You are here

Blackmailing the world with fear

Nuclear Monitor Issue: 

(December 19, 1997) The EBRD seems to have quite some problems making the decision to support or not the K2/R4 project. The bank decided in August to let the US consultant firm Stone & Webster "refine the figures" from an earlier least-cost study. Already last spring it was made clear by the bank itself that the project (completion of the Ukraini- an Khmelnitski-2 and Rovno-4 units and in exchange closure of the Chernobyl-3 unit) did not meet even the first condition; being the least- cost option. Due to pressure by the Ukrainian government and the G7, eager to finally be able to pronounce the "successful closure of the dangerous Chernobyl-3 unit", the new study "will come up with a much better result".

(483/4.4800) WISE Amsterdam -Since the results of the last least cost-study where published in April 1997, more and more people got convinced that the project was over. But we are talking high politics, so forget the numbers. It is a matter of definitions. Or, as a G7 source says in Nucleonics Week, "it depends on how creative the bank wants to be".

Within the G7 there is a big concern that the European Bank for Reconstruction and Development (EBRD), founded at least partly to help improve the nuclear safety heritage of the former USSR, is not able to take politically difficult decisions such as the completion of Soviet-build reactors. Up till now, none of the EBRD efforts have led to the official goal, the shutdown of unsafe Soviet-built reactors. And time is running out -- the two reactors would be completed (if started immediately) at the latest in the year 2000, the year the Cherno- byl-3 would be taken off-line. The Ukrainian government is now accusing the West of postponing the decision to pay for the K2/R4 completion. It has already announced that it would either accept Russian (or other) money to complete the K2/R4 and just not close Chernobyl-3 or, if the Russian money does not show up, at least keep the Chernobyl- 3 unit open until the two reactors are completed with Western money. The EC and G7 are so eager to complete the two reactors that delay of closure of Chernobyl-3 probably would be accepted, pressing the partners to discuss again the conditions of the Memorandum Of Understanding for its closure.

Of course this would lead to new problems for the funders -- it will become even harder to explain why they should fund two new reactors and not just provide money for the closure of Chernobyl and help the Ukraine solve its energy needs and problems in a more rational and environmentally sound way. Because the issue is so important (if this does not work out for the West every new project for completion of nuclear reactors would become more difficult) we pay extra attention to the history and background. (See also the Chernobyl Special Edition, 10 April 1996: Possibility and Necessity of Phase-out of Chernobyl)

In 1994, the European Commission authorized itself by way of Euratom, to help with (co-financing) the construction of nuclear reactors outside the European Union. Of course this had to do with the fact that no reactors could be built within the EU countries anymore. The EC formulated the condition that "a major proportion of the expenditures should be provided by a Community enterprise".

In the past three years, the EC has been actively searching for projects in Eastern Europe that fit the criteria. A number of Soviet designed, partly built reactors were or are being assessed as potential recipients of these loans; Kozloduy 5 and 6 in Bulgaria, Mochovce in Slovakia, Kalinin and Rostov in Russia and Khmelnitsky 2 and Rovno 4 (K2/R4) in the Ukraine.

In December 1995, the so-called Memorandum of Understanding (MOU) was signed between the government of the Ukraine and the European Union and the G7. Most important aim for the West was to set a date for the closure of Chernobyl, being considered as the most dangerous nuclear reactors. The Ukraine smartly used this fear to get the promises for additional funds for energy projects. The G7 and the EBRD, thus involved in the process for completion of the K2/R4 reactors, developed a new set of conditions, one of them being that the completion should also be the least-cost option. At that time it was made clear by the Ukrianian government that they would "anyway" continue completion of the K2/R4 reactors (both at that time approximately 75% complete). The European Commission declared that the total costs of completion of the two reactors as well as an additional reactor at Zaporozhe and the closure of the Chernobyl-3 reactor would cost US$1.6 billion. The initial consultant, the Germany- based firm Lahmeyer, came with a "yes" on the question if this was the least-cost option. The conclusion was clear: "Therefore, the most cost- effective option is to complete some partially constructed nuclear station which will also increase the Ukraine's energy self-sufficiency. The commission has looked at the costs of alternatives, such as updating existing coal-fired stations or new constructions, but found them to be more expensive."

