Speech by H.E.Mr. Gleb A.Ivashentsov

Ambassador of Russia

to the Republic of Korea,

at the 146^th Breakfast Meeting

of Korean Nuclear Community

(Seoul, May 31, 2007)

Ladies and Gentlemen,

I am glad to be with you this morning. Thank you for your kind invitation to address you on the present state and development prospects of the Russian nuclear industry. For me, as Ambassador of Russia to the Republic of Korea, it is very important that the Korean public has a true vision of the situation on my country. Russia and the Republic of Korea are close neighbours. Geography and history predetermined them to settle quite a few common issues by joint efforts.

The Russian-Korean relations have been steadily approaching the level of comprehensive and trustful partnership. There is no such sphere of human activities in which our two countries do not cooperate. We cooperate on land and on sea and are beginning our cooperation in the outer space. As in 2008 the first South Korean cosmonaut after training in Russia will be launched to the International Space Station by a Russian space-ship.

Our cooperation cover the peaceful use of nuclear energy as well. And it is but reasonable that the Korean nuclear community is interested in the present state of the Russian nuclear industry.

My country is the actual pioneer in starting nuclear power houses. The Obninsk nuclear power plant put into operation in 1954 was first in the world.

1. Development Programme of the Nuclear Power Industry in the Russian Federation

At present Russia is a country with advanced nuclear power industry. 31 nuclear power plant units with the total installed electrical capacity of 23,2 GW are currently operated here. Three more nuclear power plant units are under construction, one of them will have a fast neutron reactor (FN-800). The volume of power generated by operational Russian nuclear power plants in 2006 amounted to 154,6 bn kWh. In January-March 2007 Russian nuclear power plants generated 40,6 bn kWh or 95,7% of the previous year�s production volume.

In addition to having a fairly large nuclear power plants fleet, Russia expressly strives to intensify the development of nuclear power industry on the basis of comprehensive analysis and recognition of the advantages provided by this power generation source. Adoption by the Russian Government of the Federal Target Programme (FTP) called �The Development of the Russian Nuclear Power Generation Complex for 2007-2010 and up to the Year of 2015� became an important step towards this goal. Under this Programme the total installed capacity of nuclear power plants is to reach 33 GW. By the completion of the FTP 10 new power plants units with the total capacity of over 11 GW will be put into operation, and ten more units will be at various stages of construction.

The Programme�s objective is to put into operation new nuclear power plant units with the total installed electric capacity of at least 2 GW/year. Moreover, the FTP envisages development of spent nuclear fuel and radioactive waste management capacities at nuclear power plants and preparation for decommissioning of outdated power plant units and transition to innovative technologies.

The Programme is scheduled to be implemented in two stages: Stage One is designed for years 2007-2010, Stage Two � for 2011-2015. The volume of financing will amount to Roubles 1471.4 bn (US$ 55.5 bn) at current prices and include federal budget funding of 674.8 bn Roubles (US$ 25.5 bn) allocated for capital investment and own resources of the nuclear industry organizations and enterprises of Roubles 796.6 bn (US$ 30.0 bn).

The implementation of the Programme will increase the share of nuclear power plants up to 18,6% of the total power generation volume in Russia. It is envisaged to gradually increase the share of nuclear power plant units construction at the cost of the Federal Agency for Atomic Energy (Rosatom) enterprises, which after 2015 shall reach 100% what means that from that time on the federal budget facilities will not be drawn for these purposes.

Development of nuclear power generation obviously requires the development of its raw materials base and guaranteed adequate nuclear power plants fuel supply. Recognizing that Russia is taking appropriate steps. With this view the decision was passed to establish OAO Uranium Mining Company (The UMC). The establishment of the company will consolidate production, financial, intellectual and raw materials resources in order to increase the mining and processing volume of natural uranium to meet the country�s nuclear power generation industry growing demand. The UMC�s main objective is to secure long-term reliable supply of uranium raw materials to the Russian nuclear industry. The UMC was co-founded by two Russian public nuclear companies having equal equities capital shares � OAO Techsnabexport (TENEX) and OAO TVEL. The UNC received its registration certificate November 30, 2006. The UMC is planning to carry out its activities along several lines: follow-up exploration and development of the ore deposits located in Russia, development of the country�s raw materials potential, including exploration work, joint ventures setup for mining of uranium in the other states of the former Soviet Union and other foreign countries, imports of natural uranium. The UMC envisages to actively attract Russian and foreign investments to uranium mining. The expanding cooperation with Kazakhstan is aimed to fulfill the same objectives of raw materials supply.

Improvement of the applicable legal framework of the Russian Federation�s international cooperation in the area of peaceful uses of nuclear energy constitutes an important aspect of the Russian nuclear industry raw materials base expansion, particularly in terms of its exports programme implementation. The aim of this work is to lift political and legal restrictions in imports and nuclear materials use imposed by certain countries rich in natural uranium deposits (Canada, Australia).

