July/August 2012 | Arms Control Association

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Friday, July 13, 2012

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Senate Panel Takes Up Law of Sea Treaty

Lauren Weiss

The Senate Foreign Relations Committee held hearings in May and June on the UN Convention on the Law of the Sea, which drew strong support from Obama administration officials and Democratic senators but sharp opposition from most Republicans on the panel.

The treaty, which codifies rules of maritime activity, was negotiated from 1973 to 1982. It was amended in 1994 and entered into force later that year. It has more than 160 members, but has never come to a Senate vote.

Foreign Relations Committee Chairman Sen. John Kerry (D-Mass.) said during the May 23 hearing he does not “currently intend to bring the treaty to a vote before the November elections.” During a hearing on June 14, Kerry said he plans to hold a hearing with U.S. business leaders. He also stated his plans for a briefing for the entire Senate on the relevant classified information after the November elections.

Although primarily a navigation and economic agreement, the treaty has implications for arms control. For example, it would strengthen the Proliferation Security Initiative, which aims to stop trafficking of weapons of mass destruction by clarifying issues of jurisdiction.

Secretary of State Hillary Rodham Clinton, Secretary of Defense Leon Panetta, and other top government and military officials testified at the hearings that the treaty would ensure U.S. freedom of navigation and provide a new tool to help resolve disputes peacefully. This could be vital, they said, for sorting out competing claims in the South China Sea, as well as for establishing rules to govern the Arctic. The treaty also secures the United States’ exclusive right to exploit resources in the extended continental shelf, particularly off the coast of Alaska, Adm. Robert J. Papp Jr., the commandant of the U.S. Coast Guard, said in his testimony at the June 14 hearing.

Some Republican senators argue the treaty has been ineffective in resolving maritime disputes. They say the United States does not need to join because countries respect the United States’ maritime rights based on the power of its navy, not treaties. They also voiced concerns over the royalties companies would have to pay to an international organization and the potential threat of lawsuits over environmental issues.

Sen. Richard Lugar (R-Ind.) was the only Republican on the committee to express support for the treaty.

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House Passes Nuclear Security Bill

Benjamin Kagel

The House of Representatives on June 28 passed legislation required to bring the United States into compliance with two international treaties that improve nuclear material security and enhance measures to prevent nuclear terrorism.

Efforts to implement the 2005 amendment to the Convention on the Physical Protection of Nuclear Material and the 2005 International Convention on the Suppression of Acts of Nuclear Terrorism began in 2008, but stalled in Congress. President Barack Obama submitted a similar draft proposal in 2010 and again in 2011 to implement the nuclear security agreements following his commitment to complete U.S. ratification at the 2010 nuclear security summit in Washington. (See ACT, May 2010.)

The updated legislation submitted to Congress would bring U.S. law into line with provisions in the treaties. Congressional passage of the bill is the last substantive hurdle to U.S. ratification of the pacts.

The 2005 amendment extends protection requirements beyond the original agreement, which covers nuclear material while in international transport, by expanding the coverage to apply to nuclear facilities and to materials in peaceful domestic use and storage. It also would impose new legal penalties for misuse of radioactive material and sabotage of nuclear facilities. The convention on suppressing nuclear terrorism provides a definition of nuclear terrorism and specifies how states should handle offenders and illicit materials when seized.

The bill approved by the Judiciary Committee excludes controversial language involving the use of wiretaps in federal investigations and the possible application of the death penalty to individuals for a crime of nuclear terrorism. That language had delayed congressional approval of previous versions of the bill.

Ratification will not only “enhance the national security of the United States,” but also will strengthen international counterterrorism and nonproliferation policies and encourage other states to ratify the treaties, House Judiciary Committee Chairman Lamar Smith (R-Tex.) said in a press statement following the panel’s voice vote June 6.

The bill also includes implementing legislation for two treaties dealing with maritime security. The Senate has not yet voted on its version of the bill.

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Nuclear-Weapon States Meet in Washington

Kelsey Davenport

Officials from the five original nuclear-weapon states reaffirmed their “shared goal of nuclear disarmament” in a joint statement issued at the end of a June 27-29 meeting in Washington designed in part to review the progress on commitments made at the 2010 Nuclear Nonproliferation Treaty (NPT) Review Conference.

Representatives of the five states—China, France, Russia, the United Kingdom, and the United States—also exchanged ideas related to “transparency, mutual confidence, and verification, and considered proposals for a standard reporting form” on progress in those areas. This was the third such meeting of the group, sometimes known as the P5 because the countries are the five permanent members of the UN Security Council. The countries met previously in 2009 in London and 2011 in Paris.

According to their joint statement, the five states “agreed on the work plan for a P5 working group led by China, assigned to develop a glossary of definitions for key nuclear terms that will increase P5 mutual understanding and facilitate further P5 discussions on nuclear matters.”

The United States briefed the other four countries on activities being undertaken at the Nevada National Security Site, the former U.S. nuclear testing site, “with a view to demonstrate ideas for additional approaches to transparency.” A tour of the U.S. Nuclear Risk Reduction Center also was offered, to allow officials to observe the communications center that enables the United States to “simultaneously implement notification regimes,” such as the New Strategic Arms Reduction Treaty, according to the joint statement. The United Kingdom highlighted advances made in disarmament verification from a project it undertook jointly with Norway.

The five states “reiterated their commitment to promote and ensure the swift entry into force of the Comprehensive Nuclear-Test-Ban Treaty (CTBT) and its universalization” and discussed ways to achieve a global fissile material cutoff treaty and support the planned 2012 conference on a Middle Eastern zone free of weapons of mass destruction.

The five countries agreed to hold a fourth conference in the “context of the next NPT Preparatory Committee,” which is scheduled for April 22-May 3, 2013, and to continue to meet at “all appropriate levels on nuclear issues.”

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Financial Interdictions to Curb Proliferation

By Javier Serrat

Over the past four decades, the world has gotten several glimpses of the illicit procurement methods used to support nuclear programs: Iraq’s diversion in the 1980s of agricultural loan funds into its nuclear procurement program, the payment schemes of the Abdul Qadeer Khan network as part of its sale of uranium hexafluoride to Libya, [1] and the fraudulent transactions through New York banks of shell companies linked to IRISL, Iran’s state-owned shipping company.

