Endangering alliance or risking proliferation?: US–Japan and US–Korea nuclear energy cooperation agreements

ABSTRACT

This paper seeks to understand why the United States treated Japan and Korea differently in the revisions of bilateral nuclear cooperation agreements. On the sensitive issue of grating its allies the rights of developing enrichment and reprocessing (ENR), the United States did so for Japan in the 1977 and 1987 revisions, but did not for Korea during the 2015 revision. For the great power as a supplier state, there are two factors affecting the decision: policy-makers’ concern about alliance management prior to the calculation of security outcome, and firms’ commercial interests. In order to avoid damage to the US–Japan alliance and to maintain Japan's complementation for the US nuclear industry, Washington granted the rights of ENR to Tokyo. In contrast, because of its confidence of managing the US–Korea alliance and partly because of incompatibility of commercial interests between the two, Washington did not grant the rights to Seoul at the 2015 revision. Based on the comparison of the two cases, this paper underscores a need to alter the power projection theory regarding nuclear proliferation by explicating the alliance management as the ex ante element of power projection and by accounting for commercial interests such as fuel sale and technological partnership.

KEYWORDS:

• Nuclear energy cooperation agreement
• enrichment and reprocessing (ENR)
• alliance management
• power projection
• commerce
• proliferation

Introduction

With more and more countries around the world aspiring to adopt nuclear power, assistance with the technology of uranium enrichment and reprocessing (ENR) has become a hot topic in bilateral negotiations on nuclear energy cooperation. One development that has probably made the ENR issue more sensitive and controversial is the historic deal in 2015 on Iran's nuclear program. This deal has succeeded in limiting Tehran's enrichment capability and banning it from carrying out reprocessing. However, it has set a precedent – in a negative sense from the nonproliferation perspective – for other states that aspire to ENR capability. For great powers such as the United States, the spread of ‘nuclear latency’ in terms of ENR capability is a new kind of nuclear proliferation (Kaplow & Gibbons, 2015).

In the US–Korea negotiations on revision of the four-decade-old nuclear cooperation agreement, ENR was the main agenda item. The negotiations were concluded in April 2015, almost simultaneously with the Iran deal, and the United States, despite Korea's demand for ‘nuclear sovereignty’ (Sheen, 2011), did not grant Seoul the full-fledged right to develop ENR technology, although the terms of the revised agreement were to a limited extent better than those of the 1972 original. The two governments left the issue of front-end fuel cycle technology – that is, enrichment by less than 20 percent – to the future High-level Bilateral Commission. They need to agree in writing on the uranium enrichment issue, so enrichment is hardly likely to take place in Korea. As for Korea's back-end fuel cycle, the two sides agreed to continue with the Joint Fuel Cycle Study for pyroprocessing, which started in 2011. This joint study will not be conducted in the facilities already constructed in Korea but in the United States. Compared to the rights the United States has granted to Japan, the scope of the rights granted to Korea, another ally in East Asia, are extremely limited. Through the two revisions of their agreement in 1977 and 1987, the United States has allowed Japan to conduct reprocessing in Japanese facilities and granted programmatic consent, i.e. long-term consent, to activities related to ENR and the transfer of sensitive materials abroad. This has made Japan the only individual country among the non-nuclear weapons states to have retained the right to full ENR capability, although Euratom, a collective of 28 EU states, is another entity that retains ENR capability (IAEA, 2005, p. 11).

What, then, has led the United States to conclude two different agreements with Japan and Korea? Why did the United States differently treat the two allies, both of them Asian democracies? Supply side theories have contributed to identifying the implications of nuclear assistance for the risk of proliferation or for a great power's power projection (Fuhrmann, 2009a, 2009b, 2012; Kroenig, 2009, 2010). In particular, the theory of power projection has aptly maintained that the great power, as a power projecting state, is unlikely to provide sensitive nuclear assistance to a potential nuclear recipient state, since it fears that the assistance will empower the recipient and reduce its own power over the recipient. The prime example of this power projection theory is that the United States did not provide the assistance to Israel and thus the latter had to develop its nuclear program with French assistance (Kroenig, 2010, p. 3, 37). However, the power projection theory, and the supply side theories more broadly, has not been able to solve the puzzle of why the United States granted Japan the rights of independent development of ENR. Despite its merits, the power projection theory must be altered in order to explain the great power's assistance to its ally (Japan in this study) that might diminish the great power's influence.

This paper, instead of building another supply side theory of proliferation and testing it, intends to explain the factors that led the United States to two different decisions about its assistance regarding the ENR. And then the paper shows implications of this analysis for the alteration of the power projection theory.

In this comparative study, I explicate two factors for the great power's decision on whether to assist an ally with ENR. One is policy-makers’ concern over alliance management and the other is firms’ commercial interests. Understanding both of them is essential for explaining discriminatory intra-alliance nuclear cooperation, and additionally contributes to alter the existing power projection theory about nuclear proliferation. It is noteworthy that commerce remains an unexplored aspect of the supply side explanation, although there exists a converging interest between policy-makers and firms. As for the negotiations on the fuel cycle issue, the supplier state takes nonproliferation and alliance management into account and responds to interests of and demands from the nuclear business sector.

The organization of the paper is as follows. First, while engaging in critically reviewing the existing supply side explanation of nuclear proliferation, the paper frames two factors for the great powers, i.e. the United States’, decision regarding ENR assistance: policy-makers’ concern about alliance management and firms’ commercial interests. Second, it examines the two factors in the US-Japan and US-Korea cases of the revision of nuclear cooperation agreements. Finally, it draws a couple of generalizations and demonstrates implications of this analysis for the alteration of the power projection theory and, more broadly, the supply side explanation.

