This research paper has been commissioned by the International Commission on Nuclear Non-proliferation and Disarmament, but reflects the views of the authors and should not be construed as necessarily reflecting the views of the Commission

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This research paper has been commissioned by the International Commission on Nuclear Non-proliferation and Disarmament, but reflects the views of the authors and should not be construed as necessarily reflecting the views of the Commission.

The role of the civil nuclear industry in preventing proliferation and in managing the second nuclear age

Paper prepared for the Second Meeting of the International Commission on Nuclear Nonproliferation and Disarmament, Washington, 1315 February 2009

Martine Letts

Fiona Cunningham


Acknowledgements P. 3

Executive summary P. 4

Main paper P. 9

Introduction P. 9

The nuclear industry P. 9

The nuclear renaissance P. 10

The case for greater industry involvement in support of nonproliferation P. 15

Initiatives to engage industry P. 18

Code of Conduct P. 20

A government-industry conference P. 23

Prospects P. 26

Recommendations P. 27

Annex A: Drivers of expansion in nuclear energy P. 28

Annex B: Elements for a survey of industry P. 30

Annex C: Multilateral fuel cycle initiatives P. 33

References P. 34

The authors would like to acknowledge with thanks the advice, cooperation and assistance of the following:
Michael Angwin, Executive Director, Australian Uranium Association
Tom Reynolds, former President, Chemical Confederation of Australia and Chairman of the Industry Forum at the 1989 Government-Industry Conference Against Chemical Weapons (Canberra)
The Australian Safeguards and Nonproliferation Office (ASNO), and in particular Russell Leslie, Director, International Safeguards (ISG), Australian Department of Foreign Affairs and Trade (DFAT)
Rory Medcalf, Program Director, International Security, Lowy Institute for International Policy
Paul O’Sullivan, Director-General of Security, Australian Intelligence Security Organisation and former Australian Ambassador for Disarmament
John Ritch, Director General, World Nuclear Association (WNA)
Ziggy Switkowski, Chair, Australian Nuclear Science and Technology Organisation (ANSTO)
John Sullivan, Assistant Secretary, Arms Control and Counterproliferation Branch, Australian Department of Foreign Affairs and Trade (DFAT)
Special thanks to Joanne Bottcher, Information Manager at the Lowy Institute for International Policy, for editing and beautifying the text

The views expressed in this paper are entirely the authors’ own and not those of the Lowy Institute for International Policy1234

The changing nuclear landscape and the integrated nature of the world’s nuclear industry strengthen the case for a concerted effort by industry and government to develop jointly a new set of understandings of what the future nuclear proliferation dangers are, and to work closely together in the design and implementation of measures to prevent such proliferation.
Industry and governments have generally considered the issue of nuclear nonproliferation a political and security matter for government. Industry’s view - broadly shared by most governments, but contested by some aspects of civil society - is that the nuclear power industry has no direct responsibility for nuclear weapons proliferation. Industry feels it is already highly controlled and regulated, and that abuses are largely the consequences of actions by rogue states and associated networks determined to develop a nuclear weapons program.
Yet sensitive nuclear technology, including technology ostensibly for peaceful purposes, has found its way into nuclear weapons programs since the 70s (into the Indian, Iraqi and now Iranian nuclear weapons programs to name a few) and industry was involved in many cases. These are significant examples of where equipment and material designated for peaceful purposes can, even inadvertently, be misused for non-peaceful purposes. States have in the past responded to these events, and to the failure of the international community to detect in a timely manner the weapons programs in a number of states, by taking remedial action such as the establishment of export control mechanisms in the Nuclear Suppliers Group (NSG), starting in 1978, the conclusion of an Additional Protocol to states' safeguards agreement with the IAEA in 1997 to assist with early detection of undeclared activities and, more recently, counterproliferation actions through the Proliferation Security Initiative (with around 90 participants) and actions pursuant to April 2004 Security Council Resolution 1540. Membership of and adherence to these measures, guidelines and actions are not universal and many are still voluntary.
The global nuclear landscape is continually changing and never more so than in recent years. This is likely to put an even greater strain on efforts to contain nuclear proliferation. Climate change and rapidly increasing global energy needs have dramatically increased the attractiveness of nuclear energy as a known provider of base load power with a very low carbon footprint. We now face what some have called a ‘nuclear renaissance’, or a ‘second nuclear age’. The challenge for the world is to ensure that this renaissance continues to be managed safely and securely at a time when nuclear proliferation pressures are on the increase. Importantly, we know that sensitive nuclear technologies, to which all NPT members believe they have a treaty-given right, can be diverted to non-peaceful use with relative ease by determined proliferators and that we need to find ways of better controlling them, perhaps through multilateral mechanisms. This will have an impact on industry interests and actions.
The ICNND’s brief is broad, strategic and seeks to shape the future international nuclear order. Its aim is to add value to the sum total of efforts currently underway all over the world to manage the large and growing nuclear challenges we face. Examining the role of industry in this context is one area where the ICNND will be able to add value. Under ‘Peaceful Uses of Nuclear Energy’, the ICNND lists four objectives for further examination by the Commission:

