Japan and Kazakhstan: Nuclear Energy Cooperation

Introduction

Resource scarce Japan, with the world's second largest economy and highly advanced technology, and resource rich Kazakhstan, with a growing economy and an expanding share of the global uranium market, have established a mutually beneficial relationship. Japan is the world's third largest importer of uranium but currently imports only one percent of its uranium from Kazakhstan, which possesses the world's second largest reserves. As a culmination of efforts in recent years to enhance bilateral relations, Japan's then Prime Minister Yasuo Fukuda and Kazakhstan's President Nursultan Nazarbayev sealed a strategic deal in June 2008 in Tokyo,[1] the statement of which noted the countries' desire to rapidly move forward with the signing of a Japan-Kazakhstan peaceful nuclear energy cooperation agreement. Earlier support for such an agreement was stipulated in the memorandum of understanding (MoU) on Japan-Kazakhstan Agreement for Cooperation in the Peaceful Uses of Nuclear Energy signed by former Prime Minister Koizumi and Kazakhstan's president on August 28, 2006. [2] Following the joint statement by Japan's Fukuda and Kazakhstan's Nazarbayev on June 20, 2008, representatives of Toshiba Corporation and Kazatomprom, Kazakhstan's national uranium company, signed a Memorandum of Understanding to further enhance their cooperation in the field of nuclear energy.

Japan's basic policy of peaceful use of nuclear energy

Japan legally constrains itself from using nuclear energy for military purposes. The Atomic Energy Basic Law of 1955 strictly limits the use of nuclear technology to peaceful purposes only. As a non-nuclear weapon state of the Nuclear Non-proliferation Treaty, all of the country's nuclear facilities are under the International Atomic Energy Agency's comprehensive safeguards and additional protocol, thereby demonstrating Japan's commitment to nuclear nonproliferation.

Since Japan consumes vast amounts of energy while having very scarce natural resources, the country imports nearly 80 percent of its energy resources including uranium. Japan's pursuit of nuclear energy and a more independent energy supply have been at the top of the national policy agenda since 1973, when the country experienced its first oil shock.[3] Ever since, Tokyo has sought to diversify its energy sources to reduce dependence on oil from the Middle East given the region's instability.

In order to overcome energy vulnerabilities, Tokyo has enthusiastically made efforts to expand nuclear energy. Despite its deep-rooted nuclear allergy as the only country to have experienced nuclear attacks, Japan has been one of the most eager countries to expand nuclear energy.

Almost 30 percent of Japan's current electricity production is generated by nuclear energy, and this number is projected to increase to 37 percent by 2009, and 41 percent by 2017. Currently, 55 nuclear power reactors are in operation across the country, two are under construction, and 11 are planned. Japan is the third largest user of nuclear energy in the world after the United States and France. [4] This high demand of nuclear energy inevitably motivated Japan to increase uranium supplies from abroad since Japan has no indigenous uranium resources. Japan currently imports uranium from several countries, including Australia and Canada, which dominate 60 percent of Japan's uranium import share. Japan is aiming to increase its uranium imports from Kazakhstan from the current one percent to 30-40 percent in the next decade or so.[5]

While securing stable uranium supplies, Japan is progressively developing a complete domestic nuclear fuel cycle industry based on imported uranium to recycle spent nuclear fuel. To achieve nuclear energy self-sufficiency, Japan constructed an industrial scale nuclear fuel cycle complex at the Rokkasho reprocessing plant. The Japanese government considers that establishing domestic nuclear fuel cycle capabilities is of "utmost importance." [6] However, opposition from both inside and outside of the country continue. The Rokkasho reprocessing plant will make Japan the first country with such a facility in a non-nuclear weapon state. Currently, Japan's civilian stocks of separated plutonium consist of 6.7 metric tons stored inside the country, and 38 metric tons outside the country. [7] Once fully operational, the Rokkasho reprocessing plant reportedly will be able to reprocess 800 tons of spent fuel annually yielding approximately 8 tons of weapons usable plutonium. This amount is sufficient to produce over 1000 nuclear warheads. [8] Japan's civilian separated plutonium stockpile is expected to grow to 70 tons by 2020. [9]

