Even though Pakistan is fighting its war on terror China is investing in Pakistan's economy like there is no tomorrow. China's main interest in the treacherous territory of Balochistan are the copper mines and the Gwadar Port on the Arabian Sea.
In the Pakistani province of Balochistan, South Asia and central Asia bleed into the Middle East. Bordered by Afghanistan, Iran and the Persian Gulf, and well endowed with oil, gas, copper, gold and coal reserves, Balochistan is a rich prize that should have foreign investors battering at the gates. But for a half-century it has been the exclusive playground of the Pakistani government and its state-owned Chinese partners. China would prefer it to stay that way.
China is Pakistan's oldest military and political ally, but in the last two decades it is the economic component of the alliance that has taken center stage. Pakistan, and in particular Balochistan, is China's physical link to its sizable investments in Iranian gas, Afghan hydropower and Gulf oil. Explains Andrew Small, a fellow at the German Marshall Fund, the Sino-Pak relationship "matters more now, because of India's economic growth. Pakistan being a trade and energy corridor means that possible pipelines and projects [in Pakistan] have a strategic significance beyond the specific investments." Chinese control of Pakistan's commodities corridor can "bind India down in South Asia, restricting its capacity to operate elsewhere."
Chinese companies have poured at least $15 billion into Baloch projects: an oil refinery, copper and zinc mines and a deepwater port at Gwadar, in the Gulf of Oman. "They wanted Gwadar to be another Dubai," says Khurram Abbas, the port's managing director, "to capture the transit trade with countries that are landlocked, like Afghanistan, and to encourage transshipment trade from the Persian Gulf to East Africa."
China's Tianjin Zhongbei Harbor Engineering has invested $200 million to build the first three berths and plans to invest a total of $1.6 billion to expand the port in the future. But business at Gwadar has been slow. Though the three berths have the capacity to handle $2 billion worth of cargo a year, the port saw only $700 million in 2009. "The challenge," says Abbas, "is that Gwadar is not yet linked to the rest of the country. The government was supposed to provide road connectivity. Without roads there can be no commercial activity [in Balochistan]. And we need commercial activity, investors to set up factories around Gwadar, to get cargo for the port."
China is taking matters into its own hands, starting to build a highway from Gwadar to the capital of Balochistan, Quetta, on the Afghan border, where it will connect to Pakistan's national highway network, and from there to the Karakoram Highway that leads into China. China's Harbor Engineering Corps is also working on a new airport at Gwadar, due to open in 2013.
Infrastructure is not the only challenge that Chinese investors in Balochistan face. The province is a key battleground in the wars currently threatening Pakistan. Quetta is rumored to be hiding wanted leaders from the Afghan Taliban. Small towns in the Baloch heartland, meanwhile, are a launchpad for a decades-old separatist movement that capitalizes on populist resentment of federal agencies and foreign investment Chinese firms can usually weather these threats. Explains the German Marshall Fund's Small, "They are less concerned about security than the U.S. because they have faith in the Pakistani military's ability to look out for their interests, a level of faith that Chinese workers will get privileged levels of protection even amidst destabilizing [political] circumstances." Unsaid: China is willing to play in the bribery culture traditional to the area.
Moreover, China recruits local figures as managers. Muhammad Sanjrani, the managing director of China's Saindak copper mine in Chagai, Balochistan, is also the head of the local tribe, with historic control of the Chagai region, and has worked to sell the project to the populace.
Beijing is willing to play hardball to protect its position in Balochistan. That's a lesson learned the hard way for Tethyan Copper, a joint venture between Canada's Barrick Gold ( ABX - news - people ) and Chile's Antofagasta. In 2006 Tethyan signed a deal to survey, and then develop, the Reko Diq reserve in Balochistan, estimated to hold $70 billion in copper and gold.
Though the provincial government holds a 25% stake in the venture, the deal was signed between the federal government and Tethyan's foreign execs, and no prominent tribal authorities are involved. As a result, the mine has been unusually unpopular, exacerbating threats to other foreign investments in the province, including China's highway project.
In January the Baloch government, struggling politically and looking to appease separatist hardliners, announced it would cancel Tethyan's license and force investors to absorb a $3 billion loss. Almost immediately the U.S. intervened, putting pressure on the Pakistani central government to dissuade Quetta from doing this. U.S. diplomats believe the sanctity of the Tethyan deal is essential to its efforts to encourage Western investment in Pakistan as a counter terror tool.
For China, however, American intervention was an alarm bell, confirming longstanding suspicions in Beijing that Pakistan's alliance with the U.S. in Afghanistan would come at the expense of China's relationship with the Pakistani military establishment and its exclusive access to Pakistan's wealth and strategic location.
But the confrontation between Pakistan's central government, responding to U.S. pressure, and a more intransigent provincial leadership also presented China with an opportunity. The giant Metallurgical Corp. of China, which controls the Chinese stake in the Saindak site, bid to take over the Reko Diq site from Tethyan, too.
Though the provincial and federal governments have yet to agree, MCC made a compelling case. In private meetings with Baloch leaders the Chinese representatives agreed to build a railroad and a power plant in Balochistan as well as to waive any requirements for sovereign guarantees. Says a frustrated William N. Center, the U.S. State Department's foreign commercial attaché in Pakistan, "These are terms that no private company could compete with."
Push to the Sea
A highway from Gwadar to Quetta will serve as a pipeline for China. Metallurgical Corp. of China, a stakeholder in the Saindak copper mine, is aiming to take over Barrick's Reko Diq site.
Reko Diq :
Reko Diq is a small town in Chagai District, Balochistan, Pakistan, in a desert area 70 kilometres north west of Naukundi, near to the Iran-Afghan border.