  • Establishment of a global understanding that ensuring 3S (safeguards, safety and security) are indispensable for peaceful uses of nuclear energy.

  • Development of internationally agreed arrangements for effective control of sensitive nuclear technology (enrichment and reprocessing)

  • Development of mechanisms for ensuring long-term supply of nuclear fuel and fuel management services so that states will not feel compelled to develop national fuel-cycle capabilities.

  • Development by the nuclear industry of a comprehensive ‘Code of Conduct’ ranging from responsible uranium supply to support for the development of proliferation-resistant fuel cycle technologies

There is an opportunity for industry to become a more active partner with governments to shape the world’s nuclear future, to get on the front foot and to take a more proactive and less defensive approach.

Much of the world’s nuclear industry is multinational, with significant public/private cross-ownership where commercial interests, nonproliferation interests and national strategic interests can overlap or collide. Yet governments have tended to manage proliferation as a political issue with virtually no industry involvement other than an expectation that it comply with directives which themselves can be difficult to follow or implement. Industry surveys in the US have shown that industry assesses it own performance in meeting export controls requirements as less than perfect. At the same time, some governments and states have found it convenient to ignore or tolerate proliferation where it suited their strategic or security positions.
Governments rarely include industry representatives in proliferation information exchanges or policy discussions in groups such as the Nuclear Suppliers Group (NSG) except through the occasional outreach activity. Yet industry is at the front line of the development and spread of dual-use nuclear technology and has the capacity to prevent, limit or place conditions upon the spread of that technology, as well as report it, and to influence the type of nuclear technology that is developed in the future.
Industry should be an active partner with Governments in the drafting of regulations and treaties that affect their activities, to ensure that they create a level playing field for all industry players and make operational sense to encourage compliance.
However optimistic the outlook is for the future of nuclear energy (and the global financial crisis may slow things in the short to medium term), the fact remains that in the eyes of the public, it remains a high-risk industry where a major incident can have disastrous consequences. Governments also consider that the rise in nuclear power worldwide does increase the risk of proliferation, even if they understand that value of nuclear energy as a provider of energy with a low carbon footprint. An aggressive growth program risks accentuating those fears. We know that in many parts of the world, the public remains opposed to the introduction of nuclear energy, even if attitudes are starting to shift.
Being politically more proactive does not mean that industry has to abandon its evidence-based approach to risk. It can, however, help industry in its ambition to ‘strengthen and sustain public confidence, both in the reliability of nuclear technology and in the people and institutions responsible for its use.’
Moreover, governments have under active consideration the development of new rules of the game which may have real impact on the development of the industry, most notable among them proposals: to multilateralise the nuclear fuel cycle; to limit the spread of sensitive nuclear technologies; and to change NSG rules to insist that countries not exercise the right to develop sensitive technology as a condition of supply, as well as making the adoption of the Additional Protocol a mandatory condition of supply.
In the nuclear industry, commercial interests are tightly woven into national interests, especially when it comes to the right to develop sensitive nuclear technologies such as enrichment. The controversial two-tier system enshrined in the Nuclear Nonproliferation Treaty (NPT) between nuclear weapon states and non-nuclear weapon states spills over into the peaceful uses domain. Initiatives to limit the possession and use of sensitive nuclear technologies to those who have them now for good nonproliferation reasons is currently opposed by emerging nuclear powers which will not, on understandable equity grounds, accept the perpetuation of a two-tier system in the nuclear power industry.
There is no chance these states will even consider foregoing the right to develop sensitive aspects of the nuclear fuel cycle, or see them centralised or regionalised under multinational control, in the absence of a solid commitment from the nuclear armed states to achieving a world without nuclear weapons.