These transactions are a powerful reminder that proliferators rely on access to the global financial system for their illicit activities. The globalized nature of this trade is an important asset to proliferators and their support networks, but it also is a vulnerability that countries seeking to stop the spread of weapons of mass destruction (WMD) are increasingly exploiting.

The use of a country’s economic leverage to advance foreign policy objectives is certainly not new, nor is the imposition of trade, travel, diplomatic, and financial restrictions by the international community on states in violation of their nonproliferation obligations and other rules of international law. Nevertheless, sanctions have evolved from devices of economic statecraft into practical tools that aid intelligence services and law enforcement in the complex tasks of tracking, mapping, and dismantling the financial support nodes of proliferation networks; prosecuting the criminals involved in these operations; and, ultimately, denying proliferant states the ability to conduct clandestine purchases of weapons-usable matériel.

Financial transactions leave a trail of information that intelligence and law enforcement officials can follow to identify key actors and their support networks. U.S. Secretary of the Treasury Henry Paulson noted that “opening an account or initiating a funds transfer requires a name, an address, a phone number; identification information that does not lie. Unlike a phone call or conversation that essentially disappears if it’s not captured at the moment it occurs, the financial system produces records that tend to survive.” [2] This makes financial data a timely and reliable source of intelligence for nonproliferation investigations.

The United States employs a broad palette of financial and economic tools to prevent WMD proliferation. For decades, Washington has applied trade restrictions against foreign individuals found to be part of proliferation activities and has threatened various penalties for violations of its nuclear cooperation agreements with other countries. More recently, Congress has enacted into law severe penalties against foreign banks that maintain business relationships with certain Iranian institutions, and the U.S. Department of the Treasury has used authorities under the PATRIOT Act to designate the entire Iranian banking system as posing a money-laundering and proliferation-financing risk, with the aim of cutting off Iran from the global financial system.

Tools of Disruption

U.S. officials have emphasized the singular benefits of anti-proliferation financial controls, and some of these actions have been widely adopted by the international community. The UN Security Council, for instance, has mandated global asset freezes against individuals and firms involved in the nuclear and ballistic missile program activities of Iran and North Korea. At a U.S. congressional hearing in 2006, Robert Werner, director of the Treasury Department’s Office of Foreign Assets Control, explained that entities “designated” to be added to sanctions lists “represent a starting point as we seek to unravel the support networks that enable these entities to function…. The subsequent designation of any entity or individual serves as an additional basis for aggressive investigation…with the aim of designating additional parties.” [3] He concluded that the targeting of the broader support networks of proliferators has been the critical factor behind successful nonproliferation programs.

The investigation that led to the indictment last year of 11 shell companies and five individuals allegedly conducting transactions on behalf of IRISL, which was under U.S. sanctions, illustrates this point. The information uncovered by law enforcement and intelligence officials convinced a grand jury in Manhattan that the suspects had probably helped the shipping firm evade U.S. sanctions and that the district attorney should proceed with criminal charges against them. Additionally, the U.S. government added the companies and individuals to its sanctions list, forcing IRISL to move some of its operations to Panama and register shell companies there, which were in turn traced and placed under sanctions by the Treasury Department.

Another recent novelty in the arsenal for anti-proliferation financial “warfare” is the inclusion of individual IRISL-owned vessels, stemming from the sanctions that the United States and the European Union levied against the shipping firm. (The UN Security Council imposed financial restrictions on three IRISL affiliates in 2010.) IRISL had been added to U.S. sanctions lists for providing logistical support to Iran’s Ministry of Defense and Armed Forces Logistics. [4] According to U.S. officials at the time, IRISL vessels had transported a shipment of a precursor chemical, allegedly for use in Iran’s ballistic missile program, to Parchin Chemical Industries, which was under the sanctions imposed by UN Security Council Resolution 1747. Although in the past, persons, governments, and entities had been targeted by financial restrictions, the public identification of individual vessels expands the reach of sanctions to more effectively target another layer of proliferation activity: the logistics support networks of proliferators.

The designations of IRISL resulted in its loss of maritime insurance from its underwriter, Lloyd’s of London. The Iranian firm sought insurance coverage from a Bermuda-based company, which later also adopted the restrictions. IRISL was then forced to turn to Moallem Insurance, a company created by the Iranian government, to ensure it could remain in operation. Still, the EU has refused to validate this coverage and has shut IRISL vessels out of its ports. At the same time, because of the financial sanctions, the shipping firm has had trouble transmitting payments for mortgages on its vessels, its creditors have ordered the vessels arrested at ports in Europe and Asia, and the company has had to tap valuable foreign currency reserves to have the vessels released. This is a prime example of how financial controls can target proliferators and their broader support networks.

Private institutions that purposely or unwittingly violate sanctions face the real prospect of hefty fines. This is an additional dimension that adds potency to anti-proliferation financial tools and amplifies their effectiveness. For example, in 2010, ABN AMRO, now Royal Bank of Scotland, was fined an unprecedented $500 million as a result of sustained violations of U.S. sanctions by some of its foreign branches. From 1998 to 2005, some of ABN AMRO’s foreign branches altered the names of Iranian and Libyan entities in payment messages or removed references to the target countries altogether before forwarding letters of credit, wire transfers, and U.S. dollar-denominated checks to branches in the United States. This practice, known as “stripping,” had already cost the bank a $40 million administrative penalty from the U.S. government, but the Department of Justice pursued a criminal investigation that resulted in a deferred prosecution agreement for two charges and forfeiture of the value of the illegal transactions—$500 million. [5] ABN AMRO is not the only bank found to be involved in stripping. Credit Suisse was assessed a record-breaking $536 million fine in 2009, and Lloyd’s TSB agreed to pay $350 million as part of a settlement.

Although in recent times the United States has been enforcing its financial restrictions more aggressively, the Treasury Department has increasingly provided incentives, in the form of less-severe penalties, for financial institutions to self-disclose any violations and fully cooperate with investigators. This approach is particularly effective because it signals to private firms that violations will result in a financial loss while authorities gain access to a wealth of data that can lead them to identify more proliferators, understand how their networks operate, and disrupt their activities.

Global Enforcement

The Security Council resolutions against Iran and North Korea identify individuals and entities engaged in the proliferation activities of those two countries. All states must ensure that their financial institutions prevent access to their funds and block transactions with these individuals and entities. The same resolutions direct countries to prevent financial transactions related to the acquisition of components for the Iranian and North Korean nuclear and missile programs.

