Russia’s invasion of Ukraine resulted in the EU and the US quickly imposing sanctions on imports of Russian oil and gas. But sanctions on Russia’s nuclear exports have been far lighter because alternatives are hard to find. Ihor Moshenets at the Central European University takes a deep dive into the current situation. He takes a close look at the EU and the US’s actual level of dependence, as well as moves by both to develop and enlarge their own nuclear industries. Nuclear reactors, uranium mining sources, uranium enrichment, new nuclear fuels, Small Modular Reactors, and more are covered. A fast break with Russian dependence is not considered feasible by Western policymakers. But the build up of its own nuclear industry is essential for energy security, and can open the door to the EU and the US becoming major nuclear exporters globally, a position currently dominated by Russia.
Is the “small-steps” approach by the US and the EU to wean itself off of its dependence on Russia’s civil nuclear industry effective?
In mid-December, the US House of Representatives voted on the bill providing the prohibition of Russian low-enriched uranium import to the United States until 2040. Despite the opportunity for US entitites to receive some waivers until 2028 in case of unavailability of alternative supplies, this policy measure became the major Western economic response in last two years targeting specifically the Russian civil nuclear industry.
Since the Russian full-scale invasion of Ukraine western powers, such as Canada, the EU, the UK, US imposed multiple sanctions on the Russian economy. The restrictions against the energy sector played a prominent role since energy trading is one of the key revenue resources for the Kremlin and an important determinant of the country’s macroeconomic stability. Nevertheless, in comparison to fossil fuel industries, such as oil, coal, and natural gas, the Russian nuclear civil industry remained relatively weakly affected by the newly imposed sanctions due to the more complex technological nature of this industry and the practical challenges of making quick supply diversifications.
However, the absence of formal sanctions against Rosatom and most of its subsidiaries does not mean that Western governments are not concerned with the Russian leverage provided by the nuclear industry. What steps have already been undertaken and to what extent could they affect Russian position on American and European markets?
Rosatom’s strategic position
To begin with, the full nuclear fuel cycle has a distinct structure. Its main segments are mining and milling of uranium; processing and reprocessing; enrichment; fabrication of nuclear fuel; storage and disposal; constructing reactors and providing additional equipment for technological maintenance services.
One could distinguish six main elements of Rosatom’s strategic geoeconomic importance for the Russian state in general and Putin’s regime in particular.
- First, concerning extraction, Russia mines only 5% of the global uranium supply. Despite that, Rosatom subsidiaries are mining more uranium ore abroad than in Russia and their presence abroad is only expanding (as was demonstrated by the May 2023 deal acquiring a 49% stake in the second largest uranium mine in Kazakhstan – the country with the biggest uranium reserves in the world).
- Second, Russia controls 40% of global processing facilities and 46% of total world enrichment capacity.
- Third, Russians are ahead of their Western counterparts in producing novel types of fuel required for the prospective fourth generation of nuclear reactors that have distinct technological structures from conventional light-water reactors that use low-enriched uranium (LEU, 3-5% share). On the other hand, the fourth generation requires high-assey low-enriched uranium (HALEU) with a 15-19.75% share of enrichment. Its subsidiary Tenex is so far the only entity in the world selling HALEU on a commercial basis.
- Fourth, Rosatom is the most active player in the world in terms of constructing nuclear reactors outside the country of its headquarters’ residence. According to a 2022 Rosatom report, the company was involved in the construction of 23 units in 8 countries abroad. Its constructing activities are concentrated in such countries as Bangladesh, Belarus, China, Egypt, Hungary, India, Turkey and Iran.
- Fifth, Rosatom revenues are smaller in comparison to the main Russian hydrocarbon giants, but are still significant. As of 2022, Rosatom posseses an overall portfolio of orders for the next 10 years of almost $136 billion . Its annual revenues are growing – from $7.5 billion in 2020 to $11.8 billion in 2022. Nevertheless, only a minor part of these funds came from the West. In 2022, Rosatom earned roughly around $1 billion from trade with US and €720 million from economic operations with EU.
