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Relations with Vietnam lost the atom

Why Russia's Ninth Thuan-1 has left the agenda of bilateral relations

At the end of last year, the Vietnamese National Assembly voted to halt all nuclear power plant (NPP) construction projects in the country. The Russian NPP Ninh Thuan-1 was to become a new locomotive in cooperation between the two countries, the first NPP of Rosatom in Southeast Asia and a symbol of a new stage in the development of the Vietnamese energy sector. But it turned out differently. Anton Tsvetov, an expert at the Center for Strategic Research, tells on Carnegie.ru how the story of the Russian nuclear power plant in Vietnam developed.


Relations with Vietnam lost the atom
Photo: http://www.atomic-energy.ru
Energy hunger
The Vietnam nuclear program began in 1958, when South Vietnam became one of the first countries to order the American Triga Mark II reactor under the Atoms for Peace program. The research reactor started working in the city of Dalat in 1963, but due to the outbreak of the second Indo-Chinese war, the Americans stopped it, and then removed it altogether for security reasons.

Shortly after the breakdown with China and the border war, Vietnam, united under the rule of the communists, had only one strategic ally from among the members of the nuclear club - the USSR. Soviet scientists and engineers did not complicate their work and in 1980 assembled a new research reactor in Dalat at the American site, placing the Soviet IVV-9 reactor in the American Triga building and leaving some of the structural elements. The new facility was used to train Vietnamese physicists and engineers, as well as for the production of medical isotopes.

Around the same time - in the early 1980s - the Vietnamese first thought about the prospects for nuclear energy and conducted two studies on this topic. It is known that in the third such study, already in 1995, it was proposed to start generating electricity at nuclear power plants in 2015, when Vietnam's electricity needs will reach 100 billion kWh per year.

At that time, Vietnamese economists could not assume that the real demand for electricity would be twice as high. The market reforms "renewal", which began in 1986, and the opening of the country to foreign capital quickly yielded results - Vietnam was embarking on the export-oriented growth tracks, which are well known to Asian countries. From 2000 to 2008, the growth rate did not fall below 6,8%, and with it the increase in energy consumption, which in the 2000s was about 15% per year.

On this wave of growth, the addition of the atom to the structure of energy consumption looked like a logical step, moreover, capable of showing the technological orientation of the Vietnamese economy, and signaling to foreign investors that growth will be long and sustainable. In 2006, the Vietnamese government announced that two 2020 GW reactors were to be launched in 2 in southern Ninh Thuan province, followed by two more in the neighboring province and three more by 2030. According to the optimistic scenario, in 2020 in Vietnam, nuclear power plants could operate at eight facilities in five provinces of the country. By 2050, nuclear energy would account for 20-30% of energy consumption.

There was little to do - it was necessary to choose a partner for the first two reactors. The US-Japanese Westinghouse, the French EdF, the Korean Kepco and the Chinese China Guangdong Nuclear Power Group (CGNPG) have shown interest. In 2007, rumors surfaced that the Vietnamese would opt for Japan's Kyushu Electric Power Company, which would supply the Westinghouse reactors assembled by Mitsubishi. The project cost was then estimated at $ 4 billion.

However, Russia's Rosatom and its subsidiary Atomstroyexport became the happy owner of the right to build the first nuclear power plant in Vietnam. Vietnamese officials referred to the fact that it is Russia that offers the safest technologies, as well as a high level of political trust between the countries. There is no doubt that politics played an important role here. It was a good time for Russian-Vietnamese relations - there was a narrative about the restoration of Russia's position in the world, and Vietnam could be successfully put on the showcase of such a "return", recalling the rich history of allied relations, when Soviet ships sailed across the Pacific Ocean, resting in the famous Cam Ranh bay. In 2009, Vietnam signed a deal to buy six diesel-electric submarines of the 06361 project, and the construction of the nuclear power plant looked like an effective addition to this kind of strategic cooperation, only in the non-military area.

In October 2010, an intergovernmental agreement drew a line under the agreements. Russian companies were supposed to start construction of the Ninh Thuan-2014 NPP with two VVER-1 reactors in 1200 and connect them to the power grid in 2020. The deal was estimated at $ 8 billion, 85% of which would be covered by a Russian loan. In the same 2010, a similar agreement was signed with the Japanese consortium at the Ninh Thuan 2 NPP with a commissioning date in 2024–2025.

The Russian project was extremely important from the image point of view. Ninh Thuan-1 would become not only the first nuclear power plant in Vietnam, but also the first workstation in the whole of South-East Asia, as well as the first nuclear power plant of Rosatom in the region. The Vietnamese project played an important role in the company's export strategy - during the construction of the Tianwan NPP in China, the Russian supplier was limited to the construction of a reactor and piping, and in Vietnam, Russia received a full package of services for the construction and maintenance of the plant. The head of Rosatom Sergei Kiriyenko then said that he intends to use "the Vietnamese nuclear program as a platform, as a fulcrum for the development of the peaceful use of atomic energy, nuclear technologies in the Asia-Pacific region."


