OREANDA-NEWS. October 2, 2012. Alexei Grigoriev, director general of Techsnabexport (TENEX), is truly a legend in the nuclear industry. He began his career at TENEX in 1975 and has since then been a part of every important event that determined Russia’s position in the global enrichment market. Mr. Grigoriev directly participated in drafting the HEU-LEU contract and it was under his leadership that TENEX entered markets previously closed to it. During his tenure, Mr. Grigoriev helped to transform TENEX into a global player and a force to be reckoned with from somewhat of a special case. It is no surprise that for long time Mr. Grigoriev was the sole Russian representative on the board of directors of the World Nuclear Association (WNA).

UxC’s Anna Bryndza, Vice President for Eurasian Programs, sat down with Mr. Grigoriev in London during the WNA symposium to talk about TENEX’s past and future. The interview, conducted in Russian, was translated into English.

UxC: TENEX will celebrate its 50th anniversary next year. What changes have taken place at TENEX over the past 50 years and how would you imagine TENEX 50 years from now?

Grigoriev: I would like to emphasize that in a very unusual way, these 50 years have been split exactly down the middle into two halves. The first half took place during the Soviet Union, and Techsnabexport’s activity was carried out within the Ministry of Trade of the Soviet Union in the environment of a strict monopoly on foreign trade held at that time. TENEX began its activity in the 1960s with the export and import of isotope products, which included uranium (by the way, uranium also consists of the different uranium isotopes). When the Soviet government decided to enter the global uranium market at the beginning of the 1970s, TENEX was chosen as the foreign trade agent. In my opinion, TENEX has been very successful in accomplishing this task, and during the 1970s and 1980s, TENEX concluded long-term contracts with practically every western European utility that had western-design reactors. These enrichment contracts were from the feed material provided by the customers since, at that time, no Soviet natural uranium was used in foreign enrichment contracts. Some of these contracts were so grandiose, indispensable, and mutually beneficial that they continue to this day.

The second half of this 50-year history is dedicated to the Ministry of Atomic Energy of the Russian Federation that had different names at different times – now it is the Rosatom State Corporation – where TENEX is a subsidiary, an open joint stock company. During this time, there have been a number of new important developments. Several new markets opened up: America, Japan, the entire Far East in general, Africa, and more recently, the Middle East. The end of the Cold War led to the launch of disarmament initiatives, resulting in important developments. Here TENEX has also played a role as executive agent for deliveries of low-enriched uranium from the highly-enriched uranium extracted from nuclear warheads. The program has been very successful and its conclusion coincides with TENEX’s 50th anniversary.

I am also absolutely certain that the most valuable thing at TENEX is our team of outstanding professionals that have continued to pass the baton over the course of the last 50 years. This allowed us to work for the last 50 years without receiving any criticism from our clients and without any problems with deliveries. The high quality of our products is a result of the modern technologies of the State Corporation Rosatom, the existing scientific base, and the powerful industrial and production base. I am confident that TENEX has a big future ahead of it, as I am convinced that nobody plans to put an end to nuclear power. I believe that those serious incidents that took place in the past will ultimately be useful in developing the nuclear industry considering that additional measures to enhance safety are undertaken and the industry will only become safer and environmentally sound. I believe the industry will find solutions to the issues regarding the back-end of the nuclear fuel cycle. The future holds a lot of promise; I am absolutely confident in that.

UxC: Over the last couple of years, the Russian enrichment and conversion industry went through another round of restructuring, consolidating the industry under the umbrella of the TVEL Fuel Company. What role does TENEX play in the new structure and what is its relationship with TVEL?

