24.11.2015 Author: Dmitry Bokarev

Is There A Peaceful Nuclear Race Between Russia in China in the Middle East?

435345344Countries in the Middle East are currently paying a great deal of attention to the development of their nuclear programs. It’s understandable why: developing nuclear energy demonstrates the economic success of a country and enhances its international prestige, not to mention the benefit to the domestic market derived from the production of electricity at the local nuclear power plant.

However, when it comes to nuclear energy, none of the countries of the Middle East can do without the help of other states, and those states that lend this aid – with their money or technology – will no doubt gain great influence in the region for the long term. One of the main contenders to this influence is the Russian Federation, which intends to participate in the development of the nuclear energy programs of Iran, Saudi Arabia, Turkey, Egypt and Jordan. The Russian Federation occupies 3rd place in the global production of nuclear energy for its own consumption. Strengthening its position in the international market of nuclear technology is one of the Russia’s top priorities.

The US however has taken the short-sighted position of ignoring the Middle East nuclear energy market. Nuclear energy can be a powerful lever of influence in the Middle East, which has great strategic importance. Investments in nuclear projects do not bring immediate profits, but following their completion, the nuclear power plants can generate huge profits. The power plants’ need for continued service and personnel training creates the prerequisites for establishing long-term relationships between the country in whose territory the nuclear power plant is constructed, and the country who is providing the construction services. However, America is in no hurry to join the game, as evidenced by the recent expiry of the license of the Export-Import Bank of the United States, which was responsible for the spread of the US global commercial presence, and the Congress’ failure to renew it. Thus, the only full-fledged competitor to Russia in the Middle East in the nuclear energy sector is China.

China has only recently started to enter this market: having mastered nuclear power plant construction at home (not without Russian assistance), it then began to actively offer its services for export. In doing so, China offers very favourable loans for construction. In addition, Chinese offers have become interesting because of new Chinese technology. For example, the third-generation nuclear reactor “Hualong One”, which was tested and approved by the IAEA in 2014. These reactors are currently being built in China, and there are plans to install them in Argentina and Pakistan.

The threat that the PRC could press Russia on the market of nuclear technology in the Middle East, is very real. This is evidenced by the situation in Iran. Until now, Russia and Iran have been linked by a deep and long-term partnership regarding nuclear energy. In 2010, the Russian Atomstroyexport finished construction of the Bushehr nuclear power plant, and over the entire period of the sanctions against Iran Rosatom supplied fuel to it. Moreover, the construction of another nuclear power plant and additional power generation units for the Bushehr nuclear power plant are scheduled for upcoming implementation.

However, even before the sanctions were lifted, Iranian officials visited Beijing where talks were held with China. It was agreed that China will also build a nuclear power plant in Iran. In July 2015, Iran and China signed an agreement to build two nuclear power plants in southern Iran, near the coast. Therefore, cooperation between Russia and Iran is soon to be terminated: the contracts that have already been signed will be the last. Russia was ready for this, and has long been looking for new clients among the Middle Eastern countries that are competing with Iran. The main objective of the Russian Federation is to secure as many contracts for the construction of nuclear power plants, even if the conditions do not seem to be the most profitable at first glance. Thus, the Akkuyu Nuclear Power Plant project in Turkey, the construction of which Atomstroyexport is planning to launch in 2016, is estimated at $ 20 billion, and Russia takes over 93% of the funding. Later, it is planned to sell to Turkish investors up to 49% of the shares. Critics of the project say it is an excessive burden on the Russian budget and urge to revise the project. It is unlikely that this will happen: today, it is the main Russian project in the Middle East.

Nevertheless, geopolitical games require collaboration that can be very unexpected. Russia recently decided to take the unusual step of using the help of its own competitor. For example, in Jordan, the Rosatom project will be implemented with the participation of China. In 2013, Rosatom got a contract for the construction of the first nuclear power plant in Jordan. Then it was planned that the Russian side will finance half of the project cost of  $10 billion. However, in the autumn of 2015 it was decided that China will take on about 50% of the costs. So far, Beijing has only funded Rosatom projects, which were carried out in China. As can be seen, fearing competition, Rosatom is committed as soon as possible to take a free niche in the market of nuclear technology, even if it means resorting to the help of its rival.

In February 2015, Russian President Vladimir Putin visited Egypt, where an agreement on the construction of a nuclear power plant was signed with Rosatom. This will be the first commercial nuclear power plant in Egypt. In June 2015, Russia signed an agreement on cooperation in the nuclear energy sector with Saudi Arabia, which then committed to invest $10 billion in the Russian economy. This might seem strange, since the relations between Russia and Saudi Arabia have so far been rather tense. Perhaps, Saudi Arabia agreed to this due to the difficult situation in which it proved today. The threat from the Islamic State, a terrorist organization banned in Russia, its conflict with Yemen, the strengthening of Iran – the main rival of Saudi Arabia – and the cooling of relations with its long term ally, the United States: all this made Saudi Arabia to seek support from Russia.

Thus, on the one hand, the competition – as well as a partnership – between Russia and China in the export of nuclear energy services is rapidly gaining momentum. On the other hand, in a global perspective, this will need to develop more advanced technology in order to secure more favourable contracts. On the third hand, the regions that stand to benefit from such a situation are those at the scene of the struggle. After all, if new nuclear power plants will be built, investments will start arriving, jobs will be created, and infrastructure developed. Who knows, maybe the improved living standards of the local population will usher in a long-awaited stability in the Middle East.

Dmitry Bokarev, political observer, exclusively for the online magazine “New Eastern Outlook“.