Long harnessed
Although by the end of 2010 the global financial crisis had already broken out and the Vietnamese economy felt its negative impact (and soon came the public sector crisis), the NPP project was predicted to have a great future. But already less than six months after the signing of the intergovernmental agreement, in March 2011, an accident occurred at the Japanese nuclear power plant "Fukushima" - the strongest shock for the nuclear power industry in recent decades. In Rosatom itself, it was calculated that in the first year alone, 62 power plants around the world were suspended and the number of nuclear power plant projects decreased by 10%.

Public opinion, especially in Asian countries, in the early days after the incident, with tension related to nuclear energy. Vietnam was no exception, so the Russian side did a lot to convince partners that Russian technologies are safe. The reactors at Ninh Thuan-1 were supposed to belong to generation III +, that is, to have modern passive safety systems.

Despite some silence around the project over the past years, it has remained the focus of Russian-Vietnamese cooperation - the NPP has invariably featured in joint statements. In the Obninsk branch of MEPhI, future Vietnamese specialists were trained, they also trained in Volgodonsk, where the Rostov nuclear power plant and the Atommash plant are located - only about four hundred people. The Vietnamese authorities were preparing the resettlement of people who lived in the territory allocated for the nuclear power plant.

As a PR support for the project, Rosatom created the Atomic Energy Information Center in Hanoi, designed to “inform and educate the public” about its benefits. The company regularly held public events, participated in exhibitions and even landed a peaceful atom in Fanrang Alley. All this was intended to set up in the company and the atomic project a public opinion, agitated by the disaster in Japan. Moreover, Rosatom had an unpleasant experience in India, where the Popular Movement against Atomic Energy organized protests against the construction of the Kudankulam NPP.

The first clouds appeared on the horizon in 2014, when the first cubic meters of concrete were to be poured under the nuclear power plant. In January, the Vietnamese government said it was postponing construction for four years due to "ongoing negotiations on financial and technical issues." Earlier it became known that the IAEA called for a more thorough preparation of the project, and in 2015 the Vietnamese Atomic Energy Agency had already named 2019 as the date for the start of construction.

In November 2015, the Science, Technology and Environment Committee of the Vietnamese Parliament (National Assembly) moved the construction date to 2022 and the commissioning to 2028. Around the same time, an article was published by a member of the Central Committee of the ruling Communist Party of Vietnam, deputy head of the Central Propaganda Committee, Vu Ngoc Hoang, who discussed in detail the shortcomings of the Vietnamese nuclear program, recalled Chernobyl, listed environmental risks and pointed out the high cost of the project.

If these signs were not enough, then in early 2016 an extremely unfortunate incident was added to them. Taiwanese steelmaker Formosa Ha Tinh Steel in Central Vietnam dumped toxic waste into the sea, resulting in massive fish deaths. More than 200 thousand people were hit in at least four provinces - families of fishermen and salt miners, who were forbidden to use the poisoned marine resources. For a long time, the government refused to name the perpetrators, protests took place in large cities that do not subside until now, Catholic villages are especially active, which did not receive compensation. All this led to an unprecedented interest in the environmental topic in the Vietnamese information space - any news gained great importance, especially when it came to enterprises with foreign participation.

By the beginning of autumn 2016, there were rumors that NPP projects, both Russian and Japanese, could be frozen or canceled. And on November 10, the head of the Vietnamese state energy corporation said that in the country's updated energy plan until 2030, there are no nuclear energy projects and the budget for them is not included. On November 22, the National Assembly of Vietnam voted in support of the government's proposal to stop the development of nuclear energy projects in the country.

The main reason for the cancellation of NPP projects is the changed economic environment. In 2009, Vietnam's electricity demand growth was projected at 17–20% per year, and last year for 2016–2020, the forecast was already at 11%; for the period 2021–2030 - 7–8%. In addition, the cost of projects has almost doubled - from $ 9 billion to $ 18 billion, and according to some Vietnamese media - up to $ 27 billion. The growth in the cost of electricity from nuclear power plants from 4-4,5 cents per kilowatt-hour to more than 8 cents per kilowatt hour. This increase in costs looked extremely unfortunate against the backdrop of falling oil and coal prices, as well as the threat of exceeding the government debt ceiling of 65% of GDP.

Vietnamese officials did their best to show that there is nothing personal about the cancellation of the project and that they have no doubts about the quality of the Russian (and Japanese) proposal. A week before the vote in the National Assembly, Deputy Prime Minister Chin Dinh Dung took turns and quietly met with Russian and Japanese counterparties, and immediately after the official cancellation of the "NPP projects in Ninh Thuan province", government representative and head of the chancellery Mai Tien Dung made a long soothing statement where he expressed confidence in Russian and Japanese technologies and promised not to slow down the overall pace of cooperation.