Grigoriev: You know that TVEL and TENEX are joint stock companies that both are part of the State Corporation Rosatom. Indeed, today TVEL consolidated under its umbrella the companies that manufacture the whole range of the front-end of the nuclear fuel cycle products and services – from natural uranium conversion to fuel fabrication. Until then TVEL was only involved in fuel fabrication. At this time, TVEL is a powerful corporation that produces a high quality product using advanced Russian technology. Over the course of the last ten years, TVEL has been working on the nuclear fuel used in the reactors of Soviet and Russian design. TENEX, on the other hand, has been focused on supplying uranium products for western designed reactors. Today, Russia is taking steps to produce and supply the nuclear fuel assemblies for western designed reactors since our competitors in the west are doing the same, supplying nuclear fuel for reactors of Russian design. I am not certain they are doing this very successfully, but nonetheless it does take place. As such, we have a right to do the same as some healthy competition is a good thing for the development of the nuclear industry. At this time, this initiative is in its early stages and TVEL is undertaking them with TENEX support. TVEL already is able to produce such fuel assemblies and when we complete the very complex process of certification, licensing, and testing, we will become a player in this market as well. As of today, however, the relationship between our companies is very close. We are connected to each other by long-term agreements, and I am on the board of directors of the TVEL Fuel Company and the president of TVEL is on the board of directors of TENEX. That is why there can be no contradictions between us in this regard and we are walking together, so to say, along the nuclear road and are doing everything to transform Rosatom State Corporation into a truly global company covering all aspects of nuclear power.

UxC: Next year brings the end of the historical and very successful Megatons to Megawatts Program. What does this mean for TENEX and for the Russian enrichment industry?

Grigoriev: I must emphasize the HEU Agreement is not a commercial deal despite the fact that it has commercial aspects. The intergovernmental agreement that governs the deal was signed in 1993. Following its signing, the implementing contract was concluded between TENEX, which was selected to be an agent by the Russian government, and USEC, which was chosen respectively from the U.S. side. I think that this is the only substantial project between the two countries that has given tremendous benefit both to the United States and the Russian Federation. Furthermore, it is a product of a very noble process of global disarmament and a reduction of nuclear threats. I think it has really helped us in our relations with the U.S. utilities as well as with relations between our countries in general since this agreement continues to be closely monitored by various federal agencies, including the U.S. State Department, the U.S. Department of Energy, and the Russian Ministry of Foreign Affairs, and the Rosatom State Corporation. Also, the contract began in the early 1990s, which were very difficult years for the Russian economy. Thus, the contract really helped Rosatom (which at that time was called the Ministry of Atomic Energy of the Russian Federation) to make the civil nuclear industry one of the few industries at that time that continued to increase its production. This is what the HEU contract meant for TENEX and for the nuclear industry in general.

UxC: Many continue to wonder as to the possibility of the HEU-II agreement, especially given the nonproliferation incentives enshrined in the Domenici Amendment. What are your thoughts regarding the possibility of such an initiative or the possibility of some other Russian-U.S. Government initiative that could follow in the footsteps of the HEU deal?

Grigoriev: First of all, as far as I am aware, there will be no continuation of the HEU Agreement. As I have already said, this is first and foremost a political initiative and at this time, as far as I know, the Russian side has no intentions to continue it. From our side, we have accomplished a lot already through the existing contract: 500 MTU is quite an impressive amount of material and perhaps now is the time to talk about the U.S. side doing the same thing meaning diluting U.S. HEU into LEU. I understand that it has also taken steps in this direction; however, not all the LEU that has accumulated in the U.S. has been downblended and we could talk about its downblending. As a matter of fact, we were prepared to assist the U.S. government in doing so using Russian technology. I would like to emphasize that it appears there will be no follow-on to the HEU agreement. Once again, it is a purely governmental decision and TENEX and USEC are only executive agents that have no role in the decision-making process.

I would like to note that in 2011 we signed a new contract with USEC that was based purely on commercial conditions and will supply LEU from natural uranium. I think that both the Russian and the U.S. sides are satisfied with this contract, as it has already entered into effect, and deliveries will begin in 2014. Of course, it will not replace the HEU Agreement, but it will nonetheless replace a significant part of it. Additionally, we signed an amendment to the Suspension Agreement to make direct deliveries to the U.S. utilities (within certain limits). Together with the material to be delivered under the long term deal recently signed with USEC, the volume of Russian material entering the U.S. market will be approximately sufficient to compensate for the material that will no longer be in the market after the end of the HEU Agreement. At least that is what we are striving toward.

