By John Helmer in Moscow
BHPB’s Russian relationship hostage to Canberra uranium threat as Australian govt invokes Caucasus war to stir uranium sale opposition.
A threat last week by Australian politicians to revoke a year-old agreement for Australian uranium concentrate to be processed into fuel in Russia has been met with calm in Moscow, where sources noted that the uranium is not planned to start moving for another seven years, until 2015. Russian sources close to the uranium negotiations between the two countries also point out that the major loser, if the Australian government implements its threat, will be BHP Billiton, which had been one of the most active lobbyists for the uranium supply deal in the first place.
At a public hearing in Canberra by the joint parliamentary committee on treaties on September 1, Kelvin Thompson, a backbencher who chairs the committee, said he wants to delay ratification of the agreement on uranium supply, processing, and nuclear energy cooperation, which was signed by then President Vladimir Putin and former Prime Minister John Howard, on September 8.
Terms for nuclear fuel processing of BHP Billiton’s ore concentrate from the new Olympic Dam had been in negotiation for several years before last year’s pact was concluded. According to Thompson, “I think that we could supply uranium to him [Putin] and if he changed his mind about the uses to which he was going to put it, I don’t think we’d have any effective comeback at all.”
The Australian minister of foreign affairs, Stephen Smith, said he had instructed officials from his ministry to meet the Russian Ambassador to Australia, Alexander Blokhin, to advise that it was Russian action in the Caucasus that was putting the deal in doubt. “When considering ratification, the Government will take into account not just the merits of the agreement but recent and ongoing events in Georgia and the state of Australia’s bilateral relationship with the Russian Federation,” Smith told his parliamentary colleagues. The director-general of the Australian Safeguards and Non-proliferation Office, John Carlson, said Russia needed the uranium to meet future energy demands, and was unlikely to breach its safeguards and non-proliferation agreement with Canberra.
Russian nuclear officials point out that Russia has been far more observant of the international non-proliferation and nuclear safeguards regime than the US and France, which allowed Israel to build its nuclear weapons; or the US ally, Pakistan. In addition, they point out, Russia has a direct interest in preventing nuclear proliferation on its borders, in countries such as North Korea and Iran. Ambassador Blokhin told an Australian newspaper the controversy in parliament was “politically biased”. He added: “We do not see any connection between the events in the Caucasus region and the uranium deal.”
The Australians appear to think that Russia needs the additional BHPB-mined yellowcake for converting into fuel for the country’s ambitious new domestic reactor projects. In fact, as Mineweb has reported, new uranium deposits in development by ARMZ, the newly designated Russian uranium mine holding, will generate a substantial exportable surplus, while Soviet-era stocks will last for another 60 years at the current consumption rate. Taking account of the reactor construction plan announced by Putin last year, with a 70% increase in the demand for uranium concentrate, and the uranium inventory life would be cut to 30 years. More pessimistic estimates suggest depletion of the stockpile by the year 2020. But that has triggered preparedness, not urgency. On current planning, ARMZ is projecting an increase of about 5,000 tonnes of uranium concentrate from domestic deposits, such as the huge and undeveloped Elkonskiy project in the fareastern Sakha republic. Another 5,000 tonnes is planned to be mined annually from joint ventures in Kazakhstan, in which ARMZ is a 50% stakeholder. By 2025, ARMZ is projecting production of 20,000 tonnes of uranium per annum. Current output this year is expected to fall just below 4,000 tonnes: http://www.mineweb.com/mineweb/view/mineweb/en/page38?oid=58238&sn=Detail [1]
In January 2007, Mineweb also reported that then chief executive of BHPB, Chip Goodyear, made a confidential trip to Moscow to lobby for a uranium supply pact with Sergei Kirienko, head of the Russian Agency for Nuclear Power (Rosatom), plus a group of men who direct the fuel processing company TVEL, the nuclear export company TENEX, and officials who have subsequently moved on to head ARMZ, which was chartered later that year. BHPB tried to keep Goodyear’s visit in Moscow from being publicly known. Asked to clarify what Goodyear had wanted to discuss with Kirienko, the company’s London spokesman Illtud Harri told Mineweb: “We have no comment to make on the matter.” This was also his response to a question about a related set of meetings BHPB had in Australia in October 2006, when BHPB helicoptered a group of Russian nuclear energy officials, subordinates of Kirienko, to the Olympic Dam mine-site. The chief Russian on board was Vladimir Smirnov, director-general of TENEX.