Unfortunately for the EBRD and the Ukrainians the Lahmeyer findings were effectively attacked by independent panels, saying they had been using regressive analysis dating back to a period when the Ukraine had one of the highest energy intensities in the world. The EBRD was forced to overdo her homework. To review the Lahmeyer report, the EBRD announced in September 1996 the establishment of an independent panel to "assess whether the completion of K2/R4 was necessary to meet Ukraine's demand for cheap power after the closure of the Chernobyl-3 station in the year 2000". The so-called Surrey Panel, comprised of six energy experts from the West, was "undertaking its role in an entirely independent manner". The panels' report was released by the EBRD on February 19, 1997, and concluded: "K2/R4 are not economic. Completing these two reactors would not represent the most productive use of EBRD/EU funds at this time." The justification for their conclusions were:

  • electricity demand had been so reduced by the highly depressed economic situation that there is a large capacity surplus wich is likely to last until at least the year 2010;
  • there is little confidence within the panel in any of the estimated costs of completion and operating K2/R4, including waste disposal and decommissioning. This makes the whole idea a high-risk investment;
  • the need for safety upgrades at the existing VVER-1000 stations is pressing. If the safety upgrades increase reliability, the extra output of the existing nuclear reactors would make K2/R4 even more unnecessary;
  • low-energy efficiency in final uses and conversion processes and high losses in electricity transmission and gas pipelines and district heating schemes present an opportunity to improve overall productivity, reduce energy demand and increase effective electricity supply capacity -- all at relatively low cost;
  • even with the closure of Chernobyl by 2000, it is highly unlikely that there would be need for additional base load capacity before 2010.

Reading these conclusions, there is only one action to be taken; the withdrawal of the EBRD and the European Commission from the project. The national governments of the G7 countries must accept that completion of the two reactors is not in the economic interest of the Ukraine and should abandon any bilateral funding proposals. But the Ukrainian government successfully protested against some assumptions made by the Surrey Panel and so the Board of the EBRD, although not longer speaking with one mouth, requested to "reduce uncertainties" and undertake additional economic assessment work. And so the US recently decided to pay "Stone and Webster" for an additional assessment. The firm has been asked to consult various parties on what assumptions would be acceptable to use for additional least-cost modeling work, attempting to go the "consensus route".

Up till now the environmental non-governmental organizations (NGOs), working on the issue, have not been consulted on this. The Surrey Panel, sticking to the viewpoint that their least cost-study was well done and complete are also no longer part of the consultations. The Board of the EBRD will again discuss the findings of the new least cost-study in a "workshop" scheduled for late January 1998 at the earliest, most likely sometime February. In their "documents for public consultation" published in the summer of 1997, the EC "Project Managament Group" gives the latest estimate of the project costs; only completing K2/R4 is now estimated at US$1,265 million.

What is wrong with the safety
Besides the economics there is of course an other issue of concern; the safety of the two reactors. Although the NGOs fighting against the financial aid for new reactors have been mostly focusing on economic arguments (of course the biggest concern for the EBRD...) there is quite some evidence that the safety situation is as bad. And thus that the EC and the G7, as parties in the Memorandum of Understanding, have problems explaining and communicating their wish to proceed with this project.

Within the MOU agreements, it was said that the involved reactors should, due to involvement by the West, reach full Western safety standards. As the commission put it (in 1995): "We insist that they (the reactors) should be completed not just to Russian or Ukrainian standards but to full Western safety levels instead." The president of the EBRD made even a stronger statement: "The safety of any nuclear plant we would be working on would have to be at the highest existing standard." After some years this safety objective was lowered and now the commission will "eventually allow the implementation of a safety level for these two units which is equivalent to the level currently achieved in Western Europe for plants of the same vintage designs". This is roughly a standard similar to that of NPPs designed in the West during the 1970s, without the modifications made following the Harrisburg and Chernobyl accidents. This change in policy is due to the results of initial analysis on the design of both reactors. Already in 1994 an international expert group stated that "in addition to their design shortcomings, most of Ukraine's nuclear plants suffer from poor quality construction materials, inadequate instruments and control, insufficient attention to maintenance". And more recently, even the IAEA and Goscomatom (Ukrainian ministry responsible for overlooking the nuclear power plants) reported "deterioration of equipment at the sites".

It is reported that, even to meet the changed standards, more than 100 design changes would be necessary. For example, the lack of separation of the cable trays (standard condition in the West since the cable tray fire in the US nuclear Browns Ferry plant in 1975); the Surrey Panel reported that the VVER 1000 design does not allow the separation of the cable trays. Because the two involved nuclear reactors are almost complete, modifications to meet the Western standard would "effectively mean tearing down large parts of the reactor building in order to rebuild cable trays, and that while this might be possible, it would cost such very large sums of money that no one has made such a proposal or calculated a probable cost".

Of course all this drew quite some international attention, not in the last place from environmental organizations. The "Bankwatch-network" and for instance Greenpeace are following the matter thoroughly, seeing it as a good chance to block any further plans from the EC and the West in general to provide funds for new nuclear reactors in the former Soviet Union.

Time is on our side. Delay will lead to victory.


