Nuclear: The Other American and European Dependence on Russia That Nobody Talks About.
Beyond gas and oil, Moscow is also a key player in the atomic sector, spared by Western sanctions, much to the regret of Ukrainians.
Gas, oil, coal. The war in Ukraine, by provoking an energy crisis of unprecedented magnitude, has exposed the links of European countries with the Russian hydrocarbon sector. But another dependence has been little mentioned until now: in the East of the European Union (EU) in particular, some states rely on the Russian nuclear industry to run their power plants and produce up to half of the electricity they need.
While the atomic giant Rosatom is a real instrument of influence for Vladimir Putin's power, in charge of the country's nuclear weapons and involved in the occupation of the Zaporizhzhia power plant in Ukraine, this sector has so far been spared by Western sanctions. This status quo should not prevent the market from being restructured, at least in part, benefiting French players in the process.
One figure illustrates Russia's weight in the nuclear industry: of the 440 reactors in operation around the world, 80 are of Russian design, i.e. of the VVER type.
Over the past decades, Russia has exported more units than any other player. The EU has 18 of the 100 or so units in operation, mainly in the former Soviet bloc countries. In Bulgaria, for example, the two Russian reactors provide one-third of the country's electricity. In the Czech Republic, the 6 units are responsible for nearly 37% of production, while in Hungary the 4 reactors produce nearly half.
Moscow continues to dominate the international nuclear market.
According to the World Nuclear Industry Status Report, of the 53 reactors under construction in mid-2022, 20 were built by the Rosatom group, 17 of them outside Russia. Only France and South Korea are also building reactors (2 each) outside their borders. With more than 300 companies, 275,000 employees and commercial partnerships signed with more than 50 countries, the Federal Atomic Energy Agency Rosatom is a behemoth.
Involved in almost all nuclear countries, it was officially created in 2007 by the Russian president. "Vladimir Putin brought together public and private sector nuclear activities that year," says Mark Hibbs, a nuclear policy expert at the Carnegie Endowment for International Peace. "Putin centralized the entire industry, including military nuclear, in a single organization that was placed directly under his command."
Exemptions for Russian nuclear power
Since then, Rosatom has pursued an offensive strategy, offering to deliver "turnkey" plants. Not only does Russia build, maintain, and provide technical expertise or fuel, but it can also take on the financial cost, even for operations considered risky. One such contract, for four reactors estimated at around $20 billion, was signed in 2010 with Turkey, which had been trying in vain for decades to launch a nuclear program.
The Russians are hyper-competitive; no one in the Organisation for Economic Co-operation and Development can compete with the conditions they offer.
As far as natural uranium is concerned, Russia was the third largest supplier to the EU in 2021 with a 20% market share, according to the European agency Euratom. Kazakhstan is the second largest supplier, and some of the uranium mined in this landlocked country transits through Russian territory. "About 45% of French uranium comes from Kazakhstan, a regime under Russian influence, and transits in Russian cargo ships, which is not neutral," says Pauline Boyer, nuclear campaigner at Greenpeace.
Once extracted, natural uranium must also be "converted" - the ore is purified and transformed into uranium hexafluoride (UF6) - and then "enriched" - the concentration of uranium 235 is increased - before it can be used as fuel. Here too, Rosatom wields real weight: the group controls 25% of the European conversion market and 31% of the enrichment market - figures that rise to about 40% and 46% worldwide.
In addition to the EU, the United States is also heavily dependent on Russia.
"At any moment, Russia could cut the world's available supply of nuclear fuel in half, and the most exposed market in the world is the United States," said Paul Dabbar, former deputy secretary of the US Department of Energy, in late October 2022. In 2021, Rosatom supplied nearly a quarter of the fuel needed for the 93 reactors in the US fleet.
Most of the advanced "fourth generation" reactor designs under development also require uranium enriched to 20%, which only Russia is currently able to provide. The dependence on nuclear power is particularly strong because it is not simply dependent on a material, but also technologies and industrial capacities.
In April 2022, the European Parliament called for a "total embargo" on imports of coal, oil, gas, and nuclear fuel from Russia. But after nine months of war and eight rounds of sanctions, the nuclear industry is one of the few sectors not affected by the restrictions, much to the regret of Ukrainian leaders.
It has even benefited from exemptions: cargo planes coming from Moscow and transporting fuel destined for Slovak and Hungarian power plants have been allowed to circulate despite the closure of European airspace to Russian aircraft.
