Is KazAtomProm Dominating the Global Nuclear Energy Industry?

by Joshua Foust on 4/18/2008 · 2 comments

kazatomprom.jpgLast year, Nathan noted some strange objections by James Love to KazAtomProm’s 10% purchase of Westinghouse from Toshiba. They just didn’t hold up:

It would be a shame if CFIUS blocked the deal. Kazakhstan has been responsible with nuclear technology. And because it will become a more important player in nuclear energy with or without links to the US, I would much rather that Kazatomprom have ties to US companies than not.

Obviously, CFIUS not only didn’t block the deal, but the Kazakh-Russian so-called “World Bank for Uranium” took several important steps forward. More recent news about the Toshiba subsidiary gearing up to build new nuclear plants in the U.S., along with Toshiba’s domination of the Japanese power generation market, mean that a Kazakh company is making inroads into what could be an enormous industry. Indeed, all signs point to a rapidly growing Kazakh presence in the global nuclear energy market. What could this mean?

In March of this year, the intriguingly-named Abraham Lustgarden wrote an expose for Forbes on the man at the top of Kazakhstan’s uranium mining concerns, Moukhtar Dzhakishev.

As Dzhakishev sees it, a widespread nuclear renaissance is not only inevitable but well underway. And he’s probably right. Global warming is weighing heavily on the international conscience, and with it comes a newfound sense of urgency to dispense with coal and other carbon fuels. No alternative is more developed, economically viable, and emission-free than nuclear energy. Since world electricity use is expected to double in the next few decades, nearly every industrialized country is considering a fresh buildout of nuclear power. Worldwide, 34 new reactors are under construction, and 280 are being planned or proposed. China alone has broken ground on five reactors to feed that nation’s insatiable need for power.

That has raised questions about whether uranium producers can find enough of the element to fuel this long-term growth. In 2006 producers met only 62% of demand. (The rest was recycled from a diminishing supply of decommissioned warheads or taken from dwindling Cold War stockpiles.) The World Nuclear Association says uranium mining could need to increase by almost 300% in the next two decades.

Talk of such a crunch has brought the market to fever pitch. Spot prices for uranium jumped from about $7 a pound in late 2000 to a record high of $136 in June [of 2007]. Prices today hover at $74. More than 400 uranium companies are listed publicly, hedge funds buy warehouses of the stuff, and old U.S. mines are grinding back to life. Applications for new mines in Colorado and Utah have risen more than 200% since 2003.

And so on. It is mostly driven by high prices, just like their oil boom. It’s funny to see Dzhakishev, like too many prominent businessmen in Kazakhstan, has the requisite ties to disgraced Kazakh boy wonder Rakhat Aliyev, and of course some of his mines came under the influence of Frank Guistra, the legendary Canadian financier who leveraged his BFF status with Bill Clinton to the tune of hundreds of millions of dollars (along with shady connections to disgraced renegade financier Mark Rich).

Anyway, the important thing here is that Dzhakishev has a growing circle of powerful friends and powerful clients eager to get at the precious yellow metal he is pulling from Kakakhstan’s sands. And he has open intentions to dominate the uranium supply and make serious inroads into reactor construction.

While this would seem like a good thing—a mostly non-nepotistic businessman from the Former Soviet Union making good on a strong market—Abdujalil Abdurasulov sees it otherwise.

In a January interview with the Arabic daily al Hayat, Mohammed ElBaradei, director general of the International Atomic Energy Agency, named Kazakhstan among the four states where most nuclear trafficking incidents occurred, noting that such material could be used for making a “dirty bomb.”

Call me crazy, but Mohammed ElBaradei didn’t say that. At the English-language version of the Dar al-Hayat story, Kazakhstan came up only once:

We constantly receive information about attempts to smuggle radioactive materials across borders. We have a log of illegal trafficking attempts for nuclear and radioactive materials in all world countries. These states inform us when they apprehend individuals attempting to cross borders or airports with radioactive materials. There are about 100 incidents in which individuals attempt to traffic radioactive materials… we and the international community have so far been focused on protecting radioactive and nuclear materials in the former Soviet Union states. We still have a lot of work ahead of us, especially that many of the trafficking attempts that I mentioned come from former USSR and East Europe countries such as Kazakhstan, Uzbekistan, Ukraine and Romania.

Even then, I doubt. Abdurasulov noted the Kyrgyz train incident was indicative of the security issues facing the region. It doesn’t, as it was some Cesium-137 dust that set off alarms at the Uzbek border—indicating the systems in place to check for radiation are actually working. In Lawrence Scott Sheets’ excellent exposé of actual uranium smuggling rings, Kazakhstan is barely mentioned at all, and then only as a theoretical concern—and other countries like Georgia aren’t even mentioned by ElBaradei as major areas to be concerned about.

