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Russia vs China: The biggest slice of yellowcake

Putin’s visit to Egypt raises major questions regarding funding for Egypt’s potential nuclear energy programme

Cairo streets have been decorated with Vladimir Putin portraits and Russian flags to mark the Russian president's visit to Egypt on 9 and 10 February (DNE Photo)
Cairo streets have been decorated with Vladimir Putin portraits and Russian flags to mark the Russian president’s visit to Egypt on 9 and 10 February
(DNE Photo)

By Catherine Vergiz

Russian President Vladimir Putin arrived in Egypt on 9 February  to discuss bilateral ties as well as regional issues in the Middle East. With a glance to the upcoming Economic Summit, this visit could shed light on perspectives of Russian participation in Egyptian nuclear energy investment projects.

Moscow is ready to take part in a tender on construction of the nuclear power plant (NPP), according to a statement from the Russian President’s Assistant, Yuri Ushakov, reported by Sputnik news agency. In 2013, the Egyptians approached the Russians with hopes to renew their nuclear cooperation agreement to focus on the joint development of uranium deposits and NPP construction in Dabaa. Later, the Russian foreign minister confirmed Russia is ready to cover 85% of the project’s cost.

During a recent visit to Cairo, Deputy Prime minister Arkadiy Dvorkovich reminded the Egyptians that his government is still waiting for an invitation to begin work on the Dabaa NPP. As a state influencer in the gas industry, and right-hand man of former president Medvedev, Dvorkovich proved these commitments by resuming Russian supplies of liquefied natural gas (LNG). Despite these efforts, it was reported that a week later, President Abdel Fatah Al-Sisi had conversed with Chinese investors regarding the Dabaa project during his visit in China, according to CBC channel.

Egypt faces a severe energy shortage, a problem that was all too evident in last summer’s frequent blackouts – the longest and most widespread in the country’s history.

Due to population growth, the level of electricity consumption in Egypt declined from 1.743 kWh/person in 2011 to 1.303 kWh/person in 2012. To reach the level of 2kWh/person, necessary for sustainable development, Egypt must add 3 gWh to installed capacity per year.

Exacerbating the problem is that most electricity production is fuelled by gas, which is running out. To meet this challenge, Egypt was set to build a nuclear power plant with at least two light water units of 900-1650 mWh capacity on the Mediterranean shore, Dabaa.

The roots of Egypt’s nuclear programme date back to the 1960s, which until today, has been plagued with repeated suspensions because of wars and crises. In the 1980s, the US and Egypt failed to come to an agreement on NPP construction, and the project was put on hold indefinitely after Chernobyl.

Until 2006, former president Hosni Mubarak expressed no interest in nuclear power. However, with gas resources dwindling, Mubarak set his sights to revive the Dabaa project. Egypt, however, found itself unable to undertake the construction of the Dabaa project due to lack of capital, and human resources.

On the horns of a dilemma of asset deficiency and threat of foreign energy bondage, Egypt picked the lowest fruit on the tree. With the initial cost of $8bn, the agreement would be an ordinary EPC contract on turn-key and lump-sum models. Besides 85% of foreign financing, it also requires 20% localisation.

For state-supported projects only

Russia’s state-owned holding atomic energy corporation, Rosatom, is considered one of the most promising companies to win the market. With a more budget-friendly construction price, product assurance included, waste utilisation, and potentially inexhaustible uranium reserves, Rosatom could tick all the boxes.

But the shocking report in 2013 on the China National Nuclear Corporation, building the first Chinese licence-clean 1000-mWh reactor in Pakistan, discomforted Russia – unlikely as it might have seemed two decades ago.

The energy situation in China after the Chernobyl incident was quite similar to Egypt’s current energy situation. The tragic events at Chernobyl put a lot of the world’s nuclear projects on hold. This forced downtime saw companies lose out on profits. As a result, the companies, looking to rebound, lined up for contracts, even with a low profit margin.

China took this opportunity to create its nuclear industry. It stipulated not only a good credit line, but also reached out for a high level of localisation and even technology transfer. And by now they could help other developing countries to retry their experiment.

This is not the first clash of interests between China and Russia in the nuclear energy field. Earlier, Rosatom sacrificed their perspectives in China to Western companies, refusing its reactors cloning. Then Rosatom and China hardly crossed each other on the way to uranium fields in Namibia and Kazakhstan. With yellowcake prices dramatically falling from $75 to $53, 40% of Kazakh uranium was exported to China, with 200 units to be build there by 2010, Kazatomprom’s director Vladimir Shkolnik said to the business publication Kursiv.


The quiet end of cheap uranium

Behind these numbers is a problem, which both the Russians and the Chinese would relay to Egypt through gritted teeth.