Japan's Framework for Nuclear Energy Policy adopted in October 2005 by the Cabinet also reiterated its commitment to further promoting the nuclear fuel cycle. It also highlights Japan's goal to commercialize practical Fast Breeder Reactor (FBR) cycles. Tokyo has been committed to develop a FBR, which produces more fuel than it consumes in order to improve uranium utilization of its nuclear fuel cycle program. However, after a 1995 accident at the prototype FBR Monju in the Fukui prefecture, the FBR remains shut down. The target year for FBR commercialization has been pushed out to 2050. Once the FBR has become fully operational, Japan can decrease its uranium imports. According to the Japan Atomic Energy Agency, it will become unnecessary for Japan to import uranium by around 2100.[10] Nevertheless, for the time being, stable uranium supplies are essential for Japan to secure energy sources. Developing a strategy to secure natural uranium resources is one of the essential action plans stated in "Nuclear Energy National Plan" that the Japanese Ministry of Economy, Trade and Industry (METI)'s Nuclear Energy Subcommittee drew up responding to the 2005 Framework for Nuclear Energy Policy.[11]

Moreover, in recent years, the growing concerns over global warming, climate change, and environmental degradation as a result of greenhouse gas emissions, coupled with the uncertainty of future energy supplies have ignited renewed interest in nuclear energy. In the New National Energy Strategy issued by METI in May 2006, nuclear power is given special attention for its ability to reduce external energy dependency as well as to reduce CO2 emissions. [12]

The G-8 Hokkaido Toyako Summit in July 2008 was a perfect opportunity for Japan, as a host country, to solidify the norm to increase the use of nuclear energy to reduce global CO2 emissions. The G-8 recognized the importance of nuclear power in combating climate change and emphasized that countries seeking to build nuclear power plants must show their nonproliferation commitment to the world, and operate their plants in a safe and secure way. The G-8 final document states that these countries' leadership will work with emerging powers to reduce greenhouse gas emissions by a minimum of 50% by 2050.[13] To accomplish this goal of tackling global warming, Japan believes that increasing dependence on nuclear energy is the best option.

Kazakhstan's nonproliferation policy and nuclear energy plans

Similar to Japan, Kazakhstan is widely considered an ardent supporter of nuclear non-proliferation. When the Soviet Union collapsed and thousands of nuclear weapons were left in the country, Kazakhstan could have become the world's fourth largest nuclear power. The country's leadership chose to denuclearize. Since then, Kazakhstan has unfailingly demonstrated its adherence to nonproliferation values: it accepts IAEA comprehensive safeguards, IAEA's additional protocol, and is now, together with its Central Asian neighbors, a part of the Central Asian Nuclear-Weapon-Free Zone, that is about to become active in late March 2009. By virtue of being a part of a nuclear-weapon-free zone, Kazakhstan took upon additional obligations to prevent nuclear proliferation. In yet another shared pattern with Japan, Kazakhstan's population had a high degree of resistance to anything nuclear due to dramatic environmental and health impacts of Soviet nuclear testing conducted on Kazakh lands. Following years of failed attempts to introduce nuclear energy to its energy mix, the government finally prevailed over public opposition, environmental concerns, and competing industries, and has made firm plans to build its first nuclear power plant on the shores of the Caspian Sea in the city of Aktau. The nuclear reactor (two 300 megawatt reactor units based on Russian naval reactor designs) will be built in cooperation with Russia. There are also plans to build and export such reactors to third countries in the future.[14]

In parallel with plans to develop domestic nuclear energy, Kazakhstan's government and uranium industry are taking steps to significantly expand the role of the country in the international nuclear energy market. In the last few years, ambitious projects have gotten underway to increase exports of uranium and nuclear fuel.

Kazakhstan possesses the world's second largest uranium reserves. At 1.5 million metric tons, it holds roughly 19 percent of the world's total. More than 50 percent of Kazakh reserves are suitable for extraction by in-situ leaching, a cheap and environmentally friendly method compared to extracting uranium from open pits or deep shaft mines.[15]

Kazakhstan's Kazatomprom produced 6,637 metric tons in 2007, 8,521 metric tons in 2008, and plans to produce approximately 11,900 metric tons in 2009.[16] There has been a rapid expansion of foreign investment in the development of uranium mines. Apart from cooperation with Japan discussed in detail below, Kazatomprom reached cooperation agreements and set up a number of joint ventures with companies from Russia, Canada, France, and China. In a recent development, Kazakhstan signed a cooperation agreement with India in late January 2009 that provides for uranium exports and broader cooperation in the nuclear energy field between two countries.[17]

Japan-Kazakhstan Cooperation Agreements

Japan's strategy to secure energy resources from Kazakhstan started relatively recently when two countries became new strategic partners. In August 2006, in his last foreign trip as prime minister, Koizumi made a four day visit to Central Asia as the first Japanese prime minister to visit the region. He met with Kazakh President Nazarbayev and Uzbek President Karimov. The purpose of this trip was to enhance political and economic development initiatives started by Japan in the 1990s. Initially, Japan focused on extending foreign aid to Central Asia. Political cooperation began in 1997 when then Prime Minister Ryutaro Hashimoto established a strategy of Eurasian diplomacy. These activities were more specifically directed to energy cooperation after the Koizumi administration. In 2002, Prime Minister Koizumi dispatched a Silk Road energy mission to Kazakhstan, Uzbekistan, Azerbaijan, and Turkmenistan to identify how Japan can cooperate with these countries. These initiatives continued under the "Central Asia plus Japan" dialogue started in 2004 which has sought to promote stability and development in Central Asia.

