Sasha Pursley, CNS Research Associate
November 1998
INTRODUCTION
In March 1998, following a visit by US Secretary
of State Madeleine Albright, the Ukrainian government announced that it
would not participate in Iran's Bushehr nuclear power plant project. While
the Bushehr plant was being built by the Russian company ZarubezhAtomEnergoStroy,
Ukraine's state-owned TurboAtom had hoped to supply two turbines to the
project. Ukraine's decision to withdraw from the project followed years
of pressure applied by the United States and Israel. The ramifications
of Ukraine's decision cover a wide spectrum of nonproliferation issues
and include funding for the completion of two new reactors at Khmelnytskyy
and Rivne,
financial loss associated with the withdrawal from the project, and Ukraine's
entry into the MTCR (Missile Technology Control Regime).
BUSHEHR BACKGROUND
In the late 1970s, Iran entered into a contract
with the German company Siemens to design and build a nuclear power plant
in Bushehr, in southern Iran. After the Iranian revolution, however, work
on the project was halted due to an international embargo on the sale and
development of nuclear technology in Iran.[1, 17] Work resumed on
the plant in 1995 when Russia signed an $800 million contract with Iran
to build a VVER-1000 light water reactor capable of generating 1,000 MW.[2,
5, 6] In early 1996, Ukraine became involved in the project when Kharkiv's
TurboAtom expressed its intention to supply two turbines to the plant.[1,
3] The contract, worth about $50 million, would bring state-owned TurboAtom
on board as a subcontractor to Moscow's ZarubezhAtomEnergoStroy.[3] Despite
expectations that the contract would be signed quickly, by April 1997 TurboAtom
still had not entered into an official agreement to supply the turbines.
By this time political considerations had become an important factor in
Ukraine's decision. Concerned over nonproliferation issues, the United
States and Israel expressed deep misgivings to Ukraine about the project.
In a private meeting held in April 1997, Ukrainian President Leonid Kuchma
assured Israeli Minister of Trade and Industry Natan Sharansky that Ukraine
would not supply turbines to the Bushehr project. At that time, the head
of the foreign press section of the presidential administration, Volodymyr
Ogryzko, stated at a press briefing that Ukraine was neither subject to
nor a direct participant in the deal.[4, 12, 15] Two months later, in June
1997, Iranian Foreign Minister Ali Akbar Velayati paid an official visit
to Ukraine. According to Ukraine's Foreign minister Hennadiy Udovenko,
the two officials refrained from discussing the Bushehr project.[5, 6]
But a month later, it was announced that TurboAtom had signed a contract
with Moscow's ZarubezhAtomEnergoStroy to design the turbines for Bushehr.[7,
8] An actual contract to supply two turbines was slated to be signed the
following month, in August 1997, despite Udovenko's admission that "fulfillment
of the contract could complicate relations with our partners."[8, 9, 10]
Meanwhile, the contract remained unsigned, and in November 1997 President
Kuchma said that Ukraine's involvement in the project would be confined
to the "electrical and not the nuclear cycle."[11, 14]
In the month prior to Secretary of State Albright's
trip to Kiev, several key developments related to the Bushehr project occurred.
In February 1998, the Clinton administration blocked the provision of US
nuclear fuel and technology to Ukraine unless it canceled its plans to
supply turbines to the Bushehr project.[12] In preparation for Albright's
visit, US Ambassador-at-Large Stephen Sestanovich traveled to Kiev in February
to meet with key Ukrainian officials. Some progress was made during the
negotiations and on 14 February 1998 Ukraine's Secretary of the National
Security and Defense Council Volodymyr Horbulin noted at a press conference
that Ukraine and the United States "for the first time have found common
ground" on the Bushehr issue. Horbulin noted, however, that "not all the
details were worked out."[13] He stated that Ukraine's decision on whether
to participate in Bushehr would be "taken in the next two or three weeks."[14]
Despite this assurance, the United States remained concerned over the possibility
of the Bushehr deal going through as planned. Thus, when Secretary Albright
traveled to Kiev in March 1998, she arrived with a "strong message of friendship
but also of warning."[16]
ALBRIGHT'S VISIT: AGREEMENTS REACHED ON BUSHEHR,
MTCR, SPACE COOPERATION, AND NUCLEAR FUEL
Secretary of State Albright's visit to Kiev lasted
only seven hours.[19] Despite the short stay, several important agreements
were reached between the United States and Ukraine. At a joint press conference
held at the end of Secretary Albright's visit, Ukrainian Foreign Minister
Gennadiy Udovenko announced that "Ukraine has decided to refrain from nuclear
cooperation with Iran, including the supply of turbines to the 'Bushehr
Project'." Hailing this move, Secretary Albright stated that "this decision
took great statesmanship. By carrying it out, Ukraine will cement its place
in the international coalition to halt the proliferation of weapons of
mass destruction."[20] Udovenko took pains to stress that "this arrangement
corresponds to Ukrainian national interests," although he also noted that
