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Asean Affairs   May 2, 2014

The Administration and Congress Should Work Together to Quickly Approve the U.S.-Vietnam Nuclear Cooperation Agreement

By Murray Hiebert (@MurrayHiebert1), Senior Fellow and Deputy Director, Sumitro Chair for Southeast Asia Studies, CSIS

The administration of President Barack Obama should sign a bilateral agreement for peaceful nuclear energy cooperation, commonly known as a 123 Agreement, with Vietnam soon and pass it to Congress for its 90-day review. This pact, which was initialed by Secretary of State John Kerry and his Vietnamese counterpart, Pham Binh Minh, last December, will allow the transfer of nuclear energy-related equipment, materials, and expertise between the two countries.

Completing this agreement would add another concrete plank to the U.S. rebalance to Asia, which President Obama highlighted on his just-completed four-nation visit to Asia. It would add new heft to the comprehensive partnership launched by Vietnam and the United States during the visit to Washington by Vietnamese president Truong Tan Sang last July. And it could provide access for U.S. companies to the growing nuclear market in Asia.

“Vietnam has the second-largest market, after China, for nuclear power in East Asia, and our companies can now compete,” Kerry said after initialing the agreement. “What is a $10 billion market today can be expected to grow into a $50 billion market by the year 2030.” The Washington-based Nuclear Energy Institute, which works to promote nuclear technology, estimates that the agreement could result in 10–20 billion dollars in business for U.S. firms.

Vietnam is looking to expand electricity production to keep up with exploding demand brought on by 5–7 percent economic growth over the past two decades. The country’s coal reserves are running low and it has only limited hydropower potential. This has prompted leaders to discuss plans to build at least a dozen nuclear power plants with a total capacity of some 16,000 megawatts over the next 20 years. Vietnam has signed contracts with Russia to finance and build the first two reactors by 2020 and with Japan to build the next two. With a 123 Agreement between Vietnam and the United States, U.S. companies could provide services for reactors being built by Japanese companies and could compete on contracts for subsequent reactors.

Under the terms of its agreement with the United States, Vietnam has made a political commitment not to enrich uranium or reprocess plutonium and instead to depend on international markets for nuclear fuel. Hanoi cooperated with the U.S. Nuclear Regulatory Commission to hammer out regulatory issues and has acceded to the Nuclear Non-Proliferation Treaty and Comprehensive Nuclear Test Ban Treaty. Vietnam also completed a safeguards agreement with the International Atomic Energy Agency.

Once the 123 Agreement is formally signed by the two governments, it will go to Congress for a review period of 90 days of continuous session (usually around six calendar months). If Congress does not object, the agreement will go into effect.

However, several issues could affect how Congress reacts to the Vietnam agreement arriving on Capitol Hill. Some members are expected to oppose the agreement because it does not include a legally binding pledge by Vietnam not to build uranium enrichment and reprocessing facilities.

Administration officials respond that, under U.S. law, pledging not to enrich is not a requirement for bilateral nuclear cooperation with the United States and, they add, most agreements Washington has signed do not include this commitment. U.S. officials do not regard Vietnam as a proliferation risk. Vietnam is a vocal opponent of nuclear proliferation and six years ago passed an Atomic Energy Law that bans the development of nuclear weapons and nuclear proliferation.

A second issue could be congressional frustration about Vietnam’s human rights record. The House of Representatives in particular has been increasingly outspoken about human rights problems in Vietnam, particularly the increasing arrests of bloggers and pro-democracy activists in recent years. President Obama raised concerns about human rights with President Sang last July and the two countries conduct an annual human rights dialogue. Hanoi recently released four of its most prominent detainees, at least in part because of U.S. demands.

A third concern in Congress, particularly among members of the Senate Foreign Relations Committee, is the issue of an expiration date. Some members want the 123 Agreement to expire after 30 years. The administration is exploring possibilities of addressing the issue of an expiration date, but officials believe it would not be appropriate, now that the agreement is already completed, to reopen the text with Vietnam at least in part because it could provide an opportunity for Hanoi to seek other changes. Renegotiating the duration would certainly delay the agreement for a year or longer. From the vantage point of Congress, the 123 Agreement with Vietnam remains very much a work in progress.

Delaying approval of the agreement will not affect Vietnam’s nuclear plans. The country already has nuclear agreements with Canada, China, France, Japan, Russia, and South Korea, and their companies are willing to provide civilian nuclear technology to Vietnam. If Congress insists on imposing onerous requirements on Vietnam, the country can be expected to look to alternatives to the United States and further diminish the competiveness of U.S. companies selling nuclear equipment and services.

Delaying the agreement indefinitely after it was hammered out between the two governments back in 2010 could crimp Washington’s efforts to forge a burgeoning strategic partnership with Vietnam, which shares U.S. concerns about China’s increased assertiveness in the South China Sea. It would also limit the potential benefits to U.S. companies, which are currently the seventh largest investors in Vietnam, by hobbling their ability to sell nuclear equipment and services to what could become the first country in Southeast Asia to introduce nuclear energy.

If the agreement is not signed and sent up to Congress soon, it will become impossible for the 90-day review to kick in before the November elections. This would mean the Vietnam agreement could not come into force until at least mid- to late 2015.

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