Is a nuclear fuel bank a good investment?

The idea of establishing a fuel bank for low-enriched uranium (LEU) was conceived as long ago as President Dwight Eisenhower's "Atoms for Peace" program. The primary idea behind a fuel bank at that time was to encourage nations to adopt civilian nuclear energy programs. But due to Cold War tensions, little progress was made toward a fuel bank until the new millennium began. Over the years, the main motivation for establishing a repository of LEU shifted to nuclear nonproliferation: Signatories to the Nuclear Non-Proliferation Treaty (NPT) are permitted to maintain enrichment facilities for peaceful nuclear energy programs, but the same facilities might be used to produce weapons-grade uranium.

This nonproliferation motif may be one reason that fuel bank proposals are unpopular among many potential customer nations. Because most non-nuclear weapon states in the developed world already maintain, or otherwise have access to, enrichment plants — as, for instance, through Urenco, a consortium with British, Dutch, and German ownership — a fuel bank's most likely customers are developing nations. Many of these countries, gradually progressing out of the "developing" category in both economic and technological terms, now feel ready to acquire and operate nuclear reactors. They are attracted to nuclear energy partly because their electricity requirements have increased and partly because they would like to demonstrate their emerging technological capabilities.

But from an ideological and strategic perspective, developing nations tend to view fuel bank proposals with suspicion — as yet more examples of the nuclear "haves" trying to keep the "have-nots" out of their club (rather like NPT itself). Many developing countries that suffered during the colonial era can be prone to interpreting Western initiatives, sometimes with justification and sometimes out of knee-jerk paranoia, as attempts by past oppressors to keep them down technologically and militarily.

At a more concrete level, some developing countries fear that a fuel bank owned or controlled by a power bloc or an individual nation might choose not to provide fuel to a specific country for geopolitical reasons. That is, LEU might be used as a tool of political blackmail — something with which producers of nuclear fuel could extract cooperation from buyers.

Such fears should be allayed by the fact that two proposed fuel banks — one of which is already stocked with uranium (though, to my knowledge, it has no customers yet) and the other of which is at an advanced stage of development — have a strong international flavor, despite originating with the two Cold War superpowers. In March 2010, the International Atomic Energy Agency (IAEA) signed an agreement with Russia to establish a reserve of LEU at the International Uranium Enrichment Centre in Angarsk, Russia. The facility was inaugurated in December 2010 and stocked with uranium. This fuel bank is internationally managed and open to IAEA member states that experience "noncommercial disruption of supply." It is the first global repository of LEU in history.

In a similar vein, in 2006 the Nuclear Threat Initiative (NTI), with backing from the investor Warren Buffett, pledged $50 million to the IAEA toward establishing an international fuel bank, on the condition that nations pledge a combined $100 million. Money came in from the European Union, the United States, Kuwait, Norway, and the United Arab Emirates, and the IAEA approved NTI's idea in December 2010. Under the current version of the plan, the repository would be located in Kazakhstan, but with the IAEA retaining complete control of the site as well as ownership of the nuclear material stored there. It is hoped that the facility might open in late 2013. Perhaps the IAEA's high level of control over the Russian and Kazakh facilities will address developing countries' traditional fears that they will be discriminated against.

An additional feature of both these proposed facilities — one that is unpopular with some potential customers — is a limitation on how much fuel could be purchased from the repositories. The facility in Russia stores 120 metric tons of LEU, sufficient for fueling a typical 1000-megawatt light water reactor for more than four years. The proposed Kazakh facility is envisioned as storing 60 metric tons. These modest capacities are consistent with the IAEA's view that a fuel bank is meant only for emergencies; a fuel bank should be used only when market arrangements have failed. But this entirely reasonable condition, meant to protect the interests of existing private-sector LEU producers, disappoints some nations that might have hoped to obtain cheap nuclear fuel from a fuel bank.

But there is a fear that a fuel bank could be a means of pressuring non-nuclear weapon countries in the developing world into purchasing all their fuel on the open market or through a fuel bank, in effect foregoing their rights under the NPT and IAEA statutes to build enrichment plants. Many developing countries are not eager to renounce their right to enrich. Brazil began enriching uranium for civilian purposes in 2009, and nations like Argentina and South Africa have discussed doing likewise. This desire to enrich stems partly from concerns over energy security, but also in some cases from commercial considerations. Considerable reserves of uranium lie within some non-weapon states, and a few of these states have sufficient technological skill to construct enrichment facilities. These countries could increase the value of their uranium by enriching it for sale as fuel. If fuel-bank schemes were to discourage nations from building enrichment plants, they could interfere with what these countries regard as a legitimate commercial opportunity.

