Decision Time for the HEU Deal: US Security vs. Private Interests
Neff, Thomas L., Arms Control Today
Because USEC has control of LLS. enrichment facilities and supply from Russia, the future of the nation's nuclear fuel supply is effectively in the hands of a single private company.
In 1992, the Bush administration initiated a program with Russia to destroy 500 metric tons of highly enriched uranium (HEU) from Russian nuclear weapons-the equivalent of about 25,000 nuclear weapons-and turn it into fuel for U.S. nuclear power plants.' Codified in a 1993 government-to-government agreement, this program has become the centerpiece of U.S. efforts to prevent the nuclear arsenal of the former Soviet Union, and the personnel responsible for it, from proliferating around the world.
The flow of nuclear fuel from Russian nuclear weapons has also become essential to the 100 nuclear power plants in the United States, which supply more than 20 percent of the nation's electricity. Half of all U.S. nuclear fuel now comes from Russia, with the other half being provided by a single aging domestic facility and imports from Western Europe, which are restricted by capacity limits. This makes a secure supply of nuclear fuel from Russia at reasonable prices critical to U.S. electricity supply.
The Highly Enriched Uranium Purchase Agreement, or "HEU deal" as it is called, is thus now fundamental to U.S. energy security, as well as national and international security. Although the HEU deal was originally administered by the U.S. government, it is now run by the private U.S. Enrichment Corporation (USEC), formerly a government company under Washington's direct control. When USEC was privatized, it was given control of U.S. enrichment facilities and supply from Russia, effectively putting the future of the nation's nuclear fuel supply in the hands of a single private company.2
USEC's actions as a private company have often been in conflict with the public objectives of the HEU deal, but two recent actions the corporation has taken to better its financial situation have now brought this tension to a crisis point.
Late last year, USEC filed a trade action with the Commerce Department against the only other foreign suppliers of nuclear fuel to the United States, the European companies Urenco and Eurodif, potentially eliminating competitive supply to U.S. utilities. A successful trade action, together with exclusive control over Russian supply and U.S. domestic production, would give USEC monopoly power over the U.S. nuclear fuel supply and drive up electricity prices in the United States.
USEC is also in the process of renegotiating the terms of its contract to purchase Russian HEU and is seeking to pay a far-below-market price, a strategy that threatens the non-proliferation goals of the agreement. In 1996, before USEC was privatized, the United States directed the company to enter into a five-year, fixed-price contract with Russia. Under the terms of that contract, USEC paid Russia a discounted, but acceptable, price below what USEC resold the material for. However, that contract expires at the end of this year, and the new terms USEC has proposed could, given current and expected market conditions, result in a profit markup for USEC of 50 percent or more.'
As the only U.S. authorized buyer, USEC has tremendous power to dictate low prices to Russia. This power is limited only to the extent that the U.S. government is willing, or even able, to direct USEC's commercial activities. The great danger is that a Russia forced by USEC and the United States to accept a bad deal will lose political support for, and ultimately end, a program that is important not only to U.S. national security but also to domestic energy supply. A situation in which USEC can survive only by charging high prices to U.S. utilities while paying Russia prices far below market levels is a thus a serious threat to the United States, and steps must be taken to change it.
The HEU Deal
Nuclear fuel is made by enriching uranium so that it contains higher levels of the isotope U235 (from the naturally occurring 0. …