The agreement is predicted to provide US utilities with a supply of nuclear fuel by allowing Russia to boost exports to the United States while striving to minimizing any disruption to the United States’ domestic enrichment industry.
"The agreement will encourage bilateral trade in Russian uranium products for peaceful purposes," US Commerce Secretary Carlos Gutierrez said in remarks to reporters over the weekend.
"It will also help to ensure that U.S. utilities have an adequate source of enriched uranium for US utility consumers.
Gutierrez and Sergei Kiriyenko, director of Russia’s atomic energy agency Rosatom Federal signed the deal allowing for sales of Russian enriched uranium directly to US utilities. Before the agreement, such direct transactions were not permitted by anti-dumping legislation dating back to 1991.
During the last 17 years, the US government has restricted Russian uranium shipments, fearing Russia would dump uranium in the US market and financially hurt the major American uranium supplier, USEC Inc.
End of Megatons to Megawatts opens floodgates
USEC, for its part, has long had a monopoly on selling Russian produced uranium in the United States as a part of its “Megatons to Megawatts” programme, a non-proliferation initiative under which USEC buys down blended highly enriched uranium for use in commercial reactors in the United States. Uranium sold to the US under this programme was not subject to the anti-dumping barrier tax.
The programme was designed to curb the proliferation of bomb grade uranium in Russia by taking highly enriched uranium from nuclear warheads and blending it down to low enriched uranium.
Some 44 percent of US reactors are powered by down blended uranium sold to the United States under the Megatons to Megawatts programme, the Russian business daily Kommersant reported.
Kiriyenko anxious to buck fixed prices and reap gold rush
But Rosatom under Kiriyenko is leery of the low fixed price that USEC pays for this uranium, which is well below the world market value of $185 per kilogram. With the Megatons to Megawatts programme set to end in 2013, Kiriyenko smells a bonanza.
Where Russia has netted between $400m and $500m annually since 1994 through the Megatons to Megawatts programme, Kiriyenko projects that the lifting of the 118 percent US barrier tax against Russian uranium will net Russia between $1.1 billion and $2 billion a year based on soaring 2007 uranium prices.
According to the USEC website, Russia has made a total of $4.6 billion since 1994 on uranium sold to the US by the Megatons to Megawatts programme. The entire contract is for a sale of $7.6 billion.
The new deal
Under the newly signed uranium fuel import deal, Russian uranium exports to the United States would increase slowly over a 10-year period, beginning in 2011, when shipments would be allowed to reach 16,559 tons, a spokeswoman for Tekhsnabexport (Tenex), the Russian nuclear fuel giant which has overseen the Megatons to Megawatts programme said.
Exports would then increase about 50 percent annually over the next two years and increase more than tenfold from 41,398 tons in 2013 to 485,279 tons the next year, said the spokeswoman.
Shipments would increase at much slower rates in each of the following six years, until they reach 514,754 tons in 2020.
USEC has said it does not object to the new uranium deal with Russia so long as Russian uranium does not jeopardize existing USEC facilities and the various new projects they have underway.
Owners of US nuclear power reactors bought 30 million kilograms of uranium in 2006, the US Department of Energy (DOE) said. About 16 percent came from the United States and the rest, 25.4 million kilograms, came from foreign suppliers, according to DOE figures.