Government Support: Official Help in the Sales Department

The Presidential emissary told King Saud that the U.S. would make its nuclear technology available to Europe if the Suez Canal was used as a tool of blackmail. The decision to encourage nuclear exports was made within months of the Suez Crisis of 1956. The diffusion plants’ capital cost had largely been assumed by the defense programs, so the U. S. could afford to sell enriched uranium at a price that did not reflect the huge investment required for isotope separation plants.

General Electric and Westinghouse received a significant contribution from the U.S. government in their early efforts to establish light water reactors as the world standard in nuclear technology. The support included low interest loans, direct state-to-state pressure, and government contracts that paid for basic materials development.

This government support came for several reasons. Not only did later light water reactors sales contribute to American prosperity (especially for those people directly associated with General Electric and Westinghouse) by producing a huge currency inflow through export sales and licenses, but they also helped to enforce the U.S. government’s nuclear weapons non-proliferation policy. In addition, a rapid introduction of American reactor technology supported a conscious drive to bring non-aligned nations into the Western sphere of influence.

Most interestingly, the rapid release of American reactor technology in 1956 seems to have been related to a promise made by a special emissary of President Eisenhower to King Saud of Saudi Arabia. The Presidential emissary told King Saud that the U.S. would make its nuclear technology available to Europe if the Suez Canal was used as a tool of blackmail. The decision to encourage nuclear exports was made within months of the Suez Crisis of 1956. (Yergin, The Prize, p. 488.)

Some observers believe that the sales of American reactor technology helped to spread nuclear ideas throughout the world and led to the potential for increases in the number of nuclear weapons states. A careful study of the history of the era shows that this view is simplistic and misses some key facts.

Non-Proliferation Policy

A consistent tenant of U. S. foreign policy since World War II has been to control nuclear materials and technical information. At first, Congress believed that they could successfully declare nuclear knowledge to be an American monopoly. Under the Atomic Energy Act of 1946 the death penalty was prescribed for anyone found guilty of passing information useful in the construction of nuclear weapons or nuclear reactors to a foreign power, even in peacetime.

When that idea failed, U. S. atomic policy leaders decided to impose unilateral “safeguards” on atomic material. The inspection and verification methods suggested for those controls seemed reasonable to American government leaders, but they caused resentment in other countries. The selected safeguards regimes neglect long held views on sovereignity and could cause costly interruptions in the business of operating nuclear facilities.

There were some in government who advocated a continued embargo on nuclear reactor technology, but those voices lost out to others who pointed out that U.S. policy makers would have no control at all over foreign nuclear programs if reactors designed and built outside the U.S. were readily available as alternative power sources.

Natural Uranium vs Special Materials

Starting in 1945, the U. S. government established a policy of purchasing a large portion of the free world’s supply of natural uranium. The strategy backfired, partially because the price that the government offered to pay was far above the production cost.

The price incentive initiated a burst of exploration that rapidly demonstrated that uranium was a plentiful element. The amounts the uranium prospectors discovered were far more than the U. S. could afford to buy. By 1960, the U.S. Atomic Energy Commission had reduced purchases of material from Canada and South Africa considerably, and by 1964, new contracts for uranium imports stopped altogether in a protectionist push to help support American uranium mine operators.

Because of the exit of the U. S. government from the world’s natural uranium market, a large quantity of low cost raw material suddenly became available. This abundance came at a time when there was considerable interest in building power stations that could help relieve a disturbing dependence on Middle Eastern oil.

The natural uranium, gas cooled reactors designed and built by the English and French appeared well suited for exploiting this abundant raw material. The British and French suppliers of these reactors actively began looking for export markets that could help them ammortize their reactor research and development programs. Britain successfully concluded contracts with Japan and Italy for one reactor each. The market for reactors was beginning whether or not the U.S. decided to allow its companies to sell their wares.

The American government had one remaining lever that could be used to advance its nuclear control policy. Based on navy propulsion reactor programs, large American companies experienced in power plant design and construction had developed and refined the technology needed to build light water reactors. These reactors could not operate without enriched uranium because ordinary water will absorb some neutrons.

With its massive investment in gaseous diffusion plants, the U. S. had an effective monopoly on the world’s supply of enriched uranium. The diffusion plants’ capital cost had largely been assumed by the defense programs, so the U. S. could afford to sell enriched uranium at a price that did not reflect the huge investment required for isotope separation plants.

No other country could hope to meet the U. S. price. Gaseous diffusion plants large enough to support reactor production are very costly and require a lengthy construction period. If a customer needed enriched uranium, it was far more cost effective to purchase the material from the U. S. than to build the required plants. This held true even if the American government attached safeguards conditions on the sale of the material. Thus, the U. S. government entered the business of marketing light water reactors to foreign purchasers.

Encouraging Dependence

From 1956 until 1964 potential reactor customers had two basic choices. They could purchase or construct a reactor fueled by natural uranium and avoid the costs and loss of sovereignty associated with intrusive safeguards provisions, or they could purchase a reactor dependent on enriched uranium that came with conditions attached to the sales agreement. Once a reactor requiring enriched uranium was purchased, the customer would have little choice by to return to the American government to purchase additional material on a regular basis.

In order to ensure that the customers made the correct choice, the American government offered substantial financial incentives. An example of the favorable deals that were available was a 1963 agreement with the Indian government for the purchase of a pair of 190 MWe boiling water reactors. The terms of the agreement included 40 year financing by the American controlled Export-Import bank with an interest rate of 0.4 percent and payments that were deferred for the first ten years of the loan.

Another deal that encouraged dependence on the American supply of enriched uranium and light water reactor technology was an “Atoms for Peace” program that sold research reactors using the technology to a number of different countries at a price of between $500,000 and $1,000,000. In addition to the low price, there was a $350,000 government grant available, making the deal difficult to refuse. More than 40 research reactors were eventually sold under the program.

With the financial backing from the U. S. government, light water reactors looked far more attractive than the alternative gas cooled reactors. This early support helped to build an installed base of users that became self-sustaining as a growing number of countries made substantial investments in the specialized infrastructure and training needed to support their chosen reactors.

Echoes Heard Today

The official policy favoring light water reactors seems to still be in effect, as demonstrated by the recent intense reaction to North Korea’s construction of two 5 MWe, gas cooled, graphite moderated reactors. An agreement to stop using these simple two reactors has resulted in an aid program totalling over $4 billion dollars. The program includes an agreement to build two modern 1000 MWe light water reactors that are subject to international safeguards. By any measures, North Korea is getting a pretty fair return on its investment in reactor technology.