The Nuclear Fuel Cycle and Russian Control

Following the Russian invasion into Ukraine in February 2022, western nations implemented various measures of economic statecraft hoping to cut off Russia from the global trade and financial system. Such measures included but not limited to asset freezes and travel bans, removing Russian banks from SWIFT (Society for Worldwide Interbank Financial Telecommunication), freezing the Russian Central Bank's dollar reserves, banning imports of Russian energy commodities, and many others that sought to weaken the Russian economy, restrict their ability to finance the war and force them to negotiate with western allied-nations. However, not all sectors of the Russian economy were targeted, specifically the nuclear fuel sector due largely to the interdependence with western nations and the potential for western nations to inflict more harm on themselves than their Russian adversary. In essence, the west lacked the autonomy required to deploy economic statecraft. How did this happen? The history of the U.S.-Russian nuclear fuel relationship has created vulnerabilities to U.S. autonomy limiting our ability to engage in economic warfare when needed most.

Megatons to MegaWatts and Increasing Problems for the U.S. Nuclear Supply Chain

Following the end of the Cold War in 1991, which was a period of ideological rivalry between the U.S. and the Soviet Union, the Russian Federation possessed around 35,000 nuclear warheads that concerned the U.S. regarding how to protect the homeland against the abundance of nuclear weapons and nuclear fuel that Russia still controlled. A key concern outside for the U.S. outside of nuclear proliferation however, was market related - would this excess Russian nuclear material infiltrate western markets and damage America's nuclear fuel industry by suppressing prices and investment?

In late 1991, a physicist at MIT by the name of Thomas Neff proposed a solution that would entail down-blending Russian weapon's grade uranium into commercially viable fuel for U.S. nuclear power plants. Under this proposed agreement, Russia would convert around 500 tonnes (the equivalent of around 20,000 nuclear warheads) of highly enriched uranium (HEU) from warheads and military stockpiles to low enriched uranium (LEU) for a period of 20 years. The benefit to the US: by purchasing LEU from Russia, the U.S. could fuel its growing commercial nuclear industry while reducing the risk of excess weapons-grade nuclear material being used for proliferation and domestic market-damaging externalities. The program would be called Megatons to Megawatts and it would fuel America's civilian nuclear industry for the next two decades.

Under the agreement, the United States formed a government-owned corporation (privatized later in 1998) called United States Enrichment Corporation (USEC) while Russia designated Techsnabexport (Tenex) as agents for each government. The U.S. would pay for the LEU in the amount of work that was required to downblend the HEU to LEU, which is measured in separateive work units (SWU). Russia would also receive an equal amount of unenriched uranium. The first shipment was made in 1995 contributing to nearly half of the uranium used in U.S. commerical reactors from 1995 to 2013. Thereby, Russian uranium began to impact the U.S. nuclear sector, but in a auspicious way.

Although the Megatons to Megawatts program provided America's commercial reactor fleet with a steady and reliable supply of fuel to power our nuclear energy ambitions, it also created negative externalities that exacerbated an already oversupplied market in its later years. By 2008, the Department of Energy (DOE) initiated a policy for dealing with excess uranium that had been accumulated as commercial inventories that were a surplus to the U.S. Department of Defense's needs. This Excess Uranium Inventory Management Plan would allow excess government uranium inventories to be sold into the market to support the commercial nuclear fleet. Although the plan was intended to not damage the domestic uranium mining sector, that is exactly what happened. Soon after the 2013 plan was implemented, the domestic uranium mining industry was in severe decline as an oversupplied market cut out many domestic producers from the competitive landscape.

During this time, Kazakhstan, a former Soviet Union state began to expand its production capacities and would become the world's largest uranium producer with ~43% of global market share by 2022. Kazakhstan's natural endowments and geological advantage in uranium production would be further supported by a depreciating currency allowing them to corner the global market for uranium mining. In 2011, Japan's Fukushima Daiichi nuclear disaster would cause Japan to shutdown all of their 33 reactors with the excess uranium inventories exacerbating an already oversupplied uranium market. The public sentiment of nuclear energy took a severe hit as developed countries around the world, including Germany would begin to scale back their nuclear reactor programs. To make matters worse for the uranium sector, the U.S. fossil fuel industry was undergoing a breakthrough innovation in natural gas extraction called fracking that would enable abundant untapped energy sources to be utilized for electrical generation further damaging the cost competitiveness of the nuclear power sector. By the late 2010's, the U.S. domestic nuclear fuel industry was facing an existential crisis as the domestic nuclear fleet turned away from its domestic suppliers who were able to compete on the global stage to foreign sources of supply.

