KSA: OUTLIERS AND FIREWALLS

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The recent attention given to a U.S. Congressional report, and especially its allegations of secrecy and potentially illegal actions concerning individuals close to President Donald Trump, raises the question whether advisers to the President could engineer the export of nuclear power reactors to the Kingdom of Saudi Arabia (KSA) or another foreign destination outside the requirements of U.S. statutes and behind the backs of lawmakers.

Based on information brought to light in this affair so far, the answer in my view is almost certainly no. Individuals advocating exporting nuclear items to the KSA, whose activities are the focus of the Congressional report, could not have escaped the obligations of the U.S. Atomic Energy Act (AEA). Moreover, they appear to have been outliers, having no business relationship with, or endorsement from, the private industry firms whose know-how would have to be the basis of any U.S. nuclear power plant export to the KSA or elsewhere.

Two months ago Democrats on the U.S. House of Representatives “Committee on Oversight and Reform” released an “interim report” documenting efforts by individuals close to the President to sell “sensitive nuclear technology” to the KSA. Having suggested that the activities it described were secret and may have been illegal, upon release the document captured the attention of the U.S. major media. Thereafter, the report’s contents were boiled down in social media and the international press, where in some cases it was suggested that the United States was about to embark upon clandestine and unlawful foreign nuclear cooperation.

The backbone of the Congressional narrative was not news; for three years it had already been established that two firms, ACU and IP3, working with personalities known to or close to the President, including Trump adviser Michael Flynn, tried to convince the White House it should back a scheme to sell nuclear power plants—first Russian, then Chinese, and then finally American reactors—to the KSA and to other states in the Middle East.  

Under U.S. law, a foreign country that is the intended destination of a nuclear power plant exported by a commercial entity in the United States needs, as a prerequisite, an “agreement of cooperation,” a so-called “123 Agreement” with the U.S. At issue is Section 123 of the U.S. Atomic Energy Act, (AEA) as amended in 1954, pertaining to “Cooperation with Other Nations.” Section 123 sets forth that such an agreement includes nine nonproliferation conditions that a foreign country must meet. Whether a country satisfies these is a judgment based on an internal U.S. government assessment. So far, the KSA does not have such an agreement with the U.S.

Congress and Technology

The House report in several instances refers to the export of “nuclear technology” in a manner that inaccurately describes the scope of possible U.S. nuclear exports to the KSA and, in light of information revealed after the release of the report, might also mislead lay readers about the extent of Congressional oversight concerning what U.S. firms and U.S. government agencies may and may not do in pursuit of nuclear trade opportunities with a foreign nuclear program.

In its attention-grabbing mise en scène, the House report repeatedly refers to U.S. entities possibly supplying “sensitive nuclear technology” to the KSA. That would be truly an alarming development because “sensitive nuclear technology” (SNT) in official US nuclear trade and nonproliferation parlance specifically refers to technology for uranium enrichment and separation of plutonium that can be used for the production of nuclear weapons. Deeper into the document, it becomes clear that what’s at issue here is not assistance provided for enrichment or reprocessing but the sale of nuclear power plants to the KSA by U.S. industry. That prospect has been under consideration by vendor firms and government agencies for several years including under the Obama Administration.  

The House report in one instance does concern itself with sensitive nuclear technology (in fact without specifically referring to it as such), in the context of a possible future determination by the U.S. government “permitting Saudi Arabia to enrich and reprocess as part of a deal that would allow Westinghouse Electric Co. (WEC) and other American companies to build nuclear reactors” in the KSA. That formulation left out the critical distinction that a determination by the U.S., pursuant to a 123 Agreement, not to compel the KSA to forego its future options to enrich or reprocess would, under terms routinely governing U.S. bilateral nuclear cooperation with foreign countries, for sure obligate the KSA to obtain the prior consent of the United States to enrich or reprocess any U.S.-obligated nuclear materials (essentially, any nuclear fuel supplied by U.S. entities or used in a nuclear installation supplied under U.S. government licenses). The language “permitting Saudi Arabia to enrich and reprocess” may suggest erroneously to lay readers that the U.S. would be complicit in any future enrichment or reprocessing by the KSA. Beyond this and separately, it remains an open question whether Washington would impose upon the KSA additional conditions for nuclear cooperation concerning Riyadh’s future nuclear fuel cycle options.

