services Commission, Ex-Im Bank, and K-Sure (a state-run trade insur- The South Korean nuclear industry also has a er), whose objective would be to spearhead South number of other advantages: a good track record Korea’s exports of nuclear power plants. The task for construction, operation, and maintenance; force would be in charge of financing, strategic consistent government policy; a strong nuclear planning, and promoting cooperation among the infrastructure; on-time performance with good involved institutions. This effort is seen as a signif- scheduling software; and robust supply chains— icant factor for promoting plant exports to devel- for engineering, construction, fuel, and competi- oping countries.207 tive pricing with continuous production. South Korea is also building relationships with South Korea is also developing cutting-edge tech- countries developing nuclear industries by estab- nology. For example, POSCO—a multinational lishing the Kori Nuclear Power Education Insti- steel-making company headquartered in South tute and KEPCO’s International Nuclear Graduate Korea—has developed an advanced corrosion-re- School, where highly qualified students (half from sistant stainless steel for use in the construction of outside South Korea) are trained in all aspects of nuclear reactors. This steel will help extend the life the nuclear industry. South Korea is thus build- span of reactors, and the demand for this high-val- ing an international framework of cooperation in ue-added product is increasing globally. The new education and development that should establish steel product, branded SR-50A, will be used to important contacts for its nuclear export industry build a nuclear reactor in the UAE by Hyund- in the future.208 ai Heavy Industries. This will give South Korea a strong position in producing a product that only a South Korea is also looking to the future by devel- handful of steel makers in Europe and Japan man- oping several new reactor designs for its domestic ufacture.205 market and for export. These include: • APR+. This is a developed version of the In order to promote its export goals, South Korea is APR1400, increased from a 1,400 MWe net investing significant financial and human resourc- output to 1,500 MWe and modified to im- es in enhancing its own technological self-suffi- prove efficiency and capacity factor over the ciency, especially in the export of its APR1400 re- APR1400s. actor. It is training more engineers—nearly 2,500 new nuclear experts annually—to support the re- • SMART (System-integrated Modular Ad- quirements of exports as well as its domestic nu- vanced Reactor). On July 4, 2012, the Nu- clear expansion plans.206 clear Safety and Security Commission issued Standard Design Approval for the

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 52 KAERI-developed SMART small modular Lack of a full-service package. Some South Kore- reactor—the first commercially licensed ans believe that the absence of domestic enrich- small modular reactor anywhere in the ment capability, in particular, will hamper the world. KAERI plans to build a test and ROK’s ability to export its reactors because some demonstration unit by 2017. KEPCO Nu- customers may be interested in a “full-service” clear Fuel is providing design, support, and package along with purchasing a nuclear power consulting services for nuclear fuel to be plant. However, South Korea’s lack of an indige- used for 45,000 kW SMRs being developed nous enrichment capacity may be easily addressed by the U.S. company NuScale Power.209 by teaming up with one of the many international enrichment suppliers, such as Urenco, Areva, and • Sodium-Cooled Fast Reactor. KAERI and the possibly the U.S. Sodium-Cooled Fast Reactor Development Agency (SFRA) are working on a project to Safety and reliability. One potential weakness of construct a commercial fast reactor whose the South Korean nuclear industry results from target “go/no-go” construction start date is some recent events that have damaged its repu- 2019. According to SFRA, on-site spent fuel tation for reliability and safety, both domestically storage at Kori Unit 1 will be full in 2016. and internationally. The first was a series of steam Recycling spent light water reactor fuel us- generator tube and main condenser tube failures. ing fast reactors would, it says, improve the In late 2011 Urchin Unit 4 (which was renamed uranium utilization rate over 100 times, Hanul Unit 4 in early 2013) suffered damage to 25 as well as reduce the volume of high-level, percent of its steam generator tubes. The plant was long-term waste that has to be stored.210 just over two years old, and the steam generators were designed for a life of more than 30 years. In According to the World Nuclear Association, the 2012, KEPCO discovered that it had been sup- main roles of South Korean nuclear R&D are to plied with nearly 8,000 parts for at least five reac- ensure that the national energy supply is secure, tors that had been falsely certified as genuine by and to build the country’s nuclear technology base eight unnamed suppliers. In May 2013, safety-re- so that it becomes a nuclear exporting country by lated control cabling with falsified documentation early in the 21st century.211 was found to have been installed at four reactors. Investigations revealed the discovery of various Disadvantages of the South Korea unsavory practices by individuals and firms that Nuclear Industry resulted in the use of substandard parts, the filing of false quality assurance certificates, and various The South Korea nuclear program also suffers collusion/bribery schemes among varied person- from some limitations and weaknesses that could nel at contractors and in the KHNP universe of adversely affect its competitiveness in the interna- subsidiaries.212 tional nuclear market. The scandals led to the immediate shut down of Inexperience. Notwithstanding its successful bid- several reactors and the postponement of the start- ding for the UAE reactors, South Korea has limited up or final construction of several others. In June involvement in the international nuclear market 2014, a South Korean government audit revealed compared with its larger competitors. It may, there- that a number of the country’s nuclear firms have fore, be to its advantage to partner with foreign been using fraudulent certificates for their safe- suppliers with more experience. As noted above, ty products. The audit by the Ministry of Trade, collaborating with Westinghouse in the UAE sale Industry, and Energy’s internal auditor uncovered was an important factor in securing that bid. seven fake quality-assurance certificates for five

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 53 different types of components from four suppliers. Conclusion The ministry revealed that the components with the fraudulent certificates play a direct role in nu- Inevitably, American and South Korean industries clear energy plant safety.213 will often be competitors in the global marketplace. The comparative strengths and weaknesses KHNP has taken steps to reshape its corporate cul- of the U.S. and South Korean nuclear industries ture and its allied and subsidiary concerns.214 And may favor one or the other in direct competition South Korea’s Nuclear Safety Commission has for markets in third countries. For example, the instituted a set of measures to enhance the safety strong political and financial support that the of the country’s reactors that will include heavier government of South Korea gives South Korean fines for safety-related crimes.215 companies is an advantage versus American firms. South Korea’s proven record of building reactors at It is not clear to what extent South Korea’s recent low cost and on schedule, and its ability to provide safety scandals may damage its export prospects. major component parts that the U.S. no longer South Korea’s use of U.S.-based technology and manufactures, puts the ROK in a strong position the involvement of U.S. personnel in South Ko- to compete not only with the United States but also rea’s domestic nuclear industry and exports may with other suppliers. Conversely, the advanced re- help enhance Seoul’s nuclear competitiveness, giv- actor technology offered by the United States, the en that other nations not only look to the United high American safety standards, and the strong States industry for operational experience, but also political, economic, and strategic relationship the see the NRC as setting the international gold stan- U.S. has with a number of countries could provide dard for safety and physical security regulation.216 important advantages to U.S. firms. In some markets, each industry may see benefits in going at it One additional step that South Korea could take alone as much as possible or teaming up with oth- is to move forward with KHNP’s application for er partners, such as Westinghouse and China in certification of its APR1400 reactor design for li- Turkey. censing in the United States. KHNP submitted the design certification application to the NRC in In other cases, the two industries may complement September 2013, following more than three years each other and favor collaboration in joint projects of preapplication discussions with the regulator. in the global market. The U.S. and South Korean However, the NRC decided not to accept KHNP’s nuclear industries are natural partners in sever- application for certification of its APR1400 reactor al areas, given the common technology, minimal design because it contained insufficient informa- language barrier, and the long-standing familiari- tion in some areas.217 The NRC told KHNP in De- ty between the two industries, especially between cember 2013 that the application’s “deficiencies” KEPCO and Westinghouse. Both industries use were in the areas of instrumentation and control, the same codes and standards from the American human factors engineering, probabilistic risk as- Society of Mechanical Engineers, and the ROK has sessment, and the environmental report. Once the adopted NRC licensing practices and has intro- deficiencies have been addressed, the NRC may duced the Bechtel system of engineering. Project complete reviewing it in 2017. The NRC’s certifi- implementation is similar in both countries. Such cation of the South Korean reactor could help to commonalities should ease cooperation between enhance South Korean nuclear exports’ reputation the U.S. and ROK industries. for safety. KHNP was aiming to reapply for an APR1400 design certification at the end of 2014.218 In addition, the relative strengths of one may compensate for the weaknesses of the other. For

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 54 example, the ROK is especially strong in its man- Another model would be the development of joint ufacturing capabilities of major components; the proposals by U.S. and South Korean companies, integrated nature of its industry; its good track such as Westinghouse and KEPCO, in bidding for record for construction, operation, and mainte- reactors in third countries. The U.S. and South Ko- nance; the consistency of its government policy; rea have not thus far collaborated on such a pro- its strong nuclear infrastructure; and the financial posal. A joint proposal might make sense if one and political support it receives from the ROK party decided that it did not want to compete for a government. These advantages may compensate particular project, or if it knew that there was little for the sharp decline in some U.S. manufacturing chance of winning the bid on its own. As described capabilities. above, Westinghouse has adopted this model in its proposed collaboration with China’s State Nucle- The United States’ strengths in safety may help ar Power Technology Corporation in the devel- compensate for the reputational damage that the opment and construction of a four-unit plant for ROK industry has recently taken in that area. Turkey’s state-owned Electricity Generation Co. American strengths in such areas as advanced re- Given Westinghouse’s work with Chinese com- actor designs, safety, the provision of high preci- panies in constructing power reactors in China sion products, and a proven record in constructing and China’s ambition to become a major export- reactors in the global market could complement er, Westinghouse-Chinese cooperation on joint ROK capabilities. In addition, the political, eco- export projects could become more frequent—a nomic, and strategic relationship that the two development that could be in direct competition countries enjoy with each other may prove advan- with South Korea’s nuclear exports. tageous in winning contracts in some countries.219 Nonetheless, there is a strong strategic rationale One model for possible U.S.-ROK collaboration for close collaboration between the U.S. and South is the UAE project. That is, the ROK and U.S. Korea. Both U.S. and South Korean nuclear in- would initially compete for a project, and then the dustries will face fierce competition from Russia, winner could subsequently take on the loser as a which has many advantages in exporting its nucle- subcontractor. In the UAE project, the Emiratis ar technology—its vertically integrated industry, needed manpower, construction, and operation strong support from government, political pres- support. The ROK was able to meet those needs. sure, aggressive financing, and its spent fuel take- Westinghouse could not provide the infrastruc- back policy. China is also likely to be a major force ture for operations. KEPCO had much operation in the international market in the longer term. and maintenance experience and could provide its own experienced personnel. Westinghouse is As two countries with similar democratic values providing design, technical support services, con- and economic systems—as well as the many com- sulting on licensing issues and control equipment, monalities in their nuclear energy programs dis- instrumentation, and major components, as well cussed above—the U.S. and the ROK may find it as engineering, construction management, train- advantageous to strengthen their civil nuclear col- ing, legal, regulatory, environmental and other laboration to provide a counterbalance to Russian services.220 The model of the UAE deal is likely to and Chinese influence in this key strategic area. be replicated in the next two reactors to be built in the UAE.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 55 chapter 6 The Potential Role of the U.S. Government in Promoting U.S.-ROK Collaboration

ost of the initiative for enhancing collab- participation in that country’s nuclear program. oration between the U.S. and the ROK Even in those cases where transfers or retransfers in the global nuclear market will need to of U.S. nuclear items do not require a U.S. peace- Mcome from the private sector. As was already not- ful nuclear cooperation agreement, the U.S. would ed in the previous chapter, the extent of this col- give considerable weight to whether it has such an laboration would be based to a large extent on the agreement in effect with a third country when it comparative advantages and disadvantages of the considers individual requests to approve nuclear two countries in the nuclear field. Thus, the U.S. exports from the United States or retransfers by government’s role would necessarily be modest. the ROK to that country.

Nonetheless, the U.S. government can play a role The United States presently has 19 peaceful nucle- in facilitating both South Korean nuclear exports ar cooperation agreements in force with individual to third countries and U.S.-ROK cooperation in countries, as well as with Taiwan, with the IAEA, the global market by (1) concluding bilateral U.S. and with Euratom and its 28 member states. Most peaceful nuclear cooperation agreements with po- of the countries to which South Korea has shown tential new partners and renewing existing agree- interest in selling its nuclear products and services ments; (2) facilitating approvals for the retransfer have agreements with the United States, the ma- of U.S.-origin nuclear materials, equipment, and jor exceptions being Jordan, Saudi Arabia, and the components from the ROK to third countries; (3) Philippines. promoting U.S. nuclear exports by putting its own nuclear export house in order; and (4) expanding The United States’ peaceful nuclear cooperation U.S.-ROK intergovernmental R&D cooperation. agreement with China will expire in December This chapter examines the prospects for, and ob- 2015, and its agreement with the ROK will expire stacles to, taking these steps. in March 2016.221 But the negotiations for both replacement agreements are nearing completion, Peaceful Nuclear Cooperation and their texts are expected to be soon submitted Agreements to Congress.

U.S. peaceful nuclear cooperation agreements will The replacement of the existing U.S.-China peace- be necessary for direct U.S. nuclear exports of nu- ful nuclear cooperation agreement may well be clear materials, reactors, and their major compo- controversial in Congress. Congressional review nent parts to a third country as well as reexports of of the original agreement in 1985 proved espe- such items from South Korea in support of Korean cially contentious because of Chinese assistance to

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 56 the Pakistani nuclear weapons program. Congress nuclear weapon ambitions. Some in the U.S. have enacted a resolution of approval that required the expressed concerns that introducing nuclear pow- president to make a number of determinations er into this toxic mix would not be in the national regarding Chinese nonproliferation behavior and security interests of the United States. At the very commitments before the pact would be allowed least, the U.S. government would regard it as vitally to enter into effect. The agreement finally entered important that any new civil nuclear programs in- into force in 1998, after China ceased its sensitive troduced into this region not include enrichment nuclear cooperation with Pakistan and Washing- or reprocessing capabilities. It is highly doubtful ton secured adequate nonproliferation assurances that Congress would approve any agreement with from Beijing. a Middle Eastern state that did not contain some form of commitment to abstain from acquiring During a recent Senate Foreign Relations Com- enrichment and reprocessing capabilities. mittee hearing on peaceful nuclear cooperation agreements, the committee chairman, Robert Moreover, two existing agreements with states in Menendez, made a pointed remark about China the Middle East already contain severe restrictions and its sale of reactors to Pakistan in violation of on the possession of enrichment and reprocessing. the NSG guidelines, and asked what price China As described in chapter 2, the U.S.-Egypt agree- should have to pay for this behavior.222 He asked ment for peaceful nuclear cooperation provides whether adherence to the NSG guidelines should that any reprocessing of U.S.-obligated nuclear be part of any new agreement with foreign nations. material and any storage or fabrication of pluto- His calling out China on this issue suggests that nium recovered must take place in facilities out- some in Congress could raise objections to a re- side Egypt. In the agreed minute to the U.S.-Egypt placement agreement with China due to its nucle- agreement: ar export policies. In addition, other controversial issues—such as China’s human rights record, and The Government of the United States con- its provocative actions in the South China Sea and firms that fields of cooperation, terms and East China Sea over disputed claims to islands conditions accorded by the United States there—are also likely to be raised by some in Con- to the Arab Republic of Egypt for coopera- gress. Conversely, the prospect that China will tion in the peaceful uses of nuclear energy purchase eight new Westinghouse reactors valued shall be no less favorable in scope and ef- at $24 billion will create strong commercial incen- fect than those which may be accorded by tives for concluding a replacement agreement.223 the United States to any other non–nuclear weapon state in the Middle East in a peace- Several countries in the Middle East have ex- ful nuclear cooperation agreement. In this pressed an interest in initiating peaceful nucle- connection it is understood that the safe- ar power programs. However, negotiating new guards required by this agreement shall be peaceful nuclear cooperation agreements with no more restrictive than those which may countries such as Jordan and Saudi Arabia could be required in any peaceful nuclear cooper- present major challenges. First, these countries are ation agreement between the United States in an especially volatile region characterized by and any other state in the region. domestic political turmoil; civil war; sectarian ri- valries, both within and between countries, partic- In this respect, the U.S.-UAE agreement goes even ularly between Sunni and Shia; the Israeli-Pales- further, in that the UAE legally forswears the pos- tinian conflict; and resentment among Arab states session of both enrichment and reprocessing. In over the undeclared nuclear weapons program of addition, in exceptional circumstances of nonpro- Israel and fears of the Sunni states about Iranian liferation concern, the United States may remove

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 57 special fissionable material subject to the agree- Energy Commission, Khaled Toukan, has publicly ment from the UAE. In the agreed minute to the rejected the U.S. request to abstain from acquiring U.S.-UAE agreement, the U.S. confirms that the enrichment and reprocessing capabilities because, fields of cooperation, terms, and conditions ac- in his view, that would amount to Jordan’s renun- corded by the U.S. to the UAE for cooperation in ciation of its rights to peaceful nuclear energy, as the peaceful uses of nuclear energy: guaranteed by article IV of the NPT. The talks have been stymied over this disagreement. shall be no less favorable in scope and effect than those which may be accorded, from From a practical point of view, Amman is not in- time to time, to any other nonnuclear weap- terested in reprocessing, but because it possesses on State in the Middle East in a peaceful considerable reserves of natural uranium, it does nuclear cooperation agreement. If this is, at not want to foreclose the option of acquiring a ca- any time, not the case, at the request of the pability to enrich that uranium. Nevertheless, Jor- Government of the United Arab Emirates dan’s insistence on what it considers to be its right the Government of the United States will under the NPT to enrich uranium may be more provide full details of the improved terms a case of political posturing than one of practical agreed to with another non–nuclear weap- significance. Jordan, like other Sunni countries in on State in the Middle East, to the extent the Middle East, is concerned that Iran’s develop- consistent with its national legislation and ment of its civil nuclear program is intended as a regulations and any relevant agreements route to a nuclear weapons capability. In January with such other non-nuclear weapon State, 2014, Mohammad al-Momani, Jordan’s minister of and, if requested by the Government of the state for media affairs, said his nation would con- United Arab Emirates, will consult with the sider developing a “peaceful” nuclear energy pro- Government of the United Arab Emirates gram as a “strategic option.”224 This characteriza- regarding the possibility of amending this tion of Jordan’s intentions will only raise questions Agreement so that the position described in Washington. above is restored. As noted in chapter 4, the Jordanian government These “most-favored-nation” provisions create im- has recently confirmed that it has concluded an portant incentives for the U.S. to include similar agreement with Russia’s Rosatom to build the na- restrictions in any new peaceful nuclear cooper- tion’s first nuclear plant under very favorable fi- ation agreements it reaches with other countries nancial terms. Russia will build, own, and operate in the Middle East. Thus, it is highly probable that the reactors. In addition, the ROK has a contract the U.S. will insist on incorporating a pledge not to build a research reactor in Jordan that will be to acquire enrichment and reprocessing in new based on South Korea’s 30-MW High-Flux Ad- agreements with any states in the Middle East, vanced Neutron Application Reactor.225 If the including Jordan, Saudi Arabia, and the eventual ROK succeeds in winning a nuclear power reactor replacement of its existing agreement with Egypt. bid to Jordan, the conclusion of a U.S.-Jordanian agreement could facilitate South Korea’s exports A possible Jordanian agreement. The U.S. and to Jordan. But whether the U.S. and Jordan will be Jordan have been considering an agreement for able to conclude such an agreement remains to be peaceful nuclear cooperation for several years. The seen because Amman has options to import its nu- principal negotiating stumbling block has been clear technology from other suppliers, and under the United States’ insistence that Jordan agree to particularly favorable financial conditions. Jordan, forswear enrichment and reprocessing. On sev- therefore, has little incentive to give a commit- eral occasions, the head of the Jordanian Atomic ment to the United States to forgo enrichment and

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 58 reprocessing capabilities—unless its government recently, he told attendees of a security conference makes a decision to conclude an agreement with in the Bahraini capital, Manama, that the Gulf the United States in view of its political ties with states should be prepared for any possible outcome Washington and to burnish its nonproliferation from Iran’s nuclear talks with the world powers. credentials. He said: “We do not hold any hostility to Iran and do not wish any harm to it or to its people, who A possible Saudi Arabian agreement. Concluding are Muslim neighbors. But preserving our regional a U.S.–Saudi Arabian peaceful nuclear coopera- security requires that we, as a Gulf grouping, work tion agreement will face two potentially critical, to create a real balance of forces with it, includ- interrelated political obstacles. The first concerns ing in nuclear know-how, and to be ready for any Riyadh’s nuclear weapons intentions. The second possibility in relation to the Iranian nuclear file. is the United States’ insistence on obtaining a Any violation of this balance will allow the Iranian strong Saudi commitment in any such agreement leadership to exploit all holes to do harm to us.”230 to forswear indigenous enrichment and reprocessing capabilities. The Saudis have been concerned that the P5+1 talks with Iran will allow Tehran to maintain some The Saudis have been outspoken in their fears of limited uranium enrichment capability as part of a an Iranian nuclear weapon capability, and officials deal on Tehran’s nuclear program. After these talks have warned that the Kingdom might acquire a got under way, there was a spate of leaks that the nuclear weapons capability of its own if Iran goes Saudis may seek to obtain nuclear weapons from down that route. In 2009, King Abdullah warned Pakistan. Some Western experts believe that Saudi a visiting U.S. envoy that if Iran crossed the nu- Arabia has given generous financial assistance to clear threshold, “we will get nuclear weapons.”226 Pakistan’s defense sector over the years, including Since then, officials of the Kingdom have sent the its missile and nuclear programs, with the under- Americans numerous signals of their concerns standing that Riyadh could obtain a nuclear weap- about Iran’s nuclear intentions. Most prominently, ons capability in return, if and when the Kingdom Prince Turki al-Faisal, who has served as the Saudi decides to acquire nuclear weapons to counter a intelligence chief and as ambassador to the United nuclear Iran. In response to these reports, the Sau- States, warned in December 2011 that an Iranian dis have pointed out that the Kingdom is a par- quest for nuclear weapons and Israel’s presumed ty to the NPT and has worked for a nuclear-free nuclear arsenal might force Saudi Arabia to follow Middle East. But they have also pointed out that suit, stating that “it is our duty toward our nation the UN’s “failure to make the Middle East a nucle- and people to consider all possible options, includ- ar free zone is one of the reasons the Kingdom of ing the possession of these weapons.”227 Saudi Arabia rejected the offer of a seat on the UN Security Council.”231 In addition, at the Munich Security Conference in February 2014, Prince Turki al-Faisal suggest- In May 2008, the U.S. and Saudi Arabia signed a ed that if Tehran retained uranium enrichment “U.S.–Saudi Arabia Memorandum of Understand- capability in a final nuclear deal with the P5+1 ing on Nuclear Energy Cooperation,” in which countries (i.e., the permanent five members of the “Saudi Arabia has stated its intent to rely on inter- UN Security Council, plus Germany), then Riyadh national markets for nuclear fuel and to not pur- and other Arab governments could pursue enrich- sue sensitive nuclear technologies, which stands in ment programs of their own. He stated: “I think direct contrast to the actions of Iran.”232 Howev- we should insist on having equal rights for every- er, there is little doubt that the U.S. will call for a body; this is part of the [NPT] arrangement.”228 He legally binding pledge in any U.S.-Saudi peaceful reiterated this statement in late October.229 More nuclear cooperation agreement that Saudi Arabia

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 59 will not acquire such technologies. The Saudi civil a considerably weaker incentive to acquire their nuclear establishment seems interested mostly in a own enrichment and reprocessing capabilities. secure supply of nuclear fuel, but sources familiar with U.S.-Saudi talks say that Riyadh has argued The Egyptian agreement. As discussed in chapter that Washington’s insistence on a pledge by Riyadh 4, the existing U.S. agreement with Egypt, which to forgo enrichment and reprocessing capability expires in 2021, contains special restrictions on represents an unacceptable infringement on its the reprocessing of the spent fuel that is subject to national sovereignty, emphasizing that the NPT the agreement. However, it does not go as far as the gives its parties a right to develop peaceful nuclear UAE agreement in securing a commitment from energy.233 Moreover, reports have surfaced that the Egypt to make a legal commitment to forswear the Saudis have been pursuing scientific and engineer- possession of both enrichment and reprocessing ing expertise for all aspects of the nuclear fuel cy- on Egyptian territory. If the U.S. decides to con- cle, including employing technical experts capable clude a replacement agreement with Egypt, it will of constructing the centrifuge cascades required to most likely demand the commitment found in the enrich uranium.234 Whether Washington and Ri- UAE agreement not to acquire enrichment and re- yadh can reach agreement on the enrichment and processing capabilities. reprocessing issue remains to be seen. The Saudis are unlikely to accept a formal legal pledge to for- The absence of a U.S. peaceful nuclear cooper- swear these technologies, though they might be ation agreement with these countries could ad- willing to go along with a statement of intent not versely affect South Korean–U.S. collaboration in to acquire enrichment and reprocessing as was the these markets. Without such an agreement, the case for the U.S.-Vietnam agreement. But is it not U.S. could not export nuclear materials, reactors, certain any U.S. administration or Congress would or their major components to these countries, nor be willing to accept this approach. could it permit the retransfer of such items from the ROK to these states. The absence of an agree- As described in chapter 4, Saudi Arabia has signed ment would also make it more difficult for the U.S. preliminary agreements with a number of coun- to approve nuclear exports or reexports to these tries—including China, France, and South Ko- countries of nuclear components that do not re- rea—to help the Kingdom compare available op- quire an agreement, because the U.S. takes into tions for its long-term program to build alternative account whether a country has an agreement in energy plants for electricity production and water effect with the U.S. when licensing or approving desalination. Although the Saudis have made no the exporting or reexporting of such items. In ad- decision to proceed with a nuclear program, they dition, the exporting or retransferring of technol- have options other than U.S. supply. ogy to a country without an agreement would not be generally authorized and would require specific Needless to say, the Saudis’ public statements about authorization from the secretary of energy. their interest in nuclear weapons and reports of Saudi actions to acquire enrichment expertise will Thus, a U.S. peaceful nuclear cooperation agree- make it difficult for the U.S. to conclude a peaceful ment with these countries will either be necessary nuclear cooperation agreement with the Kingdom. for South Korea’s reexports of nuclear materials, However, if the P5+1 are successful in conclud- facilities, and major equipment to these countries, ing an agreement with Iran that places effective or will facilitate U.S. approval of other nuclear constraints on Tehran’s ability to rapidly acquire components or technology from the ROK to these a nuclear weapons capability and includes rigor- countries. ous monitoring by the IAEA, then other countries in the region, including Saudi Arabia, will have

