Many people underappreciate the vulnerability of the West’s nuclear industry to Russia, and the sector may be about to become embroiled in the Russia-West economic conflict. The EU is debating sanctioning Russia’s nuclear sector, with the EU parliament passing a resolution by 489 votes to 36 urging European Union leaders to include sanctions on Russia’s nuclear industry in the 10th sanctions package, which is expected before the 24th of February. Tensions will escalate as President Putin uses all means at his disposal to secure a victory in Ukraine, including action to discourage Western support for Ukraine.
Nuclear energy produces roughly one fifth of electricity in the EU and USA. Commentators focus on Russia’s dominance over European and American nuclear power in three areas. Firstly, Russia is a major uranium supplier, the material mined for nuclear fuel. Secondly, Russia is even more dominant in developing uranium into nuclear fuel via conversion and enrichment processes, representing 46% of the world’s enrichment capacity. On average, the EU and USA depend on Russia for over 20% of their supplies and services in these areas. Thirdly, commentators note that many nuclear plants in Eastern Europe are Russian made and rely on Russia for maintenance and fuel supply. While Europe and the USA have some counter measures—principally restarting or building processing capacity—these will take time, money, and a thus far absent urgency.
Focusing on these areas, particularly Russia’s dominance in processing, is an insufficient analysis of the risks to the West’s nuclear energy security. A broader, more holistic view reveals that uranium is potentially the most vulnerable facet of the nuclear sector. Russia can target the uranium supply beyond its services and trade, and a tight uranium market will amplify the impact of disruptive action.
Russia’s Influence Over the West’s Uranium
The uranium market and trade routes are concentrated, making them susceptible to disruption. Kazakhstan and Uzbekistan, producing over half of the world’s uranium supply, are geopolitically vulnerable to Russia. Together with Russia, these countries account for 44% and 49% of the uranium supply to the EU and USA respectively. Kazakh and Uzbek uranium exports often transit through Russia, via St Petersburg or Russian airspace. The main alternative route, touted as a Russia-free substitute, is also vulnerable, including land, maritime, and air routes across the Black Sea, Caspian Sea, Georgia, Azerbaijan, and Armenia. Russia could block transit through its territory, and a particularly desperate Russia could even use its regionally active military forces to interfere with nearby air or maritime trade. New routes for the West are unlikely as they would cross Iran, Afghanistan, or China—which often stockpiles imported uranium rather than exporting it.
Russia could also exert pressure or take action to disrupt uranium production and trade in Kazakhstan, Uzbekistan, and ‘alternative route’ countries. It has substantial influence over these countries, which were all in the Soviet Union. In Kazakhstan, Russian soldiers propped up President Tokayev in January 2022 and Russian companies are also heavily integrated in Kazakh uranium production. Russia could exert influence on Armenia and Azerbaijan as a militarily-involved broker in the Nagorno-Karabakh conflict, and on Georgia through its puppet breakaway republic of South Ossetia and Abkhazia. Russia also has military bases in and around these states.
Given Russia’s military focus in Ukraine, action is likely to be covert or represent ‘grey zone’ warfare. Threats, pressure, and the modicum of deniability afforded by fake explanations, could drive these pivotal countries in the uranium market to be politically pragmatic, acquiescing or turning a blind eye to Russia disrupting their uranium trade or production. Disruptive action could come in the guise of corporate sabotage, damage by ‘democratic agitators’, or technical, environmental, and operational issues, which disrupt uranium supply, just as ‘technical issues’ initially stopped Russian gas supply to Europe via Nord Stream 1.
A Global Uranium Deficit Will Amplify Any Disruption
An emerging structural uranium demand-supply imbalance would amplify the impact of Russian disruption. Demand for nuclear energy is surging as countries begin to recognise it is fundamental to the energy transition; providing reliable energy capacity to complement intermittent power from renewable sources. Supply cannot meet rising demand. Uranium prices have been low for a decade, disincentivising mine development, following the unpopularity of nuclear energy after the Fukushima disaster. Since 2019, uranium prices have doubled, as stockpiles have plummeted, and mine supply has fallen to 77% of global demand. New uranium production to combat the supply deficit will emerge slowly, it takes 10-15 years to build a mine and roughly two years to restart a suspended one.
The Cost of Action and Inaction
Whether Russia, or less likely the West, will pursue this new front in the economic conflict—especially as tensions rise—is unknown. Russia currently holds most the cards in the nuclear sector, particularly uranium supply; patchy Western stockpiles will not provide comprehensive resilience. Indeed, Russia could probably tolerate the economic consequences of weaponizing the sector considering its readiness to risk gas revenue from EU customers. Gas earned it c.US$55Bn since February 2022 from the EU alone, while its nuclear exports to Europe and the USA earn it a mere US$1Bn a year.
A uranium supply shock could spark sky-high prices. While the nuclear industry can absorb a higher uranium price, as the material is a small component of operating costs, being able to pay elevated prices does not guarantee supply. As the global scramble for PPE during the COVID-19 pandemic shows, financial firepower has limits and possession can become king, with the ‘have’ and ‘have nots’ quickly becoming apparent. In 2023, being a ‘have’ could simply mean keeping the lights on.
By Global Risk Insights
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