Court decisions stymie Russian-American non-proliferation agreement, and pave way for a Moscow uranium boom

Trasportation of low-enriched uranium from Russia to the United States under the HEU-LEU agreement

Publish date: March 27, 2008

Written by: Charles Digges

Recent US court decisions eliminating high tariffs that blocked imports of Russian uranium to the United States are threatening to unravel efforts geared toward continuing to reduce Russia’s stockpiles of weapons-grade uranium, Washington nonproliferation officials have said in recent interviews.

Meanwhile, Russian officials are anxious to cash in now that the tariffs have been nixed, and in the words of officials from both the US and Russian nuclear establishments, Moscow has little interest in extending noncommercial non-proliferation-based uranium exports to the United States now that they have the legal right to treat Washington as just another customer.

The US court decisions torpedoing anti-dumping measures that have blocked Russia’s exports of uranium to the United States – except for those covered by the 1993 Megatons to Megawatts agreement, which ships down blending highly enriched uranium (HEU) to low enriched uranium (LEU) for use in US commercial reactors – have prompted the Bush Administration to seek legislation in Congress overturning the court rulings lifting the prohibitive tariffs against Russian uranium, World Politics Review reported.

The 1993 Megatons to Megawatts, also known as the HEU-LEU programme, envisions down-blending 500 metric tons of Russia weapons HEU for use in US reactors over a 20-year period ending in 2013. To date, the programme has down-blended 325 metric tons of HEU – the equivalent of 13,000 nuclear warheads, according to statistics provided by USEC, the US uranium enrichment giant, which facilities the HEU-LEU programme with Russia and the domestic sales of the down-blended fuel.

The nonproliferation programme was largely protected by onerous tariffs of 118 percent the value of uranium imported from Russia outside of the programme. But in January, a US trade court found in favour of a 2006 suit lodged by Sergei Kiriyenko, head of Russia’s atomic energy agency Rosatom, and Russia’s Tekhnabexport (Tenex), Russia’s nuclear fuel producer, asking that the barriers be removed.

In the suit, Tenex said it was losing out on $1.1 billion a year in possible uranium import revenues to the United States, given the fixed price per kilogram of uranium that was independent of market fluctuations assigned by the HEU-LEU programme.

According to a 2007 study conducted by Tenex and Russian daily Kommersant, Russia’s missed revenues for sales to the United States had doubled. By contrast, Russia has been making $400 million to $500 million annually on sales under the HEU- LEU agreement, for a 14-year total of $4.6 billion according to USEC’s website.

Russia’s accrued earnings in uranium sales under HEU-LEU are well below the current $185 per kilogram world market price for uranium, which is on the rise.

Commercial uranium to arrive in US in 2011

U.S. utilities and Russian atomic energy officials increasingly have chafed at the HEU-LEU agreement restrictions because Russia has been unable to take full advantage of its vast uranium-enrichment capacity – nearly half of the world’s total – at a time that enriched uranium prices have been soaring.

Russian officials have pursued both diplomatic and legal strategies to make greater inroads into the US market. Diplomatically, they have sought to ensure that they have access to the US market after the suspension agreement ends in 2013, and that they can take the more lucrative path of enriching natural uranium rather than down-blending HEU.

Following the January trade court order, US Secretary of Commerce Carlos Gutierrez and Kiriyenko, signed a pact on February 1st that will allow uranium that is not down-blended from weapons to begin trickling into the US market in 2011. Such imports will be permitted to constitute about 20 percent of total U.S. imports beginning in 2014, when the suspension agreement will have expired.

The Russian government is predicting a bonanza in revenues: Even under the restrictions of the HEU-LEU agreement, some 40 to 44 percent of US commercial reactors are fueled by uranium obtained under the agreement. Russia is counting on this same degree of dependence for competitive prices.

White House says free trade threatens nonproliferation
Bush administration officials have warned US Congress that the court decisions could affect not only the viability of HEU-LEU, but threaten the ability of the US government to negotiate future agreements that could lead to further down-blending beyond the remaining 175 metric tons of Russian HEU still has slated for conversion by 2013.

Before the programme began, the total Soviet-era HEU weapons stockpile was estimated at about 1,250 metric tons, according to US and Russian officials.

Bush administration officials urged the US Senate Energy and Commerce Committee March 5th to support legislation overturning the decisions, particularly if the US Supreme Court does not act on an administration appeal to strike them down.

