A Peaceful Atom

27 march 2011

Nuclear Rapprochement Between Moscow and Washington

Anton Khlopkov is Director of the Center for Energy and Security Studies in Moscow; Editor-in-Chief of Nuclear Club journal.

Resume: Russia’s negative image in nuclear security, export controls and nonproliferation dates back to the early 1990s; it is based on a combination of real problems that existed at the time and Hollywood-like stories in the media. Until recently, that image has often stood in the way of practical contacts and politicized nuclear energy cooperation between Russia and the United States.

The recent devastating tsunami that hit Japan and the subsequent tragedy at a Japanese nuclear power plant has once again demonstrated the vulnerability of the nuclear power industry. The industry’s long-term future (there are no alternatives in the short and mid-term) depends largely on whether the major nuclear countries can agree to coordinate their efforts for the nuclear power industry and emerge from this crisis stronger and safer than it was before the accident at the Fukushima nuclear power plant. The preservation of the nuclear power industry requires broader international cooperation in the nuclear field.

On January 11, 2011 the U.S.-Russian agreement on peaceful nuclear energy cooperation, also known as the 123 Agreement, entered into force. Diplomatic notes to that effect were exchanged at a special ceremony in Moscow attended by Russian Deputy Foreign Minister Sergei Ryabkov and U.S. Ambassador to Russia John Beyrle. The agreement puts into place the legal framework for civilian nuclear energy cooperation between the two countries for the next 30 years.

By the start of 2010, Russia had cooperation agreements for the peaceful use of nuclear energy with 53 countries, while the United States had agreements with 48 countries plus Taiwan. Paradoxically, the world’s two largest nuclear powers – not just in terms of nuclear weapons, but the civilian nuclear industry as well – did not have such agreements with each other. There was therefore no common legal basis for equitable, sustainable and comprehensive nuclear energy cooperation between Russia and the United States. U.S.-Soviet agreements to that effect in 1973 and 1990 did not cover all possible areas of cooperation and had long expired. There were few joint nuclear projects and all of them were regulated by ad-hoc documents or special executive orders from the leaders of the two countries.

Therefore, it would not be an exaggeration to describe an event that happened on December 8, 2010 as historic – when the U.S.-Russian agreement for cooperation in the peaceful uses of nuclear energy finally passed the vetting of the U.S. Congress. All such documents signed with foreign countries are called a “123 Agreement” in the United States, as 123 is the number of the section regulating international cooperation with other nations in the U.S. Atomic Energy Act of 1954. The last formal step was on January 11, 2011, when Moscow and Washington exchanged diplomatic notes to confirm that all national procedures needed for the agreement to enter into force had been completed (Russian law does not require the agreement’s ratification).

 

RUSSIA’S FIRST BRUSH WITH 123

The Russian nuclear industry first realized the importance of having a 123 Agreement in place with the United States back in 1991, when industry representatives brought a prototype for a space nuclear reactor to Albuquerque, New Mexico and the University of Maryland. 

The Topaz unit, designed as an electric power source for intelligence and broadcast satellites, was met with great interest in the United States. But when the time came to take the reactor back to Moscow, U.S. customs refused to let it out of the country, much to the consternation of the Soviet scientists who had brought it. 

U.S. customs officials said a special license was required in order to take the unit abroad, but the licensing authorities refused to issue such a license, citing the U.S. Atomic Energy Act of 1954. 

The act severely restricts nuclear cooperation with any foreign country that has not signed a 123 Agreement with the United States. The Soviet scientists were forced to return to Moscow without the Topaz unit. It was only in May 1991 that the U.S. president issued an executive order authorizing the return of the space reactor to the Soviet Union.

Moscow has been emphasizing the need to eliminate legal barriers in cooperation among hi-tech industries with the United States since the early 1990s, using various channels and venues. This issue was high on the agenda of the first official meeting between former presidents Boris Yeltsin and Bill Clinton held in Vancouver in April 1993. Moscow’s concerns over the hurdles faced by Russian hi-tech companies on the U.S. market, as well as restrictions on exports for U.S. hi-tech products to Russia, were also expressed in a letter Yeltsin sent to Clinton on July 10, 1997.

