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Forget Chernobyl

 "I eat everything," says Oleksii, a resident of Kyiv (Kiev). "Including the fish?" asks Petroleum Economist. "Especially the fish." So much for the advice of the guidebooks, which warn tourists not to touch anything that has come down-river past Chernobyl. Blasé? Perhaps. But despite grotesque facts and myths about the state of the nuclear power industry in the former Soviet Union, it remains crucial to the economy of Ukraine.

Of all countries using nuclear power, Ukraine's history is, understandably, the most notorious. When reactor number 4 at the Chernobyl nuclear plant exploded on 26 April 1986, it destroyed lives and blew apart the myth of Soviet industry. A banner in a ghost-town close to the defunct plant, where tourists now seek a macabre post-modern experience of an area stuck in a Soviet time warp, proclaims: "The health of the people is the wealth of the country."

"Had the wind been blowing in a different direction ..." The phrase, frequently heard when Ukrainians and others tell how fortune spared Kyiv (and cursed neighbouring Belarus), still holds true. And that grim fact might, in part, explain why Ukraine's government is talking openly again of ramping up its nuclear power capacity. The plan calls for 11 new reactors by 2030.

The proposals have alarmed some – polls show most Ukrainians oppose the plans, while farmers on the country's northern border are particularly concerned. But the main reason why Yulia Tymoshenko, Ukraine's prime minister, announced recently that the country would increase its nuclear power capacity has everything to do with the influence of another neighbour: Russia.

"We want Ukraine to be self-sufficient in energy," Tymoshenko told investors and reporters at the World Economic Forum's Kyiv meeting, in June. Such a statement owes something to the imagination and much to politics. But Ukraine could substantially reduce its dependence on Russian oil and gas imports, if nuclear generation could power a greater share of its economy.

Despite Chernobyl, Ukraine never abandoned nuclear energy. Of the country's total electricity consumption, 15 nuclear plants supply around 51% (81.5 terawatt hours in 2003). Electricity generated from nuclear power is one of Ukraine's few energy-related exports to Russia. Under a contract signed last year, Russia imports some 500 gigawatt hours a month, or more, from Ukraine.

Also last year, two new reactors were brought into operation – Khmelnitski-2 and Rovno-4. The new capacity was designed to replace what was lost when Chernobyl's last two operating units, 1 and 3, closed in 1997 and 2000, respectively. At the same time that the two new plants were connected to the grid, state-owned Energoatom announced plans to build Khmelnitski-3.

But, for now, Chernobyl continues to soak up large portions of the state budget. Unit 2 will need a new $0.75bn sarcophagus by 2007. And the decommissioning of the rest of the plant will not come cheap – especially as many of the loans that Western governments and bodies (such as the European Commission and the European Bank for Reconstruction and Development) promised Kyiv either have not materialised, or have been substantially reduced.

That is worrying for the government, because any significant capacity expansion of the kind Tymoshenko has in mind will need enormous capital expenditure. Nuclear power plants cost around $2bn to build, depending on the size of reactor, meaning Ukraine could be looking at a bill of more than $20bn by 2030.

And, points out Jack Edlow, a nuclear power expert and enthusiast, if Ukraine is serious about increasing nuclear's share of the country's energy mix, its investment will be threefold. First, it will have to upgrade existing plants. Second, if GDP is to grow as Ukraine expects, it will have to add capacity so that nuclear can retain its market share. The third investment would be in new capacity to increase market share.

Where would Ukraine find the money? "That's the question," says a sceptical Frank Verrastro, an analyst at Washington DC's Center for Strategic and International Studies. Like other analysts, Verrastro says Tymoshenko's enthusiasm for nuclear is more political than economical. Adrian Collins, from the World Nuclear Association, agrees and adds that the government's position ought to be seen as a "continuing commitment to nuclear" and nothing more.

But, argues Edlow, nothing should stop Ukraine pursuing a nuclear future. If Kyiv could bring the international financing bodies on board, finding sources for the massive capital outlay might be plausible. Once a nuclear plant is on line, it quickly repays its investment, costing far less to operate than a typical fossil-fuel plant. French and US firms might see Ukraine as a good bet, given expectations of economic growth and rising energy demand. The size of the plans might cause some contractors to pause, however. "Even if I were as sharp as the French [are in the nuclear industry], I'd be a little reluctant to contract to build 11 reactors by 2030," says Ronald Hagen, a nuclear power analyst at the US' EIA.

World uranium prices are relatively cheap (around $30 a pound), too. At those levels, Ukraine need not worry about mining its own deposits – another expensive process. And, in any case, the companies contracted to build the plants are often also contracted to source the uranium, says Hagen.

So what of Chernobyl's legacy, and the Dniepr river's dodgy fish? "That has no relevance to the new generation of plants," says Edlow. Even Russia now accepts that new plants must be built with "containment" – a protective outer layer that could have minimised the disaster at Chernobyl unit 2. Protection of that kind would be a welcome thing, whichever way the wind blows.

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