Framing the great power's nuclear assistance: actors and their core interests

At the state level, the nuclear energy cooperation agreements are normally bilateral. When laddering down to the domestic level, there are two important domestic actors of the supplier state, or the great power (the United States in this study), in relation to the agreements. One is policy-makers, particularly those who work in international security affairs, and the other is firms which try to maintain and extend the stake in relation to the establishment or revision of the agreements. The former concerns nonproliferation and power projection, whereas the latter is keen to profits. As far as the nuclear agreements are concerned, the two actors’ core concerns and interests are interconnected and convergent frequently. Where the agreements take place between asymmetrically interdependent allies (the great power and the small power), the application of strict regulations is the top wish list for both the policy-makers and the firms.

Policy-makers’ concern about alliance maintenance

Nuclear assistance is a special type of assistance which encompasses the dual-use dilemma (Fuhrmann, 2008). In particular, sensitive nuclear assistance, in the form of the supply of sensitive technology and materials, carries with it the so-called nuclear latency, i.e. the risk that the recipient may be tempted to use the technology and materials for military purposes. The sensitive nuclear assistance means either direct technology transfers (helping to construct fuel cycle facilities for ENR) or granting the recipient the right to further advance that fuel cycle. (In the cases of US–Japan and US–Korea under investigation, the sensitive nuclear assistance means United States granting its allies the right to advance independent ENR capability.) States may try to divert sensitive nuclear assistance to military uses for various reasons – feelings of insecurity, proof of technological capability, national pride, a wish to achieve political legitimacy, or a motivation to practice coercive diplomacy, etc. (Cirincione, 2007; Sagan, 1996/97). The contribution of supply side theories is that they have shed new light on the unexplored half of the study of nuclear proliferation. In particular, power projection theory is useful in identifying conditions on assistance in the form of sensitive technology and materials.

According to the power projection theory, where sensitive technology and materials related to ENR are concerned, the supplier state calculates the expected security outcome before making its decision whether or not to assist its allies (Kroenig, 2009, 2010). The theory basically posits that the supplier state seeks to make sure its allies (or enemies of enemies) continue to be reliant on it. Also it posits the great power's refusal of assistance with the implications of power diminution.

What the power projection theory has yet to explore is the prime concern of the supplier state: alliance management – how to keep its allies within its sphere of influence. This is the fundamental security consideration and thus precedes the great power's calculation of the security outcome. The best outcome for the great power is to maintain its alliance and force its ally to follow a policy of nonproliferation. However, where it has to choose between alliance and nonproliferation, the great power is unlikely to risk the collapse of the alliance solely in order to maintain its policy of nonproliferation; indeed, it is more likely to sacrifice nonproliferation for the sake of preserving the alliance. Why? It is only the existence of the alliance that makes it meaningful for the great power to calculate the security outcome of providing its ally with sensitive nuclear assistance. In this regard, I argue that the great power's concern about alliance management is the ex ante element of its power projection regarding the assistance.

If the policy-makers are confident of their ability to maintain the alliance, regardless of whether or not they offer its ally the sensitive nuclear assistance, they will inevitably choose not to provide the assistance (e.g. in the case of Korea). This is so because, exactly as the power projection theory posits, the assistance would diminish its power over the ally and its ability to influence the ally's behavior. Conversely, if the great power believes that the ally seriously considers the assistance to be a crucial test of alliance commitment, it is likely to offer the assistance in order to maintain the alliance (e.g. in the case of Japan). With the introduction of alliance management as an independent variable, power projection theory is able to account for the two different approaches the great power adopts toward its allies with regard to ENR technology.

The two cases in this paper are instructive and enlightening. Japan and Korea are important allies of the United States and robust Asian democracies. According to the original power projection theory, both of the allies would be unable to obtain ENR assistance from the United States because the latter is concerned about the diminution of its power. If those countries used the technology for weapons development, the United States would to a significant degree lose its influence over security and military affairs in the Asia Pacific. In fact, however, Japan achieved the right to advance its ENR capability, whereas what Korea obtained was very limited in scope. At the time of negotiations in the 1970s and 1980s, the US policy-makers were concerned about how to keep the US–Japan alliance healthy, or at least not to damage it. Behind the reasoning of the alliance management was Japan's role of burden sharing to strengthen the economy of strategically important countries around the world (Muroyama, 1992).

How can observers identify the priorities of the supplier great power and its ally with regard to alliance management? These priorities can be identified if we examine the internal discussions that appear in some key documents rather than the top leaders’ rhetorical public statements alone. This is particularly true in the case of Japan, which was granted reprocessing rights four decades ago.

Firms’ commercial interests

As the need for nuclear energy increases, the commercial aspect becomes an important factor; however, despite its importance, it has not received commensurate attention in the study of nuclear cooperation. Particularly in the United States, the interface between security and the commercial interests – what I would call the political economy of nuclear cooperation – has attracted the attention of former policy-makers and leaders of the nuclear industry. Today, experts in think tanks and leading members of Congress believe that the strict application of bilateral agreements, specifically Section 123 of the US Atomic Energy Act, contributes to Washington's nonproliferation efforts. Stringent regulations benefit and help restore the US nuclear industry through fuel sales, the provision of technical services, and the development of small modular reactors and non-light water reactors (CSIS, 2013; Kerr & Nikitin, 2015).

