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Publish date: May 30, 2024
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The ban breaks with more than three decades of trade. The US, which hosts more nuclear plants than any other country — 94, compared to 56 in France and China, and 36 in Russia — has actively purchased up to 25% of the enriched uranium product (EUP) it needs from Russia throughout that time. Unlike natural uranium, this uranium has undergone an enrichment process in special centrifuges, increasing the content of the important uranium-235 isotope from 0.7% to about 5%. Only after this can uranium be used to produce nuclear fuel for most types of nuclear power plants worldwide.
Russian centrifuge-based uranium enrichment plants account for up to 40% of the world’s enrichment capacity. This is largely why the Russian nuclear industry has not faced serious official sanctions during the entire Ukraine war. The new US law could become the biggest restriction on Rosatom during this period.
On one hand, not much is likely to change immediately. The law allows for the purchase of enriched uranium from Russia until the beginning of 2028 if the US Department of Energy determines that there is a threat to US national interests or a risk of supply disruption due to the inability to find alternative sources. In such cases, the Department of Energy can approve EUP purchases upon company requests.
Centrus Energy Corp, the largest American buyer of Russian EUP, has already announced its intention to submit such a request. Centrus has been responsible for supplying Russian EUP to the US market and reselling it to US nuclear plant operators since the 1990s, when the US and Russia signed the HEU-LEU (or Megatons to Megawatts) agreement, under which excess weapons-grade uranium from the USSR was processed into EUP for civilian nuclear power plants. Currently, Centrus is the first among American companies to start independent uranium enrichment for new reactor types with government support, but production volumes are still small.
Another American company, Honeywell International, applied for several export licenses to enrich about 8,500 tons of natural uranium in Russia until 2028 even before the law was signed. The company’s plant is the largest conversion facility in the US, where natural uranium — which can be mined anywhere, but the largest uranium-producing countries are Kazakhstan, Canada, Namibia, and Australia — is converted from an oxide form to a fluoride form. After this, the resulting uranium hexafluoride can be sent for enrichment, and this is what the company plans to do in Russia, then transferring the enriched uranium further up the nuclear fuel chain, most likely for the production of fuel for US nuclear power plants.
It is therefore clear that Russian enrichment facilities will continue to operate for customers from the United States. The law mandates a complete ban on the import of Russian EUP from 2028 to 2040. But it is too early to predict how that will go.
On the other hand, the volume of these purchases is likely to decrease. US law limits the allowable purchases to amounts ranging from 476.5 tons in 2024 to 459.1 tons in 2027. Over the past 15 years, the US has on average purchased almost one and a half times more EUP from Russia annually, rarely dropping below the maximum purchase limits specified in the law. For instance, last year, the US purchased just over 700 tons, evidently stockpiling before the ban is enforced.
However, it is unlikely that the effects of the law will be visible this year. The law takes effect 90 days after signing — in mid-August. It is still difficult to say whether the restrictions it describes will apply to the import of uranium in the first half of the year. According to Comtrade data, in the first quarter of 2024, the US has already imported about 117 tons of enriched uranium from Russia worth $256 million — which is a mere quarter of the maximum allowable amount under the law for 2024. However, this is almost half of what was imported in the first quarter of 2023. So overall, it is expected that purchases will decrease in 2024.
Nevertheless, the restrictions could lead to an increase in the cost of uranium enrichment services in both the US and Europe. In 2023, according to Comtrade, the US purchased EUP from Russia at prices on average 20% higher than in 2022. Analysts predict that after the ban is introduced in the US, prices could rise by another 20%, especially if Russia decides to introduce its own restrictions and halt supplies unilaterally.
Within the Western market — which includes the US, the EU, South Korea and Japan, all the biggest EUP consumers — there are currently only two players, aside from Russia, that enrich uranium: Anglo-German-Dutch company Urenco and the French company Orano.
Those two companies currently fulfill up to two-thirds of the need for EUP in both the EU and the US. In the US, half of these supplies come from Urenco’s only plant in New Mexico, and the other half come directly from the EU. Russia had covered the remaining 25-30% of the needs of both the US and the EU. Therefore, Russia’s exit from the supply market to the US will automatically increase demand in the EU enrichment market. In the US, there may be a rush to submit applications for the permitted purchases within the allocated limits.
During the two years of the war, Urenco and Orano have understood where things are headed and announced plans to expand their capacities last year, even before the restrictions on EUP supplies from Russia to the US were introduced. Urenco will expand both its plant in the US and its plants in the EU. Orano plans to expand its French plant and is considering reviving old plans to build a plant in the US. However, these plans, with the announced timelines and expansion volumes, will at best allow replacing the current volume of EUP supplies from Russia to the US in only about four or five years from now. But it is unlikely that they will simultaneously replace supplies from Russia to both the US and the EU. A ban on Russian EUP imports in the EU isn’t expected any time soon unless replacement plans are seriously accelerated. This is under discussion.
