Friday, April 30, 2010

Russia Proposes Nuclear Cooperation with Ukraine

Leo Tolstoy put in his time at Sevastopol.

It’s funny how nuclear energy can sometimes be sucked into larger geopolitical considerations.

Case in point, this week’s proposal by Russian Prime Minister Vladimir Putin to create a nuclear power holding company with Ukraine:

“We have made massive proposals, referring to generation, nuclear power engineering, and nuclear fuel,” Putin told reporters after a meeting with Ukrainian President Viktor Yanukovych in Kiev today. Any cooperation may be phased, Putin said after the surprise visit to Kiev.

On the face of it, it sounds good for both partners:

“Ukraine will get $40 billion to $45 billion of investment from Russia in the next ten years because of a gas agreement reached last week, with fuel supplies subsidized by Russia’s budget, Putin said.”

Russia gets

“…to take “an active part” in upgrading Ukrainian reactors and will allow Ukrainian partners on the Russian market, Putin said. Nuclear cooperation in third countries is also possible, he said.”

But that’s not the whole story. Turns out that last week Russia and Ukraine made another agreement: Russia offered cut-rate natural gas in exchange for extending a lease on a strategic naval base at Sevastopol in the Ukraine:

Viktor Yanukovich, Ukraine’s newly elected president, agreed a deal with President Dmitry Medvedev of Russia last week that gave Moscow a 25-year extension of the right to station its Black Sea fleet in Ukraine’s Crimean peninsula.  In return, Ukraine secured a 30 percent cut in the price of Russian gas deliveries.

Then on Monday of this week, Putin sweetened the deal by offering cooperation on nuclear energy. 

In a way though, it might not be that big of a change after all. Russia heavily influences the Ukrainian nuclear industry already. Just take a look at the Ukraine page from the World Nuclear Association: 

The country's nuclear production was 84.3 billion kWh in 2007, which accounted for 47 percent of total domestic electricity production … All are Russian VVER types, two being 440 MWe    V-312 models and the rest the larger 1000 MWe units - two early models and the rest V-320s.

And that’s not all, they also control the fuel.

Ukrainian uranium concentrate and zirconium alloy are sent to Russia for fuel fabrication … the country depends primarily on Russia to provide other nuclear fuel cycle services also, notably enrichment.

Of course, with many things Russian there are two ways of looking at this. It could be a benign move by Russia to control the fuel cycle and the spread of sensitive technologies, like enrichment. Supporting this point of view is the IAEA Russian fuel bank. Ukraine could source its fuel from Russia without having to develop its own technology. On the other hand, it could all be an attempt to get the port back.

If there’s any larger lesson from this, it may be this: countries, like Russia, which have created a large, vertically-integrated nuclear industry can come into new markets and offer a compelling package on short notice. Not only can they offer nuclear reactors, but they can offer fuel supply, enrichment services, maybe even used fuel take-back. In Russia’s case, they can offer even more: cheap natural gas. It’s all part of some nations using their nuclear industry to forge national champions that can compete on a global scale.

The competition is getting stiff out there.

For more on Ukraine’s energy mix check out the International Energy Agency’s Ukraine page.

For those who want to get into the history, politics [and complexity] of Ukraine/Russian relations, the Siege of Sevastopol and Tolstoy’s first-hand account of it, might be a good place to start.

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