Jay Newman was a senior portfolio manager at Elliott Management. Jim Cornell is President of NuCore Energy, a nuclear-fuel advisory and investment group. Alex Michshenko is President and CEO of Trident Maor Advisors, a consultant that specialises in nuclear security, and former head of US Operations for Kazatomprom. All three authors are long uranium.

Someone pitches you on a “new” technology: it’s green, safer than nearly every other source of energy, and produces the most reliable base load electric power possible. You say: my lucky day — why tilt at windmills that kill bats, or build solar and hydro projects that devour resources and scar the landscape?

After fits and starts, the world has come around to the view that nuclear power is the best way to achieve broad societal goals: protecting the environment, weaning off fossil fuels, and powering electrification of transportation and industry. Over 60 nuclear reactors are under construction (21 in China) with plans for another 110 (70 in China). At the recent Dubai climate conference, 22 nations committed to trebling nuclear capacity by 2050.

Of course, nuclear power never really went out of style: it supplies nearly 20 per cent of US (50 per cent of zero carbon) and roughly 25 per cent of European electricity (68 per cent in France).

That’s good news — a victory for rational thought.

Not such good news is that, thanks to fearsome environmental politics and the Western policy myopia, we are facing a trifecta: a structural global deficit in uranium production, a choke point in enrichment (the process that turns the raw material, U308, into usable fuel), and the fact that agents of chaos have snatched the keys to the nuclear power kingdom. If that sounds pretty bad, self-inflicted wounds could make matters worse.

Belatedly recognising that nuclear energy production is a national security issue, the US House of Representatives just voted to ban imports of Russian uranium. Predictably, Russia threatened to cut the US off immediately — including recalling a ship already on the high seas carrying enriched uranium. It’s a fair point that ceding power over Western energy to Russia was never a good idea, but poking the bear without having a back-up plan seems reckless.

Cruel irony: American and European ratepayers are financing both sides of Russia’s war on Ukraine — Rosatom drops more than $1bn annually into Putin’s pocket through its uranium sales to US utilities alone.

Here’s a not-so-fun fact: the supply chain for uranium runs from Kazakhstan through Russia, which together account for 40 per cent of US supply — and Putin controls half of the world’s enrichment capacity. Even more concerning: in plain sight, Russia and China have cornered the market for U3O8.

Here’s some math:

Supply: 59mm pounds of U308 — 44 per cent of current global uranium production — are currently sourced from Kazakhstan, the Saudi Arabia of uranium.

Kazakh-origin uranium, either directly or indirectly, covers 40 per cent of US utility needs — 44 per cent for the EU. How long Western utilities can count on Kazakh production is an open question for a couple of reasons. Not least, President Kassym-Jomart Tokayev owes his tenuous grip on power to the Russian army.

More to the point: Russian and Chinese companies have cemented a corporate takeover of the national uranium operator; Russia owns some 26 per cent of Kazakh uranium deposits, and has rights to a further 22 per cent of annual production; China National Uranium Corporation (CNUC) and its confrères hold rights to almost 60 per cent of future Kazakh production; and CNUC is erecting a warehouse in Xinjiang just over the Kazakh border as a hub for uranium trading. Elsewhere, CNUC and China General Nuclear Power Group own stakes in uranium mines in Niger and Namibia, as does Russia’s Rosatom.

Further complicating geopolitics is the fact that Kazakhstan is landlocked, bordering both Russia and China. For decades, the only viable export route for Kazakh uranium to Western markets has been through the port of St Petersburg.

Existing and potential sanctions on Russian uranium exports, together with limited shipping options due to vessel availability and insurer concerns make shipment exquisitely vulnerable to disruption. Kazakhstan and a few of its Western partners had been discussing the development of an alternate Trans-Caspian shipping route. For now, it’s cheaper and safer to send ore through China by rail. 

The implications for US, Canadian, and EU nuclear utilities are profound. After 2028, when the new supply contract cycle kicks in, Western nuclear utilities will have to replace approximately 40mn pounds of uranium concentrates annually that are currently sourced from Kazakhstan — no small feat. By then, annual uranium demand in the US, Canada, and EU will be running close to 94mn pounds. But annual production in countries not aligned with or dominated by China and Russia will amount to only 48mn pounds. Inventory drawdowns and secondary supply can fill a small part of that 46mn pound gap, but the deep hole created by the loss of Kazakh production would need to be filled with uranium from OECD nations.

Given the permitting, licensing, funding and supply chain bottlenecks that new uranium mining faces, closing that gap will be a heavy lift. It’s not that the US and the OECD miners can’t address the supply problem. There are prospective mines in Australia, Canada, and the US that could produce more than enough uranium given the right market assurances. In fact, US miners alone could produce enough to supply 50 per cent of US requirements — if policymakers and environmentalists allow it. 

Enrichment: supply won’t matter as much as the ability to enrich uranium. The US hasn’t added new capacity in decades. There is momentum in the form of proposed projects spearheaded by Urenco, Orano, Global Laser Enrichment and Centrus, but Russia controls over 50 per cent of the world’s enrichment capacity (Rosatom) and 27 per cent of US supply. Rosatom is so critical to Western utilities that until recently it has been given a free pass on economic sanctions — enabling it to funnel billions into Vladimir Putin’s war effort. To accommodate US utility supply concerns, even the ban proposed by the US Congress wouldn’t fully kick in until 2029.  

On-again-off-again conversations about increasing the production of Separative Work Units (SWUs) have been going on for decades, but now we’re facing the urgent need to bring on new facilities. Assuming Russia doesn’t cut off supplies precipitously, there’s — at best — a five-year window. A crash effort to ramp up US capacity needs to get under way immediately. But, even with massive US government funding and permitting (a big “if”), the timeline is long.

Reflecting structural deficits in uranium mining and enrichment — and geopolitical uncertainties, uranium prices have more than doubled over the past year — with significant purchases by financial investors. But we’re likely only in the early innings of problems for US and EU nuclear power producers.

From an energy and national security perspective, we can now add deficits in uranium (particularly enriched uranium) to deficits in the mining and processing of rare earth minerals, EV metals, and computer chips. The golden opportunity to deploy nuclear power as a transitional (or ultimate) source of power is now held hostage.

As we negotiate the foothills of this new Cold War (as Henry Kissinger had it), our adversaries begin with massive advantages. China, seeking self-sufficiency in energy production, has secured the resources that ensure an industrial transformation that will eliminate its need to import 14mn barrels per day of oil.

Russia, already avoiding sanctions on Rosatom, has American utilities — and the US Congress — over a barrel. Vladimir Putin holds the whip hand over the cost of American nuclear power — and, potentially, whether US nuclear power plants can keep the lights on at all. That is, of course, unless and until replacement mining and enrichment capacity is built in the West.

Western policymakers didn’t see the 1973 Arab oil embargo coming, and, today, in the midst of a multi-front Cold War that stretches from the South China Sea to Ukraine to the Middle East, they’ve so far missed the nuclear cloud gathering on the horizon. The 1973 embargo saw oil prices quadruple. In hindsight, $90 uranium may look like $3 oil.