Overview of Nuclear Export Policies of Major Foreign Supplier Nations

Published by the Government Accountability Office on 1977-10-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          DCCUMENT FSUME
03705 -   B2994241]

Overview of Nuclear Export Policies of Major Foreign Supplier
Nations. ID-77-60; 9-181963. OctobEr 21, 1977. 19 pp. + 5
appendices (41 pp.).
Report b Charles D. Llylander (for J. K. Fasick, Director,
International Div.).
Issue Area: International Economic and Military Programs:
    International Security Through Controls Over Weapons and
    Destructive Elements (607).
Contact: International Div.
Budget Function: International Affairs: Conduct of Foreign
    Affairs (152).
Organizaticn Concerned: Department of State; Energy Research and
    Development Administration; Nuclear Regulatory Commission;
    Export-Import Bank of the United States.
Congressional Relevance: House Committee on International
    Relations; Senate Committee on Foreign Relations.
Authority: Atomic Eergy Act of 1954, as amended (41 U.S.C.
    2011). Energy Reorcanization Act of 1974 (.L. 93-438).
    Export Administration Act of 1969, as amended. Federal
    Atomic Fnergy Ccntrol Act [of] 1946.

          A study of the peaceful nuclear export policies of
 major foreign supplier nations indicated that the United States
faces inreased competition from foreign suppliers. The United
 States and other supplier nations have reassessed their nuclear
export programs and established the Nuclear Suppliers Group.
 Member nations have adopted some principles as a matter of
national policy of future nuclear exports. There are no required
international standards for the physical protection of nuclear
material and equipment, and although foreign suppliers have
procedures for regulating nuclear exports, in ost cases they
have no independent regulatory agencies similar to the U.S.
Nuclear Regulatory Commission.   Findings/Conclusions: In recent
years, the U.S. share of the available nuclear export market has
decreased markedly. U.S. suppliers received 851 of such orders
through 1972, but during the next    years the U.S. share dropped
to 42%. France and West Germany are the leading foreign
suppliers of light-water reactors. Japan has a strong domestic
nuclear industry and the potential to beccme an important
nuclear exporter. Canada exports heavy-water reactors, heavy
water, and uranium. he British have been much more successful
in the field of nuclear fuel services than in the export of
reactors. Among the principles adopted by naticns comprising the
Nuclear Suppliers Group are: to apply International Atomic
Energy Agency safeguards to exports; to prohibit recipients
using assistance for any nuclear explosions; tc require physical
security measures by recipients on nuclear equipment and
materials; to encourage multinational regional facilities for
reprocessing and enrichment; and to take special care in the use
or retransfer of sensitive material, equipment, and technology.
   ·s%~,             STUDY BY THE STAFF
                           OF THE

            Overview Of Nuclear Export
            Policies Of Major
            Foreign Supplier Nations
           The United States faces increased competition
           fror foreign nuclear uppiier, includ!ng West
           Ger nny, France, the United Kingdom,
           Can,, and, possibly, in the near future, Ja-
           pan. Ti is general overview shows the differ-
           ences and similarities in foreign nuclear sup-
           plier export requ;rements. It is based on sum-
           maries furnished by the Department of State
           covering the nuclear export policies and pro-
           cedures of the major foreign supplier nations.

           ID774o                                           OCTOBER 21, 1977
                                 WASHINGTON, D.C.   20B48



               This study of the peaceful nuclear export policies
          of major foreign supplier nations was made with the view
          that it would be helpful in considering actions to curb
          further nuclear weapons proliferation. Although we were
          able to develop general information on foreign atomic
          energy programs, inquiries at the Department of State,
          Energy Research and Development Administration, Nuclear
          Regulatory Commission, nd Export-Import Bank of the
          United States, showed that much of the detail informa-
          tion on the policies of foreign supplier countries was
          not readily available in Washington.
               State Department officials requested that we con-
          duct our study without contacting foreign groups or
          governments because international nuclear export policy
          talks were entering an especially intense and critical
          phase. They believed that any contacts outside of
          established diplomatic channels during this period
          could be misunderstood and complicate the U.S. negoti-
          ating task. It was proposed that we submit specific
          inquiries to the Department which would supply avail-
          able data from U.S. sources and do its best to obtain
          other desired information from foreign governments as
          necessary and appropriate.

               In response to our specific request, the State
          Department furnished summaries of the peaceful atomic
          energy activities of West Germany, France, the United
          Kingdom, Canada, and Japan, as developed by the U.S.
          Embassies.   (See apps. I througn V.) These summaries
          serve as the basis for our comparison of U.S. and for-
          eign nuclear export policies and procedures. Because
          of the sensitivity of this issue, we did not verify
          the accuracy and completeness of the information con-
          tained in the summaries.
               This general ovk       ?w of the differences and simi-
          larities of the polici           procedures of major nuclear
          suppliers may be usefu          he executive agencies and
congressional committees dealing with U.S. nuclear policy.
Therefore, we are sending copies to the Secretaries of
State and Energy; Chairman of the Nuclear Regulatory
Commission; Director of the Arms Control and Disarmament
Agency; and Chairmen of the Senate Committees on Foreign
Relations and Governmental Affairs and the House Committee
on International Relations.

                   Con tents

SUMMARY                                             1

           SUPPLIER NATIONS                        3
             Organizational responsibilities       3
             Export activities                     4
             Uranium enrichment technology         6
             Reprocessing technology               7
             Fast breeder reactor technology       7
             Statutory requirements and agree-
               ments for cooperation               9
             Regulatory and licensing functions   11
             Retransfers of nuclear material,
               equipment, and technology          12
           AND PHYSICAL SECURITY                  14
             International safeguards             14
             Physical security                    16


           Peaceful Nuclear Export Policies of
             the Federal Republic of Germany      20
  II       Peaceful Nuclear Export Policies of
             the Government of France             29
 III       Peaceful Nuclear Export Policies of
             the United Kingdom                   40
  IV       Peaceful Nuclear Export Policies of
             the Government of Canada             47
  V        Peaceful Nuclear Export Policies of
             the Government of Japan              54

AECL      Atomic Energy Agency of Canada Limited
BFCE      Banque Francaise du Commerce Exterieur
CEA       Commissariat a L'Energi Atomique
COPACE    Compagnie Francaise d'Assurance pour
            le Commerce Exterieur
ERDA      Energy Research and Development
EURATOM   European Aomic Energy Community
GAO       General Accounting Office
IAEA      International Atomic Energy Agency
KFW       Kreditanstalt fuer Wiederaufban
NPT       Treaty on the Non-Proliferation of
            Nuclear Weapons
NRC       Nuclear Regulatory Commission
UKAEA     United Kingdom Atomic Energy Authority
     Tne United States no longer has a monopoly on the
supply of nuclear material, equipment, and technology.
Other nations have developed the capability to compete
in the expanding worldwide commercialization of nuclear
power. In recent years the U.S. share of the available
nuclear export market has decreased markedly. According
to the nuclear industry, U.S. suppliers received 85 per-
cent of such orders through 1972 but during the next
3 years the U.S. share dropped to 42 percent.
     The United States has been the world's dominant sup-
plier of enriched uranium services. But in 1974 it had
to suspend the signing of long-term enrichment contracts
because of its limited enrichment capacity. Other nations
and groups of nations continued to develop teir own
enrichment capability, and although the administration
is pposing to reopen the order books for enrichment
services, as these nations bring their own commercial-size
enrichment plants online, the U.S. share of the interna-
tional market could be reduced.
     In recent years there has been a growing worldwide
awareness of the inherent risks to world security posed
by the continued expansion of peaceful nuclear technology.
Following India's test in 1974, the United States and
other supplier nations reassessed their rclear e:.port
programs and established the Nuclear Suppliers Group. 1/
The principles adopted by the member nations as a matter
of national policy on future nuclear exports include:
      -- Provisions for applying International Atomic
         Energy Agency safeguards to exports of material,
         equipment, and technology.
      -- Prohibitions against recipients using assistance
         for any nuclear explosions, including those for
         "peaceful purposes."

      -- Requirements for physical security measures by
         recipients on nuclear equipment and materials.

1/   Group of countries originally consisting of the
     United States and six other nuclear suppliers who,
     in January 1976, notified one another of their
     intentions to unilaterally follow certain common
     nuclear export policies. Eight other nations
     subsequently have joined.

    -- Application of restraint in transferring sensitive
       technologies, such as enrichment and reprocessing.

     -- Encouragement of multinational regional facilities
        for reprocessing and enrichment.
     -- Special conditions governing the use or retransfer
        of sensitive material, equipment, and technology.
     The Group's discussions about strengthening interna-
tional safeguards, physical security, and controls over
sensitive technologies are an important step in the devel-
opment of more stringent international nuclear export
policies.  However, the guidelines agreed to are only
a framework for international nuclear cooperation, and
individLal countries are free to establish and implement
their international nuclear programs within this framework.
     Knowing what requirements other supplier countries
place on their nuclear exports can be very helpful in the
reassessment of U.S. non-proliferation precautions. Thus,
the following hapters contain information on the suppliers'
nuclear export programs and the specific nuclear export
pclicie, and procedures: laws, regulations, and interna-
tional agreements governing each supplier's international
peaceful nuclear cooperation activities.

                        CHAPTER 1
                  SUPPLIER NATIONS
     For years, foreign government interests in atomic
energy have focused primarily on developing strong
domestic nuclear energy programs.   ecently, however,
a number of foreign countries have developed nuclear
energy to the point where they are now exporters of
nuclear commodities, including light-water and heavy-
water reactors. Enriched uranium fuel is also becoming
available from foreign sources as countries develop in-
digenous enrichment capabilities using gaceous diffusion
and the new gas centrifuge technologies. Additionally,
breeder reactor research outside the United States is
continuing to move ahead, hich could provide an dvant-
age in the ultimate commercialization of such reactors.
To put these foreign activities in better perspective,
the following sections present a broad overview of the
domestic and international nuclear programs in West
Germany, France, the United Kingdom, Canada, and Japan.
     Atomic eergy activities in the supplier nations are
cazried out through the interrelationship of various
departments and agencies established by the central govern-
ments. France's Commissariat a L'Energi Atomique (CEA),
the United Kingdom Atomic Energy Authority (UKAEA), nd the
Atomic Energy Agency of Canada Limited (AECL), which are
similar to the former U.S. tomic Energy Commission, have
been established to coordinate nuclear research and devel-
opment activities in their rspective countries. West
Germany does not have a national atomic energy agency,
and its Ministry for Rese&rch and Technology is responsible
for nuclear energy research and development. In Japan,
nuclear research and development activities are carried
out by five semi-governmental organizations which receive
their funding from the government and private sources.
     The West German Ministry of Economic Affairs is
responsible for issuing nuclear export licenses, and
customs authorities under the Ministry of Finance enforce
the license requirements.  In France, export permits are
issued by te Ministry of Finance after consultations
with other government agencies, including the CEA. All
Canadian export permits are granted by the Department
of Indistry, Trade and Commerce; however, nuclear export

permits are issued orly with the concurrence of the
Atomic Energy Control Board. The Department of Trede
in the United Kingdom is responsible for export con-
trols imposed on nuclear-related euipment and mater-
ials. Japan, on the other hand, is not now a signifi-
cant nuclear exporter, and has no specific regulatory
and licensing criteria for this type of export.


     Atomic energy export competition is most intense
for equipr=.l comprising the basic nuclear reactor plant.
Countries producing nuclear fuel in excess of their
needs--fuel available for export--are few. However, this
could change as oreign enrichment plants come online.
      France and West Germany are the leading foreign
suppliers o light-water reactors. France's first
reactor export went to Belgium in 1969. In 1974, Belgium
ordered two additional reactors, and in 1976 South Africa
ordered two units and Iran submitted a Letter of Intent
to purchase two. Future French program plans call for
selling two to four nucl3ar reactors a year to other
 -ountries. Framatome, the primary light-water reactor
manufacturer in France, achieved its technological and
product on capabilities through licensing arrangements
with a U.S. company.

      In 1976, France became involved in a controversial
deal with Pakistan to supply nuclear reactors and a
reprocessing plant for separating plutonium from the used
reactor fuel. The United States has strongly protested
this arrangement because the size of the Pakistan nuclear
program does not justify a reprocessing plant and the sale
would provide the potential for another -ountry to develop
atomic weapons. Although the French have officially
stated they would not cancel their deal with Pakistar,
there have been signs that France is slowing delivery of
essential plans for the construction of the reprocessing
plant. Since the contract with Pakistan was signed, the
French Government has established a new policy barring
any more such sales.

     West Germany has exported 1G reactors to date.
General data on total 1974 West German nuclear exports
indicate their value at approximately $70 million, about
$44 million of it for reactors, fuel elements, and source
and fissionable materials. Source and fissionable mater-
ials exports go primarily to common market countries

through the European Atomic Energy Community (EURATOM).1/
The dominant reactor manufacturer is the raftwerk Union,
which builds reactors for domestic use as well as for
     There is little data on other West German nuclear
exports except for the Brazilian deal which has a potential
value of $4 billion. Strong protests were raised by the
United States over this deal because the contract includes
sensitive enrichment and reprocessing technologies. In
June 1977, West Germany issued a statement, similar to the
French statement after the Pakistan deal, to the effect
that future exports of controversial nuclear technology
which could be used to make atomic weapons would be
halted. However, the West German statement reaffirmed
the decision to fulfill the existing contract with Brazil.
     Canada's nuclear industry depends on the export of
CANDU (heavy-water) reactors, heavy water, and uranium
to maintain its competitiveness in the international
nuclear trade market. Although figures are not readily
available on CANDU reactor sales, the U.S. Department of
State etimates that such sales will approximate $200 mil-
lion annually from 1976 through 1981.   Canada also exports
about 5,000 to 7,000 tons of uranium  concentrate a year.

