It’s one of Russia’s major exports, a source of symbolic pride and commercial revenue: atomic energy, in the form of civilian technology to build and maintain nuclear reactors around the world. State-owned company Rosatom is the driver of that policy, with ambitions for nearly $15 billion in revenues from outside Russia by 2024.
Now, a snowballing spy scandal in the Czech Republic, involving a pair of 7-year-old explosions and Russia's military intelligence agency, threatens to pull the plug on one of Rosatom’s higher-profile international forays: a new $7 billion-plus nuclear power facility in the Czech Republic.
With relations between Prague and Moscow thrown into turmoil -- the head of the Czech Senate called the 2014 blasts an “act of state terrorism” -- Czech government officials said on April 19 that they were kicking Rosatom out of the bidding for the project in Dukovany, about 220 kilometers southeast of Prague.
The Czech deputy prime minister, Karel Havlicek, said the decision was made out of “security.” The final bidding process would be limited to companies from France, the United States, and South Korea, he said.
Rosatom described the decision as politically motivated.
“We regret this decision of the Czech authorities, because the Russian and Czech nuclear industries had serious prospects for the development of a mutually beneficial partnership, not only in the Czech Republic, but through joint work in third countries as well,” Rosatom said in a statement.
“The Russian offer envisioned the involvement of hundreds of Czech and European companies in the Dukovany nuclear power plant expansion project, which could have included contracts worth billions of euros. Thus, by excluding Rosatom from the tender, the Czech authorities are pushing aside their own national industry."
“This is a game changer,” said Pavel Havlicek (no relation to the deputy prime minister), a political analyst at the Prague-based Association for International Affairs. “In terms of rhetoric, diplomacy, politics, this is a very significant gesture, that things will not be the same in the future."
The Czech Republic generates more than one-third of all its electricity from nuclear power, from two sites: one, in Temelin, about 120 kilometers south of Prague, with two reactors, and the other at Dukovany, with four reactors. All are Soviet designs; the first went into operation in the mid-1980s.
Both facilities are majority owned by the state energy company Ceske Energeticke Závody (CEZ).
Rosatom, and its immediate predecessors, has been the main holder of contracts for helping to maintain the reactors, and also for reprocessing spent fuel. The U.S. energy giant Westinghouse was brought in after the 1989 Velvet Revolution to modernize two of the Temelin units and also supply some of its fuel. But the Czech authorities later switched the fuel supply back to Russia.
Russia now supplies all fuel for Czech reactors.
By the mid-2010s, the Czech government forecast a substantial increase in power demand and the need to switch the country’s electricity supply away from coal. So it decided to build another unit at Dukovany and held talks with six companies, including Rosatom and Westinghouse.
Czech relations with China, plagued for years by criticism from mainly liberal Czech lawmakers concerned about Beijing’s authoritarian policies, ultimately led to China General Nuclear Group being frozen out of the process.
Rosatom, meanwhile, was long seen as a leading contender, given Moscow’s history with the Czech nuclear industry.
“For Rosatom, it’s both money and prestige,” said Martin Jirusek, an energy expert and an assistant professor at Masaryk University in the Czech city of Brno, and managing editor of the Czech Journal of Political Science.
He said the costs for building the new Dukovany facility were probably closer to $12 billion, when ancillary costs are figured in. The government’s time line for finishing construction in 2029, and starting generation by 2036, was already unrealistic, he said, even before the spy scandal
October Parliamentary Elections
Despite the heated rhetoric and the move to remove Rosatom from the bidding, it’s not a certainty that will happen, Jirusek said. The current stage that Rosatom is being removed from entails a security review by Czech government agencies.
And there’s nothing at this stage to prevent Rosatom from being allowed to rejoin the process, depending on the outcome of October parliamentary elections in the Czech Republic.
“Kicking Rosatom out of the screening process is kind of a big deal. But at the same time, it doesn’t say anything about the future of the process,” Jirusek said.
If the ruling coalition -- led by Prime Minister Andrej Babis’ ANO Party -- wins a new mandate, that would potentially reopen the door for Rosatom. And President Milos Zeman, who supports closer business and political ties with Moscow, has said openly in the past that Rosatom should win the tender.
Zeman aside, Czechs’ opinion of Russian policies, while never particularly warm, soured markedly after Moscow’s 2014 annexation of Ukraine’s Crimean Peninsula, Havlicek said.
The latest spy scandal means the issue of Russia’s role in Czech society is likely to be a prominent election issue; opposition groups have already come out with strong, clear statements critical of the Kremlin.
That includes the opposition president of the Czech Senate, who called the findings that a Russian military intelligence unit was behind the 2014 deadly explosions at the ammunition depot an “act of state terrorism.”
“This is about credibility of the country, our position in the world. Czechs are bit of an egotistical people,” Havlicek said. “We want to be seen. We want to be recognized. And we don’t want to be subordinate to Russia.”
“We know what it means to be dependent on Russia,” he said.
Atomic Soft Power
Since being established in 2007, Rosatom, which was formed out of a reorganization of the Atomic Energy Ministry, has played an important role expanding Moscow’s commercial ties outside the country.
Between 2009 and 2018, Russia accounted for 23 of 31 export orders for nuclear power facilities around the world, according to a 2020 report by the Center for Strategic and International Studies, a Washington, D.C., think tank. And the company initiated construction on 10 reactor units overseas between 2007 and 2017. That compares with just four between 1986 and 2007.
In its 2018 annual report, the company said it had $133 billion in overseas orders spanning a 10-year period. Nearly three-quarters of that figure came from construction of nuclear plants; the rest came from fuel supplies and uranium products. Its reported overseas revenues that year were $6.5 billion
Unlike with private companies in the West, like Westinghouse, Rosatom is state-owned. For customers, that means Rosatom can provide contract sweeteners, like financing backed by the Russian state.
The company has become an instrument of “soft power” for the Kremlin, Jirusek said. He said there were parallels with another major Russian state-owned company -- Gazprom -- whose natural-gas exports to Europe and elsewhere have been tinged with political calculations.
“I see there is a strong government hand in what Rosatom has been doing lately, and the support the Russian government gives...resembles how the government did that with Gazprom a decade before,” he said.
“To help it clinch contracts abroad, it often comes with political strings. It’s a geopolitical thing,” he said