With Kazatomprom Deal, China Secures Nuclear Fuel Supply and Enhances Ties With Kazakhstan

China’s state-owned cor­po­ra­tions are acquir­ing strate­gic resources around the globe, includ­ing lock­ing in nuclear fuel sup­plies from Kazakhstan.

Credit: Depositphotos

In April 2021, at the vir­tu­al glob­al cli­mate sum­mit host­ed by the United States, Chinese President Xi Jinping declared his country’s inten­tion to start reduc­ing its coal pow­er gen­er­a­tion in 2026, and reach peak car­bon emis­sions before 2030. The announce­ment fol­lowed the issu­ing of China’s 14th Five-Year Plan, pub­lished in March, in which Beijing laid out its objec­tive to increase nuclear pow­er gen­er­a­tion from 50 gigawatts (GW) to 70 GW in just five years. Nuclear pow­er is a key com­po­nent of China’s plan to reduce its car­bon emis­sions and win the glob­al clean ener­gy race. With 17 plants cur­rent­ly under con­struc­tion, China is under­tak­ing the world’s largest nuclear pow­er plant build­ing pro­gram. According to Luo Qi of China’s Atomic Energy Research Initiative, “By 2035, nuclear plants in oper­a­tion should reach around 180 GW,” almost qua­dru­pling China’s cur­rent nuclear pow­er gen­er­a­tion in 15 years.

On the heels of Xi Jinping’s announce­ment in April, China final­ized a nuclear fuel deal with Kazakhstan’s nation­al atom­ic agency, Kazatomprom, the largest ura­ni­um sup­pli­er in the world. State-owned China General Nuclear Power Group (CGNPC) and Kazatomprom formed a joint ven­ture to build the Ulba Nuclear Fuel Plant, giv­ing China a 49 per­cent stake in the plant for $435 mil­lion, and guar­an­tee­ing that CGNPC will pur­chase 49 per­cent of the plant’s pro­duc­tion annu­al­ly. The ini­tial invest­ment from CGNPC, and its sub­se­quent pur­chas­es, will enable Kazatomprom to ascend the val­ue-added lad­der and oper­ate along the entire front end of the nuclear fuel cycle. The agree­ment also guar­an­tees a buy­er for the new plant’s pro­duc­tion in a world of unpre­dictable demand for ura­ni­um and its byprod­ucts. After the 2011 nuclear dis­as­ter in Fukushima, Japan, nuclear pow­er became polit­i­cal­ly con­tro­ver­sial and glob­al ura­ni­um prices col­lapsed. China and Kazakhstan’s prox­im­i­ty and shared bor­der will facil­i­tate over­land sup­ply by rail­road, avoid­ing for­eign juris­dic­tions and the poten­tial secu­ri­ty risks posed by trans­port­ing ura­ni­um through them.

The CEO of Kazatomprom, Galymzhan Primatov, recent­ly stat­ed that China’s ura­ni­um acqui­si­tions sur­pass its cur­rent demand: “Сomments com­ing from China around dis­cus­sions to build strate­gic stock­piles are some­thing I think mar­ket par­tic­i­pants are miss­ing. So today, long-term secu­ri­ty of sup­ply is undoubt­ed­ly a focus for the Chinese new-build pro­gram.” China’s grow­ing pur­chas­es could indi­cate that China wish­es to lock in sup­ply while it is cheap, or that it is hedg­ing against poten­tial future sanc­tions or sup­ply-chain instability.

Considering that CGNPC has been sanc­tioned before by the United States for its links to China’s mil­i­tary, it would not be sur­pris­ing if this agree­ment with Kazakhstan is viewed with con­cern in Washington D.C. The United States for some time has been alarmed by China’s state-owned cor­po­ra­tions acquir­ing strate­gic resources around the globe. In May, Ivan Glasenberg, the CEO of Glencore, the world’s largest com­modi­ties trad­er, pub­licly warned that China was build­ing a lead­ing posi­tion in strate­gic com­modi­ties through invest­ments, often made under the frame­work of the Belt and Road Initiative. In 2020, sev­er­al months pri­or to the deal with Kazatomprom, anoth­er Chinese state-owned enti­ty, China National Nuclear Corporation (CNNC), pur­chased the Rossing Uranium Mine in Namibia, the sec­ond-largest pro­duc­er of ura­ni­um in the world. The Chinese gov­ern­ment, by acquir­ing assets abroad, has cre­at­ed a glob­al sup­ply chain for strate­gic resources under its ownership.

Despite the wide­ly held belief that Russia and China have increas­ing­ly close rela­tions, this agree­ment will no doubt elic­it unease in the Russian gov­ern­ment. With its new nuclear fuel plant, Kazatomprom becomes a com­peti­tor to Russia on the glob­al nuclear mate­ri­als mar­ket – one of Russia’s core export sec­tors. Russia has tra­di­tion­al­ly been Kazatomprom’s largest busi­ness part­ner, but now, China pro­vides Kazatomprom an alter­na­tive — one with deep pock­ets — as a coun­ter­weight to Russian influ­ence. China has grad­u­al­ly nib­bled away at Russia’s priv­i­leged posi­tion in Kazakhstan’s strate­gic eco­nom­ic sec­tors, and this deal was per­haps its biggest bite yet.

The Diplomat by Gregory Xanthos

Gregory Xanthos

Gregory Xanthos is an inde­pen­dent Central Asia ana­lyst. From 2018–2020, he was based in Kazakhstan with an American NGO. Prior to this, he worked with U.S. agen­cies on non-pro­lif­er­a­tion projects in the for­mer Soviet Union. He has taught Russian and Eurasian Studies at George Washington University and George Mason University.

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