The U.S.-Russian agreement to buy uranium removed from Russian nuclear weapons may collapse because of contract disputes between Russia and the U.S. purchaser, the Los Angeles Times reported today (see GSN, Nov. 30, 2001).  The pricing dispute has delayed the 2002 shipment of three metric tons of uranium, according to the Times.

“U.S. strategic interests may be at risk if [the U.S. Enrichment Corp.] cannot ensure continuity of shipments of Russian down-blended [uranium] to the United States,” wrote U.S. Energy Undersecretary Robert Card in a letter to USEC last week.  USEC is the U.S. agent of the HEU Deal.

Russia and USEC “seem to be at loggerheads,” said a Bush administration official familiar with the dispute.  “I think [the uranium deal] is in jeopardy.  I would not characterize this as normal negotiations.”

How Much to Pay?

The dispute began in early 2000 when USEC proposed new pricing terms, which would have taken effect this month, the Times reported.  The proposed terms would lower the uranium price USEC paid to Russia by 15 percent.  Contracts are subject to both U.S. and Russian approval.

Russia, however, did not agree to the USEC proposal at an annual review last year, which is when the 2002 uranium order would have been placed, according to the Times.  Without ratification of the new pricing terms, USEC would still have to pay the same price that Russia charged in 2001.  USEC refused to place an order for 2002 until Russia agrees to lower prices through 2013, the Times reported.

USEC spokesman Charles Yulish said he expects an agreement to be reached. 

“We’re seeking a prompt resolution to this matter and that’s why we’re fully engaged with the Russians to seek mutually acceptable terms,” he said.  “They have the incentive to take the right deal and we have the incentive to offer it.  But right now it’s one of those negotiating deals that you just have to be patient with.”

Card said USEC should not delay the 2002 uranium shipment by waiting for lower long-term prices.

“Our first priority remains the continuity of shipments of down-blended Russian [uranium] in 2002,” he wrote in his letter to USEC President William Timbers. 

“I want to stress that this is a requirement for the U.S. government and that no long-term contract will be reviewed favorably unless it contains a separate mechanism to ensure 2002 deliveries,” Card said.  “Given the lack of progress on [the] negotiations, we support focusing on 2002 at this time” (Willman/Miller, Los Angeles Times, Jan. 16).

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