     Except for small research and training reactors,
the United Kingdom has been unable to break into the
commercial export market dominated by the United States,
West Germany, and other countries which adhere to light-
water reactor designs. The British have been much more
successful in the field of nuclear fuel services, such
as uranium enrichment and reprocessing, as carried out by
British Nuclear Fuels Limited, a commercial offshoot !)f
the UKAEA.

     Up to the present time, Japan's nuclear exports have
consisted of radioisotopes for medical and diagnostic pur-
poses and nuclear equipment for industrial use.   Its first
potential major nuclear export may be light-water  reactor
components for the Soviet Union. Japan has a strong do-
mestic nuclear industry and the potential to become an
important nuclear exporter.

1/   Composed of Belgium, Denmark, France, West Germany,
     Ireland, Italy, Luxembourg, the Netherlands, and the
     United Kingdom, and established in 1957 to "create
     conditions necessary fcr the speedy establishment
     and growth of nuclear industries" in member countries.


      The European suppliers and Japan have agreed to
 exeLcise restraint in future exports of uranium enrich-
 ment technology, but several are moving ahead with plans
 to enhance their own enrichment capability.  Canada is
 not in the business of enriching uranium.

     France has an extensive uranium enrichment construc-
tion program underway which provides for partial foreign
ownership in return for a proportional share of the pro-
duction of the facility.  Initial production of 2.3 million
separative  ork units 1/ is scheduled for 1979 from EURODIF
I 2/ which will have an estimated annual capacity of
million separative work units by 1982. EURODIF II, 3/ with
an expected 5 million separative work units capacity,
begin initial production in 1984.

     West Germany, the United Kingdom, and the Netherlands,
participate i  URENCO, a centrifuge enrichment organization
which has two pilot plants operating in the Netherlands
one in the United Kingdom.  Current enrichment capacity for
these plants totals about 75,000 separative work units.
The United Kingdom dlso operates a diffusion enrichment
plant at Capenhurst for its nuclear power program.

     Japan is also seeking to diversify its source of supply
for enriched uranium through the development of a centrifuge
enrichment process.  Two small centrifuge test facilities
are already operational and are providing operating data
necessary to construct a pilot centrifuge enrichment plant
scheduled for completicn in the early 1980s.  A full-scale
production facility is expected to supply a significant
tion of Japan's enriched uranium requirements in the

1/   Measurement of the efforts required to separate
     uranium into a product containing the desired concen-
     :ration of the isotope U-235.

2/   EURODIF I, a joint venture of France, Italy, Belgium,
     Spain, and Iran, is building a gaseous diffusion
     enrichment plant in France.

3/   EURODIF II is a joint venture of EURODIF I,   (which
     has a majority ownership), France and Iran.


      The only commercial reprocessing plant in the world
for light-water reactor fuel is a small facility located
 in La Hague, France, However, the weapons countries all
have noncommercial reprocessing plants and several coun-
tries reprocess spent fuel from other types of reactors.
The La Hague plant is under the auspices of United Repro-
cessors, a company composed of France, West Germany, and
the United Kingdom, which reprocesses spent reactor fuel
on a commercial basis. Reprocessing capacity at La Hague
will reach 400 tons per year *in 1978; 800 tons per year
by 1981; and, after planned expansion, 1,500 tons per year
by early 1990.

      At its Windscale facility, the United Kingdom has
operated a plant to reprocess natural uranium fuel since
3964.   However, its reprocessing plant for light-water
reactor type fuel operated only from 1972 to 1973. Plans
for a ne; commercial reprocessing facility for use in the
1980s are currently a subject of'public debate; however,
design and development work is proceeding.

     The West German pilot reprocessing plant at Karlsrhue
has a capacity of about 40 tons a year and additional
capacity is expected to be completed by 1985. Janan's
first reprocessing plant, with a capacity of 210 tons
year, has been built by French and Japanese firms and ais
scheduled to begin operating in 1977. Because of the
limited capacity of this plant, Japan plans to construct
a second nuclear fuel reprocessing plant with a capacity
of 1,500 tons a year to begin operating around 1985.

     Japan's plans to begin reprocessing operations
initially encountered problems as a result of President
Carter's position opposing reprocessing for the imme-
diate future. A joint U.S.-Japanese team of scientists
was tasked to study the situation.  It has been recently
reported that under a tentative agreement, Japan would be
permitted to reprocess U.S.-supplied spent fuel for 2
years. To date, specific details on the agreement have
not been announced.

     Despite opposition by the United States to the
commercial development of plutonium-fueled fast breeder
reactors, there has been little indication that other
countries heavily involved in breeder research and

development are pulling back.  In fact, it was reported
that France, West Germany, and three other European
nations recently signed a series of accords for joint
research and marketing of fast breeder reactors.

     The French breeder research and development program
is the largest single program in the CEA's civil sector,
overshadowing even the French uranium enrichment program.
The breeder program has been organized into three construc-
tion stages--the experimental Rapsodie reactor which bgan
operation in 1967, the demonstration Phenix reactor which
was brought to full power in 1974, and the commercial-size
Super Phenix which the French hope to complete by 1979.
     The fast breeder reactor is also important in West
Germany's nuclear power program. The German fast breeder
project was started in 1960 and currently centers around
the construction of a 300-megawatt prototype breeder re-
actor, the SNR-300, which is jointly financed with Belgium
and the Netherlands (15 percent each). Construction of
this reactor started in early 1973 and is expected to
be completed in 1980, with full power operation in 1981.

     Other suppliers, except Canada which does not now
reprocess spent fuel, are conducting extensive fast
breeder reactor research and development programs. The
United Kingdom has completed construction of an inter-
mediate-size demonstration reactor and a full-scale
demonstration unit is scheduled to begin operating in
1984 or 1985. Fully commercial breeders are not expected
until the late 1980s, at the earliest. Also, to meet
increasing energy requirements, Japan is developing a
fast breeder reactor which is scheduled for introduction
on a commercial basis in the late 1980s.

                         CHAPTER 2

     Peaceful nuclear cooperative activities of the major
foreign supplier nations are generally carried out within
statutory frameworks similar to the U.S. Atomic Energy Act
of 1954, as amend.d (42 U.S.C. 2011). Foreign suppliers
also have established procedures for regulating or con-
trolling nuclear exports although, in most cases, they
have no independent regulatory agencies similar to the
U.S. Nuclear Regulatory Commission.

     The basis for U.S. participation in an international
nuclear cooperative program is the Atomic En rgy Act of
1954, as amended. The act authorizes the U..ted States
to enter into agreements for cooperation in the civil
uses of atomic energy with other nations to share the
peaceful benefits of nuclear energy. In return for U.S.
cooperation, each nation or group of nations guarantees
that U.S. assistance will not be used for nuclear
weapons development.

     The Energy Reorganization Act of 1974 (Public Law
93-438), abolished the Atomic Energy Commission and trans-
ferred its licensing and regulatory functions to the newly
created, independent Nuclear Regulatory Commission (NRC),
including licensing for peaceful nuclear exports. NRC
must now decide whether an export would be detrimental
to the comlcn defense and security of the United States.

     All foreign nuclear suppliers, through various laws,
decrees, ordinances, or circulars, have established stat-
Ltory frameworks governing nuclear cooperation with reci-
pient nations. These countries generally use formal
agreements to identify the parameters and responsibilities
of cooperation with other countries.

     West Germany has many general agreements providing
for international scientific and technological coopera-
tion which, in many cases, would permit nuclear coop-
eration under specific agreements negotiated separately.
Typically, West Germany would require a specific agree-
ment for cooperation before authorizing the export of

significant nuclear material, equipment, an technology.
At the present time, outside the Common Market 1/, such
agreements exist only with Brazil and Iran.

     France currently has bilateral agreements with 13
individual nations. In practice, it requires bilateral
agreements covering safeguards and conditions for the
sale of nuclear material and sensitive technologies.
According to the U.S. Department of State, these agree-
ments appear to be fully compatible with the export
policy guidelines of the Nuclear Suppliers Group.
     The United Kingdom generally conducts its inter-
national nuclear cooperation without entering into formal
agreements. One exception noted in our analysis of inf.r-
mation furnished by the Department of State was an agree-
ment with Romania which was necessary to satisfy Romania's
domestic requirements. However, we are also aware of
agreements the United Kingdom has with the United States
and Japan.

     Canada does not provide any nuclear material, equip-
ment, or technology without a peaceful uses agreement. It
currently has agreements with 14 individual nations, the
International Atomic Energy Agency (IAEA), 2/ and EURATOM.
Bilateral agreements include assurances that the recipient
will not divert material for any nuclear explosive device
and stipulate sanctions for non-compliance, such as the
suspension of nuclear cooperation and the return of
Canadian-supplied nuclear commodities. In addition, under
new agreements a recipient of Canadian nuclear cooperation
must be a Non-Proliferation Treaty signatory or accept
international safeguards on its entire peaceful nuclear

1/ Officially named the European Economic Community, the
   Common Market is an economic association established
   in 1958, and was originally composed of Belgium,
   France, Italy, Luxembourg, the Netherlands, and West

2/ IAEA, composed of 109 member nations, is   an autonomous
   intergovernmental organization under the   aegis of the
   United Nations. It is recognized as the    agency respon-
   sible for international peaceful uses of   atomic energy.

      Japan has nuclear agreements wth the United States,
 Australia, France, Canada, and the United Kingdom
 are wiritten as mutually applicable to each signatory
 country. Although there is a definite supplier-customer
 relationship with Japan on the receiving end, reciprocity
 provisions are included.

      The Nuclear Regulatory Commission controls U.S. nu-
clear exports through a system of export licenses.
ever, the Department of Commerce also licenses certain
nuclear exports and the Energy Research and Dev,!1-ment
Administration (ERDA)I/ authorizes the export  of civilian
nuclear power reactor technology and assistance.
     NRC's statutory authority for nuclear exports is
derived from the Atomic Energy Act of 1954 as amended
the Energy Reorganization Act of 1974. NRC licenses and
natural and enriched uranium, plutonium, radioactive
products, and reactors or facilities designed to produce
enriched uranium or plutonium. However, in weighing
ensing decisions, NRC relies heavily on information lic-
vided by the executive branch concerning foreign policy
and defense and security implications of the exports.

     The statutory authority of the Department of Commerce
is the Export Administration Act of 1969, as amended.
merce currently licenses about 100 items identified     Com-
former Atomic Energy Commission as being of special by the
egic nuclear interest, including specially designed
ponents of nuclear reactors. Commerce receives policycom-
direction from ERDA on the 100 items and does not
                                                   issue a
license without ERDA concurrence. The NRC also advises
Commerce on specially designed reactor components
                                                  on the
100-item list.

     The four major foreign supplier nations also
licenses or permits for certain nuclear material require
ment they export. However, it appears that Canadaand equip-
                                                    is the
only supplier country which has an organization comparable
to NRC, its Atomic Energy Control Board, responsible
licensing and regulating nuclear exports. Additionally,
there appears to be no division of responsibility
                                                   in the
foreign systems for licensing essentially complete
facilities, or components of such facilities, as    nuclear
                                                  the licens-
ing organizations are responsible for bcth types of

1/ On October 1, 1917, the new Department of Energy
   the responsibilities o   ERDA.

     Intragovernmental coordination on nuclear export
license applications in the four supplier countries is
also characteristic of the U.S. program.   In all cases,
the government organization responsible  for export li-
censing receives policy direction or  consults  with other
government departments and agencies  as part of  the licens-
ing process. In no case does a single   government  body
have sole authority or control  over nuclear exports.

     Under a typical U.S. agreement for cooperation, U.S.-
supplied nuclear material and equipment or nuclear material
produced through the use of such items may not be trans-
ferred to unauthorized persons or retransferred from one
agreement to another without prior U.S. approval. Under
current U.S. export policies, ERDA, in consultation with
State, NRC, and the Arms Control and Disarmament Agency,
approves requests to retransfer U.S.-supplied nuclear ex-
ports provided through NRC license or ERDA authorization.
Reexports of nuclear-related commodities initially li-
censed by the Department of Commerce require the approval
of Commerce.
     Retransfers must be within the scope of an agreement
for cooperation between the United States and the party
receiving the nuclear material.   Controls to assure that
foreign nations do not retransfer  U.S.-supplied nuclear
material and equipment without  U.S. approval are limited.
The United States must rely  primarily on international
safeguards accountability  inspections and the good faith
of the foreign recipient.
      France, the United Kingdom, a-d West Germany, in
 line with Nuclear Suppliers Group guidelines, have estab-
 lished similar requirements governing retransfers. Con-
 trols applied by these suppliers permit retransfers of
 non-sensitive nuclear material and equipment without prior
 approval as long as the recipient of the retransfer has
 provided the same assurances qgiven by the original cus-
 tomer, including acceptance of safeguards, non-explosive
 use, and physical protection. Retransfers of sensitive
 material, equipment, and technology may only be made with
 the consent of the supplier nations.
      Canada, the United Kingdom, and West Germany have
 incorporated provisions on retransfers into their agree-
 ments for cooperation with other countries. All Canadian

bilateral agreements since 1974, and some prior to this
date, prohibit the retransfer of Canadian-supplied nuclear
materials and equipment. United Kingdom agreements pro-
vide for retransfers to be handled "in accordance with
the international obligations of each of the contracting
parties under conditions to be agreed upon in each parti-
cular case. " West Germany has incorporated retransfer
provisions in its agreement with Brazil.