Like other types of technological cooperation, the nuclear energy cooperation, and related agreements, involves commercial interests and profit-seeking efforts. The firms, particularly those of the great power, normally expect that the partner state's nuclear industry should play a complementary role rather than produce a competitive environment. Here the firms mean reactor makers, fuel companies, recycling companies, and electricity companies, who seek profits in the domestic or international markets. Just as other forms of industrial cooperation, the nuclear energy cooperation involves a certain type of multilevel collaboration: bilateral agreements at the state level permit sales, mergers, consortia, and research and development (R&D) at the industry level.

In order to enhance nuclear cooperation, industrial complementation is needed. That is, the recipient state's nuclear industry should be complementary to that of the supplier great power. Suppose any recipient state tries to maintain and develop independent, clandestine industry; then it is difficult for the supplier side's firms to believe that there are shared interests. Both Japan and Korea needed nuclear fuel, and thus for the US firms, fuel sale is one of the agenda items. But fuel sale is not the only agenda item of complementary cooperation, and technological partnership is another. In nuclear cooperation, Japan was ready for a partnership – e.g. an R&D consortium to develop new models of nuclear reactors and reactor parts for export – with the United States at the time of negotiations for the revision of the bilateral agreement.

Normally technological partnership between big and small partners is more likely to take place when the big partner believes that the small partner has achieved a relatively high level of technical sophistication (Hagedoorn, Lorenz-Orlean, & Kranenburg, 2008), as this can reduce the big partner's costs in achieving its intended objectives. Also, isomorphic governance structure may enhance the partnership, as sociological institutionalists posit (e.g. DiMaggio & Powell, 1991). The prime element of the governance structure is the ownership of the firms involved in the nuclear industry. The US electricity companies which are involved in nuclear power generation and the manufacturers which produce the necessary facilities such as Westinghouse, Combustion Engineering (CE), and General Electric are privately owned; all related Japanese companies are also privately owned. The Korean case is an example of a state-controlled structure in which the government has more than a fifty percent share. The Korea Electric Power Corporation (KEPCO) is the main company that produces, transmits, and distributes electricity, and it leads 620 generation units including nuclear, thermal, hydroelectric and internal combustion units (Reuters, 2016). Also, it is responsible for the contracts to export power plants. It is fair to say that the state-controlled firm's international advancement is likely to be government-backed and political, rather than technology-based and businesslike. International consortia are more freely formed between private companies than between private and state-controlled companies. Private firms are interested in large markets and host-country's strategic assets and try to avoid economic and political risks, whereas state-controlled firms are likely to follow the strategic needs of their home country (Amighini, Rabellotti, & Sanfilippo, 2013). For the firms in the great power, the private firms of the partner state (e.g. Japanese case) are more attractive than the state-controlled ones (e.g. Korean case). In sum, for the supplier side, fuel sales and technological partnership are important elements for bilateral cooperation with the recipient state.

The revision of US–Japan agreement: ‘preserve alliance, maintain complementation’

The United States and its allied powers and their enemy Germany were not the only states trying to develop an atomic bomb at the end of World War II. Japan made its own desperate efforts to manufacture such a weapon. After Japan's defeat in the Pacific War, however, research into nuclear physics and any kind of nuclear development program were banned in Japan until 1953 (Yoshioka, 2011, p. 54). Also, there was a kind of allergy within the country to all things nuclear. But the tide turned when President Dwight D. Eisenhower of the United States made his ‘atoms for peace’ speech at the United Nations in 1953. The US government began to make efforts to change the public mood in Japan concerning the peaceful use of nuclear technology. With US collaboration, exhibitions on the peaceful use of nuclear technology were staged in Tokyo and even in Hiroshima, the place where the first atomic bomb had been dropped. The exhibitions were to some extent successful in changing the perception of nuclear energy among the Japanese (Zwigenberg, 2014, p. 111).

Postwar Japan had inherited a high level of wartime technology, and this contributed to advancing nuclear technology in the country, particularly the fuel cycle. Japan began its research cooperation with the United States in 1955 and started construction of its first nuclear plant at Tokai in 1961 with UK assistance. The Tokai plant began its commercial operation in 1966, and enriching uranium using gaseous diffusion succeeded for the first time in 1969. Thus, as far as the enrichment issue was concerned, Japan had already achieved success with its own technology before the Nonproliferation Treaty (NPT) came into effect. In 1972, Japan decided to make uranium enrichment a national project, and in 1978 it started construction of the Ningyo-Toge uranium enrichment pilot plant which went into partial operation the following year (Goto, 2012, p. 6; Yoshioka, 2011, p. 192).

Japan also made great efforts to advance the back-end fuel cycle, i.e. conventional reprocessing. Japan completed a hot test to extract 208 grams of plutonium between 1968 and 1969, and simultaneously, with technological assistance from the French company Saint-Gobain Nucléaire, designed a pilot reprocessing plant. Construction of this plant at Tokai started in 1975, with US$20 billion of Japanese investment. Japan then began to justify domestic commercial reprocessing in terms of energy security or energy independence (Oberdorfer, 2003, p. 461; Yoshioka, 2011, p. 128). Indeed, Japan's reliance on oil from the Middle East became a serious national concern with the onset of the oil crisis (Kitamura, 1996, p. 2).

However, the Ford administration, having witnessed India's ‘peaceful explosion’ in 1974, adopted a new nuclear policy in 1976 which was aimed at stopping the reprocessing and recycling of plutonium in order to reduce the risk of proliferation. After Jimmy Carter became president in 1977, the new administration confirmed that the United States would put the commercial reprocessing and recycling of plutonium on hold indefinitely and indicated that it wanted other states to follow suit. Specifically, the Nuclear Nonproliferation Act, adopted in 1978, required recipients of US assistance to obtain prior US approval for the re-transfer and reprocessing of materials of US origin. In this way, the United States postponed the development of fast breeder reactors and stimulated alternative fuel cycle research (Andrews, 2008, p. 3). With regard to the tough US policy, it is also worth noting that a few years earlier in the mid-1970s, the United States had stopped Taiwan and Korea from developing nuclear weapons (National Security Archive, 2007).

