COMMENT: Russia’s Rosatom: A steady regress back to Soviet ‘supremacy’

Рабочая встреча президента Дмитрия Медведева с генеральным директором Госкорпорации «Росатом» Сергеем Кириенко 11 января 2011 года.

Publish date: January 20, 2011

Written by: Andrey Ozharovsky

Translated by: Maria Kaminskaya

MOSCOW – The Russian State Nuclear Corporation Rosatom will be issuing itself its own construction and operational licenses, will own nuclear power plants abroad and enjoy representation at Russian embassies – that is the gist of the broad political backing Russian President Dmitry Medvedev is pledging to the national nuclear industry. What will this loyalty cost Russia?

On January 11, 2011 President Medvedev had a working meeting with Rosatom head Sergei Kiriyenko. The conversation, which took place in Gorky, Moscow Region, centred on Rosatom’s performance in 2010, the amendments introduced last year into the law governing the operations of the state corporation Rosatom, on the state’s political support for the nuclear industry, as well as building nuclear power plants abroad and Rosatom’s foreign contracts.

This meeting’s tone was noticeably different from the propaganda statements customarily heard from state officials. In fact, Medvedev managed to refrain from his usual incantations about the “advanced” and “innovative” nuclear energy industry. But an industry that is still hobbling along on the crutches of technologies that debuted sixty years ago and is at sea as to what to do with the vast amounts of waste it continues to accumulate, can only keep existing with financial and political support from the state. And unfailingly, Medvedev keeps providing this support to Rosatom.

An extension on the transition period

By way of an appetiser: A few words on the good old Russian tradition that says there is nothing more permanent than what is meant as temporary.

Quoted here and elsewhere in this article are Medvedev’s and Kiriyenko’s statements from the meeting’s minutes as per the official translation posted on Kremlin.Ru.

Dmitry Medvedev: Mr Kiriyenko, last year I signed a law amending some provisions on Rosatom’s status. I believe it is an important document because it clarifies some of the details and, hopefully, will better equip Rosatom to address the tasks that are assigned to the state corporation. What is your opinion?

Sergei Kiriyenko: Thank you, Mr President, these amendments are extremely important for us. The fact is that when the law on the state corporation was adopted three years ago, many things were different.[…]

Federal Law No. 305 “On introducing amendments to the Federal Law ‘On the State Atomic Energy Corporation Rosatom’” was adopted on November 22, 2010. It had a few nice surprises for the nuclear industry officials – in that, for instance, the three-year transition period that was given the former Federal Agency of Atomic Energy (and formerly still, the Ministry of Atomic Energy) to fully accomplish its transformation from a state agency into a loosely defined format of “state corporation” was extended by four more years, with the deadline pushed back from December 2010 to January 1, 2015.

A reference note to the amendments states that the extension was “necessitated by the fulfilment of measures stipulated by the programme for the restructuring of the nuclear arms complex.”

The very transition period was established in order to “transfer to the Corporation the property portfolios of federal state unitary enterprises, as well as assets secured by right of operational management to federal state enterprises, as the asset contribution of the Russian Federation.”

Apparently, three years was not enough to – simply said – hand all property used by state companies of the nuclear industry over to the newly created corporation. Is this to mean that some other state property is on its way soon to be entered on Rosatom’s books?

Nurtured by the state

According to Kiriyenko, it was exactly Medvedev’s help in creating propitious political conditions for Rosatom that enabled the corporation to land a number of foreign contracts. One of the examples of this support that Kiriyenko mentioned during his briefing with Medvedev was the establishment of representative offices at Russian embassies to promote the corporation’s interests abroad.  

Sergei Kiriyenko: […] The law [on amendments] greatly expands export opportunities. In particular, as per your directive, it gives the state corporation the right to establish representative offices at Russian embassies. […] Right now we are starting to set up offices at key embassies in countries where we work, because it is crucial to have a permanent presence.

That permanent presence is not only an excellent tool to achieve political ends, but will evidently go a long way toward helping Rosatom expand its propaganda net. How long before Rosatom’s representative offices start springing up across Russia’s entire diplomatic corps as agitprop cells to advance the corporation’s commercial agenda?

