Nuclear Belt and Road and U.S.-South Korea Nuclear Cooperation
Nuclear exports are an important component of the Belt and Road Initiative, Xi Jinping’s signature infrastructure and development project abroad. Chinese nuclear industry officials have said that China could build as many as 30 nuclear reactors abroad worth $145.5 billion by 2030. China has already built four nuclear reactors and is currently building two more in Pakistan. It has also entered the United Kingdom’s nuclear market by financing a third of the French construction of the United Kingdom’s new nuclear reactors. China has also recently signed a contract to build a Hualong One nuclear reactor in Argentina, and is currently in negotiations with Saudi Arabia and Kazakhstan, among many others.
As a latecomer to the global nuclear market, China’s share is still relatively small, but China is increasingly becoming a competitive vendor based on its advanced nuclear technology, competitive prices, and lavish financing. The Nuclear Belt and Road, if successful, will expand China’s influence and possibly enhance its coercive power abroad. Thus, Washington has reason to thwart it. The United States and South Korea, two democratic allies that can compensate for each other’s weaknesses as nuclear vendors, should cooperate in this endeavor.
Will the Nuclear Belt and Road Succeed?
China has acquired sophisticated nuclear technology. China’s first homegrown Hualong One reactor, which went online in November 2020, has been certified as compliant with European safety requirements and has also been approved for construction in the United Kingdom. Hualong One reactor is also cheaper and faster to build compared to those of U.S. and European counterparts. In addition, China appears more advanced than other nuclear vendors when it comes to next-generation nuclear reactors. The country has connected to grid the world’s first fourth-generation nuclear reactor based on high-temperature gas-cooled reactor technology, and acquired the first approval for a small modular reactor by the International Atomic Energy Agency. These newer generation of reactors are very promising, because they are smaller, cheaper, quicker to build, safer, and more mobile. There will be a huge advantage for whoever can first bring to market this technology, and China seems to have the lead.
Another strength of China as a nuclear vendor is its affordable prices. China’s domestic nuclear market is second only to the United States. China is expected to invest up to $440 billion in the sector over the next 15 years and overtake the United States in nuclear energy generation sometime before 2030. China’s large domestic nuclear reactor market allows it to reach economies of scale, which it can pass on to foreign clientele.
Moreover, China is willing to offer generous financing backed by Chinese state-owned banks to cover upfront costs. Nuclear power plants are relatively cheap to run but expensive to build, costing billions of dollars. China has provided over 80 percent of the financing for its nuclear projects in Pakistan and has recently agreed to finance 85 percent of the two nuclear reactors it will build in Argentina. Only the Chinese and, until recently, the Russian nuclear industries can offer such massive financing. However, with Russia, the leading vendor accounting for over 65 percent of world reactor sales between 2012 and 2021, being pushed out of the market in the wake of its invasion of Ukraine, Chinese financing will be increasingly appealing, especially for developing countries.
Why Should We Care?
The Nuclear Belt and Road could expediate the power shift away from the United States toward China. Due to the sensitive nature and large-scale, long-term operation of nuclear plants, nuclear cooperation deepens relations among states. Relying on China’s construction and maintenance of nuclear power plants is particularly dangerous, because China does not shy away from wielding its economic clout to achieve diplomatic ends. If nuclear buyers take stances on important issues that diverge from official Chinese views, China could threaten to suspend nuclear power generation to exert leverage over recipient countries. Further, in cases where recipients of Chinese financing fail to repay loans, China could expand its so-called “debt-for-equity swap,” seeking control over recipient countries’ strategic assets, including ports and mines, in return for debt cancellation. Such moves would enhance China’s power projection capabilities and supply chain resiliency, and increase China’s position in its power competition with the United States.
For all the reasons above, Washington should take seriously China’s ability to leverage its Nuclear Belt and Road projects, and work to develop its own set of alternatives. The United States has recently had some success in thwarting China’s nuclear exports. For example, in 2020, Romania decided to cancel a nuclear reactor deal with China and instead work with a U.S.-led consortium. Last year, the U.S. firm Westinghouse won a bid to build Poland’s first nuclear power plants. The Czech Republic has also decided against allowing China to build nuclear power plants on their soil, while the United Kingdom is seeking to end China’s involvement in its civil nuclear program. However, these negative reactions are mostly coming from European countries, and it is less clear if non-Western, developing countries will react in the same way. Several surveys show that China is viewed quite positively in African, Middle Eastern and Latin American countries. A recent survey conducted by the University of Cambridge suggests that slightly more people view China more positively (62 percent) than the United States (61 percent) in developing countries. China’s economic coercion has not discouraged many developing countries from cooperating with China in other critical infrastructure projects, such as 5G or high-speed trains.
U.S.-South Korea Cooperation to Thwart China’s Nuclear Belt and Road
In order to thwart China’s nuclear exports more globally, the United States needs to find ways to make its technologies better, cheaper, and safer. In addition, it needs to come up with more attractive financing plans for its nuclear exports. Development of smaller and more affordable next-generation reactors would also help in this regard. However, because the United States does not build things cheaply and quickly, and cannot match China’s lavish funding, it will be a challenge to match China’s prices and speed without joining forces with other nuclear vendors.
South Korea, a democratic ally of the United States and one of the few rules-based players in the nuclear market, would be a logical partner. South Korea can build nuclear power plants more cheaply, on time and on budget, while the United States can impart its advanced capabilities in safe facility operation and management. The two countries could pursue joint export projects that leverage each other’s strengths, for instance with the United States providing reactor designs and maintenance and operation support, and South Korea providing equipment and construction work. They could also devise a co-financing scheme to make their joint offer more appealing vis-à-vis China’s. In addition, the two countries should pool their R&D efforts to jointly develop next generation nuclear reactor models in order to beat China to the plate and reap the rewards of the first-comer advantage. Presidents Biden and Yoon already pledged to enhance cooperation on nuclear energy during their summit in May 2022, though it remains to be seen how this cooperation will unfold.
Although close cooperation between the two countries is urgently needed, the United States and South Korea are currently mired in legal disputes regarding nuclear technology after Westinghouse sued Korean Nuclear and Hydro Power for unlicensed use of its intellectual property. The likely winner of this dispute is China. For example, the lawsuit will likely sabotage South Korea’s bid to build nuclear reactors in Saudi Arabia (Riyadh has ruled out the United States as a potential nuclear vendor), giving China the highest chance to win the bid.
This is no time for U.S. and South Korean nuclear firms to fight. What is at stake is not merely nuclear dealmaking, but how much China will be able to leverage its nuclear technology to challenge the rules-based international order.
Lami Kim is an Associate Professor and Director of the Asian Studies Program in the Department of the National Security and Strategy at the U.S. Army War College. Dr. Kim was also a U.S.-Korea NextGen Scholar with CSIS and USC Korean Studies Institute.
The views expressed are those of the author and do not necessarily reflect the official policy or position of the Department of the Army, Department of Defense, or the U.S. Government.