US and Russia agree amendment to HEU deal

21 July 2009

An amendment to the contract under which Russia sells uranium derived from weapons-grade uranium to the USA for use as fuel in nuclear power reactors has been approved by the governments of both countries.


The amendment, which was entered into in February, implements a new pricing methodology for deliveries to USEC of the USA of low enriched uranium (LEU) from Russia's Joint Stock Company Techsnabexport (Tenex) starting in 2010 and continuing through the end of the contract in 2013.


The US government approved the contract amendment on 2 April and the government of the Russia approved it on 11 July.


In 1993, the governments of the two countries signed an agreement for the purchase over a 20-year period of 500 tonnes of Russian 'surplus' weapons-grade high-enriched uranium (HEU) from nuclear disarmament and military stockpiles to be bought by the USA for use in civil nuclear reactors. Known as the HEU Agreement, and sometimes referred to as the 'Megatons to Megawatts' program, it was implemented through a 1994 contract between the US Enrichment Corporation and Tenex acting as executive agents for the US and Russian governments. After the HEU Agreement was signed the US Enrichment Corporation was later privatized, becoming USEC Inc.


After signing the 1996 purchase agreement at fixed price purchase terms in the $90 per SWU range, the market price for enrichment dropped to the low $80 range. As a result, USEC was losing money under this agreement.


In February 2002, Usec and Tenex signed an amendment in Moscow. In June 2002, the US and Russian governments approved implementation of the contract amendment for the remaining 12 years of the program. The amendment introduced new, market-based pricing terms that went into effect in January 2003.


The latest amendment modifies these pricing terms for the years 2010 through 2013 in order "enhance the stability of future pricing for both parties through a formula that combines a different mix of price points and other pricing elements from the previous methodology."


The amendment follows the agreement of a new pricing structure for the remainder of a commercial deal under which Cameco purchases uranium from dismantled Russian nuclear weapons.


Canadian uranium company Cameco announced in June 2008 that, along with partners Areva and Nukem, it had reached an agreement on pricing with Tenex, from which it currently purchases about 7 million pounds (3175 tonnes) of uranium per year under a commercial agreement dating from 1999 and due to expire in 2013. The uranium purchased by Cameco from Tenex is sold on for use as fuel in nuclear power plants. Although that agreement was updated in 2001 and 2004, the purchase price paid for the uranium by Cameco was fixed in 2001 when the price of uranium was much lower than it is today.


According to USEC, as of 30 June, some 367 tonnes of bomb-grade HEU have been recycled into 10,621 tonnes of LEU, equivalent to the elimination of 14,686 nuclear warheads.