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By Hannah Thoburn,
Reuters,
6 May 2015

Russia building nuclear reactors - and influence - around the globe

Hannah Thoburn is a Eurasia analyst at the Foreign Policy Initiative. She tweets on Russia and Ukraine at @HannahThoburn. The opinions expressed here are her own.

(Reuters) - Russia has been notoriously brazen in using state-owned companies as instruments of national power. President Vladimir Putin`s natural-gas wars with Belarus and Ukraine made headlines and sometimes left substantial parts of Europe in the cold. But Moscow`s exploits in other energy-related areas have been less noticed.

Recent revelations about the concerted Russian effort to buy up uranium resources across the globe may change that. For Moscow`s state-owned nuclear-energy company, Rosatom, has made successful inroads into markets around the world. It is Rosatom - not France`s Areva or the United States` Westinghouse - that has 29 nuclear reactors in various stages of planning and construction in more than a dozen countries, the largest number of nuclear reactors being built internationally. In contrast, Areva, though largely owned by the French state, has not sold one reactor since 2007.

Much of Rosatom`s success can be ascribed to the strong support provided by the Russian government. Moscow recognized roughly 10 to 15 years ago that Rosatom`s work enables Russia to add another energy-related means of extending its long-term political influence throughout the world. Unlike oil or gas projects, Russia`s nuclear developments need not be in neighboring countries or even in its region - a fact that broadens the Kremlin`s investment options.

Globe-trotting deals

The countries that Russia and its state-owned nuclear company have signed agreements with in the past year are diverse indeed. The most recent deal is with Jordan, a land-locked, energy-poor Middle Eastern nation, which just agreed to have Rosatom complete two nuclear reactors by 2022.

Less than a month before the Jordanian agreement, Putin finalized a deal with Hungary for Rosatom to build and install two reactors to the already existing Soviet-built plant at Paks in south-central Hungary. The deal has come under intense scrutiny from the European Union over the source of the nuclear fuel, but looks set to go ahead.

Only days before the Hungary deal, Putin used his visit to Egypt to conclude a preliminary agreement with Egyptian President Abdel Fattah el-Sisi. Moscow is set to build Egypt`s first nuclear power plant, in the northern city of Alexandria.

In November, Russia signed a contract with Iran to build two more reactors at the Bushehr site, where Russia has already built one reactor that is now operational. The deal left open the possibility of Rosatom building an additional four reactors at a site yet to be determined.

India has long had a relationship with Rosatom, as New Delhi has worked desperately over the past years to increase its electricity production capacity. A Russian-built reactor came online at the Kudankulam Nuclear Power Plant in 2013, a project conceived under the Soviet regime. Another reactor is to begin operation at Kudankulam later this year. Two more nuclear reactors are planned for construction at the same site. When Putin visited India in December 2014, the two governments confirmed that their cooperation in the nuclear sector would continue, with at least 10 more reactors planned in the coming years.

In northern Finland, Rosatom has started preliminary work on a site where a new nuclear plant is scheduled to come online in 2024. Turkey`s first nuclear plant, also built by Rosatom, is set to break ground this spring.

Rosatom is also looking toward Latin America. While Putin was touring South America in July 2014, the Russian leader and Argentine President Cristina Kirchner signed nuclear energy cooperation agreements and in April 2015 agreed to have Rosatom build a reactor at the Atucha-3 plant outside Buenos Aires. In February 2015, Rosatom concluded an agreement with Brazil`s National Nuclear Energy Commission to provide supplies of Molybdenium-99, an element used in many nonmilitary nuclear applications.

Crucial Moscow support

So why, tender after tender, are Russia and Rosatom having more success than Western nuclear firms? There are four key reasons:

Favorable financing. Though Russia may be hurting for cash because of international sanctions, Moscow is still willing to undertake projects that promise long-term gains. The returns are expected to be more than financial. The Putin regime sees these projects as part of its national strategy. It is willing to heavily subsidize Rosatom and also provide loans to countries too poor to afford its products. These subsidies mean that Rosatom can sell nuclear reactors at a far lower price than its competitors.

Rosatom`s Build, Own and Operate scheme. Many developing countries are keen to develop nuclear power as a source of comparatively cheap energy but are unable to raise the funds to build reactors. In addition, they have neither the desire nor the expertise to operate the reactors once they are built. The build, own and operate deals remove these obstacles and put the responsibility on the Russians. But they also hold the countries hostage to Russian desires and demands. Under these controversial deals, Russia and Rosatom provide nuclear fuel, processing when it has been depleted, education for workers and technicians, maintenance and installation of any needed upgrades. Turkey`s new plant at Akkuyu is the first set to be built under these conditions.

Rosatom`s relative freedom from governmental oversight. In comparison to the world`s other large companies engaged in nuclear construction, Areva of France, Westinghouse of the United States and TEPCO of Japan, Rosatom is not dissuaded from building in certain countries. In contrast, U.S. companies are prevented from building reactors in all but the 46 countries with which the United States has already concluded so-called 123 Agreements on the sharing of nuclear expertise. Countries such as Vietnam and Bangladesh, where Rosatom is building reactors, are not on that list, effectively keeping U.S. companies from even competing for those deals.

Deal sweeteners. In certain circumstances, a nuclear deal with Russia is only part of a larger package. Vietnam`s collaboration with Russia, for example, has also allowed it to purchase submarines and other military equipment from Moscow.

West versus Rosatom

For all these reasons, competing against Russia and Rosatom has become increasingly difficult for Western corporations, which are steadily falling behind.

France`s Areva, for example, is in serious financial straits and must address recent revelations of technological problems with one of its reactor designs. Westinghouse is hamstrung by Americans` reluctance to build new reactors. Foreign buyers often want to see how the reactor models they decide to build are running in a company`s base, and Westinghouse has nothing to show them. Japanese companies have been adversely affected by the 2011 meltdowns at the Fukushima power plant.

Meanwhile, Rosatom, backed by the full power of the Putin government, is expanding its international reach and, in doing so, widening the scope of Russian power. As it has begun to do in other arenas - media and finance, for example - Europe and the United States must identify and counter Russian influence in the energy sphere.

Sooner or later, Washington`s and Brussels` instinct to ignore these challenges will not only seriously undermine Western businesses, it will also cede to Russia the international influence it so ardently seeks to purchase. (Hannah Thoburn)


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