- Global demand for alternative energy, including nuclear power, will grow in spite of past nuclear disasters.
- Russia will expand nuclear power exports as a part of its strategy to garner global political influence through energy production.
- Contract conditions will allow Russia to prolong its presence in geopolitically important countries, especially under the "build, own, operate" model for constructing nuclear facilities.
- Moscow will compete with Beijing for market space, especially in areas that require financing in order to achieve nuclear power goals.
On a spring day in 1986, an explosion and subsequent fire at the Chernobyl nuclear power plant in Ukraine, near the Belarusian border — then part of the Soviet Union — projected a plume of radioactive material into the sky. Nearly 30 years later, an exclusion zone with a radius of roughly 30-kilometers (18.6-miles) is still enforced. Meanwhile, efforts are underway to construct updated containment facilities to stem further contamination. The catastrophic accident was the result of a flawed reactor design and lapsed safety protocols, and the incident severely damaged the reputation of Soviet (now Russian) nuclear power production. In fact, the Russian nuclear sector — now led by state-owned company Rosatom — may never fully escape the ghost of Chernobyl, though the global memory of the incident is fading into history.
In 2010, Rosatom announced ambitious plans for growth, thereby expanding Russia's role in the international nuclear community. But before it could fulfill these aspirations, another catastrophic nuclear accident occurred — the only other recorded Level 7 disaster on the International Nuclear and Radiological Event Scale. A tsunami in 2011 severely damaged the facilities of Japan's Fukushima Dai-ichi nuclear power plant, causing a meltdown. The world once again became wary of nuclear energy. China temporarily suspended approvals for new power plants. Japan shut down all nuclear reactors in the country and stopped producing nuclear power for two years. Germany also still plans to phase out all nuclear power production by 2022.
As with past nuclear accidents, however, the stigma is beginning to lift and plans for nuclear expansion that may have been hindered by social backlash are beginning to regain ground. With the U.N. climate talks just around the corner, numerous countries seeking to meet emissions targets could seek to exploit nuclear energy — a proven clean energy source. China, now basically self-sufficient in terms of nuclear power production, has resumed its ambitious targets to expand domestic capacity and is building on existing knowledge of Western designs. However, China does not plan to remain just self-sufficient and aspires to export nuclear technology in the near future. But by the time Beijing reaches that point, Russia is hoping to have cornered the market on nuclear exports, especially to countries with no prior experience with nuclear power.
Russia's Nuclear Ambitions
Rosatom's stated, if not intangible, goals in 2010 have gained traction over the past several years. At the end of 2013, Rosatom's foreign orders totaled $74 billion. In September 2015, Rosatom estimated the value of export orders reached $300 billion with 30 plants in 12 counties. In addition, Russia has memorandums of cooperation and deals at various stages of negotiation across the globe. From South Africa to Argentina to Vietnam to Hungary to Saudi Arabia, there appears to be no region where Russia does not seek to send its nuclear exports.
Russia is no novice when it comes to using energy exports for political gain — see Russian natural gas exports to Europe. But as the game of pipelines continues in Europe, Russia is in a bitter standoff with the United States. In Russia's political chess strategy, numerous pieces are currently in motion. Economic pressure to lift sanctions seems to be hastening de-escalation in the Ukraine conflict. Meanwhile, Moscow is strengthening its presence in Syria through its more aggressive military stance. With hydrocarbon exports vulnerable, especially at times of low oil prices, exporting nuclear technology can provide Russia with another means of exerting influence. Nuclear power may never become as important as hydrocarbons, but it does provide a measure of political insurance as Russia attempts to maintain its global heft.
Russia's nuclear sector did not face the same cutbacks that other energy sectors did because of sanctions. And throughout 2014 and 2015, Rosatom blazed a path toward several agreements favorable to expanding its nuclear power interests. Many of these areas of possible expansion are in geopolitically important countries, from Moscow's perspective.
Middle East: Jordan, Saudi Arabia, and Iran
In March 2015, the Jordanian government signed a $10 billion agreement that will allow Russia to build two nuclear reactors in the country by 2022. Unlike Syria, Jordan cannot provide Russia with a Mediterranean port. Still, a solid relationship with Jordan through nuclear power cooperation helps Russia keep a foothold in the Levant, regardless of the outcome of the Syrian civil war.
Furthermore, as the world anticipates Iran's return to the global community once Western sanctions are lifted, the region is also preparing for the continued development of Tehran's civilian nuclear program. Russia consequently signed a framework deal in June 2015 with Saudi Arabia, Tehran's regional rival. Riyadh is eager to grow its nuclear sector, which is now only in the early stages, to 16 reactors over the course of the next 20 years. And Russia, naturally, is more than willing to help meet this goal.
