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Home > Publications > Research Papers > > Game Changers from Nuclear Politics and Economics
Game Changers for Nuclear Energy

Game Changers from Nuclear Politics and Economics

In this section, we consider developments that do not concern technology yet are specifically “nuclear” in character. Any consideration of nuclear energy requires attention to the complex political and economic issues that surround this unique energy source. Here, we look at possible game changers from the changing nuclear market, from acts of terrorism or war, and from nuclear weapons proliferation.

The Changing Nuclear Market

New customers and new suppliers have the potential to change the game for the nuclear market. America’s and other Western states’ domination of the nuclear supplier market, and their attendant influence over accepted norms of behavior, is waning. This development has ramifications for future international agreements that may shape the nuclear market. In particular, rules designed to minimize nuclear weapons proliferation may be less important to the new entrants into the market than they are to the United States, with its far-flung military commitments. There is at present no clear indication whether this is the future direction or not.

The nuclear power market has been international almost from its inception, but the roles of individual states and the rules under which they operate are changing. In particular, the United States, while retaining major roles in nuclear fuel and components, now only supplies reactors through foreign companies (Westinghouse is part of Toshiba) or combines (the General Electric-Hitachi group). Russia, which as the Soviet Union was long a supplier to its allies and, since the early 1970s, to India, is now the largest reactor exporter in the world, followed by France. South Korea has successfully begun a program of reactor exports, as has China. Both, but especially China with its low-cost structure, have considerable growth potential. Japan, with a large and advanced domestic industry, is becoming an exporter of reactors as well.

On the whole, the rules for nuclear exports have gradually been tightened, with the list of items considered sensitive expanding and the powers given to the IAEA increasing. Some of this tightening occurred as a result of India’s using an imported Canadian reactor to make weapons-grade plutonium, culminating in a nuclear test in 1974. Much more tightening occurred following the discovery of the full extent of Iraq’s nuclear weapon program after the 1991 Gulf War. At the same time, starting at least two decades ago, a parallel supply system for technology and materials relevant to nuclear weapons was developed, led by Pakistan’s principal scientist, A.Q. Khan. It is not entirely clear to what extent that system has been shut down.

A major and perhaps prophetic departure from this gradual tightening of exports controls occurred in 2006, when the United States and India agreed to a framework for an agreement that would legitimize nuclear trade between the two countries. Heretofore, NSG members had not engaged in such trade with India because India is not a party to the NPT and has a nuclear weapon program. Indeed, India’s first nuclear explosion in 1974 spurred the formation of the NSG. The U.S.-India agreement has cleared most legislative hurdles in both countries and most operational details have been worked out. As a result of it, the other NSG members have agreed to an exemption for India. These agreements remain controversial, as they depart from the prior behavior of NPT parties toward non-parties that have acquired nuclear weapons, as all four non-parties have.

Who will be the major players in the nuclear market in the future, who will set the rules, and will any game changer arise from the shifts in importance among market participants? The factors most likely to affect this issue are cost, government financial backing, and assurance of nuclear fuel services for both the front and back ends of the fuel cycle.

Cost. Both initial and levelized cost32 matter. In a strictly competitive world, with long-term financing available, levelized cost would be the sole determinant of market winners. However, with governments often both guaranteeing the initial investment and subsidizing the cost of electricity to customers, initial cost affects the choice of supplier. For some new-entrant buyers with limited budgets, initial cost may be determinative. Thus, if nuclear power expands to new countries, low initial cost suppliers such as Russia and, in the future, China are likely to do particularly well.

Government Backing. In all countries, major nuclear power investments made by private firms are backed by various forms of government financial guarantee. This is not specific to nuclear power: infrastructure investments, for which benefits flow in part to society as a whole rather than just to paying customers, usually require some form of government support. The role of government support is particularly prominent in the case of nuclear power investments, which are large and suffer from political as well as economic uncertainty. Rising exporters Russia, South Korea, and France all benefit from export-support policies on the part of their governments. Purely U.S. exporters went out of business when the domestic market for new reactors ended; it is an open question whether new ones will arise.