While a myriad of events shattered the competitiveness of the domestic nuclear supply chain during a period of globally oversupplied markets, negative public sentiment towards nuclear energy and cost-competitive alternatives, it was the former Soviet Union states that took advantage of the vulnerability of U.S. energy security. Geopolitical disruptions in Eastern Europe from Russian aggression continued to display a precarious and emerging trend: U.S. influence abroad was weakened and its reliance on foreign adversaries and geoconcentrated supply chains threatened its autonomy. The U.S. Government turned its attention away from geoeconomics and domestic energy security at a time when government support was needed most.

Today, Russia's and Russian-influenced nations have a hold on the global nuclear supply chain and for many years this adversarial strength has put the domestic nuclear sector in a fight to support its nuclear fleet that provides ~20% of U.S. electricity.

The Nuclear Fuel Cycle

To understand how Russia has strategically captured the global nuclear supply chain, one must understand how the nuclear fuel cycle works. This fuel cycle is unlike many other energy sources as it requires several steps that take many months before it can be prepared and loaded into a nuclear reactor.

The nuclear fuel cycle encompasses all activities related to generating electricity from nuclear reactions, beginning with uranium mining and ending with nuclear waste disposal. When used fuel is reprocessed and recycled, the cycle becomes a closed loop. The cycle is divided into two parts: the "front end," which involves mining, milling, conversion, enrichment, and fuel fabrication, and the "back end," which includes temporary storage, reprocessing, recycling, and waste disposal. These stages collectively enable the efficient and sustainable use of nuclear materials.

We will primarily focus on the front-end of the fuel cycle in this section.

Uranium, a slightly radioactive metal found abundantly in the Earth's crust, is extracted through mining methods such as open-pit, underground, and in-situ leach (ISL) or in-situ recovery (ISR) mining. Open-pit mining is used for shallow deposits, while underground mining is suited for deeper ones. ISL mining, an increasingly popular method, involves circulating oxygenated groundwater to dissolve uranium oxide for extraction. After mining, uranium is milled to separate it from waste rock, producing a concentrated uranium oxide product known as "yellowcake." The milling process generates tailings, which must be safely managed due to residual radioactivity.

In terms of global uranium resources, ~50% of global uranium resources are in Australia (28%), Kazakhstan (13%) and Canada (10%) with Russia controlling ~8% of global resources. World uranium production has drastically evolved over the years where the U.S. produced enough to support its domestic fleet in the 1950s to today where it doesn't even produce enough to support 1 of its 93 reactors. This part of the fuel cycle is where Kazakhstan has significantly grown their global influence impacting the competitiveness of U.S. uranium producers.

The next step in the nuclear fuel cycle is conversion. The conversion process begins with converting uranium oxide (U3O8) into uranium hexafluoride (UF6), a gaseous form suitable for enrichment. The uranium oxide is first refined into uranium dioxide, which can be used directly in reactors that do not require enriched uranium. For most reactors, however, the uranium dioxide is further processed into uranium hexafluoride, which is cooled and solidified in metal cylinders for transport to enrichment facilities.

The primary "wet" method for uranium conversion, employed in countries like Canada, France, China, and Russia, involves dissolving uranium concentrate in nitric acid to produce uranyl nitrate. This nitrate solution undergoes solvent extraction using tributyl phosphate mixed with kerosene, which separates the uranium. Afterward, the uranium is purified with nitric acid and concentrated through evaporation. The concentrated solution is calcined in a reactor to produce either uranium trioxide (UO3) or uranium dioxide (UO2). Alternatively, ammonia can be added to form ammonium diuranate, which is then calcined to create UO3. The next step reduces UO3 or U3O8 to UO2 using hydrogen gas. The uranium dioxide is subsequently reacted with hydrogen fluoride (HF) to form uranium tetrafluoride (UF4), which is later fluorinated with gaseous fluorine to produce uranium hexafluoride (UF6). This substance is purified throughout the process and stored in its final form for use in enrichment.

In contrast, the "dry" method, primarily used in the United States, begins by heating uranium oxide concentrates to remove impurities, followed by agglomeration and crushing. At U.S. facilities such as Converdyn's, U3O8 is transformed into crude UF6, which is then purified through a two-step distillation process. UF6 is a highly reactive substance, especially when exposed to moisture, and is handled under strict safety measures. It remains gaseous at warmer temperatures, making it suitable for enrichment, but is cooled into a solid crystalline form for transport in heavy, specially designed steel containers. Both wet and dry conversion plants must adhere to stringent regulations to address environmental, safety, and security concerns associated with handling fluorine-based chemicals. As you can see below, Russia's state-owned Rosatom controls ~29% of the global conversion market.