KSA and Part 810

In the wake of the release of the House document, it has become known through media reports that U.S. companies pursuing nuclear power plant business in the KSA have been awarded seven authorizations by the U.S. Department of Energy (DOE) under so-called 10 C.F.R. Part 810 regulations. These rules specifically govern export and re-export of unclassified nuclear technology and assistance to foreign countries. It is usual practice for companies embarking upon negotiations with a foreign nuclear program to request such authorizations to be able to share restricted information concerning the items that may be transferred.

There is an interagency process for the award of these authorizations, whereby DOE must consult with the Department of Commerce, the Department of Defense, and the Nuclear Regulatory Commission, and concur with the Department of State. It would appear that, contrary to hasty media reporting suggesting that DOE may not have consulted one or more of these agencies prior to the award of Part 810 authorizations to the KSA, in these cases the interagency consultative process was in fact followed.

Following headlines in media reports, some lawmakers accused DOE of having made “secret” authorizations and withholding cooperation with Congress. Lay readers of the House report may well have drawn that conclusion, having read that “Under Section 123 [of the AEA] the U.S. may not transfer nuclear technology to a foreign country without the approval of the U.S. Congress.” With regard to DOE’s actions, this statement does not apply and is potentially misleading because neither a 123 Agreement nor Congressional approval are prerequisites for the award of a Part 810 authorization by DOE. Independently of these facts, on April 10, U.S. lawmakers introduced legislation to amend the AEA to compel the Executive Branch to divulge to Congress details of Part 810 authorizations for transfers to foreign countries.

What’s the danger?

In December 2017, Mieke Eoyang and Laura Holgate, a former U.S. ambassador to the IAEA and an Obama appointee, published this blog post 
to explain “Why Flynn’s Nuclear Advocacy was so Dangerous.” They gave three reasons: 1.) General Flynn, as former National Security Adviser, may have persuaded Trump to tilt U.S. policy toward Russia in support of their private business interests; 2.) Flynn was advocating on behalf of foreign nuclear power industries; and 3.) While advocating nuclear trade with the KSA, Flynn was urging Trump to walk away from the JCPOA, a decision that would contribute to destabilizing the Middle East.  These are all serious objections. It is notable that Eoyang and Holgate did not include in their list of “dangers” that Trump might open the road for nuclear commerce with the KSA by short-circuiting U.S. law including the requirements under AEA Section 123.

Indeed, for anyone seeking to enlist the U.S. President to export power reactors anywhere, Section 123 looks like a solid firewall. Whether or not the KSA’s lobbyists and lawyers convince Trump and the Congress to conclude an agreement for peaceful nuclear cooperation with the KSA that would not deprive Riyadh of its future option to deploy reprocessing and enrichment technology, the result of bilateral atomic diplomacy will not be a “secret nuclear deal” between Trump and the KSA, since a negotiated 123 Agreement must be put before the Congress for its consideration.

That said, Trump could elect to suspend any of the nine nonproliferation conditions specified for 123 Agreements by the AEA, and/or include unique provisions. To date, with the singular exception of India discussed below, the U.S. has never concluded a 123 Agreement in which any of the nine nonproliferation conditions were suspended by the President. Were Trump to do this in the case of the KSA, the Congress would have to affirmatively approve it for the agreement to go into effect. With this in mind, lawmakers are currently considering increasing Congressional authority governing future approval of proposed 123 Agreements.

IP3-Industry Disconnect

In addition to a 123 Agreement, for a company like IP3 to make headway and participate in a nuclear power project in the KSA or elsewhere, it would also need the cooperation of U.S. private industry exporting nuclear power plants.