Nevertheless, Rosatom is one of the rare examples of a Russian company having elaborated some types of technologies ahead of the West. Additionally, the company expands its ability to perform another strategic geoeconomic task for the Russian state. The nuclear energy giant is also the producer of liquid natural gas equipment and one of the key prospective developers of lithium mines at home and abroad, making it an important player in the global critical minerals race.
Rosatom also takes an active role in Russian military aggression in Ukraine. Its participation in the seizure of Europe’s largest nuclear power plant in Zaporizhya is well-documented. There are also investigations covering its role in supplying electronics to the Russian army.
US dependency: uranium mining and new types of fuel
Rosatom is an important player in ensuring uranium supplies for the American market – in 2021 it accounted for 14% of the US uranium supply and 28% of enrichment services. Some American utilities were actively lobbying to ensure that the civil nuclear industry would not be included in the anti-Russian sanctions. The Presidential order issued in March 2022 hasn’t added nuclear to the list of energy sources prohibited for import.
Despite that, 2023 was the time of the steady expanding of American sanctions pressure against Rosatom. So far, ten Rosatom’s subsidiaries have been put on the US sanctions lists:
Rosatom’s subsidiaries sanctioned by the US:
- Name of subsidiary / Area of activities / Date
- Joint Stock Company Operating Organization of Zaporizhzhya Nuclear Power Plant / legal entity for controlling occupied Zaporizhia nuclear power plant / February 2023
- Energospecmontazh JSC / construction subsidiary / February 2023
- Trest Rosspetsenergomontazh / construction subsidiary / February 2023
- Rusatom Overseas / constructing nuclear reactors abroad / April 2023
- Umatex / producer of high technology carbon fibre / April 2023
- Rusatom Additive Technologies / additive manufacturing programs, cooperation with defence industry / May 2023
- Federal State Unitary Enterprise Hydrographic Company / operator of one of the largest dredging fleets in Russia / May 2023
- FSUE Atomflot / maintaining of nuclear-powered ice-breakers / May 2023
- AEM Propulsion / production and supply of production systems for ships / June 2023
- NPO Kis / production and procurement of various microelectronics / June 2023
As one can see, these sanctions were aimed foremost at non-nuclear operations (predominantly related to shipping and cooperation with defence industry) or entities operating predominantly in third world countries. However, restrictive measures haven’t so far touched key Rosatom’s subsidiaries, such as Tenex or Tvel, providing advanced nuclear fuel cycle services Western countries are mostly dependent on.
Nevertheless, the recent US policy activities create expectations about the possibility of more radical policy actions tackling dependency on Rosatom. Despite significant dependency on Russian uranium mining and processing, the changes in moving away from them are already visible in terms of increased policy attention, favorable market conditions, and the commissioning of new infrastructure.
US production of nuclear materials
Domestic US production of nuclear materials has been declining since the 1980s. After the end of the Cold War, the US concluded an agreement with the Russian Federation that allowed the export of relatively cheap Russian uranium made from nuclear missiles to the American market (the so-called Megatons to Megawatts program) and outcompeting local US industry in pricing terms. Since 2010, the Rosatom Group even owned one of the American uranium producers with mining assets in Wyoming, the US’s largest uranium deposit region. Despite the Russian annexation of Crimea and military support of its proxies in the eastern part of Ukraine in 2014 which clearly demonstrated the Kremlin’s intention for geopolitical confrontation with the West, the dependence on Rosatom was not addressed in US policymaking in the 2010s. Moreover, the period after 2014 experienced the most dramatic fall in US domestic uranium output.
Nevertheless, the situation has changed in recent years. The quota for Russian uranium supply was reduced in 2020. Rosatom’s mines in the US were sold in 2021 to US entity Uranium Energy Corp shortly before the full-scale invasion of Ukraine. In 2020, Congress adopted a bill about the national uranium reserve securing annual purchases of this energy source from American producers. $75 million were allocated for this purpose. It was followed by the increased intensity of developing domestic US uranium mining such as the restart of the Sunday Mine Complex in Colorado, Consolidated Uranium’s acquisition of the largest US unused uranium deposit in Coles Hill in Virginia (which has a moratorium on uranium mining), and the development of uranium mines in Wyoming, which are mostly owned by Uranium Energy Corp.
