The Asia-Pacific Journal | Japan Focus Volume 7 | Issue 33 | Number 5 | Article ID 3207 | Aug 17, 2009

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Japan and the United Arab Emirates - A Nuclear Family?

David Adam Stott

Japan and the United Arab Emirates– A Nuclear Family?

日本とアラブ首長国連邦−−核家族？

David Adam Stott

Concerned about the sustainability of its oil andgas reserves, the United Arab Emirates (UAE)has been taking steps to diversify its economyand reduce its dependence on natural resourceexports. The most eye-catching of thesechanges has been the rapid development ofDubai as a finance, services and travel hub inthe last decade. A further plank in this strategyhas recently been revealed: UAE plans toembark upon a nuclear power programme.Emphasising transparency and closecooperation with the International AtomicEnergy Agency (IAEA), it hopes to have the firstof its reactors on line by 2017.

Rather than taking the more tortuous route ofdeveloping indigenous expertise, the Emirateshave been proposing joint-venture schemeswith foreign contractors to construct andoperate its nuclear power plants. Japan becamethe fourth such country to sign a bilateralnuclear cooperation agreement after France,the USA, and the UK. To secure theirparticipation, and to maintain its image as anoutward-looking, foreign investment-friendlynation, the Emirates has stressed that it willnot enrich uranium itself but import nuclearfuel for its plants. These supplies will comefrom a foreign partner and, furthermore, theUAE will return all spent nuclear fuel ratherthan reprocess it. The IAEA will also have theright to conduct snap inspections and beallowed unlimited access to the nuclear sites.

This stands in marked contrast to Iran, whichpersists with enrichment which can be used forproducing weapons material despite claimingits nuclear programme is also aimed solely atgenerating electricity. To acquire nuclearweapons it is necessary to either pursueuranium enrichment or develop spent fuelreprocessing capabilities which can producethe necessary plutonium.

Given the furore over Iran’s nuclearprogramme, the UAE’s plans could potentiallytransform the landscape for nuclear powergeneration in the Middle East and beyond.Critics contend that even strictly civiliannuclear programmes could lead to nuclearproliferation in the region, especially given therisks of illicit trade and the UAE’s history ofclose ties with Iran. However, supporters arguethat the UAE’s programme will set a goodexample for other potential developers ofnuclear power in the Middle East, most notablyIran. At present, IAEA Director GeneralMohamed El-Baradei is among the many whobelieve that Israel is the only state in theMiddle East to actually possess nuclearweapons and the means to deliver them.(Despite hiding behind a policy of so-called“nuclear opacity”, Israel is widely believed topossess between 75 and 400 nuclearwarheads.) Indeed, in response to Israel’ssuspected nuclear capability, many Arab stateshave frequently called for the Middle East andNorth Africa to be free of nuclear weapons.Given the lack of American pressure on Israel,Iran’s enrichment programme and theincreasing number of countries exploringnuclear power in the region, this is unlikely tomaterialise.

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Although the UAE has so far held discussionswith various nuclear producers such as theUnited States, France, Britain, Germany,Russia, China and South Korea, this paper willfocus largely on Japan’s role in the programme.Firstly, it will briefly examine the history ofnuclear power in both the UAE and Japan.Thereafter, the motivations of Japan and theother foreign bidders will be considered beforeconclusions are drawn.

The need for nuclear power in the Gulf

The six members of the Gulf CooperationCouncil (GCC) – the UAE, Kuwait, Saudi Arabia,Bahrain, Qatar and Oman - rely exclusively onfossil fuels for electricity generation and havebeen experiencing 5-7% annual demand growthin recent years. Given their locations, waterdesalination also consumes large qualities of oiland gas. A 2009 report estimates thatelectricity demand in the GCC block willincrease 10% per annum to 2015, accompaniedby desalination demand rising annually by 8%,in total requiring 60 gigawatts of electricity(GWe) of new capacity by 2015 (World NuclearAssociation, ‘Nuclear Power in the United ArabEmirates’ June 2009).

To meet future demand, the GCC statesannounced in December 2006 that they werelooking into harnessing nuclear energy. All sixmembers are signatories to the Nuclear Non-Proliferation Treaty (NPT), and France quickly

signalled its willingness to cooperate, whilstIran also promised assistance. GCC members,led by Saudi Arabia, agreed in February 2007with the IAEA to launch a feasibility study intoa GCC-wide nuclear power and desalinationscheme, with Riyadh envisioning a programmeemerging around 2009.

However, since the IAEA submitted a pre-feasibility study to the regional body in late2007 there has been no progress in any jointGCC nuclear programme, and various memberstates have consequently signed their ownbilateral agreements with established nuclearenergy producers. Most recently, Oman signeda Memorandum of Understanding (MoU) withthe Russian Federal Atomic Energy Agency(Rosatom) in July 2009. In January 2008, Qatarand France inked a similar deal. Bahrainsubsequently sealed a nuclear energy MoUwith the United States in March 2008, andManama has also indicated it will forgoenrichment and reprocessing technology andequipment. As in the UAE, it intends topurchase nuclear fuel on the internationalmarket instead. Both Kuwait and Saudi Arabiaare presently discussing the content and scopeof their own bilateral nuclear cooperation dealswith France. An agreement with Riyadh islikely to be signed by the end of 2009. Of thenon-GCC members in the region, both Yemenand Jordan have signalled their interest inharnessing nuclear energy. Indeed, the latteralready has nuclear cooperation agreementswith Britain, Canada, France, the UnitedStates, Russia, China and South Korea.