The technicalities of the process are probably not necessary for the purpose of this blog post, but hopefully informative and illustrative to the length and complexity of the nuclear supply chain. This process requires an abundance of skilled labor and capital and without it, the supply chain becomes inept in supporting domestic nuclear reactor programs.

Before the fuel is fabricated and loaded into fuel rods for commercial reactor use, the UF6 must be enriched. Enrichment is achieved through isotope separation, a process that increases the proportion of U-235 relative to the more abundant uranium-238 (U-238).

Today, most commercial enrichment facilities typically use gas centrifuge technology, where thousands of rapidly spinning tubes exploit the slight mass difference between U-235 and U-238 to separate the isotopes. Think of this process as like a washing machine where the heaviest clothes (U-238) get separated to the external part of the cylinder and the lighter pieces (U-235) remain closer to the center.

However, uranium enrichment has a long history in the U.S. deriving from the Manhattan Project after WWII. Understanding the needs to secure a domestic nuclear supply chain, the U.S. began investing in gaseous diffusion technology at the K-25 plant in Oak Ridge, Tennessee to produce highly enriched uranium for the atomic bomb. Post-war, the U.S. government expanded the technology's use during the Cold War to support the nuclear weapons program and supply enriched uranium for the growing commercial nuclear power industry. Facilities like those in Paducah, Kentucky, and Portsmouth, Ohio, became central to these efforts. However, by the late 20th century, the energy-intensive and costly nature of gaseous diffusion led to its obsolescence. By the early 21st century, gaseous diffusion plants were decommissioned, replaced by more efficient gas centrifuge technology, marking the end of an era shaped by government-driven nuclear innovation. Today, advanced enrichment technologies like laser isotope separation are being invested in by some U.S. companies to help provide a source of domestic enrichment capabilities.

After U-235 is enriched and the isotopes are separated in a centrifuge, the result is two distinct streams: LEU, which contains the required concentration of U-235 for fuel, and depleted uranium, or "tails," which has a reduced U-235 content. The tails assay is an important part of the enrichment process because it determines the amount of work that is required for a particular quanitity of uranium. The capacity of the enrichment process is measured in separative work units (SWU), which measures the energy input versus the amount of fuel that is processed and the level of depleted fuel that remains, which is called the tails. Utilities that buy uranium need a fixed amount of enriched uranium for fabrication, which is determined by the enrichment level required and also the tails assay. If there is reduced demand for enrichment services, like what happened from 2011-2019, enrichers can underfeed - underfeeding is essentially when the enrichment plant works harder with less natural uranium. A common analogy has been to relate underfeeding to creating orange juice. If there is less demand for oranges, the enrichment plant can make the same amount of enriched uranium product by using less oranges (fixed quanity of natural uranium) and squeezing the oranges more to capture more juice. Underfeeding was a significant secondary source of supply to the global uranium market during a period of depressed uranium prices further contributing to the supply glut.

This enrichment process is energy-intensive and requires advanced technology to ensure efficiency and safety. It is also strategically sensitive and very capital intensive creating many barriers to entry and few suppliers worldwide.

As the U.S. commercial nuclear fleet had security of supply throughout the nuclear fuel supply chain, their policies to advance uranium enrichment projects in the U.S. failed and other global players seized the opportunity to control the market. Today, Russia's state-owned enterprise (SOE), Rosatom controls ~40% of global uranium enrichment, China controls ~12%, URENCO, owned by the U.K, Netherlands and Germans controls ~30% with France's Orano controlling ~12% and some smaller players making up the rest.

The enriched uranium hexafluoride is then reconverted into uranium oxide, the final chemical form used to produce fuel. Up to this point in the nuclear fuel cycle, the material is fungible, with enrichment levels varying based on reactor specifications. The enriched uranium is later fabricated into fuel pellets and assemblies tailored to precise reactor requirements. These steps in the conversion and enrichment process are pivotal in transforming raw uranium into a highly efficient energy source, underscoring the technical sophistication of the nuclear fuel cycle.

From the time it takes to mine uranium out of the ground to load into fuel rods into a reactor takes about 18-24 months leading to long lead times necessary for consumers of nuclear fuel to actually obtain the final product they need to generate electricity.

Current Affairs

Russia's control of the nuclear fuel cycle over the past several decades has allowed them to have either some indirect influence or direct influence over the critical steps necessary for U.S. electricity generation. It wasn't until the late 2010's where the U.S. Government began to understand the weaponization of nuclear fuel by Russia and how it could negatively impact U.S. autonomy. Today, as the U.S. and west moves back to supporting nuclear energy, they have put themselves in a precarious position in not having the domestic supply chain necessary to support their domestic goals of supporting their current reactor fleet let alone their ambitions of future nuclear build out programs.

