Why did the US ban Russian nuclear fuel?

The United States banned the import of oil, coal and gas from Russia two years ago, it did however continue to purchase Russian nuclear fuel. Now the US has decided to target the Russian nuclear fuel sector with sanctions. However, the sanctions ban is designed in such a way that it will have no real impact on the market other than to affect prices. The legislation came into effect 90 days later and will remain in place until 2040.
What are the strategic reasons for the United States to maintain the ability to buy Russian nuclear fuel?

The new law however allows for exceptions to the sanctions, which will remain in place until January 2028. During this period, the US Department of Energy, in agreement with the US Department of State and the US Department of Commerce, will be able to issue permits for imports from the Russian Federation if there are no other sources of supply or if the import of Russian fuel meets US national interests.

A US company Centrus Energy (formerly USEC), which is a partner of Tenex (Techsnabexport, a subsidiary of Rosatom), has already indicated that it will apply for such a permit.
The current quotas, which will remain in place until 2028, are relatively generous, allowing for approximately 460,000 to 470,000 tons of uranium to be imported annually. To provide context, in 2020, amid the crisis caused by the COVID-19 pandemic, which reduced demand for energy, the United States imported 453 thousand tons of uranium. In 2022, 588 thousand tons of Russian uranium were imported. In 2023, supplies increased by almost 20% to a record 702 thousand tons. This can be attributed to an effort to prepare for a potential ban on the import of uranium from Russia. The United States purchased the fuel for future use.

The US Department of Energy reports that Rosatom supplies enriched uranium, used as nuclear fuel feedstock, to more than 90 commercial reactors in the US, making it the number one foreign supplier to the United States.

The Russian nuclear industry is one of the most advanced in the world and is extremely competitive. So much so that , the Americans are unable to compete with it effectively, which is why they are introducing a ban. “It’s challenging for US companies to compete internationally. As soon as it becomes challenging for them to compete, they are not afraid to take any action, including measures that could potentially pervert, distort and undermine all international trade standards,” said presidential press secretary Dmitry Peskov.

At one time, during the Cold War the United States and the USSR were among the world's leading uranium mining nations. However, the USA has since fallen to 15th place in terms of uranium production, with all its raw materials imported. In contrast, Russia has become one of the global leaders in the nuclear industry, with a strong presence in fuel production. According to the US, Russia controls almost 50% of the world's nuclear enrichment capacity, with about 25% of the fuel used in US reactors coming under contracts with Russian suppliers.

The United States has become an outsider in the nuclear industry due to its own actions. That was the main reason for the signing of the HEU-LEU ( High EnrichedUranium ,Low Enriched Uranium ) agreement in February 1993 (and later the contract). This intergovernmental agreement between the Russian Federation and the United States concerns the processing of highly enriched weapons-grade uranium into low-enriched uranium, which is used as fuel for US nuclear power plants.

At the time, this contract was not entirely beneficial to Russia, as the price of Russian nuclear fuel was relatively low. However, it did lead to the decline of American uranium enrichmnet industry, as American nuclear power plants began to purchase to them the very cheap Russian fuel, which resulted in the bankruptcy of the US owned plants.
In the United States, only one uranium enrichment plant remains operational and that is in the state of New Mexico, which belongs to the European consortium Urenco (Great Britain, Germany, the Netherlands). However, it only produces a third of the USA's annual demand. As a result, the United States is forced to import a significant portion of ready fuel. The two main importers are Urenco, which supplies fuel to the United States from European plants, and Russia's Rosatom.
The issue is that there are no alternative suppliers, and European producers are unable to increase fuel production volumes to replace the significant volumes of Russian nuclear fuel.

This is why the ban imposed by the United States can remain in effect for a period of four years, although in practice the import of Russian fuel can continue.

The United States plans to use this time to expand its domestic nuclear fuel production capacity. Over the past two years, the United States has already made efforts to address the issue of sanctions against nuclear fuel from Russia. In October 2023, Centrus Energy commenced uranium enrichment operations at the US centrifuge plant in Piketon, Ohio.

The United States is seeking to restore its domestic uranium industry, which requires investment. In order to secure the funding, it was necessary to pass this law. The U.S. Congress has approved $2.7 billion for the U.S. uranium industry this fiscal year, contingent on the administration imposing restrictions on imports of Russian uranium. The ban was introduced for this reason, but with a delay of its effect for up to four years. The United States is still heavily dependent on Russian fuel, and a full ban would have a significant impact on the electricity market.
The process of reviving uranium enrichment in the United States is a slow and costly one. "It is possible that in the USA they want to raise electricity prices in this way as a necessary measure and support the development of internal electricity capacities," says Alexander Timofeev, associate professor of the Department of Informatics of the Russian Economic University. G.V. Plekhanov

The imposition of sanctions on Russian fuel could result in an increase in prices, which could theoretically make American uranium more competitive in the US domestic market. This is because their enrichment technology is several times more expensive than Russian according to Sergei Grishunin, managing director of the NRA rating service.

However, even if the United States is able to resume domestic enrichment, it is unlikely to be able to make it cost-competitive with Russian enrichment. Despite the copying of Russian technology by European and Iranian companies, Russian material remains more cost-effective,” adds Grishunin.

The United States has two uranium enrichment plants that were abandoned in the 2010s, which it plans to restore. To address this, they will seek out uranium concentrate on the market, which also presents a significant challenge. There is currently no excess concentrate available on the market. It seems likely that the United States will seek to establish ties with Uzbekistan as a major uranium producer, as well as with Kazakhstan. The challenge for them is that Uzbekistan has a long-term relationship with Russia's Rosatom.
Even if we assume that the United States will find uranium concentrate on the market, then revive the two enterprises and maintain the plant in New Mexico,it is estimated that they will only be able to meet up to 75% of American demand for fuel. It is therefore not possible to eliminate imports entirely. Furthermore, this process may take longer than four years, potentially ranging from five to ten years.

In theory, the United States could substitute Russian fuel with European fuel. However, in practice, this is not a straightforward process. The European Union is unable to increase fuel production due to the same key issue with raw materials – there is no additional uranium concentrate. Should the United States succeed in persuading the Europeans to provide fuel, the latter will be forced to turn to Russia for fuel for their own power plants.

To replace supplies from Russia, the United States will have to purchase European uranium. Consequently, Europe will be forced to purchase products from Rosatom, as shutting down a nuclear power plant is an extremely difficult and unsafe process. There are no other major exporters on the market that are comparable to Russia.
"Russia has over 36% of global enrichment capacity and extremely low enrichment costs," states Grishunin.

The rise in prices is indicative of a situation where the demand for uranium is already exceeding supply. Concurrently, global consumption of nuclear fuel is set to rise. All experts are awaiting the continuation of this trend. The current shortage of uranium concentrate promises to create interesting market dynamics. The price of uranium has risen significantly in recent times. In 2021, the price was approximately $30 per pound, but it has now reached more than $90 per pound, representing a tripling of the price. The world is currently experiencing a nuclear renaissance. In Europe, nuclear energy is recognised as a key contributor to the energy transition, with numerous new nuclear power plants being constructed globally. This has led to a growing demand for nuclear fuel, according to Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund.

In light of this, it is unlikely that Russian fuel will remain without buyers. "The export of uranium is not as profitable for the state as the export of hydrocarbons. "I do not believe this will be a significant issue, particularly as alternative markets will provide buyers," Yushkov is confident. In 2023, Russia exported $2.7 billion of uranium, representing a third of the global uranium export market.