Sokolski

Conventional industries have it easy. Make a good product; invest in technology and engineering to make it better and keep costs in line; then crank up the output and sell it wherever you can.  Unit costs drop.  Word of mouth bolsters your smart advertising campaign to millenials, creating feedback loops on social media, driving customers to buy still more of your product and fueling double digit growth.  Grow production and sales, both in domestically and abroad.  Grow brand recognition.  Grow revenues.  Grow profit.  You are limited only by your skills and your imagination.

Economic pressures conflict with nonproliferation goals in the nuclear sector

Were the world of nuclear vendors so easy!  They've got an industrial structure that begs for high throughput because their upfront capital investment and engineering demands are so great.  More units sold (in theory, at least; FOAK1-reality has been a good deal rougher) should bring the total cost per delivered product down sharply but for one tiny problem:  their products are linked to nuclear weapons, or the potential for nuclear weapons. 

And so, unlike a toothpaste manufacturer, n-vendors are a bit constrained in ramping up production and selling all they've got.  One can't slap reactors up just anywhere, after all.  And, despite the wishes of shareholders and managers alike, one can't sell "nuclear products" to just anyone.

Thus the dance begins.  The industry continually tries to demonstrate why they should be allowed to sell more stuff to more people, and how it won't really be a problem.  They generate colorful graphics on how everybody else outside the US is already doing what they want to do, and therefore the US firms doing it too won't cause any incremental harm.2  They run more numbers to calculate the grevious financial losses not only to the industry, but to the country overall. Political optics matter:  it is very important that this not just be seen as their problem, but instead be reframed as everybody's problem, and not just now, but in the future as well.  There are losses now from reduced exports and jobs in foreign-owned US plants; but also future costs as the "needless" restrictions on exports bleed investment and squander our technical lead in an industry we created. 

The push to sell more is so strong, one might forget that we talking about nuclear equipment, designs, and fuels, and not Crest 3D White Vivid Flouride Radiant Mint flavored toothpaste.  (And, yes, in case you were wondering, this is the first time Crest 3D White Vivid toothpaste and nuclear reactors have been linked in the same sentence, and no doubt Procter & Gamble hopes it will also be the last... Though, in a testament to the ingenuity, or insanity, of humans, radioative toothpaste -- one containing thorium, and another thorium and radium -- was actually sold in the 1950s).  But this dynamic is how we end up with industry-published documents arguing that the US' nuclear export policy should be more like Russia's (see item 2 at the link) and have some people take that argument seriously.


Nuclear cooperative agreements should protect against proliferation, but often don't

It is against this backdrop that recent testimony and related background materials prepared by Henry Sokolski of the Nonproliferation Policy Education Center is so useful.  He focused on many aspects of nuclear cooperative agreements (123 Agreements) for a hearing before the Senate Foreign Relations Committee last month (PDF version here; presentation and background slides here).

Some of the key points:

  • Once passed, 123 Agreements offer limited latitude for Congressional oversight. (Testimony by Sharon Squassoni of the Center for Strategic and International Studies also speaks to this issue, highlighting the lengthening of agreement duration and their auto-renewal absent a "no" vote by Congress as examples of the dwindling power of Congressional oversite).  
  • Appropriate use of Congressional power prior to passage critical.
  • Industry claims about financial ($740 Billion) and job (5-10,000 jobs per $ billion) losses from "overly stringent" export restrictions need to be taken with a grain of salt.  Not only is there the common risk that numbers from self-interested parties may not be so reliable, Sokolski points out that the key companies under discussion are often "American" in name only.  Westinghouse is headquarted in the US, but entirely foreign owned; 80% of the revenues from GE-Hitachi export sales go abroad; enrichment firm URENCO's US subsidiary is entirely foreign-owned as well.  And only a small portion of current exports from these firms are even subject to 123 Controls.

Given these characteristics, why the fuss?  Sokolski argues that the main reason for the "sort-of American" industry to focus on modifying the controls governed by the 123 Agreements has nothing to do with direct exports, but rather with limits on their ability to re-export technology and components to third countries, and to recycle and enrich nuclear fuel. 

