Sustaining the nuclear watchdog with a grand budgetary bargain

On March 11, 2011, a powerful earthquake struck the east coast of Japan. Fifty-six minutes later the seismic safety experts at the Vienna-based International Atomic Energy Agency (IAEA) concluded that the event, and its accompanying tsunami, could damage nuclear power plants in the region. The Agency’s Incident and Emergency Centre was activated, declared to be in “full response mode” and staffed continuously 24 hours a day for the following 54 days. Approximately 200 agency personnel were diverted from their normal activities to the Fukushima disaster response, keeping in touch with Japanese authorities, advising concerned member states and coordinating offers of assistance. Fukushima-related activities ended up consuming all unencumbered funding in the agency’s safety and security budget for 2012 as well as requiring a one-off transfer of funds from other major programs. This incident illustrates graphically the hand-to-mouth existence of what is popularly known as the “nuclear watchdog.”

A more recent example: the July 2014 agreement to curb Iran’s nuclear activities. To implement the vital monitoring and verification provisions with which it was entrusted, the IAEA has been forced to go cap-in-hand to its wealthier member states to fund the effort, seeking additional funding that amounts to $10 million per year. It is also reliant on member states providing the state-of-the-art verification equipment mentioned in the agreement. Similarly, the fourth and final Nuclear Security Summit, held in Washington DC in March, agreed on an action plan for the IAEA but pledged no additional funding so the agency could carry it out.

Despite facing a succession of nuclear crises over its almost 60-year existence (the Chernobyl and Fukushima disasters and the major non-compliance cases of Iran, Iraq, and North Korea), the IAEA has no emergency or contingency fund. Its nuclear laboratories outside Vienna—where, for instance, it assesses radioactive samples from Iran—were until recently rundown and non-compliant with the agency’s own safety and security guidelines. Refurbishment efforts are still not fully funded. Modernization of vital safeguards equipment like 24-hour surveillance cameras at nuclear power plants is described as “unfunded” in successive agency budgets. Its regular funding has increasingly been supplemented by irregular voluntary contributions, even for core functions like nuclear safeguards.

The sledge-hammer approach to budgeting: zero real growth. Like other organizations in the UN system, the IAEA has been held to annual zero real growth—with few exceptions—for more than 30 years. The current budget is $353 million. By comparison, the annual budget of the New York City Police Department is $4.6 billion. Zero real growth has been imposed at the insistence of the Geneva Group, composed mostly of Western states, despite the agency being widely judged one of the most effective and efficient of international organizations. Its management and administration costs have declined as a percentage of its regular budget over several years, and its inspectorate has remained numerically static at around 250 for decades.

Such budgetary constraint has been imposed regardless of the IAEA’s demonstrable importance to international security. Note the IAEA’s inspectors’ discovery that North Korea was in violation of its safeguards agreement in 1992. Note also the agency’s certification in 2003, which turned out to be accurate, that Iraq was free of nuclear weapon activities and materials prior to the US invasion. Recall, too, the agency’s pivotal role in strengthening nuclear safety after the Chernobyl disaster in 1986, as well as its contribution to strengthening nuclear security after the events of 9/11 stoked fears that nuclear weapons or material might be involved in future terrorist attacks.

Meanwhile international demand for the more prosaic but important services provided by the agency has been steadily rising. Verifying compliance with nuclear safeguards agreements, which provide early warning that states are seeking nuclear weapons, now applies to almost all states in one form or another. Safeguards are also becoming more elaborate and intrusive. Technical assistance in the peaceful uses of nuclear energy (known as Technical Cooperation or TC) is provided to the majority of member states and is essentially demand-driven. States seeking nuclear energy for the first time are increasingly turning to the agency for advice. For nuclear safety and security, the agency provides a variety of “public goods”: setting standards or guidelines; organizing peer reviews; nourishing networks; convening conferences and workshops; and providing training and equipment. Although the popularity of such offerings is indicated by the agency’s steadily increasing membership, the newer members are mostly poorer developing countries that are avid recipients of assistance rather than contributors to IAEA coffers.