These two types of obligations are country specific, and as such, their impact might be limited. The breach of nonproliferation norms, however, is not limited to cases that have gained the attention of the Security Council, and rogue regimes are not the only ones interested in acquiring weapons of mass destruction. Last March at the nuclear security summit in Seoul, UN Secretary-General Ban Ki-moon spoke of the need to curb the financing of terrorism and proliferation as a means to prevent nuclear terrorism.

The international community had sought to confront this latter threat through UN Security Council Resolution 1540, which obliges all states to establish domestic controls on the financing of WMD matériel and means of delivery and transit. It also requires them to adopt and enforce legislation to prevent and penalize the financing of these and related activities. Much effort has gone into implementing the tighter controls on exports of sensitive goods, while other important areas, such as the financial restrictions, have received far less attention from the nonproliferation community. Consequently, nonproliferation specialists understand the flow of goods better than the financial flows.

At the 2005 Gleneagles summit in Scotland, the Group of Eight (G-8) industrialized countries—Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States—committed themselves to developing cooperative procedures to identify, track, and freeze proliferation-related financial transactions and assets. Shortly afterward, participants in the Proliferation Security Initiative formed a working group on proliferation financing. Another ad hoc group, the Global Initiative to Combat Nuclear Terrorism, turned its attention to nonproliferation financial tools and in 2010 conducted an exercise on nuclear terrorism counterfinancing. Ultimately, the members of the G-8 other than Russia decided that technical work on measures to implement anti-proliferation financing obligations under Resolution 1540 and other UN Security Council resolutions should be entrusted to the group of financial experts at the Paris-based Financial Action Task Force (FATF). [6]

Bringing in the Financial Experts

The FATF was first convened by the G-7 (as the G-8 was known before Russia joined) in 1989 in response to growing concern about the pervasiveness of money laundering and counterfeiting. The task force developed 40 countermeasures to address these threats to the international financial system. Initially, a handful of countries that are members of the Organization for Economic Cooperation and Development actively participated in this effort. An ever-larger group of countries accepted the recommendations, and the intergovernmental body itself expanded into its current composition of 34 member countries and two supranational institutions (the European Commission and the Gulf Cooperation Council). The task force encouraged the creation of regional bodies, such as the Council of Europe’s Moneyval and the Middle East and North Africa FATF, which adopted the policy standards. The FATF also established partnerships with more than 20 international and regional organizations that have a role to play in its anti-money laundering remit, including Interpol, the International Monetary Fund (IMF), the UN Office on Drugs and Crime, and various regional development banks.

In 2001, just weeks after the September 11 attacks, the FATF adopted eight countermeasures against the financing of terrorism (the so-called Special Recommendations), adding a ninth in 2005. Collectively, the “40+9 Recommendations,” embraced by 180 jurisdictions, are the global standard for the prevention of money laundering and terrorism financing. The speed with which the FATF adopted the new policies highlighted not only the urgency of the terrorism threat but also the virtues of the informal task force model.

In 2007 the FATF issued two sets of guidance on how countries could implement proliferation-related sanctions. One set dealt with sanctions based on designations [7] while the other covered so-called activity-based sanctions, beyond the list of individuals or entities but still targeting the procurement programs of specific countries. [8]

Nevertheless, FATF members recognized that the global community at large did not have a very good understanding of the dynamics of proliferation financing, and in 2008 the FATF conducted a comprehensive study of the techniques employed by proliferation networks to finance illicit trade in WMD matériel as well as possible measures to implement the broad anti-proliferation financing requirements under Resolution 1540. [9] In 2010 the task force produced a document with 23 policy proposals to improve the regulatory, investigative, and judicial components that are necessary for an effective, multilateral strategy to combat the financing of WMD proliferation. [10]

The formulators of the FATF policy document envisioned a comprehensive architecture that includes elements to harness the vigilance of financial institutions, aid law enforcement and intelligence agencies in their effort to track and disrupt proliferation networks and their operations, and facilitate the punishment of proliferators and their abettors. For instance, some policy options encourage countries to criminalize proliferation financing, ensure procedures to support extraterritorial investigations, and create channels for information sharing with financial institutions.

A New Tool of Enforcement

Last February, the FATF formally incorporated proliferation financing into its standards by adopting a consolidated set of recommendations, “International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation.” The recent additions include two standards that could aid in the targeting of proliferation financiers. One of them seeks to foster greater intelligence coordination among domestic export control, security, and law enforcement agencies to investigate proliferation financing. The other requires that financial institutions include identifying information for the ultimate beneficiary of wire transfers—a further data point that could aid in designations.

A third recommendation calls for the implementation of proliferation-related UN Security Council sanctions. All countries are already required to implement Security Council financial sanctions against designated targets and to prohibit proliferation-related transactions with target countries, but the FATF’s contribution in this area could significantly bolster the effectiveness of existing and future financial controls by producing public evaluations of individual countries’ implementation of sanctions.

The FATF is not a formal organization. Its mandate, which specifies its remit, must be renewed by its members. Its recommendations are nonbinding. Its resources are very limited; it has a budget of just more than three million euros and a very small technical secretariat. At first glance, this might not seem like the most appropriate instrument to enforce international norms against proliferation, but the FATF boasts some unique tools that could increase pressure on countries to comply with these obligations.

To ensure that its members implement the standards on money laundering and counterterrorism financing, the FATF established two compulsory processes. One is a self-assessment similar to the national reports countries submit to the UN committee of Security Council members overseeing the implementation of Resolution 1540 (the 1540 Committee). The other, which has no parallel in the nonproliferation regime, is a peer review of each member’s performance with regard to each of the recommendations. For FATF members, this review is conducted by a group of evaluators selected from the national financial experts. For members of the FATF associate bodies, the IMF or the World Bank typically works with the FATF Secretariat to conduct the assessments. [11]

A member may opt not to publish the full report of the FATF’s findings, but may not refuse the public release of a summary report on its performance, which the FATF publishes on its website. The summary includes a “grading rubric”—“compliant,” “largely compliant,” “partially compliant,” and “non-compliant”—along with comments and a brief description of any deficiencies. Countries and territories that are found to underperform significantly can be publicly identified if the FATF plenary decides to do so. FATF members are warned of the potential risks of doing business with those countries and, on occasion, are urged to apply countermeasures that include increased vigilance and scrutiny of transactions from listed countries.

