UPDATE: Reports that new megatons to megawatts deal is being brokered on sidelines of Start talks met with scepticism from nuke industry experts

National Nuclear Security Administration

Publish date: November 10, 2009

Written by: Charles Digges

NEW YORK – Part of what is propelling current arms negations between Russia and America, according to officials close to the talks, is apparently renewing a non-proliferation programme under which the United States purchases down-blended Russian bomb grade uranium at marked down prices to power US commercial reactors.

But both international and Russian nuclear experts said on Wednesday that, despite high level anonymous comments coming out of the negotiations, renegotiating the highly enriched uranium destruction deal would, at this point, be nearly impossible.

The non-proliferation agreement called the HEU-LEU, or Megatons to Megawatts programme, expires in 2013, after which Russia’s fuel export giant Teksnabeksport (Tenex) has been granted the right to sell uranium in the United States at whatever price the market will bear. HEU stands for highly enriched uranium and LEU for low enriched uranium.

The driving force behind the reported sideline talks to prolong this agreement that are taking place in Geneva – where a successor to the Strategic Arms Reduction Treaty (Start) is being negotiated –  is a desire by Washington to buy up the uranium that will come from warheads that will be put out of service under the new arms reduction agreement, two American officials anonymously told the New York Times.

Two other officials close to the talks confirmed that a “re- brokering” of the Megatons to Megawatts programme was in the offing to Bellona Web.

A new arms reduction treaty to replace Start has been a centrepiece of the Barack Obama presidency, and could be ready as early as December 5th, officials said yesterday. An extension to Megatons to Megawatts would be icing on that goal.

Why extend Megatons to Megawatts?
But the news of extending the Megatons to Megawatts programme has left many nuclear industry watchers scratching their heads particularly because Russia has recently been granted the right to sell uranium on the US free market without going through Megatons to Megawatts. 

“Well, the whole thing is unclear for me, frankly speaking,” said Igor Kudrik, a Bellona expert on the Russian nuclear industry. 

“Russia has been fighting to get a deal so that they can trade uranium freely and get more money, so how is it possible that (the Russians) would put (Megatons to Megawatts) back into the frame of an agreement, without at the same time upsetting American companies and Russians?” he said. Washington has thus far been short on specific answers.
Kudrik, while supporting the notion of extending the programme, however, noted that times have changed since the programme was inked in 1993.

“I agree it is the right direction, but at the time when HEU-LEU was put into force, Russia was collapsing and disintegrating,” said Kudrik.

“Now things are much more normal compared to the 1990s, and Russia seems to be willing to sell uranium anyway, since it is one of the main sources of income for (Russian state nuclear corporation) Rosatom. So what’s the point of the new agreement?” he said.

Megatons to Megawatts has proved lucrative for US utilities, while at the same time dispensing of surplus Russian weapons grade uranium. Under the deal, some 45 percent of reactor fuel used in America is supplied by down-blending part of Russia’s excess weapons uranium, with 10 percent of that HEU coming from warheads in missiles that had been pointed at the United States.

Another 5 percent comes from dismantled American missiles, according to the Nuclear Energy Institute, a Washington-based lobby for the nuclear industry.

According to an American diplomat and an official with a federal agency in Washington, both of whom spoke anonymously to the New York Times yesterday, Russia and America are quietly negotiating another agreement to continue down-blending Russian HEU after Megatons to Megawatts expires, using some or all of the material from warheads that are likely to be decommissioned as a result of the current arms reduction talks in Geneva.

Two other Washington officials familiar with the Start talks – and the seeming nuances of extending Megatons to Megawatts – confirmed the Times’ report to Bellona Web in a telephone interview, but said they could not comment on any specifics of the programme.

“I only know that I have heard that the idea of some sort of extension to the (Megatons to Megawatts) programme is under discussion,” in Geneva, said one of the officials to Bellona Web on Wednesday, though he did add that new agreement, if it comes through, would be called HEU-2.

How Megatons to Megawatts works
Under the current Megatons to Megawatts programme, the United States purchases through the United State Enrichment Corporation (USEC) – formerly a division of the US Energy Department, and the treaty’s designated agent – HEU, which is down-blended to LEU for use in America’s 104 reactors.

The treaty levied a 100 percent tariff on Russian uranium, making it untenable for Moscow to sell uranium in the United States but through Megatons to Megawatts, and has led to constant complaints from the Russia that USEC is artificially depressing the prices it pays. USEC, for its part, has said that the prices it pays for Russian LEU are an accurate reflection of market values.

“While USEC would welcome the idea of extending Megatons to Megawatts past its expiration in 2013, news reports have indicated for years that the Russians have said there would be no follow up to this program,” Elizabeth Stuckle, a spokeswoman for USEC, told Bellona Web in a telephone interview Wednesday.

“USEC is not aware of any change in this position,” she said.

Russia open for business in 2014
Recent deals worth over $1 billion between Teksnabexport (Tenex), Russia nuclear fuel exporter, and four US nuclear utilities – Pacific Gas &Electric, Ameren Corp, Luminant and Exelon – have also made the reported sideline deals to extend the Megatons to Megawatts programme puzzling.

A decision by an American federal court in late 2006 paved the way for purely commercial uranium deals between Russia and the United States, circumnavigating USEC, beginning in 2014.  In May 2007, Tenex signed a deal worth over $1 billion to supply the four US utilities. Amerem press relations director Michael Cleary said in an email response to questions from Bellona that his company’s Nuclear Management division "prefer not to comment at this time." Calls for comment to Pacific Gas & Electric, Exelon and Luminent were not returned.

Rosatom, according to a spokesman there who asked not to be named, said his company would “have face economic realities,” but also said he had no knowledge of the reported negotiations of the HEU-2 agreement.

Rosatom is deeply involved in recycling weapons materials and will need new supplies as many US-Russian bilateral weapons cuts programmes begin to wind down.

This summer, Obama and Russian President Dmitry Medvedev agreed to set a new limit on delivery vehicles at 500 to 1.100 and a limit on deployed warheads as low as 1,500. The United State currently has 2,200 nuclear warheads deployed, and Russia, 2,800. This agreement, which is anticipated as early as this week, would provide large amounts of raw material for that enterprise.

If the New York Times report, and the sources Bellona Web spoke to are correct about the HEU -2 agreement, there are a number of ways that it could be politically sold.

“It’s a great, easy source” of fuel, Marina Alekseyenkova, an analyst at Renaissance Bank and an expert in the Russian nuclear industry that has profited from the arrangement since the end of the Cold War, told the New York Times.

In Russia, postulated the New York Times, HEU-2 would be useful as a way of making sure the United States is living up to its side of the bargain in the numerous non-proliferation and nuclear weapons destruction treaties that the two countries signed after the collapse of the Soviet Union.

In the United States, these post Cold War  agreements are portrayed as nonproliferation treaties – intended to prevent loose nukes in Russia.

Indeed, under the Cooperative Threat Reduction act, thousands of warheads have been decommissioned. In 1993, when the Megatons to Megawatts agreement was signed, it was also understood that excess weapons materials could be mines for power.

But Kudrik remained sceptical that such political inducements would be viable for selling Russia on HEU – 2, as they would all run counter to Rosatom’s long-stated wishes to break into the American market and play along side big boys like Areva and Siemens. 

Therefore, as enriching raw uranium is more expensive than down-blending HEU, American utility customers may be looking at a price hike.

To make fuel for electricity-generating reactors, uranium is enriched to less than 5 percent of the isotope U-235. To make weapons, it is enriched to about 90 percent U-235.