The ‘ownership model’

After reporting to Medvedev on two of a “series of large-scale international solutions” of last year – the peaceful nuclear cooperation deal with the United States, also called the 123 Agreement, which came officially into force earlier that day, and the “[fulfilment] of the most important directive issued by the President of Russia, creating the world’s first nuclear fuel reserve bank under [the International Atomic Energy Agency’s] control […] in Angarsk, the Irkutsk Region” – Kiriyenko proceeded to inform the president of the corporation’s financial results and domestic performance in energy supply and labour productivity in 2010.

The conversation then turned to Rosatom’s ongoing programme for the construction of 28 new commercial nuclear reactors in Russia and the corporation’s international contracts.

Sergei Kiriyenko: […] Labour productivity growth and the creation of political conditions, which you mentioned at the outset, made it possible for us to conclude new international contracts. For us the number of international contracts is a major indicator.

Dmitry Medvedev: The export portfolio has increased by 450%.

Sergei Kiriyenko: That’s right. Today we already have a portfolio of orders worth more than $20 billion. We are certain that this year we will increase it by a further 50% to total $30 billion. And the most important thing is the contracts for the construction of nuclear power stations.

[…] Now we have very strong growth in the volume of orders due to the new international contracts, because 28 nuclear power units in the country is an enormous programme, but it is already at a fairly high degree of readiness, and we estimate our potential international market at 30 more units, so we will build 28 units in Russia and another 30 abroad. The key countries for us are India, which you visited recently, Vietnam, a new partner for us, and Turkey. We have a unique model of ownership contract, signed last year, which gives Russia, or Rosatom, the ownership of the nuclear power station on the territory of another country. This is certainly a unique case. This means that we have come to Turkey for 100 years, because the contract stipulates construction, 60 to 70 years of operation and fuel supply. This radically increases the scale of the contract.

Today a number of new countries are showing a great interest in this type of contract. They are ready to follow Turkey’s example and offer us the opportunity not only to build nuclear power stations using Russian technology, but also to be co-owners or owners of nuclear power stations. This option is currently under discussion with our colleagues.

This new “unique model of ownership contract” deserves a separate treatment.

If the Russian State Nuclear Corporation Rosatom had not had that word “State” in its title, no issues would be there to raise with its activities abroad. So some businessmen want to gamble their money on building a nuclear power plant in Iran, Turkey, or Vietnam – what’s the big deal? Let them.

But the way the situation is, it is exactly the state – meaning, the Russian taxpayers – that will bear the costs and the risks of building nuclear power plants abroad. And it is not clear that this activity will bring any returns on the investments. The dubious pay-off prospects were in fact the reason why local investors in Turkey turned down proposals to finance the construction of the Turkish plant.

As it turned out during August 2009 Russian-Turkish negotiations, if the Turkish project were to be developed based on existing market prices, one kilowatt-hour of energy produced by the plant, suggested for a town of Akkuy on the Turkish coast of the Mediterranean Sea, would have cost around $0.21. Turkey’s energy and natural resources minister Taner Yildiz thought the price was not just exorbitantly high, but simply insane. In November that year, Turkey rejected Russia’s bid, even though Moscow had adjusted the energy rate down to $0.153…

Such a nuclear power plant would have never brought any profit, but Rosatom does not heed the laws of economics – though it does enjoy special, tailor-made political conditions to thrive in. As it stands, the Turkish NPP will be built on the Russian taxpayer money as both its construction and operation-related costs will be covered by subsidies from the Russian state budget, just like Russia’s domestic nuclear power plants. When one has a state budget at its disposal, one can easily sell power at a loss – especially since no one will buy it at 21 US cents per kilowatt-hour.

What does Medvedev think of this arithmetic? Does he even know?