Yet despite emerging cooperation with Saudi Arabia, Russia also wants to maintain a presence in Iran. Iran signed a construction contract with Russia to expand its Bushehr Nuclear Power Plant in 2014, and Moscow will not eliminate nuclear cooperation it has already established. Iran, however, could become the first battleground between China and Russia in terms of nuclear exports because Beijing has agreed to construct two plants in the southern Iran.
Europe: Hungary and Finland
One of Moscow's geopolitical imperatives is to have clout in Eastern Europe to ensure the security of the Russian core, a strategy especially evident during the Cold War. Hungary, once behind the Iron Curtain, is now part of the European Union. But growing anti-European sentiment in the country could provide Russia the opportunity to gain a better foothold there. Rosatom was selected to expand Hungary's Paks Nuclear Power Plant facility despite European objections.
Finland, on Russia's northern border, also ignored EU objections and agreed to have Rosatom come in to build a nuclear power plant in the north. Given last year's rumblings about Sweden and Finland possibly joining NATO and how close Finland's borders are to St. Petersburg, Russia will remain vigilant in maintaining its influence in Helsinki.
Rest of the World
Moscow's nuclear export campaign has also touched the rest of the world. South Africa has a non-binding memorandum of understanding with Russia. Rosatom is believed to be one of the leading candidates, along with China, to build a new nuclear plant in the country, which has seen recent blackouts due to insufficient power. Elsewhere on the African continent, Ghana and Nigeria are also potential sites for future Russian-built nuclear power plants.
Russia's push east for energy exports is not limited to hydrocarbons to China. Rather, several Southeast Asian countries — Laos, Vietnam, Myanmar and Indonesia — have signed either agreements for construction of plants or at least memorandums of cooperation for nuclear power.
Finally, the export of nuclear power facilities follows Russia's broader plan of investing in Latin America. Moscow could potentially cooperate with countries for the mutual goal of countering U.S. influence in the region. Still, Russia and China could compete directly to bring nuclear power to the continent, undermining that goal.
Russia's Secret Weapon
Plans and ambitions are all well and good, but as Russia moves from the planning stages into actual construction and operation, we will see the true success of the scheme. Russia's economic downturn has made Western experts skeptical of Moscow's ability to finance all of these contracts. But Russia has beaten out Western firms because of more attractive financing in the past. U.S.-based firms have been further disadvantaged by the suspension of the Export-Import Bank's charter on June 30. While reinstating the Export-Import bank could come to a vote later this month, Russia's financial flexibility should continue to give it an edge. Some countries such as China and Iran pay for Russian power plants directly. Others such as Belarus, Bangladesh and Hungary depend on favorable loans. Jordan brought in Chinese banks to finance roughly 30 percent of its project in addition to the Rosatom's 35 percent share, and India has certainly benefited from Russian finance.
High initial capital requirements are often a deterrent to adopting nuclear power, but Rosatom and its subsidiaries claim to have brought down development costs substantially. Requirements of a nuclear facility are site specific, meaning that each facility is unique. Repetitive production could drive down cost and while Rosatom does not exactly construct identical nuclear power plants, they do claim that the use of 3-D smart models has significantly increased speed of work, driving down their initial costs.
Ultimately, it is a new business model that gives Russia the edge, one in which Russia builds, owns and operates the facility, as well as provides training and education. This alone could see Rosatom winning more bids, especially in countries with no previous nuclear experience. Turkey, poised to be an important transit state for Russian natural gas, will serve as a proving ground for the build, own, operate model. The geopolitical implications are obvious, as the model gives Russia a more permanent foothold in the country than just building the facility or importing the material would.
Russia's desire for a global nuclear presence, however, will have to overcome several hurdles. Russian firms will continue to compete with Western ones in the near future, as well as Chinese producers in the coming years. South Africa is also an example of a country in which the build, own, operate model could fail, the big question being who will pay. While the Russian model may be attractive for Pretoria, which is not able to independently provide the capital for such facilities up front, it still requires the potential for a return on investment for Rosatom. South Africa has a poor track record of having consumers pay and that could prove a sticking point for its Russian partnership. Russia's own financial situation, while it has not yet hurt Rosatom, could eventually limit Moscow's ability to offer attractive financing options. But even with these obstacles, much like natural gas before it, nuclear power is only poised to augment Russia's global influence.