The "Central Asia plus Japan" Dialogue Action Plan adopted in June 2006, states that "Japan and the Central Asian countries, as partners for an international attempt to maintain and strengthen the disarmament and non-proliferation regime of weapons of mass destruction, will cooperate in the Process of 2010 NPT Review Conference, universalization of the International Atomic Energy Agency (IAEA) Additional Protocols, and the promotion of nuclear security and atomic energy safety."[18] With increasing cooperation between Japan and Central Asian countries in the field of peaceful use of nuclear energy, these countries have an even stronger obligation to strengthen nuclear nonproliferation and disarmament regimes.

In April 2007, a 150-member strong delegation of representatives of the Japanese government and private sector visited Kazakhstan's capital, Astana. Top executives from 29 Japanese companies (accompanying Japan's then-minister of economy, trade, and industry Akira Amari) signed 24 deals with Kazakh enterprises.

Marubeni Corporation acquired a stake in a uranium mine. Toshiba agreed to help Kazatomprom build nuclear power reactors. It was also agreed that the Japanese side will provide technology assistance for processing uranium fuel and building light-water reactors in exchange for uranium.[19]

Additionally, a new framework for the first underwriting by Nippon Export and Investment Insurance (NEXI) of "comprehensive insurance for natural resources and energy resources" (for the amount of USD 500 million) was established.[20] The agreement between NEXI and Kazatomprom makes it easier for Kazatomprom to borrow money from the Japanese banks when it deals with the Japanese companies because if any such loans become unrecoverable, the Japanese bank will pay the insurance. Moreover, premiums will be lowered by up to 75 percent from current premiums, and the risks covered will be expanded. The first underwriting under "comprehensive insurance for natural resources and energy resources" is expected to be a USD 30 million private bank loan for a development project for the Kharasan-1 uranium deposit. For the same project the Japan Bank for International Cooperation (JBIC) will provide financing of USD 199 million.[21]

Kazatomprom, Marubeni, Tokyo Electric Power (TEPCO), Chubu Electric Power, and Tohoku Electric Power agreed to develop Kharasan-1 and Kharasan-2 deposits in Southern Kazakhstan. It is planned that by 2014, full production of yellowcake will reach about 5,000 tU per year and will continue for about 35 years. The Japanese companies will have rights to 2,000 tU per year from the mine. This will cover about 20 percent of Japan's current annual uranium needs.[22]

Another mine — the West Mynkuduk Mine — will be developed by Kazatomprom, Sumitomo Corporation, Kansai Electric Power, and APPAK LLP, a company created to develop the mine financed by Kazatomprom (65%), Sumitomo (25%), and Kansai Electric Power (10%). It is expected that full production will reach 1,000 tU of yellowcake per year by 2010. This will meet 10 percent of Japan's current annual uranium needs.[23] Itochu Corporation and Kazatomprom concluded an additional agreement: Itochu will buy 600 tU of yellow cake over the period of 2009-2013 (an already existing agreement provides for annual purchase of 1,000 tU).[24]

One of the key developments took place in October 2007 when Kazatomprom paid USD 540 million to acquire 10 percent of Westinghouse Electric from Japan's Toshiba. Westinghouse is one of the world's largest suppliers of nuclear power reactors. Toshiba bought 77 percent of Westinghouse in October 2006 for about USD 4.16 billion.[25] By acquiring a share in the U.S. nuclear technology company, Kazakhstan received direct access to the world nuclear energy market. In return, Toshiba received access to Kazakh uranium.

Future prospects

Kazakhstan is moving towards leading the global uranium market and Japan is looking to secure a stable supply of uranium for its growing nuclear energy industry. With expanding global demand for uranium, especially in China and India, two rapidly developing economies, Japan is increasingly concerned over the availability of uranium resources in the long run. To respond to this possible future uranium scarcity, Tokyo enhanced its strategy to secure uranium sources and found Kazakhstan to be the best partner for this purpose. For Kazakhstan, Japan is also seen as a reliable partner who can provide crucial nuclear energy technologies, expertise, and access to new global markets.