Notwithstanding, the deal with the UAEcontains significantly more substance than theother bilateral nuclear cooperation agreementswith other GCC members. Indeed, the UAE hasbeen in the vanguard of such unilateral moves,and in April 2008 independently published acomprehensive nuclear energy policy outline.This white paper was assembled with inputfrom the IAEA and the governments of France,the USA, Britain, Russia, China, Japan,

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Germany, and South Korea. It forecastelectricity demand growing by 9% per annumfrom 15.5 GWe in 2008 to over 40 GWe in2020, with natural gas supplies sufficient foronly half of this. At present, around 98% of theUAE’s total capacity is derived from gas.Indeed, in 2008 Abu Dhabi, the wealthiest andbiggest of the seven Emirates with the largestoil reserves, began importing natural gas fromQatar as its own deposits contain too muchsulphur to make power generation costeffective. Imported coal was dismissed as anopt ion to meet th i s shor t fa l l due toenv ironmenta l and energy secur i tyimplications, whilst buttressing extant oil anddiesel generation was also discounted due toenvironmental and cost concerns.

The reason for this increasing demand hasbeen the urbanisation and construction boom ofthe last decade, as record oil revenues havefuelled economic expansion and populationgrowth. Indeed, the UAE was one of the fastestgrowing economies in the world between 2000and 2007, achieving a compound annualgrowth rate of 9.3% in the five years to the endof 2007. (Figures from Global Research(http://www.globalinv.net), part of Kuwait’sGlobal Investment House.)

In particular Dubai, the largest city in theEmirates, has been at the forefront of thesechanges, as it strives to remodel its economyfrom reliance on almost depleted naturalresource exports. For instance, the Dubai Mallis the largest shopping centre in the world andDubailand will be the largest amusement parkwhen it fully opens in 2012, two times biggerthan Florida’s Disney World. The city is alsoslated to have the most comprehensive metrosystem, the biggest airport, the longestwaterfront, and the largest indoor skiingfacility. Perhaps the most startling of thesedevelopments are the three man-made PalmIslands (Palm Jumeirah, Palm Jebel Ali andPalm Deira) which will add 520 kilometres ofbeaches to Dubai’s coastline. A similar

development is The World, an artificialarchipelago of some 300 islands shaped in theimage the Earth’s landmass, located 4kilometres off the coast. Naturally, such hugeprojects require ever-increasing electriccapacity to sustain them, straining the UAE’spower grid.

The World development, 4 kilometres offthe coast of Dubai.

Power projections readjusted to account for thepresent global downturn are difficult to assessas no-one can safely predict how long and howdeep the decline will be. Whilst some of Dubai’smega projects will likely be delayed by theglobal credit crisis, its economy is still growing,albeit only by an estimated 2.5% in 2009.(According to a February 2009 estimate byDubai’s chief economist Raed Safadi. TheInternational Monetary Fund (IMF) estimatesthat growth for the UAE as a whole will fall to3.3% in 2009 from 7.4% in 2008.) Much of thisgrowth is being fuelled by governmentinvestment in major infrastructure projects andother public spending.

Whilst the country’s gas deposits are limited,the UAE as a whole still retains substantial oilreserves. Thus, with the high commodity pricesof recent years, nuclear energy would enablethe GCC’s oil and gas producers to reap richrewards by selling more of their naturalresources to foreign buyers. Furthermore, theUAE envisages it can produce electricity fromnuclear power at just a quarter the cost of gas.

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Whilst this figure does seem exaggerated,studies from Europe and North Americaindicate that over time nuclear power isgenerally the most cost effective option forincreasing the capacity of a power grid, unlessa territory does not have to import coal andgas. (For an overview of studies conducted bythe OECD, the European Commission andvarious North American institutions, see WorldNuclear Association, ‘The Economics ofNuclear Power’, June 2009. Interestingly,nuclear costs were highest in Japan.)

Since the announcement of the nuclearscheme, proposed generating capacity hastwice been revised upwards. The authoritiesoriginally hoped to have two 1600 megawatt(MW) nuclear plants running by 2016, but thiswas subsequently changed to three 1500 MWplants on line by 2020. With Abu Dhabi beingthe driving force behind the nuclear project, itwas speculated that two reactors would besited between Abu Dhabi and Ruwais, with athird probably on the Indian Ocean coast at AlFujayrah. However, in May 2009 it was finallyconfirmed that the first nuclear power plantwill be constructed at Al Bayyaa, close to theSaudi Arabian border. Construction will takeplace in three phases with a capacity of 5000MW upon completion, much larger than theoriginal projection. Thus, each phase will be1,650 MW. First phase construction is expectedto begin in 2012, with completion by 2017. Thesecond and third phases are expected to befinished in 2018 and 2019 respectively. It wasannounced that the reactors will be financed bythe government, without resorting to loans,although future equity partners have not beenruled out.

The gestation of the nuclear scheme gatheredsteam in mid-2008 when the UAE appointed anambassador to the IAEA, and established aNuclear Energy Program ImplementationOrganisation upon its recommendation. Thenational Emirates Nuclear Energy Corporation(ENEC) was subsequently founded, charged

with facilitating all nuclear power projectswithin UAE. It is the ENEC which has beendealing with all the prospective foreignsuppliers of technology and expertise. Ratherthan taking the more tortuous route ofdeveloping indigenous expertise, the ENEC hasbeen proposing joint-venture schemes withforeign contractors to construct and operate itsnuclear power plants. It is understood the UAEwill standardise on one technology, namelythird-generation light water reactors (LWR),the current standard in nuclear plants.

