The first domino has fallen in the unravelling of Russia’s control of the international nuclear reactor market. Finland has terminated a contract with Russia to build a large new nuclear power plant, pushed over the edge by the war in Ukraine.
Russia’s state-owned nuclear company, Rosatom, stated that the Finnish decision was “absolutely incomprehensible.” However, what’s completely clear is that this is the beginning of loosening Rosatom’s grip on global nuclear exports driven by concerns about national and energy security.
Concurrent with Finland’s decision, the U.K. Prime Minister visited the aging Hartlepool nuclear power station and declared that he wants to build a new nuclear power plant every year in order to reduce dependence on fossil fuels, including Russian oil and gas. Talks have already taken place with South Korea’s state utility, Korea Electric Power Corporation.
While the reactor-a-year ambition is unrealistic, it is consistent with Britain’s new energy security strategy which proposes to build eight new nuclear plants by 2050. Expanding nuclear energy has been on the agenda in Britain for years, and it previously flirted with a collaboration with China in this effort. That partnership collapsed last summer under the weight of concerns about allowing Chinese state-financed companies to have deep involvement in British strategic infrastructure.
At the heart of this decision are security concerns, including the authoritarian overreach of China’s ruling party in domestic and international affairs, the danger posed by control of a major power source by a foreign nation, and the disconnect between China’s and the U.K.’s humanitarian values. Other European nations also have pushed China and Russia out of their nuclear projects.
These decisions are a clear manifestation that national security has re-emerged as a dominant consideration in global economic and energy thinking. Russia’s invasion of Ukraine crystalized this security primacy.
There now seems to be a building wave of interest in “friendly sourced” technologies. U.S. Treasury Secretary, Janet Yellen, in a recent speech to the World Bank and International Monetary Fund, called for reshaping trade relationships and unstable supply chains around, “trusted partners.”
This theme was further amplified in a recent interview with Jamie Dimon, the CEO of JPMorgan Chase and Co., the largest bank in the U.S. His key theme was the centrality of national security in international energy and economic affairs. He stated that, “If I was in the White House the only thing I’d be doing now is national security.”
He further made the case that a Cold War-like separation of the democratic and authoritarian worlds was occurring around strategic supply chains, noting that “I’d be thinking every day about how we create more secure energy, rare earths, commodities, wheat…to protect the western world.”
He advocated for democratic nation allies continuing to work together beyond their support for Ukraine to permanently protect global security. He stated that these allies need to coalesce, “not just for military purposes but for global economic, strategic, [and] investment purposes” in order to create a safe world. He noted that in order to establish the new, secure supply lines, the U.S. will have to consider financial subsidies and a form of industrial policy.
There is a hazard in placing too much value on the opinion of one person, but JPMorgan manages about $3 trillion in assets that are distributed around the globe. Its responsibility is to protect and grow those assets. So sometimes it pays to listen to people outside the blinkered political system about what matters and needs to happen in a rapidly evolving international system.
Of course, for the expansion of nuclear energy, one serious challenge posed by pushing Russian and Chinese state-owned nuclear companies to the sidelines on new nuclear projects, is how to finance the building of expensive reactors in market economies. Russia and China have used their cash infusions to gain international market share. Western nation investors have been more hesitant about providing the resources required to expand nuclear energy.
A good approach to solving this problem is contained new legislation, introduced by U.S. Senators Risch and Manchin, to reduce China and Russia’s influence in international civil nuclear energy programs.
A key provision of the bill calls for the establishment of a Strategic infrastructure Fund Working Group to determine “how best to structure a Fund to finance projects critical to national security.” The Fund would support rare earth elements and critical minerals, microprocessors, and other strategic investments in addition to civil nuclear technologies. It also expands the role of the Export-import bank and allows allies nation contributions for civil nuclear facilities and goods. It could be used to prepare nations that want nuclear energy, but don’t have experience, to operate the technology safely and securely, a prerequisite for deployment.
One of the many unintended negative consequences for Russia of its invasion of Ukraine is the falling support for its nuclear exports and the rising importance of national security as an energy priority. This opens many opportunities for democratic nations to reassert their role in the international nuclear market. The dawning realization in the financial community that national security and secure supply chains again are paramount could pry open the private-public sector financial collaboration that is needed to support this important global security goal.