West scrambles as Putin reveals his energy war trump card
In an effort to punish Vladimir Putin, Western governments have hit Russia’s energy industry with a barrage of punishing sanctions since his invasion of Ukraine.
But one sector has conspicuously escaped their ire so far: nuclear power.
Since the conflict erupted, Russian nuclear exports are actually thought to have increased while those of coal, oil and gas have been squeezed.
Meanwhile, despite the key role it has played in Moscow’s takeover of the Zaporizhzhia nuclear power plant in Enerhodar, eastern Ukraine, state monopoly Rosatom remains untouched by Western sanctions.
The reason, say experts, is the complicated nature of nuclear supply chains – from the supply of uranium to the construction of reactors – and the dominant role Russia currently plays in many of them.
Through its global nuclear network, Moscow can exert political and economic pressure on friends and foes alike, the White House has warned.
A new partnership between the UK, the US, Canada, Japan and France aims to change this.
Together the five countries want to squeeze Russia’s share of nuclear exports and “ensure Putin, nor anyone like him, can ever think they can hold the world to ransom over their energy again,” said Grant Shapps, the Energy Security Secretary.
The group aims to become independent from Moscow and help other countries do the same, the agreement says.
Most experts agree that these are achievable goals, but it will require time, resources and close collaboration.
“The main challenge is to get out of the asymmetric mindset we’ve been in,” says Lincoln Hill, head of policy at the Nuclear Industry Association (NIA).
“In the past, the West has seen this as a purely commercial, market-based situation and the Russians approached it as a strategic priority, so our companies were undercut and struggled to compete.”
Raw uranium is no longer used to power nuclear reactors, so the fuel supply chain is divided into four parts: uranium mining, conversion, enrichment and fuel fabrication.
Russia’s share of the world’s mining of the metal – about 5pc – is by no means the largest, with Kazakhstan, Namibia, Canada, Australia and Uzbekistan all boasting higher levels of production.
But Moscow’s grip on the later stages is much tighter.
Only four countries – France, China, Canada and Russia – were running conversion plants to refine uranium in 2020, with Russia responsible for 38pc of total output, according to the World Nuclear Association.
Meanwhile, Russia controlled about 46pc of the world’s current or planned enrichment capacity, along with between 15pc and 19pc of the stages in fuel fabrication.
Moscow’s dominance is partly enforced through the web of contracts Rosatom has with countries around the world – many of them former Soviet bloc states – which are running Russian-made reactors, leaving them reliant on the company for parts and fuel.
These “VVER” power stations are still being used by Nato members Turkey, Finland, Czechia, Bulgaria and Hungary, for example, while other customers include India and China.
On top of this, Myanmar and Egypt are among countries who recently inked deals with Rosatom to build new reactors with Russian help.
Eugene Shwageraus, a professor of nuclear systems engineering at the Open University, says persuading any of these countries to ditch Russian supplies will be difficult for a simple but practical reason: VVER reactors use hexagonal-shaped “fuel assemblies”, an industry term for groups of fuel rods, whereas Western designs used square-shaped ones.
However, even Western countries that do not rely on Russian technology have become more dependent on Moscow since the fall of the Berlin Wall.
Under the “Megatons to Megawatts” deal, the US agreed to purchase thousands of metric tonnes of uranium that was cannibalised from nuclear weapons as the Kremlin scaled back its enormous arsenal.
At one stage this agreement alone provided around 10pc of fuel for American nuclear power stations.
Overall, around 31pc of the enriched uranium sold to EU utility companies came from Rosatom in 2021, along with 28pc sold to those in the US.
These imports of Uranium have continued since Russia’s attack on Ukraine.
France, which in turn supplies other allies with fabricated fuel, imported €359m (£320m) worth of enriched uranium from Russia last year, up from €92.4m in 2021, according to recent research by the Royal United Services Institute (RUSI).
The US imported $829.8m (£667m) worth, up from $645.5m in 2021, along with another $70m in January alone.
In the UK, EDF says fuel used by the Sizewell B nuclear power plant, in Suffolk, was made using uranium enriched by Rosatom.
Darya Dolzikova, research fellow at RUSI, says there is some evidence to suggest that Russia has made around $1bn from nuclear exports since the Ukraine invasion began and that this figure may even be rising.
“In terms of the amount of money that it brings into the Russian economy, it is not as significant as some of the other energy exports,” she explains.
“But at the same time, that might make it a little bit easier to dismiss – even though it is a good chunk of money.”
Industry insiders say state-backed Rosatom has spread its tentacles so far by using rock-bottom prices, which made it difficult for others to compete.
However, the West still retains significant nuclear capabilities and the UK Government and its allies are now taking steps to weaken the Kremlin’s hold on the market.
Part of this is expected to involve greater sanctions on Rosatom, with the US recently unveiling sanctions on a raft of the company's foreign subsidiaries and the EU considering sanctions on the company itself with support from Germany.
But it will also require the kind of boost to domestic production not seen for generations.
For example, US-based Westinghouse received £13m in December to revive its conversion facility in Springfields, Lancashire, where it already fabricates fuel.
The site will be ready by 2028.
At the same time, Westinghouse has developed a method for making the Russian-style hexagonal fuel assemblies itself and has signed deals to provide them to Czechia and Bulgaria.
One industry figure says the new product is nicknamed “freedom fuel”. The firm is already providing them to Ukraine, another country that uses Russian reactors.
Urenco, the British-German-Dutch nuclear firm part-owned by the UK Government, has also indicated it will expand its enrichment capacity, including at its site in Capenhurst, Cheshire.
There is also capacity for more conversion in Canada, the US and France.
“The capability is there,” adds Dolzikova. “So it's not a technical issue, but rather an issue of political will.”
Another interesting new source of nuclear fuel could be recycling.
As part of its expansion of Springfields, Westinghouse is developing a so-called reprocessing facility, where uranium from nuclear waste is recycled and used again.
It will be the only one of its kind outside Russia.
Bruce Hanson, a professor of nuclear process engineering at Leeds University who worked in industry for more than 25 years, says reprocessing was previously done in the UK but is now seen as too expensive to be economically viable.
Instead, it is cheaper to simply make new nuclear fuel.
Future efficiency improvements, as well as growing demand for uranium from China, could change the calculus, however. Reprocessing is also more sustainable, he argues.
“I think if you were to go out and ask people, ‘Should we be throwing out nuclear [waste] if we can recycle it?’, I'm pretty sure what most of the British public would say – they’d say we should be recycling it,” Prof Hanson says.
The NIA’s Hill says success will be a matter of perseverance and giving companies enough certainty to invest.
The nuclear business is a long game, and bosses will not commit if they think the sanctions on Russia will simply be rolled back in a year’s time.
Westinghouse previously closed its conversion facility in Springfields in 2014 because there was not enough demand from customers.
This is likely to push the costs of nuclear fuel higher, at least temporarily, while RUSI’s Dolzikova warns that China may also see it as an opportunity to gain market share from Russia.
The West would be swapping one dependence for another.
But Hill argues the trouble will be worth it. “The extra costs of switching from Russian to Western fuel will easily be worth the security of supply and energy security benefits, particularly for countries in Eastern Europe,” he says.
“So it’s a challenge, but it’s a very doable challenge. It will just require close cooperation, clear objectives and concrete action.”