Tuesday, March 17, 2009

Russia plays nuke card with Vietnam

Russia plays nuke card with Vietnam
By Sergei Blagov

MOSCOW - Russia is playing the nuclear card to curry favor with Vietnam's leaders, leveraging its atomic know-how to draw an advantage in gaining access to the Southeast Asian country's various under-exploited natural resources.

Now clearly emergent as a major global energy player, Moscow has lost little time in turning its oil barrels, megawatts and atoms into foreign-policy tools, particularly when dealing with the West and former Soviet satellite states. But what has been less noticed is Moscow's new drive to re-establish energy and commodity-related dealings with its former Cold War allies, particularly in Southeast Asia.

Russia is now bidding to win a tender offer to build Vietnam's first

nuclear power plant, according to officials at Atomstroiexport, Moscow's state-run nuclear-technology export agency. Despite continued controversy over Russia's involvement in Iran's nuclear program, Moscow has reiterated its plans to export nuclear technology to other countries, regardless of Washington's reservations. Moscow also recently held talks with Myanmar's military junta, another well-established nemesis of Washington, about the possibility of building a nuclear power plant there.

Vietnam is a less confrontational destination nowadays, with the United States, China and Russia all competing for commercial as well as strategic influence.

From an energy-security perspective, on the surface, Vietnam's interest in nuclear technology makes good policy sense. A Russia-Vietnam oil-and-gas joint venture, known as Vietsovpetro, is currently the cornerstone of Vietnam's energy industry and is expected to expire some time between 2017 and 2020.

Russia, it appears, is dangling its nuclear know-how before Vietnam in hopes of sealing deals in other commodity and energy-related fields. In mid-May, Atomstroiexport's team attended a four-day international nuclear-energy fair in Hanoi, where the Russian delegation held talks with Vietnam's Industry Ministry, Science and Technology Ministry and Atomic Energy Commission, and with the Energy Institute of Vietnam.

"Should a tender be announced, Atomstroiexport would have good chances of winning it," the company's first deputy chief executive officer, Alexander Glukhov, announced in Hanoi last Thursday. "We are absolutely competitive and we have a very good offer," Glukhov said, implying that the Russian government could be prepared to offer financial incentives to win the multibillion-dollar bid.

Atomstroiexport is currently the world's only nuclear company building power units for nuclear plants in China, India and Iran - often to Washington's chagrin.

Moscow has already laid the groundwork to pull Vietnam into its nuclear orbit. Russia has a long-standing nuclear agreement with Vietnam, which reportedly involves maintenance of the research test reactor at Dalat in central Vietnam. In March 2001, Vietnam announced plans to build its own nuclear power station in either Ninh Thuan, also in central Vietnam, or in the neighboring province of Binh Thuan. Now Vietnam reportedly aims at commissioning its first US$3.4 billion nuclear plant by 2017-20, which Russia now hopes to build and outfit.

Atoms for ores
In recent weeks - perhaps coincidentally, perhaps not - other Russian energy and commodity-related companies have quickly moved to re-establish or set up new offices in Vietnam, notably just months before Vietnam accedes to the World Trade Organization (WTO) and is required to open its commodity markets through competitive bidding to multinational players. For instance, Russky Ugol, Russia's main coal producer, opened its first foreign office in Hanoi on May 5.

"We want specific investment projects implemented on Vietnamese soil, both in the coal and the metals industries," said Vadim Varshavsky, Russky Ugol's CEO. The company plans to open several plants in Vietnam "in a couple of years' time", he said.

For Russia and Vietnam, such deals represent a sort of reunion. During the 1970s and 1980s, for instance, the Soviet Union helped to develop Vietnam's coal-mining industry, most notably around Cam Pha in northern Vietnam. Vietnam's coal reserves, situated mainly in the north, have recently been estimated at a substantial 20 billion tons.

In recent years, Russia and Vietnam have resumed cooperation in coal mining, electricity and natural gas. Russia currently runs about 50 energy and energy-related projects in Vietnam, including a Kamaz project to help the Vietnam Coal Corp (VinaCoal) build a truck factory in the central province of Quang Nam. Siloviye Mashiny, or Power Machines, is now aiming to supply generators and other equipment to Vietnam's A Vuong hydro-electric power plant.

Russia's natural-gas monopoly, Gazprom, has meanwhile spearheaded Moscow's recent efforts to re-establish itself as a global fuel player. In 2000, Gazprom and Vietnam set up a $1 billion joint venture on a parity basis to develop two offshore gas fields, the so-called Block 112. Commercial development of the fields, scheduled to start last year, were estimated to yield nearly a trillion cubic meters of gas reserves per year. However, the project was slow to take off as Gazprom was preoccupied with other global endeavors.

Russian officials this month indicated that the country's aluminum giant, RusAl, is studying the possibility of building an alumina facility and power plant in Vietnam at a total cost of more than $1 billion. Although RusAl is yet to reveal details of the potential deal, the project could come as an unprecedented development for Vietnam's aluminum industry. During the Cold War-era bilateral partnership, the Soviet Union did not mine bauxite directly in Vietnam, but rather imported up to 50% of its bauxite needs from India, Guinea and Guyana.

Meanwhile, Vietnam has said it aims to develop bauxite mining and refinery projects in the central-highlands provinces of Lam Dong and Dac Nong. Vietnam says the country has more than 8 billion tons of bauxite ore reserves, including 7.9 billion tons in the central highlands region and some southern provinces.

The Vietnam Mineral Corp (Vimico), the country's largest mining company, on April 7 started construction of a bauxite facility in Lam Dong province. The $490 million project, due to come on-stream in 2009, is scheduled to have a production capacity of 1.7 million tons of bauxite and 600,000 tons of alumina per year.

Still, Russian companies will soon face formidable international competition for Vietnam's ores and minerals. On April 25, US giant Alcoa announced that its Alcoa World Alumina and Chemicals affiliate had signed a memorandum of understanding (MoU) with Vietnam to explore the feasibility of construction and operation of an alumina refinery in the Gia Nghia bauxite-deposit area in the Dac Nong area. The first-stage capacity of the project would produce upwards of 1.5 million tons per year.

Russia's aluminum giant is also set to face heavy Chinese competition. Last December, China's biggest aluminum producer, the Aluminum Corp of China Ltd (Chalco), signed an MoU with Vietnam for the construction of a 600-megawatt thermal power plant and 300,000-tons-per-year aluminum facility in Dac Nong. The $1.3 billion joint-venture alumina plant would have a production capacity of 4 million tons a year.

Apart from bauxite, Vietnam's commercially exploitable and underdeveloped metals and mineral industry includes iron ore, tin, copper, lead, zinc, nickel, titanium, and apatite. As global commodity prices rise, Vietnam's under-exploited deposits will likely be of increasing interest to multinational mining concerns, all the more so after the country is bound by WTO trade and investment rules. The global race for Vietnam's natural resources is now firmly under way, and Russia has managed a savvy head start in the competition.

Sergei Blagov covers Russia and post-Soviet states, with special attention to Asia-related issues. He has contributed to Asia Times Online since 1996 and was based in Southeast Asia from 1983 to 1997. Nova Science Publishers, New York, has published two of his books on Vietnamese history.

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