Amid escalating U.S.-Russian tensions over Moscow’s illegal incursion of Crimea and subsequent provocations in eastern Ukraine, Russian Energy Minister Alexander Novak threatened last week to halt gas supplies to Ukraine and Europe should Western leaders decide to impose punitive sanctions on his government. Given that Russia accounts for about a quarter of all EU gas supplies while Ukrainian pipelines carry about half of those imports each year, Mr. Novak’s threats should be taken seriously.
While European leaders are visibly struggling with how to respond to Russia’s aggression, U.S. leadership is required to help develop a comprehensive energy strategy that would decrease EU dependency on Moscow in order to fully reduce its leverage over Eastern Europe. At the same time, European leaders must reconsider constructing nuclear energy plants across the continent in order to provide their populations with a safe, clean and viable alternative to Russian gas.
Behind France and Great Britain, Ukraine is Europe’s third largest nuclear market with its 15 power reactors in operation, accounting for nearly 44 percent of its electricity production in 2013.
Within this context, Westinghouse Electric Company’s recent agreement with Ukraine’s nuclear power operator, Energoatom, valued at between $100m and $200m, is more than a commercial agreement as it sends a clear signal that Kiev will no longer rely on Moscow for its energy infrastructure. While the agreement is commercial in nature, its symbolism cannot be understated, either. This comes as NATO recently dispatched a team of experts to Ukraine to advise the government on how to secure critical infrastructure, including of its nuclear power plants and gas pipeline.
In the meantime, despite the obvious negative associations connected to Ukraine’s Chernobyl accident of 1986, nuclear technology has proven to be safe and clean. Only three major reactor accidents have been recorded in the history of civil nuclear power: Three Mile Island (1979), Chernobyl and Fukushima (2013).
Germany Could Play Leadership Role
Despite an estimated 18 percent of Germany’s electricity stemming from its 17 reactors, public opinion remains opposed to constructing additional plants. Given Germany’s hesitancy to impose sanctions on Russia over Ukraine, fearing that its $28 billion investments could be compromised, Chancellor Angela Merkel could reintroduce the nuclear power plant debate by arguing that re-opening the eight power plans that were shut down in 2011 would protect Europe’s long-term security, while creating thousands of jobs in the process.
Given Chancellor Merkel’s standing as Europe’s most effective – and widely respected – leader, both at home and within the union, Germany must lead by bringing nuclear energy back to the forefront of the EU’s energy debate. Merkel’s Eastern and Central European counterparts are likely to follow should she take a clear stance as they fully recognize Russia’s threat potential to their security and to critical infrastructure in particular. It is therefore a welcoming sign that the Czech Republic, Poland, Hungary, Lithuania and Finland are considering constructing nuclear power plants in their respective countries.
As of today, the Czech Republic has six nuclear reactors generating about one-third of its electricity. The government’s commitment to the future of nuclear energy is strong, partially explained by the fact that more than 80 percent of its gas comes from Russia. By 2025, Poland plans to add nuclear power in order to diversify its energy portfolio. While Hungary has four nuclear reactors, generating more than one-third of its electricity, the country’s parliament has signed a contract for building two new power reactors. Lithuania, which closed down its last nuclear reactor in 2009, intends to build a new reactor in Visaginasas as the country currently pays 15 percent over market rate for Russian gas. Finland has four nuclear reactors providing nearly 30 percent of its electricity; with a fifth reactor under construction and two more are planned. The government, however, is struggling to move forwards with finding a start date for its long-delayed Olkiluoto 3 nuclear reactor as the Teollisuuden Voima utility company and French supplier Areva continue to battle each other in court, blaming each other for the latest delays. The unfolding Finish drama demonstrates that before a decision can be made to construct additional power plants on the continent, European leaders must exhaust the political process to hammer out a clear nuclear strategy. With German leadership, the rest of the EU is expected to follow.
Washington Must Support European Energy Independence
Amid these shifting variables, potentially leading Europe on a long-term path towards energy independence, Russia is not sitting idle by as she is striving to become a nuclear industry leader, including investing in the development of new reactor technology. Russia has so far increased its foreign contracts by 60 percent over the past two years, with over 20 nuclear power reactors confirmed or planned for export construction. With active government support for Rosatam, its nuclear contractor, the U.S. is no longer a key player in the global market place as it faces steep competition from Russia, France, and South Korea. Lukewarm support for the American business community by the White House coupled with a dysfunctional U.S. Congress over whether Export-Import Bank of the United States (EXIM) should be granted the necessary re-authorization, have hampered the U.S. nuclear industry and their subcontractors from competing in the global market place. Ever since EXIM became a political football in 2012, no authorization has been granted to allow the agency to carry out its mandate. While Republicans have repeatedly accused EXIM of cooperate welfare, this organization is critical for small to medium size businesses to obtain the necessary financing to compete within the global market place. In the meantime, Russia’s Rosatom benefits from generous government subsidies, illustrating why reaching a Congressional settlement on EXIM funding is urgently required so that the U.S. nuclear industry and its subcontractors can compete internationally.
With political sensitivities triggered by the Fukushima accident subsiding, global demand for nuclear energy is once again increasing, prompting Russia to take a clear leadership role on this as U.S. public policy is preventing American business from fully competing. In Washington, the lack of progress on ratifying 123 agreements with a number of countries, including with Vietnam and Saudi Arabia, has left Russia as the principal competitor to U.S. industry as Moscow actively pushes its nuclear industry within the so-called BRIC countries (Brazil, Russia, India and China).
At this stage, it is critical that the White House must recognize that supporting European energy independence would not only effectively remove one of Russia’s most powerful tools to squeeze concessions out of European leaders, but this could also lead to U.S. job creations. Energy security aside, an additional benefit would be for the environment: nuclear energy is not only clean and safe, but could also play an important factor when it comes to fighting climate change. Ironically, Russian aggression in Ukraine presents a number of strategic opportunities for the Euro-Atlantic community: But whether the political leaders inside and outside the region possess the wisdom, the perseverance, and the ability to seize this chance remains to be seen.
Sigurd Neubauer is a Washington, DC-strategic affairs analyst.