Federal Ministry for Research and Technology, 'Cabinet Submission: RE: Draft of an Agreement between the Federal Ministry for Research and Technology and the Atomic Energy Organization of Iran on Cooperation Regarding the Peaceful Use of Nuclear Energy'

Federal Ministry for Research and Technology

226-9240 (IRN)-6/76; Strictly Confidential - For Internal Use Only

Section: MinRat Dr. Markus

Ph.: 59/54390

Bonn, [1976]

Appendix 1 to Cabinet Matter of the Federal Ministry for Research and Technology from [1976]

Cabinet Submission

RE: Draft of an Agreement between the Federal Ministry for Research and Technology and the Atomic Energy Organization of Iran on Cooperation Regarding the Peaceful Use of Nuclear Energy

1. On 14 January 1976 the Federal Cabinet has agreed to the continuation of negotiations begun in April 1974 on a German-Iranian Agreement about cooperation regarding the peaceful use of nuclear energy. This is based on inclusion into the negotiations of demands resulting from the guidelines of the main delivery countries for nuclear exports. In the meantime those demands have been mostly met during two rounds of negotiations held on the 4th and 5th of February [1976] in Bonn and from the 10th to the 12th of May [1976] in Tehran. Probably there will be a consensus reached over the few open points left in the context of another round of negotiation. In detail, regarding the provisions dealing with the limitation of proliferation of nuclear weapons, the agreement draft (appendix^[1]) is now adhering to the principles of

- unlimited IAEO^[2] control of the fissile material delivered by Germany or gained as a result of the cooperation, irrespective of the Iranian membership in the Non-Proliferation Treaty and the duration of the German-Iranian Agreement;

- Guarantee of the same controls also after an export to third countries;

- Commitment to sufficient physical protection of nuclear material and facilities;

- Reserve of prerequisites and conditions in case of a further cooperation in the so-called sensitive area, this is in particular with regard to the transfer of technology for uranium enrichment and the reprocessing of radioactive nuclear fuel

- Reserve of rights of intervention in case of exports of fissile material from Iran to third countries

With regard to the last-mentioned aspect, which is basically and primarily concerning the reprocessing of radioactive fuel elements to third countries, the initially raised demand to make such exports dependent on the approval of the Federal Government was implemented only pertaining to exports in such states for which there exist COCOM^[3] export limitations. For other countries, which in any case will have to accept IAEO safety controls, the following solution is taking shape: Iran will consult the Federal Government in advance of each export and will in any case not export to a certain country against its [Federal Government] will, if a third country will be offered to Iran that has committed to the reprocessing or otherwise needed services. This solution would correspond to the guidelines of the main [nuclear] export countries and exceed the provisions agreed to with regard to Brazil.

2. The discussion in the cabinet on the 14th of January was preceded by consultations with the United States on 8th December 1975. They had dealt with the question under which conditions a cooperation in the sensitive area can be offered to Iran. With regard to the development of the respective discussion in the meantime, especially in the American public, we again consulted the United States on this issue on 26 and 27 of April 1976 and explained the German position developed according to the result of the talks from 8 December 1975. On the basis of this information, Secretary of State Kissinger^[4] then commented during his visit [to Bonn] on 23 May, this is only two weeks after the date of German-Iranian negotiations he was aware of. The American position was explained in more detail in a memorandum handed over on the 24th of May.

The tendency of this memorandum was surprising insofar as, in contrast to the result of the consultation on 8 December 1975 and the impressions gained by the German delegation on 26 and 26 April, the United States are now arguing against a statement that is offering to Iran the delivery of reprocessing facilities, no matter at what time and under which conditions whatsoever. In case that the German side would nonetheless plan for a cooperation [with Iran] on this matter, the American side is urging for

- a clarification in the agreement text that a delivery of such a facility will not materialize at least within the next 10 to 15 years and

- a statement of assurance vis-a-vis the United States that we would actually apply the reserved option of a German participation in a facility exported from Germany.

A second main point of the American memorandum is the request that the German side may directly exert influence -the same way as the United States are doing it in their own negotiations with Iran-, via conditional approval for the fuel elements exported by Germany, on construction and organizational structure of reprocessing facilities [in Iran] that are not being delivered from the German side. According to the American position, this especially means that the reprocessing as well as subsequent storage and further processing of gained plutonium into new fuel elements should be allowed in such facilities only that are jointly operated by two or more countries, and usually with participation of the delivery country.

