It's not just dependency on Russian natural gas that poses problems for Ukraine, it's also Russia's virtual monopoly on the fuel for Ukraine's nuclear reactors.
But just as Ukraine is struggling to diversify away from Russian natural gas, it is also eager to break Moscow's virtual monopoly over its nuclear fuel.
Pennsylvania-based Westinghouse Electric Co. told various media outlets this week it will renew a contract with Ukraine's Energoatom that will extend and expand its flow of nuclear fuel to the struggling nation. The deal is valued at $100 million.
"Based on discussions as late as last night [April 3], we will make a deal and increase fuel deliveries this year, and the agreement will be multiple years, going through 2020,” Michael Kirst, Westinghouse vice president of customer relations and sales in Ukraine, told the Kyiv Post. “We are hoping and expecting that this will be tied up by the end of next week.”
The news comes as Russia's state-owned gas company again boosted the price it charges Ukraine for the natural gas it uses for heating and electricity production. Just this week, Gazprom raised gas prices by 80 percent – a move that Ukrainian Prime Minister Arseny Yatsenyuk called politically motivated.
Most of the West's efforts to support Ukraine have focused on countering the natural gas "weapon" that Russia has long used. But changing gas flows requires capital- and time-intensive investments in infrastructure. The Westinghouse deal raises the possibility that boosting Western nuclear supplies to Europe could offer another – perhaps more immediate and significant – way to bolster regional energy security.
About half of the electricity Ukraine generates comes from its 15 nuclear reactors. Until a couple years ago, those reactors were powered exclusively by Russian fuel. In 2011, Westinghouse became the first Western company to supply Ukraine with nuclear fuel.
But Ukrainian authorities began finding flaws with the Westinghouse rods. Westinghouse claims changes in the design of Russian fuel rods, working next to its rods, caused the problems. For a fascinating look at the back and forth, see this account in the Kyiv Post. The new agreement with Westinghouse, however, suggests that whatever problems it found, Ukraine is now willing to work with Westinghouse.
Russia produces about 5 percent of the global uranium supply and aims to triple production levels in the next two years. It holds more than half of the world's uranium enrichment capacity – the process that turns the heavy metal into nuclear fuel – according to Wood Mackenzie, an Edinburgh-based consultancy. Russia supplies 28 percent of Europe's raw uranium and is responsible for 41 percent of the Continent's uranium enrichment.
In 2011, natural gas made up nearly a quarter of the European Union's total energy consumption (including heating), while nuclear comprised 14 percent, according to EU statistics. But when it comes to the EU's own power, nuclear made up more than a quarter of its electricity production while gas accounted for 22 percent.
Ukraine's energy minister, Yuri Prodan, told Ukrainian news agencies this week he expected the proposed deal with Westinghouse to be completed by next week. Ukraine is also working with US-based Holtec International to build storage for its spent fuel, Mr. Prodan said Thursday.
"[T]here has been a substantial increase in the price of the contract, but we are now holding negotiations in order to find sources of financing," Prodan told Interfax-Ukraine. "This is a very important project for Ukraine because we can get from Russia the spent fuel that was at one time shipped there for temporary storage."
Ukraine is no stranger to the potential dangers of nuclear power. In 1986, an explosion at the Chernobyl Nuclear Power Plant nuclear plant in northern Ukraine caused the world's worst nuclear disasters. A zone spanning 12 miles around the site of the meltdown remains largely closed to visitors today.