Monthly Archives: January 2016

Damning the Nile, the winners and losers

white and blue nile. image from wikipedia

Egyptian politicians discussed sabotaging the Grand Ethiopian Renaissance Dam in 2013, they naturally assumed it was a private meeting. But amid all the scheming, and with a big chuckle, Muhammad Morsi, then president, informed his colleagues that their discussion was being broadcast live on a state-owned television channel.

Embarrassment apart, it was already no secret that Egypt wanted to stop the largest hydroelectric project in Africa. When Ethiopia completes construction of the dam in 2017, it will stand 170 metres tall (550 feet) and 1.8km (1.1 miles) wide. Its reservoir will be able to hold more than the volume of the entire Blue Nile, the tributary on which it sits. And it will produce 6,000 megawatts of electricity, more than double Ethiopia’s current measly output, which leaves three out of four people in the dark…

This boon for Ethiopia is the bane of Egypt, which for millennia has seen the Nile as a lifeline snaking across its vast desert. The river still provides nearly all of Egypt’s water. Egypt claims two-thirds of that flow based on a treaty it signed with Sudan in 1959. But even that is no longer enough to satisfy the growing population and sustain thirsty crops. Annual water supply per person has fallen by well over half since 1970. The UN warns of a looming crisis. Officials in Egypt, while loth to fix leaky pipes, moan that the dam will leave them high and dry.,,

Only recently has the Egyptian government adopted a more conciliatory tone. In March of last year Abdel-Fattah al-Sisi, who ousted Mr Morsi in a coup, joined Hailemariam Desalegn, Ethiopia’s prime minister, and Omar al-Bashir, Sudan’s president, to sign a declaration that tacitly blesses construction of the dam so long as there is no “significant harm” to downstream countries. The agreement was affirmed in December. 2015, when the three countries settled on two French firms to study the dam’s potential impact. The impact studies were meant to be completed last year, but bickering over the division of labour, and the withdrawal of one firm, caused delays. Many Egyptians believe that Ethiopia is stalling so that the dam becomes a fait accompli. Already half-finished, experts worry that it may be too late to correct any problems. Representatives of the three countries are now meeting to discuss “technical” issues. The contracts for studying the dam are not yet signed.

A sense of mistrust hangs over the dam’s ultimate use. Ethiopia insists that it will produce only power and that the water pushing its turbines (less some evaporation during storage) will ultimately come out the other side. But Egypt fears it will also be used for irrigation, cutting downstream supply.  …A more reasonable concern is over the dam’s large reservoir. If filled too quickly, it would for a time significantly reduce Egypt’s water supply and affect the electricity-generating capacity of its own Aswan Dam. But the Ethiopian government faces pressure to see a quick return on its investment. The project, which is mostly self-funded, costs $4.8 billion….

A potential wild card in the negotiations is Sudan, which long sided with Egypt in opposition to the dam, some 20km from its border. But as the potential benefits to Sudan have become clear, it has backed Ethiopia…Short on energy itself, Sudan will receive some of the power produced by the dam. By stabilising the Nile’s flow, it will also allow Sudan to prevent flooding, consume more water and increase agricultural output (once old farming methods are updated). Currently much of the country’s allocation of water under the 1959 treaty is actually consumed by Egyptians…

The Renaissance Dam is merely the latest test of countries’ willingness to share water. There may soon be more difficulties. Ethiopia plans to build other dams on the river, which could further affect downstream supply. Sudan has promised foreign investors an abundance of water for irrigation…

Sharing the Nile, Economist, January 16, 2016, at 49

Can George Soros Control China?

George Soros. image from wikipedia

A handful of mainly U.S.-based macro hedge funds have led bets against China’s yuan since late last year (2015) and the coming weeks should tell how right they are in predicting a devaluation of between 20 and 50 percent. Texas-based Corriente Partners… [bets against the yuan].The firm reckons rush by domestic savers and businesses to withdraw money from China will prove too strong for authorities to resist and control, even with $3.3 trillion in FX reserves, the biggest ever accumulated.  London-based Omni Macro Fund has been betting against the yuan since the start of 2014. Several London-based traders said U.S. funds, including the $4.6 billion Moore Capital Macro Fund, have also swung behind the move.  Data from Citi, meanwhile, shows leveraged funds have taken money off the table since offshore rates hit 6.76 yuan per dollar three weeks ago…

That has prompted comparisons with the victories of George Soros-led funds over European governments in the early 1990s. Chinese state media on Tuesday warned Soros and other “vicious” speculators against betting on yuan falls.

