Paksi Riot

The expansion of Rosatom: spreading Russian influence by building nuclear reactors

The state-owned Russian nuclear energy corporation, Rosatom is now the market leader in exporting and building nuclear reactors. There are important elements of this success: tailor-made projects that fit the needs of the customer; appealing financing offers and diplomatic tools that Russia is using to convince potential customers. Building a nuclear plant is a long-term investment that defines the economy of a country that decides on such a project; a nuclear plant has strategic importance in any country by supplying a significant part of its electricity. Western powers are worried about the quick spreading of Russian-made nuclear reactors because they are afraid of Russia’s geopolitical influence being strengthened by the reactors built by Rosatom. The West is also worried about the lowering of nuclear control and safety standards.  

The countries that are shifting their energy sector to renewables are enjoying more economic independence because their energy dependence is lowered by using decentralized, renewable energy sources. They are thus also able to more effectively work towards their strategic and foreign policy goals. As renewables are replacing fossil fuel sources, energy will become a much less potent tool of geopolitics.

Renewables might thus also lower the probability of interstate armed conflicts while at the same time climate change is endangering peace and security.

Russia might find itself on the losing side if the shift towards renewables because Moscow uses energy as an important foreign policy tool.

Its economy is based on its oil and gas exports and by building nuclear reactors outside its borders, it is expanding its geopolitical influence.

Russia and energy

With the fall of the Soviet Union, the age where two global powers were competing was over. Russia was no longer a global power but a regional one. Soon after NATO started to expand into former Soviet territories and satellite states as well, which worries Moscow.

Russia tries to become a global actor again and also works towards containing the expansion of NATO near its borders.

One of the most important tools that Russia uses to achieve the above goals is energy policy, and one of the most important region for this is Europe because this is a continent the imports a significant part of its energy from Russia. For a long time, Russia exported oil and gas to Europe but nuclear energy was added to the portfolio later.

After Fukushima

After the Fukushima nuclear disaster in Japan in 2011 the nuclear energy industry was reshaped and the biggest winner of that is Russia. Rosatom is now dominating the nuclear plant design and export field. The main reasons for this is that the Russian technology is cheaper than the others and the stability of state-backed financing. Another reason is that the main competitors of Rosatom are suffering from serious business troubles at the moment thus they mean no real competition for the Russian company.

A change in the number of nuclear plants over the years

Rosatom uses a number of different models for exporting nuclear reactors. One of them is BOO (Build, Own, Operate), where Rosatom is building the plant, it takes part in running it and it is also one of the owners. This allows countries with no nuclear expertise to use nuclear energy, in return for committing to Russia for decades. Turkey chose this path.

Another, more popular model is where Rosatom designs the plant or the reactor, then builds it according to local nuclear regulations then hands it over to the local company that will be responsible for running the plant.

Hungary and Finland chose this path. This model usually includes no Russian ownership.

However, the dependence on Russia is enhanced by the fact that Rosatom also provides nuclear fuel and then takes the used fuel back, which means energy security and energy independence are taking a back seat in these cases. Hungary is a prime example of this where 70-80 percent of electricity will be provided by the nuclear plant once the new Paks2 reactors are built.

Nuclear ministry

A 2014 report by Greenpeace said that Rosatom is a questionable business partner because of its corrupt practices and the security and quality standards used in its reactors. Rosatom is also unable to keep deadlines and project costs significantly overrun the planned costs.

The report also states that Rosatom is not a usual market-based or state-owned company. It looks much more like a government ministry with a special license, controlled directly by the president of Russia and the country’s government.

Its CEO and the members of its board are, for example, appointed by the president.

It is also important to note that Rosatom is not only building nuclear reactors. It works through about 300 different companies and agencies: companies producing nuclear weapons, nuclear ice-breakers, development of nuclear technology, treatment of spent nuclear fuel, plutonium re-use, nuclear medicine, and so on. The strategic directions and goals are set by the government and both civilian and military activities are financed by the state.

Potential partners of Rosatom, at the same time, enjoy the special attention of the Russian government which means visits by Vladimir Putin or the members of the government. Partners might also enjoy invitations to Moscow. Putin, for example, has been a regular guest in Hungary since the contract about the Paks2 reactors was signed.

According to Rosatom the company is right now building 36 rectors in 12 countries, plus 6 more inside Russia. According to its 2017 annual report, the international turnover of Rosatom was 6.1 billion US dollars, and 2.5 billion of that came from building nuclear plants. Rosatom’s international nuclear portfolio was worth 133 billion US dollars.

Nuclear magic

But why does Russia concentrate on exporting nuclear reactors instead of fossil fuels? The first answer is obvious: there is more money to be made. All projects have a budget of billions of dollars, the volatility of oil and gas prices do not affect the profit and these nuclear project will provide Rosatom with income for decades.

Also, by having a nuclear plant built by Russia the respective countries also need to pay for other services which will make them even more dependent on Russia. This expands Russia’s international influence.

By building a nuclear reactor in a country Russia will be able to influence the electricity production of the given country.

Electricity should be a strategic sector that has to be protected in every country but by Rosatom’s nuclear reactors it will be dependent on Russia for decades. At the same time, Russia has tools to influence these countries: it can raise the price of uranium for political reasons or simply shut down a reactor that it operates – the same way it raised gas prices for political reasons before.

