CHAPTER 2
INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS

A.1 Is it feasible and effective to establish international nuclear fuel supply centers as an incentive for countries not to develop indigenous enrichment facilities?


The joint committees were asked, Is it feasible and effective to establish international nuclear fuel supply centers as an incentive for countries not to develop indigenous enrichment facilities?

It is, indeed, feasible to establish international enrichment centers, as demonstrated by the fact that two such centers exist and Russia is creating another one. Urenco represents one approach, where each of the partners (Germany, the Netherlands, and the United Kingdom) has an enrichment facility within its borders, and shares knowledge of the centrifuge technology. New partners to Urenco, France and the United States, will not have access to the technology. Eurodif operates a facility in France, and its partners (Belgium, Spain, and until 1974 Sweden)1 obtain enrichment services from the Eurodif facility; while the partners serve on the decision-making board, they do not help operate the facility and have no access to the technology. Russia is establishing a center at Angarsk with joint ownership by other countries, similar in some respects to the Eurodif approach; in particular, foreign partners will not participate in facility operations and will have no access to the technology. Russia has said that joint facilities for other fuel services could be set up on its territory in the future.

In 2006, the French nuclear group, AREVA, entered into a joint venture with Urenco, the joint British-Dutch-German uranium enrichment centrifuge consortium, acquiring a 50 percent share of ETC, the Enrichment Technology Company, which comprises all of Urenco’s centrifuge design, manufacturing, and related research and development. Despite owning a 50 percent share of ETC, France does not have a right-to-access to ETC’s centrifuge technology. ETC is providing centrifuges to AREVA’s new enrichment facility, Georges Besse 2, located in Tricastin, France, and to the National Enrichment Facility (NEF) located in New Mexico in the United States, led by Urenco. In both cases, the centrifuges will be in “black boxes” so that neither French nor U.S. personnel will have access to the centrifuge technology—though factories may be built in France and the United States, staffed by ETC personnel, to produce centrifuges. The ETC required intergovernmental agreement between the governments of France and Germany, the Netherlands, and the United Kingdom to set up a joint venture.

Eurodif is a joint stock company formed by Belgium, France, Spain, and Sweden in 1973. Sweden withdrew from the company in 1974 and was replaced by Iran and later by Sofidif, a joint French-Iranian venture. Eurodif’s operating facility, Georges Besse 1, uses gaseous

1

Iran is also a partner, through Sofidif, as described later.



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CHAPTER 2 INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS A.1 Is it feasible and effective to establish international nuclear fuel supply centers as an incentive for countries not to develop indigenous enrichment facilities? The joint committees were asked, Is it feasible and effective to establish international nuclear fuel supply centers as an incentive for countries not to develop indigenous enrichment facilities? It is, indeed, feasible to establish international enrichment centers, as demonstrated by the fact that two such centers exist and Russia is creating another one. Urenco represents one approach, where each of the partners (Germany, the Netherlands, and the United Kingdom) has an enrichment facility within its borders, and shares knowledge of the centrifuge technology. New partners to Urenco, France and the United States, will not have access to the technology. Eurodif operates a facility in France, and its partners (Belgium, Spain, and until 1974 Sweden)1 obtain enrichment services from the Eurodif facility; while the partners serve on the decision- making board, they do not help operate the facility and have no access to the technology. Russia is establishing a center at Angarsk with joint ownership by other countries, similar in some respects to the Eurodif approach; in particular, foreign partners will not participate in facility operations and will have no access to the technology. Russia has said that joint facilities for other fuel services could be set up on its territory in the future. In 2006, the French nuclear group, AREVA, entered into a joint venture with Urenco, the joint British-Dutch-German uranium enrichment centrifuge consortium, acquiring a 50 percent share of ETC, the Enrichment Technology Company, which comprises all of Urenco’s centrifuge design, manufacturing, and related research and development. Despite owning a 50 percent share of ETC, France does not have a right-to-access to ETC’s centrifuge technology. ETC is providing centrifuges to AREVA’s new enrichment facility, Georges Besse 2, located in Tricastin, France, and to the National Enrichment Facility (NEF) located in New Mexico in the United States, led by Urenco. In both cases, the centrifuges will be in “black boxes” so that neither French nor U.S. personnel will have access to the centrifuge technology―though factories may be built in France and the United States, staffed by ETC personnel, to produce centrifuges. The ETC required intergovernmental agreement between the governments of France and Germany, the Netherlands, and the United Kingdom to set up a joint venture. Eurodif is a joint stock company formed by Belgium, France, Spain, and Sweden in 1973. Sweden withdrew from the company in 1974 and was replaced by Iran and later by Sofidif, a joint French-Iranian venture. Eurodif’s operating facility, Georges Besse 1, uses gaseous 1 Iran is also a partner, through Sofidif, as described later. 25

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 26 diffusion technology to enrich uranium for nuclear power utilities that operate nuclear power plants, including EDF. The Georges Besse 2 plant will replace Georges Besse 1. At a meeting of the Interstate Council of the Eurasian Economic Community on January 25, 2006, the Russian President Vladimir V. Putin proposed the creation of a network of international nuclear fuel cycle centers to provide “nuclear fuel cycle services, including enrichment, on a non-discriminatory basis and under control of the [International Atomic Energy Agency] IAEA,” (IAEA, 2006).2 To implement this proposal, the International Uranium Enrichment Center (IUEC) was set up on the site of the Angarsk Electrolysis Chemical Complex (AECC) with the aim of providing “IUEC-participating organizations with guaranteed access to uranium enrichment capabilities,” (IAEA, 2007a). The main principles underlying IUEC development are as follows (Ruchkin and Loginov, 2006): • The center will be a commercial organization and operate as an open, joint-stock company supervised by a joint advisory committee (with IAEA representation). • All countries not pursuing the development of weapon-related sensitive nuclear technologies and meeting all nonproliferation requirements will be eligible for equal, nondiscriminatory IUEC membership. • Russia maintains national control over the material, and export regulations will be developed to guarantee shipment of the material to any participating state at their request, or to other states at the IAEA’s request. • Part of the AECC’s production facilities will be made eligible for voluntary IAEA safeguards.3 • Participants will have no access to Russian uranium enrichment technology. • Enriched uranium should meet the requirements of nuclear power stations for nuclear fuel for participant countries. • The political, economic, and technological advantages to IUEC membership should outweigh the drawbacks of refraining from full nuclear fuel cycle development. On May 10, 2007, the head of the Russian Federal Atomic Energy Agency, Sergey Kirienko, announced that five to seven countries had expressed interest in joining the IUEC. Through the signature of an intergovernmental agreement on that day, Kazakhstan then became the first joint member. Armenia and the Ukraine have expressed interest in joining.4 In the future, international centers could be developed and set up for spent nuclear fuel management (including its long-term storage and reprocessing and further use in innovative fast reactors), innovative reactor and nuclear fuel cycle technology development, or nuclear personnel training (Ruchkin and Loginov, 2006). Russia is discussing with IAEA a mechanism enabling shipment of material out of Russia at IAEA request, which might contribute to a broader IAEA structured assurance of supply. 2 In Russian, the word kontrol’, rendered here as “control,” often refers to monitoring rather than actual management of a facility. Russia has not made any proposal that the IAEA should manage the Angarsk enrichment enterprise. 3 Which part of the facility eligible for safeguards is still being worked out between the AECC and IAEA. 4 For a chronology of events regarding the Angarsk International Uranium Enrichment Center Chronology, see PIR Center for Policy Studies (Russia), http://pircenter.org/index.php?id=1976&gfkey=chronology.

