STRATEGIC NUCLEAR ISSUES IN EAST ASIA: SECURITY,

ENERGY, AND FUEL CYCLE CHOICES

On 26 April 2016, the International Institute for Strategic Studies (IISS) held the fourth workshop
under a MacArthur Foundation-funded project on strengthening cooperation between Chinese and
Western policymaking communities on nuclear issues. Held in Beijing and jointly organised with the
China Institute for International Studies (CIIS), the meeting attracted experts from China, Japan, the
Republic of Korea (ROK), the United Kingdom and the United States. Expanding on previous IISS-CIIS
discussions on nuclear security cooperation in the narrow sense of physical security of nuclear
facilities, this meeting expanded that definition to incorporate nuclear energy and fuel cycle choices,
non-proliferation and nuclear security, cybersecurity, deterrence, and broader regional
relationships.

Non-proliferation and nuclear security

Speakers from the United States, the United Kingdom and China began proceedings by outlining
respective positions on the status of the non-proliferation and nuclear security regimes. The global
non-proliferation regime was assessed to have had a mixed set of results: a huge success in the form
of the Iran deal; huge failure in approaches to North Korea; partial failure at the 2015 Review
Conference (RevCon) Nuclear Non-Proliferation Treaty (NPT); and finally partial success at the recent
Nuclear Security Summit (NSS) in Washington, DC in March 2016.
The deal brokered between Iran and the E3/EU+3, the Joint Comprehensive Plan of Action (JCPOA),
prevented the possibility of war and demonstrated the possibilities of diplomacy, based on
incentives and disincentives, sanctions pressure and engagement, and pragmatic leaders on both
sides. Unfortunately, the same could not be said of relations with North Korea, which has conducted
more provocative tests of nuclear and missile components. Stronger sanctions are now in place, but
still contain loopholes open to exploitation. This topic was explored in much greater detail in the
final session.
The NPT RevCon failed to achieve a consensus outcome document, representing partial failure.
There are clear strains surrounding the issue of disarmament and language to overcome the issues
has yet to be agreed. A compromise should be able to be found between all parties involved,
including language acceptable to states supporting the initiative to recognise the humanitarian
effects of nuclear use. It was suggested that the UK, US and China, each of which sent a
representative (although in the case of China, not in an official capacity) to the most recent
conference to discuss humanitarian consequences in Vienna, should be able to work together on this
issue.
The 2016 NSS was graded as a partial success, primarily because attendance lacked delegations from
Russia, Iran and the DPRK, three states important to the objective of securing vulnerable nuclear
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materials around the world. The entry into force of the amended Convention on the Physical
Protection of Nuclear Material (CPPNM), Chinas Centre of Excellence, and Japans return of
plutonium from its critical assembly facility to the US were all listed as key developments, however,
and demonstrated important progress.
A Chinese speaker suggested promoting non-proliferation via two efforts. The first was to harness
new technologies that have useful applications for civil programmes, citing the Arak reactor in Iran,
to modified (with Chinese cooperation) as part of the JCPOA, as an example. He also encouraged
non-nuclear weapon states to use technology that has no weapon potential and would not raise
non-proliferation concerns. Proliferation resistant technologies was an issue also addressed in a later
session on civil nuclear energy.