     Information i sketchy on the controls that foreign
suppliers have instituted to assure compliance with
retransfer requirements. Canadian bilateral agreements
call for immediate and full consultations when consent to
retransfer is not granted. In addition, as part of its
export control program, Canada appears to be the only
supplier in the group that requires the original export
and any retransfers be approved by the same governmental
agency--the Atomic Energy Control Board. West Germany
relies on the International Atomic Energy Agency safe-
guards system to detect violations and unauthorized trans-
fers. Information was not provided on United Kingdom
procedures for approving retransfers.

                           CHAPTER 3

                    PHYSICAL SECURITY
     As the number of countries having access to peaceful
nuclear materials, equipment, and technology increases,
greater reliance will be placed on international safe-
guards systems to assure that cooperative activities in
nuclear energy do not lead to nuclear weapons capability.
Similarly, terrorist acts in recent years emphasize the
importance of protecting sensitive nuclear material from
attempted diversion by subnational groups and preventing
the sabotage of nuclear facilities. At the present time,
the responsibility for internatitLal safeguards in most
countries rests primarily with tt. IAEA. However, the
physical protection of nuclear material and equipment
historically has been the responsibility of individual
sovereign countries. Although efforts are being made to
upgrade physical security, there are no required interna-
tional standards for the physical protection of nuclear
material and equipment.


     Since 1955 the United States has required that all
U.S. nuclear exports supplied under agreements for coop-
eration be used only for peaceful purposes. To insure
such use, the United States included a provision which
gives it the right to verify these peaceful uses through
a review of transfer records and reports and through
onsite safeguards inspection.

     As IAEA developed, the United States recognized the
advantages of having the Agency apply safeguards to U.S.
exports of nuclear material and equipment- As a result,
over the years the United States has transferred the
safeguards functions of most U.S. bilateral cooperation
agreements to the IAEA. U.S. safeguards rights are now
suspended as long as IAEA safeguards are applied. How-
ever, the wording of some agreements reserving U.S.
rights raises questions of when the United States could
or would reinstate its own safeguards and whether such
safeguards rights L.tend beyond the expiration dates of
the agreements.
     Although the United States has encouraged countries
who are not members of the Treaty on the Non-Proliferation
of Nuclear Weapons (NPT) to become parties to the Treaty,
it currently does not require a country to be party to the

NPT or accept safeguards on its entire peaceful program
as a precondition for receiving U.S. nuclear cooperation.
At the present time, the United States cooperates with 10
non-NPT countries and is negotiating new agreements with
such non-NPT countries as Egypt and  srael.

     The major foreign nuclear suppliers are all IAEA
members and over the years have actively supported and
participated in Agency safeguards activities.   West
Germany, France, the United Kingdom, and Canada require
IAEA safeguards on nuclear rnaterial and equipment
provided to recipient nations outside the European Com-
munity.  Exports within the European Community are sub-
ject to the EURATOM safeguards system.   Since the end of
1976, Canada has gone a step further and requires non-
nuclear weapons states to accept international safeguards
on their entire peaceful program as a mandatory condition
of supply. To date, Canada is the only nuclear supplier
to impose such a condition on its nuclear cooperation.

     From the information provided by the Department of
State it appears that foreign suppliers, except Canada,
have no bilateral safeguards inspection programs and
have no specific provisions in their agreements for re-
sidual safeguards rights in the event IAEA safeguards
can no longer be effectively applied.  Residual safeguards
rights are provided for in Canadian bilateral agreements.
In addition, Canada has carried out bilateral inspections
in such countries as France, West Germany, Switzerland,
Italy, and the United Kingdom prior to export of Canadian-
origin materials.

     The French bilateral agreement with South Africa
requires that should the recipient partner withdraw from
NPT--assuming that South Africa becomes a party to the
Treaty--IAEA safeguards or their equivalent will continue
in force.  Neither the West German-Brazil bilateral agree-
ment, characterized by West Germany as a good example of
an appropriate arrangement for a non-NPT recipient, nor
the West German-Brazil-IAEA trilateral safeguards agreemert
reserves to West Germany any residual safeguards rights.

     On the question of whether safeguards extend beyond
the expiration dates of the agreements, West Germany's
agreement with Brazil provides that safeguards obligations
will not be affected by the termination of the agreement.
In the French bilateral agreement with South Africa, the
length of time for safeguards coverage includes reference

to the sensitive life of the nuclear material and/or tech-
nologies supplied.   Safeguards coverage in Canadian agree-
ments negotiated  since 1974 cover the entire life of
Canadian-supplied  nuclear  material, facilities, euipment,
and all subsequent  fissile  material produced.

     Little information was provided on the safeguards
requirements of the United Kingdom and Japan.    The United
Kingdom requires  the application of  IAEA safeguards, or
comparable safeguards verified by the IAEA, on its exported
nuclear material and equipment.   Japan, which is in the
process of  formulating its nuclear  export policies and
procedures, including those relating to safeguards, takes
the position that as long as nuclear material remains in
a receiving country, the covering safeguards agreement
cannot expire.


     Historically, the physical security of nuclear mate-
rials and equipment has been the responsibility of individ-
ual sovereign countries.  However, over the past several
years, the physical protection of nuclear material and
eauipment has received increased attention.  This awareness
has led supplier nations to agree to common policies
requiring recipients of nuclear exports to meet stringent
physical security standards.

     The United States, realizing the importance of ade-
quate physical security systems, revised its policy in
1974 and requires foreign countries to implement physical
security arrangements acceptable to the United States
prior to the export of significant quantities of pluton-
ium and highly enriched uranium.  New policy initiatives
were required because current agreements for cooperation
do not specifically provide for U.S. rights to verify the
adequacy of foreign physical security. As a result of
this policy, ERDA and NRC officials, prior to the export
of such nuclear material, review a nation's physical
security through discussions with roreign atomic energy
representatives and through onsite inspections.

     The physical security requirements of West Germany,
France, the United Kingdom, and Canada are apparently in
line with the Nuclear Suppliers Group guidelines requir-
ing recipients of their nuclear material and equipment
to implement adequate physical security measures on such
exported products.   IL appears that Canada is the only
foreiqn supplier  that conducts physical security reviews

incountry prior to exporting nuclear commodities to deter-
mine that the protection will be adequate. Additionally,
Canada specifically provides for periodic consultations
and review rights on physical security in its peaceful
nuclear agreements with recipient nations.
     West Germany's current position, based on the recent
German-Brazilian agreement, is that the supplier and
recipient country should agree on the level" of physical
security required. Specific "measures consistent with
the required level must be the responsibility of the
recipient country. France, in its agreement with South
Africa, for example, requires the recipient to take ade-
quate physical security measures. However, there are
no provisions for France to make prior inspections or to
be continually advised of the state of South African
physical security measures.

                         CHAPTER 4


     The Export-Impor Bank of the United States (Exim-
bank), an independent corporate agency, supports a broad
range of U.S. exports in keeping with its legislative
mandate to facilitate the export of US. goods and ser-
vices. To date, Eximbank has been the largest .S.
Government source of financing for foreign nuclear en-
ergy projects, through direct financing and commercial
and political risk insurance and guarantees. Although
U.S. nuclear equipment may be fully competitive in
price, quality, service, and delivery, sales may be
lost unless adequate financing is available.   It is
Eximbank's view that private capital markets should be
relied upon to the fullest extent possible to finance
U.S. exports; however, according to an Eximbank offi-
cial, there are a number of export sectors, including
the nuclear sector, where private export credit is not
available in sufficient volume and on appropriate terms.
      Providing financial support for the export of
nuclear goods and services is not unique to the United
States. The West German policy for financial support
of nuclear exports is that commercial sources should
provide thp funding required. However, based on par-
ticular circumstances, official assistance may be pro-
vided by Hermes Kroditversicherungs (Hermes), a private
firm acting on behalf of the government, through finan-
cial guarantee or insuring of commercial financing or
by the Kreditanstalt fuer Wiederaufban (KFW) through a
financial guarantee or direct credit. To date only
three of the eight West German nuclear exports (to
Brazil, Argentina, and Spain) have received official
financing assistance. Nuclear sales to developed
countries and to Iran have been handled on a purely
commercial basis.

     Assessment of the economic and technical feasibility
of nuclear sales is customarily performed by the selling
firm in West Germany. Relyvant studies are then submit-
ted to Hermes, which in the cise of nuclear exports, ;?ould
make the final decision o whether oficial financial
assistance is warranted. Terms and interest rates are
normally determined by conditions in the private finan-
cial markets where the funds are obtained. According to

Department of State information, a direct credit from KFW
would carry an interest rate of 8 percent with a maturity
of up to 12 years.  In most cases involving official fin-
ancial assistance, financial policies are in total accord
with national policies.
     French financial support for exports is provided
through long-term credits of the Banque Francaise du
Commerce Exterieur (BFCE) and the Bank of France.   In
addition, Compagnie Francaise d'Assurance pour le
Commerce Exterieur (COFACE) administers the insurance
and guarantee program. Both BFCE and COFACE, joint
stock companies with a quasi-public status, conduct
their business as commercial operations.

     According to State Department officials, little is
published regarding specific French policies and prac-
tices for financing nuclear exports. U.S. officials
believe that the normal provisions of the Ministry of
Finance for general exports also cover nuclear exports
and that terms and rates of loans are more severe han
those of Eximbank. Additionally, in the past, French
r actor sales have been part of an overall government-
to-government cooperative program and have included
barter arrangements as well as financial assistance.

     Canada's official export credit and insurance pro-
gram is administered by the Export Development Corpora-
tion, a Canadian Crown corporation. Under Canadian
policy, each new application for a reactor sale must be
approved by the full cabinet.  Once approved, the first
choices for financing would be private sources in Canada
or recipient government financing. Otherwise, nuclear
exports are financed through the Export Development
Corporation, which maintains close coordination with
FxAmbank on terms and conditions for financing.

     The United Kingdom has no policy laid down on nuclear
export financing, and each export case is examined on its
own merits. Overall official export credit and insurance
systems are administered by te Export Credits Guarantee
Department, an executive agency of the British Government.

     Nuclear exports from Japan have been of very little
consequence, therefore, no firm policy has been adopted
on financing large equipment exports. It is expected,
however, that Japan would finance up to 80 percent of
such exports. Currently, the Export-Import Bank of Japan
and Ministry of International Trade and Industry admin-
ister the Japanese export    -port system.

APPENDIX I                                             APPENDIX I

                         REPUBLIC OF GERMANY

                        Summary     and Introduction

             The FRG has ratified the NPT and participates
       actively in the work of the Nuclear Suppliers' Group
        (NSG) and in COCOM. FRG nuclear export policy is
       strongly influenced by the obligations so established.
       German authorities and nucivar industrialists consider
       nuclear exports essential for the economlic well-being
       of the nation as a net exporter of high technologies.
       International cooperation in general scientific and
       technological affairs has serve4 as a basis for
       commercially motivated exports of nuclear power plants
       and other nuclear technologies. The FRG conducts
       research to improve international safeguards and
       cooperates in relevant programs of EURATOM and the IAEA.
       Consequently, in general, the FRG would not implement
       nuclear safeguards and control measures in a recipient
       country on a bilateral basis.

 SOURCE:     Department of State
 GAO notes    Attachments to these five sumaries are not
              included since they are not essential to
              understanding tne overview.

                                                        APPENDIX I


      Overview:  Nuclear Energy Research and Development
 and Demonstration are the responsibility
                                           of the FRG
 Ministry for research and technology
                                       (BMFT), which pro-
 motes and supports the development of
                                        advanced nuclear
 power reactor systems such as the liquid
                                           metal cooled
 fast breeder and the gas cooled high
                                       temperature concepts.
 The FRG Ministry of Economic Affairs has
                                           strong influence
 in the industrial area; and, with guidance
                                             from the foreign
 office, is responsible for the issuance
                                          of licenses for
 nuclear exports by the Federal Office
 nomy (BGW). Customs authorities under for Industrial Eco-
                                         the finance ministry
 enforce this license requirement.

     Export sales of German nuclear power
                                            plants began with
an order in 1968 from Argentina for the
                                          Atucha 340 EMW
natural uranium heavy water reactor.
gives data on nine other German nuclear
                                       ATTACHMENT A,
                                          power plant exports
(eight PWR, one BWR) to seven countries
                                          (Netherlands, Austria,
Switzerland, Iran, Brazil, Spain and
                                      Luxembourg).    Some of
these plants will not he commissioned
                                       until 1982.    Available
data suggest that seven of these nine
                                       orders total roughly
DM 8 billion (roughly $3.2 billion original
                                              price estimates--
not including first two reactors for Brazil).
Credible economic data about German nuclear      Comment:
difficult to obtain. This information         exports  are
                                        is viewed as commer-
cially sensitive.

