Political power play

22 May 2016

In the wake of growing tensions between Russia and the West over perceived Russian aggression in Ukraine, sanctions were imposed on Russia. They have been in place for more than two years but, as Judith Perera reports, their impact on the Russian nuclear industry has been limited.

Although Russia's nuclear industry has weathered the worst effects of the US and European sanctions imposed in March 2014 in the wake of Russia's annexation of Crimea, there has been a significant impact on bilateral scientific cooperation between the US and Russia and on cooperation on nuclear security issues.

The 2011 US-Russian Agreement for Cooperation in the Field of Peaceful Uses of Nuclear Energy had opened new opportunities for joint research on a wide range of issues, including reactors, the fuel cycle, radioactive waste handling, nuclear industry and commerce and "shipments... of moderator material, nuclear material, technologies and equipment". The governments agreed to "facilitate commercial relations" in such fields.

A follow-up agreement signed between Russian state nuclear corporation, Rosatom, and the US Department of Energy (DOE) provided the legal framework to expand cooperation between US and Russian nuclear research facilities in areas such as nuclear technology, waste processing, nuclear medicine, non-proliferation, fundamental and applied science, energy and environment. The US and Russia were equal partners, each bore its own costs under the agreement which also regulated access to research sites in accordance with established procedures.

However, in April 2014 the US National Aeronautics and Space Administration (NASA) announced it was severing ties with Russia (except regarding the International Space Station, which relies on Russian rockets). Russia responded in May 2014 by announcing a ban on exports of RD-180 engines, the US uses on its Atlas V rockets to launch satellites into space. Dmitry Rogozin, deputy prime minister and head of the Russian space agency, said Russia will no longer permit NASA to use the International Space Station (ISS) after 2020.

In the same month DOE informed Rosatom that it was indefinitely suspending collaboration on peaceful atom projects. DOE barred Russian scientists from its laboratories and US scientists working for DOE were prohibited from travelling to Russia. There were possible exceptions in three cases: nuclear security; weapons of mass destruction; or top- level national interests. In 2013, 6,700 Russian scientists and other researchers travelled to the US and the previous year more than 2,000 Russians were in permanent employment in US laboratories. Russia's Education and Science Ministry warned of retaliatory measures against American scientists conducting research in Russia.

One exception is a programme run by the Massachusetts Institute of Technology that sends students to work in Russia. “We decided... not to let high-level politics get in the way of this important travel," said Elizabeth Wood, co-director of the programme. "So far we've had no pushback from the governments."

Cooperation is also continuing within the context of the International Thermonuclear Experimental Reactor (ITER) project under construction at Cadarache in France. ITER is an intergovernmental organisation established in 2006. The Parties to the ITER Agreement are China, the European Atomic Energy Community (Euratom), India, Japan, South Korea, Russia and the US. On 14th April Russia's Domestic Agency ITER and International Organization ITER signed the last agreement on supply of the equipment, making Russia "the first ITER partner to complete the process of preparing and ratifying agreements on all 25 systems within the scope of its responsibility," Russian Domestic Agency ITER said.

Nuclear security

Nuclear security cooperation has also been affected by the sanctions. In the early 1990s, in the wake of the Soviet collapse, the US invested billions of dollars under the Cooperative Threat Reduction (CTR) programme to help Russia secure its nuclear materials and facilities. This included building a storage facility for 25,000kg of fissile materials in Chelyabinsk and transferring 58,000 former Soviet nuclear weapon scientists to civilian programmes. It also gave US scientists and officials access to Russian nuclear facilities previously considered secret.

When the CTR programme ended in September 2013 it was replaced by the Rosatom-DOE agreement. By this time, Russia had recovered from the severe financial crash that followed the Soviet collapse and no longer needed US support. The presence of American monitors at sensitive Russian facilities had long caused resentment, industry sources told NEI, and even before the imposition of sanctions Russia had begun to curtail this area of cooperation. Russian authorities argued they could effectively secure their nuclear materials and facilities without US help.

