Why Russia is pushing into Africa’s nuclear energy market

Good morning and welcome to Energy Source, coming to you this morning from New York and Johannesburg.

Oil prices edged up yesterday as Iran blamed Israel for a deadly attack on its Damascus consulate, ratcheting up tensions in the region. US benchmark West Texas Intermediate gained about 1 per cent to settle at $83.71 a barrel, its highest level since October. Brent crude, the international marker, rose by a similar margin to settle at $87.42/b.

For decades, Gulf states have built their wealth on plentiful oil and gas reserves, which have powered the global economy. But as the world targets an energy transition away from fossil fuels, countries in the region are diversifying their economies and investing in new industries, including mining.

My Financial Times colleagues Harry Dempsey and Chloe Cornish report on the Gulf states’ increasing investment in the resources needed to produce clean energy. For some resource-rich nations in Africa, Asia and Latin America, the entrance of these middle powers into the critical minerals battleground is a welcome alternative to decades of exploitative arrangements underpinned by either western colonialism or Chinese debt.

Our main item today focuses on how Rosatom, Russia’s state-owned nuclear giant, is making strides to export its technology and build plants in the global south. As Rob Rose reports, the company is targeting Africa in a strategy that presents strategic challenges for the US and other western nations.

Thanks for reading,

Jamie

Russia, hedging against nuclear sanctions, courts Africa

As the sabre-rattling over possible sanctions against Russia’s nuclear industry intensifies, the country’s state-owned energy company Rosatom is busily drumming up new business in Africa. 

Last month, speaking at the African Energy Indaba in Cape Town, Rosatom’s chief executive for central and southern Africa, Ryan Collyer, urged the continent’s most industrialised country, South Africa, to press go on its nuclear programme to ensure “stable, affordable and environmentally friendly” power.

It was a message that resonated with South Africa’s energy minister Gwede Mantashe, who said the country, which has been battling electricity blackouts for the past 16 years, expects nuclear energy to be part of the fix. 

“The proposal to develop 2,500MW of nuclear power is not a dream — there’s already an agreement, and the procurement capacity is being worked on. We’re going to be investing in that capacity,” he told the conference.

While nuclear power provides about 10 per cent of electricity generated globally, according to the Paris-based International Energy Agency, the Koeberg plant in Cape Town is the only nuclear power station on the African continent.

Yet a number of African countries have announced plans to build nuclear power plants in the past year — including Uganda, Rwanda and Kenya.

Russia, sensing an opportunity to forge new economic alliances to mitigate the impact of western sanctions imposed as a result of Vladimir Putin’s February 2022 full-scale invasion of Ukraine, has been quick to pledge its support to African countries with nuclear energy ambitions.

Mantashe said nuclear energy will be “part of the solution” to filling Africa’s energy gap. Last year, research presented at the UN put the number of people without electricity in sub-Saharan Africa at 598mn — nearly half the region’s population.

“African nations are going to be investing more in gas infrastructure and expanding nuclear access,” said Mantashe. 

Rosatom believes it can capture a significant slice of this market — speaking in Russia’s parliament this month, the group’s director-general Alexey Likhachev said he considered Africa a “point of growth” for nuclear technology.

Last week, Rosatom announced it had signed nuclear energy “co-operation” agreements with Mali, Burkina Faso and Algeria during the two-day Atomexpo energy conference, held in the Russian city of Sochi. This entrenched an earlier agreement, announced in October, in which Rosatom said it would build a nuclear power station in Burkina Faso, a country in which the World Bank estimates only 19 per cent of the population has electricity.

And in January, Rosatom announced that construction had begun on the fourth reactor at the $30bn El Dabaa nuclear power plant in Egypt, about 300km from Cairo, which has been billed as one of the two largest nuclear construction projects in the world.

Reducing dependence

Russia’s frenetic push into African markets comes as calls intensify to institute sanctions on Rosatom, including from several EU countries, in response to Putin’s war in Ukraine.

Last week, Belgian Prime Minister Alexander De Croo told the FT that the EU must wean itself off Russian nuclear fuel “as fast as possible” to ensure the bloc doesn’t further boost Putin’s war chest. 

Yet this goal is fraught with difficulty, given Rosatom’s centrality in the global nuclear energy chain. As it is, Rosatom supplies more than a fifth of the enriched uranium fuel used to power nuclear reactor fleets in the US and Europe, and as much as half of the needs of countries such as Hungary.

Rosatom’s Likhachev has fought back, describing calls in Europe and the US for greater sanctions as “short-sighted”, since it increases the price for nuclear fuel in their own countries.

“The US itself has announced plans to close access to its market for our products in a few years. Similar initiatives are being voiced in the EU. Market prices are moving up based on expectations of a negative scenario,” he said in a February interview with Russian state news agency Tass. 

Likhachev said the result is that energy companies from the US and EU will be “forced to buy uranium products at a higher price on the market”. 

This illustrates how Rosatom’s global influence — and the assistance it has provided to foreign governments in building nuclear plants — has provided a significant source of soft power for Putin.

“Nuclear technologies tend to lock in diplomatic ties in a way that other energy sources don’t,” Kevin Book of ClearView Energy Partners, a Washington-based independent research group, told the FT in January. 

Hartmut Winkler, professor of physics at the University of Johannesburg, wrote in December of the danger of African countries borrowing money from Russia to develop nuclear plants. Egypt, for example, borrowed $25bn from Russia to build the El Dabaa power station, which is meant to be paid off over 35 years at a 3 per cent interest rate per year.

“The drawback is that the country develops a strong long-term dependence on Russia to meet one of its most basic needs: electricity provision,” he wrote. The fallout from the Ukraine war could then lead to “disruption and ultimate termination of projects already in place”, given that it typically takes more than a decade to build a nuclear plant.

In South Africa, the relationship with Rosatom has proven particularly controversial.

In 2014, the Russian agency signed a broad “intergovernmental agreement” to build eight nuclear reactors, which would provide 9.6GW of power to South Africa, at an estimated cost of R1tn ($76bn). But this deal, which reports said was directly negotiated between South Africa’s former leader Jacob Zuma and Putin, was later scrapped by the courts amid widespread corruption claims.

Rosatom’s high-profile charm offensive at the African Energy Indaba last month suggests that relationship hasn’t been irrevocably tainted. 

That courtship took another step forward last week, as South Africa’s state-run power company Eskom signed a training “action plan” with Rosatom, including skills sharing at universities and the “secondment of engineering competencies”. 

Russia is betting on these training partnerships as part of a bid to ensure countries from the Brics group are at the forefront of the global move away from fossil fuels. These emerging-market countries are expected to account for 41 per cent of global energy production and consumption by 2040, Rosatom’s executive Evdokiya Polyakovskaya said at the Indaba. (Rob Rose)

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Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.