Ukraine's nuclear-power sector in dire straits (01/19/03)

Ukraine's nuclear-power sector in dire straits

by Vera Rich
RFE/RL Poland, Belarus and Ukraine Report

Ukraine's nuclear-power industry, which satisfies close to 50 percent of the country's energy needs, is in serious financial trouble. The Chornobyl power station, the site of the world's worst nuclear disaster in April 1986, is a constant strain on the state budget.

The last of the working reactors there (No. 3) was ceremonially closed under pressure from the West in December 2000. But until the plant is finally decommissioned, it will need a constant input of money for water, gas, electricity and the wages of the maintenance staff. But there is no money. Instead, there are only debts that now exceed 20 million hrv ($3.8 million). Recently, the water supply was cut off, although after an appeal from the staff about possible consequences, the Vodokanal supply company agreed to reconnect it.

But the draft Ukrainian state budget for 2003 allots to Chornobyl only funds for the staff payroll. According to Oleksander Antropov, the presidential representative at Chornobyl, it may be necessary to reduce the safety level at the plant.

This is no easy decision. There are, Mr. Antropov said, "many millions of curies of radioactive" waste at the site, and the "sarcophagus" enclosing the ruined No. 4 reactor is in a "critical" state, with nuclear fuel still inside. Following the accident, a whole range of monitoring devices was installed, but there is no money to run them. Now, some Ukrainian lawmakers, in particular, members of the parliamentary Committee for Fuel and Energy, are suggesting that, although the closure of Chornobyl was politically correct, it was economically premature, and they are urging that the No. 3 reactor be restarted to provide the necessary electricity.

Almost immediately after the accident there was worldwide pressure for the permanent closure of the Chornobyl power station. However, the Soviet authorities, and later those of independent Ukraine, maintained that they could not manage without the electricity from the surviving three Chornobyl reactors.

Back in 1986, the G-7 countries agreed to provide "compensation" for the lost generating capacity by helping fund the construction of two additional reactors, one at the Khmelnytskyi power station and one at Rivne, a project known as K2R4.

The extra electricity is definitely needed. Yurii Kostenko, Ukraine's environment minister in the early 1990s, told the author of this note that closing or not closing Chornobyl was a matter of having to choose between the putative death toll of a possible new explosion at Chornobyl or the certainty of many thousands of deaths from hypothermia in the coming winter.

Eventually, the Chornobyl station was closed, and the European Bank for Reconstruction and Development (EBRD) began negotiating a $215 million loan for the completion of K2R4. But, just when the negotiations seemed about to be finalized, the Ukrainian side expressed a reluctance to meet the bank's conditions. During the visit of EBRD President Jean Lemierre to Ukraine in mid-October, Ukraine's prime minister at the time Anatolii Kinakh, expressed a desire to renew negotiations. Lemierre was shown on Ukrainian television saying that the bank and the Ukrainian government had "agreed to renew talks" on the project.

In the meantime, however, the parameters and costs have changed, and the details of the project will have to be renegotiated. Moreover, Mr. Lemierre stressed the importance for K2R4 of cooperation between Ukraine and the International Monetary Fund, saying that K2R4 is "a big long-term project, and it will have an impact on the energy sector in general."

Mr. Lemierre added that the project "will require long-term energy policy, and we'll talk both with the prime minister and the IMF on this subject." An IMF delegation is due to visit Ukraine at the end of October to discuss a new "stand-by" agreement. However, it may well be some time before the projected loan for K2R4 materializes.

Meanwhile, the Ukrainian nuclear industry is strapped for cash across the board. At all the country's five operating nuclear stations, safety levels are imperiled by lack of money. There is a massive brain drain. According to Oleksander Bilychenko, the director of capital construction at Ukraine's national nuclear-generating company Enerhoatom, over the past three years, 280 specialists with top qualifications in nuclear power have left Ukraine, while 60 percent of those still at their posts want to leave.

To stem the outflow, Enerhoatom drew up at the end of September what it describes as a "social policy program" for its employees. But this would cost an estimated 91.8 million hrv to implement, which would mean trebling the present tariff for the sale of electricity to the energy market.

Yet, such is the state of the Ukrainian labor market that almost simultaneously with Mr. Bilychenko's announcement of the nuclear brain drain, it was revealed that at the Rivne nuclear station at least 10 senior engineering and administrative posts were held by unqualified people, whose diplomas in "nuclear engineering and thermal-power stations" from Odesa Polytechnic University were forged. (When purchased three years ago, the going rate for such documents is said to have been $500 to $600 apiece.) The Rivne Oblast prosecutor has now started criminal proceedings under Ukrainian Criminal Code Articles 358 (deliberate use of false documents) and 367 (negligence in the workplace).

Not surprisingly perhaps, Rivne has had in recent months a record of malfunctions, breakdowns and emergency stoppages that, in spite of assurances from the station management that no escape of radiation was involved, built up into a worrying picture that eventually led the prosecutor to instigate an investigation.

Enerhoatom has had its own troubles. On June 5, 2002, the cabinet of Ministers dismissed Enerhoatom Chairman Yurii Nedashkovskyi, replacing him with former Fuel and Energy Minister Serhiy Tulub. Mr. Nedashkovskyi immediately filed a lawsuit against the Cabinet of Ministers, claiming illegal dismissal, and the trade-union committee of Enerhoatom also protested his ouster.

At the beginning of July, President Leonid Kuchma convened a three-day conference to sort out the "serious" problems (financial and otherwise) of the nuclear industry and, in particular, instructed the government to set up an interdepartmental working group to look into Enerhoatom's finances (a grim record of unpaid debts, overdue wage bills, and money earmarked for work on new reactors and upgrading safety measures failing to materialize).

A few days later, Mr. Kuchma in effect called for a purge of the company. "We must sort it out, and name 'the heroes.' The enterprise should work for people, not for the small group of people who have brought it to bankruptcy," the president said.

Then, in August, the Kyiv-based newspaper Den announced that several former officials (unnamed) of the company had been charged under Article 364/2 (abuse of power with grievous consequences). Interfax quoted Volodymyr Hohol, who was described as "acting head of a department of the Procurator General's Office," as saying that the accused had caused damage to the state in the amount of some 200 million hryvnyas over the period from 1998 to 2001, when, as managers of Enerhoatom, they had "concluded a number of contracts that they knew were not advantageous to the state in selling promissory notes through commercial banks, causing enormous losses to the company."

Furthermore, the harm done by corruption may have been compounded by incompetence. Den quoted a "source close to Enerhoatom" as saying that in one deal, the company lost profits "because of simple forgetfulness: Someone failed to take into account the payment for the transmission of electricity." Considerable sums of money, Den claimed, had "evaporated" beyond the borders of Ukraine in some rather strange deals, including the case of 500 tons of uranium concentrate, which Enerhoatom received in 2000 from the Ukrainian Ministry of Fuel and Energy at a price of 352 hrv per kilogram and then sold on to a Russian enterprise for only 97.2 hrv per kilogram.

Under Mr. Tulub's leadership, the situation has apparently improved. The whole commercial side has been separated into a new department, and a tender committee has been established with the aim of lowering the cost of buying equipment, materials, and services. A new social policy program has been drafted, even if it is not clear where the money will be found. Work on the K2R4 reactors has been speeded up. Mr. Tulub seems determined that the reactors will be built eventually, with or without the EBRD loan. But on both safety and financial counts, Ukraine's nuclear industry is still far from healthy.

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