The FTP objectives are not limited to the construction of nuclear power plants on the territory of Russia. Nowadays fully-fledged development of the nuclear power generation complex is not possible without multifaceted economic cooperation. The Programme is therefore also aimed at the promotion of the products (works, services) offered by the Russian nuclear power plants outside the territory of the Russian Federation.

Russian companies are also prepared to provide existing nuclear power plants completion and modernization services. Negotiations with several foreign partners are currently underway. Russian organizations are prepared to consider broad-ranging cooperation proposals from Korean nuclear companies, including the construction of NPPs.

Intergovernmental cooperation in the nuclear area continues to develop as well. Last year Russia signed a number of bilateral agreements on peaceful use of the nuclear energy. Among them are the agreement on cooperation in nuclear and radioactive safety provision between Russia and Norway and the intergovernmental cooperation agreement on peaceful use of nuclear energy between Russia and Indonesia.

2. Restructuring of the Russian Nuclear Industry

The Russian nuclear industry today represents one of the few branches of the country�s economy present in the world market in the segment of science-driven high-technology products.

It was the export of these products that made it possible of the industry to survive in the challenging �perestroika� times of the 1990s. However, the industry�s involvement in commercial activities was not backed up by required structural reshaping based on market principles, which was then taking over the Russian economy. The enterprises that actively participated in foreign economic activities had primarily non-defense profiles and only technically belonged to the defense complex, and, in essence, continued to operate under planned distribution management system terms.

The success of the Russian nuclear industry if the international market has been and, to a great extent, is maintained owing to the legacy inherited from the Soviet Union � unique technological solutions and production capacities in all nuclear fuel cycle process stages, and first and foremost, in uranium enrichment, accumulated strategic reserve of uranium and highly qualified personnel. However, the exploitation of the achievements of the foregone years was unfortunately not accompanied by the industry�s qualitative progress in the development of the production, scientific and technological potential.

The combination of all these factors led to the aggravation of the system contradictions and objective necessity to alter the legal framework and governance mechanisms from 100 percent state ownership and supervision to state regulation and application of market tools in the economic activities.

The main objectives of the forthcoming Russian nuclear industry restructuring have been defined to overcome accumulated contradictions, separate non-defense and defense sectors, create within the practicable timeframe conditions for accelerated growth of the nuclear power generation complex (NPGC) and increase its competitive advantages in the international markets.

One of the key elements of the nuclear industry restructuring is the federal law establishing its legal basis � the so called �tunnel law� designed to create a special legal background for the industry restructuring and developing of its non-defense sector under the applicable national regulatory framework. President Vladimir Putin of Russia signed the �tunnel law� on February 5^th 2007, and it came into effect on February 20^th, 2007.

The predestination of the �tunnel law� is to (within the shortest time):

- Create legal conditions to the increase of the nuclear power generation complex enterprises competitiveness in the world markets,

- Reinforce their investment attractiveness,

- Eliminate existing gaps and contradictions in the applicable law impeding the efficient performance of the nuclear power generation enterprises,

- Reinforce and regularize the proprietary basis of their production and commercial operations,

- Bring organizational, legal and management structures of the nuclear power generation complex in line with the conditions under which the overall Russian economy currently operates.

The law envisages appropriate measures in the result of which federal unitary state-owned enterprises, comprising the majority of the industry, shall be re-incorporated as joint-stock companies.

Consequently the Presidential Decree on establishment of the Nuclear Power Industry Public Corporation (Moscow) with 100% federal ownership was signed at the end of April as the next stage of the industry restructuring. It is defined by the Decree that the Nuclear Power Industry Public Corporation �Atomenergoprom�, as well as its affiliated and associated joint-stock companies will have the following priority lines of activities: deployment, construction, operation, warranty and service maintenance, modernization, repairs and decommissioning of nuclear installations, radiation sources and nuclear materials and radioactive substances storage facilities; scientific research in the area of nuclear energy use, implementation of new technologies and developments; construction, operation, warranty and service of nuclear power plants located outside of the Russian Federation, production of electric and thermal power; exploration and mining of minerals containing nuclear materials and radioactive substances; isotope enrichment of uranium and other nuclear materials; development, production and marketing of fuel assemblies for nuclear reactors; export and import of goods and services related to use of nuclear energy, training of specialists in the area of nuclear energy use.

3. Cooperation of the Russian Federation with the Republic of Korea in the Peaceful Uses of Nuclear Energy

The Agreement between the Government of the Russian Federation and the Government of the Republic of Korea �On Cooperation in the Peaceful Uses of Nuclear Energy� signed May 28, 1999, constitutes the contractual basis of the Russian-Korean cooperation.

The Agreement was concluded for the period of 10 years and will be automatically extended for successive five-year terms. It envisages cooperation in the following areas: fundamental and applied research and development in nuclear energy; designing, construction, operation, maintenance and nuclear power and research reactors service life extension; exploration and development of uranium deposits; development and commercial production of fuel elements components and materials; nuclear safety, radiation safety and environmental protection leading-edge technologies of the nuclear fuel production, radioactive waste management.

