Ukraine’s reliance on nuclear energy to produce 48 percent of its electricity and its near total dependence on Russia for fresh nuclear reactor fuel led senior Ukrainian officials in January 2006 to announce plans to develop the capability to enrich uranium. Enrichment plants raise concerns because they can be used not only to upgrade natural uranium to the level needed for nuclear power plant fuel, but also to further enrich the material to make it suitable for nuclear weapons. Citing the nuclear proliferation danger of such facilities, on February 11, 2004, President George W. Bush called for a halt to the development of enrichment plants in any state that, like Ukraine, does not already possess “full-scale, functioning” facilities of this kind. [1] Consistent with this statement, the United States has expressed concerns regarding Kyiv’s growing interest in developing this technology.

Background
After the breakup of the Soviet Union, Ukraine inherited a number of important nuclear industry enterprises, including 15 operating nuclear power reactors, but these were disparate elements, which did not provide the full complement of facilities necessary to sustain a nuclear power program. [2] As a result, Ukraine remains completely dependent on Russia for both fuel for its nuclear power plants and for the disposition of irradiated, or “spent,” fuel.

Recently the Ukrainian government has begun planning to make Ukraine more self-sufficient. Some initiatives raise few international concerns, such as the planned construction of a modern storage facility for spent nuclear power plant fuel, which will allow Ukraine to end spent fuel shipments to Russia and the payment of costly processing and storage fees amounting to $70 to $120 million annually. [3] The development of a uranium enrichment capability, however, could prove more controversial.
International attention is focused on the development of uranium enrichment capabilities because of the issues currently surfacing in Iran. That country, which, like Ukraine, is a member of the Nonproliferation Treaty (NPT), secretly pursued a uranium enrichment program for eighteen years without disclosing it to the International Atomic Energy Agency, as required under the treaty. While the program is currently under IAEA inspection, there is growing concern that once Iran has mastered the enrichment process, it might withdraw from the NPT and be able to rapidly build a nuclear arsenal. Although Ukraine’s nonproliferation record is excellent, its development of enrichment facilities to supply its nuclear power plants would provide similar capabilities to those being sought by Iran and set a precedent that would seriously weaken international efforts to curb the spread of this technology. [4]

Enrichment Initiative
Ukrainian President Viktor Yushenko announced plans to create a nuclear fuel production capability in Ukraine, including uranium enrichment, in mid-January 2006. The announcement came on the heels of two energy shocks to Kyiv. In December 2005, TVEL, the Russian supplier of nuclear fuel to Ukraine, announced that it was seeking to significantly increase the price of this commodity. TVEL claimed that the price of natural uranium, which it was buying from Ukraine, had risen from $25 to $88 per kilogram, but that it continued to sell enriched uranium fuel back to Ukraine at the same price as in the past. As a result, TVEL declared it was losing about $150 million a year and wanted a 50 percent increase in the prices it charged Ukraine. [5]

Occurring simultaneously was the bitter, and more widely publicized, crisis over Russia’s demands to greatly increase the price of natural gas sold to Ukraine. The controversy resulted in a brief cut-off of gas supplies to Ukraine before a settlement was reached, and further underscored Kyiv’s vulnerability to arbitrary Russian decisions over energy supplies and pricing. [6]

Yushenko’s call for Ukraine to acquire the capability to produce nuclear power plant fuel domestically was immediately echoed by Ukrainian Prime Minister Yuri Yekhanurov. In addition, David Zhvania, an influential political leader and former Minister for Emergencies, claimed that Ukraine could eventually become a world leader in nuclear fuel production and declared that Ukraine could never agree to new arrangements under which fuel for its nuclear power reactors would continue to be produced abroad. On January 23, 2006 the Ministry of Fuel and Energy issued a decree calling for the establishment of a new institution, UkrAtomProm, by October 1, 2006. The new agency is to propose a plan for developing the resource base of the country’s uranium industry by January 1, 2007. [7] If a decision is made to build an enrichment complex in Ukraine, UkrAtomProm is expected to be responsible for the design and construction of the facility. [8]