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INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS 27 WHAT IMPACT CAN SUCH CENTERS AND ASSURED FUEL SUPPLY IN GENERAL HAVE ON NONPROLIFERATION ISSUES? Whether a facility is under national, multinational, or international control need not have a major effect on its role in the international commercial marketplace. Urenco, for example, is a multinationally controlled enrichment enterprise that provides enrichment services both to its partner countries and to other countries on a commercial basis. Future multinational or international centers might do the same. Indeed, if an existing nationally controlled facility were converted to multinational or international control, its role in providing enrichment services internationally might be much the same as it was before. If, in the future, governments decided to subsidize the establishment of an internationally controlled enrichment facility, perhaps for nonproliferation reasons, decisions would be needed as to how this facility would relate to other players in the commercial marketplace. Fuel supply centers are one of several possible options for assurance of supply of nuclear fuel. IAEA Director General Mohamed ElBaradei and a working group of the IAEA Secretariat submitted to the IAEA Board of Governors in June 2007, a report titled Possible New Framework for the Utilization of Nuclear Energy: Options for the Assurance of Supply of Nuclear Fuel (IAEA, 2007d). The report lays out a multilayered and multilateral approach to assuring supply of nuclear fuel against political disruptions.5 “The risk of such disruptions might dissuade countries from initiating or expanding nuclear power programmes and/or create vulnerabilities in the security of supply of nuclear fuel that might drive States to build their own national enrichment capabilities with possible additional proliferation risks” (IAEA, 2007d). Mechanisms for assurance of fuel supply, then, provide countries an incentive for developing nuclear power without developing their own capacity for uranium enrichment, particularly if countries can only exercise the mechanism if they are not conducting enrichment activities. Incentives, by definition, reduce rather than eliminate the risk of a determined nation developing domestic enrichment facilities for reasons of national pride or seeking nuclear weapons capabilities. The incentives can, however, increase the degree of resolve required for a country to take this step by making it less attractive from economic and political perspectives (see the next section concerning economic aspects of these questions). Providing credible offers of assured fuel supply on attractive terms could also help focus international attention on the motives of countries that rejected these offers. While it cannot be assumed that a nation rejecting such offers aspires to nuclear weapons capability, the availability of a mechanism for assurance of fuel supply undercuts that particular argument and strengthens suspicions that the country may be trying to develop the option of a nuclear weapons program. Mechanisms other than assurance of fuel supply, such as nuclear fuel leasing with spent fuel take-back, may be possible and could prove to be significantly stronger incentives against developing enrichment capabilities than assurance of fuel supply. The United States and Russia are also working on forms of assistance such as infrastructure planning and development, financing, and linkage of reactor supply as deterrents to developing enrichment for now. As a current example, although not a leasing agreement, Russian supply of nuclear fuel to a nuclear power station in Iran is carried out on the 5 The report defines political disruptions as disruptions unrelated to technical or commercial considerations. Because the assurance of supply is meant to serve nonproliferation objectives, it could not be exercised to compensate for disruptions related to safeguards violations or nonproliferation transgressions. This IAEA report built on the considerations of an earlier expert group established by Director General ElBaradei and chaired by former Deputy Director General Bruno Pellaud (IAEA, 2005b).

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 28 condition of spent fuel take-back to Russia. Assurance of supply and fuel leasing are both discussed in more detail below. Assurance of fuel supply can itself mean several different things. At our workshop, some participants argued that such a mechanism should mitigate not only political disruptions of supply, but any disruptions of supply. This argument has not, to date, gained much support, because the existing fuel supply market works well and nonpolitical disruptions are viewed as fairly unlikely. Reactor operators already use a variety of mechanisms to reduce risk of interruption of supply, such as backup contracts with different suppliers and stocking fuel reserves to assure themselves that fuel will be available. Indeed, the IAEA working group on assurance of fuel supply established early on that any proposed mechanism for assurance of supply should not disrupt the existing market, for fear of damaging a system that is functional and reliable. The IAEA proposal is for a multilayered assurance of supply that would include primary reliance on the commercial market, commitments from suppliers to provide backup supplies if politically motivated interruptions occur, and one or more fuel banks as a final layer of assurance. This proposal was based in part on a proposal for “reliable access to nuclear fuel supply” (RANF) developed by the major suppliers.6 The 2007 IAEA document mentioned above (IAEA, 2007d) describes a structure for assurance of nuclear fuel supply that would operate as a tiered set of mechanisms, with the existing market as the first tier, a virtual fuel bank or enrichment bonds as a second tier,7 and an actual fuel bank as the third tier, to be exercised only if the first two fail. Countries, under this proposal, would have access to these mechanisms based on four possible criteria for states to be able to access the proposed assured fuel supplies: (1) that the disruption is political; (2) that the state have a safeguards agreement in force for the material;8 (3) that the state be in good standing with respect to its safeguards commitments, with no issues before the IAEA Board of Governors; and (4) that the state comply with other criteria that may be imposed by the Board of Governors (such as having an additional protocol in force). One additional criterion discussed in the proposals from the major suppliers has been that the nation receiving supply assistance may not currently be engaged in enrichment activities. One could envision a slightly different approach, again using a set of tiered mechanisms, that offers different types of assurance based on the different levels of nonproliferation and sensitive-technology commitments made by the participating nations. Specifically, if the international community were to offer the additional benefit or incentive of assurance against nonpolitical disruptions, a criterion, condition, or payment for that service might be based on the level of a nation’s commitment not to enrich uranium or reprocess nuclear fuel. For example, any nation that signs an agreement to not develop enrichment (not forever, but perhaps 10 years or 20 years) could access a fuel bank in cases of any interruptions of supply (or possibly even exorbitant price spikes) that are not the result of the country violating nonproliferation agreements. Countries could offer this additional commitment regarding sensitive technologies as a form of payment for the assurance of a supply mechanism that would provide against normal 6 The six enrichment-services-supplier states set up an intergovernmental working group to develop a Concept for a Multilateral Mechanism for Reliable Access to Nuclear Fuel (RANF), signed by France, Germany, the Netherlands, Russia, the United Kingdom, and the United States in 2006. 7 A virtual fuel bank is often defined as a commitment by one or more fuel suppliers to provide fuel if called upon by IAEA, but is not a dedicated separate stock of fuel. 8 Note: This does not mean that full-scope safeguards would be required.

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INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS 29 market disruptions. As noted above, reactor operators now pay for other insurance mechanisms (backup contracts and backup onsite inventories of fresh fuel),9 so a monetary value can be placed on the service such an assurance entails. Some nations, notably some in the Non-Aligned Movement,10 are cautious about mechanisms for assurance of supply and critical of additional criteria for accessing them. From this perspective, whatever advantage is offered by a fuel bank, for example, is reduced if the suppliers can deny access. So if the Russian government’s approval is needed to release the enriched uranium Russia pledged to the IAEA fuel bank (Kirienko, 2007), and if the U.S. government must agree in each case to release the enriched uranium it has pledged, these major suppliers still control whether fuel is supplied through the fuel bank. Being among the owners of an enrichment facility, and having a government-to-government agreement in place prohibiting any interruption of supply from that plant, may significantly increase states’ sense of assurance about fuel supply, although being part owner of Eurodif has not allowed Iran to access Eurodif services. The assurance of nuclear fuel supply could mean assurance of access to uranium enrichment services or to uranium enrichment and fuel fabrication services, or it could mean access to a stock of material, uranium as uranium hexafluoride (UF6) or uranium oxide powder (U3O8). Creating a stock of fabricated fuel is less feasible because of the reactor-specific features and characteristics of fuel and fuel elements. Nuclear fuel is highly specialized, and each nuclear power station reactor needs nuclear fuel with inherent specific characteristics of this reactor. International fuel supply centers are somewhat different from such mechanisms as virtual or real fuel banks. Fuel supply centers could be structured to operate entirely within the existing enrichment market, providing only its joint stockholders with assurance against disruptions of supply. The incentives for not developing an enrichment or reprocessing facility would extend only to those joint stockholders. Assurances might also be extended to contracting parties, which would broaden the potential effect of the center. In both cases, substantial work would be needed on legal questions to establish enforcement mechanisms for exercising the assurance mechanism against the political will of the (other) joint stockholders if they are the cause of a political disruption of supply. A very different approach would entail long-term contracts between each joint stockholder and the center, which could insulate the participants against price fluctuations but would make the participants reliant on the center’s performance. To serve as an incentive, the center would need to be economically competitive, factoring in whatever benefits a nation perceives from the assurance of fuel supply. 9 Reactor operators do not typically purchase a substantial reserve stock of fuel because of the cost of having that capital sitting idle and unproductive, but some operators do choose this option. South Korea has enough fuel and enriched uranium to supply its reactors for 1 year, but this is partly because South Korea fabricates its own fuel and has material and fuel in its pipeline. 10 “The Non-Aligned Movement is a Movement of 115 members representing the interests and priorities of developing countries….[The Movement attempts] to create an independent path in world politics that would not result in Member States becoming pawns in the struggles between the major powers. [T]hree basic elements which influenced the approaches of the Movement to international issues…are the right of independent judgement, the struggle against imperialism and neo-colonialism, and the use of moderation in relations with all big powers.” The Non-Aligned Movement: Description and History (http://www.nam.gov.za/background/history.htm ).