I’m not saying there is no danger in Kazakhstan aggressively exporting its nuclear materials. There would be with any country dramatically increasing the shipment of dangerous materials—even the U.S. or France. But Abdursulov falls for several traps in trying to spark fear over Kazakhstan’s rise, from mentioning it is “close” to Afghanistan and Pakistan, to the idiotic concerns raised by environmentalists (and addressed by Nathan’s posts) concerned not with contaminating pristine wilderness, but global nuclear security—not their strong suit.

In fact, Kazakhstan has an especially good record with its nuclear materials. It very rapidly “de-nuclearized” after the fall of the USSR, and has been cooperative and open with the IAEA and American and Russian scientists in the dismantling of the many nuclear weapons and other WMD testing sites around the country. While the Kazakh border checks didn’t catch the minute amounts of radioactive Cesium in that renegade train, the amounts were so small—nothing on the order of what would be necessary to build a dirty bomb of any note—this is on its own indicative of nothing.

Notably, despite mentioning the scariness of Kazakhstan’s growing nuclear influence, the experts Abdursulov finds see positive steps and good structures in place, saying its rapid economic growth, strong export ties, and membership in control regimes effectively limits any potential smuggling that could happen. There are vague fears that the mere presence of plutonium in a breeder reactor might spark terrorists to seek illicit material; but it is all innuendo and baseless supposition. Structurally, Kazakhstan is unique in having a sufficient infrastructure to handle nuclear production and export.

None of this, however, means Kazakhstan is set to dominate the world’s uranium markets. Though cheap to extract, it has less uranium than either Canada or Australia. Though in relative abundance, the human capital is simply not in place to make effective use of existing and future mining facilities to extract everything on the blistering schedule Dzhakishev has set for himself.

The possibility, however, is tantalizing. It is one intriguing way the country could outwit an oil-sparked Dutch disease, though diversifying into other natural resources doesn’t really do that; Kazakhstan’s economic problems are a bit more fundamental. Regardless, it is hard not to root for their success—seeing a country that was literally an economic basket case ten years ago emerge as a serious global player in several commodities markets. Even if the economic growth proves less permanent than we think, that in and of itself is a remarkable achievement.

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This post was written by...

– author of 1848 posts on 17_PersonNotFound.

Joshua Foust is a Fellow at the American Security Project and the author of Afghanistan Journal: Selections from His research focuses primarily on Central and South Asia. Joshua is a correspondent for The Atlantic and a columnist for PBS Need to Know. Joshua appears regularly on the BBC World News, Aljazeera, and international public radio. Joshua's writing has appeared in the Columbia Journalism Review, Foreign Policy’s AfPak Channel, the New York Times, Reuters, and the Christian Science Monitor. Follow him on twitter: @joshuafoust

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Jim April 19, 2008 at 10:28 pm

On the smuggling thing, I’d have to dig into some papers I’ve written on the subject, but I believe you to be right… confirmed smuggling incidents in Kazakhstan are pretty low or non-existent. Of course, this may be because they just aren’t catching people, but I suspect it’s not a large issue in Kazakhstan.

Georgia, on the other hand, is a whole other story. There are a *lot* of incidents in Georgia, relative to the total number of incidents. This may be because Istanbul seems to be a big selling point for nasty nuclear materials.

But I definitely think their interdiction record is only slightly related to the question at hand. Most of these smuggling efforts are people getting materials from Russia itself because of their laughable security at labs.

So the key question is then how responsible do we think Kazakhstan would be in maintaining these mines? And I think you make an excellent case that they would be, citing the maturity they had in rescinding their weapons after independence, and the efforts to make Central Asia a nuclear weapons free zone.

Also, on the interdiction thing, we should actually be more pleased if there are smugglers being caught in Kazakhstan, not less. That means they are able to effectively deal with these sorts of situations. Looking at Georgia, nobody can say that they haven’t done a good job with interdiction. Sure, for every one caught, I’m sure one or more got through… but at least we know they are catching /some/ of these guys.

Jim April 19, 2008 at 11:03 pm

Hmm, okay, I’m embarrassed that I misremembered on this. Yes, Kazakhstan is one of the top locales, although oddly enough the IAEA database doesn’t mention any of these incidents at all, so if ElBaradei is really saying that they are getting reports of incidents from Kazakhstan, they should start reporting them. Although it’s such a pain to get their data anyway. gah.

But yeah, my source for this was a paper written in 2002, and unfortunately uses a different (classified, unfortunately) database that notes 4 incidents in Kazakhstan, mostly around the turn of the century (heh, I don’t think I’ve gotten to use that phrase yet for the 1999-2000 time period).

And unfortunately, the news gets worse, the source for the smuggled materials in each case was suspected to be Ulba, so it does point to poor security at Kazakh facilities.

Still, I dunno. I don’t see it as being any worse than Russian facilities. Right? I may write something up on this myself, if I do, I’ll do a trackback.

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