Uranium market observers expected nuclear producers to start increasing their production in a new facility after the price hit $70-75/lb. In the second half of November 2023 the uranium price reached a 15-year high and crossed the line of $80/lb, and $92/lb in the beginning of January, which clearly shows that the increase of uranium mining needed economic preconditions.
Other important events from last year, such as the already mentioned ban on Russian low-enriched uranium imports, the recent COP28 declaration of 22 countries supporting the tripling of nuclear energy capacity up to 2050, and an increase in nuclear capacity development projections by both the IEA and the IAEA, could all provide the needed confidence for investors.
The new wave of US uranium extraction and enrichment projects
As an outcome of the favorable economic and political environment, the new wave of American uranium extraction projects is already coming. Uranium extraction projects were recently started in Texas (Rosita), Arizona (Pinyon Plain ) and Utah (La Sal and Pandora). A couple of projects in Texas (Alta Mesa), Utah (Nichols Ranch) and Colorado (Whirlwind) are expected to begin this year. Additionally, producers are working on permitting issues or considering plans to start uranium production in Wyoming (Sheep Mountain, Gas Hills), Utah (Bullfrog ), New-Mexico (Roca-Honda) and South Dakota (Dewey-Burdock).
In terms of enrichment, the only operating commercial enrichment plant is in Eunice, New Mexico, and is run by the British-German-Dutch consortium Urenco. The company announced plans to expand its capacity by around 15% in 2025.
A special issue with enrichment is its role in producing HALEU which requires a higher percentage of enriched uranium. For example, the Natrium demonstration project in Kemmerer, Wyoming, developed by Bill-Gates-chaired Terra Power, announced the postponement of its planned commissioning date of 2028 by at least two years. The main reason cited was the possible lack of sufficient amounts of non-Russian sources of HALEU.
Due to these hurdles, the availability of this source of fuel is one of the main policy goals targeted by policymakers. The Department of Energy established a consortium for building future production chains of HALEU in July 2022. The American Centrifuge plant in Piketon, Ohio, became the first US facility licensed to produce HALEU, and its HALEU demonstration project started its enrichment operations in October 2023. Last year, the Inflation Reduction Act provided $700 million support for different aspects of HALEU development, such as demonstration projects and research. By passing the National Defense Authorisation Act in mid-December, the US congress created new Nuclear Fuel Security Program. Under its conditions, the Department of Energy is obliged to buy 20 tons of HALEU from US producers annually until the end of 2027, create a stockpile and make these resources available for American companies.
EU dependency: VVER reactors and uranium supply
Despite some recent changes, nuclear energy remains a contested issue at the supranational EU level, which makes the political climate surrounding this energy technology radically different to the US. Some EU member states are actively opposing it due to the strong historical tradition of domestic anti-nuclear movements (such as Austria, Ireland or Portugal). Germany stopped the operation of its nuclear power plants in spring last year and the current left-centrist Spanish government has a plan to start the closure of its five remaining reactors in 2027. On the other hand, in February 2023, the representatives of more than ten nuclear-supporting countries under the leadership of French Minister Agnes Pannier-Runacher established an alliance defending the role of nuclear energy in European energy transition.
A first look at the statistical materials of the European Atomic Supply Agency does not reveal a substantial vulnerability in the civil nuclear industry: 98% of nuclear fuel deliveries are done under long-term contracts, and EU repositories contain enough fuel to function without any import for the next three years. Nevertheless, Rosatom and its subsidiaries still play one of the key import roles: almost 17% of uranium imports, 22% of conversion and 30% of enrichment is covered by Russian imports. (Despite that, the amount of Russian fuel supplies dropped by 20% in 2022 – partially reflecting the general trend of a 10% drop in fuel usage). The trade of enriched uranium between Russian and some European entities, such as French Framatome, continues, as is documented by activist organisations.