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 30 ECONOMIC ASPECTS OF THE NUCLEAR FUEL CYCLE Fresh LEU Supply Fresh fuel typically contributes less than 10 percent of the cost of nuclear-generated electricity today.11 Each component of low-enriched uranium (LEU) fuel supply—the production of natural uranium, conversion to uranium hexafluoride, enrichment, fabrication into fuel assemblies, and delivery of the fuel to the reactor—is characterized by a mature and competitive market. Thus, it should be possible to construct fuel supply assurances that have very little effect on the cost of nuclear-generated electricity and the functioning of markets for fuel services, and which do not disadvantage either suppliers or recipients. Consider, for example, an international store of low-enriched uranium that is created through donations from supplier countries, such as the United States and Russia. A country or reactor operator that draws from this store under agreed rules could be required to pay the prevailing market prices for the natural uranium and separative work used to produce the withdrawn material. The method for setting the market price could be fair to both suppliers and their customers. One possibility would be to set prices equal to those that would be paid to replenish the stock, which would have the virtue of making the international fuel bank automatically self-sustaining. (The fuel bank might seek to have in place at all times a contract to supply enriched uranium.) Alternatively, the prices could be set equal to contract prices that had already been negotiated between the customer and the original supplier. In either case, the impact on the cost of electricity or the operation of markets for fuel cycle services would be small. Spent LEU Take-back The take-back of spent fuel is substantially more complicated because there are several possible options for the disposition of spent fuel. Moreover, because there is a lack of competitive markets for most services at the back end of the fuel cycle, the costs of the various options are uncertain. These services include long-term spent fuel storage and disposal, and reprocessing of spent fuel followed by disposal of the resulting wastes and fabrication of fuels for recycling or transmutation. Spent Fuel Transport and Storage. Of the back-end services, the costs of long-distance transport and long-term storage of spent fuel are relatively low and well established.12 The cost of spent fuel transport is on the order of $70-100/kg for transcontinental shipment by truck or rail (Shropshire et al., 2008); the cost of intercontinental transport by ship may be as high as 11 Although spot prices for uranium have been volatile recently (rising substantially and dropping somewhat), nuclear fuel is usually procured through long-term contracts. Fuel cycle costs, including waste disposal, historically have been taken to be 10 percent of the cost of electricity, (see, e.g., IEA 2007). A more recent study by the U.S. Congressional Budget Office states that “Doubling [the fuel cost of nuclear power] would increase the levelized cost of new nuclear capacity by about 15 percent above that assumed in the reference scenario.” (CBO, 2008, Chapter 3.6.1) This suggests that the fuel costs may be 15 percent of the estimated cost of electricity, which is $8/MWh (in 2006 dollars) based on long-term projections by the U.S. Energy Information Administration and including $1/MWh to cover the cost of disposal. This would imply a fresh fuel cost of about 13 percent of cost of electricity. 12 Regulatory, standards-setting, and waste handling organizations state that the transportation of nuclear fuel has an excellent safety record. See U.S. NRC, 2005; and DOE, Undated. A U.S. National Research Council committee reasoned that the driver qualifications, standards, and scrutiny for such shipments probably contribute to a better safety record than in transportation of other goods (NRC, 2006).

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INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS 31 $200/kg.13 The life-cycle cost of providing 50 years of dry storage is estimated at $100-300/kg (Shropshire et al., 2008, pp. E2-16). For comparison, the cost of fresh light-water reactor (LWR) fuel is $1500-3000/kg.14 Thus, the cost of spent fuel take-back for long-term storage (for example, in an international spent fuel storage center) is relatively small—on the order of 10 percent of the cost of fresh fuel or 1-2 percent of the cost of nuclear-generated electricity. If the number of countries willing to take back spent fuel is limited, the price charged for take-back services could be substantially higher than the cost of providing the service. The price that reactor operators would be willing to pay for spent fuel take-back is unknown in the absence of a market for this service, but prices as high as $1,000-1,500/kg have been discussed.15 The prospect of correspondingly large profits could provide the incentive necessary for a country to provide take-back services—and ultimately stimulate additional countries to provide this service. Direct Disposal. One option for the ultimate disposition of spent fuel is disposal in a deep geological repository. Several countries, including Finland, Sweden, and the United States have advanced programs for the geological disposal of spent fuel, but no repository has yet accepted spent fuel (or other high-level waste) for permanent disposal. The take-back of spent fuel for geological disposal is a possibility, but to date no country has indicated a willingness to accept foreign power-reactor fuel for direct disposal.16 Regional or international repositories have also been discussed, but no country has indicated a willingness to host such a site.17 The total undiscounted costs of geological disposal have been estimated at $400-900/kg (Shropshire et al., 2008, pp. F1-10). In the United States, the cost of building and operating the Yucca Mountain repository is to be financed through a $1/MWh charge on nuclear-generated electricity, which is less than 2 percent of the total cost of electricity.18 Thermal Recycle. A second option for the disposition of spent LEU fuel is to reprocess the fuel and recycle the recovered plutonium in mixed-oxide (MOX) fuel for another pass through light-water or other thermal reactors.19 France and the United Kingdom have reprocessed spent fuel from other countries, including Belgium, Germany, Japan, and Switzerland. In doing so, France and the United Kingdom have provided only the reprocessing service; the resulting plutonium in storage and high-level waste remain the property of the owner of the spent fuel, and by contract are to be returned for recycling (as MOX fuel) and disposal, respectively. The prices charged for these services have been estimated at $2,000-2,500/kg in 13 Atsuyuki Suzuki, personal communication based on information accessed at http://www.meti.go.jp/policy/electricpower_partialliberalization/contentscost-rire on September 2, 3008. 14 A cost of $1,500/kg corresponds to average contract prices in 2006 ($60/kg for uranium and conversion, $120/SWU for enrichment, $220/kg for fabrication); $3,000/kg corresponds to spot prices in early 2008 ($200/kg for uranium and conversion, $150/SWU for enrichment), for pressurized water reactor fuel with a burn-up of 50 MWtd/kg. 15 See Bunn et al., 2001, pp. 73-77, which describes a $1,000/kgHM estimate from Pangea for a disposal service in Australia; an estimate of $1,500/kgHM for a proposed storage and disposal service in Russia; and estimates of $300 to $600/kgHM for temporary storage, or $1,200 to $2,000/kgHM for reprocessing with no return of wastes or plutonium. 16 Russia has passed laws to enable it to accept foreign spent nuclear fuel for reprocessing, including disposal of the waste, and offers fuel services whereby Russia retains ownership and takes back the fuel. These points are discussed later in this section. 17 Examples are the inability to secure approval for storage or repository sites for a Pacific Basin spent fuel storage facility on Palmyra Island and the Pangea attempt to develop a repository in Australia. 18 A $1/MWh charge is equivalent to $400/kg of spent fuel, assuming a burn-up of 50 MWtd/kg and an efficiency of 33 percent. With interest, these payments are estimated to be sufficient to pay the cost of the construction and operation of the Yucca Mountain repository. 19 Using light water reactors for recycle was examined in Collins et al., 2007.