In this context, a global call for disarmament might also become the business of industry. It may be worth exploring whether industry is prepared to make a public commitment to the goals of disarmament and nonproliferation as a sign of good faith and in the interests of the future bona fides of the business as well as a contribution to dismantling the two-tier system.
The world’s chemical industry certainly understood (eventually) the advantage of demonstrating to shareholders and to the public its commitment to chemical disarmament and nonproliferation, especially in light of its inadvertent contribution to Iraq’s chemical weapons program. The industry understood that if it was going to be regulated intensively and obtrusively, there were distinct advantages to industry being an active collaborator in ensuring that its business did not contribute to chemical proliferation, while at the same time having a direct say in how commercial confidentiality could be preserved through the Chemical Weapons Treaty. The 1989 Government-Industry Conference Against Chemical Weapons provided a useful vehicle to publicly set the basis for a successful government-industry partnership for this purpose.
Without the chemical industry’s active support and collaboration, that treaty could most probably not have come into existence. It is, however, the case that GICCW took place in the context of the emerging global consensus among states that chemical weapons should be abolished altogether. No such consensus exists for nuclear weapons, other than the aspiration to general and complete disarmament in the NPT. Yet the global, integrated nature of the nuclear business, its very close connection to government and a changing nuclear policy landscape, including the renewed push towards progress in nuclear disarmament, argue strongly in favour of more regular government-industry collaboration, including through joint monitoring, reporting and enforcement of the rules and export controls. A jointly negotiated declaration as to how that could be done would add a new dimension to the global nuclear conversation.
Initial signs are that some industry players see opportunities and advantages to becoming more engaged in the global nonproliferation agenda. An increasingly globally integrated industry needs to take a global view and be more globally engaged. The CEO of AREVA has agreed to become a member of the ICNND’s Advisory Board. Members of industry are now active participants in second-track discussions about the future role of nuclear industry in a growing nuclear power market. The 2008 WNA policy documents and its Charter of Ethics and Principles of Uranium Stewardship spell out clearly industry responsibilities in ensuring 3S (safeguards, safety and security) are indispensable for peaceful uses of nuclear energy. The Australian Uranium Association has begun to advocate for best practice in support of nonproliferation and its uranium stewardship principles support broader engagement to bring that about.
The engagement of industry as a whole will require intense diplomatic effort and will have to be managed adroitly. Large commercial interests are at stake and if there are to be additional standards, they will need to be universally applied.
More information is needed about industry’s views on these matters, and, given the very close relationship between much of the world’s established nuclear industry and government, government views are also important.
What is set in train today, given the complexity of the issues and the relatively long lead time involved in the nuclear business, will play out over the decades to come.
The paper takes the long view and argues for a more concerted partnership approach between governments and industry which will set benchmarks for the joint management of this enterprise over time.

The ICNND agree to the following steps to be reported on ahead of its June 2009 Moscow meeting:
1. Commission an industry-wide survey to gauge industry attitudes to nonproliferation threats and industry’s future role (A draft survey is at Annex B).

  • Invite one of the designated research centres to conduct a survey on its behalf.

2. Commission further research into the need for an additional industry Code of Conduct, based on an assessment of current codes in the nuclear domain.

  • Invite one of the designated research centres to conduct this research.

3. Meet with a selection of industry representatives in Moscow in June 2009 to gauge views on codes of conduct and a government-industry conference in 2010. Discuss other steps for government-industry partnership in managing the ‘second nuclear age’ with minimal proliferation risks.

4. Designate a national industry association and an interested government to act as a ginger group to canvass support for a government-industry conference and to design an agenda for that conference, using the 1989 Government-Industry Conference Against Chemical Weapons as a model.