“China has an opportunity now to allow a very sharp devaluation. The wise move would be to do it quickly,” Corriente chief Mark Hart said on Real Vision TV this month.”If they wait to see if things change, they will be doing it increasingly from a position of weakness. That’s how you invite the speculators. Every month that they hemorrhage cash, people look at it and say, ‘well now if they weren’t able to defend the currency last month, now they’re even weaker’.”

“It’s a popular trade. I can’t imagine a single western hedge fund has got short dollar-(yuan),” Omni’s Chris Morrison said.Derivatives traders say large bets have been placed in the options market on the yuan reaching 8.0 per dollar and data shows a raft of strikes between 7.20 and 7.60. The big division is over pace and scale.  Corriente and Omni both say if China continues to resist, it may be forced this year into a large one-off devaluation as reserves dwindle….

China’s response to yuan pressure has underlined a difference with earlier currency crises: Beijing has an offshore market separate from “onshore” China into which it can pump up interest rates at minimal harm to the mainland economy.  Earlier this month, it raised offshore interest rates, making it prohibitively expensive for funds to leverage overnight positions against the yuan. That sent many reaching for China proxies, including for the first time in years, the Hong Kong dollar.“We have a direct position in the (yuan) but it’s much easier to trade second-round effects of China,” said Mark Farrington, portfolio manager with Macro Currency Group in London. “The Korean won, Malaysia, Taiwan, are all easier plays.” … [Hedge funds] say Beijing may have spent another $200 billion of its reserves in January 2015; at that rate, most of its war chest would evaporate this year and the yuan weaken by a further 18-20 percent. Omni’s Morrison states “That is a fundamental misconception [to believe that Chinese authorities control the yuan]. They’re not making the tide, they’re just desperately holding it back.”

Excerpts from PATRICK GRAHAM, Hedge funds betting against China eye ‘Soros moment, Reuters, Jan. 26, 2016

The Scramble for Lithium

Lithium rich brine  Uyuni, Bolivia .  The lithium-rich brine is concentrated by pumping it into solar evaporation ponds. image from wikipedia

SQM, Chile’s biggest lithium producer [has]Its headquarters in the military district of Santiago bears no name. The man who for years ran the business, Julio Ponce, is the former son-in-law of the late dictator, Augusto Pinochet. He quit as chairman in 2015, during an investigation into SQM for alleged tax evasion. (The company is co-operating with the inquiry.) Last month it emerged that CITIC, a Chinese state-controlled firm, may bid for part of Mr Ponce’s controlling stake in SQM, as part of China’s bid to secure supplies of a vital raw material…

SQM is part of a global scramble to secure supplies of lithium by the world’s largest battery producers, and by end-users such as carmakers. That has made it the world’s hottest commodity. The price of 99%-pure lithium carbonate imported to China more than doubled in the two months to the end of December, to $13,000 a tonne…

The industry is fairly concentrated, which adds to the worry. Last year Albermarle, the world’s biggest lithium producer, bought Rockwood, owner of Chile’s second-biggest lithium deposit. It and three other companies—SQM, FMC of America and Tianqi—account for most of the world supply of lithium salts, according to Citigroup, a bank. What is more, a big lithium-brine project in Argentina, run by a joint venture of Orocobre, an Australian miner, and Toyota, Japan’s largest carmaker, is behind schedule. Though the Earth contains plenty of lithium, extracting it can be costly and time-consuming, so higher prices may not automatically stimulate a surge in supply.