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 32 the initial contract period (Bunn et al., 2003), and $900/kg subsequently.20 Costs as low as $500/kg have been estimated for a new, large reprocessing facility in the United States (Boston Consulting Group, 2006).21 Of the countries listed above, all but the United Kingdom have used some of the recovered plutonium in MOX fuel for thermal reactors. The separation of plutonium has outpaced its use in MOX fuel, however, leading to large stocks of plutonium. The prices charged for MOX fuel fabrication are not publicly available, but are estimated to be $1,200- 4,000/kg (Bunn et al., 2003, p. 216). At the low end of this range, the cost of MOX fuel (ignoring the cost of recovering the plutonium) is less than the cost of fresh LEU fuel (including the costs of natural uranium and enrichment). Because spent LEU fuel contains about 1 percent plutonium and fresh MOX fuel contains about 6 percent plutonium, thermal recycling can supply one-sixth of the fuel for a fleet of LWRs. The cost of thermal recycling is dominated by the cost of reprocessing, less any cost savings from decreased waste storage or disposal costs and reductions in fresh fuel supply.22 Assuming, for purposes of illustration, a reprocessing cost of $1,000/kg, storage/disposal cost savings of $200/kg, and a MOX fabrication cost that is equal to the total cost of fresh LEU fuel, the additional cost of thermal recycling is $2/MWh. Although there is significant uncertainty in each of these parameters, a reasonable range for the net cost of thermal recycling is $1-2/MWh, equal to 2-4 percent of the cost of electricity and about $7-15 million/yr per GWe of capacity. As indicated above, France and the United Kingdom have provided only the reprocessing service, with the return of the separated plutonium (once fabricated into MOX fuel) and high- level wastes to the customer. If, in keeping with the goal of limiting the spread of sensitive fuel cycle steps, the return of plutonium or MOX fuel to countries without sensitive fuel cycle technologies is prohibited, it seems unlikely that those countries would pay the additional costs associated with the reprocessing of their spent fuel, unless the take-back country also assumed responsibility for final disposal of the high-level wastes. But if the take-back country assumes responsibility for both the plutonium and waste, the decision of whether to reprocess for thermal recycling would be entirely up to the take-back country. Although a user country might be willing to pay a price high enough to cover the costs of reprocessing and waste disposal, the take-back country could reduce its costs and increase its profits through long-term storage or direct disposal, or by deferring reprocessing until the recovered plutonium could be used immediately and cost-effectively in reactor fuel. Plutonium storage. A variant of the previous option is reprocessing followed by long- term storage of the separated plutonium. The Soviet Union (and, now, Russia) has reprocessed 20 Press release, “EDF and AREVA sign a contract for managing EDF used nuclear fuel,” August 24, 2004. Cited in Shropshire et al., 2008, pp. F1-10. 21 The $500/kg cost supposedly includes all operating and capital costs, including interest on borrowed money. Some members of the joint committees are skeptical that unit costs this low can be achieved in practice. 22 To a first approximation, the increase in the cost of LWR electricity (compared to direct disposal) due to thermal recycle, ΔCOE ($/MWh), is given by: ΔC fuel Crep − ΔCdisp + 6 ΔCOE ≈ 24Bε where Crep is the unit cost of reprocessing, ΔCdisp is the unit cost savings due to the storage and disposal of high-level waste instead of spent fuel, ΔCfuel is the unit cost difference between MOX fuel fabrication and the total cost of fresh LEU fuel of equal burn-up (all in dollars/kg of heavy metal in the fuel), B is the burn-up of the fuel (MWtd/kg), d is days, and ε is the thermal efficiency of the reactor (MWe/MWt).

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INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS 33 spent fuel from other countries, including Armenia, Bulgaria, and Finland. Under Soviet fuel supply agreements, the fuel remained the property of the Soviet Union, including the plutonium and wastes separated during reprocessing. Russia continues to supply reprocessing services for foreign customers. Russia has accumulated a large stock of separated plutonium from the reprocessing of domestic and foreign commercial spent fuel. Rather than recycle this plutonium in LWRs, Russia plans to use the plutonium for start-up fuel for future fast-breeder reactors. Safe and secure storage of plutonium is expensive. The Mayak storage facility in Russia, which has a design capacity of 100 metric tons of plutonium, cost $421 million to build (completed in 2003) and has an estimated operating cost of $13 million/yr.23 The cost to build a new storage facility in the United States for 45 metric tons of plutonium has been estimated at about $600 million, with an operating cost of $75 million/yr (Shropshire et al., 2008). Assuming facility lifetimes of 50 years, the corresponding undiscounted life-cycle costs would be $12,000 and $100,000/kg of plutonium capacity, respectively. Because spent fuel contains 1 percent plutonium, this is equivalent to $120-1,000/kg of spent fuel. This can be compared to the $100- 300/kg given above for the long-term storage of spent fuel. Long-term spent fuel storage has the added advantage of deferring reprocessing for several decades, which is equivalent to a cost savings of at least $300-400/kg.24 Plutonium that is separated from recently discharged spent fuel still contains nearly all of its plutonium-241. If that plutonium is then stored for some years, the plutonium-241 decays with a 14.4- year half-life to produce americium-241—a radionuclide that complicates fuel fabrication and handling. If instead that spent fuel is stored for the same number of years, and the plutonium is separated soon before it will be fabricated into fuel, the in- grown americium will be separated and the plutonium will be more pure at fabrication. Restated, as a result of the in-growth of americium-241, plutonium separated from recently discharged spent fuel and then stored is more difficult and costly to fabricate into fuel than plutonium separated after storage. Transmutation. A final option for the take-back of spent LEU fuel is that envisioned by the U.S. Global Nuclear Energy Partnership (GNEP): reprocessing followed by immediate transmutation of the recovered plutonium and other transuranics (TRU) in a fast reactor. In addition to the costs of reprocessing the spent LEU fuel discussed above, there would be costs associated with the construction and operation of the fast reactor, including the reprocessing and fabrication of TRU fuels. Because fast reactors can transmute TRU isotopes that are responsible for most of the long-term heat load from spent LEU fuel, transmutation may offer significant reductions in geological disposal costs.25 The required fast-reactor capacity depends on the conversion ratio of the fast reactor, which is the average number of TRU atoms produced per TRU atom consumed or fissioned in the fuel. A fast reactor fissions about 880 kg/yr of TRU per GWe of installed capacity.26 A 23 The construction cost includes the facility and all the containers (see http://www.nti.org/e_research/cnwm/securing/mayak.asp; accessed on December 12, 2008), and the operating costs are taken from Shropshire et al., 2008, pp. E3-5. 24 Assumes a reprocessing cost of $500/kg, a discount rate of 3 percent per year, and a delay in reprocessing of 30- 50 years. For discount rates higher than 7 percent per year, the net present value of deferring reprocessing is essentially the cost of reprocessing, which, as noted above, could be $1,000/kg or higher. 25 Recycling the plutonium from irradiated LWR fuel once through an LWR as MOX offers no heat-load advantage compared to simply using LEU fuel for both cycles. Fast reactors are more efficient in fissioning nonfissile transuranic isotopes. 26 Assumes 0.93 MWtd of energy released per gram of TRU fissioned, a net thermal efficiency of 38 percent, and a capacity factor of 85 percent.

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 34 LWR fueled with LEU discharges about 250 kg/yr of TRU per GWe of capacity.27 Thus, if no new TRU were produced in the fast-reactor fuel (a conversion ratio of zero), 250/880 = 0.28 GWe of fast-reactor capacity could consume the TRU from 1 GWe of LWR capacity. But proven fast-reactor fuels are mostly uranium, leading to the production of additional plutonium and other TRU in the fast-reactor fuel. Although the fuel and core design can be modified to minimize the production of TRU, there are limits to what can be achieved while maintaining an acceptable degree of safety. A conversion ratio of about 0.7 is achievable using existing reactor and fuel designs, which would lead to a net consumption of only 260 kg/yr of TRU per GWe of fast- reactor capacity, in which case the installed fast-reactor capacity would be about equal to the installed LWR capacity for the fast reactors to consume all of the TRU from the LWRs. A goal of the U.S. Advanced Fuel Cycle Initiative is to achieve a conversion ratio of 0.25, in which case fast reactors would comprise 27 percent of total nuclear capacity.28 A thorough assessment of the economics of transmutation would require the development of detailed models involving dozens of parameters, most of which have very large uncertainties. Two points can, however, be made at this time. First, the effect of transmutation on the cost of nuclear-generated electricity will depend largely on the capital and operating cost of fast reactors relative to thermal reactors. Fuel-related costs are a relatively small contribution to the cost of electricity from either type of reactor, and differences in fuel-related costs will almost certainly be small compared to differences in capital and operating costs. Limited experience with fast reactors in France, Japan, and Russia suggests that fast reactors are likely to cost more to build and operate than thermal reactors. Some people believe, however, that a new generation of improved fast reactors could have significantly lower costs than next-generation light-water reactors, in which case transmutation would decrease the average cost of nuclear electricity. Because the technologies required for transmutation have not yet been specified, there is little factual basis today for judging whether separation and transmutation would ultimately increase or decrease overall costs. Second, regardless of whether fast reactors are more or less expensive than thermal reactors, transmutation would require a mechanism to pay for the extra costs of the more expensive component of the system. If fast-burner reactors are more expensive than thermal reactors, a mechanism would be needed to ensure that the expensive fast reactors are built in sufficient numbers to transmute the TRU produced in the thermal reactors. This mechanism could take the form of a tax (for example, a charge on LWR electricity or spent fuel) or a legal requirement (for example, a law requiring that all spent fuel undergo separation and transmutation). When the LWR and the burner reactor are in different countries, these mechanisms would have to be incorporated in an international agreement to ensure that the extra costs associated with separation and transmutation are borne by one party or the other or shared between them. If fast reactors prove to be cheaper than thermal reactors, a mechanism would be needed to limit the spread of the cheaper fast-reactor technology and its associated reprocessing and the fabrication of plutonium fuels. It is not realistic to expect current supplier states to retain a monopoly on a reactor technology that generates cheaper electricity, and to expect all other 27 Assumes spent fuel with an average burn-up of 50 MWtd/kg containing 1.3 percent TRU (1.16 percent plutonium, 0.06 percent neptunium, 0.06 percent americium, 0.008 percent other), a net thermal efficiency of 33 percent, and a capacity factor of 85 percent. 28 For an equilibrium system in which all TRU produced by LWRs and fast reactors is consumed by fast reactors, the fast-reactor fraction of the installed nuclear capacity is approximately R/(R–CR), where CR is the conversion ratio and R is the ratio of rate of TRU production in LWRs to the gross rate of TRU consumption in fast reactors per unit installed capacity (250/880 = 0.28 for the assumptions given above).