Notwithstanding these concerns, fuel banks could still prove beneficial for developing nations that are interested in nuclear power but are uninterested in nuclear weapons. With a credible international authority like the IAEA guaranteeing the availability of LEU, such countries could build power reactors without having to build expensive enrichment facilities. These facilities in any case can require a stable of a dozen reactors to absorb the fuel they produce, but most of a fuel bank's likely customer nations need a reactor or two at most. Their power requirements do not exceed what one or two reactors can provide, and their electricity grids are not capable of accommodating more.

Significant amounts of effort and funding have gone toward establishing fuel banks. It is my hope that enough nations will take advantage of them to justify the investment.

Editor's note: This article was updated on September 14, 2012, to correct an editorial mistake on the details of the structure of international fuel banks.

The basic idea behind an international fuel bank is that it would, in a reliable and nondiscriminatory way, make emergency supplies of market-priced low-enriched uranium available to states that sign up to participate. States that opt for membership in a fuel bank would gain increased confidence that their access to reactor-grade fuel would not be interrupted. In return, they would renounce the right to enrich uranium and reprocess spent fuel on their own. Such an arrangement could be appropriate for a number of states. But for others, it might be less than ideal.

Nations might harbor several objections to a fuel bank. First, a fuel bank might guarantee a supply of low-enriched fuel at market prices, but it would not provide protection against price volatility. A fuel bank would be designed to provide fuel only when the need for it arose — that is, when disruptions occurred in nuclear fuel's normal supply chain. But any such disruption would imply higher market prices, so the existence of a fuel bank would not stop the cost of electricity generation from increasing accordingly. (It should be noted, however, that the cost of nuclear fuel accounts for only a small proportion of the total expenses of operating a nuclear power plant.)

Second, some states might be reluctant to sign up for an international fuel bank out of concern that doing so would impose requirements on them beyond those mandated by the Nuclear Non-Proliferation Treaty (NPT). Nations asked to impose a moratorium on establishing new nuclear facilities for enrichment and spent fuel reprocessing might well perceive such restrictions as infringements on their sovereign rights. (It is my understanding that existing facilities would be allowed to run through the end of their lifetimes.) After all, if a state has become a party to the NPT, complied with all the requirements of the treaty, and acquiesced to a Safeguards Agreement that subjects its nuclear facilities and activities to international monitoring, why should it relinquish its right to carry out the various processes associated with the fuel cycle?

Third, signatories to the treaty may feel that some proposed fuel-bank requirements, such as that customer nations forfeit their right to domestic uranium enrichment, interfere with their ability to develop a self-sustaining, economically feasible nuclear energy program. Jordan, my own country, has pursued nuclear power in order to achieve greater energy independence, secure a more reliable source of fuel, utilize indigenous uranium deposits, and avoid the high costs of generating electricity from hydrocarbons. Requiring a state such as Jordan to forego domestic enrichment and to rely instead on international suppliers for enrichment services asks it to forfeit significant opportunities for economic growth.

Denying fuel-bank customers the ability to reprocess spent fuel could have much the same effect — that of infringing on nations' rights, as provided for in the NPT, to pursue comprehensive, peaceful nuclear energy programs. In my view, signatories to the treaty should be encouraged to reprocess spent fuel, albeit under strict verification procedures. This would allow for spent fuel to be stabilized and waste to be reduced; for nuclides to be reclaimed that could be useful for additional power production and in medical and industrial applications; and for research and development activities to be carried out, perhaps leading to enhancements in the safety and performance of nuclear reactors. In any case, restricting such activities to the nuclear weapon states, as well as a select number of non-nuclear weapon states, would seem to create an unfair monopoly in the supply chain for nuclear fuel.

A fuel bank need not withhold from nations pursuing peaceful nuclear energy programs the support that the NPT guarantees them. Unfortunately, the fuel-bank concept as it is currently envisioned appears discriminatory in nature. It fails to recognize the long-term compliance with the treaty that most signatory states have demonstrated and, further, infringes on these states' sovereign right to pursue comprehensive, peaceful nuclear energy programs.

However, it should be possible to formulate the fuel-bank idea in such a way that compliance with the NPT is strengthened and non-nuclear weapon states are rewarded for adhering to the mandates of the treaty. Many of the weaknesses in the fuel-bank concept as it now exists could be eliminated, or significantly ameliorated, if it included a basic principle that underlies both "Atoms for Peace" and Article IV of the treaty: to promote safe, secure, and peaceful nuclear technologies. Therefore, I strongly urge that any fuel bank be designed to allow member states to develop comprehensive nuclear energy programs that are suitable for their domestic needs. Such programs must be carried out transparently, of course, and under the watchful eye of the International Atomic Energy Agency. But signatories to the NPT should not be asked to forego their sovereign rights.

