Rosatom state corporation

Publish date: November 26, 2007

Written by: Alexander Nikitin

The upgrade of the Federal Atomic Energy Agency (Rosatom) into the State Atomic Corporation Rosatom seems to be the first step to privatise Russian nuclear industry. In this document we analyse the recent reshuffling of Rosatom and the consequences it may have.

The Federation Council, Russia’s upper house of parliament, approved the law approving the unification of Russia’s nuclear agency under one roof, creating a giant “state corporate” monopoly industry for all things atomic on November 23d.

The Federal Atomic Energy Agency (Rosatom) was created on March 9th 2004 in place of the abolished Ministry of Atomic Energy (Minatom). As a structure, Rosatom occupied one of the lowest places on the totem pole of the federal state bodies, along side the agencies for tourism, fitness and sports.

It was thus that one of the most powerful ministries in the government was reduced to an agency with limited functions and possibilities. Many organisations of the former ministry were turned into joint stock companies, unitary enterprises, regional and local organisations and business structures and other types of private property.

At the end of 2005, Sergei Kiriyenko, a career bureaucrat friendly to business interests, who served as prime minister for a mere five months in 1998 during the era of former President Boris Yeltsin’s tumultuous cabinet shuffles, was appointed to head Rosatom. By all indications, the appointment of Kiriyenko, who had been outside nuclear industry circles, seemed to have the makings of radical realignments within Rosatom. Starting with his first day on the job, Kiriyenko announced that the aims of his new team would be to restore the glory days of Mindredmash, the notorious secret super-industry of Soviet times that had under its purview all things nuclear. The goal was puzzling, as the resurrection of such a Soviet behemoth would be impossible today.

Following the recent adoption of the law "On the State Atomic Corporation Rosatom" (hereafter Rosatom) and after other shuffles in the Russian atomic energy, it is possible to draw some conclusions.

The Goal
Sergei Kiriyenko defines his goal as follows: "Within Russia, the goal of Rosatom is to arrange a normal market. Rosatom is interested in developing the market – the more participants the better. And on the world market, Rosatom will be just one of the players on the market."

The goal of creating the Corporation as declared is rather pompous: "The Corporation is created and acts toward the goal of carrying out government policies, the realisation of normative regulation, provision of government services and management of government property in the sphere of the use of atomic energy, the development and safe functioning of organisations in the atomic electric energy sector and the nuclear weapons complex, to guarantee nuclear and radiation safety, non-proliferation of nuclear materials or technology, the development of atomic science, engineering and education, and the realisation of international cooperation in this sphere."

As such the Corporation is officially created to conduct state policy in the atomic energy sphere. On the other hand, the reorganisation of Rosatom has gone the way of the creation of yet another powerful business by the creation of a privatised nuclear industry.

It is worth noting that in the 90s, juicy portions of Russian industry, like oil, gas, metallurgy and others were privatised in sweetheart deals, and today there is virtually no possibility of participating in these industries. Therefore, those who were not able to snatch up fundamental resources in time are today looking to different areas and possibilities. Nuclear energy remained one un-privatised field.

It is understood today that privatisation cannot take place a la the methods of Anatoly Chubais – whose scandal tarred free market approach as Yeltsin’s chief of staff still draws howls of corruption a decade later – and the nuclear industry is no exception. The formation of a “state-Corporation” is therefore the most acceptable route. And for Kiriyenko himself, it is an opportunity to get catapulted to higher echelons. At present, Kiriyenko is not even a member of the government – as were ministers of Minatom and Midsredmash. According to the new law, the head of the Corporation is appointed by the Russian president, and responsibility ends with him. The Corporation is not a part of the government apparatus and exists by virtue of a specially adopted law. The law allows for the privatisation outside the usual channels and with minimal government participation.

At the same time, the “state corporation” method of privatisation doesn’t look entirely complete and therefore many experts evaluate the institution of government corporations as an intermediate step toward a full-scale privatisation. The substance of such privatisation is clear: to turn state property into non-commercial partnerships without membership (non-commercial organisations, or NCOs) with a single founder (the state), the status of which is described by a custom tailored federal law. This is the most important point on which business can stake their claims – what will come further remains to be seen. For instance, in the United States, Germany and other western countries, the nuclear energy, including weapon programmes, is private. Today we are seeing how property passed to a state corporation (an NGO) ceases to be owned and becomes the property of the Corporation. Perhaps there will come a time when the state company Rosatom will be reformed as a private-state or even an entirely private corporation.

The new Corporation – the revamped Rosatom – gathers under its roof all structures of the atomic industry, beginning with uranium mining and its enrichment to decommissioning nuclear installations and disposal of radioactive waste.

The Corporation’s structure is composed of three branches – the nuclear energy complex (Atomenergoprom), the nuclear weapons complex (NWC) and the branch that oversees nuclear and radiation safety and fundamental science.

The law also says that by decree of the president and the government, various enterprises and organisations with all their property will be transferred under the auspices of the Corporation in the capacity of a property investment of the Russian Federation.

As seen in the structure, the fundamental economic hope for the Corporation will be Atomenergoprom, which will include the concerns Rosenergoatom, Russia’s nuclear utility – along with all of Russia’s nuclear power plants – Russia’s nuclear fuel producer TVEL, and a number of other lucrative enterprises.