Long before Trump’s election, personalities that set up ACU, the forerunner of IP3, first flogged the idea in Washington that nuclear power vendor companies build scores of power reactors in the Middle East and take back the spent fuel. In the U.S. they generated some interest from firms selling engineering, enrichment, and nuclear fuel-related services, but they got very limited traction in U.S. government circles. After Trump’s election, IP3 reached out to U.S. industry concerning its ambition to sell American-design nuclear power plants to the KSA. Some nuclear firms in early 2017 told Saudi Crown Prince Mohammad Bin Salman they were interested in an IP3 scheme for a Middle East “Marshall Plan.”

But what did IP3 and its advisers have to contribute to a nuclear power plant export project?

The main focus in U.S. industry for potential nuclear sales to the KSA is WEC, working with a consortium of dozens of firms. According to sources, WEC was enlisted by IP3 in late 2017 to include IP3 in its projects, but WEC management never endorsed IP3’s nuclear export scheme and it never included IP3 in its business plans. IP3 persisted, and in February 2019 set up a meeting—referred to in the House report—between Trump and nuclear power companies. According to sources, IP3 also offered to prepare a report after that meeting and then convene a follow-up meeting in about three months, assuring that it would remain in the picture for U.S. industry doing nuclear business in the KSA.

Independent of IP3’s own interests in getting involved in a nuclear power project in the KSA, executives from vendors in the power reactor sector accepted IP3’s offer to convene a meeting with the President. In light of dim global prospects for nuclear power plant sales–and especially in the teeth of competition from state-owned vendors in China and Russia—CEOs acted on wishful thinking that if they were to put their case for nuclear power sales to Trump in person, as one industry executive said, “they would get results.” Ultimately, U.S. private industry firms would have to carefully consider their shareholder obligations and potential liability in any case where impropriety allegations might be raised. Given that White House staffers had in this instance warned about potential conflicts of interests under U.S. law, industry executives may have been deterred by risk considerations from including IP3 in their plans. WEC did not conclude that IP3 could add value to WEC’s own efforts to sell power reactors to the KSA and according to sources, sometime after the February meeting, the IP3 effort was put to rest.

The Example of India

Executive Branch personnel in this case also expressly informed inexperienced would-be nuclear exporters about the requirements for a 123 Agreement. Similar advice was given by the State Department in a previous case. Not long after the November 2000 U.S. election, aides of President-Elect George W. Bush prepared to set the stage for a plan to upgrade U.S.-India relations by exporting nuclear power plants to India. To move this project forward on short order, advocates briefed officials in the Department of State about their aims. According to sources, U.S. diplomats explained right off the bat that because the U.S. was a party to the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), U.S. industry could not export nuclear power plants to India, an NPT non-party, without first changing U.S. law. Until then, according to sources, some leading personalities in the Bush transition team were unaware that the NPT stood in the way of making a snap change of U.S. policy in India’s favor.

“Friends of India” in the incoming Bush administration had no choice but to comply with the requirements of U.S. statutes in order to permit U.S. industry to export nuclear equipment to India. After seven long years, they succeeded, having concluded a unique 123 Agreement with India, and having obtained the consent of world’s nuclear exporters to make an exception to rules of the Nuclear Suppliers Group that virtually ban nuclear exports to the Subcontinent.

If there is to be nuclear cooperation between the United States and Saudi Arabia, it will likewise not come about as a consequence of a fast-track arrangement secured behind the scenes by people who claim to have access to President Trump. There will be a process that looks like what industry and government have followed in past cases. There will be Congressional involvement and interagency consultation. There will be requirements concerning U.S. national security and nonproliferation. And in the case of the KSA, the deliberations of IP3 and its advisers, documented in the House report and elsewhere, appear rudimentary and unconnected with actions undertaken on a separate and parallel track by U.S. technology holders in industry to organize a bona fide nuclear power plant export project.