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Nuclear Monitor Issue: 
Special: Agenda 2000: Will it increase nuclear safety in Eastern Europe?

(June 19, 1998) All European Union member states are at the same time member of Euratom, the Atomic Energy Community of the EU. Euratom is established way back in the fifties and it's main aim was (and still is): "to contribute to the raising standard of living in the Member States and to the development of relations with the other countries by creating the conditions necessary for the speedy establishment and growth of nuclear industries"43.
The accession to the Euratom Treaty will have consequences for CEE countries in many different areas of which we describe some.


5.1: Euratom Supply Agency

Since the establishment of Euratom in 1958, the Euratom Supply Agency is responsible for secur-ing ample supply of nuclear fuels in the Euratom countries. In the 1950s it was feared there would soon be a shortage of uranium. However, in the past 40 years, there has never been a scarcity of nuclear fuels. The ESA has the exclusive right to conclude contracts for delivery of nuclear materials and is formally also owner of all nuclear materials in the EU countries.

Since 1991 the ESA controls the uranium import from CIS based on Article 81 of the Euratom Treaty. When Sweden became an EU member in 1994, its nuclear utilities were forced to lower their uranium imports from Russia from 40% to 20% of their annual uranium needs. The extra costs were calculated at about US$38 million a year, because Russian uranium prices were much lower at that time than those of other uranium producers.44 The extra costs for the Swedish utilities will have decreased now, since the price difference between NIS (New Independent States) and non-NIS-supplied uranium has become less in the last few years.
However, Finnish utilities (Finland became an EU member state at the same time) were allowed to continue buying the same amount of Russian-produced uranium. Reason for that is the fact that two of the four Finnish nuclear reactors are Sovietdesigned VVER reactors and thus use fuel with a different design.45 European suppliers don't yet produce VVER fuel because Russia does not want to give the fuel design characteristics.
The Euratom Supply Agency has from the beginning the exclusive right to conclude contracts for delivery of nuclear materials and is formally also owner of all nuclear materials in the EU countries. One exception applies to Special Fissile Materials (plutonium and high-enriched uranium). These are left to the disposal of the producer, to be stocked or to be used for his own needs or to be placed at the disposal of other connected companies. Export of special fissile materials outside the EU can only happen by the ESA after approval of the Commission.
With the exception of the special fissile fuels, in practice the ESA has only a strict formal function: officially they must sign each contract in which nuclear fuels or services are sold or bought. Since 1960 the utilities were allowed the right to conclude their own contracts and only send the contracts afterwards to the ESA for signing.

origins of natural uranium delivered to EU utilities 1997

Euratom quota policy
The reason Sweden was forced to lower the import of Russian uranium is the `informal' quota policy of ESA, regarding the import of natural uranium and enriched services from outside the EU. ESA uses a theoretical ceiling for uranium of 25% dependency on a single uranium-producing region, such as NIS or North America, in the name of supply diversification and 20% for a single country or supplier. Therefore Russia is not allowed a larger market share than about 20%. An obligation of the Czech national electricity company to buy domestic uranium would infringe EC law, but because uranium mining is phased out anyway in the Czech Republic, no problems are expected with that. But the European Commission notes also that Bulgaria's accession could increase overall EU dependence on Russian uranium and that the country, after accession, would need to abide by the EC's policy of security through diversification.46
The quota policy is "informal", because it has never been officially published. The policy is aimed to assure diversification and security of supply and to protect the European enrichment industry (Eurodif and Urenco). Together, these two European enrichers have a EU market share of about 80% and Russia has the remaining 20%.47 So an important consequence of this policy is the protection of the European enrichment companies, which each have 40% of the EU market.

CEE nuclear utilities
There are 20 Soviet-designed reactors in operation in the Central and Eastern European countries, which buy all their nuclear fuel from Russia. If the same EU policy is applied to those countries as was to Finland, most CEE utilities would be allow-ed to continue to buy cheap Russian fuel (uranium and enrichment service) when they have become EU member as long as fuel production technology for the different Soviet-designed reactors is not available in the West. Therefore their nuclear fuel costs would stay about the same, unless Russia starts asking higher prices. That is quite possible: Russia more than doubled reprocessing prices in the last years. That's why some countries stopped reprocessing their spent fuel.

Westinghouse got access to VVER fuel design characteristics during upgrading work of the Czech Temelin VVER-1000 reactors in the last years. It got a contract to fabricate two first cores and four reloads for Temelin.48 The company will seize each opportunity to capture part of the CEE nuclear fuel market, for both VVER-440 (which has a different fuel design) and VVER-1000 reactors. Western fuel companies as BNFL, Siemens, ABB and Framatome are also interested in this new market, where Russia currently has a near-monopoly.
From the moment Western fuel fabricators are capable of producing fuel for each VVER-type reactors, the ESA will most likely not allow any longer a larger than 20% share of Russian fuel. Those countries could then be forced to sign more expensive contracts with non-NIS uranium suppliers. But for this also, the future is not very clear: no clear policy for this part of the accession is established. Although Russian uranium and fuel prices will continue to rise, and price difference with Western service will decrease, it's very likely that nuclear fuel prices will increase in the accession countries.


