The federal Coalition government has been embarrassed by revelations about Investigaciones Aplicadas (Invap), the Argentinean company contracted to build a nuclear reactor in the southern Sydney suburb of Lucas Heights.

Several issues have been publicised by Raul Montenegro, professor of evolutionary biology at the National University of Cordoba and president of the Argentinean environment group Funam. Issues raised by Montenegro include negotiations between Invap and Robert Mugabe’s regime in Zimbabwe regarding nuclear technology transfer, and Invap’s financial situation.

It is likely that Montenegro will give evidence to a recently established Australian Senate inquiry into the plan for a new reactor and associated matters such as waste management.

Montenegro’s statements featured in a page one article in the August 17 Sydney Morning Herald. On the same day, federal industry, science and resources minister Nick Minchin issued a press release saying, “These allegations in the Australian media today are based on a plethora of false information and inaccurate statements by anti nuclear activists.”

Minchin rejected Sutherland Shire Councillor Genevieve Rankin’s comment that the government was dealing with “the Dodgy brothers of the nuclear club”.

However, follow up articles in the August 19 Sydney Morning Herald and subsequent information has made it clear that it is Minchin issuing “false information and inaccurate statements”. Minchin has made no further public comments about Invap since he put his foot in his mouth on August 17.

A clue to Minchin’s bout of foot in mouth disease was provided by the May 16 Bulletin. A leaked report from a bureaucrat in Minchin’s department described a working tour of overseas research reactors. The report discusses taxi rides in Indonesia, wine making in Korea, the pyramids and a museum in Egypt, and the usual tourist haunts in France and Canada. As for the research reactors, “I’m obviously at the foot of a very steep learning curve”, the bureaucrat said.

Invap has willingly engaged in nuclear export negotiations and transfers over the years with countries known to be pursuing covert nuclear weapons programs. Indeed Argentina itself pursued a covert nuclear weapons program from the 1960s to the mid-1980s. The other short-listed tenderers come from countries (France, Germany, and Canada) which have also supplied weapons states and would-be weapons states. The dual-use nature of reactors and associated technologies strengthens the case for pursuit of non-reactor technologies and programs to meet medical and scientific goals.

Zimbabwe

Allegations about negotiations between Invap and Mugabe’s regime in Zimbabwe, regarding possible supply of nuclear research and power reactors, led Minchin to say in the Senate on August 17, “I understand that Zimbabwe itself approached Invap but there were no negotiations entered into and there was certainly no formal proposal to Zimbabwe.”

However, there were extensive negotiations and Argentina was very much an active partner. According to the August 19 Sydney Morning Herald, the Argentine ambassador to Zimbabwe, Enrique Pareja, held meetings with at least six key Zimbabwean ministers in February, 2000, to present a proposal for Invap to build a research reactor with a later view to building nuclear power plants.

A separate report in the August 19 Sydney Morning Herald suggests that nuclear power was on the short term agenda. On February 4, Pareja gave Zimbabwean foreign affairs minister Stan Mudenge a set of documents which, Pareja later said, “outlined Invap’s proposals to the Government for the setting up of a nuclear power plant in the country”.

Pareja said in a media interview, “I’m now going to meet with several other ministries that would be involved and these include Transport and Energy, Industry and Commerce, Agriculture, and Health.” Pareja told the ministers that the proposal could be worked into a fully costed proposal once Zimbabwe had decided whether to proceed with its nuclear program.

ANSTO (14/9/00 letter to Jim Green) says "ANSTO is aware of press reports that the then Argentine Ambassador to Zimbabwe mentioned the possibility of INVAP supplying a nuclear power reactor to that country. We have no way of confirming or denying the accuracy of those reports."

The chief executive of Invap, Hector Otheguy, says the negotiations have gone no further since the February meetings between Pareja and Zimbabwean ministers.

Invap hopes to develop relatively small “Carem” power reactors, but little progress has been made with the project and no export contracts have been secured. Zimbabwe was to be Invap’s “guinea pig” according to Montenegro.

“Here we know about this mistakes because Argentina was used as ‘guinea pig’ by Canadian dealers of nuclear technology during the last military government (1976 to 1983). We are still paying a high price in terms of unprecedented risks, radioactive leaks and accidents.”

“In countries like Zimbabwe a nuclear accident degree 7, the worst, could destroy hundred of thousand lives and the entire national economy. Besides, the country would become more sensitive to terrorist attacks. The building of a nuclear power plant in Zimbabwe would be good business for Invap and the Argentine nuclear lobby, but a nightmare for generations of African people”, Montenegro said.

In addition to the environmental and public health risks, the potential for civil nuclear facilities to lay the foundations for a weapons program in Zimbabwe has also raised concern. “I think everyone would fear the consequences of a despot like Mugabe attaining such powerful nuclear capabilities,” a British diplomat told the Sydney Morning Herald’s New York correspondent, Mark Riley.

While the negotiations between Argentina and Zimbabwe appear to have ended, Invap has been involved in several nuclear transfers to countries suspected of, or known to be, pursuing covert nuclear weapons programs.

Iran

While the negotiations between Argentina and Zimbabwe appear to have ended, Invap has been involved in several nuclear transfers to countries suspected of, or known to be, pursuing covert nuclear weapons programs.

According to a document posted on the Australian Nuclear Science and Technology Organisation (ANSTO) website on June 8, Invap remodelled an research reactor in Iran in the late 1980s to allow the use of low enriched uranium instead of the weapons usable highly enriched uranium previously used. “So the work was of proliferation relevance. It reduced the risk of proliferation”, ANSTO says.

However, the nuclear connections between Argentina and Iran go much deeper.

From 1987, CNEA joined a consortium that was to complete the Bushehr nuclear power reactor in Iran; the deal was ultimately suspended in 1995 before the project was finished.

In 1987, Invap concluded an agreement to construct a pilot scale fuel fabrication plant in Iran. Five years later, the project was cancelled by Argentine President Carlos Menem following pressure from the United States. A 1995 report by Kenneth Timmerman, Director of the Middle East Data Project, states:

"In 1989, the Argentine National Institute for Applied Research, INVAP, signed an $18 million contract with Iran, to build a series of unsafeguarded facilities for processing uranium ore. According to U.S. officials familiar with the deal, INVAP intended to build a milling plant and a separate facility for fabricating nuclear fuel that could be used in a 27 MW research reactor purchased from China that same year. Spent fuel from the Chinese reactor could be reprocessed to obtain plutonium.

