Gennady Voskresensky

    The world economy’s globalization is making national economies more open and their interaction more extensive. Along the way the industrialized nations are concentrating on the one pole with the developing countries clustering on the other. Under the international division of labor members of the first group are providing the world market with a wide range of modern goods dominated by hi-tech products. In their turn countries of the second group are serving mainly as a source of energy carriers, raw materials and semi-products.
And it is exactly the second group of states where Russia has become firmly established. According to the official data, raw materials and semi-finished products account for about 90 % of Russia’s total exports volume. But independent analysts believe that the actual figure is higher reaching 95 % to 97 %, if not more.
Anyway, the whole situation is not that simple. Even now, after a decade of crisis development and loss of leading positions in many economic sectors, Russia is by no means doomed to be a raw material appendage of the world economy. The country possesses a sufficient potential for increasing its share of the world’s value-added products. And it should be considered a strategic task.
«It is necessary to accomplish this task if only because there is an objective tendency taking shape in the world economy now, which points to the reduced consumption of mineral resources and raw materials. Therefore, in the long run Russia’s significance as a supplier of raw materials to the world market should also go down». That is the opinion of Nodar Simoniya, an academician of the Russian Academy of Sciences (RAS), deputy director of the Institute of World Economy and International Relations.
Options for maneuvering are rather limited. «Essentially there are two of them», says Nikolai Shmelev, an academician of RAS, director of the Institute of Europe. «The first one is to optimize the exports structure by processing raw and ore materials more thoroughly, by regulating their shipments to foreign markets in a better managed and more flexible way so as to rule out the competition among the country’s own exporters, which is still the case quite often. (It is no secret that they are supplying raw materials, metals, uranium to these markets in excess and for underselling prices). And the second option is to boost exporting products of some science-intensive industries», he points out.
There is literally a mere handful of science-intensive industries in Russia, which are developing normally. And the count invariably starts with the atomic industry.
By some estimates, the currency earnings from the export of nuclear technologies, equipment and materials now account for about 10 % of the federal budget revenues. Experts at the department of international and external economic cooperation of the Russian Ministry for Atomic Energy (Minatom of Russia) are predicting their further growth in the nearest future by «2 % to 3 % or by 4 % to 5 %» a year. That is a «quantitative side» of nuclear export shipments. But, in experts’ opinion, «their qualitative side is far more important».
Here is what Sergei Ivanov, the department’s deputy chief, has to say on this: «The term «nuclear export» is often used meaning the whole list of products being exported by our Ministry’s enterprises. However, such a use of this term is not quite correct. Strictly speaking, the «nuclear export» is an export of equipment and materials specifically intended for processing, use or production of fissionable materials as well as export of appropriate technologies. It goes without saying that such products are playing a leading role in our industry’s exports accounting for 84 % to 85 % of the total volume. But the palette, so to say, of our exports is much more colorful and richer. A lot of other products and technologies, which are not falling under «nuclear» control restrictions are starting to play an increasingly bigger part»...
People at Techsnabexport JSC, Minatom’s principal «trading house», are providing the more specific data. Techsnabexport’s experts are dividing these export shipments into several large blocks:
– uranium (natural and enriched) and its enrichment-related services;
– nuclear fuel;
– constructing installations abroad;
– scientific and engineering products;
– isotopic products;
– electric power;
– other exports.
In the experts’ opinion, «such a classification allows to structure Minatom’s exports, to determine basic trends and prospects as far as each of these blocks is concerned». So, what are these prospects?
Trend No.1. «In recent years the stabilization or insignificant annual increase of exports’ physical volumes (except some particular cases) has become evident. At the same time the exports’ structure is dominated by uranium products including services related to uranium enrichment. The share of these products accounts for 50 % to 60 % of the annual export volume.
However, today the situation with exporting uranium materials is being influenced by a number of factors, which are not exactly favorable. The market is depressed, predictions of the world nuclear power development are not optimistic, the level of inventory is high, the competition between leading suppliers (above all, on the enriched uranium market) is getting more intense.»