Reko Diq, also the name of an ancient volcano, literally means sandy peak, but this is something of a misnomer. It could be called Tangav Diq, or gold peak, because according to development expert Syed Fazl-e-Haider, below the sands lie some 12.3 million tons of copper and 20.9 million ounces of gold. The copper-gold deposits at Reko Diq are believed to be even bigger than those of Sarcheshmeh in Iran and Escondida in Chile.
Reko Diq is a large copper-gold porphyry mineral deposit on the Tethyan belt, located in southwest Pakistan in the province of Balochistan in which Barrick holds a 37.5% interest. A pre-feasibility study was completed in third quarter 2009; a full feasibility study is being finalized and is under review and progress continues with the expansion studies and the baseline environmental and social impact assessment which is expected to be completed in the first half of 2010.
Barrick’s share of measured and indicated and inferred gold resources are 9.5 million ounces1 and 6.4 million ounces1, respectively and its share of measured and indicated and inferred copper resources are 11.7 billion pounds1 and 8.4 billion pounds.
Friday, April 30, 2010
Wednesday, April 28, 2010
China to build two 650-MW Nuclear Reactors in Pakistan - Chashma-3 and -4.
After the completion of 300 MW Chashma-I and Chashma-II Nuclear reactors China today signalled building of two more Nuclear Reactors. Pakistan Deal Signals China's Growing Nuclear Assertiveness
A mum US watches the pending Sino–Pakistan reactor deal turn into reality and reflects the growing confidence and assertiveness of China’s nuclear energy program. Contrary to guidelines adopted in 1992 by nuclear equipment supplier states in the Nuclear Non-Proliferation Treaty (NPT), China is poised to export two 650 MW Nuclear power reactors to Pakistan. This transaction is about to happen at a time when China’s increasingly ambitious nuclear energy program is becoming more autonomous.
Guidelines of the Nuclear Suppliers Group (NSG), representing 46 NPT states, call on parties to the NPT not to supply nuclear equipment to non–nuclear-weapon states without comprehensive IAEA safeguards, including Pakistan. China joined the NSG in 2004.
The United States and other NSG states may object to the pending transaction but they cannot prevent China from exporting the reactors. Senior officials in NSG states friendly to the United States said this month they expect that President Barack Obama will not openly criticize the Chinese export because Washington, in the context of a bilateral security dialogue with Islamabad, may be sensitive to Pakistan’s desire for civilian nuclear cooperation in the wake of the sweeping U.S.–India nuclear deal which entered into force in 2008 after considerable arm-twisting of NSG states by the United States, France, and Russia. The United States may also tolerate China’s new nuclear deal with Pakistan because Obama wants China’s support for United Nations Security Council sanctions against Iran this spring.
China’s Civilian Nuclear Industry On The March:
The pending Sino–Pakistan reactor deal reflects the growing confidence and assertiveness of China’s nuclear energy program as it establishes a track record of reliability in reactor construction and operation. Chinese nuclear entities are wary of interference from the International Atomic Energy Agency (IAEA) in their programs and are keen to establish their freedom of action vis-à-vis cooperating foreign governments and firms. China within a few years also wants to become a global nuclear equipment exporter.
If China succeeds, ten years from now it will likely become the world’s second-biggest nuclear power generator after the United States. After years of bilateral disputes over nonproliferation issues, in 1998 the U.S. Congress allowed a 1985 Sino–U.S. nuclear cooperation agreement to enter into force. After that, U.S. nuclear cooperation with China dramatically increased, culminating in China’s 2006 selection of a consortium of companies led by Westinghouse to build four AP1000 power reactors in China. Westinghouse bested bidders from France and Russia in a competition set up by China to determine which of the three would provide the technology blueprint for the future standardized development of China’s nuclear power industry.
China chose Westinghouse after it agreed to transfer to China ownership of the technology for the new and untried 1,000-MW reactor. China then awarded contracts to Westinghouse and its partners to build four AP1000s in China. The first two are scheduled to be finished in 2013. Westinghouse scored another coup when in 2008 China selected AP1000 for China’s first raft of inland power reactors.
Westinghouse’s apparent emergence as primus inter pares among foreign reactor vendors in China in 2006 was linked to the fortunes of the State Nuclear Power Technology Co. (Snptc). It was set up by China’s State Council of Ministers to take charge of technology selection and transfer for China’s future nuclear power program, after two decades during which China organized a handful of “boutique” reactor projects in cooperation with Canada, France, Japan, and Russia.
China also does not share NRC’s view that a terrorist attack on reactors, using a hijacked passenger aircraft as a weapon, is a realistic enough scenario to warrant modifying the design. Right now, China operates only eleven reactors representing about 9 gigawatts (GW) of installed generating capacity, but these have established a record of reliability, and have convinced China’s leaders that nuclear power is safe, efficient, and profitable. Fed by galloping energy demand and concerns for global warming among Chinese leaders, China’s appetite for nuclear power is now increasing. In 2005 China expected to have 40 GW on line by 2020. Chinese officials and executives now routinely assert that by 2020 China will have a total installed capacity over 70 GW. If China succeeds, ten years from now it will likely become the world’s second-biggest nuclear power generator after the United States.
Shortly after China selected Westinghouse to shape its nuclear future, rival Areva made a separate deal with China to build two of its new EPR reactors in Guangdong Province in China’s southeast, where French nuclear firms have been engaged since the late 1980s. Unlike Westinghouse, Areva also offered China a suite of fuel cycle technology options, and French officials hoped that a mammoth fuel cycle deal would coax China to continue building the EPR.