"The Argentine government announced in Jan. 1992 that under U.S. pressure it was withdrawing from the agreement, although no mention was made of how much equipment had actually been shipped to build the plants. An Argentinean newspaper reported in 1994 that the Buenos Aires government intervened on Dec. 13 1991 to prevent a shipment of equipment bound for Iran's Atomic Energy Organization that was on board the Fathulkhair, an Iranian cargo vessel docking at an Argentine port. The equipment had been manufactured at Invap's plant in Bariloche, in Rio Negro Province, the paper said.

"It is unclear whether all shipments of nuclear equipment to Iran from Argentina stopped in 1992."
 

Kenneth R. Timmerman
"Iran's Nuclear Program: Myth and Reality"
<www.iran.org/tib/krt/castiglioncello.htm>

Algeria

Invap supplied the Algerian regime with a small (one megawatt thermal) reactor fuelled with low enriched uranium in the late 1980s. Algeria was not a signatory to the Nuclear Non Proliferation Treaty at the time, nor was the reactor subject to any other safeguards agreement.

The reactor itself was of little significance in terms of weapons proliferation (partly because of its limited capacity, partly because (according to ANSTO) the reactor was subject to a site-specific safeguards agreement with the IAEA) but it was a stepping stone for more dangerous facilities. All the more so because, as Invap notes on its website, the project involved “genuine transfer of technology”, with over 50 Algerian professionals and technicians, and a number of Algerian firms, involved in the project.

Confidential documents reveal that the Spanish intelligence service Cesid were in no doubt that nuclear cooperation between Algeria and China, and Algeria and Argentina, in the 1980s had the clear objective of producing weapon grade plutonium. (M. Gonzáles and J.M. Larraya, "El Cesid warns that Algeria can have the capacity to produce military plutonium in two years", El Pais, August 23, 1998.)

Further discussions were held with a view to Argentina supplying Algeria with another, larger reactor and hot cells. Potentially, a larger reactor could produce significant quantities of plutonium and hot cells could be used to separate plutonium from irradiated fuel or targets.

While these discussions between Argentina and Algeria did not progress, US intelligence agencies discovered in early 1991 that, with Chinese assistance, Algeria was building a 10-15 megawatt thermal research reactor, known as Es Salam, which was not subject to International Atomic Energy Agency (IAEA) safeguards. The reactor began operating in late 1993. Hot cells were built adjacent to the Es Salam reactor. Following detection of the Es Salam facilities, they were placed under IAEA safeguards.

Argentina supplied a fuel-fabrication plant to Algeria, which might be used to produce targets for plutonium production although it is also subject to IAEA safeguards.

A 1998 report in the newspaper El Pais, drawing on a confidential documents from the Spanish intelligence service Cesid, states: "The Chinese cooperation was complemented by that of Argentina, which, in 1989, sold Algeria the Nur research reactor, irrelevant from a military point of view. Argentina also committed to build a fuel fabrication plant, in theory for the Nur reactor, but really directed at Es Salam, which can only operate with uranium enriched to 3%. Due to the fact that the Algerians complained of faulty construction and Argentinean delays in payments, the plant has not yet begun operating, although it should have in 1990. Almost completed, it should begin functioning by the end of this year." (M. Gonzalez and J.M. Larraya, “Cesid Warns that in Two Years Algeria Will Have the Capability to Produce Military Plutonium,” El Pais, August 23, 1998 (english translation at www.isis-online.org).)

A 1998 report from the Carnegie Endowment for International Peace stated: "The restoration of democratic governance in 1983 did little to change the liberal export policy of the Argentine military, especially as it pertained to North Africa. In 1985, Argentina and Algeria concluded an agreement under which Argentina exported a 1 MWt research reactor that went critical in 1989 - Algeria was not a NPT member and had no safeguards agreement at the time. Under a second agreement, discussed in 1990 but never concluded, Argentina would have sent an isotopic production reactor and hot cell facility to Algeria." (Rodney W. Jones, Mark G. McDonough, with Toby F. Dalton and Gregory D. Koblentz, 1998, Tracking Nuclear Proliferation, 1998, Washington, DC: Carnegie Endowment for International Peace. <http://www.ceip.org/programs/npp/nppargn.htm>.)

According to Albright and Hinderstein, claims made in the late 1980s that Argentina was secretly providing assistance with uranium enrichment technology to Algeria were not viewed as credible, and US experts and officials have said they have found no indication of uranium enrichment activities. (David Albright and Corey Hinderstein, “Big deal in the desert?”, Bulletin of the Atomic Scientists, Vol. 57, No. 3, May/June 2001, pp. 45-52.)

Libya

According to the June 8 statement from ANSTO, “Claims that Invap has supplied nuclear technology to Libya are incorrect.”

However, the 1998 edition of Tracking Nuclear Proliferation, published by the Carnegie Endowment for International Peace, is more equivocal:

“In 1974 Argentina concluded a deal with Libya under which the former would provide Tripoli with equipment for uranium mining and processing. By then, Argentina had already extracted plutonium from spent reactor fuel, but it is unclear if this contract with Libya provided any assistance for this type of activity.”

“In 1982, when Argentina was engaged in the war over the Falkland Islands, Libya provided $100 million in anti aircraft and air-to-air missiles. In exchange, Argentina possibly provided information or technology for the nuclear weapons program pursued by Libyan leader, Colonel Muammer Khadafi.”

“According to a May 1983 report, Argentina and Libya continued nuclear cooperation after the Falkland/Malvinas War; discussions most likely took place on the export of reprocessing and enrichment technologies from Argentina; at the time, Argentina was constructing the reprocessing facility at Ezeiza and the enrichment facility at Pilcaniyeu. Later reports suggested that in 1985, Argentina was prepared to send a hot cell facility to Libya, and only U.S. pressure prevented the sale.”

Egypt & Syria

Invap also built a 22 megawatt-thermal research reactor in Egypt, completed in 1997. A 1997 report on the Arabic News website says, “Cairo confirmed that its new reactor is for peaceful purposes and works according to the regulations of the international laws. It called on any country which might feel ‘uncomfortable’ about the reactor to remember that the USA transformed a nuclear reactor designated for peaceful purposes in the State of Tennessee, USA into a nuclear reactor for military purposes, thus violating the nuclear pact.” Questions have also been raised over the safety and performance of the Egyptian reactor.