One person who will be definitely happy about this “unique ownership model” is the President of Belarus, Alexander Lukashenko. Despite all problems, violations of national and international laws, and widespread public protests both in Belarus and in neighbouring countries, Lukashenko’s government has settled firmly on its plans to build a nuclear power plant in the town of Ostrovets in Grodno Region, near the Lithuanian border. Belarus has no money to pay for the plant – which will be built to an as yet untested Russian project – so the only remaining hope is that the $10 billion needed for the NPP will come from the Russian state budget. This is what Russia is signing up for: Building a nuclear power plant barely 50 kilometres away from a European capital of Vilnius, but on the Belarusian territory and to be owned by Russia. The question persists – not for Kiriyenko, but for Medvedev – why?

There is one more paradox in this whole “ownership model” business. Russia seems to have found a way to build its own nuclear power plants abroad, paying for construction with its own money. But at the same time, it is seeking foreign partners to pitch in for NPP construction projects back at home. For instance, plans for the newly initiated construction of the Baltic NPP, in Russia’s westernmost enclave of Kaliningrad Region, include attracting 49 percent in private investment funds, of both foreign and domestic origin. The Russian state NPP operator company, Rosatom-owned Rosenergoatom, will cover the remaining 51 percent of the costs. If Rosatom has money enough to build itself a nuclear power plant in Turkey, why look for a foreign investor for a project on its own soil? And why have they so far failed to find one?   

And did this paradox crop up at any point during Medvedev and Kiriyenko’s conversation?

The NPP’s online! Oh wait, it’s not working…

Sergei Kiriyenko: […] And the most important thing is the contracts for the construction of nuclear power stations. We have a programme for the construction of 28 nuclear power units in Russia, which has been approved. The deadlines had to be moved back because of the economic crisis but none of the projects have been cancelled. The work is in progress at nine sites. In this regard 2010 was a key year for us. We have commissioned the first nuclear power unit from this batch. We are especially proud that we completed construction in March, according to the schedule, and in November the power station was put into operation.

A few words about that construction Kiriyenko is so proud of. This, contrary to what Kiriyenko’s words may seem to indicate, is not a new project, and not a “first nuclear power unit from the batch.” What he actually means is one single power unit that Rosatom finished building at Rostov (Volgodonsk) NPP – Reactor Unit 2 of the plant, based on an old reactor of the VVER-1000 series. Two more are being completed at the same site – both, strangely enough, to a design developed as far back as the 1970s, with construction elements produced twenty or thirty years ago stacked upon piles driven into the ground there in the early 1990s.

Had Kiriyenko reported these details to Medvedev? Had Medvedev agreed? As in, sure, yeah, we gotta put that old rusty junk to use somewhere, don’t we, like slap together a nuclear power unit, why not… But let’s get back to Rostov NPP.

The unit, taken online for test operation on March 18, 2010, and officially commissioned on December 10, 2010, is barely working. Ever since the launch, the reactor is simply refusing to stay plugged into the grid for any extended period of time. For instance, on January 4, 2011, it got switched off the grid for eighteen hours after an emergency shutdown initiated by the electrical protection system. Incidents like this keep happening almost every month.

To name just a few:

October 14, 2010:  A transformer failure brings down Generator G-2, disconnecting it from the grid and causing a 60 percent load reduction. The reactor, still under trial operation but officially confirmed “good to operate at nominal capacity under the base load,” was proceeding at 1,000-megawatt capacity at the time. Unscheduled repair works are started on the unit.

November 29, 2010: Turbogenerator of Reactor 2 shuts down, reducing reactor load to 670 megawatts, as a result of a temporary drop of the turbine’s power reference setpoint. The reactor was operating at the design-basis capacity of 1,000 megawatts. Unplanned repair works initiated on the unit.

To be sure, the older reactor, Power Unit 1 of Rostov NPP, is not that reliable either. A very simple conclusion presents itself: Yes, Rosatom managed to complete the project, but something seems to be very wrong with the reactor. It just keeps malfunctioning… God forbid it goes up in smoke – what then? Did Kiriyenko report these and other incidents to the president?

And another nine sites…

Sergei Kiriyenko: […] The work is in progress at nine sites. […]

Construction works are under way at the following nuclear power plants at the moment: Rostov NPP (Power Units 3 and 4) and Kalinin NPP (Power Unit 4), as well as Leningrad NPP-2, Novovoronezh NPP-2, and Baltic NPP, with two new units being built at each of these sites.

