Nowadays it is not very frequent that one would hear of a new nuclear project coming onstream in Europe. Perhaps unsurprisingly the Old Continent’s forthcoming nuclear launch takes place in its “last dictatorship” – after 9 years of construction and even more years spent in waiting, Belarus is expected to start up its first nuclear plant during the next couple of weeks – against a strung-up background of energy conflicts, elections-related ambiguity and personal suspicion. The Belorussian nuclear plant (abbreviated BelAES) is being built by Rosatom, Russia’s nuclear holding, based on Russian technology and configured to run on its nuclear fuel, nevertheless its impeding launch is perceived as a sign of diversification, namely a gas-to-nuclear diversification drive that’s just a part in a grand balancing act of President Lukashenko. Allies when it comes to superficial moves like commissioning a WWII military monument, political difficulties between Belarus and Russia have redoubled throughout 2020. Throughout 2020 Minsk and Moscow failed to resolve amicably their oil and gas disputes – all the while gas imports have continued to flow (albeit at lower rates), Belarus has ramped up its non-Russian crude intake to previously unprecedented levels. As Belarus is set to hold a presidential ballot on August 09, President Lukashenko has jailed almost every possible opposition candidate, including prime contender Viktor Babariko. Considering the 20 years he spent at the helm of Gazprom-controlled Belgazprombank, Babariko’s month-long arrest has raised some eyebrows in Moscow.
The quest to join the club of countries using cheap nuclear energy had been quite bumpy for Belarus. Local authorities first started to build a nuclear plant near the capital of Minsk in the early 1980s yet after the 1986 Chernobyl disaster the construction was swiftly scrapped. Upon becoming independent, Belarus has revisited its intent to go nuclear (given its considerable dependence on Russia’s gas, the pricing of which was unreasonably beneficial to Minsk and was always rather an essentially subsidizing tool that the Kremlin used as a political chip) and by 2008 it even pinpointed the location – Ostrovets, 20km from the Lithuanian border. In 2011, the Belarussians concluded the long-prepared deal on the construction of two VVER-1200 water-water reactors with the Russian nuclear firm Atomstroyexport (ASE).
At the time the construction deal was concluded, everything pointed towards building a nuclear plant – in 2011 the price of gas that Belarus has paid to Russia’s gas pipeline monopoly Gazprom reached 265 USD per MCm, a level which it failed to surpass since. The deal package also came with a 10-year loan worth 10 billion, equivalent to roughly 90% of the plant’s total costs. Fast-forward into 2020 and one would find that the gas market conditions have changed substantially as the COVID-induced market slump and cheap LNG depressed prices, yet Belarus’ willingness to finish the nuclear plant seems unwavering. A long-term also predicated on the fact that Gazprom owns Belarus’ gas transmission system, whilst the nuclear plant would be owned by the Belarussian side, Russia’s nuclear holding Rosatom would “only” build it and provide nuclear fuel.
Lithuania, the country closest to the nuclear plant (so much that Vilnius is closer to it than Minsk), has been the most vocal opponent of BelAES. Whenever Lithuanian authorities complain against the nuclear plant, they claim that the capital Vilnius would automatically become a part of a nuclear exclusion zone in case of any force majeure and that BelAES’ using of the Viliya/Neris river to cool the reactor down is a calamity waiting to happen. The Lithuanian government went as far as to ban all electricity imports from Belarus in 2017, i.e. more than 3 years before the nuclear plant was constructed. The Belarussian-Lithuanian spat has several additional twists, first amongst them is the fact that Lithuania wanted to build a nuclear plant of its own (to replace the Soviet-era Ignalina plant that went offstream in 2010) but was forced to abandon the idea after a failed national referendum on the issue and looming prospects of little-to-zero profitability.
Initially the expected grid connection startup date of Belarus’s nuclear plant was set to 2016, then Q1 2019, the commissioning date was continuously pushed back so that currently the first reactor is expected to be launched this August. The reasons for delaying the launch are manifold – first the reactor pressure vessel slipped out of sling in mid-2016, hitting the ground without apparently incurring any damage, nevertheless the Belarussian side demanded that it be replaced. Then the Belarussian side started to take its time, cognizant of the fact that it would need to start paying back the Russian loan 6 months after the startup of the nuclear plant (but not later than April 01, 2021). These tactics have indeed worked out – in May the two sides agreed to postpone the start of payments to 2023 and to decrease the percentage rate to 3.3%. The previous interest rate scheme stipulated a fixed 5.23% percentage for half of the loaned sum and a 6-month LIBOR + 1.83% rate for the other half.
As heated as the situation currently seems to be between Moscow and Minsk, both sides have more or less tried to shield the nuclear deal from the ramifications of each other’s frustration. For Minsk, 97% dependent on gas for electricity generation, nuclear energy will allow it to decrease its gas imports by 10-15 BCm per year (from the current annual average of 20 BCm per year). Although some of the benefits the Ostrovets nuclear plant could have provided for Belarus will be left idle, such as exporting electricity across the board to now-hostile Lithuania or Poland, the main objective of it, self-sufficiency, will be enough to see it through. For Russia and its nuclear holding Rosatom commissioning BelAES will be a harbinger of things to come, with similar VVER-1200 reactors expected to come onstream in the upcoming years in at least 6 countries – Hungary (Paks), Turkey (Akkuyu), Bangladesh (Ruppur), Finland (Hanhikivi), Egypt (El Dabaa), China (Xudapu).
By Viktor Katona for Oilprice.com
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