Arab States Go Nuclear to Close Power Gap, Catch Up With Iran

Historically, it has proven extremely difficult for countries in the Middle East to build nuclear power plants. The idea of commercial reactors secretly processing weapons-grade nuclear material has always alarmed Washington, which for decades has used its clout in the region to keep the Mideast as nuclear-free as possible.

Today the U.S. is leading the way in imposing sanctions on Iran’s nuclear program. Israel also remains ready to protect its interests, as it did when its air force bombed the unfinished Osirak reactor in Iraq in 1981.

The situation is gradually changing, as Arab allies of the U.S. increasingly petition Washington to bless their plans for civilian nuclear programs. The U.S. is proving pliable, since the programs do not appear to have a sinister intent, at least in the medium term, and offer a business opportunity for multinationals such as General Electric Co., Bloomberg Businessweek reports in its Aug. 9 issue.

Saudi Arabia and the United Arab Emirates need to satisfy demand for electricity that is growing at a rate approaching 10 percent a year. Their interest in nuclear energy has in part been sparked by a shortage of natural gas, the usual fuel for electric power plants. Without enough gas, the Saudis and the Gulf Arabs have been burning oil to generate power, which is inefficient and polluting. These countries also consider themselves energy specialists and want to prepare for an era when carbon emissions may be penalized.

“There is more to this than straight economics,” said Ian Jackson, a nuclear specialist at London’s Chatham House think tank. “It is clearly about strategic energy positioning.”

Korea Beats France

Among the Gulf states, the United Arab Emirates is furthest down the nuclear road. At year-end, the U.A.E. concluded a $20 billion deal for four nuclear plants with Korean Electric Power Co., which beat General Electric and France’s Areva SA on price. The U.A.E. has also agreed with the U.S. on strict safeguards, which include forgoing any domestic uranium enrichment or reprocessing of spent fuel.

“They are the poster child for nukes in the Middle East,” said Mark Hibbs, a nuclear analyst at the Carnegie Endowment for International Peace in Washington.

Not to be outdone, the Saudis recently said they would build a city specializing in nuclear and renewable energy, a concept that appears to be modeled on Masdar, Abu Dhabi’s planned showcase green metropolis. The Saudis say they will spend some $80 billion on added power capacity, with a big chunk possibly coming from nuclear facilities.

Oil Exports

“Use of nuclear in electricity will free more oil for exports and more gas for development,” said Anas Alhajji, chief economist at NGP Energy Capital in Irving, Texas. With the Arab world’s largest economy and a fast-growing population, the Saudis could prove to be the regional leaders in nuclear and other energy technologies, said Leila Benali, an analyst at energy consultants IHSCERA in Paris.

“The Saudis continue to position themselves so they can play a leading role in the sector in 20 to 30 years’ time,” she said in an interview.

The most surprising would-be entrant is Jordan. Though the kingdom lacks the plentiful coffers of the Gulf petro-states, it wants to take advantage of its recent, large discoveries of uranium to become a nuclear energy center.

Jordan’s program will be devoted to generating electricity and “has no military uses whatsoever and could in no way be a threat to anybody,” said Khalid Touqan, chairman of the Jordanian Atomic Energy Commission.

Future Deals

The prospect of future deals has sparked huge interest among nuclear suppliers. General Electric is firmly ensconced in the region: Saudi Arabia is its biggest customer for conventional power generation equipment, and the U.S. company has teamed up with Hitachi Ltd. to sell and build nuclear power plants.

“Saudi is obviously of interest to us,” said Daniel Roderick, senior vice-president for nuclear projects at GE- Hitachi. “We’re interested in Kuwait, we’re interested in a lot of different countries there that are in various stages of their nuclear programs.”

There is still much haggling to do on where the nuclear fuel will come from and how best to prevent proliferation. The U.S. is reluctant to permit states in the region to enrich uranium, which can then be used for nuclear weapons, or reprocess fuel, which can yield plutonium to go into bombs.

High Costs

What helps keep things under control is that these countries can’t build plants on their own and need outside expertise to pursue their nuclear dreams. Carnegie Endowment’s Hibbs figures that some of the wealthy Gulf states will succeed in going nuclear, while the high costs will make it tougher for the rest of the region.

Looming over all this activity is the prospect of a nuclear-armed Iran. While the rulers of the Gulf states and Saudi Arabia seem genuinely interested in peaceful nuclear development, they know reactors can provide needed know-how if tensions with their ancient Persian enemy escalate.

“It’s a longterm hedging option,” said Hibbs, “particularly in light of concerns that U.S. security guarantees will become weaker.”

To contact the reporters on this story: Stanley Reed in London at sreed13@bloomberg.net; Nayla Razzouk in Amman at Nrazzouk2@bloomberg.net.

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