IN THE SPORT OF MINING, THE RUSSIANS TAKE URANIUM

C O N F I D E N T I A L TASHKENT 000650

SIPDIS

SIPDIS

DEPT FOR SCA/CEN

E.O. 12958: DECL: 04/03/2016
TAGS: ECON EMIN PGOV PREL UZ ZK PENV
SUBJECT: IN THE SPORT OF MINING, THE RUSSIANS TAKE URANIUM

REF: A. A) TASHKENT 237

B. B) TASHKENT 614

C. C) TASHKENT 633

Classified By: CLASSIFIED BY AMB. JON R. PURNELL FOR REASONS 1.4 (B, D)
.


1. (C) Summary: The local press is painting an idealistic
picture of the agreement between Techsnabexport and
Uzbekistan,s Navoi Mining and Metallurgy Combine (NGMK) to
produce uranium. Meanwhile, US-based RWE Nukem is worried
that it is slowly being pushed out of the uranium industry.
Non-Western businesses and governments are increasingly
seeking to buy local uranium and mine new fields. End
summary.


2. (C) Uzbekistan, along with Kazakhstan, is now part of
Russia,s proposal to create an international uranium
enrichment center. The center, according to a February
statement by President Putin, would likely operate within the
framework of the Eurasian Economic Community (EurAsEC),to
which Uzbekistan acceded in January (ref A). At the EurAsEC
meeting earlier this year, Uzbekistan reached an agreement
with Russia to deepen cooperation in exploring and developing
uranium deposits. At the same time, Russian-owned
Techsnabexport signed a protocol regarding joint production
of uranium with NGMK. (Note: According to its website,
Techsnabexport is a joint stock company associated with the
Russian Federal Agency for Atomic Energy. The website
advertises its "unique" ability to deliver the range of
nuclear fuel cycle-related products and services. End note.)


3. (C) A February 2006 press article from the Delovoi Partner
Uzbekistana newspaper placed the uranium deal in the context
of the GOU,s shift away from the West. The article
illustrates the continued idealistic depiction of local
industry, at least publicly. According to the article,
Uzbekistan seeks to cooperate only with &those countries
that treat our country as a competent partner.8 Moreover,
it claims that Uzbekistan is on the road to effective world
competition in the uranium industry. According to an
RWE-Nukem representative, in 2005, NGMK mined 2,300 tons of
uranium, or approximately six percent of total worldwide
production. He also estimated that NGMK has approximately
150,000 tons of uranium yet to be mined, which should last
for the next 75 years (ref B).


4. (C) Until the Techsnabexport/NGMK protocol, RWE Nukem
considered itself the primary partner of NGMK, however, now
it seems that the American company,s Russian competition is
gaining a toehold in the market. An Embassy contact from RWE
Nukem characterized the Russian-Uzbek agreement as a &green
light8 for further planning on prospecting uranium deposits.
Due to what he described as &political reasons8, RWE Nukem
has been waiting since March 2005 for the GOU to approve the
memorandum on joint venture exploration and mining in the
Navoi region. However, our contact said that RWE Nukem is
not worried yet, as it remains the exclusive purchaser of
Navoi uranium until 2013, and continues to look for joint
venture opportunities.


5. (C) Comment: Although RWE Nukem holds exclusive rights to
purchase uranium, anything goes in the current political
climate. It appears that the protocol between NGMK and
Techsnabexport may signal serious Russian entry into uranium
and the mining sector in general. Given the current
political-economic climate favoring Russian businesses,
especially those closely related to the government, we cannot
rule out that the GOU will find a way to sell the Navoi
uranium to the Russians, the contract with RWE Nukem
notwithstanding. While the Russians pose the largest threat
to RWE Nukem,s market share, other countries are expressing
interest in uranium too, including China and South Korea (ref
C).
PURNELL