The bodies authorized to implement the Agreement are the Federal Agency for Atomic Energy (Rosatom) of the Russian Federation and the Ministry of Science and Technology (MOST) of the Republic of Korea.

The principal body established to supervise the Agreement implementation and review issues arising in the course of its execution is the Nuclear Power Joint Coordinating Committee headed by relevant Deputy Ministers. Meetings of the Committee are held on an annual basis in Seoul and Moscow alternatively. In December 2006 the 11^th Committee meeting took place in Seoul.

In the framework of the Committee the parties develop a cooperation programme in various areas of nuclear power use, which, according to the opinions expressed in the course of the recent meeting, brings undeniable benefits for the both parties. The programme primarily includes research and development works.

Commercial cooperation is marked by successful development as well. The Republic of Korea, as you well know, is one of the world leaders in the share of electric power generated by nuclear power plants (in the order of 40% over the last few years).

Due to the unavailability of own nuclear fuel cycle (NFC) capacities, with the exception of nuclear fuel fabrication, the Republic of Korea is a major importer of uranium products and services. Russia is one of the key suppliers of low-enriched uranium (LEU) to the Korean market.

Supplies of the Russian LEU to the Republic of Korea commenced in 1989, when diplomatic relations between the two countries have not yet been established. Therefore, the first contract for the LEU supply to the Republic�s only energy company operating a nuclear power plant � KHNP � was concluded by the leading Russian uranium products and services supplier � OAO Techsnabexport (TENEX) through an intermediary. The Russian supplier nowadays accounts for approximately 25% of the uranium enrichment market in the Republic of Korea. The Russian supplier�s policy is aimed at further reinforcement of its commercial positions in the South Korean market by concluding direct contracts with uranium products and services end-users.

As is known, the Republic of Korea plans to build 8 more nuclear power units by the year of 2020 bringing the total nuclear power plants capacity up to almost 31 GW. Growing demand for nuclear fuel makes the uranium market of the Republic of Korea exceedingly challenging for the Russian export of nuclear fuel cycle products and services.

4. International Uranium Enrichment Centre (IUEC)

President Putin�s initiative to establish IAEA-supervised international centres for nuclear fuel cycle services provision, including enrichment was put forward in January 2006.

The initiative, first voiced by the President of Russia at the Session of the Eurasian Economic Community Interstate Council, is oriented at granting all countries the access to the benefits of nuclear energy on a non-discriminatory basis on condition they renounce the development of national nuclear power cycles. The initiative is aimed at strengthening of the nuclear weapons non-proliferation regime by providing the interested parties with nuclear fuel cycle enrichment services and guaranteed fuel supplies.

In this sense the initiative is in line with all recent international community proposals in the area of nuclear fuel cycle products and services guaranteed supplies, including the IAEA experts� recommendations on multilateral nuclear approaches (MNA) and the US President�s Initiative on Global Nuclear Energy Partnership (GNEP).

The Russian Initiative implementation plan envisages, as the first stage, the establishment of the International Uranium Enrichment Center (IUEC). It was announced by Rosatom at the 50^th jubilee Session of the IAEA General Conference which was held in September 2006. The IAEA supported the Russian initiative. In the course of the General conference an official invitation for the IAEA to participate in the IUEC activities was handed over to its director General Dr.Mohamed El Baradei. The Republic of Kazakhstan was the first country to have expressed interest to participate in the IUEC.

The Russian Government decision of December 2006 removed the Angarsk Electrolysis Chemical Complex (FGUP AECC), on the basis of which the IUEC will be established, from the list of top security facilities. It was required to take this step in order to provide for a fully-fledged IUEC operation from the presence of foreign partners viewpoint.

January 24, 2007 the Permanent Mission of the Russian Federation to the International organizations in Vienna forwarded a note to the IAEA Secretariat requesting the Angarsk Complex to be included to the list of organizations to which the agency�s guarantees application to the sophisticated installation such as the Angarsk Complex.

Simultaneously intensive work was carried out to coordinate the Russia-Kazakhstan intergovernmental draft agreement on establishment of the IUEC and its commercial model based on the joint stock company principle. The relevant intergovernmental agreement was signed May 10^th during the visit of President Vladimir Putin to Kazakhstan.

Intergovernmental draft agreements and the IUEC incorporation documents provide all required terms and conditions for joining of the IUEC by organizations of other interested states complying with the Nuclear Weapons Non-Proliferation Treaty and their nuclear programmes corresponding to the IUEC objectives.

In view of the ambitious nuclear power generation programme adopted by the Republic of Korea and its orientation to the world uranium products and services market, it may be beneficial for the ROK to consider the possibility of joining the Russia-Kazakhstan IUEC agreement. In our opinion such a move could contribute to the reliability of meeting the country�s nuclear power generation growing demand for nuclear fuel and further strengthen the non-proliferation regime all over the world and in the Asia-Pacific Region in particular.