Nuclear Chain Nonsense

The sky is falling!

The United States is about to knock over the first domino and start the nuclear proliferation chain reaction in the Middle East. With the region at war, the argument goes, the American attempt to negotiate with Iran over its previous nuclear weapons work (and current nuclear infrastructure) is painfully naïve, and portends a future of nuclear-armed states. This new nuclear future, we are led to believe, will begin in Saudi Arabia; be followed by a Turkish nuclear weapons program; include a Hashemite bomb in Jordan; and end with Cairo dusting off those Nasser era plans for nuclear weapons (Hey, with Sisi going full Nasser on us, perhaps he may approach China about purchasing a weapon.)

One problem with this argument: It is at odds with all that we know about nonproliferation decision-making and, at least in the case of Turkey, Jordan, and Egypt, is near impossible, given their choices about nuclear financing. The region is a mess. A total mess. But proliferation is – thank god – not something that should dominate the debate. In fact it misses the point entirely. Folks concerned with nuclear issues in the Middle East should certainly keep an eye on proliferation concerns, but should focus on a more serious issue: nuclear safety.

From the little we know about Saudi Arabia’s current nuclear plans, the Kingdom has pursued a rather benign approach to nuclear energy. After threatening to “go nuclear” for years, the Saudis chose to sign a MOU with South Korea’s KEPCO. Just next door, KEPCO is putting the finishing touches on the first of four reactors at the Barakh power plant. KEPCO has a great reputation for finishing projects on time, but is not really known to be the Korean peninsula’s equivalent of the AQ Khan network. Does South Korea have a pristine nonproliferation record? No. Has it exported enrichment or reprocessing technology to a customer? No. Will Saudi proliferate using a KEPCO APR1400. Hell no.

There is an elephant in the room. Pakistan, the argument goes, has reserved some warheads for Saudi Arabia’s defense. The Kingdom subsidized the Pakistani nuclear weapons program and therefore could try to collect on its investment. There is simply no way to account for this, other than look to history for some examples. The aforementioned Nasser asked a few countries for nukes during the 1960s. They said no. The Saudi case may indeed be different, owing to the Kingdom’s alleged investment in the program. My colleague and friend Philipp Bleek tackled this issue a few months ago, arguing:

History suggests that while some states have trumpeted their potential desire for nuclear weapons—think Germany in the early years of the Cold War, or Japan more recently—they tend not to be those that later went on to actually acquire them. And for good reason: calling attention to proliferation intentions is counterproductive if one is intent on actually proliferating. Instead, states tend to draw attention to their potential proliferation in the service of another goal: rallying others to address the security concerns that are motivating potential proliferation, and especially securing protection from powerful allies. At least one state, though, trumpeted its potential proliferation while actually pursuing nuclear weapons, and the case is an instructive one for analyzing Riyadh’s recent nuclear saber rattling.

 Again, the Kingdom chose KEPCO.

Turning to Turkey, Egypt, and Jordan – or as I have dubbed them, the Rosatom three. These three countries don’t have the cash to pay for a nuclear power plant. Or, if they do, they don’t want to pay ~$20 billion up front for their 70 year investment. To pay for their reactor, all three rely on a financing scheme known as Build, Operate, Own (BOO). Turgut Ozal came up with this idea in 1983 to help Turkey develop, after the country switched from import industrial substitution to export oriented capitalism. The BOO model was meant to attract private investment to what Ozal dubbed Turkey’s most trust-worthy sector: state-owned energy utilities.

This model is the reason why Turkey failed to procure a reactor between 1983 and 2010; more specifically, Ankara failed to give the vendor a treasury guarantee. It still doesn’t, arguing that the power purchasing arrangement with the electrical utility is good enough. Enter Rosatom. The Russian state-owned nuclear firm is not a private entity and receives ample funding from the Kremlin. Rosatom’s reactors are one of Russia’s few high-technology exports and the industry helps to employ Russia’s legions of Cold War era – and current – nuclear experts. The Kremlin, in turn, has also sought to use the company, as a tool of foreign policy, in much the same way Gazprom has become an arm of the Russian MFA.

For these reasons, Rosatom has embraced the BOO model – despite ample evidence that the financing for such a project makes little sense for the nuclear vendor. Under the terms of the BOO model, the vendor agrees to pay for the cost of construction and operate the plant in perpetuity, in exchange for the host-country to purchase a fixed amount of electricity at a set rate. For Turkey, that rate is 12.35 US cents per kilowatt-hour for 70% of the power produced at reactors one and two, and 30% of the power at the same price from reactors three and four.

After an agreed upon time – usually 15 years – the vendor is expected to have recouped its investment. In turn, Rosatom will then collect a percentage of the profit the Turkish state will make from the continued sale of Russian nuclear energy for the lifetime of the nuclear plant (70 years). This financing model puts pressure on Rosatom to finish the project on time, or otherwise risk extending the time in which it will recoup its initial outlay of expense – keeping in mind that the Kremlin is footing the bill for a $20 billion dollar investment. The Turkish reactor is now 4 years delayed.

Jordan and Egypt have announced that they too will pursue the BOO financing model. The good news: This model makes it all but impossible for the Rosatom three to proliferate. The reactor – a VVER-1200, or VVER-1000 – will be Russian owned and operated. The spent fuel pond will be Russian owned and operated. The fuel, Russian supplied. You get the point. So, if the Rosatom three wanted to proliferate, they would have to steal spent VVER LWR fuel from a Russian owned spent fuel pond and then reprocess it in facilities that don’t exist. They would have to do this without getting caught. Good luck.

The bad news: The BOO model is a regulatory nightmare. To ensure that Rostaom does not cut corners to hasten construction, the Rosatom three need strong, independent nuclear regulators. The regulator must also be empowered to influence the behavior of the operator. How will this work with a foreign owned and operated plant? Is Rosatom beholden to Turkey, or Moscow. At a bare minimum, you need a strong regulator and clear guidelines. The evidence is not encouraging: Turkey’s regulator is weak and beholden to the Prime Ministry for all its funds. Egypt’s is geriatric. And Jordan has no nuclear history. Not good.

If you add Saudi Arabia and Iran’s Bushehr, you can start to see a “nuclearized” region with little nuclear expertise – and nuclear regulations that are very much in their infancy. Is this the end of the world? No. There is stil time to work through these upcoming challenges. However, the regulatory issues are real and the international community has an incentive in ensuring that the region “gets this right.” Focusing on the long disproven idea of nuclear proliferation chains is not helpful and actually distracts from the issue we all should be focusing on: nuclear safety in a region (mostly) using creative financing techniques to “go nuclear.”