3. These American demands are creating a difficult situation for us insofar, as since the beginning of the talks in fall of 1974 the Iranian side could work based on the assumption that we are not linking in principle cooperation in the nuclear field to any further conditions except for the application of IAEO controls - which are a consequence of the [Iranian] signing of the nuclear weapons Non-Proliferation Treaty. In this context, during the recent round of negotiations in Tehran Iran did indicate in detail that

- still before the handing over of the Iranian letter of intent over the order of the two nuclear power plants in November 1974, a German memorandum submitted before in October concerning the options for cooperation in the field of nuclear energy did not contain any indication of the exclusion of certain areas or special preconditions for a cooperation;

- during the first round of negotiations in Tehran in April 1975 only the IAEO controls were mentioned, in addition to aspects regarding the physical protraction of nuclear facilities meanwhile no longer under dispute;

- during two additional meetings in June and September 1975 the Iranian side consented to the agreed postponement of negotiations (which seemed appropriate in light of the international discussion over the Nuclear Energy Agreement with Brazil) only under the assumption that nothing will change regarding the extent of the safety control requirement demanded by the German side during the negotiations in April 1975;

- the Iranian side became reaffirmed in this expectation also by statements from the Federal Chancellor which he had made during his visit in Tehran in November 1975 regarding the impact of consultations between the main delivery countries for nuclear exports on cooperation with Iran;

- even during the second round of negotiations in February 1976 in Bonn the German side did not provide any hints that there still be additional demands raised.

In the meantime, an irritation has occurred on the Iranian side about the changes in the German position over the course of the three rounds of negotiation. This became reflected, among else, in an according letter from 19 May 1976 by the President of the Atomic Energy Organization of Oran, Dr. Etemad^[5], to State Secretary Haunschild^[6].

In light of the importance of regulations in the agreement for export and operations, especially for the provision of nuclear fuel elements, of the two nuclear power plants, Iran has now established a linkage between the signing of the Government Agreement and the signing of the finalized contract with the Kraftwerk Union^[7] scheduled for the 1st of July 1976. The implementation of these contracts, in which besides the Kraftwerk Union also the companies Hochtief and Dyckerhoff & Widmann are involved, comprises of a volume of abut 78 billion German Marks for the delivery of the nuclear power plants as well as 3 additional billion German Mark for the provision of nuclear fuel elements for the first 10 years of operation. In case of a failure of German-Iranian government negotiations, what cannot be excluded in case of a deepening of Iranian irritations, there exists the danger of failure for the entire deal. In all likelihood, this would have negative impacts on overall German-Iranian economic relations.

4. Concerning the statement of intent regarding cooperation pertaining to the nuclear fuel cycle that got especially criticized from the American side: Already in October 1974 we had declared towards Iran the German willingness for cooperation also in the so-called sensitive area, and we included in the catalogue of areas of cooperation in Article 1 of the Draft Agreement the “provision and production of natural and enriched Uranium as well as the provision of other services in the nuclear fuel cycle”. This draft had been the basis for the Cabinet Decision of 14 January 1976. In order to avoid undesired speculations in the international public, details regarding the inclusion of sensitive technologies were excluded during the negotiations in February 1976 from the agreement text on suggestion from the German side. Instead they were addressed in an accompanying exchange of letters. Under the impression of the growing discussion in the United States and the German-American consultation on 26 and 27 April 1976, we did in the following weeks link the initial agreement of intent in successive steps -most recently so during the therefore difficult negotiations [with Iran] between 10 and 12 of May- to a couple of prerequisites and conditions. Accordingly

- the construction of a sensitive facility in Iran, especially so of a reprocessing facility, ought to be necessary for economic and practical reasons, whereby the German side needs to be involved in the review process; in Iranian opinion this prerequisite will hardly take effect before the end of the 1980s;

- options are to be considered for an operation of the facility by multiple countries;

- the Federal Government can in any case demand a German participation in the operation of the facility;

- the German side is reserving the unlimited right to introduce further conditions for cooperation in the sensitive area. 