Nevertheless, Russia has managed so far to maintain its positions on this market thanks to shipments of enriched uranium to Western Europe in the first place. By Techsnabexport’s data, the total volume of exporting uranium products and services now meets 26 % of the Western market’s requirements. As for the natural uranium, its shipments satisfy 23 % of the demand of Western countries’ reactors.

Security is being kept as the «apple of the eye» by local authorities at the nuclear power plant in Buhsher, Iran’s first nuclear power installation

A landmark contract on utilizing high-enriched and low-enriched uranium (HEU-LEU) between Russia and the U.S. is even more important for retaining positions on the world’s uranium market. The agreement on recycling high-enriched uranium extracted from nuclear warheads was signed by Moscow and Washington in 1993. Acting governments’ executive managers of this agreement are from American side USEC and from Russian – Techsnabexport JSC. Under this agreement, which was meant to last for 20 years and unofficially called «Megatons into Megawatts», Russia already shipped to the U.S. over 3 thou. tons of low-enriched uranium for utilizing it as fuel by nuclear power plants. This amount of LEU was received by reprocessing 140 tons of HEU good for making more than 5 thousand nuclear warheads. By USEC’ data, the Russian side was paid 2.3 billion dollars. Signed in 1996 this contract expired at the end of December of 2001.
The HEU-LEU contract is known in Russia’s Minatom as «a truly currency-bearing project». As the Ministry’s officials report, proceeds from its implementation «are used to finance ecological programs as well as programs to ensure nuclear power safety, to implement converting and restructuring enterprises of the nuclear defense complex. This money also goes to finance priority research on the fundamental and applied sciences».
However, things are not exactly smooth. Minatom’s problems are usually hushed up but people there still concede that last year the U.S. unilaterally suspended the contract’s implementation and Russian uranium shipments to the American market stopped.
A year and a half ago USEC and Techsnabexport worked out terms of a new contract, which was supposed to become effective on January 1, 2002. However, after taking power the administration of George Bush started reviewing the program. It gave its consent to additional purchases of Russian uranium extracted from nuclear warheads but refused to accept Moscow’s suggestion of shipping commercial nuclear fuel.
As a result, the preliminary agreement, which was reached earlier, should now be revised. According to vice president of USEC Charles Yulish, the acute lack of time notwithstanding, USEC hopes to sign a new contract before the year-end.
So, what is going on with this contract now? «Our two countries found a compromise. The principle readiness to resume the contract was stated at the recent summit meeting between Vladimir Putin and George Bush», Russian minister for atomic energy Alexander Rumyantsev says in response to this question. «Now it is our governments’ turn to act. The Russian Cabinet has already spoken out in favor of keeping the contract. The U.S. administration is to do the same thing. After that shipments will be resumed. It is assumed that this will happen already in September or October», he points out.
The U.S. administration gave the green light to preparing a new contract of shipping Russian low-enriched uranium to the American market. As Charles Yulish reported, this permitted his company to renew talks with Minatom and Techsnabexport, its Russian partners, on further implementation of the intergovernmental HEU-LEU agreement for next 13 years.
We intend to give more details on the contract’s implementation in one of Eurasian Metals’ issues.
Meanwhile, experts at the department of international and external economic cooperation of Minatom as well as at its foreign trade divisions are looking with optimism at Asian markets. They regard the entry into the markets of Taiwan and Japan, which has started in 1999 and 2000, as a positive tendency toward «widening the scope of the uranium export». By estimates, in the nearest ten years the share of Russian uranium products will reach between 20 % and 25 % of these markets. The total value of potential contracts for natural uranium shipments and its enrichment-related services exceeds $1 billion.
Extending long-term contracts should also secure currency proceeds of no smaller amount. «To this end all necessary means should be applied. That is an aggressive pricing policy, measures to raise attractiveness of a contract’s accompanying terms, maximum use of opportunities emerging on the market of short-term contracts». That is the way staff members at Techsnabexport describe Minatom’s future foreign trade policy. This fully extends to all export blocks of the nuclear power industry and, in a large degree, sets one more important trend in its development.