Japan has been a front-runner in nuclear disarmament and nonproliferation. At the same time, increasing reliance on nuclear energy is inevitable in order to secure stable energy sources even if Japan's nuclear allergy among the general public still prevails. Public acceptance of nuclear energy seems to fall behind the speed of increasing reliance on nuclear energy. In order to overcome this gap, enhancing nuclear security and safety is essential. Moreover, the Japanese government must continue to make efforts in nonproliferation and disarmament to mitigate concerns both inside and outside of Japan.

Similarly for Kazakhstan, with its ambitious plans for developing domestic nuclear energy, increasing uranium mining and exports, and expanding nuclear fuel production and export, serious attention should be paid to environmental, health, and nonproliferation concerns associated with such activities. While the country's leap into nuclear energy both domestically and on the global market has its pros and cons,[26] it is clear that cooperation with Japan fits well with Kazakhstan's objectives in this field.

It is necessary for Japan and Kazakhstan in the process of finalizing the bilateral nuclear agreement, to include clear and strong provisions stipulating the two countries' roles in strengthening nuclear nonproliferation and disarmament regimes. More emphasis should be placed on global nuclear nonproliferation and disarmament efforts beyond expanding cooperation in peaceful use of nuclear energy.

Sources:

[1] Joint Statement by Japanese prime minister Fukuda and Kazakh President Nazarbayev. Japanese Ministry of Foreign Affairs' Website. (Japanese only) www.mofa.go.jp.
[2] Memorandum of Understanding between Japanese Prime Minister Koizumi and Kazakh President Nazarbayev. Japanese Ministry of Foreign Affairs' Website, www.mofa.go.jp.
[3] World Nuclear Association, Nuclear Power in Japan, www.world-nuclear.org.
[4] World Nuclear Association, Nuclear Power in Japan, www.world-nuclear.org.
[5] Japan Eyes Larger Uranium Imports from Kazakhstan, Jiji Press, May 1, 2007.
[6] Japan's Nuclear Power Program, www.japannuclear.com.
[7] Global Fissile Material Report 2008.
[8] Gavan McCormack, "Japan as a plutonium super power." January 17, 2009, www.nautilus.org.
[9] Tadahiro Katsuta and Tatsujiro Suzuki, "Japan's spent fuel and plutonium management challenges, Carnegie Nonproliferation Conference 2007, www.carnegieendowment.org.
[10] www.jaea.go.jp.
[11] Ministry of Economy, Trade and Industry (METI) Website, Main Points and Policy Package in "Japan's Nuclear Energy National Plan" www.enecho.meti.go.jp.
[12] METI Website, New National Energy Strategy, May 2006, www.enecho.meti.go.jp.
[13] G8 Hokkaido Toyako Summit, www.mofa.go.jp.
[14] Togzhan Kassenova, "Kazakhstan's Nuclear Ambitions," The Bulletin of the Atomic Scientists, April 28, 2008, www.thebulletin.org.
[15] "Deposits of Kazakhstan," Kazatomprom, www.kazatomprom.kz.
[16] "2008 Uranium Production in Kazakhstan," Kazatomprom, press release, www.kazatomprom.kz.
[17] "India Signs Pact With Kazakhstan for Uranium Supply," The Times of India, January 24, 2009, timesofindia.indiatimes.com.
[18] Central Asia plus Japan Dialogue Action Plan, Japanese Ministry of Foreign Affairs, www.mofa.go.jp.
[19] 'Japan Set to Raise Kazakh Share in Uranium Imports to 30-40 per cent,' BBC Monitoring Asia Pacific, April 30, 2007.
[20] NEXI has underwritten trade insurance related to three deals with Kazatomprom from 2005 to 2007.
[21] "Japan and Kazakhstan Issue Joint Statement on Nuclear Cooperation," Atoms in Japan, April 30, 2007.
[22] "Japan and Kazakhstan Issue Joint Statement on Nuclear Cooperation," Atoms in Japan, April 30, 2007.
[23] "Japan and Kazakhstan Issue Joint Statement on Nuclear Cooperation," Atoms in Japan, April 30, 2007.
[24] "Japan and Kazakhstan Issue Joint Statement on Nuclear Cooperation," Atoms in Japan, April 30, 2007.
[25] Toshiba, Seeking Uranium, Sells 10% of Westinghouse to Kazakhs, Bloomberg, August 13, 2007.
[26] Togzhan Kassenova, "Kazakhstan's 'Nuclear Renaissance'," St. Antony's International Review, St. Antony's International Review, The Oxford University, Volume 4, Number 2, February 2009, pp. 51-74.