The role of the civil nuclear industry in preventing proliferation and in managing the second nuclear age

This paper examines the opportunities and constraints relating to intensified government-industry cooperation in light of increased global interests in nuclear energy, while mitigating the attendant risks.
Key industry players and the current state of the nuclear industry are identified. The paper then examines the ‘nuclear renaissance’ and its implications for additional proliferation risks. It looks at the case for greater nuclear industry engagement in nonproliferation, incentives and disciplines, as well as possible disincentives for industry to take a more active role in nonproliferation and in the limitation of the pursuit of sensitive technologies which give rise to proliferation concerns.
Some preliminary thoughts are advanced as to how such a process might yield more concerted and regular government-industry collaboration in a way which is effective, sustainable and can generate the confidence of government, the public and industry. This includes a brief exploration of the value of a Code of Conduct or other arrangements for the effective management of future nuclear proliferation risks
Finally, the paper will examine the possibility of convening a nuclear government–industry conference or summit similar to the Australian sponsored government–industry conference against Chemical Weapons in 1989, which would discuss these issues, perhaps agree on a joint strategy for intensified collaboration in nonproliferation, or at least make recommendations in this regard.
1. The nuclear industry

Scope of activities
Nuclear power industry activities can be broadly divided into fuel cycle activities, reactor activities and support activities. Fuel cycle activities include uranium mining and milling to produce ore concentrates, conversion of uranium ore concentrates into uranium hexafluoride or uranium dioxide, uranium enrichment, fuel fabrication, spent fuel reprocessing and nuclear waste management, and the design and construction of fuel cycle facilities. Reactor activities include reactor design and construction, reactor operation, maintenance and decommissioning. Both reactor and fuel cycle services rely upon a number of support activities, including consulting, legal services, parts manufacturing, fuel transportation and fuel supply brokers, research and development (R&D) institutions (government, enterprise or university-based) and industry bodies.
The industry activities of most proliferation interest are the fuel cycle activities, and reactor design, which determines the physical and isotopic nature of the irradiated fuel.
Key players
The nuclear industry is dominated by three companies that engage in fuel cycle, reactor and support activities. The French company AREVA holds the largest market share in the global nuclear market, (25-30%)5 and is developing reactors in a joint venture with Mitsubishi Heavy Industries, followed by General Electric-Hitachi, and Westinghouse (77% owned by Toshiba). Russia’s Atomstroyexport and the China National Nuclear Corporation are positioning themselves to challenge the market dominance of these three Western-Japanese nuclear companies in turnkey reactor sales.6 Six companies operate commercial enrichment facilities, the China National Nuclear Corporation (2); Eurodif (1); Rosatom (4); Japan Nuclear Fuel Limited (1); Urenco (3) and the United States Enrichment Corporation (1).7 Three additional multinational enrichment facilities are being planned for construction in the United States.8 The only two commercial reprocessing plants are operated by AREVA (La Hague, France) and Sellafield Ltd (Sellafield, UK). The eight largest uranium ore producers were responsible for approximately 85% of global production in 2008, and include Cameco, Rio Tinto, Areva, Kazatomprom, Rosatom, BHP Billiton, Navoi, Uranium One and General Atomics.9 The largest reactor operator in the industry is Electricité de France (59 reactors).
Present capacity
As of June 2008, 439 operational nuclear reactors account for 16% of world electricity production, and 57% of global nuclear generating capacity is situated in the United States, France and Japan.10 34 new reactors are under construction11 in China (7); Russia (7); India (6); South Korea (3); Canada (2); Slovakia (2); Japan (2); Argentina (1); France (1); Finland (1); Iran (1) and Pakistan (1). The first two Generation III+ reactors, both European Pressurized Reactor (EPR) designs, are presently under construction at Flammaville, France and Olkiluoto, Finland.
2. The nuclear renaissance
Drivers of an expansion in nuclear energy
Governments are reconsidering the role of nuclear power within their power generation capacity because of increasing energy demand, pressure to reduce greenhouse gas emissions, rising fossil fuel prices, the improving economics of nuclear power and the pursuit of security of energy supply. (A more detailed description of these drivers can be found at Annex A.)
Public opposition to nuclear power is significant, but changing