When sanctions were imposed, Russia announced it would no longer accept any US aid to secure its weapons-grade nuclear materials. Joint security projects were cancelled at 18 civilian facilities housing weapons material, as were security upgrades at Russia's seven nuclear 'closed cities'. US nuclear and radiological security assistance to Russia was further constrained by funding restrictions imposed in 2015 by the US Congress.

In its March 2016 annual report to Congress on the global nuclear threat, the DOE's National Nuclear Security Administration (NNSA) said: "Although the vast majority of bilateral nuclear and radiological security cooperation with Russia has ended, DOE/NNSA continues limited activities with nine Rosatom sites and organisations approved for continuing bilateral cooperation, as well as seven non- Rosatom civilian sites."

NNSA also maintains cooperation with nuclear regulator Rostechnadzor. "Limited cooperation related to radiological source recovery and upgrades to source storage facilities also continues. These activities are subject to congressional restrictions on contracts with, or assistance to, the Russian Federation," said the report. Other NNSA work in Russia - which is performed with funding carried over from prior years - focuses on building nuclear and radiological security capacity, using training and technical exchanges and limited equipment procurement and upgrade activities. The report adds: "DOE/NNSA is exploring areas for nuclear security research and development cooperation with Russia that will focus on issues of common concern to both countries. There is also merit in maintaining working level relationships among nuclear security professionals in the United States and Russia through both bilateral and multilateral engagements."

Writing in the Moscow Times in April 2016, Josh Cohen - a former USAID project officer involved in managing economic reform projects in the former Soviet Union – said: "A two year information gap about Russian nuclear security now exists." He went on: "The US should understand that the narrative from the 1990s whereby the US is a donor and Russia is an aid recipient, is no longer acceptable in Moscow. US- Russian nuclear cooperation must therefore be reframed as a partnership of equals, with both sides contributing to the conversation." He stressed the need to "delink nuclear security cooperation with Moscow from US- Russian geopolitical tensions", adding "the consequences from nuclear terrorism are so dire that to do otherwise is foolhardy".

The sanctions also put an end to wider nuclear security cooperation which began with the setting up of the US-Russia Bilateral Presidential Commission in 2009. The commission spawned 21 different working groups including the Nuclear Energy and Nuclear Security Working Group, which comprised five sub-working groups focusing on: highly enriched uranium (HEU) minimisation; nuclear security; plutonium disposition; international safeguards and export controls; and nuclear energy. The NENSWG is co-chaired by Daniel Poneman, US deputy secretary of energy, and Sergey Kiriyenko, director general of the Rosatom State Corporation. There had been six working group meetings since 2009, the most recent in St Petersburg in June 2013. The Commission website now notes the US has temporarily suspended several projects planned under its auspices and that funding for these activities will instead be used to contribute to a package of US assistance to Ukraine.

Recovering HEU

The US and Russia had long-standing cooperation on several programmes aimed at retrieving highly enriched uranium (HEU) fuel (fresh and used) from various research reactors around the world and to convert those reactors to use low enriched fuel instead of HEU. These initiatives are likely to continue, despite sanctions, as they also involve the International Atomic Energy Agency (IAEA).

The Russian Research Reactor Fuel Return (RRRFR) programme started in December 1999 after US Energy Secretary, Bill Richardson, announced the US was prepared to work with Russia and the IAEA to manage and dispose of Russian-origin HEU research reactor fuel stored in a number of countries. In October 2000 then IAEA Director General sent a letter to the governments of relevant countries concerning the elimination of their HEU fuel from Soviet-built research reactors. The programme was launched in 2002.

Between 2002 and 2014 26 shipments totalling 800kg of fresh HEU were returned safely to Russia under contract agreements with the IAEA. Since 2006 32 shipments totalling around 1,320kg HEU used fuel from research sites have also been returned to Russia. In September 2015, the last used HEU fuel was removed from Uzbekistan.