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 60 Facilitating Approvals for the Retransfer 3 and with the provisions of IAEA document of U.S.-Origin Nuclear Materials, INFCIRC 274/REV 1, as they may be revised Equipment, and Components from the and accepted by the Parties and the Member ROK to Third Countries States; • the nature and content of the peaceful nuclear In addition to replacing expiring agreements for programs of the third country in question; cooperation and negotiating new ones with countries that the ROK sees as potential customers for • the potential proliferation and security im- its nuclear exports, the U.S. can take steps to fa- plications of the transfer for either Party or a cilitate retransfers of U.S.-origin nuclear materials, Member State of the Community. equipment, components, and other substances to such countries. For example, the agreed minute to Retransfers to third countries not included on the the United States–Euratom peaceful nuclear coop- lists may be considered on a case-by-case basis. eration agreement provides that: The U.S. could enter into a similar arrangement with the ROK that would greatly facilitate retrans- the Parties shall exchange lists of third fers to third countries of items that are subject to countries to which retransfers may be made the U.S.-ROK agreement. by the other Party. Eligibility for continued inclusion on such lists shall be based, as a In addition, the U.S. could give its advance con- minimum, upon satisfaction of the follow- sent to South Korea to transfer its spent fuel to ing criteria: Euratom for reprocessing. The U.S. has done this in other agreements—for example, the UAE and third countries must have made effec- Taiwan agreements—and such consent could as- tive non-proliferation commitments, sist the ROK in meeting its immediate needs to normally by being party to, and in full resolve its spent fuel storage problems.235 respect of their obligations under the Non-Proliferation Treaty or the Treaty Facilitating Transfers and Retransfers of Tlatelolco and by being in compli- of U.S. Technology from South Korea to ance with the conditions of INFCIRC Third Countries 254/REV 1/Part 1, and The U.S. could help with facilitating retransfers of in case of retransfer of items obligated U.S.-origin technology from South Korea to third to the United States from the territory countries by reforming its regulatory process (10 of the Member States of the Commu- CFR part 810) that governs approvals of transfers nity, third countries must be party to and retransfers of U.S.-origin technology. As noted a nuclear cooperation agreement with in chapter 2, current DOE procedures allow for fa- the United States. cilitated approvals of certain transactions involving nonsensitive technology or assistance to countries The agreed minute also allows for the addition of that share the United States’ nonproliferation ob- other countries to the list and specifies that, in con- jectives. In such cases, transfers are “generally au- sidering such additions, the U.S. and Euratom shall thorized” and do not require a special authorization take into account the following additional criteria: from the secretary of energy. For transfers to other countries and transfers of sensitive nuclear tech- • consistency of the proposed action with the nology, the part 810 regulations require a special guidelines contained in IAEA document approval by the secretary of energy. As discussed INF-CIRC (information circulair) 225/REV elsewhere, DOE is in the process of proposing

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 61 major changes to these regulations. One such • bring the Convention on Supplementary change would add the UAE to the list of countries Compensation for Nuclear Damage into ef- for which technology transfers are generally au- fect as the highest diplomatic priority; thorized. Other countries with which South Korea • work with the U.S. Treasury to encourage is cooperating or is planning to cooperate and that international lending institutions (e.g., the are not eligible for general authorization include World Bank, OPIC) to lift their prohibitions Jordan, Saudi Arabia, China, and India. The U.S. on supporting nuclear projects; could help facilitate South Korean retransfers of U.S.-origin technology by reforming its part 810 • reform the part 810 licensing rules to expe- regulations to improve their clarity and by expedite trade and to bring certainty to process- diting the approval process. ing and timeliness in issuing licenses;

Improving the United States’ Export • create a team of U.S. industry, government, Performance academia, and research labs—a so-called Team USA approach—that would, among other things, support domestic and inter- If the U.S. is going to become a more effective part- national commercial nuclear opportunities ner with South Korea in the global nuclear market, and work to level the international playing it will need to take steps to improve its own nuclear field by opening markets and encouraging export performance. Various organizations have consistent commercial practices worldwide; issued reports calling on the U.S. to take steps to strengthen the domestic U.S. nuclear energy sector • help maintain and grow the technically and to help American industry play a leading role competent U.S. nuclear workforce necessary in the global market for nuclear energy.236 These for continued competitiveness in a global recommendations have called for: nuclear market; • Increasing the usefulness of the Export-Im- • develop a technology road map that includes port Bank of the United States in supporting strategies to increase the industry’s familiar- U.S. nuclear exports; ity with the resources offered by the national laboratories, encourages new technologies • Simplifying the U.S. export regulations for by leveraging national laboratory resources commercial nuclear technology, including and capabilities, and develops cost sharing by clarifying authority and consolidating it programs to mitigate front end costs of new in one agency and making the export license technology; process streamlined and timely; and • develop and expeditiously implement a plan • Continuing efforts by the NRC and indus- to handle spent nuclear fuel. Without this try to strengthen nuclear plants’ safety and step, U.S. companies will be hindered in the security, particularly in light of the lessons front-end deployment of reactors, fuel, and learned from the Fukushima nuclear disas- services both domestically and overseas, ter in order to maintain U.S. leadership in because buyers desire a complete nuclear nuclear safety and security. solution, including the back end of the fuel cycle; CINTAC, which is an advisory board to the U.S. secretary of commerce, makes recommendations • accelerate and simplify the commercializa- on ways to promote U.S. nuclear exports. Among tion of advanced nuclear technologies from other things, CINTAC has recommended that the the national laboratories to U.S. companies U.S. government take steps to: by rebuilding the industry’s relationship

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 62 with government-funded research programs In addition, the Obama administration has also and by establishing a decade-long Nuclear taken several organizational steps to improve U.S. Technology Competitiveness Initiative; competitiveness in the international nuclear market. As noted, it is developing a “Team USA” ap- • continue the U.S. government’s strong sup- proach to civil nuclear engagement abroad. In Jan- port for international trade missions to fa- uary 2012, it created a new position—director of cilitate the U.S. industry’s entry into the nuclear energy policy in the White House—to lead global commercial nuclear market and to this effort. In addition, DOC’s Advocacy Center, increase its leverage of geopolitical relation- the State Department, and other U.S. government ships to ensure open markets and consistent agencies are working to put the U.S. government’s fair play in commercial nuclear tenders and support behind American bidders for internation- bidding processes; and al sales. DOC has also established a Civil Nuclear • reallocate funding and resources devoted to Trade Initiative to identify the U.S. nuclear indus- promoting commercial nuclear export op- try’s trade policy challenges and commercial opportunities. This will increase the U.S. gov- portunities and to coordinate the public and pri- ernment’s focus, improve the probability of vate sectors’ efforts to support the growth of the success for important tenders, and provide U.S. civil nuclear industry.240 substantial support for the President’s Na- tional Export Initiative.237 (President Obama Nevertheless, as indicated in the recommenda- announced this initiative in his 2010 State of tions of various groups noted above, more needs the Union Address to renew and revitalize to be done by the U.S. government to give Ameri- U.S. efforts to promote American exports.) can nuclear exports the same kind of support that other governments do to back their industries in A senior State Department official has noted that the international nuclear market. the president is emphasizing the importance of nuclear power both domestically and internationally. Expanding U.S.-ROK As she explained, “We must harness the power of Intergovernmental Nuclear Research nuclear energy on behalf of our efforts to combat and Development Cooperation climate change and advance peace and opportunity for all people.”238 Internationally, the U.S. be- As described in chapter 5, South Korea and the lieves that its “nuclear exports are a key strategic United States have enjoyed a long and cooperative asset—a mature energy technology that does not bilateral relationship in nuclear R&D. Both coun- emit greenhouse gases, while also providing a tries also participate in a range of international source of base-load electric power. Nuclear ener- R&D efforts. gy has an important role to play in pursuing our foreign policy objectives. Our top priority, though, However, there may be potential for broader co- is to make sure that U.S. access to energy is secure, operation between DOE and its laboratories on reliable, affordable, and sustainable.”239 the one hand, and the ROK’s corresponding institutions on the other hand. DOE conducts a num- As noted above, the Obama administration has ber of programs to promote nuclear energy as a sought to promote nuclear power in the United viable energy source and to support R&D activi- States, among other things, through a loan guar- ties aimed at resolving the technical, cost, safety, antee program for new nuclear power reactors that waste management, proliferation resistance, and may prove critical to a renaissance of the U.S. nu- security challenges of using nuclear energy. These clear industry. include wide-ranging nuclear R&D programs to (1) develop technologies and other solutions that

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 63 can improve the reliability, sustain the safety, and 2012, and in January 2013, DOE released extend the life of current reactors; (2) develop im- its “Strategy for the Management and Dis- provements in the affordability of new reactors posal of Used Nuclear Fuel and High-Level to enable nuclear energy to help meet U.S. ener- Radioactive Waste,” which lays out plans to gy security and climate change goals; (3) develop implement a long-term program that begins sustainable nuclear fuel cycles; and (4) understand operation of a pilot interim storage facility and minimize the risks of nuclear proliferation by 2021, advances toward the siting and li- and terrorism.241 DOE’s major nuclear R&D pro- censing of a larger interim storage facility by grams include the following: 2025, and makes demonstrable progress on the siting and characterization of geologic • Reactor concepts research, development and repository sites. The strategy fully endors- demonstration. This program is designed to es the need for a consent-based process for develop new and advanced reactor designs siting facilities, whereby jurisdictions are and technologies that enable improved treated as partners and consent is obtained competitiveness and safety. at multiple levels to provide the stability, fo- • Next Generation Nuclear Plants. The NGNP cus, and credibility needed to build public program is designed to investigate the tech- trust and confidence.242 nical viability of high-temperature, gas reactor technology to provide more efficient The U.S. and the ROK are already examining pros- carbon-free electricity and high-temperature pects for the long-term storage of spent fuel. The process heat for a variety of industrial uses. two governments could continue and extend their The program is focused on long-term R&D cooperation in this area. In addition, the siting and and includes materials and fuels testing, such characterization of geological repositories may be as the irradiation testing of graphite materials. a particularly fruitful area for joint study and co- The program also involves collaboration with operation by the ROK and U.S. governments. the NRC to develop a licensing framework. Possible broadened U.S.-ROK intergovernmen- • Light Water Reactor Sustainability. The tal cooperation. Given the broad range of activ- Light Water Reactor Sustainability program, ities in which DOE and its national laboratories which is closely coordinated with the NRC are engaged, South Korea might find it beneficial and shares costs with the Electric Power to expand and deepen its relationship with DOE Research Institute, explores extending the vis-à-vis nuclear issues, and possibly also its rela- operating lifetime of current plants beyond tionships with other U.S. government agencies in 60 years and, where possible, enables further a way that would parallel DOE’s broader coopera- improvements to be made in their safety and tive relationships with other countries. For exam- productivity. ple, DOE has Action Plans and MOUs with sev- • Waste management. Following the cancella- eral major nuclear powers—preeminently, China, tion of the Yucca Mountain Nuclear Waste Japan, and Russia—that more efficiently facilitate Repository program, the Obama administra- R&D by enabling intergovernmental collaboration established the Blue Ribbon Commission tion involving the key facilities and technologies on America’s Nuclear Future to conduct com- unique to each country and government agency. prehensive recommendations for creating a safe, long-term solution for managing and Cooperation with China. The U.S.–China Bilater- disposing of the nation’s spent nuclear fuel al Civil Nuclear Energy Cooperative Action Plan and high‐level radioactive waste. The com- involves joint studies of advanced nuclear technol- mission issued its final report on January 26, ogies and includes six technical working groups

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 64 focusing on fast reactor technologies, advanced Energy Action Plan, including advanced reactor separations technologies, advanced fuels and ma- and fuel cycle technologies and a number of new terials development, nuclear safety enhancement, areas endorsed by the Bilateral Commission, such spent fuel storage and repository science, and as existing reactor fleet sustainability. The commis- high-temperature gas reactor technologies. An sion has five working groups to coordinate bilater- MOU between DOE and the Chinese Academy of al cooperation. They cover the following subjects: Sciences for cooperation on nuclear energy scienc- • nuclear security; es and technologies seeks to foster nuclear energy collaboration among U.S. and Chinese scientists, • civil nuclear energy R&D; laboratories, research institutes, and universities • safety and regulatory issues; in such areas as molten salt coolant systems, nuclear fuel resources (the extraction of uranium from • emergency management; and seawater), and nuclear hybrid energy systems. The • decommissioning and environmental man- Peaceful Uses of Nuclear Technology Agreement agement. with China focuses on nuclear safety.

Action plan with Russia. DOE also has an action Cooperation with Japan. The U.S.-Japan Bilateral plan with Russia that includes reactor demonstra- Commission on Civil Nuclear Cooperation, which tion projects; R&D for innovative nuclear energy was established in 2012, serves as a standing se- technology options; modeling, simulation and nior-level forum to foster a comprehensive strate- safety; and development of a global civil nuclear gic dialogue and joint activities related to the safe framework.243 and secure implementation of civil nuclear energy and the response to Fukushima nuclear disaster. The ROK and the United States might find it useful In July 2012, the Bilateral Commission endorsed to enhance and broaden their cooperation through the creation of the new Civil Nuclear Energy R&D the establishment of similar relationships with Working Group to enhance the coordination of DOE. This strengthened R&D cooperation could U.S.-Japan joint civil nuclear R&D efforts, build- lead to the development and commercialization of ing upon collaborative R&D objectives that were new technologies that could, in turn, strengthen created in 2007. This working group is now co- both countries’ competitiveness in the global mar- ordinating cooperative nuclear energy R&D in ket and enhance their prospects for collaboration several of the topical areas previously support- in third countries’ nuclear programs. ed under the United States–Japan Joint Nuclear

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 65 chapter 7 ROK-U.S. Cooperation in Advancing Nuclear Nonproliferation, Security, and Safety Objectives

he success of nuclear power in meeting The ROK and the U.S. have a number of policy global energy and climate needs demands tools to strengthen nonproliferation, nuclear safe- that both governments and the nuclear in- ty, and nuclear security, ranging from diplomacy Tdustry take the steps required to ensure public and nuclear arms reductions to sanctions and even confidence that the risks associated with the civil military action. Civil nuclear trade is one of these use of nuclear energy are being minimized. These tools, and the relationships flowing from it can steps must be directed at three interrelated risks: give the American and South Korean governments (1) the proliferation of nuclear weapons to addi- as well as their nuclear industries an opportunity tional states, (2) the failure to ensure the safety of to advance the nuclear nonproliferation, safety, nuclear facilities and operations, and (3) the theft and security agendas in several ways: of nuclear materials and the sabotage of nuclear • Intergovernmental nuclear cooperation facilities and nuclear materials by subnational ac- agreements and other bilateral instruments, tors such as terrorists or criminals. Unless all three such as MOUs and diplomatic notes, offer risks are adequately addressed, governments will the opportunity to persuade other countries not license nuclear exports or imports, the public to assume legal obligations or political com- will oppose the development of nuclear power, and mitments, or to take diplomatic action in all the nuclear industry and financial institutions will three areas. not gamble on investing the large sums needed to build and operate nuclear facilities. • Agency-to-agency and laboratory-to-laboratory contacts offer invaluable opportuni- The failure to deal effectively with all these risks ties to conduct joint R&D projects in order is a threat not only to the future of nuclear energy to improve technologies for strengthening but, more important, to international peace and safeguards, safety, and security systems; to security. Although nonproliferation, nuclear secu- educate cooperating partners on the impor- rity, and nuclear safety are separate areas of con- tance of these issues, and to advise and as- cern, they are closely interrelated—for example, sist them in establishing their own effective the material accountancy and control measures nonproliferation, export control, safety, and of IAEA safeguards are an important component security systems; and to assist partners to of nuclear security, and the physical protection of implement such measures in the their own nuclear facilities is critical to their safe operation. national laws, regulations, and practices. Thus, inadequacies in one area could adversely af- • The relationships that private American and fect the effectiveness of another. South Korean industries forge with their

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 66 foreign customers give them similar op- most developing countries view as the institution portunities for education and assistance in most suitable to assist them in establishing a nu- these areas. clear infrastructure, including systems for nuclear exports, safety, and security. This chapter proposes steps that the ROK and U.S. governments, as well as their respective nuclear in- The new U.S.-ROK peaceful nuclear cooperation dustries, could take—either unilaterally or in col- agreement should open up fresh opportunities for laboration with each other, and with other nucle- the two countries to work together to strengthen ar-exporting states and international institutions, all three areas of nonproliferation, nuclear safe- such as the IAEA—to ensure that international ty, and nuclear security. Toward this end, the two civil nuclear trade and national civil nuclear pro- governments should set up a standing consulta- grams are carried out under the highest standards tive body under the auspices of their cooperation for nuclear nonproliferation, security, and safety. agreement. This body would meet at least annually and would provide for regular, high-level ex- These steps will vary from country to country. Na- changes of views on and coordination of polices tions with advanced nuclear programs and lengthy in all these areas, as well as the implementation of experience with nuclear matters will most likely the U.S.-ROK peaceful nuclear cooperation agree- not require American governments and industries ment. to employ a sufficient number of well-trained nuclear professionals; to establish laws, regulations, Nonproliferation institutions, assistance from the U.S. or the ROK in establishing or implementing export control, South Korea and the United States have long nuclear safety, or security systems. Nonetheless, shared a strong interest in preventing the spread new or strengthened bilateral nuclear relation- of nuclear weapons. Both countries adhere to and ships with such countries may offer opportunities have worked hard to strengthen the key elements to exchange information, engage in joint R&D, of the global nonproliferation regime, including and forge common policies on key issues. Other the NPT, IAEA safeguards, and the multilateral countries that are just launching their nuclear pro- nuclear export control mechanisms—the guide- grams and lack the nuclear experience, the insti- lines of the Zangger Committee and the Nuclear tutions, and the infrastructure for implementing Suppliers Group. nuclear power programs will be able to benefit significantly from the advice and assistance of the In addition, the ROK and the U.S. have worked ROK and good practices to control their nuclear together closely in confronting the threats posed exports; and to ensure the safety and security of by individual countries aspiring to acquire nucle- their nuclear materials and facilities. ar weapons. Most significantly, they have opposed the threat posed by the North Korean nuclear pro- In some cases, the U.S. or the ROK may work grams, both bilaterally and in the now-suspend- separately with trading partners to advance non- ed Six Party Talks, and continue to press for that proliferation, safety, and security goals. In other country’s denuclearization. The foundation of cases, particularly when American and South Ko- their common strategy toward the North Korean rean firms are involved in joint projects in third nuclear threat is the U.S.-ROK Mutual Defense countries, the two nations could find it useful to Treaty. Both states have also made efforts to halt work collaboratively on the same issues. In still North Korean efforts to export sensitive technolo- other cases, they could find it most appropriate to gy to other states, including through the participa- steer their cooperating partners to participate in tion in the Proliferation Security Initiative (PSI)— the various programs offered by the IAEA, which an informal understanding in which participating

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 67 states agree to undertake effective measures, either Efforts such as these have contributed significantly alone or in concert with other states, to interdict to a robust nonproliferation regime, but the threat the transfer or transport of weapons of mass de- of nuclear proliferation remains, and the ROK and struction (WMD), their delivery systems, and the U.S. need to maintain their efforts to ensure related materials to and from states and nonstate the continued effectiveness of nonproliferation ef- actors of proliferation concern. Although not sole- forts, and to address ongoing and new aspects of ly directed at North Korea, the Proliferation Secu- this threat. One of the key risks facing the non- rity Initiative has made Pyongyang’s illicit trade proliferation system is that countries might illic- in components and technology of WMD to other itly and clandestinely acquire nuclear technology states a key target of that effort. The ROK has also from abroad to develop nuclear weapons. There is pressured Myanmar (Burma) to sever its military little doubt that the international nuclear trade has links with North Korea if it expects to receive as- assisted some countries to acquire a nuclear weap- sistance from, and enjoy strong commercial links ons capability, often due to a lack of adequate ex- with, the ROK. port controls. Some countries have sought to use their civil nuclear programs, including their coop- In response to Pyongyang’s nuclear and ballistic eration with other states, as a cover while they de- missile activities, the UN Security Council has velop nuclear weapons. Countries with ambitions adopted four resolutions imposing sanctions on to possess nuclear weapons usually have used North Korea. These resolutions restrict North Ko- clandestine means to acquire both dual-use items rea from importing conventional weapons, luxury and sensitive nuclear technology, such as those for goods, and materials to develop its nuclear and enrichment and reprocessing, sometimes in viola- missile programs; impose an asset freeze and trav- tion of their NPT obligations. The most notorious el ban on those people and entities that are tied example of this phenomenon is the clandestine to its nuclear program; prohibit financial transfers network of A. Q. Khan, the “father” of Pakistan’s or loans that could be used to enable it to further nuclear bomb, which transferred enrichment develop its nuclear weapons and ballistic missile know-how and weapons design information to stockpiles; and authorize other countries to in- Iran, Libya, North Korea, and possibly other coun- spect and detain cargo passing into or out of North tries. Korea through their territory on land, sea, or air, if they suspect that the cargo is being used to devel- As civil nuclear power grows, and particularly as it op nuclear weapons. Both the ROK and the U.S. spreads to new countries, one of the key challenges have strongly supported and faithfully implement- facing the United States and South Korea as nucle- ed these resolutions. ar exporters is to ensure that this projected growth in civil nuclear power, if actually realized, will not The ROK has played a significant role in global ef- lead to the proliferation of nuclear weapons. An forts to contain the threat posed by Iran’s nuclear indispensable aspect of meeting this challenge is program by adopting a wide range of economic to maintain and strengthen the nonproliferation sanctions against Tehran—especially by sharply controls and conditions on their civil nuclear reducing its imports of Iranian crude oil, by re- trade, as well as to assist their cooperating part- fusing to engage in transactions with sanctioned ners to establish effective controls on their exports Iranian banks, and by retaining Iranian revenues of nuclear and dual-use items. Areas of particular from reduced crude oil sales in restricted South importance include: Korean accounts rather than repatriating them to • Ensuring the adequacy of their own nuclear Iran. In its bilateral contacts with Tehran, Seoul export control systems, especially (1) prevent- has also given consistent diplomatic support to a ing illicit trade and smuggling in nuclear and negotiated solution to the Iranian nuclear threat.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 68 dual-use items, and (2) blocking the spread role in the global nuclear market, it should ensure of sensitive nuclear technology. that its professional expertise and resources are sufficient to meet its export control and related re- • Assisting their cooperating partners, as well sponsibilities. The U.S. also needs to ensure that it as other states, particularly those with lit- assigns appropriate priority and allocates adequate tle nuclear experience, to establish effective resources to export controls and related customs controls on their nuclear and dual-use ex- and intelligence functions in the midst of a severe ports. fiscal environment of likely federal budget cuts. • Supporting the multilateral nuclear export control systems to ensure that all the major Two issues that demand special attention from suppliers are playing by the same rules and those responsible for export controls in the ROK that the guidelines of these systems keep and the U.S. are preventing the clandestine pro- pace with technical and political develop- curement of items on the international market by ments. countries wishing to acquire a nuclear weapons capability and halting the spread of enrichment • Supporting the IAEA safeguards system, and reprocessing capabilities. especially by assisting new nuclear states to set up national nuclear material accounting Preventing Clandestine Procurement in the U.S. and control systems and cooperating with and the ROK the IAEA in implementing their safeguards responsibilities. Pakistan, Iraq, and Iran were particularly effective in clandestinely obtaining many items that were Ensuring Effective Domestic Export Controls useful for developing their nuclear weapons programs from the major nuclear suppliers. As the Both the ROK and the U.S. need to ensure that major nuclear exporters progressively tightened their export control systems remain effective. As their export controls, these countries were able to a relative newcomer to the international nuclear circumvent these controls—by manufacturing the market, South Korea may face more challenges in needed equipment themselves, by using illicit traf- this respect than does the United States, which has ficking and smuggling techniques, or by resorting been a nuclear exporter for many decades. Until to newly emerging suppliers that had weak or no recently, South Korea’s nuclear expertise has been export controls. Iran, Pakistan, and North Korea largely confined to building its domestic civil nu- continue to actively pursue clandestine nuclear clear power and R&D programs, and it has only procurement efforts. recently been applied to the international market with its sale of nuclear reactors to the United Arab A recent study by the Institute for Science and In- Emirates. The ROK has adopted the nuclear export ternational Security (ISIS) concluded that clandes- guidelines of the Zangger Committee and the Nu- tine procurement could emerge as one of the most clear Suppliers Group but has limited experience in significant global challenges in combating the fu- implementing nonproliferation assurances and con- ture spread of nuclear weapons.245 The ISIS report trols as a nuclear supplier. made 100 specific recommendations in 15 broad policy areas that the United States should imple- Most experts in the South Korean nuclear field ment to mitigate or eliminate future threats posed work in industry and the scientific community, by illicit nuclear trade. These recommendations and the ROK has limited numbers of government included promoting awareness of the threat posed officials specializing in nonproliferation.244 But as by illicit trade, improving controls on sensitive and Seoul comes to play an increasingly important classified information, stopping the flows of money

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 69 to support the illicit trade, prosecuting smugglers to ensure that their companies do not allow their more vigorously, and improving methods to detect products and services to be diverted to the nuclear smuggling. programs of countries seeking nuclear weapons.