Whilst economic considerations are the drivingforce behind these nuclear plans, there is also agrowing awareness in the UAE that it shouldreduce its environmental footprint. Indeed,2005 statistics compiled by the World WildlifeFund (WWF) revealed that the country had theworld’s highest per-capita ecological footprintat 9.5 global hectares, ahead of the UnitedStates and Kuwait, and much higher than theglobal average of 2.1 hectares. This followedsimilar data from 2003 in which the UAEalready had the world’s biggest ecologicalfootprint at 11.9 global hectares, compared to9.6 hectares for the USA and a global averageof 2.2 hectares. These figures refer to theamount of productive land and sea arearequired to generate the consumption of anaverage individual but they ignore aircraftemissions. (See the WWF’s ‘Living PlanetReport 2008’ which presented the 2005 data.Its 2006 report featured the 2003 data.Nevertheless, the UAE’s overall demand onglobal resources was less than half of onepercent in 2005.) Such reports haveembarrassed the Emirati authorities somewhatand provide another justification for nuclearpower. Unlike power generation from coal, oilor natural gas, nuclear power plants do notemit carbon dioxide. Instead, the energy lockedinside the nuclei of uranium atoms is turnedinto electricity. Therefore, despite the accidenthazards and the problem of radioactive wastetreatment, nuclear power is championed bysome as a ‘clean’ alternative to fossil fuel

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power generation.

Indeed, the nuclear option is just one of theUAE’s resource-conserving schemes. In 2006Abu Dhabi unveiled its plans for Masdar City tobecome the world’s first zero-carbon city,power for which will primarily come from alarge photovoltaic solar power plant. The firstphase, already the largest solar power grid inthe Middle East and North Africa, opened inJuly 2009. With renowned architect NormanFoster at the helm, it is hoped that car-freeMasdar will be completely self-sustaining,being key to Abu Dhabi’s transformation into aworld technological centre rather than just alarge consumer. Masdar is expected to fulfil acommercial role as a base for manufacturingfacilities specialising in green technologies, andwill be home to around 50,000 people. To thisend, the city will host the InternationalRenewable Energy Agency (IRENA), anintergovernmental organisation formed inJanuary 2009 for encouraging the worldwideadoption of renewable energy. With Masdar,Abu Dhabi is thus aiming to kick start anentirely new industrial sector based onsustainable energy.

An architect’s rendering of Masdar’swalled city, designed with narrow and

shaded streets to shut out hot desert winds

A Japanese presence is visible in Masdar too. InJanuary 2009, Masdar’s investment arm, the

Masdar Clean Tech Fund, announced a venturefund with Japan’s SBI Holdings to invest infirms involved in solar, wind and otheralternative energy. The two companies agreedto put in US$10 million each, with each chosenstartup to receive around $2 million. It was alsoreported that the two firms were in talks toboost investment to around $200 million to$300 million, after the first $20 million fundwas exhausted. (Reuters, ‘UAE fund to invest inJapan renewable energy firms’, January 22,2009.)

Japan and the UAE’s nuclear energy

Japan is the world’s third-biggest generator ofnuclear power after France and the UnitedStates. In response to the first oil shock in1973, nuclear energy became a nationalstrategic priority. As of 2009, Japan has 55reactors on line, with a total capacity of 47,577megawatts (MW), along with two reactors(2,285 MW) under construction and 12 otherreactors (16,045 MW) in the pipeline. The online reactors account for approximately 30% ofthe country’s electricity capacity, and that isprojected to rise to at least 40% by 2017.

Japan imported her first commercial nuclearpower reactor from the UK, which beganoperating in July 1966, and thereafter set aboutdeveloping its own indigenous expertise. In the1970s the number of commercially operatingreactors was steadily increased by purchasingdesigns from and cooperating with Americanfirms. By the end of the decade, suchtechnology transfers had enabled companiessuch as Hitachi, Toshiba and Mitsubishi HeavyIndustries to design and build their ownnuclear power plants, and subsequently exportthis technology to neighbouring countries andfurther afield.

Nuclear cooperation between Japan and GCCmember countries was first mooted in May2007 when then Prime Minister Abe Shinzovisited Qatar. At the time, it was reported herebuffed his hosts’ request for Japanese

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assistance in acquiring nuclear technology.However, as France, the US and the UKsubsequently inked similar deals with the UAEin 2008 and early 2009, Tokyo performed avolte face. The first rumblings that Japan mightchange its stance towards the GCC came inMay 2008 when Kondo Takeshi, Japan’sAmbassador to Bahrain, revealed that Tokyowas willing to help his host country develop acivilian nuclear power station.

In December 2008 it became apparent that theUAE was locked in talks with the Japanesegovernment over developing civilian nuclearpower capabilities. A UAE delegation, led byENEC president Muhammad al-Hammadi,visited Tokyo in December 2008 for a week,met representatives of Mitsubishi HeavyIndustries (MHI), visited a nuclear power plantand toured Hitachi and Toshiba factories.(Megumi Yamanaka, U.A.E. Seeks Japan’s Helpto Develop Nuclear Power Plants, December 5,2008, Bloomberg.) Subsequently, on January15, 2009, Condoleezza Rice, then US secretaryof state, and Sheikh Abdullah bin Zayed al-Nahayan, the UAE foreign minister, signed abilateral agreement for peaceful nuclearcooperation. Just four days later Ministry ofEconomy, Trade and Industry (METI) SeniorVice-Minister Yoshikawa Takamori and theUAE’s Foreign Affairs Undersecretary SaifSultan al-Aryani inked a similar pact definingJapanese assistance to the same programme.

Japanese will focus on the training andeducation necessary to construct and manage acivilian nuclear plant. Before the partnershipcan be realised, the two countries are requiredby internat ional law to s ign a treatyguaranteeing that the technology involved willbe used for civilian energy only and not formilitary purposes. Once in place, Japanesemanufacturers will be able to sell their reactorsto the UAE.