     There are few data on other significant
exports, with the exception of the trensfer      German nuclear
                                                to Brazil of
technology for a reactor components industry,
                                                  a fuel element
fabrication plant, a uranium enrichment
                                            demonstration plant
and a chemical reprocessing pilot plant.
                                              The valu. of these
exports--together with "up to eight nuclear
                                                power plants"
prior to 1990, is usually given as DM
                                        15-20 billion.
     General data on FRG nuclear exports for
                                              1974 (latest year
available) indicate that exports totaled
which DM 111 million for reactors, fuel   DM 173 million, of
                                         elements and source
and fissionable materials.  (see attachment H)
     Source and fissionable materials are
                                            exported from the
FRG, primarily within the common market
                                          (i.e. through
EUratom).  In 1975, approximately 56 tonnes of
fuel materials and 124 tonnes of non-irradiated irradiated
                                                  nuclear fuel
materials were exported.  France
With the permission of COCOM, the received  the largest share.
                                   FRG exports natural

APPENDIX I                                         APPENDIX I

  uranium to the Soviet Union for toll enrichment.    COCOM
  required that the depleted uranium be returned to the
  FRG.  Data on these exports to the USSR are not immediately
  available.    However, the magnitude of these transactions
  is indicated by 1975 import statistics: The FRG received
  approximately 364 tonnes of depleted uranium and
  approximately 30 tonnes of 3 - 10 percent enriched uranium
  from the USSR (about 12 percent of its imports is of this
  latter material).   See attachment A-1.

       Industrial Capacity:  The FRG possesses a pilot plant
  for reprocessing spent fuels: the "WAK" plant at Karlsruhe
 with a capacity of about 40 tonnes/year.   (Attachment B)'
 An integrated nuclear fuel cycle center, with a
 reprocessing capacity of 1500 tonnes/year, is scheduled
 for completion about 1985. Germany's uranium enrichment
 capacity is represented by the Urenco Tri-partite Dutch,
 British and German plant in the Netherlands.   (Attachment C)
 This plant employes gas centrifuge technology and has a
 current capacity of about 60 tonnes SWU per year. Current
 plans provide for expansion to 200 tonnes SWU by mid-1978,
 and to 2000 tonnes SWU per year by 1986. Uranit, the
 German partner in this enterprise, recently announced plans
 to construct a Urenco plant in the FRG, with a capacity
 of 1000 tonnes SWU per year by 1985. The "jet nozzle"
 enrichment process is in a relatively early stage of

       Estimates vary about the number of nuclear power
  plants that must be produced per year to maintain the
 economic viability of the German nuclear industry. One
  semi-official document implies that the production of
  four or five plants per year--including two export orders--
 would be adequate. Nuclear industry sources claim that
 eight nuclear power plant orders per year--including four
 orders--would be required to utilize current capacity.
 The leading German nuclear power producer, Kraftwerk
 Union (KWU), lost DM 47 million on a 1975 gross of DM 1.48
 billion, primarily through the performance of necessary
 preliminary work on its backlog of contracts, many of
 which have not yet been licensed for construction. With
 DM 102 in investments, KWU holds DM 19.8 billion in
 contracts (DM30 billion, including letters of intent).
 A study indicated that each 1300 MWe nuclear power plant
 provides 39000 man years of employment.   Public media
.report that some 300 German firms will be involved in
 the sale of German nuclear technology to Brazil.

                                                   APPENDIX I

       Germany now has ten nuclear power plants
  (3,494 EMW) and some 27 additional units       operating
                                            under construction,
  ordered or planned.  These units, if contructed, would
  total approximately 34,000 EMW by about
  "official" prediction for 1986 was recently     The
                                               lowered to
  35-38,000 MWe, a target it may be difficult
                                               to achieve.
  Statutory Requirements and Agreements
                                        for Cooperation
       The FRG has many general agreements providing
  international scientific and technological          for
  Attachment E.  Many of these would permit nuclear
  cooperation under specific agreements
                                        negotiated separately.
  Agreements explicitly providing for the
                                           export of significant
  nuclear technology or facilities outside
  market exist only with Brazil and Iran.   of the common

       In general, an agreement for cooperation
  required before the FRG would authorize       would be
                                          the export of
  significant nuclear technology, materials,
                                             equipment or

      We know of no explicit requirement for
                                               technical or
 economic justification as a precondition
                                           for the export
 of German nuclear technology.
 such criteria would be applied Our  contacts explain that
                                 "pragmatically," not as a
 matter of law and probably only to the
                                         export of the more
 sensitive nuclear technologies.   Exports of nuclear reactors
 desired by a recipient state woulu not
                                         be vetoed on these
 grounds.  However, German financial
 consider this point carefully before institutions would
                                       approving any loans
 required.  Government financial guarantees would
                                                    not be
 given in such cases if the financing
                                       were not sound.
      As noted above, the FRG has ratified
 participates actively in the deliberations the NPT and
                                             of the nuclear
 suppliers' group and COCOM.  Consequently,
 nuclear technology equipment or facilities the export of
                                             covered by
 the NPT, the IAEA Trigger List, restrictions
                                               developed as
 a result of NSG onsultations or COCOM
                                        restrictions,   ould
 be covered by specific agreements and
                                       export authorizations.
 Judging by the Brazilian example (Attachment
                                               F) the FRG
 would require:

      a commitment to the non-proliferation
      a guarantee against use for any nuclear

      an obligation to employ suitable physical
      measures,  to be agrjed,

APPENDIX I                                         APPENDIX I

   -- IAEA safeguards, under "trilateral" agreement,

   -- transfers and re-transfers of sensitive technology,
      materials, and facilities only with the permission
      of the FRG, and under IAEA safeguards,

   -- "supplier involvement" in construction and operation
      of the sensitive facilities supplied,

   -- a long-term obligation to accept safeguards on any
      facilities constructed using the technology supplied,

   -- safeguards and physical security requirements not
      affected by termination of agreement.

        The FRG would probably not seek provisions for
   bilateral safeguards rights or specific sanctions for non-
   compliance. In the German view, the IAEA and/or Euratom
   systems must assume these responsibilities. The German-
   Brazilian agreement also illustrates that the FRG was
   willing to transfer nuclear technology to a nation which
   has not signed the NPT--provided that the IAEA applies
   safeguards to the materials, equipment, facilities and
   technology transferred.

   Regulatory and Licensing Functions

         A. Under the FRG Atomic Law ("Atomgesetz")
   (Attachment 1), exports of source and fissionable materials
    require a license which is granted if the international
    obligations of the FRG are maintained and if the national
    secirity of the FRG is not endangered. Other nuclear
   materials, equipment, and facilities require an export
    license under the provisions of the Foreign Trade Act
    ("Aussenwirischaftsgesetz") if they are included in the
    "International Nuclear Energy List" Attachment G)
    reproduced therein (considered identical with the "Trigger
    List" of the IAEA "Zangger Committee").  The export
    licenses are issued by the Federal office for the Industrial
    Economy ("Bundesamt fuer qewerbliche wirtschaft") of the
    Ministry for Economic Affairs. The FRG foreign office
    advises. Customs authorities in the finance ministry
    enforce the license requirements. Nuclear components
    would also require an export license, if they are included
    on a Trigger List. We are not aware of any provisions
    for exceptions for government - government transfers.


         A. To the best of our knowledge, the FRG has never
    conducted a bilateral safeguards inspection on any nuclear

APPENDIX I                                         APPENDIX I

export pending IAEA inspections. Exports within the EC
are subject to the Euratom safeguards system and other
significant  xports have always triggered IAEA safeguards,
including the Atucha nuclear power plant for Argentina,
which was ordered in 1968.

     The FRG-Brazil Agreement, often characterized by the
FRG officials as a good example of an arrangement appro-
priate for a recipient nation that has not signed the NPT,
provides that safeguards obligations are not affected by
the termination of the agreement. However, neither this
agreement nor the FRG-Brazil-IAEA trilateral safeguards
agreement reserves to the FRG any residual safeguards
rights. We are not aware that the FRG has ever asked to
be provided with IAEA accountability data. As a party to
the trilateral safeguards agreement with the IAEA and
Brazil, however, the FG does have certain rights and re-
sponsibilities with respect to reports on transfers under
the cooperative programl.

     As noted above, safeguards obligations are not affected
by termination of the FRG-Brazil agreement. The FRG is an
effective supporter and participant n the IAEA safeguards
program. The FRG has accepted research grants from the
IAEA for the development of safeguards methodology, espe-
cially techniques capable of performing adequately with
minimum intrusion.

Physical Security
     The German-Brazilian agreement requires suitable
physical security measures, to be agre-d between the
parties, who must also keep the IAEA informed as required
by the safeguards trilateral agreement. We are not aware
of specific physical security "reviews" conducted by offi-
cials of the FRG in any recipient country. For the German-
Brazilian agreement, mutual agreement on suitable physical
security measures is required. We are not aware, however,
how this agreement would be achiev.ed in practice. Presumably,
the joint commission which is responsible for the cooperative
program would provide an effective forum for this purpose.
     We have no basis for an estimate of the action which the
FRG, itself, would take should physical security measures
prove weak or inadequate. This would, for example. be a
violation of the German-Brazilian agreement which requires

APPENDIX I                                        APPENDIX I

 "...measures necessary to guarantee the physical protection..."
 Ou    -itacts explain that the supplier and recipient country
 wo...    Weally agree on the "level" of physical security re-
 quired. Specific "measures" consistent with the required
 level must be the responsibility of the recipient state.

      Nuclear materials, equipment, facil'.ties and technology
 transferred to Brazil by the FRG may be transferred to a
 third country only if the recipient country has concluded
 a safeguards agreement with the IAEA. Retransfers of
 "sensitive' materials, equipment, facilities and technological
 information can be made only with the consent of the FRG.
 There has not yet been a case in point to illustrate this
 concept in practice. In general, however, this would seem
 to be the responsibility of the FRG foreign office. We
 doubt that the same procedure used for authorizing exports
 from the FRG would be employed in this context. We assume
 that the FRG would depend upor the IAEA safeguards system
 to detect violations and unauthorized transfers.

 Nuclear Export Financing

      Basic policy in the FRG with regard to financing of
 exports is that commercial sources should provide the fund-
 ing required. Based on the particular circumstances in-
 volved, official assistance may be provided in the form of
 a HERMES financial guarantee or insurance of commercial
 financing or through the Kreditanstalt fuer wiederaufbau
 (KFW) by means of a financial guarantee or direct credit.
 Concerning nuclear exports, the FRG has demonstrated a
 willingness to provide official assistance when requested
 due to the relatively large cost of these projects and due
 to the economic importance which the FRG attaches to nuclear
 exports -- provided of course, that statutory requirements
 are fully met. In point of fact, however, only three of
 the eight nuclear exports (Brazil, Argentina, and Spain)
 have received official financing assistance. Argentina
 received a direct credit from the KFW and the Spanish sale
 was supported by a KFW financial guarantee. Nuclear sales
 to the developed countries and to Iran have been handled on
 a purely coaercial basis.

      W en a direct credit is involved, as in the Argentine
 case, inancing could b, a powerful lever for implementing
 non-proliferation and safeguards objectives since a subsidy

APPENDIX I                                        APPENDIX I

  element is contained in the financing.  Financial
  guarantees, however, actually increase the cost of the
  financial package. Therefore, its usefulness as a
  bargaining chip in these instances would be diminished.
  We are aware of no case where this tactic has yet been
  applied. Terms and interest rates are normally deter-
  mined by conditions on private financial markets where
  the funds are obtained and thcr-fore are also based on
  the credit-worthiness of the borrow.r. A direct credit
  from the KFW, according to most recent data, would carry
  an interest rate of 8 percent for a buyer loan and could
  carry a maturity of up to 12 years.  No ceiling has been
  set on the extent of officlal liability for financing of
  nuclear exports.

         When official financial assistance is involved,
  financial policies are in total accord with national
  policies. Assessment of economic and technical feasi-
  bility of nuclear sales is customarily performed by the
  selling firm in the FRG.    Relevant studies are then sub-
  mitted to HERMES. which in the case of nuclear exports
  would make the final decision of whether or not official
  financial assistance is warranted, as part of the material
  required before any official assistance will be granted.
   fERNMES continually evaluates country risks as part of
  its decision-making process in providing official assistance.
  Political risk is of course a major part of this evaluation
  and assumes greater importance as HERMES' exposure in a
  particular country increases and in direct relation to the
  sensitivity of the export.

  Nuclear Suppliers' Meetings

       The FRG participated actively in the deliberations
  of the nuclear Sruppliers' group and announced its own
  commitment to observe the consensus reached.   In the FRG
  view, this  consensus confirmed the terms and conditions
  imposed on Brazil, an interpretation further strengthened
  by subsequent IAEA approval of the trilateral safeguards
  agreement.  FRG officials have made this point in public

       Insofar as existing legislation permits, the NSG
  guidelines are now implemented by the FRG. We understand,
  however, that certain possible interpretations of the
  guidelines, i.e., those which would require safeguards
  on relatively conventional equipment especially prepared
  or designed for a nuclear purpose cannot yet be enforced,
  pending more detailed consultations about this criterion
  and amendment of domestic legislation. The FRG continues

APPENDIX I                                        APPENDIX I

to favor the IAEA as the implementing agency for the
NSG guidelines (outside the common market). In the
German view, the requirement for safeguards on technology
negotiated by the FRG with Brazil and subsequently
adopted by the NSG, filled a "loophole" in the NPT safe-
guards administered by the IAEA.