One of the main challenges facing any nonprolifer- ISIS has also suggested that countries educate their ation system is to stay ahead of the often-resource- industries on these matters, and has pointed to na- ful methods of aspiring nuclear weapon states to tional programs of industry outreach and educa- obtain items clandestinely for nuclear weapon tion, such as those used by the U.K. and Japan.248 programs. The U.S. and the ROK should: One study of American companies concluded that the private sector—including manufacturers, con- • Ensure that they have in place adequate sys- sultants, trading companies, freight forwarders, tems—including laws, regulations, and ade- export-import brokers, financial institutions, and quate intelligence and customs and law en- other entities involved in selling or transferring nu- forcement resources—to thwart attempts to clear or dual-use goods and services—has a role to illegally procure nuclear and dual-use items play in preventing illicit trade, and that the adop- and technology from American and South tion of industry self-regulation and best practices Korean companies; could make a critical contribution to fulfilling this • Share information with each other as well as role. Industry information can be especially timely other relevant states when faced with clan- and accurate because companies are in direct con- destine procurement efforts; and tact with the users of the goods and technology that could be illicitly diverted throughout the supply • Closely collaborate with their private firms chain.249 This will require close government-indus- to halt illegal efforts to obtain dual-use try collaboration, particularly in ensuring the im- items. plementation of dual-use and catchall controls.250 To facilitate such cooperation, they should set up a Assisting Other States to Prevent Clandestine bilateral consultation mechanism to exchange in- Procurement telligence, share expertise, and coordinate efforts to conduct cooperative interdiction operations. In addition to maintaining their own nuclear controls to prevent illicit procurement, both the A number of studies have called for governments U.S. and the ROK should assist their cooperat- to work with the nuclear industry to develop inter- ing partners, particularly those beginning nucle- nal compliance systems. The IAEA’s 2008 Report of ar programs, to set up and implement effective the Commission of Eminent Persons on the Future nuclear export control systems. The ISIS report of the Agency (“Agency” meaning the IAEA) rec- cited above concluded that “the most problem- ommended that “governments and private firms atic future suppliers could emerge in developing with sensitive technologies should strengthen countries.” Beginning in the 1980s, several new their partnerships to help these firms build strong suppliers of nuclear materials, equipment, and internal compliance programs and give them in- technology emerged on the international mar- centives to provide key information on suspicious ket. The increased availability of information, to- inquiries and procurements.”246 ISIS has pointed gether with technical advances, has the potential to a model for a corporate internal compliance to enable many new countries to become suppli- mechanism based on a system created by the Ley- ers of equipment and components significant for bold Company in Germany in the early 1990s.247 a nuclear weapons program. A good illustration The U.S. and ROK should consider initiating pro- of this problem is the case of a firm in Malaysia grams to help their industries establish programs that participated in the Khan network by making

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 70 thousands of high-precision aluminum centrifuge instrument to halt the spread of WMD, its imple- parts, including the casings and molecular pumps mentation 10 years after adoption faces continuing that were being shipped to Libya when they were obstacles, including a lack of understanding of the found on the ship MV BBC China in October importance of the issue among governments and 2003.251 Today, most countries are able to produce civil society, and insufficient resources available one or more items from the ZC’s Trigger List or to countries to comply with its requirements. In- the NSG’s Dual-Use List, but many of them do not adequate expertise and personnel have prevented adhere to the export guidelines of the ZC or the some governments from producing the compre- NSG. Any country that has an industry such as hensive reports required by the resolution to doc- steel, chemistry, new materials, electronics or ma- ument the steps taken to meet their obligations. chine tools is capable of contributing to a nuclear Some countries clearly need assistance to build up weapons program through its exports. Thus, many their capacity to implement the resolution.253 states have acquired the capability to provide significant assistance to a nuclear weapons program UN Security Council Resolution 1540 calls on na- but lack the legal, regulatory, and enforcement sys- tions that are able to do so to provide expertise or tems, the resources, and, in some cases, the will to financial, organizational, or technical assistance to implement effective nuclear export controls. those governments requesting such help. The U.S. and South Korea should work individually or to- An important step to obligate states to adopt effec- gether with their nuclear trading partners to pro- tive export controls was the UN Security Coun- vide them with assistance in implementing their cil’s 2004 adoption of Resolution 1540, which calls obligation to establish effective export controls. on countries to put in place “appropriate effective Depending on the needs of the individual coun- measures to account for and secure” WMD-re- try, various types of assistance may be appropriate, lated items in production, use, storage, or trans- including funding, legal advice or model laws and portation and to “maintain appropriate effective regulations, the loaning of staff members, training physical protection measures” of said items. The for customs agents and licensing officers, and the resolution’s primary purpose was to deny such provision of technology. There is also a role to be items to nonstate actors, but it also obliges states to played by American and South Korean nuclear establish effective export controls. The resolution firms in working with and educating their cus- also established a 1540 Committee and a group tomers on the importance of adopting company of experts assigned to the committee to monitor policies and practices that will help prevent illegal compliance with the resolution, including by reexports. viewing country reports. In 2011, UN Security Council Resolution 1977 extended the mandate of In the case of the United States, the State Depart- the 1540 Committee for 10 more years. The 1540 ment’s Office of Export Control Cooperation is Committee has organized or supported 38 region- devoted to assisting foreign governments to en- al or thematic workshops, organized meetings of sure that their strategic trade control systems civil society representatives, and collaborated with meet international standards. In particular, the industries that could undertake practical measures office helps foreign governments establish inde- related to implementation of the resolution.252 The pendent capabilities to regulate transfers of items committee does not itself provide assistance to related to WMD, conventional arms, and related countries, but instead identifies countries in need dual-use items, and to detect, interdict, investi- of assistance and links them with available sources. gate, and prosecute illicit transfers of such items. The office engages in dialogue, provides training, Although the adoption of UN Security Coun- and donates equipment to foreign government to cil Resolution 1540 constitutes a major new legal achieve these objectives. DOE also has programs

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 71 devoted to strengthening the capability of foreign meant to deny countries equipment and technol- governments to deter, detect, and interdict illicit ogy for legitimate peaceful purposes. Rather, they trafficking in nuclear and other radioactive mate- are intended to facilitate commerce for such pur- rials across international borders and through the poses by providing assurances to exporters and global maritime shipping system, and to help build the international community that such equipment foreign partners’ nuclear forensics capabilities to and technology will be used for peaceful purposes help deter illicit trafficking in nuclear and radio- in a transparent manner. logical material. The U.S. and the ROK should also seek to persuade In the case of South Korea, the Nuclear Safety their cooperating partners that are capable of pro- and Security Commission (NSSC), an indepen- ducing items of potential proliferation concern dent regulator, has responsibilities for licensing, either to adopt export policies that are consistent inspections, enforcement, incident and emergen- with the guidelines of the ZC or the NSG, or to be- cy responses, nonproliferation and safeguards, come members of one or the other of these multi- export/import controls, and physical protection. lateral export control systems.255 They should also The NSSC is responsible for the implementation persuade countries to enforce the UN Security of strategic trade controls under the Foreign Trade Council’s sanctions resolutions against countries Act, and the Korea Institute of Nuclear Nonprolif- engaged in illicit trade, such Iran and North Korea. eration and Control (KINAC) provides technical support to NSSC for matters related to the efficient Preventing the Spread of Enrichment and implementation of safeguards, export and import Reprocessing controls, and security related to nuclear materials and facilities. KINAC also has the responsibility An especially important objective of both countries to enhance the professional capabilities of South should be preventing the spread of enrichment Korea’s nuclear industry in all these areas. And and reprocessing. South Korea could institute new KINAC’s Nuclear Export Control Division has an and strengthened nonproliferation measures in its active outreach program, and conducts seminars peaceful nuclear cooperation agreements that will and workshops in order to improve South Korean more closely parallel those that the U.S. requires. companies’ compliance with, and understanding For example, South Korea requires consent rights of, the country’s strategic trade control law. Inter- for reprocessing in its agreements with some coun- nationally, South Korea has also agreed to share its tries but not others. Reportedly, it does not require experience in nuclear trade controls, safeguards, consent rights on reprocessing in its cooperation and physical protection with the UAE.254 with “advanced nuclear states,” such as Argentina, Brazil, Canada, China, France, Germany, Russia, American and South Korean nuclear firms also and the United Kingdom.256 In all of Seoul’s future have an important role to play in working with peaceful nuclear cooperation agreements—and and educating their customers on the importance particularly those with developing countries in re- of adopting company policies and best practic- gions of proliferation concern—it should consis- es that will help prevent illegal exports. The U.S. tently require consent rights on reprocessing and and South Korean governments should encourage alteration in the form or content of material used their private companies to implement programs to or produced in South Korean–supplied nuclear re- assist their customers in adopting effective export actors or their significant equipment. control practices. The United States already has a tough policy of A key element of these efforts will be to educate discouraging the spread of reprocessing and en- new nuclear states that export controls are not richment by requiring consent rights in all its

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 72 cooperation agreements. In addition, it has ob- information about nuclear installations as soon as tained a legal commitment from two cooperat- the decision is made to build them.258 ing partners—the UAE and Taiwan—to forswear the acquisition of these technologies. However, Both countries could explore alternatives to indig- some proposals risk overreach. For example, re- enous enrichment and reprocessing in the Middle cent, well-intentioned efforts by some in the U.S. East. KHNP’s investment in Areva’s Georges Besse Congress and the nonproliferation community II enrichment plant offers a good example of a to require that all future cooperation agreements multinational approach to securing a reliable sup- contain a legal commitment by the cooperating ply of enriched uranium. In addition, South Ko- parties to forswear enrichment and reprocessing rea’s supply of nuclear reactors to the UAE could capabilities could seriously damage the prospects provide Seoul with the opportunity to cooperate for U.S. nuclear exports and could deprive the with the UAE on its search for spent fuel and nu- United States of the nonproliferation influence clear waste management options.259 The UAE is that comes with nuclear cooperation. Other sup- looking at options for long-term spent fuel storage pliers are not going to require such demanding ex- and a geological repository, possibly in coopera- port conditions, and most consumer countries are tion with other states in the Gulf region. likely to reject U.S. demands that they believe deny them their rights or legitimate peaceful commer- The ROK is considering its options for spent fuel cial opportunities. Thus, any such policy should be management, and there is potential for a fruitful applied very carefully and selectively. exchange of views on this key issue facing both South Korea and the United States, which they As discussed above, some countries in unstable should share with their nuclear trade partners. The regions such as the Middle East have expressed ROK could also explore the study of regional spent interest in developing a civil nuclear program. If fuel storage and waste management in East Asia. these countries proceed with their civil nuclear The August 2014 ruling by the NRC that spent programs, they are likely to be small and restricted fuel may be stored safely for an indefinite period to one or two research or power reactors for the should help support the technical feasibility and foreseeable future. It would make no economic political acceptability of using long-term spent sense for these countries to acquire either enrich- fuel storage either on a national or regional basis ment or reprocessing plants. Moreover, the pres- as an alternative to reprocessing. ence of these sensitive nuclear technologies in such a politically volatile area would threaten regional Sustaining and Strengthening Multinational stability, and seriously risk the threat of prolifer- Export Control Regimes ation. The U.S. and South Korea need to closely coordinate their civil nuclear cooperation policies The U.S. and South Korean export control systems, to dissuade these countries from acquiring enrich- no matter how effective, cannot by themselves ment or reprocessing capabilities. It would also be prevent the spread of nuclear weapons. Without important to require additional stringent nonpro- an agreement on the common rules of the game liferation conditions. For example, some experts among the key nuclear exporters, supplier coun- have advocated that any agreement for coopera- tries would be tempted to further their competition with Saudi Arabia should include a require- tive position in the international market by min- ment that the Kingdom adopt the IAEA Addi- imizing the nonproliferation conditions on their tional Protocol, that it rescind its Small Quantities nuclear exports. Nuclear aspirants would be able to Protocol,257 and that it conclude up-to-date sub- play one supplier against another to obtain nuclear sidiary arrangements to its safeguards agreement equipment and technology on minimal nonprolif- with the IAEA in order to give the IAEA design eration terms. In order to address these concerns,

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 73 the major nuclear suppliers have established two Korea should continue to ensure that the ZC and multilaterally coordinated nuclear export control the NSG regularly update these lists. regimes. The second major challenge facing the NSG is to The first is the so-called Zangger Committee, ensure that its members are abiding by its guide- which was established in 1974 in order to imple- lines. In 1993, the NSG adopted a new guideline to ment article III.2 of the NPT, as described through- supply Trigger List items only if the recipient non– out this report. Article III.2 obliges states that are nuclear weapon state has a comprehensive safe- party to the NPT to require IAEA safeguards on guards agreement in effect with the IAEA—that is, their exports of nuclear materials and equipment. if it placed all peaceful nuclear facilities under the The second multilateral arrangement is the NSG, IAEA’s safeguards. This decision remedied a major whose guidelines were developed in response to deficiency in the safeguards system that allowed several nonproliferation crises in the 1970s, and some countries to develop parallel peaceful and which has also been described throughout this re- military programs. However, this 1993 guideline port. The NSG adopted the ZC’s Trigger List of nu- applied only to new supply commitments, not exist- clear items, but it also applied conditions to nucle- ing ones—the so-called grandfather clause. Unfor- ar exports that went beyond the requirements of tunately, China has been abusing this loophole as its the NPT and ZC, and that included assurances of justiﬁcation for supplying civil nuclear reactors to adequate physical protection and special restraints Pakistan—a country that is not a party to the NPT on the export of sensitive nuclear technology— and that has no comprehensive safeguards agree- that is, enrichment, reprocessing, and heavy wa- ment with the IAEA. When Beijing joined the NSG ter production technology. Both these multilateral in 2004, it provided a formal “declaration of exist- systems have evolved over time in order to keep ing projects,” in which it identified its 1991 cooper- pace with technical innovations and political de- ation agreement with Pakistan, under which it had velopments, and in response to various challenges supplied a 300 MW reactor at Chashma, and had to the nonproliferation system, including the risks just undertaken to supply an additional 325 MW presented by the spread of enrichment and repro- reactor at the same location. The Chinese claimed cessing facilities and the successful operation of that the supply of these reactors did not constitute clandestine procurement networks by countries a “new” supply commitment, and therefore, was aspiring for a nuclear weapons capability. grandfathered under the NSG’s comprehensive safeguards guidelines. This was a dubious claim Today the NSG faces two major issues. One is to at the time because the 1991 Chinese-Pakistani remain ahead of the game by clarifying and ex- pact was a general framework agreement and re- panding the nuclear and dual-use items on its con- portedly did not contain an actual commitment trol lists in order to keep abreast of technical de- to supply reactors at Chashma. In addition, Chi- velopments and the sometimes-creative methods na did not mention grandfathering any more re- that would-be proliferators have used to exploit actors under the 1991 agreement. Now, China is loopholes in the export control regimes of supplier supplying Pakistan with three new reactors that states. The ZC has clarified and updated its nucle- are clearly not covered by the 1991 agreement, ar Trigger List. Today, the expanded lists are es- and it is once again flouting the NSG’s guideline sentially the same. The NSG has recently updated on comprehensive safeguards. its Trigger and Dual-Use Control lists. The 2013 NSG Plenary in Prague and the IAEA published China’s behavior threatens to undermine the com- all 54 agreed amendments in revised IAEA doc- prehensive safeguards norm as well as the NSG’s uments INFCIRC/254/Part 1 and INFCIRC/254/ integrity. The U.S. and South Korea should make Part 2 on November 13, 2013. The U.S. and South clear that Chinese behavior violates Beijing’s NSG

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 74 commitments, and insist that China seek an ex- Support for the Additional Protocol. The ROK emption from the NSG for such exports to Paki- and the U.S. should also take advantage of their stan and then firmly reject that request. As Seoul roles as major nuclear exporters to make adher- and Washington engage in nuclear collaboration ence by recipient states to the AP to the IAEA’s with Beijing, they also need to obtain solid assur- comprehensive safeguards agreements a condition ances from the Chinese authorities that their nu- of nuclear supply and a universally accepted inter- clear exports to China will not be retransferred to national norm. The 1991 revelation of a significant Pakistan or to any other non–nuclear weapon state clandestine nuclear weapons program in Iraq, a that does not have a comprehensive agreement in party to the NPT with a comprehensive safeguards effect with the IAEA. Even though exports of du- agreement in effect, underscored the limitations of al-use items do not require comprehensive safe- IAEA safeguards as they were being applied at the guards as a condition of supply, the U.S. and the time. In particular, they were too focused on ver- ROK should obtain similar guarantees for the du- ifying nuclear activities at declared facilities. The al-use items that they supply to China. IAEA needed more information about, and access to, nuclear activities at undeclared locations in or- Support for the IAEA Safeguards der to ensure the completeness as well as the cor- rectness of a state’s declarations. IAEA safeguards are a core element of the global nonproliferation regime, are essential to the effec- In response, the IAEA undertook a major reform tive implementation of the NPT, and are a neces- of its safeguards system when the Board of Gov- sary condition for the development of civil nuclear ernors adopted the Model Additional Protocol programs and international commerce. Over the (INFCIRC/540, Corrected) in 1997. Under this years, the IAEA’s safeguards system has been con- protocol, the IAEA has the right to increased in- siderably strengthened as the Agency has adopted formation and access to all aspects of a state’s nu- new safeguards techniques and has acquired addi- clear fuel cycle—from uranium mines to nuclear tional authorities to detect the diversion of nuclear wastes and to locations where nuclear material materials to nonpeaceful purposes. However, the intended for nonnuclear uses is located. Among Agency’s safeguards system faces many political, other things, the AP gives “complementary access” technical, and political challenges. The ROK and rights to the IAEA and its inspectors. For exam- the U.S. should utilize their nuclear trading rela- ple, access is possible to any place on a “site,” or tionships to help strengthen the IAEA’s safeguards to mines, or to nuclear-related locations where systems in various ways. no nuclear material is present, such as sites where related R&D or manufacturing activities are per- Resources. In his address to the IAEA’s 58th Gener- formed, in order to ensure the absence of unde- al Conference in September 2014, Yukiya Amano, clared activities. The AP also permits environmen- the IAEA’s director-general, said that the Agency tal sampling on either a location-specific or, under is likely to face tough budget constraints for some certain conditions, wide-area monitoring basis. years to come, that the demand for the services of the IAEA continues to grow, and that it is not pos- The AP constitutes a major strengthening of the sible to meet these growing needs within existing IAEA’s safeguards system. However, it is not self-ex- financial means.260 The U.S. and the ROK need to ecuting, and the IAEA must negotiate an agreement continue their efforts, including through their con- with each state in order to apply the broadened safe- tacts with their nuclear trading partners, to ensure guards measures envisioned by the AP. As of August that the IAEA has the financial, political, and tech- 6, 2014, 127 states have adopted the AP. But sev- nical support it needs to meet the rapidly growing eral key states with nuclear facilities or with plans demands on its nuclear safeguards system. to implement new nuclear programs have thus far

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 75 chosen not to adopt the AP, including Argentina, international norm. Strong proponents of nonpro- Brazil, Iran, Myanmar, Malaysia, and Thailand. liferation have been trying to persuade the NPT Review Conference to adopt the position that One important step in strengthening the nonpro- new nuclear supply arrangements to non–nucle- liferation regime in general and the IAEA’s safe- ar weapon states should require acceptance of an guards system in particular would be universal IAEA comprehensive safeguards agreement and acceptance of the AP and its recognition as the an AP. However, some states continue to take the international safeguards norm for non–nuclear position that acceptance of the AP is a voluntary weapon states. The U.S. and the ROK can help matter, and is not required by the NPT. achieve this objective by requiring the AP as a condition of supply in their own civil nuclear cooper- This issue is also debated at the annual IAEA Gen- ation agreements. U.S. law does not require the AP eral Conference, where the United States and other as a condition of U.S. nuclear supply under peace- Western states have tried to urge the conference to ful nuclear cooperation agreements, and the U.S. adopt a safeguards resolution that recognizes the has been inconsistent in requiring the AP in its AP as the IAEA’s safeguards standard for all non– bilateral agreements since the IAEA adopted the nuclear weapon states. Brazil, Argentina, Iran, and Model Additional Protocol in 1997.261 South Korea Egypt routinely reject this proposal, with the result has not made the adoption of an AP a condition that the resolution adopted by the conference typ- for nuclear exports, but has said it will support this ically acknowledges the AP only as an important requirement if the NSG endorses it.262 Both coun- safeguards measure. tries should require new cooperating partners to adopt the AP to their safeguards agreement, and The U.S. and the ROK should accelerate their ef- should encourage existing partners that have not forts in their nuclear trading relationships with adopted the AP to do so as soon as possible. other countries, particularly with members of the Non-Aligned Movement, and in the context of Both countries should also continue to urge the the NPT Review Conference, to endorse the AP NSG to adopt the AP as a condition of supply as the verification standard under article III of the for Trigger List items. Only limited success has NPT and as the IAEA standard for all non–nuclear been achieved on this issue thus far because some weapon states. members argue that it is not required by the NPT and should therefore be a voluntary measure. The Safeguards assistance for new states. States em- NSG did manage to agree to require the AP as a barking on a new nuclear program lack the knowl- condition of supply for enrichment and reprocess- edge and infrastructure to implement their safe- ing equipment and technology, but with a key ex- guards responsibilities effectively. The IAEA has ception that allows such exports when a regional a number of programs to assist states in carrying safeguards approach is being applied.263 However, out their safeguards obligations, including various the one regional safeguards system to which this guidance documents for implementing safeguards; exception would apply is the bilateral safeguards advisory service missions to provide advice on agreement between Argentina and Brazil, and that such matters as export control, nuclear material ac- system falls far short of the requirements of the AP. counting and reporting, and the establishment of a The ROK and the U.S. should continue to press the legal regulatory framework; and international and NSG to adopt the AP as a condition of supply for regional training courses and a safeguards trainee all Trigger List items, with no exceptions. program addressing all aspects of safeguards implementation. One particular area of importance The two countries should also continue efforts is the establishment of state systems of account- to have NPT parties recognize the AP as the ing and control. The effectiveness and efficiency of

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 76 IAEA safeguards depend, to a considerable degree, In addition, some have argued that the IAEA may on the effectiveness of state and regional systems have questions from time to time about apparent of accounting for and control of nuclear material inconsistencies in a country’s nuclear program. If (SSACs/RSACs) and on the level of cooperation the IAEA has questions about a particular dual-use between the IAEA and state or regional authori- item in order to obtain a complete assessment of a ties (SRAs) responsible for safeguards implemen- particular country’s program or to resolve an in- tation. The U.S. and the ROK should encourage consistency, NSG member states should be willing and assist their nuclear trade partners to establish to provide all the information needed by the IAEA effective SSACs and urge them to take advantage on individual goods and on that country’s pro- of the various programs that the IAEA offers for curement practices. Hans Blix, the IAEA’s former training and assistance in these areas. director-general, has said that, “in comparing the information required by the Agency under the Ad- As a matter of policy, the United States’ peaceful ditional Protocol and the Trigger List as elaborated nuclear cooperation agreements require that its co- by the NSG, it will be noted that the Agency does operating partners establish and maintain a sys- not require information about dual-use items. How- tem of accounting for and control of source and ever, there is no doubt that greater transparency and special nuclear material subject to the agreement, increased cooperation among the suppliers and im- and that the procedures for this system be compa- porters of such items will also be helpful from the rable to those in the model IAEA comprehensive perspective of the overall level of confidence in the safeguards agreement. South Korea should do the conclusions of safeguards verification.”264 same in its agreements, if it does not already do so. One study has recommended that the NSG should Increased information sharing with the IAEA. agree that each member state should, on an indi- In 1993, the IAEA Board of Governors endorsed vidual basis and under its own responsibility, share a voluntary reporting system on imports and ex- information with the IAEA about applications to ports of specified equipment and nonnuclear ma- export controlled items that they have denied for terial. This was designed to increase the transpar- reasons related to the NSG guidelines.265 Sharing ency of a state’s nuclear program. In addition, the denial notifications with the IAEA should impose AP requires that states report imports and exports no additional burdens and would significantly as- of Trigger List nuclear items to the IAEA. How- sist the IAEA in fulfilling its mission to analyze ever, neither the 1993 IAEA Board of Governors’ procurement patterns and states’ nuclear capabil- decision to endorse voluntary reporting of nuclear ities. Sharing such information is a national deci- exports nor its approval of the AP called for re- sion, but few countries will agree to do so regularly porting on exports of dual-use items or technol- unless the NSG collectively makes this a guideline ogy. When this issue was discussed at the IAEA for all members. The same report has proposed committee negotiating the AP, many states argued that NSG members should also consider sharing that dual-use items do not qualify for regular re- information with each other and the IAEA on porting to the IAEA because they are not as signif- “informal denials” and approvals for key dual-use icant as items on the nuclear Trigger List and are items.266 Sharing such information could be based more difficult to control. Another objection was on the same principles of no undercutting and that, if the IAEA received information about the commercial confidentiality that govern the denial transfer of a dual-use item, it would not be able to notification—namely, that information about de- verify its location or use in the importing country. nials will not be used for commercial purposes. However, Pakistan, Iran, and Iraq built their nuclear weapons programs through the extensive use The Report of the Commission of Eminent Per- of imported dual-use items. sons on the Future of the Agency concludes that