Biden’s Russian EUP ban simultaneously unlocked $2.7 billion in federal funds to stimulate domestic EUP production in the US. Considering these funds, the US government plans to award contracts worth $3.4 billion for the supply of domestic low-enriched uranium in June.
In another development, the US, France, the UK, Japan, and Canada last year formed an informal alliance — called the Sapporo-5 — by agreeing to strengthen and expand their nuclear fuel capacities in order to reduce dependence on Russia. To do this, they agreed to allocate $4.2 billion for this — and the US is now allocating its share.
The UK also recently announced the allocation of £300 million to expand the Urenco plant on its territory. France, while remaining the largest purchaser of Russian EUP in the EU, is evidently supporting Orano. Even Japan plans to significantly increase its own enrichment production. Canada’s Cameco is also planning to expand. Cameo is one of the world’s largest uranium suppliers. It also owns Westinghouse, itself one of the world’s the largest supplier of nuclear fuel, which also produces fuels that can be used as alternatives to the Russian fuel that has powered Soviet-built VVER reactors located in Europe.
Thus, the Sapporo-5 alliance politically represents a significant portion of the Western nuclear industry.
All these additional efforts and finances, along with American restrictions, could accelerate the implementation of the plans announced by Urenco and Orano. In principle, new players like the American company Centrus could also emerge in the US enrichment market, but in the short term, most of the growth will still come from the familiar players. Therefore, the current situation, where Rosatom occupies at least 35% of the global uranium enrichment market, may change in the coming years.
The US is the largest buyer of enriched uranium from Russia, accounting for up to 50% of all Russian enrichment services sales (up to 60% in 2023). In monetary terms, this is about $1 billion out of the approximately $2 billion that Rosatom earns in the international EUP market.
In recent years, the EU has been purchasing less EUP from Russia than the US—about $500 million a year. However, they buy a comparable amount of enriched uranium from Russia as part of nuclear fuel supplies for Soviet-designed VVER reactors in Eastern Europe (more details about nuclear fuel imports to the EU can be found here). But the EU is also gradually moving away from this fuel even without official sanctions. As such, over the next five years, Rosatom could lose up to half of its international nuclear fuel revenue, which currently amounts to around $3-4 billion.
Of course, Rosatom will be able to partially compensate for the loss of the Western market with future fuel supplies to other countries where it is currently building nuclear power plants—Turkey, India, China, Egypt, Bangladesh, etc. But $1-2 billion is not a negligible amount. Moreover, Rosatom had plans to expand its operations in the West, the largest nuclear market, with fuel for Western-style reactors, decommissioning services, and much more, all of which now can be forgotten.
Additionally, the main potential buyer, China, can enrich uranium itself and strives to be increasingly self-sufficient in the nuclear field, even though it initially took technologies from abroad, including from Russia, such as uranium enrichment technologies. In the last 20 years, China has built more nuclear power plants than all other countries combined—more than 50 units. It did so by taking the best technologies and designs from around the world—from France, the US, and Russia. Now, China is building nuclear power plants based on its own design and plans to export it.
Therefore, it is still unknown whether China will be more of a partner or a competitor for Rosatom in the future. Nonetheless, Rosatom has no option but to work with China, so it is already turning in that direction in all aspects. Over the past two years, China has increased its purchase volume of Russian enriched uranium, which now exceeds the physical volume of EU purchases. However, uranium is sold to China significantly cheaper than to the West.
At the same time, in other segments of the global nuclear market, primarily in nuclear power plant construction and several new non-nuclear directions, Rosatom’s international revenue is at least twice as high as in the fuel cycle segment and continues to grow. In 2023, Rosatom’s international revenue exceeded $16 billion. Of this, according to Rosatom’s head Alexei Likhachev, more than $12 billion comes from so-called friendly countries. However, unlike uranium and fuel exports, some of these projects, especially nuclear power plant construction, are financed by Russian loans. Nonetheless, the current situation is radically different from a decade ago when uranium supplies to the US were one of the largest components of Rosatom’s exports.
Therefore, it is not expected that Rosatom’s international activities will sharply decrease after the restrictions imposed by the US. Overall, the situation for Rosatom is not critical but still extremely unpleasant and significant, as it breaks cooperation with its largest and most long-standing partner in the fuel sector — which was also the most profitable and beneficial.
The restrictions will have a much greater impact on the Western nuclear industry, providing a significant impetus for strengthening and development.
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