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uzbekistan still considering nuclear energy project with russia’s rosatom

Uzbekistan Still Considering Nuclear Energy Project with Russia’s Rosatom

Author: Haley Nelson

Dec 14, 2022

Image source: voelkerrechtsblog.org

On November 30, during Russian Prime Minister Mikhail Mishustin’s visit to Uzbekistan, Uzbekistan’s Energy Minister Sherzod Khodjayev discussed the potential construction of a nuclear power plant (NPP) in Uzbekistan’s Jizzakh region near Lake Tuzkan.  This project has been in the works since 2018 when Uzbekistan entered into an agreement with Russia on the construction of two nuclear units with water-cooling reactors of the VVER-1200 type with a capacity of 1.2 GWh.  The initial plan was for these reactors to be completed by 2028.  The cooperation with Rosatom, Russia's nuclear power company, has, however, created some difficulties for Uzbekistan in creating operational nuclear plants. 

In June 2022, Russia’s NPP construction company, Rosatom, discussed potential projects with Uzbekistan’s Deputy Energy Minister Sherzod Khodjaev, who expressed concerns over the financials of the projects.  Khodjaev questioned “how economically feasible it is” and “how much will the energy produced at this nuclear power plant cost us? Will it be competitive compared to other sources?” When the project was initially proposed, the estimated cost was placed around $10-11 billion.  Now, since the COVID-19 pandemic has caused shortages and disruptions to global supply chains, the World Nuclear Association projects that this endeavor will cost upwards of USD $13 billion, prompting additional financial concerns.   

A month following these discussions, in July 2022, Uzbekistan and Rosatom signed a Memorandum of Understanding (MoU) on the NPP development, specifically regarding a “training programme for teachers in Uzbekistan, arrangement, and performance of technical tours to the Russian nuclear power plants as well as apprenticeships in the Russian nuclear power plant training centres.” Although the MoU addressed some of the logistical issues of the project, it did not solve the financial challenge, and the question of economic feasibility remained unaddressed.  Financial issues, along with efficiency issues, have prompted the question of why Uzbekistan is continuing to cooperate with Rosatom, especially given that renewables may be a more suitable alternative.  

An NPP facility is important for Uzbekistan's efforts to keep up with growing domestic energy consumption as its reliance on fossil fuels needs to be reduced.  Margarita Kalinina-Pohl, a researcher at James Martin Center for Nonproliferation Studies, stated it’s estimated that by 2030, 15% of Uzbekistan’s energy will come from nuclear sources.  However, currently, 85% of Uzbekistan's energy consumption is fueled by natural gas, 9% oil, 5% coal and lignite, and 1% hydropower.  With the growth of Uzbekistan's economy and population, Uzbekistan’s electricity demand will grow to 117 billion kWh every year by 2030.  As of May 2022, 85% of Uzbekistan's annual production of 69 billion kWh comes from Thermal Power Plants (TPP), and 90% of the energy generated in TPPs comes from natural gas. However, the TPP natural gas reserves are estimated to only last for another 20-30 years, meaning Uzbekistan needs to quickly develop its renewable energy sources to maintain its commitment to the 2017 Paris Agreement. 

Diversification would be supported by nuclear energy, but other sources could provide a larger energy output without requiring 10 years of construction and high disposal costs.  For example, solar energy, which only takes several months to construct, ranges from USD 39-48 per megawatt-hour (MWh), while nuclear energy costs USD 120-205 per MWh.  However, according to Uzbekistan’s Ministry of Economic Development and Poverty Reduction, Uzbekistan is aiming to explore all potential energy markets with plans to establish five GW of Solar and three GW of wind capacity by 2030, and 13 hydropower projects with a capacity of 756 MW between 2021 and 2026. However, the challenge with renewables like wind and solar is that they can only produce energy under favorable conditions.

 Solar and wind energy is non-dispatchable and intermitted, meaning it cannot adjust to variations in demand, but it does change in production with variation in weather. Nuclear energy, on the other hand, is not intermittent, and only needs maintenance preformed every several years, making it a cheaper, more efficient, and more predictable alternative. Additionally, using other Rosatom NPP’s as a reference, one Rosatom NPP, with two VVER-1200 reactors, can provide $1.9 billion to local suppliers, $4.3 billion in the country's GDP, and $1.4 billion to the budget in the form of tax revenues. Construction of the NPP will increase job opportunities for highly qualified engineers, scientists, builders, and maintenance personnel, and it will indirectly contribute to the research and development of Uzbekistan's technology, electronics, and energy infrastructure. 