What’s even more crucial in security terms is that 15 out of 102 EU reactors were constructed based on Soviet technologies and are designed to use the Russian type of nuclear fuel. Six reactors are located in the Czech Republic, five – in Slovakia, two – in Finland, and two – in Bulgaria. Despite the relatively low percentage of these reactors compared with the overall number of reactors operating in the EU, their positioning in geographically close to Russia is a critical vulnerability. This issue was recognised in RepPowerEU – the broad plan of replacing Russian fossil fuel imports with energy from other sources, adopted in May 2022.
The full-scale Russian invasion made the issue of civil nuclear industry dependence on Russia part of the political agenda. The sanctions against Rosatom’s deliveries have not yet been introduced. Despite the call from the European Parliament, the European Commission has not included the Russian civil nuclear industry in the sanction lists. This is in large part due to the resistance and potential use of veto power in the European Council by Hungarian Prime Minister Viktor Orban because Hungary has a contract with Roastom for the construction of a new Hungarian nuclear reactor. Therefore, only one Rosatom subsidiary, FSUE Atomflot (operating nuclear-powered icebreakers) has so far been sanctioned by Europeans by being included in the 10th EU sanctions package adopted in February 2023.
What is the EU doing?
However, the traditional EU customers of Russian nuclear services are diversifying their portfolio. It is foremost through the construction of new facilities, diversifying fuel deliveries, and cooperating with Western producers in emerging segments of the nuclear industry (such as small modular reactors – SMR).
First, the construction of new reactors in countries with Soviet reactors has now predominantly shifted to non-Russian service providers from the US and France. America’s Westinghouse plays the leading role, aiming to introduce its AP1000 reactor for the nuclear plants needing capacity expansion. The contracts with Bulgaria and Ukraine have already been signed. Additionally, the talks are ongoing about the possibility of selecting the AP1000 for installation in the Czech Republic, as well as Sweden and Finland. After the start of Russia’s full-scale invasion of Ukraine, Finland cancelled the Hanhikivi I nuclear reactor project which was to be constructed by Rosatom. Framatome, the subsidiary of French state-owned electricity giant EDF, has similar ambitions of getting more contracts for the installation of its EPR reactors.
As for now, Rosatom’s services are not being considered by post-communist EU member states planning the extension of their nuclear capacities and replacing existing reactors (such as Bulgaria or the Czech Republic), nor countries that are preparing the construction of their civil nuclear power plants (as Poland and Estonia). It is also highly unlikely that the Swedish U-turn on nuclear power and the roadmap announced in November, and Italian prime minster Giorgia Meloni’s nuclear energy ambitions would be met by providing commercial opportunities for Russia (especially taking into account the refusal of Sweden’s Vattenfal to obtain deliveries of nuclear fuel from Rosatom immediately after the February 2022 invasion).
That makes Hungary the sole country in the region to continue actively developing nuclear energy cooperation with Rosatom which got the contract to build nuclear reactor Paks II and started main construction works in August 2023. However, the possibility of using fuel from alternative producers is also considered by Hungarian policymakers who introduced the relevant changes in their legislation and signed a memorandum on the potential manufacturing of nuclear fuel with French Framatome.
Second, the prospect of increasing the internal production of uranium mining in a region with a high population density seems not very feasible in terms of social acceptance and NIMBY attitudes of local populations, making import diversification of prime importance. Many European uranium sites were abandoned more than 20 years ago and their renewal could be socially controversial.
Nevertheless, energy security needs and high uranium prices still have their impact. The Summer 2023 decision of the Swedish Parliament in lifting the 2018 ban on uranium mining could be seen as decision able to change radically the domestic EU uranium output, taking into account that Sweden holds 80% of EU uranium reserves and 15% of world reserves. Despite the relatively slow development with issuing new licenses after that decision, there are already strong visible interest in developing the country’s uranium sites.
There is also significant available uranium deposits (more than 100,000 tons) in other places such as Danish Greenland, the Czech Republic and Ukraine. However, each of them has its problems. Greenland banned uranium mining in 2019. Czechoslovakia belonged to the top-10 uranium miners in the world in communist times but stopped the exploitation of most sites after the fall of communism (and since 2017 the Czech Republic has stopped uranium production completely), or in the central part of Ukraine where mining was not commercially attractive, at least when taking into account the previous lower price environment.