  • Private conversations with the 'Bankwatch network', November and December 1997
  • Report: The European Commission, the European Bank for Reconstruction and Development and the Completion of Khmelnitsky 2 and Rovno 4 Nuclear reactors in Ukraine, Greenpeace International, February 1997
  • Financial Times Energy Economist Briefings, February 1997
  • Press release Ukraine Goscomatom, undated, approx. 15 August 1997
  • Actions and Scope Planned for Khmelnitsky 2 and Rovno 4 Environmental Impact Assessment (EIA), documents for public consultation, EC Project Management Group, undated, approx. August 1997
  • Safety problems at Rovno and Khmelnitsky NPP: A preliminary survey, FOE International/Polski Club Ekologiczny/CEE Bankwatch/For Mother Earth, Summer 1997
  • Nucleonics Week, 4 & 18 September 1997

Contact: CEE Bankwatch, Peter Hlobil. c/o Biocit, Chlumova 17, Praha 3 -Zizkov 130 00, Czech Republic.
Tel & Fax: +420-2-2278 0052

Chernobyl already closed - forever? Due to more than 100 defects found in piping systems the reactor number 3 at Chernobyl will remain closed untill at least March 1998 and most probably untill next summer. Defects were found in the main coolant system and in emergency cooling systems as well. The National Academy of Sciences says that the reactor can operate without repairing the small cracks. This was done with the Kursk nuclear plant (in Russia) when simular cracks were found. But the Ukraine Nuclear Regulatory Administration, noting that there were fewer cracks involved, did not agree with the proposal and says the reactor will remain closed untill the problems are solved. This position was supported by the Ukrainian Council of Ministers. One of te biggest problems is that the repair staff is receiving a too high dose (6.5 rem where annual legal limit is 5 rem). The repairs will cost about US$ 55 million. Government has announced that this will be paid by taking money from the State Chernobyl Fund, ment to be used for solving social and environmental problems caused by the Chernobyl disaster in 1986.
(Sources: Nucleonics Week, October 16 and November 6, 1997)

Public hearings and EIA. Very recently WISE-International got directly involved in the K2/R4 completion project as well. Besides all the discussions on economics, the K2/R4 project is currently in a renewed Environmental Impact Assessment (EIA) phase, which requires for instance public hearings, not only in the Ukraine but also in other countries, even when they do not border the Ukraine. The public participation process has already begun in Ukraine with public meetings to discuss the scope of the EIA. However, to date there has not been sufficient involvement of interested parties in or outside of Ukraine. Under the requirements of both the European Commission and the EBRD, a condition for the loan is that there is an adequate public participation.
Working and living in a "potentially affected area" (ESPOO Convention on Tranboundery Pollution), WISE has requested the Ukrainian government to conduct a process of public participation in the Netherlands and thus organize, for instance, public hearings. Besides requesting the Ukrainians, we have also asked the Dutch government to do the same -- they should force the Ukrainians to fulfill the requirements of an EIA process. Up till now, we have not received any official response. Very recent discussions with the responsibles in the Ukrainian government and within the EBRD have made clear that the public participation process has been delayed once more -- making the whole project again more uncertain!!
Contact: Wim Kersten at WISE International, Amsterdam.

EBRD/NSA: Not a nice place to work? Since April, when Manfred Babaschik suddenly left the EBRD's Nuclear Safety Account (NSA), Mark Tomlinson headed both the NSA as well as the Banking Division's Special Energy Projects Department, the latter being responsible for both the Chernobyl shelter implementation program as well the implementation of the G7/Ukraine Memorandum Of Understanding agreements to complete the two Ukrainian reactors K2/R4. Last August, Tomlinson announced his intention to leave the EBRD by accepting a job as head of the World Bank's African Energy Program. Quite recently, another senior staff member left the bank's NSA department; F. Maltini, responsible for an ECU 118-million (US$130 million) safety upgrade, waste management and decommissioning program at Chernobyl. The NSA is, until replacement is found, run by Joachim Jahnke, EBRD's vice-president. The choice for the successor of Maltini will be between a Canadian and a Swede. Charles Frank, new first vice-president at the EBRD (coming from General Electric), will be mainly responsible for K2/R4. From an anti-nuclear point of view it is a good thing that Tomlinson left the bank -- he was, despite all the troubles and arguments against, one of the biggest advocates for the completion of the Ukrainian reactors. Unfortunately, one of the opposers of the deal, EBRD's President De Larosiere, is leaving the bank as well in January. Both France and Germany are vying for the post. Up till now it is unclear whether De Larosiere will lead another board workshop (most probably in February 1998) to decide whether the bank should review again in detail the K2/R4 project.