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May 6, 2013 | 10:02 GMT

8 mins read

The Political Benefits of a Nuclear Deal in Turkey

ADEM ALTAN/AFP/Getty Images
Summary

Japanese Prime Minister Shinzo Abe and Turkish Prime Minister Recep Tayyip Erdogan announced May 3 during Abe's visit to Ankara that the Turkish government has selected a Japanese-French consortium to build a nuclear power plant on the Black Sea coast. The deal is still in its preliminary stages, and another costly nuclear deal between Turkey and Russia has seen little progress. Still, the announcement itself has the potential to shape perceptions on the revival of the nuclear power industry after Japan's Fukushima reactor disaster, maintain political relationships and drive investor interest in Turkey.

The power plant, which would have a production capacity of 4,500-5,000 megawatts, would be located on the Sinop Peninsula on Turkey's northern Black Sea coast. Japan's Mitsubishi Heavy Industries and Itochu Corp., along with French utility firm GDF Suez, make up the consortium that beat out China Guangdong Nuclear Power Holding Co. in the final bidding round. The plan calls for the installation of four Atmea-designed 1,100-megawatt reactors (a smaller and less expensive version of the third-generation European Pressurized Reactors) jointly developed by French nuclear engineering firm Areva and Mitsubishi Heavy Industries. GDF Suez would operate the plant with a local Turkish partner. No details have been released yet on the distribution of stakes or on a financing plan for the estimated $22 billion project, but a representative of Japan Bank for International Cooperation, a state-owned policy financing institution, was part of the Japanese delegation in Turkey. Turkey would also need to create a nuclear safety regulatory agency to provide building permits. Preliminary estimates aim to start construction in 2017 and begin operations by 2023, should the deal be finalized.
 
The road from a preliminary nuclear cooperation agreement to an operational nuclear facility is a long and difficult one. The government, engineering and utility firms, regulatory bodies, environmental lobby groups and banks need to sort out critical details, such as an environmentally safe location for the site, the disposal of nuclear waste, operational control over the facility, supply of nuclear fuel, questions over transfer of technology, competition from other energy sources and financing for the multibillion-dollar project. This process takes on average 10-15 years, an extensive investment period during which many things can change. Until the construction crews break ground and the loans are lined up, prospects for a nuclear power plant deal coming to fruition should be treated with caution.
 
That said, the mere signing of a deal can still yield notable benefits in creating favorable perceptions on nuclear energy and in maintaining strategic political relationships.

A Public Relations Boost for Nuclear Power 

Demand for nuclear power took a substantial hit after the Fukushima nuclear crisis in 2011, affecting the bottom line for major nuclear industrial powers such as Japan as well as France, which saw a slowdown in its overseas nuclear investments. At the same time, an increasingly competitive natural gas market has influenced countries that are already reticent toward nuclear power. For example, Germany, which has a developing political relationship with Russia and depends on Russia for 40 percent of its natural gas needs, has committed to completely phasing out nuclear power by 2022. At the same time, Central European countries such as Hungary and Slovakia are being tempted by Russian offers to build and finance nuclear power plants as Moscow seeks to diversify its energy tools of influence in Europe.
 
The French nuclear industry — including major firms Areva and EDF, with the government holding majority shares in both — has been facing rising political and financial resistance to nuclear power at home and throughout Europe. Nuclear power plant projects involving EDF in Normandy and Areva in Finland are both running behind schedule and over budget. While not uncommon, these delays and risings costs come at a time when EU infrastructure funding is increasingly jeopardized. French industrial powers are therefore looking beyond Europe for business and a fresh vote of confidence. For example, Areva is building two European Pressurized Reactors for China's Taishan plant and in late April signed a deal with China for a facility to process nuclear fuel. A multibillion-dollar deal in Turkey helps drive the perception that France's nuclear industry is recovering. On another level, nuclear cooperation between France and Turkey could help alleviate the growing strain in political relations between Paris and Ankara over Turkey's political estrangement from the European Union.
 
For Japan, the Turkish nuclear deal is a major public relations victory. Sinop is the first contract for Japanese companies to export a nuclear power plant since the Fukushima crisis. In the years preceding the disaster, Japan had embarked on a campaign to lock down nuclear cooperation agreements and infrastructure export deals with emerging markets. In addition to renewing existing agreements with Russia and South Korea, Japan signed agreements with Kazakhstan (2007), Indonesia (2007), Vietnam (2008), the United Arab Emirates (2009), Jordan (2009), Italy (2009) and Mongolia (2009). It also held talks with many other states in southeast and East Asia, the Middle East and Central Europe. But with criticism rising over Fukushima, and the subsequent shutdown of all of its reactors (only two of which have restarted to date), Japan risked losing out in nuclear export deals to competitors.