The responsibility of dealing with spent nuclear fuel (SNF) and radioactive waste – both overdue problems – is rather artfully removed from Atomenergoprom’s mandate, and assigned to the nuclear and radiation safety and fundamental science division. Apparently, the assumption is that Atomenergoprom, by receiving government property, gets to get down to the business of making money with a clean slate and does not have to answer for its previous activities. The responsibility for these overdue problems (interring spent fuel and radioactive waste, contaminated territories, people’s ruined health) is taken over by the government and international programmes with in the framework of the federal target plan called “Nuclear and Radiation Safety.” In other words, Kiriyenko has laid this problem at the feet of Russian and international taxpayers. The nuclear and radiation safety division will deal with problem enterprises, such as the Zheleznogorsk site, SevRAO (responsible for nuclear clean-up on the Kola Peninsula), DalRAO (responsible for nuclear clean-up in the Russian Far East).

The nuclear weapons complex is also financed by the budget – that is by taxpayers. This division gets such unprofitable enterprises as the Mayak Chemical Combine.

The law on the Corporation also envisions financing from the budget of state orders, measures for safety, fundamental sciences and all federal target programmes that have been adopted until 2015.

The law also envisions that the Corporation will create special reserve funds and will carry out management of these funds. The special reserve funds will include:

    • A fund for financing expenses to guarantee nuclear, radiation, technological and fire safety, maintenance and equipping accident and emergency services, and financing their work toward preventing and cleaning up emergencies;

    • A fund to finance expenses for physical protection, accounting and control of nuclear materials, radioactive substances and radioactive waste;

    • A fund to finance decommissioning of nuclear facilities, radiation sources, storage points for nuclear materials, radioactive substances and radioactive waste, and scientific research and structural engineering for fortifying the safety of nuclear installations;

    • A fund for modernisation of the organisations of the nuclear energy industry and the nuclear weapons complex, the development of atomic science and engineering, engineering and scientific work and the realisation of other investment programmes.

The law stipulates that special reserve funds of the Corporation will be financed by organisations dealing that do especially dangerous radiological and nuclear work or are dangerous nuclear and radiological installations.

The one thing remaining unclear is how much time it will take to build up the funds sufficient to decommission at least one nuclear power plant.

The law establishes that financial programme support for the activities of the Corporation for the long term will be realised by:

    • the Corporation’s income;
    • Federal budget subsidies;
    • budget funds earmarked for national defence;
    • property investments of the Russian Federation from the Russian state budget;
    • supplements from the Corporation’s special reserve funds;
    • other means of the Corporation and its subsidiary bodies.

As is apparent from the adopted articles of the law, the financing of the created Corporation is, at its heart, in one way or another tied to state budget. In the next 10 to 15 years it is more than likely that the created accounts won’t contain anything. What kind of profits the activities of the Corporation can be expected to draw is still too early to predict.

The law on the Corporation has significantly expanded the power of the nuclear authority and its management.

First, as noted, the Corporation does not fall under the purview of the government, and its management is named (and sacked) by the president. Aside from this, the Corporation, with the help of the law that it itself created, has solved for itself three fundamental issues – acquiring special status, including the practical impossibility of interfering in its matters, acquisition of government property, and constant access distribution of state investments (for example, via federal target programmes).

Second, the law significantly magnifies the power of the Corporation in the sphere of licensing and control over the activities of entities engaged in development, preparation, experimentation, transport, storage, liquidation and dismantlement of nuclear weapons and military nuclear energy installations. This authority was previously the purview of the Ministry of Defence. Aside from that, the law assigned the Corporation responsibility for assuring government control for the safety of nuclear materials transport, for radiological installations, and also for taking measures to warn of nuclear and radiological disasters. As such, we see significant expansion and monopolisation of by the Corporation of oversight functions in comparison with the authority of the Federal Atomic Energy Agency. In the decree forming that agency, it was clearly shown that it had no oversight authority. The Corporation acquired not only the departmental control over oversight, but state control as well. The inspection of the Ministry of Defence is left with oversight functions only for its own sites.

The law has also given the Corporation wide authority to protect information. It can be expected that the Corporation will become less transparent and more inaccessible for civil society insight. Such opaque practices are already exemplified by Russian oil and gas companies like Gazprom and Lukoil.

1. The nuclear industry in Russia will be gathered under the umbrella of the State Atomic Corporation (Rosatom) to become a large state monopoly with a specially tailored legal status. The Corporation will embrace around 130 enterprises, including Rosenergoatom, which operates all 10 Russian nuclear power plants.

Sergei Kiriyenko, the current head of Rosatom, has managed not only to resurrect the Soviet Minsredmash, but has created an even more powerful structure. The Corporation has become the owner of vast chunks of state property, but does not answer to the cabinet. Formally, the state can take back all the property, but only if the Corporation does not sell this property to the private hands (which, according to the law, the Corporation can do).

Having an absolute monopoly in Russia, Rosatom aims at becoming a powerful competitor to Westinghouse, Areva, Siemens, General Electric and other giant western nuclear peddlers.

2. The nuclear monopolist Rosatom will largely live off the federal budget and sales of uranium for the 10 to 15 years to come. At the same time the Corporation will employ political lobbying to squeeze investments into the promised 10 new reactor units from the aluminium, gas and oil businesses.

3. It seems like the solution to the problems of spent nuclear fuel and radioactive management will be further postponed. The Corporation plans to receive funding from the federal budget to tackle the issue. The decision to create funds aimed at funding decommissioning and dismantlement is the right decision but ineffective, as the funds will remain empty for the foreseeable future. The Corporation has thus – in the tradition of Minsredmash and every Russian nuclear power ministry or agency to follow – put aside the issues related to the safe management of spent nuclear fuel and radioactive waste.

4. The reshuffling of oversight and regulatory functions, as well as licensing responsibilities as suggested by the new law on the Corporation do not contribute to increased safety. New legal possibilities that the Corporation obtained to classify information can lead to decreased transparency and less public control.