Usually, when we mention Russia’s energy developments, we picture endless pipelines spanning Europe, Central Asia, and China. But in recent years, despite slowing domestic economy and international sanctions, another major industry has taken off – Russia’s nuclear power industry. At the forefront of it is the government corporation Rosatom, which has consolidated the nuclear sector and has turned it into a vertically integrated powerhouse. International sanctions over Russia’s annexation of Ukraine’s Crimea peninsula may have affected the economy and the country’s future oil and gas exploration, but they have done little to affect the ability of Russia to provide nuclear power to the world.
In the last decade, slowly but steadily, Russia has moved towards building a vast nuclear empire spanning South and North America, Europe, the Middle East, Africa, India, South Korea, Vietnam, China, Malaysia and Indonesia.
Rosatom is the government corporation behind this expansion, authorized since 2007 by federal law to pursue and “implement the national atomic energy policy in the interests of the Russian Federation and its citizens.” The corporation was charged with pursuing nuclear state policy, management of existing nuclear power plants (NPP) and transportation of radioactive materials, development of new nuclear power enterprises and nuclear weapon complexes, ensuring nuclear and radiological safety, etc. At the head of it, since 2005, has been Sergey Kiriyenko – a trusted ally of president Putin.
Under Putin, Russia has caught the West off-guard with military adventures in Georgia, Ukraine and Syria – aggressive moves which few analysts foresaw. They have attracted the world’s attention and have brought West-Russia relations to a new low unseen since the end of the Cold War. As a result, the country has suffered under heavy economic sanctions, but surprisingly it has persisted with exporting nuclear technology all over the world and this policy has allowed Rosatom to become one of the world’s leading nuclear powerhouses. In the wake of Fukushima, Rosatom not only kept all of its production capacities online and its commitments to continue work on ongoing projects, but since 2011, it has increased its portfolio by 60%. Despite accidents like Chernobyl and Fukushima, the International Atomic Energy Agency predicts that nuclear power will continue to grow in the next 15 years. The agency’s latest report puts the low margin of growth at 17% and the high at 94%, which means a doubling of the existing nuclear capacity by 2030 to near 722 GW(e), from today’s 373 GW(e). Russia is uniquely positioned to capitalize on this projected growth – it has a rich legacy of research and engineering in the field, and has a history of cooperation with African and Middle Eastern countries. In the last decade, the Federation has stealthily worked to expand and strengthen its nuclear power markets in strategic and vital locations across the world. The expansion serves not only economic purposes, but more importantly – strategic geopolitical purposes. By developing and maintaining projects with 60+ years of useful life, the Kremlin is ensuring a steady presence on almost every single continent.
In the aftermath of Fukushima and the following stigmatization of nuclear power, it might seem that building a nuclear empire is a costly exercise destined for failure, but when examined closely, the Russian efforts prove to be not only aimed at delivering profits for Moscow’s coffers, but also at expanding its sphere of influence beyond traditional military and hydrocarbon means.
Oil exports have long been considered the “cash-cow” – and the geopolitical weapon of the Kremlin – but increasingly nuclear power has also been employed to expand Russia’s sphere of influence. The ambition to become the preeminent authority in the field, and to cater to new nations wishing to develop or expand their nuclear capabilities, has flown “under the radar” of the West, and the country’s efforts are finally paying off. Rosatom is on the verge of delivering projects to strategic countries. The company has 29 ongoing projects – in Turkey (Akkuyu), Armenia, Finland, Belarus (Ostrovets), Vietnam, Bangladesh, India (Kudankulam) and China (Tianwan). It operates in 40 countries; its portfolio of overseas orders for the next 10 years exceeds $101 billion. Its NPP projects grew from 19 in 2012 to 29 today. It is currently constructing power units in Belarus, Finland (Hanhikivi 1), Turkey, Iran (Bushehr), India and China and is preparing for construction in Vietnam, Bangladesh, Hungary and Jordan. The number of Russian design reactors worldwide is 72 and 29 more will be constructed by 2030. Rosatom has achieved a 17% market share of the nuclear fuel fabrication and every 6th reactor in the world is operating with Russian nuclear fuel. It holds 36% of the worlds uranium enrichment market and employs 260,000 workers.