According to the Federation of American Scientists, the US pressured Argentina into abandoning a proposed sale of a reactor to Syria in 1995.

Uranium enrichment in Argentina

ANSTO’s June 8 statement says, “It has been implied that there is something illegitimate about Invap’s involvement in the enrichment of uranium. The Nuclear Non Proliferation Treaty does not proscribe uranium enrichment, for very good reason. For uranium to be usable as nuclear fuel in a reactor, it needs to be enriched. Given Argentina’s nuclear power industry, it is not surprising that they enrich their own uranium.“

Problem: not all power reactors use enriched uranium and, more to the point, both of Argentina’s power reactors were designed to use non-enriched uranium. (The Atucha reactor has recently used lightly-enriched uranium, but that is beside the point. I do not know whether this enrichment takes place in Argentina; again it is of no importance.)

Argentina’s gaseous diffusion enrichment plant was built in the late 1970s and early 1980s, when the military junta in control of Argentina was actively pursuing a covert nuclear weapons program. The existence of the secret enrichment plant was announced by the military junta in 1983. An official involved in building the plant said that Argentina had thrown off Western intelligence agencies by encouraging them to look for a non-existent plutonium production reactor.

(The secret enrichment program has a parallel in Australia. From 1965-68, a secret uranium enrichment project, known as the Whistle Project, was pursued in the basement of a building at Lucas Heights. In the archives at the University of New South Wales, hand-written notes from the former head of the Australian Atomic Energy Commission, Philip Baxter, can be found in which he calculates how much highly-enriched uranium could be produced by a scaled-up Whistle Project, and how many nuclear bombs could be fabricated using the enriched uranium. The enrichment research was publicly revealed in 1968, and it was pursued until terminated by government direction in the mid-1980s. For a summary of the covert push for nuclear weapons in Australia, click here, or for notes which address the current situation, click here.)

Invap's financial problems

Invap’s financial status is another issue under question. The company recorded its lowest sales last year, earning just US$26 million, down from US$47 million in 1996.

“Invap is a company which obtains most of its income from large projects, and a slight slump is normal after one such project has been completed”, Invap’s chief executive, Hector Otheguy, told the August 17 Sydney Morning Herald.

Although it promotes itself as self funding, Invap approached the Argentine government last year for a US$132 million grant to assist in the development of a Carem prototype power reactor. The request was rejected, in part because of strong opposition from the broader scientific community.

More on this topic at <www.geocities.com/jimgreen3/invap3.html>

Australian contract

With its previous exports shrouded in controversy, and with its precarious financial situation, the Australian contract has been enthusiastically welcomed by Invap and sections of the Argentine state. They clearly hope that the Australian contract will bring other export contracts in its wake, and that the Australian deal will give the organisation the momentum required to develop and export Carem power reactors.

Dr Aldo Ferrer, head of CNEA, said the Australian contract “sets a dividing line between a past with problems and a future with huge prospects.” A June 6 statement by Invap says the company has been “rocketed into the international nuclear limelight” by the Australian contract and that the contract “may well be the most important in the history of the provision of nuclear research reactors in the world”.

In a press conference celebrating the Australian deal, President De la Rua said, “This is good news for all Argentines. We have won this bid by competing with the most important companies in the world. This triumph of Invap in Australia must allow us to have confidence in ourselves and leave negativism aside.” The contract win was “phenomenal”, he said, and it would help Invap out of its budgetary problems.

Minchin said in June that the contract “will be a major boost to our relations with Argentina in particular and South America in general, which I think can only be to the good.”

On June 28, the Adelaide Advertiser reported that a rift was developing between the secretary to the department of the prime minister and cabinet, Max Moore-Wilton, and Nick Minchin over the decision to award Invap the reactor contract. Moore-Wilton was reported to be concerned about unspecified “foreign policy implications” of not awarding the contract to the French tenderer Technicatome.

One of the “foreign policy implications” of the decision, though probably not one of concern to Moore-Wilton, is that Technicatome is linked to Cogema, the company ANSTO is relying on to reprocess spent fuel from the operating HIFAR reactor at Lucas Heights and the planned new reactor. The contract between ANSTO and COGEMA for the management of HIFAR spent fuel includes “provisions” for the reprocessing of spent fuel from the replacement reactor. These “provisions” might be more secure if Technicatome won the reactor contract.

If there is a split in Canberra, perhaps it has widened with the recent revelations about Invap and the Argentine nuclear industry more generally. But the other short-listed tenderers, Technicatome, Siemens from Germany, and Atomic Energy Canada Limited, have equally problematic records.

French, Canadian and German exports

France supplied Israel with a research reactor used to produce the plutonium for Israel’s nuclear arsenal. France also supplied a similar research reactor to Iraq, which would have been used for the same purpose except that Israel bombed the reactor into oblivion in 1981.

France has supplied numerous other countries which were pursuing, with greater or lesser vigour and success, covert nuclear weapons programs, including Brazil, Iran, Pakistan, South Africa and Pakistan.

Much of the plutonium in India’s weapons arsenal comes from a research reactor supplied by Canada. Taiwan also purchased a research reactor from Canada, and also planned to use it to produce plutonium for weapons but was constrained by pressure from the US.

West Germany’s 1975 agreement to supply extensive nuclear fuel cycle facilities to Brazil was largely responsible for reinvigorated efforts to develop nuclear weapons in Argentina in the late 1970s and early 1980s. West Germany also supplied Argentina, South Africa, and Iran with nuclear technology.

Fewer countries are now pursuing nuclear weapons programs than between the 1960s and 1980s, and export controls are stricter. But as the recent revelations about Invap’s negotiations with Zimbabwe demonstrate, the profit motive is alive and well in the nuclear industry.

In fact, with more suppliers and less demand than in previous decades, the temptation for any nuclear exporter to supply would-be weapons states is acute.

As Argentina's politicians prepare to vote on whether to accept spent fuel from the new $300 million Sydney research reactor, the nuclear deal has attracted international criticism.

