Saudi Arabia Says It Might Select China for Nuclear Reactors

In what should have come to few as a surprise for those who follow the nuclear industry, Saudi Arabia went on the record, as reported by the Wall Street Journal (WSJ) (firewall) on August 25th, that it is considering a Chinese bid to build it two 1,000 MWe Hualong One PWR nuclear power plants there.

The reason it is not news is that as long ago as February 2019, Saudi Arabia aired its perspective that it would choose China if the US did not back off of its insistence on a ban on uranium enrichment in return for permission to buy nuclear reactors from Westinghouse and other US firms in the nuclear supply chain.

With regard to the Saudi nuclear program, Reuters reported on 8/25 that State-owned China National Nuclear Corp (CNNC) has bid to build a nuclear plant in Saudi Arabia’s Eastern Province, near the border with Qatar and the United Arab Emirates.

According to Reuters, China’s foreign ministry did not confirm the report, but a ministry spokesperson told a news briefing: “China will continue to conduct mutually beneficial cooperation with Saudi Arabia in various fields, including civil nuclear energy, while strictly abiding by international non-proliferation obligations.”

China and Saudi Uranium Prospecting

Separately, China has helped Saud Arabia prospect for domestic uranium deposits and also reportedly is helping Saudi plans to build a hard rock uranium mill to produce yellowcake. That’s a stop well short of enrichment.

Last April the NEA/OECD Red Book reported that over the past six years Saudi Arabia  spent more than $37 million prospecting for deposits but only managed to identify ores that would be “severely uneconomic” to mine. The deposits are only “inferred” which is the least reliable method of identifying underground minerals. Some of the hard rock deposits containing the uranium, which is mixed in with other minerals, are more than 1,000 meters (3,330 feet) underground.

Negotiating with a Point

The WSJ reported that Saudi officials told the newspaper the purpose of raising the issue about buying reactors from China was to convince the Biden administration to seek a compromise on its nonproliferation requirements.

The reason the issue has gained news media attention is that in March of this year Saudi Arabia asked the US for assistance with its nuclear energy program. The Saudis also asked for US security assurances relative to external threats, e.g., Iran, and it also opened the door to normalize relations with Israel.

Saudi Arabia’s desire for enrichment stems from a view that it cannot appear weak relative to its hostile neighbor Iran. Having enrichment, with its potential path to nuclear weapons, would be a Saudi deterrent to Iran’s expanding nuclear program.

The Saudi three part proposal can be seen as part of a larger effort across multiple vectors to blunt Iran’s nuclear drive as evidenced by IAEA reports that Iran has enriched U235 to 84% which is HEU in weapons’ grade range. The Biden Administration has been trying to figure out how to address the Saudi requests and has dispatched State Department and National Security Officials to meet with their Saudi counterparts.

President Biden has cautioned that a deal is not pending and that the talks could take some time to reach a deal that the US, Saudi Arabia, and Israel would buy.  Israel government officials are reported to be divided on the enrichment issue but are intensely interested in normalizing relations with Saudi Arabia.

So far, the US has not publicly said anything about changing its nonproliferation policy which is based on long standing practice that agreements under Sec 123 of the Atomic Energy Act require that nations eligible for nuclear technology exports from US firms have to waive their plans for uranium enrichment and spent fuel reprocessing. The United Arab Emirates (UAE) signed such an agreement which allowed South Korean firms, using some US technologies, to build and commission four 1400 MW PWRs in the UAE.

What Would It Take for the US and Saudi Arabia to Cut a Deal?

A mainstream view of the nonproliferation challenges ahead, and the conditions needed to craft an agreement, is contained in the September/October 2023 issue of Foreign Affairs Magazine.

In the article Daniel C. Kurtzer, the former U.S. Ambassador to Egypt and former U.S. Ambassador to Israel, and Aaron David Miller, Senior Fellow at the Carnegie Endowment wrote that while “no deal is better than a bad one,” they went on to specify what could be the practical elements of a deal that would open the door to US exports of nuclear technologies to Saudi Arabia;

“The Biden administration should be careful not to concede too much or accept too little. Riyadh is asking Washington to support a civilian nuclear program, reportedly including a right for Saudi Arabia to enrich uranium. Any export of U.S. nuclear technology to the kingdom must involve three ironclad Saudi commitments:

• to sign a nuclear cooperation agreement with Washington that includes strong nonproliferation requirements,
• to sign and ratify the Additional Protocol of the Nuclear Nonproliferation Treaty that strengthens the
  verification capabilities of the International Atomic Energy Agency,
• to allow onsite American inspection and electronic monitoring of their facilities.”

