NUCLEAR ENERGY IN VIETNAM

NUCLEAR ENERGY IN VIETNAM Overview June 2014 Vietnam is a developing country in southeast Asia of 93 million people. Since 1986, it has been modernizing its once centrally planned economy and has achieved a gross domestic product of $326 billion. To power this economic growth, Vietnam generates 117,000 GWh of electricity annually from natural gas, coal, and hydroelectric power. To meet soaring power demand from its expanding manufacturing sector and growing population, Vietnam plans to develop up to 10 nuclear power plants by 2030. In May, President Barack Obama submitted to Congress an agreement for peaceful nuclear energy cooperation between the United States and Vietnam, also known as a Section 123 Agreement, referring to Section 123 of the Atomic Energy Act of 1954. Before the United States can engage in nuclear commerce with another country, a bilateral Section 123 agreement must be in place. If Congress does not disapprove the U.S.- Vietnam agreement, it will come into force later this year. Like other Section 123 agreements, the U.S.-Vietnam agreement commits Vietnam to nine strict nonproliferation assurances and guarantees. The U.S.-Vietnam agreement also contains a Vietnamese political commitment to refrain from pursuing sensitive nuclear technologies such as uranium enrichment or used-fuel reprocessing. 1201 F Street NW Suite 1100 Washington DC 20004 www.nei.org 202.739.8000 Since the United States and Vietnam established full diplomatic relations in 1995, the two countries have expanded their political and economic connections. Bilateral nuclear energy cooperation would strengthen these ties, as well as the United States growing strategic interests in the Southeast Asia region. Vietnam s nuclear energy program represents a commercial opportunity of $10 billion to $20 billion for U.S. nuclear energy suppliers. U.S. industry

will be able to compete in this market only if Congress allows the U.S.-Vietnam Section 123 agreement to enter into force. Exports of U.S. nuclear reactors and certain nuclear equipment, technology and services are also subject to U.S. export control regulations. By allowing the U.S.-Vietnam Section 123 agreement to enter into force, Congress would advance U.S. interests in nuclear nonproliferation, safety and security; strengthen the bilateral relationship and U.S. influence in the region; and enable the creation of tens of thousands of jobs through U.S. supply of nuclear energy technology, equipment and services. Vietnam s Growing Energy Needs The Vietnamese government has stated that the country s strong economic growth will be jeopardized without diversification of energy sources. Driven by a growing population and expanding industrial base, annual electricity demand has grown an average 13 percent over the past decade. 1 Annual demand growth is expected to increase to 15 percent by 2015. 2 Vietnam has struggled to keep pace, falling short of its electricity needs by 3 percent in each year since 2006, requiring it to import energy. 3 Vietnam relies on hydro power for 38 percent of its electricity generation, but this capacity is limited during the dry season and most of the country s hydroelectric potential has been developed. Natural gas fuels another 32 percent of Vietnam s generation, but domestic gas production has leveled off. Coal is responsible for 20 percent of generation and it must be imported. 4 Nuclear energy can provide Vietnam with enhanced energy security, reduced reliance on imported fossil fuels and a clean and reliable source of baseload power. The nuclear power plants planned in Vietnam will avoid 79 million metric tons of CO 2 each year equivalent to the annual emissions of 15 million passenger cars or the total annual CO 2 emissions of Romania. 