Cyber threats to civil nuclear facilities

Having discussed proliferation threats, the focus shifted to cyber threats and the risks posed to civil
nuclear facilities. This is still an emerging field, with relatively little overlap between practitioners in
the nuclear and cyber domains. Perspectives were provided from UK and Chinese speakers with the
aim of increasing understanding of the issue and identifying possible areas of concern to both states.
It was explained that the UK first determines the threat, which is then compared with known
vulnerabilities. The threat spectrum is broad, comprising: recreational hackers; those with a personal
antagonism to nuclear power; disgruntled former employees; organised crime; nation state
individuals who realise that cyber-attacks are a cheap way of causing damage; and finally, terrorists.
The means through which attacks occurred include phishing emails; Distributed Denial of Service
(DDoS); Trojans or malicious computer programmes; spear fishing; website defacement; and zeroday exploits, or holes in software unknown to the vendor.
A Chinese participant provided examples of known cyber-attacks on civil nuclear facilities, such as
the information stolen from the South Korean nuclear operator and attacks on Irans centrifuge
facility at Natanz. In the latter case, the Stuxnet code was targeted at a specific system. Cyber
criminals are not as discrete, however, and do not restrain themselves to defined targets.
Most civil nuclear facilities were built before the Internet was widely used, providing a perceived air
gap between reactors and the cyber domain. Digital vulnerabilities have since been introduced
however, through the use of industrial control systems (ICS), supervisory control and data
acquisition (SCADA) systems, and programmable logic controllers, which increase levels of
automation and control operations. Modernisation and equipment failures mean that new
components are introduced, often leading to unintended consequences. A Chinese participant
emphasised that air gaps no longer exists between civil nuclear facilities and the cyber domain,
despite claims that reactors are offline.
Given the evolving threat environment, a former UK regulator explained his role, which was to set
goals for security, rather than rely on prescriptive standards. Some national regulators set out a
series of criteria, which, if achieved, represent compliance. In the UK, nuclear operators are
expected to proactively demonstrate why a nuclear facility is secure to the regulator. Chinese
participants did not explain the specifics of cybersecurity compliance from the perspective of their
regulator. However, a Chinese participant with experience of the private sector explained that in
2012, a Chinese facility was attacked roughly 700 times per day. When asked where these attacks
were coming from, and whether the threat profile was similar in the UK and China, participants were
told that tracing and attribution is very difficult. An attack on a telecommunications firm by a
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recreational hacker in the UK, for example, produced all sorts of theories that it was a very
sophisticated attack. In fact, three 16 year olds in a remote part of Ireland were the culprits. This
identification problem is a key area for future collaborative efforts. When asked about the biggest
cyber threats, a UK participant explained that subtle multi-layered attacks, involving the introduction
of malware on the back of legitimate software or control systems, pose the greatest risk. A known
attacker persistently attacking was deemed better than one that suddenly stops, because this would
likely mean that security has been breached.
Given the scale of industrialisation in China and the associated development of smart cities and
advanced infrastructure, the risks are high and continually growing. It was explained that protecting
nuclear facilities is very difficult and made harder by limited international collaboration among
cybersecurity teams. Although cybersecurity is becoming a focus in China, with simulation systems
and proper regulation having been established, this growth is slower than capabilities of attackers.
Collaboration between the UK and China was encouraged on this issue. It was noted that China and
the ROK have an annual cyber dialogue and that CIIS is launching a Track II dialogue with Japan and
the ROK.
Speakers were asked whether international cooperation in the cyber domain should be open-ended,
or whether clear benchmarks or international standards were preferable. A British speaker drew
parallels with the nuclear security framework: entry into force of the binding Amendment to the
Convention on the Physical Protection of Nuclear Material (CPPNM) has been a long term effort,
while the Code of Conduct on the Safety and Security of Radioactive Sources (CCSSRS) is non-binding
but has arguably been more useful. The introduction of a formal international standard was now
deemed to be too late, with a coalition of the willing a more viable option.
In the discussion, the Chinese speaker emphatically advised against any offensive use of cyber
capabilities, as in the case of the Stuxnet attack. Once unleashed, such worms spread uncontrollably.
The Stuxnet attack also set a precedent for others, he warned.
Civil nuclear energy
Discussion of nuclear fuel cycle policies in China was divided into front- and back-end issues. The
former included presentations on mining, enrichment and reactor construction. The latter focused
on reprocessing, a topic that emerged in most sessions throughout the day. In introducing the topic
of civil nuclear energy in China, a speaker from the UK highlighted that the IAEA offers both low and
high estimates for potential civil nuclear expansion worldwide; anywhere between 2.4% and 68% by
2030. Although a broad range, the majority of new capacity is expected to be in countries outside
the Organisation for Economic Co-operation and Development (OECD). In fact, China is now almost
singlehandedly leading a nuclear renaissance, with 54 reactors that are either operational or under
construction. The 13th Five-Year Plan, covering 201620, anticipates a rise in total installed nuclear
capacity to 150GW by 2030, equivalent to around 10% of domestic power generation.
Having initially bought nuclear technology from traditional suppliers such as Westinghouse Electric
Company, Beijing signed a multibillion-dollar deal in 2006 to acquire four reactors, including the
transfer of intellectual property in addition to reactor technology. The speaker suggested that China
had made a strategic investment in uranium, which appears crucial to the countrys long-term plans
for nuclear energy. Extensive prospecting in its own territory and purchases of mines overseas have
allowed China to triple its uranium resources in the last decade. In terms of enrichment, there has
also been a clear drive for self-sufficiency; demand for enrichment capacity is expected to triple by
2020, which correlates with expansions at facilities in Hanzhong, Emeishan and Lanzhou.
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The Chinese economy continues to grow and carbon dioxide emissions remain a big issue for the
government. The current domestic landscape includes numerous reactor designs, including the
M310 from France, the VVER from Russia and the CANDU from Canada. Third generation nuclear
reactors have provided a base of energy and expertise, but imported fourth generation designs have
also started to come online. A Chinese speaker was keen to stress that, domestically, nuclear
reactors have been delivered on schedule, a fundamental characteristic of a successful nuclear
industry.
Reactors are currently situated on the coast, but the nuclear industry is apparently keen to move
construction to inland areas. Yet, according to a Chinese official, levels of public acceptance would
not allow this. Building on the banks of the Yangtze River, for example, where 30% of the population
resides and 30% of GDP is generated, was believed to be a risk. When asked if anti-nuclear
sentiment was growing in China, it was explained that the population was becoming more aware of
the details. Resistance largely comes from real estate companies who fear the impact on land prices
should there be an accident.
With regard to Chinas exports, nuclear-cooperation agreements have been signed with several
states, including Argentina, Iran, Saudi Arabia and Romania. These often involve innovative financing
models, such as cheap credit and soft loans. The bilateral arrangement with the UK is particularly
interesting. There was discussion of the ongoing controversy regarding the Hinkley Point C facility in
the southwest UK, which has been plagued with concerns regarding financing and design. If the
reactors are constructed, China will provide one third of the 24 billion required.
Since nuclear energy represents just 1.8% of Chinese power, one participant also asked why
renewables, another sector that has seen significant Chinese investment, was not prioritised over
nuclear energy. It was suggested that there was no expectation that non-nuclear technologies would
replace nuclear for meeting Chinas climate, growth, air quality targets and challenges. Moreover,
Chinese participants explained that grid and energy storage systems were not advanced enough to
balance supply and demand. Nuclear provides stable baseload and reactors can be built near key
energy users, minimising losses during transmission.
A UK participant then analysed the potential future role for small modular reactors (SMRs) that are
proliferation resistant. The prevailing concept has traditionally been the bigger the reactor, the
better. The costs involved in building a 1000MW reactor are the same as a 600MW variant for
example, despite the vastly differing outputs. The UK is interested in SMRs, partially because of the
ongoing concerns about the viability of Hinkley Point C, discussed previously. Some of the old first
generation Magnox sites and former coal powered stations could be useful sites for SMRs
throughout the UK. Other benefits include factory construction, which allows for high quality
manufacturing and modular units to be quickly assembled. Access to cooling water and grid
connections are also easier than large reactors. In the event of an accident, the likely exclusion zones
would need to be carefully considered however.
Based on the discussion of SMRs, one participant asked about the prospect of Beijing deploying
floating reactors in the South China Sea. Chinese participants explained that this was likely; floating
reactors would be deployed to allow oil and gas exploration in the region, with the first expected to
be rolled out in 2019. As many as 20 are to be built to achieve economies of scale. The Chinese are
actively cooperating with Russia and also signed a contract with Lloyds Register to develop floating
reactors. There are significant prospective markets, particularly in the Middle East.

