Negotiations in Canada between the world’s biggest uranium miners produced an agreement at the end of March, which signalled the emergence of Russia and Russian weapons-derived uranium onto the world market.

It might be remembered as the dawn of diversification by the global giants of uranium mining — Cameco, Cogema, Nukem (CCN) and Techsnabexport — and recalled with disdain by anti-nuclear activists as the deal that made it cheaper, easier and politically-expedient to proliferate the naturally radioactive nuclear fuel.

The new commercial agreement grants Cameco and its partners a ‘buy now, pay later’ option on 117 million kilograms of Russian natural uranium derived from high-enriched uranium (HEU) destined for American stockpiles. Russian Techsnabexport is entitled to the remaining 45 million kgs included in the agreement, "to fulfil prior commitments and a proportion of the U.S. import quotas for this material," according to a Cogema press release. The HEU comes from 2,300 Russian nuclear warheads dismantled since 1993. Reuters reported that under the deal, the United States would pay $12 billion over 20 years to buy uranium from the equivalent of 1,000 decommissioned Russian nuclear warheads and use it as fuel in civilian nuclear power plants.

Beginning in 1999 and continuing for 15 years, 27, 000 kgs per year will be shipped from Russia to the U.S., adding to 54,420 kgs already delivered. "The purchase price will be determined on the basis of market prices and taking account of marketing costs, subject to the application of a floor price which will guarantee Russia a minimum revenue," the Cogema press release read.

For the Russian government, the potential increase in disposable state income offered by the commercial agreement is an irresistible alternate to the burden of borrowing from international creditors. Russian Atomic Energy Minister, Yevgeny Adamov, called the anticipated cash influx, "worthy and timely," in a March statement reported by Itar-Tass.

After receiving $325 million from the U.S. government for uranium shipped prior to this year under a 1993 agreement called HEU-LEU, Russia’s new commercial share of the world market will begin at about $US 10.50 per 0.45 kg of natural uranium (U3O8).

Elaine Kergoat, spokesperson for Canadian uranium producer Cameco, said all the parties to the deal had their interests met, with Russia coming out on top.

"What you have is two separate agreements that compliment each other: one is for the natural, one for the enriched component of the material," Kergoat said.

"Our deal is to buy the natural uranium in 1999 for the post-98 deliveries."

Russia will receive cash payment for both radioactive materials, and payments of uranium from the U.S. for the natural uranium Russia uses blending down HEU. Cameco and its partners will purchase the Russian weapons-derived natural uranium from U.S. stockpiles. Uranium not purchased will be sent back to Russia until the Russian stockpile equals the American stockpile of 26 million kgs. Under the terms of the agreement, Russia can then sell its uranium into contracts.

The result is a controlled entry of Russian weapons-derived uranium onto the world market, an important incentive for the deal’s players. The U.S. and Russian Federation governments stabilise world uranium prices by keeping a portion of the world’s supply out of circulation for ten years.

In its annual report, Cameco acknowledges it entered into discussions only on the basis of broader U.S. and Russian government involvement.

"As a further inducement to conclude a commercial agreement, the U.S. Department of Energy promised to defer the sale of approximately 26 million kgs U3O8 of inventory, which includes the 13 million kgs (already paid for) for 10 years," Cameco’s yearly report explains.

Price control
Russia has access to its own HEU derived uranium cache but cannot, under the terms of the agreement, start to sell into contracts until it too has a 26-million-kg stockpile. Russian willingness to manage its own remote inventory is, in theory, to be rewarded by the marketing elan of the world’s biggest uranium producer, and price mechanisms that guarantee a minimum revenue regardless of the market price at the time of delivery.

The inflationary pressure created by CCN’s ability to move uranium into the reactors of its clients and the monitoring of stockpiles by the two governments is what the signatories of the deal are counting on. Global uranium producers seem already to have seen the first dividends of the deal, to the delight of the commercial deal’s Russian signatories.

A Cameco stockholder’s memo notes, "Since the end of 1998, the uranium spot price (market price for contracts of up to a year) has increased by 20 per cent to $US 10.50 per 0.45 kg (of) U3O8." It continued, "… the spot market started 1999 strong, with 1.58 million kgs U3O8 trading in January alone."

For the uranium producers, including Russia’s Techsnexport, acquiring natural uranium through weapons-derived stockpiles, is a far less costly venture than mining for it. As Kergoat put it, "I can assure you, we wouldn’t be involved if there wasn’t money to be made."

Uranium acquisition costs through mining include such overhead as water control, stabilisation of ground surfaces, radiation protection, insurance, licensing fees, handling, etc., according to Cameco’s shareholder report.

The market Russia enters
The optimism and forward-looking gaze characteristic of the deal’s parties is founded on a belief that nuclear energy will maintain its 17 per cent share of rising world electricity production well into the future. Cameco informed its shareholders of an expected increase in world electricity consumption of 3 per cent annually for the next 20 years, and cites the difficulties some countries have meeting Kyoto emissions quotas as reasons for survival of nuclear power.

Russian uranium, Cameco concedes, will likely fill the needs of reactors producing electricity for Eastern Europe, the CIS and some Asian countries. It’s not known whose uranium will fuel the 16 reactors said to be under construction in South Korea.

Russian weapons-derived uranium enters a commercial market where world consumption is still double production, according to a uranium industry report, despite the prescient decisions and discussions in some western countries aimed at neutralising a utility still plagued by dangerous mishaps.