Foreign Relations of the United States, 1969–1976, Volume E–14, Part 2, Documents on Arms Control and Nonproliferation, 1973–1976

151. Options Paper Prepared by the Verification Panel Working Group¹

Washington, undated.

OPTIONS PAPER—PROPOSED FRG NUCLEAR REACTOR SALE TO USSR

I. The Problem

The U.S. and UK have refused thus far to grant an exception in COCOM permitting a West German firm to sell a nuclear reactor to the USSR. While we have some reservations concerning the possible transfer of sensitive technology, our position on the COCOM exception has been based on our general policy of requiring the application of IAEA safeguards to such sales, and on NSDM 261, which reiterated this policy in connection with a proposed U.S. reactor sale to the PRC. If we choose not to approve the proposed sale, this issue could become a major irritant in our relations with our German ally. On the other hand, U.S. approval of the sale would require a change in current U.S. safeguards policy in COCOM which could have adverse affects on other U.S. interests.

II. Background

The FRG has pressed us at a high level to approve an exception in COCOM to the proposed sale of a West German-made nuclear reactor to the USSR. The equipment involved is a computer-controlled 1,300 megawatt nuclear power plant containing a pressurized water reactor, valued at $540 million, and 550,000 kilograms of natural uranium, which will be enriched in the USSR and used for the first fueling of the reactor, valued at $75 million. The natural uranium furnished by the FRG will be enriched in the USSR and returned to the FRG for fabrication into fuel elements. The German firm negotiating the sale, Kraftwerke-Union (KWU), will supply the nuclear reactor and fuel; no production technology will be furnished to the Soviets by the FRG, and the FRG has indicated that none of the equipment or technology to be used in the plant is of direct U.S. origin or is to be manufactured under a U.S. licensing arrangement. There is nevertheless some concern that the sale would lead to transfer of information and know-how which could assist the Soviet naval nuclear propulsion program, and enhance their commercial competitiveness in the nuclear power field.

The USSR plans to locate the reactor in Kaliningrad (formerly Königsberg, East Prussia) and to pay for the project by exporting power from the plant to West Berlin and the FRG via Poland and the GDR. The transmission line from the reactor would run through Poland and GDR territory to the FRG. Because the line will supply the FRG as well as West Berlin, any cut-off would affect both. Thus, the political inhibitions against any Soviet pressure on West Berlin arising from the arrangement would be strengthened. The FRG has assured us that West Berlin’s reserve capacity could in any case provide 80 percent of the city’s power needs in case of a cutoff; the line between West Berlin and the FRG could also carry a reverse power flow from FRG sources to augment this capacity.

Chancellor Schmidt personally attaches great importance to this project, as he considers that the successful negotiation of these terms would constitute the most concrete Soviet acknowledgment to date of the relationship between the FRG and West Berlin and would bring significant political and economic benefits to the city.

At our request, Schmidt asked the Soviet leaders in Moscow last October to accept IAEA safeguards on the reactor, but the Soviets refused. It is unlikely that the Soviets would reverse their traditional position, i.e., that safeguards are pointless for advanced weapons powers, and are not required of weapon states under the NPT.

Brezhnev and other Soviet leaders emphasized to Schmidt the importance which they attach to the proposed sale, and they undertook to negotiate with Poland and the GDR the requisite rights-of-way for the power transmission. These talks may be deadlocked, and if an impasse develops while the U.S. appears uncompromising in COCOM, then the German press and public reaction might be to incorrectly place all of the blame for the failure of the sale on the U.S., rather than recognizing the inter-Eastern bloc disagreements. To avoid this politically undesirable outcome, a U.S. policy shift which would permit the proposed FRG sale without the safeguards requirement, if deemed appropriate, should be timed with the above in mind.

The West German press has devoted considerable commentary to this subject, much of which has erroneously accused us of blocking the German sale for our own commercial advantage. (French officials have implied that they too consider the U.S. position to be commercially motivated.) German Government officials have continued to push for a favorable USG decision, and Ambassador von Staden raised it with Secretary Kissinger on February 3. We expect that, if the FRG is able to obtain from the Soviets the power transmission arrangement described above, Schmidt himself will raise this issue with the President or Secretary Kissinger.

III. Issues

A. Should the U.S. approve the sale?

In deciding whether the U.S. should in principle approve the sale, we must balance the commercial and strategic risks of permitting some Western reactor technology to be transferred to the Soviet Union against the political and material costs of opposing the sale.

The strategic issue is very largely confined to such indirect assistance as the proposed sale might provide to Soviet military programs through transfer of western technology. Soviet stockpiles and production of fissionable material are considered more than adequate for both military and civil requirements. The probability of diversion of feed material supplied by the FRG, or the fissionable reactor products, to Soviet military programs, is therefore considered to be very low.