But the real level of security is one thing, and mass perception is another. While it is in Vietnam that Russia has the highest Pew Global Attitudes support rating, environmental negligence can cost the government dearly, as it is one of the topics of concern to all sections of Vietnamese society, bringing together nationalists, greens, Catholics and the urban average. class.

Another suspicion can be added to economic risks and environmental activism. An active anti-corruption campaign, which is led by the Secretary General of the CPV Nguyen Phu Chong and uses, among other things, as a tool to "cleanse" the party of so-called interest groups, does not contribute to the implementation of large projects. As in neighboring China, such campaigns generate some bureaucratic stupor, when taking on big plans can be dangerous for a political career.


Now what?
The external calm around the cancellation of the NPP project, of course, does not hide the Russian resentment from the lost forces and funds. Hundreds of Vietnamese students were trained in nuclear specialties in Russia, 150 engineers practiced at the Rostov NPP. Of course, they will remain in demand specialists and will be able to work at other energy facilities of the country, in the field of nuclear medicine and other spheres of application of the peaceful atom (the very first reactor in Dalat is still working), but the feeling of lost profit will remain.

No matter what they say, the loss of the Vietnamese atomic project has caused damage to Russian-Vietnamese relations. The trade and economic component has always been their weak point and contrasted sharply with the lush political rhetoric and the almost mandatory annual meetings of heads of state. This year alone, at least two such meetings should take place - the visit of Vietnamese President Tran Dai Quang to Moscow in June and the trip of Vladimir Putin to the APEC summit in Vietnam. Partly taking into account the plans for the supply of equipment and services for nuclear power plants, the parties annually declare their intention to reach a turnover of $ 10 billion by 2020, although in 2016 it amounted to $ 3,8 billion, down 1,5% compared to the previous year.

The Rosatom project could become a new flagship of bilateral cooperation - a new, high-tech industry, and, moreover, a breakthrough for Vietnam and all of Southeast Asia. Ninh Thuan-1 could replace, as the most significant project, the Vietsovpetro joint venture operating from 1980's, producing oil on the Vietnamese shelf. Now the parties will have to look for new large projects, although it will be difficult to achieve the same scale and quality, not to mention such opportunities for access to technology.

All this is not very good news for Rosatom itself and its regional strategy. In 2014, a representative office of the company was registered in Singapore, and in the summer of 2016 the company positively assessed the prospects of Southeast Asia as a market for nuclear goods and services. Director of the International Business Department of the company Nikolay Drozdov then говорилthat Indonesia and Malaysia could become the next in line for nuclear power plants, although even then the representative of Rosatom stressed the role of public opinion in the success of such projects.

In addition to Vietnam, Russia has agreements on cooperation in the field of peaceful nuclear energy with six other countries in the region: Malaysia, Indonesia, Thailand, Cambodia, Laos and Myanmar. However, none of them so far deals with the construction of a nuclear power plant. Apparently, now the stake is being placed on Indonesia, where Rosatom has developed an experimental reactor with a capacity of 10 MW, but where there is also no clarity in terms of public perception. The government will have to convince the population that it is safe to build a nuclear power plant in the archipelago, where earthquakes, typhoons, forest fires and even terrorist attacks are not uncommon.

In other words, Vietnam was an important link for Russia's NPP export strategy. Despite the image of Rosatom as a successful high-tech player of the global level and the astronomical value of the portfolio (over $ 100 billion), the actual nuclear power plants are being built today only in three countries - India, China and Belarus (although large-scale preparatory work is also underway in Bangladesh and Finland). In a broader sense, the actual construction of nuclear power plants in Southeast Asia could become a serious contribution to the Russian strategy of presence in the region, which today, in essence, boils down to projects in the field of oil and gas and the export of arms. And the volume of trade and investment cooperation does not take more than 2% of the total volume for both Russia and the ASEAN countries.

The story of the cancellation of the Russian nuclear power plant project in Vietnam is not about how Russia lost something or was unable to successfully implement a foreign economic project in Asia. On the contrary, the Russian proposal was of high quality, technological and appropriate, but the bet did not work due to an unfortunate coincidence of circumstances. What makes this loss more noticeable is the absence of other Russian projects of a similar level in Southeast Asia.

For the Russian presence in Asia, in the long term, it is important to create a critical mass of business ties at the level of medium-sized businesses, but it is the large state corporations that usually have the opportunity, with political support, to pave the way into the complex and undeveloped Asian markets. Unfortunately, in Vietnam, Rosatom failed to become such a pioneer.

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