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Home Archive September 2011 Issue Issue Content America Falling Behind: The Strategic Dimensions of Chinese Commercial Nuclear Energy

America Falling Behind: The Strategic Dimensions of Chinese Commercial Nuclear Energy

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Due to a confluence of events the United States has recently focused more attention on nuclear weapons policy than it has in previous years;  however, the proliferation of commercial nuclear technology and its implications for America’s strategic position have been largely ignored. While the Unites States is currently a participant in the international commercial nuclear energy trade, America’s own domestic construction of nuclear power plants has atrophied severely and the US risks losing its competitive edge in the nuclear energy arena.

Simultaneously, the People’s Republic of China (PRC) has made great strides in closing the nuclear energy development gap with America. Through a combination of importing technology, research from within China itself, and a disciplined policy approach the PRC is increasingly able to leverage the export of commercial nuclear power as part of its national strategy. Disturbingly, China does not share America’s commitment to stability, transparency, and responsibility when exporting nuclear technology. This is a growing strategic weakness and risk for the United States. To remain competitive and to be in a position to offset the PRC when required the American government should encourage the domestic use of nuclear power and spur the forces of technological innovation.

America: dominant no longer

History has recorded well American wartime nuclear developments which culminated in the July 1945 Trinity Test, but what happened near Arco, Idaho six years later has been overlooked.  In 1951, scientists for the first time produced usable electricity from an experimental nuclear reactor.  Once this barrier was conquered the atom was harnessed to generate electricity and permitted America to move into the field of commercial nuclear power. In the next five years alone the United States signed over 20 nuclear cooperation agreements with various countries.  Not only did the US build dozens of power plants domestically during the 1960s and 1970s, the US Export-Import Bank also distributed $7.1 billion dollars in loans and guarantees for the international sale of 49 reactors.  American built and designed reactors were exported around the world during those years. Even today, more than 60% of the world’s 440 operating reactors are based on technology developed in the United States.  The growth of the US civilian nuclear power sector stagnated after the Three Mile Island incident in 1979 – the most serious accident in American civilian nuclear power history.  Three Mile Island shook America’s confidence in nuclear power and provided the anti-nuclear lobby ample fuel to oppose the further construction of any nuclear power plants. In the following decade, 42 planned domestic nuclear power plants were cancelled, and in the 30 years since the Three Mile Island incident the American nuclear power industry has survived only through foreign sales and merging operations with companies in Asia and Europe.  Westinghouse sold its nuclear division to Toshiba and General Electric joined with Hitachi.  Even the highest levels of the American government came to cast nuclear power aside.   President Bill Clinton bragged in his 1993 State of the Union Address that “we are eliminating programs that are no longer needed, such as nuclear power research and development.”  
America’s slow pace of reactor construction over the past three decades has stymied innovation and caused the nuclear sector and its industrial base to shrivel. While some aspects of America’s nuclear infrastructure still operate effectively, many critical areas have atrophied. For example, one capability that America has entirely lost is the means to cast ultra heavy forgings in the range of 350,000 – 600,000 pounds,  which impacts the construction of containment vessels, turbine rotors, and steam generators. In contrast, Japan, China, and Russia all possess an ultra heavy forging capacity and South Korea and India plan to build forges in this range.  Likewise, the dominance America enjoyed in uranium enrichment until the 1970s is gone.  The current standard centrifuge method for uranium enrichment was not invented in America and today 40% of the enriched uranium US power plants use is processed overseas and imported.   Another measure of how much the US nuclear industry has shrunk is evident in the number of companies certified to handle nuclear material. In the 1980s the United States had 400 nuclear suppliers and 900 holders of N-stamp certificates (N-stamps are the international nuclear rating certificates issued by the American Society of Mechanical Engineers). By 2008 that number had reduced itself to 80 suppliers and 200 N-stamp holders.

A recent Government Accountability Office report, which examined data from between 1994 and 2009, found the US to have a declining share of the global commercial nuclear trade.  However, during that same period over 60 reactors were built worldwide.  Nuclear power plants are being built in the world increasingly by non-American companies.  

