Canada may have unintentionally killed Westinghouse nuclear deal with Saudis

By Henry Sokolski and Victor Gilinsky

In the latest you-can’t-make-this-stuff-up event, Saudi Arabia’s furious campaign of economic retaliation against Canada — in response to Canadian foreign minister Chrystia Freeland’s criticism of the arrest of Saudi women’s rights activists — threatens to dash Westinghouse’s hopes for a lucrative nuclear deal with the Saudis. And, ironically, it may help to preserve tough rules on nuclear exports (“gold standard”) that the Saudi deal might otherwise scuttle.

On Aug. 7, the Saudis recalled their ambassador and expelled Canada’s ambassador, canceled flights to and from Canada, ordered Saudi students and even Saudis in Canadian hospitals to leave Canada, ordered the immediate sale of Saudi-owned Canadian assets “no matter the cost,” and — what is most important for our story — suspended all new business with Canada.

Canada’s Minister of Foreign Affairs, Chrystia Freeland, tweeted about women’s rights in Saudia Arabia. Now that country is tossing out everything — and everyone — Candian including, maybe, a nuclear power deal.

Why this matters takes a bit of background. The story has, as they say, many moving parts.

The White House has been working hard for months to negotiate a U.S.-Saudi nuclear cooperation agreement to permit the sale of Westinghouse nuclear power plants to Saudi Arabia. Although headquartered in Pennsylvania, it was until recently owned by Toshiba Nuclear Energy Holdings. But it is headquartered near Pittsburgh and it has over 5,000 US employees in Pennsylvania, an important political state.

The company has not done well recently. After losing money through its mismanagement of two large US nuclear construction projects, Westinghouse was forced seek protection in Chapter 11 bankruptcy in March 2017. The one remaining two-unit construction project formerly run by Westinghouse, the Vogtle plant in Georgia, now has an estimated completion cost of $27 billion, double the original cost estimate. 

Toshiba, the parent company, which itself lost money from backing Westinghouse, decided it had enough and sold Westinghouse to Brookfield Asset Management. The deal became final on Aug. 8, and thereby pulled Westinghouse out of bankruptcy. The kicker is that Brookfield is a Canadian-owned company, one that presumably falls under the new Saudi edict.

The Trump White House is unlikely to let go. The Saudi nuclear business was supposed to be worth untold billions. The Saudis had announced they would start with a twin-unit nuclear plant and claimed they would go on to build a dozen more. That they would do so, and that they would choose Westinghouse was always implausible — it made much more sense for the Saudis to hire a South Korean construction team, and there are cheaper alternatives to nuclear power.

There are cheaper energy options for Saudia Arabia than nuclear — solar and wind being two obvious examples. (Photo: Edward Musiak, Creative Commons/Flickr.)

Last fall, the White House was reported to be “flexible” on the gold standard, a critical nonproliferation issue. This concerned whether to leave open in the U.S.-Saudi agreement the possibility of the Saudis reprocessing their spent (irradiated) fuel to extract the contained plutonium and, even more importantly, operating uranium enrichment plants. Such enrichment plants could also produce highly enriched uranium. Plutonium and highly enriched uranium are, of course, the basic nuclear explosives in nuclear weapons. Conceding that Saudi Arabia had the right to produce these explosives would be a major setback for US nonproliferation policy.

The United States had previously negotiated a gold standard agreement with the United Arab Emirates that ruled out reprocessing and uranium enrichment. The Saudis, and their paid supporters in Washington, have insisted that the Kingdom is too proud and too important — being the major weapons buyer in the world — to submit to such conditions. Moreover, the Saudi Crown Prince, in an interview during his charm tour of the United States, famously said that, although he was negotiating an agreement for “peaceful” nuclear cooperation and did not intend to make bombs, if Iran produced a nuclear weapon, so would Saudi Arabia. He made it unambiguous that Saudi Arabia intended to match Iran in uranium enrichment, and that the purpose was not to make fuel, but to have the capacity to make nuclear explosives.

Which presented a dilemma for the White House. It wanted to accommodate the Saudis, but the gold standard is precisely the restriction it wants to impose on Iran, and letting Saudi Arabia get into enrichment would make it much harder to get Iran to quit the technology. Significantly, the Israelis urged a tough US nonproliferation standard for the Saudis. The Trump administration told Congress it would stick with the tough standard. Nevertheless, hard cases make bad law, and the betting within the Beltway has been that the Trump White House, in its eagerness for the putatively lucrative deal, might soften the nonproliferation rules for the Saudis.

Now, however, the Saudi hysterical response to Canadian criticism has upended the betting. The Saudis appear to have left themselves no room for retreat. Nor does it seem that Canada will back down. If that remains so, it should become clear that the Westinghouse option is dead and that it will not help to weaken U.S. nuclear export rules. In that case, the nonproliferation gold standard may be left standing, which would be a clear win for nonproliferation.

Headline photo of Chrystia Freeland, WikiCommons.

Henry Sokolski is executive director of the Nonproliferation Policy Education Center and served as deputy for nonproliferation policy in the office of the U.S. Secretary of Defense from 1989 to 1993. Victor Gilinsky served on the U.S. Nuclear Regulatory Commission under Presidents Ford, Carter and Reagan and is program advisor for the Nonproliferation Policy Education Center.

This article originally appeared on August 13, 2018 in The Hill, under the title, “Canada May Secure America’s Nuclear Nonproliferation Bacon”.

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