the decision was not an easy one "since our companies are having very substantial
financial losses." In exchange for this concession, Ukraine received a
number of promises from Washington and signed several bilateral agreements
meant to counteract the financial losses associated with Ukraine's withdrawal
from the Bushehr project. One bilateral agreement on the peaceful uses
of nuclear energy focuses on the supply of US nuclear fuel to Ukraine.[21,
22] This agreement, initialed during Albright's Kiev trip and submitted
to Congress by President Bill Clinton on 6 May 1998, provides US assistance
in Ukraine's development of diversified nuclear fuel sources. Ukraine,
which has been dependent on Russia for the supply of nuclear fuel, has
stated its intention to develop its own nuclear fuel industry. Until Ukraine
has developed a complete fuel cycle, it must continue to purchase nuclear
fuel from abroad. With the new US agreement, Ukraine will not have to rely
solely on Russia for nuclear fuel supplies. The Agreement for Peaceful
Nuclear Cooperation also opens the way for US vendors to bid on a $1.2
billion project to complete two nuclear power reactors in Khmelnytskyy
(Khmelnitskiy) and Rivne
(Rovno).[22, 23] These two reactors are important in that they are meant
to replace power generated by the Chornobyl
NPP. Although Ukraine has publicly stated its intention to close down Chornobyl
in 2000, the closure will not be effected until the two new reactors are
completed.[24] Westinghouse has expressed interest in the Khmelnytskyy
and Rivne projects.[22, 23]
A second agreement with the United States is aimed
at safeguarding Ukraine's satellite technology and another initial agreement
is directed at space cooperation. In addition, the United States agreed
to support Ukraine's accession to the MTCR (Missile Technology Control
Regime).[29, 31] While Ukraine had maintained for years that it was in
voluntary compliance with MTCR guidelines, it also regularly asserted the
right to produce short and medium-range missiles. Ukraine currently has
over 200 Scud missiles with ranges of over 500km, and is in the process
of constructing a more modern Scud variant.[35] While guidelines for the
MTCR apply only to missile-related transfers, not domestic production or
deployment, the United States has pressured Ukraine to decrease production
of missiles, fearing illicit export.[35, 36] Ukraine has not publicly indicated
whether it intends to cease or decrease its rocket production in exchange
for entry into the MTCR.[35]
Ukraine's decision to withdraw from the Bushehr
project was influenced by a variety of factors, including national security
and financial concerns. Even after withdrawing from the project, however,
another obstacle was presented in the form of US Congressional hearings
over continued aid to Ukraine. Almost $100 million of a $225 million package
was being held up over concerns of corruption. A number of US companies
doing business in Ukraine had complained to Congress of chronic and endemic
corruption in the Ukrainian economy, and during her March 1998 visit to
Kiev, Albright raised the issue with her Ukrainian counterpart. Upon returning
to Washington, Albright felt that the issue had been sufficiently resolved
to warrant further US aid to Ukraine. Before Congressional hearings held
in April 1998, Albright testified in favor of continued aid to Ukraine,
stating that the problems associated with corruption were being addressed.
After these assurances, Congress decided to release the $100 million that
was being held.[33, 34] The agreements reached between the United States
and Ukraine were designed, in part, to ameliorate financial losses associated
with the Ukrainian withdrawal from the Bushehr project. According to the
general manager of TurboAtom, Anatoliy Buhayets, the direct loss to the
company was $50 million per turbine.[27, 32] In addition to this loss,
Ukraine faces indirect losses to subcontractors associated with the project.
Buhayets particularly expressed concern over the possibility of sanctions
from Russia, in the form of not awarding future contracts to TurboAtom.[27,
28, 32]
Ukraine's decision to withdraw from the Bushehr
project had important consequences for nuclear nonproliferation. The agreements
reached between the United States and Ukraine open the way for possible
US involvement in the completion of two reactors at Khmelnytskyy and Rivne,
the provision of US nuclear fuel to Ukraine, and US support for Ukraine's
entry into the MTCR.
Sources:
[1] Intelnews, 25 January 1996; in
"Kharkov to Manufacture Turbines for Iranian Nuclear Plant," FBIS-TAC-96-002.
[2] "Russian-Iranian Nuclear Cooperation,"
RFE-RL Newsline, online edition, http://www.friends-partners.org,
no. 221, 22 November 1994.
[3] Interfax, 4 July 1996; in "Kiev
to Supply Turbine for Iranian Nuclear Plant," FBIS-SOV-96-131.
[4] Interfax, 16 April 1997; in "Official:
Ukraine Not Party to Iran Nuclear Contract," FBIS-TAC-97-106.
[5] Interfax, 9 June 1997; in "No Discussion
on Turbine Delivery to Iran Nuclear Plant," FBIS-SOV-97-160.
[6] Interfax, 10 June 1997; in "Udovenko
Denies Talks on Turbines for Iranian Nuclear Plant," FBIS-SOV-97-161.
[7] Interfax, 26 July 1997; in "Ukrainian
Firm to Supply Turbine for Iranian Nuclear Plant," FBIS-SOV-97-207.
[8] Interfax, 19 August 1997; in "Ukrainian
Foreign Minister on Construction of NPP in Iran," FBIS-SOV-97-231.