5 Ambitious Development Plans Vietnam approved a legal and regulatory framework for its nuclear energy program in 2008 with its Atomic Energy Law. The measure established the Vietnam Agency for Radiation and Nuclear Safety and Control and the Vietnam Atomic Energy Institute both under the Ministry of Science and Technology as the two main agencies responsible for nuclear safety and security. Vietnam conducted a self-assessment of its nuclear infrastructure in 2008 and, in 2009, asked the International Atomic Energy Agency (IAEA) to conduct an Integrated Nuclear Infrastructure Review (INIR) mission. Based on INIR s recommendations, Vietnam took numerous steps to improve human resources development and nuclear power project management. One such step was the establishment of the Vietnam Atomic Energy Agency to oversee research, development and project management. 6 Vietnam s first four nuclear energy facilities will generate at least 1,000 megawatts each and are planned at two coastal sites in the southern province of Ninh Thuan. Technology selection and safety precautions led Vietnam officials to delay the construction of these plants by four years. 7 Construction of the first plant will begin in 2017-2018 and it is expected to begin commercial operation in 2023; the schedule for the second plant will follow the first by one year. An additional six plants of similar capacity are planned, including two additional plants at each of the Ninh Thuan sites, and two plants in a central province that Vietnam has not yet identified. Vietnam expects total nuclear generating capacity to surpass 10,000 megawatts by 2030. A Step Forward for Nuclear Nonproliferation Some Members of Congress have urged that every Section 123 agreement include the partner country s NUCLEAR ENERGY IN VIETNAM 2

commitment is not binding, it is a significant assurance that Vietnam will not pursue domestic enrichment capabilities. Central (uncommitted) Central (uncommitted) Ninh Thuận 1-1 (Russia) Ninh Thuận 1-2 (Russia) Ninh Thuận 2-1 (Japan) Ninh Thuận 2-2 (Japan) Ninh Thuận 1-3 (uncommitted) Ninh Thuận 1-4 (uncommitted) Ninh Thuận 2-3 (uncommitted) Ninh Thuận 2-4 (uncommitted) Map of Vietnam s Planned Nuclear Power Reactors renunciation of technologies for the enrichment and reprocessing of nuclear fuel (E&R). This condition, described by its supporters as the gold standard, has been accepted only by the United Arab Emirates and Taiwan (and this is not a standard ). Since the United States opened negotiations for a Section 123 agreement with Vietnam in 2010, Vietnam has made clear that it would not sign an agreement in which it renounced its right to E&R. Vietnam has nonetheless made clear that it does not intend to develop sensitive fuel-cycle technologies but, like many other countries, it is unwilling to forswear a sovereign right. Although Vietnam declined to condition nuclear cooperation on its renunciation of E&R, it commits in the agreement s preamble to rely on international markets for uranium enrichment rather than develop indigenous enrichment capabilities. Although the bilateral Leading nonproliferation experts have expressed support for the agreement. Miles Pomper of the Center for Nonproliferation Studies called it a significant step forward compared to multiple other agreements the U.S. has already concluded with non-nuclear-weapon states, and a small but useful precedent in the direction of a global norm against new national enrichment and reprocessing facilities. 8 Similarly, Mark Hibbs of the Carnegie Endowment for International Peace argues that the UAE agreement cannot serve as a a global template for U.S. nuclear cooperation, noting, There are no grounds to suspect Vietnam of ulterior motives. If the bilateral nuclear cooperation agreement is not accepted by Congress, Vietnam can partner instead with others. 9 Like other Section 123 agreements concluded since 1978, the U.S.-Vietnam agreement would commit Vietnam to nine strict requirements for nuclear security and nonproliferation. These requirements include a prohibition against the enrichment or reprocessing (E&R) of U.S.-controlled nuclear material without prior U.S. consent. 10 Other supplier countries like Russia, Japan, and France do not include the latter restriction in their bilateral nuclear cooperation agreements. Vietnam has set very high standards for nuclear nonproliferation. The country has been a party to the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) since 1982. It signed the Comprehensive Nuclear Test Ban Treaty in 1996 and ratified it in 2006. Vietnam brought a Comprehensive Safeguards Agreement into force with the IAEA in 1990 and, in 2007, signed the IAEA Additional Protocol. Vietnam is also a member of the Southeast Asia Nuclear-Weapon-Free Zone Treaty. There is no evidence to suggest that Vietnam has ever NUCLEAR ENERGY IN VIETNAM 3

