Moscow’s Asian Nuclear Campaign

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Moscow’s Asian Nuclear Campaign

Energy-hungry Asia offers Russia a chance to re-engage with the continent. But is a nuclear strategy a guarantee of influence?

When Russian Foreign Minister Sergey Lavrov remarked that many of the leaders at last weekend’s Association of Southeast Asian Nations summit had expressed an interest in acquiring Russian nuclear energy technologies, he was merely highlighting an increasingly obvious point—nuclear power and arms sales are now the two most important sources of Moscow’s influence in Asia.

The fact that Russian President Dmitry Medvedev also travelled to Hanoi to join the meeting—which saw the first formal Russian-ASEAN summit for several years—underscored Moscow’s broader interest in reaffirming Russia’s status as a major Asian power.

And from Moscow’s perspective, Hanoi was an excellent location for an ASEAN summit. Seeking to strengthen foreign ties to help manage a rising China, which contests Vietnam’s maritime claims, the Vietnamese government has been eager to reenergize its longstanding connections with Russia, as well as develop new ties with Washington.

On the sidelines of the summit, Medvedev and Vietnamese leaders signed an intergovernmental memorandum of understanding that Russia would construct Vietnam’s first nuclear power plant, with a combined capacity of 2.4 GW. According to Rosatom, Russia’s state-owned nuclear energy monopoly, it will cost about $5.5 billion to build the two-unit plant, expected to become operational by 2020. Although the parties have yet to negotiate a firm contract, Russian officials have indicated that they are prepared to loan Vietnam (still a relatively poor country) some of the funds needed to finance the plant’s construction

It’s becoming increasingly clear that Vietnam is emerging as Moscow’s most important partner in South-east Asia. The government-run Vietnam Oil & Gas Group, PetroVietnam, has been one of the few foreign companies allowed to extract oil on Russian territory and its RusVietPetro joint venture (51 percent owned by Russia’s Zarubezhneft) has been exploring deposits in the Nenets autonomous district since being registered in 2008.

In addition, Vietnam has also begun buying major Russian weapons systems. When Prime Minister Nguyen Tan Dung visited Russia last December, he signed a contract to purchase six Kilo-class conventional submarines as well as other advanced military equipment. Meanwhile, this July, Vietnam agreed to purchase 20 Sukhoi fighter planes.

But arms issues aside, it’s rising energy demand around Asia that has as much as anything been encouraging governments in the region to consider Russia a potential partner. Rising incomes and growing populations have left even those countries that can afford to import large quantities of oil and natural gas preferring to diversify their foreign energy sources to reduce the commercial and security risks of being dependent on a few states.

Nuclear power is a popular option because it not only allows countries to meet these commercial and security needs, but can also help ASEAN countries limit their carbon emissions and cut their dependence on the region’s maritime transportation chokepoints, which are vulnerable to foreign navies and disruption by pirates and terrorism. Vietnam alone aims to construct eight nuclear reactors in the next two decades, with at least one set to become operational within the next decade.

It’s not just in the nuclear arena that Russia is proving attractive. ASEAN countries are also interested in expanding their use of geothermal energy and hydroelectric power—although there’s limited potential, geothermal and hydroelectric plants still typically cost less than nuclear power facilities and can be brought on-line faster. The first ASEAN nuclear plants will probably not become commercially operational for a decade, while geothermal and hydroelectric systems could enter service in just a few years. Russia has therefore offered to partner with ASEAN countries on various geothermal and hydroelectric projects as well as nuclear energy.

Such energy deals are part of an ongoing effort by Russian leaders, especially Medvedev and Prime Minister Vladimir Putin, to exploit Russia’s energy assets to bolster Russia’s economy and global influence. In March, Putin established a target of raising Russia’s share of the international nuclear market from the current 16 percent to 25 percent. As part of this drive to exploit renewed international interest in nuclear power, the Russian government has worked with Rosatom to secure nuclear contracts with Venezuela, Turkey and other countries. But meeting the goal of supplying one-fourth of the global nuclear market will require Russia to capture a significant share of Asia’s growing market for uranium fuel, reactors and other nuclear services.