U.S. Objection
These tentative plans met with open disapproval from the United States, a political partner of great importance to the Yushenko government. On February 20, 2006, following a meeting with Prime Minister Yekhanurov, U.S. Ambassador to Ukraine John Herbst declared that the United States opposed the creation of a complete nuclear fuel cycle in Ukraine. This statement received considerable coverage within the country, and, in an apparent attempt to placate Herbst, Prime Minister Yenkhanurov said that at the moment the Ukrainian government planned only to create a “cluster” of existing enterprises and research and educational establishments that would work on nuclear technologies. [9]

Ukraine is currently working to diversify sources of nuclear fuel for its reactors. In 2005, for the first time, fuel supplied by Westinghouse Electric Company, a U.S.-based subsidiary of British Nuclear Fuels Limited, was used at the South-Ukrainian nuclear power plant – the crowning result of a contract signed five years earlier. A particular challenge for Westinghouse and EnergoAtom, the operator of Ukraine’s nuclear power reactors, was to certify American-made nuclear fuel for use in a Soviet-built reactor. [10]

Continuing Pressures for Domestic Fuel Production
According to observers, while successful in meeting Ukrainian technical requirements, the U.S.-supplied fuel is 40 percent more expensive than that supplied by Russia. [11] Although the price increases announced by TVEL in December 2005 could make the Westinghouse alternative more cost competitive, the fact that nuclear fuel from all potential foreign sources is becoming substantially more expensive is likely to sustain interest in Ukraine in developing a domestic alternative, U.S. concerns notwithstanding. [12]

In addition, the future of existing Ukrainian nuclear enterprises may also be at stake. It is widely believed in Ukraine that unless these enterprises are made part of a more comprehensive, economically justified nuclear sector, they will either go bankrupt or fall under the control of Russia. Indeed, Russia may already be seeking to reincorporate a number of Ukrainian nuclear enterprises and research centers into its nuclear industry. In January 2006, for example, Prime Minister Yekhanurov met with Sergey Kiriyenko, chief of the Russian Atomic Energy Agency (Rosatom), to discuss the creation of a special committee within the two states’ Intergovernmental Committee on Economics that would oversee the supply of Ukrainian nuclear power stations with fresh fuel. During the talks, however, Kiriyenko openly declared that he sought to “restore the common technological complex” in nuclear energy generation, a statement taken in Ukraine as an unfriendly call for Russia to acquire key Ukrainian nuclear enterprises. [13] The fight for control of the country’s nuclear industry is likely to intensify interest in proposals for the indigenous production of nuclear fuel, as a means for strengthening Ukraine’s nuclear sector and making it less vulnerable to Russian encroachment.

Still another reason for continuing interest in such proposals is that the Ukrainian Ministry of Fuel and Energy plans to further increase the share of electricity produced by nuclear energy because of the soaring price of the principal alternative, natural gas. Although the start of construction of any new nuclear power reactors is unlikely before 2012-2015, the anticipated growth in nuclear power generation would strengthen the economic case for an indigenous enrichment capability.

On February 24, in a further response to earlier criticism from the U.S. Embassy, Prime Minister Yekhanurov declared that Ukraine would develop only “elements” of the nuclear fuel cycle, but would not engage in the enrichment of uranium. [14] The statement appears to lay the enrichment issue to rest for the moment. Moreover, given the overall weakness of the Ukrainian economy and the technological difficulties of building a commercial-scale uranium enrichment complex, it is unlikely that Ukraine could move forward with such a project any time soon. Nonetheless, interest in such a project could easily resurface, and U.S. decision-makers will need to be attentive to developments in this sphere.

Nikolai Sokov – Monterey Institute Center for Nonproliferation Studies