Rosatom’s Role in Russian Foreign Policy with a Case Study of the Astravets Plant in Belarus MSc Thesis Political Science: Political Economy Research Project: The Political Economy of Energy University of Amsterdam. Graduate School of Social Sciences Amsterdam June 22, 2018 Author: Sarah Poss #10880887 Supervisor: Dr. M.P. (Mehdi) Amineh Second reader: Dr. H. (Henk) Houweling 1 Table of Contents Acknowledgements 3 Maps 4 List of Abbreviations 5 List of Tables and Figures 6 Abstract 7 Chapter 1: Research Design 8 1.2 Literature Review 10 1.3 Theoretical Framework . 16 Chapter 2 - Russia’s Political & Economic Structure 21 Introduction 21 2.1 Political Structure: Who Rules Russia? 22 Rising to the top: A profile of Sergei Kiriyenko 28 2.3 Foreign Policy: Principles and Goals 39 2.4 Conclusion 45 Chapter 3 - Inside Rosatom 46 Introduction 46 3.1 About Rosatom 46 3.2 Leadership 48 3.3 Performance & Prospects in the Domestic Market 48 3.4 Rosatom’s Expansion Abroad 52 3.5 Rosatom’s New Industries 58 3.7 Conclusion 61 Chapter 4: A Case Study of the Astravets NPP in Belarus 61 Introduction 61 4.1 A Timeline of Nuclear Energy Developments in Belarus 62 4.2 Financing & Ownership 63 4.3 Russia-Belarus Relations & Justifications for the NPP 64 4.4 Safety Concerns 67 2 4.5 Political Fallout 70 4.6 Conclusion 72 Conclusions: Rosatom & Russian Foreign Policy 73 References 78 3 Acknowledgements A special thank you to Mehdi Amineh, whose advice was as invaluable as his enthusiasm for the politics of energy is contagious. I would also like to thank Dr. Houweling for being the second reader. It is both an honor and an source of motivation to have these two scholars read my work. And to Roman Artyushkin, who supports me endlessly and generously indulged me in my constant talk of Rosatom over the past five months. And finally, I would like to thank my parents for helping me pursue my dreams throughout my life. 4 Maps Map 1: Russia Map 2: Belarus 5 Source: CIA Factbook List of Abbreviations NPP - Nuclear Power Plant CIS - Commonwealth of Independent States ​ MoU - Memorandum of Understanding BOO - a reference to Rosatom’s “Build, Operate, Own” model EAEU - Eurasian Economic Union FSB - Russia’s Federal Security Service 6 CSTO - Collective Security Treaty Organization SCO - Shanghai Cooperation Organization FAEA - Russia’s Federal Atomic Energy Agency 7 List of Tables and Figures Figure 1. Correlation between Russia’s GDP and the price of oil………………………….34 Figure 2. Inflation, disposable income, and labor compensation in the Russian economy....38 Figure 3. Nuclear power plants in Russia…………………………………………………...50 8 Abstract The Russian state atomic corporation, Rosatom, has quickly expanded its business abroad since it was formed in 2007. The objective of this research is to clarify the connection between this expansion and the political motivations of the Russian government. Rosatom offers to finance, build, operate, and own nuclear plants in client states, which makes a compelling opportunity for developing countries with increasing electricity demand and little or no experience in the nuclear industry. However, becoming dependent on a Russian state corporation for energy supply is a definitive risk, explored in this research by looking at past occurrences of political involvement by the state in oil, gas, and nuclear energy deals. The case of the Astravets plant under construction in Belarus shows how the political impact of a Russian plant can extend far beyond the borders of the client country, and connects the construction of a nuclear plant with the objectives of Russian foreign policy. The outward expansion of Rosatom is found to coincide with the development of a more globally-oriented yet neomercantilist foreign policy, driven by economic and geopolitical factors. 9 Chapter 1: Research Design Objectives The topic of this thesis is the expansion of Rosatom internationally, and how this expansion plays into Russian external policy goals. The primary objective of this research is to understand the extent and nature of Rosatom’s activities with respect to promoting and expanding the use of nuclear energy internationally. A second objective is to understand Rosatom’s role in the global nuclear energy industry now and in the medium term. The final objective is to ascertain how Rosatom’s activities coincide with the Russian foreign policy agenda. Research question What are drivers of Rosatom’s international expansion, and how does this expansion coincide with the Russian foreign policy agenda? Sub-questions 1. How do Russian state corporations fit into the political, economic, and foreign policy agenda? 2. How has the role of Rosatom developed over time, and what is the outlook and strategy for the future? 