IRAN’S ROLE

Consultations began in the mid-1990s about the possibility of signing a 123 Agreement. Washington made any commercial nuclear industry relations with Russia conditional on Moscow’s commitment to stop its nuclear cooperation with Iran and end its involvement in a project to build a nuclear power plant in Bushehr (Russia and Iran signed an intergovernmental agreement on peaceful nuclear energy cooperation on August 24, 1992; the two countries later signed a contract on January 8, 1995 for the completion of the first nuclear reactor in Bushehr). During a meeting with Russian Prime Minister Yevgeny Primakov held in November 1998 on the sidelines of an ASEAN summit in Kuala Lumpur, U.S. Vice President Al Gore said that Russia had to choose between nuclear cooperation with Iran or the United States. From Washington’s point of view, cooperation with both at the same time was impossible. The U.S. position remained unchanged throughout Clinton’s eight-year term and during the first years of the George W. Bush administration.

After a review of U.S. nuclear energy strategy and renewed efforts to support U.S. nuclear exporters on foreign markets, the Bush administration publicly recognized in late 2005 that the light water energy reactor being built in Bushehr posed no nuclear proliferation threat. Another factor that made Washington reconsider its previous stance was an agreement signed between Moscow and Tehran on February 28, 2005, under which all spent nuclear fuel from the Bushehr plant was to be sent to Russia. Nevertheless, for a long time the beginning of talks on the 123 Agreement remained conditional on Moscow’s and Washington’s ability to work out a common approach to Iran’s clandestine nuclear activities that were revealed in August 2002.

Significant progress was made in the summer of 2006. At a meeting in Vienna on June 1, the five permanent UN Security Council members, plus Germany, agreed on a joint proposal to resolve the crisis over the Iranian nuclear program. The proposal was handed over to Iranian representatives in Tehran on June 6, 2006. After that, U.S.-Russian contacts on the 123 Agreement were stepped up. Following talks held ahead of the G8 summit in St Petersburg on July 15, 2006, Russian President Vladimir Putin and U.S. President George W. Bush instructed their governments to begin consultations with the aim of signing the 123 Agreement. 

A draft agreement was ready by early 2007. Only a few provisions had yet to be finalized, but that coincided with growing rivalry between the two countries in the former Soviet republics. Proponents of a conservative line in relations with Moscow once again had the upper hand. As one member of the Bush administration said at the time, an influential group of hardliners essentially sabotaged the implementation of Bush’s orders and of the agreements already reached by the two delegations. As a result, the 123 Agreement was initialed only on June 29, 2007.

It then took another 10 months for the document to be officially signed. At a meeting in Sochi on April 6, 2008, the Russian and U.S. presidents agreed that 123 should be signed and enacted as soon as possible. That intention was reflected in the U.S.-Russian Strategic Framework Declaration. The official signing ceremony took place on May 6, 2008, the last day of Putin’s second term.

THE ROLE OF CONGRESS

Under U.S. legislation, the 123 Agreement with Russia is not subject to ratification – but Congress has the opportunity to review it for 90 days in a continuous session. The agreement then becomes effective unless both houses pass a joint resolution not approving the proposed deal.

President George W. Bush submitted the agreement for congressional review on May 13, 2008, when there were only 77 days left of the continuous session (rather than the required 90) before the last session of the 110th Congress. This meant that the whole procedure was doomed from the very beginning. There was only one alternative way for the agreement to pass congressional vetting: both houses needed to vote for a resolution explicitly supporting the deal. But that was not realistic. Moreover, the final session of the House of Representatives held after the election of new representatives – the so-called lame-duck session – lasted only five days rather than the 13 days required for the 90-day term to be fulfilled. Members of the Bush administration later blamed the situation on a “technical error” in counting the number of remaining congressional sessions when the 123 Agreement was submitted to Congress. On September 8, 2008, the White House recalled the agreement from Congress, using the Georgian crisis as a pretext. But that did not change anything: the agreement would have had to be re-submitted for congressional review in any event.

After Barak Obama’s decisive victory in the presidential elections on November 4, 2008, the issue of the 123 Agreement was once again in the hands of a Democratic administration. Russian President Dmitry Medvedev and Barak Obama discussed the agreement during their first meeting in London on April 1, 2009. In a joint statement they said both sides would work to bring the bilateral agreement on peaceful nuclear energy cooperation into force.

