Adamov sacked for unprofitable proliferation

Publish date: March 29, 2001

Written by: Rashid Alimov

Russian nuclear minister Yevgeny Adamov was sacked. One of the reasons may be the international projects carried out by Minatom, which brought no profit and undermined Russia’s non-proliferation obligations.

The question of sacking the head of the Russian Ministry for Nuclear Energy, Minatom, was raised by the presidential administration on March 22d, envirogroup Ecodefense! said in its press release. On that day the Russian State Duma voted to postpone the second reading of the bills calling for spent fuel import to Russia. The majority of the Duma members voted in favour of the bills in the first reading in December 2000.

The vote result was explained by the unfavourable relation towards the bills from the presidential administration. The bills were very unpopular among the Russian population. Polls showed that as many as 90% were against spent fuel import into the country.

A couple of weeks before the vote, Duma’s anticorruption commission revealed a report, which outlined Adamov’s engagement in various commercial enterprises, his personnel policy that undermined nuclear safety etc.

Despite all that Adamov seemed to be confident. His public statements were focused on the fact that Minatom may be the only agency in Russia, which works for the benefit of the Russian budget. The importation of spent nuclear fuel will take Russia out into the international market of high technologies rather than turning the country into a nuclear waste dump, Adamov said.

Adamov enjoyed trust from the presidential administration. There is no doubt that it was nuclear ministry’s initiative to have President Putin talking about nuclear energy that would exclude usage of weapon grade uranium and plutonium at the UN Millennium Summit in 2000. A number of Russian scientists pointed later that the idea could not be implemented technically. Academician Nikolay Ponomarev-Stepnoy wrote that “such proposals are not proved scientifically, their basic principles are doubtful”.

But any trust has its limits. Minatom’s engagement in commercial projects beneficial for its leader and his companions, but economically unfavourable for Russia and undermining the non-proliferation efforts, could play a decisive role when decision was taken to sack the minister.

The analysis of the international projects carried out by Minatom prove that the situation is not so bright as the former minister and businessman Yevgeny Adamov tried to picture.

A billion revenue

According to Minatom’s annual report 2000, published on March 22nd 2001, the nuclear exports were increased and maintain its place in the goods and services market for nuclear fuel cycle.

The total export value of Minatom amounted to $2.3 billion, which is almost $400 million more than in 1999. It means a 20% increase, the report says.


The major part of the export revenue, however, came from the US-Russian deal, under which the USA agreed to buy 500 tonnes of highly enriched uranium blended down for burning in American nuclear power plants. During the last year all the supplies and payments were carried out in consent with schedule, the report says.

The HEU-LEU (highly enriched uranium – low enriched uranium) contract was signed in 1993. Russia sells to the USA uranium extracted from nuclear weapons resulting from the nuclear disarmament programs. “It was not until the year 2000, that the annual LEU supplies to USA and the natural component return to Russia were completely fulfilled. The funds received were spent on weapon reduction, nuclear submarine decommissioning and nuclear safety programs,” the report says.

In 2000, uranium prices in the world market went down due to oversupply. As a result, USEC Corp., the American executor of the contract, suffered losses. Having regarded the state of the market, Minatom offered USEC to buy additional uranium volumes for lower prices. At the same time, Russia said the prices for the raw materials, being exported to the USA under the HEU-LEU contract, could be reduced.

From June 1995 and through October 2000, the United States paid Russia $1.6bn for slightly more that one-fifth of the 500 tonnes of uranium. The deal is valid from 1993 and until 2013, totalling $12bn.

The major funds for Minatom-USA collaboration were provided through grants, appropriated by the US Congress for technical assistance for nuclear disarmament in Russia. For the fiscal year 2000, that began in October 1st 1999, the US Congress allotted ca. $236.5m. President Bush’s proposed fiscal 2002 budget would cut spending for Russia nuclear non-proliferation activities by more than $72m.

Loans and barter contracts

Other Minatom’s contracts abroad are covered through either loans or barter agreements, without bringing in the much-desired cash.

In 2000, Minatom continued collaborating with China, Iran, India, Bulgaria, Slovakia and Czech Republic in building, reconstructing and upgrade of nuclear power plants (NPP’s) units.

The increase of the NPP building exports is provided today, most of all, by Minatom’s activities in the Asian market. Two 1000-megawatt units are being built for Tienwan NPP in China, one 1000 megawatt unit is being constructed for Bushehr NPP in Iran. Now the ministry works on the feasibility study on Koodankulam NPP in India (two 1000-megawatt units).

“All Minatom’s projects are not economical, but rather political,” co-chairman of Ecodefense! envirogroup Vladimir Slivyak said in interview with Russian daily Segodnya. Russian state finances almost all Minatom’s contracts abroad, often without excepting that the loans will be ever paid back. As an example, Mr. Slivyak cited Russian interest-free $27m loan to Cuba, provided in 1997. Until now Cuba has not started paying back to Russia Soviet loans totalling $20bn.