Then, before, and since, according to Russian sources, BHPB has been trying to persuade the Russian government to modify Russian legislation and regulations banning foreign miners from mining uranium on Russian territory. In exchange, BHPB offered to lobby the Australian government in Canberra to accept changes in Australian policy towards the movement of nuclear fuels on the international market.
Smirnov and TENEX have told Mineweb they were interested in processing more ore and exporting more fuels. Kirienko agreed to modifications of the Russian law allowing Russian processing plants to accept BHPB-mined ores, re-export the fuels, and share the profits. According to TENEX, the result of the October 2006 visit to Australia was an understanding that “we must cooperate – they have 40% of global uranium and we have 50% of enrichment facilities. It is impossible not to co-operate. We’ve reached an in-principle agreement.” BHPB was also successful in nudging the Howard government towards the agreement signed with Putin last year.
But Russian sources are clear — as is the April 29 enactment of the new strategic resources law — that there are tough limits curtailing BHPB’s ambitions in Russia. Nikolai Gudkov, a spokesman for the federal Ministry of Natural Resources, has told Mineweb that uranium falls into the special category which, according to the latest version of the Russian resource legislation, is essential for the country’s defence capability. According to this legislation, a foreign miner may join a Russian partner in a joint venture to prospect for uranium, but his equity participation would be restricted to a minority interest; likewise, the ambit of his management control.
ARMZ sources say the strategic resources law is so new, it remains unclear what stake and what role a foreign uranium miner like BHPB may take in Russian mining. In any case, ARMZ has committed most of its effort outside the former Soviet Union on exploration ventures in Canada, with Cameco, and with Russian partners in Namibia. Anton Vakhonin, deputy chief of staff of the Duma Committee on Natural Resources, told Mineweb last year that there are other restrictions for uranium in the Russian regulations. The state secrets regulations and a government order covering the production, stocking, and sale of strategic raw materials combine to prohibit foreign companies from owning the uranium ore that is mined and processed into nuclear fuels on Russian territory. Vakhonin emphasized that only state companies may qualify for these operations.
For the time being, then, uranium in Russia is entirely government-owned property. According to a Rosatom source, “uranium materials can belong only to legal entities fully owned by the state. The list of these entities will be identified by the President, and it is [expected to be] minuscule.” What made BHPB and Goodyear so insistent on secrecy in 2007 was their reluctance to admit publicly that, unless the Russian law is changed, there will be no place for them on Russia’s uranium fields.
On the other hand, some industry analysts, bankers and Kirienko himself reportedly favour financing the investment requirement for the additional domestic uranium — about $10 billion — by developing joint ventures with foreign uranium miners and traders. BHPB and Rio Tinto have been in talks; only Cameco and Mitsui have so far got the nod. Such schemes have also the advantage, in terms of the Russian national interest, of directing the foreign capital into the exploration of greenfields, where Soviet geologists haven’t trod; and of reserving the ore that may be uncovered for domestic consumption. The strategic investors in such mines, if they materialize, are to get their payback in cash, not uranium.
BHPB was asked to clarify its position towards Australian parliamentary ratification of the Putin-Howard agreement, and the impact the threatened revocation would have on BHPB’s plans for the sale of concentrate from Olympic Dam. Company spokesmen in London did not respond.
A high-level Russian government source, asking for anonymity, told Mineweb that billions of dollars in sales of Australian uranium were at stake for the Australians, and he expects last week’s threats to evaporate. Foreign Minister Smith conceded in parliament that the agreement ”opens up opportunities for Australia and Russia on nuclear non-proliferation matters generally…”The Government believes that the agreement meets Australia’s longstanding safeguards requirements and promotes the highest international standards in this area, including involvement and oversight by the international regulator.”