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Vanand Meliksetian

Vanand Meliksetian

Vanand Meliksetian has extended experience working in the energy sector. His involvement with the fossil fuel industry as well as renewables makes him an allrounder…

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Why Nuclear Energy Is Critical For Russia


As the world’s largest natural gas and oil producer and exporter, Russia plays an important role in setting the global geopolitical agenda. The recent agreement with OPEC is evidence of Moscow’s ability to set prices. However, in another field of energy production Russia captures an even more dominant position: nuclear technology.

The Russian nuclear industry is one of the oldest and most mature in the world. After the end of the Second World War and the start of the Cold War, nuclear technology was not only essential for security purposes as a deterrent towards the competing power bloc, but also as a sign of prestige. The first nuclear power plant connected to the grid was opened in 1954 in the USSR. Global nuclear power plant construction in later years was dominated by three countries: France, the U.S., and the Soviet Union.

The demise of communism and the end of the Cold War significantly reduced the development of nuclear technology by the Soviet Union’s successor: the Russian Federation. In 2007 President Putin signed a decree in which a government owned holding company was created to solidify the domestic civil nuclear technology sector. The downward spiral steadily reclined and has turned out to be a resounding success.

The order book of Russia’s state owned Rosatom has steadily increased to $300 billion dollars in recent years. Currently, 34 reactors in 12 countries are under construction while several other states have shown interest. The order book adds up to a global market share of 60% of all nuclear power plants planned or under construction.

(Click to enlarge)

China also hosts an ambitious civil nuclear power sector where the largest number of reactors in a single country is under construction. Beijing’s export-oriented nuclear power technology development, renders risks for Rosatom in the long term. However, despite significant progress made by Chinese developers, Russian reactors remain popular in the Asian country - as illustrated by the recent approval of another four reactors during a state ceremony in Beijing.

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Russian civil nuclear technology appeals to a host of customers due to attractive agreements. To many, the power plants will be the first in their history while several locations are in the developing world. In most cases, Russia’s nuclear packages are attractive as Rosatom provides both financing and day-to-day management of the power plants as well as actual construction and the shipping of nuclear fuel. Furthermore, Rosatom offers far greater discounts than its competitors.

Previously, the civil nuclear power sector was dominated by western firms: Areva and Westinghouse (part of Toshiba). The major success of Rosatom abroad coupled with a declining demand for civil nuclear technology in the West, has reduced the flow of revenues for these companies. Westinghouse even filed for bankruptcy, but has been able to reach a deal with its creditors to resolves some of the financial issues.

However, Rosatom - and therefore Moscow - also faces risks. If all plans are executed according to plan, the Russian company will be facing a mountain of nuclear waste, which (in some cases) it is contractually obliged to take care of. Furthermore, the hazardous waste also needs to be protected against theft, with a real threat of terrorists or criminals getting their hands on it.

Moscow’s strong support for national champions in various sectors such as oil and gas (Rosneft and Gazprom), defence (Rosoboronexport), and nuclear energy (Rosatom) is not solely based on financial reward. High profile deals in these crucial sectors also provide the Kremlin diplomatic clout in the countries concerned.

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Furthermore, the civil nuclear energy sector is highly sensitive to public perception. Changes in attitude can quickly halt or rollback developments. The multiple methods of electricity production provide alternatives for decision makers in case the nuclear option falls out of grace. The disaster with the plant at Fukushima is the most recent example of the world’s love-hate affair with civil nuclear energy. The meltdown at the Japanese power plant dramatically changed the energy policy of the third and fourth largest economies of the world: Japan and Germany. As a result, demand for LNG and investment in renewable energies has skyrocketed in recent years in these countries.


Although Rosatom’s order book is already impressively full and several potential orders could be concluded in the foreseeable future, unforeseen actions can seriously hamper developments. The high-risk nature of the nuclear energy business renders unique mitigating factors unlike others in the power production business. As the nuclear energy sector is highly dependent on reputation and safety, one mistake or accident could break Rosatom’s winning streak overnight.

By Vanand Meliksetian for Oilprice.com

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  • Mamdouh G Salameh on July 15 2018 said:
    President Vladimir Putin earnestly believes that the breakup of the Soviet Union was the greatest geopolitical tragedy of the 20th century. Millions of Russians share Putin’s view and accuse Mikhail Gorbachev and Boris Yeltsin of selling the USSR short.