That intention was reiterated in a joint statement on nuclear energy cooperation made after a Moscow summit on July 6, 2009. The two presidents also agreed to set up a working group on nuclear energy and nuclear security within the bilateral presidential commission. Sergei Kirienko, head of the Rosatom state nuclear energy corporation, and Dan Poneman, a deputy energy secretary, were appointed as the working group’s co-chairmen. However, nuclear energy issues were not high on the agenda of the first two presidential meetings in London and Moscow. Those were dominated by the proposed new START treaty and the opening of a new transit corridor to supply NATO forces in Afghanistan.

The new U.S. administration also insisted on linking nuclear energy cooperation with Russia to progress on the Iranian nuclear issue. The Obama administration also let it be known that it viewed the ratification of the new START treaty as a higher priority than the 123 Agreement. The Obama administration would therefore re-submit it for congressional review only after the START talks had been completed and the new treaty had been submitted to the Senate.

But the START talks took longer than expected, and the Obama administration suddenly found itself facing the same problem as its Republican predecessors. New congressional elections were due soon and the window of opportunity to comply with the “90 days of continuous session” requirement was closing rapidly. The administration had to choose between submitting the 123 Agreement to Congress without any further delay and postponing the procedure until after the elections. The situation was further compounded by worries that submitting 123 to Congress before the new START treaty could complicate the ratification of that treaty.

Eventually, with the upcoming congressional elections in mind, the two documents were submitted for congressional vetting almost simultaneously. The 123 Agreement was re-submitted on May 10, and the new START treaty was introduced on May 13, 2010. Shortly before that, on April 8, Medvedev and Obama met in Prague to sign the START treaty and discuss the Iranian nuclear problem. They made significant progress towards achieving common ground on a new UN Security Council resolution on Iran (Resolution 1929 was passed on June 9, 2010). The day after the meeting, on April 9, the Obama administration launched the intra-agency process for Agreement 123 ahead of its resubmission to Congress.

The actual resubmission came when fewer than 90 days of continuous session remained before the next congressional elections. The White House calculated that the lame-duck session would continue much longer than usual, and the 90-day term would be fulfilled. When the Congress was to leave for its pre-election recess, the 123 Agreement was 13 days short of its 90-day goal. Most experts agreed that a third re-submission would be required. However, the lame-duck session of both houses was the longest in the past 28 years – the last time it had continued for 13 days or more was back in 1982. On December 8, 2010, the 90-day term had finally elapsed and the way was clear for the 123 Agreement with Russia to enter into force.

AREAS OF COOPERATION

Russian-U.S. nuclear industry relations potentially contain elements of rivalry (especially for nuclear power plants and nuclear fuel contracts) as well as partnership. However, there are areas where the two countries’ nuclear industries can be complementary. The most likely areas for cooperation in the short and mid-term include uranium enrichment and joint development of innovative nuclear power reactor technology.

Uranium enrichment. There are 104 nuclear power reactors in operation in the United States, the largest market for nuclear fuel cycle services. The runners-up are France, with 58 reactors, and Japan, with 55; Russia has 32. The United States is also a leading exporter of nuclear fuel (to Japan, South Korea and other countries). However, well over half of the U.S. demand for enriched uranium is covered by imports. In order to end its dependence on foreign suppliers, the U.S. is building new enrichment facilities based on the latest European centrifuge technology in Ohio and New Mexico. There are also plans to build two enrichment centers using technology that has not yet been commercially proven. One (in Ohio) will rely on a U.S. centrifuge design, and the other (in North Carolina) will use an Australian laser enrichment technology called Silex.

Russia has an internationally competitive nuclear separation industry based on gas centrifuge technology. It controls 40 to 45 percent of global enrichment capacity and is the largest exporter of uranium enrichment services. At present, half the energy output of U.S. nuclear power plants is generated using Russian LEU downblended from weapons-grade uranium and supplied to the United States under the 1993 HEU-LEU agreement. These supplies bring Russia about $800 million in revenue each year. Since nuclear power accounts for about 20 percent of all electricity generation in the United States, it can be said that one in ten light bulbs in the U.S. are powered using Russian nuclear materials. But the HEU-LEU Agreement expires in 2013, after which Russia will have to compete for a share of the U.S. uranium market on purely commercial terms.