What Does Saudi Arabia Really Want?

Another issue that came up in the WSJ report is whether Saudi Arabia even wants US nuclear reactors. Instead, the newspaper reported that what the Saudis really want is US nuclear energy management expertise and PWRs from South Korea, the same kinds of reactors built for the UAE.  Neutron Bytes reported last June this was an emerging Saudi position.

South Korea has two compelling competitive advantages. These are a mature supply chain for nuclear reactor systems and components and experienced engineering and construction management teams that could start almost immediately. The original announcement of the Saudi tender actually called for the same electrical power rating as the South Korean design – 1400 MWe.

The UAE developed engineering, procurement, and construction organization with US help and also hired former officials from the Nuclear Regulatory Commission to help set up its safety and oversight agency. The Saudi government would likely seek to repeat that process for its nuclear program.

Intellectual Property Dispute Overhang

A major impediment to a decision by Saudi Arabia to hire South Korean firms to build its reactors is that Westinghouse has sued South Korea’s nuclear firms over allegations that they infringed on Westinghouse patents in the design of the APR1400. For its part, the South Korean firms assert that the updated design, which they would offer to Saudi Arabia, the Czech Republic, and Poland, is a 100% a domestic product with no Westinghouse IP in it.

Clearly, Westinghouse is pursuing two objectives. It is spiking South Korea’s competition to book new sales in global markets and it is demanding revenue from licensing the intellectual property which it claims South Korea is still using. For its part, South Korea’s industry parties in the dispute say they will not pay for IP they have not included in the current reactor design of its export offerings. The two parties have recently entered into arbitration with the objective of settling their differences. It is possible they could do so by the end of this year.

Reframing the Enrichment Issue in the Context of US Security Assurances

Mohammed bin Salman Al Saud, aka “MBS”, the Crown Prince of Saudi Arabia, has continued to make it clear he thinks it is possible to push the US into accepting his plans for enrichment by playing the China card for its reactors and maybe some Chinese military bases on the country’s Persian Gulf coastline.

However, a much bigger moving piece for MBS may be desire for US security assurances relative to Iran. Up until now US concerns about enrichment have been framed relative to the Saudi civilian nuclear program. Maybe it is time to re-frame these issues in the context of the greater need MBS has for dealing with his insecurities about Iran?

The US has the potential to leverage its capabilities to cover some of MBS’ security needs as a push back on his hard position to be able to pursue enrichment and control the entire nuclear fuel cycle for any reactors built in Saudi Arabia.

MBS’ waving the China card isn’t wholly credible because China would not give him the security assurances relative to Iran that he wants from the US.  Also, China isn’t going to let MBS control the nuclear fuel cycle for Chinese reactors. China has already said no to a proposal by Argentina to supply the fuel for a proposed Hualong One in that country.

Gaming this out, US could push back on the enrichment issue relative to security assurances MBS wants from US.  If MBS has a strong US security agreement, why would he still insist on enrichment?  Would he give it up? Whether the US would pursue a strategy using this scenario is unknown.

There is always the possibility that Iran might agree to some kind of pause in enrichment in return for lifting of US economic sanctions which it dearly wants as the Iranian economy is a basket case. But such a deal won’t stop its support of regional proxies, like the Houthi rebels in Yemen and Hezbollah in Jordan, in its quest for expansion of its regional power and influence.

The Houthis, acting as proxies for Iran, have launched missile attacks against industrial and civilian targets in Saudi Arabia and the UAE.

• In September 2019 the Houti rebels attacked the Abqaiq oil processing facility causing extensive damage that cut Saudi oil production in half until repairs could be made.
• In January 2022 the Houtis launched missiles at buildings near the Abu Dhabi airport killing several people and damaging a fuel oil terminal.

These kinds of attacks from Iranian proxies are the reasons why it is possible Saudi Arabia might be convinced to give priority to obtaining US security assurances relative to separate track to build civilian nuclear reactors. Its the one “security partnership” the Saudi nation can count on.

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