Perhaps not surprisingly, given the potential loss of access to the global financial system that could come with these penalties, countries with deficiencies are keen to work with the FATF to address them. Even Iran, which is not a member of the task force, quickly enacted anti-money laundering legislation after a 2007 public warning by the FATF. The changes, however, did not assuage the FATF’s concerns. Tehran, facing the prospect of a second public rebuke, dispatched a high-level delegation of government and central bank officials to Paris to lobby the FATF. Although ultimately unsuccessful, Iran’s reaction to the decisions of an informal and seemingly powerless group of experts is remarkable given its defiance of the international community in more prominent forums.

Next year, when the FATF begins to evaluate compliance with the newly adopted standards, each country’s enforcement of Security Council proliferation sanctions will be evaluated. For the first time, the international community will be able to gauge the lacunae in the system; provide technical assistance where needed, just as the 1540 Committee does in support of the export control provisions of the resolution; and identify the willful abettors of noncompliance.

Last year, in Deauville, France, the G-8 resolved to promote “a more concrete approach” to curbing WMD proliferation through “effective implementation of multilateral instruments and strong national measures.” Notably, these concrete steps include the following:

To fight proliferation financing, we support the process launched at the Financial Action Task Force (FATF) that will strengthen the financial vigilance of G8 countries in a coordinated manner. To support UN proliferation sanctions, we will bolster the existing criminal provisions in national legislation and encourage States to identify as a specific offence the proliferation of WMDs, their means of delivery and related materials. Such provisions will also target financing and financial services…. Such actions will be taken to further implement Resolutions 1540 and 1887, as well as other UNSC resolutions. [12]

The new FATF guidelines clearly are a modest achievement in comparison with the comprehensive global system that was envisioned by the authors of the policy proposals and by the G-8. Nevertheless, the recognition by global leaders of the singular importance of financial vigilance in curbing the spread of weapons of mass destruction augurs well for the development of a much-needed coordinated strategy. This sustained effort will be critical to maximize the potential of financial tools in support of the global nonproliferation regime.

Javier Serrat is a research assistant and was a Scoville Peace Fellow at the James Martin Center for Nonproliferation Studies in Washington.

ENDNOTES

1. International Institute for Strategic Studies, “Nuclear Black Markets: Pakistan, A.Q. Khan and the Rise of Proliferation Networks,” 2007, p. 78.

2. Henry Paulson, “Targeted Financial Measures to Protect Our National Security,” Remarks to the Council on Foreign Relations, New York, June 14, 2007.

3. Robert W. Werner, Testimony before the House Financial Services Subcommittee on Oversight and Investigations, February 16, 2006.

4. The ministry was sanctioned by the United Nations under Security Council Resolution 1737. A November 2011 report by IAEA Director-General Yukiya Amano identified the ministry as the entity overseeing Iran’s clandestine nuclear program.

5. Under a deferred prosecution agreement, the Department of Justice files a “criminal information”—a criminal charge without a grand jury indictment—but agrees not to proceed with prosecution, provided that the defendant complies with the requirements outlined in the settlement.

6. The announcement was made by the finance ministers of the seven countries, following a meeting in February 2007. Russia, a member of the G-8 since 1997 and the Financial Action Task Force (FATF) since 2003, did not join the statement.

7. FATF, “Guidance Regarding the Implementation of Financial Provisions of United Nations Security Council Resolutions to Counter the Proliferation of Weapons of Mass Destruction,” June 21, 2007.

8. FATF, “Guidance Regarding the Implementation of Activity-Based Financial Provisions of UNSCR 1737,” October 12, 2007.

9. FATF, “Proliferation Financing Report,” June 18, 2008.

10. FATF, “Combating Proliferation Financing: A Status Report on Policy Development and Consultation,” April 23, 2010.

11. Some offshore financial centers are members of the FATF-associated Group of International Finance Centres Supervisors, and their compliance with FATF standards is independently assessed. For example, the performance of the Isle of Man, a British crown dependency whose foreign affairs and defense are the responsibility of the United Kingdom, does not factor into the United Kingdom’s ratings.

12. G-8, “Renewed Commitment for Freedom and Democracy,” Deauville, France, May 26-27, 2011.

Over the past four decades, the world has gotten several glimpses of the illicit procurement methods used to support nuclear programs: Iraq’s diversion in the 1980s of agricultural loan funds into its nuclear procurement program, the payment schemes of the Abdul Qadeer Khan network as part of its sale of uranium hexafluoride to Libya,1 and the fraudulent transactions through New York banks of shell companies linked to IRISL, Iran’s state-owned shipping company.

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The Iranian Nuclear Dispute: Origins and Current Options

By Hossein Mousavian

After a pause of more than a year, the seven countries that are holding talks on Iran’s nuclear program resumed their discussions in April, with subsequent meetings in May and June. As the countries—Iran and the P5+1 (China, France, Germany, Russia, the United Kingdom, and the United States)—prepare for their next meetings, efforts to find pathways to a resolution need to take into account the origins of Iran’s nuclear program and the sources of the ongoing dispute over it.

Western countries have major concerns about the nature of Iran’s nuclear program as they try to deduce whether it is a peaceful energy program or is designed to build nuclear weapons someday. This article addresses a different concern: whether pressure from the West has resulted in the Iranians accelerating and expanding their nuclear activity and capability.

The history of Iran’s nuclear program suggests that the West is inadvertently pushing Iran toward nuclear weapons. There were seven key steps in this process.

Nuclear aid to the shah. Iran owes its entrance into the nuclear field largely to the United States, which entered into negotiations with young Shah Mohammad Reza Pahlavi in 1957 as part of President Dwight Eisenhower’s Atoms for Peace program. In the 1970s, the shah had ambitious plans for expanding the nuclear program, envisioning 23 nuclear power plants by 1994, with support from the United States. The shah announced in 1974, “Get, as soon as possible, 23,000 megawatts [of electricity] from nuclear power stations.” [1] This was the main step toward nuclearizing Iran.