"While we are committed to facilitating Russia’s transition into the US nuclear market as a commercial partner, we believe it should be accomplished in ways that advance our national security, nonproliferation, and energy interests," testified William H. Tobey, deputy administrator for nuclear nonproliferation at the Department of Energy’s semi-autonomous National Nuclear Security Administration.

Other legal avenues for Russian uranium into the US
Legally, Russia and US utilities have sought to take advantage of a recent case involving the European enrichment consortium EURODIF to find cracks in the original 1993 antidumping judgment, World Politics Review Reported.

In the 2005 EURODIF case, the US Court of International Trade (CIT) ruled that imports of uranium mined in other countries but enriched by EURODIF could not be considered under antidumping law because EURODIF was just providing an enrichment service for utilities. Services, unlike goods, are not subject to duties. The international trade court’s ruling was upheld in September 2007 by the US Court of Appeals for the Federal Circuit.

Tenex and US utilities won a similar judgment from the CIT in September 2007 after making a similar plea. If upheld, that judgment would immediately free Russia to sell to the United States uranium mined by producers such as Kazakhstan and Australia by indicating that Russia had simply supplied the enrichment services.

Russia recently signed enrichment agreements with both countries, which boast two of the world’s largest reserves of uranium.

The Bush administration has opposed the judgments both on national security and commercial grounds. The DOE’s Tobey said that the court judgments threaten not only the current agreement but the ability of the United States to entice Russia into further down-blending of nuclear weapons-usable material into reactor fuel.

Tobey has acknowledged in recent interviews that Russia has shown little interest in singing off on another agreement similar to the HEU-LEU agreement, and indicated that an effort in 2002 to strike another down-blending agreement foundered against the shoals of cost issues and Russia’s preference to use any down-blended uranium to fuel its own power plants in order to profit from the export trade.

But Tobey said that: "while we can’t predict whether Russia will be persuaded to enter into a future HEU agreement, we can certainly foresee no progress in the absence of incentives, incentives that the EURODIF decision effectively undercuts."

Tobey said that progress in negotiating a future agreement could serve several US nonproliferation goals. For example, it would represent a concrete step to fulfill US commitments under the nuclear Nonproliferation Treaty (NPT) to pursue nuclear disarmament.

Commercial concerns are not far from centre stage
Tobey and David Spooner, assistant secretary for import administration in the Department of Commerce, told
World Politics Review that the court decisions lifting the tariffs on Russian uranium also threaten the potential commercial viability of several firms that have planned to build enrichment plants in the United States to fill the market gap anticipated in 2013.

In an effort to prevent these effects, the Bush administration has appealed the EURODIF case to the US Supreme Court, said World Politics Review. It has also offered its support for legislation by several Kentucky lawmakers, including Senate Republican Leader Mitch McConnell, to alter the law so that Russian enriched uranium would be subject to the February 1st agreement, regardless of the origin of the natural uranium.

Meanwhile, New Mexico Republican Senator Pete Domenici, who is active in the US-Russian nonproliferation establishment, is said to be circulating legislation that would permit additional imports from Russia beyond those in the February 1st agreement for uranium down-blended from Russian weapons.

Nuclear interest under the red herring of CO2 reductions
Worldwide interest in nuclear power has been growing because of rising prices for fossil fuels and the fact that these fuels contribute to global climate change. Countries from Europe, to North America and the Middle East have all been pursuing vast increases in nuclear builds both at home and exporting them to countries that don’t have the technology in the interest of lowering world wide CO2 emisisions.

Yet the cash to be made by nuclear merchant nations like Russia and France – and the energy technology that is easily convertible to weapons programmes – have been the prime mover in the international nuclear boom. If every country that is currently contracting for domestic and foreign expansions in nuclear power were to complete these plants over even the next five years, several environmental studies show that the plants would cut worldwide carbon emissions by a mere 4 percent.

Bellona has been chief among international organisations to point out that the average cost of building modern nuclear power plants cost $10 billion on average and take more than 1ooyears to come online – far beyond the date that irreversible damage will have been wrought on the climate.

Bellona further asserts that international spending on nuclear power will be far higher and ultimately disastrous in comparison to spending a fraction of the cash earmarked for nuclear on renewable sources and carbon capture and storage – technologies that are ready to be deployed today, not a decade from now.

And after this world nuclear build is complete, there remains the question of what to do with the waste, which no country yet has an adequate solution for.