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 77 “all member states should provide the IAEA with regarding its current (or in the case of an the information it needs to do its job—including additional protocol state, its future) nuclear data on exports and imports of nuclear and re- development program, whether granted or lated technologies, export denials, inquiries, and denied by the exporting state, would put the suspicious procurement attempts; information IAEA in a better position to raise questions that states may have available from other sources; and to make evaluations with potential relevant police information, as appropriate; and compliance implications.269 m ore .” 267 It also states: The IAEA has reported that a number of member While the universalization of CSAs and states voluntarily provided the Agency with infor- APs is a key goal, it will also be important mation concerning 62 denied nuclear trade-relat- to continue tackling the limitations identi- ed procurement inquiries over the last year, and fied in the existing legal framework. Unad- that this information was used to assess the consis- dressed, these limitations can hamper the tency of nuclear activities declared by states to the process of assessing the nuclear programmes IAEA.270 The U.S. and the ROK should provide the of States. For example, the list of equipment IAEA with information on their dual-use nucle- and materials for which States are required ar-related exports, particularly export denials, and to provide export and import information should urge their trading partners to do the same. under an AP could be expanded to reflect the evolution of nuclear technology as well Compliance with safeguards agreements. Perhaps as address items likely to be involved in the the most serious challenge to the safeguards sys- clandestine nuclear trade. Moreover, vari- tem has arisen from the refusal of certain countries ous voluntary reporting schemes providing to comply with their comprehensive safeguards relevant information not covered under ex- agreements with the IAEA. These have included isting agreements will need to be evaluated Iraq and Libya in the past, and currently include to see how the current irregular and limited North Korea and Iran. The U.S. and the ROK reporting by States could be enhanced.268 should continue to stress the importance of states complying with their safeguards obligations, and One expert on IAEA safeguards puts it this way: to support the efforts at the IAEA General Confer- ence and the NPT Review Conference to demand Export control information, especially with that states such as Iran and Syria cooperate with regard to denials of dual use items that the IAEA to remedy their noncompliance with could be serving proliferation-relevant ac- their safeguards obligations, and to urge North tivities, is potentially very significant to Korea to permit the verification of its denuclear- the IAEA’s ability to draw safeguards con- ization. In promoting these objectives, they should clusions for a state, whether it has only a make use of their ties with their partners in civil comprehensive safeguards agreement or an nuclear trade. additional protocol in force as well. Many factors go into the Agency’s process of de- Safety veloping a state-level safeguards approach, most of which are beyond the scope of this The Fukushima nuclear accident of 2011 has fo- presentation. But having information re- cused the attention of governments and the in- garding the interest of a state to acquire dustry on strengthening nuclear safety around the certain components that could be of pro- world. Both the U.S. and the ROK have undertak- liferation significance, and that did not en steps to bolster the safety of their own nuclear match the declarations made by that state installations, and both countries have substantial

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 78 safety cooperation programs with other countries. performance testing of nuclear safety and disaster The ROK and the U.S. should utilize the opportu- management preparations. nities provided by their nuclear cooperation agreements and industry-to-industry links to educate Regional Safety Initiatives their cooperating partners on the importance of nuclear safety and, where appropriate, to provide South Korea has taken an important initiative to bilateral safety assistance and advice to such states. improve nuclear safety in Northeast Asia. On Au- Both countries should also continue regional ef- gust 15, 2014, South Korean president Park Geun- forts to strengthen nuclear safety and support the hye proposed a nuclear safety consultative group IAEA in its various programs in this area. to promote and ensure nuclear safety in Northeast Asia.271 The forum is to be led by Seoul, Beijing, Bilateral Safety Efforts and Tokyo, while involving the participation of the U.S., Russia, eventually North Korea, and Mongo- Both countries should encourage their cooperat- lia. ing partners to take advantage of the safety assistance and cooperation programs of their relevant South Korea hosted the Northeast Asia Nuclear safety agencies. In the case of the U.S., the NRC Safety Symposium—the second Top Regulators has an extensive program that provides advice and Meeting+ (TRM+)—in Seoul from November 26 assistance to both international organizations and through 28, 2014, to discuss ways to promote safe- other countries on developing effective regulato- ty in Northeast Asia.272 The symposium brought ry organizations, and on enforcing rigorous safe- together about 200 government officials, including ty standards. It maintains close working relations those from the U.S., China, and Japan, as well as with nuclear agencies in more than 35 countries, experts from the private sector. The ROK should exchanges operational safety data and other reg- consider whether this regional forum could be ulatory information, and provides safety and safe- extended to other states, particularly its nuclear guards advice, training, and other assistance to trading partners that are considering or beginning countries that seek the United States’ help in im- nuclear programs, for example, Indonesia and Ma- proving their regulatory programs. The NRC orig- laysia. inally worked primarily with major nuclear power countries but has since expanded its cooperation South Korea is providing assistance in the areas to include countries with small nuclear power of nuclear safety, security, and nonproliferation to programs, as well as some launching new nuclear countries in the Asia-Pacific region, particularly programs. The NRC’s information exchange ar- through its nuclear security educational training rangements should be used to the fullest extent to center established in 2014. KINAC is enhancing its provide health and safety assistance to less-devel- support for countries that are interested in developed countries in their attempts to prevent acci- oping nuclear energy programs. dents, and to develop and improve their regulatory capabilities and their nuclear safety infrastructure. Treaties Related to Nuclear Safety

The Korean Institute of Nuclear Safety (KINS) The U.S. and South Korean governments, as well provides assistance to the UAE and Jordan in the as their private companies, should take advantage nuclear safety area. Both the ROK and the Unit- of the nuclear relationships they have with their ed States should press their trading partners to nuclear cooperation partners to urge them, if they establish a strong, financially and politically inde- have not already done so, to ratify and implement pendent nuclear regulatory system, to invite peer relevant international treaties and conventions, in- reviews of safety planning, and to conduct regular cluding:

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 79 • the Convention on Nuclear Safety (and Action Plan’s implementation requires the full co- make public annual national reports under operation and commitment of member states. The the convention), U.S. and ROK could make extrabudgetary contributions to the IAEA safety program, particularly • the Joint Convention on the Safety of Spent for the implementation of the Action Plan. Fuel Management and on the Safety of Ra- dioactive Waste Management, and Liability • the Convention on Early Notification of a Nuclear Accident and the Convention on Nuclear liability is one of the many elements of the Assistance in the Case of a Nuclear Accident Action Plan on Nuclear Safety adopted by IAEA or Radiological Emergency. member states after the 2011 Fukushima accident. The current international system for nuclear li- The IAEA ability and compensation for a nuclear disaster consists of a confusing hodgepodge of different Many states look to the IAEA for advice and as- international instruments—including the Vienna sistance on nuclear safety matters. The IAEA has Convention on Civil Liability for Nuclear Dam- long had safety programs, which include advice on age, the Paris Convention on Third-Party Liability safety standards, a system of safety fundamentals, in the Field of Nuclear Energy, the Joint Protocol safety requirements, and safety guides. Follow- Relating to the Application of the Vienna Conven- ing the disaster at the Fukushima Daiichi nuclear tion, and the Paris Convention, the Brussels Sup- power plant, the IAEA Board of Governors adopt- plementary Convention, and the Convention on ed a draft IAEA Action Plan on Nuclear Safety in Supplementary Compensation for Nuclear Dam- September 2011 that was unanimously endorsed age (CSC). Several states with large nuclear pro- by the General Conference that same year. The grams—such as China, South Korea, Japan, and purpose of the Action Plan is to define a program India—are not party to any international nuclear of work to strengthen the global nuclear safety liability convention and rely on their own nation- framework, including emergency preparedness al legislation. Most nuclear suppliers have found and radiation protection. India’s national liability law woefully inadequate, a fact that has inhibited nuclear trade with that The IAEA has reported that it has made progress country. More than half the world’s reactors are in implementing the Action Plan in various areas, outside the Paris and Vienna conventions.273 The including assessing safety vulnerabilities of nucle- Fukushima nuclear disaster has gone a long way ar power plants, strengthening the Agency’s peer to raise global awareness about the inadequacy of review services, improving emergency prepared- the current situation, and the need to bring some ness and response capabilities, strengthening and coherence and consistency to the current liability maintaining capacity building, and protecting landscape. people and the environment from ionizing radiation. It has also made progress in sharing and dis- According to the World Nuclear Association, the seminating the lessons learned from the Fukushi- failure to devise an effective global nuclear liability ma accident. The ROK and the U.S. should press system has been the result of differences between their trading partners to develop cooperative re- the United States and France, whereby Paris is a lationships with the IAEA’s Department of Nucle- proponent of the Paris and Joint protocols, and the ar Safety and Security, and to invite IAEA opera- U.S. supports the CSC. However, the two countries tional safety review teams to help provide relevant are trying to resolve this disagreement and are en- advice and assistance on nuclear safety matters. couraging more countries to sign up to the revised The IAEA has pointed out that the success of the Paris and Brussels conventions or to the revised

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 80 Vienna Convention, the Joint Protocol, and the promote the highest possible standards of nuclear CSC in particular. An ‘initial step’ envisaged is the safety. Its policies emphasize effective communi- CSC’s entry into force.274 cation and open information sharing among operators. WANO operates four main programs: peer The U.S. has strongly supported the CSC’s entry reviews, operating experience, technical support into force as a key step in rectifying the deficien- and exchange, and professional and technical de- cies and confusion in the international nuclear li- velopment. The U.S. and ROK governments and ability system. The CSC has two main objectives. industries should urge foreign reactor operators to The first is to establish a worldwide liability sys- join this organization and to take advantage of its tem in which all states may participate. (The CSC programs. is open not only to countries that are party to an existing nuclear liability convention, such as the Nuclear Security Vienna Convention on Civil Liability for Nuclear Damage, but also to other countries, provided that With the rise of terrorism and the interest shown their national legislation is consistent with the uni- by some terrorist groups such as al Qaeda in ac- form rules on civil liability laid down in the annex quiring nuclear weapons and materials and in at- to the CSC.) The second objective is to increase the tacking nuclear facilities, nuclear security has be- amount of compensation available in the event of come a topic of major international concern. The a nuclear incident by establishing a minimum na- U.S. and South Korea have taken leading roles in tional compensation amount and an international strengthening the security of nuclear materials and fund to which contracting parties will be expected facilities from theft or sabotage by nonstate actors to contribute in the event of a nuclear accident. such as terrorists and criminals. Both participate in the Global Initiative to Combat Nuclear Terror- The Vienna Convention now has 18 signatories ism and the Global Partnership against the Spread and five contracting states, but it will not enter into of Weapons and Materials of Mass Destruction. In force until at least five states with a minimum com- addition, the U.S. hosted the first Nuclear Security bined total of 400,000 MW (thermal) of installed Summit in Washington in 2010, and the ROK held nuclear capacity become parties. Thus far, five the second one in Seoul in 2012. Both participated states with a total combined installed nuclear ca- in the third summit this year in The Hague, and pacity of 308,000 MW (thermal) have ratified the they will take part in the final summit, most likely CSC. Japan and Canada have recently announced in Chicago, in 2016. their intention to do so. These ratifications would bring the CSC into force, almost doubling the The 2010 Washington summit unanimously en- number of civil nuclear power plants covered by dorsed a nonbinding communiqué to secure glob- nuclear liability treaties. The U.S. has ratified the al stocks of nuclear material within four years and CSC, and the ROK should move quickly to do the produced a work plan detailing further steps that same. Both countries, as well as their companies, countries would take in the pursuit of nuclear should stress the importance of an adequate lia- security. The plan emphasized strengthening ex- bility system and urge their nuclear cooperation isting measures, such as the Convention on the partners to join the CSC. Physical Protection of Nuclear Materials (CP- PNM) and its 2005 amendment, the International Nongovernmental Organizations Convention for the Suppression of Acts of Nuclear Terrorism (ICSANT), and UN Security Council The World Association of Nuclear Operators Resolution 1540.275 Other accomplishments have (WANO) is an international organization of nu- included securing commitments to convert civil- clear power plant operators whose objective is to ian reactors from the use of HEU fuels to the use

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 81 of LEU fuels, and to promote measures to secure, international nuclear security architecture con- account for, and consolidate stocks of HEU and sisting of legal instruments, international orga- plutonium. The 2012 Seoul Summit reaffirmed the nizations and initiatives, internationally accepted steps outlined at the 2010 Washington summit and guidance, and good practices. Like the previous gave new or greater emphasis to some issues, such summits, it called on states that have not yet done as the nexus between nuclear security and nuclear so to become party to the Convention on the Phys- safety, the importance of protecting radiological ical Protection of Nuclear Material (CPPNM) and sources, the need for improved security for sensi- to ratify its 2005 amendment, and to become party tive information, and cyber security. to the International Convention on the Suppres- sion of Acts of Nuclear Terrorism (ICSANT). The 2014 Nuclear Security Summit in The Hague emphasized the need to strengthen and coordinate One of the most important accomplishments of international cooperation in the field of nuclear The Hague summit was an initiative by the Unit- security, including through bilateral and regional ed States, the Netherlands, and the ROK to obtain cooperation. It noted that “international coop- the agreement of 35 participants to a so-called gift eration fosters the capacity of States to build and basket on “Strengthening Nuclear Security Imple- sustain a strong nuclear security culture and effec- mentation.” The joint statement contains a com- tively combat nuclear terrorism or other criminal mitment to embed the objectives of the IAEA’s threats.” It encouraged states, regulatory bodies, nuclear security fundamentals and the IAEA’s research and technical support organizations, the physical protection recommendations, which are nuclear industry and other relevant stakeholders, nonbinding, in national rules and regulations, and within their respective responsibilities, to build to host peer reviews to ensure their effective im- such a security culture and share best practices plementation.276 and lessons learned at the national, regional, and international levels. Also of note, the same 35 countries agreed to conduct self-assessments of their nuclear security The three nuclear security summits succeeded in systems, host periodic peer reviews by the IAEA’s increasing global awareness of the necessity of se- International Physical Protection Advisory Ser- curing nuclear materials effectively, led to concrete vice (IPPAS), and implement recommendations steps and measurable progress in reducing the identified in the reviews. If actually carried out, availability and improving the security of weap- the commitment to the IAEA’s physical protection ons-usable nuclear material, and produced spe- reviews will be important to ensure that countries’ cific commitments by participating countries to physical protection laws, regulations, and prac- improve nuclear security. However, the summits tices will be assessed on the basis of international have also shown that much more work lies ahead standards and will help ensure the effectiveness of for the international community to promote the the measures taken. establishment of effective and sustainable national systems of physical protection, a strong worldwide South Korea and the United States should consid- nuclear security culture, and an effective interna- er supporting these steps in implementing their tional legal architecture of nuclear security. nuclear export policies and in educating their cooperating partners on the importance of physical The 2014 Hague Summit produced several doc- protection of nuclear materials and facilities and, uments and national statements calling for coun- where appropriate, providing assistance to im- tries as well as the nuclear industry to take specif- prove their partners’ security systems and practic- ic steps to strengthen nuclear security worldwide. es. In particular, the U.S. and South Korea should The summit recognized the need for a strengthened undertake the following six steps:

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 82 The first step is to encourage adherence to nuclear Both countries could also commit to provide tech- security treaties. The U.S. and South Korea should nical and financial assistance where appropriate to require that their future cooperating partners ad- their cooperating partners to help implement such here to CPPNM and its 2005 amendment as well commitments in coordination with the IAEA. The as the ICSANT, and should also encourage exist- U.S. and the ROK could either individually or in ing partners to do so. Unfortunately, Washington collaboration provide technical assistance and has yet to ratify these treaties and, to be credible in training to those countries to which they export convincing others to adhere to these internation- nuclear materials, equipment, and technology, and al security instruments, the United States should particularly to those developing countries that do take immediate steps to ratify them. not possess a nuclear security infrastructure.

The second step is to strengthen nuclear security im- The third step is to promote a security culture and plementation. As noted above, a number of states at best practices. The nuclear security summits also the last summit committed to embed the objectives encouraged countries, regulatory bodies, research of the IAEA’s nuclear security fundamentals and and technical support organizations, the nuclear the IAEA’s physical protection recommendations industry, and other relevant stakeholders to help in their national rules and regulations. The U.S. and build a “security culture,” and share good practices South Korea should require future cooperating part- and lessons learned at the national, regional, and ners and encourage existing ones to incorporate the international levels. Both countries have programs IAEA’s physical protection guidelines into their na- for providing such assistance, and should empha- tional laws and regulations, and to publish their rel- size encouraging their nuclear cooperation part- evant regulations. They should also encourage their ners to exchange information and best practices coordinating partners to conduct self-assessments on nuclear security in order to help build an effec- of their nuclear security systems, host periodic peer tive security culture in those countries. Industries reviews by the IAEA’s IPPAS missions, and imple- in both countries should also have programs to ment recommendations identified in the reviews in further these objectives with states to which they order to provide a level of confidence to the interna- are supplying nuclear materials, equipment, and tional community that they are taking nuclear secu- technology. rity within their borders seriously. The fourth step is to encourage international and To do so credibly, however, Washington and Seoul regional cooperation in education and training. will need to follow through on their own pledg- The summit process also encouraged stronger in- es and expeditiously fulfill their summit commit- ternational and regional cooperation with regard ments by incorporating the guidelines into their to education, awareness-raising, and training, in- national laws, and by inviting IPPAS missions to cluding through nuclear security centers of excel- review their nuclear security systems. Both states lence. At the 2010 Nuclear Security Summit, Chi- have recently had IPPAS missions to set such an na, the ROK, and Japan pledged to create Centers example,277 and the IAEA has reported that these of Excellence (COE) or Nuclear Security Training missions resulted in the identification of areas for and Support Centres (NSSCs), whose main pur- improvement as well as of good practices, which, pose would be to train individuals on nuclear se- if shared, could be beneficial to other states.278 The curity matters—in other words, they focus on the U.S. and South Korea should work toward making human factor of nuclear security. Japan established routine international reviews of nuclear security a COE in 2010, and the ROK followed in 2014; measures the international norm, and should en- China will open its facility in 2015. The United courage their cooperating partners to request IP- States established a collaborative nuclear security PAS missions on a regular basis. center in 2011 with China, with the objective of

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 83 enhancing China’s domestic nuclear security capa- In 2012, the IAEA established an International bilities and of serving as a regional hub for the dis- Network for Nuclear Security Training and Sup- semination of best practices in the field. The cen- port Centres (NSSC Network) in order to share ter would provide a resource for sharing technical lessons learned, and to promote regional and in- data and best practices, establishing training pro- terregional cooperation between such centers. grams, “and promoting technical collaborations The objectives of the NSSC Network are to pro- that will enhance nuclear security in China and mote a high level of nuclear security training and throughout Asia.”279 The United States will supply support services, and to facilitate cooperation trainers and machinery for the center, while China and assistance activities (including technical and will bear most of the cost of its operation. The two scientific efforts), to optimize the use of available countries also created a training center in China resources, and to leverage these resources to meet that would educate customs officials in the detec- specific needs. In February 2013, NSSC members tion of trafficked nuclear materials. The ROK and from China, Japan, and the ROK met in Vienna the U.S. should look for opportunities to establish and established the Asia Regional Network under similar cooperative relationships with each other the auspices of the NSSC Network.281 Membership and possibly with their nuclear trading partners. is open to all IAEA member states, observers to the IAEA, and other relevant stakeholders that are The COEs/NSSCs could play an important role involved, or are planning to be involved, in the after the 2016 Nuclear Security Summit in shar- provision of training and/or technical and scien- ing technical data and best practices, establishing tific support in the area of nuclear security. Any training programs, and promoting technical col- of these groups can request membership in the laboration to enhance nuclear security. The U.S. IAEA through their official established channels. and the ROK should give careful consideration The U.S. and South Korea should coordinate their to how these COEs may be best utilized. Some efforts to encourage their trading partners to par- experts have advocated that COEs should not re- ticipate in the COEs and the NSSC Network. They strict themselves to the technical aspects of nucle- should also take steps to ensure that such centers ar security, and should integrate policy elements receive sufficient priority and resources to carry with their technical focus. They should include out their critical functions. information-sharing as an important part of improving nuclear security and should go beyond The fifth step is to promote the security of radio- exchanges of materials on laws and regulations. logical sources. The 2014 Hague Nuclear Security They should also share information on such non- Summit saw 23 states, including the United States sensitive matters as to whether countries are ful- and the ROK, sign a statement in which they ly implementing the IAEA’s physical protection agreed to secure dangerous radiological sources recommendations, whether they are participating that could be used in so-called dirty bombs. The in a peer review process with the IAEA or others, parties to the statement pledged to secure all their how they have implemented the resulting recom- most dangerous Category I radiological sources mendations, and whether they have completed a under guidelines set out by the IAEA in its “Code of comprehensive threat analysis. These experts be- Conduct on the Safety and Security of Radioactive lieve that COEs can play a key role in determining Sources” by the end of 2016. They “declared their whether the answers to these questions can safely commitment to secure IAEA Category 1 sources be shared, with whom, and in what form. Another consistent with the IAEA’s Code of Conduct on possibility is supplementing the IAEA peer review the Safety and Security of Radioactive Sources and process with a regional peer review system.280 The with consideration of Nuclear Security Series 14: main challenges to COEs/NSSCs will be budget- Nuclear security recommendations on radioac- ary, priority, and sustainability. tive material and associated facilities and Nuclear

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 84 Security Series 15: Nuclear security recommen- Nongovernmental Organizations dations on nuclear and other radioactive material out of regulatory control.”282 The ROK and the The World Institute for Nuclear Security (WINS) U.S. should take the necessary steps to fulfill these is a nongovernmental organization that provides commitments, and should press their cooperating a forum for sharing best practices in strengthen- partners to make the same commitments. ing the physical protection and security of nuclear and radioactive materials and facilities worldwide. The sixth step is to reinforce the central role of WINS brings together nuclear security experts, the IAEA. There will be a clear need for continu- the nuclear industry, governments, academia, and ing high-level attention to nuclear security coop- international organizations to focus on improving eration after the nuclear security summit process security at nuclear facilities around the world. It comes to an end in 2016. All three nuclear sum- has developed numerous best practice guides on mits confirmed the central role of the IAEA in a wide range of nuclear security topics. The WINS strengthening the international nuclear security Academy is a new, online certification course that framework, and the Agency is likely to be a cen- offers a core curriculum and electives in different tral focus for promoting nuclear security following professional areas. The U.S. and the ROK govern- the end of the summits. The IAEA has an exten- ments and industry should encourage their nu- sive program devoted to nuclear security enhance- clear trading partners to take advantage of these ment, and it provides guidance, information, programs. training, and assistance to help member states enhance their nuclear security practices, including a The Role of Industry Trafficking Database Program, Integrated Nuclear Security Support Plans, and numerous training This chapter has stressed the important roles that and education programs.283 States participating in the private nuclear industries of both the U.S. and the summit process pledged to work to ensure that the ROK can play in advancing the two nations’ the IAEA continues to have the appropriate struc- nonproliferation, safety, and security agendas. ture, resources, and expertise needed to support KEPCO and Westinghouse are two of 11 global the implementation of nuclear security objectives. reactor suppliers284 that have adopted the so-called The U.S. and the ROK should encourage their nu- Nuclear Power Plant and Reactor Exporters’ Prin- clear trade partners to participate in these various ciples of Conduct.285 Sponsored by the Carnegie programs, if they do not already do so, and to par- Endowment for International Peace and adopted ticipate in Agency meetings, working groups, and on September 15, 2011, the principles set stan- support other programs on nuclear security. They dards of practice for companies across the range of should also redouble their efforts to support the issues examined in this chapter, including safety, IAEA’s security role. The IAEA continues to rely liability insurance, security, and nonproliferation, heavily on extrabudgetary contributions for these as well as environmental protection, spent fuel programs. The U.S. and the ROK should press for management, and ethics. They reflect the partici- increasing the funds in the regular IAEA budget pating companies’ commitment to their customers devoted to nuclear security and to increase their to develop and share best practices that reinforce voluntary contributions to this program. They and enhance existing codes, standards, and regula- should encourage their nuclear trade partners to tions in all these areas. The companies meet regu- do the same. larly to update each other on their implementation efforts and discuss best practices, engage stakeholders, and update the principles.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 85 At their meeting in Seoul in October 2014, the chains by encouraging their suppliers to adopt the vendors underscored the importance of the in- same codes of conduct in nonproliferation, safety, tegrity of the supply chain to the safety of the nu- and security. The nuclear industry associations in clear power plants they export, and discussed the both countries, such as the Nuclear Energy Insti- importance of deeper engagement with suppliers, tute in the United States and the Korea Nuclear in particular in their quality assurance programs. Association and the Korea Atomic Industry Fo- American and South Korean nuclear reactor ven- rum, could also implement programs to educate dors should work together to encourage countries American and Korean nuclear firms on the impor- receiving nuclear assistance from them to have tance of instituting internal compliance programs their companies, whether public or private, adopt and, where appropriate, of providing advice and these same principles. In addition, Westinghouse assistance to their foreign customers on nuclear and KEPCO should also work to extend these exports, nuclear safety, and nuclear security. principles to cover their entire nuclear supply

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 86 chapter 8 Summary and Conclusions

his report has sought to assess the prospects framework for U.S. nuclear exports. Such agree- for enhanced collaboration between the ments contain strict nonproliferation conditions, Republic of Korea and the United States in including guarantees and assurances by cooper- Tfostering the civil uses of nuclear energy in third ating partners of peaceful, non-explosive use, the countries while ensuring the highest standards of application of IAEA safeguards in perpetuity, and nuclear nonproliferation, security, and safety. The consent rights over reprocessing, retransfer, en- two countries already enjoy a strong relationship richment and storage of plutonium and HEU. in bilateral peaceful nuclear trade and in cooperation in nuclear ventures in third counties, such A peaceful nuclear cooperation agreement, howev- as the United Arab Emirates and China, as well er, is legally required for the transfer of only a few as in various bilateral and international nuclear items—nuclear materials, nuclear facilities, and R&D projects. They also work closely in promot- their major components and equipment. Peaceful ing nonproliferation, nuclear security, and safety nuclear cooperation agreements are not needed for objectives. The conclusion of a new ROK-U.S. civil the transfer of other nuclear items, substances, and nuclear cooperation agreement and the project- technology. Their exporting is governed by differ- ed growth in nuclear power worldwide offer new ent legal instruments and assurances between the opportunities for deepening and expanding U.S.- U.S. and its cooperating partner. But even for those ROK collaboration in promoting these objectives exports that do not require a peaceful nuclear co- in third countries. operation agreement, one of the key factors that the U.S. takes into account in approving such transfers U.S. Laws and Policies: Their Relevance is whether the U.S. has such an agreement in effect for U.S.-ROK Collaboration with the destination state.