If you are foreign-owned, but still reliant on products or intellectual property derived from the US, your freedom of action to ramp up production and sales is severely constrained in two main areas:

  • Equipment and design.  Transfer of US-origin nuclear reactor design information critical to other countries' (e.g., Japan, Korea, PRC) manufacture and retransfer of nuclear components to 3rd to other states, (e.g., Vietnam, UAE, Turkey, etc).
  • Fuel.  Transfer of US-origin nuclear materials (e.g., yellowcake and LEU fuels) and their subsequent enrichment or reprocessing overseas (e.g., in China, RoK, Japan, etc.) if they are derived via US-exported or designed reactors.

While the industry views this as a flaw of the 123 process, Sokolski sees the restrictions as an important source of leverage to control proliferation -- and one that needs to be used much more than it has been.  Relying on existing IAEA controls is not a substitute, he argues, noting that the IAEA review process did not stop the pursuit of bomb options with reprocessing and enrichment in Iraq, Iran, Syria, North Korea, or Libya.  Weaker restrictions on fuel recycling from US-derived reactors, for example, could generate enough material for many bombs, as the slide below hypothesizes based on the reactor count in China. 

The central driver in whether or not to allow the export of nuclear goods and services from the US must be based on natural security, not commercial interests.  Sokolski:

Generally, these matters have been discussed in the context of promoting nuclear power's further expansion overseas, of increasing the number of jobs or of concluding nuclear agreements and cooperation initiatives more generally. All of these considerations are important. They are not, however, the primarily lens that should be used for weighing these matters... security concerns should be the first business of our government. Certainly, the most profound contributions Congress has made to promoting and controlling truly peaceful foreign nuclear activities were premised on putting U.S. national security first. This was true in 1946 when Congress created the Atomic Energy Commission, in 1978 when it passed the Nuclear Nonproliferation Act, in the 1990s when it conditioned the Nuclear Agreed Framework with North Korea, and today as it considers legislation relating to our nuclear negotiations with Iran.

 

Bomb potential from Pu in US-derived reactors in China

 

  • 1. "First of a kind," is a term frequently used by industry and academics to estimate the overnight costs of new reactors. The average costs of later reactors tend to be projected at much lower costs/kWe due to economics of scale and learning, and FOAK estimates are presented as best-guesses of the first few plants, but not the "real" costs one should focus on when evaluating policy options. In reality, however, the costs of later units have often escalated rather than decreased. This has been due to low production runs of the exact same reactor type limiting scale effects, the discovery of new problems from the early units, variation across sites that makes routinized installation impossible, regulatory or financial pressures that build based on macro factors in the civilian nuclear segment overall, or some mixture.
  • 2. NEI President Marv Fertel frames it this way in his Senate testimony: NEI "Opposes initiatives to condition U.S. nuclear cooperation on new terms that our potential partners will not accept and other supplier nations will not require." So if our partners (that is, their potential customers) won't accept certain terms, we should drop them?
Natural gas fracking well in Louisiana

Clandestine nuclear programs have been at the heart of many difficult international conflicts, and that number seems likely to grow.  Although the overlap in skills, technologies, and equipment between civilian and military programs is both substantial and well-recognized, the push for the expansion of civilian nuclear power -- even when it makes no economic sense -- has continued unabated.  Often, this is justified under the terms of the Nuclear Nonproliferation Treaty (NPT) that came into force in 1970.

The specific issue of whether the rights garned in the NPT on "peaceful" nuclear development are absolute, or constrained by other factors like nearly every other legal agreement in existence, including the US Constitution, is one that has not gotten enough attention.

Henry Sokolski, Executive Director of the Nonproliferation Education Center, has taken this on directly as part of a much longer essay on US mis-steps that contributed to the current Iranian nuclear crisis.  His entire essay is worth a read, but I'm grateful for his permission to reprint the section on civilian power and the NPT below:

Exaggerated the value of peaceful nuclear energy and NPT member states’ right to it.

One of the reasons Washington felt so comfortable promoting civilian nuclear energy in the Middle East is that it was a diplomatic path that already was well worn. Back in the l970s, the US endorsed the Shah’s fantastic nuclear plans to assure Iran’s dominate role in the Persian Gulf and its strategic ties to the US. Even after initial plans were dropped to transfer reprocessing technology, Carter subsequently offered the Shah access to this technology again. At the same time, the U.S., Russia, Germany, and France all competed for nuclear sales and political influence in the Middle East by offering nuclear reactors to Jordan, Israel, Turkey, Egypt, Libya, Iraq, Iran, and Algeria. This was the state of play just before the Shah was deposed.