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INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS 35 countries to pay the full costs of a more expensive reactor technology. One possibility might be the leasing of long-lifetime sealed-core reactors to other states, with all fuel manufacture and spent fuel management centralized in supplier states. NON-ECONOMIC ASPECTS OF THE NUCLEAR FUEL CYCLE The main incentives discussed thus far to help convince states not to pursue their own enrichment and reprocessing are economic. Historically, however, economic considerations have not been the decisive factors for countries that have pursued enrichment or reprocessing technology. Nations such as Argentina, Brazil, China, France, Germany, India, Japan, and South Africa, and some others, developed their own nuclear fuel cycle facilities. Some of these countries, for at least some of the period of nuclear fuel cycle development, also had nuclear weapons programs that yielded (or could have yielded) nuclear explosive devices. But it does not appear that Germany or Japan has sought to develop nuclear weapons since World War II. For Japan, the main driver was a desire for some degree of energy security, considering the nation’s scarce energy resources.29 But this latter consideration has been invoked for Japan to construct facilities for a full, closed fuel cycle: uranium enrichment, nuclear fuel fabrication, spent nuclear fuel storage and reprocessing, and waste storage (pending availability of waste disposal facilities). Current efforts are attempting to reduce the chance that other countries will follow a similar path. Not all countries share this goal, because of the differentiated status among nations, which it reinforces. Therefore, measures must be taken to allay suspicions and concerns of some countries that the nations with fully developed nuclear enterprises are trying to lock in their nuclear technological and market leadership under the guise of strengthening the nonproliferation regime. Offering all states the opportunity to participate in the profits from multinational or international centers could help address this concern about commercial advantage. It has been noted that no nuclear power reactor has ever had to shut down because of lack of fuel.30 This suggests that existing market mechanisms have provided reliable nuclear fuel supplies. New mechanisms designed to increase the assurance of supply should “first, do no harm,” and take care not to disrupt the existing nuclear fuel market. There have been events in the past, however, that have created concerns over the reliability of nuclear fuel supply. Several of the early problems that framed the debate arose from management of the enrichment operations of the U.S. Atomic Energy Commission (AEC), which supplied the entire noncommunist world with enrichment during the 1960s and much of the 1970s (van Doren, 1983; Norman, 1986). In 1966, the AEC decided that it would not accept imported uranium as feed for enrichment contracts for U.S. reactors (which represented a large fraction of world uranium demand), thus creating a major shock in the uranium market and depressing uranium prices outside the United States. Then, in 1973, the AEC announced a drastic revision in the contract terms for enrichment, requiring recipients to enter into long-term fixed contracts at least eight years before the initial delivery. This required renegotiation of 29 Japan had a small nuclear weapons program during World War II. More recently, Japanese documents show that for some key participants (including then Defense Minister Nakasone), gaining a nuclear weapons option for the future was an important part of the reason to pursue a civilian plutonium recycling program (Harrison, 1996, p. 122). 30 India has had to sharply reduce the power output of some of its reactors due to lack of fuel because India is unable to participate in the international market for uranium. This is discussed later in the report.

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 46 countries also have centers that provide training in particular tasks related to physical protection, material control, or material accounting, such as the Department of Energy’s Safeguards and Security Central Training Academy or the Russian Methodological and Training Center at Obninsk. But there are few opportunities for training that integrate technical matters with a broader nonproliferation perspective. There are not enough people around the world who have an understanding of these issues. The need for these personnel, however, is independent of having centers: Expanding nuclear power around the world will require a lot of expertise. The Russian institute is an example of how the increased need for personnel to support the fuel cycle can be met. The long stasis in the U.S. demand for new civilian nuclear power reactors led to a greatly reduced interest among undergraduates for nuclear science and engineering programs. This put great pressure on U.S. universities to scale back in these areas. Many did, so that today there are many fewer degree programs available: “[T]he number of university nuclear engineering departments has decreased from 66 in the early 1980’s to 30 today.” However, undergraduate enrollment has increased “from a low of about 500 in 1999 to over 1,900 in 2007 (APS, 2008).” Therefore, in the United States, nuclear engineering department enrollment is increasing as job opportunities for developing new plants seem to be more attractive than those for maintaining existing plants. Finding 4 As use of nuclear power grows, there is a need worldwide for well-educated personnel to support the whole nuclear fuel cycle. Recommendation 4 Countries with large nuclear power programs, such as the United States and Russia, should encourage young people to enter nuclear engineering and related fields and programs that give the breadth of perspective needed. Finding 5 Arrangements that would provide assured return of spent nuclear fuel could provide a much more powerful incentive for countries to rely on international nuclear fuel supply than would assured supply of fresh fuel, because assured take-back could mean that countries would not need to incur the cost and uncertainty of trying to establish their own repositories for spent nuclear fuel or nuclear waste. Further, it would reduce the number of countries where plutonium-bearing material is stored around the world. Fuel leasing, reactor leasing, and similar approaches could have this benefit, if managed appropriately. For many countries, however, the political barriers to taking back other countries’ spent nuclear fuel or nuclear waste are substantial. Recommendation 5 The United States, Russia, and other suppliers should increase their emphasis on establishing mechanisms for assured fuel-leasing or reactor-leasing services,44 including take-back of all irradiated fuel. Russia already has legislation and arrangements in place to offer fuel leasing and has such a contract in place with Iran. In both international fuel supply approaches and take-back of spent fuel, Russia is further along in offering services 44 Today the only discussions of reactor leasing are those on the floating power plants being built by Russia and the nuclear battery being proposed by Toshiba. There will be many legal issues to work out in both cases.

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INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS 47 to other countries. The United States and Russia should work together on cooperative approaches that would make it possible to enter into fuel-leasing arrangements in which they would guarantee to supply, and to take back, fuel for the lifetime of reactors built in “newcomer” states, with the fuel taken back to Russia for now, or to the United States as well if circumstances someday make that possible. Finding 6 A hidden danger of creating such centers is the potential for leakage of sensitive technology. The most damaging leakage of sensitive technology occurred when A. Q. Khan, working as a contractor for Urenco, was able to acquire enough information and contacts to build the supply line for Pakistan’s nuclear weapons program. Khan went on to form a supply network that fed into weapons programs in Libya, North Korea, and Iran. An event like this puts the nonproliferation regime in great danger. Recommendation 6a The United States and Russia should work diligently with other nations to ensure that all efforts to establish international centers for enrichment, reprocessing, or other sensitive activities include specific, stringent plans to prevent leakage of sensitive information and technology. Plants with staff from countries that do not have technology of the type used at that plant should maintain the sensitive technology in “black boxes” so that the international staff does not have access to the technologies themselves. Plans to prevent technology leakage should be subject to review by a small group of international experts familiar with such technology controls before the centers are established. Recommendation 6b Russia, the United States, and other countries working to develop centers should have criteria for participation. Two major criteria for participation by countries beyond the technology holders who provide the technology for the center should be that they not have or be developing an enrichment facility, and that they should be in compliance with IAEA safeguards and nonproliferation obligations. A3. How should ownership of the nuclear material and the fuel in such arrangements be structured? There are currently a number of options for fissionable material ownership during the entire fuel cycle. Fuel leasing is the clearest ownership situation: In a lease arrangement, the country of origin maintains ownership of the fuel. Such arrangements are not common. In Soviet times, the arrangement was true leasing: Customers did not own the fuel, even when it was inserted in their reactors; the customers just paid for services. The United States, too, had fuel leasing in earlier years: The U.S. government procured uranium, enriched it, and fabricated fuel, which was then leased to a utility that paid for the energy extracted. This arrangement ended when the law was changed to permit private ownership. An interesting alternative approach is leasing of self-contained, portable reactors, including the fuel in their long-life cores. Russia is building a prototype of a small floating power plant based on icebreaker reactor designs, which it hopes to market for export, and Toshiba is marketing a small reactor that would come with a sealed core containing fuel built in for the entire reactor lifetime. Small sealed-core