U.S. imports of Russian uranium products in 2014-2020 will have to remain within the agreed ceiling of about 20 percent of the requirements for existing reactors (supplies of fuel for any new reactors will not count towards the overall total). This restriction stems from an anti-dumping investigation launched in November 1991 against the Soviet Union at the request of a group of U.S. uranium producers and the trade union representing staff of the Department of Energy’s enrichment plants. The actual Soviet supplies that triggered the investigation began in 1990. As a result, the United States imposed a protective 116-percent import tariff on Russian uranium. On October 16, 1992, the Russian Ministry of Atomic Energy and the U.S. Department of Commerce signed an agreement to suspend the anti-dumping investigation. The deal lifted import tariffs on low-enriched uranium supplied under the intergovernmental HEU-LEU Agreement. At the same time, it all but closed the U.S. market to any commercial supplies of Russian uranium products.

After almost two years of consultations Rosatom (the successor to the Russian Ministry of Atomic Energy) and the Department of Commerce signed an amendment in February 2008 to the 1992 suspension agreement. The document allows commercial supplies of Russian uranium within the agreed quotas until 2020, when all anti-dumping restrictions will be lifted. The amendment specifies the quotas on a year-by-year basis. That quota will be a token 16.6 tons of uranium in 2011, which is not enough for even for a single refueling of a 1,000 MW reactor. But the quota will increase to 485 tons (enough to refuel 20 reactors) by 2014. That translates into a roughly 20-percent share of the U.S. commercial market for reactor fuel over the period from 2014-2020. The figure does not take into account Russian uranium supplies destined for new reactors that may be launched after 2011 – those supplies will not be subject to any restrictions.

In 2008, Tenex, the largest Russian exporter of low-enriched uranium and of enrichment service, launched a campaign to market its products to U.S. nuclear operators. The company is the only Russian supplier allowed access to the U.S. market under the amendment to the 1992 suspension agreement. By the end of 2010, Tenex had won 11 long-term contracts with nine U.S. companies to supply enriched uranium products. The deals are worth about $5 billion. In October 2010 the company opened a U.S. office of TENAM Corporation, a fully-owned subsidiary set up to facilitate and expand the Russian presence on the U.S. market.

It is important to note that these contracts are governed by the amendment to the 1992 deal; as such, they are not contingent on the 123 Agreement entering into force.

A uranium enrichment plant. One proposal that could become a real revolution in U.S.-Russian relations is to build an enrichment plant in the U.S. based on Russian centrifuge technology. However, it is possible that the two projects relying on U.S. centrifuge design and the Australian Silex laser enrichment technology will fail to reach commercial enrichment targets within the designated timeframe. In that case the U.S. will once again need to acquire additional uranium isotope separation capacity.

The idea of building a uranium enrichment plant in the U.S. using Russian centrifuge technology is not new. The first time U.S. nuclear industry representatives expressed an interest in such technology was back in the mid-1990s. At the time Victor Mikhailov, the Russian nuclear energy minister, proposed an alternative idea. Under his plan, the United States would be allowed to acquire a stake in one of the four Russian nuclear enrichment plants which had spare capacity. That plant would then produce low-enriched uranium destined for U.S. export. In 1998, top managers at the United States Enrichment Corporation once again brought up the idea of building an enrichment plant in the United States using Russian technology. Russian Nuclear Energy Minister Yevgeny Adamov proposed a joint venture on U.S. territory. Russia would contribute the centrifuges, while the U.S. would provide funding and build the required infrastructure. But the project never received the go-ahead.

The idea was proposed later by top managers of U.S. nuclear energy operators during a visit to the United States by Rosatom chief Sergei Kirienko in February 2008. In August 2010 Kirienko mentioned the proposal in an interview with the Financial Times.

The project to build an enrichment plant in the United States using Russian technology could improve the climate of U.S.-Russian relations because it would require an unprecedented level of mutual trust. The two countries would need to agree on measures to protect the sensitive centrifuge enrichment knowhow being transferred, and to ensure the security of the Russian equipment being supplied. In essence, they would need to sign an agreement on the protection in the U.S. of information that constitutes state secrets in Russia.

A precedent already exists for an enrichment plant constructed abroad using Russian technology. The first stage of such a plant was launched in China in 1996, the second in 1998, the third in 2001 and the fourth is nearing completion. The total enrichment capacity of all four stages is 1.5 million SWU.