In line with plans by China to build more reactors, China promulgated that it would follow the path of France, Russia, and Japan and embark on commercial-scale plutonium separation from China’s spent fuel, and recycle of the plutonium as reactor fuel. Areva offered China to help set up a reprocessing industry in China, modeled on its own experience in France. More recently, Russia has made a counteroffer to do the same, vowing to integrate Chinese labs into advanced fuel cycle R&D work now ongoing in Russian centers.
China’s nuclear power program has become more aggressive, politically organized, and independent of its foreign partners in the wake of recent changes in China’s decision-making structure. China will certainly build more reactors than it anticipated when beginning in 2003 it organized the competition leading to selection of Westinghouse. But many or most of these set up this decade will likely not be AP1000s or EPRs but instead be based on the original French design built in Guangdong and now dubbed China Pressurized Water Reactor or CPR-1000. To meet China’s higher targets for more nuclear capacity, China is now replicating these CPRs.
Rumors in Beijing circulated last month that China will therefore go back on its plan to permit Westinghouse to build all of the first group of inland power reactors in the country. Chinese officials won’t confirm that, but utility executives―including at China Power Investment Corp. (CPI), a major AP1000 investor—said that China through 2020 will shift resources away from more AP1000s and instead toward cookie-cutter construction of the CPR at many Chinese locations, including at inland sites.
In the meantime, the ambitious construction schedule for the U.S.-designed reactors in China has come under heavy pressure.
In part out of Chinese concern to keep construction on track, China’s nuclear regulator, the National Nuclear Safety Administration (NNSA), will not agree to a proposal, favored by the U.S. Nuclear Regulatory Commission (NRC) and Westinghouse, to modify the design of the containment structure of the AP1000 to provide improved protection against an air crash. In the United States, NRC, after a design review prompted by post-9/11 concerns about terrorist threats, asked Westinghouse to change the design of a shield building which is part of the containment and to use stronger materials. Westinghouse then urged China to also follow that advice.
China will not do that, Beijing officials said last month after consultations with Westinghouse and U.S. regulators. “China will build Revision 15,” the AP1000 design version originally approved for construction in both the United States and in China, one official said. “It will not approve Revision 17,” which incorporates the changes sought by NRC and Westinghouse, he said.
Changing the AP1000 design now would require construction in China to be halted and delayed. China also does not share NRC’s view that a terrorist attack on reactors, using a hijacked passenger aircraft as a weapon, is a realistic enough scenario to warrant modifying the design.
The Westinghouse project has encountered other challenges which, so far, have not caused schedule delays. Last year, a key firm which is part of the technology transfer program, China First Heavy Industries (CFHI), failed to produce forgings to the required quality standard for the AP1000. Project executives said CFHI had difficulty handling the demanding steel material called for in critical components. The schedule was not set back because a Westinghouse partner in Korea, Doosan, had a stock of prototype forgings it had made earlier. The AP1000 has also encountered problems in main coolant pumps, which are of a unique design. Chinese officials said last year that further deployment of the AP1000 would depend on successful demonstration of these pumps, which were a critical feature of the passive cooling system billed as one of the key advantages of this reactor model. According to diplomats there have also been some Chinese bureaucratic delays for certain AP1000 project approvals.
Fed by galloping energy demand and concerns for global warming among Chinese leaders, China’s appetite for nuclear power is now increasing.
Nearly immediately after partnering with Westinghouse, Snptc demanded the U.S. firm aggressively localize AP1000 production at a pace Westinghouse would not agree to, including for safety reasons. Snptc and Westinghouse then compromised, but utility investors say that the AP1000 program cannot go fast enough to localize and at the same time supply China’s growing nuclear power needs, and that China has continued to pressure Westinghouse to accelerate the localization program. Because production of CPRs in China is already highly localized after about 15 years of Chinese experience, domestic politics in China favors building more of these reactors.
Snptc also wants Westinghouse to increase the power of the reactor to 1,400 MW and then to 1,700 MW, matching the EPR. According to Snptc last month the 1,400-MW design will be ready for construction by 2013. Many foreign executives are skeptical that schedule will hold up.
China’s nuclear power program has become more aggressive, politically organized, and independent of its foreign partners in the wake of recent changes in China’s decision-making structure. Those at the top of this pinnacle are now watching how Snptc delivers in tandem with Westinghouse.
Ten years ago Chinese central planners began looking at uranium as their chosen future fuel to meet breakneck demand for base load electricity. But Premier Zhu Rongji, who was skeptical, kept the lid on.
Under Zhu, who was replaced by Wen Jiabao in 2003, the biggest player in nuclear energy decision making was the China Atomic Energy Authority (CAEA), which answered to the Committee for Science, Technology, and Industry for National Defense (Costind), an organization which supervised all defense-related industry. Under Zhu, Costind and CAEA began losing power, especially after China in 1998 established the General Armaments Department (GAD), now one of four departments of the People’s Liberation Army (PLA). As GAD’s authority increased, Costind’s and CAEA’s diminished.
Two years ago, China set up a brand new organization to take command of China’s energy policy, including nuclear policy, the National Energy Administration (NEA). It is headed by Zhang Guobao, who strongly favors nuclear power development and who is also Vice-Chairman of China’s leading planning agency, the National Development and Reform Council (NDRC). NEA has largely supplanted CAEA, and it reports to Li Keqiang, China’s First Vice-Premier, a likely successor to Wen Jiabao.
NEA—which is staffed by about 170 experts, including fewer than 20 responsible for nuclear matters—cooperates with NDRC on setting planning targets, but NEA decides which reactors will be built, at what sites, and which state-owned enterprises will get contracts. It, Chinese officials said last month, will favor construction of more CPRs, and will also support China’s biggest nuclear SOE, the China National Nuclear Corp. (CNNC) with a total payroll of over 100,000, in exporting more reactors to Pakistan.