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 48 reactors with lifetime cores and passive safety features could have significant nonproliferation advantages, as could reactor-leasing concepts, and deserve additional research and development to determine if their costs can be reduced (see below for a discussion of advanced technology). In the regular (nonleasing) uranium and nuclear fuel market today, ownership of (legal title to) a defined lot of uranium is somewhat fungible, like ownership is for other commodities. Ownership can be transferred at each step or process of the fuel cycle, and the end user may simply buy fuel from the fuel manufacturer. Alternatively, some reactor owners buy uranium, retain ownership, and just buy enrichment and fuel fabrication as services. Arrangements exist among yellowcake suppliers,45 conversion facilities, enrichers, and fuel fabricators for accounting of uranium products and services (most importantly, separative work units, or SWU). An end user may purchase 2 metric tons of yellowcake from company A, purchase conversion and enrichment services from company B, and purchase fuel fabrication services to procure a fuel assembly from company C. The companies will transfer material from A to B and from B to C, but the enriched uranium product transferred from B to C in the end user’s name is not typically from the lot of yellowcake that the end user purchased. Likewise, the fuel fabricator often uses enriched uranium from its inventory to fabricate fuel rather than linking a particular delivery of enriched uranium product to the actual fabrication of a client’s fuel. The client owns material at any given point, but the accounting of equivalencies in uranium products and services mentioned above facilitates the nuclear fuel supply chain by making the commodity fungible. Ownership of the fuel is transferred either at the beginning or end of shipment of the fuel from the fuel manufacturer to the reactor operator. The end user may own the fuel in typical nuclear fuel contracts, but provisions, restrictions, and guarantees may be attached that limit the owner’s rights to use the fuel in some ways. There are several current examples of such restrictions. As noted above, material and fuel provided by U.S. companies (and even fuel of U.S. design and any fuel irradiated in a reactor based on a U.S. design) is considered U.S.-origin or U.S.-obligated fuel and requires U.S. permission for transfer to another country. The members of the Nuclear Suppliers Group have agreed to impose specific requirements on such retransfers. The Rosenergoatom-Iran contract is a sale, not a lease, but there is a contract guarantee that Iran will return the fuel after irradiation in its reactor. The protections are in place to assure supply can be made by contract or, as in the international centers, under intergovernmental agreements, which are presumably harder to breach than contracts. For an internationally controlled center supplying fuel to several recipients who were part owners of the center, the fuel might be owned by the international group that owned the center (including, but not limited to, a particular recipient). Another option is that fuel, fuel material, or byproducts within a plant might be owned by particular participants (just as Japanese utilities retain ownership of spent fuel sent to La Hague, as well as the separated plutonium and the vitrified waste from processing in France). Currently enrichment tails belong to the enricher, but this may be revisited in future arrangements because of their value—tails can be further stripped of uranium-235, which is economic for some tails at current uranium prices.46 Some issues related to ownership may be important to the success of an approach or scheme (for example, liability and intellectual property), but the specifics of the ownership arrangements may not have a major effect on the nonproliferation issues central to the 45 Yellowcake is a uranium oxide (U3O8) produced when a mill separates uranium from uranium ore. 46 Tails from uranium enrichment are not a proliferation hazard; with enough enrichment capacity, however, the very low concentration could be made into HEU.

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INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS 49 committee’s concerns. Ownership per se is not considered an important proliferation issue as long as full-scope IAEA safeguards are in place and security provisions are adequate to assure that no unauthorized transfers occur. On the other hand, if there are no safeguards and security then it is considered a proliferation threat, regardless of ownership. This does not mean that there are no ownership issues with multinational or international fuel centers. There are and will be issues of liability, issues of funding because of differences in how different entities handle the cost of time and cost of money, issues of performance, issues of responsibility, and so forth. All of these issues must be resolved between the supplier and the buyer or lessee, but they are not issues of proliferation as long as safeguards and security are in place. The exceptions are cases in which an ownership arrangement imposes restrictions or commitments that undermine the incentives that are the goal. For example, if transfer restrictions in the context of a fuel bank required the recipient to give up rights to enrich (or to forgo enrichment for a long time), the requirement may be viewed as a too-great commitment for the benefit received and therefore dissuade nations from participating. Under the IAEA’s 2007 proposal, any state that suffered a politically motivated interruption of fuel supply and was in good standing with its nonproliferation and safeguards obligations would be able to draw on the assurances of fuel supply. Under the proposal from the major supplier states, states would only be able to draw on the assurance of supply if they were NPT parties and did not have operational enrichment or reprocessing plants at the moment when they needed fuel. If an IAEA-controlled bank is established on the terms described in the IAEA’s proposal, states that supply the material for the bank may still insist that states receiving their material meet additional criteria―such as not having enrichment and reprocessing facilities―before they receive fuel from that particular supplier. It is possible that multiple reserves will be established with somewhat different criteria for drawing on them. Indeed, this already appears to be occurring, as the United States is establishing an LEU reserve on U.S. territory, which will presumably only provide fuel to states that meet U.S. criteria (U.S. Mission to International Organizations in Vienna, undated); Russia is establishing an LEU reserve at the Angarsk enrichment center that the IAEA will be able to draw on to provide LEU to countries suffering a politically motivated interruption; and the IAEA is seeking to establish an additional reserve not on the territory of any current supplier state, to provide additional confidence (using funds from U.S. investor Warren Buffett, the U.S. government, Norway, and other contributors). None of the current fuel bank proposals call for states to give up their right to enrichment and reprocessing forever, or even for a long period, such as 10 years, as such a requirement might be viewed as too great a commitment for the benefit received. Limiting the assured fuel supply to states that do not currently operate enrichment and reprocessing plants would provide an additional incentive for states not to invest in such plants of their own. On the other hand, states such as Brazil and South Africa have strongly objected to such an arrangement, seeing it as an infringement on rights to the peaceful use of nuclear energy under Article IV of the NPT, and since the IAEA Board of Governors operates by consensus, this objection might make it difficult to establish an IAEA-controlled fuel bank with such a requirement. Even a fuel bank without such a limitation would provide additional assurance that fuel would always be available and hence undermine states’ incentives to invest in building their own enrichment or reprocessing facilities, and there may be some value in making such assurances available to states such as Brazil, to encourage them to rely increasingly on international supply, and possibly to phase out their own facilities, or at least not increase them to commercial scale.

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 50 A4. Should the international facilities be owned by governments or could private companies own some or all of the facilities? Ownership can be by governments or private entities. In either case, a governmental agreement is likely to be required to establish the legal framework for the international centers, and effective regulation by the host state will be essential. There are examples of international facilities that are government owned, and international facilities that are privately owned. CERN,47 the international particle physics research center on the Swiss-French border, is fully owned and operated by an international organization with many governments participating. International telescopes in Chile are run by a private company under contract. Both arrangements can work provided that care is taken in establishing and operating them. VARIANTS ON MULTINATIONAL AND INTERNATIONAL OWNERSHIP AND CONTROL In addition to the question of private versus government ownership, there are many potential variations on concepts for multinational or international ownership and control of fuel cycle facilities. By a multinational center, the joint committees mean a facility whose ownership and management involves an arrangement among several countries. Eurodif, Urenco, and the International Uranium Enrichment Center at Angarsk are examples. By an international facility, the joint committees mean a facility whose ownership and management is centered in a fully international organization such as the IAEA. Germany has recently proposed, for example, that a new enrichment plant be established under IAEA control (though managed by a commercial firm), on territory a country was willing to set aside as an international zone (IAEA, 2007c). CERN is arguably a fully international facility (though it could also be considered a multinational facility with a particularly large number of nations participating). There are important differences between CERN and a consortium that operates in the commercial market, but CERN provides a precedent of multinational ownership and governance. Multinational or international fuel cycle centers might have several nonproliferation benefits. As has already been discussed, states may have more confidence that their fuel supply is assured if they are part owners of such a center and have intergovernmental agreements in place prohibiting any political interference with deliveries. The opportunity to participate in the profits from such multinational or international centers may also reduce states’ desire to invest in national facilities of their own. In addition, many argue that if enrichment and reprocessing facilities are established in the future in countries that do not have them today, the resulting proliferation risk would be lower if these facilities were owned and staffed under multinational or international auspices. If many countries owned the facility, there would be a higher―though not insuperable―political barrier to the state where the facility was located (the host state) seizing it and using it to produce nuclear weapons material. Moreover, such an approach with international staff working regularly with the host country’s key experts might make it more difficult for those experts to be used to establish covert facilities without any sign of such activity being detected. Furthermore, 47 CERN is the European Organization for Nuclear Research, a center for particle physics research, technology, collaboration, and education founded in 1954. The organization is run by the CERN Council composed of representatives from the 20 member states.

