(24/11/00)

No EBRD Money for Nuclear Reactors in Ukraine

Khemelnitsky 2 and Rivne 4 (K2/R4) are two partially built, Russian designed nuclear reactors in Ukraine. The Ukrainian government has not been able to complete K2/R4 on its own, and has been seeking the $1.48 billion US needed to complete the plants from other sources. Project sponsors (Energoatom) have approached the European Bank for Reconstruction and Development (EBRD) for a loan of $215 million US. Other sources of funding from the Russian government, Ukrainian government, export credit agencies, and Energoatom depend on getting funding from the EBRD. The Board of the EBRD (made up of 58 shareholding countries, European Commission and European Investment Bank) is expected to make a decision on the loan on 7th December 2000.


Help Us stop this project.

A decision to finance these reactors would open the road for further expansion of the nuclear industry in the region. If the project is stopped, it will be very difficult to find future financing for the construction of nuclear reactors.
K2/R4 should not be financed

The EBRD, G-7 governments and other financial institutions should stop working on the K2/R4 project. These reactors are dangerous, the Ukrainian public does not want them, and they are unnecessary. They are also economically unviable. As a result of these problems, Ukraine has decided to use Chernobyl as a bargaining chip, claiming that without western funding for K2/R4 it would not be able to close Chernobyl’s last operational unit. However, there is growing international opposition to the project, and a desire to find alternative ways to replace Chernobyl.

Dangerous
On April 26, 1986, reactor 4 of the Chernobyl Nuclear Power Plant exploded. Radioactive fallout from Chernobyl spread throughout Europe and even reached Japan and the United States. Nearly 400,000 people were evacuated. According to a recent United Nations document, nine million people were affected by radiation in one way or another. The most affected were the so- called liquidators (numbering about 800,000) who did the clean-up work. Although they are of a different design from the Chernobyl reactor, the reactors at K2/R4 are far below present safety standards and would not be allowed to operate in any Western country. Furthermore, Energoatom plans to begin operating these reactors before implementation of all safety measures; the company will only correct some of the know safety problems at the first refuelling. Therefore, even the designed (but unsatisfactory) safety level will only be reached after three years of operation. These safety problems are compounded by the fact that Ukrainian workers are often not paid their salaries.

Ignoring Public opinion
A public opinion poll undertaken by SOCIS – Gallup International in April 2000 showed that completion of K2/R4 is supported by only 14% of the Ukrainian public. A similar level of opposition to the project was heard at three public meetings held in Ukraine at which not a single person spoke in favour of the plan. These meetings included one in Neteshin, home of many nuclear workers. Unlike other projects, the EBRD president wants the Board to approve the project subject to a number of important conditions being met. However, to accept the proposal in this form effectively removes the ultimate decision of approval from the Board, and places it in the hands of the unaccountable EBRD operational staff. There is also a great worry that the Ukrainian government will ignore its legal requirements to hold a proper public consultation process and Environmental Impact Assessment in order to speed up the funding process.

Economic evaluation
One of the EBRD’s funding conditions is that the project must be the least-cost option. In 1997, the EBRD established an independent Panel of Experts to review the economics of the project. The Panel concluded that "… K2/R4 are not economic. Completing these reactors would not represent the most productive use of $1 billion at this time." Since this report was written the estimated cost of the project has risen from $1.2 billion to $1.48 billion. Investment in wind energy and a reduction in demand through energy efficiency both represent more cost-effective options. Additionally, Ukraine is currently in a critical financial situation. The EBRD loan would make the situation even worse, especially as cost overruns and construction delays are highly probable. The current rate of monetary payment for energy in Ukraine is very low, making it unlikely that Ukraine could repay the loan.

Unnecessary
Energy needs in Ukraine are declining. Energy consumption has declined by 2.2% in the past year alone. At present there is a significant over-capacity in electricity generation in Ukraine. Even without the Chernobyl nuclear power plant, there is about twice the capacity needed to cover current peak electricity demand. The country’s needs could be met through energy conservation and the management of demand.

Nuclear Blackmail
In June 2000 President Kuchma said the Chernobyl nuclear power plant should close by December 15th independent of international assistance. The closure is needed on safety grounds, and is not clearly based on political will. However, pressure is being exerted by the Head of the Ukrainian Parliament, inspired by President Kuchma and the nuclear industry, to have K2/R4 funded prior to the final closure of Chernobyl. The only option open to them is to threaten the continued operation of Chernobyl. By reacting to such blackmailing the EBRD would completely loose credibility as a bank, and will be seen as the tool for political support of the nuclear industry.

International opposition
After several delays in the project, Ukrainians have been sending out signals that this project is not the only solution for their energy sector. In May 1999, Ukrainian Ambassador to Germany Anatolyj Ponomarenko said that " Ukraine is ready for compromise"on the K2/R4 project. At this point, it is up to the G-7 countries to propose to Ukraine an alternative for which the country will receive funding to restructure its energy sector. The French Ministry of Environment has taken a lead by presenting a study on alternatives to the K2/R4 Project. Support for an alternative project has also been shown in Germany, where the SPD (Social Democrats) and Green governmental parties approved a resolution requesting the German Government to vote against this loan in the EBRD Board. In November 1999 the Lower House of the Dutch parliament unanimously approved a motion calling on it’s government to not agree with the proposal for financing the Ukrainian nuclear plants, and in March 2000 a similar resolution was passed by the Italian Parliament. In March 2000 the German export credit agency Hermes, which was one of the potential lenders, stated that it is not planning to release funds for K2/R4.

Alternatives are available
All of these parliamentary initiatives call for foreign investment into alternatives to Chernobyl. The Ukrainian government and sections of the Ukrainian energy industry have already made a number of proposals. These include the financing of Gas Turbine Projects, small scale hydro-electricity, and energy conservation. There is also clearly scope for the development of renewable energy such as wind and solar.

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