During 2001 the guidelines for Export Credit Agencies (ECAs) from industrialised countries for developing environmental assessments when granting financial cover will be finally adopted. At present only a few agencies have to apply binding guidelines to assess the environmental impacts of the operations they financially support. These negotiations are being carried out both by the Organisation for Economic Co-operation and Development (OECD) and by the G8. The 1999 G8 Cologne Summit Communiqué stated that the heads of States undertook to “work within the OECD towards common environmental guidelines for export credit agencies… by the 2001 G8 Summit”. This was reaffirmed in the 2000 Okinawa Summit Final Communiqué.

This review is long overdue, in particular in its relationship to the proliferation of nuclear technology, as the secrecy and unaccountability of ECAs is fundamental to the survival of the global nuclear power industry. In each of the G8 countries ECAs have been used to facilitate the proliferation of nuclear technology abroad, even as nuclear power has lost favour at home. This is particularly remarkable in the case of Italy, where nuclear power has been phased out for political and environmental reasons.

This report summarises the financial assistance given by ECAs and International Financial Institutions (IFIs) to the spread of nuclear technology and highlights the concentration of investment in two global regions. Firstly and most prominently China is the key country for the construction of new reactors, with over one quarter of the world’s total. All of these reactors receive financial support from at least one ECA of a G8 country. The second region of importance is Eastern Europe, where part built reactors and additions to the original designs offer work to Western contractors.

The development of the use of nuclear power to generate electricity began in G8 countries. From the 1950-70s nuclear power was seen as a new technology that offered cheap and clean electricity. However, major accidents such as Three Mile Island and Chernobyl, collapsing orders and poor economics have resulted in a global slump in nuclear power. This collapse has been most visible in the G8 which, although still operating 313 of the world’s reactors, only has 6 under construction.

The nuclear manufacturers see the collapse in orders as a temporary situation and envisage a period of further growth about ten years hence, especially if they can financially benefit from concerns over climate change. However, nuclear power plants are large technically complex constructions. Although some of the parts needed to construct a nuclear power plant are also used in conventional power stations, considerable specialised manufacturing equipment is needed to build a nuclear power plant. Without new orders the nuclear infrastructure will collapse. One visible sign of this is the decreasing number of nuclear construction firms due to mergers and acquisitions.

The industry is also active in overseas sales. By creating new markets and continuing to expand in already established foreign markets, the nuclear industry is trying to maintain its manufacturing base. The ECAs are fundamental to this strategy as they offer financial assistance for construction. This assistance is free of environmental and public accountability requirements and is often at favourable bank rates. The table lists the current nuclear projects that have ECA financial support.

There are currently 25 reactors under construction throughout the world. Of these, fourteen are part funded by an ECA from the G8 and six are under construction in a G8 country. The influence of the G8 on the global nuclear industry is therefore indisputable.

China has eight reactors under construction, more than any other country in the world – and in the next year at least two new reactors are expected to be ordered. Foreign contractors dominate these projects, in part because of the ease of obtaining foreign credits as funding. The construction of overseas-designed reactors is being explicitly linked by officials to the need to obtain foreign export credits.

In Central and Eastern Europe (CEE) and the Newly Independent States (NIS-former Soviet Union),ECAs are also prevalent. Following the political changes in Eastern Europe in 1989 many reactors remained partially built. This opened up a new area of business for Western nuclear constructors. Further work is also envisaged in extending the operating life of and upgrading the Soviet designed reactors. ECAs have already part funded the completion of four reactors, Temelin 1 (Czech Republic), Mochovce 1 and 2 (Slovakia) and Cernavoda 1 (Romania). In addition there are three projects still underway, Temelin 2, the completion of Khmelnitsky 2 and Rovno 4 (K2R4) in Ukraine and the upgrade and life extension of Kozloduy 5 and 6 in Bulgaria. Loans are also being considered for the completion of Cernavoda 2 in Romania.

The K2R4 project was a classic example of ECAs being used for a political purpose. Five ECAs from the Czech Republic, France, Switzerland, UK, and US have all provisionally agreed funding. This is despite Ukraine being off-limits for ECA funding for some of these countries and no companies actually approaching the ECAs for cover. Rather, a political agreement was reached to fund the project no matter what corporation might undertake the work. Safety concerns are also emerging with reactors being completed to lower than original design specifications using different technologies and methodologies. The most notorious example is the completion of the Temelin nuclear power plant which was five years late and around US$1 billion over budget.

ECAs are not the only source of financial assistance open to the industry for contracts in Eastern Europe. The European Commission extended the scope of the Euratom Loan facility in 1994 to enable it to fund projects in CEE and NIS. This resulted in the approval of two projects in 2000 – Kozloduy 5 and 6 and K2R4. As a result of these projects the Loan facility is now largely spent and the European Commission is preparing a proposal to extend the loan ceiling. This proposal requires the unanimous support of Member States which, given the current lack of support for nuclear power within the Union, is extremely unlikely. A freeze on the Euratom Loans programme could increase the pressure on some European ECAs to fund nuclear projects.

The funding of K2R4 in Ukraine was also significant as it involved the first ever loan by an International Financial Institution (IFI) for a nuclear power project. The loan, by the European Bank for Reconstruction and Development (EBRD), was granted despite its own independent panel of experts concluding that the project was not economic and should not be funded. However, once again, political pressure took precedence over fact or reason. However, the approval by the EBRD is only provisional and the dispersal of funds to undertake the work is still a long way off.

Political pressure from some EU and G8 countries is also clear in the Russia Mox project scheduled for discussion at the G8 Summit in Genoa in July 2001. The proposal for funding the construction of facilities in Russia to make and use Mixed Oxide Fuels (Mox) or plutonium fuels has been building since the 1996 Nuclear Safety Summit. However, the project is plagued by political and economic problems and underscored with technical and proliferation concerns. In recent months, lack of funding for the first phase of the US$2 billion project has also become apparent. Additional obstacles remain in liability concerns and a body to host the multilateral fund. Despite continual denials by EBRD staff that they want to host it, they appear to be the only body with the experience or infrastructure to deal with such a project.

The chances of the Genoa Summit achieving its objective to “develop an international financing plan for plutonium management and disposition based on a detailed project plan, and a multilateral framework to co-ordinate this co-operation” are now slim. The US review of its financial assistance to Russian proliferation is likely to be sufficient to justify further delays. The current single-track approach of Mox utilisation as opposed to plutonium immobilisation is much to blame. Fewer countries are likely to give financial assistance to a project that is technically risky and will increase the overall production of plutonium.

In the rest of the world the era of blind faith in the promises of the nuclear industry has passed. Nuclear power now has to compete in the global marketplace like other technologies. The result of this competition is clear, as there are fewer reactors under construction. To counter this, the nuclear industry has used its political influence to develop large, unnecessary and dangerous projects, like that for Russian Mox, to enable multilateral funds to be put together to subsidise the use of plutonium fuels. The industry also relies on Government credits and financial assistance to export reactors around the world.

The Genoa Summit is a key opportunity for the G8 to renounce nuclear technology and regain some environmental and social credibility. A rethink of the current Mox project must be undertaken and a real reform programme for ECAs put forward. Such a programme should exclude lending for nuclear power, which for over forty years has been shown to be dirty, dangerous and expensive.