Because the participation of American industry in Perhaps the most relevant and important U.S. legal the global nuclear market is governed by a range requirement for American-Korean nuclear collab- of laws, regulations, and policies, this report has oration in the global nuclear market is article 57.b described in some detail how these apply to vari- of the AEA and its implementing regulation—part ous kinds of U.S. nuclear exports, and has explored 810 of the Code of Federal Regulations—because their implications for U.S.–South Korean nuclear they apply to South Korean reexports of U.S. re- cooperation. The Atomic Energy Act is the prima- actor and other nuclear technology to third coun- ry legal instrument governing U.S. nuclear exports, tries. The export of nuclear technology may be and peaceful nuclear cooperation agreements approved under an agreement for cooperation, (so-called 123 agreements) provide the basic legal but technology exports can also be authorized by

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 87 the secretary of energy under the part 810 regu- control system could lead potential customers to lation—and virtually all U.S. nuclear technology turn away from cooperation with the U.S. and the exports have been authorized using the part 810 ROK and toward other nuclear suppliers, or moti- option. Most nuclear technology exports to South vate South Korean companies to decline to collab- Korea are authorized on a general basis and do not orate with U.S. nuclear firms because they believe require a special authorization from the secretary tough U.S. nonproliferation policies would hurt of energy. ROK prospects with third-party customers.

However, under the current part 810 regulation, a In the 1970s and 1980s, the United States imposed special authorization of the secretary of energy is nonproliferation conditions that most other nucle- required for the transfer of technology to a list of ar suppliers did not, for example, by (1) requiring 76 countries. Therefore, if the ROK were to wish to comprehensive safeguards as a condition of sup- reexport U.S.-origin nuclear technology to any of ply to non–nuclear weapon states, (2) imposing these countries, the retransfer would require the broad and restrictive consent rights over enrich- special authorization of the secretary of energy. ment and reprocessing of U.S.-obligated nuclear The vast majority of these countries are not likely material, (3) restraining the transfer of sensitive candidates for nuclear cooperation with the ROK nuclear technology, and (4) imposing export con- or the U.S. They include states that are not parties trols on nuclear dual-use items and technology. In to the NPT, are non–nuclear weapon states that do some cases, these disparities clearly hurt Ameri- not have comprehensive safeguards agreements, can competitiveness in the international nucle- do not share U.S. nonproliferation objectives, or ar market. U.S. nuclear cooperation was cut off are developing nations with no nuclear programs. from a number of states, and other suppliers took The list contains three countries with major nu- the place of American companies. For example, clear programs—China, Russia, and India. Even during the later 1970s, the United States strongly though these three countries have agreements opposed reprocessing and the civil use of pluto- with the U.S., transfers and retransfers of nuclear nium in all countries, and sought to use its prior technology to these states would require special consent rights to promote that objective. The reauthorization of the secretary of energy. sulting delays and uncertainties in U.S. approval of requests for reprocessing and retransfers for DOE is presently proposing changes to the part reprocessing led some foreign utilities to turn to 810 regulation that, among other things, would in- non-U.S. sources for their uranium enrichment crease the number of countries for which specific services and also for other nuclear supplies. authorizations are required from 76 to 146. Gen- eral authorization would apply to those countries Over time, however, the disparities between U.S. that have an agreement for cooperation with the nuclear export controls and those of other major United States, with the exception of China, India, supplier states have greatly diminished. The bilat- and Russia. The revision would add Kazakhstan, eral controls of each individual supplier state were Ukraine, the United Arab Emirates, and Vietnam eventually supplemented by two internationally to the generally authorized list of countries. coordinated nuclear export control regimes—the Zangger Committee and the Nuclear Suppliers The Strictness of U.S. Laws and Policies Group. Today, the conditions of supply set out and Its Effect on U.S. Competitiveness in the NSG guidelines are broadly similar to U.S. in the International Market nuclear export controls. Still, the multinational systems are voluntary, and variations therefore A major issue is whether and to what extent exist among individual suppliers in their policies the comparatively rigorous U.S. nuclear export and practices and in their interpretation of the

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 88 international guidelines. In many cases, however, developing world have demonstrated little interest these differences should have little or no practical in acquiring such capabilities, and (3) the econom- effect on the competitive position of the United ic and fuel supply and fuel management cases for States in the global market. such fuel cycle facilities has not been proven, especially in countries with small nuclear programs. Nonetheless, despite much greater harmonization between the nuclear export policies and practices The U.S. has also shown a willingness to give ad- of the United States and those of other suppliers, vance consent for retransferring nonsensitive differences continue to exist. Some of these have materials, equipment, and components to third been cited as hurting U.S. competitiveness. These countries with which the U.S. has an agreement include: for cooperation—for example, the U.S. gave such consent to Euratom. It has also given advance ap- • The United States’ reputation, gained largely proval in some cases—for example, the UAE and in the 1970s, as an unreliable and unpredict- Taiwan—to transfer U.S.-obligated spent fuel to able cooperating partner, particularly in the Euratom for reprocessing, which would reduce the exercise of its consent rights. This includes perceived need to reprocess indigenously. Hence, the legally mandated character and the it is not at all clear that U.S. consent rights are like- greater strictness and breadth of U.S. con- ly to be a major impediment to the United States’ sent rights compared with those of other competitiveness in the international market. suppliers. • The slowness and inefficiency of the U.S. ex- Policy on technology exports and the inefficiencies port approval process, particularly the han- of the approval process. The U.S. industry regards dling of requests for technology exports and the requirements for specific authorizations for reexports. technology transfers and retransfers contained in the part 810 regulation as an impediment to Amer- • Potential changes to the AEA. ican competitiveness, and has registered concerns about the regulation’s overly broad scope, lack of Reputation and consent rights. In the 1980s and clarity and predictability, and outdated provisions, 1990s, the U.S. went to some lengths to reestab- and also the protracted period required by DOE lish its reputation as a reliable supplier by giving to process applications for specific authorization. advance consent to reprocessing and enrichment for its cooperating partners that already had such Interviews by the authors of this report with capabilities, were close allies, had excellent non- U.S. industry sources revealed complaints that proliferation credentials—for example, Japan and the part 810 approval process is so onerous and Euratom—and were located in areas of little pro- time-consuming that some U.S. firms have lost out liferation concern. on foreign sales. South Korean industry representatives have also complained to the authors that the In addition, the more extensive and stricter U.S. U.S. is slow in approving requests for reexports of consent rights on reprocessing, the storage of technology. In 2010 the Government Accountabili- weapon-usable materials, and enrichment may ty Office issued a report that, in many respects, reit- not have as much adverse effect on consumers’ erated these concerns and highlighted the slowness willingness to cooperate with the U.S. as they and inefficiencies of the part 810 process. had in the past, for three reasons: (1) only a few countries have enrichment and reprocessing facil- Notwithstanding the widespread dissatisfaction ities, (2) newly emerging nuclear programs in the with the part 810 approval process, it has apparently not caused great harm to U.S. nuclear exports

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 89 to South Korea or ROK retransfers of U.S.-origin pledge of no enrichment and no reprocessing in all technology to third countries. DOE is in the pro- future U.S. agreements. There may be special cas- cess of updating its part 810 regulations, which will es where such a pledge would be appropriate, for hopefully respond to most of industry’s concerns, example, regions of instability and of proliferation while at the same time protecting U.S. national se- concern. In addition, some potential partners will curity interests. Whether the new regulations will have political and strategic reasons for concluding achieve these objectives remains to be seen. a peaceful nuclear cooperation agreement with the United States, and may well be willing to provide Changes to the Atomic Energy Act. The House some form of commitment to abstain from en- Foreign Affairs Committee unanimously adopted richment and reprocessing, especially if they en- a bill in 2012 that would require that all future U.S. vision having little practical nuclear energy need peaceful nuclear cooperation agreements contain to acquire fuel cycle capabilities in the foreseeable a legal commitment by the cooperating partner future. to abstain from acquiring enrichment or reprocessing capabilities, with the stipulation that any However, adopting such a requirement for all fu- agreement submitted to Congress without this ture nuclear cooperation agreements would seri- provision would require an affirmative vote of the ously threaten the prospects for concluding new two houses of Congress. The committee reintro- agreements because most countries regard access duced the same bill in 2013, but it has not passed to such technology as their right under the NPT. either house of Congress. Moreover, any attempt by the U.S. to impose this requirement could lead many states to find other The administration decided to adopt a case-by- suppliers that do not require a similar pledge as a case approach toward this issue, whereby the U.S. condition for their nuclear trade. would press future partners, except for the ROK and the IAEA, to make a legal undertaking to Despite the various criticisms of U.S. nuclear ex- refrain from enrichment and reprocessing, but port laws and policies, the degree to which com- would not necessarily walk away from an agree- paratively strict U.S. nuclear export controls af- ment if the other country refused to accept this fect U.S. competitiveness in the global market is condition. The U.S. required such a commitment difficult to pin down. A 2010 study by the Gov- in its recently concluded agreement with Taiwan, ernment Accountability Office identified several but sought a compromise formula in its agree- other factors that impede the ability of the U.S. ment with Vietnam. That agreement contains no industry to compete globally for nuclear trade, legally binding commitment on enrichment and including a decline in domestic manufacturing reprocessing. Rather, in the agreement’s preamble, capabilities, the U.S. industry’s liability concerns, Vietnam affirmed its intent “to rely on existing in- and the emergence of other suppliers that place ternational markets for fuel services rather than great emphasis on supporting bids through acquiring sensitive nuclear technologies.” At the high-level government advocacy and strong same time, the U.S. is insisting on a legally binding financial support. Moreover, other factors may pledge of no enrichment and reprocessing from favor the United States over its international com- countries in regions of instability or proliferation petitors, including the close political and strategic concern, such as the Middle East. relationship that the U.S. enjoys with a number of countries, the quality of its advanced nuclear tech- Despite the case-by-case approach that the U.S. ad- nology, and its excellent safety standards. ministration has adopted, many in Congress and the U.S. nonproliferation community remain com- Although the U.S. may have stricter nonprolif- mitted to enacting legislation that would require a eration requirements than many other suppliers,

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 90 this difference has not prevented the U.S. from U.S.-China cooperation agreement, the proposed concluding agreements with 19 individual coun- text of which is expected to be submitted to Con- tries, Taiwan, and two international organizations, gress in early 2015. including Euratom and its 28 member states. Fi- nally, precisely because of the strict nature of U.S. India is also a potential market for South Korean nonproliferation requirements, some countries nuclear exports, but the ROK is behind its com- are interested in concluding peaceful nuclear co- petitors, particularly Russia and France. Moscow operation agreements with the United States be- seems to be the main partner of choice for New cause they view the United States’ willingness to Delhi. In December 2014, Russia signed a strategic conclude such agreements as a validation of their vision document on nuclear power with India that nuclear nonproliferation credentials. said both sides would strive to complete the construction and commissioning of “not less than 12 Potential Markets units” in the next two decades. The South Koreans are now waiting for the Indian government to allot Seoul is interested in competing for nuclear proj- a site for a nuclear reactor. However, the initiation ects in a number of countries, including China, of peaceful nuclear trade with India faces several India, Vietnam, Indonesia, Poland, Jordan, Saudi obstacles, particularly if it involves the retransfer Arabia, Turkey, and South Africa. of U.S. nuclear technology from the ROK to India. First, many potential nuclear suppliers, including China is planning on a major expansion of its nu- the United States, will not export to India because clear power program, and is basing its technolo- New Delhi’s 2010 law on civil liability for nuclear gy development for the immediate future on the damage provides that operators of nuclear plants Westinghouse AP1400 reactor. South Korea is can hold foreign suppliers liable in the event of an playing an important role in Westinghouse’s sales incident due to faulty equipment or material sup- to China. South Korea’s Doosan Heavy Industries plied. Second, Japan and India have been unable & Construction has partnered with Westinghouse to conclude an agreement due to differences with to supply two pressure vessels and four steam gen- regard to nonproliferation. The absence of an In- erators for the two AP1000 nuclear power reactors dian-Japanese nuclear pact could block the supply it is constructing in China. South Korea hopes that of U.S. reactor vendors—Westinghouse-Toshiba the contract with Westinghouse will be a stepping and GE-Hitachi—as well as a range of other global stone for South Korean companies to expand in the nuclear reactor manufacturers, because the reac- nuclear power market in China and other coun- tor pressure vessels for many reactors are made by tries. However, China wants to become progres- the Japanese heavy forging firm Japan Steel Works. sively more self-sufficient in deploying AP1000s Without an agreement, Japan will not permit nu- and its own derivatives, and is placing emphasis clear exports to India. on using domestic products in the key equipment and components of nuclear reactors. Whether Finally, New Delhi has refused to provide the U.S. and to what extent Doosan or other South Kore- with information that tracks and accounts for ma- an companies will be able to participate in future terial subject to the U.S.-Indian agreement or to Chinese nuclear projects may depend on whether permit end-use monitoring of certain exports— China has the domestic capacity to meet its am- which is not only a common practice among nu- bitious nuclear power goals and to what extent it clear trading partners but also a requirement of may have to resort to foreign companies to fill the the U.S. legislation that authorized the initiation gaps. The continuation of South Korea’s cooper- of U.S.-Indian peaceful nuclear cooperation. Until ation with Westinghouse in the Chinese nuclear all of these issues are resolved, both U.S. nuclear program will depend heavily on the renewal of the exports to India and South Korean nuclear trade

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 91 with that country that is tied to U.S. export con- acquisition of enrichment and reprocessing. The trols will be problematic. U.S. has an agreement for cooperation with Egypt, but Russia appears to be the clear partner of choice Vietnam is purchasing its first reactors from Rus- to develop Egypt’s first nuclear power plant. Rus- sia and Japan. The U.S. has recently concluded an sia’s willingness to finance Egyptian reactors is agreement for peaceful nuclear cooperation with clearly a key factor in that choice. Vietnam that could facilitate American–South Ko- rean nuclear collaboration with that country and, Turkey will purchase its first nuclear plant from in particular, the retransfer of U.S.-origin technol- Russia, with French participation, and its sec- ogy from South Korea to Vietnam for its third nu- ond from a Japanese-French consortium. In 2014 clear project. Westinghouse, China’s State Nuclear Power Tech- nology Corporation, and Electricity Generation Indonesia, Malaysia, and the Philippines are also Company (the largest electric power company in potential markets for South Korean nuclear ex- Turkey) announced an agreement to enter into ports, but these countries have not committed to exclusive negotiations to develop and construct a initiating a nuclear program. Of these countries, four-unit nuclear power plant site in Turkey based the U.S. has agreements in effect only with Indo- on the AP1000 reactor’s technology. nesia. South Korea made a proposal to sell a reactor to The European countries—particularly Romania, Turkey, but it foundered over a dispute regarding Poland, and the Czech Republic—are also poten- electricity sales guarantees. The United States has tial markets for South Korean nuclear exports. a peaceful nuclear cooperation agreement in effect However, the ROK appears to be in an uphill bat- with Turkey that would facilitate the retransfer of tle—behind France, Russia, and China—to win re- U.S.-origin technology to Turkey, if Ankara de- actor contracts with these countries. The U.S. has cides to purchase Seoul’s reactors. a peaceful nuclear cooperation agreement with Euratom that would facilitate U.S.–South Korean In South Africa, South Korea faces aggressive com- collaboration in the event South Korea were to win petition from France, especially Russia, and possi- bids for reactors in these countries. bly China in trying to sell its nuclear reactor technology to that country. In the Middle East, the ROK is interested in selling its reactor technology to Jordan, Saudi Arabia, and Some of the countries that South Korea is target- Egypt, and it has already signed an agreement with ing for its nuclear exports are in the early stages of Jordan for a research reactor. However, funding is planning nuclear power programs, whereas others very important for Jordan’s ability to build a power are more advanced. Given the poor financial con- reactor, and Amman seems to be favoring Moscow dition of some of these countries and their lack of to build its first nuclear reactor due to the strong any kind of nuclear infrastructure, it is far from financial support that Moscow is prepared to pro- certain that the ambitious nuclear power programs vide. Saudi Arabia has signed agreements with a of many of them will be realized. number of potential suppliers but has not yet committed to initiating a nuclear program. Moreover, in pursuing their nuclear exporting goals, South Korea and the United States face com- The U.S. has not concluded an agreement for co- petition from traditional suppliers, such as France operation with either Jordan or Saudi Arabia be- and Russia, and also new suppliers, such as Chi- cause of these countries’ reluctance to agree to na and Japan. Through its aggressive nuclear the United States’ demand that they forswear the export promotion policies, Moscow is winning

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 92 competitions by offering below-market financ- of significant weaknesses, including the failure to ing, and providing a complete range of products build a nuclear plant in 40 years, the atrophying and services, including manufactured parts, engi- of U.S. manufacturing capability, and inadequate neering services, construction, operations, main- high-level political support from the U.S. govern- tenance, and fuel. In countries with little or no ment for the country’s nuclear exports. domestic nuclear infrastructure or experience, including Turkey and Vietnam, Russia has offered Of particular significance is the uncertain and a full build-own-operate model. Russia has also weak nature of U.S. government financial support agreed to take back the spent fuel produced from for nuclear exports. The U.S. Ex-Im Bank has been the fuel it supplies—a strong selling point that nei- the subject of considerable controversy in Con- ther the ROK nor the U.S. is able to offer. gress, and its charter has been extended only to June 30, 2015. This contrasts with the particularly Although China is facing strains in its capacity to aggressive financing terms that Russia employs to meet its ambitious domestic construction goals, increase its share of the global nuclear energy mar- Beijing is aiming to sell nuclear technology in the ket. The failure of adequate financial support may global market. China is also pursuing aggressive be particularly damaging to the prospects for U.S. financing tactics, as is evidenced by its willingness nuclear exports in developing countries that are to invest in the reactors it is proposing to build in undertaking new nuclear programs. Another fac- Romania. Beijing is also teaming its firms up with tor that puts the U.S. industry at a disadvantage is Westinghouse to compete in the international the growing trend among suppliers toward invest- market. ment in plants they sell abroad. Most importing countries, especially developing economies, want Potential Cooperation between the co-investment as part of any deal to purchase for- United States and South Korea eign nuclear technology. Although U.S. firms are taking some investment positions in foreign reac- This report has sought to identify the overall tor projects, this approach has its limits because comparative advantages and disadvantages of the U.S. companies simply do not have the requisite American and South Korean nuclear industries, finances to invest heavily in such projects. recognizing that such relative strengths and weaknesses could in certain cases promote collabora- The South Korean nuclear industry also has its tion in some markets, while giving one country or strengths and weaknesses. The ROK’s nuclear in- the other an edge in competing for sales in other dustry is well integrated. It is able to quote an ac- cases. curate total price because key subcontractors are part of its one, cohesive team. In contrast, West- The U.S. nuclear industry has important strengths inghouse does not have such an integrated team. in such areas as advanced reactor designs, excel- It must assemble a group of subcontractors and lence in nuclear safety, the provision of a full range cannot be certain about a total project price. West- of nuclear services, including engineering and inghouse is also not a construction company, and construction, nuclear fuel services, and the manu- this is a disadvantage compared with the integrat- facturing of high-precision components, as well as ed South Korean team. a proven record in working with partners around the world on technology transfer, localization, ed- The South Korean nuclear industry has also has ucation and training, high standards for quality as- a number of other strengths: a good track record surance, and a demonstrated ability to build plants for construction, operation, and maintenance; internationally. On the other hand, the nuclear in- a consistent government policy; strong nuclear dustry in the United States suffers from a number infrastructure; on-time performance with good

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 93 scheduling software; and a well-integrated indus- joint projects in the global market. The U.S. and try with robust supply chains—engineering, con- South Korean nuclear industries are natural part- struction, fuel, and competitive pricing with con- ners in several areas—with common technology, tinuous production. a minimal language barrier, and a long-standing familiarity between the two industries, especial- In addition, the ROK government’s ownership of ly between KEPCO and Westinghouse. Both in- KEPCO presents a major competitive advantage dustries use the same codes and standards of the for South Korean companies compared with those American Society of Mechanical Engineers, and in the U.S. industry. Indeed, the highly coordi- the ROK has adopted the NRC’s licensing practic- nated support the South Korean nuclear industry es and has introduced the Bechtel system of engi- receives from the ROK government is an import- neering. Project implementation is similar in both ant factor bolstering South Korea’s position in the countries. Such commonalities should ease coop- global nuclear market. eration between the U.S. and ROK industries.