Withdrawal from agreements. After the 1979 Iranian Revolution, although Iran decided to cancel or shrink the ambitious nuclear and military projects of the shah, the West withdrew from all nuclear agreements and contracts and isolated Iran through sanctions and other means. In that period, Iran had no plans to have uranium-enrichment activities on its own soil. Iran had an agreement with the French-based consortium Eurodif, which was established in 1973, to enrich uranium in France and supply fuel to the Tehran Research Reactor and the Bushehr power plant, bypassing the need to have the facilities in Iran.

Following the revolution and under pressure from the United States, however, the French pulled out of the deal. This event forced Iran to proceed with efforts to reach self-sufficiency to complete billions of dollars’ worth of unfinished projects and to ensure that it would have adequate supplies of reactor fuel.

Support of Iraq. In 1980, Iraq’s Saddam Hussein invaded Iran to bring regime change and disintegrate the country. Unfortunately, the United States and the West supported this invasion, providing Hussein with the material and technology to make the chemical weapons that killed and injured thousands of Iranians. Although Iran remained committed to the nuclear Nonproliferation Treaty (NPT) and did not retaliate against the Iraqis with weapons of mass destruction, the event changed Iran’s security calculations, pushing Iran toward a nuclear capability to defend its existence and deter any future Arab-Western aggression.

Failure to negotiate seriously. In 2003, shortly after Iran mastered enrichment technology, its nuclear case came under the spotlight of the International Atomic Energy Agency (IAEA), and the IAEA Board of Governors issued its first resolution on Iran’s nuclear program. To find a solution to the Iranian nuclear issue, the EU countries of France, Germany, and the United Kingdom (the EU-3) began diplomatic negotiations with Iran. During those negotiations, which lasted until 2005, I served as the spokesperson for the Iranian nuclear negotiating team.

Iran submitted different proposals, which included a declaration to (1) cap enrichment at the 5 percent level; (2) export all low-enriched uranium (LEU) or fabricate it into fuel rods; (3) commit to an additional protocol to its IAEA safeguards agreement and to Code 3.1 of the subsidiary arrangements to the agreement, [2] which would provide the maximum level of transparency; and (4) allow the IAEA to make snap inspections of undeclared facilities. This offer was intended to address the West’s concerns regarding the nature of Iran’s nuclear program by ensuring that no enriched uranium would be diverted to a nuclear weapons program. It also would have facilitated the recognition of Iran’s right to enrichment under the NPT. [3] In exchange for these Iranian commitments, the Iranian nuclear file at the IAEA would be normalized, and Iran would have broader political, economic, and security cooperation with the European Union. Furthermore, Iran was interested in securing fuel for the research reactor in Tehran and was ready to ship its enriched uranium to another country for fabrication into fuel rods.

Iran’s overtures to its negotiating partners for a mutually acceptable deal failed, primarily because the United States was not on board and held the position that there should not be even one centrifuge within Iran. In a meeting I had at the time with French Ambassador to Iran François Nicoullaud, he told me, “For the U.S., the enrichment in Iran is a red line which the EU cannot cross.”

Denying Iran its right to enrichment and blocking efforts to have fuel rods provided for the Tehran reactor sent clear signals to Tehran that the West was not interested in solving the nuclear issue. Rather, the West wanted to compel Iran to forgo its enrichment program completely. This episode highlighted the inflexible position of the West and its lack of interest in reaching a compromise. This was particularly true of Washington, as the Bush administration’s position was that it would never tolerate enrichment in Iran. This left Iran with no option but to change its nuclear diplomacy and accelerate its enrichment program, as it sought self-sufficiency in nuclear fuel.

Punitive measures. Since 2003, the proposals exchanged between Iran and the EU-3, which later became the P5+1, have failed largely because the Western proposals did not meet the bottom lines of both sides: for Iran, recognition of its right under the NPT to enrich uranium and produce reliable civilian nuclear energy; for the United States and Europe, preventing Iran from ever developing nuclear weapons. Instead, the West has taken major punitive actions, such as sanctions and covert operations against Iran. This has made the nuclear endeavor Iran’s number one issue of national pride.

Reversal on the fuel swap. After the breakdown of talks between Iran and the P5+1 in the fall of 2009, Tehran decided to increase its enrichment capability from below 4 percent to around 20 percent, enabling it to produce fuel for the research reactor in Tehran. In February 2010, Ali Akbar Salehi, the head of the Atomic Energy Organization of Iran, proposed that Iran would keep its enrichment activities below 5 percent in return for the West providing fuel rods for the Tehran reactor. The West refused this offer.

In May 2010, Iran reached a deal with Brazil and Turkey to swap its stockpile of LEU for research reactor fuel. The deal was based on a proposal first drafted by the Obama administration with Brazilian and Turkish officials under the impression that they had the blessing of Washington to negotiate with Iran. Regrettably, the United States trampled on their success by rejecting the plan; the UN Security Council subsequently passed additional sanctions against Iran. Here again, Iran was not interested in enriching to 20 percent or continuing beyond that level; it sought only to have assurances that fuel would be guaranteed for the Tehran reactor and its rights under the NPT respected. The actions of the West pushed Iran to reach 20 percent enrichment so that it could make fuel rods for the Tehran reactor.

Rejection of other deals. There were still other opportunities to reach a compromise. They came in the form of the Russian step-by-step proposal in the summer of 2011, which addressed all the West’s concerns about Iran’s nuclear activities. The proposal required Iran to (1) allow full supervision by the IAEA; (2) implement the IAEA additional protocol and subsidiary arrangement Code 3.1; (3) stop production of highly enriched uranium and limit enrichment to 5 percent; (4) halt installation of new centrifuges; (5) limit the number of enrichment sites to one; (6) address IAEA concerns about the “possible military dimension” of the nuclear program and other technical ambiguities; and (7) suspend enrichment temporarily. In response, the P5+1 would recognize Iran’s legitimate rights to enrichment under the NPT and would gradually lift the sanctions.

The Iranians publicly showed their readiness to negotiate, but the West declined to discuss the proposal further. In September 2011, when Iran had completely mastered 20 percent enrichment and had a growing stockpile, it proposed stopping its 20 percent-enrichment activities and accepting Western-provided fuel rods for the Tehran reactor. Once again, the West declined and made it necessary for the Iranians to move toward producing their own fuel rods.

