Rosatom’s nuclear exports surge in 2022

Rosatom’s nuclear exports surge in 2022
Business is booming for Russia's state-owned nuclear power company Rosatom, but it is also increasingly being used as a political tool to bind non-aligned countries to Moscow with generous funding and long-term cheap energy deals. / bne IntelliNews
By Ben Aris in Berlin February 16, 2023

Russia's nuclear exports were already booming well before the war in Ukraine started but now they are growing even faster. After the disaster of Chernobyl in the 80s, Russia has fully modernised its nuclear technology and switched to the VVER 1200 reactors (water-water energetic reactor) that are compliant with the IAEA’s International Nuclear Safety Group (INSAG) recommendations and general considered to be amongst the safest in the world.

And customers around the world are queuing up to buy them. The sales drive was organised by former Prime Minister Sergei Kiriyenko, who presided over Russia during the 1998 financial crisis but was given the job of running Rosatom after leaving office and tasked with selling 40 nuclear power plants (NPPs) internationally, with roughly the same number being added to the Russian domestic power network, including a bevy of small modular reactor (SMRs) that are a cheap way of powering remote mining towns and factories or which can be installed on a ship as mobile power stations.

Russia already has over $100bn of orders for NPP exports at various stages of commitment before the war started but those exports have surged since the invasion a year ago.

The business is especially lucrative, as not only does Russia sell the hardware and do the building, but NPP deals usually come with 60 years of fuel supply and maintenance deals that keep the customers dependent on Russia for decades afterwards. While both Russia and Kazakhstan are big producers of the uranium 235 fuel the NPPs burn in the eastern bloc, processing and refining of the ore is almost all done in Russia.

Rosatom is slowly taking over the role that Gazprom used to have. At the company’s fifth birthday party Russian President Vladimir Putin said during his speech that the company was not just a big revenue earner for the country; it was a major tool of Russia’s foreign policy. Putin spent his first years in office travelling the world doing package “energy & arms” deals that brought in billions of dollars to the exchequer and bound countries more tightly to Moscow, especially in the Emerging Markets.

Trade data compiled by the UK’s Royal United Services Institute (RUSI) show that Russian nuclear fuel and technology sales abroad rose more than 20% in 2022, Bloomberg reports. At the same time, the EU remains heavily dependent on imports of uranium for its numerous reactors; normally French reactors produce some 80% of its power, although in 2022 capacity was cut in half by maintenance problems at several of its NPPs.

Even the US remains heavily dependent on Russian uranium. Rosatom provides about one-fifth of the uranium needed for America’s 92 reactors. In Europe, utilities that generate power for 100mn people rely on the company, Bloomberg reports. Bulgaria, Czechia, Hungary and Slovakia all continued to purchase Rosatom uranium, unable to source the fuel elsewhere.

Ukraine has five working NNPs and was also a Russian customer until recently, when it cut ties and now sources its uranium from Westinghouse Electric Co., a US company. Bulgaria, Finland and Slovakia are among the few European countries that have announced plans to cancel Russian uranium imports and swap to other suppliers.

Allies and Africa

Rosatom successfully sold, financed and built a controversial NPP to Belarus at Astravets, close to the Lithuanian border. Russia is also building Turkey’s first NPP at Akkuyu, which is expected to generate 10% of the country’s power needs when it comes online in the next few years.

President Putin used the project to bind Turkish President Recep Tayyip Erdogan even closer to him when he wired a $20bn “loan” to Ankara in July to cover payments for the next stage of construction of more units just as Turkey was facing a currency crisis after it burned through most of its foreign exchange defending a collapsing lira.

Hungary is also getting the same sort of financial help. Hungary commissioned Rosatom without public tender in 2014 to construct two new 1,200-MW reactors at the Paks NPP, next to the country’s sole NPP, for €12.5bn, financed by a €10bn Russian loan. The Paks NPP provides half of Hungary’s electricity production and meets more than a third of electricity consumption. The new blocks should go operational in 2025-2026, according to the original schedule.