The public aversion to nuclear power that peaked during the 1990s is diminishing. The World Nuclear Association attributes this to the impeccable safety record of the nuclear industry after the Three-Mile Island and Chernobyl accidents, the fact that the health effects of Chernobyl were less severe than expected, and community acceptance of nuclear waste repositories.12 Nevertheless, nuclear phase-out plans or de facto moratoriums on nuclear build are in place in Switzerland, Sweden, Spain, Germany and Belgium, often in response to public aversion to nuclear power.13
Even in Japan, where nuclear power is well established, the public remains wary of its dangers, especially following significant incidents at nuclear power plants such as the earthquake damage in July 2007 to parts of the Kashiwazaki-Kariwa Nuclear Power Plant.14
That said, the potential of nuclear power to combat climate change may be a decisive factor in changing public attitudes to nuclear power. A poll taken in Europe in 2008 reports a decline in European hostility to nuclear power, as that hostility has yielded to the more pressing concern of global warming. According to that poll, 44% of people in the European Union support nuclear energy, up from 37% in 2005, and 45% oppose it, down from 55% four years ago. In Australia, where a majority of Australians remains opposed to nuclear energy, recent polling suggest that Australians are increasingly attuned to the argument that nuclear energy needs to be part of the future energy mix.15
Constraints on the expansion of nuclear energy
The capacity of the global nuclear industry is the major constraint upon a rapid expansion in nuclear energy. Supply bottlenecks in human resources, heavy forgings and other reactor parts are likely to worsen as demand increases.16 Other key components such as reactor cooling pumps, diesel generators, and control and instrumentation equipment have long lead times, requiring up to six years to procure and manufacture.17 Personnel qualified to design, construct and operate nuclear facilities are increasingly difficult to employ as present employees approach retiring age, and a decreasing number of university degrees are awarded in nuclear relevant fields.18 Governments and intergovernmental nuclear agencies have put in place measures to encourage students to enter the nuclear field and support nuclear R&D, however the maintenance of power reactor skills and competence has been largely left to industry.19
The OECD Nuclear Energy Agency estimates that, based upon historical experience in the 1980s and the expansion in global industrial capacity since, nuclear industry capacity may feasibly increase to meet projected demand, as additional capacity would not be required until after 2020, from bringing 10 reactors online per year up to 2020, to 40-50 per year in the 2030s and 50-60 in the 2040s.20 These figures suggest that the long lead times for nuclear projects will allow industry sufficient time to rebuild and expand capacity such that construction schedules and reactor safety are not compromised in the coming nuclear renaissance. The disadvantage of long lead times is that they limit the contribution that nuclear energy may make to reducing carbon emissions.21
Assessing the proliferation risk of nuclear energy expansion
The proliferation risk of the second nuclear age is determined by three principal factors: whether the expansion takes place in existing nuclear power states or new nuclear power states; the geostrategic contexts of countries acquiring nuclear technology for the first time; and the nature of the nuclear technology acquired.
Eighty per cent of the expansion in nuclear power is forecast in countries already using nuclear power.22 Newly-minted nuclear countries are likely to account for only 5% of global nuclear capacity by 2020.23 China, Russia and India will account for the largest increases in new nuclear generating capacity by 2020, though the United States, France and Japan will retain their dominant position, producing 50% of global generating capacity.24 The non-nuclear power countries which have planned or approved nuclear power generation are Vietnam, Turkey, Iran, Indonesia, Belarus and the United Arab Emirates (UAE), although in Indonesia popular opposition may yet prevent plans going ahead.25 Countries without a present nuclear power capacity which have proposed or intend to use nuclear power are Thailand, Bangladesh, Bahrain, Egypt, Ghana, Georgia, Israel, Jordan, Kazakhstan, Kuwait, Libya, Malaysia, Namibia, Nigeria, Oman, the Philippines, Qatar, Saudi Arabia, Uganda, Venezuela26 and Yemen.27
The states seeking nuclear power for the first time are concentrated in Africa, the Middle East and Southeast Asia. All are zones of varying degrees of domestic political instability. The Middle East is strategically unstable and directly affected by the Iranian enrichment program. While Southeast Asian countries are not directly in the line of North Korean nuclear threats, their security would nonetheless be affected by a deteriorating East Asian strategic environment were Pyongyang’s nuclear ambitions to be unchecked. In all three regions, states have genuine reasons for wanting to develop nuclear power, including growing energy demand28 and the desire to preserve fossil fuels for export,29 and in many cases had been interested in acquiring nuclear power prior to the Iranian and North Korean proliferation crises. Significantly, Vietnam and Indonesia have signaled their intent not to develop an enrichment capacity, as have Bahrain and the UAE.30