Time will show whether Rosatom manages to build better reactors there than the less than reliable one at Rostov NPP. What is of special concern is that the reactors under construction at the Leningrad, Novovoronezh, and Baltic sites are being built to an experimental design developed by Rosatom – AES-2006 (for NPP-2006), a series that has not yet been tested in practical operation anywhere. No one but Kiriyenko or his subordinates can give any guarantees of the safety and reliability of this new and absolutely unproven equipment when it is assembled and launched as whole units at the sites.

A guaranteed $300 million reserve

A few words more on Rosatom’s costly international projects – in particular, about the creation of that “guaranteed reserve” of nuclear fuel for foreign nuclear power plants.

Sergei Kiriyenko: Here, too, I would like to report that by December 1 we fulfilled the most important directive issued by the President of Russia, creating the world’s first nuclear fuel reserve bank under IAEA control. It was Russia’s initiative and we implemented it in full. Since December 1 the fuel storage facility in Angarsk, the Irkutsk Region, has been under the control of IAEA inspectors, under IAEA safeguards, and we deposited 120 tons of low enriched uranium there. It is sufficient to completely refuel two large nuclear reactors. This is a unique new situation in the world. Russia has spent more than $300 million, and now the IAEA has the following opportunity: if a country, which is restricted in its efforts to produce nuclear fuel for political reasons, applies to the IAEA Board of Governors, and the Board makes a decision, we immediately open up this fuel bank so that such country can have access to its reserves. Delivery is guaranteed. This is a crucial event for the secure development of the nuclear industry.

Now the Americans are following in our footsteps. Their initiative is just beginning to take shape whereas ours has already been fully implemented.

So, yes, security – and what about safety? The Russian word bezopasnost, used by Kiriyenko when he talks about the future development of the nuclear industry, covers both meanings and thus allows for two different interpretations. In either case, this provides for a somewhat skewed view of the best future scenario for nuclear energy. It is as though Kiriyenko has completely forgotten about the issues of nuclear safety and security and radiation safety, having prioritised economic security – and then again, not even for Russia’s own sake, but for that of foreign nuclear corporations.

In fact, it is the economics of this achievement that creates a certain problem here. So Russia has spent three hundred million dollars – what for? A hundred and twenty tonnes of low-enriched uranium are now lying in storage in Angarsk – dead wood that no one is seeing any profit from. Are we now going to offer nuclear power plant construction to all dictatorships on the map? Like, forget those international sanctions, “delivery is guaranteed”?

What is clear is that this is yet another extravagant project for which Rosatom has succeeded in poaching funds from the state budget.

Rosatom will be issuing its own licenses

And for dessert:  One of the amendments introduced by Medvedev’s recent law gave the nuclear corporation some unprecedented powers. In accordance with the newly added Item 26 of Article 7, Rosatom is now authorised to give itself licenses to build and operate sites of application of atomic energy – including nuclear power plants.

Earlier, this was fully within the mandate of the Russian Federal Agency for Ecological, Industrial, and Economic Supervision, Rostekhnadzor. It’s not that Rosatom earlier had any problems obtaining licenses from the ever-so-loyal Rostekhnadzor. But now it’s all just dandy like candy – Rosatom gives itself permission to start building nuclear power plants, storage facilities for radioactive waste and spent nuclear fuel, or even sites for underground pumping of radioactive waste, then Rosatom itself commissions these sites into operation. Perfect. No oversight needed.

The state nuclear corporation has had a rich several-decade history as it shed and donned a string of names ranging from the arcane Ministry of Medium-Size Machine Building of the 1950s to the more recent Federal Agency of Atomic Energy. But whatever its moniker, little has changed since the Soviet time: Rosatom is fast becoming, as before, a “state within a state,” a powerful and secretive dominion with an almost limitless access to government funds and no accountability to either the state or the public.

Given the continued political support it is enjoying from the country’s leaders, how long before it fully regresses back to the 1950s? And will it really be to Russia’s benefit?