The United States was on its guard where the issue of proliferation was seriously concerned during the negotiations on Japan's right to carry out reprocessing at Tokai. For the United States, the nuclear test in India at that time – and aborted nuclear weapon programs in Taiwan and Korea – was significant no less than today's proliferation concern and nuclear latency. In this context, President Carter gave the Japanese little reason to hope regarding the Tokai pilot plant. In early 1977, he pressed Japan not to bring the almost completed plant into operation. Specifically, at the Carter-Fukuda summit held in March 1977, Carter argued that reprocessing was not economical (Oberdorfer, 2003, p. 461). Because all of Japan's uranium fuel had originated from the United States at that time, Japan had to acquire prior US approval for hot testing with the spent fuel to separate plutonium (Yoshioka, 2011, p. 176). In response to the US pressure, the Japanese argued that the country had faithfully conformed to Washington's nuclear policy, meaning that Tokyo's overall nuclear policy and the construction of the pilot plant were in line with US policy. For example, one high-ranking Japanese official stated, ‘We were good students and did what the teacher told us… and you abruptly change the policy’ (Saar, 1977, cited from Shih, 2011, p. 2).

However, the US–Japan negotiations ended with an agreement in September 1977 allowing Japan to bring the pilot reprocessing plant at Tokai into operation. Why, then, did the United States give way? More than anything else, Japanese authorities did its best to persuade the United States that reprocessing was an essential element of alliance maintenance, and the United States’ alliance with Japan was indeed important in an era of alarming Soviet expansion, particularly after the communist takeover of South Vietnam. With the New Pacific Doctrine unveiled in Hawaii on December 7 1975, President Gerald Ford identified its partnership with Japan as one of the specific ways of containing the Soviet Union in the Western Pacific (Ford, 1975). In response, Japan faithfully followed the path of US-framed strategic assistance to underdeveloped areas around the world. Japan's rapidly increasing ODA from the late 1970s to early 1980s proved this: Japan twice doubled the amount of strategic aid during this period (Department of State, 1981; Mansfield, 1988). Given this circumstance, the United States did not want to damage the important alliance, although it was keenly aware of the dual-use dilemma involved in approving reprocessing.

As for the alliance management, one of the most sensitive issues in the negotiations was Japan's claim on ‘discrimination.’ As the Japanese government rightly pointed out, it would have been discriminatory for the United States to oppose reprocessing in Japan considering that reprocessing was being carried out unchallenged in West Germany, and that the Germans, along with nuclear weapons states such as France and Great Britain, were transferring the technology to others. For example, in 1975, West Germany signed an agreement with Brazil for the construction of reactors and reprocessing and enrichment facilities (Albright, 1989, p. 16). West Germany was not only a potential nuclear industrial competitor of Japan but a US ally in Western Europe with equivalent status to Japan in the Asia Pacific. As early as April 1977 the National Security Council took up this point as an important internal agenda item. On the sensitive issue of discrimination, it was stated in an Action Memorandum of April 5 1977, that the United States ‘should be sensitive to the Japanese political imperative of avoiding arrangements which subject them to discrimination vis-à-vis other industrial competitors.’ The White House was indeed worried that any unequal treatment of Japan compared to West Germany could damage the Fukuda cabinet and have a negative impact on the alliance relationship as a whole. As an alternative to an outright ban, the administration suggested modification of the reprocessing, i.e. producing a mixture of radioactive products, but the Japanese did not see this as a solution (NSC, 1977).

As usual, the US ambassador in Tokyo, Mike Mansfield, was more concerned about alliance management than the people in Washington. On July 12, Mansfield cabled Carter, stressing the need for a rapid compromise and pressing the president to permit the operation of the Tokai plant. He argued that compromise was ‘mandatory if the bilateral alliance is to be preserved’ in a form that would ensure sustained Japanese support for security cooperation and to clear Japanese suspicions about the alliance relationship (Oberdorfer, 2003, p. 463). Mansfield's argument was based on his direct access to top Japanese leaders and first-hand information about their views. The Japanese aspiration to acquire reprocessing rights must have been extremely strong. What is more, Carter had promised Fukuda that the United States would support Japan's application for permanent membership of the UN Security Council (Drifte, 2000, p. 44). The Japanese may well have asked themselves why, if Washington considered Japan to be a reliable ally that might play such important international security role, it could not be allowed to operate its pilot reprocessing plant.

For the Japanese, reprocessing was a matter both of pride and of international status, particularly in its relations with the United States. In his letter to Carter of August 26 1977, Prime Minister Fukuda pointed out the two types of discrimination Japan would not tolerate – less favorable treatment than that accorded to nuclear weapons states and less favorable treatment than its industrial peers. Fukuda said, ‘It has long been Japan's position that there should be no discrimination between nuclear-weapon and non-nuclear-weapon states with regard to the peaceful use of nuclear energy. If too strict conditions were to be attached to the operation of the Tokai facility, Japan would be unduly handicapped as compared not only with France and Britain but also with West Germany. For Japan this would be politically intolerable’ (Fukuda, 1977). On the other hand, inasmuch as the Japanese considered the possession of reprocessing capability to be crucial in their relations with the United States, they needed Washington to believe in their commitment to nonproliferation. In fact, the track record demonstrated that the Japanese government adhered to the NPT and actively participated in the so-called London Club, the meetings of the Nuclear Suppliers Group that were held in London in 1975–1977. Consequentially, despite the dilemma of dual use, the Carter administration's stance regarding reprocessing shifted from one of opposition to approval.

