There is a growing number of countries across the Middle East seeking to establish civilian nuclear energy programs. Last week, three leading nuclear industry-related firms—two from the United States and one from Japan—announced a joint initiative to build and operate nuclear power plants in Saudi Arabia.

In a Q&A, Mark Hibbs explains that Saudi Arabia believes its future economic security depends on diversifying its domestic energy system away from fossil fuels. Currently, the country consumes a quarter of the crude oil it produces. Riyadh’s commitment to nuclear energy could also affect regional dynamics. “Setting up a Saudi Arabian nuclear energy program with the cooperation of the United States and other advanced nuclear countries would directly challenge Iran’s aspirations for regional leadership in nuclear power,” Hibbs says.

Why does Saudi Arabia want nuclear energy? Are the country’s petroleum reserves enough to provide the Kingdom with long-term energy security?

In recent years, Saudi Arabia has experienced an increase in electricity demand—between 8 and 10 percent per year—and this is expected to continue. Working hand-in-hand with the Gulf Cooperation Council (GCC), a regional trade bloc, Saudi Arabia is expanding its power grid across the country and is adding a new power plant to the grid every 20 months on average.

While Saudi officials and experts have been interested in nuclear energy for three decades, it is only recently that the interest has gained political traction. Top leaders are now convinced that the Kingdom faces serious future political and economic liabilities if it does not diversify its economy away from petroleum and natural gas. Burning oil for electricity production currently consumes about a quarter of the crude oil Saudi Arabia produces. In the past several years the price of oil has been rising and in parallel the opportunity cost of continuing to burn fossil fuels for domestic power production is going up.

In April, King Abdullah announced that he would establish the King Abdullah City for Nuclear and Renewable Energy in Riyadh. A handful of top-level officials have been appointed to head the organization, but the government has disclosed few details about how it will proceed. The Saudi government has reiterated to foreign counterparts that, so far, Saudi Arabia has not taken a formal decision to build and operate power reactors in the country. But it is likely that it’s only a matter of time.


Do other countries in the region use nuclear energy and will Saudi Arabia’s efforts encourage its neighbors to start their own programs?

No country in the Middle East generates nuclear power at this time. After three decades of construction, Iran is the only country in the Middle East that has built a power reactor and it may begin generating electricity soon. Saudi Arabia is one of several countries in the region that has announced plans to intensify their efforts to use nuclear energy for peaceful purposes and may build and operate power reactors.

The United Arab Emirates (UAE) signed contracts with Korean firms worth about $20 billion to build four reactors last year and the drive for growth and need to diversify the economy in the UAE are the same as in Saudi Arabia. Other Persian Gulf states—Oman, Kuwait, and Qatar—have also expressed interest in nuclear energy, but if Saudi Arabia succeeds in setting up reactors on its territory, these countries may instead choose to establish grid connections to Saudi Arabia with GCC assistance and buy power from those reactors.


Is there a political explanation for Saudi Arabia’s interest in nuclear power? How does this relate to Saudi Arabia’s rivalry with its neighbor Iran?

Saudi Arabia sees a nuclear-armed Iran as an existential threat. Some Saudi officials believe that if the country establishes its own nuclear power program, the Kingdom will enjoy greater influence over the region’s nuclear development, including vis-à-vis Iran.

In recent years, Saudi Arabia and Iran have made proposals and counterproposals to pool future nuclear resources—but both sides have rejected them at some stage. Some of the Iranian proposals attached the condition that U.S. armed forces—upon which Saudi Arabia depends for its security—must leave the region.

In step with the UAE, setting up a Saudi Arabian nuclear energy program with the cooperation of the United States and other advanced nuclear countries would directly challenge Iran’s aspirations for regional leadership in nuclear power. It would also demonstrate to Iran that if Tehran continues on its course of developing weapons-related nuclear capabilities in defiance of international sanctions, it will become further isolated, including in the Middle East.


Is Saudi Arabia a nuclear proliferation risk?

Indirectly yes. Iran’s ambitious and ambiguous nuclear drive has shown states in the Middle East, including Saudi Arabia, that having nuclear energy facilities—particularly fuel cycle facilities—gives a country a sense of prowess and strength. Setting up their own nuclear programs give states long-term hedging options, particularly in light of concerns that U.S. security guarantees to its allies will become weaker. Some Saudi diplomats complain that, since 2003, the United States has permitted Iran to gain in influence in the region at the expense of Saudi Arabia and other states with Sunni majorities.

If Iran obtains nuclear weapons, some regional analysts and Western government officials assert that Saudi Arabia will react by entering into a nuclear defense pact with Pakistan, which tested nuclear weapons in 1998 and is now expanding its atomic arsenal. U.S. and European officials say privately that they are concerned about how Saudi Arabia would respond to a nuclear-armed Iran, given a lack of transparency in Saudi government decision making and the country’s precarious security situation.