Two United States academics have urged Australia to reconsider the Argentine option, saying it could lead to a build-up of material and expertise for the development of nuclear weapons.

Hundreds of protesters from Greenpeace, Amnesty International and other groups demonstrated outside Argentina's parliament yesterday against the legislation.

They claim the legislation violates Argentina's constitution, which forbids "the entrance of dangerous or potentially dangerous residuals and radioactive materials".

If Australian spent fuel was sent to Argentina the contract would partly open a plant designed to separate plutonium that was shut in 1990 due to international pressure and a lack of funds.

"Australia is facilitating the creation of a possible source of weapons-useful material," said Frank von Hippel, of the Science and Global Security Program at Princeton University. "I think it is an unnecessary extra burden to the world nuclear security system."

Under the nuclear treaty, the Australian Government will have the right to demand Argentina oversee treatment of spent fuel from the new Sydney reactor that its state-owned company, INVAP, is building.

Argentine nuclear authorities plan to process the spent fuel at the Ezeiza atomic centre on the outskirts of Buenos Aires before it is returned to Australia as radioactive waste in glass and concrete blocks.

While Argentina would only partly open the $540 million Ezeiza plant, and not separate plutonium, Professor von Hippel said Australia was creating an unnecessary risk.

"If Argentina wanted to acquire plutonium for weapons again, this is the plant it would use. It would be a very minor change to their process to separate out the plutonium. Australia, being holier than the Pope as far as non-proliferation, really should take this into consideration."

Matthew Bunn, a nuclear terrorism expert and research associate at Harvard University, said the Australian contract could help develop expertise useful in weapons production.

"Anytime you are chemically processing spent fuel at a big facility, you are gaining valuable experience. I believe Argentina is committed to a non-nuclear weapons path, but one never knows about the future."

Not all US nuclear experts are critical of the deal. Fred McGoldrick, a former senior executive with the US State Department's non-proliferation branch, said he was not concerned, as long as plutonium was not separated. The US State Department declined to comment.

The head of nuclear fuels at the Argentine National Commission of Atomic Energy, Pablo Adelfang, said that although the Ezeiza plant was originally built to separate plutonium, this was no longer an option. "At that time, being a reprocessing plant, it was designed to produce plutonium. Nowadays that is impossible. Now we have modified everything."

A RIFT is developing between federal bureaucrat Max Moore-Wilton and Industry Minister Nick Minchin over awarding the
contract for the new Lucas Heights nuclear reactor to Argentinian company INVAP.

The Advertiser has been told Mr Moore-Wilton, the secretary of the Department of Prime Minister and Cabinet, is working
behind the scenes, apparently to try to reverse the decision and award the contract to French firm FRAMATOME. Mr
Moore-Wilton, one of Prime Minister John Howard's most trusted advisers, is understood to be concerned at the "foreign policy
implications" of not awarding the contract to the French.

The French Government is also upset at the decision to let INVAP build the $280 million reactor and French Ambassador
Pierre Viaux will meet Senator Minchin tomorrow when he is expected to raise the issue.

It is understood Mr Moore-Wilton has also been holding talks with representatives of other parties involved. About a month
ago, Cabinet approved INVAP as the preferred tenderer to build the new reactor following an assessment of bids by the
Australian Nuclear Science and Technology Organisation.

Before Cabinet approved INVAP, the recommendation was ratified by the Foreign Affairs Department.

Signing the agreement is due to take place next month.

It is understood Mr Moore-Wilton did not raise any concerns before or during the Cabinet discussion.

Controversy has surrounded INVAP with speculation raised over its dealings with countries such as Iran, Cuban and Egypt.

More importantly, there was no well-defined proposal by INVAP as to what fuel the new reactor would use, whether it could
be reprocessed and where the waste would be stored.

Senator Minchin attempted to dispel disquiet over the fuel on Monday by declaring whatever was used could be reprocessed.

The Government has an agreement with French company COGEMA to reprocess about 1300 spent fuel rods produced by the
current Lucas Heights reactor.

COGEMA is the dominant shareholder of FRAMATOME and Mr Viaux said recently there was no guarantee the French would
reprocess fuel rods from the new reactor if they did not build it.

It is understood Senator Minchin will not back down on what was a Cabinet decision.

The Argentine company chosen by the Howard Government to build a nuclear reactor in Sydney is before the courts at home and has had to ask for financial help. Mark Riley reports.

The Argentine company chosen to replace the Lucas Heights nuclear reactor is facing court proceedings in its own country for running a series of allegedly illegal tests on a new prototype reactor.

The company, Invap, is also negotiating with the Zimbabwean strongman, Mr Robert Mugabe, to build what would become Africa's largest nuclear facility, sparking worldwide concern.

Invap has already built reactors in Algeria, Cuba and Egypt, and pulled out of another contract to supply nuclear materials to Iran after extreme pressure from the United States.

The contract awarded by the Howard Government makes Australia the company's first client for a reactor outside the Third World.

A Herald investigation has also found that Invap was rejected by Thailand as a bidder on a similar research reactor, and was in a drastic sales slump before winning the Lucas Heights contract.

The company had no construction contracts and its sales revenues had plummeted by nearly half, forcing it to plead for Argentine government funding to continue its research on the controversial prototype reactor, known as Carem.

The Argentine Federal Court of Justice is considering claims that tests on the Carem reactor violated government regulations by proceeding without the necessary approvals.

The provincial government of Rio Negro, which administers the regulations, is also Invap's main shareholder. The case is locked in legal argument.

The Minister for Industry, Science and Resources, Senator Minchin, announced last month that the Australian Nuclear Science and Technology Organisation had recommended Invap for the Lucas Heights project ahead of tenders from Germany's Siemens corporation, Atomic Energy Canada and the French consortium Framatome.

The revelations about the controversies hovering over the company come as the Senate debates whether to conduct an inquiry into Invap's background to establish whether it has the credentials to fulfil the contract.

Dr Raul Montenegro, head of Argentina's leading environmental group, Funam, told the Herald he would be happy to supply any inquiry with "a long collection" of problems associated with Invap facilities in Argentina and their disposal of radioactive waste.

"I have read ANSTO's describing the excellent, nice background of Invap," he said."But ANSTO has only spoken with Invap. Australia should also hear about all the problems with the nuclear program in Argentina and the problems with the management of radioactive waste.