Russia has developed and produced fuel enriched to below 20% to replace HEU fuel for research reactors it had supplied to Hungary, Ukraine, Vietnam, the Czech Republic, Uzbekistan, Libya, Bulgaria, and North Korea. In December 2010 Russia and the US agreed to conduct a preliminary study on the possibility of converting six Russian research reactors but this project is another victim of sanctions.

In 2009 President Obama announced his intention to secure all vulnerable nuclear materials around the world within four years, beginning with "a Global Summit on Nuclear Security." In April 2010 the US hosted the leaders of 47 nations at the first Nuclear Security Summit (NSS), which endorsed the goal of securing vulnerable HEU and plutonium within four years. It called on states to convert civilian facilities using HEU to non-weapons-usable materials.

The second NSS in Seoul in 2012, attended by 53 heads of state, reported progress and pledged to accelerate HEU reduction efforts.

In March 2014 the same countries, with representatives from four international organisations, met for the third NSS in The Hague. The summit focused on strengthening the global nuclear security architecture, including reducing stockpiles of nuclear materials, improving the security of nuclear and radioactive sources, increasing coordination with the nuclear industry and improving international cooperation.

Russia, which had attended the first three meetings, did not attend the fourth and final Summit in March 2016 in Washington. President Vladimir Putin gave notice of Russia's absence during a speech in October 2014. Instead Russia would focus on a similar conference to be held in 2016 by the IAEA, the Russian Foreign Ministry said in a later statement.

Uranium trade continues

The Russia-US cooperation is continuing on some levels, including trade in uranium. The arrival of the final shipment of low- enriched uranium (LEU) from Russia to the USA in December 2013 marked the end of the Megatons to Megawatts programme (HEU Agreement) to downblend weapons- grade uranium. In 1993 the US agreed to buy 500t of Russian 'surplus' HEU from nuclear disarmament and military stockpiles over 20 years, downblended for use as fuel in civil nuclear reactors. The US then transferred to Russia a quantity of natural uranium equivalent to the amount used in the downblending.

The agreement was implemented through a 1994 contract between the US Enrichment Corporation and Rosatom subsidiary Techsnabexport (Tenex), which acted as executive agents for the US and Russian governments. After the agreement was signed the US Enrichment Corporation was later privatised, becoming USEC Inc (and subsequently Centrus). After 2000 the programme was transferred to the NNSA.

USEC continued to purchase LEU from Tenex under a multi-year contract signed between the two companies in March 2011. The LEU is supplied from Russia's commercial enrichment activities, not its weapons stockpile. Tenex began supplying the LEU to USEC in 2013; the amount increased by year to 2015 when it reached half the level supplied under the Megatons to Megawatts programme. In December 2015, under USEC's new name, Centrus Energy Corp, the company agreed with Tenex to extend their contractual relationship until 2026. Daniel Poneman, Centrus president and CEO, said: "The updated agreement reflects the changing fuel market and extends our supply arrangement for a decade, further strengthening the partnership between our two companies - a partnership that has played an indispensable role in US-Russia nuclear cooperation for more than two decades."

Cooperation between Tenex and US power company Exelon was also strengthened. Exelon said it will extend its contract with Tenex when it expires, but will not expand it. Exelon President and CEO Christopher Crane told Sputni that anti-Russian sanctions had no impact on cooperation with Tenex. "They are a good-quality supplier. We have enjoyed the relationship over the years and we plan on continuing to work together," he said.

Nuclear industry unaffected

While Russia's nuclear industry has not been directly affected by Western sanctions the general economic situation has led to cuts
in planned programmes and project delays. However, most nuclear industry companies appear to be relatively unscathed and Russia's international nuclear projects are unaffected.