Based on the memorandum submitted in November 1974, which is stipulating a cooperation in constructing in Iran nuclear power plants and such facilities becoming necessary for the fuel cycle to operate these plants, Iran issued in November of 1974 a letter of intent and began with the construction of both nuclear power plants. So far about 1 billion German Marks have been used up in this process. Together with Iran, back then we could act from the assumption that IAEO inspections performed pertaining to the entire fuel cycle would be sufficient, since Iran is a signatory to the Non-Proliferation Treaty. During the ongoing contacts with the United States, the latter raised over the course of 1975 additional demands. In spite of the acceptance of the guidelines for nuclear exports in January of 1976, the U.S. further tightened their demands in April 1976. As the United States are aware, those are hardly in accordance with the foundation of the German-Iranian arrangements. Nonetheless, so far we have succeeded in several rounds of negotiations to persuade Iran to accept some of the constantly added demands. Thus for the first time assurances were received from a Non-Proliferation Treaty signatory that go beyond the obligations of the Non-Proliferation Treaty. In this situation, a German demand to now drop the letter of intent completely - according to the American request - would gravely endanger the conclusion of the agreement and therefore it should not be raised.

Furthermore, when looking at timing of content of the American intervention, you can gain the impression that the U.S. Administration primarily wants to shield itself against any domestic criticism in light of the expected conclusion of the German-Iran agreement. It had already been noted in the Cabinet Submission from 6 January 1976 that criticism in the American public will have to be taken into account.

In order to deny this criticism any starting points as much as possible, we are willing to assure the United States, according to their request, of our willingness to actually use our reserved option of a German participation in a reprocessing plant potentially exported from Germany. As more problematic - and in light of current facts no longer warranted due to the so far achieved negotiation results - does appear the additionally requested clarification in the text of exchanged letters that the export of a reprocessing facility will not occur within the next 10 to 15 years. It can be attempted [though] to add a phrase of clarification that there is no intention to export sensitive facilities to Iran in the near future (see here annotations regarding the draft of Letters of Exchange I).

To what extent an according change to the draft can be achieved, however, be predicted with any certainty given the already existing Iranian irritation over the extent of the added German demands during the course of negotiations. If the German request would not be fully accepted by Iran, we still have sufficient means to determine the timeline for exporting a reprocessing facility - namely by our scrutiny reservation concerning the economic need for exporting a reprocessing plant as well as through our right to introduce additional conditions. If the explicit adoption of a timeline in the Letters of Exchange will not be possible, we will explain to the Iranian side during the next round of negotiations to be held on 17 and 18 June 1976 in Vienna - and based on our rights of participation - our ideas for a timeline in vein of the annotations on the draft of Letters of Exchange I. The conclusion of a agreement ought not to fail because of the issue of an additional clarification of the timeline in the text of Letters of Exchange, because the American timeframe concept would be anyways accommodated in essence.

5. It has been already explained under 2. with regard to the reprocessing of fuel elements delivered by Germany - what is the subject of the second American demand - that the export for reprocessing to third countries is subject to German rights of participation. The construction of a reprocessing facility in Iran itself would hardly be possible in a foreseeable future through Iranian agency alone. Therefore the participation of one of the main nuclear export countries bound by the London Agreements would be necessary. In this case, this particular country would be the primary actor in charge of the necessary agreements regarding the operation of such a facility. Thus the American demand has practical impact only in the sense that Iran can in any case be required to implement security control requirements beyond the IAEO controls; this is an impact only with regard to the possibility that in a distant future Iran itself is developing a reprocessing technology.

We have already introduced the issue of an approval reservation regarding reprocessing in an Iranian facility to the negotiations held between 10 and 12 May; after the United States had explained during our consultations of 26 and 27 April their position in their own negotiations with Iran. The Iranian side had reacted with strong irritation to this demand, which in its opinion is affecting both the sovereignty of Iran and its credibility as a signatory member to the nuclear power plants on nuclear weapons. Iran has indicated that a German insistence on this demand would jeopardize the continuation of negotiations. On the other hand: The concept of international facility operation, at which implementation the American demand is aiming, is still immature and gets also assessed inconsistently in American statements. As a result, for now it cannot be assumed that other main nuclear export countries will attempt in similar fashion to exert influence, via the export of fuel elements, on the national or international forms of organization of a reprocessing plant in a receiver country. The United States themselves have so far not insisted on such rights of reservation pertaining to their own exports of nuclear power plants, with the only exception of the American-Egyptian Agreement.

After weighing all relevant aspects, it is thus appearing acceptable not to link the export of fuel elements, at least for the so far nuclear power plants Iran and 2 contracted for export by the Kraftwerkunion, with an approval reservation for reprocessing in Iran.

The Federal Cabinet is asked

To agree

to the conclusion of negotiations concerning an agreement between the Federal Ministry for Research and Technology and the Atomic Energy Organization of Iran pertaining to cooperation regarding the peaceful use of nuclear energy, based on the attached draft^[8] and the explained negotiation guidelines, and

[to agree] to the signing of the agreement by the Federal Ministry for Research and Technology.