While no other state with recent nuclear energy ambitions has expressed intent to develop enrichment or reprocessing capabilities, Egypt has refused to rule out its acquisition of such technologies on equity grounds.31 Such attitudes do not allay suspicions that the renewed interest in nuclear power in the Middle East is at least in part a hedging strategy in response to Iran’s nuclear program.32 Some analysts have expressed concern over the proliferation risks posed by the lack of regulatory competence in the region.33 No new plans for enrichment or reprocessing have been advanced in Africa or South East Asia, though fuel preparation may become economically viable as more plants come online in the region.34
Important factors in the realisation of these nuclear energy ambitions are whether these states will be able to pay for their nuclear energy plans and whether they can develop and finance the necessary regulatory and technical bases to realise them safely. They do suggest fertile ground for increased assistance from established nuclear powers and industry to help them develop competence in regulation and effective export controls. In the present economic climate, the ability to finance these costly projects, however, is far from assured.
Nuclear power reactors themselves, in particular the standard light water reactors (LWRs), are not considered a high proliferation risk because the isotopic content of the spent fuel and the difficulty of separating plutonium from the spent fuel assembly mean that they are not effective producers of fissile material.35 No additional states currently have plans to construct commercial enrichment plants, though Argentina, Brazil and South Africa have the capacity and so far insist on the right to do so in future. No state currently has firm plans to construct a commercial reprocessing plant.36 Renewed US support for reprocessing as a method of dealing with the waste disposal problems has led to R&D cooperation with South Korea on pyroprocessing techniques, a reprocessing technique that present research shows to be more ‘proliferation safe’ than the PUREX process presently used, but is by no means ‘proliferation resistant’.37
Nuclear energy ambitions among states without an existing nuclear power capability are not of direct proliferation concern, especially if sensitive technologies are not pursued.
However, views on whether an increase in the number of power reactors around the world poses an increase in nuclear proliferation dangers differ. John Ritch, who was President Clinton’s Ambassador to the IAEA in the 1990s and is current Director General of the World Nuclear Association (WNA), is not convinced that even a tenfold increase in power reactors in the would have a significant impact on nuclear proliferation. He believes that by far the greatest problem is rogues states determined to develop a nuclear weapons program and their number has not significantly increased in the last 10-15 years.38 This is in contrast with the views in the 2008 report of the International Security Advisory board of the U.S. Department of State that ‘the rise in nuclear power worldwide, and particularly within Third World countries, inevitably increases the risks of proliferation.39
There is always a risk that the establishment of even the most basic nuclear infrastructure and expertise can presage later pursuit of a full nuclear fuel cycle. At the very least, it gives such countries that option. Under cover of their rights to develop such technology, the examples of Iran and the DPRK have presented great challenges to the international community in managing future nuclear ambitions by new states under the current international rules, which have not deterred a determined proliferating state.
Mitigating the proliferation risk
Three strategies suggest themselves to policymakers and industry to mitigate the proliferation risks of the second nuclear age: technical solutions, commercial solutions and political solutions. Technical solutions would include making fissile material more technically difficult to produce, and include the development of nuclear reactors that produce less or no fissile material and/or make any fissile material more difficult to extract. Commercial solutions might include replacing turnkey reactor sales contracts to build-own-operate contracts,40 or inserting minimum nonproliferation requirement provisions into supply contracts.41 Political solutions would include placing the nuclear fuel cycle under multilateral control and restricting supply to those states with an Additional Protocol in place with the IAEA.

Industry is a necessary partner in all three approaches.

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