The Non-Proliferation Benefits of the Low U.S. Dollar

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In September 2006 billionaire investment guru Warren Buffett joined forces with the Nuclear Threat Initiative (a sister organization to the UN Foundation, which sponsors this blog) to kick start the creation of a “nuclear fuel bank” at the International Atomic Energy Agency. The idea behind a nuclear fuel bank is pretty simple: countries that seek civilian nuclear power must either a) import low-enriched uranium or b) enrich their own uranium. From a country’s perspective, b is generally preferable because it means they are not dependent on external sources of enriched uranium. From a non-proliferation perspective, however, b is worrisome because once countries start enriching their own uranium, it could be only a matter of time until they decide to use that technology to create weapons-grade uranium.

A “nuclear fuel bank” would theoretically obviate the need for countries to enrich their own uranium because the bank would provide a back-up supply of low-enriched uranium should the importer’s supply become disrupted. It is sort of an insurance policy for countries that chose to not develop their own uranium enrichment technologies. It also helps take away the incentive for developing the kind of uranium enrichment technologies that could eventually yield nuclear weapons.

The idea to create a nuclear fuel bank has been around for decades, but in 2006 Buffet breathed new life into it by promising $50 billion to the IAEA as a seed investment to start the bank. His pledge was conditioned on IAEA member states raising $100 million in matching funds by the end of 2008.

So far, the United States pledged $50 million, and Norway and the United Arab Emirates pledged $15 million. It looked like the European Union’s pledge of 25 million euros would leave the bank just shy of the $100 million mark. Then this happened:

The dollar’s 12 percent slide since Dec. 10 is helping the International Atomic Energy Agency beat a year-end deadline to win $50 million from Buffett, money he offered on condition UN member states raise $100 million in matching funds. Euro appreciation wiped out a $3 million shortfall last week in the matched funds, when the European Union said it would give 25 million euros ($36.6 million) to the project.

So there you have it. The declining dollar to the rescue.

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