Therefore, diversifying uranium import routes is essential for EU energy security. The coup in Niger (supplying nearly a quarter of EU uranium imports in 2022) in June last year has not caused any problems for EU supplies, but has demonstrated the need for more attention to security of uranium supply routes taking into account the limited number of countries supplying that resource for the international market. Central Asian countries, such as Kazakhstan and Uzbekistan (slightly more than 30% of EU uranium imports combined), have strong cooperation with Russia and China in their uranium mining industries. Nevertheless, Kazakhs tried to distance themselves somewhat from Russia when Kazatoprom started the deliveries of its uranium via the Caspian Sea, Caucasus and Turkey by bypassing Russian territory. As another alternative, recent development of projects and explorations in Canada, Australia, Namibia (with both Australians and Rosatom entities having assets in the country’s uranium extraction) and also Tanzania (undertaking preliminary explorations) could provide new opportunities for European diversification.
Third, the full-scale Russian war spurred efforts aimed at developing technological alternatives to Russian fuel for the reactors previously designed by Russian or Soviet nuclear industry specialists. The key role in this regard is played by the APIS project – a Westinghouse-led, multi-stakeholder initiative aimed at the development of alternative fuel for VVER-type reactors, allowing the countries where they are used to diversify away from Russian deliveries. The APIS project also receives its funding from EU sources. The project’s planned tenure is 2023-2025 and it will provide technical solutions for reactors in the Czech Republic, Finland, Slovakia, and Ukraine. Based on Westinghouse facilities in Sweden, it will allow the manufacture of nuclear fuel for VVER types of reactors without using Rosatom’s technical know-how. In September 2023, the first-ever Westinghouse-manufactured fuel for VVER-440 was uploaded in a reactor of the Rivne nuclear power plant in western part of Ukraine.
Fourth, in terms of enrichment services, some measures have also been undertaken to allow a decrease in dependency on Rosatom’s services. In October 2023, France’s Orano announced the 30% expansion of its Georges Besse II uranium enrichment plant in the southern part of France until 2028. It is a significant move taking into account that this facility accounts for half of total EU enrichment capacity. Additionally, Urenco has recently announced a 15% increase in capacity at its enrichment facility in Dutch Almelo until 2027.
Compared to US experiences, the EU is only in the initial stages of arranging HALEU production chains: the deadline for initial proposals for the preparatory stage of forming the relevant public-public and public-private partnerships was in November 2023. The already mentioned ORANO only last year started the regulatory procedures to allow producing HALEU at Georges Besse II. The first HALEU production program in Europe so far was launched recently in the UK.
Fifth, small modular reactors (SMRs) are another means of potentially counteracting the Russian civil nuclear industry influence. They are cheaper to install and require less time to reach maximum output which makes them potentially a viable alternative to the coal or gas-firing power plants able to balance the unstable inflow of renewable electricity dependent on weather conditions and period of the day.
North American and British companies are now leading in the initial stages of establishing new commercial connections on the continent concerning the prospective SMR technology. America’s NU Scale was the first ever company to introduce the SMR projects, and it is now developing its technology in Romania, as well as having an extensive portfolio of memorandums of understanding on developing SMR technologies with many European countries in Europe, such as Bulgaria, the Czech Republic, Estonia, Poland and Ukraine. Westinghouse has developed its SMR model, and the UK’s Rolls-Royce is also aiming at entering prospective market niches. The most advanced European project in this sub-industry is France’s Nuward SMR being developed in cooperation with Finns and Czechs, which already has a memorandum with Slovaks for constructing these facilities in their country.
There is also high-level political support for scaling up SMRs, given its geopolitical significance. Last year, during COP27 in Sharm El Sheikh, US Special Presidential Envoy John Kerry introduced the Phoenix project aimed at financing feasibility studies for replacing European thermal plants with SMRs and elaborating a framework for retraining the domestic workforce and saving jobs. In September 2023, projects from Poland, the Czech Republic, and Slovakia were selected for the program.