3. What are the potential consequences of reliance on Rosatom for energy security? Social Relevance The social relevance of this research is multifaceted. First, as a matter of national security for other states, monitoring the changes and development of the Russian sphere of influence is 10 paramount. The Russian government has proved it is willing to forcefully defend its perceived sphere of influence using diplomatic, economic, covert, and military means (Sokolsky, 2017). The promotion of Russia-backed nuclear energy to create long-term dependence in energy-deprived states has the potential to significantly expand Russian influence around the world, and this research seeks to identify if and how this is taking place under the auspices of Rosatom. Second, for all the scholarship on Russia as an oil and gas giant, Rosatom is a leader in the nuclear energy industry and the ever-growing list of countries Rosatom has made agreements with is a neglected topic of study given the potential influence Russia could gain from pushing nuclear energy adoption around the world, especially in the recent past as the number of deals with Rosatom have more than doubled (Rosatom, 2018). There is a debate among scholars about the nature of Russian energy giants, with some pointing to the economic logic behind their actions while others emphasize actions perceived to be politically motivated, and this research will bridge the gap between those arguments. The work of Minin & Vlček (2017) provides the most comprehensive argument in the peer-reviewed literature in favor of an economic explanation for Rosatom’s expansion, but there are flaws in this argument that this research attempts to address. Lastly, those who are working toward a future powered by renewable energy must be aware and contend with the fact that Russia’s vision of the energy transition includes the use of nuclear energy, making this research is relevant as it highlights the actions Rosatom is taking to ensure that Russia is central to the future of global energy supply and security. Delineation of Research This thesis is centered on how Rosatom fits within the framework of Russian foreign, economic, and security policy, and how Russia gains influence through Rosatom’s newly-acquired reach into all regions of the world. The research is delineated into the space of Russian policy and outcomes, over the time period since 1991, with brief references to ways the Soviet system has influenced the current behavior of the Russian state. 11 The main actors in this research are organs of the Russian state, from Rosatom and its subsidiaries, to the Kremlin, security services, the Ministry of Foreign Affairs, and other ministries. Since arrangements regarding nuclear energy are typically organized at the state level, the foreign actors in this research are primarily state actors and state-run companies as well. An exception is in the analysis of Rosatom’s competitors, some of which are private companies. The time frame under consideration is from the collapse of the Soviet Union until the present time. This research is focused on role of Rosatom in foreign policy, and therefore the development of Russian policy from its Soviet roots through its evolution under the Russian flag will be referenced, but the primary focus is the development of nuclear expansion under Vladimir Putin. 1.2 Literature Review There is a debate among scholars about the nature and existence of the Russian energy “weapon.” Some conclude that political meddling in the energy industry by the Russian government is a rare occurrence or coincidental byproduct, while others see Rosatom or Gazprom as being inherently political in nature. This literature review covers both sides of this debate in terms of the economic as well as the political arguments to highlight different perspectives on the drivers and motivations of Russian energy giants. It draws on experiences in the oil and gas industry as well as the nuclear energy industry to create a broad view of the motivations and involvement of the Russian state in energy issues. The Economic Argument Minin and Vlček (2017) assess whether concerns regarding Rosatom as a political tool is ​ warranted, and conclude that economic motivations are sufficient to explain Rosatom’s external strategy to the extent that political factors are coincidental. They note the competitiveness of the 12 global nuclear industry, emphasizing that regardless of ownership, Rosatom could not survive in the competitive environment if political considerations routinely superseded the economic. The economic argument highlights the fact that nuclear power plants are becoming more efficient through technological advances that lower the production costs of electricity generated by nuclear energy (Minin and Vlček, 2017). Despite the push for renewable energy on economic ​ ​ grounds, modern nuclear power plants (NPPs) remain an economically sound form of electricity production that is profitable for companies such as Rosatom. For example, light water reactors, the most common type of reactor in service today, have operating costs between USD 0.025/kWh and 0.07/kWh to produce electricity (Sovacool, 2011).