WASHINGTON, July 23 (UPI) -- Record-high oil prices have the globe not only taking a new look at alternative energy sources, but have revived interest in nuclear energy, the hardest PR sell since the 1979 Three Mile Island partial meltdown and 1986 Chernobyl reactor explosion.
As Europe ponders its natural gas future falling increasingly under Kremlin domination, Russia, currently the world's fourth-largest uranium producer, is angling to become the world's No. 3. As in the oil and natural gas market, this expansion will require that Russia assert control over a number of states in the post-Soviet space including, if possible, Kazakhstan, Uzbekistan and Mongolia. While the eventual success of Kremlin foreign policy is somewhat problematic at this point, growing world demand for the metal is not.
Last year the world produced 41,000 tons of uranium, a figure that analysts believe will double by 2030. There are 437 reactors operating worldwide, and 256 new reactors are under construction or planned for completion within the next decade, so the market for enriched uranium is there, particularly in Asia. South Korea produces 45 percent of its electricity with nuclear energy, while Japan uses nuclear power for 30 percent of its energy needs. While nuclear power currently produces just 1.4 percent of China's electricity, more than 16 provinces, regions and municipalities have announced plans to construct nuclear power plants by 2016, a total of 77 planned and proposed new reactors.
The market capitalization of the leading international uranium companies, producers and explorers currently stands at $64 billion, but the market capitalization of Russia's sole shareholding company engaged in uranium extraction, the Priagunskii ore processing plant, is a paltry $1.4 billion. It is not that Russia lacks resources; the country's proven uranium reserves are 615,000 tons, with estimates ranging as high as 830,000 tons. Despite such riches, in 2007 Russia's state-owned Atomredmetzoloto Holding, a part of the state corporation Rosatom, produced 3,527 tons of uranium, a meager 8 percent of the world total, behind Canada (27.9 percent), Australia (22.8 percent) and Kazakhstan (10.5 percent). Along with Niger (7.4 percent), the five countries out of 17 nations currently mining uranium account for 75 percent of the world's present output; only 35 countries worldwide possess reported uranium reserves.
Uranium producers also have the advantage that uranium is not currently listed as a commodity on global exchanges. While currently about 15 percent of uranium is sold via the spot market, long-term contract pricing accounts for the remaining 85 percent, allowing producers the opportunity to insulate themselves from the markets' bull and bear swings.
Current Russian uranium production is heavily concentrated in a single site, the Priagunskii ore processing plant in eastern Siberia's Chita oblast, which produces 93 percent of Russia's output, while the remaining 7 percent is derived from the Kurgan oblast's Dalur field and the Buryat Republic's Khiagda reserve.
As with hydrocarbon resources, Moscow is attempting to gain a foothold in uranium deposits throughout the post-Soviet space. Kazakhstan, which contains the world's second-largest uranium reserves, estimated at 1.5 million tons, produced 5,279 tons of uranium in 2006 -- 21 percent more than in 2005. Two years ago Russia signed a cooperation agreement with Astana, Kazakhstan's capital, that gave Russia a 49-percent share in the Zarechnoe joint venture, which contains an estimated 19,000 tons of uranium. In 2007 Moscow signed an agreement with Armenia to create a joint venture to prospect for and mine uranium. Moving beyond the post-Soviet space into agreements with the world's No. 1 and No. 2 uranium producers, Russia concluded an agreement with Australia to buy $1 million of uranium annually for power generation, and a joint venture with Canada's Cameco Corp. to locate and mine uranium in both Russia and Canada.
It is cash-strapped Mongolia, however, that represents the richest potential prize for Moscow. Russia has unique pressure that it can bring to bear on Ulaan Baatar, as it provides 90 percent of the nation's oil imports and more than 200,000 tons of wheat annually. In the wake of a decadelong drought, Mongolian Prime Minister Sanjaagiin Bayar made an official visit to Moscow in April that resulted in a Russian agreement to supply Mongolia immediately with 100,000 tons of wheat on preferential terms. Russia received immediate payback, as on April 11 the two countries signed agreements for Russian specialists to assist in the prospecting, production and reprocessing of Mongolian uranium. According to Rosatom state corporation chief Sergei Kirienko, the document "should secure a comprehensive approach to the development of the nuclear industry in Mongolia. Mongolia should not only produce uranium, but also conduct the initial ore processing," even though Mongolia's Parliament is still gridlocked over amending its 1996 Mining Law to give the state greater control of its mineralogical resources, and even though in January 2006 the government identified "strategically significant" uranium deposits at Mardai, Dornod and Gurvanbulag in Dornod aimag.
Europe must pay close attention to Russia's ambitions to dominate the Eurasian uranium market. If the Kremlin succeeds in establishing its primacy over Mongolia's uranium assets alone, those, combined with Russian production and its share of Kazakh uranium, would mean that by 2030 Russia's potential natural and weapons-grade uranium reserves would give Moscow control of 45 percent of the world's uranium-enrichment market and 20 percent to 25 percent of the world's nuclear plant construction market.
Eurocrats in Brussels should note that of the European Union's 27 member states, 11 generate 30 percent or more of their electricity from nuclear power plants, from the Czech Republic (six reactors, 31 percent) to France (59 reactors, 78 percent).
Former Soviet states are equally vulnerable, from Armenia (one reactor, providing 42 percent of the nation's electricity) to Ukraine (15 reactors, 48 percent). Nor is Russia likely to run short of nuclear fuel anytime soon. In an ironic coda to the end of the Cold War, Russian Alfa-Bank analyst Vladimir Zhukov notes that, at Russia's current consumption rate, the massive uranium inventories established by the Soviet leadership to fuel its military will last for another 60 years. It would seem that Europe could be on the brink of a new Cold War, but this one will be fought with thermostats.
