While in India, Australia’s Prime Minister Tony Abbott was expected to sign a deal to sell Australian uranium that will be the single most significant advance in bilateral relations in decades. The journey to get to this point has been tortuous and the controversy is unlikely to fade anytime soon.
The main impetus for the change in Australia’s policy came from geopolitical changes (the re-emergence of China and India as major players and the relative decline of the United States) and the increased importance of the bilateral relationship with India rather than commercial calculations.
Nuclear energy is used by about 30 countries to generate 11 percent of the world’s electricity, with almost zero greenhouse gas emissions. Currently there are 437 operating reactors and around 70 under construction.
Nuclear energy is tipped to grow between 23 and 100 percent by 2030 (the long-term impact of the March 2011 Fukushima disaster remains impossible to predict with certainty). Most of the growth in nuclear energy will be in Asia (China, India, Indonesia, Malaysia, Pakistan, Thailand and Vietnam).
The world’s current total requirement for uranium is 66,000 tons (all figures are rounded). The biggest users are the U.S. (19,000 tons) and France (10,000 tons). India’s uranium requirement is 1,000 tons, compared to 6,000 for China and 5,500 for Russia.
In Asia, the other big uranium consumers are South Korea (5,000 tons) where nuclear energy accounts for 28 percent of electricity generation, and Japan (2,000 tons in 2014) where nuclear energy produced 29 percent of electricity before the Fukushima accident; it has fallen to below 2 percent.
Australia has 31 percent of the world’s uranium reserves, but its share of the global uranium market is only 12 percent. The policy framework for the export of Australian uranium was set in the 1970s.
The Nuclear Non-Proliferation Treaty (NPT) obliges Australia to facilitate the peaceful uses of nuclear energy, but uranium sales would be restricted to countries that could satisfy Canberra that it would not be diverted to noncivilian purposes. For this, recipients had to be in good nonproliferation standing and conclude a bilateral safeguards agreement to account for the use of Australian uranium and nuclear material produced from it.
Uranium processed at Australian mines must go through three more processes (conversion, enrichment, fuel fabrication) before it can be used in a nuclear reactor. The high-energy density of uranium fuel means that a 1,000 MWe nuclear reactor requires 27 tons of fresh fuel each year, compared to a coal power station that requires more than 2.5 million tons of coal to produce equivalent electricity.
There are thus clear environmental benefits of adding nuclear fuel to the portfolio of energy grids. Uranium enriched to between 3 and 4 percent for civilian uses cannot be used in a nuclear weapon, which requires enrichment to 80 to 90 percent. Thus it is not too difficult to put in place safeguard measures against diversion for noncivilian uses.
The Howard government (1996-2007) announced in-principle willingness to sell uranium to China, Russia and India. The Labor government (2007-13) insisted that recipients had to be party to the NPT. Accordingly, negotiations were successfully concluded with China in 2008 and Russia in 2010 as both were NPT states parties, but not with India.
Following the 2008 India-U.S. civil nuclear cooperation deal, the Rudd government joined Washington in the India-specific waiver by the Nuclear Suppliers Group. But this left it with an illogical and untenable policy of supporting open access to global nuclear trade for India but not selling it Australian uranium.
The Bush administration argued there were significant nonproliferation benefits of bringing India inside the tent of safeguarded nuclear commerce and export controls, putting most of its nuclear reactors under international safeguards was better than having none under such controls, and India’s nuclear weapons program would continue regardless of international civil cooperation.
India also augmented its “impeccable nonproliferation record” with strengthened domestic and export controls, a unilateral moratorium on nuclear testing and support for total abolition through a nuclear weapons convention.
Australia’s recalcitrance became a major hindrance to the broader bilateral relationship. The oddity of selling uranium to China and Russia was also questioned. As a responsible uranium exporter, Australia has to satisfy itself about the safety record and risks of reactors in the recipient countries; the security of materials and facilities against theft, leakage and raids; the adequacy of safeguards against diversion to noncivilian uses, such as making nuclear weapons; and proliferation risks. Nor are the issues of safe nuclear waste disposal insignificant. Like China and Russia, India operates nuclear reactors for both peaceful purposes and military uses.
The civilian-but-not-military-use reactors are subject to international safeguards under International Atomic Energy Agency oversight.
In the past, the world had greater worries about the security of nuclear materials and facilities in Russia — the problem of “loose nukes” — than in India. And India’s record of proliferation to third countries is superior to China’s past complicity in the proliferation of materials and designs to North Korea and Pakistan (remember A.Q. Khan?).
Asia will provide most of the market growth opportunity for uranium in the foreseeable future. Australia has the advantages of proximity to this growing market. The bilateral agreements with China and India means that Australia is already covering one-third of the world’s population and has been given access to the two big growth-potential markets.
The world price of uranium has been depressed for some time, and the finalisation of the India deal could give it the necessary boost to incentivize uranium exploration and production.
The economic benefits could potentially be optimized even more if Australia moved into some of the value-added phases in the global supply chain.
Nonetheless, against the larger considerations of bilateral relations with a democratic India across the Indian Ocean at a time when assertive Chinese visibility and activity is growing in the East and South China Seas, the anticipated economic gains from uranium sales are modest.
Compared to the A$63 billion iron ore export industry, for example, Australia’s uranium exports are worth only $1 billion and the most optimistic projections would see the rise restricted to under $2 billion. While the fear of losing market share in the long run to competitors might be a relevant commercial consideration, the changed policy is more persuasively attributable to adjustments to changed geopolitical circumstances and efforts to consolidate and deepen bilateral relations with one of the key emerging powers of this century.
Ramesh Thakur is director of the Center for Nuclear Non-Proliferation and Disarmament at the Australian National University.
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