There are additional developmental and environmental variables affecting Uzbekistan’s decision.  Researcher Margarita Kalinina-Pohl, of the James Martin Center for Nonproliferation Studies (CNS) stated that for Uzbekistan, the introduction of nuclear energy may signal higher-level development, making the country more attractive for investors in the future.  “For many nations, having nuclear technologies is a matter of prestige.  It shows that they belong to the ‘elite club’ – a country with advanced technologies,” Margarita Kalinina-Pohl stated.  Looking at the leading nuclear energy producers in the world, most of these countries also top the list of most developed countries.  Uzbekistan’s NPP project would put it on the same list with the United States, France, China, Russia, and South Korea; it would be a significant sign that the country is significantly developing its economy and integrating into the global economy. 

 On the environmental side, it’s believed that NPP’s offer “minimal carbon footprint, unlike fossil fuel plants,” and when compared to other renewables, they have a “significantly higher capacity.” Noting that this NPP would be the first in Central Asia, Kalinina-Pohl added that the successful creation of a NPP will make Uzbekistan a “nuclear pioneer” and a regional leader in nuclear energy.  Uzbekistan has the capability to become one of the world's largest nuclear energy producers.  Uzbekistan owns 2.3% of the world’s uranium, ranking 5th in uranium production, and 10th in uranium reserve capacity.  Two nuclear power units with VVER-1200 water-cooling reactors would produce an additional 18.9 billion kWh per year.  These NPPs would save the existing natural gas reserves for TPPs and lead to a reduction in carbon monoxide in the atmosphere by 3 million per year

However, whether nuclear energy can be beneficial to Central Asian states is debatable as the potential benefits trigger environmental, economic, and political concerns.  Regarding the environmental impacts, uncertainties have made the project riskier and more expensive.  First, Uzbekistan's large uranium deposits require proper handling of its byproducts.  Abandoned uranium mines and uranium tailings contain radioactive gas called radon, which poses a major public health hazard if not properly maintained.  According to the U.S. Nuclear Regulatory Commission, uranium byproducts must be isolated in a containment site, necessitating a long-term surveillance plan.  It has been established that the radioactive waste from the NPP will be stored in Uzbekistan’s soil, however it’s yet to be established the precise location of the storage. 

 It’s assumed that waste will be kept near the plant in the Jizzakh region, however, there are two major issues with this.  First, Jizzakh is only 200 kilometers from Tajikistan’s second-largest city, Khujand, and it's also near the Kazakhstan border.  Therefore, it poses an Enivronmental and security risk to Uzbekistan’s two neighbors.  Although the risk is low, nuclear alarmists in both countries are highly opposed to any storage site near their border.  Second, the Jizzakh region houses the Aydar-Arnasay system of freshwater lakes, which was noted as an internationally important wetland, according to the Ramsar Convention on Wetlands.  Because the two VVER-1200 reactors will produce an estimated 88,000 cubic meters per year of wastewater, there is great concern over the environmental impact this project will have on the wetlands.  

Regarding the political challenges of working with Russia, Khodjaev stated that "the cooperation” with Russia “has not stopped.” However, it is undeniable that working with Russia’s Rosatom means "there are certain nuances” to address before construction can begin.  Although Rosatom works to reduce capital costs of construction by offering soft loans and operating under a Build-Own-Operate model (BOO), according to Vladimir Slivyak, the co-chair of Russian environmental NGO ‘Ecodefense,’ Russian loans to construct nuclear plants make these countries “dependent on Russian technologies, fuel supplies and specialists for 100 years.  There are never other investors, because economically all this does not make sense.”  When Uzbekistan first agreed to work with Rosatom in 2018, it seemed to be a much more attractive option.  However, the Ukraine invasion and the implications of growing sanctions on Russian energy companies has added new risks to the project.

Russian Implications

For the development of this new NPP, Russia’s benefit is Uzbekistan's risk.  Russia’s presence in Uzbekistan’s emerging energy sector provides it a stronger foothold in the Central Asia market.  However, for Uzbekistan, Russia’s presence may deter future trade agreements with Western actors.  

After Russia first invaded Ukraine in 2014, it was increasingly faced with encroaching global isolation, inducing the need for a reproachment strategy in the former Soviet space.  In response, Russia attempted to reestablish itself in regional affairs through economic cooperation, namely, through the Eurasian Economic Union (EAEU).  However, as Uzbekistan has expressed concerns over shifting from observer status to full-membership in the EAEU, Russia is seeking alternative methods to exert influence over Uzbekistan.  Rosatom has not yet been sanctioned by Western governments, and therefore nuclear cooperation is one of Russia’s last available tools to fortify its position within the Central Asian economy.  

