Australia-China Nuclear Material Transfer Agreement and Nuclear Cooperation Agreement

November 2007

Why is China interested in Australian uranium?

China is seeking secure, long-term sources of energy to fuel its economic growth. It is the second largest energy consumer behind the US, currently generating some 80% of its electricity by fossil fuel, mainly coal.

China is seeking a 4-fold increase in nuclear energy by 2020. Such expansion of nuclear energy will help manage greenhouse gas emissions and reduce pollution, not only in China but globally.

While China currently meets its own uranium needs, it will need to start importing uranium within the next few years if it is to meet its expanding nuclear energy requirements. Australia has about 30% of the world's medium cost uranium reserves.

Why are there two agreements?

China requested two agreements to reflect its domestic responsibilities for international agreements. One agreement covers transfer of nuclear material, and the other covers nuclear cooperation, including transfer of nuclear-related material, equipment or technology. The two agreements, read and applied together, have the same effect as previous Australian safeguards agreements, and fully meet all of Australia's safeguards requirements. A number of other Australian safeguards agreements apply only to nuclear material transfers, with no specific provisions for nuclear cooperation (e.g. the Australia/Euratom nuclear transfer agreement) – the Nuclear Material Transfer Agreement with China covers similar ground to these transfer agreements.

Do the agreements comply with Australian nuclear safeguards requirements?

Yes, the two agreements fully meet all Australia's safeguards requirements. The agreements ensure that any nuclear material transferred between Australia and China will be used solely for peaceful, non-military purposes. Likewise, any nuclear-related material, equipment or technology transferred between Australia and China, and any nuclear material produced using such material, equipment or technology, will be used solely for peaceful, non-military purposes.

Australia has similar safeguards agreements in place with three of the other nuclear weapon states (US, UK and France), and a safeguards agreement with Russia covering processing of uranium on behalf of other Australian safeguards agreement partners.

What conditions will apply to Australian uranium?[1]

Australian uranium would be supplied to Chinese power utilities for electricity generation.

A key condition for supply of AONM (Australian obligated nuclear material—Australian uranium and nuclear material derived from this) to a nuclear weapon state, such as China, is that AONM must be covered by the state's safeguards agreement with the IAEA. The Nuclear Material Transfer Agreement ensures that AONM will be used or processed only within the jointly agreed list of facilities, which will be subject to China's safeguards agreement with the IAEA.

Monitoring of AONM will be based on safeguards procedures applied at the facilities where AONM is handled, in accordance with China's safeguards agreement with the IAEA and procedures under the Australia-China Nuclear Material Transfer Agreement. ASNO (Australian Safeguards and Non-Proliferation Office) will cross-check reports on AONM provided by China for consistency with information from the IAEA and from other sources.

While China has the right to choose which facilities are eligible for IAEA inspections, Australia and China must jointly agree on which facilities will be eligible to use AONM under the Australia-China Nuclear Material Transfer Agreement. These agreed facilities must then be subject to IAEA safeguards under the China-IAEA safeguards agreement.

Further Australian safeguards conditions required by the agreement include:

Requirement for Australia’s prior consent

The Nuclear Material Transfer Agreement provides for transfers of AONM to third countries only with the prior consent of Australia. Prior consent is already provided under the Agreement to allow China to transfer AONM to other Australian agreement partners for uranium conversion, enrichment or fuel fabrication. Similar consent has been given under Australia's other safeguards agreements.

The Agreement requires Australia's prior consent before AONM can be reprocessed. Australia recognises China's interest in reprocessing as part of its civil nuclear energy program, to ensure efficient energy use and management of spent fuel. The Agreement sets out conditions under which consent to reprocessing would be given in the future. These conditions are similar to those for reprocessing consent under Australia's agreements with Euratom (including the UK and France), Japan and Switzerland.

Are military uses proscribed?

Yes. AONM cannot be used for any military purpose. The agreement proscribes direct military applications of nuclear energy or nuclear material such as nuclear weapons, military nuclear propulsion, military nuclear reactors, production of tritium for military purposes, and direct military non-nuclear applications of nuclear material such as depleted uranium munitions.

AONM is not eligible for use in military facilities (which are excluded under China's safeguards agreement with the IAEA).

How can we be sure that China will not divert Australian uranium to weapons?

Assurances that AONM will not be used for military purposes derive from a number of factors, which include: (1) China's willingness to give a treaty-level commitment to use AONM solely for peaceful purposes; (2) the safeguards agreements China has with both the IAEA and Australia; (3) detailed nuclear accounting information to be reported to ASNO; (4) uranium would be bought for power utilities for electricity generation and not sold for unspecified purposes; and (5) the five countries recognised as NWS under the NPT – China, France, Russia, UK and USA – have sufficient fissile material for their military programs – Open sources suggest that China ceased production of fissile material for nuclear weapon some years ago. Australia has urged China to join the other nuclear weapon states in announcing a moratorium on production of fissile material for nuclear weapons.

Does the IAEA inspect nuclear facilities in China?

Yes. China has a number of nuclear facilities eligible for IAEA inspections. These were designated some time ago – and the IAEA conducts inspections on a selective basis. Given the requirement that AONM can only be used in safeguarded facilities, once supply begins, it is likely that the number of facilities eligible for IAEA inspections will increase beyond those already designated.

What happens if China does not abide by the agreements?