 A Comparison of Value of US and Global Exports of Nuclear Reactors, Major Components and Equipment, and Minor Reactor Parts, 1994 through 2008, in 2010 US Dollars

Source: US Government Accounting Office Report, Nuclear Commerce: Government-wide Strategy Could Help Increase Commercial Benefits from US Nuclear Cooperation Agreements with Other Countries  

 

The American nuclear industry entered the 1960s in a strong position, yet over the past 30 years other countries have closed the development gap with America. The implications of this change go beyond economics or prestige to include national security. These changes would be less threatening if friendly allies were the ones moving forward with developing a nuclear export industry;however, the quick advancement of the PRC in nuclear energy changes the strategic calculus for America.

The shifting strategic landscape

While America’s nuclear industry has languished, current changes in the world’s strategic layout no longer allow America the option of maintaining the status quo without being surpassed. The drive for research, development, and scientific progress that grew out of the Cold War propelled America forward, but those priorities have long since been downgraded by the US government. The economic development of formerly impoverished countries means that the US cannot assume continued dominance by default. The rapidly industrializing PRC is seeking its own place among the major powers of the world and is vying for hegemony in Asia; nuclear power is an example of their larger efforts to marshal their scientific and economic forces as instruments of national power.
The rise of China is a phrase that connotes images of a backwards country getting rich off of exporting cheap goods at great social and environmental costs. Yet, this understanding of the PRC has lead many in the United States to underestimate China’s capabilities. The Communist Party of China (CPC) has undertaken a comprehensive long-term strategy to transition from a weak state that lags behind the West to a country that is a peer-competitor to the United States. Nuclear technology provides a clear example of this. 

In 1978, General Secretary Deng Xiaoping began to move China out of the destructive Mao era with his policies of 'reform and opening.'  As part of these changes during the 1980s, the CPC began a concerted and ongoing effort to modernize the PRC and acquire advanced technology including nuclear technology from abroad. This effort was named Program 863 and included both legal methods and espionage.  By doing this, the PRC has managed to rapidly catch up to the West on some fronts. In order to eventually surpass the West in scientific development the PRC launched the follow-on Program 973 to build the foundations of basic scientific research within China to meet the nation’s major strategic needs.  These steps have brought China to the cusp of the next stage of technological development, a stage known as “indigenous innovation.”
 
In 2006 the PRC published their science and technology plan out to 2020 and defined indigenous innovation as enhancing original innovation, integrated innovation, and re-innovation based on assimilation and absorption of imported technology in order improve national innovation capability. The Chinese seek to internalize and understand technological developments from around the world so that they can copy the equipment and use it as a point to build off in their own research. This is a step beyond merely copying and reverse engineering a piece of technology. The PRC sees this process of absorbing foreign technology coupled with indigenous innovation as a way of leapfrogging forward in development to gain the upper hand over the West.  The PRC’s official statement on energy policy lists nuclear power as one of their target fields.  When viewed within this context, the full range of implications from China’s development of nuclear technology becomes evident. The PRC is now competing with the United States in the areas of innovation and high-technology, two fields that have driven American power since World War Two. China’s economic appeal is no longer merely the fact that it has cheap labor, but is expanding its economic power in a purposeful way that directly challenges America’s position in the world.
 
The CPC uses the market to their advantage to attract nuclear technology and intellectual capital to China. The PRC has incentivized the process and encouraged new domestic nuclear power plant construction with the goal of having 20 nuclear power plants operational by 2020.  The Chinese Ministry of Electrical Power has described PRC policy to reach this goal as encouraging joint investment between State Owned Corporations and foreign companies.  13 reactors are already operating in China, 25 more are under construction and even more reactors are in the planning stages. 