As the fourth major player to have signed anuclear cooperation agreement with the UAE,

Japanese policy has essentially been reactiverather than proactive despite its heavydependence on GCC oil and, increasingly, gas.Aside from the UAE, it remains to be seen ifTokyo will conclude similar deals otherinterested parties in the GCC, such as Bahrainand Qatar. Even though ties with the latter inparticular are drawing closer due to Qatar’shuge natural gas reserves, established practicepoints to Japan once again waiting until the USor perhaps other Western powers make thefirst move.

Left to right, UAE Foreign Minister SheikhAbdullah bin Zayed al-Nahayan; Abu Dhabi

Crown Prince Sheikh Mohammed binZayed al-Nahayan; Japanese ForeignMinister Komura Masahiko; and then

Japanese Prime Minister Fukuda Yasuo atFukuda’s Tokyo office, December 2007.

Foreign Investment Competition

Rather than taking the more tortuous route ofdeveloping indigenous expertise, the ENEC hasbeen proposing joint-venture schemes withforeign contractors to construct and operate itsnuclear power plants. These will be similar toits existing water and electricity set ups inwhich the government has a 60% stake and40% is owned by joint venture partners. As theENEC originally invited nine companies tosubmit proposals for the construction of its first

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nuclear power plant, Japan has been facing stiffcompetition to break into this lucrative newmarket. The UAE first signed a full nuclearcooperation agreement with France in January2008, fo l lowed by a Memorandum ofUnderstanding with the UK in May 2008 andsubsequently the US and Japan in January2009. On June 22, 2009, South Korea becamethe latest country to sign such a deal during avisit by Prime Minister Han Seung-soo.

Sheikh Mohammed, UAE Prime Ministerand Vice President, with Han Seung-soo,

the Korean Prime Minister, June 22, 2009.

In mid-May 2009 ENEC reduced this originalnine to a shortlist of three consortia forbuilding and operating the first plant. Theseare the French team of GdF Suez, Areva andTotal; an American-Japanese consortium of GEHitachi and Westinghouse, a subsidiary ofToshiba; and Korea Electric Power Corporationwith Hyundai Engineering & Construction.After the selection process is completed, it isexpected that one of these bidders will sign acontract in late 2009 for construction of thefirst phase of the Al Bayyaa nuclear facility.

Other deals are already in place. A five-yearcontract was sealed with American firmThorium Power to help formulate the UAE’snuclear regulatory agency. The ENEC has alsoinked a 10-year contract with CH2H Hill, anAmerican project management firm, to oversee

the programme. Specifically, CH2H Hill ishelping the ENEC choose the main contractorsand will manage plant construction. GoodHarbor Consulting, whose chairman is formerWhite House national security official RichardClarke, has been tasked with handling thephysical security of the power plants, inparticular the safety of the reactors.

Even though the prime contractor has yet to beselected, the French consortium is quietlyconfident. French President Nicolas Sarkozyhas been particularly proactive in nucleardiplomacy since entering office in May 2007. Intrying to promote the French civilian nuclearindustry worldwide, he has signed severalbilateral agreements to build nuclear reactorsor extend technical assistance, namely withMorocco, Algeria, Libya, Saudi Arabia, Qatar,UAE, Tunisia, Jordan, India and China. Theagreement wi th the UAE is the mostcomprehensive of these and was sealed duringSarkozy’s tour of the Middle East in January2008. French companies Areva and Suezalready jo int ly operate a power anddesalination station in Abu Dhabi.

Nuclear cooperation between the UAE and USAhas been threatened by revelations of torturecommitted by Sheikh Issa bin Zayed al Nahyan,a member of the UAE’s ruling family. TheSheikh was videotaped near Abu Dhabipersonally brutalising a business associate. Tothe dismay of American proponents of thenuclear deal, the tape was submitted asevidence in a federal civil law suit filed inHouston against the sheikh by Bassam Nabulsi,another former business partner and aLebanese-born U.S. citizen resident in Houston.The case fuels criticism of Washington forignoring human rights to maintain good termswith a rich autocratic regime in a strategicallyvital region.

Regardless of the outcome however, thereseem to be at least three motivating factorsbehind the sudden scramble to get involved in

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the UAE’s nuclear industry: consolidating oiland gas agreements; opening up a new market;and setting an example to Iran and others inthe region intent on developing nuclear power.

Oil and Gas

In an era of increasing resource nationalism inwhich host governments seek greater control ofthe natural resources in their territories,foreign firms have been manoeuvring to retainexploration rights in the UAE. Even in theinvestment-friendly Emirates, the renewal ofexisting oil and gas concessions has been aconcern. For example, Abu Dhabi Co. forOnshore Operations (ADCO) – in which foreignpartners BP, Exxon, Shell, Total and Partexshare a 40% stake – faces the expiration of itsconcession at the end of 2013. In an attempt togenerate further competition for its finiteresources, Abu Dhabi has been refusing torenew the contract without first soliciting bidsfrom other parties. Indeed, despite calls fromOil Minister Mohammed bin Dhaen Al Hamli formore oil and gas investments, in recent yearsthe Emirates have granted only a handful ofconcession extensions, mostly to US operations.By contrast, on January 22, 2009, just threedays after the signing of the Japan-UAE nuclearcooperation agreement, it was revealed thatthe Abu Dhabi Oil Company (ADOC) had beengranted a 20-year extension of its offshoreconcession rights in Abu Dhabi. ADOC’s 45-year concession was due to expire in 2012, andit was announced that the firm may also receiveadditional exploration rights after renewalthree years hence. ADOC is a subsidiary ofCosmo Oil, Japan’s fourth biggest refiner, inwhich the Abu Dhabi government acquired a20% stake in 2007.