On the other hand, the South Korean nuclear pro- In addition, the relative strengths of one may gram suffers from some limitations and weakness- compensate for the weaknesses of the other. For es that could adversely affect its competitiveness, example, the ROK is especially strong in its man- including limited experience in the international ufacturing capabilities of major components; the nuclear market compared with its larger competi- integrated nature of its industry; its good track tors, and several domestic scandals that have dam- record for construction, operation, and mainte- aged its reputation. nance; the consistency of its government policy; its strong nuclear infrastructure; and the financial The comparative strengths and weaknesses of the and political support it receives from the ROK U.S. and South Korean nuclear industries may fa- government. These advantages may compensate vor one or the other when they are in direct com- for the sharp decline in some U.S. manufacturing petition for markets in third countries. For exam- capabilities. On the other hand, U.S. strengths in ple, the strong political and financial support that safety may help compensate for the reputational South Korea’s government gives to the country’s damage that the ROK industry has recently suf- companies; the country’s proven record of build- fered in that area. American strengths in such ar- ing reactors at a low cost and on schedule; and Ko- eas as advanced reactor designs, the provision of rea’s ability to provide major component parts that high-precision products, and a proven record in the U.S. no longer manufactures put the ROK in a constructing reactors in the global market could strong position to compete not only with the Unit- complement the ROK’s capabilities. In addition, ed States but also with other suppliers. Converse- the political, economic, technical, and strategic rely, the advanced reactor technology offered by the lationship that the two countries enjoy with each United States, America’s high safety standards, and other may prove advantageous to winning con- the United States’ strong political, economic, and tracts in some countries. strategic relationship with a number of countries could provide important advantages for U.S. firms. One model for possible U.S.-ROK collaboration is In some markets, each industry may see benefits in the UAE project, where the ROK and the U.S. ini- going at it alone as much as possible or in teaming tially competed. Then the winner, the ROK, took up with other partners, such as Westinghouse and on the U.S. to provide a wide range of support China in Turkey. for the project, including design, technical support services, consulting on licensing issues, con- In other cases, the two nations’ industries may trol equipment, and instrumentation and major complement each other and favor collaboration in components, as well as engineering, construction

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 94 management, training, legal, regulatory, environ- The Potential Role of the U.S. mental, and other services. The model of the UAE Government in Promoting U.S.-ROK deal is likely to be replicated in the next two reac- Collaboration tors to be built in the UAE. The U.S. government can play a role in facilitating Another model could be the development at the both South Korean nuclear exports to third coun- outset of a joint proposal by U.S. and South Kore- tries and U.S.-ROK cooperation in the global mar- an companies, such as Westinghouse and KEPCO, ket by (1) replacing existing bilateral U.S. peaceful in bidding for reactors in third countries. A joint nuclear cooperation agreements and concluding proposal might make sense if one party decided agreements with new partners; (2) facilitating ap- that it did not want to compete for a particular provals for the retransfer of U.S.-origin nuclear project on its own, if it knew that there was little materials, equipment, and components from the chance of winning the bid independently, or if the ROK to third countries; (3) putting its own nucle- two parties concluded that a joint proposal might ar export house in order; and (4) expanding U.S.- give them a comparative advantage vis-à-vis com- ROK intergovernmental R&D cooperation. petitors. Such U.S.–South Korean collaboration may prove one of the few ways to compete against New and replacement agreements. The United the aggressive export policies of other suppliers, States presently has 19 peaceful nuclear coopera- including Russia. tion agreements in force with individual countries, as well as with Taiwan, the IAEA, and Euratom Westinghouse has adopted this model in its pro- with its 28 member states. Most of the countries posed collaboration with China’s State Nuclear in which South Korea has shown interest in selling Power Technology Corporation for the develop- its nuclear products and services have agreements ment and construction of a four-unit plant for with the United States, the major exceptions being Turkey’s state-owned Electricity Generation Com- Jordan, Saudi Arabia, and the Philippines. pany. China intends to become a major exporter, and Westinghouse’s work with Chinese companies The U.S. peaceful nuclear cooperation agreement in constructing power reactors in China creates with China will expire in December 2015, and natural opportunities for Westinghouse-Chinese its replacement will be particularly important cooperation on joint export projects—a devel- not only to avoid a cutoff of U.S. nuclear exports opment that could be in direct competition with to China but also to enable continued U.S.-ROK South Korean nuclear exports. collaboration in nuclear projects in China. The replacement agreement, which is expected to be sub- One important reason for close collaboration be- mitted to Congress soon, may prove contentious, tween the U.S. and South Korea is strategic. Both given Beijing’s nuclear exports to Pakistan in vio- U.S. and South Korean nuclear industries will face lation of the NSG guidelines, its human rights re- fierce competition from Russia, which has many cord, and its provocative actions in the South Chi- advantages in exporting its nuclear technology—its na Sea and East China Sea over disputed claims vertically integrated industry, strong support from to islands there. On the other hand, the prospect government, aggressive financing, and spent fuel that China will purchase eight new Westinghouse take-back policy. China is also likely to be a major reactors will create strong commercial incentives force in the international market in the longer term. for approval of the replacement agreement. A strengthened U.S.–South Korean alliance to compete in the international civil nuclear marketplace Negotiating new U.S. peaceful nuclear coopera- thus could offer a major counterbalance to Russian tion agreements with countries in the Middle East, and Chinese influence in this key strategic area.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 95 such as Jordan and Saudi Arabia, may present ma- an agreement would not be generally authorized jor challenges. Some in the U.S. have expressed and would require a specific authorization from concerns that introducing nuclear power into this the secretary of energy. highly unstable region would not be in the national security interest of the United States. At the very Facilitating reexports. In addition to replacing ex- least, the U.S. government would regard it as vital- piring agreements for cooperation and negotiating ly important that any new civil nuclear programs new ones with countries that the ROK sees as po- introduced into the region not include enrichment tential customers for its nuclear exports, the U.S. or reprocessing capabilities. Moreover, it is highly can take steps to facilitate retransfers of U.S.-or- doubtful that Congress would approve any agree- igin nuclear materials, equipment, components, ment with a Middle Eastern country that did not and other substances to such countries by giving contain some form of commitment to abstain from the ROK advance consent to retransfer items and acquiring enrichment or reprocessing capabilities. material to a list of specified countries, thus avoid- ing a requirement for case-by-case approvals of re- Jordan has publicly rejected the U.S. request to for- transfers. This could include advance approval to swear these technologies. In addition, the Jordani- transfer U.S.-obligated spent fuel to Euratom for an government has recently confirmed that it has reprocessing to relieve South Korea of some of its concluded an agreement with Russia’s Rosatom to pressing spent fuel storage problems. build the nation’s first nuclear plant under very favorable financial terms. Concluding a U.S.–Saudi Improving the export approval process and ex- Arabian peaceful nuclear cooperation agreement port performance. The U.S. could help facilitate will face two potentially critical and interrelated South Korean retransfers of U.S.-origin technol- political obstacles. The first is a concern that an ogy by reforming its part 810 regulations so that Iranian nuclear program and Israel’s presumed they are clearer and by expediting the approval nuclear arsenal might force Saudi Arabia to follow process. In addition, various organizations have suit. The second is U.S. insistence on obtaining a made numerous recommendations for improving Saudi legal commitment to forswear indigenous U.S. export performance, including increasing the enrichment and reprocessing capabilities. Wheth- role of the Export-Import Bank in supporting U.S. er Riyadh would be willing to go along with such nuclear exports, promoting the nuclear industry a demand remains to be seen. In any event, any in the U.S., and allocating funding and resources U.S.-Saudi agreement is likely to be highly contro- for promoting commercial nuclear export oppor- versial in the U.S. Congress. tunities.

The absence of a U.S. peaceful nuclear cooper- Expanding R&D cooperation. The U.S. and the ation agreement with these countries could ad- ROK are already cooperating in R&D in areas versely affect South Korean–U.S. collaboration in such as pyroprocessing, spent fuel management, these markets. The U.S. could not export nuclear and fast reactors. The U.S. has so-called action materials and reactors or their major components plans and MOUs with several countries that facil- to these countries, nor permit the retransferring itate R&D collaboration in key facilities and tech- of such items from the ROK to these states. The nologies unique to each party. The ROK and the absence of an agreement would also make it more United States might find it useful to enhance and difficult for the U.S. to approve the nuclear exports broaden their cooperation through the establish- or reexports of other nuclear components or items ment of similar relationships with DOE. Strength- to these countries, even though they do not re- ened R&D cooperation between the U.S. and the quire such an agreement. In addition, the export ROK could lead to the development and commer- or retransfer of technology to a country without cialization of new technologies that could in turn

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 96 strengthen the competitiveness of both countries information with each other and with their in the global market and enhance prospects for cooperating partners about clandestine pro- collaboration in third countries’ nuclear programs. curement efforts by countries of proliferation concern. ROK-U.S. Cooperation in Advancing Nuclear Nonproliferation, Security, and • South Korea should consider including re- Safety Objectives quirements for ROK consent to reprocessing and enrichment in all new nuclear cooperation agreements, and particularly in any Effective nuclear export controls exercised by in- agreements with developing countries or dividual governments, along with other elements regions of proliferation concern, in order to of the nonproliferation and nuclear security and help prevent the spread of sensitive nuclear safety systems, are necessary to provide the pub- technologies. lic and national governments with confidence that the proliferation and safety risks associated with • South Korea should also increase its re- civil nuclear energy are manageable. The ROK and sources and capacities in nonproliferation U.S. governments, as well as their respective com- and export control. panies, should cooperate to further their mutual nonproliferation, security, and safety objectives. In areas of political instability or high proliferation Actions that the two countries could take as part risk, the U.S. and South Korea should coordinate of their nuclear cooperation in third countries their civil nuclear cooperation policies closely to should include the following. ensure that these countries do not acquire enrichment or reprocessing capabilities. Nonproliferation: Safety: • Strengthen the IAEA’s safeguards system by requiring new cooperating partners to adopt The U.S. and the ROK should work together to en- the Additional Protocol to their safeguards courage countries engaged in nuclear cooperation agreements with the IAEA, which provides with them to: the Agency with additional information on and access to their peaceful nuclear activi- • Have their companies, whether public or ties. private, adopt the “Nuclear Power Plant and Reactor Exporters’ Principles of Conduct.” • Provide assistance to customer states embarking on nuclear programs to establish an • Establish a strong, financially and politically effective system of nuclear materials protec- independent nuclear regulatory system. tion, accounting, and control. • Ratify and implement the Convention on • Assist the authorities in third countries to Nuclear Safety and make public annual na- develop the capacity and procedures to co- tional reports under the convention. operate in the interdiction of items of pro- • Ratify the Conventions on Assistance in liferation concern that may be transiting or Case of a Nuclear Accident and Early Notifi- originating from their territories. cation of a Nuclear Accident. • Provide technical and/or financial assistance • Invite peer reviews of safety planning, and to help other states to implement their obli- conduct regular performance testing of nu- gations to establish and implement effective clear safety and disaster management prepa- export controls under UN Security Coun- rations. cil Resolution 1540. They should also share

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 97 • Establish cooperative relationships with the • Require or at least encourage future co- IAEA’s Department of Nuclear Safety and operating states to incorporate the IAEA’s Security, and invite operational safety re- physical protection guidelines into their na- view teams to help provide relevant advice tional laws and regulations, conduct self-as- and assistance on nuclear safety matters. sessments of their nuclear security systems, host periodic peer reviews by the IAEA In- Nuclear liability: ternational Physical Protection Advisory Service (IPPAS missions), and implement • Both states should promote the adoption recommendations identified in the reviews. by cooperating states of the Convention on They should also provide cooperating part- Supplementary Compensation for Nuclear ners with technical and financial assistance Damage. to further their nuclear security policies and practices in coordination with the IAEA. Nuclear security: • Consider incorporating provisions into The U.S. and South Korea should press their nu- their bilateral cooperation agreements that clear cooperating partners to carry out steps to would establish mechanisms to build an ef- strengthen nuclear security that were called for at fective security culture in those countries the nuclear summits in Washington, Seoul, and that are party to the agreements. The Hague. In particular, they should: • Consider establishing a joint ROK-U.S. • Require that their future cooperating part- collaborative nuclear security center—or ners adhere to the Convention on the Phys- perhaps expand South Korea’s center of ex- ical Protection of Nuclear Material (CP- cellence called the International Nuclear PNM) and ratify its 2005 amendment, and Security Academy (INSA)—to serve as a encourage all states to become party to the resource for sharing technical data and best ICSANT. Seoul has ratified the CPPNM and practices, and for establishing training pro- ICSANT. To be credible, Washington needs grams. to take immediate steps to ratify the CP- PNM and the ICSANT.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 98 endnotes

1. The International Atomic Energy Agency isotope production. The new law permits (IAEA) has recently projected that overall the export of U.S. HEU to medical isotope nuclear generating capacity will grow by be- producers even if they refuse to convert to tween 17 and 94 percent by 2030 depending LEU. In recent years, there have been only a on a wide range of factors, such as global handful of HEU exports for that purpose. In economic growth. The International Energy 2012, the United States announced a number Agency, in the 2014 edition of its World En- of measures to encourage reliable supplies of ergy Outlook, projects global nuclear power molybdenum-99 (MO-99) produced with- capacity to increase by almost 60 percent in out HEU, including steps to further reduce its central scenario, from 392 GW in 2013 to exports of HEU for medical isotope produc- more than 620 GW in 2040. China accounts tion when sufficient supplies of non-HEU- for 45 percent, while India, the Republic of produced MO-99 are available to the global Korea (ROK), and Russia collectively make marketplace. In January 2013, the president up a further 30 percent of this projected signed into law the Medical Isotope Produc- growth. International Energy Agency, World tion Act. Among other things, the law directs Energy Outlook (Paris: International Ener- the secretary of energy to establish a technol- gy Agency, 2014), available at http://www. ogy-neutral, cost-shared program to evaluate worldenergyoutlook.org/. and support projects for the domestic pro- 2. Peaceful nuclear cooperation agreements are duction of MO-99 for medical uses without often referred to as “123 agreements” because the use of HEU and prohibits the NRC from they are governed largely but not exclusively issuing a license for the export of HEU for by section 123 of the U.S. Atomic Energy Act. medical isotope production effective seven 3. This practice is supported by section 402 of years after the date of enactment. the U.S. Atomic Energy Act, which prohibits 5. U.S. law does not ban the export of plutoni- the exporting of source material for the pur- um, but the United States as a matter of pol- poses of enrichment except pursuant to an icy does not export plutonium. However, the agreement for cooperation. United States has given consent to the use of 4. The so-called Schumer Amendment to the plutonium recovered from United States– U.S. Energy Policy Act (1992) required for- obligated spent fuel in the civil nuclear pro- eign reactors supplied with highly enriched grams of Euratom, India, Japan, and Switzer- uranium (HEU) fuel by the United States to land. commit to converting to operate on LEU fuel 6. The United States does not export heavy wa- as quickly as possible and prohibited exports ter reactors and does not presently have the of HEU to foreign reactors if they did not capability to produce reactor pressure vessels. undertake such obligations. The implemen- 7. For the definition of these various terms, see tation of this amendment, in combination U.S. Nuclear Regulatory Commission, “Part with LEU fuel development and a drop in 50: Domestic Licensing of Production and the construction of new reactors, facilitated Utilization Facilities,” http://www.nrc.gov/ a rapid decline in U.S. HEU exports. On July reading-rm/doc-collections/cfr/part050/ 29, 2005, Congress passed the Energy Policy full-text.html. Act of 2005, which included provisions relax- 8. The U.S. Atomic Energy Act defines the term ing restrictions on HEU exports for medical “restricted data” as meaning all data concern-

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 99 ing (1) design, manufacture, or utilization of U.S. nonproliferation objectives or otherwise atomic weapons; (2) the production of spe- jeopardize the common defense and security cial nuclear material; or (3) the use of special of the United States. nuclear material in the production of energy, 13. However, before the effective date of any such but shall not include data declassified or re- determination, the president must submit the moved from the Restricted Data category by determination, together with a report con- the proper authority. taining the reasons for his determination, to 9. This does not include plutonium contained the committee on international relations of in spent fuel. the House of Representatives and the com- 10. The term “sensitive nuclear technology” mittee on foreign relations of the Senate for a means any information (including informa- period of 60 days of continuous session. (The tion incorporated in a production or utili- president actually waived this requirement zation facility or important component part for the United States–India peaceful nucle- thereof) that is not available to the public and ar cooperation since India had detonated a that is important to the design, construction, nuclear device after entry into force of the fabrication, operation, or maintenance of a NNPA.) 22 U.S. Code 8003. Waiver authority uranium enrichment or nuclear fuel repro- and congressional approval, http://www.law. cessing facility or a facility for the production cornell.edu.uscode/text/22/8003. The Henry of heavy water, but shall not include Restrict- Hyde Act on the U.S.-India Nuclear Cooper- ed Data. ation Act also exempted India from the com- 11. Section 130.g. (2) of the Atomic Energy Act prehensive safeguards requirement. Henry J. stipulates that “[F]or purposes of this section Hyde United States–India Peaceful Atomic insofar as it applies to section 123 . . . conti- Energy Cooperation Act of 2006 HR 5682. nuity of session is broken only by an adjourn- 14. Pursuant to sections 4 and 6 of the Taiwan ment of Congress sine die; and . . . the days on Relations Act, PL 96-8, 93 Stat. 14, and Ex- which either House is not in session because of ecutive Order 13014, 61 FR 42963, any inter- an adjournment of more than three days are national agreement entered into by the Unit- excluded in the computation of any period of ed States and the governing authorities on time in which Congress is in continuous ses- Taiwan before January 1, 1979, and in force sion.” The effect of this provision is that (1) any between then on December 31, 1978, is ad- period of continuous session terminates only ministered on a nongovernmental basis by with the final adjournment of the last session the American Institute in Taiwan, a nonprofit of a Congress; but (2) in determining the length District of Columbia corporation, until the of a period of continuous session, any day on agreement’s termination. which either house is in a recess of its session 15. The conditions in sections 127 and 128 are is not counted. This arrangement is apparent- the same as those specified in sections 123 ly intended to prevent a situation in which an for agreements for cooperation. agreement would go into effect only because 16. Section 126 a. (1) Congress was not in session, or did not remain 17. See “Part 110: Export and Import of Nucle- in session long enough to act on a disapproval ar Equipment and Material,” http://www. resolution. nrc.gov/reading-rm/doc-collections/cfr/ 12. However, this provision of the law also al- part110/. lows the president to waive this requirement 18. Jonathan B. Schwartz, “Controlling Nuclear and to permit nuclear exports if he deter- Proliferation Legal Strategies of the United mines that a cessation of nuclear cooperation States,” Law and Policy in International Busi- would be prejudicial to the achievement of ness 20, no. 1 (1988).

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 100 19. “Electronic Code of Federal Regulations,” a high probability of its existence or future http://www.ecfr.gov/cgi-bin/text-idx?tpl=/ occurrence. Such awareness is inferred from ecfrbrowse/Title10/10cfr810_main_02.tpl. evidence of the conscious disregard of facts 20. Aside from the U.S.-Australian agreement known to a person and is also inferred from a on SILEX, the only exception has been the person’s willful avoidance of facts.” approval of the transfer of pyroprocessing 28. Export Administration Regulations Part technology to the ROK in connection with 744.2, http://www.ecfr.gov/cgi-bin/text-idx- the Joint Fuel Cycle Study being conduct- ?SID=ec6b6559d58e6f63f05ff50eea2e44a4& ed by authorized technical experts from the node=se15.2.744_12&rgn=div8. United States and the ROK. The purpose of 29. Proposed Agreement between the United the Joint Fuel Cycle Study is to explore the States and Japan Concerning Peaceful Uses of technical and economic feasibility and the Nuclear Energy, Message from the President nonproliferation acceptability of the electro- of the United States (Washington: U.S. Gov- chemical recycling process and of other spent ernment Printing Office, 1987), 369. fuel management options. (The U.S. govern- 30. Dual-use items are those that may be used for ment has concluded that electrochemical re- both nuclear and nonnuclear uses. cycling technology, as defined in the agree- 31. The current members of the Zangger Com- ment, is sensitive nuclear technology within mittee are Argentina, Australia, Austria, the meaning of U.S. law.) Belgium, Bulgaria, Canada, China, Croatia, 21. DOE is proposing changes to its regulations Czech Republic, Denmark, Finland, France, that would make exports and re-ports to the Germany, Greece, Hungary, Ireland, Italy, UAE and Vietnam generally authorized. Japan, the Republic of Korea, Luxemburg, 22. This treaty provides that Latin American is a the Netherlands, Norway, Poland, Portu- nuclear-weapon-free zone. gal, Romania, Russian Federation, Slova- 23. 10 CFR part 810,10 kia, Slovenia, South Africa, Spain, Sweden, 24. For the proposed changes to Part 810, see Switzerland, Turkey, Ukraine, the United http://nnsa.energy.gov/sites/default/files/nn- Kingdom, and the United States. The Euro- sa/07-13-inlinefiles/2013-07-31%20SNOPR. pean Commission is a permanent observer. pdf. Current members of the NSG are Argentina, 25. See “Export Administration Regulation Australia, Austria, Belarus, Belgium, Brazil, Downloadable Files,” http://www.bis.doc. Bulgaria, Canada, China, Croatia, Cyprus, gov/index.php/regulations/export-adminis- Czech Republic, Denmark, Estonia, Finland, tration-regulations-ear. France, Germany, Greece, Hungary, Ireland, 26. The NSG “Guidelines for Transfers of Nucle- Italy, Japan, Kazakhstan, the Republic of Ko- ar-Related Dual-Use Equipment, Materials, rea, Latvia, Lithuania, Luxembourg, Malta, Software and Related Technology” may be the Netherlands, New Zealand, Norway, Po- found at: http://www.iaea.org/Publications/ land, Portugal, Romania, Russian Federation, Documents/Infcircs/2013/infcirc254r9p2. Slovakia, Slovenia, South Africa, Spain, Swe- pdf. den, Switzerland, Turkey, Ukraine, the Unit- 27. The Export Administration Act Regulations ed Kingdom, and the United States. In addi- Part 772.2 states that, “knowledge of a cir- tion, non-NSG members, such as India and cumstance (the term may be a variant, such Israel, have indicated that they would abide as ‘know,’ ‘reason to know,’ or ‘reason to be- by the guidelines of the NSG. India is pres- lieve’) includes not only positive knowledge ently applying for membership in the NSG. that the circumstance exists or is substantial- 32. For the latest edition of the Zangger Committee ly certain to occur, but also an awareness of Guidelines, see INFCIRC/209, Rev.2, Mod.1,

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 101 http://www.vertic.org/media/assets/nim University, May 2011, http://belfercenter.ksg. _docs/NSG%20and%20ZC/infcirc209r2m1. harvard.edu/publication/21010/limiting_ pdf. For the latest edition of the NSG guide- transfers_of_enrichment_and_reprocess- lines covering nuclear exports, see INF- ing_technology.html?breadcrumb=%2F. CIRC/254/REV.12 / Part 1, http://www.nei. 45. Glasgow, Teplinsky, and Markus, “Nuclear org/Master-Document-Folder/Background- Export Controls.” ers/White-Papers/Nuclear-Export-Con- 46. Ibid. trols-A-Comparative-Analysis-of. For the 47. Government Accountability Office, “Gov- latest edition of the NSG guidelines for du- ernmentwide Strategy Could Increase Com- al-use items, see INFCIRC/254/Part2/Rev.9/, mercial Benefits from Nuclear Cooperation http://www.iaea.org/Publications/Docu- Agreements with Other Countries,” Novem- ments/Infcircs/2013/infcirc254r9p2.pdf. ber 4, 2010. 33. James Glasgow, Elina Teplinsky, and Ste- 48. Government Accountability Office, “Nucle- phen L. Markus, “Nuclear Export Controls: ar Commerce: Additional Actions Needed A Comparative Analysis of National Regimes to Improve DOE’s Export Control Process,” for the Control of Nuclear Materials, Com- October 2014. ponents and Nuclear Technology,” Nuclear 49. U.S. Department of Commerce, 2010 Ener- Energy Institute, October 2012, www.nei. gy Industry Assessment (Washington: U.S. org/file/ExportControlsComparativeAnaly- Government Printing Office, 2010). How- sis.PDF. This report, which was prepared by ever, the Commerce report noted that U.S. the firm Pillsbury Winthrop Shaw Pittman, companies have participated in the world compared U.S. policies with those of France, market, often as a minority partner, and Japan, the Republic of Korea, and Russia. have invested in research and development 34. Fred McGoldrick, “Nuclear Trade Controls: for the next generation of reactors. Minding the Gaps,” Proliferation Prevention 50. “Nuclear Power in China,” World Nuclear Program, Center for Strategic and Interna- Association, updated September 30, 2014, tional Studies, 2013. http://www.world-nuclear.org/info/coun- 35. Ibid. try-profiles/countries-a-f/china--nucle- 36. Glasgow, Teplinsky, and Markus, “Nuclear ar-power/. Export Controls.” 51. “South Korea Wants to Export Nuclear Reac- 37. McGoldrick, “Nuclear Trade Controls.” tors to Romania,” Aactmedia Romanian News 38. Ibid. Agency, January 15, 2014, http://actmedia. 39. Ibid. eu/daily/south-korea-wants-to-export-nu- 40. Glasgow, Teplinsky, and Markus, “Nuclear clear-reactors-to-romania/24971. Export Controls.” 52. “Nuclear Power in South Korea,” World Nu- 41. McGoldrick, “Nuclear Trade Controls.” clear Association, updated November 26, 42. As noted above, the United States has given 2014. consent to enrich uranium up to 20 percent 53. “Scandal Threatens South Korea Nuclear Ex- in its agreements with Argentina, Australia, port Ambitions,” Los Angeles Times, Novem- Brazil, Canada, Euratom, India, Japan, Nor- ber 7, 2012; “Nuclear Power in South Korea,” way, Russia, and Switzerland. World Nuclear Association, updated January 43. McGoldrick, “Nuclear Trade Controls.” 30, 2014. 44. Fred McGoldrick, “Limiting the Spread of 54. International Energy Agency, World Energy Enrichment and Reprocessing Technolo- Outlook. November 12, 2014. gy: Issues, Constraints and Options,” Belfer 55. Sonal Patel, “South Korea Ramps Up Nucle- Center for Science and Technology, Harvard ar Exports,” Power Magazine, November 1,