Following Russia's invasion into Ukraine in early 2022, western nations sought to constrict the Russian state from the global financial markets by sanctioning key sectors that generate revenues for the Russian regime. Although there has been bi-partisan support to disentangle trading and financial relationships between the west and Russia, the nuclear fuel cycle was untouched. Any policies to restrict Russia's nuclear fuel cycle was likely to inflict far greater damage on the west than it would on Russia thereby preventing the U.S. Government from enacting in geoeconomic warfare on this front. An example of the impact that a weak nuclear fuel supply chain had on the U.S. occurred in 2022 when advanced nuclear reactor developer, TerraPower (partially owned by Bill Gates) announced that they would have to delay their natrium reactor demonstration project in Wyoming due to the lack of a domestic fuel supply chain for HALEU that is necessary for their reactor. Our current and future energy security are threatened by the lack of a vibrant nuclear supply chain.

Current Affairs and Revitalizing the Domestic Nuclear Supply Chain

Support for the nuclear sector began to increase in the past few years as nuclear energy has been recognized as not only a crucial component of the energy transition, but for energy security Below is a list of key legislation that has been enacted in an attempt to revitalize the nuclear energy sector in the U.S.

In 2018, the U.S. enacted the Nuclear Energy Innovation Capabilities Act - aimed at reducing regulatory costs and promoting collaboration in the nuclear energy sector for current and advanced nuclear reactor technologies.

In 2019, after domestic uranium producers filed a Section 232 petition to protect agaisnt damaing Russian uranium exports, the U.S. created the Nuclear Fuel Working Group - aimed at addressing the challenges in the nuclear fuel supply chain and reducing reliance on foreign sources of fuel, particularly from Russia and China.

Also in 2019, the Nuclear Energy Innovation and Modernization Act was enacted - intended to revise the budget and fee structure of the Nuclear Regulatory Commission (NRC) to help promote efficiency of licensing nuclear reactors and advanced reactor technologies.

In 2021, the Infrastructure Investment and Jobs Act sought to help the current fleet of nuclear reactors by appropriating $2.4 billion for microreactors, small modular reactors (SMRs) and other advanced reactor technologies. It also established the Civial Nuclear Credit Program allowing for operators of nuclear reactors to apply for loans to finance the operation of currently operating reactors.

The following year, the Inflation Reduction Act looked to further support existing and new reactors through investment and tax incentives such as production tax credits for existing reactors and high-assay low enriched uranium (HALEAU) production.

Later in 2024, the U.S. stance agaisnt Russian uranium began to solidify when they enacting the Prohibiting Russian Uranium Imports ban, which banned uranium imports from Russia and released $2.7 billion to enhance domestic uranium enrichment capabilities.

The 2024 ADVANCE Act was the latest piece of U.S. legislation to support the domestic nuclear supply chain by promoting the development of advanced fuel in the U.S. and allied countries while restricting the possession of enriched uranium from Russia and China. It also provides incentives for nuclear technology development, supports international nuclear cooperation and attempts to streamline processes at the NRC.

Will this be enough to revitalize America's nuclear supply chain? It is unlikely as decades of failed policies and negligence from the U.S. and west to support their nuclear supply chain exacerbated by a global supply glut in the nuclear fuel market will challenge the necessary capital and speed of production rampup necessary to ensure domestic energy security. When sectors go through prolonged periods of stagnation, capital leaves the sector, labor leaves the sector, and the time it takes to revitalize the sector increases regardless of the effort. Russia's hold on the western nuclear supply chain remains tight and U.S. policies to escape their grip may be insufficient to revitalize their domestic supply chain.

The U.S. needs a coordinated geostrategic plan that incorporates key sectors like nuclear energy that unleashes the power of entrepreneurship and innovation of capitalism and the American people. In recent years, capital has begun to flow back into the nuclear sector as the public realizes that nuclear energy can be a critical solution to many of our problems we face today. You cannot fight physics! There are promising technologies in how we develop and build reactors with small modular designs that take advantage of economies of scale. While there are arguments that these SMRs will still require substantial upfront capital for manufacturing warehouses, design thresholds regarding shielding and the HALEU required to power many of these advanced reactor designs, progress is being made by many companies. Importantly, all of these innovations need people and ones who are able to face many obstacles that the nuclear energy faces domestically and internationally. Skilled labor has left the sector after years of stagnation and the average age of a nuclear worker is much older than the average across other sectors in the U.S. We need to get our next generations involved in nuclear energy if we want to have a future with it.