01.02.23 Sanctions Review

The Not-so-peaceful Atom: can Europe afford sanctions against Russian nuclear power?

A debate has erupted in Europe over the possibility of sanctioning Russian nuclear energy. Nuclear power is yet another trump card in the Kremlin's geopolitical strategy. While preparing for its invasion of Ukraine, the Kremlin had planned to seize Ukrainian nuclear power plants as part of its blitzkrieg strategy and in the hope it could leverage these against recalcitrant Ukrainian regions and European countries. Despite the fact that these plans fell through, Moscow continues to use the ‘peaceful atom’ as a political tool. Russia controls a large proportion of the European nuclear fuel market and maintains many of the continent’s nuclear plants. As it has yet been possible to find alternative sources to replace Russian supplies, Rosatom has thus far been exempt from all sanctions. If sanctions were to be imposed, the new gap in Europe's energy supply may cause oil prices to rise again, allowing Moscow to offset its lost revenue from uranium exports. However, based on previous experience of sanctions policies, it appears likely that once the debate in Europe begins, it will almost certainly end with the imposition of some kind of restrictions. However, the exact configuration of these sanctions is unknown at this time.

In Brussels, discussions are underway about possible sanctions against Russia's nuclear power industry, which could be included in a new package of restrictions. According to Reuters, as might have been expected, the discussion was initiated by representatives from Poland and Lithuania. Articles detailing the ways in which Rosatom assists the Russian army in Ukraine sparked the initiative. According to a Washington Post article, the state-owned corporation provides technology and raw materials for the production of rocket fuel to defence industry enterprises. As a result, the state-owned company is a direct participant in the conflict. However, this debate was heightened by Hungarian Prime Minister Viktor Orban's equally anticipated announcement in late January that Budapest would veto any move by the EU to impose restrictions on Russian nuclear energy. That being said, he made similar statements in the spring regarding an embargo on Russian oil supplies to Europe, which proved to be merely a ploy to gain additional concessions from Brussels. But in this case, it's not just Orban who stands in the way. 

In general, nuclear energy has played and continues to play an important, albeit often overlooked, role in the Kremlin's geopolitical calculations and strategies. The Royal United Services Institute (RUSI) published a report late last year on the lessons learned from the Russian invasion. The report detailed the Kremlin's sensational plan to seize Ukrainian nuclear power plants. The Kremlin's strategy envisioned three possible uses for Ukrainian nuclear power plants in order to achieve a quick and decisive victory. First, they were intended to serve as bases for Russian troops and ammunition depots, as well as command points for troops. Second, by seizing Ukrainian nuclear power plants, which generate more than 60% of Ukraine's electricity, the Kremlin hoped to gain control of the Ukrainian energy system and thus be able to cut off power to any regions of the country that refused to cooperate with occupation. Third, control of nuclear power plants could be used to exert pressure on European countries. The Kremlin hoped to avoid direct or indirect Western intervention in the conflict by threatening Europe with power plant accidents. However, the plans were thwarted because they were only able to capture the Zaporizhzhya NPP at the start of the war. 

Despite the failures of this audacious plan to seize Ukrainian nuclear power plants, nuclear power remains an important strategic resource for Moscow. Last autumn, the Insider detailed Russia’s uses of nuclear power as leverage in its relations with both developing countries and Europe. Rosatom accounts for only 6% of global uranium production; the corporation controls more than 45% of the global uranium processing and enrichment market; and the European Union purchases approximately 40% of enriched uranium from Russia and Kazakhstan. Bulgaria, Czechia, Finland, Hungary, and Slovakia rely on the fuel supplied by Rosatom. 

Ukrainian politicians made repeated calls last year for sanctions against Russia's nuclear industry. President Volodymyr Zelenski asked the international community to sanction Rosatom over the situation surrounding the Zaporizhzhya NPP in the second half of the summer, and consulted with high-ranking European officials on this matter. In October, Ukrainian Foreign Minister Dmytro Kuleba issued a statement urging the West to impose sanctions on Rosatom and its affiliates, as well as to limit IAEA member states' cooperation with Russia. Only Lithuania, Poland, Latvia, and Estonia agreed with these appeals. Based on data from Investigate Europe, Meduza has demonstrated quite convincingly why nuclear power remains an industry unlikely to ever face sanctions, despite the fact that it generates hundreds of millions of euros in annual revenue for the Kremlin. Many European countries, even if they wanted to, would be unable to replace not only the uranium fuel sources for their reactors, but also the Russian technology, components, and even the Rosatom specialists who service reactors across the EU in a timely manner. 

In 2021, Moscow supplied the EU with 2,538 tonnes of raw uranium, accounting for nearly 20% of all European imports. Rosatom also controls uranium mining in Kazakhstan, which supplied 2,753 tonnes (23%) to Europe. Niger (2905 tonnes, 24%) was the only country from which the EU purchased more uranium. Russia earned €210 million from these transactions, while Kazakhstan profited to the tune of another €245 million. Rosatom also controls roughly 30% of the global uranium enrichment market and 17% of the reactor fuel market. Twenty percent of the world's 450 nuclear power plants were built using Russian/Soviet technologies and require Russian specialists to service them. Moreover, Rosatom is in the process of constructing 23 more units around the world, including in India, Turkey, and Egypt, with an estimated $200 billion in overseas orders. 

According to Reuters, Rosatom expected its exports to grow by 15% by the end of 2022. European nuclear power, which generates roughly a quarter of all electricity in the EU, is thus heavily reliant on Rosatom. Nuclear power provides more than 40% of all electricity in Slovakia, Hungary, and Bulgaria, and more than 70% in France. Of course, Eastern Europe is the most reliant on Russian nuclear fuel, with 18 nuclear power plants built by Soviet/Russian specialists in the region. To ensure their continuous operation, their reactors rely on Rosatom technology, services, and fuel. Bulgaria and Finland each have two such reactors, Hungary and Slovakia have four, and Czechia has six. As a result, Russian cargo planes carrying nuclear fuel were exempted from sanctions and thus continued to fly to the EU over the past year.

Europe has managed to survive the winter without Russian gas without experiencing too much hardship. However, gas shortages will persist as a result of the decreasing volumes supplied by Russian pipelines. This year, the effects of the energy deficit was dampened by nuclear power and increased nuclear fuel supply purchases from Russia. In such circumstances, can Europe afford to create another gap in its energy mix? And where would that lead? If the result is a new surge in oil prices, the West is unlikely to deprive Moscow of revenues from this source, but rather would simply transfer those revenues into a different pocket. The past year, however, has demonstrated that Brussels can make difficult but coordinated decisions to support Ukraine and contain Russia. Moreover, we have witnessed that when a discussion about sanctions begins, it is likely to end with the imposition of some kind of restrictions. Furthermore, the success of the oil price cap so far encourages the search for similar measures which might be adopted in other areas, including nuclear energy.