                                                             APPENDIX II

                                              GOVERNMENT OF FRANCE

       I.    Background on Nuclear Activities

             Overview of Program

            The French Government Agency, Commissariat
      Atomique (CEA), has full responsibility           a L'Energie
                                                for the promotion
      and coordination of every aspect of nuclear
                                                    energy in
      France and performed by French interests
                                                 in other countries.
      CEA was created y government decree on
                                               October 18, 1945,
      to advise the government and implement
                                              France's nuclear
      policy; pursue necessary research and
      activities including basic and applied development
                                              sciences related
      to nuclear matters; transfer nuclear
                                            technology to end-users
      including the national utility, Electricite
                                                    de France, and
      private industry; perform studies and
                                             production of Ntuclear
      materials for the benefit of national
                                             defense; and study
      governmental measures for the protection
                                                 of goods and
      people against any physical   and environmental dangers of
      atomic energy.

           National nuclear policy is developed
                                                 principally in
      the Ministry of Industry and Research
                                             and through it by
      the CEA.   Other ministries involved include the
      of Defense, which contributes policy direction    Ministry
                                                       to CEA's
      military nuclear research activities,
                                             the office of the
      Prime Minister, which directs the activities
                                                    of the
      Secretary General of the Interministerial
                                                 Committee on
      Safety and Protection, the Ministry of
                                              Health and the
      Ministry of the Quality of Life which
                                             also contribute to
      policies regarding safety and protection
                                                and the Ministry
      of Finance and the Ministry of Foreign
      are involved in financing and international       which
      respectively.   Policies regarding French nuclear exports
      are subject to overview by a special
      council chaired by the president of the
                                               Republic, known
      as the Interministerial Council on Nuclear
                                                  Export Policy.
      II.   Organization

            1.   Commissariat a L'Energie Atomique,   CEA.
           CEA is under the general direction of
      Senior technical advice is provided by      an administrator.
                                              a high commissioner
      and general policy development is initiated
      central staff. Operational units of the      by a senior
                                              CEA include:
SOURCE:  Department of State

APPENDIX II                                            APPENDIX II

            Military application

            Nuclear materials through Cogema
            (Compagnie Generale Des Matieres Nucleaires)
            through participation in

           Eurodif I, Eurodif II     (aka Coredif),
           and enrichment

           Mining and concentrate activities in France
            (Uranex, CFMU, Simo), in Niger (Somair, Cominak,
           in Gabon (COMUF), in Central Africa (URCA), in
           Canada (AMOK, SERU-NUCL), and in Australia, the
           USA, etc.

           Reprocessing through United Reprocessors (UK, F,
           FRG) and subcontractors including St. Gobain, PUK.

           Institute of Fundamental Research

           Institute of   Safety and Protection

           Industrial nuclear application through:

     --    Technicatome (Small reactors)

           Novatome (LMFBR and HTG±'    and subcontractor[s
           including Creusot Loire.

           2.   The Interministerial Committee on Safety and

         The Interministerial Committee on Safety and
    protection is supported by CEA's Institute of Safety and
    Protection  and reports directly to the Prime Minister.

           3.   The Ministry of Foreign Affairs

         The MFA has responsibility for all nuclear matters
    within an office of atomic affairs of the MFA under a
    director of scientific affairs.

    III.    Export Activity

         French exports of nuclear reactors began in 1969
    with the construction in Belgium of an 870 MWe reactor
    for SEMO.  Two additional reactors were ordered for

                                                     APPENDIX II

   Belgium in 1974, each with a capacity of
   1976, Iran submitted a Letter of Intent 925 MWe.      In
                                             to purchase two
   reactors of 925 M.We each and in the same
                                              year South
   Africa ordered two units of 922 MWe each.

        Through the organization COGE;T, there
   French prospecting enterprises, mostly       are several
                                          in association
   with foreign partners, which include operations
   Gabon, Mauritania, Senegal, Canada, U            in Niger,
   Indonesia. While it is understood that    Australia, and
                                           there have been
   no exports of uranium mined to France,
                                          it is assumed
   that a significant portion of the uranium
   subsidiaries in other countries have been mined by French
                                              exported under
   French control to third countries.

         In the enrichment field, France has an
    construction program underway which           extensive
                                        enjoys partial
    foreign ownership in return for a proportionate
    the production of the facility. Eurodif            share of
                                              I is a gaseous
   diffusion plant located at Tricastin which
   estimated annual capacity of 10.7 million will have an
   production is scheduled for 1979 with 2.3 SWUs.      Initial
   and full production is scheduled by 1982. million SWUs
   facility, Eurodif II, has been approved      A second such
                                            and is scheduled
   for five million SWUs with initial production
   in 1984. Ownership of Eurodif I is divided       beginning
   France-43 percent; Italy-25                   as follows:
                                percent; Belgium-ll percent;
   Spain-ll percent; Iran-10 percent. Eurodif
   following ownership: Eurodif 1-51 percent; II has the
   percent; Iran-20 percent. Ninety percent      France-29
   production of Eurodif I has been scheduled of   the
   shareholders and the remaining balance       to  to go
   German and Swiss electrical utilities.  to Japanese,
                                            No similar infor-
   mation is available on Eurodif II.

       At Le Hague, France has a reprocessing
  will reach 400 tonnes per year in 1978       facility hich
                                          and 800 tonnes
  per year by 1981. By 1981 the fuel storage
  Le Hague will have a capacity of 1,250       pond at
                                          tonnes. Current
  plans are to expand the reprocessing capacity
  to reach 1,500 tonnes per year by early        at Le Hague
                                           1990. Cogema
  manages Le Hague's operations and is under
  of the United Reprocessors which offers     the auspices
  tracts for storage of irradiated fuels   long-term con-
                                          scheduled for

APPENDIX II                                        APPENDIX II

  IV.   Industrial Capacity

       The French industrial nuclear capacity for
  enrichment and reprocessing has been briefly outlined
  above. Pressurized water reactors are produced solely
  by Framatome.  It is estimated that seven to eight
  reactors per year of the 900 MW to 1,200 MW electric
  size are necessary to maintain an economically viable

        In 1974, nine reactors including the Phenix LMFBR
  provide France with an installed nuclear capacity of
  2,800 MWe.   This capacity constituted 7.7 percent of
  the total national production of electricity (180 TWH).
  The long-term objective of the French electrical plan
  is to have 19,000 MWe installed by 1980 which would
  constitute 30 percent of the total power production
   (260/275 TWH), and by 1985 nuclear power is expected to
  provide 70 to 75 percent of the total production of
  electrical power.   France's nuclear power plans scheduled
  three reactors of 900 MWe each to come into operation in
  1976, one 900 MWe reactor in 1977, four similar reactors
  to begin services in 1978, and five reactors to begin
  services by 1979.

       In 1982 and 1983, France's nuclear power plans call
  for a 1,300 MWe plant for each of the two years in
  addition to five 900 MWe plants scheduled for operation
  in 1982.

       This planned program is ambitious and will fully
  accommodate the expectations in power demand growth in
  France.  The planned program may also assist France in
  reducing the full-time operation of some fossil fuel
  plants and thus reduce necessary purchases of petroleum
  from other countries.  In addition, the planned program
  leaves a strong desire for two to four nuclear reactors
  per year to be sold to other countries.

  V.    Statutory Requirements and Agreements for Cooperation

        Laws and regulations governing atomic energy

       An ordinance of October 1945 provided for the
  creation of the CEA   A government decree of 1963,

                                                       APPENpIX II

 modified in 1973, grants authority for the
 nuclear reactors; a government circular of building of
 procedures for public review of proposed     1976 outlines
                                           sites fcr
 public utilities to select and build either
 or nuclear power plants; government decrees fossil fuel
 regulates radioactive gaseous and liquid      of 1974
 how their releases should be controlled;  effluents   and
                                           a  decree
 established a central service which is responsible  of  1973
 the safety of                                         for
                 uclear installations and which reports to
 the Ministry of Industry and Research. A
                                             decree of 1975
 established the Interministerial Committee
                                              on Nuclear
 Security whih reports to the Prime Minister.

 VI.   French Nuclear Agreements


       Federal Republic of Germany, January 19,
                                                1967, and
       July 6, 1971, high flux reactor;

       Belgium, September 23, 1956, Ardennes nuclear
       Brazil, May 2, 1962, utilization of atomic
       June 9, 1961, Euratom-Brazil Agreement;

       Canada, September 30, 1968, plutonium;

       Spain, July 27, 1967, December 15, 1967,
       November 26, 1970;

       United States, May 7, 1959, Atomic Energy
       Mutual Defense, July 27, 1961;            for

       Indonesia, April 3, 1969;

       Iran, June 27, 1974;

       Iraq; Ncvember 18, 1975:

       Japan, July 23, 1965; February 26, 1972,
       September 22, 1972, June 20, 1975;

       Pakistan, December 14, 1962;

       Switzerland July 19, 1956, September 13,
       European Organization. for Nuclear Research,
                                                    May 14, 1970;
       Vietnam, January 28, 1961.

APPENDIX II                                           APPENDIX II


         UNESCO Convention to Establish a European
         Organization for Nuclear Research (CERN),
         July 1, .953, and amendments;

         Convention following the statute of the
         International Agency for Atomic Energy,
         October 26, 1956, and amendments;

         Treaty on the creation of C.E.E.A. (Atomic
         Energy European Community), March 25, 1957;

         OECD decision on creation of the European
         Agency for Nuclear Energy, December 17,   957;
         Convention on the creation of Eurochemic,
         December 20, 1957;

         OECD Convention on Civilian Responsibility
         in Nuclear Energj, 1960, and amendments;

         OECD Coavention on Maritime Transportation of
         Nuclear Materials. December 17, 1971;

         IAEA-France-Japan accord on nclear safeguards,
         September 22, 1972;

        UK-FRG-France Exchange of Letters on
        Cooperation in the Field of Studies using
        Intense Neutrino Beam!, December 19, 1972;

        Second Protocol to Treaty on Non-Nuclear Arms
        In Latin kerica. July 18, 1973;

        UK-FRG-France Convention on the Construction
        and Operation of a High Flux Reactor, July 19, 1974;

        IAEA-South Korea-France Safeguards Agreement,
        September 22, 1975;

        Accord cn Cooperation Between C.E.E. A. and the
        International Atomic Energy Agency, December 1, 1975;

        IAEA-Pakistan-France Safeguards Agreement,
        March 18, 1976.

APPENDIX II                                         APPENDIX II

 VII.    Criteria   for Nuclear Exports
      On September 1, 1976, the President of the Republic
 established the Council on Nuclear Export Policy with
 the President as Chairman. The members of the Council
 include the Prime Minister, the Ministers of Foreign
 Affairs, Defense, Economy and Finance, Industry and
 Research, Foreign Trade, and the Administrator of CEA.
 On October 11, 1976, the Council presented six general
 guidelines concerning the export of nuclear equipment,
 technologies and materials as follows:

      On October 11, the Council presented six general
 guidelines concerning the export of nuclear equipment,
 technologies and materials:

        (1) Nuclear energy represents for a certain number
        of countries a competitive source of energy necessary
        for development. Therefore, France will remain
        prepared to contribute to the implementation of the
        peaceful use of nuclear energy.

        (2) France intends to keep full command of .ts
        nuclear export policies in accordance with relevant
        international agreements.

        (3) France does not favor the proliferation of
        nuclear arms. In its nuclear export policy, France
        will reinforce appropriate safeguards and guarantees
        regarding nuclear equipment, materials and technologies.

        (4) France will assure the security of supplies of
        nuclear fuels for nuclear plants that it has sold
        and will meet the legitimate needs of others foL
        access to nuclear technologies.  France will also
        ensure the services of all portions of the fuel
        cycle that are requested. France is ready to study
        with interested parties on a bilateral or multi-
        lateral basis agreements likely to guarantee these

        (5) The French government is,Qf the opinion that
        the supply of nuclear equipment, materials and
        technologies should not be such as to favor the
        proliferation of nuclear arms through commercial

APPENDIX II                                        APPENDIX II

    (6)  France is prepared to discuss these problems
    with supplying countries and/or with receiving
    countries which are engaged in substant al programs
    of nuclear power plants.

     On December 16, 1976, the Council presented a brief
statement that, until further notice, the siqnature of
bilateral contracts covering the sale to ocher countries
of nuclear reprocessing plants would no longer be
authorized.   In practice, France requires a bilateral
agreement covering safeguards and conditions for the
sale of nuclear materials and sensitive technologies.
In addition, it requires trilateral agreements with
the IAEA covering that Agency's safeguards procedures.
The details of these agreements appear fully compatible
with the London suppliers' nuclear export policy guidelines.
VIII.   Regulatory and Licensing Functions

    The Ministry of  Finance through its director of
customs and taxes has authority to regulate French
exports.  On a case-by-case basis, exporters are
required to specifically identify equipment to be
exported nd its destination as part of the application
for the export permit.   The Ministry of Finance con-
sults other interested agencies which, in the case of
nuclear materials, would include the Ministry of Foreign
Affairs and the CEA.   The December 8, 1976, listing is
fully compatible with suppliers' list, including
3dentifying types and trigger quantities of nuclear
materials, equipment and technology.

IX. Safeguards

    The early French-built reactors in Belgium were
subjected to Euratom safeguards.   Later, contracts for
French reactors in South Africa and those expected in
Iran will require IAEA safeguards.   France has supported
the IAEA safeguards program and is expected to insist
upon its provisions in the export of any nuclear material
appropriately requiring such safeguards.   Typically,
French foreign sales arrangements consist of a
bilateral agreement and a trilateral agreement with
the IAEA.

