The U.S. and South Korea are in the process of blowing a once-in-a-century opportunity to wrest control of the global nuclear market from Russia and prevent China from taking its place. The clean energy and international security consequences of a blunder are very high. But both countries seem content to continue at full speed with their head-on collision.
The major nuclear industries of both countries have symbiotic technology and supply chain relationships. But they are now pitted against one another in what seems to be a winner-take-all competition in the expanding large reactor markets of Eastern Europe and the Middle East.
The most recent danger signal is a statement from the president of energy systems at Westinghouse Electric Corporation, America’s major reactor company. He states that if Westinghouse wins the lawsuit it recently filed against Korea’s two major nuclear companies over intellectual property it asserts are in the Korean reactor, “then I do not see them building these [Korean] reactors either in Poland or in the Czech Republic or Saudi Arabia.”
There are three significant problems with this position.
First, Westinghouse and the South Korean companies, KEPCO and KHNP, are mutually dependent on bilateral supply chains for their reactors. There was about $2 billion in Westinghouse content in the four reactors South Korea built in the United Arab Emirates. Whether this content is now indigenously produced by the Koreans or still controlled by Westinghouse is the issue at the center of the lawsuit.
The latest flashpoint is Poland, which recently selected the Westinghouse AP-1000 as the first reactors to be built in the country. The financial details are still to be worked out and could be contentious. But additional reactors could be the Korean APR-1400 model deployed at a separate site. Both countries also are competing for the reactor business of the Czech Republic.
The implication of the Westinghouse official’s statement is that his company may withhold the provision of its technology to the Korean reactors if it wins its legal case. This, hopefully, is an overinterpretation of the statement. But is difficult to decipher an alternative conclusion. Of course, in this interdependent world, it is senseless to have a nuclear supply trade war especially among strong allies.
And Westinghouse has its own supply chain vulnerabilities. It is dependent on Korean suppliers, including for major reactor components. That technology could be withheld from the Korean side in retribution. Perhaps in anticipation of this, the Westinghouse president stated, “We intend to have…a local European supply chain servicing all of those projects.” That could be a challenge. And pushing the Koreans into a corner doesn’t make sense.
Already, in its search for new overseas nuclear business, KHNP, has signed a $2 billion deal with a Russian state-controlled nuclear firm to assist with the construction of the El-Dabba nuclear plant in Egypt. That is not a partnership that the U.S. should want to encourage or see expand if it is trying to limit Russia’s nuclear exports.
Further, the Korean government is irritated by new U.S. legislation that excludes foreign-assembled electric vehicles from a tax credit. This will disadvantage Korean car manufacturers in an expanding market and the Korean government has hinted that it may conflict with international trade agreements. The Westinghouse statement likely looks like more U.S. protectionism and provocation to South Korean officials and companies.
The second issue with the Westinghouse assertion of control over the nuclear markets in Poland, Czech Republic, and Saudi Arabia, is that the company is not on the list of invited vendors for the Saudi reactors. The Saudi regime intentionally left it off the most recent list while soliciting bids from South Korea, France, Russia, and China for its two reactors.
Westinghouse cannot deliver any reactors to the kingdom without a U.S.-Saudi nuclear cooperation agreement. That deal was a longshot before the Saudi’s bucked the Biden administration on oil production this fall. And the bipartisan animosity in Washington toward the kingdom continues to ratchet higher, making congressional approval of any potential deal questionable.
The performance of the Korean companies in building four reactors in the UAE has made an impact on Saudi officials and they may favor Korean reactors as a result. There already is a Korea-Saudi partnership on small modular reactors. This is the root of the corporate legal fight. The Korean companies do not want to be hindered in selling reactors to Saudi Arabia by American export controls. So, they have asserted that there is no content in the reactors that is subject to U.S. reach.
But if Westinghouse wins its case and blocks Korea from being able to sell its reactors to Saudi Arabia, the likely alternative is that China will win the business. Saudi and Chinese officials have been in discussions on nuclear and other energy cooperation as tensions with the U.S. have intensified.
There is no scenario where it is in the interest of U.S. national security for China to build nuclear reactors in Saudi Arabia. That provides China with a scalable nuclear export foothold in the Middle East, cements an 80 to 100-year Saudi-China nuclear energy relationship, undermines high non-proliferation standards, and forces the U.S. to peer through a spy glass to see what other technologies, including uranium enrichment, may come with the deal.
So, if Westinghouse blocks the Korean bid in the kingdom, and the business goes to China or Russia, that is a net negative for U.S. and global security. Full stop.
Third, the U.S. has agreed at two presidential summits with two different Korean leaders to cooperate on nuclear exports to third countries and to adhere to high non-proliferation standards. Summit level commitments are often ephemeral but the pledge by Westinghouse to prevent Korean access to key markets seems a blatant contradiction of a U.S. presidential commitment and a blow to American credibility.
The question, then, is whether the U.S. and Korean governments are doing anything to head off this very obvious looming disaster. Some reports indicate that the Korean government wants to “minimize” this disagreement. But they’ve been ineffective at finding a solution for over three years and the hazards of inaction have only grown higher.
There is no doubt that the American government is happy about the decision of Poland to choose Westinghouse technology after all it has done to cultivate that deal. And there is undoubtedly bureaucratic epicaricacy at having beaten the Koreans after they beat the U.S. in the UAE.
But the stakes in this dispute have grown much more serious as the role of nuclear power has evolved in recent years. There is a rush away from Russian fossil fuels toward nuclear energy in Central and Eastern Europe. There is a growing role for nuclear energy in global decarbonization as evidenced by the expanding nuclear industry presence at COP 27. There is, for the first time in decades, the opportunity to keep Russia down and China out in the expanding civil nuclear market of this century.
But instead of finding a way to create a powerful democratic-nation nuclear export coalition that can serve all these needs, there is corporate divisiveness, division among two critical allies, and a distinct lack of political leadership that is fumbling away a huge opportunity.
Ken Luongo, President, Partnership for Global Security