Ever since the barricades went up in Kiev last November some people have been bracing for Russia to stick it to the United States and European Union powers negotiating with Iran. When in January Russia and Iran reportedly agreed to a whopping barter trade deal worth $20-billion, pessimists feared that Russia, with its ties to the U.S. and the EU turning into mush over Ukraine, would cut and run on Iran. Western governments at a high level in fact warned Moscow that the nuclear talks would collapse if it went ahead with a separate trade pact with Tehran.

Mark Hibbs
Hibbs is a Germany-based nonresident senior fellow in Carnegie’s Nuclear Policy Program. His areas of expertise are nuclear verification and safeguards, multilateral nuclear trade policy, international nuclear cooperation, and nonproliferation arrangements.
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Since then cooler heads have prevailed among the P5+1 about how such a barter deal would work in practice, and in general terms U.S. officials suggest that regardless of tension with Russia over a number of issues including Ukraine, Moscow will continue to cooperate with the U.S. on issues essential to global security.  More specifically, a Russian rift with the West over Iran has become increasingly less likely this spring as Iran inflated its demand for uranium enrichment capacity allowed under a comprehensive nuclear agreement. This is messing up Russian designs for a new nuclear deal with Iran as foreseen under the Joint Plan of Action (JPOA) concluded last November.

As a benchmark, let’s recall that Russia, like the other five powers negotiating with Iran, has a basic interest in Tehran not obtaining nuclear weapons nor developing a nuclear weapons capability that could turn Iran into a nuclear-armed state in a hurry. An Iran with nuclear weapons would be a serious incalculable factor for Moscow to have to deal with on its southern flank.

That said, it’s also likely that Moscow sees the nuclear threat posed by Iran as less dramatic than the U.S. and the EU powers do. Were it up to Russia alone (or China) to decide how the Iran nuclear talks conclude, Moscow might be more comfortable than Western powers with a compromise that permits Iran to deploy more gas centrifuges, to operate the IR-40 reactor using heavy water as Iran has long planned, to return to routine safeguards in Iran without the International Atomic Energy Agency (IAEA) knowing for sure what all of Iran’s nuclear weapons-related capabilities are, and to throw off remaining restrictions on its nuclear program in fewer than the 15 to 20 years that some Western negotiators want to set as the term for a comprehensive agreement.

In any case, however, recently-transmitted Iranian suspicions that the Ukraine crisis might prompt Russia to stand in the way of Iranian Foreign Minister Javad Zarif’s efforts to negotiate defy previous logic. Until now, Russia’s differences with the West over Iran nuclear diplomacy have tended to line up Moscow with, not against, Tehran. When for example in 2008 Russian Foreign Minister Sergei Lavrov proposed a road map for resolving the crisis, Russia and Western powers didn’t see eye to eye over the length of time Iran would have to suspend uranium enrichment as called for by United Nations Security Council resolutions. That problem alone served to stop the “Lavrov plan” in its tracks. As one Western negotiator then quipped: “We want to suspend Iran’s enrichment program for 100 years, and the Russians want to suspend it for about 45 minutes.”

Russia and Iran today don’t agree on how to go forward, but this has nothing to do with Ukraine.  The assessment today, contributions by other experts, and the discussion below strongly suggest Russia and the rest of the P-5+1 are still and are likely to remain on the same page.

Moscow’s Bilateral Problem with Tehran

The concern expressed earlier this year about Russia leaving the P-5+1 fold didn’t factor in how Iran’s posturing in ongoing nuclear talks stands in the way of a Russian plans to advance bilateral civilian nuclear cooperation with Tehran.

The JPOA calls for “international civil nuclear cooperation, including among others, on acquiring modern light water power and research reactors and associated equipment, and the supply of modern nuclear fuel as well as agreed R&D practices.” On that basis, Russia and Iran have been negotiating terms of an agreement for the supply of additional nuclear power reactors, deals that could provide a lot of money to Russia for both reactor construction and fuel services.

Russia is willing to supply these. But increasingly during the last five months Russia has been exasperated by Iranian demands that Iran enrich the uranium and fabricate the fuel for these reactors but also for Bushehr-1, Iran’s only operating power reactor, built by Russia on the basis of a 1992 generic agreement and a contract five years later. In parallel, on the P5+1 track, Iran is including all these reactors in the basket of its “practical needs” for enrichment capacity which would be allowed under the JPOA in a final agreement. Even if Moscow were willing to accept Iran’s position from a strategic perspective, building reactors for Iran that elects not to buy fuel services from Moscow would be much less lucrative than Moscow originally hoped for.

P5+1 negotiators may now look for a face-saver for Iran on fuel supply assurances to coax Tehran to drop its demand that it be allowed to operate many thousands of centrifuges. But the essential fact that the P5+1 and Ali Akbar Salehi, head of the Atomic Energy Organization of Iran (AEOI), should be communicating to Iran’s top leadership is that even if Iran were to install and operate many thousands of centrifuges to enrich uranium to fuel Bushehr for fifty years, that wouldn’t increase Iran’s nuclear fuel supply security one iota.

