Russia breaks "wall" into U.S. nuclear market

MOSCOW Tue May 26, 2009 1:15pm EDT

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MOSCOW (Reuters) - Russia signed a landmark deal to supply nuclear fuel directly to U.S. companies on Tuesday, setting itself up to control 20 percent of the U.S. uranium market and extending its global reach in the nuclear sector.

At a ceremony in the Russian capital, U.S. electricity firms PG&E, Ameren Corp and Luminant signed deals to get more than $1 billion in uranium supplies from Russia's state nuclear fuel exporter Tenex between 2014 and 2020.

"This is a revolutionary breakthrough," Sergei Kiriyenko, the head of Russia's state atomic energy firm, Rosatom, which controls Tenex, told reporters.

Until last year, U.S. anti-dumping laws had only allowed Russia to sell the United States uranium recovered from dismantled Soviet nuclear weapons. These sales are carried out through U.S. uranium trader USEC Inc.

"We have broken through the wall forbidding us to sell Russian fuel to the American market. After the contracts signed today, we will start new contracts," a jubilant Kiriyenko said after drinking toasts of champagne with the Americans. "This is only the beginning."

Bruce Hamilton, the president of Fuelco, the intermediary set up by the three U.S. companies for the deal with Russia, said Tuesday's agreements open the door for Russia to directly take 20 percent of the U.S. uranium market between 2014 and 2020.

"The Russians do it all. They mine it, they convert it and they enrich it," Hamilton told Reuters after the deals were signed. "And after 2020, it's just wide open (for Russia)."

The Russian fuel would be used initially to provide power to 5 million U.S. homes in California, Texas and Missouri, he added.

NUCLEAR STORAGE IN THE U.S.

Russia, one of the world's biggest nuclear players, has long been seeking to expand its clout in the sector by moving into developed markets such as the United States, European Union and Japan.

Earlier this year, it signed deals to cooperate with Japan's Toshiba and Germany's Siemens, putting Russia in the center of a nuclear alliance stretching from Western Europe to East Asia.

Tuesday's deals extended its reach further into the United States, where Russia is now discussing access to nuclear infrastructure, such as uranium storage facilities, Kiriyenko said.

"The directors of the U.S. energy companies discussed this with us. For them it would be more convenient if these facilities were located right in the United States. This is a logical step for us," Kiriyenko told reporters.

He added that these facilities would be jointly owned.

Hamilton declined to comment on this project.

U.S. anti-dumping laws were eased last year in a deal between Moscow and Washington to allow direct sales of uranium to other U.S. firms aside from USEC.

Analysts expect the increased access for Russian uranium to lead to lower prices in the United States.

The head of Tenex, which is also known as Techsnabexport, said his company expects to get as much as 25 percent of the U.S. uranium market through the deals signed on Tuesday.

"I am confident other similar deals will follow," Tenex CEO Anatoly Grigoryev, who signed all the contracts on behalf of the Russian side, told reporters.

(Editing by Anthony Barker)

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