In line with this economic policy, China has bought nuclear reactors from Westinghouse and Areva and is cooperating with a Russian company to build nuclear power plants in Taiwan.  By stipulating that Chinese companies and personnel be involved in the construction process, China is building up its own domestic capabilities and expects to become self-sufficient. China’s State Nuclear Power Technology Corporation has partnered with Westinghouse to build a new and larger reactor based on the existing Westinghouse AP 1000 reactor.  This will give the PRC a reactor design of its own to then export. If the CPC is able to combine their control over raw materials, growing technical know-how, and manufacturing base, China will not only be a powerful economy, but be able to leverage this power to service its foreign policy goals as well.
Even though the PRC is still working to master third generation technology, their scientists are already working on what they think will be the nuclear reactor of the future. China is developing Fourth Generation Fast Neutron Reactors and wants to have one operational by 2030.  Additionally, a Chinese nuclear development company has announced its intentions to build the “world’s first high-temperature, gas-cooled reactor” in Shandong province which offers to possibility of a reactor that is nearly meltdown proof.  A design, which if proved successful, could potentially redefine the commercial nuclear energy trade.


The construction of the containment liner at the Taishan nuclear power plant in Guangdong province.   Building began at the end of 2009 on this Areva-designed Third Generation reactor.
Source: Areva North America
The risk to America

The international trade of nuclear material is hazardous in that every sale and transfer increases the chances for an accident or for willful misuse of the material. Nuclear commerce must be kept safe in order for the benefits of nuclear power generation to be realized. Yet, China has a record of sharing dangerous weapons and nuclear material with unfit countries. It is a risk for America to allow China to become a nuclear exporting country with a competitive technical and scientific edge. In order to limit Chinese influence and the relative attractiveness of what they can offer, America must ensure its continuing and substantive lead in reactor technology.

 
The PRC’s record of exporting risky items is well documented. It is known that during the 1980s the Chinese shared nuclear weapon designs with Pakistan and continues to proliferate WMD-related material.  According to the Office of the Director of National Intelligence to Congress, China sells technologies and components in the Middle East and South Asia that are dual use and could support WMD and missile programs.  Jane’s Intelligence Review reported in 2006 that China,

Despite a 1997 promise to Washington to halt its nuclear technology sales to Iran, such assistance is likely to continue. In 2005, Iranian resistance groups accused China of selling Iran beryllium, which is useful for making nuclear triggers and maraging steel (twice as hard as stainless steel), which is critical for fabricating centrifuges needed to reprocess uranium into bomb-grade material.  

China sells dangerous materials in order to secure its geopolitical objectives, regardless if those actions harm world stability. There is little reason to believe China will treat the sale of nuclear reactors any differently. Even if the PRC provides public assurances that it will behave differently in the future, the CPC has not been truthful for decades about its nuclear material and weapons sales and hence lacks credibility. For example, in 1983 Chinese Vice Premier Li Peng said that China does not encourage or support nuclear proliferation.  In fact, it was that same year that China contracted with Algeria, then a non-NPT [Non-Proliferation Treaty] state, to construct a large, unsafeguarded plutonium production reactor.  In 1991 a Chinese Embassy official wrote in a letter to the The Washington Post that 'China has struck no nuclear deal with Iran.'  In reality, China had provided Iran with a research reactor capable of producing plutonium and a calutron, a technology that can be used to enrich uranium to weapons-grade.  It has been reported that even after United Nation sanctions were put on Iran, Chinese companies were discovered selling “high-quality carbon fiber” and “pressure gauges” to Iran for use in improving their centrifuges.
In 2004 the PRC joined the Nuclear Suppliers Groups (NSG), gaining international recognition of their growing power in the nuclear field. In spite of this opportunity for China to demonstrate its responsibility with nuclear energy, it has not fulfilled it NSG obligations. The PRC has kept the terms of its nuclear reactor sale to Pakistan secret and used a questionable legal technicality to justify forgoing obtaining a NSG waiver for the deal.  Additionally, China chose to forgo incorporating new safety measures into the reactors in order to avoid possible complications.
A further consequence of China exporting reactors is that these countries may wish to control the fuel cycle which provides the uranium to power their new reactors. The spread of fuel cycle technology comes with two risks: enrichment and reprocessing. Uranium can be enriched to between 3% and 5% for reactor use, but the process can be modified to produce 90% enriched uranium which is weapons-grade. Even if a country only produces low enriched uranium they could easily begin enriching at a higher level if they so choose. Every new country that nuclear technology or information is spread to exponentially increases the risk of material being stolen, given to a third party or being used as the launching point for a weapons program. China’s history of proliferation and willingness to engage economically with very unsavory governments seems likely to increase the risks involving nuclear material.

