Controversial Advances on Korean and Saudi Civil Nuclear Stalemates

The fractious nuclear energy issues between the U.S, South Korea, and Saudi Arabia seem to be rolling toward potential resolution, but the process is generating concern.

The nuclear cooperation challenges have been both bilateral between the U.S. and each nation and triangular because the Saudi desire for nuclear power likely runs through Seoul and Washington.

The movement is on two fronts. The most prominent is the Biden administration’s push for a Saudi-Israeli peace agreement. The other is the decision of a Washington, D.C. court to dismiss an American corporation’s lawsuit against Korean nuclear companies.

The Saudi-Israeli negotiation is as complex as it is potentially historic. If completed it likely will result in a peace agreement between the two nations, concessions to the Palestinians, U.S. security guarantees to Saudi Arabia, a reduction in Saudi-China high-tech engagement, and U.S. support for the nascent Saudi nuclear power program.

The nuclear energy plan potentially would set new precedents.

China is Saudi Arabia’s largest trading partner and the Kingdom has been in discussions with Beijing regarding its desire to build new nuclear power plants. China’s President Xi visited Riyadh last year to shore up economic and energy ties, including nuclear cooperation. These developments undermine U.S. objectives.

The U.S. also has been discussing civil nuclear cooperation with Riyadh for some time. But those talks have foundered as bilateral relations chilled during the early stages of the Biden administration, and as a result of non-proliferation requirements for cooperation that the Saudi’s have opposed.

The non-proliferation issues center around the U.S. insistence that uranium enrichment is not possessed by the kingdom and that the nation accept the International Atomic Energy Agency’s safeguards agreement’s Additional Protocol. This allows for more intrusive inspections to assure no nuclear weapons work is occurring.

In a 2008 Bush administration MOU, the Saudi’s agreed “to not pursue sensitive nuclear technologies…in contrast to the actions of Iran” (a reference to uranium enrichment) and to build nuclear power cooperation, “in accordance with evolving International Atomic Energy Agency guidance and standards” (indicating the Additional Protocol).

Under the emerging bilateral peace agreement, the previously frozen U.S.-Saudi nuclear cooperation discussions have revived and Saudi Arabia is again requesting U.S. assistance with its nuclear program. 

But the development of this assistance is a very complex and sensitive matter. And its contours will have significant implications for long-standing U.S. non-proliferation standards and the global nuclear order.

Recent reports indicate discussions on whether a Saudi uranium enrichment site could be in-country but under U.S. supervision and security. This is being pitched as part of a potential U.S.-Saudi Nuclear Aramco, a reference to the original 1930’s Arab-American oil partnership with the U.S.’ Standard Oil company. A cautionary note is that what started as a joint oil company ended with Saudi Arabia nationalizing the company in 1980 by purchasing the shares of the participating American corporations in the wake of the 1970’s oil shock.

Because any concrete move to allow Saudi Arabia to control uranium enrichment is a non-proliferation red line, the U.S. national security advisor noted that the administration is “interested in the IAEA’s view” on nuclear cooperation with Saudi Arabia.

This move perhaps indicates that the U.S. wants the Agency’s strongest safeguards strategy for a potential Saudi-based uranium enrichment program. Alternatively, it could be a probe of the mechanisms by which enrichment equipment could be transferred. Or it could be a search for international political top cover for a controversial idea. For any or all of these explanations, the U.S. will encounter Russian, Chinese, and non-aligned nation interests in the Agency’s decision making.

A further complicating factor is that Iran has effectively argued it has a sovereign right under its non-proliferation commitments to enrich uranium for peaceful purposes. This was accepted under the multilateral nuclear constraint agreement, the JCPOA. The Saudi’s are pressing forward the same sovereign rights argument.

The problem is that Iran has used its uranium enrichment to support a nascent nuclear weapons program, including racing to enrich uranium above weapons thresholds after the demise of the JCPOA. And Saudi officials have recently and repeatedly stated that if Iran obtains nuclear weapons it will too. It will not be reassuring if both countries have the capacity to produce weapons grade uranium based on these precedents. 

Mindful of the nuclear weapons potential of uranium enrichment, the Israeli Strategic Affairs Minister recently stated that “we’re not going to agree to any nuclear weapons program with any of our neighbors.”

Surprisingly however, he noted that Israel may accept a Saudi uranium enrichment program, depending on the details, perhaps obliquely referring to U.S. oversight. He remarked that the Saudi’s can go to China “tomorrow” and ask for a domestic enrichment capability as part of a reactor export package. Saudi Arabia has underscored the China option.

As a result of that possibility, the Israeli minister indicated that deep U.S. involvement in a Saudi nuclear program was preferable for the long term to a deal with China.

American officials seem to agree with that assessment. But the situation throws into sharp relief the implications of America’s decline as a nuclear power exporter. China and Russia now offer viable reactor alternatives along with financial sweeteners and potentially dangerous technology supplements. This leaves Washington playing catch-up, navigating a nuclear policy knot, and having to adjudicate its competing strategic interests.

These circumstances further intersect with the nuclear export ambitions of South Korea.

The Korean nuclear industry is well regarded in the Middle East, having effectively constructed four reactors in the UAE. The Korean government is eager to expand its nuclear exports, as the Emirates was its first and last major reactor export deal. Saudi officials have indicated support for Korean nuclear reactors based on the UAE experience.

However, Korean export objectives have led to serious conflict between the major Korean and American nuclear companies, KEPCO/KHNP and Westinghouse, over intellectual property that the American company claims is in the Korean reactor. That would make it subject to U.S. export approval. Because the U.S. does not have an agreement for nuclear cooperation with Saudi Arabia it would curtail the ability of Korea to send their reactors to Saudi Arabia.

This commercial dispute has dragged on for years, but now seems to have settled on two pathways. One is arbitration between the two companies over the IP issue. The second is a lawsuit by Westinghouse against KEPCO and KHNP. That suit has now been dismissed by the court while the outcome of the arbitration process is not yet determined.

While the legal outcome is likely unwelcome for Westinghouse and it is appealing it, the decision may offer an opening to finally end the IP fight and use the arbitration process to make a deal that would release the Korean reactors from U.S. export oversight.

This could include a Korean IP buyout or related result. Such an outcome would free South Korea to export reactors to Saudi Arabia without U.S. approval but with Washington in a supporting role. It would give South Korea a new market while Westinghouse focuses on Poland and other Central European nation bids, decreasing competition between the companies.

It is unclear how the Saudi-Israel peace agreement will develop but it will have significant nuclear and security implications if successfully concluded along current lines.

Ultimately, it could strengthen the U.S.-Korea-Saudi nuclear energy partnership. And that could prevent China or Russia from creating a new nuclear power colony in the region. It also could reframe U.S. non-proliferation requirements for Saudi Arabia from demanding prohibitions to offering incentives for restraint and transparency. But uranium enrichment is the third rail of nuclear nonproliferation, and if the U.S. grabs it, it will be assuming very significant risk and should be fully prepared for a shock.

Ken Luongo, President, Partnership for Global Security