Possible Considerations in a China-Pakistan Deal :
China has long assisted Pakistan’s nuclear energy program. In 1991 CNNC contracted with the Pakistan Atomic Energy Commission (PAEC) to build Chashma-1, a 325 MW power reactor. It was finished and began operating in 2000.
In 2004, China joined the NSG. China then explained to the NSG that a longstanding framework agreement with Pakistan committed China to provide a second reactor, Chashma-2, more research reactors, plus supply of all the fuel in perpetuity for these units. Chashma-2 construction began in 2005.
Chashma-2 is scheduled to be finished in 2011. To keep CNNC at work in Pakistan thereafter, CNNC and PAEC negotiated terms for two 650-MW reactors, Chashma-3 and -4.
In 2006 Pakistan urged China to approve the new project but China was not keen to do so. Pakistan diplomats said then China was holding back because it was not clear that the U.S.-India nuclear cooperation deal would be approved by both governments and by the NSG.
Chinese officials said last month that export of the reactors to Pakistan would be justified in consideration of political developments in South Asia, including the entry into force of the U.S.–India deal and the NSG exemption for India.
After the U.S.–India deal was approved and India’s NSG exemption entered into force without any Chinese objections in 2008, China’s policy evolved to support demands by Pakistan for compensation, but China did not expressly advocate awarding Pakistan a broad exemption from NSG trade sanctions matching India’s.
NSG country representatives last week said they expect that the Obama administration will accept a limited amount of additional Chinese nuclear commerce with Pakistan as a price for getting Chinese support on UN Security Council sanctions against Iran in weeks ahead. Some suggested that the United States would also enlist China in this regard to persuade Pakistan to drop its opposition to negotiation of a Fissile Material Cut-Off Treaty, which Pakistan has said it could not accept because the U.S.–India deal had tilted the nuclear balance in South Asia in India’s favor.
As long as Pakistan resists outside initiatives which would limit the autonomy of its strategic nuclear program, and because China is believed to be hiding behind Pakistan in avoiding making a firm FMCT commitment in light of China’s strategic dilemmas with the United States, it is doubtful whether China would have effective influence on Pakistani decisions to halt fissile material production.
Mindful that the NPT’s 189 parties will convene a Review Conference on the status of the treaty in May, European diplomats told Chinese counterparts last month that the NSG will currently not agree to exempt Pakistan from NSG sanctions, regardless of Pakistan’s demands for such a step during bilateral security talks with the United States.
Senior NSG diplomats said this month that they expect that soon after China has completed political and contractual arrangements for the reactor sale to Pakistan, China will inform the NSG of its planned transaction. The matter could then be taken up by the NSG as an agenda item or point of business at a future NSG meeting. So far no NSG meetings are scheduled in 2010 prior to an annual plenary meeting in New Zealand in late June.
The U.S. State Department, in line with its response to a 1998 reactor export from Russia to India, continues to hold that a new reactor export by China to Pakistan would be contrary to both NSG and U.S. policy, but whether the United States would record an objection at the NSG or encourage other NSG states to do so would be up to President Obama following interagency discussions and consultation with foreign governments including Pakistan and China.
If the United States were not to register opposition to China’s new exports, that would signal the United States under Obama was prepared to brush off an important nuclear nonproliferation norm on grounds of political expediency.
Chinese officials said last month that export of the reactors to Pakistan would be justified in consideration of political developments in South Asia, including the entry into force of the U.S.–India deal and the NSG exemption for India. Western diplomats said China would not strongly favor an NSG exemption for Pakistan matching India’s because that would not additionally benefit Chinese industry and because Pakistan, compared to India, is a limited nuclear power market with far less infrastructure and far fewer financial resources.
China in 2004 did not claim that more power reactors after Chashma-2 would be “grandfathered” by the prior Sino–Pakistan nuclear accord, and China has argued instead that there are compelling political reasons concerning the stability of South Asia to justify the exports. China will therefore not justify the transactions on the basis of any confidential commercial agreements between China and Pakistan, NSG state representatives said.
Should any NSG party object to these Chinese exports, the NSG would have no recourse to prevent the transaction, because its guidelines are not legally binding, leaving a decision to abide by the guidelines up to each sovereign member state.
Notification by China of intent to export reactors to Pakistan will prompt an internal debate among NSG members over whether to “jointly reconsider their common safeguards requirements” under paragraph 5 of the NSG guidelines, because the Sino–Pakistan transaction came to fruition just two years after the United States, France, and Russia firmly pressured many supplier states to grant India a broad exception to NSG trade rules.
A long term remedy could be provided...by making significant changes in the rules governing the world’s nuclear nonproliferation and trade regime.
In support of the U.S.–India deal, former IAEA Director General Mohamed ElBaradei in bilateral meetings with NSG states in 2007 and 2008 urged the NSG to eventually lift NPT sanctions against both Pakistan and Israel.
U.S. diplomats beginning in 2005 held out to Pakistan a distant promise that it would be exempted from the NSG safeguards requirements, but they weren’t counting on having to make the hard choices faced by the United States concerning Pakistan and China on many fronts in 2010. Still, if the United States were not to register opposition to China’s new exports, that would signal the United States under Obama was prepared to brush off an important nuclear nonproliferation norm on grounds of political expediency. Since NSG states are awaiting leadership from the United States on how to eventually respond to China’s challenge of the rules, tacit U.S. acquiescence would seriously damage the NSG’s credibility as a rule maker for nuclear trade.