There is, however, a degree of risk that certain unclassified but important technology and information could be indirectly transferred which would be helpful in improving the Soviet naval nuclear propulsion program. There is no evidence that specific sensitive components or technology relevant to this program would be directly transferred, and this is considered unlikely. However, some are concerned that the interrelationship between commercial and military nuclear systems technology could permit, through person-to-person contact over a lengthy period of time, inadvertent Soviet access to information which could be helpful to their naval nuclear program. Particularly if the sale involves Soviet visits to FRG plants, “black art” engineering know-how and proprietary information may be inadvertently transferred. However, it is recognized that sales by other Western countries pose fewer problems of this kind than U.S. sales.

The possibility of technology transfer could also provide some limited commercial benefits to the USSR. Soviet light-water reactor technology appears to be inferior to that of the West in some areas (e.g., welding, instrumentation, quality control, etc.), and much of Soviet motivation may be to acquire Western technology to assist in solving such problems. While again the amount of relevant technology that might be transferred is not quantifiable, it could to some degree strengthen the Soviet competitive position in the world reactor market. Given the preeminent position of the U.S. in this field, however, the likelihood that this kind of assistance could result in a substantial shift in the Soviet competitive position is not great.

While recognizing that there is inevitably some possibility that significant technology may be inadvertently transferred in any nuclear export, some believe that on the basis of our present knowledge, the risk involved in the FRG sale is low. Moreover, it is worth noting that the U.S. agreed almost ten years ago to COCOM procedures which would permit the export of reactors to bloc countries, provided only that IAEA safeguards, which do not affect the technology transfer problem, were required. The U.S. has in fact sold a large research reactor to Romania, indicating that we have not in the past considered the technology transfer problem to be significant where a sale involved primarily hardware.

The primary political considerations are the potential economic and political benefits to Berlin, which underlie the intense interest of the FRG in completing the sale. The proposed arrangement is extremely important to assuring an adequate supply of electrical power to West Berlin, and Schmidt is personally committed to the effort to conclude a successful negotiation. A U.S. attempt to block the deal may be deeply resented by the FRG. While the Soviets would probably welcome a positive U.S. attitude, it is unlikely that our position in the matter would be significant in terms of the overall U.S./USSR relationship.

B. The Safeguards Problem

The only available mechanism through which the U.S. can decisively affect the outcome of the FRG proposal is through the COCOM strategic embargo. Nuclear reactors are on the COCOM embargo list, and under the COCOM unanimity rule the U.S. has an effective veto on granting an exception. Our position in COCOM has been to condition approval of the FRG application for an exception on acceptance by the Soviet Union of IAEA safeguards on the reactor. Since it is virtually certain that the USSR will not accept the IAEA safeguards conditions, this position is tantamount to a veto of the FRG application.

The rationale for our present safeguards position in COCOM, however, may be difficult to defend as it applies to exports to advanced nuclear-weapons states such as the USSR. International safeguards are designed to identify, and thereby to deter, the diversion of fissionable material to nuclear explosive programs. This is done by international inspection of and accounting for material flows within the reactor fuel cycle. Particularly where it is clear that a nuclear power has an adequate independent capability to produce sufficient fissionable material to meet the needs of his military and civil nuclear programs, and therefore no motive to divert imported materials, it may be questioned whether the application of safeguards has more than a symbolic significance. In this regard it is significant that the NPT does not require that nuclear weapons states accept IAEA safeguards on their peaceful nuclear facilities (an exemption which both the U.S. and USSR supported), and the USSR’s refusal to accept them is based on its nuclear weapons state status under the NPT.

The United States however has consistently adhered to a policy of requiring safeguards as a condition of all U.S. nuclear assistance, including that to other nuclear weapons states such as France, the UK, and the PRC. We have done so in part because the importation of unsafeguarded nuclear materials or equipment may involve valid concerns about diversion, particularly in the case of nuclear weapons states whose indigenous stockpiles or production capabilities are a constraining factor for military programs. Moreover, even where diversion is not of real concern, we have felt that the acceptance of safeguards by nuclear weapons states is indeed important for symbolic and political reasons. Uniform application of safeguards reduces the discriminatory aspects of the NPT to which many non-nuclear weapons states object, both as recipients and as potential exporters of nuclear assistance; and thereby enhances the acceptability of the NPT. Thus, it was largely in support of political and non-proliferation objectives that the U.S. and the UK voluntarily offered to place our own civilian power programs under IAEA safeguards (while unsuccessfully urging the USSR to take similar action).