The company has accomplished a complete vertical integration – from uranium mining, to fuel conversion and enrichment, to fabrication of fuel, NPP construction, engineering, power generation, waste management and plant decommissioning. Seventeen percent of Russia’s domestic electric power generation is provided by Rosatom’s 25.2 GW of installed NPP capacity, which produced 180.5 billion KWh in 2014. Nine new reactors are under construction domestically.
Rosatom is the world’s only “full cycle” nuclear company and since 2010 it has started developing its projects under the “Build-Own-Operate” (BOO) model. This allows countries with no domestic nuclear expertise to bring NPPs into their mix. The first contract for the complete supply of equipment under the BOO model was for the 4 reactor units in Turkey’s Akkuyu power plant.
Rosatom’s subsidiary Atomflot, on the other hand, is at the forefront of developing and operating atomic icebreakers. Its nuclear fleet consists of 6 icebreakers, 2 floating technical bases, 2 ships for nuclear fuel and waste transporting and 1 floating dosimetric control post. It enables Russia to be the biggest player in the Arctic and to command an unchallenged position when it comes to future exploration in the region. It is enabling the opening of the Northern transportation route, which has seen an increase in shipping form 46 passing ships in 2012 to 129 in 2015. Two next-generation atomic ice-breakers are currently being built.
The expansion of the nuclear power fleet is starting to face an increasing opposition in the West and Japan, and many countries have looked to scale back their nuclear power programs. On the other hand, this source of energy is perceived as desirable by regimes across the Middle East, Asia and Africa. It is the perfect solution for alleviating their energy poverty and allows centralized regimes to cement their power. Distributed and democratized power generation may have a bright future in the developed countries, but electricity markets in the developing world are still dominated by central governments. Even if the economics of renewable energy sources (RES) continue to improve in the next decades and they undermine the market share of conventional power generators, RES are still a diffused and intermittent energy source, which currently cannot serve as a baseload. Developing countries are also facing another dilemma – their populations and energy demands are projected to soar in the next decades and nuclear power provides them with a centralized and plentiful source of energy. The allure of the turnkey nuclear power plant, built, owned and operated by Rosatom, allows governments across the world to embrace such projects. But for Russia they are much more than a major economic export. They are another geopolitical tool, allowing the Kremlin to tie up strategic governments into long-term cooperation. In some cases, as we see with the breakdown of the Russian-Turkish relations after the downing of the Russian jet, such projects are not enough to guarantee a stable relationship. But the two nations have had a complicated history throughout the centuries and large scale economic projects are not enough to overcome their differences. The economic measures, announced by the Russian Premier Medvedev after the aircraft incident, did not affect the cooperation on the $20 billion Akkuyu NPP project, but recently Rosatom announced that they may sell their share in the first Turkish nuclear plant due to deteriorating economics.
Iran-Russian Nuclear Cooperation
Another country with which Russia has had a complicated relationship throughout the 19th and 20th century is Iran. The two nations share many crucial characteristics – desire for geopolitical hegemony, energy abundance, and messianic ideologies. Orthodox Christianity, the Shiite version of Islam, Marxism, and Bolshevism have all shaped these countries in the 20th century. They all claim monopoly of truth, require absolute power in the hands of a minority and regard the individual as a mere tool of history or God. From the Bolshevik support for the Iranian Tudeh communist party, which played a pivotal role in Iran after World War II, to the refusal of the Red Army to leave Iran and Stalin’s hand in fomenting a separatist movement in Kurdistan and Azerbaijan, which eventually won the Soviets a concession rights for oil and gas exploration in northern Iran, the relationship between the two has seen ups and downs. The ideological battle between the hegemons ended in 1965 with the signing of an economic pact giving the Soviets Iranian gas in return for the building of Iran’s first steel mill. At the time, the steel industry was considered the symbol of national power and the Kremlin delivered that project to Iran. In the following decades, the two powers have witnessed cyclical deterioration and improvement of relations – from Iran’s joining of the anti-Soviet coalition, to the welcoming of the anti-American Islamist regime in Tehran by Moscow, to the Soviets’ support of Saddam Hussein during the Iran-Iraq war – they have seen tumultuous times. But the relationship again saw a categorical improvement after Tehran decided to develop a domestic nuclear program in 1984. The West was not keen on cooperating with the Islamist regime and Moscow was all too eager to help. In an age when the nuclear industry was regarded as the new status symbol of national pride and power, Moscow decided once again to help Iran, just as they had done with the steel-mill industry in the 1960s. In more recent history, it was Iran’s nuclear program, which Moscow has been using as a bargaining chip against the West. Both Russia and China have consistently opposed sanctions against Iran at the UN Security Council, until the recent deal stuck by the West and Iran. Russia again played a key role in the deal.