Most Russian nuclear enterprises are managing well in the face of sanctions and economic recession, with many reporting increased revenue. Last year Tenex increased total revenue to RUB93.4 billion, up 41.2% on with the preceding year, and net profit rose to $191 million. Increased revenue and orders were reported by nuclear utility Rosenergoatom, engineering holding Atomenergomash, nuclear facility repair company Atomenergoremont, design and construction companies OKBM Afrikantov, NIAEP and Atomenergoproekt, and fuel companies Angarsk Electro Chemical Combine and Chepetsky Mechanical Plant. In Russia's biggest uranium mining company the Priargunsky Industrial Mining & Chemical Union, losses were said to have fallen and efficiency increased.

The nuclear companies have, to a large extent, been cushioned by equipment orders for overseas projects which remain a priority. Rosatom director general Sergei Kirienko said last year that Rosatom would not revise plans to build nuclear plants abroad, despite the challenging economic situation. "On the contrary, the macroeconomic situation helps us," he said, adding that the company's portfolio of foreign deals has tripled over the past three years.

The size of Rosatom's foreign order backlog was $101.4 billion in 2014, rising for the first time above $100 billion. In 2016 Rosatom plans to increase its ten-year portfolio of foreign orders by between $20 billion and $130 billion said Alexander Lokshin, first deputy director general of Rosatom, in April. At the end of 2015 the portfolio was 34 nuclear power projects in 13 countries. Lokshin noted that in 2015 Rosatom's foreign revenues for the first time equalled the proceeds from the domestic market.

In 2014 nuclear fuel company Tvel secured contracts with foreign partners that exceeded $3 billion, keeping its ten-year order book above $10 billion. Contracts were signed with Finland, Hungary and Slovakia, as well as for research reactors in the Czech Republic, the Netherlands and Uzbekistan. In March a deal was signed with India for the supply of fuel for Tarapur. Rosatom is continuing to supply nuclear fuel to all Ukrainian operating nuclear plants despite the political turbulence.

Despite the difficult economic and political situation, Russia continues to hold its own in Central Europe with projects and fuel
contracts in Hungary, Bulgaria and the Czech Republic as well as in Finland. Russia is also maintaining its position in the former Soviet states, apart from Ukraine, with projects in Belarus, Armenia and potentially Kazakhstan. In Asia, Russia is building nuclear plants in China, India, Bangladesh and Vietnam and is designing a research reactor for Indonesia. The country is also extending
its nuclear market in the Middle East with projects in Egypt, Jordan and Turkey - although this could be affected by political developments - and it recently signed a cooperation agreement with Algeria. In 2014 an intergovernmental agreement was signed on construction of eight units in Iran - four at Bushehr and four on a new site. Pre- construction works have started on the first two Bushehr units.

In Africa, Russia has agreements with Nigeria and Ghana and is optimistic that it will win contracts in South Africa.

In South America, agreements have been signed with Argentina, Brazil and Bolivia. All these projects make Russia the world's leading exporter of nuclear technology.

The European Union is now resisting US pressure to apply more sanctions and some countries favouring dropping sanctions entirely. Quentin Peel, a senior fellow at the UK Chatham House's Europe programme, has highlighted there were disagreements over sanctions from the start, as Germany tried to mediate between supporters such as Lithuania and Poland and those less convinced such as Italy, Greece, Cyprus and Hungary.

In late April, France's lower house of parliament voted in favour of lifting EU sanctions against Russia, in a non-binding vote that went against the government's recommendation. On 26th April French utility EDF signed an agreement to extend its cooperation with Russian nuclear utility Rosenergoatom in reactor operations, decommissioning and waste management. EDF's executive director for nuclear power plant operations, Dominique Miniere, said: "Our collaboration with Rosenergoatom – which began in 1994 - has blossomed wonderfully. On certain issues of nuclear safety we have moved to the operation, maintenance and repair and the construction of new units."

Russian companies remain excluded from international financial markets and Russia has lost its investment-grade ratings. However, President Vladimir Putin said sanctions have given Russia a strong incentive to diversify away from reliance on oil and imports and will encourage it to develop high-tech industries and boost agricultural production. He said he expects sanctions to continue for years but they will ultimately strengthen Russia.


Privacy Policy
We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.