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INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS 51 if such an international-facility regime were in place and widely and successfully used, then if a country decided to begin developing and using these sensitive technologies indigenously, that country’s motivation for doing so would legitimately be subject to closer scrutiny, focused on whether the real purpose was to develop a nuclear weapons option. On the other hand, approaches involving international staffing would have to be carefully structured to avoid the centers themselves contributing to proliferation of critical knowledge of how to build and operate enrichment or reprocessing facilities (see discussion of international centers and technology controls). It may be difficult to convince new states establishing such facilities that they should all be under multinational or international control if existing facilities in major nuclear supplier states remain under purely national control (and even, for facilities in nuclear weapon states, exempted from international inspections). Hence, IAEA Director General ElBaradei has argued that the long-term goal “should be to bring the entire fuel cycle, including waste disposal, under multinational control, so that no one country has the exclusive capability to produce the material for nuclear weapons” (ElBaradei, 2008). Shifting away from purely national control of facilities with the capacity to make large quantities of nuclear bomb material may be particularly important if the world moves toward very deep nuclear arms reductions or a prohibition on nuclear weapons. Vigorous diplomacy and targeted sets of incentives are likely to be needed to convince countries to participate in international centers rather than build their own facilities, or to establish approaches to multinational or international control for new or existing facilities. In principle, existing nationally controlled facilities could be opened to investment and partial ownership, control, and even staffing from other countries without interfering substantially with their existing operations and contracts, in a way that the host countries can control and build confidence in, so there is no need for countries with such facilities to fear that the international community is somehow going to seize control of these plants. Nevertheless, such transitions are unlikely to be simple or easy. It is likely to be many years before anything like Dr. ElBaradei’s vision of a universal regime in which no country any longer has purely nationally controlled enrichment and reprocessing capabilities could be achieved. How to structure a step-by-step effort that provides benefits to world security and appropriate incentives for participation at each step will be a critical question. In addition to its potential benefits, multinational or international control of fuel cycle facilities raises important questions and issues. Questions that will need to be resolved for each center include how key decisions are made, what criteria should make states eligible or ineligible to take part, who gets what share of the profits and losses, who bears what share of the liabilities (such as those for accidents and for nuclear wastes the facilities may generate), how sensitive technologies would be controlled, and how technological improvements would be developed. Choices on these issues have already been made for enterprises such as Urenco, Eurodif, and the Angarsk center. Additional choices will have to be made as these enterprises evolve and additional multinational or international centers are established in the future. In general, any center, whether national, multinational, or international, may require a unified management structure, so that key decisions can be made efficiently. Similarly, any center will have to be regulated appropriately; for Eurodif, Urenco, and Angarsk, the host state where the facility is located has always maintained the authority and responsibility to set and enforce appropriate safety, security, and environmental rules, and this is likely to be the case for future facilities as well.

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 52 A wide range of multinational or international approaches is possible. Variations along several dimensions are particularly important. Control of sensitive technology. In some approaches, only the host state has access to the sensitive technology used at the center. This is the approach taken in the Eurodif consortium and the Angarsk center. In such cases, there would in general be no more danger of technology leakage than there is for purely nationally controlled facilities. In Urenco, by contrast, all of the Urenco partners have access to Urenco’s centrifuge technologies. In principle, in approaches where one partner provides and controls the technology, that partner need not be the state hosting the international facility. For example, new enrichment plants using Urenco centrifuges are scheduled for construction in both France and the United States, with the centrifuges in “black boxes” that the United States and France have no access to; some analysts have proposed that an enrichment plant with multinational ownership and staffing be established in Iran on a similar “black box” basis (Forden and Thompson, 2006). Clearly, if multinational or international centers are to avoid themselves becoming a source of proliferation of nuclear-weapons-related technologies, plans for how the sensitive technologies used at each center will be controlled will be very important. In general, centers with a variety of states participating should limit access to sensitive technologies to personnel from states that already possess these technologies. (See the discussion of technology controls for international centers.) Degree of multinational or international sharing of ownership. In some approaches, the partners might have shares of the ownership and control of the facility small enough that no one partner had control, and all major decisions would require support from several countries. In Eurodif, by contrast, France, the host state, has always maintained majority ownership, so that ultimately France can control all of the consortium’s key decisions. Similarly, Russia has indicated that it plans to maintain a majority of the shares of the Angarsk enrichment center. In these cases, the minority partners may get little actual control of the center, though they do get to share in its profits. Fully international ownership would presumably mean that the actual equity ownership of the facility would rest in the hands of an international organization, and a large number of states within that organization would have to support each major decision. This would include the financial aspects, so that all profits or losses would be internationally shared, and annual budgets would be approved by a board of directors, presumably appointed by the international organization. (The international organization could be an ad hoc organization established solely for this purpose, or could be an existing organization that also exists for other purposes, such as the IAEA.) If an important part of the reason for placing a facility under multinational or international auspices is to increase the international community’s confidence that the plant will not be turned to weapons use, each particular arrangement will have to be reviewed to see if the approach to multinational or international control will meet that purpose; a multinational consortium consisting of several allied states perceived to be bent on developing nuclear weapons, for example, would do little to increase international confidence in the peaceful nature of the facility. National, multinational, or international staffing. As noted above, facilities with a multinational or international staff have both advantages and disadvantages. The advantage is increased transparency in the operations of the facility and the activities of the host country’s experts in that technology, making both covert diversion and construction of covert facilities more difficult to accomplish without detection. The disadvantage is the potential for leakage of sensitive technology to participants on the multinational or international staff who are from countries seeking those technologies (if the staff includes individuals who are not from countries

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INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS 53 that already have all of the relevant technologies). For facilities with key technologies (such as centrifuges) in a “black box,” it would be important to understand whether the knowledge and experience of, for example, cascade operations that the multinational staff would gain would still make an important contribution to a weapons program. In principle, it should be possible to design facilities with important parts of the facility staffed by multinational teams that did not spread any critical fuel cycle knowledge. Along these and other dimensions, centers could be closer to or further from purely national ownership, control, and staffing, and each variation would have somewhat different nonproliferation impacts. A5. What regulatory requirements should be in place in the receiving country to provide assurance of safety and safeguards? If a country is to participate as a “recipient country” in any of the fuel-assurance and fuel take-back schemes under discussion, it is highly desirable that the country have in place laws, regulations, and procedures that meet international norms for safeguards, safety, and physical security.48 Concerning safeguards, all of the proposals now under consideration include a requirement that the recipient country be in full compliance with its international obligations according to the NPT and the IAEA’s safeguards regime. Different countries, however, have entered into different obligations, which may affect their eligibility under different proposed approaches. In some approaches, for example, the recipient country would have to have accepted safeguards on all its nuclear activities, and possibly also the Additional Protocol, to be eligible to participate. In other proposed approaches, countries such as India, which have safeguards on only a portion of their nuclear activities, would also be able to be recipients of assured fuel supplies. At a minimum, the material provided under such an arrangement should itself be under safeguards to assure its peaceful use, and this must be monitored by the national, international, or multinational center that is supplying services. Concerning safety, if the country is operating one or more nuclear power reactors, it is necessary that an effective nuclear regulatory agency be in place, along with a legal framework (laws, regulations) that provides the wherewithal for that agency to perform its work effectively. While the joint committees do not expect that a supplier of fuel cycle services will be required to monitor this aspect explicitly, or to deny such services on the basis that the country does not have an effective regulatory regime, the committee does expect that there will be enough international 48 With respect to safeguards, all nonnuclear-weapon states that are parties to the NPT are required to accept IAEA safeguards on all of their civil nuclear activities, and to have state systems of accounting and control of nuclear materials that are comprehensive and accurate enough to serve as the basis for declarations and inspectors’ checks of the accuracy of those declarations. (Nuclear weapon states and states not party to the NPT are not required to accept safeguards on all their civil nuclear activities, so they do not have the benefit of this international discipline on the quality of their national nuclear material accounting systems; in some cases their domestic standards for the accuracy of nuclear material accounting are quite different from the IAEA’s international standards.) With respect to safety, in most cases recipients would be expected to be participants in the major nuclear safety and nuclear liability conventions, and it is essential that they have an effective nuclear regulatory body in place with the independence, expertise, power, and resources needed to do its job. With respect to physical security, recipients would typically be expected at least to follow the minimal requirements established in the Nuclear Suppliers Group guidelines; many suppliers may call for recipients to meet higher standards, including participation in the Convention on Physical Protection of Nuclear Materials (and its amendment, once it enters into force), and protecting materials and facilities in a manner consistent with IAEA recommendations.