5.2: Euratom safeguards

If countries join the European Union they, like all EU countries, become subject to Euratom safeguards. From 1958 on the Euratom Safeguards Agency has carried out safeguard inspections at civil nuclear facilities in the member-states, to ensure that no diversion of nuclear materials take place "for other than intended uses". However, the Euratom Treaty allows `intended use' to be also 'military use'. This is in contrast with the IAEA safeguards, which do not allow any diversion of civil nuclear material into a military program. The IAEA, however, has no right to safeguard the nuclear weapon states other than at a small number of selected facilities on a voluntarily basis. In 1996 the IAEA inspected only one nuclear installation in France and four in the United Kingdom.49 Safeguard agreements with the IAEA of the accession countries will be changed in agreements between Euratom and the IAEA.
At first sight it might seem the Euratom inspections are more strict than the IAEA's, but there are important differences. The EU countries are the only ones which have a regional safeguards system, where the Euratom Safeguards Agency controls the nuclear materials and the IAEA only verifies the Euratom inspections. This comes down to self-control. In other countries there is some jealousy about the special treatment. Especially in Northeast Asian countries (China, Japan, South Korea) there has since long been discussion on this theme, and they are talking of establishing Asiatom.50
Inside the EU non-nuclear weapon states, it is Euratom which carries out all the inpections. The IAEA controls mainly the data which it receives each month from Euratom. IAEA inspectors participate in less than 50% of all Euratom inspections.
Euratom reports movements and inventories of nuclear materials to IAEA. Although the European Commission promised to send Euratom Safeguard Reports to the EP on a biannual basis, no such report has been made public since 1992.

Euratom-USA agreement
In November 1995 a new agreement for nuclear cooperation between the European Union and the United States was signed. Main criticism was the failure from the US to keep control of nuclear material once it is inside the EU. The US Nuclear Control Institute stated: "The new agreement cedes to Euratom full control over US-supplied nuclear reactors, technology and materials in the European Union".51

In the future, it will be up to Euratom members to decide whether their particular uses and re-transfer of these items are consistent with the US non-proliferation requirements. Euratom's new members will have full rights and privileges to nuclear materials and technology originating from the US, with no US consent whatever.


5.3: Euratom loans

Euratom loans were introduced to help finance the construction of nuclear installations in the EU. In 1990 the Council increased the amount to 4,000 million ECU. But inside the EU less and less use was made of the loans. By the end of 1996 the amount of outstanding loans was only 572 million ECU.52
In 1994 Euratom loans were also made available to "certain countries" outside the EU, by which was meant the CEE countries. 1,100 million ECU could be lent to finance upgrading and completion of nuclear reactors. Up to now, no CEE country has made use of the Euratom loans. Under dicussion are loans for the completion of the Ukrainian Kmelnitsky-2 and Rovno-4 reactors, the Kalinin 3 reactor in Russia and for upgrading and modernization of the Kozloduy 5 and 6 reactors in Bulgaria, but no decisions have been made yet. In contrast to financing by the EBRD, which is limit-ed to at most 30% of the costs, Euratom loans are allowed to cover 50% of the costs of construction. Euratom loans also form part of the Agenda 2000 financial instruments.

The criteria for projects eligible for loans is very broad requiring only that the projects had "received a favorable opinion from the Commission in technical and economic terms".
Therefore, the Commission has to undertake both a technical (safety) and economic review of the projects. The safety analysis is undertaken by the PHARE/TACIS Nuclear Safety Expert Group (NSEG), under the direction of Directorate General 1A. This body is comprised of representatives of member-states, which give a consensus opinion on the project. The economic analysis is undertaken by the Commission which prepares the assessment of the justification of the project, taking into account a specific recommendation from the European Investment Bank on the economic and financial aspects.
The final decision of the Commission is made by the full Cabinet of Commissioners.53


5.4: Euratom Treaty already invalid?

In a recent report54, an interesting argument about the validity of the Euratom Treaty is described.
Contrary to the European Steel and Coal Community (SCSC) Treaty, there is no expiry date for the Euratom Treaty. However, one could say that the treaty has already expired because the main objective (create conditions for nuclear energy to grow) is no longer necessary. In the EU, 14 of the 15 member-states have come to reject any growth in nuclear capacity, so Article 1 is no longer valid. The European Commission called the nuclear industry in Europe a mature industry. But then there is no need to create the conditions for it to grow if it's already mature. In that case Article 1 is outdated.
Therefore, if the treaty's objective has been removed, the treaty itself cannot be considered valid any longer. It must be considered defunct.

There is a growing movement for revision of the Euratom Treaty. However, it is very difficult of members of the European Parliament (MEP) to have influence on it. There is not even a requirement for the Commission to consult the European Parliament over the illustrative nuclear programs. The parliament is almost totally ignored on international agreements (like paying 75 million ECU for nuclear reactors in North Korea), although the treaty calls for consultations on those issues.
The parliament tried hard to revise the Euratom Treaty at the June 1997 Amsterdam Council meeting, also because of the Accession program, but at the end of the day nothing happened. One or two member-states, and mainly France, have consistently refused any changes in the treaty, and because of the need for unanimous decisions, they succeeded.