Time running out on deal with Russia to swap warheads for atomic fuel
d all of their nuclear fuel free of charge from Russia as part of a trilateral disarmament agreement with Russia an the United States. Now, the party is about to end.
The agreement, under which Ukraine has sent 3,600 nuclear warheads to Russia for dismantling in exchange for the 1,800 fuel rods, was originally scheduled to expire at the end of 1997, but has lingered on into this year due to unspecified delays in implementing a further plan of action, as the American Embassy carefully put it.
Indications are that it will not last into next year, however. Which will leave the cash-strapped Ukrainian government looking for a way to suddenly pay for the $350 million worth of nuclear fuel annually its nuclear plants currently consume.
Ukraine is particularly reliant on nuclear power to meet its energy needs. Since the country became independent in 1991, output at the country's five nuclear power plants has risen, and currently accounts for more than 50 percent of Ukraine's total electricity output.
Furthermore, in Ukraine nuclear energy is five times more cost efficient to produce than alternative energy sources like coal and natural gas – a fact that can hardly be overlooked by a country whose state budget coffers are as empty as the Gobi desert. Of course, nuclear waste disposal and high maintenance costs add to the cost of producing nuclear fuel.
Under the terms of the trilateral agreement, the Ukrainian government receives nuclear fuel from Russia. The government, in turn, is supposed to sell that fuel to state-owned domestic nuclear power plants. Since these plants have no money, however, they effectively receive this fuel for free.
The nuclear power plants – or the government – must soon come up with a way to pay for that fuel. As it stands, this is money they do not have. The power plants' problems stem from the fact that they receive cash payment for at most 7.5 percent of the electricity they produce. The rest is paid for in barter if it is paid for at all.
How bad is the problem? Consider that power plants are owed $2.7 billion by the electricity distributors it gives its energy to – the equivalent of 9 months worth of electricity for the entire country, according to an Aug. 22 article in Zerkalo Nedeli. The plants cannot afford to pay their own employees in cash. And they cannot afford to dispose of their waste properly or implement proper safety measures.
The Ministry of Energy and the state nuclear power company Energoatom, which controls Ukraine's nuclear power industry, have been working on solutions to the problem of paying for nuclear fuel when the time arises.
Key to the plans is the Russian concern TVEL, from whom Ukraine receives 100 percent of its nuclear fuel. The short-term plan is for Ukraine to work out a way to pay TVEL when the free fuel deal ends.
According to Energoatom Deputy Director Yevgeniy Kovalenko, the Ukrainian side will find a way to pay. 'Nuclear power stations get a portion of their proceeds in cash. We are going to pay with this money,' Kovalenko told the Post. In addition, he adds, Energoatom is working on a plan to pay TVEL with products.
In other words, Energoatom will use cash they do not have and barter – not necessarily a foolproof blueprint for success.
Nonetheless, Kovalenko insists barter is a viable option. He says TVEL and Energoatom are working together to find Russian companies that demand particular Ukrainian goods. These goods will end up in TVEL's possession in return for supplied nuclear fuel. TVEL will then dispose of these goods via barter operations of its own in Russia. According to Kovalenko, the most likely products to be bartered are steel, metals, and chemicals.
'I think we will be able to fulfill this complicated plan,' said Kovalenko. 'If something does not work out, however, there is a possibility for fuel supply problems at our nuclear power stations. In such case we could rely only on help from Russia, or we must simply cut off electricity to all those who do not pay.'
At the same time, the Ministry of Energy is working on a more long term solution to the fuel supplies problem: the launching of a domestic nuclear fuel production facility. Ukraine mines domestically around one third of the uranium required to run its nuclear power plants at current levels. However, it completely lacks facilities to enrich uranium and manufacture nuclear fuel.
Volodymyr Pavlenko, the head of the fuel supplies division at the Ministry of Energy's nuclear department, said, 'We have been working on a plan of nuclear fuel production since 1991; however, all the capital we originally accumulated was lost to inflation. Nonetheless, we will begin producing nuclear fuel with the help of Russia.'
The Russian partner in such a deal would, of course, be TVEL. In 1996, TVEL won a tender to start producing nuclear fuel in Ukraine. But it was only this August that Ukraine's Ministry of Energy and its Nuclear Energy Ministry got around to sanctioning the tender.
Under the terms of the deal, both Russia and Ukraine will supply the raw uranium, which will be 80 percent processed in Russia, then shipped to a planned facility in Ukraine that will be capable of completing the remaining 20 percent of the process.
According to the plan, the project will not be launched until 2001 at the earliest. But it will save Ukraine Hr 50 million in nuclear fuel costs when and if it does take effect.
There has been widespread speculation that the U.S. has plans to help Ukraine build such a facility. At a press conference dedicated to U.S. Vice President Al Gore's visit to Ukraine in July, U.S. Ambassador to Ukraine Steven Pifer said that the U.S. was in fact considering such a deal.
A U.S. Embassy spokesman said only that no further agreements have been signed between Ukraine and the United States on the subject of nuclear fuel.
If the U.S. did engage in such a project, it would be to the chagrin of Russia, which would prefer not to see the Ukrainian market sealed off from its nuclear fuel.