“Russia is able to build units up to 1200 mWh of total capacity, but whether is it a reasonable solution for Egypt? Total amount of uranium fuel in the world is enough for 400-500 units by 1 gWh per one recourse only,” said Professor Igor Nikolaevich Ostretsov, a nuclear scientist and an incident commander of the Power Engineering Ministry during the Chernobyl disaster.

“Let’s face the facts,” said Ostretsov, “the total number of nuclear units hasn’t grown since the beginning of the century. The US, for example, has built no reactors since 1978. European countries one by one are closing their nuclear programmes, and that’s for a reason. Main interested parties know the uranium-235 isotope is a few years from depletion.”

As for the International Atomic Energy Agency (IAEA), it keeps the issue of uranium depletion quiet, due to its nature as an executive authority representing the interests of nuclear industry lobbying groups, asserted Ostretsov.

“The energy supplies scarcity is an incredibly terrifying topic of our days. And so a politician having admitted that will have to make very difficult and unpopular decisions,” he said. Such a step would inevitably crash both the nuclear industry stock and expectations on super-profits of after-peak prices.

According to Ostretsov, Russia could hardly be a long-term source of uninterrupted nuclear fuel – as well as any other country. Being fourth in the world for uranium resources, “Russia is not able to produce enough uranium for its own nuclear industry”, he said. And while Rosatom mines less than 4 kilotons of uranium from domestic deposits, the Russian industry needs 16 kilotons. This shortage, explained Ostretsov, is covered by the non-civilian uranium.

No more Megatons

Russia is not the only country depending on the highly enriched military uranium resources. By the end of 80s, 95% of the world’s highly enriched uranium and plutonium resources had been concentrated in US and USSR – 600 kilotons/85 kilotons and 1,100 kilotons/155 kilotons respectively.

The program Megatons to Megawatts stipulated that Russia would supply of 500 kilotons of uranium from Soviet nuclear warheads to the US at below-market prices. That figures to be up to about 12% of world demand, as well as 40% of the US’s. This nuclear warhead uranium was keeping Western nuclear energy generation safe over the decades.

Ostretsov recalls the gloomy prophecy of Swiss physicist Michael Dittmar regarding an impending uranium deficit due to the end of Megatons to Megawatts, on the horizon in 2013. Dittmar’s forecast had nonetheless not been fulfilled, because Japan and Germany –  two of the world’s main uranium consumers – closed their nuclear plants. “Honestly speaking, if Fukushima hadn’t happen it would have to be made – or else about 50 US reactors would stop working on the other side of the Pacific ocean,” said Ostretsov.

This explains China’s aggressive scramble for uranium. China is following the footsteps of the Russians and Americans to stockpile uranium while it is still cheap. In 2013, the country imported about 15 kilotons of uranium, which was double the domestic demands, according to its customs agency GAC. Some estimates of Chinese stored uranium reserves are about 50 kilotons, and it is rumoured China is raising it to 100 kilotons. With estimated demands of 24 kilotons in 2030, its reserves could keep Chinese nuclear energy production alive for four years without uranium import at all.

Cheap uranium in the MENA region?

Does this mean the Egyptian plans for the development of a nuclear power industry are ill-fated? “No, it doesn’t,” asserted professor Ostretsov. He stressed the necessity for a developing country to build its own atomic power energetics, outdated though its principles are, until a new phase of nuclear energetics comes out. But the programme will only be sustainable, argues Ostretsov, if Egypt mines its own uranium. Ostretsov goes on to say that Egypt should follow in Iran’s footsteps by creating “a domestic uranium enrichment industry” and avoiding expensive ventures like the International Thermonuclear Experimental Reactor.

Unconventional uranium resources in Egypt contain 35-100 kilotons in phosphate rocks (Red Book 2014). Ostretsov estimated that the amount is sufficient for the Egypt’s nuclear industry consumption, but not more. “Anyway, nuclear power energetics covers only 4% of the world energy consumption,” he warned. “So currently it can’t be a solution for the energy deficit problem.”

However, news from Jordan might give Egypt a more solid foundation. While Egyptian electricity minister Mohamed Shaker was discussing energy cooperation with China, his deputy Hassan Hassanein was on his way to Amman to talk over a memorandum of understanding. With 40 kilotons of uranium identified and 40 kilotons inferred (Red Book 2014), Jordan has the biggest resources in MENA – but at the same time does not have the capabilities to explore it. This leaves the door open for Egyptians to obtain cheap uranium at their doorstep, provided they select a foreign investor to construct the Dabaa NPP.

Until then, Egypt has to guess which foreign investor will share with them the biggest slice of yellowcake – Russia or China.

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