With a 20-year nuclear fuel pact between the United States and Russia due to expire in 2013, Russia is looking to supply other countries and civil contractors with nuclear fuel from its growing reserves.

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 lucrative 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.

Nearly one in 10 U.S. households runs on power from Soviet nuclear bombs. Now Russia hopes that its Cold War arsenal, twinned with fast-growing uranium mines and enrichment capacity, will also soon be powering China, India and other booming economies.

Old Russian warheads are currently a key source of fuel in the global uranium market, accounting for 13 percent of world supply and helping to fill a gap from mined output.
Analysts expect recycled Russian supplies to continue flowing after the U.S. deal expires in 2013, while 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 Renaissance Capital. "The economics of the 20-year contract to reprocess weapon-grade uranium are not so attractive to Russia."

Russia, which holds a tenth 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 global reactor-building market.

The expiry of the partnership with the United States is expected to earn Russia more than $8 billion but has fuelled concerns about a looming supply shortfall.

But Russia has not shunned the U.S. market and its 104 reactors. Instead, this year it signed a succession of deals to supply fuel directly to U.S. utility companies, including PG&E Corp., Ameren Corp., Exelon Corp. and Luminant. The first deals prompted Sergei Kiriyenko, the former prime minister who now heads state nuclear giant Rosatom, to say Russia had "broken through the wall" forbidding independent sales of Russian fuel to the U.S. market.

The deals also effectively end the monopoly of U.S. government agent USEC Inc. on imports of Russian uranium.

"Six commercial contracts have already been signed with U.S. nuclear power plant operators," said Ivan Dybov, 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 (LEU) recycled from 375 tons of bomb-grade material, or highly enriched uranium (HEU). This is equivalent to 75 percent of the 500 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 provide another 5 percent. Nuclear plants in turn contribute about 20 percent of the power produced in the United States.

Analysts say direct deals could ultimately be more profitable for Russia than the existing program, which was set up in 1993 to encourage a country still rebuilding after the Cold War to extract and use fuel from dismantled warheads.

Russia 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, the world's fifth most important uranium miner, 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 Sakha holds 5.3 percent of the world's recoverable reserves. Russia is also home to 31 reactors with capacity to produce more than 22 gigawatts, or 6 percent of the world's nuclear power capacity.

Moscow has extensive plans to build new reactors at home and abroad. Vladimir Putin, addressing the nation last week in his annual call-in show, said Russia planned to build more than 30 new reactors in the next decade.

Further agreements on reactor construction, as well as an expansion of atomic fuel exports to India, were sealed when Indian Prime Minister Manmohan Singh visited Moscow on Dec. 7.

"It's not simply billions. It's dozens of billions of dollars," Kiriyenko, the Rosatom head, said of the reactor deal. "We're not afraid of competition. It's clear that nuclear energy is a global sector."