"That, too, is part of Invap's background but ANSTO never, ever analysed this."

It was Dr Montenegro, Professor of Evolutionary Biology at the National University of Cordoba, who brought complaints about the Carem reactor tests to the notice of the Federal Court of Justice.

The chief executive of Invap, Mr Hector Otheguy, defended his company's record, saying it followed the strict safety regulations set by regulatory authorities in all its client countries.

"No safety problem in any of the facilities, reactors or otherwise, built by Invap was ever reported anywhere in the world," he said.

"Invap will construct the facility for ANSTO to fulfil its contractual obligations, that is, to satisfy ANSTO's conditions for a facility which will meet the national and international safety principles ... and to comply with all commitments and conditions arising from the EIS process."

The President of Argentina, Mr De la Rua, alluded to the controversies surrounding his country's nuclear industry in a recent press conference.

"This triumph of Invap in Australia must allow us to have confidence in ourselves and leave negativism aside," he said.

Dr Aldo Ferrer, head of Argentina's Atomic Energy Agency, added: "I think this success sets a dividing line between a past with problems and a future with huge prospects."

Mr De la Rua described the contract win as "phenomenal" and said it would help Invap out of its budgetary problems.

"We must take full advantage of this sale ... which allows Invap to self-finance the development and work of its technicians and scientists," he said.

The company recorded its lowest sales last year, earning just $US26 million.

Although it promotes itself as fully self-funding, Invap approached the Argentine government last year for a $US132 million hand-out in the 2000 budget to fund its development of the Carem prototype.

That request was denied amid uproar from Argentina's scientific community.

Mr Otheguy said the Lucas Heights project would help establish Invap's international credentials and help it in future bids outside the Third World.

Mr Otheguy conceded that the company had been losing revenue, but said this was common for a player in the international nuclear industry.

"Invap is a company which obtains most of its income from large projects, and a slight slump is normal after one such project has been completed," he said.

Mr Otheguy confirmed that Invap has put a formal proposal to Zimbabwe to build a research reactor for training. This would later be upgraded to a much larger reactor able to supply a third of the country's power.

The prospect of Mr Mugabe emerging as a new nuclear power in the bloodied landscape of African politics has sent a shudder through the diplomatic community.

The Argentine company that will build the new Lucas Heights reactor seems happy to deal with dictators and has been criticised over how it handles nuclear waste. Mark Riley reports.

What began as just another reception at the home of Australia's Ambassador to Argentina soon became a night of great celebration. It was one of the last dinners Martine Letts would host in the grand old ambassadorial residence in Buenos Aires before completing her posting.

The affable career diplomat had invited a group of executives from Argentina's leading nuclear technology company, Invap, to dine with her on the night of June 5 so she could be the first to tell them the good news.

At the same time, halfway around the world in Canberra, that news was being broken at an official function by the Industry Minister, Senator Nick Minchin. The Howard Government had awarded Invap the $326 million contract to build a new medical research reactor at Lucas Heights. It was a great victory for Invap, by far its largest contract ever and the one it hoped would finally deliver the international recognition it had dearly sought for so long. At last, it could add an OECD customer to a client list dominated by Third World dictatorships.

The Australian wines flowed freely at the ambassador's home that night.

The following morning, Letts joined all the heads of Argentina's nuclear industry at Government House in Buenos Aires for a rare press conference by an obviously delighted President Fernando de la Rua.

"This is good news for all Argentines," the President said proudly. "We have won this bid by competing with the most important companies in the world." De la Rua invited the ambassador to add a few words, noting the assistance she had given the company in promoting the bid.

"This signifies an important change in relations between Argentina and Australia," Letts said. "This is the first really important Argentine investment in Australia. It will help us strengthen the relationship between our countries at the highest level ever."

It was good news all around. Yet very little was known about the background of the company Australia was embracing so readily to undertake such a politically sensitive project.

Back in Canberra, Minchin was attempting to head off the inevitable controversy over the selection of the Argentine group.
"Invap has a solid track record constructing research reactors, with five constructed around the world over the past two decades," he said in a media statement.

"Argentina has ratified the Non-Proliferation Treaty and is a responsible and active participant in the activities of the International Atomic Energy Agency [IAEA]."

But just how "solid" is Invap's record? And how "responsible" has Argentina really been as a member of the international nuclear community? The company completed work on its first overseas facility in 1989, supplying a one-megawatt reactor to the military dictatorship in Algeria.

Such a small reactor cannot produce uranium with anywhere near the enrichment levels necessary for bomb-making, yet it still managed to become the centre of an international nuclear firestorm.

In mid-1992, British intelligence agents claimed the reactor, in Draria, outside Algiers, was being used to stockpile high-grade uranium for Saddam Hussein's nuclear weapons program in Iraq.

Britain's Sunday Times reported that Saddam had sent 10 tonnes of uranium to Algeria at the end of the Persian Gulf War to hide it from the prying eyes of the (IAEA) and the United Nations weapons inspectors.

Invap denied any knowledge of the facility being used as an Iraqi hiding place. It was not the first time an Invap project had become embroiled in international controversy. And it would not be the last.

In the mid-'80s, Invap entered discussions with Ayatollah Khomeini's fundamentalist Islamic regime in Iran to help build up the country's nuclear industry at a time when the bloody war with Iraq was at its peak.

The contract with Iran was brokered by the IAEA, which suggested Invap modify the country's existing reactor to use less-volatile fuel, to produce uranium well below bomb-grade enrichment.

The US was uneasy about the deal from the outset. It became considerably more concerned when it heard that Iran had also asked Invap to build an additional medium-sized research reactor and another plant to produce what is known as "heavy water".

Heavy water is used with a minimum of uranium to power large-scale reactors and produce spent fuel that can be transmuted into bomb-grade plutonium. The US State Department learnt to its great distress that Iran was negotiating with China to build a facility for exactly that purpose and pressured the Argentines into dropping the contract.

That left Invap without an international client until Egypt invited tenders for an experimental reactor in 1993. Invap won that bidding process and the resulting 22-megawatt research reactor was commissioned in 1998.

The only other facility built by Invap outside Argentina is a small reactor in Fidel Castro's Cuba, which is used to produce radio-pharmaceuticals.