[9] "Ukraine May Supply Turbine to
Iran," RFE/RL Newsline, vol. 1, no. 98, part II, 19 August 1997.
[10] Interfax, 20 August 1997; in "No
Contracts Exist for Turbines to Iranian Nuclear Plant," FBIS-TAC-97-232.
[11] UNIAN, 18 November 1997; in "Kuchma
on Involvement in Iran Nuclear Plant Project," FBIS-SOV-97-322.
[12] David B. Ottaway and Dan Morgan,
"U.S. Nuclear Sale to Ukraine in Jeopardy Over Iranian Deal," Miami
Herald online edition, http://www.herald.com/usa/digdocs,
9 February 1998.
[13] Interfax, 14 February 1998; in
"Foreign Minister, US Envoy Discuss Iran's Nuclear Plant," FBIS-TAC-98-045.
[14] UNIAN, 14 February 1998; in "Ukrainian,
US Officials Discuss Nuclear Project in Iran," FBIS-TAC-98-045.
[15] Pavel Polityuk, "Ukraine Pressured
to Make Decision on Sale of Turbines Needed in Iran," The Ukrainian
Weekly, 22 February 1998, p. 2.
[16] "Albright to Warn Ukraine During
Visit...and to Try to Halt Kyiv's Deal with Iran," RFE/RL Newsline, vol.
2, no. 44, part II, 5 March 1998.
[17] "Iran: The Nuclear Power Plant
that Never Was," Nucnet, http://www.nucnet.aey.ch/nucnet/news.html,
31 July 1996.
[18] UPI, 7 March 1998; in "Albright
Wins Kiev Arms Export Promise," Inquisit Agent Report, http://www.inquisit.com.
[19] Roman Woronowycz, "Ukraine Tells
Albright it Will Not Sell Turbines for Nuclear Project in Iran," The
Ukrainian Weekly, vol. LXVI, no. 11, pp. 1, 4.
[20] "Transcript: Remarks of Albright
and Udovenko in Kiev," USIS Washington File, http://www.usia.gov/current/news,
9 March 1998.
[21] Viktor Demidenko, RIA Novosti,
7 March 1998; in "Ukraine Satisfied with Development of US Strategic Ties,"
FBIS-TAC-98-066.
[22] "U.S.-Ukraine Agreement Would
Let U.S. Vendors Bid on Fuel, K2/R4," Nucleonics Week, vol. 39,
no. 11, 12 March 1998, pp. 1, 10-11.
[23] "Ukraine Keeps Missiles, Agrees
Not to Sell Turbines to Iran," Disarmament Diplomacy, March 1998,
p. 46.
[24] David R. Marples, "Analysis: Nuclear
Power Disputes; Ukraine, Russia and the Bushehr Question," The Ukrainian
Weekly, 29 March 1998, pp. 2, 11.
[25] Lviv Infobank, 13 April 1998;
in "Ukrainian Nuclear Official Reportedly Offered Busher Post," FBIS-SOV-98-103,
16 April 1998.
[26] "AES Director to Iran?" Eastern
Economist, vol. 5, no. 13, 20 April 1998, p. 20.
[27] Lviv Infobank, 3 April 1998; in
"Ukrainian Nuclear Plant May Face Sanctions from Russia," FBIS-SOV-98-093.
[28] "Turboatom Penalties," Eastern
Economist, vol. 5, no. 12, 13 April 1998, p. 18.
[29] Scott Parrish, "Trip Report: Kyiv
and Dnepropetrovsk, Ukraine, 20-25 April 1998," p. 2, UKR980420.
[30] "Clinton on U.S.-Ukraine Pact
on Peaceful Nuclear Energy," USIA, http://www.usia.gov,
6 May 1998.
[31] Victor Zaborsky, "MTCR in Ukraine's
Interest," Space News, 4-10 May 1998, p. 25.
[32] Interfax, 16 June 1998; in "Atomic
Plant Wants Damages for Loss of Iranian Contract," FBIS-SOV-98-167.
[33] "Senate, House Heading For Showdown
Over Ukrainian Aid," Post-Soviet Nuclear & Defense Monitor,
27 April 1998, pp. 2-3.
[34] George Gedda, "Ukraine Spared
Cut in U.S. Aid," Washington Post online edition,
http://www.washingtonpost.com, 29 April 1998.
[35] Sergey Kirzhaev, "Sdacha bushera,"
Moskovskiye novosti, no. 9, 8-15 March 1998, p. 5.
[36] Center for Nonproliferation Studies,
Monterey Institute of International Studies, Inventory of International
Nonproliferation Organizations and Regimes, 1996-1997 Edition, p. 25.
{Entered 7/16/98 SP}
Comments or questions? E-mail Cristina Chuen at MIIS
CNS: Cristina.ChuenATmiis.edu
This material is produced independently for NTI
by the Center for Nonproliferation Studies at the
Monterey Institute of International Studies and
does not necessarily reflect the opinions of and has
not been independently verified by NTI or its directors, officers,
employees, agents. Copyright © 2002 by MIIS.
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