Foreign Control of Nuclear Energy

The issue of energy is at the very top of national as well as international agendas. After the 2008 financial crisis, most of the world is experiencing economic growth, which quite naturally requires energy.
 
Without electricity, oil and gas, modern economies cannot survive, let alone prosper. Therefore, the major ingredient of any economic growth is a sufficient supply of energy. This is a cardinal rule for all economies, whether they are members of the G-8, or regimes facing state failure.
 
The United Kingdom, similar to many other developed states, is continuing to suffer from the aftereffects of the global economic crisis. It has been committed to an austerity package aimed at putting a lid on public finances, decreasing spending wherever possible and reducing borrowing. It is an unenviable task and there are many both within the UK and internationally that question whether this strategy is the right one at the moment. Be that as it may, the UK is projected to grow by 1.4 percent in 2013 but faces a short-term energy crisis. A report prepared for the Prime Minister's Office forecasts that the UK will face an energy shortage by 2015.
 
EU: Going green
 
In order to meet EU pollution directives, most British coal-based energy plants are expected to be closed in 2015. Coupled with facing increased demand by consumers, whether they be commercial or private, an energy gap is expected to emerge which will have to be met. If not, power shortages and blackouts loom on the economic horizon. The British government has been looking at the available alternatives, which have been rather limited.
 
The burning of fossil fuels is a nonstarter; after all, that is the reason why coal is being made redundant. Importing more gas is an option and importing more oil is another. Encouraging higher returns from green energy such as wind and solar power will not yield sufficient returns in the short run. Which leaves the nuclear power option as a highly credible solution to the forthcoming energy shortage. One must recall that nuclear plants provided about 6 percent of the world's energy and 13 percent of the world's electricity in 2012. In 2013, the International Atomic Energy Agency (IAEA) reported 437 nuclear power reactors located in 31 countries were in operation.
 
The current coalition government has held steadfastly to its agreed principle on withholding subsidies to the energy sector. Given the harsh austerity policies that it has been committed to implementing, it would have been politically very difficult to compromise over this issue. Therefore, in order to fill the expected energy gap, new investments in energy are badly needed. Under the circumstances, these investments must come from the private, rather than the public sector.
 
Considering the choices available the British government has come down in favor of expanding civilian nuclear power. During the recent visit by the British chancellor, George Osborne, to China, there was a new development with regard to the funding and construction of nuclear power in the UK. Mr. Osborne declared that the Chinese were more than welcome to participate in the new nuclear plant, elaborating that they would not be restricted to minority shares, but could own more than 50 percent of nuclear plants in the UK.
 
Therefore, alongside a cross-party political consensus, after negotiating with the leading French state-owned firm EDF, the construction of a single new plant in Somerset, with EDF taking a 30 percent stake and leading a consortium, which includes the China General Nuclear Corporation and China National Nuclear Corporation, costing approximately $26 billion was decided upon by the UK government on Monday. The two proposed reactors are expected to provide power for about 60 years and cater for 7 percent of the UK's total energy once it is completed in 2023.
 
China: Emerging civilian nuclear power
 
The Chinese are extremely interested in nuclear energy despite the fact that only 2 percent of their domestic energy is generated from nuclear power. China has 15 nuclear power-generating units in operation, with another 30 units currently under construction. Thus, China will have the third-largest number of nuclear plants in operation in the world by 2020 -- after the United States and France.
 
Given the fact that a single new nuclear plant runs into tens of billions of dollars, the total cost of constructing so many nuclear power plants is likely to be in the range of half a trillion dollars, if not more. Therefore, it is not surprising that the only country that could undertake such an approach is one that possesses the second largest economy in the world, which is also the fastest growing economy within the G-20 and holds more than $1 trillion invested in varying sovereign wealth funds.
 
In Britain, the major issue has not been foreign partnership as such with regard to the new nuclear power plant. Nobody has questioned the decision to cooperate with the French nuclear energy giant EDF -- an established power in the energy sector. Not surprisingly, attention has been focused on Chinese involvement in the UK domestic energy market. The question revolves around the matter of what is termed "critical national infrastructure."
 
According to a report presented to parliament in June by the British Intelligence and Security Committee, the definition of Britain's critical national infrastructure is defined as “certain critical elements of infrastructure, the loss or compromise of which would have a major detrimental impact on the availability or integrity of essential services, leading to severe economic or social consequences or to loss of life." Within this definition, energy supply pipelines as well as transport infrastructure and water supplies -- even certain telecommunications networks -- are also included.
 
Therefore, the usual understanding of energy security referring to the diversification of both energy supply and demand has taken on board a new dimension -- that of ownership of domestic energy production. Countries such as the United States, Canada and Australia have legal restrictions that prevent foreign countries from being involved in their national nuclear energy programs. Thus, China is not permitted to engage in the construction or production of nuclear energy in the United States for example. In fact in March, the US Nuclear Regulatory Commission upheld a decision preventing EDF from building a reactor at a plant in Maryland citing federal law which bans foreign ownership or control of nuclear plants. For sure, some states are wary of allowing foreign companies into a sensitive energy field.
 