Russia may, as mentioned above, be more generous than the U.S. and EU powers in how to define Iran’s “practical needs” for enrichment. But Iran’s demand for renegotiating contract terms for Bushehr-1 is a non-starter for Moscow.

Specifically, Tehran has told Russia that its current 10-year fuel supply contract with TVEL, the Russian nuclear fuel company which is supplying fuel for Bushehr-1, must be renegotiated to allow Iran to make the fuel for Bushehr-1. Iran wants to be formally qualified to make this fuel at a capacity of somewhat over 20 tons uranium per year—approximately enough for one reload of new fuel per year—by 2021 when the contract expires. Salehi, an MIT-trained engineer, and AEOI project management staff are aware that for technical reasons this timetable is not realistic for Iran. Developing the capability to reliable build and certify fuel for powers reactors is a complex business and even if Russia is willing, more time would be needed to implement such a cooperative approach.

But until Iran’s top leadership sees the light, any good news about the Russo-Iran nuclear power plant deal we read in the press will probably be served up by Iranian sources only. Russia will not be inclined to sign on the dotted line for construction of new Russian VVER-type power reactors in Iran unless Russia supplies the fuel, and is paid for it – thereby undercutting Iran’s stated justification for a large enrichment program.

And Iran has a weak hand to play in its game with Russia if it wants to maintain its position in the bilateral negotiation. Iran has no experience and no infrastructure for making commercially significant quantities of VVER fuel and no intellectual property agreement with Russia giving Iran access to design data for core internals including fuel, which it would need to make the fuel by itself. Were Iran to go ahead without Russian cooperation, a bilateral agreement assigning Russia liability in the case of safety issues arising at Bushehr would be automatically terminated. In the wake of huge losses which Russian vendor Rosatom incurred in setting up Bushehr-1, Russia won’t likely agree to build more reactors in Iran unless it is allowed to profit from supplying the fuel.

Rubles to be Made

Finally, Article V of the 1992 bilateral memorandum for Russo-Iranian nuclear cooperation sets forth that “Russian organizations shall supply the Islamic Republic of Iran with nuclear fuel for the nuclear power plant being built there in accordance with the present Agreement for the entire lifespan of the nuclear power plant. The fuel shall be supplied in the form of finished sets of fuel assemblies and control rod assemblies.”

Russia has contracted similar fuel supply arrangements with about a dozen other states. Russia has fulfilled these agreements without a hitch, including even now in the case of Ukraine. In the case of Iran, Russia in the past delayed supply of fuel, following discussions with the IAEA, the U.S. and others justifiably concerned about Iran’s nonproliferation bona fides and in light of concern raised at the IAEA about the safety of Bushehr-1, given lack of Iranian engagement in that area (Iran remains the only country operating a nuclear power plant which is not a member of the International Nuclear Safety Convention). When those concerns began to ease, and when Russia stepped in to assume greater liability and control over the project’s commissioning and post-commissioning phases, the nuclear power plant was completed, the Russian fuel supplied, and the reactor began operating.

Currently the only conceivable alternative fuel supplier to Russian industry for Iran would be Westinghouse, a U.S.-based company which is majority owned by Japanese vendor Toshiba and has been working on making fuel for Russian power reactors. At some future time, it might be possible for Westinghouse to provide fuel to Iran. But if Iran wants to make fuel indigenously for Bushehr without Russia’s full engagement, Westinghouse’s experience in trying to make fuel for Russian reactors in Ukraine and the Czech Republic should give Iran pause, since the U.S. firm has run into a host of legal, technical, and political obstacles including damage claims and cost overruns all told measured in the hundreds of millions of dollars and delays of many years. The war of words between Westinghouse, TVEL, and surrogates over this business in Eastern Europe moreover doesn’t suggest that a Westinghouse fuel supply agreement with Iran would be any easier to achieve and then successfully implement.

Iran might prefer to obtain new reactors from Western vendors instead of from Russia, as Mark Fitzpatrick writes, but the same commercial and liability obstacles which stand in the way of a Russo-Iran nuclear pact would also obtain for any other foreign vendor. Especially given its private shareholding, these factors alone would likely preclude Westinghouse and other U.S. firms from supplying reactors to Iran.

Rosatom management’s experience of negotiating with Iran since 1992 has not inspired confidence among nuclear industry captains. Alleged concerns raised by Iran now about nuclear fuel supply security to justify expanded uranium enrichment capacity, it should be underscored, did not deter Iran from negotiating with Rosatom during the last six months without any up-front assurances from the Russian vendor that Iran would be permitted to enrich and fabricate fuel. That track record won’t inspire Rosatom’s competitors to step into the breach to provide Iran nuclear power plants if Russo-Iran negotiations fail.

This article was originally published on the Iran Fact File