UxC: It is not that long ago that TENEX began direct contracting with the U.S. utilities. How successful have you been in filling the quota allotted by the amended Russian Suspension Agreement?

Grigoriev: From the outset I would like to say that TENEX has been supplying enrichment services and LEU to the U.S. utilities for a long time. We began doing this before the beginning of the antidumping investigation. In 1989, after the Soviet Union announced that it stopped production of HEU for military purposes, we began deliveries and concluded a number of direct contracts with U.S. consumers for quite a lengthy period of time. When the Suspension Agreement was signed, these contracts were grandfathered and the deliveries according to these contracts continued throughout the 1990s. Later, at the end of 1990s, the contracts naturally came to an end and the antidumping investigation did not allow us to sign any new contracts, permitting only deliveries within the scope of the HEU Agreement. Thus, the goal of the March 2008 amendment – I have to give credit to Rosatom and to Mr.Kirienko personally here as he supported various initiatives connected to it, including those of TENEX, and with the help of other Russian organizations was able to reach an agreement with the U.S. Department of Commerce – was to be able to resume direct deliveries to the U.S. customers. Thus, TENEX has a long history of deliveries to the U.S., but you could say that recently there was a renaissance and TENEX resumed direct deliveries. Deliveries within the scope of the HEU Agreement are not direct deliveries to the end users, but deliveries to USEC. We always strived toward resumption of direct deliveries and the 2008 amendment allowed us to do so. As of today, we have already concluded a number of direct contracts with the U.S. utilities and have already contracted more than half of the quota available to us. I think we still have opportunities to fill this quota this year, next year, and in 2014, and I am absolutely certain that it will be filled.

UxC: What markets hold the most potential for TENEX going forward?

Grigoriev: TENEX has always considered itself a global supplier; we practically work with all countries that develop nuclear power. I believe there is no nuclear power country to which we do not supply Russian material. There is no market that can be especially highlighted, since every market is important to us. Of course it is understood that the European market remains the foundation that was laid for TENEX, and some of those contracts continue to this day. For the most part it is with France, the largest European country that still has the largest share of generation from nuclear. We are very pleased that we have direct relations with Electricite de France and a large long-term contract. As I just said, the American market is also important for us as well since it is the largest market in the world. Apart from that, we are very happy that despite relatively small volumes, our deliveries are geographically diversified. At the end of the last century, Japan finally opened up and our share of the Japanese market reached nearly 15 percent before the Fukushima accident, and I believe that when the situation in Japan settles down, our deliveries to Japan will begin to grow. I hope that the Japanese consumers have been happy with our cooperation and I am certain it will continue. Also in the Far East, we have been successful in developing cooperation with China and South Korea. As to other regions, we are developing cooperation with Vietnam, which is looking to build a nuclear power plant, and other countries in the region that plan new build. I must also mention South Africa, to where we already supply our enrichment services, low enriched uranium to their only nuclear power plant Koeberg. We are also happy that the Mexican nuclear power plant, Laguna Verde, receives Russian uranium. We have had connections – and I think they will continue – with Brazil and Argentina. And finally, we are very proud to be chosen by the United Arab Emirates in their recent tender among such giants as AREVA and URENCO and are very grateful to the first Arab country that has chosen nuclear energy.

UxC: How has the accident at Fukushima affected TENEX’s market position and outlook?

Grigoriev: Of course, Fukushima has negatively affected the nuclear fuel market and TENEX is not an exception. The negative outcomes that we see right now, including requests from the Japanese customers to somehow restructure our contracts, obviously do not fit into our plans. However, our understanding toward Japanese utilities is being well received in Japan and I think that when all these obstacles connected to Fukushima-1 are overcome and the market continues to develop – and I am certain that nuclear power in Japan will continue to develop – it will allow us to make up for perhaps what we will lose in the short term. Thus, I am not dramatizing these developments.