Nuclear energy diplomacy has presented itself as a soft-power mechanism in Russian foreign policy, creating agreements that facilitate cooperation and dependency.  In 2017, 19 countries in Europe, Asia, and Africa had ongoing agreements with Russian energy companies to construct NPPs or to supply nuclear fuel.  With over one-quarter of nuclear power projects in 2016, Rosatom’s portfolio reached $100 billion, and it announced plans to triple this number by 2030.  Its success can be attributed to the variety of functions it serves.  The exploration of uranium deposits, production of nuclear fuel through conversion and enrichment, the design of reactors and power plants, nuclear safety, storage, and management of used nuclear fuel and radioactive waste are among Rosatom's functions.  Unlike most foreign construction companies specializing in the design and construction of nuclear power plants, Russia not only provides the technology and design, but it also may provide job training and guarantees of fuel supply.

For Russia, the nuclear energy industry serves several purposes in its foreign policy. First, the US Department of Commerce has predicted that the nuclear energy market will grow from $500 billion to $740 billion over the next decade.  These profits have the potential to support fiscal interests of the Russian government, and, in fact, the government recognized this in the ‘2008 Concept of Long-Term Socio-Economic Development until 2020’.  According to this doctrine, the “high technology industries” have the potential to become a driver for economic prosperity.  Further, in 2014, the national program “Development of the Nuclear Power and Industry Complex” targeted a 53% increase in overseas revenues by 2020 and a 14.9% growth in the industry's contribution to the national GDP.

Second, as the government continues to use energy as an integral part of its foreign policy, nuclear energy has the potential to modernize the economy and diversify its exports.  It is crucial that Russia develops its nuclear energy sector to avoid losing out on Europe's transition to green energy.  One of the main principles of the Russian Energy Security Strategy is the maintenance of trade relations with its historical consumers and the creation of equally stable relations in new energy markets.  Russia’s participation in this new, high-tech industry will help it maintain its competitiveness in the global energy market, especially since nuclear energy is an industry in which Russia possesses a competitive advantage.

Third, the state's foreign policy limits and shapes the activities of Rosatom abroad.  The list of potential new partnerships “have both commercial aspects and modernizing arguments supporting them; their strategic and political value is also undeniable.”  Cooperation between the state-run nuclear energy companies and the host country provides an opportunity for Russian actors to exercise soft power by increasing the economic risk of political conflict.  Russia “works to create a favorable political environment to diversify Russia’s presence in global markets through the broadening of its exports, nomenclature, and of the geography of its foreign economic and investment relations.”  As a result of Russia’s increased position in Central Asian energy security, these states are less likely to threaten Russia economically.

Rosatom’s efficiency in construction and operation makes it an attractive option for countries looking for quick profit in a new energy sector.  However, it also exposes the countries to new vulnerabilities.  In 2020, there were 13 nuclear power plant construction projects in the world, seven of the 13 were being carried out by Rosatom.  Most countries have attributed their decision to work with Rosatom to its commitment to provide fuel for the NPP, its low-interest rates, its long repayment period, and its guarantee to transport and dispose of radioactive waste.  The advantage of Russian construction contractors over other foreign contractors is its ability to provide turnkey operations through the creation of legislature, the development of nuclear energy facilities and transportation infrastructure, training of national personnel, the guarantee of stable fuel supply for the nuclear reactors, the handling of nuclear waste, and lenient financing plans.  Rosatom’s efficiency offers a solution to Uzbekistans NDC de-carbonization policy at one of the lowest prices on the market, making it a successful soft power instrument.  

Uzbekistan has a hesitant approach toward Rosatom, but its decision to cooperate has, in part, been influenced by the competitive advantage and track record of Russia.  In September 2018, after Russian Prime Minister Dmitry Medvedev and the head of the government of Uzbekistan Abdulla Aripov signed an agreement on the construction of an NPP in Uzbekistan, the director general of the Uzatom agency, Zhurabek Mirzamakhmudov, stated that the choice in favor of Rosatom was based on the results of studying the experience of building NPPs in Russia, the US, China, France, and South Korea.  The results showed that Rosatom outperformed its competitors in several dimensions -- construction experience, the speed in which necessary documents were prepared, and personnel were stationed, and the status of technology.  

While Rosatom offers several financial and operational advantages, and it affords Uzbekistan the capacity to diversify its energy products, Uzbekistan should proceed with careful consideration.  Although there are drawbacks to scrapping the project, providing a platform for Russia’s economic strategy could push Uzbekistan into long-term dependence on Russian energy infrastructure.  Despite the efficiency of nuclear energy, it is not advisable for Uzbekistan to move forward with this project, and Uzbekistan should instead expand its energy infrastructure in the sphere of wind and solar.  In cooperating with Rosatom, Uzbekistan risks long-term dependency on Russian energy systems, which increases its challenges with Western investors. 

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