BP'ENDIX II                                        APPENDIX II

       The South African bilaterei contains a provision
  which states that should the .ecipient partner withdraw
  from the NPT, IAEA safeguards or their equivaleznt will
  continue in force. There is o specific mention of
  sanctions that would be established if the recipient
  went so far as to obstruct or negate the application of
  any safeguards. The length of time for the safeguards
  coverage includes reference to the sensitive life of
  the nuclear materials end/or technologies. In the
  recently concluded trilateral agreement with IAEA and
  South Africa, France has made additional requirements
  that French-supplied fuel be exported from South Africa
  for reprocessing and that IAEA safeguards also apply to
  the subsequent construction of any reactors whose designs
  are based on the technology of the French-built reactors.
      Although France has had a longstanding relationship
 with the IAEA, the one limitation is that France does not
 permit the extension of IAEA safeguards to all of the
 French nuclear facilities.
 X.   Physical Security
      As a basic policy, France believes that physical
 security of nuclear materials is a matter which falls
 solely within the competence of a nation or state and is
 not a matter to be prescribed by international agreements
 or enforced through bilateral or multilateral accords.
 In the London suppliers' discussions, France has supported
 the guidelines on the classification of security and
 risk potentials of nuclear materials and equipment.
      Within the bilateral agreement with South Africa
 (Article 3), provisions have been made for the recipient
 to undertake adequate physical security measures.
 However, there are no provisions for France to make
 prior inspections or to be continually advised of te
 state of South African physical security measures or to
 take any actions if these measures weaken or become

APPENDIX I                                        APPENDIX II

 XI.    Retransfers

      The Ministry of Finance through its division of
 customs is responsible for the export of specific
 materials from France. However, the Ministry of
 Foreign Affairs which has responsibility for the
 maintenance of international agreements would receive
 the request and would have responsibility for decisions
 regarding the re-export of nuclear materials, equipment
 or technology by a recipient country. France ha.
 followed the Iondon suppliers' guidelines with rgard
 to the extension of safeguards'to retransfers of
 materials ad technology. France does not require
 that any rtransfer be done only with its prior approval.

 XII.   Nuclear Export Financing

     There is little published regarding specific
French policies and practices on the financing of nuclear
exports.  It i understood that the normal provisions
of the Ministry of Finance regarding general exports
cover nuclear exports as well. The terms and rates of
loans are more severe than those of the US Ex-Im Bank.
In the past, France has undertaken the sale of nuclear
reactors as paw of an overall government-to-government
cooperative program. These arrangements have been part
barter, part financing and involve a number of technical
projects performed by France in the recipient country
in exchange for certain volumes of commodities to be
imported by France.  It is not known precisely what the
terms of a reactor sale have been in the context of these
barter packages. The sale of two reactors to South Africa
is assumed that there were no other commodity exchanges
or purchase associated with the sale, However, the
terms of the contract for the sale of two French reactors
to South Africa are not known.

wIII.    Nuclear Suppliers' Meetings

     France has been an original and active participant
in the London Nuclear Suppliers Group. After the
unscheduled newspaper reporting on the results of the
London Suppliers' meetinr in late 1975 and early 1976,
the French Foreign Minister presented the French
National Assembly with France's own policies regarding
the export of nuclear materials, equipment, and

APPENDIX II                                        APPENDIX II

       Since the advent of the London Suppliers' meetings,
  there has been a great change in the public posture of
  France regarding nuclear safeguards. This change in
  public posture is best evidenced by the creation of the
  Interministerial Council on Nuclear Export Policy and
  the statements issued by the Council to date.
       Although France is not a signatory to the NPT,
 France has stated publicly that its actions will be as
 if France had signed the Treaty. France participated in
 the development of the London supplier's uidelines and
 has applied these principles to its export arrangements.
 Since September 1976, while excluding those
 arrangements involving previous commitments, France has
 taken a very different public posture on safeguards to
 the extent of postponing, indefinitely, future sales of
 sensit:'.ve technologies such as uranium enrichment and
 reprocessing facilities. To maintain a commercially
 viable business of its nuclear industry, France will sell
 nuclear reactors and supporting full fuel cycle services
 to responsible parties.

APPENDIX III                                        APPENDIX III


          1.     Background on Nuclear Activities
    A,    Overview

         In 1945 the UK established nuclear research centers
    at Harwell and Risley under the supervision of a
    Ministry of the Government. In 1950, a review of
    prospects for generating electricity from a nuclear
    reactor led to the construction of the world's first
    industrial scale reactor at Calder Hall in 1953.  In
    the same year, the UK concluded that the growing
    importance of the industrial applications of atomic
    energy and the need for an organization more akin to
    that of a large industrial undertaking required that
    responsibility should be transferred to a nondepartmental
    organization. As a result, the United Kingdom Atomic
    Energy Authority was set up in 1954.

         In 1955, the government announced a ten-year program
    for nuclear power. Under this plan, improved versions of
    Calder Hall (a Magnox reactor) were to be built by
    British industry for the various area generating boards
    so as to produce 1500 to 2000 megawatts (MW) of nuclear
    power by 1965. The program was subsequently escalated
    to call for the production of 5,000 MW by 1968. A
    second stage of the UK's nuclear power program was announced
    in 1964 to bring the total to 11,000 MW 1975. And in
    1974, the government announced a further program of up
    to 4,000 MW.

          The first stage of the nuclear power program has
    been completed. Eleven stations are in operation with
    a total capacity of 5,300 MW. Reactors exported to Italy
     (Latina) and Japan (Tokai Mura) produce 200 MW and 154 MW,
    respectively. For the second stage, twin reactor
    stations are still being constructed at five different
    locations based on the advanced gas cooled reactc. (AGR)
    design developed by the UKAEA. Stations for the '.hird
    stage are supposed to be ordered during the period 1974-
    1978.   They will employ reactor units of up to  ,0-660
    MW capacity based on the UKAEA-designed steam generating
    heavy water reactor (SGHWR).

SOURCE:   Department of State

                                                     APPENDIX III

       An experimental fast breeder reactor
                                               (DFR) was built
  and has been operating t Dounreay,
  As the world's first fast reactor to Scotland,   since 1959.
                                        produce electricity
  for commercial use, it generates only
                                          about 14 MW of
  electricity but also is used as a test
                                           bed for the
  development of fast reactor fuels and
  hiring of radiation space in the reactormaterials.   The
  and associated preparatory and post        for experiments
                                       irradiation work has
  earned more than 4 million pounds froin
                                           overseas customers.
  The prototype fast reactor (PFR) should
                                            produce 250 MW
  of electric ty when it reaches full
  way for the large fast reactors that power  and pave the
                                        are planned from the
  late 1970's onward.

        The various government departments and
   involved with nuclear exports are (a)         agencies
                                          the Department of
  Energy, which maintains overall supervision
                                                 of UK nuclear
  policy   and reviews the annudl budgets of government-funded
  activities involving entities such  as the UKAEA, BNFL,
  and the nuclear power company, (b)
                                      the UKAEA, which is
  primarily responsible for ccnduct of
                                         R&D relating to the
  whole range of nuclear activities, including
  design, (c) the National Nuclear Corporation, reactor
                                                   a partly
  government, partly privately owned corporation
  for the purpose of building nuclear               established
                                       reactors for export
  as well as domestic use, () Britsh
                                         Nuclear Fuels, Ltd.
   (described below, (e) the Foreign and
  Office, whose energy and arms control
                                          and disarmament
  divisions are responsible for developing
                                             and coordinating
  international nuclear energy policy
                                       including the
  negotiation of bilateral and multilateral
                                              agreements for
  cooperation and international safeguards
                                             aad controls,
  and (f) the Department of Trade, which,
                                            as successor to
  the Board of Trade, is responsible for
  imposed on various nuclear related equipment controls
                                                  and materials.
 B.   Annual Statistics

      Because of its virtually exclusive
                                          dedication to
 indigenous reactor concepts which have
                                         tended to have
 technical successes but commercial failures,
 has had an extremely poor reactor export
                                           record.  Except
 for small research research and training
                                           reactors, it has
 been unable to break into the commercial
                                           export market
 dominated by U.S., Gerrman and other
                                      firms which adhere
 to light water reactor designs.   Export of reactor com-
 ponents amounted to only 2.2 million
                                        pounds sterling
 in 1975.

APPENDIX III                                         APPENDIX III

        Much more successful have been British efforts ii
   the field of nuclear fuel services carried out by
   British Nuclear Fuels, Ltd. (BNFL), which was established
   as a commercial offshoot of UKAEA six years ago.   BNFL
   was organized to handle conversion and enrichment of
   uranium, the manufacture and supply of uranium and
   plutonium-based fuels and the provision of related fuel
   cycle services for nuclear power stations including the
   reprocessing of nuclear fuel.  Exports for the financial
   year ending 31 March 1976 totaled 12.4 million pounds
   sterling compared to 5.9 million pounds sterling the
   previous years. Major customers are located in Germany,,
   Japan, Italy, Spain, France and The Netherlands.   Through
   various affiliates, BNFL participates in all aspects of
   the tripartite project with West Germany and the
   Netherlands for the purpose of developing and marketing
   enriched uranium produced by the centrifuge process.
   Smaller associated companies are involved in providing
   irradiated fuel reprocessing services in Germany and Italy.

        The prospects for consideration expansion of
   nuclear fuel reprocessing facilities with a large component
   of overseas business depends to some extent on environ-
   mental constraints and international policies agreed to
   by major supplier countries.

   C.   Information on Industrial Nuclear Capacity

        Reprocessing or irradiated magnox fuel from UK and
   overseas reactors is the main activity at the windscale
   works.  The rate at which Magnox fuel can be reprocessed
   has in the past been restricted by limitations in the
   decanning plant.  A major capital investment program for
   expansion of the present Magnox plant has been devised
   and will provide for new Magnox fuel receipt, pond
   storage, and decanning facilities.  Plans for a major new
   oxise fuel storage and reprocessing facility for use in
   the 1980's is currently a subject of public debate.
   While design and development work are proceeding, final
   approval must he obtained from the Secretary of State for
   Environment.  Contracts to reprocess fuel for overseas
   customers provide for the return to the customer of the
   resulting reaioactive waste which will involve turning
   higher activity fission product wastes now stored as
   liquid into solid blocks of glass.  Negotiation of
   contract terms have been completed within the last year

                                                       APPENDIX II

   with Japan and Spain. Development
   process for solidifying             of the vitrification
   Design and construction product  wates is proceeding.
   handle ctual waste has of a small scale pilot plant to
                           been undertaken and will
   followed by further development                   be
   the introduction of vitrificacionfacilities leading to
   scale in the mid-lbO's.            on a full roduction

         Progress in
   continud and the en;rifuge
                                  enrlchment technology has
   now been operating satisfactorily enrichment plant has
   The second prototype
                                        for almost four years.-
                          plant has been working
   tan years while h firast                        for
  was scheduled for commiaioningull scale production oer
  diffusion plant at Capenhurst       in 1976. Meanwhile, the
  einriched uranium for             cantinuec to produce
  minimum of problems. UK    nuclear power stations with
                           Additional cpacity for          a
  facturing centrifuges has                          manu-
  enrichmeri                   been built to provide for
               plant requ rements during
  the erly    1960'8.                      the period up to

         Following intonee marketing
   lY75 when Urenco Ltd. (n             activity in 1974 and
   share) secured orders       which  BNFL   holda one-third
  work, there has been a for   some 26G000 tons of separative
  nuclear power plants aidslowing down in the ordering of
                             hence, a turndown in the
  enrichment market. 9evertheless,                        total
  in c,btaining letters of               Unco
                            intent for furtherLtd.    has succeeded
  wort sacme 200 million pound,
  between Capenhurst and A.lalo the work is to be divided
  centrifuge machine develpoent ii the Netherlands. The
  the objective of providing         program is continuing with
  Development work is performed second   generation machine.
  with NFLIs Dutch and German in close collaboration
        It is difficult to ay what
 reactors must be producei             numb r of nuclear
 viability of the industry.   annually    to maintain the
 sequence of poor forecasting,   Historically,   as a con-
 famine business in the UK.        this has been a feast or
 based on the SWR is considered  The current 4,000 MW program
 a nonstarter, with the referenced by most observers to be
 and a half behind schedule             design more than a year
 Recently, there has been      and  still   not accepted.
                            renewed interest in switching

APPENDIX III                                            APPENDIX III

  to LWR technology licensed from the U.S. or West Germany.
  The central policy review staff has suggested a scheme
  which would result in the nuclear power company becoming
  a turn-key engineering contractor with all the resources
  needed to compete in overseas, mainly Middle East,
  markets for nuclear power plants. Given the state of
  paralysis in the UK nuclear reactor program for the past
  three years due to a combination of political and economic
  circumstances, it would be premature to predict success
  of this latest proposal. Nonetheless, unless the
  industry can look forward to at least two nuclear power
  plant orders, either foreign or domestic, each 18 months
  to two years, it would appear difficult to avoid the
  virtual disappearance of an across-the-board UK capacity.
  In this event, boilers and turbo generators would appear
  to be the most propitious items for British manufacture.

  2.        Statutory Requirements and Agreements for Cooperation

       A.    Laws and Regulations

             Atomic Energy Authority Act, 1954.

             Radioactive Substances Act, 1960.

             Nuclear Installations Act, 1965.

             Nuclear Installations (Amendment) Act, 1965.

             Statutory Instruments 1970 No. 1288 - Customs and
             Excise - The Export of Goods (Control) Order 1970.

             Atomic Energy Authority Act 1971, Chapter 11.

