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Russia Inks Commercial Pact with US to sell Uranium

russia-inks-commercial-pact-with-us-to-sell-uraniumRussia, a large supplier of nuclear-reactor fuel to Europe and Asia, has signed its first purely commercial contract to supply low-enriched uranium to United States utilities worth one billion dollars. This was first such deals between the two countries.

On signing, Russia’s nuclear-fuel trade with the US will shift to a commercial footing, similar to Russia’s dealings with other consumers of fuel, like France and the Netherlands, both old buyers of Russian uranium.

Techsnabexport (Tenex), the export arm of the Russia’s Federal Nuclear Energy Agency (Rosatom), signed the three US enrichment contracts with Fuelco LLC – a partnership established in 2003 by AmerenUE, Luminant and Pacific Gas & Electric (PG&E) for the procurement of nuclear fuel products and services. The contracts with Tenex are for the direct supply of enriched uranium to the three US utilities between 2014 and 2020. The enriched uranium will be supplied from one or more of the four centrifuge enrichment plants in Russia.

The three US companies were named as Luminant, Ameren UE and Pacific Oil and Gas.

“The deal is worth one billion dollars (700 million euros) and runs from 2014 to 2020,” Novikov said.

The agreement on the deliveries followed a deal signed last year by Washington and Moscow which authorised Russian uranium exports to the US civil nuclear power industry.
For the US, the change is a sign that Washington is acquiesce to the idea of a major Russian role not only in the international nuclear power market, but also in the domestic market. Russia’s outsize role in supplying uranium to American utilities had previously been justified because the fuel was a byproduct of a program to eliminate nuclear weapons. Now the Russians will be selling nuclear fuel from virgin uranium.

Yet the contract signing, after North Korea’s nuclear test recently, also underscores a counterintuitive element of American nonproliferation policies. However, by encouraging the commercial availability of Russian enrichment services, the US deprives other countries of the rationale to have enrichment programs of their own.

As a legacy of the cold war, Russia possesses about 40 percent of the world’s uranium enrichment capacity, much more than it needs to service its domestic reactors, and it has sought direct access to the American utilities market for years.

“We are finally working on the principle of mutual profit,” Sergei G. Novikov, a spokesman for the Russian state nuclear energy company, Rosatom, said.

Techsnabexport, the Russian state company that exports low-enriched uranium, is expected to sign the contract in Moscow with a consortium of American nuclear companies. Techsnabexport declined to identify its American partners or the size of the contract.

Russia is already the largest supplier of enriched uranium to American utilities and provides about half of all uranium consumed in civilian reactors in the US.

Yet Russia has been prohibited from selling directly to the utilities by provisions of American law to prevent dumping at below-market prices, and it was compelled to deal only through a monopoly importer, the United States Enrichment Corporation.

The company was originally part of the United States Department of Energy, and the megaton-to-megawatts deal was a government-to-government agreement wherein Russia and the US sought to agree upon a way of safely disposing this extraneous uranium. What eventually emerged from this concern was the 1993 US-Russia Highly Enriched Uranium Agreement, commonly referred to as “the HEU deal” or the “Megatons to Megawatts”.

In a negotiated settlement in February 2008, the US agreed to allow Russia to sell low-enriched uranium directly to domestic utilities without the involvement of the enrichment corporation.

Nuclear reactors run on uranium that is composed of 3 to 5 percent uranium 235. In nature, uranium is only 0.7 percent uranium 235.

Uranium used in weapons and in the reactors that power nuclear submarines use more than 90 percent uranium 235. “Enrichment” means raising the proportion of 235 compared with the dominant type, 238, and the Russian industry was set up to provide large volumes of high-enriched uranium for weapons and marine reactors.

Russia is a major supplier to the developing world by tapping this cold war-era military industrial base. It has provided 80 tonnes of low-enriched uranium manufactured into fuel assemblies to Iran for use in that country’s Bushehr reactor, for a price of $46 million, according to Atomstroyexport, the Russian contractor building the reactor.

Tenex also announced that it had signed a long-term uranium enrichment contract with Japan’s Chubu Electric Power Co. The contracts mark the first direct supply of enrichment services to the two countries.

This is the first contract signed between Russia and Japan since the two countries signed an intergovernmental agreement on the peaceful use of nuclear energy earlier in May.
Tenex said that the contract will enable Chubu to cover part of its enriched uranium services requirements until the early 2020s.

In a statement, Tenex said, “The contract between Tenex and Chubu Electric will benefit both parties. The Japanese company has obtained guarantees of long-term supply of enriched uranium while Tenex will be able to show itself and its products to other Japanese companies.”