sought nuclear weapons. 11 As part of its national Atomic Energy law, it formally banned the development of nuclear weapons and all forms of nuclear proliferation. Vietnam is already benefitting from safety and security assistance from the United States. In 2007, its Ministry of Science and Technology signed a nuclear security cooperation agreement with the U.S. National Nuclear Security Administration. 12 The following year, Vietnam began receiving technical assistance from the U.S. Nuclear Regulatory Commission (NRC). That assistance deepened in 2009 when Vietnam became a pilot country for the NRC s New Reactor Assistance Program. 13 Vietnam has also received technical assistance from Japan, Korea and Russia. Additional Strategic Benefits Regional experts have noted the potential of U.S.- Vietnam nuclear energy cooperation to strengthen the broader bilateral relationship and to aid the Obama Administration s pivot to Asia. Murray Hiebert of the Center for Strategic and International Studies wrote that the agreement would add another concrete plank to the U.S. rebalance to Asia, which President Obama highlighted on his justcompleted four-nation visit to Asia, and add new heft to the comprehensive partnership launched by Vietnam and the United States last July. 14 Finally, the Congressional Research Service has noted that rejection of the agreement by Congress could set back U.S.-Vietnamese cooperation, including in the nuclear area, and could be interpreted by the Vietnamese as a symbolic rebuke of the new U.S.-Vietnam comprehensive partnership. 15 U.S. Companies Lack Market Access Without a Section 123 Agreement in Force The potential value of the Vietnamese nuclear energy market for U.S. suppliers is approximately $10 billion to $20 billion. U.S. companies from across the nuclear energy supply chain see commercial opportunities in Vietnam. Vietnam government officials have shown interest in partnering with U.S. suppliers of nuclear power plants, and Westinghouse Electric Company and GE-Hitachi Nuclear Energy have expressed interest in the Vietnamese market. 16 To expand its nuclear energy program from a single research reactor today to ten commercial nuclear power plants in 2030, Vietnam requires more than imported technology, equipment and fuel: It also requires regulatory, operational and training services. Winning a major nuclear power plant tender in Vietnam would create and sustain thousands of jobs in the United States much as the Westinghouse and General Electric nuclear plants under construction in China and Taiwan support tens of thousands of U.S. jobs at those companies, their subcontractors and suppliers. Leading business associations have urged Congress to support the agreement to ensure that U.S. exporters are able to compete in Vietnam s rapidly expanding nuclear energy market. 17 Vietnam Has Non-U.S. Options Vietnam s nuclear program does not depend on a Section 123 agreement with the United States. Its decision to move forward with other countries illustrates that there is not a U.S. monopoly on nuclear energy technology and nations can choose from a range of non-u.s. suppliers to develop their energy programs. Russia and Japan have been the primary beneficiaries of the longstalled U.S.-Vietnam negotiations. In October 2010, Vietnam signed an agreement with Russia for Atomstroyexport to construct two nuclear NUCLEAR ENERGY IN VIETNAM 4