Reprocessing
The issue of plutonium reprocessing featured throughout the workshop, in discussions of nuclear
security and non-proliferation and in debates about the regional strategic landscape. A US speaker
characterised the quest for reprocessing and uranium enrichment as the greatest proliferation
challenge today, because of the implications for nuclear hedging. In the context of nuclear security,
participants were reminded that the UK and France still hold Japanese reactor grade plutonium. It
was suggested that Japan should pay both states to dispose of the material; plutonium should be
treated as a liability rather than an asset. A Japanese participant agreed and supported the idea that
Japan should forego its reprocessing activity, given that most nuclear power plants that were shut
down after Fukushima will not come back online. Despite operation being delayed more than 20
times, domestic politics mean that the facility at Rokkasho will continue to receive support however.
More than one participant asked if a shift in Japans policy toward reprocessing would influence
South Korea, which seeks to compete for status. It was suggested that if both countries suspended
their development of this sensitive technology, it would send a strong signal to others interested in
reprocessing, perhaps even China, although Chinese participants indicated that Chinas decision on
reprocessing is driven by other factors.
Such a gesture would seem to contradict a resurgence in the expectations attributed to fast reactors
in China, but also in France, India, Japan, South Korea and Russia. This interest is driven, in part, by
growing global spent fuel inventories and a need for sustainable nuclear development. Simply put,
this involves resource conservation, such as the reduction of uranium consumption per unit of
energy produced, minimising the environmental impact and optimising waste management.
Continued repository design issues mean that reprocessing is becoming popular again.
It was explained that different countries clearly have a range of attitudes towards reprocessing.
Influencing factors include national commitments to nuclear energy; availability of fissile material
resources; size of the nuclear energy programme; whether the nuclear energy programme includes
military or legacy activities; geological prospects for storage or spent fuel materials; and the politics
of nuclear energy, including relationships between states and vendors.
A speaker from the US suggested that reprocessing remains uneconomic. Uranium is currently cheap
and widely available so a once-through fuel cycle is more viable economically. A Chinese speaker
explained that these cost assumptions are based on western economics; Beijing can achieve things
at much lower cost. Yet further questions remain unanswered by China, according to one
participant. These include: Why reprocess? Using what technology? Whose technology? When
should reprocessing be deployed commercially? Where would reprocessing occur? Will it ever be
profitable?
Although these specific questions were not addressed, Chinese participants provided an overview of
Beijings rationale for commercial reprocessing. Comparatively, a once-through fuel cycle means that
only 0.4-0.6% of the available energy in uranium is released. In closing the cycle and employing
reprocessing, this figure jumps to 60%. Similarly, while some criticism is acceptable, Chinese
participants were keen to emphasise that without reprocessing, it would still have rising levels of
spent fuel to deal with. In this sense, reprocessing is not purely a response to electricity demand, but
also a waste storage problem. A South Korean participant echoed this sentiment, suggesting that
despite the huge cost and incomplete technology, South Korea is a small country and cannot plan for
interim storage or geological disposal.