What should be noted is that the United States was interested in Japan's complementary role—in particular, a possible technological partnership with Japanese firms for co-processing—on account of that country's advanced technology (Kitamura, 1996, p. 7; Nakano, 2012, p. 47). Indeed, the interim agreement, which was concluded in September 1977, favored Japan. It stipulated that the Tokai facility would reprocess 99 tons of spent fuel per year for two years, and that the two governments would convert to co-processing after two years if they found this option technically feasible and effective. Although the Japan–US co-processing never took place, the United States established an instrument to minimize proliferation risk or to prove proliferation-resistant technology. It was the International Nuclear Fuel Cycle Evaluation (INFCE) (Skjöldebrand, 1980). Established on the initiative of the United States at an organizing conference held in Washington in October 1977, the INFCE deliberated the issue of the Tokai plant for two years. As a result of this deliberation, the Carter administration decided to extend the interim agreement on reprocessing.

The 1987 US–Japan negotiations for the revision of the atomic energy cooperation agreement were concerned with the granting of programmatic consent – i.e. advance approval for Japan to transfer, separate, and use plutonium from fuels of US origin. Although this long-term consent issue was not about the right to employ ENR technology per se, it was related to US policy on nonproliferation. Thus the negotiations over what should replace the soon-to-expire agreement fueled debate within the US government. The Nuclear Regulatory Commission in the United States warned that the new scheme of long-term approval would result in the production of about 153 tons of plutonium per year in Japan, and that this would be in conflict with the 1978 Nuclear Nonproliferation Act. Also, Congress insisted that approval would violate the Atomic Energy Act, whereas the Reagan administration argued that the act did not ban programmatic consent for nations with ‘no proliferation risk’ such as Japan (Leventhal, 1988, p. 12).

Just as in the case of the 1977 reprocessing issue, there arises a question of why the United States granted the programmatic consent in 1987 despite domestic concern over the risk of proliferation. This was a case of two elements – commercial reasons and alliance management – working at the same time. As for the commercial interests of US side, the export of fuels was an important agenda. The rapidly growing demand for electricity in Japan increased the need for nuclear power and low-enriched uranium fuels. The United States believed that programmatic consent would contribute to expanding exports of US nuclear fuel and thus partly correct the trade imbalance between the two countries. According to a US Energy Department estimate, the United States was expected to sell enriched uranium worth US$250 million in 1988 alone and as much as US$1 billion-worth per year in the next decade (CQ, 1988; Krugman, Baldwin, Bosworth, & Hooper, 1987). High-ranking US officials viewed the sale of enriched uranium and nonproliferation as being interconnected: locking Japan into a bilateral agreement with the United States would ensure Tokyo's continued commitment to nonproliferation. In this context, Fred McGoldrick, the Director of the Department of State's Office of Nonproliferation and Export Policy, stated, ‘If we do not have this kind of agreement, the Japanese will simply go elsewhere to buy their enriched uranium’ (AP, 1988; CQ, 1988). The UK-based company URENCO and the French company EURODIF might be ‘elsewhere’ alternatives.

The direct sale of fuel was not the only area which the United States kept in mind. Technological partnership was another element for US approval of the programmatic consent. Because of the Carter administration's strict policy on nuclear issues, plus the impact of the 1979 nuclear accident at Three Mile Island, the US nuclear energy industry, particularly the reactor industry, had stagnated. This was one reason why the United States proposed the co-development of nuclear reactors with Japan in the first half of the 1980s. Co-development was to be aimed at the export market as well as domestic consumption. The United States called it an equal partnership, but the Japanese considered it to be unequal as they were more technologically sophisticated than the United States in the field of nuclear reactor construction. Encouraged by this partnership, from 1987, Japan envisioned a long-term program of improving the technological sophistication of light water reactors that would produce a new generation reactor model (Yoshioka, 2011, p. 190).

As noted earlier, countries with isomorphic governance structures – i.e. privatized and diversified structures, compared to state-controlled and unitary structures – are more likely to cooperate with each other, and in this regard, Japan was very different from Korea, as shall be discussed later. Japan's nuclear program was indeed supported by the state, but the industry's stakeholders were diverse: government ministries, nine electricity companies, and diverse manufacturers of reactors and generators. These diverse stakeholders cooperated with one another for symbiosis and at the same time acted as veto players with regard to proliferation (cf. Hughes, 2007; Hymans, 2011; Vivoda, 2014, p. 142). For example, there was no one dominant player among Mitsubishi, Toshiba, and Hitachi, nor among the electricity companies. This type of governance structure allowed those diverse and privatized players to freely interact with foreign companies. Those companies in Japan made mergers with US partners (e.g. Hitachi-GE and Toshiba-Westinghouse) much easier than in the case of Korea.

In sum, for the US approval of the Tokai reprocessing plant in 1977 and the programmatic consent for nuclear programs in 1987, Tokyo's pledge of nonproliferation was a necessary condition but not a sufficient condition. The two agreements can be attributed to the US need to avoid damaging the alliance with Tokyo and to maintain complementation in the industry, particularly for fuel sale and technological partnership.