Demand is also on the up. At the moment, the main lithium-ion battery-makers are Samsung and LG of South Korea, Panasonic and Sony of Japan, and ATL of Hong Kong. But China also has many battery-makers…Tesla Motors, an American maker of electric cars founded by Elon Musk, a tech tycoon, is also on the prowl. It is preparing this year to start production at its “Gigafactory” in Nevada, which it hopes will supply lithium-ion batteries for 500,000 cars a year within five years….[I]n August Bacanora, a Canadian firm, said it had signed a conditional agreement to supply Tesla with lithium hydroxide from a mine that it plans to develop in northern Mexico. Bacanora’s shares jumped on the news—though analysts noted that shipping fine white powder across the United States border would need careful handling.Bigger carmakers also have a growing appetite for lithium…

Another big source of demand may be for electricity storage. The holy grail of renewable electricity is batteries cheap and capacious enough to overcome the intermittency of solar and wind power—for example, to store enough power from solar panels to keep the lights on all night.

Excerpts from  An increasingly precious metal, Economist, January 16, 2016

Get Used to It: Japan as Nuclear Weapon State

nucear fuel cycle image from federation of electric power companies of japan

See also Security Strategies of Threshold Nuclear Weapon States

Japan…had 54 reactors in operation before the Fukushima accident..,,. After the accident, which was of unprecedented scale, Japan promptly decided to stop all remaining nuclear power reactors in the country, but was not able to phase out nuclear energy like Germany. Instead, operation of these halted reactors has resumed since Shinzo Abe returned to the Prime Minister’s office in spite of massive protests and the objection of the majority of the public; Sendai 1 Reactor in Kagoshima Prefecture was restarted on August 11, 2015 and Sendai 2 Reactor successively went online on October 15, 2015….

Japan is the only country in the world that is permitted to reprocess its spent fuel, which means it can possess plutonium — a weapon-usable material…Originally, Japan envisioned fast breeder reactors (FBR) for generating electricity with plutonium separated from reprocessing. Japan’s sodium-cooled FBR Monju, which is supposed to produce more fuel than it consumes and thus is regarded as a dream reactor, has never been realized mainly because of insuperable technical problems, despite astronomical investment that exceeded 1 trillion Japanese Yen….

Meanwhile, it has never been easy to start up the reprocessing plant in Rokkasho Village, Aomori Prefecture. This reprocessing plant was initially planned to start its operation in 2000, but completion of reprocessing plant construction has been delayed more than twenty times. Moreover, the construction cost has surged up to approximately 22 billion USD, almost four times higher than the original cost planned back in 1989. And on November 16, 2015, Japan Nuclear Fuel Ltd. (JNFL), the operator of reprocessing plant, announced that the operation of the reprocessing plant is postponed again to as late as September 2018. JNFL’s President Kenji Kudo reported that a separate plant for producing MOX fuel had also been delayed by early 2019….

Nonetheless, the Japanese government still shows reluctance to withdraw from reprocessing with the excuse of its scarcity of natural resources. Without a technical way out, however, the plutonium stockpile of Japan continues to rise. As for July 2015, its plutonium stockpile reached 47.8 metric tons – 10.8 tons in Japan, 16.3 tons in France, and 20.7 tons in the United Kingdom –  the fifth largest next to the United Kingdom, France, Russia, and the United States. Considering the fact that Japan is not a nuclear-armed state, this number is obviously an outlier. For instance, Germany, which also does not possess nuclear weapons, only had 3 tons of separated plutonium at the end of 2013…. [B]oth Rokkasho Village and Aomori Prefecture intimidated the central government into adhering to [opening the Rokkasho reprocessing plant]. [T]hey contended that the more than 3,000 tons of spent fuel in the area should otherwise be transferred back to the reactors where the spent fuel was originally produced. This alternative however, is politically and technically implausible because the host communities of reactors also expect spent fuel to be removed from their backyards almost immediately…Japan’s unusual surplus of plutonium creates tremendous political pressures for the Japanese government. Japan’s neighbors like China and South Korea often become suspicious of Japan’s real reasons for having that amount of plutonium.