Invap's income has collapsed since the Egyptian project. The company's 1999 returns show that its sales revenues had plummeted from $US47 million ($79 million) in 1996 to $US26 million.

"Invap is a company which obtains most of its income from large projects, and a slight slump is normal after one such project has been completed," the company's chief executive, Hector Otheguy, said in reply to written questions from the Herald
this week.

But Invap did feel the pinch hard enough to put its hand out to the Argentine Government. The 2000 Budget papers show that the company asked for a cash injection of $US132 million to fund its research on a reactor prototype known as CAREM.

That request was eventually denied amid uproar from the Argentine scientific community, which argued that the money could be put to much better use in other areas.

Invap has been conducting tests on the CAREM technology for some years. In 1998, the company was hauled before the Federal Court of Justice in the Patagonian city of San Carlos de Bariloche for allegedly conducting some of those tests without the necessary government approvals.

Senator Minchin told Federal Parliament this week that the case was dismissed in September 1998. However, the man who lodged the initial complaint, Argentine environmentalist Dr Raul Montenegro, contends that it was simply deferred and remains active on the court's list.

He said the major complication with the case was that the provincial government of Rio Negro, whose regulations Invap allegedly breached, was also the company's major shareholder.

Montenegro is a professor of evolutionary biology at the National University of Cordoba and president of Argentina's leading environmental group, the Environment Defence Foundation (FUNAM).

He is a long-time critic of Invap, accusing it of engaging in the unsafe disposal of large quantities of radioactive waste in the Patagonian countryside and of continually misrepresenting its corporate history.

Now, Montenegro is also critical of the work the Australian Nuclear Science and Technology Organisation (ANSTO) did during the tendering process for Lucas Heights, claiming that it has not looked deeply enough into Invap's credentials.
"I have read ANSTO's documents describing the excellent, nice background of Invap," Montenegro said this week.
"But ANSTO has only spoken with Invap. Australia should also hear about all the problems with the nuclear program in Argentina and the problems with the management of radioactive waste."

The Senate voted this week to establish a select committee inquiry into aspects of the tendering process, a move that was immediately dismissed by Minchin as a political stunt by the Opposition and the Democrats.

Montenegro said he would be pleased to supply the hearings with a "long collection of problems" associated with Invap in Argentina. Moves are already under way to have him give evidence via a video link-up.

The environmental lobby in Argentina is eager for Australians to know that Invap's relationship with Third World despots did not end with the severing of its contract in Iran.

In September last year, the Zimbabwean strongman, Dr Robert Mugabe, made an official visit to Buenos Aires to meet President De la Rua and discuss the possibility of developing a large nuclear power plant to address Zimbabwe's acute electricity problems. The Argentine President said he would have Invap work on a proposal.

Minchin told the Senate this week that the "initial information" sent by Invap was as far as the discussions went.
However, the Herald has learnt that the Argentine ambassador to Zimbabwe, Enrique Parejo, held meetings with at least six key Zimbabwean Government ministers in February to present a proposal from Invap to build a research reactor that could later be replaced by a large power-generating facility.

Invap's Hector Otheguy said the discussions with Zimbabwe have had "no further consequences".

The Australian Federal Government and ANSTO would no doubt hope it stays that way.

A series of top-level meetings involving the presidents of Zimbabwe and Argentina and at least six Zimbabwean Cabinet ministers have discussed plans for a super nuclear reactor to be built in Africa by the company awarded the Lucas Heights project.

The Argentine nuclear technology company, Invap, put a proposal to the Zimbabwean Government in February suggesting it begin with a small research facility, similar to that planned for Lucas Heights, and build up to a much larger power-generating reactor.

The Minister for Industry, Science and Resources, Senator Minchin, told Parliament on Thursday: "I understand that Zimbabwe itself approached Invap, but there were no negotiations entered into and there was certainly no formal proposal to Zimbabwe."

Senator Minchin said revelations in the Herald this week about Invap's talks with Zimbabwe were "based on a plethora of false information".

However, it is now known that talks over the possibility of Invap building Africa's largest nuclear reactor in Zimbabwe began last year with an official visit to Argentina by the Zimbabwean President, Mr Robert Mugabe.

Mr Mugabe met the Argentine President, Mr Fernando De la Rua, at Government House in Buenos Aires in September to discuss the issue under the umbrella of talks on "South-South" co-operation.

Mr Mugabe told Mr De la Rua he was interested in developing a large nuclear power plant to address his country's acute electricity problems.

The Argentine President undertook to have Invap work on a proposal.

Senator Minchin said in a press statement on Thursday that Invap "supplied some initial information about a research reactor to Zimbabwe following a request, but there had been no further interactions and no negotiations had been entered into". But the Herald has learned that the Argentine Ambassador to Zimbabwe, Mr Enrique Pareja, held a round of meetings five months after the presidential visit, in which he presented Invap's proposal to a collection of high-ranking government ministers.

On February 4, Mr Pareja met the Zimbabwean Minister for Foreign Affairs, Mr Stan Mudenge, and handed over a set of documents he later said "outlined Invap's proposals to the Government for the setting up of a nuclear power plant in the country".

"I'm now going to meet with several other ministries that would be involved and these include Transport and Energy, Industry and Commerce, Agriculture, and Health," he said in an interview with the Financial Gazette in Harare.

Mr Pareja told the ministers that the proposal could be worked into a fully costed tender once Zimbabwe had decided whether it would proceed with its nuclear program.

The chief executive of Invap, Mr Hector Otheguy, said in written responses to questions from the Herald this week that the discussions with Zimbabwe have had "no further consequences" since Ambassador Pareja's meetings.

Senator Nick Minchin, Minister for Industry, Science and Resources rejected claims made today in The Sydney Morning Herald and The Age, that INVAP, the company contracted to build the replacement research reactor at Lucas Heights, is facing court proceedings in Argentina for running illegal tests on a new prototype reactor.

"I have received advice from the Argentine Government that a case brought by environmental activist, Dr Raul Montenegro in this regard in April 1998 had been dismissed by a Federal Judge in Bariloche in September 1998," Senator Minchin said.

"These allegations in the Australian media today are based on a plethora of false information and inaccurate statements by anti-nuclear activists," Senator Minchin said.

The technical capability and financial credentials of INVAP had been extensively assessed during the tender process for ANSTO's replacement research reactor. This process confirmed the technical, financial and commercial capacity of INVAP to undertake the contract.

