Attached is a copy of a letter to the President from the Acting Chairman
of the Atomic Energy Commission, dated 7 February 1961, which
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reviews projected U.S. uranium
purchases from foreign governments through 1966. I believe the letter
adequately covers the points which the President, at the 1 February 1961
NSC meeting, asked me to investigate
with the AEC, as indicated in your
National Security Action Memorandum No. 4.1
You will note that most of the uranium purchases, involving a net dollar
outlay of $700 million, will be made from Canada and the Union of South
Africa, countries now having foreign exchange problems; that the
contracts with these countries have recently been renegotiated to obtain
the maximum benefit for the U.S.; and that there is no reasonable
expectation that further deferment in purchases or payments can be
negotiated, although the possibility of bartering surplus commodities
for some South African uranium is being explored by the AEC.
Attachment2
Washington,
February 7,
1961.
Letter From the Acting Chairman of
the Atomic Energy Commission (Graham) to President Kennedy
Dear Mr. President: This is to inform you
of the situation with respect to foreign uranium purchases. The
Atomic Energy Commission is obligated to purchase approximately
36,000 tons of uranium oxide between July 1, 1961 and December 31,
1966, involving a net dollar outlay of $700 million. Most of these
purchases will be made from Canada and the Union of South Africa,
countries now having foreign exchange problems. Both contracts have
recently been renegotiated to obtain the maximum benefit for the
United States. There is no reasonable expectation that further
deferment in purchases or payments could be negotiated. Barter of
surplus commodities for some South African uranium is a
possibility.
As shown on the attached tabulation,3 the net payments for Canadian uranium will total
$370 million for deliveries under a contract with
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Eldorado Mining and Refining Limited,
a Canadian Government corporation, and $325 million for uranium from
the Union of South Africa under a contract with the South African
Atomic Energy Board. In each case the Government agency with which
AEC has its contract has
underlying contracts with private uranium producers. The balance of
the uranium (less than one percent, costing about $5 million) will
come from small operations in Australia and Portugal.
The Canadian contracts were recently revised to provide for a
stretch-out in uranium production and deliveries. Delivery of
approximately $140 million worth of uranium which would have been
delivered in 1961 and 1962 has been deferred to later years. All
deliveries are to be completed by the end of 1966. Had it not been
for the stretch-out, Canadian deliveries to the U.S. would have been
largely completed at the end of calendar 1962 with only minor
deliveries coming in 1963. Prior to the time the stretch-out
arrangement was agreed upon, the U.S. had notified the Canadian
Government that it did not intend to exercise its options to
purchase additional quantities of uranium and proposed that a
stretch-out be considered which would involve no additional costs
and no increase in the quantity of uranium being purchased. The
Commission’s decision not to exercise its options, as well as the
stretch-out arrangement, posed major economic and political problems
for the Canadian Government. Although operations will continue over
a longer period, the stretch-out arrangement has cut the Canadian
industry roughly in half with many of the mines being closed. Under
the circumstances there is no reasonable prospect that further
deferrals could be obtained.
South African purchases were formerly made under a joint United
States-United Kingdom contract with the South African Atomic Energy
Board running through 1966. The U.S. bought two-thirds of the
production and the U.K. one-third. This arrangement has also been
recently revised to provide for separate AEC-South African and U.K.
Atomic Energy Authority-South African contracts, the quantities
remaining unchanged. The revised AEC-South African contract provides for a $20 million
reduction in total cost and in a minor deferral of deliveries which
would have been made in F.Y. 1961 and 1962 totalling $7 million.
Under the new arrangement the U.K. will take most of its material
after 1966 but, because South Africa also has a foreign exchange
problem, will make substantial advances for each pound deferred. No
advances are involved in the AEC-South African contract and all deliveries are to be
completed by December 31, 1966. The Commission decided not to extend
South African deliveries beyond 1966 because of possible problems
with domestic producers. Our present domestic uranium program
terminates December 31, 1966.
It is unlikely that a further stretch-out of South African deliveries
and payments can be negotiated. There is a possibility, however,
that
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some portion of the
South African uranium could be paid for with surplus commodities,
provided the U.S. is willing, as an incentive, to purchase
additional quantities of uranium which it does not need. In prior
conversations, Commodity Credit Corporation indicated that the
amount of surplus commodities which might be involved in a barter
arrangement probably would not exceed $20 million annually. Part of
this would go to pay for the additional quantity of uranium which
might be involved.
The problems in attempting barter relate, first, to displacement of
U.S. cash sales of the commodities and, second, to displacement of
sales by friendly governments which also export the commodities
involved. The proposed barter program would undoubtedly cause
resentment on the part of Canada, particularly if it involved
additional uranium purchases—purchases which we refused to make from
Canada. Canada has already raised objections to this country’s
agricultural barter program. Domestic producers also are likely to
raise objections to additional foreign uranium purchases since the
domestic program has been cut back.
Notwithstanding the problems, we propose to explore the matter with
Commodity Credit Corporation and possibly the South Africans to see
what kind of arrangement might be worked out and to better define
any problems which may be involved.
Respectfully yours,