Australia has the right to suspend or cancel further transfers of nuclear material should China fail to comply with the provisions of the Nuclear Material Transfer Agreement or IAEA safeguards arrangements.

Will nuclear material under the agreement be properly secured in China?

China has committed itself to meet the requirements of the Convention on the Physical Protection of Nuclear Material and the security guidelines set out by the IAEA.

What is China's non-proliferation record?

China joined the Nuclear Non-Proliferation Treaty (NPT) in 1992. Like the United States, China has signed but not yet ratified the Comprehensive Nuclear-Test-Ban Treaty (CTBT). In 2002 China ratified the Additional Protocol (AP) on strengthened IAEA safeguards, the first nuclear weapon state to do so (the UK, France and Russia have since ratified the AP, the US has signed the AP and is working towards ratification). In 2004 China joined the main nuclear export controls group, the Nuclear Suppliers Group. China has strengthened its domestic controls on the export of WMD-related items and further developed its enforcement procedures. Australia maintains a regular dialogue with China on arms control and non-proliferation issues.

Have other countries concluded nuclear safeguards agreements with China?

Yes. China has nuclear cooperation agreements with a number of countries, including Argentina, Belgium, Canada, France, Germany, Japan, Republic of Korea, United Kingdom and the United States of America.

When will the agreement come into force?

The agreements entered into force on 3 February 2007.

When will we start selling uranium to China?

This is a commercial matter between Australian uranium producers and Chinese nuclear power utilities.

What types of nuclear cooperation are envisaged?

The Nuclear Cooperation Agreement provides for cooperation across the spectrum of nuclear science and technology, including uranium exploration. Such cooperation is likely to include research at the Australian Nuclear Science and Technology Organisation's new OPAL reactor, which will provide a world class neutron beam science research capability.

Won’t supply of Australian uranium free-up China’s own uranium for military use?

No. Uranium is not a scarce commodity—every country has uranium; if cost is no object it can even be recovered from seawater. All NWS have sufficient uranium for their military programs. The choice for a NWS is not, will it use uranium for weapons or for electricity, but rather, will it generate baseload electricity with nuclear, or coal, or gas, or hydro? Open sources suggest that China ceased production of fissile material for nuclear weapon some years ago.

If Chinese conversion facilities are not open for inspection, how can we be sure that Australian uranium will not be diverted for military purposes?

China has agreed to use AONM only at nuclear facilities covered by its safeguards agreement with the IAEA. However, uranium conversion facilities are before the “starting point” for IAEA safeguards procedures and are not included in IAEA safeguards agreements with nuclear weapon states. In accordance with long-standing international principles of accounting for nuclear material, on receipt of AONM (yellowcake) in China an equivalent quantity of converted natural uranium in the form of uranium hexafluoride will be added to the inventory of a facility designated for safeguards – e.g. an enrichment plant. This will have exactly the same effect as if the yellowcake had moved through the conversion plant, and will ensure that after receipt in China, AONM remains in a facility designated for safeguards and listed under the agreement at all times.

Will China be allowed to prospect for uranium in Australia and invest in Australia’s uranium mining industry?

Investing in Australian mines is not a short cut to Australian uranium. Irrespective of ownership, uranium mined in Australia is subject to Australia's export policies and the conditions set out in bilateral safeguards agreements.

While uranium exploration is one type of cooperation provided for in the Cooperation Agreement, this is merely a mechanism for collaborative work. Cooperation in this area is not new – Geoscience Australia and the Chinese National Nuclear Corporation have already held technical exchanges in China on geological and exploration techniques.

Any Chinese investment in the Australian uranium industry would be subject to State and Territory legislation, and subject to Government approval through Australia's foreign investment policies and regulations. The existing Australian uranium mines have varying levels of foreign ownership. [Current foreign ownership is principally: Ranger Mine (NT), ERA - Australia & the UK; Olympic Dam (SA), BHP-Billiton - Australia & the UK; Beverley (SA), Heathgate - US; Honeymoon project (SA) Southern Cross - Canada & South Africa.]

Glossary of Terms

Additional Protocol
An agreement designed to complement a state’s Safeguards Agreement with the IAEA in order to strengthen the effectiveness and improve the efficiency of the safeguards system. Australia was the first state to sign and ratify an Additional Protocol, doing so in 1997.
AONM
Australian Obligated Nuclear Material. Australian uranium and nuclear material derived from it, which is subject to obligations pursuant to Australia’s bilateral safeguards agreements.
Conversion
Purification of uranium ore concentrates or recycled nuclear material and conversion to a chemical form suitable for isotopic enrichment or fuel fabrication.
Enrichment
A physical or chemical process for increasing the proportion of a particular isotope. Uranium enrichment involves increasing the proportion of 235U from its level in natural uranium, 0.711%. For nuclear power reactor fuel the proportion of 235U is typically 3‑5%.
Euratom
Atomic Energy Agency of the European Union.
IAEA
International Atomic Energy Agency.
NWS
Nuclear-weapon state(s). States recognised by the NPT as having nuclear weapons at 1January 1967 when the NPT was negotiated – i.e. China, France, Russia, UK, and USA.
NPT
Treaty on the Non-Proliferation of Nuclear Weapons.
Reprocessing
Processing of spent fuel to separate uranium and plutonium from highly radioactive fission products.