Officials in Brussels also keep an eye on policy developments in this sphere. In November 2023, EU Energy Commissioner Kadri Simson told the media about the intention to create an SMR industrial alliance. Once created, that public-private partnership will emulate previous EC experiences with developing storage batteries and clean hydrogen. In mid-December, the EU Parliament supported the call for further activities in the area of SMRs development.
Thanks to these developments, one could argue that European export of SMR technologies will compete with Rosatom’s SMR models, such as their floating RITM-200S and land-based RITM-200N. Based on MoUs already concluded, the possible export targets of potential Russian SMRs now concentrates on such countries as Kyrgyzstan, the Philippines, and Myanmar.
Conclusions: more space for transatlantic cooperation?
1. Loss of interest in the nuclear industry in the 2010s as the result of negative public opinion in aftermath of the Fukushima disaster only strengthened the dominance of non-western countries in the global civil nuclear industry. China is currently installing the largest number of nuclear reactors and Russia is the biggest reactor constructor in the world. That resulted in a situation where these connections appeared much harder to break under condition of political conflict.
On one side, a fast break with Russian dependence was not considered the feasible policy option for Western policymakers due to the limited number of resource and service suppliers, when the geoeconomic cancelling of each important player could have negative impacts on the competitiveness of nuclear energies in liberalised Western electricity markets.
2. On the other hand, having directly sanctioned the Russian civil nuclear industry similar to oil or coal deliveries, Western governments intensified their activities in preparation for the removal of their dependence on Rosatom.
Based on current developments, one could suppose that the availability of uranium reserves, favourable price conditions and investments in the modernisation of nuclear technologies will steadily create more favourable political opportunities for the advocates of more radical sanctions against Rosatom.
As for now, the tendencies described in this analysis create the vision that Russians have no viable long-term future in North American and European markets. Even if that will not strongly affect Rosatom having multiple projects and partnerships in many non-Western countries, the increased attention of Western governments to the issues of nuclear technologies will represent a strong challenge to the preservation of Russian technological domination in the civil nuclear sector in the future.
3. Some differences in US and European approaches towards Rosatom are clearly visible and are the objective outcome of the differences between the economic and political contexts on the two sides of the Atlantic. As for now, the US is more advanced in terms of tackling the Russian civil nuclear industry by policy measures, having sanctioned 10 of Rosatom’s subsidiaries and adopting legislation so as to end Russian uranium imports.
Due to the particular EU decision-making procedures, it became much harder to introduce similar sanctions in Europe. Also, the US is one step ahead of the EU in terms of policy support for establishing HALEU production chains. Despite some financial problems for NuScale projects, and its recently announced refocus and job cuts, the US could potentially continue leading in preparation for the scaling up of SMRs which could also create some space for possible cooperation or coordination. On the other hand, the availability of infrastructure for the processing of spent nuclear fuel is clearly a weak spot of the US nuclear industry which lacks big facilities of the type found at France’s La Hague site.
4. Even in a situation of separate pathways for limiting exposure to Rosatom and its subsidiaries, both the EU and the US could find some kind of synergy in fulfilling their joint geoeconomic tasks. Initiatives such as APIS Project and Phoenix Project are the main examples of such transatlantic synergy from the policy-making field. The opportunities for transatlantic cooperation at the corporate level could be exemplified by the recent contract, concluded in November, between France’s Framatome and the US’s USNC about joint production of nuclear fuel for gas-cooled advanced nuclear reactors (TRISO fuel). Before 2022, Framatone was looking to develop a joint venture with Rosatom to manufacture fuel for their VVER reactors.
5. This transatlantic synergy is especially needed while taking into account the issue of the expanding nuclear cooperation between Russia and China in technologies for the civil nuclear industry and the supply of highly-enriched uranium that allows the substantial enlarging of China’s nuclear warheads arsenal. And when China, last December, became the first country in the world to commission a fourth generation nuclear reactor, it gave a clear signal that the EU and the US still have a lot of work to do if Western governments want to have an upper hand in the energy industry technological race.
Ihor Moshenets is a PhD Candidate at the Central European University