The deal has got Budapest into more hot water with Brussels. The European Commission said in January that it may review the licence for construction work of the two new blocks because Hungary is toying with the idea of reneging on an earlier agreement to not extend the lifespan of the two existing blocks, which it now may keep in operation until 2037.

Rosatom is also in talks with other countries around the world from Iran to India to China for similar deals. Rosatom chief Alexey Likhachev said this month that the company is in talks with about 10 countries on new projects, and three or four are close to signing inter-government deals, Bloomberg reports.

Rosatom has been especially active in Africa as both East and West vie to bring the non-aligned Global South into their respective camps. South Africa already has one Russian reactor and as it finds itself in the midst of a major energy crisis with rolling blackouts across the country, it is in talks with Russia to build a second.

Likewise, Egypt has broken ground on the construction of another NPP at El-Dabaa, 300 km north-west of Cairo, that will come online in 2030. Egypt and Russia signed a deal to build the facility in 2015, and Moscow is reportedly lending Cairo $25bn for the project, covering 85% of the cost, which Rosatom director-general Alexey Likhachev called the "largest project of  Russian-Egyptian co-operation since the Aswan High Dam".

Africa has only one commercial NPP, South Africa's Koeberg plant near Cape Town, but struck by a major power crisis and rolling blackouts, Pretoria is in talks with Russia on the possibility of building a second reactor and has allowed a non-proliferation deal with the US that gave it access to US uranium supplies to expire.

Several other African countries have plans in the works. Nigeria – Africa's largest country by population and biggest in terms of GDP – opened the bidding in March for a 4,000-MW NPP, and Ghana plans to choose a site for a new nuclear facility by year-end. Rosatom has already signed co-operation agreements with both countries, as well as Ethiopia and Zambia, which also have nuclear ambitions.

Russian Foreign Minister Sergei Lavrov met with Ugandan President Yoweri Museveni last autumn, who is also interested in a Russian NPP. Museveni said that people with “limited understanding” want African countries to condemn Russia for its invasion of Ukraine but argued that Moscow had “stood with Africa for the last 100 years” as part of the continent’s anti-colonial movements.

Russia had successfully reactivated old Soviet-era ties from a time when Moscow was viewed as more sympathetic than many Western capitals to the cause of liberation struggles in Africa.

Ukraine calls for sanctions

Still heavily dependent on Russian nuclear power technology and fuel, the West has shied away from sanctioning Russia’s nuclear industry. More banks and high-profile Russians are likely to be included in the tenth package of sanctions that is being prepared at the moment, but Rosatom is conspicuously still absent from the list.

Ukraine is doing its best to ensure that sanctions against Russia's nuclear industry become part of global sanctions. A major money spinner for Moscow, the reactors have also proved useful for cementing the alliance of other power-hungry emerging markets, especially in Africa, as Moscow typically finances the multi-dollar cost of the construction as well.

The failure to include Rosatom has already brought a sharp rebuke from Bankova, which is continuing to try to cut Moscow off from its sources of income.

"There is another sanctions step by our state against the nuclear industry of the terrorist state. By my decree, I put into effect the decision of the National Security and Defence Council on sanctions against 200 people working for the Russian atomic industry," President of Ukraine Volodymyr Zelenskiy said in a video address on February 12.

"We are doing everything so that sanctions against the Russian nuclear industry become part of the global sanctions against Russia for the war. It is not simple. There is some resistance. But there was a time when other restrictions against Russia also seemed difficult to implement," he said.

"Now they are already operating, for example, on oil and oil products from Russia. All elements of the Russian system involved in the war, the provision of terror and the financing of aggression, must be isolated from the world system," Zelenskiy said.

Zelenskiy’s protest was echoed the next day by Poland's ambassador to the EU, Andrzej Sados, who criticised the tenth package, saying the draft is "below Polish expectations'' without sanctions on Rosatom, and also skips over the Russian diamond monopoly that has been excluded following pressure from Antwerp. Gazprom has also been excluded from the UER (Upstream Emission Reduction) system, which provides for trading of emission certificates for hydrocarbon extraction.