So, trend No.2. «This is the introduction of export products to the world’s market, which are exclusive by their science-intensive nature. Even if we are talking about natural uranium, being science-intensive still remains the key feature of our industry. And this in essence distinguishes it from such leading industries as mining, oil-and-gas production, metals industry. The matter is that making competitive products in the nuclear power industry has always been dependent on achievements in the field of the «intellectual production». Results of scientific research being materialized, for example, in new technologies and products make a significant impact on their competitiveness and, thus, raise the export potential of individual enterprises and the industry as a whole as well as of the country», Sergei Ivanov says.
First and foremost, it applies to export shipments of nuclear fuel, the industry’s most important component of the «nuclear export» by its volume parameters and scientific significance.
In 2001 and 2002 the share of this component accounts for 15 % to 20 % of the industry’s export structure. Russian nuclear fuel is now supplied to 37 power units at nuclear power plants and 13 research reactors abroad. And «research and development works, which are being carried out in the industry, will permit to widen the geography of our nuclear fuel shipments already in the near future». That is the hope of analysts at TVEL JSC, one of the largest corporate structures of Russia’s Minatom, which incorporates nuclear fuel producers.
Widening the geography? Regardless of the ever-increasing rivalry in this market sector?
«We should admit that conditions were not the best ones for us in the past decade», economic strategy director of TVEL JSC Anatoly Vorobiev says. «Leading Western companies boosted their activities aimed at pressing Russian suppliers out of their traditional markets in Eastern and Central Europe, Finland. They were particularly active in the Czech Republic, Hungary, Ukraine. The only way to counter competitors’ expansion was to conduct a balanced policy. This included providing customers with the complete package of services for the whole technological chain, developing new promising fuel cycles and nuclear fuel, ensuring high quality of shipped products, maintaining competitive prices for nuclear fuel and services», he notes.
As TVEL’s staff members proudly state, exactly this very policy led to positive results. «Today the upgraded resource-saving nuclear fuel assemblies (new uranium-gadolinium fuel, zirconium NFA) are already being put in operation for water-moderated power reactors in Ukraine (blocks 1 and 2 at Rovenskaya Nuclear Power Plant), the Czech Republic (blocks 1 and 2 at Dukovany Nuclear Power Plant), Slovakia, Hungary, Bulgaria», executive director of TVEL JSC Vladimir Molchanov sums up. «As for the quality of our fuel, it is illustrated, for example, by the fact that there are no more than two hermetically defective fuel rods per 100, 000 of them. This is the highest quality index in the world», he says.
Nevertheless, foreign makers are ahead of the Russian ones by some indicators. «We will be able to catch up with them through research and development works, which are underway in the industry. And we also hope to significantly intensify the expansion on the world market using the same basis», Russia’s First Deputy Minister for Atomic Energy Mikhail Solonin says.
There is an intention to enter markets of Western Europe and the U.S. in the future while retaining the country’s positions on traditional markets. These are the plans of Minatom as described by Nikolai Balagurov, deputy technical director for external ties of Mechanical Engineering Works JSC (the city of Elektrostal, the Moscow region) where nuclear fuel is being produced. «The severe rivalry between Western companies for sales markets could help us», Nikolai Balagurov explains. «One of the successful schemes is to establish contacts with a large Western company, which controls a significant share of the nuclear fuel market, and ensure its assistance in getting a necessary qualification for a Russian supplier. These steps are to be followed by shipping individual components of nuclear fuel (fuel rod clads, fuel pellets, etc.) and, finally, by making and exporting NFA. Throughout all last years we have been developing our relations with Siemens under this scheme. There are essentials for cooperation with France’s Framatome ANP, U.S. General Electric and other Western partners», he says.
But Western partners themselves are not that optimistic about prospects for such a cooperation. «The offensive of Russian producers is at least putting us on guard», director of Framatome ANP for operations in Eastern Europe Albert Gozal confessed in the off-the-record conversation with a correspondent of Eurasian Metals. But probably the Russian «nuclear export» is so remarkable exactly because it is developing by skillfully bypassing reefs in the international trade and concern of Western «monsters». This very skill made tradesmen from Minatom realize: they should take aim at the promising market of nuclear fuel in Asia. The contract has been signed to ship fuel to China’s Tianwan NPP, which is under construction. Active efforts are being made to enter India’s market: while shipping fuel to Kudankulam NPP, an option of supplying fuel pellets of Russian make to existing installations is being considered. Previously this fuel was provided by the French.