The tender process was conducted in a thorough and transparent manner and independently audited by the Office of the Australian Government Solicitor and independent consultants in terms of probity, risk and the conduct of the assessment.

These reviews supported the tender process and the selection of INVAP as the preferred tenderer from the shortlist.
On 13th July ANSTO signed contracts with INVAP and its Australian alliance partners, John Holland Construction & Engineering Pty Ltd and Evans Deakin Industries Ltd. These two Australian companies conducted independent probity and risk assessments of INVAP.

INVAP have advised that they supplied some initial information about a research reactor to Zimbabwe following a request, but there had been no further interactions and no negotiations had been entered into. There was certainly no "formal proposal to Zimbabwe".

Other unsuccessful tenderers for the Thailand research reactor included two unsuccessful tenderers for the ANSTO contract. In the language of the articles, Thailand 'rejected' these bids also.

INVAP is a respected member of the international nuclear community. Argentina is a party to the Nuclear Non-Proliferation Treaty and a member of the Nuclear Suppliers Group, which sets international standards for the supply of nuclear materials and technology.

INVAP's reactors have complied fully with safety regulatory requirements and standards in all the countries in which it has operated.

In the case of the reactor to be supplied to ANSTO, it will be required to comply with the regulatory standards of the Australian Radiation Protection and Nuclear Safety Agency.

Contact: Carolyn Coleman (02) 6277 7580 or 0409 438 680
CMR424-00

Title: Question without Notice: Nuclear Reactor: Lucas Heights
Date: 17 August 2000
Database: Senate Hansard
Questioner: Stott Despoja, Sen Natasha (Deputy Leader of the Australian Democrats, AD, South Aust)
Responder: Minchin, Sen Nick (Minister for Industry, Science and Resources, LP, South Aust)
Page: 15347 Proof: Yes

Senator STOTT DESPOJA: My question is addressed to the Minister for Industry, Science and Resources. Is the minister concerned about reports today about his chosen firm to build the new nuclear reactor at Lucas Heights that it, firstly, is facing court proceedings for allegedly running illegal tests on a new prototype reactor; secondly, is negotiating with Zimbabwean despot Robert Mugabe to build a large nuclear facility; and, thirdly, was in financial difficulties before it landed the ANSTO contract? Given these revelations, will the minister now release any information supplied to the government by ANSTO about the operations and financial viability of INVAP? Will the minister also outline who conducted a due diligence report, has he seen it and was he satisfied with it, and will he make it publicly available?

Senator MINCHIN: When the government made its very sensible and wise decision in 1997 to replace the Lucas Heights reactor in the national interest, because of the enormous benefit Australia gets from having its own research reactor, I guess we knew that we would face, from then until the time the reactor was actually constructed and operating, a regular stream of baseless assertions about the reactor and about whichever company was successful in winning the tender. I regret that I think that, whether it was Germany, France, Canada or indeed Argentina that won the tender, we would face these sorts of baseless allegations from what is a well-organised worldwide movement to shut down the whole nuclear industry. Every advanced nation operates research reactors for the benefit of their community, successfully and safely, and Australia must remain part of that community if indeed it wishes to remain a knowledge nation.

In the case of the assertions today, and I am sure we will get a regular stream of those, these are apparently from some environmental activist in Argentina called Raul Montenegro. Some reporter called Mark Riley in New York has discovered Dr Montenegro, an environmental activist, and decided to run these allegations. In the time available to us to determine the veracity or otherwise of these allegations, we have had advice, both from the company and from the Argentine government, that they are baseless and that in fact Dr Montenegro made the allegations back in 1998 and sought to have them heard through the judicial system in Argentina. They were dismissed by a federal judge in Bariloche in September 1998. It was open to Senator Stott Despoja to seek information herself as to the veracity of these allegations, but of course I am sure she has not; she has simply sought to peddle them in the Senate. The allegations go back two years, and you can easily determine that they are utterly baseless.

In regard to Zimbabwe, I understand that Zimbabwe itself approached INVAP but there were no negotiations entered into and there was certainly no formal proposal to Zimbabwe. Like any company that builds reactors or research reactors, I guess INVAP is approached by many what you might call despots, but that does not imply, mean or result in any contracts on negotiations of any kind.

ANSTO is one of our finest scientific institutions in this country. It has an excellent board and excellent management. It approached this question of a new reactor with the rigour that you would expect from such an outstanding organisation. It knew, as we did, that it would face these sorts of allegations, and therefore obviously it went to enormous lengths to ensure that the process that was followed for the selection of the successful tenderer was extraordinarily rigorous. I would remind you that INVAP was joined in its tender by Leightons subsidiary John Holland Constructions and Evans Deakin, two fine Australian companies which obviously did their own risk assessments of entering into such a consortium. We do accept ANSTO's recommendation that this is the best of the four short-listed tenderers for this contract and have every confidence in its capacity to fulfil it.

Senator STOTT DESPOJA: Madam President, I have a supplementary question. I gather that the minister is stating for the record that those claims I referred to are baseless, in which case will the minister be able to make publicly available the due diligence report to which I referred? Will he also now make public the design and construct contract for the new reactor? Minister, what precedent allows you, if necessary, to terminate the contract with INVAP?

Senator MINCHIN: I regard the last one as utterly hypothetical. I have absolutely no intention of discussing that matter. That is just ludicrous. I have offered you a full briefing on the whole tender process. Most of the material you have sought is already on the web and already publicly available. This was rigorous, and we will supply you with whatever information we sensibly can. The auditing process was extraordinarily rigorous through the Australian Government Solicitor and an independent tender selection review committee. ANSTO went to enormous lengths to ensure independent verification, risk assessment and audit of the whole process at every step of the way. We are more than happy to brief you fully on that, if you ever seek it.

On 6 June 2000 it was announced that the Government had accepted the recommendation of the ANSTO Board that the Argentinian company, INVAP, be selected as the preferred tenderer for ANSTO’s replacement research reactor, in alliance with Australian companies John Holland Construction and Evans Deakin Industries.

Argentina

* Argentina is a respectable member of the international nuclear community. Response
* Argentina became party to the Nuclear Non-Proliferation Treaty in 1995. The country is a party to other nuclear non-proliferation agreements, including agreements that seek to control exports of nuclear materials, equipment and technology for non-proliferation purposes. Argentina completed a nuclear safeguards agreement with the International Atomic Energy Agency in 1997.