Russia could be interested in such international projects because there is not enough demand for the products of key Russian enrichment machinery suppliers on the domestic market. Centrifuges account for 80-95 percent of those companies’ business. At present they have spare capacity and only two large contracts – one to upgrade some of the equipment at Russia’s four enrichment plants, the other to supply gas centrifuges to China. There were hopes for another large contract to build a new 5 million SWU enrichment plant for the Russian-Kazakh Uranium Enrichment Center (UEC). That contract would keep up to 20 percent of the Russian centrifuge producers’ manufacturing capacity in business. But in June 2010 it was decided that the UEC joint venture would use an existing enrichment plant in Novouralsk, in Sverdlovsk Region (Uralsky Electrochemical Combine) rather than build a new one. Meanwhile, the bulk of the deliveries on the Chinese contract were completed in 2010, freeing up even more spare capacity.

One important consideration is that the project to build a uranium enrichment plant in the United States using Russian technology would not necessarily be contingent on the 123 Agreement entering into force. But it would definitely require the signing of a separate intergovernmental agreement.

The U.S.-Russian joint venture could also involve Japanese companies interested in acquiring a stake in a new enrichment plant and which are very closely integrated with the U.S. nuclear industry. Consultations between Moscow and Tokyo on the possibility of setting up a uranium enrichment joint venture in either Russia or Japan have been under way for several years. According to some reports, one potential Japanese partner is Toshiba, which intends to invest up to $100 million in the USEC’s isotope separation business.

Spent nuclear fuel. One of the most potential controversial areas for U.S.-Russian nuclear cooperation is a proposal to set up an International Spent Nuclear Fuel Management Center in Russia.

Russia is a global leader in reprocessing spent energy reactor fuel. The first reprocessing plant, the RT-1, was launched at the Mayak combine in Ozersk, in Chelyabinsk Region, in 1976. The plant can reprocess 400 tons annually of spent fuel from VVER-440 and BN-600 reactors, as well as research reactors and naval nuclear reactors installed on icebreakers and submarines. The reprocessed uranium is used to make fresh fuel for RBMK-type energy reactors, while the plutonium extracted from spent fuel is stockpiled.

The reprocessing of spent nuclear fuel is banned in the U.S. According to various estimates, some 75 percent of the spent nuclear fuel accumulated in various third countries (not including Russia) is “U.S.-obligated.” This term means that the spent fuel was made using U.S. technology and/or materials. It therefore cannot be re-exported to other countries without the consent of the United States. That consent can only be granted if the destination country has signed a 123 Agreement with the U.S., although that is not the only requirement.

In the late 1990s and early 2000s, the Russian Ministry for Atomic Energy studied the possibility of setting up an International Spent Nuclear Fuel Management Center in Zheleznogorsk, in Krasnoyarsk Territory, where a partially-built reprocessing plant had been mothballed since the Soviet era. The plan was that the center would reprocess and store spent fuel from Russia as well as foreign countries, which would provide the funds required to complete and launch the plant. The Ministry of Atomic Energy hoped to attract customers from Taiwan and South Korea, whose spent nuclear fuel is U.S.-obligated, as well as from Switzerland. It had also pushed through changes to Russian environmental legislation to make the project possible. The ministry has always been one of the main lobbyists for the 123 Agreement with the United States.

The need to attract foreign investment into Russian reprocessing facilities became less pressing following the adoption of a federal nuclear energy industry program for 2007-2015. The program has significantly improved the sector’s financial situation. Moreover, the first stage of dry spent nuclear fuel storage at the Zheleznogorsk plant is nearing completion, which will give the government more room for any decisions on reprocessing. The proposal to set up an international reprocessing facility in Russia has therefore ceased to be a priority for the Russian nuclear industry.

However, various environmental groups in Russia have raised concerns over the past few months that the 123 Agreement will open the floodgates to nuclear waste from other countries. It would therefore make sense for Rosatom to reiterate its position voiced several years ago by Sergei Kirienko that Russia currently has no plans to accept foreign-origin spent nuclear fuel for storage or reprocessing.