It was also highlighted that China is making decisions related to reprocessing strategically, since
choices about its fast-reactor programme follow closely behind decisions taken by Russia and India
to do the same thing. The risks are taken by India and Russia, allowing China to move forward if
decisions are correct. If not, then the risks are limited. Although several participants remained
unconvinced of Chinas plans, this was deemed a sensible approach to the development of such a
programme.
A detailed summary of the UKs experience of reprocessing was then provided, in which a history of
fast reactors was also outlined. In common with experiences in France and elsewhere, the UK
programme suffered from ongoing technical and financial problems, as well as a realisation that fast
reactors were of questionable need domestically. In the late 1970s, the direction of the UK civil
nuclear programme pointed towards the need for a major new reprocessing facility (THORP) at
Sellafield. The facility came online in 1997 at a cost of 1.8bn. A new Sellafield MOX (mixed oxide
fuel) plant for light water reactor fuel was also completed that year, but closed in 2011. The THORP
facility is also set to close in 2018, once existing contracts are completed. These closures are the
result of massive costs, with upgrades to facilities likely costing 1bn, and questionable commercial
viability, particularly in the wake of the Fukushima accident. The operation of reprocessing facilities
was also highly complex, in terms of safety and management, and with the future of civil nuclear
energy in the UK uncertain, continued investment was not deemed logical. Even if SMRs are
introduced in the UK, they will not create future demand for reprocessing.