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 102 2013, http://www.powermag.com/south-ko- Deal; Moscow Most Important Defence Partner, rea-ramps-up-nuclear-exports/. Says Modi,” Indian Express, December 11, 2014. 56. “Nuclear Power in South Korea,” World Nu- 73. “China Joins Nations Eyeing India’s Civil Nu- clear Association, updated July 2014, http:// clear Sector, “Reuters, September 25, 2014. www.world-nuclear.org/info/Country-Pro- 74. “India, EU to Sign Civil Nuclear Pact by Next files/Countries-O-S/South-Korea/. Year, Times of India, November 16, 2014. 57. “New Nuclear Projects Expecting Approval 75. “Westinghouse and Nuclear Power Compa- by Year End in China,” Want China Times, ny of India Limited Sign Memorandum of November 11, 2014. Understanding for Early Works Agreement,” 58. David Stanway, “Nuclear Delays Pose Threat http://westinghousenuclear.mediaroom. to China’s Climate Goals,” Reuters, November com/index.php?s=43&item=326. 21, 2014. 76. “GE Hitachi Nuclear Energy, L&T to develop 59. “China’s Plan for Nuclear Growth,” Word Nu- nuclear power plant,” The Economic Times, clear News, November 20, 2014, May 19, 2009. 60. “China’s Plans for Nuclear Growth May Ex- 77. “South Korean Nuclear Export Drive,” World ceed Its Grasp,” Neutron Bytes, November 22, Nuclear News, August 29, 2009, http://www. 2014. world-nuclear-news.org/South_Korean_nu- 61. “Nuclear Power in China,” World Nuclear clear_export_drive_2808092.html. Association, updated September 30, 2014. 78. “India, South Korea Ink Nuclear Deal,” The 62. “Westinghouse AP 1000 Plants China,” Diplomat, August 1, 2011, http://thediplo- http://www.power-technology.com/projects/ mat.com/2011/08/india-south-korea-ink-n- westinghouseap100/. deal/. 63. “Westinghouse Says Deal Near for 26 New 79. “South Korea Keen on Setting Up Nuclear Reactors in China,” Nuclear Street, July 30, Power Plant in India,” Times of India, Janu- 2014. ary 12, 2014, http://timesofindia.indiatimes. 64. “Nuclear Power in China,” World Nuclear As- com/india/South-Korea-keen-on-setting- sociation, updated September 30, 2014. up-nuclear-power-plant-in-India/article- 65. K. Steiner-Dicks, “Westinghouse Signs Deals show/28708387.cms. with China’s SNPAS,” Nuclear Energy Insider, 80. J. Berkshire Miller, “South Korea, India September 12, 2014. Bolster Nuclear Ties,” The Diplomat, July 66. “Westinghouse Enlists Doosan for China,” 24, 2012, http://thediplomat.com/2012/07/ World Nuclear News, April 27, 2007. south-korea-india-bolster-nuke-ties/. 67. “China Produces First AP1000 Vessel,” 81. “Russia, India Reach Agreement on New World Nuclear News, June 11, 2014, http:// Reactors at Kudankulam,” Nuclear Street, world-nuclear-news.org/NN-China-produc- April 14, 2014, http://nuclearstreet.com/ es-first-AP1000-vessel-1106144.html. nuclear_power_industry_news/b/nucle- 68. “Doosan Delivers in China,” World Nuclear ar_power_news/archive/2014/04/14/rus- News, February 9, 2009. sia_2c00_-india-reach-agreement-on-new- 69. “South Korean Nuclear Power Indepen- reactors-at-kudankulam-041401.aspx#. dence,” World Nuclear News, May 28, 2008. U0wng_ldXUI. 70. “China Produces First AP1000 Vessel” World 82. Charu Sudan Kasturi, “Nuclear Liability Nuclear News, June 11, 2014. Law Signal before Take-Off for U.S.,” Tele- 71. “New Nuclear Projects Expecting Approval graph, September 25, 2014, http://www. by Year End in China,” Watch China Times, telegraphindia.com/1140926/jsp/nation/sto- November 14, 2014. ry_18874469.jsp#.VCbfZvldXEb. 72. Shubhajit Roy, “India, Russia Ink New Nuclear 83. Vaiju Naravane, “We Will Work within the

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 103 Framework of Nuclear Liability Act, Says 97. “Indonesia Considers Building Nuclear Power France,” The Hindu, July 18, 2013, http://www. Plant,” Nuclear Power Daily, November 14, 2014. thehindu.com/news/national/we-will-work- 98. “Russia Want to Develop Nuclear Power within-the-framework-of-nuclear-liability- Plant in RI,” Jakarta Post, November 27, 2014. act-says-france/article4925115.ecet. 99. “Indonesia to Build Mini Nuclear Power 84. “India and U.S. Form New Contract Group,” Plants,” Liputan, December 5, 2014. World Nuclear News, October 2, 2014. 100. “South Korea Offers Help to Jordan, Philip- 85. Tommy Wilkes and Sanjeev Miglani, “India pines,” World Nuclear News, December 2, 2008. looks to sway Americans with nuclear insur- 101. John Ruwich, “Analysis: Southeast Asia Goes ance plan,” Reuters, December 19 2014. Slow on Nuclear,” Reuters, February 2, 2012. 86. Anil Sasi, “Global Nuclear Venders’ Indian 102. “Nuclear Power in South Korea” World Nu- Plan Runs into Japanese Hurdle,” Financial clear Association, updated December 2014. Express, October 2, 2014, http://indianex- 103. “China Nuclear Power Submits Analysis: press.com/article/business/business-others/ Southeast Asia Goes Slow on Nuclear,” Re- global-nuclear-vendors-india-plans-runs-in- uters, February 2, 2012. “South Korea Bind- to-japanese-hurdle/. ing Offer for CNE Reactors,” Nuclear Power, 87. John Carlson, “Is the Abbott Government September 25, 2014, http://business-review. Abandoning Australia’s Nuclear Safeguards eu/featured/china-nuclear-power-sub- Standards for India?” The Interpreter, Octo- mits-binding-offer-for-cne-reactors-70872. ber 1, 2014; Indrani Bagchi, “India Confident 104. Andra Timu, “Romania Seeks Deal with Chi- of Sealing Australia N-Deal, but Wary of nese Company for New Reactors,” Bloomberg U.S.,” Times of India, September 6, 2014. News, July 4, 2014, http://www.bloomberg. 88. The definition of these terms may be found com/news/2014-07-04/romania-seeks-deal- in “Accountancy and Control of Nuclear Ma- with-chinese-company-for-new-reactors.html. terial in the United States” October 28, 2013, 105. Ibid. http://pbadupws.nrc.gov/docs/ML1330/ 106. “CGN of China Selected for Roma- ML13301A153.pdf. nia Nuclear Project,” Want China Times, 89. “American Officials Put Up Hurdles, Try to October 19, 2014, http://www.wantch- Scuttle India-U.S. Nuclear Deal,” Times of In- inatimes.com/news-subclass-cnt.aspx- dia, November 19, 2014. ?id=20141019000005&cid=1206. 90. “Vietnamese Delay Confirmed,” World Nu- 107. “Nuclear Power in Poland,” World Nuclear clear News, January 28, 2013. Association, updated January 2014, http:// 91. “Vietnam Upgrades Reactor Choice,” World www.world-nuclear.org/info/Country-Pro- Nuclear News, November 21, 2014. files/Countries-O-S/Poland/. 92. “South Korea, Vietnam to Cooperate Closely 108. “Chinese Show Interest in Building Czech on Nuclear Power Development,” Nuclear Ex- Nuclear Plant—Industry Minister,” Reuters, port Controls, September 9, 2013. October 14, 2014. 93. “KEPCO Actively Pushes Cooperation with 109. “No Decision on a New Tender Has Been Vietnam for Nuclear Power Plant Projects,” Made but Expansion Remains Possible,” Energy Korea, September 12, 2013. Prague Post, October, 2014. 94. “Lightbridge and Vietnam Sign Agreement 110. “China Seeks to Export Nuclear Power Tech- for Comprehensive Consulting Support on nology,” Want China Times, November 11, Nuclear Research Reactor Development,” 2014, http://www.wantchinatimes.com/news- Globe Newswire, October 16, 2014. subclass-cnt.aspx?id=20141103000039&cid= 95. Ibid. 1502. 96. Ibid. 111. Ladka Bauerova, “Czech Nuclear Plans At-

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 104 tract Five Companies, Minister Mladek says,” in Possible Nuclear Reactor Project,” Yonhap Bloomberg News, November 27, 2014. News Agency, October 31, 2014. 112. “Dutch Research Reactor Upgrade,” World 121. “Japan, Saudi Arabia to Expedite Reactor Nuclear News, November 4, 2014. Projects,” Japan Times, January 10, 2011. 113. “Jordan Government Confirms Agreement 122. “Nuclear Power in Saudi Arabia,” World Nu- with Rosatom for Country’s First Nuclear clear Association, updated December 2013, Plant,” Nuclear Power Industry News, August http://www.world-nuclear.org/info/Coun- 19, 2014, http://nuclearstreet.com/nucle- try-Profiles/Countries-O-S/Saudi-Arabia/. ar_power_industry_news/b/nuclear_power_ 123. “Saudi Arabia and China Sign Nuclear Pact,” news/archive/2014/08/19/jordan- Utilities ME, August 12, 2014, http://www. government-confirms-agreement-with- utilities-me.com/article-3038-saudi-arabia- rosatom-for-country_2700_s-first- and-china-sign-nuclear-pact/. nuclear-plant-081902.aspx#.VLfzSC7F86l. 124. Mahmoud al-Husseini, “South Korean PM 114. “KEPCO to Carry Out Nuclear Site Study in Arrives in Egypt for Three-Day Visit,”Turk - Jordan,” Nuclear Engineering International, ish Weekly, November 27, 2014. November 13, 2014. 125. “Emerging Nuclear Energy Countries,” 115. “Jordan Plans to Build Several Small Nu- World Nuclear Association, updated Sep- clear Reactors,” Xinhua, November 5, 2013, tember 2014, http://world-nuclear.org/info/ http://news.xinhuanet.com/english/busi- Country-Profiles/Others/Emerging-Nucle- ness/2013-11/06/c_132862076.htm. ar-Energy-Countries/. 116. Patel, “South Korea Ramps Up Nuclear Ex- 126. “Egypt Turns to Nuclear Power Despite ports”; “Jordan Awards Virginia Company Challenges,” Cairo Post, April 7, 2014, http:// $1.9 Million Contract to Oversee Licensing thecairopost.com/news/105474/news/ of New Research Reactor,” Nuclear Street egypt-turns-to-nuclear-power-despite-chal- News, February 11, 2014. lenges. 117. Jordanian Nuclear Energy Effort a ‘Strategic 127. James Sampson, “Saudi Arabia, UAE, Turkey Option’: Official,”Global Nuclear Newswire, and South Africa Announce $300 Billion of January 22, 2014. New Construction Projects at Annual Meet- 118. For a good discussion of the problems facing ing,” Nuclear Energy Insider, July 9, 2013. a Jordanian nuclear program, see Chen Kane, 128. “Egypt Considers Nuclear Power,” Al Monitor, “Are Jordan’s Nuclear Ambitions a Mirage?” December 28, 2013. http://www.al-monitor. Bulletin of Atomic Scientists, December 15, 2013, com/pulse/security/2013/12/egypt-nucle- http://thebulletin.org/are-jordans-nuclear- ar-energy-interview.html##ixzz2oqXBXQfV; ambitions-mirage; and “Jordan Government Joel Gulhane, “Egypt and South Korea Sign Confirms Agreement with Rosatom for Coun- Agreement on Nuclear Power Programme,” try’s First Nuclear Plant,” August 19, 2014, Daily News, May 10, 2013, http://www.da- http://nuclearstreet.com/nuclear_power_ ilynewsegypt.com/2013/05/10/egypt-and- industry_news/b/nuclear_power_news/ south-korea-sign-agreement-on-nuclear- archive/2014/08/19/jordan-government- power-programme/. confirms-agreement-with-rosatom-for- 129. KEPCO to build nuclear power plant in country_2700_s-first-nuclear-plant-081902. Egypt,” Business Korea, November 7, 2014. aspx#.VA2uTvldXEYge? 130. “Egyptian Nuclear Power Plant Project KEP- 119. “Saudi Arabia Fast-Tracks Nuclear Pow- CO to Build Nuclear Power Plant in Egypt,” er,” Forbes, September 8, 2014, http://www. Business Korea, November 7, 2014. forbes.com/sites/jamesconca/2014/09/08/ 131. “Saudi Arabia, UAE, Turkey and South Africa saudi-arabia-fast-tracks-nuclear-power/. Announce $300 Billion of New Construction 120. “Saudi Arabia to Invite S. Korea to Take Part Projects at Annual Meeting,” Nuclear Energy

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 105 Insider, July 12, 2013; “Japan Signs Turkey 142. “French Auditors Slam Areva for Olkiluoto Deal,” BBC News, May 2, 2013. Nuclear Project in Finland,” July 17, 2014, 132. “Westinghouse Inks Multiparty Agree- http://yle.fi/uutiset/french_auditors_slam_ ment to Develop Nuclear Power in Turkey,” areva_for_olkiluoto_nuclear_project_in_ news release, Westinghouse, November finland/7358244. 24, 2014, http://westinghousenuclear.com/ 143. See “Areva Names Number Two Knoche as About/News/View/ArticleId/502/Westing- Interim CEO,” Nuclear Power Daily, Octo- house-Inks-Multi-party-Agreement-to-De- ber 22, 2014, http://www.nuclearpowerdaily. velop-Nuclear-Power-in-Turkey. com/reports/Areva_names_number_two_ 133. “Nuclear Power in Turkey,” World Nuclear Knoche_as_interim_CEO_999.html; and Association, updated April 2014, http://www. “Areva Warns Cash-Flow Target Depends on world-nuclear.org/info/Country-Profiles/ Customer Payments,” Reuters, October 31, Countries-T-Z/Turkey/; James Sampson, 2014. “Saudi Arabia, UAE, Turkey and South Africa 144. David Jolly, “French Nuclear Giant Areva Announce $300 Billion of New Construction Says Future Is Uncertain, Prompting a Sell- Projects at Annual Meeting,” Nuclear Energy Off, New York Times, November 19, 2014. Insider, July 9, 2013, http://analysis.nucle- 145. “Japan PM Promotes Nuclear Exports at arenergyinsider.com/new-build/saudi-ara- Central Europe Summit,” EU Business, June bia-uae-turkey-and-south-africa-announce- 16, 2013, http://www.eubusiness.com/news- 300-billion-new-construction-projects--0. eu/japan-ceurope.p6w. 134. “Nuclear Power in South Africa,” World Nu- 146. “U-APWR Passes EUR Assessment,” World clear Association, updated December 2014. Nuclear News, October 22, 2014. The Eu- 135. Paul Burkhardt, “South Africa to Sign More ropean Utility Requirements organization Pacts Before Nuclear Partner Bids,” Business- was launched in December 1991 by several week, October 2, 2014; “South Africa Says No European utilities to produce a common set Russian Nuclear Deal Yet,” AFP, September of utility requirements endorsed by major 23, 2014. European utilities for the next generation of 136. “South Africa And France To Sign Agree- light water reactor nuclear power plants. ment On Development Of Nuclear,” NucNet, 147. “Nuclear Power in China,” World Nuclear October 10, 3014. Association, updated July 18, 2014, http:// 137. “Nuclear Power in South Africa,” World Nucle- www.world-nuclear.org/info/Country-Pro- ar Association, updated September 25, 2014, files/Countries-A-F/China--Nuclear-Power/. http://www.world-nuclear.org/info/country- 148. “China Seeks to Export Nuclear Power Tech- profiles/countries-o-s/south-africa/. nology.” Want China Times, November 11, 138. “China, South Africa Sign Nuclear Power Ac- 2014. cord,” Nuclear Street, November 7, 2014. 149. “China Considers Merger of Its Two Largest 139. “China and South Africa Sign Nuclear Ac- Nuclear Power Companies,” Nuclear Street cords,” World Nuclear News, December 5, News, December 5, 2014. 2014. 150. World Nuclear Association, 2012, cited 140. “Nuclear Power in South Africa,” World Nucle- by Daniel S. Lipman, “What’s Next for the ar Association, updated September 25, 2014. U.S.-Korean Alliance,” Testimony before the 141. “Government Concludes Nuclear Workshop,” House Committee on Foreign Affairs. Sub- eNews Channel Africa, November 26, 2014, committee on Asia and the Pacific, June 6, http://www.enca.com/south-africa/govern- 2012. ment-concludes-nuclear-workshop. 151. Lipman, “What’s Next.”

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 106 152. Ibid.; Mark Holt, “U.S. and South Korean Co- Magazine, October 30, 2014. See also “South operation in the World Nuclear Energy Mar- Korea Plans Advanced Reactor to Burn Spent ket: Major Policy Considerations,” Congres- Nuclear Fuel,” Forbes, October 29, 2014, sional Research Service, June 23, 2013. http://www.forbes.com/sites/jeffmcma- 153. Holt, “U.S. and South Korean Cooperation.” hon/2014/10/29/south-korea-advances-reac- 154. Lipman, “What’s Next.” tor-to-burn-spent-nuclear-fuel/. 155. Ibid. 165. Several other U.S. companies are also in- 156. “Westinghouse Enlists Doosan for China,” volved in the design of SMRs, with develop- World Nuclear News, April 27, 2007. ment at various stages of advancement. E.g., 157. “Nuclear Power in China,” World Nuclear Holtec International, which is developing a Association, updated July 18, 2014. 160-megawatt reactor, is continuing to com- 158. Holt, “U.S. and South Korean Cooperation.” mercialize its SMR-160 reactor, which is a 159. “Cooperation Deal to Develop Advanced pressurized water reactor with passive cool- Reactor,” World Nuclear Association, http:// ing, even though it did not obtain DOE’s fi- www.world-nuclear-news.org/NN-Co- nancial support. operation-deal-to-develop-advanced-re- 166. U.S. utilities will find it difficult to justify the actor-2708141.html; “Argonne KAERI to investment of large amounts of capital in SMRs Develop Prototype Nuclear Reactor,” ECN, that might not pay back for a decade or longer; August 25, 2014, http://www.ecnmag.com/ reducing the size of the reactor means a loss of news/2014/08/argonne-kaeri-develop-proto- economies of scale and having more units in- type-nuclear-reactor. creases the chance that a safety problem could 160. Ted Jones, “U.S. Nuclear Technology and Afri- emerge at one of them: the power output of ca,” Nuclear Energy Institute, August 8, 2014, some SMRs is so low per unit that 10s of them http://neinuclearnotes.blogspot.com/2014/ would be needed to make the equivalent pow- 08/us-nuclear-technology-exports-and-afri- er output of one advanced light water reactors; ca.html. the efficiency of SMRs in converting thermal 161. Matthew Miller, “China Seen Buying West- energy into electrical output tends to be lower inghouse Reactors for $24 Billion Nuclear than current light water reactors; and the reg- Energy Projects,” Reuters, April 21, 2014, ulatory structure is not favorable for small re- http://www.reuters.com/article/2014/04/21/ actors. NRC regulations for control-room staff china-nuclear-idUSL3N0ND1GS20140421. levels, emergency planning zones and security 162. “Toshiba and Westinghouse Take Next Steps are all predicated on large, above-ground re- Toward Building Three AP1000 Nuclear Re- actors and may have to be modified to address actors in U.K., with NuGenToshiba to Take the specific characteristics of small reactors. 60 Percent Share in NuGen in Moorside 167. Jason Ruiter, “Babcock & Wilcox Announces Project in the UK,” press releases, http:// Layoffs, May Shut Down,” (Lynchburg) News www.toshiba.co.jp//about/press/2014_01/ & Advance, April 18, 2014, http://www.roa- pr1501.htm; “Westinghouse Takes Next noke.com/business/news/bedford_county/ Steps To Build Three AP1000(R) Nucle- babcock-wilcox-announces-layoffs-may- ar Reactors In UK With NuGen,” PRWEB, shut-down/article_617f34b6-c705-11e3- January 14, 2014, http://www.prweb.com/ 9acc-0017a43b2370.html. releases/2014-01-14Westinghouse/NuGen/ 168. “TVA to Move Ahead with Plans for Small prweb11488193.htm. Nuclear Reactor at Oak Ridge Site,” Knoxville 163. “Westinghouse Takes Next Steps.” News Sentinel, December 5, 2014. 164. Gail Reichenbach, “William Magwood IV on 169. Ted Jones, “U.S. Nuclear Technology and Nuclear Power’s Present and Future,” Power Africa,” Nuclear Energy Institute, August

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 107 8, 2014, http://neinuclearnotes.blogspot. dards; see http://neinuclearnotes.blogspot. com/2014/08/us-nuclear-technology-ex- com/2006/04/n-stamp-of-approval.html. ports-and-africa.html. 178. David Kinkaid, “Civil Nuclear Trade Initia- 170. Jones, “U.S. Nuclear Technology.” tive, Strengthening the Competitiveness of 171. “Message from the Plant Manager,” Honey- the U.S. Civil Nuclear Industry,” U.S. Depart- well, Metropolis (Ill.) Works, http://www. ment of Commerce, December 2011. honeywell-metropolisworks.com/message- 179. Jones, “U.S. Nuclear Technology.” from-the-plant-manager/. 180. Per F. Peterson, Michael R. Laufer, and Ed- 172. “Uranium Enrichment,” World Nuclear As- ward D. Blandford, “Why Nuclear Power sociation, updated October 2014. Stalled—and How to Restart It,” Foreign Af- 173. According to the latest IAEA data, “total fairs, May–June 2014. global enrichment capacity is currently about 181. “Department of Energy Issues Final $12.5 Bil- 65 million separative work units (SWUs) per lion Advanced Nuclear Energy Loan Guarantee year, compared to a total demand of approx- Solicitation,” http://energy.gov/articles/depart- imately 45 million SWUs/year.” IAEA, Nucle- ment-energy-issues-final-125-billion-ad- ar Technology Review 2013 (Vienna: IAEA, vanced-nuclear-energy-loan-guarantee. 2013), http://www.iaea.org/About/Policy/ 182. The nuclear industry has two major con- GC/GC57/GC57InfDocuments/English/ cerns. One is an EPA policy designed as an gc57inf-2_en.pdf. incentive for states to keep operating reactors 174. In mid-2007, Areva announced that it pro- “at risk” of shutting down because of market posed to build a 3.3 million-SWU/year, $2 pressure or expensive safety upgrades. The billion centrifuge plant in the United States industry maintains that the incentive is not to supply domestic enrichment services. enough and will not work as intended. The However, in December 2011, the company second issue concerns five nuclear reactors announced that it was putting the project on that are under construction. When it wrote hold for about two years as it seeks an addi- its emissions proposal, the EPA counted tional investor, and in May 2013 the project- these projects—in Georgia, South Carolina, ed timeline became indefinite. and Tennessee—as completed. The states say 175. Meeyoung Cho, “KEPCO/Urenco in talks this makes their emission targets difficult for stake in U.S. uranium plant,” Reuters, No- because they are not allowed to count these vember 21, 2012. cleaner plants’ lower emissions toward their 176. This contract is for supply of low-enriched mandated cuts. See Zack Coleman, “Emis- uranium from 2013 to 2022, ramping up to sion-Free Nuclear Industry Blasts EPA Plan,” about half of earlier levels from Russia, with Washington Examiner, October 6, 2014, an option to match those levels. The 2011 http://www.washingtonexaminer.com/emis- contract covers the supply of 21 million SWU sion-free-nuclear-industry-blasts-epa-plan/ to USEC, worth $2.8 billion. The new supplies article/2554318. will come from mined uranium enriched in 183. Jim Hopf, “Strong Industry Response to EPA Russia, rather than recycled weapons, as was Clean Power Plan,” ANS Nuclear Café, De- the case with the USEC HEU purchase agree- cember 17, 2014. ment with Russia that expired in 2013. 184. “The U.S. Domestic Civil Nuclear Infrastruc- 177. A company with an “N” stamp means it ture and Nonproliferation,” White Paper pre- has received nuclear accreditation from the sented by American Council on Global Nu- American Society of Mechanical Engineers clear Competitiveness, May 2007. and that has produced nuclear-grade compo- 185. U.S. Department of Commerce, 2010 En- nents in accordance with the society’s Boiler ergy Industry Assessment (Washington: U.S. and Pressure Vessel Nuclear Codes and stan- Government Printing Office, 2010).