    President Putin also believes that his destiny is to re-establish Russia as a superpower built on energy and defended by the most sophisticated nuclear arsenal and missile system the world has ever known and bolstered by a strategic partnership with China.

    Russia is an energy giant. It is the world’s largest crude oil producer and also the world’s largest natural gas exporter. Russia plays an important role in setting the global geopolitical agenda and also oil prices. Its agreement with OPEC to cut production helped push oil prices from $50 a barrel to $78 today. However, in another field of energy production Russia captures an even more dominant position: nuclear technology.

    In 2007 President Putin signed a decree in which a government-owned holding company, Rosatom, was created to support the domestic civil nuclear technology sector. Since then, the order book of Rosatom has steadily swelled to $300 bn. The order book currently accounts for 60% share in the global market for all nuclear power plants planned or under construction.

    Putin’s plan is to turn Russia into the world’s energy superpower and it is working. Russia has been building many pipelines to deliver its natural gas to every corner of Eurasia. With its current network of gas pipelines to the European Union (EU) soon to be augmented by the Turkstream pipeline across the Black Sea to Turkey and Europe and the Nord Stream 2 under the Baltic to Germany, not only Russia’s grip on European gas markets is tightening but it will also continue unabated for the foreseeable future. Currently, almost 40% of the natural gas consumed by Europe comes from Russia.

    Then there is the recently competed Power of Siberia pipeline which will deliver 38 bcm/y of Russian natural gas per year to China for the next 30 years. And it does not stop there. Russia and Japan are actively discussing construction of the natural gas supply pipeline from Sakhalin (a Russian island in the Pacific Ocean) to Japan. There are also plans to build a pipeline to India as an extension to Power of Siberia-2.

    Russia is reported to have more than $8 trillion worth of untapped oil and gas in its sector of the Arctic. Once developed, it could add more than 1.5 million barrels of oil a day (mbd) to Russia’s current oil production of 11.2 mbd thus consolidating Russia’s position as the top oil producer in the world.

    Hampered by US sanctions and and the 2014 oil price crash, President Putin ordered a speedy diversification of the Russian economy. These reforms since 2014 are starting to bear fruit. Russia is now saying that its economy can actually live forever with an oil price of $40 or less. The budget's dependence on oil and gas revenues has declined from 68% in 2014 to 40% in 2018. Moreover, agricultural exports have become the second largest contributor to the economy followed by the arms, the nuclear and the IT industries respectively.

    The reality of the 21st century—as Putin sees it—is that energy is a political instrument. Political alliances and the rise and fall of the international importance of particular countries will change in accordance with the energy supply routes.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • James Hopf on July 16 2018 said:
    The notion that an increased volume of waste to take back (if Russia builds a lot of foreign reactors) will cause Russia a significant problem is absurd. Far from a "mountain of waste", the volume of nuclear waste is vanishingly small, since nuclear generates almost a million times as much energy from a given volume of fuel (and resulting waste).

    The fact that the public thinks that the volume of nuclear waste is a problem clearly shows that their notions of nuclear waste (and thus any *political* difficulty in storing or disposing of it) is completely detached from the actual waste volume. In other words, whether the volume of waste that Russia has to take back is large or small, the degree of difficulty (which has always mainly been political) in managing it will be the same.

    Any practical costs (such as shipping it and building storage containers, etc..) will, at worst, scale directly with the amount of waste, which in turn scales with the number of nuclear plants. Thus, the per kW-hr cost (or the fraction of the cost of any given nuclear project) will be about the same. It's well worth merely increasing the waste volume somewhat to be able to build another plant (i.e., get a multi-billion dollar project). BTW, the cost of nuclear waste management and disposal is tiny, a fraction of a cent per kW-hr generated.

    On another topic, the statement:

    "Furthermore, the civil nuclear energy sector is highly sensitive to public perception."

    is utterly spot on (an understatement, actually). Love-hate-affair?? I can't remember any time when the public genuinely loved nuclear. It's more a case of varying levels of hate. The prejudice against nuclear (and any associated risks or pollution) is mind-boggling, and that is the main reason for high costs.
  • Aleksey on July 17 2018 said:
    Spent nuclear fuel is not a waste. Actually, it is a valuable resource for a country that posesses technology of processing and reusing it to produce new fuel and useful isotopes (for use in medicine, sience, etc). Russia has such a technology and actively developing to further.

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