The revision of US–Korea agreement: strong alliance, need of power projection

For the United States, the Korean case, unlike the case of Japan, has not generated any sense of danger regarding alliance management. Thus, power projection associated with support for Korea's ENR capability was the only important consideration in the 2015 negotiations for the revision of the US–Korea nuclear energy cooperation agreement. As a consequence, and in line with the theory of power projection, the United States was concerned about a potential diminution of power if granting ENR rights to Korea resulted in proliferation. Also, because of Korea's increasing competitiveness in the nuclear market and the lack of complementation for US nuclear industry, Washington had little interest in enhancing Korea's ENR capability.

Korea's nuclear industry has made remarkable progress since its first nuclear plant at Kori began operation in 1978. As in the case of Japan, Korea's motivation for rapid expansion of nuclear power was energy security. Both countries were hit hard by the oil shock in the 1970s and as a result doubled their efforts to increase their nuclear power capacity. Unlike Japan, however, Korea's nuclear industry was controlled and sponsored by the government. The governance of nuclear power was characterized by a state-industry unitary structure. Once Park Chung-hee had seized power through a coup in May 1961, he ordered the merger of the three existing electricity companies to create the KEPCO, in which his government held an 84% share. The state-industry unitary governance structure allowed KEPCO to dominate the entire nuclear industry, including the construction of nuclear power plants, the introduction and licensing of technology, the development of a Korean model reactor, fuel fabrication, etc. (KEPCO, 2001). KEPCO also became the main financial supporter of related nuclear research, as the nuclear industry became profitable and was responsible for the increase of electricity production (Park, 2011). This unitary governance structure is quite different from the Japanese case.

Korea could not equal Japan's rapid advancement in terms of technology. Korea has tried to take advantage of its position as a latecomer and used a catch-up strategy, which consequently enhanced its own competitiveness (Lee & Lim, 2001; Lee, 2005; Sohn, Chang, & Song, 2009). It has invested a lot of energy into obtaining technology transfers in order to independently construct nuclear power plants and, in particular, to design the Korean standard model reactor. Taking advantage of the decline in the US nuclear industry (Price, 1990, p. 29, 47), KEPCO succeeded in obtaining reactor technology from CE, and it used technology transferred from CE – rather than its longtime partner Westinghouse – to construct two reactors in 1989. The Koreans designed their own model OPR-1000 in the 1990s, based on CE's System 80 model, and managed to develop some 95% of the technology needed for the construction of power plants (KEPCO, 2001). In 2002, KEPCO upgraded that model to the APR-1400 (Holt, 2013, p. 4).

The above-mentioned state-industry unitary governance structure and catch-up strategy have made the Korean brand competitive in the global nuclear market. KEPCO became the contractor of the government-supported project of constructing two OPR-1000 reactors in Sinpo on North Korean territory (1995-2003), a project that was based on a 1994 deal between Washington and Pyongyang, the Geneva Agreed Framework. KEPCO could not complete the project, owing to North Korea's continued development of its nuclear weapons program. But in 2009, a KEPCO-led consortium won a US$20 billion contract to construct four APR-1400 reactors in the United Arab Emirates (UAE) (Reuters, 2009). It is interesting to note that Korea is the only participant in the global nuclear power market not to have its own ENR capability.

Korea's advancement has contributed to increasing US concern over US vendors’ weakening position in the global nuclear industry, which had already started under competitiveness of Japanese firms. In the mid-2000s Japanese vendors merged with longstanding US competitors or formed consortia with them – e.g. Toshiba merged with Westinghouse in 2006; in that year also, Mitsubishi Heavy Industry established Mitsubishi Nuclear Energy Systems headquartered in the United States; and in 2007 Hitachi formed a consortium with GE, establishing Hitachi-GE Nuclear Energy Ltd. in Japan and GE-Hitachi Nuclear Energy in the United States. The competitiveness of Japanese vendors, followed by KEPCO's entry into the market, caused nuclear market competition to become even more fierce (Nakano, 2012, p. 48). Along with the French company Areva and Russia's Rosatom, the above-mentioned Japanese vendors and KEPCO have been competing for business in the Middle East, Eastern Europe, and South Asia. US firms have become minor players in the international nuclear marketplace. For the Americans, the most profitable sector is uranium enrichment but not reactor. Moreover, their uranium enrichment industry in the United States has gradually been replaced by URENCO, and their share of the market has shrunk rapidly (CSIS, 2013). The weakening of the American nuclear industry was exemplified by Westinghouse's share in the KEPCO-led project in the UAE. While KEPCO took the lion's share of US$20 billion, Westinghouse's share as a subcontractor was worth only US$1.5 billion for technical support and training and because they own the original technology (Reuters, 2015).

As Washington and Seoul entered negotiations on the revision of the 1972 bilateral nuclear energy cooperation agreement, US concerns intensified, as did pressure from the US nuclear business lobby. For example, the senior vice president of Westinghouse, Daniel S. Lipman, claimed that the Koreans had taken advantage of US technology to expand their nuclear industry. He was apparently referring to the development of Korean standard model reactors based on technology transferred from CE (which was later merged by Westinghouse). Lipman advocated strict application of Section 123 of the US Atomic Energy Act when establishing or revising US bilateral nuclear cooperation agreements (Lipman, 2012).

From the US perspective, the logic of political economy is at work here. US firms’ business motives have reinforced their government's position that strengthening the competitiveness of American nuclear firms in the market is related to its policy of nonproliferation. This position has been uniformly adopted by experts and former policy-makers working in Washington think tanks (e.g. CSIS, 2013). The export of reactors and other technical services to countries that aspire to have nuclear energy capability requires the prior establishment of bilateral agreements between the United States and those countries. This holds for other exporters, such as Japanese companies and Korea's KEPCO, as most of these have technology on license from US firms such as Westinghouse. Because of this triangular relationship – the US government, the US firms, and the importing countries – the United States has applied Section 123 and enforced prior US consent for retransfers of materials and data and for ENR rights. The United States applied an even stricter regulation, called ‘gold standard,’ to its nuclear energy cooperation agreement with the UAE, whereby Abu Dhabi agreed to renounce its right to develop ENR capability (NTI, 2012). That is, firms’ interests were factored into the content of Washington's agreements with recipient states. It was with commerce in mind that the United States discouraged Korea from developing ENR capability during the negotiations for the 2015 revision.