Furthermore, Japan’s recent performance triggered a backlash even from the IAEA, whose head is a former Japanese diplomat; 640 kilogram of unused plutonium was not included in Japan’s annual reports to IAEA in 2012 and 2013. IAEA experts criticized this as “inappropriate omission” though JAEC explained that the stock was part of MOX fuel stored in a reactor that was not in operation during that period of time, and accordingly assumed exempt from reporting requirements. Japan has insisted that it would be impossible to inappropriately separate plutonium at the reprocessing plant in Rokkasho Village under the IAEA’s 24-hour surveillance. However, surveillance burdens for safeguards have aggravated simply because of the absolute amount of stockpile.

Excerpts from  Eunjung Lim, Japan’s Nuclear Trilemma,  Jan. 19, 2016

The Politics of Nuclear Summitry

ligiht at end of tunnel

The fourth and most likely the final Nuclear Security Summit will be held March 31-April 1, 2016 in Washington, DC. The three previous summits in Washington (2010), Seoul (2012), and The Hague (2014) have been the most visible features of an accelerated international effort to help prevent nuclear terrorism. President Obama, who launched the effort in a speech in Prague in April 2009 and set the aim to ‘secure all vulnerable nuclear material around the world within four years’, has expressed his intention to ‘finish strong in 2016’. …

Further ratifications of legally binding instruments such as the 2005 Amendment to the Convention on the Physical Protection of Nuclear Material (CPPNM) are necessary to sustain attention on the issue. With regards to the 2005 Amendment, the United States’ ratification in July 2015 brings entry into force one step closer but more states need to ratify it before the amendment can take effect….
The group of 35 countries that signed the Joint Statement on ‘Strengthening Nuclear Security Implementation’ at the 2014 Summit can take its contents as a template to implement a more ambitious agenda. The Joint Statement, also known as the Trilateral Initiative, is an initiative through which states agreed to implement the major recommendations of the International Atomic Energy Agency (IAEA) for nuclear and radiological source security. In October 2014, these 35 countries requested that the Joint Statement be circulated by the IAEA Secretariat as an IAEA Information Circular.
…How to include in the nuclear security system all nuclear materials, military as well as civilian. The mechanisms that already exist apply to only 17 percent of weapons-usable nuclear materials, those that are used in civilian applications..…[but do not apply to] the remaining 83 percent, commonly categorised as ‘military materials’. ..

The third potential challenge for the 2016 Nuclear Security Summit is Russia’s decision not to attend.,,[ and justification for abstaining from the summit]*,US cooperation with the Russian nuclear regulator continues; the US and Russia will continue to work to repatriate HEU from Kazakhstan and Poland. Also, Russia and the United States will continue to co-chair the Global Initiative to Combat Nuclear Terrorism (GICNT).

Excerpts from Ana Alecsandru, 2016 Nuclear Security Summit: Can Obama ‘Finish Strong’? , European Leadership Network,  Jan. 7, 2016

*According  to Russian Foreign Ministry spokeswoman Maria Zakharova Nuclear Security Summits, “have played their role” and that their political agenda has been exhausted.  The International Atomic Energy Agency (IAEA) must be a central force “to coordinate the world’s efforts in global nuclear security,” Zakharova added.  She also said that the nuclear summits try to interfere in the activities of international organizations, including the IAEA, and impose the “opinions of a limited group of states” on international structures, which is “unacceptable.”  (Radio Free Europe, January 21, 2016)

 

Why Japan Tries to Like its Monju

Monju. image from wikipedia

Monju  is a Japanese sodium-cooled fast reactor, located in Tsuruga Nuclear Power Plant, Fukui Prefecture..  Monju is a sodium cooled, MOX-fueled, loop-type reactor with three primary coolant loops…The reactor has been inoperative for most of the time since it has been built [due to accidents and resulting public suspicion].  On December 8, 1995, the reactor suffered a serious accident. Intense vibration caused a thermowell inside a pipe carrying sodium coolant to break… [T]he sodium was not radioactive. However, there was massive public outrage in Japan when it was revealed that Power Reactor and Nuclear Fuel Development Corporation (PNC), the semigovernmental agency then in charge of Monju, had tried to cover up the extent of the accident and resulting damage. This coverup included falsifying reports and the editing of a videotape taken immediately after the accident, as well as issuing a gag order that aimed to stop employees revealing that tapes had been edited.