power plants in Ninh Thuan. Russia's Ministry of Finance is prepared to finance at least 85 percent of the first plant, and Russia will supply the fuel and remove the used fuel for the life of the reactors. 18 In November 2011, Vietnam and Russia signed an agreement that will secure up to $9 billion in construction financing from the Russian government. A second agreement for $500 million financed a nuclear science and technology center. Also in October 2010, Vietnam signed an agreement with Japan for construction of two reactors at a second site in Ninh Thuan. The agreement calls for the plants to come online in 2024-25. In November 2010, the two countries signed an agreement for Japan Atomic Power Company and the International Nuclear Energy Development of Japan Co. Ltd. (JINED) to work on the power plant project. The plan will involve financing and insurance of up to 85 percent of the total cost. JINED is a consortium of Japan's METI, nine utilities (led by Chubu, Kansai and Tepco) and three manufacturers (Mitsubishi Heavy Industries, Toshiba and Hitachi). The intergovernmental agreement took effect in January 2012. Conclusion The U.S.-Vietnam nuclear cooperation agreement offers the United States the opportunity to advance multiple national interests at the same time. By approving this agreement, Congress would increase U.S. influence over Vietnam s nuclear nonproliferation policy and practices and ensure the highest possible levels of nuclear power plant safety and reliability in Vietnam. It would enable the creation of tens of thousands of jobs through U.S. supply of nuclear energy technology, equipment and services. Finally, Congress would strengthen the growing U.S.-Vietnam partnership and advance U.S. interests in Asia. NUCLEAR ENERGY IN VIETNAM 5

Notes 1. World Development Indicators, World Bank, April 2013. 2. Tran Thuy, Vietnam power demand seen up 15 pct/yr in next five yrs - EVN, June 22, 2011. 3. Id. 4. Norimitsu Onishi, Vietnam s Nuclear Dreams Blossom Despite Doubts, New York Times, March 1, 2012. 5. Emissions avoided are calculated using national fossil fuel emissions rates from the Environmental Protection Agency and generation data from the International Energy Agency. 6. Hoang Anh Tuan, Status of the National Infrastructure Development for Nuclear Power in Vietnam, Vietnam Atomic Energy Commission, December 2008; Pham Quang Trung, Experience with IAEA INIR Mission in Vietnam, Vietnam Atomic Energy Agency, February 2011. 7. Vietnamese Delay Confirmed, World Nuclear News, January 28, 2014. 8. Miles Pomper, US-Vietnam Nuclear Pact Meets the Silver Standard, Center for Nonproliferation Studies, May 9, 2014. 9. Mark Hibbs, "Nuke deal with Vietnam good for US," The Hill [oped], May 12, 2014. 10. Paul K. Kerr and Mary Beth Nikitin, Nuclear Cooperation with Other Countries: A Primer, Congressional Research Service, June 19, 2012. 11. Vietnam Country Profile, Nuclear Threat Initiative, November 2012. 12. United States and Vietnam Agree to Cooperate in Peaceful Uses of Nuclear Energy, NNSA Press Release, September 12, 2007. 13. NRC International Activities Annual Report, FY 2009, Nuclear Regulatory Commission Office of International Programs, October 2009. 14. Murray Hiebert, The Administration and Congress Should Work Together to Quickly Approve the U.S.-Vietnam Nuclear Cooperation Agreement, Center for Strategic and International Studies, May 1, 2014. 15. Mary Beth D. Nikitin, Mark Holt, and Mark E. Manyin, U.S.- Vietnam Nuclear Cooperation Agreement: Issues for Congress, Congressional Research Service, May 13, 2014. 16. Mari Iwata, Hitachi, GE Extend Nuclear Reach, Wall Street Journal, August 25, 2010; Nguyen Nhat Lam, Vietnam Considers Westinghouse for Nuclear Plants, Reuters, February 19, 2009. 17. U.S. Chamber Statement on Nuclear Cooperation Agreement with Vietnam, U.S. Chamber of Commerce press release, May 8, 2014; US-ASEAN Business Council Urges Support for U.S.- Vietnam Nuclear Agreement, U.S.-ASEAN Business Council, May 8, 2014. 18. Id., Congressional Research Service. NEI Trade Team Richard Myers Vice President, Policy Development rjm@nei.org 202.739.8021 Dan Lipman Executive Director, Policy Development and Supplier Programs dsl@nei.org 202.739.8115 Carol Berrigan Senior Director, Supplier Policy and Programs clb@nei.org 202.739.8050 Bob Powers Senior Director, Federal Programs rjp@nei.org 202.739.8117 Ted Jones Director, Supplier Programs thj@nei.org 202.739.8169 Staci Wheeler Director, Federal Programs saw@nei.org 202.739.8095 NUCLEAR ENERGY IN VIETNAM 6