IAEA governors approve first nuclear fuel bank plan

VIENNA (Reuters) - International Atomic Energy Agency governors on Friday approved a Russian plan for a multilateral uranium fuel supply bank to stem the spread of nuclear arms as more countries seek atomic energy.

Backed by Washington, the plan would allow major uranium producer Russia to set up an IAEA-supervised bank to provide low-enriched uranium to countries for their civilian nuclear programs if they can show a perfect non-proliferation record.

It is seen by the U.N. nuclear agency as a way to meet demand from some 60 nations, some in the conflict-ridden Middle East, for technical help in launching atomic energy without spreading proliferation risks.

Iran's controversial enrichment program, which the West suspects is aimed at building atom bombs, helped thrust the plan for an IAEA-supervised fuel bank up the agenda after decades on the political back-burner.

It gained significant momentum earlier this year when U.S. President Barack Obama voiced his strong support. Washington is the IAEA's biggest financial donor.

The scheme was approved by a 23-8 margin with three abstentions and one nation absent from the vote by the 35-member policy-making body of the U.N. nuclear watchdog, after years of lobbying by outgoing IAEA Director-General Mohamed ElBaradei.

Under the plan, Russia would host a 120-tonne LEU reserve to supply the IAEA. Countries would be able to tap the bank if their fuel supply was cut off for political reasons. In theory the bank could be ready to provide LEU from early next year.

A first attempt to advance the idea beyond the drawing board was blocked by developing nations at an IAEA meeting in June.

Resistance waned the second time around on Friday, but some developing states still voiced misgivings the plan could limit their right to set up sovereign atomic energy programs.

PLAN "DISCOURAGES" FUEL PRODUCTION

"The fundamental objective is to discourage states from producing their own fuel," Egypt, which voted no, said in a statement to the gathering.

Developing nations said the idea lacked vital details, such as how fuel would be produced from the low-enriched uranium (LEU), and had warned against going ahead with a plan without consensus on the IAEA board.

"I remain convinced that some such mechanism ... is essential as more and more countries introduce nuclear energy," ElBaradei said in a speech to the governors on Thursday, his last before he retires on November 30 after 12 years in office.

"Our ultimate goal, however, should be the full multinationalization of the sensitive parts of the fuel cycle -- uranium enrichment and spent fuel reprocessing -- as we, hopefully, move toward a world free from nuclear weapons."

Some diplomats said Russia had not done enough to address developing nation concerns. Four South American countries and Egypt, Pakistan, South Africa and Malaysia voted against it.

But India, which had previously led objections to the idea, stepped aside by abstaining from the vote. Along with fellow emerging economic giant China, India is expected to become one of the biggest users of nuclear power.

Other fuel bank plans remain on the table, including the IAEA's own proposal to buy 60-80 tons of LEU using $150 million in member donations and offer it to states at market prices.

(Additional reporting by Mark Heinrich; editing by Andrew Roche)