A long term remedy could be provided—as Switzerland in 2008 suggested in explaining its approval of the NSG exemption for India—by making significant changes in the rules governing the world’s nuclear nonproliferation and trade regime. But the breach created by the U.S.-India deal, which would be opened wider by Chinese export of reactors to Pakistan, will not be easily closed because, as stated by paragraph 16 of the guidelines, “unanimous consent is required for any changes in the guidelines.” In the meantime, as global nuclear trade surges, NPT suppliers will be encouraged to ignore the rules.
A mum US watches the pending Sino–Pakistan reactor deal turn into reality and reflects the growing confidence and assertiveness of China’s nuclear energy program. Contrary to guidelines adopted in 1992 by nuclear equipment supplier states in the Nuclear Non-Proliferation Treaty (NPT), China is poised to export two 650 MW Nuclear power reactors to Pakistan. This transaction is about to happen at a time when China’s increasingly ambitious nuclear energy program is becoming more autonomous.
Guidelines of the Nuclear Suppliers Group (NSG), representing 46 NPT states, call on parties to the NPT not to supply nuclear equipment to non–nuclear-weapon states without comprehensive IAEA safeguards, including Pakistan. China joined the NSG in 2004.
The United States and other NSG states may object to the pending transaction but they cannot prevent China from exporting the reactors. Senior officials in NSG states friendly to the United States said this month they expect that President Barack Obama will not openly criticize the Chinese export because Washington, in the context of a bilateral security dialogue with Islamabad, may be sensitive to Pakistan’s desire for civilian nuclear cooperation in the wake of the sweeping U.S.–India nuclear deal which entered into force in 2008 after considerable arm-twisting of NSG states by the United States, France, and Russia. The United States may also tolerate China’s new nuclear deal with Pakistan because Obama wants China’s support for United Nations Security Council sanctions against Iran this spring.
China’s Civilian Nuclear Industry On The March:
The pending Sino–Pakistan reactor deal reflects the growing confidence and assertiveness of China’s nuclear energy program as it establishes a track record of reliability in reactor construction and operation. Chinese nuclear entities are wary of interference from the International Atomic Energy Agency (IAEA) in their programs and are keen to establish their freedom of action vis-à-vis cooperating foreign governments and firms. China within a few years also wants to become a global nuclear equipment exporter.
If China succeeds, ten years from now it will likely become the world’s second-biggest nuclear power generator after the United States. After years of bilateral disputes over nonproliferation issues, in 1998 the U.S. Congress allowed a 1985 Sino–U.S. nuclear cooperation agreement to enter into force. After that, U.S. nuclear cooperation with China dramatically increased, culminating in China’s 2006 selection of a consortium of companies led by Westinghouse to build four AP1000 power reactors in China. Westinghouse bested bidders from France and Russia in a competition set up by China to determine which of the three would provide the technology blueprint for the future standardized development of China’s nuclear power industry.
China chose Westinghouse after it agreed to transfer to China ownership of the technology for the new and untried 1,000-MW reactor. China then awarded contracts to Westinghouse and its partners to build four AP1000s in China. The first two are scheduled to be finished in 2013. Westinghouse scored another coup when in 2008 China selected AP1000 for China’s first raft of inland power reactors.
Westinghouse’s apparent emergence as primus inter pares among foreign reactor vendors in China in 2006 was linked to the fortunes of the State Nuclear Power Technology Co. (Snptc). It was set up by China’s State Council of Ministers to take charge of technology selection and transfer for China’s future nuclear power program, after two decades during which China organized a handful of “boutique” reactor projects in cooperation with Canada, France, Japan, and Russia.
China also does not share NRC’s view that a terrorist attack on reactors, using a hijacked passenger aircraft as a weapon, is a realistic enough scenario to warrant modifying the design. Right now, China operates only eleven reactors representing about 9 gigawatts (GW) of installed generating capacity, but these have established a record of reliability, and have convinced China’s leaders that nuclear power is safe, efficient, and profitable. Fed by galloping energy demand and concerns for global warming among Chinese leaders, China’s appetite for nuclear power is now increasing. In 2005 China expected to have 40 GW on line by 2020. Chinese officials and executives now routinely assert that by 2020 China will have a total installed capacity over 70 GW. If China succeeds, ten years from now it will likely become the world’s second-biggest nuclear power generator after the United States.
Shortly after China selected Westinghouse to shape its nuclear future, rival Areva made a separate deal with China to build two of its new EPR reactors in Guangdong Province in China’s southeast, where French nuclear firms have been engaged since the late 1980s. Unlike Westinghouse, Areva also offered China a suite of fuel cycle technology options, and French officials hoped that a mammoth fuel cycle deal would coax China to continue building the EPR.
In line with plans by China to build more reactors, China promulgated that it would follow the path of France, Russia, and Japan and embark on commercial-scale plutonium separation from China’s spent fuel, and recycle of the plutonium as reactor fuel. Areva offered China to help set up a reprocessing industry in China, modeled on its own experience in France. More recently, Russia has made a counteroffer to do the same, vowing to integrate Chinese labs into advanced fuel cycle R&D work now ongoing in Russian centers.
China’s nuclear power program has become more aggressive, politically organized, and independent of its foreign partners in the wake of recent changes in China’s decision-making structure. China will certainly build more reactors than it anticipated when beginning in 2003 it organized the competition leading to selection of Westinghouse. But many or most of these set up this decade will likely not be AP1000s or EPRs but instead be based on the original French design built in Guangdong and now dubbed China Pressurized Water Reactor or CPR-1000. To meet China’s higher targets for more nuclear capacity, China is now replicating these CPRs.
Rumors in Beijing circulated last month that China will therefore go back on its plan to permit Westinghouse to build all of the first group of inland power reactors in the country. Chinese officials won’t confirm that, but utility executives―including at China Power Investment Corp. (CPI), a major AP1000 investor—said that China through 2020 will shift resources away from more AP1000s and instead toward cookie-cutter construction of the CPR at many Chinese locations, including at inland sites.