However, nothing like this has happened: despite the conflict between Ukraine and Russia the operation and running of nuclear reactors in Ukraine has been seamless.

Rosatom in action

SIPRI, based on data from the World Nuclear Association, says that there are seven Rosatom-projects under construction outside Russia’s borders: one in China, two in Belarus, two in India, one in Bangladesh and one in Turkey. Rosatom signed contracts for 11 more reactors and 11 more orders are in progress.  Finland and Hungary are two of those projects where the project is categorized as ’making good progress.’

Rosatom contracts around the world
Black: international framework contract; pink: under construction; blue: planned (contract signed)

One of the most important characteristics of the ’Rosatom model’ is that it provides an entire package that will make countries dependent on Russia for decades – or sometimes even a century if you count dismantling of the old plant. This is Russia’s advantage over its competitors: customers do not need to work on separate issues, Rosatom provides them with an all-around solution including financing, production of machinery and equipment, operation, providing nuclear fuel and the treatment of spent fuel.

This also includes deploying well-trained experts to the location, training locals and advising on legal and institutional changes and providing a loan to build the reactors.

I Hungary, for example, some commentators are worried about the five to six thousand strong Russian group that will move to Paks during the construction of the new reactors. Direkt36 quoted former Hungarian counter-intelligence agent Ferenc Katrein who confirmed that there might be Russian intelligence agents among them and that Hungary was ’in no way’ prepared for thousands of Russian citizens moving to its territory without any serious security check.

The Hungarian government approved the expansion of the Paks nuclear plant in 2009 and the 2011 National Energy Strategy also stated that nuclear energy would be an important part of Hungary’s energy sources in the long term. The Russian-Hungarian bilateral contract about the expansion of the Paks plant was signed on January 14, 2014, and the contract about the financing was signed in March 2014.

According to this, the project will cost 12 billion euros and 10 million of those will be provided by a loan from Russia. Two new reactor blocks will be built; one of them is supposed to start operation in 2025 and the other in 2026. The fuel will be provided by Rosatom as well and the Russian company will also take part in operating the reactors.

There are serious concerns about the project: it is not transparent, some of the key parts of the contract are classified, the new reactors will be built on a tectonic fault line and the new reactors will make Hungary’s energy sector even more dependent on Russia than before. It will also discourage the development of renewable energy sources. It will also make Hungary indebted to Russia for decades, which carries political risks.

Paks II. NPP site does not comply with IAEA seismic safety recommendations

A tectonic fault line runs under the site of the planned Paks II nuclear plant in Hungary. Moreover, a geologist found traces of earthquakes that happened less than ten thousand years ago and reached the surface, right next to the site of the nuclear plant.

An analysis by NGO Energiaklub supports the theory that through the Paks2 project Russia will try to exert political influence on Hungary and at the same time use this influence to weaken the European Union.

However, Russia is not only trying to expand its influence in Hungary through Rosatom. The Czech Republic, for example, is also closely tied to the Russian nuclear industry: Prague buys nuclear fuel for its six reactors from Russia. These six reactors provide one-third of the country’s electricity.

The Czech political elite is also apparently committed to nuclear energy in the long term, they are preparing to expand one of the plants and Rosatom is among those companies bidding for the job.

Slovakia also has two Russian-made nuclear plants and the government is planning on expansion. Rosatom is providing the reactors with fuel. A new reactor is being built in Bohunice, and the Russian BOO-model was floated first, however, the government did not agree with the set price for the electricity produced by the future plant. At the moment the most likely winner for the project is China. There are two new reactors being built in Mohi as well – here Rosatom provides technical support and advises on licensing issues.

Finland has two nuclear plants that run a total of four reactors – two of these are Russian-made. The two plants provide 30 percent of the energy needs of the country. One more reactor is under construction.

Finland signed a contract for a new reactor (Hanhikivi 1) with Rosatom in 2013 – which would be a pressurized water reactor, just like those planned in Paks2. This project is seriously delayed: construction was supposed to start in 2018 but it is scheduled to start in 2012 now. It was the granting of permits that delayed the process because security issues were raised.

Russia is also active in the Middle East. Iran made a deal with Russia in March 2014 to build two new nuclear reactors Busher. In November 2014 they signed a deal about four new reactors, in a location to be determined later.

Turkey decided to use nuclear energy to boost its economy: the construction of the first nuclear plant was started in 2018, with Rosatom as a partner.

A new competitor

The only true competition for Rosatom comes from China: it has 46 working nuclear plants and 15 more are under construction. China tries to be self-sufficient in the entire process of using nuclear energy for electricity production; however, it still relies on Western technology that it adapts to its own needs. Its two biggest nuclear plants were built based on a deals with Russia, however, China is operating the plants now on its own, independent of Russia.

However, the two countries are still cooperating in this area: Moscow and Beijing signed a contract about floating nuclear plants to be built using Russian technology. In 2018 Rosatom announced that they signed a contract for four more reactors (the expansion of two plants), they agreed on the details in March 2019 and production is planned to start in 2027-2028.

China is now more and more active on the international nuclear market – but today Russia still dominates the scene.

Written by Melinda Zsolt. Data visualizations by Attila Bátorfy.

English version by Anita Komuves. You can read the original, Hungarian-language story here.

The story was written as part of our investigative series on Energy issues with Energiaklub.