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 54 attention paid to this issue to assure that no country can possess and operate nuclear power plants without it. Several mechanisms for assuring this seem likely. For example, it is unlikely that a reactor manufacturer or vendor would sell a reactor to such a country, nor provide services to it; many companies have accepted the reasoning that a nuclear accident anywhere is a disaster for nuclear power everywhere, and would be especially damaging to the particular vendor’s business. Also, the IAEA would presumably be alert to the situation, and would help to bring international pressure to bear. The IAEA, several of the nuclear suppliers (the European Union, France, the United Kingdom, the United States), and a few other countries have for over a decade been coordinating a broad program of unilateral and sometimes multilateral technical, legal, and training assistance to developing countries in properly establishing and operating a nuclear regulatory agency.49 This program has been quite successful whenever a recipient country has embraced the ideas, which many but not all of them have. The World Association of Nuclear Operators, an industry group, has also played an important role in exchanging best practices and lessons learned and organizing international safety peer reviews. Appropriate nuclear security is another aspect of the overall safety regime that the country’s nuclear regulatory authority would need to assure. Here too, the IAEA, the United States, and a few other countries have been working to assure that each country with weapons- usable nuclear materials or nuclear facilities whose sabotage would lead to serious consequences puts in place appropriate physical protection and material accounting measures, but there is a great deal still to be done, including to convince countries that nuclear theft and sabotage are real threats deserving substantial investment to address. A6. What level of technical personnel are needed, in terms of training and in terms of numbers, to provide adequate confidence that the countries receiving fuel can safely and securely operate their reactor(s)? It is not an appropriate role for an international fuel cycle center to ensure this training and confidence. Substantial experience and knowledge about this question exists in the countries with many nuclear plants (France, Japan, Russia, South Korea, the United Kingdom, and the United States) that can address this question. As with Question A5, this is really not a question that is unique to international centers. A7. What could be the role of the International Atomic Energy Agency in overseeing the transfer, use, and/or return of fuel? For the new international center at Angarsk, this is a question that was being worked out by the IUEC and the IAEA as this NAS-RAS study was being carried out. The United States and possibly other countries hope that arrangements worked out between the IAEA and the IUEC will fulfill nonproliferation and other goals so that they can serve as a model for other centers and fuel reserves to follow in their arrangements with the IAEA. The bylaws of the IUEC say that the IAEA should have a “major role” in the work of the center and that it will be under IAEA safeguards. In particular, it appears that Russia and the IAEA have tentatively 49 One example is a program called CONCERT, begun in 1992 by the European Commission, which established nuclear regulatory cooperation and assistance with countries in Eastern Europe (see http://ec.europa.eu/energy/nuclear/safety/programmes_en.htm; accessed November 26, 2008.).

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INTERNATIONAL NUCLEAR FUEL CYCLE CENTERS 55 agreed that if an IAEA member state in good standing with its nonproliferation obligations suffers an interruption of nuclear fuel supply that it cannot address by other means, it will be able to make a request of the IAEA, which will then be able to draw on the stocks of LEU stored at the IUEC to fulfill the request. Assuming that this arrangement is, in fact, established, the IUEC will become, in effect, the first international fuel bank―though the IAEA is still working to establish one or more additional fuel banks located outside current nuclear fuel supplier states, to further increase states’ confidence that supplies cannot easily be interrupted. In short, for the Russian Federation, the United States, and other countries, the IAEA could serve as an important conduit and buffer between suppliers and recipients in the context of fuel service centers, fuel banks, and other fuel service arrangements. As with the IUEC, the joint committees expect that any center would have IAEA involvement, especially to fulfill safeguards obligations. Such centers need the IAEA to certify that a country meets safeguards and nonproliferation criteria prior to shipment; to oversee shipments to make sure they meet international standards for physical protection, safeguards, and safety; and to inspect safeguards for the facilities while the fuel is in the recipient country. A8. What changes in laws and regulations in the countries sending, consuming, and receiving spent fuel would be required to implement an international assured fuel cycle concept? The internationalization of the fuel cycle will require new laws and regulations in both countries hosting such centers and in countries using the centers. In some cases these will be new laws to address new issues raised by the international or multinational aspects of the agreements. In other cases, laws do exist but they differ from country to country, so that either new laws or revisions to existing laws must be made to arrive at a common basis. In addition there are several different concepts for internationalization, some with varying contract commitments, depending on the needs and desires of the various countries involved. As a result, it is not possible to identify generic changes that apply universally. Russia has modified several laws to enable the establishment of the IUEC and other international centers. In particular, changes to the law have made it possible for entities other than the Russian government (including foreigners) to be partial owners of nuclear facilities; modified restraints on foreign access to Angarsk; placed Angarsk on the eligible list for safeguards under Russia’s voluntary offer agreement with the IAEA; and made it possible to import foreign spent fuel for storage or reprocessing in Russia. In 2001, the State Duma, the lower house of the Russian parliament, approved a set of bills and amendments to the laws adopted earlier. The functions and objectives of and the enforcement procedures for such laws are as follows. 1. The law permitting import of spent fuel to Russia authorizes import of spent fuel to Russia for reprocessing and long-term storage at controlled sites. Spent fuel generated from nuclear fuel of Russian origin will be imported for the purposes of reprocessing and long-term storage at controlled sites, with an option (assurance) for permanently keeping in Russia all kinds of radioactive waste and fissile materials. Decisions to keep radioactive waste and fissile materials in Russia in cases where the spent fuel is from nuclear fuel of Russian origin will be made by the Russian Federation government in the form of an intergovernmental agreement. Spent fuel from nuclear fuel of foreign origin may also be imported to Russia for reprocessing and long-term storage at controlled sites, provided, however, that the requirement for repatriating

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INTERNATIONALIZATION OF THE NUCLEAR FUEL CYCLE 56 the radioactive waste be given priority. A special committee of members equally representing the Russian government, the State Duma, and the Federation Council will make a decision on importing any spent fuel of foreign origin, and such decision is to be approved by the President of the Russian Federation. Academician Nikolay P. Laverov is currently chairing the committee. 2. The law on dedicated environmental foundations requires that in cases where spent fuel of any origin is imported to Russia, part of the proceeds from such activities be mandatorily redirected to finance specific projects developed for improving the environment in the regions where such activities occur. The provisions of the laws listed above are currently applied to the import into Russia of spent fuel from the research reactors that were built in eastern European countries (under the Soviet Union) or the Commonwealth of Independent States and then loaded with Russian nuclear fuel. Since 2001, no spent fuel not of Russian origin has been imported. There are many laws and regulations that would need to be revised to reduce barriers to proliferation threat reduction. One important constraint in U.S. law and policy relates to management of spent fuel that has U.S. obligations attached to it under the Atomic Energy Act (AEA) of 1954, as amended and revised. This includes fuel that was mined, enriched, or fabricated in the United States, or irradiated in a reactor with major components based on U.S. technology. Under the AEA, countries with such fuel may not transfer it to other countries without U.S. permission, and the United States cannot legally give its permission unless it has a civilian nuclear cooperation agreement (known as a 123 agreement, referring to the relevant section of the AEA), with the country where the fuel is to be shipped. Hence, international centers for spent fuel management would not be able to handle U.S.-obligated fuel―representing a substantial portion of the world’s stock of spent fuel―unless the United States had a 123 agreement in place with the country where the center was located, and a policy of approving the transfers. The United States and Russia have recently negotiated such an agreement (see Appendix D), but as of 2008 it had not entered into force, and some members of U.S. Congress were arguing for delaying or blocking its implementation. Such an agreement would be necessary for a future international center for spent fuel management to be able to operate effectively in Russia. Politically the United States is unlikely to be able to take back spent fuel itself for many years to come. Under U.S. law, such take-backs would require congressional approval, though they are not prohibited in principle. Such approval is unlikely to be forthcoming, except in special cases such as the ongoing return of irradiated research reactor fuel, which is part of a program to reduce proliferation risks by eliminating HEU from as many research reactors as possible. See Section B6 and Finding 12 for more on this topic. Finding 7 Safeguard arrangements, fuel transfer processes, and return of spent fuel provisions are only a few of the complex legal issues that must be resolved if fuel assurance, fuel take- back, and multinational or international fuel center programs are to be effective. Recommendation 7 The IAEA should lead an international effort to identify these legal questions and options to be considered. The IAEA should also convene countries to reach agreement on preferred solutions.