The return of Putin to power in 2012 was another pivotal moment in the relationship between the two countries. The Arab Spring uprising of 2011 left Russia with a decreasing political and economic presence in the Middle East and Iran presented an ideal opportunity for Moscow to deepen its engagement with the regime that still harbored deep anti-Western sentiments. Although the opening of Iran to the West after the pivotal deal over its controversial nuclear enrichment program meant that Moscow is losing leverage over Tehran, the two countries continue to deepen their relationship and expand their trade.
Russia completed the first Iranian nuclear power plant in Bushehr in 2011 and the two countries signed a contract in 2014 to build two additional reactors at the site. The deal included provisions for a number of Russian experts to remain in Iran and to provide technical assistance and for the building of six additional reactors.
Despite reports of heavy financial losses for Russia from the lifting of Iranian sanctions, in which Moscow played a pivotal role by bringing Tehran to the negotiating table, many analysts regard the move as a strategic for Kremlin.
Putin demonstrated that he is willing to take an economic hit in order to secure its political influence in the Middle East. Bloomberg estimates that the Iranian deal with the West and bringing to market of Iranian oil would cost Moscow $27 billion over time, but Putin is regarding the strategic benefits as much more important for Russia. By arming the Islamic regime with advanced S-300 anti-ballistic missiles immediately after the lifting of the sanctions, Moscow ensured that their ally will retain a bargaining chip against the West. It showed the Iranians that Russia is still a vital partner vested in their survival. The two countries continue to have disagreements on several fronts, but share interests in the military and nuclear sectors. The $800 million missile deal was just part of a broader strategy for claiming a share of the Iranian military market. Building of new nuclear power plants, with a potential value of $30 billion is a bigger prize for Moscow – it opens the door for other future energy projects.
The Rest of the Middle East
Russia and one of the other major players in the region – Saudi Arabia – have seen their ties strain in recent years due to the civil war in Syria, where they have supported opposing sides since 2011. Some analysts also point out that Russia regards Saudi refusal to cut oil production as an oil war. Despite their differences, the two countries signed a nuclear power cooperation agreement in 2015. It is not clear if the deal with the Kingdom, which plans to build 16 reactors, will lead to a more advanced cooperation with Moscow, but the Saudi al-Arabiya TV, announced that Russia would play a significant role the operation of the planned reactors. By demonstrating that they have the technical know-how of building and operating NPPs in the Middle East, Russia is positioning itself as a major future player in the region. The build-own-operate model is especially attractive for regimes, which do not have the technical nuclear expertise.
On March 24, 2015 Jordan and Russia signed a $10bn deal to build the kingdom’s first nuclear power plant, with two 1000 MW VVER reactors. Construction of the 2,000 MW at Qasr Amra would require an investment of about $10 billion. Under the signed deal, Rosatom would bear 49% of the cost, and Jordan would retain 51% of equity in the joint venture.
In April, 2016 Moscow and Algeria signed a memorandum of understanding (MOU) for cooperation in developing Algeria’s nuclear power industry. The agreement provides opportunity of joint development of nuclear power in Algeria based on Russian technology. Similar MOUs have been signed with Bolivia, Tunisia, Cambodia, Brazil, Korea, and many others and Rosatom has already planned construction of four reactors in Egypt.
In the last decade, Russia has demonstrated using its prowess in the nuclear industry by building and bringing online rectors across the world. Moreover, with the consolidation of its domestic nuclear industry and vertically integrating the complete nuclear cycle under the Rosatom umbrella, Moscow has gained another strategic tool. By going out and building projects, which guarantee its long term presence in strategic regions, Russia is gaining a strong foothold on the ground. The nuclear power plants are not only economic projects. They require transfer of technological know-how, long-term engagement of scientists, engineers, and diplomats. They are in some essence embassies and commerce chambers, which guarantee Russian access to local governments and politicians. Kremlin is also opening its universities for students from its future nuclear clients and is building networks of cadres across the world.
Moscow may not have succeeded in organizing the natural gas producers from the Middle East into another OPEC, but it is definitely using its nuclear industry to tie strategic countries into its sphere of influence, and so far the West has not been able to challenge it.
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