The UAE is Japan’s second largest supplier ofoil after Saudi Arabia, supplying 23.8% ofJapan’s crude oil imports in 2008. Likewise,Japan is the biggest buyer of oil from the UAE,accounting for almost 40% of the UAE’s totalcrude exports in 2008. The Tokyo Electric

Power Company (TEPCO) is also the biggestbuyer of liquefied natural gas (LNG) from AbuDhabi’s Adgas. Therefore, it is not whollysurprising that ADOC was granted an extensionto its oil concession, especially given thecontemporaneous signing of the bilateralnuclear cooperation agreement.

Japan’s crude oil imports in 2008(METI figures).

GCC Zone: 73.7%Saudi Arabia: 27.8%UAE: 23.8%Iran: 11.8%Qatar: 10.8%Kuwait: 7.6%Russia: 3.4%Indonesia: 3.2%Sudan: 2.4%Oman: 2.1%Saudi-Kuwaiti Neutral Zone(Khafji): 1.6%Vietnam: 1.5%Australia: 1.2%Iraq: 1%

Given that Japan’s so-called ‘New NationalEnergy Strategy’, adopted in late May 2006,calls for stronger relations with resource-richnations, Tokyo has also been keen to seal a freetrade agreement (FTA) with the GCC. However,talks have been dragging on since 2004 withoutreaching conclusion. Whilst the Japanesegovernment wants an FTA to secure stableenergy supplies, the GCC wants to see greaterJapanese investment and technology transfersin other sectors besides fossil fuels. Until therecent economic downturn, Japan’s exports ofsteel and machinery to GCC members wereincreasing rapidly, while the GCC enjoys ahealthy trade surplus with Japan thanks to itsoil and gas exports. Indeed, Japan’s trade withthe GCC increased by 43.1% from 2007 to 2008- exports to the GCC rose by 28.4%, andimports increased by 46.3%. (Japan External

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Trade Organization (JETRO), ‘Japan-GCC Tradefor the year 2008’, May 12, 2009.)

The Emirates, in particular, are especially keento boost Japanese investment in manufacturingin order to help diversify their economy andenhance job opportunities for a burgeoningpopulation. Despite increasingly closecommercial ties, foreign direct investment fromJapan in the UAE is comparatively small. Aspart of this energy strategy, in May 2007 thegovernment -backed Japan Bank forInternational Cooperation (JBIC) signed apartnership agreement with Abu DhabiNational Oil Company (ADNOC), a firm whollyowned by the Abu Dhabi government. Therefollowed, in December 2007, a loan agreementof up to US$3 billion with ADNOC, in order tosecure a stable supply of crude oil from theEmirates. This loan enabled Japanese oilcompanies to sign five-year contracts withADNOC, guaranteeing delivery of 120,000barrel of crude oil per day. (Japan Bank forInternational Cooperation (JBIC) ‘JBIC SignsLoan Agreement with ADNOC’, December 18,2007.)

In order to consolidate stable oil supplies, itwas anticipated that the JBIC will further itsloan programme in the coming years to assistthe UAE in boosting both oil production and itswider economy. In the meantime, thebolstering of airline connections between thetwo countries would appear to be the precursorfor a closer bilateral relationship. Given Japan’sneed for stable oil supplies and the UAE’sdesire to incorporate cutting edge technologiesinto its economic portfolio, the interests of bothcountries seem to dovetail nicely.

New Markets

Naturally, nuclear cooperation with the UAEwould have commercial benefits for bothcountries. Japan in particular has been lookingoverseas to maintain the viability of its ownnuclear power plant makers — Hitachi/GE,Mitsubishi Heavy Industry and Toshiba — at a

time when ambitious plans for domesticexpansion are meeting with increasingscepticism from the general public. Withsluggish economic growth and a decliningpopulation, growth in Japan’s electricitydemand has been the lowest in East Asia. Thiswas underlined by a 2007 report from theJapan Electric Power Survey Committee, a bodywhich includes utilities such as TEPCO andmanufacturers like Hitachi. It projected thatdomestic electricity demand will increase byonly 0.9% per annum to March 2017, a fallfrom average annual demand growth of 1.7% inthe decade to March 2006. It cited increasingenergy conservation as a further contributingfactor to the declining growth rate. (Reuters,‘Japan Electricity Demand Growth to Slow–Study’, March 6, 2007.)

Such a prognosis has prompted the governmentto assist Japan’s nuclear industry to securecontracts in Asia where surging power demandis creating new opportunities for nuclear firms.Officially codified in August 2006 when theMinistry of Economy, Trade and Industry(METI) released its Nuclear Power NationalPlan to “act ive ly support the g lobaldevelopment of the Japanese nuclear industry”,this approach coincides with increasingdomestic concerns over the industry’s patchysafety record. In 2008 Japan’s Nuclear andIndustrial Safety Agency (NISA) established itsInternational Nuclear Power Safety WorkingGroup to stimulate cooperation with emergingnuclear markets, mostly in Asia, in the face ofincreasing competition from South Korea andRussia.

Agreements with several governments havesince followed, including a deal in May 2009with Russia, which provides for the transfer ofJapanese technology overseas and the sale ofraw nuclear materials to Japan. Uzbekistan hasalso signed deals in 2009 with a couple ofJapanese firms for uranium extraction, whilstJapan opened a major uranium mine inKazakhstan in April 2009. Indeed, Tokyo sees

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nuclear power as one area in which it still has acompetitive advantage over most of its rivals,and therefore nuclear cooperation is one arenain which Japan can exercise a degree ofleadership and vision, particularly in Asia.