In economic terms, EU countries have paid about $210 million for raw uranium imports from Russia in 2021. While this is far less than the amount spent on gas or oil purchases, it masks other indirect gains for Russia. "It would be logical to sanction Rosatom, which is involved in the occupation of the Zaporizhzhia plant and thus complicit in Moscow's war strategy, but no one has done so," notes Mark Hibbs.
This nuclear-related exception is explained primarily by the energy context.
While the conflict has deprived Europeans of almost all of their Russian gas supplies, doing without nuclear generation capacity would add to the risk of electricity shortages in the coming winters, which are expected to be particularly tense. In addition, the European Union is committed to a massive reduction in greenhouse gas emissions by the end of the decade.
In July 2022, the EU chose to include nuclear power, a low-carbon source of electricity, in the list of "green" investments to combat global warming. For some countries, sanctioning Rosatom would also mean breaking multiple commercial relationships and long-term commitments. If the nuclear component were to be included in the sanctions, Hungary would likely oppose it.
Lack of qualified people
Another difficulty is the inertia associated with nuclear power. If sanctions were imposed, it could take years to develop reliable alternatives without jeopardizing the safety of the facilities. Most states have sufficient uranium reserves to keep their reactors running for months or even years, but securing new supply contracts can be complex and costly, as can developing new conversion, enrichment, or even expert capabilities.
"Given the decline of the nuclear industry in recent years, there is a real shortage of skilled people who could quickly support countries like Bulgaria or Slovakia," Hibbs added.
But will the war in Ukraine, which exposes the dependence of the EU or the United States on Russian nuclear power, have an impact on the industry?
According to Euratom, the functioning of the market has been "profoundly affected" by geopolitical developments: "This has undermined confidence in what was previously a major nuclear energy partner, weakening the EU's security of supply of nuclear materials and services and exacerbating its dependency problems," writes the institution in a report published in August 2022.
In light of the war in Ukraine, the United States and the European Union must now consider how to reduce their dependence on Rosatom. While most experts believe that the imposition of nuclear sanctions is unlikely, Rosatom's dominance could be partially challenged and the group could lose some market share.
In terms of reactor deliveries, Finland canceled a contract with Rosatom to build the Hanhikivi plant after the conflict broke out. The Russian group's role as a developer of new power plants will be restricted. It can no longer lend to its clients as it used to, as the war has made access to financing more difficult.
The first loss for the nuclear sector due to the war in Ukraine is confidence in Russia, and the second concerns Rosatom's export prospects. The vacuum left by Rosatom will open the market to other players, including France, South Korea, and the United Kingdom. As a very concrete consequence of the war, the French company Orano is now seeking to expand its uranium enrichment capacity, either by building a new facility in the United States, where it is already involved or by increasing the current capacity of the Tricastin plant in France by about 30%. For this second option, the National Commission for Public Debate has already been seized by the group, and a consultation will be organized in 2023.
"There is a clear interest from European and American customers who want to reduce their dependence on Russia," explains Orano. "The process would be faster in France, but it will all depend on how quickly customers commit." Orano is not alone in this upstream cycle niche, where the Anglo-German-Dutch group Urenco is also pushing its luck.
As for fuel, the American Westinghouse had begun supplying certain VVER-type reactors in Ukraine as soon as Russia annexed Crimea in 2014. In the future, it is expected to count new customers such as the Czech Republic, which until now has been supplied by Rosatom subsidiary TVEL. Sweden, for its part, has canceled a contract to import Russian uranium in recent months. For its part, the French company Framatome is developing a fuel under a license purchased from the Russians while working on its technology for the end of the decade.
An urgent need to diversify the supply
A market realignment will, however, at some point require a political push. "Before putting money into new capacity, Western players are going to look to governments to set clear policies," Matt Bowen, a researcher at Columbia University's Center on Global Energy Policy, said in May. "Their concern is that in a year or two, maybe less, Russian products will be allowed back into the markets, causing them to lose their investments."
So far, however, players and states that are thinking about diversifying their sources of supply are doing so quietly, with little debate about ties to the Russian nuclear industry. Moreover, part of the world seems reluctant to question the dominant position held by Rosatom. In recent months, the group has begun construction of Egypt's first reactor at El-Dabaa, in the north of the country, and in July 2022 started construction of the fourth reactor at the Akkuyu plant in Turkey.
In September 2022, Hungary gave the green light for the launch of two new units, and on November 23, 2022, Kyrgyzstan announced that it would study the possibility of building its first nuclear power plant with Russia. In total, the Russian nuclear giant still claims 34 projects abroad for a total of 140 billion dollars.
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