Unlike the case of Japan, alliance management was not an issue during the US-Korea negotiations on the revision of their nuclear agreement. At the time of the negotiations, Korea was enhancing its alliance with the United States to cope with the challenge of North Korea's nuclear weapons program, while at the same time trying to convince the United States that it was still committed to nuclear nonproliferation, particularly the denuclearization of the Korean peninsula. Furthermore, the allies had developed the so-called tailored deterrence that largely relied on US forces and US strategic weapons systems. Neither the Park administration in Korea nor the Obama administration in the United States appeared to doubt the strength of the alliance. Under these circumstances, Korea argued that it needed ENR capability to cope with its increasing volume of radioactive waste. Faced with public opposition to the construction of nuclear waste storage facilities, the Korean government argued that pyroprocessing, a proliferation-resistant form of processing, was a viable solution. In addition, Korea demanded the right to enrich uranium for fuel security reasons (Choe, 2015; Einhorn, 2013).

Given the situation described above, the United States was seriously concerned about power projection: i.e. what would be the security outcome of the US granting ENR rights to Korea. As the theory posits, in the event of proliferation – in the form of Korea using the technology for military purposes – this would undoubtedly have a significant negative impact on US power over the Korean peninsula; furthermore, Japan would be likely to develop nuclear weapons for its own security. This kind of nuclear domino effect would certainly run counter to US national interests and undermine Washington's policy of rebalance toward the Asia Pacific, not to mention the US commitment to nonproliferation. This is why the United States has reiterated its pledge to provide a nuclear umbrella for its allies in East Asia.

Specifically, Korea has a track record with regard to nuclear proliferation that may have caused the United States to carefully calculate the security outcome of granting ENR rights. Between 1972 and 1975, feeling insecure due to the withdrawal of US troops from Korea and the fall of South Vietnam, the Park administration tried to introduce reprocessing technology from France, apparently with the intention of military use of it (NSC, 1975). The United States pressed President Park to give up the reprocessing project and persuaded France to withdraw its assistance. Korea eventually halted the project, and in April 1975 it ratified the NPT which it had already signed in 1968. Another attempt, although the Koreans claimed that it was for experimental rather than military purposes, was revealed in 2004 when the IAEA additional protocol came into effect that allowed IAEA inspectors greater access to nuclear programs, particularly undeclared facilities. Scientists in Korea had been secretly conducting very small-scale experiments in uranium enrichment and plutonium separation. Although the Korean government denied all knowledge of this, the IAEA director-general, Mohamed ElBaradei, raised serious concerns over the incident. It tarnished Korea's reputation for transparency and credibility regarding the proliferation issue, even though the IAEA concluded that it had been an unauthorized occurrence at a research institute (Kang, Suzuki, & Hayes, 2004). The big power's assessment of its ally's commitment to nonproliferation remains subjective, but it is obviously based on the ally's track record. In this regard, the United States might have believed that Korea, with its high level of scientific and technological development in general, would quickly be able to master the entire fuel cycle and use it for military purposes if the right to carry out ENR had been granted.

US concerns about Korea's commitment to proliferation rose as a result of the responses of Korean politicians to the development of nuclear weapons by North Korea. Right after North Korea conducted its third nuclear test in 2013, a leading ruling party politician, Chung Mong-jun, stated that: ‘South Korea may exercise the right to withdraw from the NPT as stipulated in Article X of the treaty. South Korea would then match North Korea's nuclear program step by step, while committing to stop if North Korea stops’ (cited from Hibbs, 2013). This was not deemed to be a majority view in Korea, and Chung's argument went against the Korean government's long-held commitment to nonproliferation. It was, however, a sign of growing feelings of insecurity in Korean society in the face of the North's continued efforts to arm itself with nuclear weapons. The Korean government did not take any concrete steps toward nuclear armament, but such a statement by a Korean ruling party politician at an international forum must have raised US concern about the Koreans’ commitment to a policy of nonproliferation.¹ It is fair to say that a Korean politician's call for nuclear armament must have had a certain negative impact on the negotiations on the 2015 revision.

The United States remained concerned about power projection in relation to the nuclear assistance, and this was reflected in the 2015 negotiations. The US side opposed conventional reprocessing on the grounds that it would go against Korea's expressed commitment to the Joint Declaration of South and North Korea on the Denuclearization of the Korean Peninsula, signed in 1991. As for pyroprocessing, the United States regarded this as equivalent to conventional reprocessing through separating plutonium, although Korea considered it proliferation-resistant and maintained that it was necessary in order to reduce nuclear waste (Einhorn, 2013). The negotiations regarding the particular form of processing of spent fuels, i.e. pyroprocessing, ended up with an agreement to continue the ongoing joint research on it, although this kind of research is prohibited on Korean territory. As for uranium enrichment, the United States has not granted Korea the right to enrich less than twenty percent yet, although the issue will be on the table at future meetings of the High-level Bilateral Commission.

