Skyrocketing energy prices and a rapidly worsening economic outlook have reawakened the West’s appetite for nuclear power.
In September, Germany announced it would halt the phasing-out of two nuclear power plants that were scheduled to be mothballed by the end of 2022. US legislators followed suit by extending the life of California’s last remaining plant. France, Japan and the UK have gone a step further with plans to construct new plants, with former Prime Minister Boris Johnson announcing a swansong £700m investment in EDF’s planned Sizewell C facility.
The economic fallout stemming from the war in Ukraine has clearly pushed energy security to the top of the policy agenda. But, as highlighted by our recent research, Russia’s invasion also exposed the folly of eschewing geopolitical concerns in the pursuit of new sources of energy, and atomic energy is no exception.
The authoritarian dilemma
Nuclear power might be enjoying a renaissance in the West, but uranium oxide – needed to power reactors – is primarily mined across Central Asia. Kazakhstan is by far the largest producer of mined uranium globally, accounting for 44% of output in 2020. Astana accounted for 38% of the mined uranium delivered to the US in 2021, and a fifth of that supplied to the EU.
This reliance could create a security headache for the West, not just because of Kazakhstan’s dominance within the supply chain, but also because the country’s two largest neighbours, Russia and China, are vying for influence in the region.
Figure 1: Australia and Canada home to large uranium deposits, but Kazakhstan dominates production
Tensions have simmered between Astana and Moscow since Russia’s invasion of Ukraine, with some Kremlin-backed politicians expressing a desire to launch a similar ‘special operation’ in Kazakhstan, home to a sizeable ethnic Russian minority. While a remote possibility for now given Russia’s ongoing military commitments in Ukraine, frustrations are clearly growing in Moscow as its influence wanes in Central Asia.
As it reduces its dependence on its former imperial master, Kazakhstan is increasingly looking to the east. Xi Jinping’s first overseas trip since the pandemic was to Astana, where he vowed to uphold Kazakhstan’s “independence, sovereignty, and territorial integrity.” For now, President Tokayev looks set to leverage Kazakhstan’s burgeoning partnership with China while diversifying its economy towards Europe. Indeed, Tokayev has announced various reforms in the past year to incentivise Western FDI, especially within the Kazakh mining sector.
But the West, and Europe in particular, has learned the hard way that placing your energy security in the hands of autocratic rulers can have disastrous consequences. Kazakhstan is rated extreme risk in the latest edition of our Democratic Governance Index, and Tokayev’s window dressing reforms, created in response to widespread civil unrest earlier this year, have done little to improve the democratic standing of the country.
Figure 2: Authoritarian states dominate uranium production
With both the US and the EU looking to prioritise imports from democratic allies as part of their critical mineral strategies, Australia and Canada stand out as geopolitically reliable markets. But Australia, home to more than 25% of global uranium reserves, accounted for just 9% of mined output in 2021, and Canada’s output has almost halved since 2012. Investors will need to be convinced that nuclear power has a long-term future if they are going to cough up the sizeable capital needed to fully exploit these resources.
Behind an atomic iron curtain
Russia’s status on the world stage might have slipped in recent decades, but there is one area in which it remains an undeniable superpower: nuclear infrastructure. Mining for uranium is just the first step in the process of creating fuel for nuclear plants. Raw uranium needs to be refined, converted into gas and then enriched. The infrastructure required for this process is concentrated in a handful of countries, with Russia the world’s largest player.
Take conversion, the process through which uranium oxide becomes the gaseous uranium hexafluoride. According to the World Nuclear Association, almost 40% of converted uranium came from Russia in 2020. Canada contributed 28%, China 25% and France 8%.
It is a similar story for uranium enrichment, where Russia accounts for just under half (46%) of global capacity, according to data from 2018. Russia’s share is forecast to shrink to 36% by 2030. This is largely a result of China’s bid to increase its share to 28%, up from 11% today, as part of a wider push from Beijing to grow its nuclear power sector.
Figure 3: Russia a major supplier of West’s uranium processing services
For now, the West has been hesitant to sanction Russian nuclear energy production, and Moscow remains a key supplier of uranium processing services. Indeed, Russia accounted for 31% of the enrichment services supplying EU nuclear utilities in 2021, and 15% of the bloc’s conversion services.
Same old problems
Nuclear power has been given fresh impetus by the 2022 energy crisis. But while Russia’s invasion of Ukraine exposed the geopolitical vulnerabilities within the West’s fossil fuel supply chain, similar liabilities in the atomic energy mix are going unnoticed. Without taking a strategic view when pivoting back towards nuclear power, the West risks creating new energy supply headaches for itself further down the line.