As an extension of this U.S. policy, we have taken the position within COCOM that any nuclear assistance to Communist countries by COCOM nations should be subject to IAEA safeguards. NSDM–261 reaffirmed this policy in these words:

“Nuclear exports to Communist countries by the U.S. or other COCOM countries should continue to be treated on a case-by-case basis, and U.S. or IAEA safeguard standards and procedures for equipment or materials transferred or produced therefrom shall be applied to all recipient countries.”

There is an important distinction to be made between the considerations which may be relevant to our national policy regarding safeguards requirements on U.S. exports, and those which may be relevant to COCOM votes. The purpose of COCOM is to protect western strategic interests by common agreement on embargoes and/or export conditions to Communist countries; this is the only valid and politically acceptable basis for national positions in COCOM. Where the sole or primary purpose of U.S. national safeguards policy is to support political or non-proliferation objectives and no strategic question is involved, it may be untenable logically and politically to attempt to obtain adherence to that policy by other western nations through COCOM.

Our legitimate strategic concern in the FRG case is with the possibility that unclassified but strategically sensitive technology and engineering know-how may be transferred. However, the acceptance of IAEA safeguards by the USSR as a condition of sale would have no significant effect in reducing or controlling the risk. In effect, our current COCOM position relies on the Soviet rejection of safeguards to block the sale, and the result has been to obscure the true issue of possible transfer of strategic technology.

The alternative to existing U.S. policy in COCOM would be to insist upon IAEA safeguards as a condition of exceptions only where the risk of diversion of fissionable materials can be persuasively argued (always in the case of non-nuclear weapons states). Where other strategic concerns such as technology transfer justified a veto, we would continue to disapprove COCOM exceptions, but not on the grounds of safeguard application. In the FRG case under consideration at present, this would mean dropping or finessing the safeguard condition, and resting the U.S. position solely on the question of technology transfer.

Adopting such a policy within COCOM would not necessarily affect existing U.S. policy with regard to safeguards requirements on U.S. exports. We could continue to insist upon safeguards on all U.S. nuclear exports, and could continue to urge that other countries pursue a similar policy to support mutual nonproliferation objectives. To do this, however, would place U.S. firms at a competitive disadvantage within the limited Soviet market, unless and until the Soviet Union is willing to accept safeguard conditions. Moreover, this shift in our policy in COCOM could adversely affect our nonproliferation interests by permitting non-weapon states to charge that the U.S. is moving back toward discriminatory application of safeguards on nuclear exports. We could, however, respond to such charges by saying that although we continued to believe that all states should be willing to accept safeguards on their peaceful nuclear facilities, to advocate this position internationally, and to make it a requirement on U.S. nuclear exports, it was not reasonable to coerce other nations to adopt our viewpoint through voluntary cooperative mechanisms such as COCOM. The shift could nonetheless have an adverse impact upon the forthcoming NPT review conference and upon international reactions to the common supplier policies we are trying to establish.

Another alternative would be to modify our COCOM policy on safeguards and at the same time drop the safeguards requirement as a condition of licensing U.S. sales to nuclear-weapons states, on a selective and case-by-case basis. This would permit U.S. industry to compete on an equal basis for the Soviet market, but might have even more serious consequences for our non-proliferation interests.

C. Safeguards Substitutions

Several additional proposals have been suggested which would substitute some other type of restriction, more acceptable to the USSR, for the IAEA safeguards requirement. For example, we might insist that the spent fuel rods from the FRG reactor, or the fissionable materials extracted from them (or equivalent amounts), be returned to the West. The purpose of these proposals would be to permit the FRG sale to proceed, while fulfilling the substance of safeguards without actual inspection on Soviet territory. It could then be argued that the functional equivalent of safeguards had been achieved. The main difficulty of these proposals is that they do little to support either our strategic or non-proliferation objectives. The risk of technology transfer is unaffected, while the political benefits of a non-discriminatory safeguards policy may be diluted.

IV. Implications for the PRC

It is important that in deciding upon our position with respect to the FRG proposal, we take into account the desirability of maintaining an even-handed approach to exports to the PRC and the USSR. This problem will not arise if we hold to our current position of insisting upon IAEA safeguards, since the same condition would be applicable to the PRC under NSDM 261.

A U.S. veto based on the technology transfer issue would also avoid this problem, at least for the present. While it is possible that some future nuclear exports might pose widely dissimilar technological risks in the two countries, and hence result in “discriminatory” treatment, this does not appear very likely and could be handled on a case-by-case basis.

Modification of our policy on COCOM safeguards requirements as discussed above could result in “discriminatory” treatment. Theoretically, because of its smaller indigenous stockpiles and production capacity, it must be assumed that the PRC would be somewhat more tempted to divert imported nuclear materials or equipment to support military programs. However, only light-water power reactors and slightly enriched fuel are likely candidates for sale to the PRC in the foreseeable future; the NSDM 261 study’s conclusion, that diversion of these items by the PRC is highly unlikely, apparently remains valid.”