UK intelligence warning
 
The UK Intelligence and Security Committee's report identified critical national infrastructure as covering the realm of telecommunications. It referred to a report published by Microsoft in 2011 which declared that "ICT systems are indispensable to critical infrastructures and government operations … in light of our increased dependency on cyberspace [there is] concern that sophisticated adversaries will taint the supply chain, inserting functionality into products and services that grants one entity control over another organization's ICT systems, perhaps to steal information, or to information or deny service at a critical moment." The reason why Chinese nuclear energy companies are not placed in the same category as France's EDF stems from the fact that China is suspected of engaging in espionage and the acquisition of sensitive information. This raises questions concerning whether China's intentions to enter the British nuclear energy market are commercial or if there is a covert political dimension.
 
One aspect that is missing from this discussion is the state of the British nuclear industry. Looking at the history of the civilian use of nuclear power, it was British engineers and scientists who were the pioneers in this technology in the post-war period. In fact, the first civilian commercial nuclear power station was built in the UK at Calder Hall in 1956. Once heralded as a model for the whole world, it now faces the prospect of having a Franco-Chinese partnership construct a nuclear energy plant on its own soil with limited British participation. This was certainly not what was predicted by the British nuclear pioneers half century ago.
 
Strategic industry
 
As noted, nuclear power is a very expensive venture which requires both foresight as well as deep pockets. Viewed from a globalizing perspective, which has put market principles at the forefront and retreated from the importance of state regulation, there should be no qualms about foreign companies, whether they are state economic enterprises or not, owning parts of domestic energy markets. What is required is a renewed debate on what are considered to be "strategic sectors."
 
In the 1970s, energy was considered to be one of those. Through the whirlwind of privatization, the global economic ethos changed to view the energy sector as one in which the state should not play a monopolizing role. That undoubtedly has many merits. Greater competition does lead to greater choice and benefits for the consumer -- but only when firmly regulated by the state. Energy is a particular sector which has many wide-ranging effects on the rest of society at large. No state advocates foreign companies owning large chunks of its domestic energy market.
 
When constructing a nuclear power plant with public funds it is not solely the cost per se which one ought to pay greater attention to, but the high propensity for parts of this high cost to be channeled into private pockets. It is far likelier for corruption to take place where projects cost tens of billions of dollars rather than thousands of euros. This is a pre-emptive lesson that needs to be taken on board by countries that are willing and able to initiate nuclear power programs by constructing nuclear plants. Great attention needs to be paid to the fine details of where funds need to be channeled and for which purposes.
 
In the British case, however, it is not the British taxpayer that is being asked to foot the nuclear bill but Chinese taxpayers, as the Chinese energy companies are state-owned corporations. Edward Davey, the UK's secretary of state for energy and climate change, recently underlined this fact by noting: “For the first time, a nuclear power station in this country will not have been built with money from the British taxpayer. It will increase energy security and resilience from a safe, reliable, homegrown source of electricity. This deal is competitive with other large-scale clean energy and with gas -- and while consumers won't pay anything up front, they'll share directly in any gains made from the project coming in under budget and from refinancing or equity sales.”
 
This point was also picked up by British Deputy Prime Minister Nick Clegg when he stated that "if people want to come here and build safe sustainable low-carbon ways of generating energy without dollops of British taxpayers subsidies in a way which is entirely regulated by ask, where the rules are set up by us, not in Beijing, then of course that's something we should be open to."
 
Perennial national interests
 
It would have been unimaginable during the Cold War for China to be given the go-ahead by the British government to be part of a consortium constructing a nuclear power plant on British soil. Despite the cold war being over, however, national security has not changed. National interests remain. Some states quite rightly remain committed to maintaining control of what they consider to be strategically vital domestic sectors.
 
The British debate concerning Chinese involvement in its nuclear energy program may sound like a flashback to the Cold War, but it highlights twin major developments. Firstly, none of the three major political parties in the UK have expressed opposition to this project. Secondly, there is very little international objection to states playing a greater role in energy. The developed democracies of Western Europe and North America have acknowledged the fact that the Russian and Chinese states reject the neo-liberal globalizing agenda of setting the energy sector free.
 
They themselves shun such an approach, but are perfectly willing for others to pursue that path. This raises the question of whether it makes sense for a state to monopolize its natural resources -- then the industrialized world should adopt such a strategy -- or if it does not, then they have nothing to fear from state owned energy companies. The UK finds itself rejecting the former and supporting the latter, whereas the United States is firmly against both.
 
Moscow and Beijing, therefore, currently resemble the accepted wisdom of the 1970s. Given the fact that neither are categorized as democracies, political control over energy companies has led some to be suspicious of their intentions, with some states legislatively proscribing foreign companies' existence in domestic energy markets. A clear answer is required to the query of whether the reasons for entering foreign energy markets are purely driven by commercial desires for profit, or if there are some ulterior political motives underlying such ventures?
 
In the case of Britain, the political Gordian knot has been cut by the sword of open markets and strong belief in the global neo-liberal agenda, including a firm conviction concerning privatization. As Prime Minister David Cameron declared: “This deal means 16 billion pounds of investment coming into the country and the creation of 25,000 jobs, which is brilliant news for the South West and for the country as a whole. As we compete in the tough global race, this underlines the confidence there is in Britain and makes clear that we are very much open for business.” Thus, less attention has been focused on any possible foreign motives, but much more on the state of the public coffers.
 
Economics has trumped politics, or has it? If so, for how long?