Atomstroyexport, the export arm of Rosatom, already has or will soon complete contracts with Iran for the Bushehr power plant, with China for the twin Jiangsu Tianwan reactors at Lianyungang and with India for the nuclear power plant under construction at Kudankulam. In addition, China and India have already signed agreements with Atomstroyexport to build several more reactors at Tianwan, Kudankulam and at Haripur in West Bengal. Thanks to generous Russian financing, the prospects are good that Vietnam and Bangladesh will also finalize their contracts with Atomstroyexport to construct nuclear reactors.

As part of the contracts it agrees, Rosatom typically helps the client design, build and operate the plant as well as providing training and sometimes financing. Except for China and India, Moscow requires that its firms supply all the uranium fuel used in the Russian-provided commercial reactors. Russian policy also normally demands that the client repatriate the spent fuel used by the reactor to Russia rather than store or reprocess it at home or in another country. Russia can then store the used fuel and, at some point, extract the plutonium from the nuclear waste contained in the spent fuel rods and use it to make new nuclear fuel. In addition to the commercial advantages Russian firms get from this, the supply and ‘take back’ provisions also have a useful non-proliferation function.

Interestingly, Russia (and it’s by no means alone in this) treats India much as it does China, despite India not being officially recognized as a nuclear weapons state by the Nuclear Non-Proliferation Treaty (India is a de facto nuclear weapons state, but its leaders have refused to join the NPT, denouncing it as discriminatory). As a result, Russia is supplying enriched uranium fuel for Kudankulam, but allows India to reprocess the spent fuel and keep the plutonium.

Russian commercial nuclear activities in Asia aren’t limited to selling reactors. In March 2008, AtomEnergoProm, which controls Russia’s non-military nuclear entities, signed a framework agreement with Japan’s Toshiba Corporation to explore possible civil nuclear power cooperation in such areas as developing new nuclear plants, uranium enrichment facilities and other advanced nuclear technologies. If viable projects emerge, the two firms have indicated they might establish a strategic partnership.

And just a few weeks ago, the Russian government formally endorsed an agreement on peaceful nuclear energy cooperation signed with Japan in May 2009. The deal represents one of the few bilateral economic accords between the two governments, which have yet to sign a formal peace treaty ending their 1945 war. Following ratification by the Russian parliament, the agreement provides for the exchange of information on nuclear security.

There could also be more modifications to come in Moscow’s nuclear export policies. Earlier this year, Russia signed a nuclear deal with Turkey in which Rosatom will not only construct a nuclear energy plant in Turkey but, in an unprecedented arrangement, also own and operate the facility in order to ensure Russia recovers the large loan it’s providing Turkey. To overcome Turkey’s problem of not having the money on hand to pay for the facility’s construction, Turkish electricity company Tetas has committed to buying half its electricity for at least 15 years at a fixed price from the Russian-owned plant.

Rosatom is also pioneering construction of the world’s first floating nuclear power plant, a system that Indonesia and other predominately island nations (or indeed countries with extensive river systems), might be interested in buying. Since the facility is self-contained, disposing of the spent fuel would be easy, as the plant would simply be returned to Russia after exhausting its internal fuel supply. (That said, environmental opposition to the concept remains high, with ecologists warning about a ‘floating Chernobyl’).

But Russia’s nuclear dominance in Asia is by no means assured—and neither is continued demand for nuclear power. It’s possible, for example, that the prices of oil and gas could dip far enough to sharply reduce demand for nuclear power, or that a breakthrough in solar energy production or other alternative energy source could occur, making the high up-front costs needed to construct a nuclear plant less palatable.

A worse scenario for Russia though would be another major nuclear accident that, like Chernobyl, undermined popular support for nuclear power. Even now, ecological protests at Haripur in eastern India have led Rosatom to request that Indian officials consider allowing Russia to build the plant at another site.

But the biggest danger for Moscow may be that other countries are beginning to take a leaf out of its strategic playbook. Russia already has strong commercial nuclear competitors in South Korea, Japan and the United States. Indeed, the same day that Vietnam signed the memorandum to purchase two nuclear reactors from Russia, Hanoi also signed a similar agreement with Japan, meaning that Russia and Japan will directly compete for specific nuclear contracts in Vietnam in the coming years.

Russia has already seen its advantage slip with arms exports. It could find the apprentice scenario playing out with its nuclear options too.