In the meantime, the ambitious construction schedule for the U.S.-designed reactors in China has come under heavy pressure.
In part out of Chinese concern to keep construction on track, China’s nuclear regulator, the National Nuclear Safety Administration (NNSA), will not agree to a proposal, favored by the U.S. Nuclear Regulatory Commission (NRC) and Westinghouse, to modify the design of the containment structure of the AP1000 to provide improved protection against an air crash. In the United States, NRC, after a design review prompted by post-9/11 concerns about terrorist threats, asked Westinghouse to change the design of a shield building which is part of the containment and to use stronger materials. Westinghouse then urged China to also follow that advice.
China will not do that, Beijing officials said last month after consultations with Westinghouse and U.S. regulators. “China will build Revision 15,” the AP1000 design version originally approved for construction in both the United States and in China, one official said. “It will not approve Revision 17,” which incorporates the changes sought by NRC and Westinghouse, he said.
Changing the AP1000 design now would require construction in China to be halted and delayed. China also does not share NRC’s view that a terrorist attack on reactors, using a hijacked passenger aircraft as a weapon, is a realistic enough scenario to warrant modifying the design.
The Westinghouse project has encountered other challenges which, so far, have not caused schedule delays. Last year, a key firm which is part of the technology transfer program, China First Heavy Industries (CFHI), failed to produce forgings to the required quality standard for the AP1000. Project executives said CFHI had difficulty handling the demanding steel material called for in critical components. The schedule was not set back because a Westinghouse partner in Korea, Doosan, had a stock of prototype forgings it had made earlier. The AP1000 has also encountered problems in main coolant pumps, which are of a unique design. Chinese officials said last year that further deployment of the AP1000 would depend on successful demonstration of these pumps, which were a critical feature of the passive cooling system billed as one of the key advantages of this reactor model. According to diplomats there have also been some Chinese bureaucratic delays for certain AP1000 project approvals.
Fed by galloping energy demand and concerns for global warming among Chinese leaders, China’s appetite for nuclear power is now increasing.
Nearly immediately after partnering with Westinghouse, Snptc demanded the U.S. firm aggressively localize AP1000 production at a pace Westinghouse would not agree to, including for safety reasons. Snptc and Westinghouse then compromised, but utility investors say that the AP1000 program cannot go fast enough to localize and at the same time supply China’s growing nuclear power needs, and that China has continued to pressure Westinghouse to accelerate the localization program. Because production of CPRs in China is already highly localized after about 15 years of Chinese experience, domestic politics in China favors building more of these reactors.
Snptc also wants Westinghouse to increase the power of the reactor to 1,400 MW and then to 1,700 MW, matching the EPR. According to Snptc last month the 1,400-MW design will be ready for construction by 2013. Many foreign executives are skeptical that schedule will hold up.
China’s nuclear power program has become more aggressive, politically organized, and independent of its foreign partners in the wake of recent changes in China’s decision-making structure. Those at the top of this pinnacle are now watching how Snptc delivers in tandem with Westinghouse.
Ten years ago Chinese central planners began looking at uranium as their chosen future fuel to meet breakneck demand for base load electricity. But Premier Zhu Rongji, who was skeptical, kept the lid on.
Under Zhu, who was replaced by Wen Jiabao in 2003, the biggest player in nuclear energy decision making was the China Atomic Energy Authority (CAEA), which answered to the Committee for Science, Technology, and Industry for National Defense (Costind), an organization which supervised all defense-related industry. Under Zhu, Costind and CAEA began losing power, especially after China in 1998 established the General Armaments Department (GAD), now one of four departments of the People’s Liberation Army (PLA). As GAD’s authority increased, Costind’s and CAEA’s diminished.
Two years ago, China set up a brand new organization to take command of China’s energy policy, including nuclear policy, the National Energy Administration (NEA). It is headed by Zhang Guobao, who strongly favors nuclear power development and who is also Vice-Chairman of China’s leading planning agency, the National Development and Reform Council (NDRC). NEA has largely supplanted CAEA, and it reports to Li Keqiang, China’s First Vice-Premier, a likely successor to Wen Jiabao.
NEA—which is staffed by about 170 experts, including fewer than 20 responsible for nuclear matters—cooperates with NDRC on setting planning targets, but NEA decides which reactors will be built, at what sites, and which state-owned enterprises will get contracts. It, Chinese officials said last month, will favor construction of more CPRs, and will also support China’s biggest nuclear SOE, the China National Nuclear Corp. (CNNC) with a total payroll of over 100,000, in exporting more reactors to Pakistan.
Possible Considerations in a China-Pakistan Deal :
China has long assisted Pakistan’s nuclear energy program. In 1991 CNNC contracted with the Pakistan Atomic Energy Commission (PAEC) to build Chashma-1, a 325 MW power reactor. It was finished and began operating in 2000.
In 2004, China joined the NSG. China then explained to the NSG that a longstanding framework agreement with Pakistan committed China to provide a second reactor, Chashma-2, more research reactors, plus supply of all the fuel in perpetuity for these units. Chashma-2 construction began in 2005.
Chashma-2 is scheduled to be finished in 2011. To keep CNNC at work in Pakistan thereafter, CNNC and PAEC negotiated terms for two 650-MW reactors, Chashma-3 and -4.
In 2006 Pakistan urged China to approve the new project but China was not keen to do so. Pakistan diplomats said then China was holding back because it was not clear that the U.S.-India nuclear cooperation deal would be approved by both governments and by the NSG.