Bushehr NPP in Iran

Russia does not allot funds for building of Bushehr NPP in Iran openly, but Mr. Slivyak pointed at the concealed financing. Russia builds and exports to Iran the required equipment at its own expense. The deal has one more feature: when signing the contract, Russia undertook obligations hard to fulfil. The reactor was to be completed in the end of 2001. According to the present arrangement, discussed between Iranian President Mohammed Khatami and Russian President Vladimir Putin during Khatami’s recent visit to Russia, Bushehr NPP will start producing electricity by the end of 2003. But observers doubt the reactor will be completed by that time.

Despite Iran’s great political and economical interest in collaboration with Russia, Minatom accepted the agreement, stipulating that Iran prepays only 5% of the deal cost, and about 20% will be covered by barter trade. “Except for several persons in Atomprom [branch of Minatom], nobody makes any profit on the Bushehr NPP construction, ” Mr Slivyak says.

Now Minatom works on a feasibility study for the second unit at the Iranian NPP in Bushehr. Both the USA and Israel voiced their concern over the Russian project in Iran, suspecting that Iran may use the NPP to develop nuclear weapons.

According to Economist (UK), Minatom “pursues its own policy”. The agency is willing to transfer nuclear know-how to a country accused of sponsoring terrorism, selling a laser technology of uranium enrichment. This technology may help Iran to produce nuclear bomb. Iran signed the Non-Proliferation Treaty, but has not abandoned its nuclear ambitions. Thus, the low profitable civil contract may have been recovered through a secret one.

Secret budget and China

Most part of Minatom’s budget is secret, which gives the ground for NGO’s to accuse the ministry of concealing information about nuclear deals.

Russian budget in 1999 earmarked up to $160m for building a NPP in China. How the money was spent, remains unknown. Under governmental decree from July 19th 1998, Minatom itself diverts funds allotted from the budget, including equipment exports and the NPP construction. The ministry controls prices, financial and commercial terms of the contracts and deals with the suppliers.

80% of Russian loans for NPP’s building in India and China are paid back in the form of mass consumption goods supply. Equipment supplies for Liangyungan NPP are to be recompensed with goods from China for 90%. Russian official Vneshtorg bank allots from $2.5bn to $3bn for 13 years. China’s advance is 10%. 5% out of this sum are to be paid on signing the contract (2.5% in goods), another 5% are to be paid in the course of building. The pay back of loans is to begin two years after the first unit put into operation. That is planned for 2004-2005, but the process may require 10 years. It means, that the provided loans will be paid back only in 20-30 years. These terms cannot be considered as favourable.

At the same time, Minatom’s officials argue that French loan for NPP building in China is more preferential in period of repayment and in interest rate, than Russian one. “There is no problem with credits being paid back,” they say.

Koodankulam and Tarapur NPP in India

Minatom has no contract with India, but there is an agreement between banks in place. Under this agreement, Russian official Vneshekonom bank provides $1.5bn low interest loan for Koodankulam NPP construction. This loan also cannot be accounted as profitable for Russia.

In early February 2001, the supply of nuclear fuel for Indian Tarapur NPP has been resumed. The US State Department has called on Russia to stop this deal, accusing official Moscow of the lack of adherence to the nuclear materials non-proliferation. An official from the Indian Ministry of Foreign Affairs said in response that India “consistently and strictly” follows the requirements of the International Atomic Energy Agency.

Russia asserts, that the Nuclear Suppliers Group (NGS), where Russia holds membership, cannot ban Russian nuclear reactors export to India (Koodankulam NPP), because the idea of the exports emerged in the late 80-s, i.e. before the interdiction. The same is said about uranium fuel supplies for nuclear reactor in Tarapur. The USA halted supplies after the first allegedly non-military nuclear explosion in India in 1974. France also abandoned the project to adhere to the NGS agreement. Only China, not being a NGS member, was exporting nuclear fuel to India during the past years.

The last Russian fuel supplies are carried out after Chashma NPP (325 megawatt) was built in Pakistan, India’s rival in the region. The reactor for it was exported to Pakistan by China in violation of the Non-Proliferation Treaty.

Russia’s flirting with India in the nuclear field can be explained by the ambiguity of Russian politics, observers say. Sometimes Minatom’s contracts are not made available to the Russian Foreign Ministry. Russian companies, using old Soviet contacts, often with the approval from Russian officials, who have to control them, have possibilities to smuggle nuclear and missile technologies to various countries.

Other Minatom’s projects

During the past year Minatom has been developing its nuclear accelerator exports. Four accelerators were sold to China and South Korea, an agreement on exporting to the USA four accelerators, one per annum, was signed.

In March 2000 the second unit of Mohovze NPP in Slovakia (440 megawatt) was put into operation. In December 2000 a test launch of the first unit of Temelin NPP in Czech Republic (1000 megawatt) was carried out. During the past year, Minatom was also involved in foreign trade activities with Finland, Libya, Syria and Romania.

In 2001 the contracts with the German Siemens on the supply of nuclear fuel to five reactor units in Germany, two units in Switzerland and one in Sweden are to be extended. A new Russian-Ukrainian-Kazakh enterprise established to manufacture fuel for 11 units of the Ukrainian nuclear plants equipped with VVER-1000 reactors.

One of first steps in the Southeast Asia planned is to be the construction of a research reactor in Myanmar. The Myanmar junta is accused by the United States and other Western countries of carrying out a string of human rights abuses, and crushing all political oppositions.