«Cooperation of this kind is quite attractive from the economic point of view. For example, contracts already signed for constructing nuclear power plants in Iran, China and India are valued at about $4 billion. And providing complex services for supplying nuclear fuel to foreign nuclear power plants is estimated at no less than $350 million to $400 million», general director of Atomstroyexport JSC Victor Kozlov says. In his words, «We will additionally develop one or two blocks in India besides those, which are already under construction. Apart from the second block at China’s Tianwan NPP, which is being constructed, plans are being worked out to build four blocks more at the same site. The negotiations are underway with Iran to construct by Russian projects 3 or 4 blocks in addition to the first one at Buhsher NPP. Not to mention work on ways to develop markets in a number of other countries».

R   E   F   E   R   E   N   C   E Till 1990 the USSR provided assistance in constructing 2 nuclear power plants in the German Democratic Republic, one NPP in Bulgaria, one NPP in Hungary, one NPP in Finland, two NPPs in Slovakia, two NPPs in the Czech Republic. Scientific research and development works on constructing nuclear power plants were started in the German Democratic Republic, Bulgaria, Romania, Poland, Libya, Cuba and Korea. They were terminated by decisions of these countries’ governments.

There is one more reason for exports becoming brisk. As is known, before 2001 the return of irradiated nuclear fuel (INF) from foreign countries was in fact suspended by the Russian law, although national programs of developing nuclear power in these countries were worked out taking into account exactly this return. As a result, potential customers were forced to reject shipments of Russian nuclear fuel. In 2001 the law of the Russian Federation on using nuclear power was significantly amended.
«The adopted amendments are mainly directed at providing support for a Russian producer of fresh nuclear fuel on foreign markets. Now it is fully legitimate for us to construct nuclear power plants abroad. In the past the international community used to say: since you have no legal right to bring INF to your country, then, you have no right to build your nuclear power plants either in India, China or Iran», Russian Minister for Atomic Energy Alexander Rumyantsev said in his comments for Eurasian Metals on the importance of this event.
Now if there is anything that might restrain Russia from further participation in building nuclear power plants abroad, it is just an actual suspension of their construction inside Russia itself. «This will lead to reduction of opportunities for the domestic industry to produce new materials for nuclear power industry as well as reliable and high-quality power-generating equipment. In its turn that will either strengthen our competitors on the market of constructing nuclear power plants or force us to provide foreign customers with more favorable terms, often at the expense of our own economic interests». That is how Victor Kozlov describes the problem.
But things will hardly develop according to the worst scenario. Minatom is hatching ambitious plans to renew constructing nuclear power plants inside the country. We are planning to tell you about them in one of the forthcoming issues of our magazine.
The implementation of this strategic program will permit to significantly expand export of «nuclear» electric power. As of today its share is small: just 3 % of the total volume of the electric power export. «But there is a potential for raising this share», president of Rosenergoatom Concern Oleg Saraev says. «There are real possibilities to increase volumes of the electric power export up to 20 to 25 billion kWh a year», he adds. Since 1999 Rosenergoatom has been nourishing a dream to expand exports. The negotiations with Electricite de France have become lively: in particular, both sides are discussing a possibility of electric power transit via Ukraine to the European market as well as its export to Turkey, Finland and Scandinavia.
There are other promising items on the export list in the industry. Among them, for example, are stable isotopes (today their shipments account for 30 % of the world market’s needs), calcium metal (15 %), zirconium, lithium, rare and rare-earth metals. «We also have something to offer to foreign partners in the field of science and engineering including dual-purpose technologies. Offers of this kind meet with the most enthusiastic demand in the U.S., France, Germany, China», the director of All-Russian Research Institute of Automatics Yuri Barmakov says. By the way, his institute is one of the «closest» divisions of Minatom.
This rather quick review of main directions in the industry’s foreign economic activities allows to evaluate their scope and potential. Though, on the other hand, it also gives an idea of the industry’s serious problems in this respect. These problems are still awaiting a more scrupulous analysis.