Regional strategic nuclear issues

The final session addressed broader strategic issues in the region, several of which had already been
touched upon throughout the workshop. Japanese, South Korean and Chinese participants all
provided perspectives on regional nuclear postures and the security of the Korean Peninsula. A
Japanese speaker highlighted that although it is only after a test or similar provocation that attention
is paid to North Korea, this now represents the most active foreign policy problem for Tokyo
officials. Concerns about Chinas growing nuclear arsenal are currently overshadowed by Russia,
which engages in more overt forms of intimidation. However, Japanese officials had noticed Chinas
strong opposition to THAAD which was perceived to represent a major change in its position on
missile defence. This prompted questions from Chinese participants asking whether Japans missile
defence was designed to counter China as well as the DPRK? The Japanese government has not
made any public statements on this issue, but a Japanese participant suggested that Japans missile
defence was designed to counter all regional threats and was not intended to undermine Sino-US
strategic stability.
The threat posed by the DPRK was assessed by a participant from the ROK, who outlined recent
developments on the Korean Peninsula, most notably the fourth nuclear test in January 2016. In
terms of current capabilities, it is estimated that North Korea may have 10-20 nuclear weapons; it is
assumed to have mastered warhead miniaturisation; capabilities of re-entry technology are still
unknown; and the mating of long-range missile and nuclear device remains a concern. Predictions
for future scenarios vary widely from 20 nuclear weapons and fewer than 5 ICBMS, to 100 nuclear
weapons and 20 ICBMS, by 2020. In response to recent provocations, sanctions have been tightened
in the form of UN Security Council Resolution (UNSCR) 2270. The South Korean speaker highlighted 3
primary loopholes in the text of UNSCR 2270, however. These include the discretionary
determination of whether items subject to inspection are related to nuclear weapons, the

exemption for trade of items related to peoples livelihood and exemptions for humanitarian
assistance, all of which could easily be exploited.
When asked about public perceptions of sanctions in China, one participant believed that UNSCR
2270 had been well communicated to the domestic audience and received wide support. The threat
from North Korea was now real and clear. There used to be an assumption that North Koreas
nuclear programme was reversible, but facts have now established the opposite to be the case,
according to one Chinese participant. He suggested that no one would denuclearise if put in
Pyongyangs position. The speaker predicted that we will witness more tests, a concern for China
given the impact on relations between the US, South Korea and Japan, which are being pushed
closer together by North Korean bellicosity. He suggested that an appreciation of the nasty reality is
required; the DPRK is a nuclear- armed state so the international community should change its goal
and try to make North Korea a responsible nuclear stakeholder. In contrast, the official Chinese
response has now seen DPRK denuclearisation rise to the top of the agenda, usurping previous
priorities of no war on the Korean Peninsula. It opposed THAAD because of the implications for
increased military cooperation among Japan, the ROK and the US.
It was concluded that the situation represents a total failure for all countries concerned. Assessing
the recent past in phases, a Chinese participant suggested that between 1994 and 2002 Pyongyang
still had the intention to exchange nuclear assets for benefits. At this stage, facilities could have been
dismantled. From 2003 to 2008, the DPRK was reluctant to give up its nuclear weapons programme
and was wavering between developing it further or exchanging it for something. For the past 8
years, there has been a determination to develop nuclear capabilities and make it credible. Three
more nuclear tests and demonstrations of missile technology have since occurred. One participant
asked why the recent proposition from North Korea, to stop nuclear testing in return for a cessation
of military exercises conducted by the US and South Korean militaries, was so quickly rebuffed by
the US. The costs of implementation would be low so why would it not be acceptable? A participant
from the US explained that stopping exercises had a cost; it would degrade capabilities. Moreover,
the DPRK would not be giving anything up because another test, based on previous patterns, is not
expected for two years. Furthermore, the US did not want to respond to North Korean aggression
with compromise.