Meanwhile, the US and nuclear supplier states gave up demanding through INFCE that states back off making nuclear fuel and let the market dictate what was safe and dangerous. This meant the US and others winked at Brazil, South Africa, Germany, Holland, Japan as they stood up nuclear fuel making efforts. Finally, when the crisis over Iranian fuel making came in 2002, the US and the EU almost reflexively jumped to affirm Iran’s right to develop “peaceful nuclear energy” in ways that only made Iran’s efforts to make nuclear fuel seem increasingly legitimate.

Thus, the EU was careful in its first offering of incentives to Iran to allow that Iran retained its right to peaceful nuclear energy and to offer it light water reactors. Shortly thereafter, President Bush’s national security advisor conceded Iran had the right to make nuclear fuel for peaceful purposes but suggested that it would be best if Iran could see the wisdom of exercising that right on Russian soil. It was about this time in 2006 that the US backed off its objections to Bushehr as a front for and possible path to acquiring nuclear weapons. Instead, Washington announced that deemed that Bushehr was peaceful and legitimate.

More recently, the U.S and others offered to supply Iran with nuclear fuel enriched to 19.75 percent. When the negotiations for such supplies broke down over differences regarding the swap out of low enriched Iranian fuel, Iran insisted that it must proceed to enrich to 19.75 percent – which technically is on the cusp of being  weaponsgrade. Finally, in May of 2010, the U.S. backed countries’ rights to develop peaceful nuclear energy in the final declaration of the NPT Review Conference. This declaration, though, not only iterates all countries’ right to peaceful nuclear energy. It prohibits reinterpreting the NPT’s protection of peaceful nuclear activities under Article IV in any way that would “limit” these rights. It also affirms the importance of all member states availing themselves of Gen IV International Forum efforts and moving toward a “sustainable fuel cycle” – i.e., all code for recycling nuclear fuel and moving toward fast reactors – technologies historically associated with making nuclear reactor fuels that can be quickly converted into nuclear weapons.

These views and actions  correspond with the conventional wisdom that any reading of the NPT that might curtail NPT members’ rights to peaceful nuclear energy is simply a nonstarter. Such a view, however, is mistaken about how absolute these rights are. In fact, some of the NPT’s peaceful nuclear energy benefits have already been significantly reinterpreted and effectively abolished.

Consider the Article V of the NPT and its call on nuclear weapons states to share the possible benefits of peaceful nuclear explosives. When Article V was first proposed in the 1960s, most nations, including the U.S. and Russia, believed that nuclear explosives could be employed as “ploughshares” to create canals and to complete other civil engineering tasks, including mining and excavation. To assure nonweapons states the possible benefits of such nuclear applications, the NPT allowed nuclear weapons states to share such benefits by supplying nuclear explosive services to nonweapons states on a turn-key basis.

To date, no state, though, has applied for such assistance nor has any state offered it for two unanticipated reasons. First, the “possible benefits of peaceful nuclear explosives” turned out to be negative: Given the costs of cleaning up the radioactive debris that the use of peaceful nuclear explosives would produce, it became clear that it would be far cheaper to use conventional explosives for civil engineering applications. In short, there were no “benefits” to share.

Second and closely related, the few states that insisted on conducting their own “peaceful nuclear test explosions” – India and Russia – were strongly suspected of using Article V as a cover for nuclear weapons testing. Certainly, the U.S. and most nuclear supplying states sanctioned India for its 1974 test of a “peaceful nuclear device” by depriving it access to most controlled civilian nuclear supplies and, in time, any nuclear explosion, “peaceful” or not, was seen as a violation of a norm against any form of nuclear testing.

This example of Article V’s reinterpretation speaks directly to several of the NPT’s most pressing current difficulties. As already noted, the prevailing view of the “inalienable right” to “peaceful nuclear energy” recognized by the NPT is that this right automatically allows states to participate in any nuclear activity, no matter how uneconomical or dangerous, so long as it has some conceivable civilian application and the materials or activities in questions are occasionally inspected by IAEA inspectors or their equivalent. This is Japan’s view, and that of the Netherlands, Germany, South Africa, Brazil, Iran, and the US.