Strategy and policy


In the context of US – PRC relations, nuclear energy is more than a matter of generating electrical power; it is a critical issue of national and global security. The direct consequences of China’s proliferation of commercial nuclear technology are accompanied by even larger issues which require new responses from the United States. China’s ability to connect and integrate economic and energy policy with their grand strategy is as impressive as it is menacing. The PRC leadership has established a coherent policy of economic diplomacy to leverage their economic and technological advancements in a way currently unmatched by the US government.

The US in contrast has not matched its strategy with actions. The US National Security Strategy (NSS), released in 2010, recognizes that economic competitiveness is the “wellspring of American power.”  The strategy cites American’s enduring need for a “strong, innovative, and growing” economy, yet these words are hard to reconcile with the current state of the US nuclear and related industries.  The NSS goes further and explicitly spells out that:

The United States has a window of opportunity to lead in the development of clean energy technology… If [the United States does] not develop the policies that encourage the private sector to seize the opportunity, the Unites States will fall behind and increasingly become an importer of these new energy technologies.

Yet, this recognition from the highest levels of the US government has not done enough to substantially alter the situation or effect the bureaucratic operations of government. A Government Accountability Office report released after the NSS was written found that the US government still lacked a well defined strategy to support and promote US nuclear exports, and the domestic nuclear industry is being stifled by an "outdated and unclear… authorization process" from the Department of Energy.

It appears that over the past two decades the US government has grown to accept America’s economic soft power as a permanent condition and hence has not felt compelled to promote or actively defend America’s position. The PRC is now showing that America’s economic strength can be mitigated and co-opted. To adequately counter Chinese activities the US will have to make greater efforts to clearly identify the situation and ensure that policy conforms to strategy in order for the US to advance its position. Prudent actions for US government include:

•    Build a permanent storage facility, either at Yucca Mountain or elsewhere, to dispose of nuclear waste material. The lack of a permanent storage area is a limiting factor on any expansion of domestic nuclear power plants.
•    Streamline the licensing and authorization process for new reactors. Some recent progress has been made in this area, but more can be done to improve efficiencies.
•    Continue to build on the incentives for the construction of nuclear power plants that were put in place by the Energy Policy Act of 2005.
•    Re-write US export controls to guard against PRC industrial espionage, improve US counterintelligence in places of nuclear research, and confront problems associated with deemed-export at US research institutions.
•    Invest in nuclear energy research, specifically in safer more efficient reactors that reduce the upfront costs that often hamper nuclear power plant construction. Small reactors or modular construction represent two areas with good potential.  
•    Create a whole of government strategy for the construction and export of nuclear reactors and related equipment.
•    These previous steps will allow the US to engage the PRC from a position of strength and begin a more serious dialogue that links economic cooperation on reactor construction to safer proliferation practices. America cannot stop the PRC from developing and exporting reactors, but the US can present more attractive, more technically sophisticated options and use diplomatic and economic pressure to influence China to act responsibly when exporting nuclear technology.     
•    Perhaps most importantly, consistent and strong leadership from the executive branch will be critical for implementing these policy changes and for framing the issue of nuclear commerce with regards to China in terms of security and international influence, not only in commercial terms. 

The United States today still holds many advantages, both potential and actual, over the PRC. The innovative culture inherent in America is still pushing forward research. America has the means and tools at its disposal to remain competitive and successful in a world where China is a global power. The question is what America will decide it wants its place in the nuclear world to be. Nuclear energy commerce is important for US energy security with proliferation implications, but it is even more important because it is indicative of larger efforts on both sides of the Pacific to shape the 21st century.

Contributor Scott Cullinane is a graduate student at the Institute of World Politics in Washington, D.C.
 

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