Chinese officials said last month that export of the reactors to Pakistan would be justified in consideration of political developments in South Asia, including the entry into force of the U.S.–India deal and the NSG exemption for India.
After the U.S.–India deal was approved and India’s NSG exemption entered into force without any Chinese objections in 2008, China’s policy evolved to support demands by Pakistan for compensation, but China did not expressly advocate awarding Pakistan a broad exemption from NSG trade sanctions matching India’s.
NSG country representatives last week said they expect that the Obama administration will accept a limited amount of additional Chinese nuclear commerce with Pakistan as a price for getting Chinese support on UN Security Council sanctions against Iran in weeks ahead. Some suggested that the United States would also enlist China in this regard to persuade Pakistan to drop its opposition to negotiation of a Fissile Material Cut-Off Treaty, which Pakistan has said it could not accept because the U.S.–India deal had tilted the nuclear balance in South Asia in India’s favor.
As long as Pakistan resists outside initiatives which would limit the autonomy of its strategic nuclear program, and because China is believed to be hiding behind Pakistan in avoiding making a firm FMCT commitment in light of China’s strategic dilemmas with the United States, it is doubtful whether China would have effective influence on Pakistani decisions to halt fissile material production.
Mindful that the NPT’s 189 parties will convene a Review Conference on the status of the treaty in May, European diplomats told Chinese counterparts last month that the NSG will currently not agree to exempt Pakistan from NSG sanctions, regardless of Pakistan’s demands for such a step during bilateral security talks with the United States.
Senior NSG diplomats said this month that they expect that soon after China has completed political and contractual arrangements for the reactor sale to Pakistan, China will inform the NSG of its planned transaction. The matter could then be taken up by the NSG as an agenda item or point of business at a future NSG meeting. So far no NSG meetings are scheduled in 2010 prior to an annual plenary meeting in New Zealand in late June.
The U.S. State Department, in line with its response to a 1998 reactor export from Russia to India, continues to hold that a new reactor export by China to Pakistan would be contrary to both NSG and U.S. policy, but whether the United States would record an objection at the NSG or encourage other NSG states to do so would be up to President Obama following interagency discussions and consultation with foreign governments including Pakistan and China.
If the United States were not to register opposition to China’s new exports, that would signal the United States under Obama was prepared to brush off an important nuclear nonproliferation norm on grounds of political expediency.
Chinese officials said last month that export of the reactors to Pakistan would be justified in consideration of political developments in South Asia, including the entry into force of the U.S.–India deal and the NSG exemption for India. Western diplomats said China would not strongly favor an NSG exemption for Pakistan matching India’s because that would not additionally benefit Chinese industry and because Pakistan, compared to India, is a limited nuclear power market with far less infrastructure and far fewer financial resources.
China in 2004 did not claim that more power reactors after Chashma-2 would be “grandfathered” by the prior Sino–Pakistan nuclear accord, and China has argued instead that there are compelling political reasons concerning the stability of South Asia to justify the exports. China will therefore not justify the transactions on the basis of any confidential commercial agreements between China and Pakistan, NSG state representatives said.
Should any NSG party object to these Chinese exports, the NSG would have no recourse to prevent the transaction, because its guidelines are not legally binding, leaving a decision to abide by the guidelines up to each sovereign member state.
Notification by China of intent to export reactors to Pakistan will prompt an internal debate among NSG members over whether to “jointly reconsider their common safeguards requirements” under paragraph 5 of the NSG guidelines, because the Sino–Pakistan transaction came to fruition just two years after the United States, France, and Russia firmly pressured many supplier states to grant India a broad exception to NSG trade rules.
A long term remedy could be provided...by making significant changes in the rules governing the world’s nuclear nonproliferation and trade regime.
In support of the U.S.–India deal, former IAEA Director General Mohamed ElBaradei in bilateral meetings with NSG states in 2007 and 2008 urged the NSG to eventually lift NPT sanctions against both Pakistan and Israel.
U.S. diplomats beginning in 2005 held out to Pakistan a distant promise that it would be exempted from the NSG safeguards requirements, but they weren’t counting on having to make the hard choices faced by the United States concerning Pakistan and China on many fronts in 2010. Still, if the United States were not to register opposition to China’s new exports, that would signal the United States under Obama was prepared to brush off an important nuclear nonproliferation norm on grounds of political expediency. Since NSG states are awaiting leadership from the United States on how to eventually respond to China’s challenge of the rules, tacit U.S. acquiescence would seriously damage the NSG’s credibility as a rule maker for nuclear trade.
A long term remedy could be provided—as Switzerland in 2008 suggested in explaining its approval of the NSG exemption for India—by making significant changes in the rules governing the world’s nuclear nonproliferation and trade regime. But the breach created by the U.S.-India deal, which would be opened wider by Chinese export of reactors to Pakistan, will not be easily closed because, as stated by paragraph 16 of the guidelines, “unanimous consent is required for any changes in the guidelines.” In the meantime, as global nuclear trade surges, NPT suppliers will be encouraged to ignore the rules.
Thursday, April 1, 2010
$1.9 billion Nuclear Deal with China. Nuclear Deal with the US a matter of time : Indian Abroad
WASHINGTON, March 30: A US nuclear deal with Pakistan is simply a matter of time, says a report distributed on Tuesday by the India Abroad news service.
The New York-based news agency, widely used by publications in India, disputed speculations that Pakistan made little gains in last week’s strategic dialogue with the US.
The report claimed that when the Pakistani delegation to the strategic dialogue asked for nuclear power plants, the US response was that “this could be discussed”.
“The US has nothing to lose by signing a nuclear deal with Pakistan. In fact, it will gain by nuclear trade with Pakistan, which will have no qualms about meeting the American conditions,” the report said.