Yet, how Article V is now read suggests that there is another more sensible way to interpret Article IV. This interpretation recognizes the explicit qualifications made in the NPT on exercising the inalienable right to peaceful nuclear energy. This right, the NPT notes in Article IV, must be implemented “in conformity” with the treaty’s clear strictures in Articles I and II. These two articles, in turn, prohibit nuclear weapons states “in any way to assist, encourage, or induce any non-nuclear-weapon State to manufacture or otherwise acquire nuclear weapons or other nuclear explosive devices,” and ban nonweapons states from seeking or receiving “any assistance in the manufacture of nuclear weapons.”

Properly understood, being “in conformity” with Articles I and II implies also being in conformity with Article III, the NPT requirement that all nonweapons states accept the imposition of international nuclear safeguards on all of their civilian nuclear activities and materials to prevent their military diversion to make bombs. Certainly a nonweapons state refusing such safeguards would be an implicit violation of Article II. Thus, the final statement of the 2000 NPT Review Conference refers to the need for nonweapons state members to exercise their Article IV activities in conformity with Articles I, II and III.

Technically, this condition is difficult to meet. Not all nuclear activities and materials can in fact be safeguarded to prevent their diversion to make bombs. Some activities, e.g., nuclear fuel making and operating large nuclear programs in hostile, noncooperative states (e.g., North Korea or Iran), cannot be inspected in a fashion that can reliably assure detection of a possible military diversion early enough to provide sufficient time to intervene to prevent the production of a bomb. Similarly, some nuclear materials are so weapons usable (e.g., highly enriched uranium, separated plutonium or plutonium based fuels) that reliable and timely detection of their diversion to make bombs is simply not possible.

This, then, raises the question: If a nuclear activity or material is so close to bomb making that it cannot be safeguarded against military diversion, is it protected as being “peaceful”  under Article IV of the NPT? In the 1970s, it was hoped that nuclear fuel making in Japan, Brazil, South Africa,  the Netherlands, and Germany could be safeguarded. Yet, recent discoveries of nuclear weapons usable materials unaccounted for (MUF) in Japan and the UK raise serious questions as to whether or not these assumptions were ever sound. We also know from experience in Iraq, Libya, Iran, Syria, and North Korea that the IAEA inspections system cannot be relied upon to find covert nuclear weapon related activities in states that refuse to cooperate fully with IAEA inspectors.

Many less developed states would answer, as  Iran has, that the NPT’s preamble explicitly stipulates that all of peaceful nuclear energy’s benefits, including  “any technological by products which may be derived from the development of nuclear explosives” should be “available” for civilian purposes to all states. This would suggest that the NPT recognizes and protects a per  se right of all states to get to the very brink of making bombs.

Yet, if The NPT is dedicated to sharing the  “benefits” of peaceful nuclear energy, these benefits presumably must be measurably “beneficial” and be  distant enough from bomb making or the risk of being easily diverted to that purpose so that inspections  could reliably detect their military conversion in a timely fashion (i.e., well before any bombs might be made). At the very least, what is protected ought not to be both dangerous and unprofitable. That, after all, is why the NPT bans the transfer of civilian nuclear explosives, only allowed the sharing of civilian nuclear explosive  services on a turn key basis, and why ultimately this offer was never acted upon.

In the first term of the Bush  administration, the State Department went out of its way to point out just how uneconomical Iran’s nuclear power program was. It, questioned the need for nuclear power in gas rich nations, such as Iran and Saudi  Arabia. Economic analyses were conducted to determine just how uneconomical such nuclear programs were when compared to making power with readily available natural gas. This line of inquiry, however, was hardly allowed to proceed very far and was almost entirely shut off in Bush’s second term.

Natural gas fracking well in Louisiana

A few useful resources on the potential links between civilian nuclear power and proliferation from NPEC.  Here's a couple of recent postings by Henry Sokolski on the technology sharing agreements with Vietnam and UAE.  A more detailed exposition of the nuclear nonproliferation treaty can be found here, with a variety of essays on what the NPT does and does not require in terms of technology sharing.

Twenty years ago, economic modeling of the cost of new coal plants never included an estimate for carbon controls.  Today, investors all expect to see it. 

In constrast, similar models of nuclear economics often ignore the many subsidies granted to the sector through federal tax, insurance, and credit policies.  None include even a placeholder for the proliferation-related costs that will be triggered by a widescale expansion of reactors and fuel cycle facilities around the world.  While commercial interests may explain the rationale for utilities to ignore these costs as long as possible, there is no excuse for the Obama administration doing the same.