In recent years the idea of establishing an international nuclear fuel bank has gained a lot of attention, with the United States and other Western nations promoting the concept and trying hard to make it reality. A rough example of how a fuel bank might work is provided by the 2009 agreement between the United States and the United Arab Emirates (UAE); under that agreement, Abu Dhabi agreed not to exercise its right to enrich and reprocess nuclear material, while the United States agreed to furnish low-enriched uranium to the UAE and also to provide nuclear cooperation in various forms. But in the developing world's political circles, an international fuel bank is not a particularly popular idea.

Western academics and government officials who advocate for a fuel bank often cite the need to close loopholes in the international nonproliferation regime. They argue that a country's ability under the Nuclear Non-Proliferation Treaty to enrich uranium and reprocess spent fuel creates a risk of weapons proliferation, and that reducing this risk must be treated as a high priority. (Some experts, it should be noted, maintain that a fuel bank would not succeed in its primary goal of limiting proliferation, and in fact would do the opposite.)

But what are the advantages of a fuel bank that would motivate potential customers to participate in it? Proponents point out several. First, they say, customers would not have to build their own enrichment plants, and this would save large amounts of money that could be devoted to other purposes. In 2008, the cost of constructing a new enrichment facility was estimated at between $250 million and $3.3 billion, depending on factors such as capacity and location. This is by no means a trivial amount, especially for developing nations facing fiscal constraints and relying on foreign lending or other forms of assistance to finance the development of their nuclear sectors. Especially for newcomers to the nuclear industry, a fuel bank could improve the economic viability of nuclear power.

A second argument made in favor of a fuel bank involves nuclear security: An international fuel bank would reduce a customer nation's concerns about providing physical protection for its nuclear materials. Developing countries tend to face greater difficulties than developed ones in ensuring that their nuclear facilities are secure. A fuel bank would allow a country to focus resources on the security of its nuclear power plants instead of devoting a portion of its resources to enrichment facilities.

A third point in favor of a fuel bank is that, in many countries, public support for building nuclear power plants has diminished significantly since the accident at the Fukushima Daiichi Nuclear Power Station. Fukushima renewed the public debate over nuclear energy and has forced some governments to reconsider their plans to introduce nuclear power as an alternative to fossil fuels. Those governments that wish to continue their nuclear programs must take into account public anxiety — and a fuel bank could help in that regard by assuaging, at least to some degree, concerns about the safety of nuclear facilities.

But customer nations must consider the potential problems of a fuel bank, as well. One such problem is that nations that renounce the right to enrich their own fuel would be left in a difficult position if market prices for low-enriched uranium increased sharply. In 1997, the market price for a kilogram of low-enriched uranium for use in research reactors was about $5,400. By 2005, that price had risen to about $8,800 — an increase of over 60 percent in eight years. For a nation with no capacity to enrich fuel on its own, cost increases on that scale would imply higher prices for the electricity that nuclear power plants produce, which in turn would reduce the competitiveness of nuclear power in comparison with other sources of energy. Furthermore, it is not clear how much room would exist for customers to negotiate prices with supplier states if an international fuel bank came into being. All in all, depending entirely on foreign fuel to power a nuclear reactor — and cutting off the possibility of doing otherwise — seems economically risky.

Another set of potential problems concerns nuclear fuel as a national security issue. Any country that maintains a nuclear power sector but forswears its right to uranium enrichment becomes potentially exposed to international pressure; it has less space in which to conduct foreign policy. That is, if supplier and customer nations experience diplomatic tensions or even become antagonists, a threat to cut off the supply of nuclear fuel would pose an acute risk to the customer state's national security. Concerns such as these may sound far-fetched to some, but policy makers and policy planners must foresee worst-case scenarios.

Even if a nuclear fuel bank were to become a reality, it would not become operational right away. In the meantime, a prospective customer must ask itself some basic questions: Is an international fuel bank really necessary? Does the country need one? Does it want one? Would a fuel bank merely impose the will of a supplier on a customer?

In any event, countries must keep in mind that an international nuclear fuel bank could not be expected to eliminate all proliferation concerns related to the nuclear fuel cycle. A fuel bank is intended to help reduce proliferation threats — but it is only one of many measures employed in that effort.