The Saudi government has denied recurring rumors of murky nuclear relations with Pakistan and allegations of non-peaceful intentions. But as recently as this month, officials from the United States and Europe raised concerns that Pakistan’s nuclear weapons program may have received financing from Saudi Arabian sources. Making a closer relationship between Pakistan and Saudi Arabia more troubling are fears that China would take the opportunity to project its strategic interest in the Middle East through its close relationship with Pakistan.

Given Saudi Arabia’s limited human resources and science and technology infrastructure, however, Western governments do not appear worried that the country will any time soon be able to itself develop a nuclear weapons capability.

And after many years of delays at the top of the government, Saudi Arabia allowed a safeguards agreement with the International Atomic Energy Agency (IAEA) to enter into force in 2009. The IAEA, however, is currently prevented from inspecting any nuclear activities in the country because Saudi Arabia has not modified—as it was requested by the IAEA beginning in 2005—its so-called Small Quantities Protocol (SQP). The SQP was established by the IAEA in 1974 to exempt states with little or no nuclear activities from inspections, but in 2005 the IAEA’s governing board mandated that it be modified to deter states with SQPs from secretly processing nuclear materials exempt from routine safeguards.


How should the U.S. government respond? Does this mean American firms will soon be able to set up nuclear power plants in Saudi Arabia?

No. U.S. firms cannot supply nuclear technology, material, or equipment to Saudi Arabia unless the United States and Saudi Arabia conclude a bilateral nuclear cooperation agreement under Section 123 of the U.S. Atomic Energy Act—a so-called 123 agreement. So far, the State Department has not been asked by President Obama to negotiate an agreement with Saudi Arabia and it’s unlikely that Washington will take that step anytime soon.

Concerns about proliferation in the Middle East led the United States to conclude a restrictive 123 agreement with the UAE in 2009. The UAE agreed not to pursue sensitive fuel cycle activities—uranium enrichment and spent fuel reprocessing—which would produce fissile material useable in nuclear weapons. The United States wants to establish the UAE agreement as the model for all future 123 agreements.

The United States has been negotiating a 123 agreement with Jordan since 2008, but Amman now refuses to forego enrichment and reprocessing. Western diplomats say that Saudi Arabia is also not prepared to conclude an agreement on the same terms as the UAE. The matter is sensitive because a so-called “agreed minute” in the U.S.–UAE agreement implies that the UAE will try to renegotiate if the United States concludes a less-restrictive agreement with another state.

Negotiation of a 123 agreement with Saudi Arabia might not happen for a few years during which Washington would evaluate how the U.S.–UAE agreement is being implemented.

Any move by the Obama administration to launch a 123 agreement with Saudi Arabia would likely provoke questions or resistance in Congress. There are concerns that U.S. participation in Saudi Arabia’s nuclear program would be counter to the security interests of Israel. Also for this reason, the United States is reluctant to negotiate an agreement with Riyadh unless it agreed to forego sensitive fuel cycle activities.


Will other foreign vendors fill the void if Saudi Arabia won’t agree to U.S. terms for a nuclear cooperation agreement?

The announcement by the United States and Japanese firms last week is an early attempt to participate in Saudi Arabia’s nuclear development as the country decides whether to move forward with the construction of nuclear reactors. While U.S. firms can’t participate until a bilateral agreement is reached, companies from other countries are potential suppliers.

Without a bilateral cooperation deal with the United States and anticipating the restrictions Washington would try to impose on Saudi Arabia through an agreement, Saudi Arabia may elect to contract with French or Japanese firms to set up reactors, following the negotiation of bilateral cooperation agreements with Japan and France. If there is a restrictive bilateral agreement with the United States, however, Saudi Arabia would not be able to import reprocessing and enrichment items from France and Japan.

Still, if there isn’t a U.S.–Saudi Arabia 123 agreement in place, France and Japan would not transfer enrichment and reprocessing items to Saudi Arabia. Both countries joined other nuclear exporters in the G8 last December in pledging indefinitely not to export items for enrichment or reprocessing to newcomer countries.


Does Saudi Arabia have the necessary means and infrastructure to deploy power reactors?

There is no question that Saudi Arabia has the financial resources. Its industry has experience in setting up conventional power plants as large as 2,500 megawatts, similar to the capacity of a modern nuclear power plant. And the Saudi grid is stable and growing.

As in the case for the UAE, the announcement last week by the three firms suggests that Saudi Arabia may choose to have foreigners take initial control of construction, project management, regulation, and operation of its nuclear power program. Saudi Arabia lacks sufficient skilled human resources and a unified legal framework for implementing nuclear power development on its own. The UAE model may provide Saudi Arabia its blueprint for moving forward.

Questions remain about what lies ahead for Saudi Arabia’s nuclear energy ambitions, and Saudi Arabian science and technology officials have indicated that the country will likely proceed with caution.