Analysis: Algeria, U.S. reach nuclear pact

WASHINGTON, June 11 (UPI) -- While Algeria inked a nuclear cooperation agreement with the United States Saturday, it remains unclear whether the two countries will do business based on the accord, or whether Algeria will embrace nuclear power at all.

A U.S. delegation traveled to Algeria last week to tour nuclear energy facilities and to discuss the future of nuclear cooperation between the two countries, at a time when the United States has offered to provide nuclear advice to several countries in the region and encouraged others to pursue peaceful nuclear power.

Algeria maintains two nuclear reactors. The 1-megawatt Nur reactor was built by Argentina in 1989, and the Chinese-built, 15-megawatt Es-Salam reactor came online in 1992; neither produces electricity for the country.

Algeria is also thought to hold more than 50,000 tons of uranium deposits in the south of the country.

Recent U.S. policy has encouraged Middle Eastern countries to embrace nuclear power, but to buy nuclear fuel abroad, and to ship waste products, which could be used to build nuclear weapons, back overseas for processing.

This policy is not without critics. Iran has been at loggerheads with much of the international community over its insistence to master the full nuclear cycle. The United States and others maintain that Iran cannot be trusted with the ability to produce nuclear weapons material.

Iran's rise as a nuclear power have led some in the region to take a serious look at nuclear power, according to the Council on Foreign Relations' Charles Ferguson, an expert on nuclear power and proliferation.

"A number of countries in the Middle East, especially those neighboring Iran, are interested partly because they are hedging against Iran's nuclear energy program, which many believe is a cover for a nuclear weapons program," Ferguson said.

They are also conscientious of their position on the world stage.

"Another interest is to play to national pride and prestige. Science and technology have been struggling in many of these countries. I suspect that scientific elites there are interested in promoting nuclear development because of the possible spill-over effects to other technical pursuits in those countries," he said.

"Nuclear technology is perceived by many developing countries as lifting them into advanced ranks," Ferguson said.

Although the region as a whole provides much of the world's oil and natural gas, many of the countries there also hope nuclear power will allow them to sell even more petroleum.

"I would also suspect that Algeria is motivated to free up oil and gas reserves to sell for export. However, the capital costs for nuclear power plants are typically much higher than for oil or gas-fired power plants," Ferguson said.

Geoff Porter, a Middle East and Africa analyst with the Eurasia Group, agrees.

"Algerian political decision makers all recognize that the less fuel used for domestic power generation, the more available for export, and the greater the government revenue. Given the potential for shortfall on existing gas supply commitments, Algeria is likely considering many options, including expanding nuclear power, to increase export gas volumes," he said. "For the moment, though, it appears that Algeria is concentrating on conventional co-generation power plants to reduce the country's electricity deficit."

In 2006, Algeria produced more than 2 million barrels of oil daily, making it the world's 14th-largest producer, and it was the ninth-largest exporter, sending out more than 1.8 million barrels per day, according to the Energy Information Administration, the data arm of the U.S. Department of Energy. And Algeria is the world's eighth-largest producer of natural gas.

Altogether, petroleum is the backbone of the Algerian economy, providing 60 percent of the government's budget revenues and about 30 percent of the country's gross domestic product.

A U.S. desire to convince the government petroleum company, Sonatrach, to increase the U.S. share of those exports may partially explain Saturday's nuclear agreement.

"Sonatrach chief Mohamed Meziane said last week that he intends to triple Algerian LNG supplies to the U.S., but there are serious questions about how he intends to do this and meet Algeria's piped gas commitments to EU markets," Porter said.

Economic ties between the countries have been growing for several years. In 2005, U.S. companies invested $4.1 billion in Algeria, according to the U.S. State Department. And between 2002 and 2005, U.S. imports, mostly oil and natural gas, more than doubled, form $4.7 billion to $10.8 billion.

The United States may also want to open a new market for its own nuclear companies.

"The U.S. government is motivated to support its nuclear industry, which is trying to start a nuclear renaissance," Ferguson said.

While the United States may be eyeing Algeria as a market for its domestic nuclear suppliers, it will likely have competition from France and its newly elected president, Nicolas Sarkozy.

"Sarkozy, on the other hand, has already said that if Iran is able to develop nuclear capabilities, then France would help other countries do so as well. In that context he specifically mentioned Algeria, which leads me to believe that if anyone is to help Algeria develop nuclear capabilities and benefit from more secure gas supply commitments in return, it will be France," Porter said.

--

(Comments to energy@upi.com)