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Nuclear News - 05/07/99
RANSAC Nuclear News, 7 May, 1999

A. Highly-Enriched Uranium (HEU) Agreement
1. Russian Weapons-Derived Uranium Hits Commercial Market, Bellona(05/06/99)

B. Russian Nuclear Forces
1. A Limited Nuclear War? Why Not?, Segodnya (05/06/99)
A. Highly-Enriched Uranium (HEU) Agreement
Russian Weapons-Derived Uranium Hits Commercial Market
William Stoichevski
Bellona
May 6, 1999

Uranium producers, Russian, U.S governments gather to control uraniummarket prices before HEU's commercial debut

Negotiations in Canada between the world's biggest uranium minersproduced an agreement at the end of March, which signaled the emergenceof Russia and Russian weapons-derived uranium onto the world market.

It might be remembered as the dawn of diversification by the globalgiants of uranium mining - Cameco, Cogema, Nukem (CCN) and Texnexport -and recalled with disdain by anti-nuclear activists as the deal thatmade it cheaper, easier and politically-expedient to proliferate thenaturally radioactive nuclear fuel.

The new commercial agreement grants Cameco and its partners a 'buy now,pay later' option on 117 million kilograms of Russian natural uraniumderived from high-enriched uranium (HEU) destined for Americanstockpiles. Russian Techsnabexport is entitled to the remaining 45million kgs included in the agreement, "to fulfil prior commitments anda proportion of the U.S. import quotas for this material," according toa Cogema press release. The HEU comes from 2,300 Russian nuclearwarheads dismantled since 1993. Reuters reported that under the deal,the United States would pay $12 billion over 20 years to buy uraniumfrom the equivalent of 1,000 decommissioned Russian nuclear warheads anduse it as fuel in civilian nuclear power plants.

Beginning in 1999 and continuing for 15 years, 27, 000 kgs per year willbe shipped from Russia to the U.S., adding to 54,420 kgs alreadydelivered. "The purchase price will be determined on the basis of marketprices and taking account of marketing costs, subject to the applicationof a floor price which will guarantee Russia a minimum revenue," theCogema press release read.

For the Russian government, the potential increase in disposable stateincome offered by the commercial agreement is an irresistible alternateto the burden of borrowing from international creditors. Russian AtomicEnergy Minister, Yevgeny Adamov, called the anticipated cash influx,"worthy and timely," in a March statement reported by Itar-Tass.

After receiving $325 million from the U.S. government for uraniumshipped prior to this year under a 1993 agreement called HEU-LEU,Russia's new commercial share of the world market will begin at about$US 10.50 per 0.45 kg of natural uranium (U3O8).

Elaine Kergoat, spokesperson for Canadian uranium producer Cameco, saidall the parties to the deal had their interests met, with Russia comingout on top.

"What you have is two separate agreements that compliment each other:one is for the natural, one for the enriched component of the material,"Kergoat said.

"Our deal is to buy the natural uranium in 1999 for the post-98deliveries."

Russia will receive cash payment for both radioactive materials, andpayments of uranium from the U.S. for the natural uranium Russia usesblending down HEU. Cameco and its partners will purchase the Russianweapons-derived natural uranium from U.S. stockpiles. Uranium notpurchased will be sent back to Russia until the Russian stockpile equalsthe American stockpile of 26 million kgs. Under the terms of theagreement, Russia can then sell its uranium into contracts with itsclient base of domestic reactors.

The result is a controlled entry of Russian weapons-derived uraniumontothe world market, an important incentive for the deal's players. TheU.S. and Russian Federation governments stabilise world uranium pricesby keeping a portion of the world's supply out of circulation for tenyears.

In its annual report, Cameco acknowledges it entered into discussionsonly on the basis of broader U.S. and Russian government involvement.

"As a further inducement to conclude a commercial agreement, the U.S.Department of Energy promised to defer the sale of approximately 26million kgs U3O8 of inventory, which includes the 13 million kgs(already paid for) for 10 years," Cameco's yearly report explains.

Price control Russia has access to its own HEU derived uranium cache butcannot, under the terms of the agreement, start to sell into contractsuntil it too has a 26-million-kg stockpile. Russian willingness tomanage its own remote inventory is, in theory, to be rewarded by themarketing elan of the world's biggest uranium producer, and pricemechanisms that guarantee a minimum revenue regardless of the marketprice at the time of delivery.

The inflationary pressure created by CCN's ability to move uranium intothe reactors of its clients and the monitoring of stockpiles by the twogovernments is what the signatories of the deal are counting on. Globaluranium producers seem already to have seen the first dividends of thedeal, to the delight of the commercial deal's Russian signatories.

A Cameco stockholder's memo notes, "Since the end of 1998, the uraniumspot price (market price for contracts of up to a year) has increased by20 per cent to $US 10.50 per 0.45 kg (of) U3O8." It continued, "... thespot market started 1999 strong, with 1.58 million kgs U3O8 trading inJanuary alone."

For the uranium producers, including Russia's Techsnexport, acquiringnatural uranium through weapons-derived stockpiles, is a far less costlyventure than mining for it. As Kergoat put it, "I can assure you, wewouldn't be involved if there wasn't money to be made."

Uranium acquisition costs through mining include such overhead as watercontrol, stabilisation of ground surfaces, radiation protection,insurance, licensing fees, handling, etc., according to Cameco'sshareholder report.

The market Russia enters The optimism and forward-looking gazecharacteristic of the deal's parties is founded on a belief that nuclearenergy will maintain its 17 per cent share of rising world electricityproduction well into the future. Cameco informed its shareholders of anexpected increase in world electricity consumption of 3 per centannually for the next 20 years, and cites the difficulties somecountries have meeting Kyoto emissions quotas as reasons for survival ofnuclear power.

Russian uranium, Cameco concedes, will likely fill the needs of reactorsproducing electricity for Eastern Europe, the CIS and some Asiancountries. It's not known whose uranium will fuel the 16 reactors saidto be under construction in South Korea.

Russian weapons-derived uranium enters a commercial market where worldconsumption is still double production, according to a uranium industryreport, despite the prescient decisions and discussions in some westerncountries aimed at neutralising a utility still plagued by dangerousmishaps.
B. Russian Nuclear Forces
A Limited Nuclear War? Why Not?
Segodnya
May 6, 1999

Recently, President Boris Yeltsin signed new decrees on Russia'sdefense program. According to the daily, the only official informationthat has been released so far was that one of the documents refers tothe development and use of "nonategic nuclear weapons."

The daily noted that there are strong grounds to believe that this meansthe start of work on a new generation of tactical nuclear weapons. Theobjective of the new program is to make a limited nuclear war possiblein principle, allowing Russia to make limited, low-level nuclear strikesat any point on the global - just as the U.S. is using missiles and"smart bombs" in Europe and Asia.

Russian officials are trying to keep the program a secret. However, backin 1996, Russia's then-nuclear minister Mikhailov wrote in the pressabout the program's main principles. He now supervises defense nucleartechnologies as first deputy nuclear minister. According to the daily,the most important characteristics of the next generation of nuclearweapons will be their ability to create low-level explosions. Some10,000 such new weapons will be created "to oppose NATO's expansion inEurope." A nuclear war is no longer impossible, the daily concluded.



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