Adoption of one of the safeguard substitutes for the FRG sale to the USSR could pose more difficult problems. These options are designed to permit us to drop the requirement for actual inspection on Soviet territory, while maintaining some meaningful ability to detect any significant diversion of reactor products by monitoring the electrical power output of the facility as delivered to the FRG and West Berlin. This possibility is unique to arrangements where the exported reactor is used solely for supply of power outside the territory of the recipient. Nevertheless, by crossing the line of “substitute safeguards,” we could open ourselves to requests for other kinds of substitutes from the PRC and/or other countries, and claims of discrimination if such proposals are rejected.

V. Options

Option 1. Oppose the sale by continuing our current position in COCOM of insisting that all nuclear exports to Communist countries must include the acceptance of IAEA safeguards.

PROS

—Avoids the risk of technology transfer, thereby ensuring the protection of U.S. strategic and commercial interests.

—Supports U.S. nonproliferation objectives among non-nuclear weapons states by maintaining universality of U.S. safeguards policy and avoiding discriminatory treatment.

—Avoids possible problems with PRC.

CONS

—May create major irritant in U.S.–FRG relations.

—Bases U.S. opposition on grounds which are difficult to defend, and therefore could weaken COCOM.

—May not work. FRG could conceivably proceed with sale despite COCOM veto.

Option 2. Oppose the sale within COCOM on the grounds of transfer of strategically sensitive technology; avoid issue of applying safeguards to exports to weapons states and leave U.S. options on this question open.

PROS

—Avoids risk of technology transfer, thus protecting U.S. strategic and commercial interests.

—Avoids problems with PRC.

—Avoids immediate problems with non-nuclear weapon states in NPT review conference and in connection with common supplier policies.

CONS

—May create irritant in U.S.–FRG relations.

—If U.S. case on technology transfer is weak, could weaken COCOM.

—May not prevent sale.

Option 3. Permit sale provided the spent fuel rods or an equivalent amount of produced plutonium is returned to the West.

PROS

—If acceptable to USSR, avoids U.S. clash with FRG.

—Permits U.S. to argue that purpose of safeguards has been achieved, thus reducing discriminatory appearance of a totally unsafeguarded sale.

—Provides material benefits to West Berlin, and political benefits to the West.

CONS

—Does not affect technology transfer risks.

—Weakens U.S. nonproliferation interests by permitting substitution of other conditions for safeguards which could be regarded as discriminatory by NNWS.

—Involves uneconomic shipment and storage of produced plutonium.

Option 4. Permit the sale by modifying U.S. policy within COCOM so as to require IAEA safeguards only when there is a substantial risk of diversion of fissionable materials to military programs.

PROS

—Adjusts COCOM policy to provide clear and defensible rationale for future positions on safeguards requirements.

—Avoids distortion of COCOM function, and consequent weakening of COCOM, by keeping criteria linked to valid strategic concerns.

—Would permit, on basis of NSDM 261, similar COCOM treatment of light-water reactor sales to the PRC, while preserving the option for differential treatment in unlikely event of proposed sale of HTRGs, FBRs, etc.

—Avoids adverse effect on U.S.–FRG relations.

CONS

—May permit some transfer of technology which could enhance Soviet military and commercial positions.

—High probability of criticism by the JCAE and other Congressional elements.

Under this option, there is a further choice that will need to be made with respect to our national policy concerning safeguards requirements on U.S. exports. We could:

a) Retain the requirement for safeguards on all U.S. nuclear exports to any recipient, and continue to urge other nations to adopt a similar policy and accept safeguards on their own peaceful facilities. This course would permit us to argue that there has been no change in U.S. policy, and would give continued support to our nonproliferation objectives. It would, however, place U.S. firms at a competitive disadvantage in the Soviet (and possibly PRC) markets.

b) Modify U.S. national policy so as to permit U.S. sales to nuclear weapons states without safeguards on a selective basis; such exceptions would be granted only when the risk of diversion was not deemed significant. This course would permit U.S. firms to compete on an equal basis for the Soviet and PRC nuclear export market. It would, however, weaken our NPT posture and attract charges of anti-NNWS discrimination.

1. Summary: The paper summarized the background of the proposed West German sale of a nuclear reactor to the Soviet Union, outlined several issues for the administration to consider in approving the sale in principle, and offered four options for review by the Verification Panel.

   Source: Ford Library, National Security Council, Institutional Files—NSDMs, Box 60, NSDM 298—FRG Reactor Sale to the USSR. Secret. NSDM 261 is printed in Foreign Relations, 1969–1976, volume XVIII, China, 1973–1976, as Document 83.