Recent Talks

In talks earlier this year in Istanbul and Baghdad, the West still sought to have Iran halt its enrichment and would not recognize Iran’s right to that activity. In return, it expected the Iranians to accept meager concessions, such as the removal of sanctions on oil shipping insurance and on spare parts for civilian planes. There was no talk of substantive sanctions being relaxed or upcoming EU sanctions on oil and the Iranian central bank being delayed. The hardened positions and lack of flexibility on the part of the West have made the Iranians dig in their heels. With each blockage and punitive Western action, Iran further advances its nuclear program.

At the June 18-19 talks in Moscow, the P5+1 once again was not in a position to offer anything on sanctions or Iran’s rights to enrichment while Iran signaled its readiness to accept many of the group’s major demands, such as stopping enrichment at the 20 percent level; building confidence, possibly by setting limits on production of 20 percent-enriched uranium; responding positively to the IAEA to provide the maximum level of cooperation and transparency; and extensively addressing the possible-military-dimension issues, which require Iran to implement the additional protocol and provide the IAEA with access beyond the level required by the protocol.

A comparison of the June 19 statement in Moscow by Catherine Ashton, the EU foreign policy chief and lead negotiator for the P5+1, with her April 14 Istanbul statement reveals a major difference. The P5+1 is now giving more emphasis to Iran’s compliance with its international obligations, namely, UN Security Council resolutions, rather than focusing on the country’s obligations under the NPT. This is a clear setback from the Istanbul position. It indicates a focus on suspension of Iran’s enrichment activities, a demand that has been a deal breaker since 2003.

At the time of these talks, Iran had not only mastered enrichment to the 20 percent level, it had achieved milestones few could have imagined: the domestic production of fuel rods for use in the Tehran reactor, about 10,000 centrifuges, more than 6,000 kilograms of LEU, and 150 kilograms of 20 percent enriched uranium. Yet, the West still is not ready to respect the right to enrichment to 20 percent or even 5 percent. Not only has the West pushed Iran to seek self-sufficiency, but at every juncture, it has tried to deprive Iran of its inalienable right to enrichment. This has simply propelled Iran to proceed full throttle toward mastering nuclear technology. The Iranians never intended to go this far and would have been content with the West or another country supplying their fuel. The irony is that the progress of Iran’s nuclear program is the product of Western efforts to pressure and isolate Iran while refusing to recognize Iran’s rights.

Any further opportunity to reach a deal will fail if the West does not recognize that the approach it has taken so far will yield only further progress in Iran’s nuclear program and that there is little left that the West can make subject to sanctions. If this trend continues, therefore, the prospects will be gloomy for all parties. Iran will be forced to choose between resisting Western pressures and abandoning its long-held goal of pursuing peaceful nuclear energy. It is unlikely to do the latter, even in the face of a military strike. The West is limiting its options, leaving only the option of military intervention. This cycle has brought the countries to the brink of war, due to the West’s mistaken belief that pressure, sanctions, isolation, and threats would bring Iran to its knees. On the contrary, these policies have led only to the advancement of Iran’s nuclear program.

A Way Out

The West now appears prepared to take an eighth counterproductive step by imposing devastating sanctions or launching a military strike. If that happened, Iran would be likely to withdraw from the NPT and pursue nuclear weapons.

All is not lost, however. Iran and the P5+1 could agree on a face-saving solution under which Iran would adhere to all international nuclear conventions and treaties at the maximum level of transparency defined by the IAEA. Furthermore, Iran would be flexible on 20 percent enrichment, its stockpile of material enriched to that level, and every other confidence-building measure to assure the international community that the country would remain a non-nuclear-weapon state forever. This would ensure the peaceful nature of Iran’s nuclear activity. In response, the United States and the other members of the P5+1 would agree to recognize Iran’s legitimate right to enrichment under the NPT and gradually lift the sanctions. This framework can be realized in forthcoming talks through a step-by-step plan based on the NPT, mutual confidence building, and appropriate reciprocity as agreed in the Istanbul talks in April.

To satisfy the concerns of the West regarding Iran’s 20 percent stockpile, a mutually acceptable solution for the long term would entail “a zero stockpile.” Under this approach, a joint committee of the P5+1 and Iran would quantify the domestic needs of Iran for use of 20 percent enriched uranium, and any quantity beyond that amount would be sold in the international market or immediately converted back to an enrichment level of 3.5 percent. This would ensure that Iran does not possess excess 20 percent enriched uranium forever, satisfying the international concerns that Iran is seeking nuclear weapons. It would be a face-saving solution for all parties as it would recognize Iran’s right to enrichment and would help to negate concerns that Iran is pursuing nuclear weapons.

Hossein Mousavian is a research scholar at Princeton University’s Woodrow Wilson School of Public and International Affairs. From 1997 to 2005, he was the head of the Foreign Relations Committee of Iran’s National Security Council; from 2003 to 2005, he served as spokesman for Iran in its nuclear negotiations with the European Union. He is author of The Iranian Nuclear Crisis: A Memoir (2012).

ENDNOTES

1. Greg Bruno, “Iran’s Nuclear Program,” Council on Foreign Relations, March 2010, www.cfr.org/iran/irans-nuclear-program/p16811.

2. Code 3.1 of the subsidiary arrangements to IAEA safeguards agreements specifies when a state is required to declare facilities to the agency. The IAEA originally said that states must declare nuclear facilities six months prior to introducing nuclear material, but modified the code in 1992 to require countries to inform the agency of facilities “as soon as the decision to construct or to authorize construction has been taken, whichever is earlier.”

3. Article IV of the NPT states, “Nothing in this Treaty shall be interpreted as affecting the inalienable right of all the Parties to the Treaty to develop research, production and use of nuclear energy for peaceful purposes without discrimination and in conformity with Articles I and II of this Treaty.”

Hossein Mousavian is a research scholar at Princeton University’s Woodrow Wilson School of Public and International Affairs. From 1997 to 2005, he was the head of the Foreign Relations Committee of Iran’s National Security Council; from 2003 to 2005, he served as spokesman for Iran in its nuclear negotiations with the European Union. He is author of The Iranian Nuclear Crisis: A Memoir (2012).

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The Rocky Road of Nuclear Diplomacy With Iran

By Olli Heinonen

It soon will be a decade since the West—initially the EU-3 of France, Germany, and the United Kingdom, later joined by China, Russia, and the United States to form the P5+1—embarked on a diplomatic process in 2003 to find a negotiated solution to the Iranian nuclear crisis.