Fuel Services. Domestic enrichment, when not motivated by a desire for nuclear weapons, has been motivated by a perceived need for energy security and, in the case of reprocessing, for reasons of waste management. Most buyers of nuclear power plants have neither of those motivations and little taste for investing resources into, and fighting battles over the siting of, high-technology enrichment plants, which, unlike reactors, generate no electricity or income. For these buyers, assurance of fuel supplies for the lifetime of the plant and provisions to take back and dispose of spent fuel affect their choice of supplier. The French firm AREVA comes close to offering a complete range of services. A former executive there characterized their offering as “cradle to funeral home” rather than “cradle to grave” because France does not yet have a disposal site ready. The Russian firm Rosatom, benefiting from a Russian law that permits acceptance of other countries’ spent fuel, can offer the full range.

These economic factors are likely to be the primary determinants of future nuclear purchasing decisions. Political decisions and norms can constrain those decisions. Therefore, a major question is whether future buyers and sellers will view international arrangements aimed at security or safety as economic. The answer to that question will determine the future of those arrangements.

Terrorism and War

Terrorists33 could carry out nuclear attacks in a number of ways, each of which would have different consequences for nuclear power. The most likely scenario is an attack with radioactive material in an area unrelated to nuclear power. Such a “dirty bomb” attack could increase the general public fear of all things nuclear, making it more difficult to construct nuclear power facilities in some countries. However, an attack of this form would very probably be viewed as an intelligence, law enforcement, and public health issue, not as an issue directly relevant to nuclear power. At the other end of the relevance scale would be an attack on a nuclear reactor that succeeded in releasing a significant amount of radioactive material. This latter kind of attack might well stop nuclear power programs, at least temporarily, and the resulting augmented security would likely increase the cost of nuclear power, thereby making it less attractive compared to other investments. Somewhere on this scale would be an attack by a terrorist or a state using a nuclear weapon that would destroy either a nuclear reactor, spewing its radioactivity over the surrounding area, or a city. The consequences of this last kind of attack would reach far beyond the nuclear power area; nuclear power would be only one of many areas drastically changed.

The different modes of attack would pose different degrees of difficulty to a terrorist group. Medical and industrial isotopes, some of which are highly radioactive, are widely distributed and less difficult to acquire than either weapons materials or spent civilian nuclear fuel. Fashioning them into a bomb or some other irradiation device without too much risk to the handlers poses some difficulty, but a sophisticated group could overcome it. Such a device would destroy and contaminate a building and a limited distance beyond it (a block or less for most feasible devices) but would also cause high cleanup costs and perhaps some panic. The effect on life, health, and environment beyond the building targeted would be minimal.

A successful attack on a modern power reactor—that is, one that would breach the containment building and spread radioactivity—poses great difficulty, even with access to inside personnel and/or to aircraft. However, it would be the most direct way in which terrorism could affect the future of nuclear power. Some spent-fuel storage facilities are not as well protected as reactors and could pose a greater risk, but attack on them would still not be easy and would require a sophisticated, well-trained, and equipped group. It is well to recall that any terrorist group intending to carry out an attack on a nuclear facility or with a nuclear weapon would face a number of obstacles, each independent of the other: securing appropriate equipment and materials, enlisting appropriate personnel, ensuring enough time and space to train, obtaining financing, crossing national boundaries, possibly with contraband equipment, and so on. While none of these obstacles is impossible to overcome, the chances of overcoming them all in succession could be quite small.

To be sure, terrorist use of some nuclear tool would not surprise intelligence or law-enforcement agencies, which have considered and have worked to prevent such attacks for decades. Al Qaeda planners discussed attacks on a nuclear reactor with airplanes, and there have been attempts to acquire nuclear materials. Affiliated groups and others have attempted radioactive attacks without success. Terrorist groups, Al Qaeda in particular, have an innovative and adaptive approach; should the opportunity to execute a nuclear attack present itself, it is likely they will capitalize on it.

The consequences of nuclear terrorism would vary with the location of the attack, the group that perpetrated it, the damage to life and property, and when directed at nuclear power infrastructure, the degree of attachment to and support for nuclear power by the government where an attack occurs. For some governments, nuclear facilities are symbols of government power and national progress—which can have the effect of enhancing their value as terrorist targets. For countries where nuclear facilities are simply a part of the electricity supply, other targets that are more symbolic, easier to attack, and that would involve larger numbers of potential casualties may be more attractive.

