A fundamental tenet of the Governments uranium policy is
that exports are permitted only under stringent safeguards. Uranium exportsare made only to selected countries and are covered by a bilateral
safeguards agreement. Bilateral
safeguards are concluded between the supplier and the recipient of nuclear
items and serve as a mechanism for applying conditions additional to IAEA
safeguards: for example, restrictions on retransfers, high enrichment, and
reprocessing. The safeguards
requirements Australia applies to uranium exports are bilateral; they are elaborated
in a series of treaty-level agreements with each country involved. These requirements are outlined below.

The key point is that Australias safeguards requirements
are superimposed on IAEA safeguards. IAEA safeguards provide the basic assurance that nuclear material is not
being diverted from peaceful to non-peaceful purposes.

It should be noted that IAEA safeguards are generally not
concerned with origin attribution, that is, the flag and conditions attached
by suppliers (for the IAEA there are limited exceptions, e.g. under certain non-NPT safeguards agreements).
This is
the purpose of bilateral safeguards agreements.

Australias safeguards requirements are intended to ensure
that:

• AONM(Australian obligated nuclear materialdiscussed below) is
  properly accounted for as it moves through the nuclear fuel cycle;
• AONM is used only for peaceful purposes in accordance
  with the applicable agreements;
• AONM in no way enhances or contributes to any military
  process.

Australias Safeguards Conditions

The application of Australias
requirements starts with a careful selection of those countries eligible to
receive AONM:

• it
  is a minimum requirement that, in the case of non-nuclear-weapon states,
  countries must be subject to NPT full scope safeguards, that is, IAEA
  safeguards must apply to all existing and future nuclear activities; and
• in
  the case of nuclear-weapon states, there must be a treaty level assurance that
  AONM will only be used for peaceful purposes, and arrangements must be in place
  under which AONM is covered by IAEA safeguards.
• A basic requirement is the
  conclusion of a safeguards agreement between Australia and the country
  concerned, setting out the various conditions which apply to AONM. The principal conditions for the use of AONM
  set out in Australias bilateral safeguards agreements are summarised as
  follows:
• an
  undertaking that AONM will be used only for peaceful purposes and will not be
  diverted to military or explosive purposes, and that IAEA safeguards will
  apply;
• none
  of the following actions can take place without Australias prior consent:
  • transfers to third parties
  • enrichment to 20% or more in the isotope uranium-235
  • reprocessing^[1];
• provision
  for fallback safeguards or contingency arrangements in case NPT or IAEA safeguards
  cease to apply in the country concerned;
• an
  assurance that internationally agreed standards of physical security will be
  applied to nuclear material in the country concerned;
• detailed
  administrative arrangements between ASNO and its counterpart organisation,
  setting out the procedures to apply in accounting for AONM;
• regular
  consultations on the operation of the agreement; and
• provision for the removal of AONM in the event of a
  breach of the agreement.

Australian Obligated Nuclear Material

A characteristic of the civil nuclear fuel cycle is the
international interdependence of facility operators and power utilities. Apart from the nuclear-weapon states, it is
unusual for a country to be entirely self-contained in the processing of
uranium for civil useand even in the case of the nuclear-weapon states, power
utilities will seek the most favourable financial terms, often going to
processors in other countries. Thus it
is not unusual, for example, for a Japanese utility buying Australian uranium
to have the uranium converted to uranium hexafluoride in Canada, enriched in
France, fabricated into fuel in Japan, and reprocessed in the United
Kingdom. The international flow of
nuclear material enhances safeguards accountability, through transit matching
of transfers at the different stages of the fuel cycle.

The international nature of nuclear material flows means
that uranium from many sources is routinely mixed during processes such as
conversion and enrichment. Uranium is
termed a fungible commodity, that is, at these processing stages uranium from
any source is identical to uranium from any otherit is not possible physically
to differentiate the origin of the uranium. This is not unique to uranium, but is also the case with a number of
other commodities. The fungibility of
uranium has led to the establishment of conventions used universally in the
industry and in the application of safeguards, namely equivalence and
proportionality. These are discussed
below.

Because of the impossibility of physically identifying
Australian atoms, and also because Australian obligations apply not just to
uranium as it moves through the different stages of the nuclear fuel cycle, but
also to material generated through the use of that uranium, e.g. plutonium
produced through the irradiation of uranium fuel in a reactor, the obligations
under Australias various bilateral safeguards agreements are applied to
Australian Obligated Nuclear Material (AONM). AONM is a shorthand way of describing the nuclear material which is
subject to the provisions of the particular bilateral agreement.

This approach is also used by those other countries applying
bilateral safeguards comparable to Australias, principally the US and
Canada. These countries attach a
safeguards obligation to nuclear material which they upgrade, hence giving
rise to the situation of multi-labelling, for example, AONM enriched in the
US will also become US obligated nuclear material (USONM), and its subsequent
use will have to meet the requirements of both Australian and US
agreements. This is a common situation,
that is, a significant proportion of AONM is also characterised as USONM and is
accounted for both to ASNO and its US counterpart (the DOE).

The equivalence principle provides that where AONM loses its
separate identity because of process characteristics (e.g. mixing), an
equivalent quantity is designated AONM, based on the fact that atoms or
molecules of the same substance are indistinguishable, any one atom or molecule
being identical to any other of the same substance. In such circumstances, equivalent quantities of the products of
such nuclear material may be derived by calculation or from operating plant
parameters. It should be noted that the
principle of equivalence does not permit substitution by a lower quality
material, e.g. enriched uranium cannot be replaced by natural or depleted
uranium.

The proportionality principle provides that where AONM is
mixed with other nuclear material, and is processed or irradiated, a proportion
of the resulting material will be regarded as AONM corresponding to the same
proportion as was AONM initially.

Some people are concerned that the operation of the
equivalence principle means there cannot be assurance that Australian atoms
do not enter military programs. This
overlooks the realities of the situation, that uranium atoms are
indistinguishable from one another and there is no practical way of attaching
flags to atoms. The objective of
Australias bilateral agreements is to ensure that AONM in no way materially
contributes to or enhances any military purpose. Even if AONM were to be in a processing stream with nuclear
material subsequently withdrawn for military use, the presence of the AONM
would add nothing to the quantity or quality of the military material (NB as
noted elsewhere in this Report, those nuclear-weapon states eligible for the
supply of Australian uranium have ceased production of fissile material for
nuclear weapons).

Accounting for AONM

Australias bilateral partners holding AONMare required to maintain detailed records of transactions
involving AONM, and ASNOs counterpart organisations are required to submit
regular reports, consent requests, transfer and receipt documentation to ASNO.
ASNO accounts for AONM on the
basis of information and knowledge including:

• reports
  from each bilateral partner;
• shipping
  and transfer documentation;
• calculations
  of process losses and nuclear consumption, and nuclear production;
• knowledge
  of the fuel cycle in each country;
• qregular
  liaison with counterpart organisations and with industry; and
• reconciliation
  of any discrepancies with counterparts.