More  Problems

On 16 February 2012 Nuclear and Industrial Safety Agenbcy reported that a sodium-detector malfunctioned.

On 30 April 2013 an operating error rendered two of the three emergency generators unusable

On Monday 16 September 2013 before 3 a.m. the data transmission of the reactor stopped to the government’s Emergency Response Support System.

Excerpts from Wikipedia

A panel of experts set up by the Education, Culture, Sports, Science and Technology Ministry has begun discussions on what should be done about the Monju reactor. The panel is expected to reach a conclusion by the summer 2016.  Since 2012, the Nuclear Regulation Authority (NRA) has repeatedly conducted on-the-spot inspections of Monju, which is now operated by the Japan Atomic Energy Agency (JAEA). Every time these inspections were conducted, however, they have identified faulty maintenance checks of the reactor and others that violated related laws and regulations.,Monju’s maintenance and inspection program was drawn up in 2009. What is a serious issue is the program had a large number of defects.About 50,000 pieces of equipment must be inspected at the reactor. Without a carefully thought-out plan, these inspections will be far from smooth. It is crucial to review the maintenance and inspection plan, which is the foundation for ensuring safety…

Under the government’s Strategic Energy Plan, Monju is considered a key research base to reduce the volume of nuclear waste. The development of nuclear reactors similar to Monju is under way in Russia, China and India, as uranium resources can be effectively utilized with the fast breeder reactor.  Can Japan afford to stop development of the fast breeder reactor and let these countries lead the way? This is indeed a crucial moment.

New organization needed to regain public trust in Monju management, The Yomiuri Shimbun, Jan 18, 2015

What Nuclear-Weapon-Free Really Means: better nuclear weapons

Nobel peace prize 2009. image from wkipedia

As North Korea dug tunnels at its nuclear test site last fall, watched by American spy satellites, the Obama administration was preparing a test of its own in the Nevada desert.

A fighter jet took off with a mock version of the nation’s first precision-guided atom bomb. Adapted from an older weapon, it was designed with problems like North Korea in mind: Its computer brain and four maneuverable fins let it zero in on deeply buried targets like testing tunnels and weapon sites. And its yield, the bomb’s explosive force, can be dialed up or down depending on the target, to minimize collateral damage.

Mr. Obama has long advocated a “nuclear-free world.” His lieutenants argue that modernizing existing weapons can produce a smaller and more reliable arsenal while making their use less likely because of the threat they can pose. The changes, they say, are improvements rather than wholesale redesigns, fulfilling the president’s pledge to make no new nuclear arms.

But critics, including a number of former Obama administration officials, look at the same set of facts and see a very different future. The explosive innards of the revitalized weapons may not be entirely new, they argue, but the smaller yields and better targeting can make the arms more tempting to use — even to use first, rather than in retaliation.

The United States military is replacing the fixed tail section of the B61 bomb with steerable fins and adding other advanced technology. The result is a bomb that can make more accurate nuclear strikes and a warhead whose destructive power can be adjusted to minimize collateral damage and radioactive fallout…

The B61 Model 12, the bomb flight-tested last year in Nevada, is the first of five new warhead types planned as part of an atomic revitalization estimated to cost up to $1 trillion over three decades. As a family, the weapons and their delivery systems move toward the small, the stealthy and the precise.  Already there are hints of a new arms race. Russia called the B61 tests “irresponsible” and “openly provocative.” China is said to be especially worried about plans for a nuclear-tipped cruise missile….The advanced cruise missile are estimated to cost up to $30 billion for roughly 1,000 weapons….Because the missile comes in nuclear and non-nuclear varieties, a foe under attack might assume the worst and overreact, initiating nuclear war.

Excerpt from WILLIAM J. BROAD and DAVID E. SANGERJAN, As U.S. Modernizes Nuclear Weapons, ‘Smaller’ Leaves Some Uneasy, NY Times, Jan. 11, 2016

see also Nuclear Weapons, Justice and the Law