Until the early 1990s, however, the Japanesenuclear industry maintained a largely domesticfocus, aside from uranium exploration and mineinvestment in Australia and Canada. Sincethen, Japan’s three nuclear power plant makershave expanded overseas via acquisitions of andalliances with foreign nuclear companies. Forexample, General Electric and Hitachi mergedtheir nuclear energy operations in July 2007, ayear after Toshiba purchased American reactorbuilder Westinghouse from British NuclearFuels.

As well as pushing for overseas expansion,Tokyo has spent much of this decade promotingthe nuclear option domestically, despitestagnant electricity demand and safetyscandals. A new Energy Policy Law of June2002 consolidated greater government controlover energy infrastructure, and also aimed todecrease dependence on fossil fuels. InNovember that same year it was announcedthat a tax on coal would join those alreadycharged on other fossil fuels, and would beaccompanied by a 15.7% reduction indevelopment taxes which apply to nuclearpower generation. The reasoning was twofold:to diversify Japan’s energy supplies andsimultaneously reduce carbon emissions underthe Kyoto Protocol, both of which feed into anenhanced role for nuclear power. In 2008 theMETI subsequently predicted that nuclear’sshare would reach 41.5% of total capacity by2017, despite the forced shut down of theKashiwazaki-Kariwa nuclear power plant in July2007 which accounted for a decline in nuclear’sshare to 26% in 2007. (World NuclearAssociation, ‘Nuclear Power in Japan’, May2009).

Kashiwazaki-Kariwa was just one of a series of

accidents and scandals that have shatteredpublic confidence in nuclear power in Japan.These have included two fatal accidents: atTokaimura in 1999, when poorly trainedworkers caused an uncontrolled nuclear chainreaction, releasing radiation which killed twostaff and forced the evacuation of thousands oflocal residents; and at Mihama in 2004 whensuper-heated steam leaked through a hole in apipe that feeds the plant’s turbine facility,killing four and injuring seven others at thefacility. These disasters revealed a cover-upculture in which employees’ loyalty to theircompanies permitted lax safety measures to gounchallenged. (Further examples include a2002 scandal over widespread data falsificationat TEPCO’s nuclear power plants. The utilityfirm had falsified inspection records whentrying to hide cracks in reactor shrouds in 13 ofits 17 reactors. The World Nuclear IndustryStatus Report 2007.) As a result, the Japanesegovernment has enforced stricter controlsunder a reorganised structure of agenciesresponsible for overseeing nuclear power.Nevertheless, these could not prevent theenforced shut down of TEPCO’s Kashiwazaki-Kariwa plant in the wake of the NiigataChuetsu-Oki earthquake which was strongerthan the plant was designed for. It remainedcompletely off line for almost 22 monthsalthough an IAEA inspection concluded itsuffered “no significant damage”. After seismicupgrades, in February 2009 Japan’s NuclearSafety Commission (NSC) agreed that one unit(unit 7) could be restarted on a trial basis,which began on May 9, 2009, for 50 days oftesting.

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The Kashiwazaki-Kariwa nuclear powerplant.

In order to spur domestic consumption andcapitalise on new export markets, the rulingLiberal Democratic Party has stressed the needfor Japan to become a world leader in the newgeneration of fast breeder reactors (FBRs).Mitsubishi was subsequently chosen in April2007 to spearhead this ambitious scheme.There are not many countries that can afford,either technically or financially, the kind ofadvanced nuclear reactors that the Japaneseand other consortia are offering. The UAE is aperfect new market for advanced nuclearpower plant makers. How Japan manages itsexisting reactors, as well as its development ofnew reactors, will be watched very closely bythose in the market for civilian nucleartechnology.

Setting an Example

Another reason for Western and Japanesesupport has been the UAE commitment to astrictly civilian nuclear programme. Indeed, theUAE has been lauded as setting a goodexample to would-be nuclear powers in theMiddle East, such as Iran, due to its decisionnot to enrich uranium or to reprocess spentfuel. For the West, the sale of civilian nucleartechnologies to the UAE is also a response toIranian accusations of ‘double standards’ indenying the benefits of peaceful energytechnology to other states. Iranian government

officials have thus called these efforts ‘nuclearapartheid’, whereby just a privileged few states(chiefly the five permanent members of theUnited Nations Security Council) have the rightto develop nuclear technology whilst denyingother states the same right. Such criticscontend that these privi leged stateshypocritically allow only their allies to acquirenuclear technology.

The deal is also considered a standard bearerfor other regional states, in particular Egypt,keen to develop their own nuclear schemes.Supporters of the UAE’s programme hope itwill constitute a basis for enhanced regionalcooperation in areas such as electricity sharingand human resources as well as transparencyin regulatory oversight.

The sale of nuclear technology wouldundoubtedly strengthen the strategic interestsbetween the contracting country and theEmirates. Indeed, all five powers see theirrespective nuclear cooperation agreements asconsolidating a key security relationship in theMiddle East. For instance, the UAE hosts morethan 2,000 US military personnel, and moreAmerican naval ships visit the UAE than anyother overseas destination. The US Air Forcealso operates the Al Dhafra Air Base and bothcountries share intelligence.

In addition to such logistical support, the UAEmilitary is part of the NATO mission toAfghanistan and a valuable customer forAmerican defence contractors. In September2008, Congress was informed of the proposedsale to the UAE of the Theatre High Altitude AirDefence (THAAD) system, plus the PatriotPAC-3 and AMRAM missiles, in an arms dealworth an estimated US$6.95 billion. InFebruary 2009 it was announced that the UAEwas also buying 224 AIM-120C-7 advanced air-to-air missiles for its F-16 jets from Americanarms manufacturer Raytheon. In the samemonth, American firms Boeing and LockheedMartin also secured contracts worth US$2.8

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billion from the Emirates for military transportplanes. These deals were part of a US$5 billionbuying spree the Emirati governmentconducted at the 2009 IDEX (InternationalDefence Exhibition) in Abu Dhabi, one of theworld’s biggest arms fairs. (Stanley Carvalho,‘Iran neighbour UAE spends $5 bln on armsdeals’, Reuters, February 26, 2009.)

