Europe’s insecure energy security

While the EU is formulating its Energy Union to increase energy security, some member states are working against these goals. The Commission needs to be proactive in securing that the decisions made by individual members will not counteract Europe’s objective to cut its heavy energy dependency. Despite the EU sanctions against Russia, the state corporation Rosatom is planning several nuclear investments in the EU member states.

Energy security is a key element in the common European energy policy given the massive energy dependency on external sources, the lack of diversification of energy sources, and the volatility of energy prices. Risks of dependency on gas supply from Russia have been widely recognised in the EU’s energy policy. However, the impacts of Russia’s nuclear investments in the EU are not seriously considered in the communication on energy security which the EU Commission presented in May this year.

The Commission states that it is necessary “to address control of strategic infrastructure by non-EU entities, notably by state-companies, national banks or sovereign funds from key supplier countries, which aim at penetrating the EU energy market or hampering diversification rather than the development of the EU network and infrastructure.”

If we look at the proposed actions, the Commission seems to have closed its eyes on the impact of Russian nuclear investments in the EU.

Through its energy corporations, the Russian government has means of influence far beyond the mere business transactions. Rosatom owns and controls nuclear weapons subsidiaries, research institutes, as well as nuclear and radiation safety agencies. It generates 40 percent of the nuclear power in our continent. Globally its market share in uranium enrichment accounts for 40 percent, in nuclear fuel 17 percent.

 Despite the EU sanctions against Russia, the Finnish government recently decided to support the plan to build a nuclear plant in cooperation with Rosatom. This project can be seen as a visit card of Rosatom to Western markets which have more convincing safety procedures and standards than their usual customers in autocratic countries. Russia clearly sees this investment so much more attractive than phasing out the old Chernobyl type reactors that it is even prepared to use its pension funds for it.

The nuclear project would be run by a Finnish consortium, Fennovoima, and 34 percent of the shares would be owned by Rosatom. Rusatom Overseas, a subsidiary of Rosatom, would deliver the 1.200-megawatt reactor. Rosatom would provide the fuel to the plant at least for the first ten years. However, changing a fuel contractor afterwards is not going to be easy as the fuel rods are reactor specific. Fennovoima cannot opt for the Rosatom offer to reprocess the spent fuel in Russia as exports are prohibited by Finnish law – but a fact is that at the moment it lacks a real domestic alternative.

Another EU member state, Hungary has ordered two new 1.200-megawatt nuclear reactors with Rosatom to increase the production in the Paks plant with 120 percent. Construction works were commissioned without public procurement – an obvious case for EU competition authorities. EUR 10 billion euro of the cost of EUR 12 billion will be financed by an inter-state loan from Russia. The deal offers an entire fuel cycle.

This is precisely what the EU Commission warns against: “Russia is a key competitor in nuclear fuel production, and offers integrated packages for investments in the whole nuclear chain. Therefore, particular attention should be paid to investments in new nuclear power plants to be built in the EU using non-EU technology, to ensure that these plants are not dependent only on Russia for the supply of the nuclear fuel.”

The Finnish Prime Minister Alexander Stubb argues that the chosen cooperation with the Russian nuclear industry would reduce energy dependency from Russia, as the plant would be operated by Finns on the Finnish soil. In reality, such projects would weaken the European energy security as it would

(a) increase technology dependency,

(b) link the energy supply to a Russian nuclear fuel cycle, and

(c) make the European energy supply increasingly vulnerable through financial ties with the Russian state and companies integrally linked to it.

The Commission has stated that the nuclear investment decisions made by member states need to be discussed at the European level. It also recognises the importance “in light of recent experience” of being informed about intergovernmental agreements between EU member states and third countries” which may have “a potential impact on security of energy supplies and diversification”. Apparently, the Commission is happy with the intergovernmental nuclear cooperation agreements which Finland and Hungary have made recently with Russia.

Some EU members have reconsidered their cooperation with Rosatom as a consequence of the crisis in Ukraine. Bulgaria refused a second Rosatom nuclear plant, Slovakia stopped negotiations with Rosatom, and the UK suspended its negotiations with Rosatom.

A comprehensive energy policy and energy security strategy need also to address the issues of financial and ownership dependency in the European energy infrastructure.

Published together with Benedek Jávor (MEP, Greens/EFA, Hungary) in EurActiv 18 November 2014.

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