At the same time, Rosatom could benefit from the fact that the law allows for the removal of spent nuclear fuel of Russian origin back to Russia, with no return of reprocessing products to the country where the spent nuclear fuel was produced. That is a strong competitive advantage for Russian nuclear exporters, which could be used when Russian companies bid for contracts to supply fuel to foreign nuclear power plants, both Russian and foreign-designed. Essentially, Rosatom can supply nuclear fuel on a lease scheme – deliver a fresh batch and then bring it back to Russia once it has been used up. Such a proposal could be especially attractive to Middle Eastern and Southeast Asian countries, many of which have grand nuclear energy plans. The lease scheme also has clear advantages in terms of nonproliferation. This is particularly important in the context of the nascent nuclear energy renaissance, with a whole number of countries, including those in conflict regions, that have expressed a desire to build their first nuclear power plant. At present, spent nuclear fuel is sent back to Russia from Bulgaria and Ukraine, where Soviet-designed reactors operate using Russian fresh nuclear fuel. Rosatom will also remove spent nuclear fuel from the Bushehr nuclear plant in Iran, expected to start commercial electricity production soon.

In the short and mid-term, nuclear cooperation projects between Russia and other countries, including the United States, could focus on developing innovative new technologies to reprocess spent nuclear fuel and the safe long-term storage of radioactive waste. One possible avenue for such cooperation would be to set up an international research center in Russia. Several countries, including Japan and the United States, have recently tried to implement independent programs for spent nuclear fuel management. These attempts have demonstrated that resolving the problem at a national level would require enormous financial and intellectual resources without any guarantee of success. For example, a new reprocessing plant in Rokkasho, Japan was built at a cost of $18 billion, but has still failed to provide a long-term solution. If several leading countries were to pool their efforts in this area, they could bring together much greater intellectual resources and share the financial burden of such an ambitious venture.

Other areas for cooperation. Other potential areas for cooperation include the joint development of innovative nuclear power reactor technology, including the commercialization of fast neutron reactors. Russia already has experience in operating such reactors. The technology was first designated as one of the priority areas for cooperation in the 1973 Soviet-U.S. Agreement for Scientific and Technical Cooperation in the Field of Peaceful Uses of Atomic Energy, and in a similar agreement signed on June 1, 1990.

There are many opportunities for cooperation in developing a high-temperature gas reactor – such a joint project between Russian and U.S. researchers began several years ago. Another promising area is low-power reactors. Other areas include:

  • Joint development of an innovative nuclear power reactor that would be cheaper to build and operate, and make greater use of passive safety systems;
  • Improve the efficiency of Russian-made light water reactors (by increasing their capacity factors);
  • Involve U.S. companies in the joint production of some equipment for Russian-designed nuclear power plants, as well as outsourcing some components to U.S. suppliers; 
  • Joint projects to build nuclear power plants in third countries;
  • Cooperation to improve the safety and security of nuclear reactors, facilities and materials in third countries.

 

***

The U.S.-Russian 123 Agreement paves the way for long-term nuclear energy cooperation between the two countries. However, at this point there are no specific projects whose implementation would be contingent on the 123 Agreement entering into force.

The commercial contracts for the supply of low-enriched uranium and enrichment services up to 2020, when all remaining restrictions on U.S. imports of Russian uranium produce will be lifted, do not depend on 123 (for as long as the amendment to the U.S.-Russian anti-dumping investigation suspension agreement is in force). Neither does the proposed U.S. uranium enrichment plant based on Russian centrifuge technology. The Russian nuclear industry’s earlier efforts to speed up the signing of the agreement were made with some specific projects in mind. The most important of them was a proposal to bring U.S.-obligated spent nuclear fuel from third countries to Russia for reprocessing and storage. (That proposal has since been pushed back on the list of the Russian nuclear industry’s priorities.) The importance of the 123 Agreement therefore lies in the area of long-term interests rather than any immediate plans.

The next objective for the Russian and U.S. governments is to create a sound legal footing for their nuclear energy cooperation to involve third countries. At present, under Paragraph 2, Article 8 of the 123 Agreement, nuclear materials transferred by Russia to the United States or vice versa cannot be transferred beyond the territorial jurisdiction of the recipient country unless the countries agree otherwise. Essentially, Moscow and Washington will have to agree on a list of countries to which nuclear material of Russian origin can be re-exported by the United States without seeking Moscow’s consent on a case-by-case basis. The lack of such a list would be a formal obstacle to exporting U.S.-made nuclear fuel originating from Russian uranium to long-standing U.S. customers, such as South Korea or Japan. At present, the re-export procedure is governed by the 2008 amendment to the 1992 deal on suspending the anti-dumping investigation against Russian uranium producers.