Theft of nuclear material remains a terrorist threat. As Matthew Bunn notes, “Theft of potential nuclear bomb materials is not just a hypothetical worry; it is an ongoing reality, highlighting the inadequacy of the nuclear security measures in place today: the . . . IAEA has documented some 18 cases of theft or loss of plutonium or HEU confirmed by the states concerned (and there are more cases that the relevant states have so far been unwilling to confirm, despite the conviction of some of the participants).”34 None of those cases involved enough material to make an explosive, but, as Bunn notes, the full story is not known and the existence of criminal networks devoted to this pursuit is clear. Again, as with safety, the problem has been addressed by what Bunn calls “a patchwork quilt of programs and initiatives” largely led by the United States. Among these are the U.S. Nunn-Lugar Cooperative Threat Reduction program, a multibillion dollar, multiyear government effort; the UN Security Council resolution 1540, requiring all states to pass and enforce legislation making it a crime to help nonstate actors acquire materials for weapons of mass destruction; and the more recent U.S.-Russia led Global Initiative to Combat Nuclear Terrorism. However, the main thrust of the efforts is carried by national intelligence and law-enforcement agencies, which vary widely in quality, priorities, and degree of cooperation with each other. The IAEA performs an essential role here again by tracking reported incidents and sponsoring relevant research for detection, but it is not a preventive organization beyond that. UN resolution 1540 and similar counterterrorist international resolutions lack effective implementation mechanisms. Because this area is so deeply enmeshed with sometimes conflicting national priorities and intelligence methods, it is more difficult to obtain international cooperation in implementation than is the case for safety. Terrorism thus remains a potential game changer, one which, many agree, has very negative consequences but around which international cooperation remains difficult.

Given the relative absence of pertinent data, terrorism is the least amenable area to any informed speculation about possible game changers for nuclear power. Perhaps the only assured prediction is that the consequences of terrorist use of some nuclear tool would depend crucially on the location and circumstances of the attack.

Nuclear Proliferation

The links between the growth and spread of nuclear power, on the one hand, and the development of nuclear weapons, on the other, are complex. While nuclear power and nuclear weapons involve different technologies, some of the underlying physics and some of the underlying technical training and instrumentation (for instance, in dealing with radiation) are common to the two fields. Furthermore, plutonium, one of two nuclear weapons materials, is made in nuclear reactors, albeit reactors that are much smaller and usually of a different design than those used for nuclear power. The other nuclear weapon material, uranium that has been enriched to 90 percent or more of the isotope U-235, is made in much the same enrichment facilities as are used for providing nuclear reactors with LEU. To make matters more difficult, the enrichment capability needed to fuel a power reactor of the most common size is much greater than what is needed to make one weapon’s worth of HEU.

Yet nuclear weapons proliferation has not significantly affected the global picture for nuclear energy. The historical record shows that, while the U.S. Atoms for Peace program was correlated with the worldwide growth in nuclear power that ended with the Chernobyl accident, proliferation events were not correlated with changes in nuclear power growth. Neither China’s, India’s, or North Korea’s nuclear test seemed to affect the trajectory of nuclear power in the world, whether nuclear power was growing at the time or not. There were probably several reasons for this lack of correlation. The motivations for a nuclear power program and for a nuclear weapons program are not the same, and for at least one nation that considered then abandoned its nuclear weapon program, they were in fact contradictory.35 The plutonium made in most power reactors is contaminated with highly radioactive isotopes of plutonium, making it hard to design into and handle in nuclear weapons. The enrichment capacity for a few weapons is far less than that needed to supply power reactors on an economic scale. All known cases of nuclear weapon proliferation made use of materials from facilities dedicated entirely or nearly fully to that purpose.36 Furthermore, nuclear power plants are expensive compared to the facilities needed for nuclear weapons materials, and being tied into an electric grid, the economic cost of diversion is high and the probability of discovery higher than for a dedicated covert facility.

Safeguards against the use of civilian nuclear facilities were strengthened by the entry into force of the NPT (1970); the U.S. Non-Proliferation Act of 1978,37 which was motivated by India’s diversion; and similar regulations adopted by the other members of the NSG. The great majority of states have found it in their interest to adhere to the NPT. The United States, working with its NSG partners, has been a leader in preventing sales of sensitive nuclear technologies outside the agreed NPT and NSG guidelines. It has often been successful, particularly so in the past two decades, after those guidelines became more complete and clearer partly in response to Pakistan’s, Iraq’s, North Korea’s, and Iran’s activities. The list of sensitive nuclear exports gradually expanded as did IAEA inspection powers, especially in the wake of the first Iraq war. These expanded powers are mainly included in the so-called Additional Protocol (AP). States agree to the AP voluntarily, but the United States has declared that it will limit nuclear exports to states that sign it and has promulgated that policy for other nuclear exporters, with partial success. So far as is known, no diversion of nuclear materials has occurred from safeguarded plants.