“US diplomats say that the good thing with Pakistanis is that they do what they are asked to do, while the Indians would give twenty reasons why it cannot be done.”
The report also claimed that the Nuclear Suppliers Group and the International Atomic Energy Agency board would also succumb to the US pressure as they did after Washington signed a nuclear deal with New Delhi.
The report noted that more than a year ago a US think-tank study suggested that a nuclear deal for Pakistan was desirable on the same ground that worked in the Indian case -- a partly regulated Pakistani nuclear system would serve the cause of non-proliferation more than a totally unregulated one.
The report pointed out that during the Afghan war, US presidents had repeatedly certified that Pakistan had no nuclear weapons, when they knew well that China was filling Pakistan cupboards with fissile material.
“If Chinese collaboration did not hurt the US then, there is no reason why it should hurt the US now?” the report asked.
The Indian media also claimed that Pakistan had finalised its own civilian nuclear deal with China.
The media noted that an agreement was reached last week before Islamabad’s high-level strategic talks with Washington. The deal calls for China to provide loans and technical aid to Pakistan to build two atomic power facilities, the Daily Times reported. Informed sources said Beijing would loan Pakistan more than 80 per cent of the project’s $1.9 billion cost.
The news agency also reported that while the US would not do mediation in Kashmir, it would bring pressure on both India and Pakistan to shelve the issue, if not to resolve it. “The US position remains that the solution of Kashmir is ‘LoC Plus’, with the ‘Plus’ left undefined.”
During the Kargil conflict, the report noted, the then US President Bill Clinton was as adamant that India should not cross the LoC as he was about Pakistan withdrawing to the LOC on their side. “Available reports indicate that this is exactly what India and Pakistan are seeking through the back channels.”
On the Kashmir issue, the report noted, the US could gain more by appearing not to intervene as it did not need to take the blame for delay or failure. Yet, “the US DNA will be visible all over the place if a solution breaks out”.
The biggest gain for Pakistan from the Washington parleys, according to the report, was the roadmap, drawn for America’s exit from the Pak-Afghan region by 2011.
“This will involve greater Pakistani war efforts, for which Pakistan will be compensated by a speedy disbursement of the Coalition Support Fund,” the report added.
“But more importantly, Pakistan has received assurances that no dispensation in Afghanistan will be inimical to Pakistani interests and that Pakistan will have a say in the determination of the future of the region.”
The report warned: “India would definitely not be part of the new order if the US could help it. Pakistan’s gains in this area are considerable. This is where the relationship between the US and Pakistan has turned into a partnership and Foreign Minister Qureshi has become ‘a happy man, a satisfied man’.”
The New York-based news agency, widely used by publications in India, disputed speculations that Pakistan made little gains in last week’s strategic dialogue with the US.
The report claimed that when the Pakistani delegation to the strategic dialogue asked for nuclear power plants, the US response was that “this could be discussed”.
“The US has nothing to lose by signing a nuclear deal with Pakistan. In fact, it will gain by nuclear trade with Pakistan, which will have no qualms about meeting the American conditions,” the report said.
“US diplomats say that the good thing with Pakistanis is that they do what they are asked to do, while the Indians would give twenty reasons why it cannot be done.”
The report also claimed that the Nuclear Suppliers Group and the International Atomic Energy Agency board would also succumb to the US pressure as they did after Washington signed a nuclear deal with New Delhi.
The report noted that more than a year ago a US think-tank study suggested that a nuclear deal for Pakistan was desirable on the same ground that worked in the Indian case -- a partly regulated Pakistani nuclear system would serve the cause of non-proliferation more than a totally unregulated one.
The report pointed out that during the Afghan war, US presidents had repeatedly certified that Pakistan had no nuclear weapons, when they knew well that China was filling Pakistan cupboards with fissile material.
“If Chinese collaboration did not hurt the US then, there is no reason why it should hurt the US now?” the report asked.
The Indian media also claimed that Pakistan had finalised its own civilian nuclear deal with China.
The media noted that an agreement was reached last week before Islamabad’s high-level strategic talks with Washington. The deal calls for China to provide loans and technical aid to Pakistan to build two atomic power facilities, the Daily Times reported. Informed sources said Beijing would loan Pakistan more than 80 per cent of the project’s $1.9 billion cost.
The news agency also reported that while the US would not do mediation in Kashmir, it would bring pressure on both India and Pakistan to shelve the issue, if not to resolve it. “The US position remains that the solution of Kashmir is ‘LoC Plus’, with the ‘Plus’ left undefined.”
During the Kargil conflict, the report noted, the then US President Bill Clinton was as adamant that India should not cross the LoC as he was about Pakistan withdrawing to the LOC on their side. “Available reports indicate that this is exactly what India and Pakistan are seeking through the back channels.”
On the Kashmir issue, the report noted, the US could gain more by appearing not to intervene as it did not need to take the blame for delay or failure. Yet, “the US DNA will be visible all over the place if a solution breaks out”.
The biggest gain for Pakistan from the Washington parleys, according to the report, was the roadmap, drawn for America’s exit from the Pak-Afghan region by 2011.
“This will involve greater Pakistani war efforts, for which Pakistan will be compensated by a speedy disbursement of the Coalition Support Fund,” the report added.
“But more importantly, Pakistan has received assurances that no dispensation in Afghanistan will be inimical to Pakistani interests and that Pakistan will have a say in the determination of the future of the region.”
The report warned: “India would definitely not be part of the new order if the US could help it. Pakistan’s gains in this area are considerable. This is where the relationship between the US and Pakistan has turned into a partnership and Foreign Minister Qureshi has become ‘a happy man, a satisfied man’.”
Subscribe to:
Posts (Atom)