Conclusion

The analysis in this paper has shown that: both the US policy-makers’ concern about alliance management and firms’ commercial interests were at work in the US–Japan and US–Korea negotiations, although in different ways. The United States has been concerned about alliance management prior to being concerned about power projection with regard to nuclear assistance. And the United States has also been concerned about its ongoing commercial interests – complementation through fuel sales and technological partnership. Thus, in the negotiations for the revision of the nuclear agreement, Japan was only able to obtain ENR rights as it met the above-mentioned conditions. The case of Korea was the opposite. Just as power projection theory posits, the United States must have feared that if Korea were to take a defiant nuclear-weapons path, or even nuclear latency, this would reduce Washington's power projection over Seoul. Also, Korea's state-controlled structure in the domestic nuclear industry and its state-sponsored competitiveness in the international nuclear market must have raised concerns in the United States that Seoul was a competitor rather than a collaborator. In this regard, although both Japan and Korea have remained allies of democratic regimes, the United States has discriminated between them in its granting of ENR rights.

The result was as follows. Washington allowed Tokyo to carry out reprocessing in 1977 and provided programmatic consent in the revised bilateral agreement negotiated in 1987. Where Korea was concerned, Washington was half-hearted in its support regarding the fuel cycle – continuing the joint study on pyroprocessing on US territory and holding out the possibility of low enrichment in the event of another agreement being established, but banning conventional reprocessing of spent fuel.

From the comparison of the two cases, I can draw two generalizations that require alteration of the power projection theory. First, if it is worried about the alliance being endangered, the great power will choose to assist with ENR while risking proliferation (the case of Japan), while if convinced that the alliance is strong, the great power will be concerned about power projection only (the case of Korea). Second, if the great power believes that the expansion of its ally's ENR capability will be beneficial to its commercial interests, it is likely to provide such assistance to the ally (the case of Japan).

The analysis in this paper may refute the following assumptions: one that potential proliferation by the recipient state is the only causal source of the supplier great power's decision, and the other that Japan's obtaining of the rights on ENR was a simple fait accompli of related indigenous technology. These assumptions are partly true, at best. As I have shown, proliferation is the great power's concern, but its assessment about alliance management precedes both its judgment on the potential proliferation and its calculation of power projection over the recipient. Also, it is true that Japan advanced its own technology to a significant extent before obtaining the rights from the United States, but both alliance management and commercial interests determined Washington's decision in favor of Tokyo.

The analysis in this paper is useful in two ways. First, by identifying the supplier great power's concerns about alliance management, this paper is able, in part, to highlight an underexplored aspect of intra-alliance politics. Inasmuch as nuclear fuel cycle cooperation is a significant item on the security cooperation agenda, the great power will often be caught on the horns of a dilemma – whether to provide assistance and risk proliferation, or withhold assistance and endanger the alliance. In order to come to a sound decision, the great power needs to obtain accurate information about its ally's perception of the nuclear issue. Even when it has such accurate information, it still needs to interact with its ally in order to reach a compromise, thereby avoiding having to choose between two bad options, while not risking the alliance.

Second, the paper identifies ways in which the great power links nuclear fuel cycle cooperation and commerce. Sustained efforts have been made to illustrate the interplay between economics and (in)security – e.g. economic interdependence and international cooperation or conflict, armed conflict over scarce economic resources, and poverty and political violence. But this paper is unique in the way that it examines the linkage between fuel cycle cooperation and commercial interests. Nuclear fuel cycle cooperation may be facilitated both by technological partnership based on similar levels of technological sophistication and by similar governance structures, as in the case of the United States and Japan.

Acknowledgments

Author thanks to Matthew Kroenig, Jeff Kaplow, Michael Andregg, Chang Yong-seok, and Takemoto Makiko for their helpful and critical comments.

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Funding

This research was supported by National Research Foundation of Korea funded by the Korean Government [grant number NRF-2010-361-A00017].

Notes on contributors

Sung Chull Kim

Sung Chull Kim is a Humanities Korea Professor at the Institute for Peace and Unification Studies at Seoul National University. Before holding this position, he served as a senior fellow at the Korea Institute for National Unification (1992–2003) and a professor at the Hiroshima Peace Institute – Hiroshima City University (2003–2012). Kim's two recent works are now in the process of publication: Partnership within Hierarchy: The Evolving East Asian Security Triangle (State University of New York Press, 2017, single authored book) and North Korea and Nuclear Weapons: Entering the New Era of Deterrence (Georgetown University Press, 2017 forthcoming, coedited with Michael Cohen). Also, he is the author of North Korea under Kim Jong Il: From Consolidation to Systemic Dissonance (State University of New York Press, 2006). He edited several books including Regional Cooperation and Its Enemies in Northeast Asia (Routledge, 2006, with Edward Friedman), Engagement with North Korea (State University of New York Press, 2009, with David Kang), State Violence in East Asia (University Press of Kentucky, 2013, with N. Ganesan), Hitotsu no Azia kyodotai o mezashite (in Japanese) (Tokyo, Ochnomizu shobo, 2012, with Tae-Wook Kim), and Disaster and Peace (in Korean) (Seoul, Acanet, 2015). Also he has contributed articles to journals including Systems Research and Behavioral Science (formerly Behavioral Science), Asian Studies Review, Eastern European Politics, Development and Society, and Issues and Studies. Kim is currently the editor of Asian Journal of Peacebuilding.

Notes

1. North Korea's fourth nuclear test in January 2016 and fifth one in September that year prompted many ruling party members of the National Assembly to rally around the slogan of nuclear armament. ‘Calls Growing in South Korea for Nuclear Armament,’ Yonhap News. Retrieved September 11, 2016, from http://english.yonhapnews.co.kr/news/2016/09/11/0200000000AEN20160911001200315.html