But Japan was not willing to forgo nuclear technology as a core tenet of its economic strategy. The legislature approved preliminary nuclear agreements with Vietnam and Jordan in December 2011. And with the Liberal Democrats taking power in late 2012 and launching an economic revitalization program, new funds are becoming available to push nuclear exports more aggressively.

Turkey' Seismic Hazard

Turkey' Seismic Hazard

Japan already has a reputation for superior technology and the ability to provide quality human and technical support in these nuclear deals. The fundamental challenge that Japan faced in seeking the contract was in trying to present the crisis at Fukushima as something other than proof of faults in its engineering and construction. Japan needed to shift the narrative, emphasize the extraordinary circumstances at Fukushima (the magnitude-9.0 earthquake and tsunami that breached the Daiichi plant's walls) and use them to stress the value of Japanese expertise and experience in coping with such a catastrophic scenario. The Turkish plant in Sinop lies on the Black Sea coast, just off the North Anatolian Fault, where the epicenters of Turkey's biggest earthquakes in recent decades have been located. Erdogan noted specifically that the decision to grant Japan the contract arose from the two countries' shared proneness to earthquakes and Japan's ability to give first-hand advice on security and safety measures. The Turkish decision also paves the way for Japan to pursue nuclear export deals in other emerging markets, especially in the Gulf Cooperation Council states, which can afford nuclear power, are trying to sustain their energy resources for the long term and are not comfortable with allowing Iran to be the only nuclear power in the Persian Gulf region. 

Turkey's Interest in Nuclear Power 

Turkey in many ways is an obvious candidate for nuclear power. Turkey is the world's 17th-largest economy by gross domestic product, and though its growth estimates will be tempered by the depressed European market, its industrial development and population of 73 million are rising steadily and are thus driving up electricity consumption. Turkey's lack of domestic resources to match this growing demand has forced it to import more than 90 percent of its energy resources. Beyond a ballooning current account deficit, this also creates major dependencies on energy suppliers such as Russia and Iran, with which Turkey has complicated political relationships.
 
Turkey has been toying with nuclear proposals since 1970, but proposal after proposal has fallen by the wayside due to commercial feasibility issues, lack of demand up until the 1990s, the availability of cheaper energy alternatives and heavy environmental resistance. Most of Turkey is located in seismically active zones, making it difficult for the Turkish government to win the public's confidence in moving ahead with these projects. Under the Justice and Development Party, Turkey has the political continuity and popular support to carry its nuclear plans forward, but it still faces growing constraints in trying to finance these costly projects, especially with Europe in economic decline.

Turkey's Electricity Consumption and Generation

Turkey's Electricity Consumption and Generation

These nuclear deals, while difficult to bring to fruition, still carry political value for Turkey. In 2010, Turkey signed a deal with a Russian-led consortium led by Atomstroyexport and Inter RAO to build a $20 billion 4.8-gigawatt power plant near Turkey's southern coastal town of Akkuyu. This deal to build one of the largest nuclear power facilities in the world is still in the political phase and may well remain there. Though Ankara often expresses its desire to diversify its energy supply away from Russia, this simply is not a realistic option for Turkey in the foreseeable future. Even if these two latest nuclear projects were implemented, they would address only a fraction of Turkey's electricity demand at an enormous cost. Moreover, the nuclear deal with Russia would not lessen Turkey's dependency on Russia. Russia pursues these deals, much like it is currently doing in Central Europe, with the strategic intent to maintain operational control of the project beyond the construction phase by supplying nuclear fuel and engineers to run the plant. Turkey is likely well aware of the political conditions that could come attached to this deal, but having it on the table allows Ankara to maintain a careful balancing act with Russia, especially since they both have opposing interests in the Middle East, the Caucasus and Central Asia.
 
Turkey has stated goals to build several nuclear power plants in the next decade, but those goals are probably overly ambitious. The Japanese-French nuclear deal likely has a higher chance of proceeding than the Russian deal, but it is still too early to tell. At the very least, the announcement of the multibillion-dollar energy project drives investor interest in Turkey as the country aims to rapidly develop infrastructure to meet the demands of its growing economy and to commemorate the 2023 centennial of the Turkish Republic. In the face of still-considerable financial and environmental resistance at home, Japan and France will try to use this deal to revive interest in nuclear power beyond their borders.

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