The success, though, has been partial. Certain state-parties to the NPT have developed weapons programs. Safeguards and implementing agreements did not prevent Iraq’s effort, North Korea’s nuclear explosions, the A. Q. Khan network, or Iran’s current efforts. Iran poses a particular challenge, not only because of its threat to destroy another country, but also because much of the international community, led by the United States and its allies, is trying to prevent Iran from acquiring sensitive enrichment facilities that Brazil, for instance, was allowed to acquire and that South Korea may soon be allowed to acquire. Iran has hidden much of its activities from IAEA inspection, in contravention of its obligations; however, for a number of states, that argument is not as persuasive as it is to the United States and its allies. As these states enter the nuclear market or become bigger players in it, the influence of the United States and its traditional allies may become weaker at the same time that demand for those sensitive facilities increases in some quarters because of perceived insecurity. That could certainly affect the safeguards and other conditions under which the nuclear export market operates and might well be a game changer for nuclear power.

A recent analysis by Scott Sagan and Steven Miller38 brings up other reasons to be concerned about the future spread of nuclear power. For one, the safe and secure operation of nuclear power facilities requires “good governance,” which is lacking among some of the aspiring nuclear power states (see Table 3). Second, “each known or strongly suspected case of a government starting a secret nuclear weapons program, while it was a member of the NPT and thus violating its Article II NPT commitment, was undertaken by a non-democratic government.”39 Figure 2 in Sagan and Miller’s essay shows that aspiring nuclear power states have significantly lower democracy scores than present nuclear power states, according to the World Bank’s World Governance Indicators.

Table 3: Existing and Aspiring Nuclear Power States

Americas Western Europe Eastern Europe Central and
South Asia
East Asia/
Middle East Africa



El Salvador





Sri Lanka


Saudi Arabia




Table taken from Scott D. Sagan and Steven E. Miller, “Nuclear Power without Nuclear Proliferation?” Daedalus 138 (4) (Fall 2009): 10. Sources: IAEA Power Reactor Information System,; Frank N. von Hippel, ed., “The Uncertain Future of Fission Power,” review draft,; Polity IV Project, Political Regime Characteristics and Transitions, 1800–2007, inscr/inscr.htm. Figure © Scott D. Sagan; used here with permission.


32. The levelized cost of electricity is the constant (that is, level) cost of a kilowatt- or mega watt-hour of electricity sufficient, over the lifetime of the electrical generating plant (nuclear or not), to repay the cost of the investment in the plant including interest plus its operating cost (fuel, operations, and maintenance).

33. We are indebted to Professor Martha Crenshaw of Stanford University and Dr. Michael Levi of the Council on Foreign Relations for enlightening presentations and discussions of these issues.

34. Matthew Bunn, “Reducing the Greatest Risks of Nuclear Theft and Terrorism,” Daedalus 138 (4) (Fall 2009): 112.

35. In an April 2, 2008, address at a dinner to mark the fiftieth anniversary of the International Institute for Strategic Studies (IISS), Carl Bildt, a former Prime Minister of Sweden, spoke of Sweden’s experience from a half-century ago: “[I]t was when civilian requirements for cheap and reliable electricity came to dominate Swedish nuclear programs . . . that the military option became much more complicated and expensive”; reprinted in Perspectives on International Security, Adelphi Paper 400–401 (London: IISS, 2008), 32.

36. India is an exception, having used its Canadian-built, supposedly civilian research reactor (for which the United States had provided heavy water) to make plutonium, including the material used for its first nuclear explosion in 1974.

37. The U.S. Nuclear Non-Proliferation Act of 1978 Section 104d permits peaceful nuclear exports to non-nuclear-weapon states “only if such states accept IAEA safeguards on all their peaceful nuclear activities, do not manufacture or otherwise acquire any nuclear explosive device, do not establish any new enrichment or reprocessing facilities under their de facto or de jure control, and place any such existing facilities under effective international auspices and inspection.”

38. Scott D. Sagan and Steven E. Miller, “Nuclear Power without Nuclear Proliferation?” Daedalus 138 (4) (Fall 2009): 7–18.

39. Ibid., 11.