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Link To Iran Spoils Kazatomprom Party

  • Bruce Pannier

A worker at Kazakhstan's Ulba Metallurgical Works shows nuclear fuel pellets. Kazakhstan has found buyers for its uranium throughout Asia.

A worker at Kazakhstan's Ulba Metallurgical Works shows nuclear fuel pellets. Kazakhstan has found buyers for its uranium throughout Asia.

Kazakhstan has taken on a new role as the world in uranium production -- and the achievement could not have happened at a worse time.

Just ahead of Kazatomprom's announcement today that it will produce some 13,900 tons of uranium by year-end, making it the world's leading producer, news broke late on December 29 that rogue elements within the state nuclear company were working out an illegal deal to supply Iran with a large amount of purified uranium ore, commonly known as "yellowcake."

The Associated Press reported, based on a leaked intelligence report from an unnamed member country of the IAEA, that Iran would pay $450 million for 1,350 tons of the material, which could be refined for civilian or weapons purposes.

A U.S. State Department spokesman reacted to the report on December 29 by warning that any transfer of yellowcake would violate UN Security Council sanctions. Three sets of sanctions have been imposed against Iran due to its refusal to freeze its enrichment program or other activities that could facilitate nuclear weapons production.

Today, Kazakh officials were scrambling to refute the claim.

Foreign Ministry spokesman Erzhan Ashikbaev told RFE/RL's Kazakh Service that Astana strictly adheres to international nonproliferation regulations.

"The Republic of Kazakhstan always observes its international obligations and this is true also as concerns nonproliferation in the uranium sphere,” Ashikbaev said. “All the activities of Kazakhstan are conducted in strict accordance with the demands and standards of the IAEA."

This is not the first time claims have been made that Kazakhstan was secretly planning to sell uranium to Iran.

In an interview with RFE/RL's Kazakh Service in early November, Kazakh President Nursultan Nazarbaev's former son-in-law, Rakhat Aliev, brought up the subject of "secret negotiations" between Kazakhstan and Iran on the issue of uranium export.

"I do not want speak without all the facts. I want to emphasize -- I do have [evidence] that there were secret negotiations,” Aliev said. “Do not forget there was an official visit by the president of the Iran to Astana [in April]. Just because it wasn't covered in the media doesn't mean there were not secret negotiations."

World Leader In Uranium

Kazatomprom today denied any plans to sell uranium to Iran and redirected its focus to the company's achievement of its goal -- well ahead of schedule -- to become the world's largest producer of uranium.

When Kazakhstan announced its effort to become the leading uranium producer years ago, it pegged 2015 as the year to reach the goal.

Its projected output of 13,900 tons of uranium (tU) this year would best Canada, the world's leader in 2008 with 9,000 tU. According to Kazatomprom projections, 9,934 tU will be extracted from Canada this year.

Richard Lockhart is a senior editor for "Energo Weekly," a publication of the Scotland-based News Base Group covering alternative sources of energy. Lockhart notes the impressive increase in production this year has catapulted Kazatomprom ahead of the competition.

"Kazakhstan's Kazatomprom published some interim nine-month results for its uranium production, and in the first nine months of the year it produced 9,535 tons of uranium, which is a 61 percent increase on the year,” Lockhart said. “But perhaps more importantly it forecast that they will produce a total of 13,500 tons for the full year, and that indeed is 58 percent higher than in 2008. This figure leapfrogs over Canada's Cameco in terms of annual uranium output."

Kazatomprom upped the previously announced 13,500 figure today when it said it would produce 400 tons more than expected, bringing the total to 13,900 tons.

Kazatomprom produced 795 tU in 1997, the year the company was restructured and took on its current name. Lockhart pointed out that it is only recently that Kazatomprom has ramped up output.

"Kazatomprom for the last three years has increased its uranium production by leaps and bounds compared to other producers around the world,” he said. “For example, in 2007 its output was increased by 26 percent, in 2008 this increased 28 percent and this year's increase in 2009 is forecast at 58 percent. So [it’s] a booming company in terms of output."

Dominant In Asia

Kazakhstan has the world's second largest reserves of uranium, trailing Australia. But Kazakhstan has something Australia, in the southern hemisphere, does not, Lockhart notes.

"Kazakhstan is very well placed, geographically poised, to exploit Asia -- as Asia, and especially China, have major plans to expand nuclear energy over the next 20 years,” Lockhart said. “China in particular is cozying up with Kazakhstan to source uranium and Kazakhstan is looking to supply China as well as Japan, South Korea, and so on."

Kazatomprom's list of partners is increasing nearly as fast as its production. It currently has joint ventures with Canada's Cameco; Russia's Rosatom; China's Guandong Nuclear Power Co. and China National Nuclear Corp; France's Areva; India's Nuclear Power Corporation of India Limited; and several Japanese companies, including Toshiba. (Kazakhstan bought 10 percent of Westinghouse from Toshiba in August 2007).

Kazatomprom's effort to expand market share is expected to benefit from low world prices.

Kazatomprom “will have enough customers, especially as uranium prices sort of cooled somewhat this year,” Lockhart said. “They had reached a high of $136 per pound in 2007 and they've come down to about $45 per pound now, so the market is somewhat stabilized, which should be slightly better news for producers such as Kazatomprom."

The price Lockhart cites puts the spotlight on the staggering sum reportedly involved in the alleged Iran-Kazakh uranium deal. The spot market price for 1,350 tU would be around $130 million, while AP report alleges that Tehran was willing to pay was some $450 million.

Corruption Charges

Kazatomprom's ascension to being the world's top uranium producer comes at a tense time for the company, not just because of the new alleged links to Iran.

Long-time president Mukhtar Jakishev, credited with taking a nearly bankrupt company and making it into what it is today, is currently on trial for corruption.

According to Kazakhstan's National Security Committee, Jakishev and seven other former top officials at Kazatomprom "allegedly disposed of the uranium companies' shares for the benefit of a number of offshore companies."

The specific project in question involves several Japanese companies and Canada's Uranium One. When the news broke about the arrests, Uranium One's stocked dropped briefly by almost 40 percent.

Such an incident may still give pause to some Western companies.

But even if Kazakhstan does not sell its uranium to companies in the West, Kazatomprom seems assured of steady business from its Asian neighbors.

China hopes to have 100 nuclear reactors on line by 2020 (it currently has 11 that supply some 2 percent of the country's electricity). Construction started on five new nuclear plants in 2009.

India has 17 nuclear power plants, with six more under construction, and is woefully short of uranium for reactors.

Kazatomprom also plans to build at least one domestic nuclear power plant (at Aktau) and possibly a second (at Kurchatov) by 2020.

The state company is also expanding in other areas of nuclear power.

New Kazatomprom head Vladimir Shkolnik mentioned earlier in December that plans for the company envision an organization "that encompasses all levels of the nuclear fuel cycle,” including conversion and enrichment of uranium and producing fuel for use in small- and medium-power reactors.

Erzhan Karabekov and Sultan-Khan Zhusip of RFE/RL's Kazakh Service contributed to this report.