       B.    List of Nuclear Agreements Between the UK and

        The UK generally conducts its international
  cooperation in the peaceful uses of nuclear energy without
  entering into formal agreements. One exception is the
  Agreement with Romania which was necessary to satisfy
  their domestic requirements.

  3.         Requirements for Technical or Economic Justifications
             or Criteria as a Condition for Nuclear Exports.

        UK policy on the export of nuclear equipment materials
  or technology was laid down by the Secretary of State

APPENDIX III                                      APPENDIX III

for Foreign Affairs Callaghan in reply to a written
parliamentary question on March 31, 1976. In brief, it
sets out that a proposed export is considered on its
own merits with due consideration being accorded the
NPT, the Euratovn Treaty, and whether r not the
prospective cuszomer has concluded a safeguards agree-
ment with the IAEA.
4.   Regulatory and Licensing Functions.
     Under the export of Goods (Control) Order 1970,
export control is imposed on the export of particle
accelerators, uranium hexofluoride production plant and
machines for processing nuclear materials to countries
other than commonwealth countries (except Southern
Rhodesia) the Irish Republic, the Republic of South
Africa and the USA. The list cf nuclear-related materials
and equipment for which an export license is required,
laid down in the 1970 Order, may soon be amended.
5.   Safeguards.
     The 1972 Act providing for accession to the European
Cormunities had the effect of incorporating the Community
treaties and their dependent regulations, etc., within
the body of UK law. Under the Act, Eratom applies
safeguards to nuclear material within the UK assigned to
peaceful purposes to the extent necessary to verify that
(a) material is not being diverted from its intended uses
as declared by the UK; and (b) material in respect of
which a safeguarding obligation has been assumed by
Euratom or the UK is used in accordance with that
     As a party to the NPT, the UK is under an obligation
not to supply nuclear weapons or to give assistance in
producing weapons to nonnuclear weapons states. Moreover,
the UK cannot supply nuclear material for peaceful
purposes unless the materials are subject to safeguards
under an Agraement with the IAEA.
     In 1967 the UK undertook present obligations which
require that when international safeguards were introduced
in nonnuclear weapons states to implement the relevant
NPT provisions, they would accept similar safeguards in
the UK subject to exclusions for reasons of national
security. In addition, some bilateral agreements with
the UK allow the second state the right to apply safe-
guards to its nuclear material after transfer to the UK.
Such safeguards are trom time to time invoked, notably

APPENDIX III                                   APPENDIX III

 by Canada. Re-export without the permission of the
 supplying state is usually prohibited.
      Apart from the relevant provisions of the Euratom
 Treaty and regulations, the only item of UK legislation
 related to the above-mentioned international requirements
 is S.I. 1970 No. 1288 imposing export control on certain
 nuclear materials and equipment.
 6.   hysical Security.
      Appropriate security precautions against sabotage or
 terrorist attack both at nuclear installations and fissile
 material in transit are taken in connection with all
 nuclear activities and are kept under regular review.
 Armed guards are used on certain sites and to accompany
 fissile material in transit.
 7.   Nuclear Export Financing.
      As noted above, there is no policy laid down by
 the UK on export financing. The pros and cons of each
 case are examined on its own merits.

APPENDIX IV                                           APPENDIX IV


                         Background on Nuclear Activities

    1.    Overview.

         Canada was one of the first countries to engage in
    atomic energy research and development.  In September 1945,
    a small reactor called the ZEEP, located at Chalk River,
    was the first reactor to produce power outside of the
    United States. Other test, experimental and power
    demonstration plants started operation in 1962. The first
    commercial Candu power plant (Douglas Point) came into
    operation in 1967. Canada now has 38 Candu reactors in
    operation, under construction, committed or planned and
    has focussed on heavy water cooled and moderated, natural
    uranium feled reactors using pressurized tubes. Canada
    also is a major supplier of natural uranium and of radio-
    isotopes for medical and industrial applications.

         In support of Candu reactors and export sales, Canada
    produces its heavy water supply at Bruce, Port Hawksburg,
    and Glace Bay production plants. Canada has two major
    auclear R&D centers located at Chalk River, Ontario, and
    Finawa, Manitoba in which the main areas of R&D are
    nuclear physics, solid state physics, chemistry, material
    science, biology, and waste management.

    2.    Organization

         The Canadian Government has four major organizational
    divisions which are responsible for Canada's peaceful
    nuclear energy program:   (1) Atomic Energy of Canada
    Limited, (2) The Atomic Energy Control Board, (3) The
    Department of Industry, Trade, and Commerce, and (4) The
    Department of External Affairs.

          Atomic Energy of Canada Limited (AECL)

         Atomic Energy of Canada Limited is a Crown Company
    incorporated in February 1952 under the Companies Act
    (Canada Corporation Act) pursuant to the Atomic Energy
    Control Act, AECL reports to the Ministry of Energy,

SOURCE:   Department of State

APPENDIX IV                                       APPENDIX IV

  Mines and Resources and is responsible for the
  promotional aspects of the Canadian program and for
  research into and development of  the peaceful uses of
  atomic energy, in particular the development of nuclear
  power systems to meet Canadian needs and develcp
  improved applications of radioisotopes and radiation.

       Atomic Energy Control Board   (AECB)

       In Canada, atomic energy facilities, equipment and
  materials are controlled by the Atomic Energy Control
  Board under the authority of the Federal Atomic Energy
  Control Act, which came into force in 1946.   The primary
  role of the Board, as summarized in the preamble to the
  Act is "to make provisions for the control and super-
  vision of the development, application and use of atomic
  energy, and to enable Canada to participate effectively
  in measures of international control of atoaic energy
  which may hereafter be agreed upon."   The Act was amended
  in 1954 giving the Board responsibility for only the
  regulatory and other non-promotional aspects of the
  program as follows:  "control of nuclear facilities in
  the interest of health and safety, control of atomic
  energy materials, equipment and information in the
  interest of national and international security; and
  control of awards of grants in aid for atomic energy
  research."  The Act is currently being rewritten to
  emphasize protection of the environment.   The Board,
  consisting  of five members who are responsible for
  licensing and regulating atomic materials and equipment
  similar to NRC's functions in the Unite-d States, reports
  to the Parliament through the Minister of Energy, Mines,
  and Resources.

       The Department of Industry, Trade, and Commerce

        The Department of Industry, Trade, and Commerce
  reports to the Minister uf industry, Trade, and Commerce
  and has the responsibility for issuing export permits
  for   tems listed of the Government of Canada "Export/
   mr .   Control List."  Permits for the export of nuclear
  items contained on the List are issued only on the
  idvice of the Atomic Energy Control Board which concurs

APPENDIX IV                                       APPENDIX IV

  in the issuance of permits only if safeguards to  be
  applied by the recipient are acceptable.  In a case
  involving the potential export of a Candu power plant
  to a new recipient country, for example, the Department
  of External Affairs is responsible for negotiating an
  agreement for cooperation containing appropriate controls
  and safeguards.  AECL provides the reactor design and
  engineering assistance to private industry which
  fabricates the hardware.  The Department of Industry,
  Trade,  and Commerce, with the Atomic Energy Control
  Board's concurrence, issues the export permit for con-
  trolled items.

  3.   Annual Statistics on Canada's Nuclear Export

       Canada exports uranium, Candu and research reactors,
  radioisotopes, radiation equipment, and heavy water for
  the reactors it supplies. The radioisotopes and
  radiation equiyAent are sold worldwide, and the level of
  sales is about $10 million/year. Currently uranium sales
  are about 5,000 to 7,000 tons U0 8/year. Candu reactors
  have been sold to Pakistan, India, Argentina, and South
  Korea. Research reactors have been sold to Taiwan and
  India. Figures are not readily available on Candu sales
  but the current backlog is estimated to provide an annual
  level of sales valued at approximately $200 million for
  the period extending from 1976 - 1981.

  4.   Industrial Nuclear Capacity
       Canada is nt in the nuclear fuel enrichment or
  reprocessing busines3 and is therefore not a supplier of
  these services. In the absence of export capabilities
  to supply services for these two components of the
  nuclear fuel cycle Canada's nuclear industry depends
  entirely on the export of Candu reactors, heavy water, and
  uranium as major commodities to maintain competitiveness
  in the international nuclear trade market. The number
  of nuclear power reactors, of the 600 MWe size, required
  to provide a viable nuclear industry is estimated at
  2 - 4 reactors per year including both domestic and
  foreign orders.
       Although financial constraints affecting domestic
  utilities have extended planned construction schedules,
  current and projected domestic demands for reactors

                                                    APPENDIX IV

  predicted at the end of 1976 indicates
                                         that Canada
  should have an installed net nuclear
  3.3 GWE in 1980, 11.3 GWE in 1985;   capacity of
                                     24.5 GWE in 1990, and
  47.1 GWE  in 1995.
  5.    Statutory Requirements and Agreements

        1.    Canadian laws and regulations governing
              energy activities.                      atomic

       -- Atomic Energy Control Act, R.S.
                                          1970, C.A.-19.
       -- Nuclear Liability Act, R.S. 1970,
                                             ch. 29.
       -- First Supply legislation - not
                                         yet proclaimed.

       -- Atomic Energy Control regulations,
           74-334, 4 June 1974, including atomic DORS/
           control orders affecting the Atomic     energy
           Control Board contained in            Energy
                                       the Caniada Gazette,
           Part I, dated June 8,. 1974, pages
       2.    List of nuclear agreements between
                                                the Government
             of Canada and Recipients

      The Government of Canada has agreements
 cooperation in the peaceful uses             for
                                  of atomic energy with:
 Argentina, Australia, Euratom, Finland,
 IAEA, India, Iran, Japan, Korea,        Germany, (FRG),
                                  Pakistan, Spain, Sweden,
 Switzerland, and the United States.

       3. Requirements for technical or economic
      In determining and establishing requirements
technical or economic justification                  for
                                     or criteria as
conditions for nuclear exports,
                                 the Government of Canada
examines alternate energy sources
                                   available to the
recipient country, the country's total
availability of capital for financing energy demand,
                                        the export, and
the technical and industrial infrastructure
recipient before considering the               of the
                                  export of nuclear
equipment and materials.

APPENDIX IV                                       APPENDIX IV

       Peaceful Uses Agreements. Canada does not provide
  any nuclear materials, equipment, technology, or
  assistance in the absence of a peaceful uses agreement.
  Under any new contract, the recipient of nuclear materials,
  equipment, or technology must be an NPT signatory or
  accept international safeguards on their entire nuclear
  program. In bilateral negotiations, agreements include
  binding assurances that the recipient partner will not
  divert peaceful nuclear materials to produce nuclear
  explosive devices and agree to stipulated sanctions for
  non-compliance with respect to reprocessing, transfers,
  and re-transfers prohibitive clauses.

  6.   Regulatory and Licensing Functions

      The Export Control List (SORS/DORS/73-253) provides
 procedures for authorizing exports of nuclear components,
 materials and nuclear related items. The criteria for
 authorizing, licensing and regulating nuclear exports is
 the joint responsibility of the Atomic Energy Control
 Board and the Department of Industry, Trade, and Commerce.
 All applications for the export of nuclear materials,
 equipment, and technology require approval of the Atomic
 Energy Control Board before an export permit can be
 issued by the Department of Industry, Trade, and Commerce.
 Group 8 items of the Export Control List governs atomic
 energy materials, including special nuclear materials,
 equipment, types and trigger list quantities of nuclear
 materials. Group 10 items govern technology exports
 including sensitive technologies.

  7.   Safeguards

      Bilateral safeguards inspections prior to the
 export of Canadian-origin materials have been limited to
 countries such as France, FRG, Switzerland, Italy, and
 the United Kingdom. Residual safeguards rights are
 provided in bilateral agreements in the event that IAEA
 or Euratom safeguards can no longer be effectively
 applied. As a part of bilateral agreements negotiated
 since 1974, the Government of Canada has obtained the
 right of access to IAEA accountability inspection
 information from their bilateral partners. Consultation
 provisions in the agreements also provide an additional
 mechanism for obtaining safeguards accountability

APPENDIX IV                                       APPENDIX IV

         Since 1974, the Government of Canada has negotiated
    provisions in the agreements in which safeguards will
    cover the entire life of Canadian-supplied facilities,
    equipment, nuclear materials, and all subsequent fissile
    materials produced.  In addition, the recent Canadian
    nuclear policy statement (December 22, 1976), makes full-
    scope safeguards a mandatory condition of supply.

    8.   Physical Security

         Recipients of Canadian-supplied reactors, equipment,
    and nuclear materials are required to provide adequate
    physical safeguards measures and procedures.  Canadian
    standards for physical safeguards (physical protection)
    are compatible with the nuclear suppliers guidelines,
    which in turn are consistent with those recommended in
    IAEA's publication INFCIRC/225.

         For new recipient countries, Canada conducts physical
    safeguards reviews to determine that plans for physical
    safeguards measures are adequate prior to exportation
    significant quantities of special nuclear materials.  To
    ascertain that the recipient country maintains adequate
    physical safeguards measures, periodic consultations and
    safeguards review rights are provided in agreements
    negotiated between Canada and the recipient partner.  If,
    during consultation and review activities, Canada
    determines that physical safeguards measures are less
    than adequate Canada may exercise the right to withhold
    further supply of materials until adequate physical safe-
    guards measures are instituted.

    9.   Retransfers

         All bilateral agreements since 1974, and some prior
    to these new procedures, prohibit the re-transfers of
    Canadian-supplied nuclear materials and equipment.
    According to regulations and procedures, the Atomic
    Energy Control Board must approve original exports prior
    to the issuance of an export permit.  Likewise, re-
    transfers must also be approved by the Atomic Energy
    Control Board in consultation with the Department of
    External Affairs.