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 108 186. David Banks, “The Decline of America’s Civil ian_003233.asp. Nuclear Industry and Its Impact on Our Nation- 195. Government Accountability Office, “Gov- al Security,” Heartland News, February 9, 2013, ernment-wide Strategy Could Help Increase http://news.heartland.org/editorial/2013/02/09/ Commercial Benefits from U.S. Nuclear Co- decline-americas-civil-nuclear-indus- operation Agreements with Other Coun- try-and-its-impact-our-national-security. tries,” November 2010. 187. “U.S. Domestic Civil Nuclear Infrastructure 196. Ibid. and Nonproliferation,” White Paper present- 197. “S. Korea Announces Four More Nuclear ed by American Council on Global Nuclear Reactors to Be Built,” Reuters, November 21, Competitiveness, May 2007. 2014. 188. Third Way, “A Strategy for the Future of Nu- 198. On June 25, 2014, the South Korean govern- clear Energy: The Consolidated Working ment announced that the KAERI consortium Group Report,” June 2012. won a bid as a partner to upgrade Delft Uni- 189. OPIC works with the U.S. private sector versity of Technology experimental reactor, and helps U.S. businesses gain footholds in known as the OYSTER Project. The consor- emerging markets, catalyzing revenues, jobs, tium consists of KAERI, Hyundai Construc- and growth opportunities both at home and tion, and Hyundai Engineering. This was abroad. OPIC achieves its mission by provid- significant because the ROK had been able to ing investors with financing, guarantees, po- enter the European market. litical risk insurance, and support for private 199. Chen Kane and Miles Pomper, “Reactor equity investment funds. Race: South Korea’s Nuclear Export Success- 190. E.g., Ex-Im recently authorized a $2 billion es and Challenges,” Academic Paper Series, direct loan to Barakah One Co. of UAE to Korea Economic Institute of America, May purchase U.S. equipment and construction 21, 2012. services to help build a nuclear power plant 200. The UAE and South Korea signed three nu- in the UAE. clear energy memoranda of understanding 191. Marvin Fertel, “Testimony before the House (MoU) in May 2014. The first—between Committee on Financial Services,” June 25, the Emirates Nuclear Energy Corporation 2014, http://www.nei.org/CorporateSite/ (ENEC) and the South Korean Ministry of media/filefolder/Policy/Trade/Testimony- Trade, Industry, and Energy—calls for coop- HFSCExIm.pdf?ext=.pdf. eration in developing a direct employment 192. Caroline Reda, “Why the Export-Import program in nuclear energy for graduates Bank?” Star News Media, August 14, 2014, from Korea. The second MoU will help de- http://www.starnewsonline.com/arti- velop internship programs and job opportu- cle/20140814/ARTICLES/140819854. nities in the sector for students of both na- 193. This committee is an interagency committee tions. Finally, the third agreement—between chaired by the secretary of commerce. It was ENEC, KEPCO, and its subsidiaries—will see established under the Export Enhancement the development of a local plant services in- Act of 1992 to provide a unifying framework dustry in the UAE. See Aarti Nagraj, “UAE to coordinate the export promotion and ex- Receives First Nuclear Energy Reactor Ves- port financing activities of the U.S. govern- s e l ,” Gulf Business, May 21, 2014, http://gulf- ment and to develop a government-wide business.com/2014/05/uae-receives-first-nu- strategic plan for carrying out such programs. clear-energy-reactor-vessel/? 194. This information is from CINTAC; see “Civil 201. According to a report by the IAEA, Interna- Nuclear Trade Advisory Committee (CIN- tional Status and Prospects of Nuclear Power TAC),” http://trade.gov/mas/ian/nuclear/tg_ (Vienna: IAEA, 2008), India, China, and the

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 109 ROK are expected to witness a rapid increase nuclearcafe.org/. in nuclear equipment manufacturing capa- 213. “South Korean Nuclear Firms Caught Us- bilities and emerge as significant contributors ing Fake Safety Certificates,” Nuclear Securi- to global nuclear construction. According to ty Newswire, June 26, 2014; Meeyoung Cho, the report, the industrial capacity of suppli- “South Korea to Widen Safety Probe on Cer- ers in the nuclear sector has decreased in the tificates for Nuclear Reactor Parts,” Reuters, last 20 years, leading to fewer reactor designs, February 7, 2014. skilled employees, and project management 214. Davis, “South Korea Nuclear Power.” organizations from which to choose. Cur- 215. “S. Korea to Boost Safety Measures for Nucle- rently, nuclear system suppliers are based in ar Reactors,” Yonhap News Agency, February, the United States, Russia, the ROK, Japan, 2, 2014. India, France, China, and Canada. The local- 216. “Maintaining U.S. Leadership in Global Nu- ization of skills and capabilities in China, In- clear Energy Markets: A Report of the Bipar- dia, and the ROK is expected to enhance the tisan Policy Center’s Nuclear Initiative,” Sep- nuclear capabilities of these countries. tember 2012. 202. Lee Jae-sung, “Korea Seeking to Lead World 217. “KEPCO to support US licensing of Nuclear Market,” Korea Times, August 19, 2008. APR1400,” Nuclear Engineering Internation- 203. “South Korean Nuclear Power Indepen- al, September 16, 2014. dence,” World Nuclear News, May 28, 2008. 218. Ibid. 204. Brian Wheeler, “Market Focus: India, 219. Kane and Pomper, “Reactor Race.” Japan and South Korea,” Power Engi- 220. Lipman, “What’s Next.” neering, March 11,2011 221. The agreements with Norway (July 2014) and 205. “POSCO Roles Out Steel for Nuclear Reac- Thailand (July 2014) have already expired. tors,” Korea Times, September 29, 2014. The United States has begun discussions on a 206. “India, South Korea Ink Nuclear Deal.” new agreement with Norway. 207. “South Korea to Bolster Support for Exports 222. In 1992, when the NSG adopted the guide- of Nuclear Plants,” Korean Herald, March line that called for comprehensive safe- 9, 2011, http://www.koreaherald.com/view. guards for nuclear exports to non–nuclear php?ud=20110309000846. weapon states, it applied only to subsequent 208. Will Davis, “South Korea Nuclear Power: Are nuclear cooperation and did not cover sup- the Dark Times Over?” February 24, 2014, ply commitments that existed at the time; ANS Nuclear Blog, http://ansnuclearcafe.org/. this provision is known as the “grandfather 209. “KEPCO Nuclear Fuel Exports SMR Tech- clause.” In a formal “declaration of exist- nology to the U.S.,” Energy Korea, Janu- ing projects” made at the time it joined ary 13, 2013, http://energy.korea.com/ar- the NSG in 2004, Beijing informed the chives/42162?cat=25. NSG of its 1991 cooperation agreement 210. Ibid. with Pakistan, under which it had sup- 211. “Nuclear Power in South Korea,” World Nu- plied a 300-megawatt reactor at Chashma clear Association, updated July 2014, http:// and had just undertaken to supply an ad- www.world-nuclear.org/info/Country-Pro- ditional 325-megawatt reactor at the same files/Countries-O-S/South-Korea/. location. The Chinese claimed that the 212. “Domestic Scandals Knock South Korea’s supply of these reactors did not constitute Nuclear Energy Exports, Global Insider, Jan- a “new” supply commitment and therefore uary 27, 2014; Davis, “South Korea Nuclear was grandfathered under the NSG com- Power :: Are the Dark Times Over?” ANS prehensive safeguards guideline. This was Nuclear Blog, February 24, 2014, http://ans- a dubious claim at the time because the

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 110 1991 Chinese-Pakistani pact was a general Pakistan,” BBC, November 6, 2013; “Saudi framework agreement and reportedly did Nuclear Weapons ‘on Order’ from Pakistan,” not contain an actual commitment to sup- UPI, November 7, 2013; “Saudi Arabia Con- ply reactors at Chashma. In any event, Bei- siders Nuclear Weapons after Iran’s Geneva jing’s 2004 explanations to the NSG did not Deal,” Time, November 16, 2013. mention grandfathering any more reactors 232. “U.S.-Saudi Arabia Memorandum of Under- under the 1991 agreement. Since then Chi- standing on Nuclear Energy Cooperation,” na has supplied additional nuclear plants U.S. Department of State, Office of the Spokes- at the Chashma site that are not be cov- man Media Note, May 26, 2008. ered by the 1991 agreement, are not being 233. Sigurd Neubauer, “Saudi Arabia’s Nuclear grandfathered under the NSG guidelines, Envy: Washington Should Help Riyadh Keep and clearly violate the commitments China Up with Tehran,” Foreign Affairs, November made when joining the NSG in 2004. 16, 2014. 223. Matthew Miller, “China Seen Buying West- 234. “Saudis May Go Nuclear Because of Obama’s inghouse Reactors for $24 Billion Nuclear Iran Deal,” Daily Beast, February 14, 2014, Energy Projects,” Reuters, April 21, 2014, http://www.thedailybeast.com/articles/2014/ http://in.reuters.com/article/2014/04/21/chi- 02/14/saudi-arabia-may-go-nuclear-be- na-nuclear-idINL3N0ND1GS20140421. cause-of-obama-s-iran-deal.html. 224. “Jordanian Nuclear-Energy Effort a ‘Strategic 235. The United States would undoubtedly preserve Option’: Official,” Global Security Newswire, its consent rights over the further disposition http://www.nti.org/gsn/article/jordanian- of the recovered plutonium and uranium. nuclear-energy-effort-strategic-option-offi- 236. “Saudis May Go Nuclear.” Also see Bipartisan cial/. Policy Center, “Maintaining U.S. Leadership 225. “South Korean Consortium Signs Jordan Re- in Global Nuclear Markets,” September 2012; search Reactor Deal,” NucNet, April 6, 2010. “U.S. Domestic Civil Nuclear Infrastructure”; 226. “Saudi Weapons ‘on order from Pakistan,” “Restoring U.S. Leadership in Global Nucle- BBC News, November 6, 2013. ar Energy: A National Security Imperative,” 227. “Prince Hints Saudi Arabia May Join Nucle- Center for Strategic and International Stud- ar Arms Race,” Associated Press, December 6, ies, June 2013, http://csis.org/publication/re- 2011. storing-us-leadership-nuclear-energy. 228. “Saudi Arabia Wants Uranium-Enrichment 237. CINTAC made a number of recommendations Capacity,” Global Security Newswire, Feb- to the secretary of commerce; see “Civil Nu- ruary 14, 2014, http://www.nti.org/gsn/ar- clear Trade Advisory Committee (CINTAC),” ticle/saudi-arabia-reportedly-wants-devel- http://trade.gov/mas/ian/nuclear/tg_ian_ op-full-nuclear-fuel-cycle/. 003233.asp. 229. “Empower Syria’s Rebels to Defeat ISIL: 238. Quoted by Rose Gottemoeller, then acting Former Spymaster,” The National, October undersecretary for arms control and interna- 28, 2014, http://www.thenational.ae/world/ tional security, who outlined many of these americas/empower-syrias-rebels-to-de- steps in a speech titled “Geopolitics and Nu- feat-isil-former-spymaster. clear Energy: The View from the State De- 230. “Saudi Prince Says Gulf States Must Balance partment,” given to the Nuclear Energy In- Threat from Iran,” Reuters, April 23, 2014, stitute, May 15, 2013, http://www.state.gov/t/ http://www.reuters.com/article/2014/04/23/ us/209768.htm. us-saudi-security-idUSBREA3M- 239. Ibid. 1BJ20140423. 240. Ibid. 231. “Saudi Nuclear Weapons ‘on Order’ from 241. Statement by Peter Lyons, assistant secretary

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 111 for nuclear energy, U.S. Department Ener- curity Council Resolution 1540, which calls gy, before the Subcommittee on Energy and on states to put in place “appropriate effec- Water Development and Related Agencies, tive measures to account for and secure” Committee on Appropriations, U.S. House of WMD-related items in production, use, stor- Representatives, March 14, 2013. age, or transport and to “maintain appropri- 242. http://www.energy.gov/ne/nuclear-reac- ate effective physical protection measures” of tor-technologies. said items. Although the resolution is aimed 243. DOE, “Bilateral Cooperation,” http://energy. primarily at nonstate actors, it obliges states gov/ne/nuclear-reactor-technologies/inter- to put in place export controls. It also calls national-nuclear-energy-policy-and-cooper- upon “all States to . . . develop appropriate ation/bilateral. ways to work with and inform industry and 244. Scott Snyder, “U.S.–South Korean Nuclear the public regarding their obligations under Relationship: After Fukushima,” The Asia such laws.” Foundation, March 11, 2011, http://asiafoun- 251. A good illustration of the problem is the case dation.org/in-asia/2011/03/30/u-s-south-ko- of a firm in Malaysia that participated in rean-nuclear-relationship-after-fukushima/. the Khan network by making thousands of 245. David Albright, Andrea Stricker, and Hous- high-precision aluminum centrifuge parts, ton Wood, “Future World of Illicit Nuclear including the casings and molecular pumps Trade,” Institute of Science and International that were being shipped to Libya when they Security, July 28, 2013. were found on the ship MV BBC China in 246. IAEA, Report of the Commission of Eminent October 2003. When the Government of Ma- Persons on the Future of the Agency (Vienna: laysia released a public report of its police in- IAEA, 2008), 20, http://www.iaea.org/About/ vestigation into the company’s activities and Policy/GC/GC52/GC52InfDocuments/En- the Khan network, it concluded that the NPT glish/gc52inf-4_en.pdf. does not control centrifuge components be- 247. “Roadmap to Responsible Export Controls: cause they are not listed in the NPT. As one Learning from the Past,” Institute for Science observer has pointed out, “No participant and International Security, 2003. Leybold, in the Zangger Committee could plausibly now known as Oerlikon Leybold Vacuum, argue that centrifuge components do not developed its extraordinarily rigorous system constitute ‘especially prepared or designed after several problems with its exports during equipment,’ as stated in article III, paragraph the 1980s and early 1990s. This system has 2, of the NPT.” See Jacob Blackford, “Multi- served as a model for many companies, in- lateral Nuclear Export Controls after the A. cluding Leybold’s own divestments. Q. Khan Network,” Institute for Science and 248. Ibid. International Security, January 13, 2005, up- 249. Gretchen Hund and Amy Seward, “Indus- dated August 2, 2005. try Governance: Self Regulation to Address 252. See UN press release DC5436, May 6, 2014. Nonproliferation and Nuclear Security,” 253. For a current assessment of the implementa- Pacific Northwest Laboratory, http://www. tion of UNSC Resolution 1540, see Igor Khri- inmm.org/ScriptContent/PNNL/2010/Ses- punov, “A Work in Progress: UN Security sion%201%20-%20New%20Directions%20 Resolution 1540 after 10 Years,”Arms Control in%20Nonproliferation/Industry%20Gover- Today, May 2014, http://www.armscontrol. nance%20-%20Self%20Regulation%20-%20 org/print/6250. %20G.%20Hund%20(PNNL)/Hund%20 254. “Nuclear Power in South Korea,” World Nu- Paper%20INMM%203-16-10.pdf. clear Association, updated September 2014; 250. Such collaboration is called for in UN Se- “Korea Institute for Nuclear Nonproliferation

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 112 and Control,” http://www.kinac.re.kr:8181/ cations to the protocol’s standard text that re- eng_images/activ/kinac_en.pdf; Korea Insti- quire states to provide the IAEA with “initial tute for Nuclear Nonproliferation and Con- reports” of all relevant nuclear material and trol, “2013 Strategic Implementation Report.” to allow the agency to verify those reports. It 255. Whether to ask such countries to join the also allows the IAEA to monitor nuclear fa- Zangger Committee or the NSG or simply cilities in all NPT states regardless of wheth- adhere to their guidelines depends on many er the facilities contain nuclear material. The factors. Enlarging the membership of the IAEA previously could not require states multilateral regimes, particularly the NSG, with a protocol either to provide early design will only make it more difficult for them to information about planned nuclear facilities function efficiently and effectively. Adding or allow the agency to determine the status new states with divergent interests may make of such facilities. States with either planned it more difficult to maintain effective nuclear or existing nuclear facilities that have not yet export standards or to upgrade those stan- concluded a protocol will henceforth not be dards when circumstances dictate. Converse- permitted to do so. Similarly, states with a ly, excluding any state that has the potential to small quantities protocol that have planned cause damage to the nonproliferation regime or existing facilities will be called on to re- may mean that such a state will not adhere to scind their agreements. The September 2005 responsible export policies. Such states have IAEA General Conference adopted a resolu- little incentive to adhere to the guidelines if tion encouraging states with such protocols they are not permitted to participate in the to comply with the new modifications “as decisions of the groups. See Jacob Blackford, soon as possible.” “Multilateral Nuclear Export Controls after 258. Ollie Heinonen and Simon Henderson, the A. Q. Khan Network,” Institute for Sci- “The Nuclear Kingdom Saudi Arabia’s Nu- ence and International Security, January 13, clear Ambitions,” Belfer Center for Science 2005 (updated August 2, 2005); and Harald and International Affairs, March 27, 2014, Müller, “The Future of Export Controls in http://belfercenter.ksg.harvard.edu/publica- International Nuclear Non-Proliferation,” tion/24061/nuclear_kingdom.html. paper presented at International Seminar 259. April Yee, “UAE Weighs Options for Nuclear on the Role of Export Controls in Nuclear Waste Disposal,” The National, May 30, 2011. Non-Proliferation, October 1997. 260. Yukiya Amano, “Statement to Fifty-Eight 256. McGoldrick, “Nuclear Trade Controls.” Regular Session of IAEA General Conference 257. Until 2005, a non–nuclear weapon NPT party 2014,” September 22, 2014, Vienna, http:// could conclude a so-called a Small Quantities www.iaea.org/newscenter/statements/state- Protocol, in which certain IAEA verification ment-fifty-eighth-regular-session-iaea-gen- requirements were suspended as long as the eral-conference-2014. state did not possess more than 1 kilogram 261. The United States has included the AP as a of “special fissionable material.” In addition, condition of supply in its agreements with such a state could not have any such mate- the Russian Federation (2010), India (2008), rial in a nuclear “facility,” such as a reactor, and the UAE (2009). Other agreements that a nuclear fuel production plant, or any other entered into force after 1997—Argentina “location where nuclear material in amounts (1997), Australia (2010), Bangladesh (2000), greater than 1 effective kilogram is customar- Brazil (1999), Kazakhstan (1999), Morocco ily used.” These states were also not obligated (2002), Turkey (2008), and Ukraine (1999)— to disclose their nuclear material inventory to do not contain a provision on the AP. Most the IAEA. In 2005, the board adopted modifi- cooperating U.S. partners have the AP to

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 113 their safeguards agreement with the IAEA in stitute, 2007), http://books.sipri.org/files/RR/ effect. The exceptions are Argentina, Brazil, SIPRIRR22.pdf. and Egypt, which have neither signed nor 266. Anthony, Ahlström, and Fedchenko, “Re- ratified the AP. forming Nuclear Export Controls.” These 262. Mark Hibbs, “Nuclear Suppliers Group denials include decisions not to act on an ex- and the IAEA Additional Protocol,” Nucle- port application, rather than an official denial ar Energy Brief, Carnegie Endowment for of the application. International Peace, 2010, http://carneg- 267. IAEA, Report of the Commission. ieendowment.org/publications/index.cfm?- 268. Ibid., annex, 22. fa=view&id=41393. 269. Lawrence Scheinman, “The Intersection be- 263. The guidelines provide that pending the entry tween Nuclear Export Control UN Security into force of an AP, suppliers may authorize Council Resolution 1540 and International transfers only when the recipient “is imple- Safeguards: Opportunities to Strengthen the menting appropriate safeguards agreements Nonproliferation Regime,” paper initially in cooperation with the IAEA, including a prepared for the Institute for Nuclear Materi- regional accounting and control arrange- als Management Conference, July 2006. ment for nuclear materials, as approved by 270. “Strengthening the Effectiveness and Im- the IAEA Board of Governors.” This loophole proving the Efficiency of Agency of Agency covers Argentina and Brazil by virtue of the Safeguards, Report by the Director General,” Brazilian-Argentine Agency for Accounting GC (58)/16, IAEA, August 15, 2014. and Control of Nuclear Materials (ABACC) 271. Meeyoung Cho, “South Korea Suggests which is responsible for the application of Northeast Asia Nuclear Safety Group,” Re- the Agreement for Exclusively Peaceful Uses uters, August 15, 2014, http://www.reuters. of Atomic Energy, signed by Brazil and Ar- com/article/2014/08/15/us-nuclear-safe- gentina, and to coordinate Argentina-Bra- ty-southkorea-idUSKBN0GF0A920140815. zil-IAEA-ABACC Quadripartite Agreement. 272. “Foreign Ministry to Host a Symposium However, the authorities of the ABACC and on Nuclear Safety in Northeast Asia (2nd that safeguards agreement are by no means TRM+),” Press Release, ROK Ministry of equivalent to the authorities of the IAEA un- Foreign Affairs, November 25, 2014, http:// der the AP, which is precisely the reason Ar- www.mofat.go.kr/ENG/press/pressreleases/ gentina and Brazil object to the AP—it would index.jsp?menu=m_10_20&sp=/webmod- give more authority to the IAEA than to their ule/htsboard/template/read/engreadboard. own inspectors. jsp%3FtypeID=12%26boardid=302%26seq- 264. Hans Blix, “Keynote Speech,” session 1 of In- no=314570. ternational Seminar on the Role of Export 273. “Liability for Nuclear Damage,” World Nucle- Controls in the Nuclear Non-Proliferation ar Association, updated September 2014. Regime, 1997. 274. Ibid. 265. International Institute for Strategic Stud- 275. The convention applies only to international ies, “Nuclear Black Markets: Pakistan, A. transportation. The 2005 amendment is an Q. Khan and the Rise of Proliferation Net- important one because it extends the conven- works,” May 2007; Ian Anthony, Christer tion’s provisions to domestic activities. Ahlström, and Vitaly Fedchenko, Reforming 276. The nuclear security fundamentals speci- Nuclear Export Controls: The Future of the fy the objective of a state’s nuclear security Nuclear Suppliers Group, SIPRI Research Re- regime and the essential elements of such a port 22 (Oxford: Oxford University Press for regime and provide the basis for the IAEA’s Stockholm International Peace Research In- Nuclear Security Recommendations that

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 114 set out measures that states should take to 282. The IAEA’s Code of Conduct on the Safety achieve and maintain an effective national and Security of Radioactive Sources is a nonnuclear security regime consistent with the binding international legal instrument that fundamentals. provides guidance for ensuring the control of 277. The secretary of energy, Ernest Moniz, an- radioactive sources and for mitigating/mini- nounced that the United States has recently mizing any consequences if control measures hosted an IPPAS mission at the National In- fail. Also legally nonbinding, the supplemen- stitute of Standards and Technology’s Center tary guidance on the import and export of for Neutron Research—a Category 1 site in radioactive sources was developed in 2004 to the United States. At the request of the Gov- support states’ implementation of the code. ernment of the ROK, the IAEA conducted a According the IAEA’s Nuclear Security Report two-week IPPAS mission that reviewed the 2014, as of June 30, 2014, 122 states had in- nation’s nuclear security-related legislative formed the IAEA’s director general of their and regulatory framework for nuclear and intention to implement the Code of Conduct, other radioactive material and associated fa- and 89 states of their intention to implement cilities, as well as security arrangements ap- the supplementary guidance. plied to the transportation of nuclear mate- 283. These are designed to assist member states in rial and radioactive sources, and to computer applying a structured and holistic approach systems. In addition, the team reviewed phys- to nuclear security capacity building as well ical protection systems at the Hanbit Nuclear as for enabling increased coordination be- Power Plant, operated by KHNP, and at the tween the IAEA, the state concerned, and po- High-Flux Advanced Neutron Application tential donors. Reactor, operated by KAERI. 284. They have been adopted by nine companies, 278. IAEA, Nuclear Security Report 2014 (Vienna: based in Canada, France, Japan, Russia, South IAEA, 2014). Korea, and the United States. AREVA, AT- 279. “U.S., China Sign Agreement to Establish MEA (an AREVA-Mitsubishi joint venture), Center of Excellence on Nuclear Security,” Atomstroyexport, Candu Energy (the succes- http://nnsa.energy.gov/mediaroom/pressre- sor exporting company to Atomic Energy of leases/chinacenterofexcellence01.19.11 Canada Limited), GE Hitachi Nuclear Ener- 280. Kenneth Williams and Sarah Williams, “In- gy, Hitachi-GE Nuclear Energy, Korea Elec- tegrating Nuclear Security and Policy: Asian tric Power Company (KEPCO), Mitsubishi Nuclear Security Centers,” Center for Strate- Heavy Industries (including Mitsubishi Nu- gic and International Studies, July 2014. clear Energy Systems, a subsidiary), Toshiba, 281. Bonnie Jenkins, “IAEA International Net- and Westinghouse Electric Company. work for Nuclear Security Training and Sup- 285. “Nuclear Power Plant and Reactor Exporters’ port Centers,” July 18, 2014, http://csis.org/ Principles of Conduct,” http://nuclearprinci- files/attachments/140718_CoEWorkshop_ ples.org/about/about-the-principles-of-con- Jenkins_IAEANSSC.pdf. duct/.

ROK-U.S. Civil Nuclear and Nonproliferation Collaboration in Third Countries The Brookings Institution | Arms Control and Non-Proliferation Initiative 115 about the contributors

Fred McGoldrick has extensive experience in nu- Duyeon Kim is an associate in the Nuclear Pol- clear non-proliferation and international nuclear icy Program at the Carnegie Endowment for In- policy fields. He held senior positions in the U.S. ternational Peace. An expert on nuclear nonpro- Department of Energy and the U.S. Department liferation, nuclear security, and Asia, her research of State, where he negotiated U.S. peaceful nucle- currently focuses on nuclear and security issues on ar cooperation agreements and helped shape U.S. the Korean Peninsula and in Northeast Asia. Prior policy to prevent the spread of nuclear weapons. to joining Carnegie, Kim worked as a senior fellow He also served in the U.S. Mission to the Interna- and deputy director of nuclear nonproliferation at tional Atomic Energy Agency (IAEA) in Vienna. the Center for Arms Control and Non-Prolifera- Since his retirement from the State Department, tion in Washington, DC. he has been a partner in Bengelsdorf, McGoldrick and Associates, LLC, an international consulting James Tyson is a research assistant with the Brook- firm. ings Institution’s Center for 21st Century Security and Intelligence, Arms Control and Non-Prolifer- Robert Einhorn is a senior fellow with the Arms ation Initiative. Prior to joining Brookings, Tyson Control and Non-Proliferation Initiative and the was a Fulbright Scholar to India, where he focused Center for 21st Century Security and Intelligence, on Sino-Indian relations. both housed within the Foreign Policy program at Brookings. During his career at the U.S. Depart- ment of State, Einhorn served as assistant secretary for non-proliferation during the Clinton administration and as the secretary of state’s special advi- sor for non-proliferation and arms control during the Obama administration. At Brookings, Einhorn concentrates on arms control, non-proliferation and regional security issues (including Iran, the greater Middle East, South Asia and Northeast Asia) and U.S. nuclear weapons policies.

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