Whilst keen to support the UAE politically andmilitarily, all four major players are intent onensuring that civilian nuclear programmes willnot result in regional nuclear proliferation.Tokyo has been among the staunchestsupporters of reinforcing nuclear non-proliferation measures. The revelations thatSaddam Hussein’s Iraq was secretly developingnuclear weapons prior to the Gulf War of 1990were deeply shocking. His July 1990 threat toattack Israel with chemical weapons promptedIsrael to hint at a nuclear response, raising thespectre of nuclear conflict in the Middle East. Itis now believed that an Iranian nuclearweapons capability would escalate tensions inthe Middle East again, alter the regionalbalance of power, and even precipitate thecollapse of the whole non-proliferation regime.

Iran’s nuclear programme is controversialchiefly because of Tehran’s reluctance todivulge detai ls of i ts enrichment andreprocessing activities to the IAEA. It is widelybelieved that Iran had a nuclear weaponsprogramme until 2003, which now liesdormant, but the IAEA has yet to unearth anyconcrete evidence that Iran has redirectednuc lear mater i a l f o r weapons use .Nevertheless, in February 2006 Tehran’s lackof cooperation with the IAEA was enough forthe United Nations Security Council to levywide-ranging sanctions after Iran refused tosuspend enrichment. Tehran maintains that ithas only enriched uranium to less than 5%, justenough to fuel a nuclear power plant, and hasvehemently protested the sanctions.

In order to assuage fears of nuclear

proliferation in the Middle East therefore, theUAE has contracted American firm ThoriumPower to help establish a fully independentFederal Authority for Nuclear Regulation(FANR), reporting to a senior Americanregulator. Proponents argue that cooperationwith the UAE is a major boost for global non-proliferation as many countries increasinglylook to nuclear energy to reduce carbonemissions whilst simultaneously expandingtheir power grids. As such it might evenbreathe new life into the ailing NPT regime,although this is by no means assured as otherstates are yet to commit to the same kind ofregulation as the UAE. Whilst some, such asBahrain, have shown no interest in enrichmentand reprocessing technologies, others in theMiddle East may prefer to keep their optionsopen.

Nevertheless, with around 40 developingcountries, 11 in the Middle East, expressing aninterest in harnessing civilian nuclear power,there is some unease about the prospect ofnuclear arms proliferation. Indeed, opponentssuch as European Renewable Energy CouncilPolicy Director Oliver Schafer argue that it is“impossible” to completely prevent dual use ofcivil nuclear technology. He argues that, “Whenit comes to building reactors in more unsaferegions with more terrorism, proliferation isdefinitely an issue.” (Dominic Moran, ‘The UAENuclear Debate’, International Relations andSecurity Network (ISN), March 6, 2009.)Opponents also fear that the deal may sparkincreased nuclear development in the MiddleEast, as other regional powers take advantageof the weakness of the NPT. This perceptionassumes that other regional players wouldfollow a different route to the UAE.

Moreover, Dubai was tainted by its implicationin the AQ Khan illicit nuclear network whosecustomers included Iran, Libya, North Koreaand Saddam Hussein’s Iraq. Khan’s office inDubai played a key role, from where smugglednuclear materials were shipped to Iraq and

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Libya. The UAE’s commitment to totaltransparency in its nuclear quest has beendriven partly by the need to strengthen itsrelations with the US and other powersfollowing this lapse. Ben Rhode, an analyst atthe International Institute for Strategic Studies,noted that, “Abu Dhabi has been keen for Dubaito clean up its act. And they put in an exportcontrol law. If you are an Iranian expat living inthe UAE it is a lot harder to set up thesebusinesses or to open a bank account.”However, Rhode also states that certainindividuals are able to circumvent the rules.(Dominic Moran, ‘The UAE Nuclear Debate’,International Relations and Security Network(ISN), March 6, 2009.) Indeed, more recentlythe US Congress has become aware oftranshipments to Iran through the UAE ofmilitarily useful technology. These haveapparently included computer chips suppliedby Iran and used in the homemade bombs ofIraqi insurgents which target American andCoalition troops.

Indeed, the proliferation debate is at the centreof the controversy over the UAE’s nuclearprogramme. Traditionally, it has enjoyed betterrelations with Tehran than many of its GCCneighbours and Iran is one of its major tradingpartners. For instance, the Jebel Ali Free Zonein Dubai is Iran’s largest source of foreigncommodities and consumables servicing itsgrowing middle class, and around 200,000Iranians presently live in the emirate.Furthermore, approximately half of the refinedgasoline consumed in Iran is also transhippedthrough the UAE. Hardliners in Congressbelieve the US and its allies should useleverage over the UAE’s nuclear programme tothreaten to block these imports unless Iranchanges its confrontational stance towards theUS and its allies. (Henry Sokolski, ‘NuclearCooperation with the UAE?,’ December 15,2008.) In the last few years, however, theEmirate has made numerous entreaties to Iranto abstain from nuclear weapons development,and its nascent nuclear programme is designed

in part to persuade Tehran to follow a similarpath of non-enrichment.

