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Russia Aims to Supply Nuclear Fuel to World

Nearly one in 10 U.S. households runs on power from Soviet nuclear bombs.

Now Russia hopes its Cold War arsenal, twinned with fast-growing uranium mines and enrichment capacity, will also be powering China, India and other booming economies when a 20-year nuclear fuel pact with the United States expires in 2013.

Russia has expressed no desire to refresh the “Megatons to Megawatts” program, under which it will recycle the equivalent of 20,000 nuclear warheads and create enough uranium to power the entire United States for two years.

Instead, the Kremlin is pursuing deals to supply fuel directly to power firms in the U.S. market, home to more than a quarter of the world’s nuclear power generating capacity. Russian supplies from old warheads are currently key in the global uranium market, accounting for 13 percent of world supply, helping fill a gap from mined output.

Analysts expect recycled Russian supplies to continue to flow after the U.S. deal expires in 2013, but falling to about two-thirds of present levels.

“Russia wants to expand its nuclear presence all over the world,” said Marina Alexeyenkova, an analyst at investment bank Renaissance Capital. “The economics of the 20-year contract to reprocess weapon-grade uranium are not so attractive to Russia.”

Russia, which holds a 10th of the world’s uranium reserves, is positioning itself as a major player in meeting growing demand from the nuclear power industry. The country already has a 15 percent share of the reactor-building market. The expiry of the post-Cold War partnership with the United States, which is expected to earn Russia more than $8 billion, has fuelled concerns about a looming supply shortfall.

But Russia has not shunned the U.S. market and its 104 reactors. Instead, it has this year signed a succession of deals to supply fuel directly to U.S. utilities, including PG&E, Ameren, Exelon and Luminant. The first deals prompted Rosatom head Sergei Kiriyenko to say Russia had “broken through the wall” forbidding independent sales of Russian fuel to the U.S. market. They also effectively end the monopoly of the U.S. government agent USEC on imports of Russian uranium.

“Six commercial contracts have already been signed with U.S. nuclear power plant operators,” said Ivan Dybov, a spokesman for Atomenergoprom, the civilian arm of Rosatom. “Russia’s potential for enriching uranium is sufficient to secure a notable share of the U.S. market,” he said.

Russia has to date supplied low-enriched uranium recycled from 375 metric tons of bomb-grade material, or highly enriched uranium. This is equivalent to 75 percent of the 500 metric tons that it must supply by 2013.

The LEU supplied by Russia accounts for 45 percent of the fuel used by U.S. nuclear power plants and decommissioned U.S. weapons another 5 percent. Nuclear plants in turn contribute about 20 percent of the power produced in the United States.

The country is also seeking routes into other developed markets through partnership with companies such as Japan’s Toshiba and Germany’s Siemens, as well as building a share of emerging economies in Asia.

“The Chinese market is booming, with plans to build over 70 new reactors by 2030. For Russia, it’s strategically important to fix contracts in this particular market,” Alexeyenkova said.

Max Layton, an analyst with Macquarie Securities in London, said global supply concerns related to the expiry of the agreement were overplayed. “The Russians will use it, sell it to the Chinese or sell it as part of other reactor packages,” he said. “From a [global] supply-demand balance perspective, it doesn’t matter whether they sell it to the U.S.”

Russia also plans to dig more of the metal from the ground. ARMZ, the state uranium miner, estimates that its Elkon deposit in the eastern region of Yakutia holds 5.3 percent of the world’s recoverable reserves.

Moscow has extensive plans to build new reactors at home and abroad. Prime Minister Vladimir Putin said Russia planned to build more than 30 new reactors in the next decade.

“We’re not afraid of competition. It’s clear that nuclear energy is a global sector,” Kiriyenko said.

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