In spite of these efforts, Iran continues to raise its uranium enrichment to higher levels, increase its stockpile of fissile material, and remain opaque over the military-related aspects of its nuclear program. These issues will continue to be a fundamental part of the discussions.

Iran’s increasing enrichment capacity, together with its reported possession of a crude design of a nuclear weapon, shows that Iran is positioning itself as a virtual or latent nuclear-weapon state. Given the risks involved for a potential breakout from the nuclear Nonproliferation Treaty, a more intrusive and timely inspection system, as well as Iran’s agreement to implement an additional protocol to its safeguards agreement with the International Atomic Energy Agency (IAEA), would be required.

Recently, Iran’s monthly production of low-enriched (3.5 percent uranium-235) uranium hexafluoride (UF6) at the Natanz Fuel Enrichment Plant, with its newly installed centrifuges, has increased to 220 kilograms of UF6 today. By the end of this year, Iran could have a cumulative inventory of 7.5 metric tons of low-enriched UF6. With further enrichment, that would be enough for half a dozen nuclear weapons.

Meanwhile, Iran has also produced about 150 kilograms of UF6 enriched to 20 percent. The installation and commissioning of additional cascades at the Fordow enrichment plant indicates that, by the end of this year, the inventory of 20 percent-enriched UF6 could be as high as 300 kilograms—an amount sufficient, with additional enrichment, for more than one nuclear weapon. By further enriching the 20 percent-enriched uranium at Fordow, Iran could turn it into nuclear weapons components in a couple of months. This time could even be shorter depending on factors such as whether the Natanz plant also is used to produce highly enriched uranium (HEU).

The IAEA might be able to detect those changes at locations it inspects, but would the international community be able to react in time? In the international arena, a couple of months is extremely short, increasing the risk of military action, which in itself may slow down but not end the program.

An additional uncertainty stems from Iran’s past statements that it plans to build additional enrichment plants. Tehran’s history of concealment, alongside its actions to distribute its nuclear activities at different locations and harden its facilities, adds to already serious concerns. That is why Iran has been subjected to unprecedented sanctions in recent months. At first, the sanctions targeted Iran’s nuclear program directly, but they increasingly are focusing on other sectors to intensify the pressure. One example is the oil embargo that went into effect at the end of June.

Time does not favor any of the countries involved if they are seeking a negotiated solution. For Iran, it is internally more and more difficult to find an acceptable solution to the nuclear dilemma as it digs itself deeper into its own rhetoric that the price is never too high to achieve its nuclear ends. The P5+1 sees that, with the passage of time, Iran is closing the gap to a nuclear breakout capability.

Yet, a potential solution is in sight and still to be grasped. The involved parties already have charted the rough outlines of a long-term deal, comprising efforts by Iran to undertake practical steps to ensure that its nuclear program cannot be used for nuclear weapons and to give the international community confidence that this is the case. In return, Iran would receive cooperation with the West in a number of areas. These could include, as part of a comprehensive package, addressing Iran’s nuclear power needs, giving assurances of nuclear fuel supply, providing fuel for its Tehran Research Reactor to produce radioisotopes for medical and industrial purposes, replacing that reactor with a modern civilian reactor, and providing assistance in nuclear safety and security.

In this context, it is unhelpful and underhanded that Iran, in its recent statements amid ongoing diplomacy, has further clouded the broth by broadcasting its intention to build nuclear-powered submarines. Such submarines often use HEU, but there are also reactor designs with lower enrichments. It is unlikely that there will be any external takers to provide fuel for this apparent new need Iran has announced. Iran then probably will cite the lack of foreign fuel suppliers as further justification for continuing on its uranium-enrichment path.

The road of negotiations after Moscow will continue to be rocky, but it is crucial to keep diplomacy on track. This means focusing on the overall goal that would address the proliferation concern of preventing a nuclear-armed Iran, instead of becoming bogged down in the process itself. ACT

Olli Heinonen has been a senior fellow at the Belfer Center for Science and International Affairs at Harvard University’s John F. Kennedy School of Government since 2010. Prior to that, he served for 27 years at the International Atomic Energy Agency in Vienna, including five years as deputy director general and head of the Department of Safeguards.

Olli Heinonen has been a senior fellow at the Belfer Center for Science and International Affairs at Harvard University’s John F. Kennedy School of Government since 2010. Prior to that, he served for 27 years at the International Atomic Energy Agency in Vienna, including five years as deputy director general and head of the Department of Safeguards.

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Clarification

The June 2012 news brief “U.S., Russia Discuss Cyber Hotline” referred to plans for “a hotline [between Moscow and Washington] for cyberattacks similar to one used since 1988 to prevent accidental nuclear war.” The first hotline was established in 1963; it relied on telegraph messages routed through a number of intermediate cities. The 1988 version established a direct link between Moscow and Washington, with voice capability.

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Correction

The June 2012 On the Calendar incorrectly said that the meeting of nuclear-weapon states on nuclear weapons transparency and verification would take place June 26-27. The meeting took place June 27-29.

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Letter to the Editor: The ‘Bloated’ U.S. Nuclear Weapons Budget

Edward J. Markey

In “Resolving the Ambiguity of Nuclear Weapons Costs” (June 2012), Russell Rumbaugh and Nathan Cohn estimate that the United States spends $31 billion on nuclear weapons and another $25 billion on related programs in the departments of Energy and Defense. The threats the United States faces today simply do not justify spending at these levels.

Twenty years have passed since the end of the Cold War, but U.S. nuclear weapons spending belies this historical reality. At the same time, the growing federal budget deficit menaces the country’s long-term economic security, adding to an unprecedented national debt that represents virtually the entire gross domestic product of the United States. U.S. nuclear weapons forces need to be the right size for both the country’s security needs and its tight budget constraints.

I recently introduced H.R. 3974, the Smarter Approach to Nuclear Expenditures (SANE) Act of 2012, legislation that would cut $100 billion over the next 10 years from the United States’ bloated nuclear weapons budget and make its nuclear weapons forces the right size for the 21st century. Since the fall of the Berlin Wall and the disintegration of the Soviet Union, the threats at home and abroad have changed dramatically. U.S. defense programs and priorities need to be adjusted accordingly. We can no longer afford to rob the future to pay for unneeded weapons of the past. Now is the time to reset our priorities and invest in the people and programs to get the United States back on track.