Both the U.S. and Russian nuclear industries are equally interested in simplifying procedures for re-exporting nuclear materials of Russian origin. If the existing restrictions remain in place, some traditional U.S. customers (including South Korea and Japan) could choose to place their orders for nuclear fuel elsewhere. That would be a blow to both U.S. producers of reactor fuel and to Russian exporters of uranium products.

Russian uranium enrichment technology remains highly competitive internationally. This factor underpins almost all financially attractive projects and proposals for U.S.-Russian nuclear cooperation. These include the supply of Russian uranium products to the United States, the proposal to build an enrichment plant in the United States using Russian technology, and any future U.S. exports of nuclear fuel made from Russian uranium. Starting in 2014, all Russian supplies of uranium to the U.S. will be delivered on a purely commercial basis. Until 2020, up to 20 percent of the nuclear fuel used by existing U.S. nuclear reactors could be made from Russian enriched uranium.

The project to build a nuclear enrichment plant in the United States using Russian technology would be a real breakthrough not only in nuclear cooperation, but also in wider U.S-.Russian relations. Such a project would require an unprecedented level of mutual trust. Moscow and Washington would also need to negotiate a bilateral agreement to protect the transfer of sensitive centrifuge technology and ensure the security of equipment supplies.

The establishment of an international spent nuclear fuel management center in Russia is unlikely in the short or mid-term, as is the removal of U.S.-obligated spent nuclear fuel from third countries to Russia in any significant quantity. At the same time, Russian legislation and the new 123 Agreement make it possible for Russia to offer a nuclear fuel lease scheme with countries that have operating reactors built using U.S. nuclear technology or materials. The two most promising markets here are the Middle East and Southeast Asia. The guaranteed removal of spent Russian nuclear fuel back to Russia would be especially attractive to countries that have no experience in handling such materials and also have to contend with increased security risks in their region. Therefore, the 123 Agreement could help strengthen the non-proliferation regime in the long term.

Another promising area for cooperation is developing innovative nuclear power reactor technologies, including fast reactors, high-temperature gas-cooled reactors and low-power reactors. The Nuclear Energy and Nuclear Security working group set up as part of the U.S.-Russian presidential commission in July 2009 has the potential to foster closer cooperation between the two countries. But for that to happen, Moscow and Washington would have to find the right balance between the two key areas reflected in the working group’s name. Up to now nuclear security and nonproliferation have dominated the U.S.-Russian nuclear agenda, sidelining cooperation on civilian nuclear energy. For example, the 11 practical steps agreed on at the working group’s third meeting on December 6-7 are all related to various non-proliferation projects.

The working group has a nuclear energy subgroup, which should become an important facilitator of closer cooperation between the two countries in civilian nuclear technology. As a first step, the subgroup could agree to a list of priority civilian nuclear energy projects for the short and mid-term.

The 123 Agreement has another promising consequence for the Russian nuclear industry – it removes one of the barriers to nuclear energy cooperation with Tokyo. Japan’s Toshiba and Hitachi corporations maintain a close partnership with U.S. companies Westinghouse and General Electric. For that reason they have been very cautious about pursuing cooperation with Russia, so as not to jeopardize their business in the United States. Japanese officials have said unambiguously that the nuclear energy cooperation agreement signed by Moscow and Tokyo on May 12, 2009 will not be ratified by the Diet, the Japanese parliament, until the U.S.-Russian 123 Agreement has entered into force. The list of potential areas for nuclear energy cooperation between Russia and Japan is quite extensive. It includes the outsourcing of components for Russian-designed nuclear power plants to Japanese subcontractors and a proposed uranium enrichment joint venture.

Obviously, in light of the recent disaster at the Fukushima nuclear power plant, Russian-U.S. nuclear cooperation must focus on efforts to enhance the safety of the nuclear power industry, including working out new requirements and standards for nuclear power plant construction sites. The coordinated efforts of key players in the nuclear field, including Russia and the United States, would help the nuclear power industry overcome the current crisis with fewer losses and costs.

Another important outcome that will hopefully result from broader contacts between the U.S. and Russian nuclear industries is a better reputation for Russia on nuclear security, export controls and nonproliferation. Russia’s negative image in these areas dates back to the early 1990s; it is based on a combination of real problems that existed at the time and Hollywood-like stories in the media. Until recently, that image has often stood in the way of practical contacts and politicized nuclear energy cooperation between Russia and the United States, especially during Congressional debates.

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