Sanctions Boomerang*

*Editor’s note: On March 4, Russia enacted a law that criminalizes public opposition to, or independent news reporting about, the war in Ukraine. The law makes it a crime to call the war a “war” rather than a “special military operation” on social media or in a news article or broadcast. The law is understood to penalize any language that “discredits” Russia’s use of its military in Ukraine, calls for sanctions or protests Russia’s invasion of Ukraine. It punishes anyone found to spread “false information” about the invasion with up to 15 years in prison.

For the past year, sanctions against Russia and the countries that support Russia’s special military operation have been gaining momentum, and the pressure is likely to intensify with the 10th “anniversary” package of sanctions. The initiative for new measures against Russia has almost always come first and foremost from America. Notably, it is the United States that has pressured its European partners, Italy and Germany in particular, into taking a tougher stance against the Russian Federation.

The new year has been no exception. On Jan. 10, European Commission President Ursula von der Leyen announced at a regular press conference that the European Union would introduce new restrictions: “We will extend these sanctions to those who militarily support Russia’s war, such as against Belarus or Iran,” she said.

First, the fate of frozen Russian assets remains as relevant as ever to the United States and the European Union. A number of EU countries insist on the immediate transfer of those assets to Kyiv for the rebuilding of its economy. Second, at a recent meeting with Frans Timmermans, first vice president of the European Commission, Ukraine’s Prime Minister Denys Shmyhal expressed his enduring wish that the Russian nuclear industry be targeted in the next sanctions package.

To assess the impact of such restrictions, it must be noted that the Russian Federation’s nuclear industry is not just a powerful complex of 350 enterprises and organizations that employs more than 250,000 people. It also supplies unique uranium enrichment technologies that are recognized throughout the world. Russia is currently one of the largest exporters of uranium.

In 2021, the United States alone imported 550 tons of Russian-enriched uranium valued at $645.7 million, and it purchased the same amount again between January and October 2022. Against the backdrop of the natural gas crisis in the EU, it is logical to expect that demand for other energy sources — not least, nuclear energy — will increase. France plays first fiddle in Europe in this regard, with more than 50 functional reactors at a total capacity of 61.4 gigawatts. The Fifth Republic’s large share of nuclear energy means an annual consumption of about 10,000 tons of uranium, of which 8,000 tons come from abroad, including the Russian Federation.

In 2022, France increased its purchase of uranium from Russia several times over, often skirting sanctions. Emmanuel Macron has to make difficult choices. On the one hand, he must keep in step with the collective West; on the other hand, he needs to be mindful of his country’s well-being. Of course, there are many other major uranium-producing countries, such as Canada, Niger and Australia. However, there is also China, whose industry is ready to buy up literally everything. Therefore, if France participates in the next package of restrictions against the Russian nuclear industry, it is unclear whether it will have enough fuel for its nuclear power plants. One need only recall how often the French leader has called the Russian president since the start of the special military operation.

We should also not forget another figure. According to Greenpeace, almost 30% of the uranium for nuclear power plants comes from Russia and Kazakhstan. And although Kazakhstan’s share of the total volume of exports exceeds Russia’s, Russia’s nuclear industry has an important advantage: uranium enrichment. According to expert estimates, the Russian Federation boasts 42% of the world’s uranium processing capacity, and most of Kazakhstan’s uranium goes through Russian enrichment plants first and only then is sent to buyers.

In addition, the Russian Federation’s participation in large nuclear power plant construction projects abroad is worth keeping in mind. Russia has a role in eight projects, including two plants in China, the Turkish Akkuyu Nuclear Power Plant, as well as projects under construction in the Republic of Belarus, India, Hungary, Bangladesh and Egypt. The overall foreign portfolio is 34 power units at different stages of implementation. This explains Hungarian Prime Minister Viktor Orban’s remarks on Dec. 2, 2022, when he said that “the imposition of sanctions on Russia’s supply of gas and nuclear energy will have tragic consequences for Hungary, and Budapest will try to prevent Brussels from taking such a step,” so the Hungarian government will “fight to protect its interests.” This is a question of security, not a political or ideological matter. Moscow and Budapest have to cooperate on energy issues so that the people and businesses of Hungary do not face energy restrictions.

So, whether the next package of anti-Russian sanctions will be imposed or not remains controversial. The West is a “collective” organism, of course, but self-interest rules, and if the shameless looting of Russia’s foreign assets does not produce results for the EU in the near future, then restrictions on Russia’s nuclear industry will impact the European countries themselves.

Vladimir Linnik is Professor of Economics and Management in the Fuel and Energy Complex at the State University of Management.