Rep. Edward J. Markey (D-Mass.) is a senior member of the House Energy and Commerce Committee.

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Key Senator May Oppose New Treaties

Tom Z. Collina

A key Republican senator who voted for the New Strategic Arms Reduction Treaty (New START) threatened to block future treaties, citing what he said was the failure of the Obama administration to keep its promise, made in talks with the Senate over New START in 2010, to increase funding for nuclear weapons programs.

At a June 21 hearing of the Senate Foreign Relations Committee, Sen. Bob Corker (R-Tenn.) said that he was “highly disappointed” that the administration had not requested as much for nuclear weapons in fiscal year 2013 as it said it would in 2010. Corker, who faces an August primary challenge, said he “would be very reticent to agree to any treaty with this administration on any topic, until something changes as it relates to the commitments on this START treaty.”

The White House has indicated that it is seeking a ratification vote on the UN Convention on the Law of the Sea later this year, may seek approval of the Comprehensive Test Ban Treaty next year, and eventually may ask for a Senate vote on a follow-on treaty to New START.

Corker may become the ranking Republican on the committee in the next Congress, as the current ranking member, Sen. Richard Lugar (R-Ind.), lost his primary election in May. If the Republicans win control of the Senate in November, Corker could become chairman of the panel.

Sen. John Kerry (D-Mass.), the current committee chairman, addressed Corker’s criticism by saying that the administration has been “working hard” to provide increased support for weapons programs “at a time when almost all other budgets are being slashed.” Kerry pointed out that, for fiscal year 2012, the administration had requested the full amount projected in the November 2010 funding estimate, known as the 1251 report, but that it was “the House of Representatives that cut the funding below the request, not the president, and not the Senate.” For fiscal year 2013, the administration is requesting a 5 percent increase for National Nuclear Security Administration (NNSA) weapons funding over the 2012 amount, he noted. (See ACT, April 2012.) The NNSA, which is a semiautonomous agency in the Department of Energy, is responsible for maintaining the nuclear weapons production complex.

The fiscal year 2012 congressional appropriation for NNSA weapons funding was $416 million, or 4 percent, less than the administration’s $7.6 billion budget request, which matched the 1251 report’s projection for fiscal year 2012. Under the Senate resolution of approval for New START, this shortfall triggered a requirement that the administration report to Congress on how to address any funding gap. Secretary of Energy Steven Chu and Secretary of Defense Leon Panetta submitted this report on June 5, finding that the fiscal year 2013 request meets military requirements “even during a time of pronounced fiscal austerity” and that “no additional resources are requested.”

NNSA Administrator Thomas D’Agostino testified June 21 that “we [will] have the resources we need” if Congress approves the administration’s full fiscal year 2013 request. “I’ve seen an unprecedented level of commitment on the part of [the] executive branch towards taking care of our nuclear security enterprise,” he testified.

House, Senate Differ

Corker stopped short of suggesting, as his House colleagues have, that New START should not be implemented unless the funding levels specified in the 1251 report’s 10-year projection are requested and appropriated.

In the House, Republican leaders such as Rep. Michael Turner (R-Ohio), chairman of the Armed Services Strategic Forces Subcommittee, are trying to prevent the implementation of New START as well as additional reductions. The fiscal year 2013 National Defense Authorization Act, which passed the House on May 18, includes language that could block arsenal reductions under New START if the administration does not increase its spending request for certain nuclear weapons-related projects, for which the Pentagon and the NNSA did not ask.

In a May 15 statement, the administration issued a warning that it may veto the defense bill over these provisions, which the White House said would “impinge on the President’s ability to implement the New START Treaty and to set U.S. nuclear weapons policy.”

The Senate Armed Services Committee, which completed its version of the defense bill on May 24, did not seek to link New START implementation to additional funds for modernization. Instead, the committee found that “the linkage between nuclear modernization and the New START Treaty’s implementation is sufficiently established.”

At the June 21 hearing, Lugar said he was “very concerned by attempts to force U.S. withdrawal from the New START Treaty or suspend its implementation. We should not risk either the transparency achieved by the Treaty nor the reliability and performance of our strategic nuclear forces.”

Kerry said that “those who say we should just walk away from New START” have to explain how “retaining more nuclear weapons than our military advisers say we need, and how having less insight into Russia’s strategic nuclear arsenal” would be beneficial. “We need to see the logic of that,” Kerry said.

New START on Track

As Corker accused the administration of breaking its promises, administration witnesses argued that New START was advancing U.S. security interests. Rose Gottemoeller, acting undersecretary of state for arms control and international security, testified that the treaty, which entered into force in February 2011, “is providing ongoing transparency and predictability regarding the world’s two largest deployed nuclear arsenals” while preserving the U.S. ability to maintain a strong nuclear deterrent.

In the treaty’s first year, the United States and Russia conducted the maximum of 18 on-site inspections, Gottemoeller said. So far in the second year, Russia has conducted eight inspections, and the United States has conducted seven. These inspections have taken place at intercontinental ballistic missile (ICBM), submarine-launched ballistic missile, and heavy bomber bases, as well as at storage facilities, conversion or elimination facilities, and test ranges, said Gottemoeller, who was the lead U.S. negotiator of New START.

On the issue of when the United States plans to reduce its arsenal to New START levels, Assistant Secretary of Defense for Global Strategic Affairs Madelyn Creedon testified that the Pentagon plans to “make most of the reductions in deployed systems towards the end of the seven-year reduction period,” or by 2018. By then, the United States, which currently deploys 1,737 warheads, 812 delivery systems, and 1,040 launchers, must meet the treaty’s limits of 1,550 deployed strategic warheads, 700 delivery vehicles, and 800 launchers.

Creedon testified that initial reductions will come from the conversion or elimination of systems that were counted under the 1991 START but are no longer maintained “in a deployable status.” These previously retired systems, often referred to as “phantoms” because they are no longer deployed but still counted under the treaty, include 50 empty Peacekeeper ICBM silos at F.E. Warren Air Force Base in Wyoming, 50 empty Minuteman III ICBM silos at Malmstrom Air Force Base in Montana, three excess ICBM test silos at Vandenberg Air Force Base in California; and 34 B-52G and 13 B-52H bombers currently stored at Davis-Monthan Air Force Base in Arizona. The estimated cost to eliminate or convert these systems is $47 million, she said.

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