APPENDIX IV                                       APPENDIX IV

       Verification clauses contained in bilateral agree-
  ments provide a process to detect unauthorized transfers
  by establishing controls over retransfers, reprocessing
  and enrichment involving Canadian-supplied materials,
  equipment or technology.
  10.   Nuclear Export Financing
       Each new application for a reactor sale must be
  approved by the full cabinet. In making a determination
  with respect to the proposed reactor sale the Cabinet
  considers the technical assessment of the country,
  political assessment, alternate power sources available
  and installed, economics, energy requirements and safe-
  guards. Although safeguards are not directly tied to
  financing Canadian law requires adequate physical
  safeguards prior to the export of reactors, nuclear
  materials, and equipment.
      The first choices, for financing to stimulate nuclear
 exports including applicable terms and interest rates,
 from private sources or through the recipient's govern- are
 ment financing procedures. Otherwise, nuclear exports
 are financed through the Canadian Export Development
 Corporation (EDC) which has close coordination with the
 U.S. Export/Import Bank on terms and conditions for
 financing. Canada has no sarate financing policies or
 requirements specifically applied to the export of
 sensitive technologies. As stated above, economic
 feasibility, political stability, energy requirements,
 and alternate energy source are evaluated  by the full
 Cabinet in considering the export of reactors, nuclear
 materials, and
 11.    Nuclear Suppliers' Meeting
      The Canadians believe that December 22, 1976,
 policy statement leads, rather than follows the nuclear
 suppliers' guidelines and policies, in that it requires
 comprehensive, full-scope safeguards as a condition of
 supply. The Canadians hope that the IAFA and the
 Suppliers' Group will follow the Canadians' lead in
 further strengthening safeg'ards.

APPENDTX V                                         APPENDIX V


    I.    Background on Nuclear Activities


          Policy governing the development of nuclear energy for
    peaceful purposes has been the responsibility of the Japan
    Atomic Energy Commission since its formation on January 1,
    1956.   The Commission consists of six commissioners serving
    three-year terms and a chairman.   Up to three commissioners
    may serve part time.   The chairman was previously the
    Director-General of the Science and Technology Agency (STA),
    a political appointment usually of relatively short duration.
    The JAEC has recently been elevated in stature so that it
    now reports to the Prime Minister.   At any rate, the JAEC
    deputy chairman is the key policy-making individual.

         The JAEC was established to plan, deliberate and
    decide on matters concerning atomic energy utilization,
    policy administration, long-range planning, regulatory
    activities, safety, training, reporting and other activities
    as assigned.


         Research and development activities of the GOJ in
    atomic energy are carried out by five semi-government
    organizations.  Although the government is the main source
    of funding of these R&D organizations, they also accept
    funds from private sources.  They are linkedl to or are under
    the supervision of the Prime Minister's office or the STA
    which is headed by a cabinet minister who reports to the
    PM. STA has reporting to it the Atomic Energy Bureau
    (AEB) and the Nuclear Safety Bureau (NSB), roughly
    comparable in responsibility to ERDA and NRC.   Lines of
    authority are much more loosely drawn in the R&D con-
    ducting organizations than in comparable situations in
    the U.S.

    The five R&D organizations are:

    A.   Japan Atomic Energy Research Institute (JAERI) which
    conducts the research side of nuclear R&D including fusion
    and which is roughly comparable to an ERDA multi-
    disciplinary laboratory.

SOURCE:   Department of State

                                                   APPENDIX V

  B.   Power Reactor and Nuclear Fuel Development
  Corporation (PNC) which is more engineering oriented
  was formed for:. 1. advanced reactor development,
  primarily LMFBR, but also including ATR, a heavy
  moderated natural uranium fueled reactor,         water
                                             2. development
  and installation of uranium enrichment facilities,
  3. installation and operation of spent nuclear
  reprocessing capability, 4. uranium ore prospecting,
  mining and refining, 5. nuclear waste management.
  corresponds roughly to an ERDA engineering laboratory.It

 C. Japan Nuclear Ship Development Agency (JNSDA)
 was established in 1963 for the construction of
 nuclear ship, :he Mutsu.

  D. National Institute of Radiological Sciences
                                                  which is
  responsible for conducting research on preventative
  remedial public health as it relates to radiation
 E. Institute of Physics and Chemistry Research which
 responsible for scientific research.                 is

       The Ministry of International Trade and Industry,
 MITI, is responsible for the promotion of domestic
  industry, fr the promotion of international trade
  fo the licensing ot exported material and equipment.
 As it .elates to this subject, MITI's two  primary branches
 are the Aency for Natural Resources and Energy
 and the .gency for Industrial Science and Technology
  (AIST). AIST manages government-sponsored non-nuclear
 energy R&D.   ANRE is rpespnsible for the promotion
 commercial nuclear power plants and has been given of
 specific directions to push Japanese nuclear industry
 as a top priority matter so that nuclear growth
 accElerated in Japan. A decision to license for
  (or import) nuclear materials requires MITI's approval,
 in the process of which it consults with the STA.
 AEB and the NSB are operationally involved in this
 review process. STA's review is made from the points
 of view of:   (1) overall nuclear energy development,
 (2) nuclear safety development, (3) safeguards
 and, (4) nuclear weapons non-proliferation.

      Development of international nuclear
 particularly with regard to the political policy,
                                           aspects of non-
 proliferati~l, is the responsibility of Ministry
 Foreign Affairs. The United Nations Bureau of theof

APPENDIX V                                          APPENDIX V

   has scientific affairs any isarmament
   of which are involved in policy matters.divisions, both
   at London uppliers meetings and at IAEA
   Conferences has come in part from UN Bureau
                                                and its

   II.   Statistics on Export Activity

        Radioisotopes for medical treatment or
  purposes, and industrial nuclear equipment diagncstic
  thickness gauges,have been exported. However,sucn as
  there has been no huclear expert activity       up to now
                                             of consequence
  which has either nuclear power or nuclear
  implications. The first potential export weapons
                                             of major nuclear
  power significance may be the manufacture
  nuclear power reactor components for PWR's in Japan of
  The MOFA and MITI will be heavily involved for the USSR.
                                              in this matter,
  should it mature to the point of requiring
                                              an export
  license. It is specifically MOFA's responsibility
  conduct the necessary analysis for conformance       to
                                                   with COCCO
  requirements to restrict transfer of sensitive
  to communist countries.                          technology

  III.   Industrial Nuclear Capability

       Japan is currently working on the development
  centrifuge enrichment process.                      of a
                                  PNC is responsible for
  the development and installation of a uranium
 plant targeted at supplying at least a          enridhment
 future enrichment requirements. The first        of Japan's
 consisting of 180 centrifuges, went into
                                           operation in
 the fall of 1974; the second cascade, consisting
 centrifuges, went into operation in the            of 247
                                          summer of 1976.
 The three centrifuge suppliers, Mitsubishi,
 Toshiba, are preparing to cooperate on       Hitachi and
                                         an enrichment
 pilot plant comprised of some 7,000 to
                                         10,000 centri-
 fuges, providing the authority is granted
 to cooperate in this effort. The pilot     allowing them
                                          plant is
 scheduled for completion in the early 1980's.
 Subsequently, a production facility is
                                         expected to supply
 a significant portion of Japan's enriched
                                            uranium require-
 ments in the 1990's.

      PNC's Tokai-Mura LWR spent fuel reprocessing
 built by Saint Gobain Nucleaire and PNC,           plant,
                                           is currently
 in cold test operation.  This 210 MT/year facility is
 scheduled to go into hot test operation
                                          early in 1977
 and into commercial operation in 1978.

APPENDIX V                                        APPENDIX V

       At the present time there are 13 nuclear power
  plants in operation in Japan for a total of 7400 MWe.
  The first of these is a Calder Hall type C02 cooled,
  166 MWe nuclear plant which went into operation in
  July 1966. Six of the remainder are BWR's and five
  are PWR's. The plants are 350 to 826 MWe in size and
  went into commercial operation in the following
  sequence: two in 1970, one in operation in 1971, one
  in 1972, three in 1974, two in 1975, and three in 1976.
       There are 15 plants under construction. They are
  expected to go into operation as follows: two in 1977,
  five in 1978, one in 1979, two in 1980, one in 1981,
  one in 1982 and three in 1983. These vary in size from
  524 MWe to 1100 MWe.
       The early plants were turnkey plants delivered by
  General Electric and Westinghouse using mostly U.S.
  equipment. Recent plants are being built by Mitsubishi,
  Hitachi and Toshiba, mostly with Japanese equipment.
  The nuclear industry in Japan currently has the
  capability to fabricate two or three big plants (1100
  MWe) per year.
  Statutory Requirements and Agreements for Cooperation
  I.    Laws and Regulations
       Japan's "Atomic Energy Basic Law" provides for
  research, development and utilization of atomic energy
  for peaceful purposes. It defines the constituency and
  functions of the Atomic Energy Commission and the two
  quasi-governmental organizations which copduct the vast
  percentage of its R&D, JAERI and PNC. The law describes
  the development and acquisition of minerals relating
  to Atomic Energy and controls to be exercised over
  nuclear fuel materials and reactors. It also defines
  patent relationships, protection from radiation hazards
  and compensation. There is, in addition, a law con-
  cerning the prevention of hazards from radiation which
  provides for the use, handling and obligations of users
  and sellers of radioisotopes.
  II.   Agreements
       Japan has nuclear agreements with the U.S. Australii,
  France, Canada and the UK. Each of these bilaterals is
  accompanied by a corresponding trilateral with IAEA.
  The Canadian agreement is currently under renegotiation.
  Japan has an agreement of cooperation in the field of

APPENDIX V                                          APPENDIX V

  scientce and technology, which includes nuclear, with the
  FRG, but the agreement is restricted to information
  exchange and excludes the supplying of nuclear materials.

       The bilaterals are written as mutually applicable
  to each signatory country; though there is a definite
  supplier/customer relationship with Japan on the receiving
  end, reciprocity provisions are included.

  III.    Justification

       At the present time, the condition which constrain
  nuclear exports from Japan is a brief policy statement
  made by the JAEC in 1962. The policy requires that
  exported materials and equipment will be used by the
  recipient country solely for peaceful purposes.  It is
  expected that in the near future the JAFC will develop
  more extensive and restrictive requirements, particularly
  relating to the ron-proliferation of nuclear weapons.

  Regulatory and Licensing Functions

  I.     Criteria

       At the present time there are no standard regulatory
  and licensing criteria for nuclear exports.

  II.     Trigger List

       Trigger list guidelines are being developed which
  would place under control quantities and types of
  materials along the lines of the Zanqger List and as
  discussed in the London talks.

  III.      Conditions

       There are no special conditions at the present
  which must be met on exports of SNM, heavy water plants,
  enrichment, and reprocessing facilities except for NPT
  Article III.2. Japan does not expect or plan at this
  time to export any of these materials or equipment.

  IV.       Authorizing Procedures

       There are no special procedures for authorizing the
  export of nuclear components. The same procedures apply
  as to the export of a facility.

APPENDIX V                                             APPEND:.   7

 V.   Exception

      There are no exceptions to the general export control
 procedures, but the procedures are in the very early stage
 of formulation and have not been applied to an actual case.

      As indicated above, Japan has not entered into an
 agreement as a nuclear supplier as yet and is at the
 present time in the process of formulating its export
 policy and procedures. No provisions have been made to
 extend safeguards rights beyond the agreement expiration
 date. However, Japan is taking the position that as
 long as nuclear material remains in a receiving country, the
 covering safeguards agreement cannot expire.

       Japan has been supporting IAEA's safeguards program by:

       A. Technical assistance -- research contracts; and
       research agreements.

       B.    Participation in IAEA's Perfex program.

       C. Participation in IAEA advisory groups, consultant
       groups, panels, etc.

       D. Participation of Japanese technical experts in
       IAEA Secretariat.

      Japan has expressed a general desire to strenigthen
 IAEA safeguards.  Beyond this, specific suggestions have
 been made at suppliers' conferences.

 Physical Security

      Japan indicates that it is following the London
 suppliers' guidelines.  Since essentially no material
 has been exported , the need for physical security
 reviews has not arisen.


       Japan has strong desires and ideas as to
  retransfers should be implemented and policed, but
  currently has no procedures or system for approving
  retransfers, nor process to detect unauthorized transfers.

APPENDIX V                                           APPENDIX V

   Nuclear Export Financing

        It is expected that the Exirtbank of Japan would
  finance up to 80 percent of a large nuclear equipment
  export. Japan Eximbank JFY 1977 loan quota is yen
  708 billion. A financing action associated with a
  nuclear export would be closely coordinated with MOFA,
  MITI, STA, the PM, and the Cabinet, and conducted under
  the nuclear export policies of the GOJ.    It could be in
  the form of a loan to the buyer or an export credit
  to the exporter.

  Nuclear Suppliers Meetings

  I.     Public Statements

       Japan has refrained from making public statements
  regarding future actions it will follow as a result of
  the Suppliers' meetings, but since ratification of the NPT
  Japan has expressed support of goals of suppliers

  II.     Changes

       Japan's export policy program and procedures are in
  the early formative stages.

  III.     Impact on IAEA

        It seems reasonable to anticipate a significant
  increase in IAEA responsibilities as a consequence of
  %.n.t -': expect to be Jaar's future codified export policy.