Of course, much worse is the fact that Fukushima has negatively impacted our key European market, as the German nuclear power plants will gradually close and this future market may be lost for us. Switzerland is also saying that it will not develop its nuclear industry, as well as Spain and Sweden. None of these developments are positive for the market or TENEX. However, I think that we will fully utilize those opportunities given to us by Europe. Of course, it is necessary to understand that there are two enrichment suppliers in Europe: the northern European supplier URENCO and the south European supplier Eurodif. They possess the same effective gas centrifuge technology as we do and we understand very well that the domestic suppliers are the preferred suppliers. However, we have maintained our presence in the European market for a long time as we were there before URENCO and Eurodif appeared. And, since we know that the diversification principle continues to maintain its relevance, we think everything will be all right here as well.

As far as the Far East markets go, the Japanese market has traditionally been the most important and we will continue to develop this market despite all the difficulties that resulted from Fukushima.

UxC: Congratulations to TENEX’s engineering department in completing the fourth phase of the enrichment plant in China ahead of schedule. Are there any other similar projects in the pipeline, such as additional capacity in China or the previously discussed enrichment plant in the U.S.?

Grigoriev: In general, completion of construction of the fourth stage of the enrichment plant in China was a very useful and important experience for TENEX and its relatively new engineering department. I am not certain that we will continue our activity in China, especially in such a form as it has taken place, because what we carried out completed the previously signed intergovernmental agreement. TENEX was selected as a company that facilitated Russia meeting its obligations. Nonetheless, should the Chinese colleagues show interest – and I mean the Chinese government to the Russian government – I think we can discuss ways of cooperating in the future. However, we would be more interested in joint ventures, which could potentially be developed in the future.

As for the enrichment plant in the United States, the first thing that I want to tell you is that we have discussed such options not only with the U.S., but also with other countries. As far as the U.S. is concerned, at this stage, it is not really yet a project but rather an idea that is being discussed between us and our American partners. By the way, this idea was given to Mr. Kiriyenko, the head of the Russian nuclear industry, by the U.S. utilities themselves during one of his visits to the U.S. They asked: “Could Russia do this?” to which he answered that if there is interest, and the market and the political situation allow it, it is definitely possible since Russia already has experience building such a plant abroad. I can add that if this idea is approved in the future by the U.S. and Russian governments, then TENEX will of course be ready to begin negotiations on the project.

UxC: Earlier this year, TENEX signed a contract for a trial delivery of Australian uranium with Rio Tinto. What is the significance of this contract?

Grigoriev: First of all, this project and this contract became possible only after signing of the Russian-Australian Nuclear Peaceful Use Agreement, which was approved by the parliaments of our countries. This is important for us because many of our customers have contracts for Australian natural uranium with Australian companies, and until now, Australian natural uranium could not enter Russian territory due to the absence of an intergovernmental agreement. Now there is such an agreement in place and I think by doing this trial shipment we will evaluate with our Australian partners how all this will work in practice and how all the obligations will be carried out. This will open the way for our customers to give us Australian material as the feed material for its conversion and enrichment. As a result, we will become more flexible, which will allow us to be more competitive.

UxC: The conversion industry has been thrust into the spotlight once again recently with the extended shutdown of the Metropolis plant. Would TENEX consider offering additional conversion services globally should the market need additional supply?

Grigoriev: TENEX closely watches market demand for various services, including conversion. Should there arise additional need for conversion services, we would certainly find an opportunity to cover it. However, it is important to note that conversion is a unique part of the nuclear fuel cycle where economics and logistics are the key factors. Thus, converting Russia natural uranium provided by foreign customers and sending it over in some cases may not make financial sense given the high logistic expenses compared to deals that provide for not only conversion but also enrichment of natural uranium and delivery of enriched uranium to our customers.

UxC: Thank you for your time and such an insightful interview.