Contractor INVAP

* INVAP is a State-owned company which has built five research reactors in the last two decades, two in Argentina, and one each in Peru (10 MW), Algeria (1 MW) and Egypt (22 MW). All these reactors are subject to IAEA safeguards arrangements, which guarantees that they cannot be used for military purposes.

Uranium Enrichment

* It has been implied that there is something illegitimate about INVAP’s involvement in the enrichment of uranium. The Nuclear Non-proliferation Treaty does not proscribe uranium enrichment, for very good reason. For uranium to be useable as nuclear fuel in a reactor, it needs to be enriched. Given Argentina’s nuclear power industry, it is not surprising that they enrich their own uranium. There are a number of countries around the world that do the same. What is important is whether the enrichment process is subject to international nuclear safeguards. Every nuclear facility that INVAP has constructed, whether in Argentina or elsewhere, is subject to such safeguards. Response

INVAP and Iran

* In response to a request by the International Atomic Energy Agency and the Atomic Energy Organisation of Iran, INVAP remodelled an experimental reactor in Iran. The purpose of the remodelling was the downgrading of the fuel from 90% to 20% uranium enrichment (ie from high enriched uranium, which may have non-proliferation significance to low enriched uranium, which does not). So the work was of proliferation relevance. It reduced the risk of proliferation. Response

INVAP and Libya

* Claims that INVAP has supplied nuclear technology to Libya are incorrect. An agreement was initialled between Argentina and Libya in 1974, but was not ratified, and lapsed in 1984. INVAP has advised that the only co-operation between Argentina and Libya was the training of some Libyan geologists in the mid-1970s; that is, before INVAP even existed. It should be emphasise that Argentina is a respectable member of the international nuclear community. Response

INVAP and Cuba

* Cuba has never had, and does not have, any operating reactors, either power or research. INVAP sold Cuba a radioisotope production plant in 1995 - and plants are of absolutely no relevance to nuclear proliferation.

A civil/military nuclear program was pursued by Argentina from the 1950s. After a military junta seized power in 1976, and motivated in part by Brazil’s 1975 deal with West Germany to obtain extensive nuclear fuel cycle facilities, Argentina’s nuclear program expanded and the military objective became more pronounced. Argentina rejected IAEA inspections of most of its nuclear facilities, and at the time refused to sign the Treaty for the Prohibition of Nuclear Weapons in Latin America and the Caribbean (Treaty of Tlatelolco) or the NPT.

The first Argentine research reactor was manufactured and assembled in Argentina using US plans. Several more research reactors were constructed, some with little or no foreign assistance. By the late 1960s, Argentina had developed the infrastructure to support a nuclear power plant, and in 1968 it purchased a 320 MW(e) reactor from the West German firm Siemens.

One military option considered from the late 1960s to the early 1980s included a plan to build a 70 MW(t) research reactor which could produce unsafeguarded plutonium. Another option was diversion of plutonium from safeguarded power reactors.

In the late 1960s, Argentina, possibly with assistance from an Italian firm, built a laboratory scale reprocessing facility at Ezeiza. This facility was closed in 1973 after intermittent operation and the extraction of less than one kilogram of plutonium. In 1978, the Argentine nuclear agency CNEA began construction of a second reprocessing facility at Ezeiza that had a design capacity of 10-20 kilograms of plutonium per year. The stated intention was to reprocess spent fuel from power reactors and to use plutonium in the same reactors or in breeder reactors which were (ostensibly) under consideration. Due to economic constraints, and political pressure from the US, construction on the second Ezeiza reprocessing plant was halted in 1990.

Argentina announced in 1983 that a gaseous diffusion uranium enrichment plant had been under construction since 1978 - although Argentina's nuclear power reactors did not require enriched uranium fuel - and that the plant had already produced a small amount of enriched uranium. Argentina claimed that the enrichment plant was built to service research reactors. An official involved in building the plant said that Argentina had thrown off Western intelligence agencies by encouraging them to look for a nonexistent plutonium production reactor. The enrichment plant is capable of producing up to 500 kilograms per year of 20% enriched uranium or about 10 kilograms per year of 80% enriched uranium. However it is believed that the plant produced only small amounts of low enriched uranium and no weapon grade uranium. Before building the enrichment plant, Argentina had been supplied with enriched uranium by China and the Soviet Union.

Argentina has supplied nuclear equipment to several countries suspected of pursuing covert nuclear weapons programs. In 1985, Argentina and Algeria concluded an agreement under which Argentina exported a 1 MW(t) research reactor that went critical in 1989. Algeria was not a NPT signatory at the time. Extensive nuclear cooperation between Argentina and Libya is believed to have taken place. Argentina was also closely involved in the development of Iran’s nuclear industry in the 1980s and 1990s. Other recipients of nuclear exports from Argentina include Brazil, Egypt, India, Peru and Romania. In the early to mid-1990s, as military influence over the nuclear industry waned, export controls were tightened.

From the late 1980s, Argentina and Brazil allowed joint inspections of each other’s nuclear facilities, and this agreement was formalised in 1991. In the mid-1990s, Argentina and Brazil joined the Treaty of Tlatelolco, the Nuclear Suppliers Group, and the NPT.

REFERENCES

Daniel Poneman, 1985, "Argentina", in Jed. C. Snyder and Samuel F. Wells Jr. (eds.), Limiting Nuclear Proliferation, Cambridge, Mass.: Ballinger, pp.89-116.

Leonard S. Spector with Jacqueline R. Smith, 1991, Nuclear Ambitions, Boulder, Co: Westview Press, pp.223-241.

Useful summary of Argentina's weapons program:
Rodney W. Jones, Mark G. McDonough with Toby F. Dalton and Gregory D. Koblentz, 1998
"Tracking Nuclear Proliferation, 1998"
Washington, DC: Carnegie Endowment for International Peace
http://www.ceip.org/programs/npp/nppargn.htm

Useful summary of covert weapons program generally (including discussion on Algeria):
David Albright, "A Proliferation Primer",
Bulletin of the Atomic Scientists, June 1993
http://www.bullatomsci.org/issues/1993/j93/j93Albright.html