Indeed, the bilateral relationship has been putunder increasing strain in recent years over thedevelopment of Iran’s Bushehr reactor andNatanz enrichment facility. These ties suffereda further blow with Tehran’s 2008 decision tostation maritime personnel on the Persian Gulfisland of Abu Musa, reigniting an old territorialdispute between the two states. Abu Musa isvery close to vital shipping lanes. Fears of themilitarisation of the Iranian nuclear program;Tehran’s naval exercises and missile testing;and its support for militancy in Iraq, Lebanonand the Palestinian Territories are all a causefor concern around the Gulf. These fears werefurther stoked when Iran’s elite RevolutionaryGuards took control of the Strait of Hormuz inSeptember 2008. This has allowed the Guardsto wield greater power than at any point sincethe Islamic revolution’s early days.

Other motivations for nuclear diplomacy withthe UAE exist. Nuclear cooperation agreementsare a ‘good news story’ which enable theparties involved to portray a positive image inthe Middle East, without any reference toPalestine or Israel. Indeed, Sarkozy has evenstated that extending nuclear cooperation toMuslim countries could help preventHuntington’s clash of civilisations prophecy.(See Samuel P. Huntington, ‘The Clash ofCivilizations: And the Remaking of WorldOrder’, Pocket Books, 1998. Its main thesis isthat tensions between cultural and religiousidentities will be the chief driver of conflict inthe post-Cold War world.) Nuclear alsorepresents a practical option to reducegreenhouse emissions whilst retaining accessto energy.

Conclusion

The UAE’s commitment to transparency in itsnuclear quest has attracted widespreadinternational support. This is because it hasstressed that it will not enrich uranium itself

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but import nuclear fuel for its plants. Thesesupplies will not only come from a foreignpartner, but the UAE will also return all spentnuclear fuel rather than reprocess it.

For Japan and the other prospect ivecontractors, there are at least three mainmotivating factors. Firstly, Japan in particularis heavily dependent on oil supplies from theUAE and other GCC members. To this end, ithas been trying to tie both the GCC as agrouping and the UAE individually into an FTAin which stable oil and gas supplies would beguaranteed. Tokyo is therefore hoping thatnuclear cooperation with the UAE will have apositive spillover effect into stable and secureoil supplies. Secondly, the Japanese nuclearindustry is keen to develop new markets,especially one as potentially lucrative as theUAE’s. There are not many countries that canafford, either technically or financially, the kindof advanced nuclear reactors that the variousconsortia are offering. Consequently, foreignnuclear firms will be looking to the UAE forsigns that new markets are economically andpolitically viable in other GCC member states.Thirdly, it is hoped that the UAE’s nuclearprogramme wil l set new standards oftransparency and regulatory rigour, thussetting an example to close neighbour Iran andother potential nuclear power developers in theMiddle East. As such it might even breathe newlife into the ailing NPT regime, although this isby no means assured as the other interestedstates are yet to commit to the same kind ofregulation as the UAE.

The UAE’s nuclear programme will be watchedclose ly for other reasons too . Manygovernments will be waiting to see if anychange of tone or policy is forthcoming fromIran’s leadership over its own nuclearprogramme. These same observers will also beinterested to see if the UAE’s decision to rejecturanium enrichment and reprocessing willinfluence other potential developers of nuclearpower in the Middle East and North Africa to

follow a similar path.

As with other aspects of foreign policy towardsthe Middle East, such as Iran and the Palestineissue, Tokyo has closely followed the Americanlead regarding nuclear power for the UAE.However, Tokyo views nuclear power as anarea in which it still holds a competitiveadvantage over most of its rivals, and nuclearcooperation is seen as an arena in which Japancan exercise a degree of leadership and vision,particularly in Asia. The UAE deal is one stepforward. It remains to be seen, however, ifTokyo will conclude similar deals with othermembers of the GCC, all of whom havesignalled their interest in nuclear power. Likethe UAE, Bahrain has also disavowedenrichment and reprocessing. Likewise, Japan’sties with Qatar are drawing closer due to thatcountry’s huge natural gas reserves.Nevertheless, established practice points toJapan once again waiting until the US or otherWestern powers make the first substantivemove before signing a comprehensive nuclearcooperation agreement with another GCC state.In this sense, the various deals the UAE hasconcluded contain significantly more substancethan its neighbours’ bilateral nuclearcooperation agreements.

Naturally, the UAE has its own interests indeveloping a civilian nuclear programme.Nuclear power will increase the sustainabilityof its oil and gas reserves, simultaneouslyallowing more of these resources to beexported, thus boosting earnings. The UAE andthe other five members of the GCC relyexclusively on fossil fuels for electricitygeneration, and water desalination alsoconsumes large qualities of oil and gas. Risingliving standards, population and infrastructurerequires ever greater electricity anddesalination capacity which the UAE wantsnuclear power to meet, whilst maintainingeconomic growth by exporting its naturalresources.

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In addition to these economic benefits, the UAEhas political aspirations for its nuclearprogramme. It is not alone among Arab statesconcerned that Iran’s nuclear programme couldresult in regional nuclear proliferation.Therefore, the UAE’s own nuclear plansconst i tute a d irect appeal to Iran todemonstrate greater nuclear transparency. Inrecent years the traditionally close UAE-Iranrelationship has been strained by thedevelopment of Iran’s Bushehr reactor andNatanz enrichment facility. These ties suffereda further blow with Tehran’s 2008 decision tostation navy personnel on the Persian Gulfisland of Abu Musa, reigniting an old territorialdispute between the two states. Nevertheless,

the UAE’s plans could backfire as its significantarms spending is likely to further strainbilateral relations, as might its nuclearengagement with some of Iran’s fiercest critics.

David Adam Stott is an associate professor atthe University of Kitakyushu, Japan and anAsia-Pacific Journal associate. He wrote thisarticle for The Asia-Pacific Journal

Recommended citation: David Adam Stott,"Japan and the United Arab Emirates – ANuclear Family?" The Asia-Pacific Journal, Vol.33-5-09, August 17, 2009.