What should be done? To begin with, the Geneva Group should make an exception for the IAEA—on the grounds of its significance for international security—and release the agency from the clutches of zero real growth. This does not mean unlimited funds should be thrown at it. The director general and secretariat must do a better job of demonstrating and justifying their needs, as they did in the case of the agency’s laboratory refurbishment program. Management reforms must continue apace, among other things bringing the agency’s information technology systems into the 21^st century and breaking down its infamous bureaucratic stovepipes (which separate safety, security, safeguards, and promotion of peaceful uses of nuclear energy).

Second, a grand budgetary bargain should be struck between politico-geographic factions of the agency’s membership over issues that have bedevilled rational budgetary outcomes for years. An obvious compromise would be to bring into the agency’s regular budget both Technical Cooperation, favored by the developing nations, and nuclear security, a prime concern of Western states. Nuclear security will require increased attention at the IAEA now that the nuclear security summits have ended; some of this attention will be achieved through the TC program. Both programs are now accepted parts of the IAEA mandate and deserve regular, secure funding through member states’ assessed contributions. Uncertain voluntary funding, often subject to contributors’ restrictions, should be confined to non-vital IAEA functions, to avoid distorting agreed budgetary priorities.

Such a deal would not end the bargaining over agency priorities that naturally characterizes budgetary negotiations, as in all organizations. But it would have the merit of putting all bids into the same negotiating pot and, if judiciously negotiated, would confound the decades-long linkage between increased funding for the IAEA’s safeguards system, on the one hand, and TC on the other. Part of the bargain would be thorough reform of the Technical Cooperation program, long regarded as the underfunded Cinderella of the agency’s efforts, relatively poorly managed, unintegrated with states’ development goals, and inattentive to sustainability.

A third element would be to move the IAEA definitively from annual to biennial budgeting, bringing it into line with most other UN agencies, including those it collaborates with. To do so member states need to bring into force a statutory amendment that has been lingering unattended for 16 years. While this might seem a trivial matter, it would avoid the budgetary dust-up that tends to consume the IAEA General Conference every year, leaving space for more important issues.

Fourth, key member states can make a huge difference to the IAEA’s finances by paying in full and on time. While the United States has been generous to a fault in providing voluntary funding, cost-free seconded staff, and cutting-edge technology, it is perennially late in providing its annual assessed contribution due to a budgetary quirk. During the Reagan administration, Congress approved a one-year delay in US payments to international organizations resulting in cash flow difficulties towards the end of their financial years, including at the IAEA. Whether the US can fix this problem in the near future is obviously dependent on the outcome of the next US general election. But other member states could also lift their financial game. China has for many years been a relative free-rider on the agency, getting a hefty discount on its contribution to safeguards funding through the “shielding system” for poorer states and providing little in voluntary contributions. Given the substantial assistance that the IAEA has provided China over the years and its current headlong rush into nuclear energy, it should be prepared to pay more for the benefits of global nuclear governance. Other states with rapidly expanding nuclear sectors like India, Russia, Turkey, and the United Arab Emirates should do likewise.

Finally, the IAEA needs to move quickly to develop its recently announced resource mobilization strategy to tap non-governmental sources of funding. This may be in the form of public-private partnerships with industry or philanthropic donations. The agency is one of the few UN bodies not to have such a strategy and dedicated personnel to carry it out. As a result, it has not fared well in its ad hoc attempts to attract outside funding, with the notable exception of its involvement in cancer research and treatment. Non-state funding sources could help sustain an IAEA endowment for longer-term needs, such as capital works and information technology (including cutting-edge cyber security to protect safeguards secrets). A Nuclear Emergency Fund to deal with future Fukushimas and Irans could be inaugurated, using funds that the agency has traditionally refunded to member states if it fails to spend its annual budget on time.

Despite being the paramount global nuclear governance organization, the IAEA’s culture fosters a steely focus on its member states’ needs and aspirations, to the detriment of cultivating close relationships with the industry it also purports to serve. Similarly, the IAEA’s relationships with non-governmental organizations tend to be arms-length and constrained by excessive secrecy and over-sensitivity to criticism. All this needs improvement if the agency is to successfully appeal for support beyond its wealthiest member states. Paradoxically, the agency has an excellent message to convey, not just about its invaluable contribution to international security, but about its growing role in ensuring the safe, secure and responsible use of nuclear energy for peaceful purposes.

Editor's note: This article is based on the author's Belfer Center report, What Price Nuclear Governance? Funding the International Atomic Energy Agency, published in March.